ALLI Allion Healthcare (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

þ		Preliminary Proxy Statement
o		Confidential, For Use By the Commission Only (as permitted by Rule 14a- 6(e)(2) )
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Rule 14a-12

Allion Healthcare, Inc.

(Name of Registrant as Specified in its Charter)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.*

	(1)		Title of each class of securities to which transaction applies:
			Allion Healthcare, Inc. common stock, par value $0.001 per share
	(2)		Aggregate number of securities to which transaction applies:
			20,787,548.46 shares of common stock 431,750 options to purchase shares of common stock 455,657 warrants to purchase shares of common stock 2,200,000 cash-settled phantom stock units
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			$6.60 per share
	(4)		Proposed maximum aggregate value of the transaction:
			$161,260,374.29
	(5)		Total fee paid:
			$8,998.32

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing party:

(4)

Date Filed:

Preliminary Copies

ALLION HEALTHCARE, INC.
1660 Walt Whitman Road, Suite 105
Melville, New York 11747

           , 2009

Dear Stockholder:

     You are cordially invited to attend a special meeting of the stockholders of Allion Healthcare, Inc. to be held on       , 2009, at 10:00 a.m. Eastern time, at            .

     At the special meeting, you will be asked to consider and vote upon the adoption of the Agreement and Plan of Merger, dated October 18, 2009, by and among Brickell Bay Acquisition Corp., which we refer to as Parent, Brickell Bay Merger Corp., which we refer to as Merger Sub, and Allion. Pursuant to the merger agreement, Merger Sub will be merged with and into Allion, with Allion surviving as a direct, wholly owned subsidiary of Parent. Certain of our stockholders are expected to exchange shares of Allion common stock for equity interests of Parent in connection with the merger. Parent and Merger Sub are both controlled by investment funds affiliated with H.I.G. Capital, L.L.C., a private equity firm.

     Assuming the holders of a majority of our issued and outstanding shares of common stock adopt the merger agreement and the merger is completed, upon completion of the merger, you will be entitled to receive $6.60 in cash, without interest, for each share of Allion common stock that you own, unless you have sought and properly perfected your appraisal rights under Delaware law. After the merger, you will no longer have an equity interest in Allion and will not participate in any potential future earnings and growth of Allion.

     The proposed merger was negotiated by an independent Special Committee of our Board of Directors, consisting of Willard T. Derr and Gary P. Carpenter. Our Board of Directors, acting on the recommendation of the Special Committee, has adopted a resolution unanimously approving the merger agreement. Both the Special Committee and our Board of Directors have unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interest of Allion and our stockholders. Acting on the recommendation of the Special Committee, the Board of Directors unanimously recommends that you vote “FOR” the adoption of the merger agreement. In arriving at their recommendation, the Special Committee and Board of Directors carefully considered a number of factors described in the accompanying Proxy Statement.

     The merger agreement and the merger are described in the accompanying Proxy Statement. A copy of the merger agreement is attached as Appendix A to the accompanying Proxy Statement. We urge you to read carefully the accompanying Proxy Statement, including the appendices.

     Your vote is important, and it is important that your shares be represented at the special meeting, regardless of the number of shares you hold. We urge you to submit your proxy card as soon as possible. Even if you plan to attend the special meeting, please sign and promptly return your proxy card in the enclosed postage-paid envelope. Even if you return a proxy card, if you attend the special meeting, you may revoke your proxy and vote in person.

Sincerely,

Michael P. Moran
Chairman, President and Chief Executive Officer

      NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

ALLION HEALTHCARE, INC.
1660 Walt Whitman Road, Suite 105
Melville, New York 11747

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD       , 2009

     NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Allion Healthcare, Inc. will be held at            , on       , 2009, at 10:00 a.m. Eastern time, for the following purposes:

	1.		To consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of October 18, 2009, by and among Brickell Bay Acquisition Corp., Brickell Bay Merger Corp. and Allion Healthcare, Inc. Pursuant to the merger agreement, Allion will become an indirect, wholly owned subsidiary of Brickell Bay Acquisition Corp., and the holders of Allion common stock will be entitled to receive $6.60 in cash, without interest, per share of Allion common stock held by them at the effective time of the merger;
	2.		To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies in support of Proposal 1 if there are insufficient votes at the time of the meeting to adopt the merger agreement; and
	3.		To consider and vote upon any other matter that may properly come before the special meeting or any adjournment thereof.

     You are entitled to receive notice of and to attend and vote at the special meeting and any postponements or adjournments if you owned shares of Allion stock as of the close of business on       , 2009. To ensure your representation at the special meeting, please complete, date and sign the enclosed proxy card and return it in the enclosed postage-prepaid envelope in time to be received by us prior to the special meeting. Returning your proxy card will not affect your right to revoke your proxy or to attend the special meeting and vote in person.

     REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS VERY IMPORTANT. THE MERGER CANNOT BE COMPLETED UNLESS A MAJORITY OF THE OUTSTANDING SHARES OF ALLION COMMON STOCK ENTITLED TO VOTE ON THE MERGER ADOPT THE MERGER AGREEMENT. EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

By order of the Board of Directors,

Stephen A. Maggio
Secretary

Melville, New York
      , 2009

      Please do not send your Allion common stock certificates to us at this time. If the merger is completed, we will send you instructions regarding the surrender of your certificates.

TABLE OF CONTENTS

SUMMARY TERM SHEET			1
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER			9
RISK FACTORS AND SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS			13
THE SPECIAL MEETING			15
Date, Time and Place of the Special Meeting			15
Matters To Be Considered at the Special Meeting			15
Record Date, Outstanding Voting Securities, Voting Rights and Quorum			15
Required Votes			15
Voting			16
Revocation of Proxies			16
Expenses of Proxy Solicitation			17
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER			18
PARTIES INVOLVED IN THE MERGER			18
SPECIAL FACTORS			19
Background of the Merger			19
Recommendation of the Special Committee and our Board of Directors			27
Fairness of the Merger; Reasons for the Recommendation of the Special Committee and our Board of Directors			28
Purposes and Reasons for the Merger			32
Position of the H.I.G. Buying Group as to the Fairness of the Merger			33
Position of Parallex as to the Fairness of the Merger			34
Opinion of Allion’s Financial Advisor, Raymond James & Associates, Inc.			36
Effects of the Merger			42
Plans for Allion after the Merger			44
Conduct of Allion’s Business if the Merger is Not Completed			44
Financing of the Merger			45
Limited Guarantee			46
Rollover Agreements			46
Voting Agreements			47
Interests of Certain Persons in the Merger			47
Related Party Transactions			53
Material U.S. Federal Income Tax Consequences			55
Estimated Fees and Expenses of the Merger			57
Regulatory Approvals			57
Litigation			57
Provisions for Unaffiliated Security Holders			58
THE MERGER AND THE MERGER AGREEMENT			59
The Merger			59
Treatment of Stock and Equity Awards			59
Representations and Warranties			60
Covenants			63
Acquisition Proposals			64
Conditions			66
Termination			66

Termination Fees; Expenses			68
Amendments, Extensions and Waivers			69
Payment of Merger Consideration and Surrender of Stock Certificates			69
APPRAISAL RIGHTS			71
SELECTED HISTORICAL FINANCIAL DATA			74
MARKET PRICE AND DIVIDEND INFORMATION			76
PRIOR PUBLIC OFFERINGS AND STOCK PURCHASES			77
RECENT TRANSACTIONS			77
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			78
DIRECTORS AND EXECUTIVE OFFICERS OF ALLION, THE H.I.G. BUYING GROUP AND PARALLEX			80
STOCKHOLDER PROPOSALS			84
HOUSEHOLDING			85
WHERE YOU CAN FIND MORE INFORMATION			85

ALLION HEALTHCARE, INC.
1660 WALT WHITMAN ROAD, SUITE 105
MELVILLE, NEW YORK 11747

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON            , 2009

          We are providing these proxy materials to you in connection with the solicitation of proxies by the Board of Directors of Allion Healthcare, Inc. for a special meeting of stockholders to be held on            , 2009 and for any adjournment or postponement thereof. This Proxy Statement provides information that you should read before you vote on the proposals that will be presented to you at the special meeting. The special meeting will be held on            , 2009 at 10:00 a.m. Eastern Time at            .

          In this Proxy Statement, we refer to Allion Healthcare, Inc. as “Allion,” the “Company,” “we” or “us.” We refer to H.I.G. Capital, L.L.C. as “H.I.G.,” Brickell Bay Acquisition Corp. as “Parent,” Brickell Bay Merger Corp. as “Merger Sub,” and Parallex LLC as “Parallex.” References in this Proxy Statement to our “unaffiliated stockholders” are deemed to refer to holders of Allion stock other than the rollover stockholders.

          This Proxy Statement and a proxy card are first being mailed on or about            , 2009 to people who owned shares of Allion common stock as of the close of business on            , 2009.

SUMMARY TERM SHEET

      This summary term sheet presents selected information in this Proxy Statement relating to the merger and may not contain all of the information that is important to you. To understand the merger and the transactions contemplated by the merger agreement fully, you should carefully read this entire document as well as the additional documents to which it refers. For instructions on obtaining more information, see “Where You Can Find More Information” on page 85. We have included page references to direct you to a more complete description of the topics presented in this summary.

Parties Involved in the Merger (see page 18)

	•		Allion Healthcare, Inc. , or Allion, is a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients as well as specialized biopharmaceutical medications and services to chronically ill patients.
	•		Brickell Bay Acquisition Corp. , or Parent, was formed solely in anticipation of the merger by entities affiliated with H.I.G. Capital, L.L.C. , or H.I.G., a global private equity investment firm that specializes in providing capital to small and medium-sized companies. The entities affiliated with H.I.G. and certain related persons, together with Parent and Merger Sub, are collectively referred to in this Proxy Statement as the “H.I.G. Buying Group.” Upon completion of the merger, Allion will be a direct wholly owned subsidiary of Parent.
	•		Brickell Bay Merger Corp. , or Merger Sub, was formed by Parent solely for the purpose of acquiring Allion. Upon completion of the merger, Merger Sub will cease to exist.
	•		Parallex LLC , or Parallex, is a stockholder of Allion that, as of       , 2009, beneficially owned 7,903,499 shares, or approximately 27.5% of Allion’s outstanding common stock. Parallex and certain other stockholders, whom we collectively refer to as the rollover stockholders, have agreed to surrender a portion of their shares of Allion common stock to Parent immediately prior to the effective time of the merger in exchange for equity interests in Parent. The rollover stockholders, who beneficially own

approximately 41.1% of our outstanding common stock, have executed voting agreements pursuant to which they have agreed to vote their shares of Allion common stock in favor of adoption of the merger agreement. Each of the rollover stockholders is a former stockholder of Biomed America, Inc., which Allion acquired in April 2008. None of the rollover stockholders, other than Parallex, is an affiliate of Allion.

The Special Meeting (see page 15)

	•		Date, Time and Place (see page 15). The special meeting of Allion stockholders will be held on       , 2009, at 10:00 a.m. Eastern time, at            .
	•		Matters to be Considered (see page 15). At the special meeting, you will be asked to approve a proposal to adopt the merger agreement. You may also be asked to vote to adjourn the special meeting, if necessary, to solicit additional proxies in support of the proposal to adopt the merger agreement.
	•		Record Date and Quorum (see page 15). You are entitled to vote at the special meeting if you owned shares of Allion stock at the close of business on       , 2009, which Allion has set as the record date for the special meeting. The presence, in person or by proxy, of holders of record of a majority of the issued and outstanding shares of Allion stock entitled to vote on the matters to be presented at the special meeting will constitute a quorum.
	•		Required Vote (see page 15). Adoption of the merger agreement requires the affirmative vote of a majority of the outstanding shares entitled to vote on the merger. The rollover stockholders, who beneficially own approximately 41.1% of our outstanding common stock, have executed voting agreements pursuant to which they have agreed to vote their shares of Allion common stock in favor of adoption of the merger agreement. The full text of the form of voting agreement is attached to this Proxy Statement as Appendix C .
	•		Voting (see page 16). You may attend the special meeting and vote in person or you may complete, sign and date the enclosed proxy card and return it in the enclosed self-addressed postage pre-paid envelope. Returning your proxy card will not affect your right to attend the special meeting and vote in person or to revoke your proxy. If your shares are held in “street name” by a bank or brokerage firm, your bank or brokerage firm forwarded these proxy materials, as well as a voting instruction card, to you. Please follow the instructions on the voting instruction card to vote your shares.

The Merger (see page 59)

	•		If the merger is completed, Merger Sub will be merged with and into Allion, with Allion continuing as the surviving corporation.
	•		This may be deemed a “going private” transaction. If the merger is completed, the following will occur:

	o		your shares will be converted into the right to receive $6.60 in cash per share, without interest and less any applicable withholding tax;
	o		all of the equity interests in Allion will be owned directly by Parent; immediately following the merger Parent will be owned by H.I.G. Healthcare, LLC and the rollover stockholders;
	o		you will no longer have any interest in Allion’s future earnings or growth;
	o		Allion will no longer be a public company and Allion’s common stock will no longer be traded on the NASDAQ Global Market; and
	o		we will no longer be required to file periodic and other reports with the Securities and Exchange Commission.

Effects of the Merger on Our Common Stock and Equity Awards (see page 59)

	•		Common Stock . At the effective time of the merger, each share of Allion common stock (including restricted stock) issued and outstanding immediately prior to the effective time of the merger (other than shares held by Allion, Parent or Merger Sub and stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be automatically cancelled and converted into the right to receive $6.60 in cash, without interest.
	•		Stock Options . Prior to the effective time of the merger, we will cause each outstanding Allion stock option to vest in full. At the effective time of the merger, each outstanding Allion stock option not exercised prior to the merger will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such option, multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such option.
	•		Warrants . At the effective time of the merger, each outstanding Allion warrant (whether or not vested) will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such warrant, multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such warrant.
	•		Phantom Stock Units . At the effective time of the merger, each holder of an outstanding Allion cash-settled phantom stock unit (whether or not vested) will be entitled to receive an amount in cash equal to (i) the number of phantom stock units held by that holder multiplied by $6.60, without interest, plus (ii) a tax gross-up payment to cover any excise tax liability such holder may incur as a result of any payments or benefits, whether paid pursuant to the phantom stock units or otherwise, that may be deemed “golden parachute” payments for tax purposes.

Purpose of the Merger (see page 32)

	•		Allion . The primary purpose of the merger for Allion is to permit its unaffiliated stockholders to receive cash for their shares of Allion common stock and to realize a premium to the market price at which such shares traded immediately prior and in the weeks leading up to the announcement of the execution of the merger agreement.
	•		The H.I.G. Buying Group . The primary purpose of the merger for the H.I.G. Buying Group is to allow the H.I.G. Buying Group to acquire control of Allion and bear the rewards and risks of ownership of Allion after shares of Allion’s common stock cease to be publicly traded.
	•		Parallex . The primary purposes of the merger for Parallex are (i) to receive cash for the portion of its shares of Allion common stock that will not be surrendered to Parent immediately prior to the merger and to realize a premium to the market price at which such shares traded immediately prior to the announcement of the execution of the merger agreement, (ii) to receive the principal plus accrued interest on promissory notes previously issued to Parallex by Allion, the maturity of which will accelerate at the effective time of the merger, and (iii) to retain an indirect equity interest in Allion and to continue bearing the rewards and risks of such ownership after shares of Allion common stock cease to be publicly traded.

Recommendation of the Special Committee and our Board of Directors (see page 27)

	•		The Special Committee of our Board of Directors unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interest of Allion and its stockholders and unanimously recommended that our Board of Directors approve the merger agreement.
	•		After considering the recommendation of the Special Committee, our Board of Directors unanimously approved the merger agreement and determined that it is advisable, fair to and in the best interest of Allion and its stockholders. Our Board of Directors unanimously recommends that you vote “FOR” adoption of the merger agreement.

Fairness of the Merger; Reasons for the Recommendation of the Special Committee and our Board of Directors see page 28)

•

The Special Committee and our Board of Directors determined that the merger is substantively and procedurally fair to Allion’s unaffiliated stockholders. In reaching this conclusion, the Special Committee and our Board of Directors considered, among other factors, the following:

	o		the fact that the $6.60 per share merger consideration to be paid pursuant to the merger agreement constitutes a significant premium over the market price of Allion common stock before the public announcement of the merger agreement, including a premium of approximately 30.2% over the volume-weighted average price of Allion common stock for the five days prior to announcement of the merger;
	o		the opinion of Raymond James & Associates, Inc. to our Board of Directors to the effect that, subject to the various factors, assumptions and limitations set forth in Raymond James’s written opinion, the full text of which is attached hereto as Appendix B and incorporated herein by reference, as of October 18, 2009, the $6.60 per share consideration to be received by our stockholders (excluding the rollover stockholders, Parent, Merger Sub and their respective affiliates) was fair to such holders, from a financial point of view;
	o		the fact that the Special Committee was comprised of two independent directors and acted to represent solely the interests of the unaffiliated stockholders and to negotiate with H.I.G. on behalf of such stockholders;
	o		the fact that the Special Committee, with the assistance of Allion’s legal and financial advisors, conducted extensive arms-length negotiations with H.I.G. over several months, which led to a 20% increase in the merger consideration to be received by our stockholders to $6.60 per share from a price of $5.50 per share proposed by H.I.G. in its initial letter of intent dated June 2, 2009;
	o		the fact that the Special Committee and our Board of Directors, with the assistance of our financial advisors, had engaged in an extensive process to explore a possible sale of the Company since February 2009 and that the Special Committee and our Board of Directors believed that $6.60 per share was the highest offer that could be obtained for Allion; and
	o		the Special Committee’s and our Board of Directors’ belief that the termination fee provisions in the merger agreement likely would not significantly discourage another potential acquirer from submitting an acquisition proposal.

Position of the H.I.G. Buying Group as to the Fairness of the Merger (see page 33)

•

The H.I.G. Buying Group believes that the merger is both procedurally and substantively fair to Allion’s unaffiliated stockholders. Their belief is based upon their knowledge and analysis of Allion, as well as the factors discussed in the section entitled “Special Factors—Position of the H.I.G. Buying Group as to the Fairness of the Merger” beginning on page 33.

Position of Parallex as to the Fairness of the Merger (see page 34)

•

Parallex believes that the merger is fair to Allion’s unaffiliated stockholders. Its belief is based upon its knowledge and analysis of Allion, as well as the factors discussed in the section entitled “Special Factors—Position of Parallex as to the Fairness of the Merger” beginning on page 34.

Fairness Opinion of Raymond James & Associates, Inc. (see page 36)

•

In connection with the merger, our Board of Directors received the opinion of Raymond James as to the fairness, from a financial point of view as of the date of the opinion, to Allion’s stockholders (excluding the rollover stockholders, Parent, Merger Sub and their respective affiliates) of the merger consideration to be received by such holders. The full text of Raymond James’s written opinion is attached to this Proxy Statement as Appendix

B . You are encouraged to read that opinion carefully for a description of the assumptions made, matters considered and limitations and qualifications on the review undertaken.

Interests of Certain Persons in the Merger (see page 47)

	•		Directors and Officers . Some of our directors and officers may have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. These interests may include the “cash-out” of options, the vesting and settlement of phantom stock units, the removal of restrictions on restricted stock, and the right to continued indemnification and insurance coverage by Allion after the merger. In addition, it is expected that the executive officers of Allion immediately prior to the merger will continue to serve as the executive officers of the surviving corporation following completion of the merger, and such officers may be entitled to participate in equity incentive plans that Parent or the surviving corporation may sponsor. Moreover, certain of our directors and officers may be appointed by members of the H.I.G. Buying Group or Parallex to serve on the Board of Directors of Parent or the surviving corporation following completion of the merger.
	•		Rollover Stockholders . The rollover stockholders have entered into exchange agreements with Parent pursuant to which the rollover stockholders have agreed to surrender to Parent, immediately prior to the effective time of the merger, a portion of their shares of Allion common stock in exchange for equity interests in Parent. As a result, the rollover stockholders will retain indirect equity ownership of Allion following the merger and will continue to participate in Allion’s future earnings or growth. At the effective time of the merger, the maturity of promissory notes issued by the Company to the rollover stockholders will also accelerate, and the rollover stockholders will receive the principal plus accrued interest on such notes. Finally, the rollover stockholders entered into voting agreements with Parent pursuant to which the rollover stockholders, who collectively beneficially own an aggregate of approximately 41.1% of the outstanding shares of Allion common stock, have agreed to vote their respective shares of Allion common stock in favor of the adoption of the merger agreement and have granted Parent a proxy to vote such shares in the event the rollover stockholders fail to do so. The full text of the form of voting agreement is attached to this Proxy Statement as Appendix C .

Covenants (see page 63)

	•		Allion, Parent and Merger Sub have agreed to take certain actions between the date of the merger agreement and the effective time of the merger, including using commercially reasonable efforts to consummate the merger.
	•		We have also agreed to refrain from certain enumerated actions without Parent’s consent, including actions that are outside the ordinary course of our business.
	•		Parent has agreed to use its reasonable best efforts to maintain in effect its debt and equity commitment letters and consummate the financing contemplated by the debt and equity commitment letters. In addition, Parent has agreed, for a period of twelve months following the merger, to maintain the base salary and non-equity based incentive bonus opportunity of the Allion employees who continue to be employed by the surviving corporation and to maintain 401(k) and health and welfare benefits plans that are no less favorable in the aggregate than our current benefits and policies.

      Acquisition Proposals (see page 64)

	•		The merger agreement prohibits us from soliciting, initiating or encouraging other acquisition proposals or providing non-public information to third parties with respect to any acquisition proposal. We have agreed to immediately cease any and all existing activities, discussions or negotiations with third parties conducted prior to the date of the merger agreement with respect to any acquisition proposal. If we receive an unsolicited acquisition proposal, we must promptly notify Parent of the proposal’s material terms.
	•		We may, however, provide confidential information to a third party in response to an unsolicited takeover proposal and engage in discussions and negotiations with such third party if (i) our Board of Directors (or

the Special Committee) determines in good faith that such action is necessary to comply with its fiduciary duties, (ii) our Board of Directors (or the Special Committee) determines the acquisition proposal is, or would reasonably be expected to lead to, a superior proposal and (iii) prior to taking such action, the Company executes a confidentiality agreement with such third party with terms no less favorable than those contained in our confidentiality agreement with H.I.G. Capital Management, Inc.

Conditions to the Merger (see page 66)

•

Completion of the merger depends upon the parties meeting or waiving a number of conditions, including the following:

	o		adoption of the merger agreement at the special meeting by holders of a majority of the issued and outstanding shares of Allion common stock entitled to vote on the adoption;
	o		the absence of any law or governmental order prohibiting the consummation of the merger;
	o		the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act;
	o		the material accuracy of the parties’ representations and warranties and the parties’ compliance with the covenants and agreements set forth in the merger agreement;
	o		the absence of a material adverse effect on Allion, as that term is defined in the merger agreement;
	o		the exercise of dissenters’ rights and preservation of the right to seek appraisal by holders of not more than 10% of Allion’s outstanding common stock; and
	o		other customary closing conditions.

Termination (see page 66)

•

Under certain circumstances, the merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger, whether before or after adoption of the merger agreement by our stockholders. If the merger agreement is terminated, there will be no liability on the part of Allion, Merger Sub or Parent, except for the payment of the termination fees and expenses as described below and in the section entitled “The Merger and the Merger Agreement—Termination Fees; Expenses” beginning on page 68.

Termination Fees; Expenses (see page 68)

•

Termination Fees Payable by the Company . Allion is obligated to pay Parent a termination fee of $7.5 million if any of the following occur:

	o		the merger agreement is terminated because (i)(a) the merger has not been consummated by February 18, 2010 (unless extended in accordance with the terms of the merger agreement) and Allion has received an acquisition proposal prior to termination, (b) Allion has breached its representations or covenants and, prior to the breach, it has received an acquisition proposal, or (c) an acquisition proposal is publicly announced and not withdrawn prior to the special meeting and our stockholders fail to adopt the merger agreement, and (ii) within nine months of such termination the Company has either consummated another acquisition proposal or has entered into an agreement with respect to such acquisition proposal;
	o		Parent or Merger Sub terminates the merger agreement because our Board of Directors has (i) adversely changed its favorable recommendation of the merger agreement, (ii) recommended or approved an acquisition proposal, (iii) failed to publicly confirm its favorable recommendation of the merger agreement within 10 business days of Parent’s written request that it do so after Allion’s stockholders receive a bona fide acquisition proposal or (iv) not sent a statement to its

			stockholders recommending that they reject a tender or exchange offer by a third party within 10 business days after commencement of such tender or exchange offer;
	o		Parent or Merger Sub terminate the merger agreement because we solicit, initiate or encourage a third party acquisition proposal in violation of the merger agreement; or
	o		we terminate the merger agreement in order to accept a superior acquisition proposal.

•

Termination Fees Payable by Parent . Parent is obligated to pay us a reverse termination fee of $7.5 million if Parent and Merger Sub fail to close the merger because of a failure to receive financing after the conditions to Parent’s and Merger Sub’s obligation to complete the merger have been satisfied and Parent and Merger Sub are not otherwise in breach of the merger agreement. The amount of the reverse termination fee will be $10.0 million, however, if:

	o		Parent and Merger Sub fail to close the merger in circumstances not involving Parent’s failure to receive financing, after the conditions to Parent’s and Merger Sub’s obligations to complete the merger have been satisfied; or
	o		Parent and Merger Sub terminate the merger agreement in their discretion 60 days or more after the date of the merger agreement.

•

Expense Reimbursement . We are obligated to reimburse Parent and Merger Sub for up to $3.25 million of their documented, out-of-pocket expenses in the event that the merger agreement is terminated because our stockholders fail to adopt the merger agreement, which reimbursement will be credited against any termination fee we must subsequently pay to Parent. We are obligated to reimburse Parent and Merger Sub for up to $4.5 million of their documented, out-of-pocket expenses in the event that the merger agreement is terminated because we willfully breach one or more of our representations, warranties or covenants in the merger agreement, which reimbursement will not be credited against any termination fee we must subsequently pay to Parent.

Appraisal Rights (see page 71)

	•		Pursuant to Section 262 of the General Corporation Law of the State of Delaware, if you do not vote in favor of the adoption of the merger agreement and you instead follow the appropriate procedures for demanding and perfecting appraisal rights as described on pages 71 through 73 and in Appendix D , you will receive a cash payment for the “fair value” of your shares of Allion common stock, as determined by a Delaware Court of Chancery, instead of the $6.60 per share merger consideration to be received by our stockholders pursuant to the merger agreement. The “fair value” of Allion common stock may be more than, less than or equal to the $6.60 merger consideration you would have received for each of your shares pursuant to the merger agreement if you had not exercised your appraisal rights.
	•		Generally, in order to exercise appraisal rights, among other things:

	o		you must NOT vote in favor of adoption of the merger agreement; and
	o		you must make written demand for appraisal in compliance with Delaware law PRIOR to the vote of our stockholders to adopt the merger agreement.

•

Merely abstaining or voting against the adoption of the merger agreement will not preserve your appraisal rights under Delaware law. Appendix D to this Proxy Statement contains the Delaware statute relating to your appraisal rights. If you want to exercise your appraisal rights, please read and carefully follow the procedures described on pages 71 through 73 and in Appendix D. Failure to take all of the steps required under Delaware law may result in the loss of your appraisal rights.

Material U.S. Federal Income Tax Consequences (see page 55)

•

The receipt of $6.60 in cash by our stockholders for each outstanding share of Allion common stock will be a taxable transaction for U.S. federal income tax purposes. Each of our stockholders generally will recognize taxable gain or loss, measured by the difference, if any, between the stockholder’s amount realized in the merger of $6.60 per share, and the tax basis of each share of Allion common stock owned by such stockholder.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

      The following questions and answers are intended to address briefly some commonly asked questions regarding the special meeting and the merger, and other matters to be considered by Allion’s stockholders at the special meeting. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the more detailed information contained elsewhere in this Proxy Statement, the appendices to this Proxy Statement and the documents referred to in this Proxy Statement.

      Q: When and where is the special meeting?

      A: The special meeting is scheduled to take place on       , 2009 at 10:00 a.m. Eastern time, at            .

      Q: What is the purpose of the special meeting?

      A: At the special meeting, our stockholders will be asked to vote on a proposal to adopt the Agreement and Plan of Merger, dated as of October 18, 2009, by and between Allion, Parent and Merger Sub.

     Our stockholders may also be asked to vote to adjourn the special meeting to solicit additional proxies in support of the proposal to adopt the merger agreement, if there are not sufficient votes at the special meeting to adopt the merger agreement.

           Q: Why am I receiving this Proxy Statement and proxy card?

           A: You are receiving this Proxy Statement and proxy card because you own shares of Allion common stock. This Proxy Statement describes matters on which we urge you to vote at the special meeting and is intended to assist you in deciding how to vote your shares. If your shares are held by a bank or brokerage firm, you are considered the beneficial owner of shares held in “street name.” If your shares are held in street name, your bank or brokerage firm (the record holder of your shares) forwarded these proxy materials, along with a voting instruction card, to you.

           Q: What is a proxy?

           A: A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of stock. The written document describing the matters to be considered and voted on at the meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of stock is called a “proxy card.” Our Board of Directors has designated two of our officers, Michael P. Moran and Russell A. Fichera, as proxies for the special meeting.

           Q: How many shares must be present to hold the meeting?

           A: A quorum must be present at the special meeting for any business to be conducted. The presence, in person or by proxy, of holders of record of a majority of the issued and outstanding shares of Allion stock entitled to vote at the special meeting will constitute a quorum. Proxy cards received by us but marked “ABSTAIN” will be included in the calculation of the number of shares considered to be present at the meeting. If you hold your shares in street name and do not give instructions to your bank or brokerage firm on how to vote your shares, it will not be permitted to vote your shares at the special meeting and your shares will not be counted for purposes of establishing a quorum. If a quorum is not present, a vote cannot occur, and a majority in interest of the stockholders entitled to vote at the meeting, present in person or by proxy, may adjourn the meeting until a quorum is present or represented. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given.

      Q: What vote is required to adopt the merger agreement and approve the adjournment, if necessary?

      A: Adoption of the merger agreement requires the affirmative vote of a majority of the outstanding shares of Allion common stock entitled to vote on the merger. Adjournment of the special meeting, if necessary to solicit additional proxies, requires the approval of a majority of the votes cast. The rollover stockholders, who beneficially own approximately 41.1% of the outstanding Allion common stock, have executed voting agreements pursuant to which they have agreed to vote their shares of Allion common stock in favor of adoption of the merger agreement at the special meeting. In addition, the directors and executive officers of Allion, who beneficially own approximately

0.2% of the outstanding Allion common stock, have informed us that they intend to vote all of their shares of Allion common stock “FOR” the adoption of the merger agreement and “FOR” any adjournment of the special meeting, if necessary to solicit additional proxies.

      Q: Who is entitled to attend the special meeting?

      A: You are entitled to attend the special meeting if you owned shares of Allion stock at the close of business on            , 2009, which Allion has set as the record date for the special meeting. Stockholders must present a form of photo identification to be admitted to the special meeting. If you hold your shares in street name, you are invited to attend the special meeting, but you will also need to bring a copy of your bank or brokerage statement, evidencing your ownership as of the record date, to gain admittance.

      Q: Who is entitled to vote?

      A: You are entitled to vote on the proposals to be considered at the special meeting if you owned shares of Allion stock at the close of business on            , 2009, the record date for the special meeting. For each share of Allion common stock you owned at the close of business on the record date, you will have one vote on each proposal presented at the special meeting. On the record date, there were             shares of Allion common stock issued and outstanding and entitled to vote at the special meeting.

      Q: What happens if I sell my shares before the special meeting?

      A : The record date for the special meeting,       , 2009, is earlier than the date of the special meeting. If you held your shares on the record date but transfer them prior to the effective time of the merger, you will retain your right to vote at the special meeting, but you will lose the right to receive the merger consideration for your shares. The right to receive such merger consideration will pass to the person who owns your shares when the merger becomes effective.

      Q: How do I vote?

      A: If you are a registered stockholder, meaning that you hold your shares in certificate form or through an account with Allion’s transfer agent, Continental Stock Transfer & Trust Company, you may submit a proxy prior to the special meeting or you may vote in person at the special meeting.

          To vote in person at the special meeting, you must attend the meeting and obtain and submit a ballot. Ballots for voting in person will be available at the special meeting. If you are a beneficial owner of shares held in “street name” by a bank or brokerage firm, you may not vote your shares in person at the special meeting unless you obtain a power of attorney or proxy form from the record holder of your shares.

          To submit a proxy to vote your shares of stock, you must complete and return the enclosed proxy card in time to be received by us prior to the special meeting, or you may deliver your proxy card in person at the special meeting. If a proxy card is properly executed, returned to us and not revoked, the shares represented by the proxy will be voted in accordance with the instructions set forth on the proxy card. We know of no other business that will be presented at the special meeting. However, if any other matter properly comes before the stockholders for vote at the special meeting, your shares will be voted in accordance with the best judgment of the proxy holders.

          If your shares are held in street name, your bank or brokerage firm forwarded these proxy materials, as well as a voting instruction card, to you. Please follow the instructions on the voting instruction card to vote your shares. If you are the beneficial owner of the shares, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions.

      Q: What if I do not specify how my shares are to be voted?

      A: If you are a registered stockholder, and you submit a proxy card but do not provide voting instructions, your shares will be voted:

•

“FOR” the adoption of the merger agreement, and

•

“FOR” the approval of the adjournment of the special meeting to solicit additional proxies.

          If you hold your shares in street name and do not give instructions to your bank or brokerage firm, it will not be permitted to vote your shares and your shares will not be considered present at the special meeting. As a result, it will have the same effect as a vote “AGAINST” the adoption of the merger agreement, but it will have no effect on any vote with respect to the adjournment of the meeting to solicit additional proxies in support of the proposal to adopt the merger agreement.

      Q: How do I change my vote after I submit my proxy?

      A: If you decide to change your vote, you may revoke your proxy at any time before it is voted at the special meeting. You may revoke your proxy in one of three ways:

     1. You may notify the Secretary of Allion or Allion’s proxy solicitor,            , in writing that you wish to revoke your proxy. Please contact Allion Healthcare, Inc., 1660 Walt Whitman Road, Suite 105, Melville, New York 11747, Attention: Secretary, or            . We must receive your notice before the time of the special meeting.

     2. You may submit a properly executed proxy card with a later date than your original proxy card. We must receive your later-dated proxy card before the time of the special meeting.

     3. You may attend the special meeting and vote in person. Merely attending the special meeting will not by itself revoke a proxy; you must obtain a ballot and vote your shares at the special meeting to revoke the proxy.

      Q: Who will solicit and pay the cost of soliciting proxies?

      A: Allion is paying the cost of soliciting these proxies. Upon request, Allion will reimburse brokers and other nominees for their reasonable out-of-pocket expenses for forwarding these proxy materials to the beneficial owners of Allion shares. Allion’s directors, officers and employees may solicit proxies in person or by telephone, mail, facsimile, email or otherwise, but they will not receive additional compensation for their services. In addition, Allion will pay approximately $            (plus per call fees and reimbursement of out-of-pocket expenses) to            , the Company’s proxy solicitor.

      Q: What will be the effect of the merger?

      A: After the effective time of the merger, you will no longer own any shares of Allion common stock. All of the capital stock of Allion following completion of the merger will be wholly owned by Parent.

      Q: If the merger is completed, what will I receive for the shares of Allion common stock I hold?

      A: If the merger is completed, each share of Allion common stock that you own at the effective time of the merger will be automatically cancelled and converted into the right to receive $6.60 in cash, without interest and subject to applicable tax withholding requirements. However, if you perfect your appraisal rights, you will not receive the $6.60 per share merger consideration and instead your shares will be subject to appraisal in accordance with Delaware law.

      Q: If the merger is completed, what will happen to outstanding options and warrants to acquire Allion common stock?

      A: Prior to the effective time of the merger, the Company will cause each outstanding Allion stock option to vest in full. Each stock option to purchase Allion common stock outstanding at the effective time of the merger will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such option multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such option. Each outstanding warrant to purchase Allion common stock, whether or not vested, will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such warrant, multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such warrant. If the exercise price per share of an option

or warrant to acquire Allion common stock equals or exceeds the $6.60 per share merger consideration, such option or warrant will be cancelled without payment.

      Q: What should I do now?

      A: After you read and consider carefully the information contained in this Proxy Statement, please return your proxy as soon as possible so that your shares may be represented at the special meeting. If your shares of Allion common stock are registered in your own name, you may submit your proxy by filling out and signing the proxy card and then mailing your signed proxy card in the enclosed pre-paid envelope. If your shares are held in “street name,” please follow the directions your broker or bank has provided.

      Q: Should I send in my stock certificates now?

      A: No. If the merger agreement is adopted and other conditions to the merger are satisfied, shortly after the merger is completed you will receive a letter of transmittal with instructions informing you how to send in your stock certificates to Continental Stock Transfer & Trust Company, the exchange agent appointed by Merger Sub. YOU SHOULD NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.

      Q: When do you expect the merger to be completed?

     A: We are working towards completing the merger as soon as possible. Assuming timely satisfaction of necessary closing conditions, we expect the merger to be completed in the first quarter of 2010.

      Q: When will I receive the cash payment for my shares?

      A: Assuming that you do not elect to exercise your appraisal rights, shortly after the effective time of the merger, Continental Stock Transfer & Trust Company, the exchange agent appointed by Merger Sub, will send to you a letter of transmittal with instructions regarding the surrender of your share certificates in exchange for the merger consideration. Once you have delivered an executed copy of the letter of transmittal together with your share certificates to Continental Stock Transfer & Trust Company, it will promptly pay the merger consideration owing to you, less any applicable withholding taxes.

      Q: Where can I find more information about Allion?

      A: We file reports, proxy statements and other information with the Securities and Exchange Commission, referred to as the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. You may read and copy this information at the SEC’s public reference facilities. You may call the SEC at 1-800-SEC-0330 for information about these facilities. This information is also available at the Internet site the SEC maintains at www.sec.gov . You can also request copies of these documents from us. See “Where You Can Find More Information” on page 85.

      Q: Who can help answer my other questions?

      A: If you have further questions about the merger, you should contact our proxy solicitor at the following address and telephone number:

RISK FACTORS AND SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS

     Some of the statements made in this Proxy Statement contain forward-looking statements, which reflect our plans, beliefs and current views with respect to, among other things, future events and our financial performance. You are cautioned not to place undue reliance on such statements. We often identify these forward-looking statements by use of words such as “believe,” “expect,” “continue,” “may,” “will,” “could,” “would,” “potential,” “anticipate,” “intend” or similar forward-looking words.

     The forward-looking statements included herein and any expectations based on such forward-looking statements are subject to risks and uncertainties and other important factors that could cause actual results to differ materially from the results contemplated by the forward-looking statements.

     The risks and uncertainties to which we are subject can be expected to change over time, and we undertake no obligation to update publicly or review the risks or uncertainties or any of the forward-looking statements made in this Proxy Statement, whether as a result of new information, future developments or otherwise.

     Set forth below are various risks related to the proposed merger. The following is not intended to be an exhaustive list of the risks related to the merger and should be read in conjunction with the other information in this Proxy Statement. In addition, you should review the risk and uncertainties discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2008 and in Part II, Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, both of which are incorporated by reference into this Proxy Statement, for a description of the risk factors associated with the continued operation of Allion’s business.

Completion of the merger is subject to various conditions, and the merger may not occur even if we obtain stockholder approval.

     Completion of the merger is subject to various risks, including, but not limited to:

	•		the failure of stockholders holding at least a majority of the shares of outstanding Allion common stock to adopt the merger agreement;
	•		Parent’s and Merger Sub’s right to terminate the merger agreement if a material adverse effect has occurred to Allion, as that term is defined in the merger agreement;
	•		the failure to obtain the expiration or termination of the applicable waiting period under the HSR Act;
	•		the enactment of a law or issuance of an order by a governmental authority prohibiting the consummation of the merger;
	•		the exercise of appraisal rights under Delaware law by holders of 10% or more of Allion’s outstanding common stock;
	•		the failure of any other conditions in the merger agreement; and
	•		the failure of Parent to obtain the financing contemplated by its debt and equity commitment letters entered into at the time of execution of the merger agreement.

See “The Merger and the Merger Agreement—Conditions.” As a result of these risks, there can be no assurance that the merger will be completed even if we obtain stockholder approval. If our stockholders do not adopt the merger agreement or if the merger is not completed for any other reason, we expect that our current management, under the direction of our Board of Directors, will continue to manage Allion.

Failure to complete the merger could negatively impact the market price of Allion common stock.

     If the merger is not completed for any reason, we will be subject to a number of material risks, including the following:

	•		the market price of Allion common stock will likely decline to the extent that the current market price of the stock reflects a market assumption that the merger will be completed;
	•		we must pay certain costs related to the merger even if the merger is not completed, such as legal fees and certain investment banking fees, and, in specified circumstances, termination fees and expense reimbursements; and
	•		the diversion of management’s attention from the day-to-day business of Allion and the unavoidable disruption to our employees and our relationships with customers and suppliers during the period before completion of the merger may make it difficult for us to regain our financial and market position if the merger does not occur.

If the merger agreement is terminated and our Board of Directors seeks another merger or business combination, we cannot offer any assurance that we will be able to find an acquirer willing to pay an equivalent or better price than the price to be paid under the merger agreement.

We may lose key personnel as a result of uncertainties associated with the merger.

     Our current and prospective employees may be uncertain about their future roles and relationships with Allion following completion of the merger. This uncertainty may adversely affect our ability to attract and retain key management, sales, marketing and operational personnel.

THE SPECIAL MEETING

Date, Time and Place of the Special Meeting

     This Proxy Statement is furnished in connection with the solicitation of proxies by our Board of Directors for a special meeting of the holders of Allion common stock to be held on       , 2009 at 10:00 a.m. Eastern time, at            , or at any postponement or adjournment of the special meeting.

Matters To Be Considered at the Special Meeting

     The purpose of the special meeting is to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of October 18, 2009, by and between Parent, Merger Sub and Allion, pursuant to which Allion will become a direct wholly owned subsidiary of Parent. If our stockholders adopt the merger agreement, the other closing conditions are satisfied or waived, and the merger is completed, the holders of Allion common stock will be entitled to receive $6.60 in cash per share held by them at the effective time of the merger, except for holders who perfect their appraisal rights under Delaware law. If our stockholders fail to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached to this Proxy Statement as Appendix A .

     Our stockholders may also be asked to approve the adjournment of the special meeting, if necessary, to solicit additional proxies in favor of adoption of the merger agreement.

     Allion does not expect that a vote will be taken on any other matters at the special meeting. However, if any other matters are properly presented at the special meeting, the holders of the proxies will have discretion to vote on those matters in accordance with their best judgment.

Record Date, Outstanding Voting Securities, Voting Rights and Quorum

     Our Board of Directors has set the close of business on       , 2009, as the record date for determining the stockholders of Allion entitled to notice of, and the right to vote at, the special meeting. As of the record date, there were             holders of record of Allion common stock and             shares of Allion common stock outstanding.

     Each holder of Allion common stock at the close of business on the record date is entitled to attend and vote at the special meeting. Each outstanding share of Allion common stock entitles its holder to one vote on each matter properly presented at the special meeting.

     A majority of the issued and outstanding shares of Allion common stock entitled to vote at the special meeting, whether represented in person or by proxy, will constitute a quorum. Proxy cards received by us but marked “ABSTAIN” will be counted for the purpose of establishing a quorum at the special meeting. If you hold your shares in street name and do not give instructions to your bank or brokerage firm on how to vote your shares, it will not be permitted to vote your shares at the special meeting and your shares will not be counted for purposes of establishing a quorum. If a quorum is not present at the special meeting, we currently expect that we will adjourn the special meeting to solicit additional proxies. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given.

     A list of holders of Allion stock will be available for review at our executive offices during regular business hours beginning three days after the date of this Proxy Statement and through the date of the special meeting.

Required Votes

     Adoption of the merger agreement requires the affirmative vote of a majority of the outstanding shares of Allion common stock entitled to vote on the adoption. All votes will be tabulated by the inspector of election appointed for the special meeting, who will separately tabulate affirmative and negative votes and abstentions. Adjournment of the special meeting, if necessary, to solicit additional proxies requires the approval of a majority of the votes cast.

     In connection with the merger agreement, the rollover stockholders have entered into voting agreements with Parent obligating the rollover stockholders to vote all of their shares of Allion common stock in favor of adoption of the merger agreement. The number of shares of Allion common stock that the rollover stockholders have committed

pursuant to the voting agreements is 11,795,364 shares, representing approximately 41.1% of the outstanding common stock of the Company as of the record date for the special meeting. The full text of the form of voting agreement is attached to this Proxy Statement as Appendix C .

     As of the record date for the special meeting, the directors and executive officers of the Company beneficially owned an aggregate of             shares of Allion common stock, representing an aggregate of approximately       % of our outstanding common stock. Those directors and executive officers have informed us that they intend to vote all of their shares of Allion common stock “FOR” the adoption of the merger agreement and “FOR” any adjournment of the special meeting, if necessary to solicit additional proxies.

Voting

     Registered holders of Allion stock may submit a proxy prior to the special meeting or may vote in person at the special meeting. If your shares are held in “street name” by a bank or brokerage firm, your bank or brokerage firm forwarded these proxy materials, as well as a voting instruction card, to you. Please follow the instructions on the voting instruction card to vote your shares.

     To vote in person at the special meeting, a stockholder must attend the meeting and obtain and submit a ballot. Ballots for voting in person will be available at the special meeting. If you are a beneficial owner of shares held in street name, you may not vote your shares in person at the special meeting unless you obtain a power of attorney or proxy form from the record holder of your shares.

     To submit a proxy, stockholders must complete and return the enclosed proxy card in time to be received by us prior to the special meeting, or deliver a proxy card in person at the special meeting. If a proxy card is properly executed, returned to us and not revoked, the shares represented by the proxy will be voted in accordance with the instructions set forth on the proxy card. If you are the beneficial owner of the shares, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions.

     Registered stockholders who submit a proxy card but do not provide voting instructions will be voted ”FOR” the adoption of the merger agreement and “FOR” the approval the adjournment of the special meeting to solicit additional proxies. If you hold your shares in street name and do not give instructions to your bank or brokerage firm, it will not be permitted to vote your shares and your shares will not be considered present at the special meeting. As a result, it will have the same effect as a vote “AGAINST” the adoption of the merger agreement, but it will have no effect on any vote with respect to the adjournment of the meeting to solicit additional proxies in support of the proposal to adopt the merger agreement.

Revocation of Proxies

     If you have submitted a proxy, you may revoke it at any time before it is voted at the special meeting by:

	•		delivering a later-dated, properly executed proxy card or a written revocation of such proxy to:
	•		delivering a later-dated, properly executed proxy card or a written revocation of such proxy to:

Allion Healthcare, Inc.
Attn: Secretary
1660 Walt Whitman Road, Suite 105
Melville, NY 11747; or

•

attending the special meeting and voting in person.

     If you choose one of the first two methods, your notice of revocation or your new proxy card must be received before the start of the special meeting. Attendance at the special meeting will not by itself constitute revocation of a

proxy. To revoke a proxy in person at the special meeting, you must obtain a ballot and vote in person at the special meeting.

     If you hold your shares in street name, please follow the directions received from your bank or broker to change your vote.

Expenses of Proxy Solicitation

     Allion will bear the expenses in connection with the solicitation of proxies. Upon request, we will reimburse brokers and other nominees for their reasonable out-of-pocket expenses for forwarding copies of these proxy materials to the beneficial owners of Allion shares. Solicitation of proxies will be made principally by mail. Proxies may also be solicited in person or by telephone, facsimile, or email by Allion’s directors, officers and employees. Such persons will receive no additional compensation for these services. We have engaged             as our proxy solicitor to assist in the dissemination of proxy materials and in obtaining proxies and to answer your questions. We will pay them a fee of $            plus a fee for each phone call made to our stockholders and reimburse them for their expenses.

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

PARTIES INVOLVED IN THE MERGER

Allion Healthcare, Inc.

     Allion Healthcare, Inc. is a Delaware corporation and a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients as well as specialized biopharmaceutical medications and services to chronically ill patients. Allion sells HIV/AIDS medications, ancillary drugs and nutritional supplies under the trade name MOMS Pharmacy. Allion also provides services for intravenous immunoglobulin, Blood Clotting Factor and other therapies through its Biomed America division. Allion works closely with physicians, nurses, clinics, AIDS Service Organizations, and government and private payors to improve clinical outcomes and reduce treatment costs.

     Allion’s principal executive offices are located at 1660 Walt Whitman Road, Suite 105, Melville, New York 11747, and its telephone number is (631) 547-6520.

Brickell Bay Acquisition Corp.

     Brickell Bay Acquisition Corp., or Parent, is a Delaware corporation formed solely in anticipation of the merger by entities affiliated with H.I.G. Capital, L.L.C., a leading global private equity investment firm focused exclusively on the middle market with more than $7.5 billion of equity capital under management. The rollover stockholders are expected to exchange a portion of their shares of Allion common stock for equity interests in Parent in connection with the merger. Parent currently has de minimis assets and has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement.

     Parent’s principal executive offices are located at 1001 Brickell Bay Drive, 27 ^th Floor, Miami, Florida 33131, and its telephone number is (305) 379-2322.

Brickell Bay Merger Corp.

     Brickell Bay Merger Corp., or Merger Sub, is a Delaware corporation formed by Parent solely for purposes of entering into the merger agreement and consummating the transactions contemplated by the merger. Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, at the effective time of the merger, Merger Sub will merge with and into Allion, with Allion continuing as the surviving corporation. Merger Sub currently has de minimis assets and has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement.

     Merger Sub’s principal executive offices are located at 1001 Brickell Bay Drive, 27 ^th Floor, Miami, Florida 33131, and its telephone number is (305) 379-2322.

Parallex LLC

     Parallex LLC, or Parallex, is a Delaware limited liability company and a former stockholder of Biomed America, Inc., which Allion acquired in April 2008. Parallex is controlled by Raymond A. Mirra, Jr. and, as of October 28, 2009 beneficially owned 7,903,499 shares of Allion common stock, representing approximately 27.5% of the outstanding shares of Allion common stock. Parallex and certain other stockholders, whom we collectively refer to as the rollover stockholders, have entered into exchange agreements with Parent pursuant to which such rollover stockholders have agreed to surrender to Parent, immediately prior to the effective time of the merger, a portion of the shares of Allion common stock owned beneficially or of record by such rollover stockholders, in exchange for equity interests in Parent. Each of the rollover stockholders is a former stockholder of Biomed America, Inc., which Allion acquired in April 2008. None of the rollover stockholders, other than Parallex, is an affiliate of Allion.

     Parallex’s principal executive offices are located at 27181 Barefoot Boulevard, Millsboro, Delaware 19966, and its telephone number is (610) 586-1655.

SPECIAL FACTORS

Background of the Merger

     As part of the ongoing management and oversight of Allion’s business, our Board of Directors and senior management have regularly reviewed and discussed the Company’s strategic direction, performance, risks, and long term plans. In the course of these discussions, our Board of Directors and senior management have periodically explored and assessed strategic options as part of an ongoing effort to strengthen the Company’s business and enhance stockholder value.

     In early 2009, our Board of Directors became more focused on risks associated with potential reductions in reimbursement rates, including as a result of state budget cuts, health care reform, the status of premium reimbursement programs in California and New York, and revisions to the industry’s pricing benchmarks, as well as the costs and expenses associated with our status as a public company. Our Board of Directors had also been focused for some time on the volatile nature of the trading price and the low average trading volume of our stock. In combination, those factors were continuing to restrict liquidity for our stockholders as a result of the difficulty associated with acquiring or divesting significant blocks of Allion shares without creating short-term disruptions in the market price. Limited liquidity and low average trading volume were also making it difficult for the Company to attract long-term, fundamental-oriented institutional investors, as well as institutional quality research and trading support. As a result of these factors and others, our Board of Directors determined to begin a formal process to explore strategic alternatives to maximize stockholder value, including a sale of the Company.

     On January 30, 2009, in light of market, economic, competitive, regulatory and other conditions and developments, we engaged Raymond James as the Company’s financial advisor to facilitate a process for and explore a possible sale of the Company.

     On February 17, 2009, Raymond James began contacting potential strategic and financial buyers, contacting 60 total potential buyers over the course of the process. As a result of these contacts, we executed confidentiality agreements with 51 potential buyers, including 17 strategic candidates and 34 financial sponsors.

     From February 18 through April 21, 2009, Raymond James provided each party who had executed a confidentiality agreement with a confidential information memorandum and various supplemental analyses regarding our business. During that time, we also responded, through Raymond James and Alston & Bird, to initial diligence questions from the potential buyers who had executed confidentiality agreements.

     On March 2, 2009, at a regularly scheduled meeting of our Board of Directors, at which the Company’s senior management was present, Raymond James summarized the status of the process, including the nature, number and status of the parties that had been contacted and the number and status of those parties that had entered into confidentiality agreements.

     On or around March 25, 2009, Raymond James provided the 27 potential buyers who remained active in the process with process guidelines, which requested that any party wishing to proceed further in the process submit a preliminary, non-binding written proposal by April 3, 2009. The process guidelines further provided that the preliminary proposals must, among other items, specify the potential buyer’s valuation of the Company, contemplated transaction structure, and prospective sources of financing required to close the potential transaction.

     On April 3, 2009, the deadline for preliminary proposals established by the process letter distributed by Raymond James, we received written preliminary proposals from five financial sponsors. Each proposal provided for the purchase of all of our outstanding common stock for cash at prices ranging from $4.66 to $6.00 per share.

     On April 6 and 7, 2009, we received two additional written preliminary proposals from financial sponsors. Both of these proposals also provided for the purchase of all of our outstanding common stock for cash, at prices ranging between $4.25 and $5.50 per share.

     On April 8, 2009, Raymond James provided Company management and one of our directors with an overview of the seven preliminary proposals received as of that date. Raymond James also noted that it expected feedback from the two potential remaining strategic candidates within a few days.

     On April 10, 2009, we received an oral preliminary proposal from one of the two remaining strategic candidates for an all-cash purchase of our outstanding common stock at a price range of $5.50 to $6.50 per share. That same day, Raymond James also informed Company management that the other remaining strategic candidate had elected not to submit a proposal.

     On April 13, 2009, our Board of Directors and Company management met with Raymond James and Alston & Bird to review the eight preliminary proposals received. Raymond James identified each remaining potential buyer and discussed the significant financial terms of each preliminary proposal, including price range per share, sources of financing, and financing contingencies. Raymond James also outlined a potential process for advancing the due diligence efforts of, and discussions with, the remaining potential buyers. Following a discussion of the proposals, our Board of Directors resolved to allow five of the parties from whom we had received preliminary proposals to move forward in the potential transaction process. Our Board of Directors directed Raymond James to obtain a written proposal with more specific terms from the potential strategic buyer and to request improved proposals from the two parties who had submitted the lowest price ranges in their preliminary proposals. At that meeting, a representative of Alston & Bird also reviewed for our Board of Directors the fiduciary duties of directors under Delaware law in the context of a proposed transaction involving a change in control of the Company. After discussion, our Board of Directors established an informal Negotiating Committee, consisting of Flint Besecker and Gary Carpenter, to interact with the Company’s advisors over the course of the process.

     Beginning on or around April 13 through April 28, 2009, at the direction of our Board of Directors, we provided a select group of parties from whom we had received acceptable written preliminary proposals with access to an online data room, which included certain confidential financial, legal, and operational information, as well as a draft of a proposed form of merger agreement, and those parties conducted due diligence investigations of our business.

     On April 13, 2009, we executed a confidentiality agreement with H.I.G., and Raymond James provided H.I.G. with access to the preliminary information materials previously provided to the other potential purchasers who had executed confidentiality agreements.

     During the week of April 13, 2009, as directed by our Board of Directors, Raymond James contacted the two potential buyers who had submitted the lowest price ranges in their preliminary proposals, to request improved proposals. Both potential purchasers declined to increase their proposals and were dismissed from the process. Raymond James also contacted the strategic party that had submitted the oral proposal in order to request additional information regarding their proposal and to request that their proposal be submitted in writing. The strategic party reiterated their interest to Raymond James, provided additional information regarding their oral proposal, but indicated that due to internal review and approval requirements, they would not be able to provide us with a written proposal within the timeframe we requested.

     On April 20, 2009, we received a written preliminary proposal from H.I.G., increasing the total number of preliminary proposals received to nine. The H.I.G. proposal contemplated an all-cash purchase of all outstanding Allion common stock at a price range of $5.50 to $6.00 per share. Raymond James informed the Negotiating Committee and was directed to invite H.I.G. to continue in the process.

     On April 27, 2009, we received a tenth written preliminary proposal from a financial buyer, with an indicated price range of between $7.00 and $7.50 per share. Raymond James informed the Negotiating Committee and was directed to invite the party to continue in the process.

     At the direction of the Negotiating Committee, between April 23 and May 8, 2009, the Company’s senior management made presentations regarding the Company’s business to the eight remaining potential buyers who had submitted preliminary proposals and had been invited to advance in the Company’s process, including H.I.G.

     During the weeks of May 4 and May 11, 2009, Raymond James notified the eight remaining potential buyers of the procedures for submitting a final offer, setting a deadline for final offers of May 18, 2009.

     On May 11, 2009, at a regularly scheduled meeting of our Board of Directors, at which Company management was present, Raymond James discussed the initial feedback received from the remaining potential buyers and the follow-up due diligence requests received following the buyers’ meetings with Company management.

     Between May 11 and May 15, 2009, the Company’s senior management held conference calls with three of the remaining potential buyers to provide additional information about our business. In addition, we responded to additional due diligence requests from a number of the remaining potential purchasers through Raymond James and Alston & Bird.

     During the weeks of May 11 and May 18, 2009, all of the remaining potential buyers, other than H.I.G., notified Raymond James of their decision to cease evaluating a potential transaction with the Company and exit the process, citing various reasons generally relating to risks associated with reductions in reimbursement rates and patient and profitability concentrations in certain segments of our business.

     On May 12, 2009, H.I.G. met with Raymond Mirra, the sole voting equity holder of Parallex, to discuss the Company’s business.

     On May 20, 2009, H.I.G. submitted a letter to Parallex, outlining a proposed structure for a transaction in which Parallex and certain of our other stockholders who had formerly been stockholders of Biomed America, Inc. would be required to exchange their shares of Allion common stock for equity interests in H.I.G.’s acquisition vehicle in connection with a potential acquisition of the Company by H.I.G.

     On May 20, 2009, H.I.G. submitted a written confirmation of its proposal to Raymond James to purchase our outstanding common stock at price range between $5.50 and $6.00 per share in cash, with the additional requirement that H.I.G. and Mr. Mirra reach a suitable unspecified arrangement regarding his continued involvement in the Company, should H.I.G. acquire the Company.

     On May 21, 2009, our Board of Directors met with the Company’s senior management, Raymond James and Alston & Bird. During that meeting, Raymond James discussed the status of the potential transaction process. After reviewing the stated rationale of the potential buyers who had elected to leave the potential transaction process, Raymond James reviewed the financial terms of H.I.G.’s proposal, including the price range, H.I.G.’s condition that it enter into a suitable, unspecified arrangement with Mr. Mirra, and H.I.G.’s indication that Company management would receive equity incentive compensation post-closing. A representative of Alston & Bird reviewed for our Board of Directors the fiduciary duties of directors under Delaware law in the context of a proposed transaction involving a change in control of the Company, including considerations for establishing a formal Special Committee of independent directors to evaluate the potential transaction. Upon consideration of the potential roles of Company management and Mr. Mirra in a potential transaction with H.I.G., our Board of Directors determined that the formation of a formal Special Committee was appropriate and advisable. Our Board of Directors established a formal Special Committee, consisting of Willard Derr and Gary Carpenter, to review, evaluate, negotiate and recommend for approval by our full Board of Directors a potential transaction involving a change in control of the Company, including the proposed acquisition by H.I.G.

     On May 21, 2009, the Special Committee met with Alston & Bird and Raymond James and instructed Raymond James to request that H.I.G. refine its bid. Specifically, the Special Committee instructed Raymond James to communicate to H.I.G. the Company’s requirement that H.I.G.’s letter of intent state a specific price per share and that the price be above the range previously proposed by H.I.G. in its letter dated May 20, 2009.

     On May 22, 2009, Parallex provided H.I.G. with comments to H.I.G.’s letter outlining the proposed rollover arrangement in connection with the Company’s potential transaction.

     On or around May 25, 2009, Raymond James spoke with H.I.G. and requested that H.I.G. refine its proposal to a specific price per share above $6.00.

     On May 30, 2009, H.I.G. and Kirkland & Ellis LLP, H.I.G.’s outside legal counsel, provided Parallex with comments to our proposed merger agreement for purposes of facilitating discussion regarding H.I.G.’s proposed arrangement with Mr. Mirra.

     On June 2, 2009, H.I.G. submitted a revised offer to acquire all of the outstanding Allion common stock for $5.50 per share in cash, contingent upon entering into a rollover arrangement with Mr. Mirra. H.I.G. also provided a summary of proposed revisions to the draft merger agreement.

     On June 3, 2009, the Special Committee met with Raymond James and Alston & Bird to consider the refined final proposal from H.I.G. Following discussion, the Special Committee directed Raymond James to request that H.I.G. increase its final proposal to a price per share greater than $6.00.

     After exchanging messages for a couple of days, on June 5, 2009, Raymond James spoke with H.I.G. and requested that H.I.G. increase its final proposal to a price greater than $6.00 per share.

     On June 8, 2009, H.I.G. contacted Raymond James to submit a revised final proposal of $5.65 per share.

     The Special Committee met on June 8 and June 9, 2009 with Raymond James and Alston & Bird to discuss H.I.G.’s revised final proposal. After discussion, the Special Committee directed Raymond James to request that H.I.G. increase its final offer to $6.00 per share.

     On June 11, 2009, Raymond James spoke with H.I.G. and communicated the Special Committee’s revised proposal of $6.00 per share. During that call, H.I.G. responded to the Special Committee’s request by reaffirming its proposal of $5.65 per share.

     On June 11, 2009, H.I.G. met with Mr. Mirra to discuss the Company’s business and the potential transaction between H.I.G. and the Company.

     On June 14 and June 15, 2009, the Special Committee met with Raymond James and Alston & Bird to review the history of the transaction process and to discuss H.I.G.’s proposal of $5.65 per share in relation to select other recent transactions and the historical trading price of our stock. Representatives from Alston & Bird reviewed for the Special Committee H.I.G.’s summary of proposed revisions to the draft merger agreement. The Special Committee discussed these items, including H.I.G.’s request for an exclusivity period to negotiate a potential transaction with us, and determined to present the proposed transaction with H.I.G. to our full Board of Directors for consideration.

     On June 16, 2009, H.I.G. submitted a revised proposal increasing its offer to $6.00 per share. The Special Committee met with Raymond James and Alston & Bird to consider the revised proposal, and, after discussion, determined to present H.I.G.’s revised proposal to our full Board of Directors for consideration. At a meeting of our Board of Directors on June 16, 2009, at which Company management was present, Raymond James reviewed the terms of H.I.G.’s revised offer, and Alston & Bird reviewed the proposed rollover arrangement with Mr. Mirra, the proposed exclusivity period, and H.I.G.’s proposed revisions to the draft merger agreement. Raymond James also discussed with our Board of Directors the history of the proposed transaction process (including the fact that no potential buyer other than H.I.G. had submitted a final proposal), the historical trading price and volume of our stock, as well as the valuation implied by H.I.G.’s final proposal in comparison to selected companies and selected recent transactions. Following discussion, our Board of Directors authorized the Special Committee to negotiate and execute a letter of intent with H.I.G., including an exclusivity period to negotiate the potential transaction with us.

     From June 17 through June 24, 2009, the Special Committee negotiated a letter of intent with H.I.G.

     We executed a letter of intent with H.I.G. on June 24, 2009, providing for a price of $6.00 per share in cash and subject to an exclusivity period of 30 days with two 15-day extensions upon H.I.G.’s reaffirmation of its final proposal. On June 24, 2009, our Board of Directors also executed a written consent permitting H.I.G. to discuss with Mr. Mirra (and certain of his affiliates and associates) the terms upon which such persons would be willing to participate in a potential transaction between us and H.I.G., with such consent expressly conditioned upon the final arrangement being approved by our Board of Directors. Our Board of Directors also waived, for purposes of such discussions, the standstill provision contained in the Stockholders’ Agreement, dated April 4, 2008, between us and the former stockholders of Biomed America, Inc. named therein.

     From June 25 through July 8, 2009, the Company’s senior management met with H.I.G. and its advisors to discuss our business for the purpose of H.I.G.’s due diligence review. Between June 26 and August 8, 2009, we responded to H.I.G.’s additional due diligence requests through Raymond James and Alston & Bird.

     During July and August 2009, H.I.G. had several conversations with Mr. Mirra regarding the status of H.I.G.’s due diligence review of our business and H.I.G.’s discussions with potential lenders regarding financing.

     On July 17, 2009, H.I.G. provided Parallex with a term sheet outlining the proposed terms of the potential relationship with Parallex in connection with a potential transaction between H.I.G. and the Company.

     On July 21, 2009, the Special Committee met with Raymond James and Alston & Bird to review the status of H.I.G.’s due diligence review and meetings with Company management. The Special Committee also discussed H.I.G.’s final proposal of $6.00 in light of recent increases in the trading price of our stock.

     On July 23, 2009, H.I.G. sent Raymond James a letter reaffirming its final proposal and extending the exclusivity period by 15 days, as set forth in the executed letter of intent between us and H.I.G on June 24, 2009.

     Between July 27 and August 4, 2009, the Company’s senior management met with H.I.G. and its potential lending sources to review our business and to respond to the due diligence questions of those potential lenders.

     On July 28, 2009, at a Special Committee meeting with Raymond James and Alston & Bird, Alston & Bird again reviewed the Special Committee’s fiduciary duties with respect to the consideration of a potential transaction with H.I.G. The Special Committee discussed the increased trading price of our stock in relation to H.I.G.’s final proposal of $6.00 per share.

     On July 31, 2009, Alston & Bird received a revised draft of the proposed merger agreement from Kirkland & Ellis. Among the requested changes was a request from H.I.G. that its obligations to complete the transactions contemplated by the proposed merger agreement be conditioned upon the receipt of satisfactory financing, that the amount of the termination fee payable by the Company in various circumstances be increased from $5.0 million to $10.0 million and that the definition of “material adverse effect” used in the proposed merger agreement be revised to delete a number of exclusions previously proposed by the Company.

     At a regularly scheduled meeting of our Board of Directors on August 3, 2009, with Company senior management present, our Board of Directors received an update on the status of the potential transaction with H.I.G. Our Board of Directors discussed the recent trading price of our stock in comparison to H.I.G.’s final proposal of $6.00 per share and agreed to wait until the completion of lender presentations to determine how to proceed with the potential transaction.

     On August 8, 2009, H.I.G. sent Raymond James a second letter reaffirming its final proposal and extending the exclusivity period by an additional 15 days to August 23, 2009, as set forth in the letter of intent between us and H.I.G dated June 24, 2009.

     On August 31, 2009, the Special Committee met with Raymond James and Alston & Bird for an update on the status of H.I.G.’s discussions with potential lending sources and to discuss H.I.G.’s final proposal of $6.00 in comparison to the recent trading price of our stock. After discussion, the Special Committee directed Raymond James to request that H.I.G. provide us with its best and final offer prior to the meeting of our Board of Directors on September 1, 2009, as well as to discuss to with H.I.G. its expectations with respect to the proposed arrangement between H.I.G. and Mr. Mirra in connection with a potential transaction with us.

     On September 1, 2009, H.I.G. submitted an oral revised proposal of $6.50 per share. At a Special Committee meeting on September 1, 2009, the Special Committee discussed the revised proposal and determined to recommend, to our full Board of Directors, termination of negotiations with H.I.G. At a meeting of our full Board of Directors on September 1, 2009, at which Company management was present, the Special Committee presented its recommendation that our Board of Directors terminate negotiations with H.I.G. Our Board of Directors discussed, among other things, the increased price proposal from H.I.G., the recent trading price of our stock, as well as our business prospects and the certainty of and availability of financing for a potential transaction with H.I.G. After

discussion, our Board of Directors adopted the Special Committee recommendation to terminate negotiations with H.I.G. and directed Mr. Moran to notify H.I.G. of its decision.

     Following the meeting on September 1, 2009, Mr. Moran informed H.I.G. of our Board of Directors’ decision to terminate negotiations.

     On September 16, 2009, H.I.G. contacted Mr. Moran by telephone to request a meeting to discuss re-initiating negotiations regarding a potential transaction with the Company.

     On September 17, 2009, H.I.G. met with Mr. Moran to discuss re-engaging in negotiations regarding a potential transaction. During that meeting, H.I.G. informed Mr. Moran that it was prepared to increase its proposal to $7.00 per share, that it had lending sources for the potential transaction ready to proceed, and that it was willing to eliminate any financing contingency. Mr. Moran informed H.I.G. that he would communicate H.I.G.’s revised proposal of $7.00 per share to our Board of Directors. Also on September 17, 2009, H.I.G. met with Parallex to discuss the status of the potential transaction with us, and Parallex informed H.I.G. that it would be willing to continue to explore the possibility of participating in the rollover transaction if H.I.G. revised its final proposal to $7.00 per share.

     On September 18, 2009, Mr. Moran notified Alston & Bird of his discussions with H.I.G. and requested that the Special Committee convene a meeting for Mr. Moran to update the Special Committee on his discussions with H.I.G. Later that day, the Special Committee met with Mr. Moran and Alston & Bird to receive an update on Mr. Moran’s discussions with H.I.G.

     On September 18, 2009, H.I.G. provided Parallex with a revised draft of the term sheet outlining H.I.G.’s proposed relationship with Parallex in connection with a potential transaction between H.I.G. and the Company. Later that day, Parallex’s advisors provided H.I.G. with proposed revisions to the draft term sheet.

     On September 20 2009, H.I.G. accepted Parallex’s proposed revisions to the draft term sheet outlining H.I.G.’s proposed relationship with Parallex in connection with a potential transaction between H.I.G. and the Company.

     On September 21, 2009, H.I.G. submitted a letter of intent to Raymond James to purchase all of the outstanding Allion stock at $7.00 per share in cash, with no exclusivity period.

     On September 21, 2009, the Special Committee met with Raymond James and Alston & Bird to discuss H.I.G.’s revised final proposal and letter of intent. Alston & Bird again outlined the Special Committee’s fiduciary duties with respect to consideration of a potential transaction. On September 22, 2009, the Special Committee met again with Raymond James and Alston & Bird to review H.I.G.’s revised proposal. Raymond James discussed with the Special Committee the history of the potential transaction process, the valuation implied by the revised H.I.G. proposal in comparison to selected companies and selected recent transactions, and the historical trading price and volume of our stock. After discussion, the Special Committee resolved to recommend to our full Board of Directors that we proceed to negotiate a potential transaction with H.I.G.

     On September 23, 2009, our full Board of Directors met, with Company management present, to discuss the revised final proposal and letter of intent from H.I.G. Raymond James discussed the history of the potential transaction process, a summary of the various preliminary proposals received, a comparison of selected transactions, and the historical trading price and volume of our stock. The Special Committee recommended to our full Board of Directors that we proceed to negotiate a potential transaction with H.I.G. A representative of Alston & Bird outlined our directors’ fiduciary duties with respect to consideration of a potential transaction and after discussion of the terms of H.I.G.’s offer, our Board of Directors adopted the Special Committee’s recommendation.

     During September and October 2009, H.I.G. provided Parallex with various documents outlining the proposed economic relationship between H.I.G. and Parallex in connection with a proposed transaction between H.I.G. and the Company.

     On September 26, 2009, Alston & Bird provided a revised draft of a proposed merger agreement to Kirkland & Ellis. The revised draft deleted any financing contingency and proposed that H.I.G.’s liability to the Company would be limited to the payment of a $7.5 million reverse termination fee in the event that H.I.G. was unable to

obtain financing to complete the transaction, but did not otherwise limit the liability of H.I.G. in the event that it failed to complete the transaction. The draft also provided for the payment of a $7.5 million termination fee by the Company in certain instances and re-proposed a number of the deleted exceptions to the definition of “material adverse change, including those relating to reimbursement and health care reform.

     On September 27, 2009, for the purpose of facilitating discussion among the parties, H.I.G. provided Parallex’s advisors with initial drafts of an exchange agreement, restrictive covenant agreement, stockholders agreement and registration agreement.

     On October 1, 2009, Kirkland & Ellis provided Alston & Bird with a list of key open items with regard to the proposed merger agreement and H.I.G.’s position with regard to these items. Kirkland & Ellis indicated that a $7.5 million reverse termination fee was acceptable, but further proposed that this reverse termination fee be the Company’s sole remedy if H.I.G. failed to complete the transaction for any reason or otherwise breached the merger agreement. Kirkland & Ellis further indicated that H.I.G. would agree to a $7.5 million termination fee payable by the Company.

     On October 1, 2009, Fox Rothschild LLP, legal counsel to the rollover stockholders, provided revisions to the exchange agreement, restrictive covenant agreement, stockholders agreement and registration agreement to Kirkland & Ellis. From October 1 through October 9, 2009, Fox Rothschild and Kirkland & Ellis negotiated and exchanged revised drafts of the exchange agreement, restrictive covenant agreement, stockholders agreement and registration agreement.

     From October 2 through October 18, 2009, Alston & Bird, Raymond James, Kirkland & Ellis and H.I.G. had several conversations regarding the proposed merger agreement and negotiated the terms of the potential transaction, and we responded to additional due diligence requests from H.I.G., its advisors and its potential lenders through Raymond James and Alston & Bird.

     On October 2 and October 7, 2009, the Special Committee met informally with Flint Besecker, Raymond James and Alston & Bird to discuss the outstanding issues related to negotiation of the proposed merger agreement with H.I.G. The Special Committee also discussed the availability of financing for the potential transaction.

     On October 8, 2009, the Special Committee again met informally with Flint Besecker, Raymond James and Alston & Bird. The Special Committee discussed H.I.G.’s rejection of the Special Committee’s proposal that the Company’s remedy for failure to close the transaction be limited to the $7.5 million reverse termination fee only in the event of a failed financing.

     On October 9, 2009, the Special Committee met formally to consider its response to H.I.G regarding the circumstances allowing for payment of the reverse termination fee. The Special Committee discussed its desire to maintain the $7.00 per share purchase price for our stockholders in light of recent declines in the trading price of our stock. After discussion and in an effort to preserve the $7.00 per share purchase price, the Special Committee determined to accept H.I.G.’s position limiting the Company’s remedies for a failure to complete the transaction or breaches of the merger agreement to the reverse termination fee of $7.5 million, provided that H.I.G. agree to expediently execute a merger agreement.

     On October 9, 2009, Kirkland & Ellis provided Fox Rothschild with initial drafts of a voting agreement and the amended and restated certificate of incorporation of Parent, outlining the terms of the proposed equity to be received by the rollover stockholders pursuant to the exchange agreement.

     On October 10, 2009, Alston & Bird provided Kirkland & Ellis with a revised draft of the proposed merger agreement, indicating that limiting the remedies of the Company for a failure to complete the transaction or breaches of the merger agreement to a reverse termination fee of $7.5 million would be acceptable.

     On October 11, 2009, Kirkland & Ellis provided Fox Rothschild with revised drafts of the exchange agreement, restrictive covenant agreement, stockholders agreement and registration agreement.

     Between October 12 and October 16, 2009, Kirkland & Ellis and Fox Rothschild negotiated and exchanged revised drafts of the exchange agreement, restrictive covenant agreement, stockholders agreement, registration agreement, voting agreement and amended and restated certificate of incorporation of Parent.

     On October 13, 2009, the Special Committee met with Flint Besecker, Raymond James and Alston & Bird to discuss the outstanding issues related to negotiation of the proposed merger agreement with H.I.G. The Special Committee discussed its concerns regarding the status of H.I.G.’s financing commitments, including the apparent lack of fully committed financing in relation to H.I.G.’s termination rights in the draft merger agreement. The Special Committee directed Raymond James to discuss with H.I.G. the status of its financing commitments, but to otherwise wait until receipt of H.I.G.’s revised draft of the proposed merger agreement to respond to the other outstanding issues.

     On October 14, 2009, H.I.G. informed Parallex of a proposed reduction by H.I.G. of its price per share to $6.60, and Parallex agreed to continue to explore the possibilty of participating in the rollover transaction at the reduced price.

     On October 14, 2009, H.I.G. submitted a revised oral proposal to Raymond James of $6.60 per share in cash, citing the lower trading price of our stock, the reimbursement risks and risks associated with health care reform faced by our business, which risks were also factors contributing to a lower trading price of our stock.

     On October 15, 2009, the Special Committee met with Raymond James and Alston & Bird to discuss H.I.G.’s revised proposal of $6.60 per share. The Special Committee discussed the revised proposal in light of recent declines in the trading price of our stock, as well as the nearly final nature of negotiations with H.I.G. on the remaining issues, the expectation of executed financing commitment letters promptly for the potential transaction, H.I.G.’s agreement to increase its equity commitment to the extent debt commitment letters could not be finalized prior to signing the merger agreement, and the understanding that Parallex continued to be willing to explore the possibility of participating in the rollover transaction. After discussion, the Special Committee directed Raymond James to request that H.I.G. increase its proposed price to $6.80 per share.

     Following the Special Committee meeting, on October 15, 2009, Raymond James discussed with H.I.G. the Special Committee’s revised offer of $6.80 per share, which H.I.G. rejected. H.I.G. indicated to Raymond James that it remained firm at $6.60 per share.

     At a second meeting of the Special Committee on October 15, 2009, following Raymond James’s discussion with H.I.G., the Special Committee discussed certain revisions to terms of the proposed merger agreement, primarily relating to the amount and structure of the reverse termination fee, to be requested as a result of H.I.G.’s proposed price of $6.60 per share. At the conclusion of the meeting, the Special Committee resolved to accept H.I.G.’s proposal of $6.60 per share in exchange for revisions to the proposed merger agreement and a rapid conclusion to negotiations with H.I.G.

     On October 15, 2009, representatives of Raymond James, at the direction of the Special Committee, communicated to H.I.G. that a price of $6.60 per share would be acceptable in the event that the reverse termination fee was increased from $7.5 million to $12.0 million and the material adverse change definition excluded any risks related to changes in reimbursement rates, coverage limitations, the methods of calculating reimbursement rates, and industry pricing benchmarks. H.I.G. responded by proposing a $7.5 million reverse termination fee in the event that H.I.G. was unable to obtain financing to complete the proposed transaction and a $10.0 million reverse termination fee in the event that H.I.G. did not complete the proposed transaction for any other reason, and agreeing to the requested definition of material adverse change.

     From October 15 through 18, 2009, Alston & Bird and Kirkland & Ellis continued to negotiate the terms of the proposed merger agreement.

     On October 16, 2009, current drafts of the revised merger agreement and a background presentation from Raymond James were circulated to our Board of Directors for review. Later that day, our Board of Directors met, with Company management present, to review the draft of the proposed merger agreement, the other terms of the potential transaction with H.I.G., the status of H.I.G.’s financing commitments, and the terms of the proposed rollover transaction. Raymond James discussed the history of the potential transaction process, a summary of the

various preliminary proposals received, a comparison of selected transactions, and the historical trading price and volume of our stock, and Alston & Bird summarized the material terms of the draft merger agreement.

     On October 18, 2009, the Special Committee met with Raymond James and Alston & Bird to consider the proposed final terms of the merger agreement and the proposed transaction with H.I.G. Alston & Bird summarized the material terms of the final draft merger agreement and described the revisions to the merger agreement since the last draft of the merger agreement reviewed by our Board of Directors on October 16, 2009. Raymond James discussed the history and results of the transaction process and the history of the discussions with H.I.G. Raymond James also discussed the historical trading price and volume of our stock, trading multiples for selected public companies, transaction multiples for selected recent transactions, and premiums paid in other selected transactions. Following discussion, the Special Committee resolved to recommend that our full Board of Directors approve the final terms of the proposed merger agreement and to approve the proposed transaction with H.I.G.

     Following the Special Committee meeting, on October 18, 2009, our full Board of Directors, with Company management present, met to review the proposed final terms of the transaction with H.I.G., including the final proposed merger agreement. Alston & Bird described the revisions to the merger agreement since the last draft of the merger agreement reviewed by our Board of Directors on October 16, 2009. Raymond James discussed the history and results of the transaction process and the history of the discussions with H.I.G. Raymond James also discussed the historical trading price and volume of our stock, trading multiples for selected public companies, transaction multiples for selected recent transactions, and premiums paid in other selected transactions. Raymond James also delivered its oral opinion to our Board of Directors, which it subsequently confirmed in writing, that the merger consideration to be received by our stockholders, other than the rollover stockholders, Parent, Merger Sub and their respective affiliates, was fair, from a financial point of view, to such stockholders. Following the recommendation of the Special Committee, our full Board of Directors unanimously approved the final terms of the proposed merger agreement and the proposed transaction with H.I.G.

     On October 18, 2009, we executed and delivered the merger agreement and limited guarantee with H.I.G., and H.I.G. and Parallex executed and delivered the exchange agreement, restrictive covenant agreement, stockholders agreement, registration agreement, and voting agreement. We issued a press release announcing the transaction following execution of the various transaction documents on October 18, 2009.

Recommendation of the Special Committee and our Board of Directors

     Both the Special Committee and our Board of Directors have determined that the merger agreement and the merger are fair to and in the best interest of the Company and our unaffiliated stockholders. The Special Committee unanimously recommended that our Board of Directors:

	•		approve the merger agreement and the merger; and
	•		recommend that the stockholders of Allion vote for the adoption of the merger agreement.

     After considering the recommendation of the Special Committee, our Board of Directors unanimously approved the merger agreement, declared the merger agreement and the merger to be advisable, and resolved to recommend to Allion’s stockholders that the stockholders approve the merger agreement.

     The merger agreement was unanimously approved by our full Board of Directors at a meeting called for that purpose. As a result, the merger agreement was unanimously approved by the non-employee directors of the Company, which excludes Mr. Moran, who serves as our president and chief executive officer in addition to chairman of the board. Furthermore, the merger agreement was unanimously approved by the disinterested directors of the Company, which, in addition to Mr. Moran, excludes Mr. Miller and Mr. Stepanuk, who serve on our Board of Directors as designees of Parallex.

     The Special Committee and our Board of Directors considered a number of factors in determining to recommend that our stockholders adopt the merger agreement, as more fully described above under “—Background of the Merger” and below under “—Fairness of the Merger; Reasons for the Recommendation of the Special Committee and our Board of Directors.” Our Board of Directors unanimously recommends that you vote “FOR” the adoption of the merger agreement.

Fairness of the Merger; Reasons for the Recommendation of the Special Committee and our Board of Directors

     In reaching its conclusion regarding the fairness of the merger agreement to our unaffiliated stockholders and its decision to recommend that our Board of Directors approve the merger agreement, the Special Committee considered the following factors, each of which the Special Committee believes supported its conclusion, but which are not listed in any relative order of importance:

	•		the current overall position of Allion, including our current financial position, our competitive position in our industry, our strategic business plan, and our potential for future viability and growth;
	•		potential risks associated with reductions in reimbursement rates, including as a result of state budget cuts, health care reform, the status of premium reimbursement programs in California and New York, and revisions to the industry pricing benchmarks, as well as the volatile nature of the trading price and the low trading volume of our stock restricting liquidity for our stockholders;
	•		the Special Committee’s review of alternatives to a sale of Allion, including the long term prospects of continuing to operate as an independent public company and the attendant opportunities, costs and risks, particularly the risks highlighted in our filings with the SEC;
	•		the Special Committee’s belief that the merger will result in greater value to our stockholders than the value that could be expected to be generated from the various other strategic alternatives available to the Company, including the alternatives of remaining independent and pursuing our current strategic plan, making a strategic acquisition, and various recapitalization and restructuring strategies, considering the potential risks and uncertainties associated with those alternatives;
	•		the fact that the merger consideration is all cash, which provides certainty of value and complete liquidity to our unaffiliated stockholders;
	•		the fact that our stockholders who may not support the merger will have the opportunity to seek appraisal of the fair value of their shares under Delaware law;
	•		the fact that the $6.60 per share to be paid pursuant to the merger agreement constitutes a significant premium over the market price of Allion common stock, including:

	o		a premium of approximately 30.2% over the volume-weighted average price of Allion common stock for the five days prior to announcement of the merger, and
	o		a premium of approximately 12.6% over the closing price of Allion common stock on June 11, 2009, 90 trading days prior to announcement of the merger;

	•		the fact that $6.60 per share to be received by our stockholders pursuant to the merger agreement is a substantial increase from the offer of $5.50 per share proposed by H.I.G. in its initial letter of intent dated June 2, 2009;
	•		the Special Committee’s belief that the Company’s efforts to market itself to potentially interested parties, with the assistance of the Company’s financial advisors, constituted a thorough, fair and full process to ensure that the $6.60 per share consideration was the highest offer that could be obtained for Allion;
	•		the fact that because the rollover stockholders were required to exchange a portion of their shares of Allion common stock for equity interests in Parent as a condition of the H.I.G. Buying Group’s agreement to enter into the merger agreement, it reduced the cash required to be paid by the H.I.G. Buying Group pursuant to the merger agreement and may have allowed the H.I.G. Buying Group to increase the price per share to be paid to our unaffiliated stockholders under the merger agreement;
	•		the opinion of Raymond James delivered to our Board of Directors to the effect that, based on and subject to the various factors, assumptions and limitations set forth in Raymond James’s written opinion, the full text of which is attached hereto as Appendix B and incorporated herein by reference, as of October 18, 2009, the $6.60 per share consideration to be received by our stockholders (other than the rollover stockholders, Parent, Merger Sub and their affiliates) was fair to such holders from a financial point of view;
	•		the Special Committee’s belief that the terms of the merger agreement were the product of extensive arms-length negotiations between the Special Committee and the Company’s advisors, on the one hand, and H.I.G. and its advisors, on the other hand;

	•		the fact that, subject to compliance with the terms and conditions of the merger agreement, the Company is permitted to furnish information to and conduct negotiations with third parties that make unsolicited acquisition proposals and, upon payment of a $7.5 million termination fee, terminate the merger agreement in order to approve a superior proposal, which the Special Committee believed was important in ensuring that the merger would be substantively fair to the Company’s unaffiliated stockholders and providing the Special Committee with adequate flexibility to respond to solicitations from other third parties;
	•		the Special Committee’s belief that the $7.5 million termination fee payable by the Company upon the Company’s termination of the merger agreement to accept a superior proposal (i) is reasonable in light of the overall terms of the merger agreement and the benefits of the merger, (ii) is within the range of termination fees in other transactions of this size and nature and (iii) would not preclude another party from making a competing proposal;
	•		the Special Committee’s belief that the terms and conditions of the binding debt and equity commitment letters received by Parent to finance the cash merger consideration and the terms and conditions of the exchange agreements and voting agreements entered into between Parent and the rollover stockholders reduced the risk that the merger would not be consummated;
	•		the fact that Parent is obligated to pay the Company a reverse termination fee if Parent fails to complete the merger, and the guarantee of such reverse termination fee by H.I.G. Bayside Debt & LBO Fund II, L.P., an affiliate of H.I.G.; and
	•		the fact that the merger is subject to the adoption of the merger agreement by the holders of at least a majority of the issued and outstanding shares of Allion common stock.

     In addition, the Special Committee believed that sufficient procedural safeguards were and are present to ensure the fairness of the merger to our unaffiliated stockholders and to permit the Special Committee to represent effectively the interests of our unaffiliated stockholders. These procedural safeguards include the following, which are not listed in any relative order of importance:

	•		the fact that the Special Committee is comprised of two directors who are not affiliated with H.I.G. or the rollover stockholders and who are not employees of Allion or any of its subsidiaries and the fact that the Special Committee represented solely the interests of our unaffiliated stockholders and negotiated with H.I.G. on behalf of such stockholders;
	•		the fact that no member of the Special Committee has an interest in the proposed merger different from that of our unaffiliated stockholders, other than unvested restricted stock held by members of the Special Committee that will become vested in connection with the merger and the customary indemnification and director and officer liability insurance coverage to which the members of the Special Committee will be entitled under the terms of the merger agreement;
	•		the process undertaken by the Special Committee and the Company’s advisors in connection with evaluating third party interest in acquiring the Company, as described above in “—Background of the Merger”, including the fact that the Special Committee was free to explore a transaction with any other bidder, except during the limited period of exclusivity the Special Committee granted to H.I.G.;
	•		the fact that the Special Committee consulted with Allion’s financial advisor, Raymond James, with respect to financial issues and received legal advice from our outside counsel, Alston & Bird, each of which has extensive experience in transactions similar to the proposed merger;
	•		the fact that the Special Committee, with the assistance of Allion’s legal and financial advisors, conducted extensive arms-length negotiations with H.I.G. over several months and had the authority to reject the terms of the merger agreement, and that these negotiations led to a 20% increase in the merger consideration to be received by our stockholders to $6.60 per share from a price of $5.50 per share proposed by H.I.G. in its initial letter of intent dated June 2, 2009;
	•		the fact that the terms and conditions of the merger agreement enable the Special Committee to consider and recommend a superior proposal and terminate the merger agreement upon the payment of a $7.5 million termination fee;

	•		the fact that the merger is subject to the adoption of the merger agreement by the holders of at least a majority of the issued and outstanding shares of Allion common stock; and
	•		the availability of appraisal rights to holders of Allion common stock who comply with all of the required procedures under Delaware law.

     Given the procedural safeguards described above, the Special Committee, which consisted solely of non-employee directors, did not consider it necessary to retain an unaffiliated representative to act solely on behalf of our unaffiliated stockholders for purposes of negotiating the terms of the merger or preparing a report concerning the fairness of the merger. In addition, the Special Committee did not consider it necessary to require the approval of at least a majority of our unaffiliated stockholders. Nonetheless, the Special Committee believes that the merger is fair to our unaffiliated stockholders because the Special Committee was charged with representing the interests of such unaffiliated stockholders, it was advised by independent financial and legal advisors during its negotiation of the merger agreement and it was actively involved in extended and numerous deliberations and negotiations regarding the merger on behalf of our unaffiliated stockholders.

     The Special Committee also considered a variety of potentially negative factors concerning the merger agreement and the merger, including the following factors which are not listed in any relative order of importance:

	•		the fact that, following the merger, our stockholders (other than the rollover stockholders) will no longer participate in any future earnings or benefit from any increase in the value the Company;
	•		the fact that the merger agreement does not require the adoption of the merger agreement by a majority of the unaffiliated holders of Allion common stock;
	•		the fact that, while Allion expects the merger will be consummated, there can be no assurances that all conditions to the parties’ obligations to complete the merger agreement will be satisfied and, as a result, the merger may not be consummated;
	•		the fact that the $6.60 per share to be paid pursuant to the merger agreement constitutes a discount of approximately 4.1% to the closing price of Allion common stock on September 9, 2009, 30 trading days prior to announcement of the merger and a discount to our trailing 52-week closing price of $7.40 on July 31, 2009;
	•		the fact that gains from an all-cash transaction will generally be taxable to our stockholders for U.S. federal income tax purposes as described below in “—Material U.S. Federal Income Tax Consequences”;
	•		the fact that the merger agreement contains restrictions on the conduct of our business prior to the completion of the merger, including generally requiring the Company to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent the Company from undertaking business opportunities that may arise pending completion of the merger;
	•		the restrictions the merger agreement imposes on our ability to solicit third party acquisition proposals;
	•		the requirement that we pay a termination fee of $7.5 million if the merger agreement is terminated under specified circumstances, including if we accept a superior proposal;
	•		the fact that, even if the merger is not completed, we will be required to pay our legal and accounting fees, a portion of our investment banking fees, and other miscellaneous fees;
	•		the fact that the Company’s remedy in connection with a breach of the merger agreement by Parent, even a breach that is deliberate or willful, is limited to a maximum of $10.0 million; and
	•		the risk that the public announcement of the merger, and/or the failure to complete the merger, would disrupt the operations of the Company and our relationships with employees and customers.

     In addition, the Special Committee was aware that the rollover stockholders would be required to enter into exchange agreements with Parent obligating the rollover stockholders to exchange a substantial portion of their shares of Allion common stock for equity interests in Parent in connection with the merger. Although the Special Committee was aware of the interests of the rollover stockholders, the Special Committee’s primary concern was to ensure that the per share merger consideration and other terms of the merger agreement were both procedurally and

substantively fair to and in the best interest of the Company and our unaffiliated stockholders. See “—Interests of Certain Persons in the Merger” beginning on page 47, below.

     The Special Committee did not consider the liquidation value of the Company’s assets because it considers the Company to be a viable going concern business and views the trading history of Allion common stock as an indication of the Company’s value as such. The Special Committee believes that the Company’s liquidation value would be significantly lower than the Company’s value as a viable going concern and that, due to the fact that the Company is being sold as a going concern, the Company’s liquidation value is irrelevant to a determination as to whether the merger is fair to the Company’s unaffiliated stockholders. Further, the Special Committee did not consider net book value, which is an accounting concept, as a factor because it believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs.

     In the course of reaching its conclusion regarding the fairness of the merger to the stockholders and its decision to approve the merger agreement, the Special Committee considered analyses presented by Raymond James to our Board of Directors. These analyses included, among others, an analysis of the historical trading performance of the Company’s stock, and analyses relating to potential transaction values for the Company, including a selected companies analysis, a selected transactions analysis and a premiums paid analysis. These analyses are summarized below under “—Opinion of Allion’s Financial Advisor, Raymond James & Associates, Inc.”

     The foregoing discussion of the information and factors considered by the Special Committee is not intended to be exhaustive, but includes the material factors considered by the Special Committee. In view of the wide variety of factors considered by the Special Committee in evaluating the merger agreement and the merger, the Special Committee did not find it practicable, and did not attempt to, quantify, rank or otherwise assign relative weights to the foregoing factors in reaching its conclusion. In addition, individual members of the Special Committee may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The Special Committee approved the merger agreement and recommended it to our Board of Directors based upon the totality of the information it considered.

     In reaching its determination that the merger agreement and the merger are advisable, substantively and procedurally fair to and in the best interest of the Company and our unaffiliated stockholders, our Board of Directors determined that the analysis of the Special Committee of the merger consideration of $6.60 per share was reasonable. In determining the reasonableness of the Special Committee’s analysis, our Board of Directors considered and relied upon the following factors, among others:

	•		the Special Committee’s unanimous determination that the merger agreement and the merger are fair to and in the best interest of the Company and our unaffiliated stockholders and its unanimous recommendation that our Board of Directors approve the merger agreement;
	•		the fact that no member of the Special Committee has an interest in the proposed merger different from that of our unaffiliated stockholders, other than unvested restricted stock held by members of the Special Committee that will become vested in connection with the merger and the customary indemnification and director and officer liability insurance coverage to which the members of the Special Committee will be entitled under the terms of the merger agreement;
	•		the process undertaken by the Special Committee and the Company’s advisors in connection with evaluating third party interest in acquiring the Company, as described above in “—Background of the Merger,” including the fact that the Special Committee was free to explore a transaction with any other bidder and did, in fact, explore transactions with other bidders, except during the period of exclusivity the Special Committee granted to H.I.G.; and
	•		the availability of appraisal rights under Delaware law for Allion’s stockholders who oppose the merger.

     Our Board of Directors also believes that sufficient procedural safeguards were present to ensure the fairness of the transaction and to permit the Special Committee to represent effectively the interests of Allion’s unaffiliated stockholders. Our Board of Directors reached this conclusion based on the following factors, among others:

•

the fact that the Special Committee consisted solely of independent directors who are not affiliated with H.I.G. or the rollover stockholders;

	•		the fact that the Special Committee consulted with the Company’s independent legal counsel, Alston & Bird, and the Company’s independent financial advisor, Raymond James;
	•		the fact that the negotiations that had taken place between H.I.G. and its representatives, on the one hand, and the Special Committee and the Company’s representatives, on the other hand, were structured and conducted so as to preserve the independence of the Special Committee and promote the fairness of the transaction; and
	•		the fact that the merger agreement and the merger were approved by the members of our Board of Directors who are not employees of Allion or affiliated with H.I.G. or the rollover stockholders or their affiliates.

     In light of the procedural protections described above, our Board of Directors, including each of the independent directors, did not consider it necessary to require a separate affirmative vote of a majority of our unaffiliated stockholders even though the rollover stockholders hold approximately 41.1% of Allion common stock. In addition, given the procedural safeguards described above, our Board of Directors did not consider it necessary to retain an unaffiliated representative to act solely on behalf of our unaffiliated stockholders for purposes of negotiating the terms of the merger or preparing a report concerning the fairness of the transaction.

     Our Board of Directors also considered the interests certain executive officers and directors of the Company may have with respect to the merger in addition to their interests as stockholders generally, as described below in “—Interests of Certain Persons in the Merger.”

     The foregoing discussion of the information and factors considered by our Board of Directors is not intended to be exhaustive, but includes the material factors considered by our Board of Directors. In view of the wide variety of factors considered by our Board of Directors in evaluating the merger agreement and the merger, our Board of Directors did not find it practicable, and did not attempt to, quantify, rank or otherwise assign relative weights to the foregoing factors in reaching its conclusion. In addition, individual members of our Board of Directors may have given different weights to different factors and may have viewed some factors more positively or negatively than others. Our Board of Directors approved the merger agreement and recommends it to Allion’s stockholders based upon the totality of the information it considered.

     Based in part upon the recommendation of the Special Committee, our Board of Directors voted to approve the merger agreement and resolved to recommend that you vote “FOR” the adoption of the merger agreement. In making their determination as to the fairness of the proposed merger to the Company and our stockholders, the Special Committee and our Board of Directors were not aware of any firm offers during the prior two years by any person for the merger or consolidation of Allion with another company, the sale or transfer of all or substantially all of Allion’s assets or a purchase of Allion’s assets that would enable the holder to exercise control of Allion.

     Based on the factors outlined above, our Board of Directors determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interest of the Company and our unaffiliated stockholders. Therefore, our Board of Directors recommends that you vote “FOR” the adoption of the merger agreement.

Purposes and Reasons for the Merger

     The purpose of the merger for us is to enable our unaffiliated stockholders to immediately realize the value of their investment in the Company through their receipt of the per share merger consideration of $6.60 in cash, without interest, representing a premium of approximately 30.2% over the volume-weighted average price of Allion common stock for the five days prior to announcement of the merger.

     For Merger Sub, the purpose of the merger is to effectuate the transactions contemplated by the merger agreement. For the other members of the H.I.G. Buying Group, the purpose of the merger is to allow them to acquire control of Allion and bear the rewards and risks of such ownership of Allion after shares of Allion common stock cease to be publicly traded. The H.I.G. Buying Group did not consider any alternatives for achieving these purposes. The transaction has been structured as a cash merger in order to provide our unaffiliated stockholders with cash for their shares of Allion common stock and to provide a prompt and orderly transfer of ownership of Allion in a single step, without the necessity of financing separate purchases of Allion common stock in a tender offer and implementing a second-step merger to acquire any shares of common stock not tendered into any such tender offer,

and without incurring any additional transaction costs associated with such activities. The H.I.G. Buying Group has undertaken to pursue the transaction at this time in light of the opportunities they perceive to strengthen the Company’s competitive position, strategy and financial performance under a new form of ownership.

     The purpose of Parallex for engaging in the merger is (i) to receive cash for the portion of its shares of Allion common stock that will not be surrendered to Parent and to realize a premium to the market price for such shares based on the closing price of Allion common stock on October 16, 2009, (ii) to receive the principal plus accrued interest on promissory notes issued to it by the Company, the maturity of which will accelerate at the effective time of the merger, and (iii) to retain an indirect equity interest in Allion and to continue bearing the rewards and risks of such ownership of Allion after shares of Allion common stock cease to be publicly traded. In addition, as a condition to entering the merger agreement, H.I.G. required that as part of the equity financing for the merger, Parallex and the other rollover stockholders make an equity investment in Parent by surrendering a portion of their shares of Allion common stock to Parent and enter into restrictive covenant agreements restricting their ability to engage in certain activities competitive with Allion or Parent after the merger.

Position of the H.I.G. Buying Group as to the Fairness of the Merger

     Under applicable SEC rules, the members of the H.I.G. Buying Group may be deemed to be engaged in a “going private” transaction and therefore required to express their beliefs as to the fairness of the merger to Allion’s unaffiliated stockholders. For purposes of this Proxy Statement, the members of the “H.I.G. Buying Group” are Parent, Merger Sub, H.I.G. Healthcare, LLC, H.I.G. Bayside Debt & LBO Fund II, L.P., H.I.G. Bayside Advisors II, LLC, H.I.G.-GPII, Inc., Sami Mnaymneh and Anthony Tamer. The members of the H.I.G. Buying Group are making the statements included in this section solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The H.I.G. Buying Group’s views as to fairness of the proposed merger should not be construed as a recommendation to any stockholder of Allion as to how such stockholder should vote on the proposal to adopt the merger agreement.

     The H.I.G. Buying Group believes that the merger is both substantively and procedurally fair to Allion’s unaffiliated stockholders. However, none of the members of the H.I.G. Buying Group has undertaken any formal evaluation of the fairness of the merger to Allion’s unaffiliated stockholders or engaged a financial advisor for such purpose. Moreover, none of the members of the H.I.G. Buying Group participated in the deliberations of the Special Committee or received advice from the Company’s legal or financial advisors in connection with the merger.

     While the members of the H.I.G. Buying Group believe that the merger is substantively and procedurally fair to Allion’s unaffiliated stockholders, they attempted to negotiate the terms of a transaction that would be most favorable to them and, accordingly, did not negotiate the merger agreement with the goal of obtaining terms that were fair to Allion’s unaffiliated stockholders. None of the members of the H.I.G. Buying Group believes that it has or had any fiduciary duty to Allion or its stockholders, including with respect to the merger agreement and its terms and conditions. Allion and its unaffiliated stockholders were represented by an independent Special Committee that negotiated on their behalf with H.I.G., Parent and Merger Sub, each with the assistance of its respective advisors, as described above in “—Fairness of the Merger; Reasons for the Recommendation of the Special Committee and our Board of Directors.”

     The belief of the members of the H.I.G. Buying Group that the merger is substantively and procedurally fair to the unaffiliated stockholders of Allion is based on the following factors, among others:

	•		the current overall position of Allion, including its current financial position, its competitive position in its industry, its strategic business plan, and its potential for future viability and growth;
	•		the fact that the $6.60 per share to be paid pursuant to the merger agreement constitutes a significant premium over the market price of Allion common stock before the public announcement of the merger agreement, including a premium of approximately 30.2% over the volume-weighted average price of Allion common stock for the five days prior to announcement of the merger;
	•		potential risks associated with reductions in reimbursement rates, including as a result of state budget cuts, health care reform, the status of premium reimbursement programs in California and New York, and revisions to the industry pricing benchmarks, as well as the volatile nature of the trading price and the low trading volume of Allion common stock restricting liquidity for Allion stockholders;

	•		the fact that, notwithstanding that the members of the H.I.G. Buying Group and their respective affiliates are not entitled to rely on it, Allion’s Board of Directors received an opinion from Raymond James as to the fairness, from a financial point of view, as of the date thereof, of the merger consideration to be received by Allion’s stockholders (other than the rollover stockholders, Parent, Merger Sub and their respective affiliates);
	•		the fact that the merger consideration is all cash, which provides certainty of value and complete liquidity to its stockholders; and
	•		the belief that the Company has undertaken extensive efforts to market itself to potentially interested parties, with the assistance of the Company’s financial advisors, in a thorough, fair and full process designed to ensure that the $6.60 per share consideration was the highest offer that could be obtained for Allion; and the fact that the merger is subject to the adoption of the merger agreement by the holders of at least a majority of the issued and outstanding shares of Allion common stock.

     The H.I.G. Buying Group considered each of the foregoing factors in determining the fairness of the merger to Allion’s unaffiliated stockholders. In light of the factors described above and the fact that the use of a Special Committee of independent directors is a mechanism well recognized to ensure fairness in transactions of this type, the H.I.G. Buying Group believes that the merger is procedurally fair to Allion’s unaffiliated stockholders despite the fact that Allion’s Special Committee did not retain an unaffiliated representative to act solely on behalf of its unaffiliated stockholders.

     The H.I.G. Buying Group did not consider Allion’s net book value, which is an accounting concept, to be a factor in determining the substantive fairness of the transaction to Allion’s unaffiliated stockholders because they believed that net book value is not a material indicator of the value of Allion’s equity but rather an indicator of historical costs. The H.I.G. Buying Group also did not consider the liquidation value of Allion’s assets as indicative of Allion’s value primarily because of their belief that the liquidation value would be significantly lower than Allion’s value as an ongoing business and that, due to the fact that Allion is being sold as an ongoing business, the liquidation value is irrelevant to a determination as to whether the merger is fair to the unaffiliated stockholders of Allion. The H.I.G. Buying Group did not establish a pre-merger going concern value for Allion’s equity as a public company for the purposes of determining the fairness of the merger consideration to Allion’s unaffiliated stockholders because, following the merger, Allion will have a significantly different capital structure, which will result in different opportunities and risks for the business as a highly leveraged private company.

     In making their determination as to the fairness of the proposed merger to Allion’s unaffiliated stockholders, the H.I.G. Buying Group was not aware of any firm offers during the prior two years by any person for the merger or consolidation of Allion with another company, the sale or transfer of all or substantially all of Allion’s assets or a purchase of Allion’s common stock that would enable the holder to exercise control of Allion.

     The H.I.G. Buying Group’s view as to the fairness of the merger to Allion’s unaffiliated stockholders is not a recommendation as to how any such stockholder should vote on the merger agreement. The foregoing discussion of the information and factors considered by the H.I.G. Buying Group, while not exhaustive, is believed to include all material factors considered by the H.I.G. Buying Group. The H.I.G. Buying Group did not find it practicable to assign, nor did they assign, relative weights to the individual factors considered in reaching their conclusion as to the fairness of the merger to such stockholders. The H.I.G. Buying Group believes that these factors provide a reasonable basis for its position that the merger is fair to Allion’s unaffiliated stockholders.

Position of Parallex as to the Fairness of the Merger

     Under applicable SEC rules, Parallex may be deemed to be engaged in a “going private” transaction and if so, would be required to express its belief as to the fairness of the merger to Allion’s unaffiliated stockholders. Parallex is making the statements included in this section solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. Parallex’s view as to fairness of the proposed merger should not be construed as a recommendation to any stockholder of Allion as to how such stockholder should vote on the proposal to adopt the merger agreement.

     Parallex believes that the merger is fair to Allion’s unaffiliated stockholders. However, Parallex has not undertaken any formal evaluation of the fairness of the merger to Allion’s unaffiliated stockholders or engaged a financial advisor for such purpose. Moreover, Parallex did not participate in the deliberations of the Special Committee or receive advice from the Company’s legal or financial advisors in connection with the merger and was not involved in any negotiations regarding the merger, the merger agreement or the per share merger consideration. Mr. Miller and Mr. Stepanuk currently serve as the designees of the rollover stockholders, together with certain other holders of Allion common stock, to Allion’s Board of Directors. Mr. Miller and Mr. Stepanuk, each in his capacity as a member of Allion’s Board of Directors, participated in the deliberations of the Board of Directors in approving the merger agreement and the merger, although they were not members of, and did not participate in the deliberations of, the Special Committee. Following the unanimous approval of the merger agreement by all of Allion’s independent directors, the merger agreement was unanimously approved by Allion’s full Board of Directors.

     Parallex did not consider Allion’s historic market prices, net book value, going concern value or liquidation value in determining the fairness of the transaction to Allion’s unaffiliated stockholders. Parallex was not involved in the negotiations between H.I.G. and the Special Committee with respect to the merger, the merger agreement or the per share merger consideration. Parallex has not been given access to any of the analyses undertaken by the H.I.G. Buying Group, the Special Committee or the Allion Board of Directors in valuing Allion.

     The belief of Parallex that the merger is fair to the unaffiliated stockholders of Allion is based on the following factors, among others:

	•		the fact that the $6.60 per share merger consideration and other terms and conditions of the merger agreement resulted from extensive arms-length negotiations between the Special Committee and the Company’s advisors, on the one hand, and H.I.G. and its advisors, on the other hand, and represents a substantial increase in the offer by H.I.G. of $5.50 per share in its initial letter of intent dated June 2, 2009;
	•		the fact that the Special Committee unanimously determined that the merger agreement and the merger are fair to and in the best interest of Allion and its stockholders;
	•		the fact that the merger agreement was unanimously approved by Allion’s full Board of Directors, including each of Allion’s independent directors, present at the meeting called for that purpose;
	•		the fact that the per share merger consideration and other terms and conditions of the merger agreement resulted from extensive negotiations between the Special Committee and the Company’s advisors, on the one hand, and H.I.G. and its advisors, on the other hand;
	•		the fact that neither the Special Committee nor Allion’s Board of Directors had any obligation to recommend approval of the merger or adoption of the merger agreement or any other transaction;
	•		the fact that the merger requires the adoption of the merger agreement by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of Allion common stock entitled to vote at a meeting of stockholders;
	•		the fact that, although Parallex is not entitled to rely on it, Allion’s Board of Directors received an opinion from Raymond James as to the fairness, from a financial point of view, as of the date thereof, of the merger consideration to be received by Allion’s stockholders (other than the rollover stockholders, Parent, Merger Sub and their respective affiliates);
	•		the fact that the Special Committee consulted with the Company’s legal and financial advisors, who are experienced in transactions similar to the proposed merger;
	•		the fact that the merger will provide consideration to the unaffiliated stockholders of Allion entirely in cash, which provides certainty of value;
	•		the fact that the merger will provide liquidity, without the brokerage and other costs typically associated with market sales, for Allion’s public stockholders, whose ability, absent the merger, to sell their shares of Allion common stock is adversely affected by the low trading volume of the shares;
	•		the fact that because the rollover stockholders were required to exchange a portion of their shares of Allion common stock for equity interests in Parent as a condition of the H.I.G. Buying Group’s agreement to enter

			into the merger agreement, it reduces the cash required to be paid by the H.I.G. Buying Group pursuant to the merger agreement and may have allowed the H.I.G. Buying Group to increase the price per share paid to Allion’s other stockholders under the merger agreement;
	•		the fact that any Allion stockholders who do not support the merger will have the opportunity to seek appraisal of the fair value of their shares under Delaware law;
	•		the Special Committee’s belief that the Company’s efforts to market itself to potentially interested parties, with the assistance of the Company’s financial advisors, constituted a thorough, fair and full process to ensure that the $6.60 per share consideration was the highest offer that could be obtained for Allion;
	•		the fact that none of the members of the H.I.G. Buying Group or Parallex participated in or had any influence on the Special Committee’s deliberative process or conclusions; and
	•		the fact that Allion may terminate the merger agreement prior to the adoption of the merger agreement by Allion’s stockholders in order to accept a superior third party proposal, subject to certain conditions, including payment of a termination fee.

     Parallex considered each of the foregoing factors in determining the fairness of the merger to Allion’s unaffiliated stockholders. In light of the factors described above and the fact that the use of a Special Committee of independent directors is a mechanism well recognized to ensure fairness in transactions of this type, Parallex believes that the merger is procedurally fair to Allion’s unaffiliated stockholders despite the fact that Allion did not retain an unaffiliated representative to act solely on behalf of its unaffiliated stockholders. Parallex also believes that the merger is procedurally fair to Allion’s unaffiliated stockholders despite the fact that Mr. Miller and Mr. Stepanuk, each in his capacity as a member of Allion’s Board of Directors, participated in the deliberations of the Board of Directors in approving the merger agreement and the merger. In this regard, Parallex notes that all of the other members of the Board of Directors who voted on the transaction approved the merger agreement.

     In making its determination as to the fairness of the proposed merger to Allion’s unaffiliated stockholders, Parallex was not aware of any firm offers during the prior two years by any person for the merger or consolidation of Allion with another company, the sale or transfer of all or substantially all of Allion’s assets or a purchase of Allion’s common stock that would enable the holder to exercise control of Allion.

     Parallex’s view as to the fairness of the merger to Allion’s unaffiliated stockholders is not a recommendation as to how any such stockholder should vote on the merger. The foregoing discussion of the information and factors considered by Parallex, while not exhaustive, is believed to include all material factors considered by Parallex. Parallex did not find it practicable to assign, nor did it assign, relative weights to the individual factors considered in reaching its conclusion as to the fairness of the merger to Allion’s unaffiliated stockholders. Rather, the fairness determinations were made after consideration of the totality of the information presented to it.

Opinion of Allion’s Financial Advisor, Raymond James & Associates, Inc.

     Pursuant to an engagement letter dated January 29, 2009, we retained Raymond James as our exclusive financial advisor in connection with the proposed merger. At the meeting of our Board of Directors on October 18, 2009, Raymond James delivered to our Board of Directors its opinion that, as of such date and based upon, and subject to, various qualifications and assumptions described with respect to its opinion, the consideration to be received in the proposed merger by holders of Allion common stock (other than the rollover stockholders, Parent and Merger Sub, and their respective affiliates) was fair, from a financial point of view, to such holders .

      The full text of the written opinion of Raymond James, dated October 18, 2009, which sets forth assumptions made, matters considered, and limits on the scope of review undertaken, is attached as Appendix B to this Proxy Statement. Raymond James’s opinion, which is addressed to our Board of Directors, is directed only to the fairness, from a financial point of view, to the holders of Allion common stock (other than the rollover stockholders, Parent, Merger Sub and their respective affiliates), of the consideration to be received in the proposed merger by such holders. Raymond James expressed no opinion on the relative merits of the merger compared to any alternative that might be available to Allion or the terms of the merger agreement. Raymond James’s opinion does not constitute a recommendation to our Board of Directors or any holder of Allion common stock as to how to vote with respect to the proposed merger or otherwise and

does not address any other aspect of the proposed merger or any related transaction. Raymond James’s opinion does not address the fairness of the proposed merger to, or any consideration that may be received by, the holders of any other class of securities, creditors or constituencies of Allion, including the rollover stockholders, Parent or Merger Sub, or the underlying decision by Allion or our Board of Directors to pursue the proposed merger. Raymond James expressed no opinion as to the price at which Allion common stock or any other securities would trade at any future time. In addition, Raymond James did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by our officers, directors, or employees, or any class of such persons, in connection with or as a result of the merger. Raymond James’s opinion was authorized for issuance by the Fairness Opinion Committee of Raymond James. The summary of the opinion of Raymond James set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Holders of Allion common stock are urged to read this opinion in its entirety.

In arriving at its opinion, Raymond James, among other things:

	•		reviewed the financial terms and conditions as stated in the October 18, 2009 draft agreement;
	•		reviewed our annual report filed on Form 10-K for the fiscal year ended December 31, 2008 and the quarterly reports filed on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009;
	•		reviewed certain other publicly available information on the Company;
	•		reviewed other Company financial and operating information provided by us;
	•		reviewed the historical stock price and trading activity for the shares of Allion common stock;
	•		discussed our operations, historical financial results, and future prospects with certain management team members of the Company;
	•		discussed with our senior management certain information related to the aforementioned;
	•		compared financial and stock market information for the Company with similar information for certain other companies with publicly-traded equity securities;
	•		reviewed the financial terms and conditions of certain recent business combinations involving companies in businesses Raymond James deemed to be similar to those of the Company; and
	•		considered such other quantitative and qualitative factors that Raymond James deemed to be relevant to its evaluation.

     Raymond James did not assume responsibility for independent verification of, and did not independently verify, any information, whether publicly available or furnished to it by us or any other party, including, without limitation, any financial information, forecasts, or projections considered in connection with the rendering of its opinion. For purposes of its opinion, Raymond James assumed and relied upon, with permission from our Board of Directors, the accuracy and completeness of all such information. Raymond James did not conduct a physical inspection of any of the properties or assets, and did not prepare or obtain any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise). With respect to financial forecasts and estimates, along with other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James (i) assumed, with permission from our Board of Directors, that such forecasts, estimates and other such information and data had been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management and (ii) relied upon each party to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review.

     In rendering its opinion, Raymond James assumed that the merger would be consummated on the terms described in the merger agreement. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger

agreement, and that all conditions to the consummation of the merger will be satisfied without being waived. Raymond James also assumed that all material governmental, regulatory, or other consents and approvals will be obtained and that, in the course of obtaining any necessary governmental, regulatory, or other consents and approvals necessary for the consummation of the merger, as contemplated by the merger agreement, no restrictions will be imposed or amendments, modifications, or waivers made that would have any material adverse effect on Allion. Raymond James expressed no opinion regarding the structure or tax consequences of the merger, or the availability or advisability of any alternatives to the merger.

     Raymond James’s opinion is necessarily based on economic, market, and other conditions and the information made available to Raymond James as of October 18, 2009. It should be understood that subsequent developments could affect Raymond James’s opinion and that Raymond James does not have any obligation to reaffirm its opinion.

Summary of Financial Analyses Conducted by Raymond James

     The following is a summary of the material financial analyses underlying Raymond James’s opinion, dated October 18, 2009, delivered to our Board of Directors in connection with the merger at a meeting of the our Board of Directors on October 18, 2009. The order of the analyses described below does not represent the relative importance or weight given to those analyses by Raymond James or by our Board of Directors. Considering such data without considering the full narrative description of the financial analyses could create a misleading or incomplete view of Raymond James’s financial analyses.

     In arriving at its opinion, Raymond James did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying its opinion.

     The following summarizes the material financial analyses presented by Raymond James to our Board of Directors at its meeting on October 18, 2009 and considered by Raymond James in rendering its opinion. The description below explains Raymond James’s methodology for evaluating the consideration to be reviewed in the proposed merger. No company or transaction used in certain of the analyses described below was deemed to be directly comparable to Allion or the merger, and the summary set forth below does not purport to be a complete description of the analyses or data presented by Raymond James.

      Historical Stock Trading Analysis

     Raymond James analyzed the performance of Allion common stock between October 16, 2008 and October 16, 2009. During this period, Allion common stock achieved a closing price high of $7.40 and a closing price low of $2.83. The results of this summary analysis are summarized below.

						Implied
		Price				Premium
Merger consideration		$	6.60				—
One-day volume-weighted average price* “VWAP”		$	5.22				26.4	%
Five-day VWAP		$	5.07				30.2	%
30-day VWAP		$	5.76				14.6	%
60-day VWAP		$	6.33				4.3	%
90-day VWAP		$	6.12				7.8	%

     Raymond James also presented a stock price histogram, for the trailing twelve-month and six-month periods, illustrating that approximately 84.4% and 77.1% of the trading activity in Allion common stock during the twelve

months and six months periods prior to announcement of the merger occurred at prices below the per share merger consideration of $6.60.

      Selected Public Companies Analysis

     Raymond James compared certain operating, financial, trading, and valuation information for Allion to certain publicly available operating, financial, trading, and valuation information for nine selected companies, each of which Raymond James believes to have a business model reasonably similar, in whole or in part, to that of Allion. These selected companies included:

	•		Amerisourcebergen Corporation,
	•		Cardinal Health, Inc.,
	•		McKesson Corp.,
	•		PSS World Medical Inc.,
	•		Henry Schein Inc.,
	•		Owens & Minor Inc.,
	•		BioScrip Inc.,
	•		Omnicare Inc., and
	•		Pharmerica Corporation.

     For each of the selected companies, Raymond James analyzed the multiples of enterprise value (calculated as the sum of the value of common equity on a fully diluted basis and the value of net debt) divided by (i) actual or projected revenue and (ii) actual or projected earnings before interest, income taxes, depreciation, and amortization, or EBITDA (adjusted for non-recurring income and expenses), for the twelve month period ended June 30, 2009 and years ending December 31, 2009 and 2010. Raymond James also analyzed the multiples of equity value per share divided by the diluted EPS (adjusted for non-recurring income and expenses) for the twelve month period ended June 30, 2009 and years ending December 31, 2009 and 2010. Raymond James reviewed the mean, median, low, and high relative valuation multiples of the selected companies and compared them to corresponding trading multiples for Allion on October 18, 2009. The results of the selected public company analysis are summarized below:

Multiple

Allion

Mean

Median

Low

High

Enterprise Value/Revenue:

Twelve month period ended June 30, 2009

0.6x

0.4x

0.3x

0.1x

0.8x

CY2009

0.6x

0.4x

0.3x

0.1x

0.8x

CY2010

0.5x

0.4x

0.3x

0.1x

0.8x

Enterprise Value/EBITDA:

Twelve month period ended June 30, 2009

6.7x

9.1x

7.9x

6.5x

14.1x

CY2009

6.0x

8.8x

8.3x

6.5x

12.8x

CY2010

5.5x

8.1x

8.3x

6.3x

10.4x

Price/EPS:

Twelve month period ended June 30, 2009

10.8x

16.7x

15.1x

10.5x

23.8x

CY2009

11.3x

15.8x

15.0x

10.7x

21.6x

CY2010

9.2x

13.8x

13.5x

8.3x

18.4x

     Raymond James then applied the mean and median multiples to the relevant Allion revenue, EBITDA, and EPS metrics, using consensus analyst estimates, per Allion management, to determine a range of implied Allion

enterprise values. After adjusting for Allion’s capitalization, Raymond James reviewed the range of per share prices derived in the selected public companies analysis as of October 16, 2009 and compared them to the merger price of $6.60 per share for Allion. The results of the selected public companies analysis are summarized below:

Equity Value per Share		Allion				Mean				Median
Enterprise Value/Revenue:
Twelve month period ended June 30, 2009		$	6.60			$	2.60			$	1.21
CY2009		$	6.60			$	2.82			$	1.21
CY2010		$	6.60			$	3.12			$	1.38
Enterprise Value/EBITDA:
Twelve month period ended June 30, 2009		$	6.60			$	7.32			$	6.05
CY2009		$	6.60			$	8.19			$	7.53
CY2010		$	6.60			$	8.12			$	8.43
Price/EPS:
Twelve month period ended June 30, 2009		$	6.60			$	8.38			$	7.61
CY2009		$	6.60			$	7.60			$	7.18
CY2010		$	6.60			$	8.14			$	7.97

     No company utilized in the selected companies analysis is identical to Allion, and, accordingly, an analysis of the results of the foregoing necessarily involves complex considerations and judgments concerning our financial and operating characteristics and other factors that would affect the companies to which Allion is being compared.

      Selected Transactions Analysis

     Raymond James derived a range of potential values for Allion relative to select mergers and acquisitions involving companies that Raymond James believed to have similar business models, in whole or in part, to that of Allion and were announced and completed (or were then pending) between September 1, 2007 and October 17, 2009. The selected transactions considered included:

	•		Excellere Partners’ pending acquisition of MTS Medication Technologies, Inc., announced in August 2009;
	•		MedcoHealth Solutions Inc. acquisition of Owens & Minor Inc., Direct-to-Consumer Diabetes Supply Business, closed in January 2009;
	•		The Blackstone Group’s acquisition of Apria Healthcare Group, Inc., closed in October 2008;
	•		SunLink Health Systems Inc. acquisition of Carmichael’s Cashway Pharmacy, Inc. closed in April 2008; and
	•		Allion Healthcare Inc. acquisition of Biomed America, Inc., closed in April 2008.

     Raymond James examined valuation multiples of transaction enterprise value compared to the revenue and EBITDA (adjusted for non-recurring income and expenses) of the target companies, in each case for the reported twelve month period prior to announcement of the transaction, where such information was publicly available. Raymond James reviewed the mean, median, low, and high relative valuation multiples of the selected transactions and compared them to corresponding multiples for Allion as of October 16, 2009. The results of the selected transactions analysis are summarized below:

Multiple

Allion

Mean

Median

Low

High

Enterprise Value/Trailing Twelve Months:

Revenue

0.7 x

0.7 x

0.6 x

0.5 x

1.0 x

EBITDA

8.4 x

6.5 x

6.3 x

5.3 x

8.0 x

     Raymond James then applied the mean and median multiples to the relevant Allion revenue and EBITDA metrics to determine a range of implied Allion enterprise values. After adjusting for our capitalization, Raymond James reviewed the range of per share prices derived in the selected transactions analysis and compared them to the offer price of $6.60 per share for Allion. The results of the selected transactions analysis are summarized below:

Equity Value per Share		Allion				Mean				Median
Enterprise Value/Trailing Twelve Months:
Revenue		$	6.60			$	6.44			$	5.70
EBITDA		$	6.60			$	4.59			$	4.40

     No transaction utilized in the selected transactions analysis is identical to the proposed merger, including the timing or size of the transactions, and, accordingly, an analysis of the results of the foregoing necessarily involves complex considerations and judgments concerning Allion’s financial and operating characteristics and other factors that would affect the selected transactions to which Allion is being compared.

      Premiums Paid Analysis

     Raymond James analyzed the premiums paid in all-cash acquisitions for U.S. publicly traded companies with a transaction enterprise value between $100 and $500 million that were announced and completed between September 1, 2007 and October 17, 2009.

     Raymond James’s analysis was based on the one-, five-, thirty-, sixty- and ninety-day average implied premiums paid in such transactions. The implied premiums in this analysis were calculated by comparing the publicly disclosed transaction price to the target company’s one-, five-, thirty-, sixty- and ninety-day average stock price prior to the announcement of each of the applicable transactions as summarized below:

Premiums Paid		Allion				Mean				Median				Low				High
One-day premium			21.3	%			66.4	%			43.0	%			(9.5	)%			309.4	%
Five-day premium			31.5	%			67.1	%			46.9	%			(4.9	)%			288.9	%
30-day premium			(4.1)	%			61.4	%			40.9	%			(10.7	)%			302.3	%
60-day premium			(3.8)	%			52.4	%			40.3	%			(25.9	)%			332.1	%
90-day premium			12.6	%			36.7	%			33.8	%			(41.9	)%			192.9	%

     The implied price per share range for Allion shown in the table below was calculated with the above transaction premiums using the closing price of Allion common stock on the relevant date.

Premiums Paid		Allion				Mean				Median
One-day premium		$	6.60			$	9.05			$	7.78
Five-day premium		$	6.60			$	8.39			$	7.38
30-day premium		$	6.60			$	11.10			$	9.69
60-day premium		$	6.60			$	10.46			$	9.63
90-day premium		$	6.60			$	8.01			$	7.84

     No transaction utilized in the premiums paid analysis is identical to the merger, including the timing or size of the transactions, and, accordingly, an analysis of the results of the foregoing necessarily involves complex considerations and judgments concerning our financial and operating characteristics and other factors that would affect the acquisition value of companies to which Allion is being compared.

Additional Considerations

     The foregoing summary describes all analyses and quantitative factors that Raymond James deemed material in its presentation to our Board of Directors but is not a comprehensive description of all analyses performed and factors considered by Raymond James in connection with preparing its opinion. The preparation of a fairness opinion is a complex process involving the application of subjective business judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, is not readily susceptible to summary description. In arriving at its fairness determination, Raymond James did not assign specific weights to any particular analyses.

     The analyses conducted by Raymond James were prepared solely for the purpose of enabling Raymond James to provide its opinion to our Board of Directors as to the fairness, from a financial point of view, of the consideration to be received by the holders of Allion common stock (other than the rollover stockholders, Parent, Merger Sub and their respective affiliates) to such holders. The analyses are not appraisals nor do they necessarily reflect the prices at which assets or securities actually may be sold. In performing its analyses, Raymond James made, and was provided by our management with, numerous assumptions with respect to industry performance, general business, economic, and regulatory conditions and other matters, many of which are beyond our control. The analyses performed by Raymond James, particularly those based on forecasts, are not necessarily indicative of actual values, trading values, or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses at the time of the opinion delivery. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond our or our advisors’ control, none of Allion, Raymond James or any other person assumes responsibility if future results or actual values are materially different from these forecasts or assumptions. All such analyses were prepared solely as a part of Raymond James’s analysis of the fairness, from a financial point of view, to certain holders of Allion common stock of the consideration to be received by such holders. Raymond James’s opinion is directed to our Board of Directors and is intended for its use in its consideration of the merger. The per share merger consideration was determined through negotiation between the Special Committee and H.I.G., and the decision by the Special Committee and our Board of Directors to enter into the merger agreement was solely that of the Special Committee and our Board of Directors. The opinion of Raymond James was one of many factors taken into consideration by our Board of Directors in making its determination to approve the merger. Consequently, the analyses described above should not be viewed as determinative of the opinion of our Board of Directors or management with respect to the value of Allion. We placed no limits of the scope of the analysis performed, or opinion expressed, by Raymond James. Our Board of Directors selected Raymond James as financial advisor in connection with the merger based on Raymond James’s qualifications, expertise, reputation, and experience in mergers and acquisitions. For services rendered in connection with the delivery of its opinion, we paid Raymond James a fee of $250,000 upon delivery of its opinion. We will also pay Raymond James a fee for advisory services of approximately $2.78 million in connection with, and contingent upon consummation of, the merger. We also agreed to reimburse Raymond James for expenses incurred in connection with its services, including the fees and expenses of its counsel, and we will indemnify Raymond James, including for liabilities under federal securities laws, relating to, or arising out of, its engagement.

     Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations, and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of Allion for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

     Other than the engagement of Raymond James by our Board of Directors described in this section, there are no existing or contemplated material relationships or arrangements for future services, nor have any such relationships or arrangements existed or been contemplated during the past two years, involving or resulting in the payment or receipt of compensation between Raymond James or its affiliates and any party to the transaction or their respective affiliates.

Effects of the Merger

     If the merger is consummated, Merger Sub will be merged with and into Allion, with Allion continuing as the surviving corporation and a wholly owned subsidiary of Parent. At the effective time of the merger, the following will occur:

	•		each share of Allion common stock (including restricted stock) issued and outstanding immediately prior to the effective time of the merger (other than shares held by Allion, Parent or Merger Sub and stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be automatically cancelled and converted into the right to receive $6.60 in cash, without interest;
	•		each outstanding Allion stock option will vest in full prior to the effective time of the merger, and each outstanding Allion stock option not exercised prior to the merger will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such option multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such option;
	•		each outstanding Allion warrant (whether or not vested) will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such warrant multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such warrant; and
	•		each holder of an outstanding Allion cash-settled phantom stock unit (whether or not vested) will be entitled to receive an amount in cash equal to (i) the number of phantom stock units held by that holder multiplied by $6.60, without interest, plus (ii) a tax gross-up payment to cover any excise tax liability such holder may incur as a result of any payments or benefits, whether paid pursuant to the phantom stock units or otherwise, that may be deemed “golden parachute” payments for tax purposes.

     If the merger is completed, all of the equity interests in Allion will be owned directly by Parent, which immediately following the effective time of the merger will be owned by H.I.G. Healthcare, LLC and the rollover stockholders. Immediately prior to the effective time of the merger, the rollover stockholders will surrender a portion of their shares of Allion common stock in exchange for equity interests in Parent. Except for the rollover stockholders, no current stockholder of Allion will have any ownership interest in, nor be a stockholder of, Allion immediately following the completion of the merger. As a result, Allion’s stockholders (other than the rollover stockholders) will no longer benefit from any increase in Allion’s value, nor will they bear the risk of any decrease in Allion’s value. Following the merger, the rollover stockholders and H.I.G. Healthcare, LLC will, by virtue of its ownership of Parent, benefit from any increase in the value of Allion and also will bear the risk of any decrease in the value of Allion.

     Allion’s common stock is currently registered under the Exchange Act and is listed on the NASDAQ Global Market under the symbol “ALLI.” As a result of the merger, Allion will become a privately held corporation without a public market for its common stock, Allion common stock will no longer be listed on any exchange, including NASDAQ, and price quotations for Allion stock will no longer be available. In addition, the registration of Allion common stock under the Exchange Act will be terminated following the merger. Therefore, the provisions of the Exchange Act will no longer apply to Allion, including the requirement that Allion furnish a proxy or information statement to its stockholders in connection with meetings of its stockholders. Allion will also no longer be required to file periodic reports with the SEC.

     At the effective time of the merger, the certificate of incorporation and bylaws of Allion will be amended to look like the certificate of incorporation and bylaws of Merger Sub in effect immediately prior to the effective time of the merger and will become the certificate of incorporation and bylaws of Allion as the surviving corporation.

     Upon the completion of the merger, the directors of Merger Sub immediately prior to the merger will become the directors of Allion, and the officers of Allion immediately prior to the merger will continue to serve as the officers of Allion.

     The benefits of the merger to Allion’s unaffiliated stockholders include their right to receive $6.60 per share in cash for their shares of Allion common stock and the fact that they will no longer bear the risk that Allion will decrease in value. The detriments of the merger to Allion’s unaffiliated stockholders are that they will cease to participate in Allion’s future earnings and growth, if any, that they will no longer own any interest in Allion’s net book value or net earnings, and that the receipt of the payment for their shares in the merger will be a taxable event for U.S. federal income tax purposes. See “—Material U.S. Federal Income Tax Consequences” beginning on page 55, below.

     The benefits of the merger to the H.I.G. Buying Group include the fact that, following the completion of the merger, Parent will directly own 100% of the outstanding common stock of Allion and will therefore have a corresponding 100% interest in the surviving corporation’s net book value and net earnings. The benefits of the merger to Parallex include the fact that, following the completion of the merger, Parallex will own [19.52]% of the

capital stock of Parent and will therefore indirectly have a [19.52]% interest in the surviving corporation’s net book value and net earnings.

     Immediately after the merger, based on Allion’s unaudited June 30, 2009 financial statements and calculated based on Allion’s net earnings for the six months ended June 30, 2009, Parent’s 100% interest in the surviving corporation’s net book value will be equal to approximately $189.8 million (as compared to no interest in Allion’s net book value at June 30, 2009) and $6.7 million in the surviving corporation’s net earnings (as compared to no interest in Allion’s net earnings for the six months ended June 30, 2009). Parallex’s [19.52]% indirect interest in the surviving corporation will be equal to approximately $37.1 million in the surviving corporation’s net book value (as compared to an interest of $52.3 million in Allion’s net book value at June 30, 2009) and $1.3 million in the surviving corporation’s net earnings (as compared to an interest of $1.8 million in Allion’s net earnings for the six months ended June 30, 2009).

     In addition, the H.I.G. Buying Group and Parallex will benefit from the savings associated with Allion no longer being required to file reports under or otherwise having to comply with provisions of the Exchange Act. Detriments of the merger to the H.I.G. Buying Group and Parallex include the lack of liquidity for Allion common stock following the merger, the risk that Allion will decrease in value following the merger, and the payment by Allion of approximately $            million in transaction costs and estimated fees and expenses related to the merger, which such fees and expenses are further set forth below in “—Estimated Fees and Expenses of the Merger.”

Plans for Allion after the Merger

     Following the completion of the merger, the H.I.G. Buying Group anticipates that Allion will continue its current operations substantially as they are currently being conducted, except that Allion will be a wholly owned subsidiary of Parent rather than an independent public company. Following the completion of the merger, the registration of Allion’s common stock under the Exchange Act will be terminated, along with Allion’s reporting obligations under the Exchange Act. In addition, upon completion of the merger, Allion common stock will no longer be listed on any exchange, including NASDAQ, and price quotations will no longer be available for Allion common stock. Allion will no longer be subject to the obligations and constraints or the related direct and indirect costs associated with having publicly traded equity securities.

     The H.I.G. Buying Group has advised Allion that they do not have any specific plans or proposals that relate to or would result in an extraordinary corporate transaction following completion of the merger involving Allion’s corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations or purchase, sale or transfer of a material amount of assets. However, the H.I.G. Buying Group expects to continuously evaluate and review Allion’s business and operations following the merger and may develop new plans and proposals that they consider appropriate to maximize the value of Allion. The H.I.G. Buying Group expressly reserves the right to make any changes they deem appropriate in light of such evaluation and review or in light of future developments.

Conduct of Allion’s Business if the Merger is Not Completed

     In the event that the merger agreement is not approved by Allion’s stockholders or if the merger is not completed for any other reason, Allion’s stockholders will not receive any payment for their shares of Allion common stock. Instead, Allion will remain an independent public company, its common stock will continue to be listed and traded on NASDAQ, and our stockholders will continue to be subject to the same risks and opportunities as they currently face with respect to their ownership of Allion common stock. If the merger is not completed, Allion can offer no assurance as to the effect of these risks and opportunities on the future value of your shares of Allion common stock, including the risk that the market price of Allion common stock may decline due to the fact that the current market price of Allion stock may reflect a market assumption that the merger will be completed. If the merger is not completed, our Board of Directors will evaluate and review the business operations, properties, dividend policy and capitalization of Allion from time to time, make such changes as they deem appropriate, and continue to seek to maximize stockholder value. If the merger agreement is not approved by our stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other acceptable transaction will be available to the Company or that Allion’s business, prospects or results of operations will not be adversely impacted.

     Pursuant to the merger agreement, under certain circumstances, Allion is permitted to terminate the merger agreement and approve an alternative transaction. See “The Merger and the Merger Agreement—Termination” beginning on page 66.

     To the extent Allion does so, it will be obligated to pay Parent a termination fee. See “The Merger and the Merger Agreement—Termination Fees; Expenses” beginning on page 68.

Financing of the Merger

Equity Commitment Letter

     Pursuant to an equity commitment letter from H.I.G. Bayside Debt & LBO Fund II, L.P. to Parent dated as of October 18, 2009, H.I.G. Bayside Debt & LBO Fund II, L.P. has agreed to make capital contributions of up to $165 million to Parent in exchange for equity interests of Parent, to enable Parent and Merger Sub to consummate the merger and the other transactions contemplated by the merger agreement.

     These contributions are subject to:

	•		the satisfaction or waiver at the closing of each of the conditions to Parent’s and Merger Sub’s obligations to consummate the transactions contemplated by the merger agreement;
	•		the substantially concurrent funding of the debt financing transactions described below; and
	•		the contemporaneous consummating of the merger and the other transactions contemplated by the merger agreement.

Debt Commitment Letters

     H.I.G. Bayside Debt & LBO Fund II, L.P. and Parent have arranged to secure certain commitments in respect of debt financing, consisting of a senior secured credit facility and an issuance of unsecured senior subordinated notes. The proceeds of such financing shall be used, as applicable, for the purpose of funding a portion of the consideration payable in connection with the merger, to pay certain fees and expenses of the merger, and for general corporate purposes for the operation of the surviving corporation following the closing of the merger.

     Fifth Third Bank, or Fifth Third, provided a commitment letter dated October 18, 2009 to H.I.G. Bayside Debt & LBO Fund II, L.P., pursuant to which Fifth Third, subject to the terms and conditions therein, agreed (i) to act as arranger and administrative agent for the a term loan in the principal amount of $95 million, which we refer to as the Term Loan, and a revolving credit facility in the principal amount of $15 million, which we refer to as the Revolver and refer to together with the Term Loan as the Facilities, (ii) to commit to provide a portion of the Facilities in an aggregate amount of $30 million (to be allocated pro rata between the Revolver and the Term Loan), and (iii) to use its best efforts to arrange additional lenders to provide financing commitments in the aggregate amount of $80 million to complete the Facilities. Interest on the Facilities will be payable at a rate of prime plus 5.00%, or, at the surviving corporation’s election, LIBOR plus 6.00%. The Facilities will be secured by substantially all of the assets of the surviving corporation following consummation of the merger, and will mature 5 years following the closing date.

     Falcon Strategic Partners III, LP, or Falcon, provided a financing commitment letter dated October 18, 2009 to Parent, pursuant to which Falcon, subject to the terms and conditions therein, committed to purchase an amount of senior subordinated notes, which we refer to as the Notes, sufficient to result in aggregate gross proceeds of not less than $49 million and not more than $51 million, as the surviving corporation, following consummation of the merger, may elect. The Notes will bear interest at a rate of 16.00% per annum (3.00% of which may be either paid in cash or added to principal at the election of the surviving corporation) and will mature 5.5 years following the closing date. In addition, Falcon (together with other purchasers of Notes, as applicable) will receive detachable warrants representing the right to purchase common and preferred stock of Parent equal to 3.00% of the total equity interests of Parent on a fully diluted basis.

Repayment of Indebtedness

     We intend to repay the indebtedness incurred to effect the merger through cash flow from operations. Although there can be no assurance, we believe that cash flow from operations should be sufficient to service our interest and principal repayment obligations under the indebtedness incurred to effect the merger for the foreseeable future. However, we believe that it is reasonably likely that we will need to refinance all or a portion of the Facilities and/or Notes prior to maturity with the proceeds of future financing activities.

Limited Guarantee

     Pursuant to a limited guarantee, H.I.G. Bayside Debt & LBO Fund II, L.P. has agreed to guarantee the obligations of Parent and Merger Sub under the merger agreement with respect to any reverse termination fee payable by Parent, plus interest on any unpaid reverse termination fee at the prime lending rate published in The Wall Street Journal on the date such payment is required to be paid. In addition, H.I.G. Bayside Debt & LBO Fund II, L.P. has agreed to guarantee, up to $10 million, the obligations of Parent to pay any losses or damages payable to Allion as a result of Parent’s or Merger Sub’s willful breach of the merger agreement and Allion’s expenses (including reasonable attorneys’ fees) incurred in connection with the enforcement of Parent’s obligations to pay any such termination fee.

     The guarantee will terminate upon the earlier of the completion of the merger or the first anniversary of the merger agreement, unless prior to such first anniversary the Company presents a claim for payment to Parent, Merger Sub or H.I.G. Bayside Debt & LBO Fund II, L.P. under the terms of the merger agreement or the limited guarantee.

Rollover Agreements

Exchange Agreements

     As a condition and inducement to Parent and Merger Sub to enter into the merger agreement, Parent entered into exchange agreements with the rollover stockholders. Pursuant to the exchange agreements, immediately prior to the effective time of the merger, each of the rollover stockholders will surrender a portion of their shares of Allion common stock to Parent in exchange for a combination of senior preferred stock, junior preferred stock and common stock in Parent. The rollover stockholders will surrender an aggregate of 7,911,545.54 shares of Allion common stock, or 27.6% of the issued and outstanding shares of Allion common stock. Upon the completion of the merger, the rollover stockholders will directly own approximately 29.2% of the outstanding equity interest of Parent, of which Allion will be a wholly owned subsidiary. The rollover agreements will terminate automatically upon the termination of the merger agreement prior to the completion of the merger. Parent has additionally agreed to indemnify Parallex and its members, directors, officers, employees and agents from and against any losses, damages, fees, expenses and costs arising from claims related to the merger that are asserted by any of Allion’s stockholders related to the transactions contemplated by the merger agreement and has established a $1 million escrow account to support such obligations.

Stockholders Agreement

     The rollover stockholders have also entered into a stockholders agreement with Parent and H.I.G. Healthcare, LLC, a member of the H.I.G. Buying Group, which will own the remaining equity interests in Parent upon completion of the merger. The stockholders agreement will govern the rights and obligations of H.I.G. Healthcare, LLC and the rollover stockholders as holders of equity interests in Parent following completion of the merger. Pursuant to the stockholders agreement, immediately following the merger, the board of directors of Parent will initially consist of nine members, five of which will be designated by H.I.G. Healthcare, LLC, three of which will be designated by Parallex and one of which will be the chief executive officer of Parent. The stockholders agreement also sets forth restrictions on transfer of the rollover stockholders’ equity interests in Parent and provides the rollover stockholders with certain veto rights, preemptive rights and tag-along rights.

Other Agreements

     The rollover stockholders have also entered into a restrictive covenant agreement, pursuant to which they will be subject to confidentiality obligations from and after the effective time of the merger and under the restrictive covenant agreement. Parallex and Raymond Mirra will be subject to certain non-competition and non-solicitation covenants for a period of three years, and the other rollover stockholders will be subject to such non-competition covenants and non-solicitation covenants for a period of two years. Pursuant to a registrations rights agreement, the

rollover stockholders will also be entitled to registration rights with respect to the equity interests they will own in Parent following the merger.

Voting Agreements

     Simultaneously with the execution of the merger agreement and as a condition to Parent and Merger Sub entering into the merger agreement, Parent also entered into voting agreements with the rollover stockholders. Pursuant to the voting agreements, the rollover stockholders have agreed, among other things, to vote all of the shares of Allion common stock beneficially owned by such stockholders in favor of the adoption of the merger agreement at any meeting of Allion’s stockholders. As of the record date, the rollover stockholders collectively exercised voting control over approximately 41.1% of the outstanding shares of Allion common stock. Any additional shares of common stock acquired by the rollover stockholders following the record date will automatically become subject to the voting agreements.

     The voting agreements require the rollover stockholders, among other things, to vote their shares of Allion common stock at any meeting of Allion’s stockholders (i) in favor of the adoption of the merger agreement and the merger, (ii) against any third party acquisition proposal, or any action or agreement that would interfere with the merger or the Company’s performance of its obligations under the merger agreement, and (iii) against any amendment of the Company’s governing documents or other proposal or transaction that would interfere with the merger or nullify the merger agreement.

     In addition, the rollover stockholders granted Parent an irrevocable proxy to vote the rollover stockholders’ shares of Allion common stock on their behalf in the event the rollover stockholders fail to act in accordance with the voting agreements.

     Under the voting agreements, the rollover stockholders have also agreed not to sell, transfer, exchange, pledge or otherwise encumber, assign or dispose of their shares of Allion common stock, enter into any other voting arrangement or grant any other proxy with respect to such shares, or take any other action that would interfere with the merger or Allion’s performance of its obligations under the merger agreement. Further, the rollover stockholders may not solicit proxies or become a participant in a solicitation with respect to a third party acquisition proposal.

     The voting agreements terminate on the earlier of the completion of the merger of the termination of the merger agreement.

     The full text of the form of voting agreement is attached to this Proxy Statement as Appendix C .

Interests of Certain Persons in the Merger

     In considering the recommendation of the Special Committee and our Board of Directors, our stockholders should be aware that some of Allion’s executive officers, members of our Board of Directors and other affiliates may have interests in the transaction that are different from, or in addition to, the interests of our stockholders generally. The Special Committee and Board of Directors were aware of such interests and considered them, among other matters, in reaching their decisions to approve the merger agreement and recommend that Allion’s stockholders vote in favor of adopting the merger agreement.

Treatment of Stock Options, Warrants, Restricted Stock and Phantom Stock Units

     Upon the completion of the merger, all of our equity compensation awards (including awards held by our directors and executive officers) will be subject to the following treatment:

•

each outstanding Allion stock option will vest in full prior to the effective time of the merger, and each outstanding Allion stock option not exercised prior to the merger will be cancelled and converted into the

			right to receive an amount in cash equal to (i) the number of shares subject to such option multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such option;
	•		each outstanding Allion warrant (whether or not vested) will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such warrant multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such warrant;
	•		each outstanding Allion option or warrant (whether vested or unvested) with an exercise price that equals or exceeds the $6.60 per share merger consideration will be cancelled without payment;
	•		each outstanding share of restricted stock will vest in full prior to the effective time of the merger and will be automatically cancelled and converted into the right to receive $6.60 in cash per share, without interest; and
	•		each holder of an outstanding Allion cash-settled phantom stock unit (whether or not vested) will be entitled to receive an amount in cash equal to (i) the number of phantom stock units held by that holder multiplied by $6.60, without interest, plus (ii) a tax gross-up payment to cover any excise tax liability such holder may incur as a result of any payments or benefits, whether paid pursuant to the terms of the phantom stock units or otherwise, that may be deemed “golden parachute” payments for tax purposes.

          See “The Merger Agreement—Treatment of Stock and Equity Awards” for a more complete description of the treatment of the relevant plans under which such stock options and other stock-based awards were issued.

          The following table reflects the consideration expected to be received by each of our directors and executive officers in connection with the merger:

										Cash to be				Cash to be
		Cash to be								Received for				Received				Estimated
		Received for				Cash to be				Allion				for				280G Tax
		Allion				Received for				Options and/or				Phantom				Gross-Up				Total
		Common				Restricted				Warrants ($)				Stock Units				Payment				Consideration
Name		Stock ($)				Shares ($)				(1)				($)				($)(2)				($)
Michael P. Moran			—				—				715,000				7,920,000				3,890,432				12,525,432
Chairman of the Board, President and Chief Executive Officer
Russell J. Fichera			—				—				—				1,980,000				988,397				2,968,397
Senior Vice President and Chief Financial Officer
Stephen A. Maggio			—				—				3,825				330,000				—				333,825
Secretary, Treasurer and Director of Finance
Robert E. Fleckenstein, R.Ph. Vice President, Pharmacy Operations			—				—				22,500				1,320,000				670,831				2,013,331
Anthony D. Luna			—				—				6,563				1,320,000				688,727				2,015,290
Vice President, HIV Sales
Flint D. Besecker			64,357				18,097				—				—				—				82,454
Director
Gary P. Carpenter			51,157				18,097				—				—				—				69,254
Director

										Cash to be				Cash to be
		Cash to be								Received for				Received				Estimated
		Received for				Cash to be				Allion				for				280G Tax
		Allion				Received for				Options and/or				Phantom				Gross-Up				Total
		Common				Restricted				Warrants ($)				Stock Units				Payment				Consideration
Name		Stock ($)				Shares ($)				(1)				($)				($)(2)				($)
Willard T. Derr			64,357				18,097				—				—				—				82,454
Director
William R. Miller, IV			64,357				18,097				—				—				—				82,454
Director
John Pappajohn (3)			1,485,000				—				1,898,000				—				—				3,383,000
Director
Derace Schaffer, M.D. (3)			165,000				—				—				—				—				165,000
Director
Kevin D. Stepanuk			64,357				18,097				—				—				—				82,454
Director
Harvey Z. Werblowsky, Esq. (3) Director			—				—				15,000				—				—				15,000

     For further information regarding the beneficial ownership of Allion common stock by the directors and executive officers of Allion, see “Security Ownership of Certain Beneficial Owners and Management.”

Severance Provisions of Employment Agreements with Messrs. Moran, Fichera, Fleckenstein and Luna

          Each of Messrs. Moran, Fichera, Fleckenstein and Luna are party to an employment agreement with Allion, which requires Allion to make certain payments and/or provide certain benefits to such executive officers in the event of a qualifying termination of their employment. Mr. Maggio’s employment agreement with Allion expired on July 20, 2009. The following summarizes the potential payments to each executive officer under his employment agreement, assuming the termination of such executive officer’s employment. As discussed below under “—Employment with the Surviving Corporation Post-Merger,” it is expected that, following the merger, the executive officers of Allion immediately prior to the merger will continue to serve in their respective positions and pursuant to their respective employment agreements as the executive officers of the surviving corporation. The executives will receive the following severance benefits only if their employment with Allion is terminated.

          Regardless of the manner in which the executive’s employment terminates, he will be entitled to receive: (i) accrued but unpaid salary; (ii) cash in lieu of any accrued but unused vacation; and (iii) any benefits accrued or payable to the executive under our benefit plans (in accordance with the terms of such benefit plans), which we refer to collectively as the Accrued Benefits.

           Employment Agreements with Messrs. Moran and Fichera . Pursuant to the amended and restated employment agreements with Messrs. Moran and Fichera, if the executive terminates his employment with us for

Good Reason or if we terminate the executive’s employment without Cause, or if we terminate the executive’s employment by reason of having delivered a notice of non-renewal, the executive is entitled to:

	•		the Accrued Benefits;
	•		a lump sum payment equal to the salary that would have been paid to him if there had been no termination through the expiration of the then-current term;
	•		a lump sum payment of $350,000, in the case of Mr. Moran, and equal to 140% of his salary on the termination date, in the case of Mr. Fichera;
	•		continuation of group health plan benefits, in the case of Mr. Moran, during the period he is entitled to COBRA if he has not become eligible for health insurance pursuant to other employment, and, in the case of Mr. Fichera, for a period of one year or until he becomes eligible for health insurance pursuant to other employment, whichever is earlier.

          If the executive is physically or mentally disabled so as to be unable to perform substantially all of the essential functions of the executive’s then-existing position or positions under the employment agreement with or without reasonable accommodation, our Board of Directors may remove the executive from any responsibilities and/or reassign the executive to another position with Allion for the remainder of the term or during the period of such disability. Notwithstanding any such removal or reassignment, the executive will continue to be employed by us and shall receive a lump sum payment equal to the lesser of (i) the salary and bonus he would have earned though the date that is six months after the onset of the disability or (ii) the salary and bonus he would have earned through the termination of the then-current term. At the end of the period described in the previous sentence, his employment will terminate and the executive will be entitled only to the Accrued Benefits. There are no additional severance payments or benefits payable upon a termination by reason of disability. In the event of his death, each executive is entitled to the Accrued Benefits. Mr. Fichera’s estate also is entitled to a pro-rated performance bonus for the year in which his employment was terminated.

          If we terminate the executive’s employment for Cause, if the executive terminates his employment without Good Reason, or if the executive provides us with notice of non-renewal, the executive is entitled to the Accrued Benefits. Upon payment or provision of the above Accrued Benefits, we have no further obligations to the executive under his agreement.

           Employment Agreements with Messrs. Fleckenstein and Luna. Pursuant to the amended and restated employment agreements with Messrs. Fleckenstein and Luna, upon a termination by the executive for Good Reason or by us without Cause including any such termination that occurs within 12 months following a Change in Control, the executive is entitled to receive:

	•		the Accrued Benefits;
	•		a lump sum payment equal to the one year of base salary that would have been paid to him as if there had been no termination for one year; and
	•		continuation of group health plan benefits for a period of one year or until the executive becomes eligible for health insurance pursuant to other employment, whichever is earlier.

          If the executive becomes disabled, our Board of Directors may remove the executive from any responsibilities and/or reassign the executive to another position with Allion for the remainder of the term or during the period of such disability. Notwithstanding any such removal or reassignment, the executive will continue to be employed by us and shall receive a lump sum payment equal to the lesser of (i) the salary and bonus he would have earned though the date that is six months after the onset of the disability or (ii) the salary and bonus he would have earned through the termination of the then-current term. At the end of the period described in the previous sentence, his employment will terminate and the executive will be entitled only to the Accrued Benefits. There are no additional severance payments or benefits payable upon a termination by reason of disability.

          Upon a termination by us for Cause, by the executive without Good Reason or upon the executive’s death, the executive is entitled to receive the Accrued Benefits.

           Definition of Cause and Good Reason . For purposes of the employment agreements with Messrs. Moran, Fichera, Fleckenstein and Luna, “Cause” generally means the executive’s (i) failure to perform his duties for Allion, including without limitation, his failure to follow the directives of our Board of Directors, or any other material breach by the executive of the agreement; (ii) breach of the restrictive covenants; (iii) fraud or theft; (iv) conviction of a felony, or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or a plea of nolo contendere thereto; or (v) engaging in reckless behavior or willful misconduct with respect to Allion or its business or assets that has had or is reasonably likely to have a material adverse effect on Allion or its business or assets.

          For purposes of the employment agreements with Messrs. Moran, Fichera, Fleckenstein and Luna, “Good Reason” generally means the occurrence of any of the following events: (i) any material diminution in the nature or scope of the executive’s authorities, powers, functions, responsibilities or duties; (ii) any material reduction in the amount of the executive’s base salary; (iii) any material breach by Allion or its successors of any other provision of the employment agreement; (iv) relocation of the executive’s principal place of employment; or (v) with respect to Messrs. Moran and Fichera, any material diminution in the authority, duties, or responsibilities of the supervisor to whom the executive is required to report, including a requirement that Mr. Moran report to a corporate officer or employee instead of reporting directly to our Board of Directors or that Mr. Fichera report to a corporate officer or employee other than the CEO.

           Restrictive Covenants . Pursuant to the amended and restated employment agreements, Messrs. Moran, Fichera, Fleckenstein and Luna are subject to confidentiality provisions during the term of employment with Allion and after termination of employment. Additionally, Messrs. Moran, Fichera, Fleckenstein and Luna are subject to certain non-compete and non-solicitation obligations during the term of employment with Allion and for a one-year period following termination of employment. Allion may extend such non-competition and non-solicitation period for up to one year provided Allion extends and pays the termination benefits to the executive for the duration of the extension. Notwithstanding the foregoing, if the employment agreement is terminated by Allion without Cause or by the executive for Good Reason, or, additionally for Messrs. Moran and Fichera, if employment is terminated after delivery of a notice of non-renewal of the employment agreement, the executive will no longer be bound by the non-competition restrictions.

          The following table shows the estimated amount of potential cash severance payable to our current executive officers based on an assumed termination of the executive’s employment without Cause or for Good Reason on December 31, 2009, including the estimated present value of continuing coverage of medical, dental and other benefits. The table also shows the potential estimated additional “gross-up payment” to which certain of our executive officers are entitled in the event that any benefit gives rise to an excise tax. The table does not include the consideration resulting from the Allion options and cash-settled phantom stock units described in the preceding table, although these amounts have been taken into account to the extent they constitute parachute payments under Section 280G of the Internal Revenue Code when estimating the potential gross-up payments set forth in the table.

						Potential
		Potential				Estimated
		Severance				280G Tax
		Payment				Gross-Up
Name		($)(1)				Payment ($)(2)				Total ($)
Michael P. Moran			633,281				366,270				999,551
Chairman of the Board, President and Chief Executive Officer
Russell J. Fichera			562,581				325,379				887,960
Senior Vice President and Chief Financial Officer
Stephen A. Maggio			—				—				—
Secretary, Treasurer and Director of Finance
Robert E. Fleckenstein, R.Ph.			197,238				117,171				314,409
Vice President, Pharmacy Operations
Anthony D. Luna			211,367				125,564				336,931
Vice President, HIV Sales

Indemnification and Insurance

     Pursuant to the merger agreement, Parent will cause the surviving corporation to the merger to exculpate, indemnify and advance expenses to each current and former director and officer of Allion and its subsidiaries, whom we refer to as the indemnified parties, against all liabilities for acts or omissions occurring at or prior to the effective time of the merger, as provided in Allion’s certificate of incorporation and bylaws and any indemnification or other agreements in effect on the date of the merger agreement. For six years following the effective time of the merger, the surviving corporation’s certificate of incorporation and bylaws will contain exculpation, indemnification and expense advancement provisions for acts or omissions occurring at or prior to the effective time of the merger no less favorable than those in Allion’s certificate of incorporation and bylaws in effect on the date of the merger agreement.

     In addition, pursuant to the merger agreement, Allion may purchase before the merger, or the surviving corporation shall purchase promptly after the merger, a “tail” insurance policy with a claims period of six years after the merger on terms with respect to coverage and amounts at least as favorable as Allion’s policy in effect on the date of the merger agreement.

     However, if the Company or the surviving corporation fails to obtain the “tail” policy, the surviving corporation must maintain Allion’s current directors’ and officers’ liability insurance policy for acts or omissions occurring prior to the effective time of the merger on terms and with respect to coverage and amount at least as favorable as Allion’s policy in effect on the date of the merger agreement. The surviving corporation is not required to pay premiums for such insurance of more than 300% the current annual premium paid by Allion for the insurance, although it must maintain the maximum amount of such insurance as possible for an annual cost of 300% the current annual premium paid by Allion.

Employment with the Surviving Corporation Post-Merger

     It is expected that, following the merger, the executive officers of Allion immediately prior to the merger will continue to serve in their respective positions and pursuant to their respective employment agreements as the executive officers of the surviving corporation. Following the merger, the executive officers who continue to be employed by the surviving corporation will have the right to the same base salary and non-equity based bonus policy, as well as 401(k) and health and welfare benefits that are at least as favorable as the Allion plans and policies in effect on the date of the merger agreement.

     As of the date of this Proxy Statement, none of the Company’s executive officers who are expected to remain employed by the surviving corporation following the merger has entered into any arrangement, agreement or understanding with H.I.G., Parent or their affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or the surviving corporation. Parent currently anticipates establishing a management equity incentive plan, the terms of which will be later determined by Parent in consultation with our management. Parent has held preliminary discussions with our management with respect to a management equity

incentive plan, but the terms and conditions of the plan have not been finalized. Parent anticipates that the plan would provide financial equity incentives to management in amounts customary for transactions of this kind.

Board Membership

     Pursuant to the stockholders agreement entered into by and among Parent, H.I.G. Healthcare, LLC and the rollover stockholders simultaneously with the execution of the exchange agreements and voting agreements, Parallex will be entitled to appoint three of the nine members of the board of directors of Parent following the merger. William Miller and Kevin Stepanuk currently serve as the designees of Parallex to our Board of Directors. However, Parallex has not indicated to us who it intends to appoint to the Board of Directors of Parent following the merger.

     In addition, pursuant to the stockholders agreement, the chief executive officer of Parent will serve on its board of directors. Michael Moran currently serves as Allion’s president and chief executive officer, as well as chairman of Allion’s Board of Directors. H.I.G. Healthcare, LLC and Parallex expect that Mr. Moran will serve as chief executive officer of Parent immediately following the merger, as a result of which he will also serve on the board of directors of Parent.

Rollover Stockholders

     Pursuant to the exchange agreements the rollover stockholders entered into with Parent, such stockholders will surrender to Parent, immediately prior to the effective time of the merger, a portion of their shares of Allion common stock in exchange for equity interests in Parent. As a result, immediately following the merger, the rollover stockholders will hold approximately 29.2% of the outstanding equity interests of Parent. The rollover stockholders will continue to own equity interests in the Company, although indirectly, and will continue to participate in the earnings and growth of the Company, if any.

     In addition, at the effective time of the merger, the maturity date of the promissory notes previously issued to the rollover stockholders by Allion will accelerate, and the rollover stockholders will receive cash in amount equal to the principal plus accrued interest on such promissory notes.

     The voting agreements the rollover stockholders also entered into with Parent provide, among other things, that the rollover stockholders, who collectively own an aggregate of approximately 41.1% of the outstanding shares of Allion common stock as of the record date, agree to vote their shares of Allion common stock in favor of the merger and grant Parent a proxy to vote such shares in favor of the merger in the event the rollover stockholders fail to do so.

Related Party Transactions

      Acquisition of Biomed . On April 4, 2008, Allion acquired Biomed America, Inc., which we refer to as Biomed, pursuant to the merger of Biomed with and into a wholly owned subsidiary of Allion. Allion acquired Biomed from Parallex LLC, which was Biomed’s majority stockholder, and Biomed’s minority stockholders, including the rollover stockholders.

     The purchase price paid at the closing to the former Biomed stockholders totaled $99.4 million and was paid with a combination of cash, Allion common stock and Allion preferred stock. On June 24, 2008, Allion’s stockholders approved the issuance of approximately 6 million shares of Allion common stock to the former Biomed stockholders in connection with the conversion of the preferred stock held by Biomed’s former stockholders into common stock. In addition to the initial purchase price, the Company made an earn out payment to the former Biomed stockholders in June 2009, which was valued at approximately $44 million and paid with a combination of cash, subordinated promissory notes and Allion common stock.

     In connection with the acquisition of Biomed, we also entered into a Stockholders’ Agreement, dated April 4, 2008, with the former stockholders of Biomed. The Stockholders’ Agreement grants certain demand and piggyback registration rights with respect to resales of the shares of Allion common stock issued in connection with acquisition of Biomed. Pursuant to the Stockholders’ Agreement and in connection with our annual meeting of stockholders during the calendar years ending December 31, 2008, 2009 and 2010 (unless the former Biomed stockholders fail to hold in the aggregate at least 15% of the Allion common stock on an as-converted basis), the former Biomed stockholders as a group have had and will have the right to nominate two of the six members of our Board of Directors, subject to approval by our Board of Directors’ nominating and corporate governance committee and a majority of the other members of our Board of Directors. The Stockholders’ Agreement also includes certain restrictions on the transfer of Allion capital stock held by the former Biomed stockholders and a five-year standstill provision applicable to Parallex and any assignee of Parallex (subject to the former Biomed stockholders holding at least 10% of the Allion common stock on an as-converted basis).

      Promissory Note Held by Raymond A. Mirra, Jr. . In connection with the acquisition of Biomed, Allion assumed indebtedness of Biomed payable to Raymond A. Mirra, Jr., the sole voting equity holder of Parallex, pursuant to a promissory note, dated October 5, 2007, for the principal amount of $3 million plus interest at a rate of 6% per annum. Allion has made no principal payments to Mr. Mirra pursuant to this note. Allion has made interest payments on this note totaling $165,000. The total amount of principal outstanding under the promissory note as of October 28, 2009 is $3 million.

      Promissory Notes Held by, and Transition Services Agreement with, RAM Capital Group, LLC . Also in connection with the Biomed acquisition, Allion assumed certain other indebtedness of Biomed that is payable to RAM Capital Group, LLC, or RAM Capital, pursuant to two promissory notes. In addition, Allion entered into a transition services agreement with RAM Capital immediately following the acquisition of Biomed. Mr. Mirra is the sole owner of RAM Capital and therefore has an interest in the full value of the two promissory notes and the transition services agreement.

     The first promissory note, dated September 30, 2006, for the principal face amount of $175,000, was issued by Apogenics Healthcare, Inc. in favor of RAM Capital prior to Biomed’s merger with Apogenics Healthcare, Inc. when Biomed assumed the note. This promissory note includes a line of credit for up to $250,000 in additional funds, which was drawn down prior to Allion’s acquisition of Biomed. The promissory note accrues interest at a rate of 6% per annum. Allion has made no principal payments to RAM Capital or Mr. Mirra pursuant to this note. Allion has made interest payments on this note totaling $14,307. The total amount of principal outstanding under this promissory note as of October 28, 2009 is $425,000.

     The second promissory note, dated December 31, 2007, for the principal face amount of $218,535, was issued by Biomed and certain of its subsidiaries in favor of RAM Capital. This promissory note includes a line of credit for up to $400,000 in additional funds, which would be added to any principal amount outstanding. The promissory note accrues interest at a rate of 6% per annum. Allion has made no principal payments to RAM Capital or Mr. Mirra pursuant to this note. Allion has made interest payments on this note totaling $13,112. The total amount of principal outstanding under the promissory note as of October 28, 2009 is $218,535.

     Prior to Allion’s acquisition of Biomed, RAM Capital provided various services to Biomed and its subsidiaries. Allion entered into a transition services agreement with RAM Capital to obtain RAM Capital’s assistance in the transition of the Biomed business following the acquisition. The agreement requires payments to RAM Capital of $10,000 per month, plus certain expenses, for each month in which RAM Capital provides services to Allion. The initial term of the agreement was for twelve months, subject to extension upon the mutual agreement of RAM Capital and Allion. Although the initial term of the agreement expired on April 4, 2009, we continue to operate under the terms of the agreement on a month-to-month basis.

      Release of Escrow to Former Biomed Stockholders . On April 20, 2009, Allion entered into an amendment to the Biomed merger agreement, pursuant to which Allion instructed SunTrust Bank, as escrow agent, to disburse the $4 million escrow amount from the Biomed acquisition, together with interest and earnings, to the former

stockholders of Biomed, including Parallex and the other rollover stockholders. Parallex received approximately $2.7 million of the total escrow disbursement.

Material U.S. Federal Income Tax Consequences

     The following is a summary of the material United States federal income tax consequences of the merger to “U.S. holders” and “non-U.S. holders” (each, as defined below) who receive cash in the merger in exchange for shares of Allion common stock (excluding any rollover stockholders). The discussion does not purport to consider all aspects of United States federal income taxation that might be relevant to holders of Allion common stock. The discussion is based on the Internal Revenue Code of 1986, as amended, which we refer to as the Internal Revenue Code, applicable current and proposed United States Treasury regulations, judicial authority and administrative rulings and practice, all of which are subject to change, possibly with retroactive effect. Any change could alter the tax consequences of the merger to the holders of common stock.

     This discussion applies only to holders who hold shares of Allion common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code. This discussion does not address all aspects of United States federal income taxation that may be relevant to holders of Allion common stock in light of their particular circumstances, or that may apply to holders that are subject to special treatment under United States federal income tax laws (including, for example, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, cooperatives, traders in securities who elect to mark their securities to market, mutual funds, real estate investment trusts, S corporations, holders subject to the alternative minimum tax, persons who validly exercise appraisal rights, partnerships or other pass-through entities and persons holding shares of Allion common stock through a partnership or other pass-through entity, persons who acquired shares of Allion common stock in connection with the exercise of employee stock options or otherwise as compensation, United States expatriates, “passive foreign investment companies,” “controlled foreign corporations” and persons who hold shares of Allion common stock as part of a hedge, straddle, constructive sale or conversion transaction). This discussion does not address any aspect of state, local or foreign tax laws or United States federal tax laws other than United States federal income tax laws. This discussion also does not address the tax consequences to rollover stockholders receiving cash in the merger or acquiring an equity interest in Parent or receiving any other consideration in connection with the merger.

      The summary set forth below is not intended to constitute a complete description of all tax consequences relating to the merger. No rulings have been sought or will be sought from the United States Internal Revenue Service, or IRS, with respect to any of the United States federal income tax considerations discussed below. As a result, we cannot assure you that the IRS will agree with the tax characterizations and the tax consequences described below. Because individual circumstances may differ, each holder should consult its tax advisor regarding the applicability of the rules discussed below to the holder and the particular tax effects of the merger to the holder, including the application of state, local and foreign tax laws.

     For purposes of this summary, a “U.S. holder” is a holder of shares of Allion common stock, who or that is, for United States federal income tax purposes:

	•		an individual who is a citizen or resident of the United States;
	•		a corporation, or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any state of the United States or the District of Columbia;
	•		an estate, the income of which is subject to United States federal income tax regardless of its source; or
	•		a trust if (1) a United States court is able to exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust; or (2) it has a valid election in place to be treated as a domestic trust for United States federal income tax purposes.

     A “non-U.S. holder” is a person (other than a partnership) that is not a U.S. holder.

     If shares of Allion common stock are held by a partnership (including any other entity taxable as a partnership for United States federal income tax purposes), the United States federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partnerships

that hold shares of Allion common stock and partners in such partnerships are urged to consult their tax advisors regarding the tax consequences to them of the merger.

      U.S. Holders . The receipt of cash for shares of Allion common stock pursuant to the merger agreement will be a taxable transaction for United States federal income tax purposes. In general, a U.S. holder who surrenders shares of Allion common stock for cash in the merger will recognize capital gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received in exchange for such shares and the U.S. holder’s adjusted tax basis in such shares. If a U.S. holder acquired different blocks of Allion common stock at different times or different prices, such holder must determine its tax basis and holding period separately with respect to each block of Allion common stock. Such gain or loss will be long-term capital gain or loss provided that a U.S. holder’s holding period for such shares is more than one year at the time of completion of the merger. Long-term capital gains recognized by U.S. holders that are individuals generally should be subject to a maximum United States federal income tax rate of 15%. There are limitations on the deductibility of capital losses.

     Cash payments made pursuant to the merger agreement will be reported to holders of Allion common stock and the IRS to the extent required by the Internal Revenue Code and applicable regulations of the United States Treasury. Under the Internal Revenue Code, a U.S. holder of Allion common stock (other than a corporation or other exempt recipient) may be subject, under certain circumstances, to information reporting on the cash received pursuant to the merger agreement. A U.S. holder, who is not otherwise exempt, who fails to supply a correct taxpayer identification number, under-reports tax liability, or otherwise fails to comply with United States information reporting or certification requirements, may be subject to backup withholding of tax at a rate of 28% with respect to the amount of cash received in the merger.

     Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a U.S. holder’s United States federal income tax liability provided the required information is timely furnished to the IRS.

      Non-U.S. Holders . Any gain realized on the receipt of cash pursuant to the merger agreement by a non-U.S. holder generally will not be subject to United States federal income tax unless:

	•		the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable United States income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder);
	•		the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the cash disposition, and certain other conditions are met; or
	•		Allion is or has been a “United States real property holding corporation” for United States federal income tax purposes within the five years preceding the merger. Allion does not believe it is or has been a United States real property holding corporation.

     A non-U.S. holder whose gain is associated with a U.S. trade or business in a manner described in the first bullet point will be subject to tax on its net gain in the same manner as if it were a U.S. holder. In addition, such a non-U.S. holder that is a corporation may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits (including such gain) or at such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet point above will be subject to tax at a 30% flat rate on the gain recognized, equal to the difference, if any, between the amount of cash received in exchange for shares of Allion common stock and the non-U.S. holder’s adjusted tax basis in such shares. To the extent that a non-U.S. holder’s income is eligible for a reduced rate of withholding tax under a treaty, such non-U.S. holder may obtain a refund of excess amounts withheld by filing a properly completed claim for refund with the IRS.

     Non-U.S. holders who sell their Allion common stock in the merger generally will not be subject to information reporting and backup withholding, provided that Allion does not have actual knowledge or reason to know that the non-U.S. holder is a United States person, as defined under the Internal Revenue Code, and the non-U.S. holder provides Allion a certification, under penalty of perjury, that it is not a United States person (such certification may be made on an IRS Form W-8BEN, or successor form, or by satisfying other certification requirements of applicable United States Treasury regulations). Backup withholding of tax (at a rate of 28%) for any non-U.S. holder who does not provide adequate certification may apply to cash received by a non-U.S. holder in the merger.

     Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s United States federal income tax liability provided that the required information is timely furnished to the IRS.

Estimated Fees and Expenses of the Merger

     Allion expects to incur approximately $            million in fees and expenses in connection with the consummation of the merger and the related transactions, as set forth in the table below:

		Estimated
Expenses		Amount
Financial advisory fees and expenses		$
Legal and accounting fees and expenses		$
Special committee and board fees and expenses		$
Printing proxy solicitation and mailing fees and expenses		$
SEC filing fees		$
Total		$

     Parent and Merger Sub will also incur regulatory filing fees.

     In general, all costs and expenses incurred in connection with the merger agreement and the merger and the other transactions contemplated by the merger agreement will be paid by the party incurring such expense. The Company, however, has agreed to reimburse Parent’s and Merger Sub’s documented, out-of-pocket transaction expenses in certain circumstances, as further described in “The Merger and the Merger Agreement—Termination Fees; Expenses,” beginning on page 68.

Regulatory Approvals

     The following discussion summarizes the material regulatory requirements that we believe relate to the merger, although we may determine that additional consents from, or notifications to, governmental agencies are necessary or appropriate.

     Under the HSR Act, we cannot complete the merger until we have submitted certain information to the Antitrust Division of the Department of Justice and the Federal Trade Commission and satisfied the statutory waiting period requirements. Both Allion and Parent made the necessary initial filings under the HSR Act on       , 2009. Unless either the Department of Justice or the Federal Trade Commission request additional information or we agree to extend the waiting period, we expect the waiting period under the HSR Act to terminate on       , 2009. Clearance under the HSR Act, however, does not preclude the Department of Justice or the Federal Trade Commission from later challenging the merger on antitrust grounds.

     In the merger agreement, the parties have agreed to use commercially reasonable efforts to assist each other in making all filings with governmental authorities and obtaining all governmental approvals and consents necessary to consummate the merger, subject to certain exceptions and limitations. Except as noted above with respect to the required filings under the HSR Act and the filing of a certificate of merger in Delaware at or before the effective date of the merger, we are not aware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the merger agreement or completion of the merger.

Litigation

     A lawsuit was filed on or about October 20, 2009 in the Supreme Court of the State of New York, County of Suffolk styled as follows: Fowler v. Moran, et al. , Index No. 041990/2009. The action is brought by Denise Fowler, who claims to be a stockholder of Allion, on her own behalf and on behalf of all others similarly situated,

and seeks certification of a class action on behalf of all Allion stockholders, except the defendants and their affiliates. The lawsuit names Michael Moran, Gary Carpenter, Flint Besecker, Willard Derr, Kevin Stepanuk, William Miller, Allion, Brickell Bay Acquisition Corp. and Brickell Bay Merger Corp. as defendants. The lawsuit alleges, among other things, that the individual defendants breached their fiduciary duties by failing to engage in an honest and fair sale process and by failing to maximize shareholder value in connection with the merger. In addition, the lawsuit alleges that Allion and H.I.G. Capital aided and abetted such alleged breaches of fiduciary duties by the individual defendants. Based on these allegations, the lawsuit seeks, among other relief, injunctive relief enjoining the transaction. It also purports to seek recovery of costs of the action, including reasonable attorneys’ fees.

     A second lawsuit was filed on October 27, 2009 in the Court of Chancery of the State of Delaware styled as follows: Virgin Islands Government Employees’ Retirement System v. Moran, et al. , Case No. 5022. The action is brought by the Virgin Islands Government Employees’ Retirement System, which claims to be a stockholder of Allion, on its own behalf and on behalf of all other similarly situated, and seeks certification of a class action on behalf of all Allion stockholders, except the defendants and their affiliates. The lawsuit names the same defendants as the Fowler case and also names Raymond A. Mirra, Jr., Shauna Mirra, Parallex LLC, whom we collectively refer to as the Parallex Defendants, and H.I.G. Capital, LLC. The lawsuit alleges essentially the same claims and seeks the same remedies as the Fowler case. In addition, the lawsuit alleges that the Parallex Defendants, as controlling shareholder of Allion, violated fiduciary duties to Allion’s shareholders.

     We believe that these lawsuits are without merit and intend to vigorously defend against them.

Provisions for Unaffiliated Security Holders

     No provision has been made to grant Allion’s unaffiliated stockholders access to the corporate files of Allion, the H.I.G. Buying Group, Parallex or any of their respective affiliates or to obtain counsel or appraisal services at the expense of Allion, the H.I.G. Buying Group, Parallex or any of their respective affiliates.

THE MERGER AND THE MERGER AGREEMENT

      The following summary describes the material terms of the merger agreement but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Appendix A to this Proxy Statement and incorporated herein by reference. We urge you to read the merger agreement in its entirety because it is the legal document that governs the merger.

      The representations, warranties and covenants contained in the merger agreement were made only for purposes of the merger agreement and as of specified dates, were solely for the benefit of the parties to the merger agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the merger agreement. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. You should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Allion, Parent or Merger Sub or any of their respective subsidiaries or affiliates. Further, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement, which subsequent information may not be fully reflected in Allion’s public disclosures.

The Merger

     The merger agreement provides that, upon and subject to the terms and conditions of the merger agreement and in accordance with Delaware law, Merger Sub will be merged with and into Allion. At that time, Merger Sub’s separate corporate existence will cease, and Allion will continue as the surviving corporation. The merger will become effective at the time the certificate of merger is duly filed with the Secretary of State of the State of Delaware or at such later time as is specified in the certificate of merger. The merger is expected to occur within three business days after all conditions to closing specified in the merger agreement have been satisfied or waived.

     Following the merger, Allion will be a privately held corporation and a direct wholly owned subsidiary of Parent. Our current stockholders, other than the rollover stockholders, will cease to have ownership interests in Allion or rights as stockholders of Allion and will not participate in our future earnings or growth. Instead, at the effective time of the merger, shares held by holders of Allion common stock, other than the rollover stockholders, will be cancelled and converted into the right to receive $6.60 per share in cash, without interest and less any applicable withholding taxes, as more fully described below.

     At the effective time of the merger, the directors of Merger Sub in office immediately prior to the merger will become the directors of the surviving corporation. The officers of Allion in office immediately prior to the merger will continue as the surviving corporation’s officers. Also at the effective time of the merger, Allion’s certificate of incorporation and bylaws will be amended and will look like the certificate of incorporation and bylaws of Merger Sub, except to reflect that the name of the surviving corporation will remain as “Allion Healthcare, Inc.”

     Our common stock is currently listed on the NASDAQ Global Market, or NASDAQ, under the symbol “ALLI.” After the merger, Allion common stock will cease to be listed on NASDAQ, and there will be no public market for Allion common stock. Our common stock is also registered with the SEC under the Exchange Act. Following the merger, we expect to deregister of the Allion common stock and cease to be a public reporting company. Accordingly, we will no longer be required to file periodic and current reports with the SEC, such as annual, quarterly and current reports on Forms 10-K, 10-Q and 8-K.

Treatment of Stock and Equity Awards

Common Stock

     At the effective time of the merger, each share of Allion common stock (including restricted stock) issued and outstanding immediately prior to the effective time of the merger (other than shares held by Allion, Parent or Merger Sub and stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be automatically cancelled and converted into the right to receive $6.60 in cash, without interest.

Stock Options

     Prior to the effective time of the merger, we will cause each outstanding unvested Allion stock option to vest in full immediately prior to the effective time of the merger. At the effective time of the merger, each outstanding Allion stock option not exercised prior to the merger will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such option multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such option. Each outstanding option with an exercise price that equals or exceeds the $6.60 per share merger consideration will be cancelled without payment.

Warrants

     At the effective time of the merger, each outstanding Allion warrant, whether or not vested, will be cancelled and converted into the right to receive an amount in cash equal to (i) the number of shares subject to such warrant multiplied by (ii) the excess (if any) of $6.60 over the exercise price per share of such warrant. Each outstanding warrant (whether vested or unvested) with an exercise price that equals or exceeds the $6.60 per share merger consideration will be cancelled without payment.

Phantom Stock Units

     At the effective time of the merger, each holder of an outstanding Allion cash-settled phantom stock unit (whether or not vested) will be entitled to receive an amount in cash equal to (i) the number of phantom stock units held by that holder multiplied by $6.60, without interest, plus (ii) a tax gross-up payment to cover any excise tax liability such holder may incur as a result of any payments or benefits, whether paid pursuant to the terms of the phantom stock units or otherwise, that may be deemed “golden parachute” payments for tax purposes.

Representations and Warranties

     The merger agreement includes our representations and warranties relating to the following:

	•		our corporate existence, good standing and authority;
	•		certain information about our subsidiaries;
	•		our organizational documents;
	•		our capitalization and rights to acquire Allion capital stock;
	•		our authority to execute the merger agreement and to consummate the merger and the other transactions contemplated by the merger agreement;
	•		the determination by our Board of Directors that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interest of the Company and its stockholders, its approval of the merger agreement, its declaration that the merger agreement and the merger are advisable, its direction that the merger agreement be submitted to our stockholders for their adoption and its recommendation that our stockholders approve and adopt the merger agreement and the merger;
	•		the determination by the Special Committee of our Board of Directors that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interest of the Company and its stockholders and its recommendation that our Board of Directors approve the merger agreement and the transactions contemplated by the merger agreement;
	•		our assertion that entering into the merger agreement and consummating the merger will not conflict with or violate our organizational documents, applicable law or certain agreements to which we are a party or give any other person certain rights against Allion that such person would not otherwise have;
	•		entering into the merger agreement and consummating the merger will not terminate or have a material

			adverse impact on governmental consents, licenses, or permits or require governmental consents, authorizations and notifications necessary to execute the merger agreement and consummate the merger;
	•		our material compliance with all laws applicable to us and our properties and assets;
	•		the existence of any material litigation pending with respect to us, our properties and assets, or our supervisory employees with respect to acts or omissions as an employee;
	•		our possession of and compliance with material licenses and permits;
	•		our compliance with health care laws;
	•		our certification for participation in, existence of provider agreements with, and compliance with conditions for participation in health care reimbursement programs;
	•		our having filed all required documents with the SEC and such documents’ compliance with law;
	•		the accuracy of our financial statements and the absence of undisclosed liabilities;
	•		our maintenance of a system of internal control over financial reporting and disclosure controls and procedures;
	•		the absence of prohibited loans to executive officers and directors;
	•		the absence of certain changes in our business or a material adverse effect since September 30, 2009 and the absence of certain actions by us since June 30, 2009;
	•		the existence of any governmental order binding on us;
	•		the amounts which may become payable under our employee benefit plans as a result of the merger agreement or the merger;
	•		our labor relationships, employee benefit plans, properties and assets, intellectual property, tax obligations, material contracts, insurance policies, and payors and vendors;
	•		our compliance with environmental laws;
	•		the existence of related party transactions to which we are party;
	•		the accuracy of the information contained in this Proxy Statement and in the Schedule 13E-3 we intend to file with the SEC and their compliance with law;
	•		the vote required by our stockholders to adopt the merger agreement;
	•		the receipt of a written fairness opinion from Raymond James, Allion’s financial advisor, to the effect that, as of October 18, 2009, the merger consideration was fair from a financial point of view to our stockholders, other than the rollover stockholders, Parent, Merger Sub and their respective affiliates;
	•		the absence of any brokers retained by us other than Raymond James and expenses that have been incurred or that may be incurred by us and paid or payable to any investment banker, financial advisor or similar broker; and
	•		our action to render inapplicable the restrictions of the Delaware anti-takeover statute.

     The merger agreement also contains representations and warranties that Parent and Merger Sub made to us, including representations and warranties relating to the following:

•

Parent’s and Merger Sub’s corporate existence, good standing and authority;

	•		Parent’s and Merger Sub’s organizational documents;
	•		Parent’s and Merger Sub’s authority to execute the merger agreement and to consummate the merger and the other transactions contemplated by the merger agreement;
	•		Parent’s and Merger Sub’s assertion that entering into the merger agreement and consummating the merger will not violate their organizational documents, applicable law or certain agreements to which they are a party or give any other person certain rights against them that such person would not otherwise have;
	•		governmental consents, authorizations and notifications necessary to execute the merger agreement and consummate the merger;
	•		Parent’s or Merger Sub’s retention of any broker;
	•		the absence of any litigation pending against Parent or any of its subsidiaries that would affect Parent’s and Merger Sub’s ability to consummate the merger;
	•		the accuracy of the information provided by Parent or Merger Sub to us for inclusion in this Proxy Statement;
	•		the absence of Parent’s or Merger Sub’s status as an interested stockholder under the Delaware anti-takeover statute;
	•		Parent and Merger Sub’s ability to finance the merger; and
	•		the absence of Parent’s and Merger Sub’s intentions to render the Company insolvent.

     Many of the representations and warranties made by each party in the merger agreement are qualified by a materiality standard that requires, depending on the specific representation and warranty, the representation and warranty to which it applies to be true except in the cases where their failure to be true would not either (i) be material or (ii) have a “material adverse effect” on the party as a whole.

     For the purposes of the merger agreement, when used with respect to Allion, the term “material adverse effect” means any event, change, circumstance, effect or state of facts that is, or could reasonably be expected to be, materially adverse to the business, financial condition or results of operations of Allion and its subsidiaries, taken as a whole, or our ability to perform in all material respects our obligations under the merger agreement and consummate the transactions contemplated by the merger agreement.

     The definition of “material adverse effect” with respect to Allion excludes the following:

	•		changes in general economic and political conditions (including those affecting the securities markets) that do not disproportionately impact us;
	•		changes in the industries in which we generally operate that do not disproportionately impact us;
	•		changes in applicable laws or U.S. generally accepted accounting principles that do not disproportionately impact us;
	•		acts of war, sabotage or terrorism, or other force majeure events that do not disproportionately impact us;
	•		changes in the trading price of Allion common stock;
	•		direct effects of compliance with the merger agreement on our operating performance;
	•		effects from the announcement of the merger agreement or the merger, the parties obligations under the merger agreement or the consummation of the transactions contemplated by the merger agreement;
	•		our failure to meet internal or third-party projections, forecasts, budgets or published revenue or earnings projections;

	•		claims, actions or proceedings by our stockholders arising out of or related to the merger agreement or the transactions contemplated by the merger agreement; and
	•		changes or proposed changes in reimbursement rates, coverage limitations, the method of calculating reimbursement rates or industry pricing benchmarks applicable to our products and services.

     When used with respect to Parent or Merger Sub, the term “material adverse effect” means any event, circumstance, change, effect or state of facts that, individually or in the aggregate with all other events, circumstances, changes and effects, is materially adverse to the ability of Parent or Merger Sub to consummate the transactions contemplated by the merger agreement.

     Pursuant to the terms of the merger agreement, the representations and warranties made in the merger agreement will not survive after the effective time of the merger.

Covenants

     We have made certain agreements with Parent and Merger Sub relating to actions that we will or will not take between the date of the merger agreement and the effective time of the merger, subject to certain limited exceptions set forth in the agreement. These agreements are customary in transactions such as the merger, and include the following:

	•		refraining from certain enumerated actions and other extraordinary actions relating to the Company or our business or that are inconsistent with actions that we take in the ordinary course of business, without Parent’s consent;
	•		taking certain actions with respect to the preparation of this Proxy Statement and in preparation for the special meeting;
	•		using commercially reasonable efforts to make all required filings and seek all required consents, including seeking early termination of any waiting period under the HSR Act or any foreign merger control or competition laws and regulations, if applicable;
	•		allowing representatives of Parent and Merger Sub to inspect our corporate books and records and providing Parent and Merger Sub with information relating to our business and operations;
	•		notifying Parent and Merger Sub of certain enumerated matters;
	•		consulting with Parent and Merger Sub prior making public announcements regarding the merger and the other transactions contemplated by the merger agreement;
	•		taking certain actions with respect to indemnification of and provision of directors’ and officers’ insurance for our directors and officers;
	•		using commercially reasonable efforts to consummate the merger;
	•		not terminating, amending, or modifying any material provision of any confidentiality or standstill agreement to which the Company is a party, unless required for our Board of Directors to comply with its fiduciary duties;
	•		using commercially reasonable efforts to timely make any required filings with the SEC;
	•		cooperating to take action to terminate the registration of Allion common stock after the merger;
	•		providing Parent and Merger Sub with the opportunity to participate in the defense of any stockholder litigation relating to the merger agreement or the merger and obtaining the consent of Parent prior to settling any stockholder litigation;
	•		providing all cooperation reasonably requested by Parent in connection with the arrangement of any debt financing to be obtained by Parent and its affiliates in connection with the merger;

	•		taking reasonable action to ensure that the Delaware anti-takeover statute and any other anti-takeover laws do not apply to the merger agreement and, if they do apply, to minimize their effect on the merger; and
	•		taking action to cause the disposition of shares of Allion common stock in the merger by persons subject to Section 16 of the Exchange Act to be exempt under Rule 16b-3 of the Exchange Act.

     Parent and Merger Sub have made certain agreements with us relating to actions that they will or will not take between the date of the merger agreement and the effective time of the merger, or otherwise in connection with the merger. The agreements include:

	•		taking certain actions with respect to the preparation of this Proxy Statement;
	•		using commercially reasonable efforts to make all required filings and seek all required consents, including seeking early termination of any waiting period under the HSR Act or any foreign merger control or competition laws and regulations, if applicable;
	•		notifying us of certain enumerated matters;
	•		consulting with us prior making public announcements regarding the merger and the other transactions contemplated by the merger agreement;
	•		taking certain actions with respect to indemnification of and provision of insurance for our directors and officers;
	•		using commercially reasonable efforts to consummate the merger;
	•		cooperating to take action to terminate the registration of Allion common stock after the merger;
	•		providing us with the opportunity to participate in the defense of any stockholder litigation relating to the merger agreement or the merger;
	•		maintaining the base salary and non-equity based incentive bonus opportunity of our employees who will continue to be employed by the surviving corporation, and maintaining 401(k) and health and welfare benefits that, in the aggregate, are no less favorable than such benefits and policies as in effect on the date of the merger agreement, in each case for a period of 12 months following the merger; and
	•		using reasonable best efforts to complete the financing required to consummate the merger.

Acquisition Proposals

     We have agreed that, until the earlier of the effective time of the merger or the termination of the merger agreement, we and our subsidiaries and affiliates will not, and we will cause our and our subsidiaries’ officers, directors, employees, agents and advisors not to:

	•		solicit, initiate or encourage or take any other action to knowingly facilitate any inquiry in connection with, or the making of, a proposal that constitutes or may reasonably be expected to lead to a third party acquisition proposal;
	•		enter into, maintain, participate in or continue any discussions or negotiations with, furnish any information to or otherwise cooperate in any way with, or assist, participate in, facilitate or encourage any effort by, any third party to make an acquisition proposal;
	•		grant a waiver under the Delaware anti-takeover statute or enter into any agreement, arrangement or understanding with respect to, or otherwise endorse, a third party acquisition proposal; or
	•		resolve to do any of the foregoing.

     Notwithstanding the foregoing, prior to the adoption of the merger agreement by our stockholders at the special meeting, our Board of Directors may provide information to and engage in discussions or negotiations with any third party that makes an unsolicited acquisition proposal so long as:

	•		our Board of Directors determines in good faith after consultation with its outside legal counsel that such action is necessary for our Board of Directors to comply with its fiduciary obligations to our stockholders;
	•		our Board of Directors determines in good faith after consultation with the Company’s outside legal counsel and financial advisor that the acquisition proposal constitutes or would reasonably be expected to lead to a superior proposal, as defined in the merger agreement; and
	•		prior to furnishing information to, or engaging in discussions or negotiations with, such third party, such third party executes a confidentiality agreement with us with terms no less favorable to the Company than those in our confidentiality agreement with H.I.G. Capital Management, Inc.;

     If we receive any third party acquisition proposal, we must:

	•		notify Parent of the receipt of the acquisition proposal or any inquiry regarding the making of an acquisition proposal (including any request for information or access to our properties, books or records), together with the terms and conditions of the request, acquisition proposal or inquiry, and the identity of such third party;
	•		keep Parent reasonably informed of the status of and details (including amendments and proposed amendments) of such request, acquisition proposal or inquiry; and
	•		inform Parent within 24 hours of any change in the price, structure or form of consideration or other terms and conditions of such acquisition proposal.

     If our Board of Directors determines that any third party acquisition proposal constitutes a superior proposal, we must:

	•		notify Parent within 24 hours that our Board of Directors has received a superior proposal and specify in detail the terms and conditions of the superior proposal and the identity of such third party; and
	•		negotiate in good faith with Parent to allow Parent to match or better such superior proposal for three business days after we notify Parent of the superior proposal or any material modification to the superior proposal.

     We may, at any time prior to the adoption of the merger agreement by our stockholders at the special meeting, withdraw or modify our Board of Directors’ favorable recommendation of the merger and the merger agreement and terminate the merger agreement if:

	•		the acquisition proposal constitutes a superior proposal;
	•		our Board of Directors has determined in good faith after consultation with outside legal counsel that such action is necessary for our Board of Directors to comply with its fiduciary duties to our stockholders; and
	•		three business days have lapsed since we provided Parent with notice of our receipt of a superior proposal.

     The merger agreement defines an acquisition proposal as an offer or proposal for, or any indication of interest in, (i) any direct or indirect acquisition or purchase of 15% or more of our and our subsidiaries’ total assets, (ii) any direct or indirect acquisition or purchase of 15% or more of the any class of equity securities of Allion or our subsidiaries, (iii) any tender or exchange offer (including a self-tender offer) that would result in any person beneficially owning 15% or more of any class of equity securities of Allion or our subsidiaries, (iv) any merger, consolidation, recapitalization or similar transaction involving us or any of our subsidiaries, (v) any combination of the foregoing, or (vi) any agreement or proposal to do the foregoing.

     A superior proposal is defined as a bona fide, written acquisition proposal, in which the percentages increase to 50% and (i) our Board of Directors has determined in good faith, after consultation with our independent financial advisor and our outside counsel, is more favorable, from a financial point of view, to our stockholders than the merger and (ii) is reasonably capable of being consummated.

Conditions

     The consummation of the merger is subject to the satisfaction or waiver of certain conditions. If those conditions have not occurred or are not true, either we or Parent and Merger Sub would not be obligated to effect the merger. If we waive any of the conditions to the merger, we will not re-solicit proxies.

     Conditions to the obligations of all parties to the merger agreement to complete the merger include:

	•		the adoption of the merger agreement by stockholders holding at least a majority of outstanding shares of Allion common stock entitled to vote at the special meeting;
	•		no enactment, issuance or entry of any law, injunction or other order of any governmental authority that prevents or prohibits the consummation of the merger; and
	•		the expiration or termination of the waiting period under the HSR Act or applicable merger control or competition laws or regulations.

     Conditions to Parent’s and Merger Sub’s obligations to complete the merger include:

	•		certain of our representations and warranties must be true and correct in all material respects, certain of our representations and warranties must be true and correct in all respects, and all of our other representations and warranties must be true and correct with only such exceptions as would not have a material adverse effect on the Company;
	•		we must have performed, in all material respects, all our obligations and complied with all agreements and covenants required to be performed or complied with by us before the effective time of the merger;
	•		no material adverse effect to Allion shall have occurred;
	•		not more than 10% of the holders of outstanding shares of Allion common stock shall have dissented and preserved their rights to seek appraisal of their shares under Delaware law; and
	•		we must have delivered certain other documents and certificates.

     Conditions to our obligation to complete the merger include:

	•		Parent’s and Merger Sub’s representations and warranties must be true and correct in all respects with only such exceptions as would not have a material adverse effect on their ability to consummate the merger;
	•		Parent and Merger Sub must have performed, in all material respects, all their obligations and complied with all agreements and covenants required to be performed or complied with by them before the effective time of the merger; and
	•		Parent and Merger Sub must have delivered certain other documents and certificates.

Termination

     The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by our stockholders (unless otherwise specified below), in any of the following circumstances:

	•		by the mutual written consent of Parent, Merger Sub and us;
	•		by Parent, Merger Sub or us, if:

	•		a court or other governmental authority has issued a final nonappealable order, decree or ruling permanently restraining, enjoining or otherwise prohibiting the merger;
	•		the merger is not consummated by February 18, 2010, which date will automatically be extended to April 1, 2010 in certain circumstances; or
	•		the merger agreement is not adopted by the holders of a majority of our outstanding shares of common stock entitled to vote at the special meeting, including any adjournment or postponement;

•

by Parent and Merger Sub, if:

	•		we breach any of our representations, warranties, covenants or other agreements set forth in the merger agreement and (i) such breach gives rise to a failure of certain conditions to consummation of the merger, and (ii) such breach is not cured within 30 days;
	•		at any time prior to the adoption of the merger agreement by our stockholders, (i) our Board of Directors withdraws (or modifies in a manner adverse to Parent), or publicly proposes to withdraw, its favorable recommendation of the merger and the merger agreement, (ii) our Board of Directors or the Special Committee recommends, adopts, approves or declares advisable a third party acquisition proposal, or proposes publicly to do so, (iii) following receipt of a third party acquisition proposal or material modification to such acquisition proposal, our Board of Directors fails to publicly confirm its favorable recommendation of the merger and the merger agreement within ten business days of Parent’s request that it do so or (iv) within ten business days after any third party commences a tender or exchange offer or other transaction constituting an acquisition proposal, we fail to send our stockholders a statement disclosing that we recommend our stockholders reject such tender or exchange offer;
	•		a material adverse effect to Allion has occurred that is not cured within 30 days;
	•		we intentionally breach our obligations with respect to soliciting and responding to third party acquisition proposals in a manner that materially and adversely threatens Parent’s ability to consummate the merger; or
	•		at any time 60 or more days after the date of the merger agreement, Parent and Merger Sub decide to terminate the merger agreement in their discretion;

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by us, if:

	•		Parent or Merger Sub breach any of their representations, warranties, covenants or other agreements set forth in the merger agreement and (i) such breach gives rise to a failure of certain conditions to consummation of the merger, and (ii) such breach is not cured within 30 days;
	•		at any time prior to the adoption of the merger agreement by our stockholders, we receive an acquisition proposal that constitutes a superior proposal and (i) our Board of Directors determines in good faith after consultation with outside legal counsel that it must withdraw or modify its favorable recommendation of the merger and the merger agreement with Parent and Merger Sub and terminate the merger agreement to comply with its fiduciary duties to our stockholders, (ii) three business days have lapsed since we provided Parent with notice of our receipt of a superior proposal; or
	•		at any time 60 or more days after the date of the merger agreement, the conditions to the obligations of Parent and Merger Sub to complete the merger are satisfied or waived and Parent and Merger Sub fail to consummate the merger within ten business days following the satisfaction of such conditions.

Termination Fees; Expenses

     We have agreed to pay Parent and Merger Sub a termination fee of $7.5 million in the following circumstances:

•

(i) the merger agreement is terminated because:

	•		the merger is not consummated by February 18, 2010 (or April 1, 2010 under certain circumstances set forth in the merger agreement) and a bona fide third party acquisition proposal has been announced prior to the date of such termination;
	•		a majority of our stockholders do not adopt the merger agreement and prior to the date of the special meeting a third party acquisition proposal has been publicly announced or otherwise become publicly known and has not been withdrawn; or
	•		we breach any of our representations, warranties, covenants or other agreements set forth in the merger agreement, without cure within 30 days, that gives rise to a failure of certain conditions to the consummation of the merger, and a third party acquisition proposal has been announced prior to the date of such breach; and

(ii) within nine months of any such termination, we enter into an acquisition agreement or consummate an acquisition with another party. For purposes of determining whether we must pay the $7.5 million termination fee in these circumstances, all references to 15% in the definition of acquisition proposal are deemed to refer to 50%.

               We have also agreed to pay Parent a termination fee of $7.5 million if the merger agreement is terminated:

	•		by Parent and Merger Sub because (i) our Board of Directors withdraws (or modifies in a manner adverse to Parent), or publicly proposes to withdraw, its favorable recommendation of the merger and the merger agreement, (ii) our Board of Directors or the Special Committee recommends, adopts, approves or declares advisable a third party acquisition proposal, or proposes publicly to do so, (iii) following receipt of a third party acquisition proposal or a material modification to such acquisition proposal, our Board of Directors fails to publicly confirm its favorable recommendation of the merger and the merger agreement within ten business days of Parent’s request that it do so, or (iv) within ten business days after any third party commences a tender or exchange offer or other transaction potentially constituting an acquisition proposal, we fail to send our stockholders a statement disclosing that we recommend our stockholders reject such tender or exchange offer;
	•		by Parent and Merger Sub because we intentionally breach our obligations with respect to soliciting and responding to third party acquisition proposals in a manner that materially and adversely threatens Parent’s ability to consummate the merger; or
	•		by us because we receive an acquisition proposal that constitutes a superior proposal and our Board of Directors determines in good faith after consultation with outside legal counsel that it must withdraw or modify its favorable recommendation of the merger and the merger agreement with Parent and Merger Sub and terminate the merger agreement to comply with its fiduciary duties to our stockholders and three business days have lapsed since we provided Parent with notice of our receipt of a superior proposal.

     Parent has agreed to pay us a termination fee of $7.5 million if we terminate the merger agreement because, at any time 60 or more days after the date of the merger agreement, Parent and Merger Sub fail to close the merger within ten business days after the conditions to Parent’s and Merger Sub’s obligations to complete the merger have been satisfied or waived but Parent and Merger Sub failed to receive financing sufficient to fund the merger.

     Parent has agreed to pay us a termination fee of $10.0 million in the following circumstances:

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if we terminate the merger agreement because, at any time 60 or more days after the date of the merger agreement, Parent and Merger Sub fail to close the merger within ten business days after the conditions to

			Parent’s and Merger Sub’s obligations to complete the merger have been satisfied or waived and Parent’s and Merger Sub’s failure to close the merger is due to circumstances other than Parent’s and Merger Sub’s failure to receive financing sufficient to fund the merger; or
	•		if Parent and Merger Sub terminate the merger agreement in their discretion 60 days or more after the date of the merger agreement.

     Except as described below, each party to the merger agreement will pay its own fees and expenses in connection with the merger and the related transactions. We have agreed to reimburse Parent’s and Merger Sub’s expenses in the following circumstances:

	•		up to $3.25 million of Parent’s and Merger Sub’s reasonable, documented, out-of-pocket expenses in the event that the merger agreement is terminated because a majority of our stockholders do not adopt the merger agreement, although any expenses we pay in this instance will be credited against any termination fee that we are subsequently required to pay Parent and Merger Sub; or
	•		up to $4.5 million of Parent’s and Merger Sub’s reasonable, documented, out-of-pocket expenses in the event Parent or Merger Sub terminates the merger agreement because we willfully breach any of our representations, warranties, covenants or other agreements set forth in the merger agreement and (i) such willful breach gives rise to a failure of certain conditions to consummation of the merger, and (ii) such willful breach is not cured within thirty days, provided that in this instance, any expenses we pay will not be credited against any termination fee that we are required to pay Parent and Merger Sub.

Amendments, Extensions and Waivers

     The merger agreement may be amended by the parties to the merger agreement, in writing, at any time before or after our stockholders adopt the merger agreement, except that after our stockholders adopt the merger agreement, we cannot amend the merger agreement without further approval of our stockholders if the proposed amendment would require further approval of our stockholders under applicable law. At any time prior to the effective time of the merger, the parties to the merger agreement may extend the time for the performance of any obligation of the other party, waive any inaccuracies in the representations and warranties made by the other party or waive compliance by the other party with any agreement or condition in the merger agreement, except where such extension or waiver would require approval of our stockholders under applicable law.

Payment of Merger Consideration and Surrender of Stock Certificates

     Parent and Merger Sub have appointed Continental Stock Transfer & Trust Company to act as the exchange agent for purposes of making the cash payments contemplated by the merger agreement. At or prior to the effective time of the merger, Merger Sub will deposit in trust with the exchange agent, cash in U.S. dollars in an aggregate amount equal to the merger consideration to be paid to our stockholders under the terms of the merger agreement. The exchange agent will, pursuant to irrevocable instructions, deliver to you the merger consideration according to the procedure summarized below.

     Promptly, but within five business days, after the effective time of the merger, the exchange agent will mail to you a letter of transmittal and instructions advising you of the effectiveness of the merger and the procedure for surrendering to the exchange agent your certificates in exchange for the merger consideration. Upon the surrender of your certificates or transfer of your uncertificated shares to the exchange agent, together with an executed letter of transmittal completed in accordance with its instructions and any other items specified by the letter of transmittal, the exchange agent will pay to you, within ten business days of such surrender or transfer, your merger consideration of $6.60 per share of Allion common stock represented by such certificates or uncertificated shares. No interest or dividends will be paid or accrued in respect of the merger consideration. Payments of the merger consideration also may be reduced by applicable withholding taxes.

      Please do NOT forward your stock certificates to the exchange agent without a letter of transmittal, and please do NOT return your stock certificates with the enclosed proxy card.

     At and after the effective time of the merger, you will cease to have any rights as our stockholder, except for the right to receive the merger consideration, or, if you exercise your appraisal rights, the right to seek appraisal of your shares pursuant to Delaware law, and no transfer of shares of Allion common stock will be made on our stock transfer books.

     Certificates presented to us after the effective time of the merger will be cancelled and exchanged for cash as described above.