PURCHASE AGREEMENT
Exhibit 10.1
THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 19th day of August, 2005 by and among
HEARUSA, INC., a Delaware corporation (the “Company”), and the Purchasers set forth on the
signature pages affixed hereto (each a “Purchaser” and collectively the “Purchasers”).
Recitals
A. The Company and the Purchasers are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) under the Securities Act of
1933, as amended (“1933 Act”) and the provisions of Regulation D (“Regulation D”), as promulgated
by the U.S. Securities and Exchange Commission (the “SEC”) under the 1933 Act;
B. The Purchasers wish to purchase, and the Company wishes to sell and issue to the
Purchasers, upon the terms and subject to the conditions stated in this Agreement up to $5.5
million of the Company’s 2005 Subordinated Notes due November 2008 in the form attached hereto as
Exhibit A (the “Notes”), and warrants to purchase an aggregate of 1.5 million shares of Common
Stock of the Company, par value $0.10 per share (“Common Stock”) (the “Warrants”), in the form
attached hereto as Exhibit B, in each case in the amount as are set forth on the signature page
attached hereto and executed by each such Purchaser; and
C. Contemporaneous with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit C
(the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws;
In consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have the mepanings here set
forth:
1.1. “Affiliate” means, with respect to any Person, any other Person which directly or
indirectly controls, is controlled by, or is under common control with, such Person, where
“control” means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
1.2. “Agreements” means this Agreement, the Registration Rights Agreement, the Notes
and the Warrants.
1.3. The “Company” shall refer to the Company (as defined in the first paragraph
hereof).
1.4. “Closing” means the consummation of the transactions contemplated by this
Agreement.
1.5. “Material Adverse Effect” means a material adverse effect on the (i) condition
(financial or otherwise), business, assets or results of operations of the Company; (ii) ability of
the Company to perform any of its material obligations under the terms of the Agreements; or (iii)
material rights and remedies of a Purchaser under the terms of the Agreements.
1.6. “Notes” shall have meaning set forth in the recitals to this Agreement.
1.7. “Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization, governmental authority or any other form of
entity not specifically listed herein.
1.8. “SEC” means the U.S. Securities and Exchange Commission.
1.9. “SEC Filings” as defined in Section 4.6.
1.10. “Securities” means the Notes, Warrants and Warrant Shares.
1.11. “Warrants” shall have meaning set forth in the recitals to this Agreement.
1.12. “Warrant Shares” means the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants.
1.13. “1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
1.14. “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
2. Purchase and Sale of the Notes and Warrants. Subject to the terms and conditions
of this Agreement and on the basis of the representations and warranties made herein, each of the
Purchasers hereby severally, and not jointly, agrees to purchase, and the Company hereby agrees to
sell and issue to each of the Purchasers, a Note having a principal amount equal to the amount set
forth on such Purchaser’s signature page attached hereto, plus that number of Warrants calculated
by multiplying the principal face amount of the Purchaser’s Note by 0.2727. Each Purchaser’s
aggregate purchase price (the “Purchase Price”) is set forth on such Purchaser’s signature page
attached hereto.
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3. Closing.
3.1. Closing Procedure. Upon receipt by the Company of executed Purchase Agreement(s)
for the purchase of all of the Notes and Warrants, the Company shall promptly notify such
Purchasers and set a date for the closing (the “Closing Date”).
3.2. Closing Date Deliveries.
(a) On the Closing Date, the Company shall deliver to the Purchasers:
| (i) | Notes in the form attached as Exhibit A; | ||
| (ii) | Warrants in the form attached as Exhibit B; | ||
| (iii) | The executed Registration Rights Agreement in the form attached as Exhibit C; and | ||
| (iv) | An officer’s certificate executed by an officer of the Company, certifying as to satisfaction of applicable closing conditions; good standing; and authorizing resolutions. |
(b) On the Closing Date, the Purchasers shall deliver to the Company:
| (i) | The Purchase Price set forth on the Purchasers’ signature page hereto; and | ||
| (ii) | The executed Registration Rights Agreement. |
4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Purchasers that:
4.1. Organization, Good Standing and Qualification. The Company is a corporation
validly existing and in good standing under the laws of Delaware and has all requisite corporate
power and authority to carry on its business as now conducted and own its properties. The Company
is duly qualified to do business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of property makes
such qualification or licensing necessary unless the failure to so qualify would not result in a
Material Adverse Effect.
4.2. Authorization. The Company has full corporate power and authority and has taken
all requisite action on the part of the Company necessary for (i) the authorization, execution and
delivery of the Agreements, (ii) authorization of the performance of all obligations of the Company
hereunder and thereunder, and (iii) the authorization, issuance (or reservation for issuance) and
delivery of the Securities. The Agreements constitute the legal, valid and binding obligations of
the Company, enforceable
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against the Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally.
4.3. Capitalization. Set forth on Schedule 4.3 hereto is (a) a description of
the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital
stock issued and outstanding on the date hereof; (c) the number of shares of capital stock issuable
pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and
reserved for issuance pursuant to securities (other than the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of the issued and
outstanding shares of the Company’s capital stock have been duly authorized and validly issued and
are fully paid and nonassessable. Except as set forth on Schedule 4.3, no Person is
entitled to preemptive or similar statutory or contractual rights with respect to any securities of
the Company.
4.4. Valid Issuance. As of the Closing, the Company has reserved a sufficient number
of shares of Common Stock for the issuance upon exercise of or otherwise pursuant to the Warrants.
The Warrants and Warrant Shares are duly authorized, and such Securities, when issued in accordance
herewith and, in respect of the Warrant Shares, pursuant to the terms of the Warrants, will be
validly issued, fully paid, non-assessable and free and clear of all encumbrances and restrictions,
except for restrictions on transfer imposed by applicable securities laws.
4.5. Consents. Except as set forth on Schedule 4.5, the execution, delivery
and performance by the Company of the Agreements and, subject to the truth and accuracy of the
representations made by the Purchasers in Sections 5 of this Agreement, the offer, issuance and
sale of the Securities, require no consent of, action by or in respect of, or filing with, any
Person, agency, or official, other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal securities laws and
the requirements of the American Stock Exchange, which the Company undertakes to file within the
applicable time periods.
4.6. SEC Filings; Business. In the last 12 months, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”)
(all of the foregoing filed prior to or on the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Filings”). As of the date of filing of such SEC Filings, each
such SEC Filing, as it may have been subsequently amended by filings made by the Company with the
SEC prior to the date hereof, complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Filing.
None of the SEC Filings, as of the date filed and as they may have been subsequently amended by
filings made by the Company with the SEC prior to the date hereof, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of the Company
included in the SEC Filings complied as to form in all material respects
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with applicable accounting requirements and published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
The Company is not aware of any fact or circumstance that would result or reasonably be likely to
result in the Company receiving a “going concern” opinion or qualification from its independent
auditors with respect to the Company’s financial position for the year ended December 31, 2005.
The Company is engaged only in the business described in the SEC Filings and the SEC Filings
contain a complete and accurate description of the business of the Company in all material
respects.
4.7. Use of Proceeds. The proceeds of the sale of the Securities hereunder shall be
used by the Company to redeem the Company’s 1998-E Series Convertible Preferred Stock and for
general working capital purposes.
4.8. No Material Adverse Change. Except as disclosed and described in the Company’s
SEC Filings, there has not been:
(a) any change in the consolidated assets, liabilities, financial condition or operating
results of the Company, except changes in the ordinary course of business which have not had, in
the aggregate, a Material Adverse Effect;
(b) any declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or repurchase of any
securities of the Company;
(c) any material damage, destruction or loss, whether or not covered by insurance, to any
assets or properties of the Company or any of its subsidiaries;
(d) any waiver by the Company of a material right or of a material debt owed to it;
(e) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and which is not material to
the assets, properties, financial condition, operating results or business of the Company taken as
a whole (as such business is presently conducted and as it is proposed to be conducted);
(f) any material change or amendment to or breach or default of a material contract or
arrangement by which the Company or any of its assets or properties is bound or subject;
(g) any material labor difficulties or labor union organizing activities with respect to
employees of the Company;
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(h) any transaction entered into by the Company other than in the ordinary course of business;
or
(i) any other event or condition of any character that the Company believes will have a
Material Adverse Effect.
4.9. Form S-3 Eligibility. The Company is currently eligible to register the resale
of its Common Stock on a registration statement on Form S-3 under the 0000 Xxx.
4.10. No Conflict, Breach, Violation or Default; Compliance with Law. (a) The
execution, delivery and performance of the Agreements by the Company and the issuance and sale of
the Securities will not conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under (i) the Company’s Certificate of Incorporation
(including any certificates of designation) or the Company’s Bylaws, both as in effect on the date
hereof, (ii) except where it would not have a Material Adverse Effect, any statute, rule,
regulation or order of any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its properties; or (iii) except as set forth on
Schedule 4.10 or where it would not have a Material Adverse Effect, any contract by which
the company or its property is bound. (b) Except where it would not have a Material Adverse
Effect, to the Company’s knowledge, it (i) is not in violation of any statute, rule or regulation
applicable to the Company or its assets or its activities, and (ii) is not in violation of any
judgment, order or decree applicable to the Company or its assets. (c) The Company has not
received notice from any Person of any claim, investigation or inquiry, that, if adversely
determined, would render the preceding sentence untrue or incomplete and the Company is aware of no
facts or circumstances which could give rise to such a claim, investigation or inquiry.
4.11. Tax Matters. The Company has timely prepared and filed all tax returns required
to have been filed by the Company with all appropriate governmental agencies and timely paid all
taxes owed by it, in each case taking into account permitted extensions. The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments against the Company nor, to the
knowledge of the Company, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing authority except
such as which are not material. All material taxes and other assessments and levies that the
Company is required to withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due. There are no tax liens or claims
pending or threatened against the Company or any of its respective assets or property. There are
no outstanding tax sharing agreements or other such arrangements between the Company and any other
corporation or entity.
4.12. Title to Properties and Securities. Except as disclosed in the SEC Filings, the
Company has good and marketable title to all real properties and all other properties and assets
owned by it and material to its operations, in each case free from liens, encumbrances and defects
that would materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and except as
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disclosed in the SEC Filings, the Company holds any leased real or personal property material
to the Company’s operations under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof by them.
4.13. Certificates, Authorities and Permits. The Company possesses adequate
certificates, authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it and has not received any notice of proceedings
relating to the revocation or modification of any such certificate, authority or permit that, if
determined adversely to the Company, would individually or in the aggregate have a Material Adverse
Effect.
4.14. No Labor Disputes. No material labor dispute with the employees of the Company
exists or, to the knowledge of the Company, is imminent.
4.15. Intellectual Property. The Company owns or possesses adequate rights or
licenses to the inventions, know-how, patents, patent rights, copyrights, trademarks, trade names,
licenses, approvals, governmental authorizations, trade secrets confidential information and other
intellectual property rights necessary to conduct the business now operated by it and presently
contemplated to be operated by it (collectively, “Intellectual Property Rights”), free and clear of
all liens, security interests, charges, encumbrances, equities and other adverse claims, and the
Company has not received any notice of infringement of or conflict with asserted rights of others
with respect to any Intellectual Property Rights except as disclosed in the SEC Filings and except
as to any such claims that would not have a Material Adverse Effect. Except as set forth on
Schedule 4.15 hereto, none of the Company’s Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within three years from the date of this
Agreement, except where such expirations or termination would not result, either individually or in
the aggregate, in a Material Adverse Effect. To the knowledge of the Company, the Company’s patents
and other Intellectual Property Rights and the present activities of the Company do not infringe
any patent, copyright, trademark, trade name or other proprietary rights of any third party where
such infringement may cause a Material Adverse Effect on the Company, and there is no claim, action
or proceeding being made or brought against, or to the Company’s knowledge, being threatened
against, the Company regarding its Intellectual Property Rights, and the Company is unaware of any
facts or circumstances which might give rise to any of the foregoing. The Company has no knowledge
of the material infringement of its Intellectual Property Rights by third parties and has no reason
to believe that any of its Intellectual Property Rights is unenforceable, and the Company is
unaware of any facts or circumstances which might give rise to any of the foregoing. The Company
has taken commercially reasonable security measures to protect the secrecy, confidentiality and
value of all of its intellectual properties.
4.16. Environmental Matters. The Company is not in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or toxic substances
(collectively, “Environmental Laws”), does not own or operate any real property contaminated with
any substance that is subject to any
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Environmental Laws, is not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any Environmental Laws, which
violation, contamination, liability or claim would individually or in the aggregate have a Material
Adverse Effect; and the Company is not aware of any pending investigation that might lead to such a
claim.
4.17. Absence of Litigation. Except as disclosed in the section titled “Legal
Proceedings” in (i) the Company’s Annual Report on Form 10-K for the year ended December 25, 2004
or (ii) any of the Company’s SEC Filings filed since the filing of such Form 10-K, there is no
action, suit, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened in writing against the Company or any of the Company’s Subsidiaries or
any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as
such, that would reasonably be expected to result in judgments against the Company or any of its
Subsidiaries in an amount, individually or in the aggregate, in excess of $250,000.
4.18. Financial Statements. The financial statements included in each SEC Filings
present fairly and accurately in all material respects the consolidated financial position of the
Company as of the dates shown and its consolidated results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis. Except as set forth in the financial
statements of the Company included in the SEC Filings filed prior to the date hereof, the Company
has no liabilities, contingent or otherwise, except those which individually or in the aggregate
are not material to the financial condition or operating results of the Company.
4.19. Insurance Coverage. The Company maintains in full force and effect insurance
coverage that the Company reasonably believes to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to insure.
4.20. Compliance with AMEX Continued Listing Requirements. There are no proceedings
pending or to the Company’s knowledge threatened against the Company relating to the continued
listing of the Company’s Common Stock on the American Stock Exchange.
4.21. Brokers and Finders. The Purchasers shall have no liability or responsibility
for the payment of any commission or finder’s fee to any third party in connection with or
resulting from this agreement or the transactions contemplated by this Agreement by reason of any
agreement of or action taken by the Company. Upon Closing, the Company shall pay to any finder in
connection with the transactions contemplated hereby any finder’s fee(s) owing to such finder
pursuant to a separate agreement or arrangement with the Company entered into concurrently herewith
or prior to such Closing.
4.22. No General Solicitation. Neither the Company nor any Person acting on its
behalf has conducted any general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
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4.23. Issuance of Securities. The Securities are duly authorized and, upon issuance in
accordance with the terms of the applicable agreements, shall be (i) validly issued, fully paid and
non-assessable and (ii) free from all taxes, liens and charges with respect to the issuance thereof
(other than any such taxes, liens and charges created by any Buyer or assignee or transferee), and
shall not be subject to pre-emptive rights or other similar rights of shareholders of the Company.
As of the Closing, a sufficient number of shares of Common Stock will have been duly authorized and
reserved for issuance upon exercise of the Warrants as of the Closing. Upon issuance in accordance
with the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable and
free from all taxes, liens and charges with respect to the issue thereof (other than any such
taxes, liens and charges created by any Purchaser or any assignee or transferee), with the holders
being entitled to all rights accorded to a holder of Common Stock.
5. Representations and Warranties of the Purchaser. Each of the Purchasers hereby
severally, and not jointly, represents and warrants to the Company that:
5.1. Organization and Existence. The Purchaser is a validly existing corporation,
partnership, limited liability company or individual and has all requisite corporate, partnership,
limited liability company or personal power and authority, as the case may be, to invest in the
Securities pursuant to this Agreement.
5.2. Authorization. The execution, delivery and performance by the Purchaser of this
Agreement and the Registration Rights Agreement have been duly authorized and this Agreement and
the Registration Rights Agreement will each constitute the valid and legally binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.
5.3. Purchase Entirely for Own Account. The Securities to be received by the
Purchaser hereunder will be acquired for the Purchaser’s own account, not as nominee or agent, and
not with a view to the resale or distribution of any part thereof and the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing the same. The
Purchaser is not a registered broker dealer or an entity engaged in the business of being a broker
dealer.
5.4. Investment Experience. The Purchaser acknowledges that it can bear the economic
risk and complete loss of its investment in the Securities and has such knowledge and experience in
financial or business matters and in private placement transactions of companies similar to the
Company so that it is capable of evaluating the merits and risks of the purchase contemplated
hereby.
5.5. Disclosure of Information. The Purchaser has had an opportunity to receive
documents related to the Company and to ask questions of and receive answers from the Company
regarding the Company, its business and the terms and conditions of the offering of the Securities
and has received and read the SEC Filings filed via XXXXX. Neither such inquiries nor any other
due diligence investigation conducted by the Purchaser
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shall modify, amend or affect the Purchaser’s right to rely on the Company’s representations
and warranties contained in this Agreement or made pursuant to this Agreement.
5.6. Restricted Securities. The Purchaser understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable state laws and regulations such securities may be resold without
registration under the 1933 Act only in certain limited circumstances.
5.7. Legends. It is understood that, until registration for resale pursuant to the
Registration Rights Agreement or until sales under Rule 144(k) are permitted, certificates
evidencing the Securities may bear one or all of the following legends or legends substantially
similar thereto:
(a) “The shares represented by this certificate may not be transferred without
(i) the opinion of counsel reasonably satisfactory to the corporation that such
transfer may lawfully be made without registration under the Securities Act of 1933
or qualification under applicable state securities laws; or (ii) such registration
or qualification.”
(b) If required by the authorities of any state in connection with the
issuance of sale of the Securities, the legend required by such state authority.
Upon registration for resale pursuant to the Registration Rights Agreement or upon Rule 144(k)
under the 1933 Act becoming available, the Company shall promptly cause certificates evidencing
Warrant Shares previously issued to be replaced with certificates which do not bear such
restrictive legends, and all Warrant Shares subsequently issued shall not bear such restrictive
legends and each Purchaser will certify to the Company that it will thereafter sell the Common
Stock evidenced by such unlegended certificates only pursuant to the Prospectus (as defined in the
Registration Rights Agreement) as permitted under the Registration Rights Agreement or pursuant to
Rule 144(k).
5.8. Accredited Investor. The Purchaser is an “accredited investor” as defined in
Rule 501(a) of Regulation D, as amended, under the 1933 Act.
5.9. No General Solicitation. The Purchaser did not learn of the investment in the
Securities as a result of any public advertising or general solicitation.
5.10. Compliance with Law. The Purchaser has not engaged in market transactions in
the Company’s securities since learning of the offering of the Securities.
6. Closing Documents. The parties acknowledge and agree that part of the inducement
for the Purchasers to enter into this Agreement is the Company’s execution and delivery of the
Registration Rights Agreement. The parties acknowledge and agree that on or prior to the Closing,
the Registration Rights Agreement will be duly executed and delivered by the parties thereto.
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7. Covenants and Agreements of the Company.
7.1. Reservation of Common Stock issuable upon Exercise of Warrants. The Company
hereby agrees at all times to reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number
of shares of Common Stock as shall equal the number of shares sufficient to permit the full
exercise of the Warrants in accordance with the terms of the Warrants.
7.2. Press Releases. Any press release or other publicity concerning this Agreement
or the transactions contemplated by this Agreement shall be submitted to the Purchasers for comment
one business day prior to issuance, unless the release is required to be issued within a shorter
period of time by law or pursuant to the rules of the American Stock Exchange or another national
securities exchange or market.
7.3. No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
obligations to the Purchasers under the Agreements.
7.4. Insurance. For so long as any Purchaser beneficially owns any of the Securities,
the Company shall have in full force and effect (a) insurance reasonably believed by the Company to
be adequate on all assets and activities, covering property damage and loss of income by fire or
other casualty, and (b) insurance reasonably believed to be adequate protection against all
liabilities, claims and risks against which it is customary for companies similarly situated as the
Company to insure.
7.5. Compliance with Laws. So long as the Purchasers beneficially own any Securities,
the Company will use reasonable efforts to comply with all applicable laws, rules, regulations,
orders and decrees of all governmental authorities, except to the extent non-compliance (in one
instance or in the aggregate) would not have a Material Adverse Effect.
7.6. Listing of Warrant Shares and Related Matters. The Company hereby agrees,
promptly following the last of the Closing Date of the transactions contemplated by this Agreement,
to take such action to cause the Warrant Shares to be listed on the American Stock Exchange as
promptly as possible but no later than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the Company applies to have its
Common Stock or other securities traded on any other principal stock exchange or market, it will
include in such application the Warrant Shares and will take such other action as is necessary to
cause such Common Stock to be so listed. For so long as any Warrants remain outstanding, the
Company will take all action necessary to continue the listing and trading of its Common Stock on
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
Small-Cap Market (collectively, “Approved Markets”), and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of such exchange or
market, as applicable, to ensure the continued eligibility for trading of the Warrant Shares
thereon.
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7.7. Form S-3 Eligibility. For so long as the registration statement contemplated by
the Registration Rights Agreement remains effective, the Company shall use commercially reasonable
efforts to remain eligible to register the resale of its Common Stock on a registration statement
on Form S-3 under the 1933 Act.
7.8. Corporate Existence. So long as any Warrants remain outstanding, the Company
shall maintain its corporate existence, except in the event of a merger, consolidation or sale of
all or substantially all of the Company’s assets so long as the surviving or successor entity in
such transaction (a) assumes the Company’s obligations hereunder and under the agreements and
instruments entered into in connection herewith, regardless of whether or not the Company would
have had a sufficient number of shares of Common Stock authorized and available for issuance in
order to fulfill its obligations hereunder and effect the exercise in full of all Warrants
outstanding as of the date of such transaction; and (b) has no legal, contractual or other
restrictions on its ability to perform the obligations of the Company hereunder and under the
agreements and instruments entered into in connection herewith.
7.9. Application of Certain Proceeds. Following the payment of any amounts owed by
the Company to Siemens Hearing Instruments, Inc. pursuant to the agreements in effect on the date
of Closing, any proceeds from the sale of securities by the Company while any Notes are outstanding
shall be used to pay down the outstanding Principal Amount of all of the outstanding Notes on a
pro-rata basis.
7.10. Sales by Chairman. For so long as any Notes are outstanding, the Company shall
restrict sales of Common Stock by its Chairman, Xxxx X. Xxxxx, M.D., to those (i) donated to
charitable organizations and (ii) sold pursuant to an arrangement that complies with Rule 10b5-1
under the 1934 Act.
8. Participation in Future Transactions. If at any time prior to the first
anniversary of the Closing, the Company intends to close any private placement of its equity
securities in a capital raising transaction, the Company shall give five (5) days prior notice to
the Purchasers in a writing that contains all significant business terms of the proposed
transaction. Each Purchaser shall then have the right to participate (pro rata in accordance with
such Purchaser’s participation in the offering contemplated by this Agreement) in such new
placement and purchase such securities for the same consideration and on the same terms and
conditions as contemplated by such third-party sale, which right must be exercised by the Purchaser
in a writing to the Company delivered within five (5) days of the Company’s notice. If, subsequent
to the Company giving notice to the Purchasers hereunder, the terms and conditions of the proposed
third-party sale are changed from those disclosed in the Company’s notice, the Company shall
provide a new notice to the Purchasers, which shall trigger a new right to participate. The
foregoing participation right shall not apply to offers of securities in connection with any
acquisition by the Company of any business, assets or technologies, or to any strategic investor,
vendor, customer, lease or similar arrangement, the primary purpose of which is not to raise equity
capital.
9. Survival. All representations and warranties contained in this Agreement shall
survive for one year following the Closing of the transactions contemplated hereby.
12
10. Miscellaneous.
10.1. Successors and Assigns. This Agreement may not be assigned by the Company. A
Purchaser may assign its rights and delegate its duties hereunder in whole or in part to any Person
(who is not a competitor or vendor of the Company) to which such Purchaser has transferred or
assigned all or part of its Notes or Warrants in accordance with the terms of the Notes and
Warrants, provided in each case that such transferee or assignee acknowledges in writing to the
Company that the representations and warranties contained in Section 5 hereof shall apply to such
transferee or assignee. The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective permitted successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this Agreement.
10.2. Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
10.3. Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
10.4. Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given only upon delivery to
each party to be notified by (i) personal delivery, (ii) facsimile, with electronic confirmation of
transmittal, (iii) certified mail, return receipt requested, or (iv) an internationally recognized
overnight air courier, addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice to the other party:
If to the Company:
HearUSA, Inc.
0000 Xxxxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxx, XX 00000
Fax: 561/000-0000
Attention: CEO
0000 Xxxxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxx, XX 00000
Fax: 561/000-0000
Attention: CEO
With a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Fax: (000) 000-0000
Attention: XxXxxx Xxxxxx, Esq.
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Fax: (000) 000-0000
Attention: XxXxxx Xxxxxx, Esq.
If to the Purchasers, to the addresses set forth on the
13
signature pages hereto.
10.5. Expenses. The parties hereto shall pay their own costs and expenses in
connection herewith; provided, however, the Company shall reimburse the lead investor up to $50,000
to cover documented and reasonable due diligence and legal expenses incurred directly in connection
with the transactions contemplated hereby. The Company shall pay all fees and expenses of any
placement agents or finders in connection with the transactions contemplated by this Agreement
pursuant to a separate agreement between such parties and the Company.
10.6. Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and each Purchaser to be bound by such amendment or waiver.
10.7. Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
10.8. Entire Agreement. This Agreement, including the Exhibits and Schedules hereto,
the Registration Rights Agreement, the Notes and the Warrants and the other documents contemplated
hereby constitute the entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
10.9. Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry
out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.
10.10. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles of conflicts of
laws.
10.11. Remedies. The Purchasers shall be entitled to specific performance of the
Company’s obligations under the Agreements.
10.12. Like Treatment of Purchasers and Holders. The Company shall not, directly or
indirectly, redeem any Securities unless such offer of redemption is made pro rata to all
Purchasers or holders of Securities, as the case may be, on identical terms. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or voting of Securities
or otherwise.
14
10.13. Actions of Purchasers. The obligations of each Purchaser hereunder and under
the documents contemplated hereby are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall in any way be responsible for the performance of the obligations
of any other Purchaser under any such document. Nothing contained herein or in any other document
contemplated hereby, and no action taken by any Purchaser pursuant hereto or thereto, shall be
deemed to constitute any of the Purchasers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Purchasers are in any way acting in concert
or as a group with respect to such obligations or the transactions contemplated hereby or thereby.
Each Purchaser confirms that it has independently participated in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors. Each Purchaser
shall be entitled to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of any other document contemplated hereby, and it
shall not be necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
15
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of the date first
above written.
The Company:
|
HEARUSA, INC. | |
| By: /s/ Xxxxxxx X. Xxxxxxxxxx | ||
| Name: Xxxxxxx X. Xxxxxxxxxx | ||
| Title: President and CEO |
16
| Purchasers: | ||
| X.X. Xxxxxxxxx, Towbin Capital Partners I, L.P. | ||
| Name: | ||
| /s/ Xxxxxx Xxxx | ||
| By: Xxxxxx Xxxx | ||
| Managing Member of the General Partner | ||
| Title: | ||
Purchase Price:
|
$500,000.00 | |
Principal Amount of Notes:
|
$500,000.00 | |
No. of Warrants:
|
136,360 | |
Residence:
|
||
Address for Notices:
|
X.X. Xxxxxxxxx, Towbin | |
| 000 Xxxxxxx Xxx. | ||
| Xxx Xxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Xxxxx Xxxxx | ||
| Name: | ||
| /s/ Xxxxx Xxxxx | ||
| By: | ||
| Title: | ||
Purchase Price:
|
$75,000 | |
Principal Amount of Notes:
|
$75,000 | |
No. of Warrants:
|
20,454 | |
Residence:
|
||
Address for Notices:
|
000 Xxxx 00xx Xxxxxx, Xxx. 00X | |
| Xxx Xxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Castle Creek Technology Partners | ||
| Name: | ||
| Xxxxxxx X. Friend | ||
| By: | ||
| Xxxxxxx X. Friend | ||
| Managing Director of the | ||
| Investment Manager | ||
| Title: | ||
Purchase Price:
|
$500,000 | |
Principal Amount of Notes:
|
$500,000 | |
No. of Warrants:
|
136,360 | |
Residence:
|
||
Address for Notices:
|
Castle Creek Technology Partners LLC | |
| 000 Xxxx Xxxxxxx Xxxx., Xxxxx 0000 | ||
| Xxxxxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Cordillera Fund, L.P. | ||
| Name: | ||
| /s/ Xxxxx X. Xxxxxx | ||
| By: Xxxxx X. Xxxxxx | ||
| Co-CEO of Xxxxxx Xxxxxx Capital, Inc. | ||
| General Partner of ACCF GenPar, L.P. | ||
| General Partner of the Cordillera Fund, L.P. | ||
| Title: | ||
Purchase Price:
|
$750,000.00 | |
Principal Amount of Notes:
|
$750,000.00 | |
No. of Warrants:
|
204,540 | |
Residence:
|
Texas, USA | |
Address for Notices:
|
0000 Xxxxxxx Xxxx | |
| Xxxxx 000 | ||
| Xxxxxx, XX 00000 | ||
| with a copy to: | ||
| as above | ||
| Purchasers: | ||
| Xxxxxx Partners LP | ||
| Name: | ||
| /s/ Xxxxxx Xxxxx | ||
| By:Xxxxxx Xxxxx | ||
| Portfolio Manager | ||
| Title: | ||
Purchase Price:
|
$550,000.00 | |
Principal Amount of Notes:
|
$550,000.00 | |
No. of Warrants:
|
149,996 | |
Residence:
|
||
Address for Notices:
|
000 Xxxx Xxxxxx | |
| Xxxxx 0000 | ||
| Xxx Xxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Nite Capital LP | ||
| Name: | ||
| /s/ Xxxxx X. Xxxxxxx | ||
| By: | ||
| Xxxxxx X. Xxxxxxx | ||
| Manager of the General Partner | ||
| Title: | ||
Purchase Price:
|
$250,000 | |
Principal Amount of Notes:
|
$250,000 | |
No. of Warrants:
|
68,180 | |
Residence:
|
||
Address for Notices:
|
Nite Capital LP | |
| 000 Xxxx Xxxx Xxxxxx, Xxx 000 | ||
| Xxxxxxxxxxxx, XX 00000 | ||
| Attn: Xxxxx Xxxxxxx | ||
| with a copy to: | ||
| Purchasers: | ||
| Xxxxxxx Xxxx Xxxxx | ||
| Name: | ||
| /s/ Xxxxxxx Xxxx Xxxxx | ||
| By: | ||
| Title: | ||
Purchase Price:
|
$100,000 | |
Principal Amount of Notes:
|
$100,000 | |
No. of Warrants:
|
27,272 | |
Residence:
|
||
Address for Notices:
|
000 Xxxxxx Xxxx Xxxxx | |
| Xxxxxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| MidSouth Investor Fund LP | ||
| Name: | ||
| /s/ Xxxxx X. Xxxxxxx | ||
| By:Xxxxx X. Xxxxxxx | ||
| General Partner | ||
| Title: | ||
Purchase Price:
|
$ | |
Principal Amount of Notes:
|
$300,000 | |
No. of Warrants:
|
||
| 0000 Xxxxxxxxx Xx. XX Xxxxx 000 Xxxxx | ||
Xxxxxxxxx:
|
Xxxxxxx, XX 00000 | |
Address for Notices:
|
c/o Heidtke & Company, Inc. | |
| 000 0xx Xxx. Xxxxx, Xxxxx 0000 | ||
| or X.X. Xxx 000000 | ||
| Xxxxxxxxx, XX 00000 | ||
| with a copy to: | ||
`
|
Purchasers: | |
| Xxxxxxx X. Press | ||
| Name: | ||
| /s/ Xxxxxxx X. Press | ||
| By: | ||
| Title: | ||
Purchase Price:
|
$200,000 | |
Principal Amount of Notes:
|
$ | |
No. of Warrants:
|
54,544 | |
Residence:
|
000 Xxxxx Xxxxxx, Xxxxxx XX 00000 | |
Address for Notices:
|
Wellington Management Company | |
| 00 Xxxxx Xxxxxx | ||
| Xxxxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Xxxxxx X. Xxxx | ||
| Name: | ||
| /s/ Xxxxxx X. Xxxx | ||
| By: | ||
| Title: | ||
Purchase Price:
|
$750,000 | |
Principal Amount of Notes:
|
$750,000 | |
No. of Warrants:
|
204,540 | |
Residence:
|
||
Address for Notices:
|
Xxxx Ventures | |
| 000 Xxxx Xxxxxx | ||
| Xxxxxx, XX 00000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Xxxxxx Partners LP | ||
| Name: | ||
| /s/ Xxxxxxxx Xxxxxx | ||
| By: Xxxxxxxx Xxxxxx | ||
| Managing Principal | ||
| Title: | ||
Purchase Price:
|
$275,000 | |
Principal Amount of Notes:
|
$275,000 | |
No. of Warrants:
|
74,998 | |
Residence:
|
NY | |
Address for Notices:
|
Xxxxxx Asset Management | |
| 000 Xxxxx Xxxxxx | ||
| Xxx Xxxx, XX 00000-0000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Xxxxxx-GEPT Partners LP | ||
| Name: | ||
| /s/ Xxxxxxxx Xxxxxx | ||
| By:Xxxxxxxx Xxxxxx | ||
| Managing Principal | ||
| Title: | ||
Purchase Price:
|
$225,000 | |
Principal Amount of Notes:
|
$225,000 | |
No. of Warrants:
|
61,362 | |
Residence:
|
NY | |
Address for Notices:
|
Xxxxxx Asset Management | |
| 000 Xxxxx Xxxxxx | ||
| Xxx Xxxx, XX 00000-0000 | ||
| with a copy to: | ||
| Purchasers: | ||
| Smithfield Fiduciary LLC | ||
| Name: | ||
| /s/ Xxxxx X. Xxxxxxx | ||
| By: Xxxxx X. Xxxxxxx | ||
| Authorized Signatory | ||
| Title: | ||
Purchase Price:
|
$ 500,000 | |
Principal Amount of Notes:
|
$ 500,000 | |
No. of Warrants:
|
136,360 | |
Residence:
|
Cayman Islands | |
Address for Notices:
|
c/o Highbridge Capital management LLC | |
| 0 Xxxx 00xx Xxxxxx, 00xx Xxxxx | ||
| Xxx Xxxx, XX 00000 | ||
| Attn: Xxxx Chill | ||
| with a copy to: | ||
| Purchasers: | ||
| Whalehaven Capital Fund Limited | ||
| Name: | ||
| /s/ Xxxxxx Xxxxx | ||
| By:Xxxxxx Xxxxx | ||
| Director | ||
| Title: | ||
Purchase Price:
|
$525,000 | |
Principal Amount of Notes:
|
$525,000 | |
No. of Warrants:
|
143,178 | |
Residence:
|
||
Address for Notices:
|
Whalehaven Capital Fund Limited | |
| XX Xxx XX 0000 | ||
| Xxxxxxxx XXXX, Xxxxxxx | ||
| with a copy to: | ||
