-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DphO/3HZK20WNK7pl9JG5gx9BQUVuMwJA3jkQeeBj5Z1goA2Xl2tIFNcRs7ay92b cjfZgMNHju7RPgNMbvxQgw== 0000950138-08-000973.txt : 20081223 0000950138-08-000973.hdr.sgml : 20081223 20081223163023 ACCESSION NUMBER: 0000950138-08-000973 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20081223 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20081223 DATE AS OF CHANGE: 20081223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEARUSA INC CENTRAL INDEX KEY: 0000821536 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 222748248 STATE OF INCORPORATION: DE FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11655 FILM NUMBER: 081267734 BUSINESS ADDRESS: STREET 1: 1250 NORTHPOINT PARKWAY CITY: WEST PALM BEACH STATE: FL ZIP: 33407 BUSINESS PHONE: 5614788770 MAIL ADDRESS: STREET 1: 1250 NORTHPOINT PARKWAY CITY: WEST PALM BEACH STATE: FL ZIP: 33407 FORMER COMPANY: FORMER CONFORMED NAME: HEARX LTD DATE OF NAME CHANGE: 19950808 8-K 1 form8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event

reported): December 23, 2008

HearUSA, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware		001-11655		22-2748248
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

1250 Northpoint Parkway
West Palm Beach, Florida		33407
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code:

(561) 478-8770

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On December 23, 2008, HearUSA, Inc. (the “Company”) entered into a Third Amendment to Credit Agreement (“Credit Agreement Amendment”), Second Amendment to Supply Agreement (“Supply Agreement Amendment”), Second Amendment to Investor Rights Agreement (“Investor Rights Amendment”), Amendment No. 2 to Amended and Restated Security Agreement (“Security Agreement Amendment”) (collectively the “Amendments”) and a Purchase Agreement (the “Purchase Agreement”) with Siemens Hearing Instruments, Inc. (“Siemens”). The Company and Siemens are parties to a Second Amended and Restated Credit Agreement dated December 30, 2006, as amended by a First Amendment to Credit Agreement dated as of June 27, 2007 and a Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated September 28, 2007 (the “2007 Amendments”) (as amended, the “Credit Agreement”), an Amended and Restated Supply Agreement dated December 30, 2006, as amended by the 2007 Amendments (as amended, the “Supply Agreement”) and an Investor Rights Agreement dated December 30, 2006, as amended by the 2007 Amendments (as amended, the “Investor Rights Agreement’).

Pursuant to these agreements, Siemens has extended to the Company a $50 million credit facility and the Company purchases from Siemens most of the Company’s requirements for hearing aids. The December 2006 agreements represented amendments to agreements that had been in place between the parties since 2001. In 2006 when the Credit Agreement was amended, the Company granted to Siemens the right to convert a portion of the debt into common stock at certain times and upon certain conditions. Pursuant to the Supply Agreement, the Company has agreed to purchase at least 90% of the hearing aids it sells in the United States from Siemens and its affiliates. If the minimum purchase requirement of the Supply Agreement is met, the Company earns rebates which are then applied to certain payments due under the Credit Agreement to liquidate those payments. The Investor Rights Agreement provided Siemens with certain rights, including the right to have the shares of common stock underlying the debt be registered for resale and a right of first refusal on equity securities sold by the Company. In 2007 when the 2007 Amendments were made, Siemens agreed to provide the Company with an additional $3 million revolving line of credit for working capital purposes in the form of Tranche E which would be due on December 29, 2008. In addition, in the 2007 Amendments Siemens agreed that the $4.2 million principal of Tranche D in the Credit Agreement would be due on December 19, 2008.

Pursuant to the Amendments and the Purchase Agreement executed on December 23, 2008, the parties have agreed to the following:

•

The required prepayment of $4.2 million of Tranche D loans under Section 2.05(c) of the Credit Agreement was eliminated and that amount was transferred to Tranche C. The repayment date for the Tranche E loan of $3 million was extended to coincide with the Maturity Date under the amended Credit Agreement. To facilitate that change, the balance under Tranche E was also transferred to Tranche C. Because of the prior repayment in full of Tranche A, going forward the Credit Agreement will have only Tranches B and C.

•

The aggregate maximum commitment amount of the Tranche B and Tranche C loans is $50 million, all of which is now fully self liquidating with rebates earned

under the Supply Agreement, as amended, and repaid principal may be reborrowed for acquisition purposes under the amended Credit Agreement.

•

The conversion provisions of the Credit Agreement have been eliminated.

•

The Maturity Date under the Credit Agreement and Supply Agreement has been extended by two years (to February of 2015).

•

Approximately $3.8 million of outstanding trade debt under the Supply Agreement was converted into 6.4 million shares of the Company’s Common Stock, $0.10 par value per share (the “Shares”) at a conversion price equal to $0.60 pursuant to the Purchase Agreement. An additional $6.2 million of trade debt under the Supply Agreement was converted into indebtedness under Tranche C of the Credit Agreement.

•

Under the Investor Rights Agreement, as amended, the Shares are now included in the definition of “Registrable Securities” and the Company has undertaken to register the Shares for resale within 180 days. (The Company will deregister shares underlying the Credit Agreement conversion rights which have now been eliminated.)

•

In the Investor Rights Amendment, the Company has granted Siemens a right of first refusal for all new issuances of equity (except issuances pursuant to employee compensation plans and pursuant to warrants outstanding on the date of the Amendments) for a period of 18 months. Thereafter, Siemens will have a more limited right of first refusal and preemptive rights for the life of the Investor Rights Agreement, as amended.

•

Pursuant to the Investor Rights Amendment, the Company will invite a representative of Siemens to attend meetings of the Board in a nonvoting observer capacity.

A copy of each of the Amendments and the Purchase Agreement is attached to this Form 8-K as Exhibits 10.1 through 10.5. On December 23, 2008, the Company issued a press release relating to the Amendments and the Purchase Agreement. A copy of that press release is furnished with this Form 8-K as Exhibit 99.1.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

(a) The information provided above in Item 1.01 is incorporated in this Item 2.03 by this reference.

Item 3.02. Unregistered Sales of Equity Securities.

The information provided above in Item 1.01 is incorporated in this Item 3.02 by this reference. The Company issued the Shares in a private placement to an accredited investor in reliance on

Section 4(2) of the Securities Act of 1933 and/or Regulation D promulgated by the Securities and Exchange Commission.

Item 9.01. Financial Statement sand Exhibits.

Exhibit No.	Description

10.1	Third Amendment to Credit Agreement dated December 23, 2008, by and between the Company and Siemens Hearing Instruments, Inc.

10.2	Second Amendment to Supply Agreement dated December 23, 2008 by and between the Company and Siemens Hearing Instruments, Inc. (portions of this agreement are subject to a request for confidential treatment)

10.3	Second Amendment to Investor Rights Agreement dated December 23, 2008 by and between the Company and Siemens Hearing Instruments, Inc.

10.4	Amendment No. 2 to Amended and Restated Security Agreement dated December 23, 2008 by and between the Company and Siemens Hearing Instruments, Inc.

10.5	Stock Purchase Agreement dated December 23, 2008 by and between the Company and Siemens Hearing Instruments, Inc.

99.1	Press release dated December 23, 2008

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HearUSA, Inc. (Registrant)

Date: December 23, 2008	By:	/s/ Gino Chouinard
		Name: Gino Chouinard
		Title: President and CFO

EX-10.1 2 exh10-1.htm THIRD AMEND. TO CREDIT AGREEMENT

Exhibit 10.1

EXECUTION COPY

THIRD AMENDMENT TO CREDIT AGREEMENT

This THIRD AMENDMENT TO CREDIT AGREEMENT (the “Amendment”) is entered into as of December 23, 2008 (the “Third Amendment Effective Date”), by and between HEARUSA, INC., a Delaware corporation (“Borrower”), and SIEMENS HEARING INSTRUMENTS, INC., a Delaware corporation (“Lender”).

Capitalized terms used herein without definition shall have the meanings given to such terms in the Credit Agreement (as defined in the Recitals).

RECITALS

A. Borrower and Lender are parties to (a) the Second Amended and Restated Credit Agreement dated as of December 30, 2006, as amended by that certain First Amendment to Credit Agreement dated as of June 27, 2007 and Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated as of September 24, 2007 (the “2007 Amendments”) (as amended, the “Credit Agreement”); (b) the Investor Rights Agreement dated as of December 30, 2006, as amended by the 2007 Amendments and the Second Amendment to Investor Rights Agreement of near or even date herewith (as amended, the “Investor Rights Agreement”); and (c) the Amended and Restated Supply Agreement dated as of December 30, 2006, as amended by the 2007 Amendments and the Second Amendment to Supply Agreement of near or even date herewith (as amended, the “Supply Agreement”).

B. Pursuant to a Stock Purchase Agreement by and between Borrower and Lender of near or even date herewith (the “Stock Purchase Agreement”), Borrower and Lender have agreed that Lender shall purchase, and Borrower shall issue, 6,400,000 shares of Borrower’s $0.10 par value common stock in consideration of the cancellation of certain trade payables owed to Lender in a face amount equal to the purchase price for such shares.

C. A condition precedent to Lender’s obligations under the Stock Purchase Agreement is the execution and delivery by the Borrower and Lender of this Amendment.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower and Lender agree as follows:

1.	AMENDMENTS.

(a)

Amendments to Section 1.01 of the Credit Agreement

(i) The definition of “Agreement” in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows:

“Agreement” means this Second Amended and Restated Credit Agreement, together with all Exhibits and Schedules hereto, as the same may be amended, restated, supplemented or otherwise modified from time to time.

(ii) The definition of “Maturity Date” in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows:

“Maturity Date” means February 10, 2015.

(iii) The definition of “Tranche B Loan Commitment” in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows:

“Tranche B Loan Commitment” means the agreement of the Lender to continue the Existing Tranche B Loan on the Closing Date, the agreement of the Lender to make additional Tranche B Loans to the Borrower after the Closing Date pursuant to clause (a)(i) of the Acquisition Guidelines and the option of the Lender to make additional Tranche B Loans to the Borrower after the Closing Date pursuant to clause (b)(i) of the Acquisition Guidelines, all in an aggregate principal amount not to exceed $50,000,000.00 at any time less the aggregate amount outstanding under all Loans other than Tranche B Loans at such time.

(iv) The definition of “Tranche C Loan Commitment” in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows:

“Tranche C Loan Commitment” means the agreement of the Lender to continue the Existing Tranche C Loan on the Closing Date, the agreement of the Lender to make additional Tranche C Loans to the Borrower after the Closing Date pursuant to clause (a)(i) of the Acquisition Guidelines and the option of the Lender to make additional Tranche C Loans to the Borrower after the Closing Date pursuant to clause (a)(ii) and clause (b)(ii) of the Acquisition Guidelines, all in an aggregate principal amount not to exceed $50,000,000.00 at any time less the aggregate amount outstanding under all Loans other than Tranche C Loans at such time.

(v) The definition of “Tranche C Loan” in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows:

“Tranche C Loan” means (i) the Existing Tranche C Loan, (ii) each additional loan made by the Lender to the Borrower after the Closing Date pursuant to Section 2.01(c), and (iii) the Tranche D Loan and the Tranche E Loan outstanding as of the Third Amendment Effective Date, which are converted into, and continue as, a Tranche C Loan under this Agreement pursuant to Section 2.01(c) as of the Third Amendment Effective Date.

(vi) Section 1.01 of the Credit Agreement is amended by adding the following new defined terms:

“Third Amendment Closing Statement” means a statement of Indebtedness owed to the Lender through the Third Amendment Effective Date and of certain trade payables outstanding and owed to Lender by Borrower through the Third Amendment Effective Date attached hereto as Exhibit F.

“Aggregate Purchase Price” has the meaning specified in the Stock Purchase Agreement by and between Borrower and Lender dated as of December 23, 2008 (the “Purchase Agreement”).

“Prepayment Premium” has the meaning specified in Section 2.04.

“Third Amendment Effective Date” means December 23, 2008.

“Trade Debt” has the meaning specified in the Purchase Agreement.

(b)

Amendments to Section 2.01 of the Credit Agreement

(i) Section 2.01(a) of the Credit Agreement is amended in its entirety to read as follows:

(a) Tranche A Loan. As of the Third Amendment Effective Date, there is no outstanding principal amount of the Tranche A Loan, and no accrued and unpaid interest thereon, and Borrower has no further rights to borrow under the Tranche A Loan.

(ii) Section 2.01(b) of the Credit Agreement is amended in its entirety to read as follows:

(b) Tranche B Loans. The outstanding principal balance of the Tranche B Loan, together with all accrued but unpaid interest thereon, immediately prior to and immediately following the Third Amendment Effective Date, is as set forth on the Third Amendment Closing Statement. On the terms and subject to the conditions contained in this Agreement, the Lender agrees to make additional loans to the Borrower as set forth in clause (a)(i) of the Acquisition Guidelines and in its sole and absolute discretion may make additional loans to the Borrower as set forth in clause (b)(i) of the Acquisition Guidelines. Each Tranche B Loan (i) may be made from time to time on any Business Day up to thirty (30) days prior to the Maturity Date, (ii) shall be repaid pursuant to the terms hereof and (iii) once repaid may be reborrowed. The aggregate outstanding principal amount of all Tranche B Loans may not exceed at any time the amount of the Tranche B Loan Commitment. The aggregate Tranche B Loans shall be evidenced by the Tranche B Note.

(iii) Section 2.01(c) of the Credit Agreement is amended in its entirety to read as follows:

(c) Tranche C Loans. Immediately prior to the Third Amendment Effective Date, the outstanding principal balance of the Tranche C Loan, the Tranche D Loan and the Tranche E Loan is as set forth on the Third Amendment Closing Statement and the accrued and unpaid interest thereon is as set forth on the Third Amendment Closing Statement. Effective as of the Third Amendment Effective Date, the Tranche C Loan shall comprise (i) the Tranche C Loan outstanding as of the Third Amendment Effective Date, (ii) the Tranche D Loan,

which as of the Third Amendment Effective Date shall convert into, and continue as, a Tranche C Loan hereunder, (iii) the Tranche E Loan, which as of the Third Amendment Effective Date shall convert into, and continue as, a Tranche C Loan hereunder, and (iv) designated trade payables as reflected on the Third Amendment Closing Statement, which trade payables shall convert into, and continue as, a Tranche C Loan. On the terms and subject to the conditions contained in this Agreement, the Lender agrees to make additional Tranche C Loans to the Borrower under the Agreement as set forth in clause (a)(i) of the Acquisition Guidelines and in its sole and absolute discretion may make additional loans to the Borrower pursuant to clause (a)(ii) and clause (b)(ii) of the Acquisition Guidelines.

(iv) Section 2.01(d) of the Credit Agreement is amended in its entirety to read as follows:

(d) Tranche D Loans. As of the Third Amendment Effective Date, the Tranche D Loans shall convert into, and continue as, a Tranche C Loan pursuant to Section 2.01(c) and Borrower shall have no further rights to borrow any Tranche D Loans.

(v) Section 2.01(e) of the Credit Agreement is amended in its entirety to read as follows:

(e) Aggregate Commitments. In no event may the aggregate outstanding principal amounts of all the Loans at any time exceed the Maximum Commitment.

(vi) Section 2.01(f) of the Credit Agreement is amended in its entirety to read as follows:

(f) Commitment Reductions. The Borrower may, from time to time, upon at least three Business Days’ notice to the Lender, terminate in whole or reduce in part the unused portions of the Tranche B Loan Commitment and the Tranche C Loan Commitment. Each partial reduction shall be in an amount of not less than $250,000 or an integral multiple of $250,000 in excess thereof and shall reduce permanently such Loan commitment then in effect.

(vii) Section 2.01(g) of the Credit Agreement is amended in its entirety to read as follows:

(g) Commitment Termination. The Tranche B Commitment and the Tranche C Commitment shall terminate on the Commitment Termination Date. The Tranche D Commitment shall terminate on the Third Amendment Effective Date.

(viii) Section 2.01(h) of the Credit Agreement is amended in its entirety to read as follows:

(h) Tranche E Loans. As of the Third Amendment Effective Date, the Tranche E Loans shall convert into, and continue as, a Tranche C Loan pursuant to Section 2.01(c) and Borrower shall have no further rights to borrow any Tranche E Loans.

(b) Order of Priority of Making of Loans. Loans that the Lender makes after the Closing Date shall be made as Tranche B Loans or Tranche C Loans as provided in the Acquisition Guidelines.

(d) Section 2.03(b) of the Credit Agreement is amended in its entirety to read as follows:

(b) Repayment of Tranche B Loans. On the 20^th day after the last day of each Fiscal Quarter after the Closing Date (a “Tranche B Loan Payment Date”), commencing on January 19, 2007, subject to the provisions of Section 2.03(f), (g) and (h) below, the Borrower shall pay down the principal amount of the aggregate outstanding Tranche B Loans in an amount equal to $65 per hearing aid for all hearing aids (including, without limitation, Rexton brand hearing aids but expressly excluding Electone brand hearing aids) purchased by Borrower from Lender during the Fiscal Quarter preceding the related Tranche B Loan Payment Date on each new “ship to” account for each Stand-Alone Acquisition financed with a Tranche B Loan (including Tranche B Loans outstanding on the Closing Date), plus all accrued and unpaid interest thereon as provided by Section 2.06(a) (such amounts the “Required Tranche B Payment”). On the Maturity Date, the Borrower shall pay the entire aggregate outstanding principal amount of the Tranche B Loans plus accrued and unpaid interest as provided in Section 2.06(a).

(e) Section 2.04 of the Credit Agreement is amended by making the existing paragraph clause (a) and adding the following new clause (b):

(b) Notwithstanding the provisions of Section 2.04(a), on or after a Change of Control, Borrower may not make any voluntary prepayments under Section 2.04(a) unless Borrower shall pay, together with the outstanding principal amount to be prepaid, and the accrued interest thereon, a prepayment premium equal to ten percent (10%) of such principal amount so prepaid (the “Prepayment Premium”).

(f) Section 2.05(c) of the Credit Agreement is amended in its entirety to read as follows:

(c) The Borrower shall prepay the Loan Balance contemporaneously with the closing of any sale or other disposition of a material part of its operating assets outside of the ordinary course of business, whether by sale of assets, transfer of stock, merger, reorganization or otherwise, in an amount equal to 50% of the Net Proceeds of such transaction. For purposes of this Agreement, “Net Proceeds” shall mean the result obtained by subtracting (i) an amount equal to Borrower's taxes payable as a result of the transaction in question plus Borrower's out of pocket expenses incurred in connection with the transaction in question, from (ii) the sum of (A) the cash paid, the market value of marketable equity or debt securities or interests, and the fair value of unmarketable equity or debt securities or interests issued or issuable (including the amounts reasonably expected to be recovered out of any escrow) to the Borrower, its Subsidiaries or its shareholders in connection with such transaction; (B) the principal amount of indebtedness (other than accounts payable and other normal accruals) of the Borrower or its Subsidiaries assumed by an acquiring party in connection with such transaction; and (C) the fair present value of absolute or contingent future payment obligations, such as earn-outs, arising in connection with such transaction that would be reasonably considered as part of the total consideration under generally accepted accounting principles.

(g) Section 2.10 of the Credit Agreement is deleted in its entirety and shall read as follows:

[Intentionally omitted.]

(h) Section 3.02 of the Credit Agreement is amended by adding the following new clause (c):

(c) Not less than five (5) Business Days prior to the requested date of any new Loan, Borrower shall provide to Lender financial statements or other documentation that demonstrates to Lender’s satisfaction, such satisfaction as determined in Lender’s sole discretion, that Borrower has had positive cash flows from operations during each of the three months immediately preceding the date of the proposed Loan.

(i) Section 3.03(d) of the Credit Agreement is deleted in its entirety and shall read as follows:

[Intentionally omitted.]

(j) Section 5.07 of the Credit Agreement is amended by adding the following new clause (c):

(c) as soon as available and in any event within fifteen (15) Business Days after the end of each fiscal month of the Borrower, an unaudited

consolidated income statement and statement of cash flows of the Borrower and its Subsidiaries for such month, an unaudited consolidated balance sheet and statement of stockholders’ equity of the Borrower and its Subsidiaries as of the end of such month, and a consolidated statement of the ageing of the accounts receivables and inventory of the Borrower and its Subsidiaries as of the end of such month, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to quarter and normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP); provided, however, as is necessary for, and when requested by, Lender to comply with the future financial accounting reporting requirements of Siemens Aktiengesellschaft, a corporation under the laws of the Federal Republic of Germany, Borrower agrees to provide the financial information described in this Section 5.07(c) within three (3) Business Days after the end of each fiscal month of Borrower. Notwithstanding anything to the contrary in this Section 5.07(c), as soon as is available and in any event within three (3) Business Days after the end of each fiscal month of the Borrower, the Borrower shall furnish to Lender the Borrower’s estimated (i) net third party revenues, (ii) net hearing aids sold, (iii) gross profits, (iv) earnings before income and taxes (EBIT) and (v) cash for such month in form and content reasonably acceptable to Lender.

(k) Section 5.13 of the Credit Agreement is amended in its entirety to read as follows:

Section 5.13. Additional Agreements Between Affiliates, Etc.

The Borrower acknowledges that its Subsidiaries operating in Canada currently purchase from Affiliates of the Lender operating in Canada approximately 75% of the hearing aids purchased by the Borrower and its Subsidiaries in Canada. The Borrower (a) shall cause its Subsidiaries operating in Canada to use reasonable best efforts to enter into a supply agreement with the Lender’s Affiliates operating in Canada on mutually agreeable terms; (b) agrees that until such an agreement is entered into and implemented, the Borrower shall, and shall cause its Subsidiaries operating in Canada to, purchase from Affiliates of the Lender 70% or more of all hearing aids purchased by the Borrower and its Subsidiaries in or for sale in Canada; and (c) shall promptly provide the Lender from time to time such information and documents as the Lender may reasonably request to verify compliance with the covenant contained in clause (b).

(l) Section 6 of the Credit Agreement is amended by adding the following new Section 6.11:

Section 6.11. Disposition of Operating Assets.

Except in the ordinary course of its business, the Borrower shall not, and shall not cause its Subsidiaries to, sell, lease, transfer, or otherwise dispose of a material part of its business or operating assets, whether in one transaction or a series of transactions, and whether by asset sale, sale of securities of a Subsidiary,

or otherwise, unless the Borrower prepays the Loan Balance contemporaneously with such sale or otherwise in accordance with Section 2.05(c).

(m) Section 7.01(a) of the Credit Agreement is amended in its entirety to read as follows:

(a) The Borrower shall fail to pay any principal (including, without limitation, mandatory prepayments of principal) of, or interest on, the Loans, any applicable Prepayment Premiums, any other amount due hereunder or under the other Loan Documents or any other Obligations hereunder when the same becomes due and payable; or

(n) Exhibit A-1 of the Credit Agreement is deleted in its entirety.

(o) Exhibit A-2 of the Credit Agreement is amended by:

(i) replacing the number “$30,000,000” in each place it appears with the number “$50,000,000”; and

(ii) replacing in the first paragraph “THIRTY MILLION” with “FIFTY MILLION”.

(p) Exhibit A-3 of the Credit Agreement is amended by:

(i) replacing the number “$30,000,000” in each place it appears with the number “$50,000,000”; and

(ii) replacing in the first paragraph “THIRTY MILLION” with “FIFTY MILLION”.

(q) Exhibit A-4 of the Credit Agreement is deleted in its entirety.

(r) Exhibit A-5 of the Credit Agreement is deleted in its entirety.

(s) Exhibit B of the Credit Agreement is deleted in its entirety and added in lieu thereof is Exhibit B attached hereto.

(t) Exhibit D of the Credit Agreement is deleted in its entirety.

(u) Section 2 Covenant of the First Amendment to Credit Agreement is deleted in its entirety.

2. COVENANT. On the Third Amendment Effective Date, Borrower shall issue a replacement Tranche B Note and Tranche C Note to Lender and Lender shall cancel the existing Tranche B Note, Tranche C Note, Tranche D Note and Tranche E Note.

3. REPRESENTATIONS AND WARRANTIES. As a material inducement to Lender to execute and deliver this Amendment, Borrower hereby represents and warrants to Lender (with

the knowledge and intent that Lender is relying upon the same in entering into this Amendment) as follows:

(a) After giving effect to this Amendment, the representations and warranties in the Credit Agreement are true and correct on the date hereof in all material respects, as though made on the date hereof, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate as of such earlier date).

(b) As of the Third Amendment Effective Date and after giving effect to this Amendment, Borrower is in compliance with all covenants and agreements in the Credit Agreement.

(d) Borrower has the right and power, and has taken all necessary action to authorize it to execute, deliver, and perform this Amendment in accordance with its terms and to consummate the transaction contemplated hereby.

(e) This Amendment has been duly executed and delivered by a duly authorized officer of Borrower, and is a legal, valid, and binding obligation of Borrower, enforceable against it in accordance with its terms.

(f) The execution, delivery and performance of this Amendment in accordance with its terms, do not and will not, by the passage of time, the giving of notice, or otherwise: (i) conflict with, result in a breach of, or constitute a default under the articles of incorporation or the bylaws of Borrower, or any indenture, material agreement or other instrument to which Borrower is a party or by which it or any of its respective properties may be bound; or (ii) result in or require the creation or imposition of any Lien, except any Liens in favor of Lender, upon or with respect to any property now owned or hereafter acquired by Borrower.

4.	MISCELLANEOUS.

(a) Effect on Credit Agreement. This Amendment shall not constitute a novation or termination of Borrower’s obligations under the Credit Agreement or any other Loan Document; and except as provided in this Amendment, the Credit Agreement and all other Loan Documents shall remain unchanged and in full force and effect, and are hereby ratified and confirmed. On and after the Amendment Effective Date, all references to the “Credit Agreement” or the “Agreement” shall be to the Credit Agreement, as herein amended. Except as expressly provided herein, the execution, delivery, and effectiveness of this Amendment shall not operate as a waiver of any rights of the Lender under the Credit Agreement, or any of the other Loan Documents, nor constitute a waiver under the Credit Agreement, or any other provision of the Loan Documents.

(b) Amendment Effective Date. This Amendment shall be effective as of the Third Amendment Effective Date.

(c) Reference to Miscellaneous Provisions. This Amendment and the other documents delivered pursuant to this Amendment are part of the Loan Documents referred to in the Credit Agreement, and the provisions relating to Loan Documents set forth in Article VIII of the Credit Agreement are incorporated herein by reference the same as if set forth herein verbatim.

(d) Costs and Expenses. Each party hereto shall pay its own expenses in connection with the preparation, negotiation, execution, and delivery of this Amendment.

(e) Counterparts. This Amendment may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes, and all of which constitute, collectively, one agreement. It is not necessary that all parties execute the same counterpart so long as identical counterparts are executed by Borrower and Lender.

(f) Parties. This Amendment is binding on and inures to the benefit of Borrower, Lender, and their respective successors and assigns.

[Signatures appear on the following pages.]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts as of the Third Amendment Effective Date.

	HEARUSA, INC., as the Debtor

	By:	/s/ Stephen J. Hansbrough
		Name: Stephen J. Hansbrough
		Title: Chairman and CEO

	SIEMENS HEARING INSTRUMENTS, INC., as Secured Party

	By:	/s/ Christi Pedra
		Name: Christi Pedra
		Title: Chief Executive Officer

	By:	/s/ Nicolau Gaeta
		Name: Nicolau Gaeta
		Title: Chief Financial Officer

* * * *

SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT

EX-10.2 3 exh10-2.htm SECOND AMEND. TO SUPPLY AGREEMENT

Exhibit 10.2

CONFIDENTIAL TREATMENT REQUESTED

REDACTED VERSION

SECOND AMENDMENT TO SUPPLY AGREEMENT

This SECOND AMENDMENT TO SUPPLY AGREEMENT (the “Amendment”) is entered into as of December 23, 2008 (the “Second Amendment Effective Date”), by and between HEARUSA, INC., a Delaware corporation (“HearUSA”), and SIEMENS HEARING INSTRUMENTS, INC., a Delaware corporation (“SHI”).

Capitalized terms used herein without definition shall have the meanings given to such terms in the Supply Agreement (as defined in the Recitals).

RECITALS

A. HearUSA and SHI are parties to (a) the Amended and Restated Supply Agreement dated as of December 30, 2006, as amended by that certain Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated as of September 24, 2007 (the “2007 Amendments”) (as amended, the “Supply Agreement”) and (b) the Second Amended and Restated Credit Agreement dated as of December 30, 2006, as amended by that certain First Amendment to Credit Agreement dated as of June 27, 2007 and Second Amendment to Credit Agreement, the 2007 Amendments and the Third Amendment to Credit Agreement of near or even date herewith (as amended, the “Credit Agreement”).

B. Pursuant to a Stock Purchase Agreement by and between HearUSA and SHI of near or even date herewith (the “Purchase Agreement”), HearUSA and SHI have agreed that SHI shall purchase, and HearUSA shall issue, 6,400,000 shares of HearUSA’s $0.10 par value common stock in consideration of the cancellation of certain trade payables owed to SHI under the Supply Agreement in a face amount equal to the purchase price for such shares.

C. A condition precedent to SHI’s obligations under the Purchase Agreement is the execution and delivery by HearUSA and SHI of this Amendment.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, HearUSA and SHI agree, as follows:

1.	AMENDMENTS.

(a)

Section 2 of the Supply Agreement is amended in its entirety to read as follows:

2. Term. The term of this Agreement begins on the Effective Date and ends on 10 February 2015 (“Term”).

(b)

Section 3 of the Supply Agreement is amended in its entirety as follows:

3. Terms and Conditions of Sale. HearUSA will submit its orders for Products either on the forms provided by SHI for that purpose or via a website provided by SHI. Net payment is due no later than sixty (60) days after the statement date. All payments shall be in United States dollars and made by wire

CONFIDENTIAL TREATMENT REQUESTED

REDACTED VERSION

transfer to, and cleared in the account of, SHI no later than 3:00 p.m. EST on the business day preceding the sixtieth (60) day after the statement date. HearUSA shall provide by electronic mail to SHI confirmation of the successful transfer of the funds owed immediately after such transfer and any requested cash application data.

(c)

Section 4.7 of the Supply Agreement is amended in its entirety to read as follows:

4.7. Marketing Allowance. HearUSA will earn a marketing allowance, the funds from which will only be used to reimburse HearUSA’s advertising expenses. The marketing allowance is designed to help promote HearUSA’s practice and SHI’s products in their respective markets. It may only be used for these purposes, and SHI reserves the right to directly pay the advertising vendor (e.g. print or electronic media, mailing houses) that HearUSA uses. The marketing allowance will be credited to the HearUSA's account on the fifteenth day of the month following the month it applies to, provided that HearUSA's trade payables with SHI are within terms, documentation for the advertising expenses is provided to SHI and HearUSA is in compliance with the Minimum Purchase Requirement set forth in Section 4.1. The maximum base marketing allowance shall be $200,000 per month.

(d) Exhibit A to the Supply Agreement is hereby amended by deleting such Exhibit A and adding in lieu thereof Exhibit A attached hereto.

2. COVENANT. HearUSA agrees that all trade payables hereunder outstanding as of the Amendment Effective Date and not converted into equity or debt pursuant to the Purchase Agreement or the Credit Agreement shall be payable within sixty (60) days (rather than 75 days) from the statement date for such trade payables.

3. REPRESENTATIONS AND WARRANTIES. As a material inducement to SHI to execute and deliver this Amendment, HearUSA hereby represents and warrants to SHI (with the knowledge and intent that SHI is relying upon the same in entering into this Amendment) as follows:

(a) HearUSA has the right and power, and has taken all necessary action to authorize it to execute, deliver, and perform this Amendment in accordance with its terms and to consummate the transaction contemplated hereby.

(b) This Amendment has been duly executed and delivered by a duly authorized officer of HearUSA, and is a legal, valid, and binding obligation of HearUSA, enforceable against it in accordance with its terms.

(c) The execution, delivery and performance of this Amendment in accordance with its terms, do not and will not, by the passage of time, the giving of notice, or otherwise conflict with, result in a breach of, or constitute a default under the articles of incorporation or the bylaws of HearUSA, or any indenture, material agreement, or other instrument to which HearUSA is a party or by which it or any of its respective properties may be bound.

CONFIDENTIAL TREATMENT REQUESTED

REDACTED VERSION

4.	MISCELLANEOUS.

(a) Effect of Amendment. This Amendment shall not constitute a novation or termination of HearUSA’s obligations under the Supply Agreement or any other Loan Document (as defined in the Credit Agreement); and except as provided in this Amendment, the Supply Agreement shall remain unchanged and in full force and effect, and is hereby ratified and confirmed. On and after the Second Amendment Effective Date, all references to the “Supply Agreement” or the “Agreement” shall be to the Supply Agreement, as herein amended. Except as expressly provided herein, the execution, delivery, and effectiveness of this Amendment shall not operate as a waiver of any rights of SHI under the Supply Agreement, nor constitute a waiver under the Supply Agreement.

(b) Amendment Effective Date. This Amendment, shall be effective as of the Second Amendment Effective Date.

(d) Costs and Expenses. Each party hereto shall pay its own expenses in connection with the preparation, negotiation, execution, and delivery of this Amendment.

(f) Parties. This Amendment is binding on and inures to the benefit of the Company, Investor, and their respective successors and assigns.

[Signatures appear on the following pages.]

CONFIDENTIAL TREATMENT REQUESTED

REDACTED VERSION

IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts as of the Second Amendment Effective Date.

	HEARUSA, INC., as the Debtor

	By:	/s/ Stephen J. Hansbrough
		Name: Stephen J. Hansbrough
		Title: Chairman and CEO

	SIEMENS HEARING INSTRUMENTS, INC., as Secured Party

	By:	/s/ Christi Pedra
		Name: Christi Pedra
		Title: Chief Executive Officer

	By:	/s/ Nicolau Gaeta
		Name: Nicolau Gaeta
		Title: Chief Financial Officer

* * * *

SIGNATURE PAGE TO SECOND AMENDMENT TO SUPPLY AGREEMENT

CONFIDENTIAL TREATMENT REQUESTED

REDACTED VERSION

EXHIBIT A

HearUSA Pricing Schedule for Custom and BTE Products

[*****]

EX-10.3 4 exh10-3.htm SECOND AMEND. TO INVESTOR RIGHTS AGREEMENT

Exhibit 10.3

EXECUTION COPY

SECOND AMENDMENT TO INVESTOR RIGHTS AGREEMENT

This SECOND AMENDMENT TO INVESTOR RIGHTS AGREEMENT (the “Amendment”) is entered into as of December 23, 2008 (the “Second Amendment Effective Date”), by and between HEARUSA, INC., a Delaware corporation (“Company”), and SIEMENS HEARING INSTRUMENTS, INC., a Delaware corporation (“Investor”).

Capitalized terms used herein without definition shall have the meanings given to such terms in the Investor Rights Agreement (as defined in the Recitals).

RECITALS

A. The Company and the Investor are parties to (a) the Investor Rights Agreement dated as of December 30, 2006, as amended by that certain Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated as of September 24, 2007 (the “2007 Amendments”) (as amended, the “Investor Rights Agreement”) and (b) the Second Amended and Restated Credit Agreement dated as of December 30, 2006, as amended by that certain First Amendment to Credit Agreement dated as of June 27, 2007, the 2007 Amendments and the Third Amendment to Credit Agreement of near or even date herewith (as amended, the “Credit Agreement”).

B. Pursuant to a Stock Purchase Agreement by and between the Company and the Investor of near or even date herewith (the “Purchase Agreement”), the Company and the Investor have agreed that the Investor shall purchase, and the Company shall issue, 6,400,000 shares of the Company’s $0.10 par value common stock in consideration of the cancellation of certain trade payables owed to the Investor in a face amount equal to the purchase price for such shares.

C. A condition precedent to the Investor’s obligations under the Purchase Agreement is the execution and delivery by the Company and the Investor of this Amendment.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Investor agree, as follows:

1.	AMENDMENTS.

(a) Section 1.1 of the Investor Rights Agreement is amended by adding the following defined terms:

“Approved Stock Plan” has the meaning specified in the Second Amended and Restated Credit Agreement by and between the Company and the Investor dated as of December 30, 2006, as subsequently amended.

“Second Amendment Effective Date” means December 23, 2008.

(b) The definition of “Shares” in Section 1.1 of the Investor Rights Agreement is amended in its entirety to read as follows:

“Shares” means 6,400,000 shares of the Company’s Common Stock issued by the Company to the Investor pursuant to the Stock Purchase Agreement by and between the Company and the Investor dated as of December 23, 2008.

(a) The Company will, (i) within ninety (90) days following the Second Amendment Effective Date, prepare and file with the Commission a Registration Statement on Form S-3 or, if not available, Form S-1, or any equivalent form for registration by issuers in accordance with the Securities Act, to permit the resale from time to time of the Registrable Securities under the Securities Act on a delayed or continuous basis pursuant to Rule 415 (the “Shelf Registration Statement”), (ii) use reasonable best efforts to cause the Shelf Registration Statement to be declared effective (the “Registration Effective Date”) as soon as reasonably practicable and in any event within one hundred eighty (180) days after the Second Amendment Effective Date, and (iii) use reasonable best efforts to cause the Shelf Registration Statement to remain effective until the date on which all of the Registrable Securities covered by the Shelf Registration Statement have been sold to the public pursuant to such registration statement in accordance with the intended methods of distribution thereof. The plan of distribution contemplated by the Shelf Registration Statement shall permit resales of Registrable Securities in the manner or manners designated by the Investor, including offers and sales through underwriters or agents, offers and sales directly to investors, block trades and such other methods of offer and sale as the Investor shall request. The Company shall not permit any securities other than Registrable Securities to be included in the Shelf Registration Statement.

(d) Section 3 of the Investor Rights Agreement is amended by adding Section 3.2 in the form as follows:

3.2 Observer Rights. As long as the Investor and any “affiliate” of the Investor as such term is defined in Rule 144 own not less than 10% of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities, the Company shall invite a representative of Investor to attend all meetings of its Board in a nonvoting observer capacity and shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors, at the same time and in the same manner as provided to such directors; provided, however, the Company shall not be obligated to provide material to the extent the Company reasonably determines in good faith that (i) such materials pertain to the Investor or Siemens Aktiengesellschaft, so as to create an actual or potential conflict in interest, (ii) such materials constitute attorney-client privileged documentation, (iii) such materials include information

concerning pricing or terms offered by the Investor’s competitors or similar competitively sensitive information that would be inappropriate to disclose to the Investor, or (iv) such materials pertain to extraordinary transactions or other similar highly confidential information not involving the ongoing business operations of the Company that would be inappropriate to disclose to the Investor. The representative will be the person designated by the Investor from time to time. The Investor will (and will cause its representative acting as observer to) keep confidential any confidential information obtained from the Company through the representative acting as observer pursuant to the terms of this Section 3.2, unless such confidential information (a) is or becomes known to the public in general (other than as a result of a breach of this Section 3.2 by the Investor or its representative), (b) the Investor demonstrates that such confidential information was known to the Investor when disclosed, or (c) the Investor demonstrates that such confidential information was disclosed to the Investor on an unsolicited basis by a third party without a breach of any obligation of confidentiality known to the Investor such third party may have to the Company; provided, however, that the Investor and its representative may disclose confidential information (i) to the Investor’s Board of Directors and management and to managers of the business units of Siemens Aktiengesellschaft which have supervision of the Investor’s business, provided that the Investor informs them that such information is confidential and directs them to maintain the confidentiality of such information, (ii) to the Investor’s attorneys and accountants, provided that the Investor informs them that such information is confidential and directs them to maintain the confidentiality of such information, or (iii) as may otherwise be required by law, as reasonably determined by the Investor based on written advice of its counsel, in which event Investor will give the Company notice of such advice prior to the disclosure to the extent allowed by applicable law so that the Company may seek a protective order or other appropriate remedy.

(e) Section 4.1 of the Investor Rights Agreement is amended in its entirety to read as follows:

4.1 Subsequent Offerings of Equity Securities.

(a) Subject to applicable securities laws, from the Second Amendment Effective Date through July 1, 2010, the Investor shall have a right of first refusal to purchase all or any portion of the Equity Securities that the Company may, from time to time, propose to sell and issue, except those Equity Securities issued pursuant to an Approved Stock Plan and pursuant to derivative securities outstanding on the Second Amendment Effective Date as reflected in Section 2.2 of the Disclosure Letter (as defined in the Purchase Agreement). Notwithstanding the foregoing, this right of refusal contained in Section 4.1(a) shall be limited as may be necessary to comply with applicable shareholder approval rules of the NYSE Alternext U.S. or any other national securities exchange or national market system on which the Common Stock may be listed; provided, however, the Company shall use its best reasonable efforts to obtain shareholder approval if required to comply with such shareholder approval rules for such purchase of Equity Securities by the Investor. The term “Equity Securities” shall mean (i)

any Common Stock, preferred stock or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, preferred stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, preferred stock or other security or (iv) any such warrant or right.

(b) Subject to applicable securities laws, the Investor shall have a right of first refusal to purchase all or any portion of the Equity Securities that the Company may, from time to time, propose to sell and issue in a capital raising transaction after July 1, 2010. Notwithstanding the foregoing, this right of first refusal shall be limited as may be necessary to comply with the applicable shareholder approval rules of the NYSE Alternext U.S. or any other national securities exchange or national market system on which the Common Stock may be listed such that the Company will not be required to obtain shareholder approval for such purchase of Equity Securities by the Investor.

(f) Section 4 of the Investor Rights Agreement is amended by adding Section 4.8 in the form as follows:

4.8 Preemptive Rights.

(a) Commencing on July 1, 2010 and continuing until the later of the date of the termination of the Credit Agreement or June 30, 2013 (the “Preemptive Rights Period”), subject to the terms and conditions of this Section 4.8 and applicable securities laws, the Investor shall have a preemptive right to purchase an amount of the Equity Securities, that the Company may, from time to time, propose to sell and issue (except those Equity Securities issued pursuant to an Approved Stock Plan and pursuant to derivative securities outstanding on the Second Amendment Effective Date as reflected in Section 2.2 of the Disclosure Letter (as defined in the Purchase Agreement)), equal to its pro rata share of the then outstanding Equity Securities. Notwithstanding the foregoing, this preemptive right shall be limited as may be necessary to comply with applicable shareholder approval rules of the NYSE Alternext U.S. or any other national securities exchange or national market system on which the Common Stock may be listed; provided, however, the Company shall use its best reasonable efforts to obtain shareholder approval if required to comply with such shareholder approval rules for such purchase of Equity Securities by the Investor.

(b) If the Company proposes to issue any Equity Securities during the Preemptive Rights Period, it shall give the Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions thereof and referring to the Investor’s preemptive rights hereunder. The Investor shall have fifteen (15) business days from the receiving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the

Company and stating therein the quantity of Equity Securities to be purchased, provided such purchase is consistent with the limitations of Section 4.8(a).

(c) The Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Investor’s preemptive rights applied, at a price not lower and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company’s notice to the Investor pursuant to Section 4.8(b). If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 4.8(b), the Company shall not thereafter issue or sell any Equity Securities, without first complying with this Section 4.8.

(g) Section 4 of the Investor Rights Agreement is amended by adding Section 4.9 in the form as follows:

4.9 Exercise of Rights; Certain Legal Conditions. The Investor may exercise its right to agree to buy Equity Securities from time to time pursuant to Sections 4.2, 4.5 and 4.8(b) by giving the Company notice thereof within the applicable time periods set forth in those sections. If the Investor exercises its right to agree to buy Equity Securities in a timely way pursuant to Section 4.2 with respect to 4.1(a), 4.5 or 4.8(b), as the case may be, and if the Company or the Investor is required to comply with any securities or other regulation or requirement (including, without limitation, obtaining shareholder approval, filing with the SEC, or adherence to the Hart-Scott- Rodino Act) in order for the Company to issue or sell the Equity Securities to the Investor, then the Investor’s rights under this Section 4, including with respect to the exercised right to acquire Equity Securities, shall not be diminished or prejudiced in any way by the resulting delay in completing the acquisition of Equity Securities.

(h) Section 5.12 of the Investor Rights Agreement is amended in its entirety to read as follows:

5.12 Termination. Except to the extent otherwise contemplated by Section 4.8, this Agreement shall terminate and be of no further force or effect upon the termination of the Credit Agreement, except that the provisions of Sections 2 and 5 shall continue in effect until the later of one hundred eighty (180) days after the termination of the Credit Agreement or the date on which the Investor no longer owns at least 50,000 of the Shares (adjusted for stock splits and dividends, reverse stock splits and similar recapitalizations).

2. REPRESENTATIONS AND WARRANTIES. As a material inducement to Investor to execute and deliver this Amendment, the Company hereby represents and warrants to Investor (with the knowledge and intent that Investor is relying upon the same in entering into this Amendment) as follows:

(a) The Company has the right and power, and has taken all necessary action to authorize it to execute, deliver, and perform this Amendment in accordance with its terms and to consummate the transaction contemplated hereby.

(b) This Amendment has been duly executed and delivered by a duly authorized officer of the Company, and is a legal, valid, and binding obligation of the Company, enforceable against it in accordance with its terms.

(c) The execution, delivery and performance of this Amendment in accordance with its terms, do not and will not, by the passage of time, the giving of notice, or otherwise: (i) conflict with, result in a breach of, or constitute a default under the articles of incorporation or the bylaws of the Company, or any indenture, material agreement or other instrument to which the Company is a party or by which it or any of its respective properties may be bound; or (ii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned by the Company.

3.	MISCELLANEOUS.

(a) Effect of Amendment. The Investor Rights Agreement shall remain unchanged and in full force and effect except as provided in this Amendment, and is hereby ratified and confirmed. On and after the Amendment Effective Date, all references to the “Investor Rights Agreement” or the “Agreement” shall be to the Investor Rights Agreement, as herein amended. Except as provided herein, the execution, delivery, and effectiveness of this Amendment shall not operate as a waiver of any rights of the Investor under the Investor Rights Agreement, nor constitute a waiver under the Investor Rights Agreement.

(b) Amendment Effective Date. This Amendment, shall be effective as of the Second Amendment Effective Date.

(d) Costs and Expenses. Each party hereto shall pay its own expenses in connection with the preparation, negotiation, execution, and delivery of this Amendment.

(f) Parties. This Amendment is binding on and inures to the benefit of the Company, Investor, and their respective successors and assigns.

[Signatures appear on the following pages.]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts as of the Second Amendment Effective Date.

	HEARUSA, INC., as the Debtor

	By:	/s/ Stephen J. Hansbrough
		Name: Stephen J. Hansbrough
		Title: Chairman and CEO

	SIEMENS HEARING INSTRUMENTS, INC., as Secured Party

	By:	/s/ Christi Pedra
		Name: Christi Pedra
		Title: Chief Executive Officer

	By:	/s/ Nicolau Gaeta
		Name: Nicolau Gaeta
		Title: Chief Financial Officer

* * * *

SIGNATURE PAGE TO SECOND AMENDMENT TO

INVESTOR RIGHTS AGREEMENT

EX-10.4 5 exh10-4.htm AMEND. NO. 2 TO SECURITY AGREEMENT

Exhibit 10.4

EXECUTION COPY

Amendment No. 2 to Amended and Restated Security Agreement

This Amendment No. 2 to Amended and Restated Security Agreement (this “Amendment”) is entered into as of December 23, 2008 (the “Amendment Effective Date”) by and between HearUSA, Inc. (formerly HEARx, LTD.), a Delaware corporation (the “Debtor”), and SIEMENS HEARING INSTRUMENTS, INC., a Delaware corporation (the “Secured Party”).

All capitalized terms used herein without definition shall have the meanings given to such terms in the Security Agreement (as defined in the Recitals).

RECITALS

A. The Debtor and the Secured Party are parties to that certain Amended and Restated Security Agreement, dated as of February 10, 2006, as amended by that certain Amendment No.1 to Amended and Restated Security Agreement dated as of December 30, 2006 (the “Security Agreement”).

B. The Debtor and the Secured Party are parties to that certain Second Amended and Restated Credit Agreement dated as of December 30, 2006, as amended by that certain First Amendment to Credit Agreement dated as of June 27, 2007, Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated as of September 24, 2007, and Third Amendment to Credit Agreement of near or even date herewith (as amended, the “Credit Agreement”).

C. A condition precedent to the Secured Party’s obligations under the Credit Agreement is the execution and delivery by the Debtor and the Secured Party of this Amendment.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Debtor and the Secured Party agree, as follows:

1.	AMENDMENTS.

(a)

Section 2.01(a)(iv) of the Security Agreement is amended in its entirety as follows:

(iv) all Chattel Paper, Documents and Instruments owned by the Debtor, including, without limitation, all such Chattel Paper, Documents and Instruments set forth on Schedule I;

(b)

Section 5.01(a) of the Security Agreement is amended in its entirety as follows:

(a) As of December 23, 2008, the Debtor owns the Patents, Copyrights, and Trademarks set forth on Schedule IV.

(c)

Section 8 of the Security Agreement is amended in its entirety as follows:

The provisions of Sections 8.04(b)-(d) of the Credit Agreement are incorporated herein by reference.

(d)

Schedules I, II, III and IV to the Security Agreement shall be amended and restated in their entirety to read as Schedules I, II, III and IV, respectively, attached hereto.

2. REPRESENTATIONS AND WARRANTIES. As a material inducement to the Secured Party to execute and deliver this Amendment, the Debtor hereby represents and warrants to the Secured Party (with the knowledge and intent that Secured Party is relying upon the same in entering into this Amendment) as follows:

(a) The Debtor has the right and power, and has taken all necessary action to authorize it to execute, deliver, and perform this Amendment in accordance with its terms and to consummate the transaction contemplated hereby.

(b) This Amendment has been duly executed and delivered by a duly authorized officer of the Debtor, and is a legal, valid, and binding obligation of the Debtor, enforceable against it in accordance with its terms.

(c) The execution, delivery and performance of this Amendment in accordance with its terms, do not and will not, by the passage of time, the giving of notice, or otherwise conflict with, result in a breach of, or constitute a default under the articles of incorporation or the bylaws of the Debtor, or any indenture, material agreement or other instrument to which the Debtor is a party or by which it or any of its respective properties may be bound.

(d) As of the Amendment Effective Date, the representations and warranties set forth in the Security Agreement are and shall be and remain true and correct and the Debtor is in compliance with the terms and conditions of the Security Agreement.

3.	MISCELLANEOUS.

(a) Effect of Amendment. This Amendment shall not constitute a novation or termination of the Debtor’s obligations under the Security Agreement or any other Loan Document (as defined in the Credit Agreement); and except as provided herein, the Security Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed. On and after the Amendment Effective Date, all references to the “Security Agreement” or the “Agreement” shall be to the Security Agreement, as herein amended. The execution, delivery, and effectiveness of this Amendment shall not operate as a waiver of any rights of the Secured Party under the Security Agreement, nor constitute a waiver under the Security Agreement.

(b) Amendment Effective Date. This Amendment shall be effective as of the Amendment Effective Date.

(d) Costs and Expenses. Each party hereto shall pay its own expenses in connection with the preparation, negotiation, execution, and delivery of this Amendment.

(f) Parties. This Amendment is binding on and inures to the benefit of the Debtor, Secured Party, and their respective successors and assigns.

(g) Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York without regard to conflict of law principles (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law)

[Signatures appear on the following pages.]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written.

	HEARUSA, INC., as the Debtor

	By:	/s/ Stephen J. Hansbrough
		Name: Stephen J. Hansbrough
		Title: Chairman and CEO

	SIEMENS HEARING INSTRUMENTS, INC., as Secured Party

	By:	/s/ Christi Pedra
		Name: Christi Pedra
		Title: Chief Executive Officer

	By:	/s/ Nicolau Gaeta
		Name: Nicolau Gaeta
		Title: Chief Financial Officer

* * * *

SIGNATURE PAGE TO AMENDMENT NO. 2 TO AMENDED AND RESTATED

SECURITY AGREEMENT

EX-10.5 6 exh10-5.htm STOCK PURCHASE AGREEMENT

Exhibit 10.5

EXECUTION COPY

SIEMENS HEARING INSTRUMENTS, INC.

HEARUSA, INC.

STOCK PURCHASE AGREEMENT

TABLE OF CONTENTS

Page

1.	Purchase and Sale of Common Stock		1
	1.1	Sale and Issuance of Common Stock	1
	1.2	Closing; Delivery; Form of Payment	1
	1.3	Defined Terms Used in this Agreement	1
2.	Representations and Warranties of the Company		4
	2.1	Organization, Good Standing, Corporate Power and Qualification	4
	2.2	Capitalization	4
	2.3	Subsidiaries	5
	2.4	Authorization	5
	2.5	Valid Issuance of Shares; Listing	5
	2.6	Governmental Consents and Filings	5
	2.7	Non-Contravention	6
	2.8	Reports and Financial Statements	6
	2.9	Litigation	7
	2.10	Compliance with Law	7
	2.11	Taxes	8
	2.12	Intellectual Property	8
	2.13	Conflicts of Interest	8
	2.14	Disclosure	9
	2.15	Credit Agreement	9
3.	Representations and Warranties of the Purchaser		9
	3.1	Authorization	9
	3.2	Purchase for Own Account; No Solicitation; Unregistered Shares	9
	3.3	Disclosure of Information; Etc.	10
4.	Conditions to the Purchaser’s Obligations at Closing		10
	4.1	Representations and Warranties	10
	4.2	Performance	10
	4.3	Compliance Certificate	10
	4.4	Qualifications	10
	4.5	Joint Certificate	10
	4.6	Certain Payments	10
	4.7	Credit Agreement and Security Agreement	10
	4.8	Supply Agreement	11
	4.9	Investor Rights Agreement	11
	4.10	Certain Contractual Commitments	11
	4.11	Approvals	11
	4.12	Due Diligence	11
	4.13	Opinion of Company Counsel	11
	4.14	Secretary’s Certificate	11
	4.15	Proceedings and Documents	11
5.	Conditions of the Company’s Obligations at Closing		11
	5.1	Representations and Warranties	11
	5.2	Performance	11

TABLE OF CONTENTS

(continued)

Page

	5.3	Qualifications	11
	5.4	Joint Certificate	12
	5.5	Credit Agreement and Security Agreement	12
	5.6	Supply Agreement	12
	5.7	Investor Rights Agreement	12
6.	Survival of Representations and Warranties; Indemnity		12
	6.1	Survival of Warranties	12
	6.2	Indemnification	12
	6.3	Certain Limitations and Other Provisions	12
	6.4	Satisfaction of Claim	14
7.	Miscellaneous		14
	7.1	Transfer; Successors and Assigns	14
	7.2	Governing Law; Integration; Amendment; Waiver; Remedies Cumulative	14
	7.3	Counterparts	15
	7.4	Certain Rules of Construction	15
	7.5	Notices	16
	7.6	Fees and Expenses	16
	7.7	Severability	16
	7.8	Forum; Waiver of Jury Trial	16

Exhibit A

Form of Amendment to Credit Agreement

Exhibit B

Form of Amendment to Security Agreement

Exhibit C

Form of Amendment to Supply Agreement

Exhibit D

Form of Amendment to Investor Rights Agreement

Exhibit E

Form of Legal Opinion of Company Counsel

STOCK PURCHASE AGREEMENT

This is a Stock Purchase Agreement (the “Agreement”) made as of the 23rd day of December, 2008 by and between HearUSA, Inc., a Delaware corporation (the “Company”), and Siemens Hearing Instruments, Inc., a Delaware corporation (the “Purchaser”), and by which the Company and the Purchaser, in consideration of the agreements set forth below (the mutuality, adequacy and sufficiency of which are hereby acknowledged), hereby agree as follows:

Purchase and Sale of Common Stock.

1.1. Sale and Issuance of Common Stock. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase, and the Company agrees to sell and issue to the Purchaser, 6,400,000 shares of the common stock, $0.10 par value, of the Company (the “Common Stock”) at a purchase price of $0.60 per share. The shares of Common Stock issued to the Purchaser pursuant to this Agreement shall be referred to in this Agreement as the “Shares,” and the aggregate purchase price payable for the Shares shall be referred to in this Agreement as the “Aggregate Purchase Price.”

1.2. Closing; Delivery; Form of Payment.

(a) The payments and deliveries contemplated by Section 1 (the “Closing”) shall occur at the offices of Sutherland Asbill & Brennan LLP, 999 Peachtree Street, Atlanta Georgia 30309 commencing at 9:00 a.m., local time, on December 23, 2008, or at such other time and place upon which the Company and the Purchaser mutually agree.

(b) At the Closing, the Company shall deliver to the Purchaser a certificate representing the Shares against payment of the Aggregate Purchase Price by cancellation of indebtedness of the Company to the Purchaser. The certificate shall also represent a like number of rights under the Shareholder Rights Plan.

(c) At the Closing, the Purchaser shall cancel Trade Debt in a face amount equal to the Aggregate Purchase Price. The Trade Debt to be cancelled shall be selected by the Purchaser based on ageing, so that the oldest Trade Debt (other than the Trade Debt based on the July Invoices) shall be the first selected for cancellation.

1.3. Defined Terms Used in this Agreement. In addition to the terms defined in the rules of construction set forth in Section 7.4, the following terms used in this Agreement shall have the meanings set forth or referenced below.

“Aggregate Purchase Price” has the meaning assigned to it in Section 1.1.

“Affiliate” means, with respect to any person, any other person directly or indirectly controlled by, controlling, or under common control with such person; and for purposes of this definition, "control" (including the concept of "control" when used in the terms "controlled by" and "controlled") means the possession, directly or indirectly, of the power to

direct or cause the direction of management and policies of such other person, whether through the ownership of voting securities, by contract or otherwise means with respect to any person.

“Applicable Law” means each applicable provision of any constitution, statute, law, ordinance, code, rule, regulation, decision, order, decree, judgment, release, license or other official legally binding pronouncement of, or agreement with, any Governmental Authority.

“Closing” has the meaning assigned to it in Section 1.2(a).

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” has the meaning assigned to it in Section 1.1.

“Company SEC Documents” has the meaning assigned to it in Section 2.8(a).

“Credit Agreement” means the Second Amended and Restated Credit Agreement dated as of December 30, 2006 between the Company and the Purchaser, as amended by the First Amendment to Credit Agreement, dated June 27, 2007, and by the Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement, dated September 24, 2007.

“Disclosure Letter” means the Disclosure Letter of even date herewith delivered by the Company to the Purchaser.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means United States generally accepted accounting principles.

“Governmental Authority” means any federal, state, local or non-U.S. legislative, executive, judicial, quasi-judicial or other public authority, agency, department, bureau, division, unit, court or other public body.

“Joint Certificate” has the meaning assigned to it in Section 4.5.

“July Invoices” means the invoices issued in July, 2008 under the Supply Agreement giving rise to Trade Debt otherwise due on October 31, 2008.

“Indemnified Party” and “Indemnifying Party” have the meanings assigned to them in Section 6.3(d).

“Investor Rights Agreement” means Investor Rights Agreement dated as of December 30, 2006 between the Company and the Purchaser, as amended by the Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement, dated September 24, 2007.

“Knowledge” means, when referring to the Company’s knowledge, the knowledge of the following persons after due inquiry: Stephen J. Hansbrough, Chairman of the Board and Chief Executive Officer, or Gino Chouinard, Chief Financial Officer.

“Lien” means any mortgage, deed to secure debt, security interest, lien, pledge, encumbrance or adverse claim of any kind whatsoever, including the interest of a lessor under any capital lease.

“Loss” has the meaning assigned to it in Section 6.2.

“Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, prospectsor results of operations of the Company and its Subsidiaries, taken as a whole.

“Permit” means any license, permit, authorization or certificate issued by a Governmental Authority.

“Restriction” means any option, right of refusal or similar right or other restriction of any nature whatsoever

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shareholder Rights Plan” means the Rights Agreement between the Company and the Bank of New York dated December 14, 1999, as amended and restated pursuant to the Amended and Restated Rights Agreement filed May 7, 2002, as the same may have been further amended, restated or modified.

“Shares” has the meaning assigned to it in Section 1.1.

“Subsidiary” means, when used to determine the relationship of one person to another person, a person of which an aggregate of 50% or more of the stock of any class or 50% or more of other ownership interests is owned of record or beneficially by such person, or by one or more subsidiaries of such person, or by any combination of such party and one or more subsidiaries of such person.

“Supply Agreement” means the Amended and Restated Supply Agreement dated as of December 30, 2006, as amended by the Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated September 24, 2007.

“Tax” or “Taxes” means each or all, as applicable, taxes, assessments, charges, duties, fees, levies or other governmental charges, including all federal, state, local, foreign or other income, profits, unitary, business, franchise, capital stock, real property, personal property, intangible taxes, withholding, FICA, unemployment compensation, disability, transfer, sales, use, excise and other taxes, assessments, charges, duties, fees, or levies of any kind whatsoever (whether or not requiring the filing of returns) and all deficiency assessments, additions to tax, penalties and interest.

“Threshold” has the meaning assigned to it in Section 6.3(b).

“Third Party Claim” has the meaning assigned to it in Section 6.3(e).

“Trade Debt” means indebtedness outstanding under the Supply Agreement arising out of the sale of goods or services to or for the benefit of the Company or based on its orders.

“Transaction Agreements” means this Agreement, the amendments to the Credit Agreement, the Supply Agreement and the Investor Rights Agreement referred to in Sections 5 and 6, and any other agreements, instruments or documents entered into in connection with this Agreement.

2. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as follows:

2.1. Organization, Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. Each Subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the state of its organization and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. Each Subsidiary of the Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

2.2. Capitalization.

(a) The authorized capital stock of the Company consists of (i) 75,000,000 shares of $0.10 par value common stock, of which 37,904,384 shares are issued and outstanding and 523,662 shares are held in the Company’s treasury; and (ii) 7,500,000 shares of $1.00 par value preferred stock, of which 233 shares of Series J preferred stock are issued and outstanding and 0 shares are held in the Company’s treasury. Except as set forth in Section 2.2 of the Disclosure Letter: (i) all shares or other interests of the Company’s capital stock were legally and validly authorized and issued, fully-paid and nonassessable, without violation of any preemptive or dissenters’ or similar rights and in full compliance with federal and state securities laws and other Applicable Law; (ii) the Company has complied with the terms of its capital stock; (iii) all of the Company’s capital stock acquired by it was purchased from funds appropriate for the repurchase of shares of capital stock and otherwise in accordance with its certificate of incorporation, bylaws and Applicable Law; (iv) no options, warrants, subscriptions, puts, calls or other rights, commitments, undertakings or understandings to acquire, dispose of or restrict the transfer of, any of the Company’s capital stock or other securities of any kind or class or rights, obligations or undertakings convertible into the Company securities of any kind or class are authorized or outstanding; and (vi) neither the Company nor any of its Subsidiaries is subject to any obligation to purchase, redeem or otherwise acquire any of the Company’s capital stock or securities (or of any options or rights or obligations described in the preceding sentence) upon the occurrence of a specified event (and assuming that specified time periods have passed and appropriate notices have been given) or otherwise.

(b) The Company has reserved (i) 503,061 shares of Common Stock in respect of the rights of the holders of exchangeable stock issued by its Subsidiary HEARx Canada, Inc.; and (ii) 5,835,455 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to the stock or option plans described on Section 2.2 of the Disclosure Letter, all of which plans have been duly adopted by the Board of Directors and approved by the Company stockholders. Except as described in the preceding sentence or in respect of the conversion right granted to the Purchaser under the Credit Agreement, the Company has not reserved any shares of capital stock for issuance.

2.3. Subsidiaries. Except as set forth on Section 2.3 of the Disclosure Letter, the Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. Section 2.3 of the Disclosure Letter lists (i) the name of each Subsidiary of the Company, along with its state of organization and the percentage ownership of the Company in the Subsidiary, and (ii) the name of any joint venture, partnership or similar arrangement to which the Company is a party, along with its state of organization and the percentage ownership of the Company therein.

2.4. Authorization. All corporate action required to be taken by the Company’s Board of Directors in order to authorize the Company to enter into the Transaction Agreements, and to issue the Shares at the Closing, has been taken. All action on the part of the officers of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the issuance and delivery of the Shares, has been taken. No action on the part of the Company’s stockholders is required in connection with the issuance of the Shares or the execution, delivery or performance of the Transaction Agreements under the Company’s certificate of incorporation, bylaws or Applicable Law. The Transaction Agreements constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Laws relating to creditors’ rights generally.

2.5. Valid Issuance of Shares; Listing. The Shares, when issued, sold and delivered for the consideration set forth in Section 1.1, will be validly issued, fully paid and nonassessable and free of any Liens or Restrictions, other than Restrictions imposed by applicable federal and state securities laws. Assuming the accuracy of the representations of the Purchaser in Section 3 of this Agreement, the Shares will be issued in compliance with all applicable federal and state securities laws and other Applicable Laws. The Company has filed a listing application with NYSE Alternext U.S. in respect of the Shares, such exchange has duly approved the listing without material condition, and no action has been taken to revoke, release or otherwise alter or amend in any way the listing.

2.6. Governmental Consents and Filings. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of the Company or any of its Subsidiaries in connection with the consummation of the transactions contemplated by this Agreement which

has not already been taken, other than the registration of the Shares for resale under the Securities Act and applicable state securities laws as required by the Investor Rights Agreement.

2.7. Non-Contravention. Except as set forth in Section 2.7 of the Disclosure Letter the execution, delivery or performance by the Company of this Agreement and the other Transaction Agreements and the issuance of the Shares do not and will not with the passage of time or the giving of notice or both: (a) violate, conflict with, constitute a default of, require any consent or payment under, or permit a termination of, or create or impose any Lien or Restriction upon any of the Company’s or any of its Subsidiaries’ assets or liabilities or the Company or any of its Subsidiaries under: (i) any term or provision of the Company’s or any of its Subsidiaries’ certificate or articles of incorporation or bylaws or other governing or charter documents; (ii) any loan document, lease or other contract to which the Company or any of its Subsidiaries is a party or bound or to which any of them or any of their properties is subject or bound; (iii) any Permit, judgment, decree or order of any Governmental Authority to which the Company or any of its Subsidiaries or any of their properties are subject or bound; or (iv) any Applicable Law; (b) create, or cause the acceleration of the maturity of, any of the Company’s or any of its Subsidiaries’ liabilities or obligations; or (c) cause the Company or any of its Subsidiaries not to have all of the rights, titles and interests that the Company or such Subsidiary currently has, unaltered and unimpaired, in and to any of its assets. Without limiting the foregoing, (i) the resolutions adopted by the Board of Directors of the Company authorizing the transactions contemplated by this Agreement expressly approved the purchase of the Shares by the Purchaser; (ii) such resolutions were duly adopted by action of at least a majority of the members of the Board of Directors; (iii) this Agreement constitutes the “Prior Written Approval of the Company,” as defined in the Shareholder Rights Plan; and (iv) the issuance of the Shares does not vest rights issued under, or terminate the right of the Company or its Subsidiary to redeem rights at nominal cost under, the Shareholder Rights Plan or the shareholder rights plan adopted by HEARx Canada, Inc.

2.8. Reports and Financial Statements.

(a) The Company has timely filed all forms, documents, statements and reports required to be filed by it with the SEC since January 1, 2007 (the forms, documents, statements and reports filed with the SEC since January 1, 2007, including any amendments thereto, the “Company SEC Documents”). No Subsidiary is required to file any forms, documents, statements and reports with the SEC or any other Governmental Authority regulating securities matters. As of their respective dates, or, if amended or superseded by a subsequent filing made prior to the date hereof, as of the date of the last such amendment or superseding filing prior to the date hereof, the Company SEC Documents, including all schedules included or documents incorporated by reference therein, complied in all material respects with the requirements of the Securities Act and the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder. As of the time of filing with the SEC, none of the Company SEC Documents so filed contained any untrue statement of a material fact or omitted to state any 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, except to the extent that the information in such Company SEC Document has been amended or superseded by a later Company SEC Document filed prior to the date hereof. As of the date hereof, there are no outstanding or unresolved comments in comment letters received

from the SEC staff with respect to the Company SEC Documents. The Common Stock is listed on the NYSE Alternext and there are no actions or proceedings pending or, to the knowledge of HearUSA, threatened by NYSE Alternext that could have the effect of prohibiting or terminating the listing of Common Stock on NYSE Alternext.

(b) The financial statements (including all related notes and schedules) of the Company and its Subsidiaries included in the Company SEC Documents complied as to the form in all material respects with the published rules and regulations of the SEC with respect thereto, fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments expressly described therein, including the notes thereto, which adjustments were not and are not expected to be material in amount). The financial statements (including all related notes and schedules) of the Company and its Subsidiaries have been derived from the accounting books and records of the Company and its Subsidiaries and were prepared in conformity with GAAP (except, in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be expressly indicated therein or in the notes thereto). The Company has established and maintains disclosure controls and procedures and internal controls over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) that comply in all respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer of the Company, or Persons performing similar functions.

(c) Except (i) as reflected or reserved against in the Company’s consolidated balance sheet as of September 27, 2008 (or the notes thereto) included in the Company SEC Documents, (ii) as set forth in Section 2.8(d) of the Disclosure Letter, and (iii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since September 27, 2008, neither the Company nor any Subsidiary of the Company has any material liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent, changing, known, unknown, determinable, indeterminable, liquidated, unliquidated or otherwise and whether due or to become due).

2.9. Litigation. Except as set forth in Section 2.9 of the Disclosure Letter or in the Company SEC Documents, there is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Company’s knowledge, threatened against the Company or any of its Subsidiaries or any officer or director of any of them (i) that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (ii) that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Neither the Company any of its Subsidiaries nor, to the Company’s knowledge, any of their respective officers or directors, is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any Governmental Authority.

2.10. Compliance with Law. Except as set forth in Section 2.10 of the Disclosure Letter: The Company and each of its Subsidiaries: (i) is (and since January 1, 2007

has been) in compliance with all Medicare and Medicaid Applicable Laws and in material compliance with all other Applicable Laws (including those involving antitrust, unfair competition, trade regulation, antipollution, environmental, employment, plant downsizing, relocation, closing or safety); and (ii) since January 1, 2007 has received no written notice of any non-compliance with any Applicable Law. Neither the Company nor any of its Subsidiaries has at any time made any illegal payments for political contributions, any illegal or improper payments for referrals, or any bribes, illegal kickback payments or other illegal payments. Neither the Company nor any of its Subsidiaries is disqualified, for any reason, from operating its business including receiving reimbursements from third party payors in any location in which is operates or has operated by a Governmental Authority or customer by reason of the Company’s or any of its Subsidiaries’ acts or omissions.

2.11. Taxes. Except as set forth in Section 2.11 of the Disclosure Letter: (a) all returns of every nature of Taxes required to be filed by the Company and its Subsidiaries have been timely and otherwise properly filed, and no extensions of time in which to file any such returns are in effect; (b) the Company and each of its Subsidiaries has paid and satisfied on or before their respective due dates all Taxes for periods covered by such returns; (c) all Taxes and other amounts that the Company or any of its Subsidiaries is or was required by Applicable Law to withhold or collect have been duly withheld and collected and have been paid over to the proper Governmental Authorities in accordance with Applicable Law; (d) there are no Liens for Taxes on any of the Company's or any of its Subsidiaries’ assets other than any Lien imposed by Applicable Law for property Taxes for the current Tax period that are not yet due and payable; and (e) no audit of the returns of the Company's or any of its Subsidiaries’ Taxes is currently being conducted.

2.12. Intellectual Property. Either the Company or a Subsidiary of the Company owns, or is licensed or otherwise possesses all rights necessary to use, all trademarks, trade names, service marks, service names, mark registrations or applications, logos, assumed names, domain names, registered and unregistered copyrights, patent registrations or applications and registrations, and trade secrets used in their respective businesses (collectively, the “Intellectual Property”). There are no pending or, to the Knowledge of the Company, threatened claims by any person alleging infringement or misappropriation by the Company or any of its Subsidiaries for their use of the Intellectual Property of the Company or any of its Subsidiaries. To the Knowledge of the Company, the conduct of the business of the Company and its Subsidiaries does not infringe or misappropriate any intellectual property rights of any person.

2.13. Conflicts of Interest. Except as set forth in Section 2.13 of the Disclosure Letter:

(a) Other than (i) employee benefits generally made available to all employees, (ii) director and officer indemnification agreements approved by the Board of Directors, and (iii) as disclosed in the Company SEC Filings, there are no agreements, understandings or proposed transactions between the Company or any of its Subsidiaries, on the one hand, and any of their officers, directors, or key employees, or any Affiliate of any of the foregoing, on the other.

(b) Neither the Company nor any of its Subsidiaries is indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing. None of the Company’s or any of its Subsidiaries’ directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing, to the Company’s knowledge, have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except ownership of stock in (but not exceeding two percent of the outstanding capital stock of) publicly traded companies that may compete with the Company. To the Company’s knowledge, none of the Company’s or any of its Subsidiaries’ directors, officers or employees or any members of their immediate families or any Affiliate of any of the foregoing are, directly or indirectly, interested in any material contract with the Company. None of the directors or officers of the Company or any of its Subsidiaries, or any members of their immediate families, has any material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s or its Subsidiaries’ major business relationship partners, service providers, joint venture partners, licensees and competitors.

2.14. Disclosure. No representation or warranty of the Company contained in this Agreement, as qualified by the Disclosure Letter, and no certificate furnished or to be furnished to Purchaser at the Closing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

2.15. Credit Agreement. The representations and warranties of the Company contained in the Credit Agreement are true and correct on and as of the date hereof as if made on the date hereof. The Company is in compliance as of the date hereof with all of its covenants and agreements contained in the Credit Agreement, as modified by the amendments contemplated by the Transaction Documents.

3. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company that:

3.1. Authorization. The Purchaser has full power and authority to enter into the Transaction Agreements. The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Laws relating to creditors’ rights generally.

3.2. Purchase for Own Account; No Solicitation; Unregistered Shares. The Shares are being acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the public resale or distribution of any part thereof. The Purchaser to its knowledge has received no public solicitation or advertisement concerning an offer to sell the Shares. The Purchaser has been advised that the Shares are not being registered under the Securities Act on the grounds that this transaction is exempt from registration, and that reliance by the Company on such exemption is predicated in part on its representations in this Agreement.

3.3. Disclosure of Information; Etc. The Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Shares with the Company’s management. The foregoing, however, does not limit or modify in any respect the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchaser to rely thereon. The Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D. The Purchaser is not a broker, a dealer or an entity engaged in the business of being a broker dealer.

4. Conditions to the Purchaser’s Obligations at Closing. The obligations of the Purchaser to purchase Shares at the Closing are subject to the fulfillment, on or before such Closing, of each of the following conditions, unless otherwise waived:

4.1. Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects as of such Closing, except that any such representations and warranties shall be true and correct in all respects where such representation and warranty is qualified with respect to materiality in Section 2, as the case may be.

4.2. Performance. The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before such Closing.

4.3. Compliance Certificate. The President of the Company shall deliver to the Purchaser at such Closing a certificate certifying that the conditions specified in Sections 4.1, 4.2 and 4.4 have been fulfilled.

4.4. Qualifications. All authorizations, approvals or permits, if any, of any Governmental Authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of such Closing. Without limiting the foregoing, approval for the valid listing of the Shares with NYSE Alternext U.S. shall not have been modified or withdrawn and shall not require stockholder approval.

4.5. Joint Certificate. The Company shall have executed a Joint Certificate (the “Joint Certificate”) with the Purchaser certifying (a) the amount of the purchase price per share of Common Stock; (b) the Trade Debt deemed satisfied pursuant to Section 1.2(c); (c) the Trade Debt converted into loans under the amendment to the Credit Agreement referred to in Section 4.7; (d) the amounts outstanding under each tranche of loans outstanding under the Loan Agreement and (e) the amount of Trade Debt based on the July Invoices.

4.6. Certain Payments. The Trade Debt based on the July Invoices, and all accrued but unpaid interest on the outstanding principal amounts of the Tranche D and Tranche E Loans (as defined in the Credit Agreement), shall have been paid in full in cash.

4.7. Credit Agreement and Security Agreement. The Company shall have entered into an amendment to the Credit Agreement in substantially the form of Exhibit A, and an amendment to the related Amended and Restated Security Agreement in substantially the form of Exhibit B.

4.8. Supply Agreement. The Company shall have entered into an amendment to the Supply Agreement in substantially the form of Exhibit C.

4.9. Investor Rights Agreement. The Company shall have entered into an amendment to the Investor Rights Agreement in substantially the form of Exhibit D.

4.10. Certain Contractual Commitments. The Company shall have demonstrated full funding for its obligations under certain of its contractual commitments to the reasonable satisfaction of the Purchaser.

4.11. Approvals. The Purchaser shall have received all required approvals for entering into the Transaction Agreements from its Affiliates.

4.12. Due Diligence. The Purchaser shall have completed its financial and legal (including compliance) due diligence with respect to the Company.

4.13. Opinion of Company Counsel. The Purchaser shall have received from Bryan Cave LLP, counsel for the Company, an opinion, dated as of the Initial Closing, in substantially the form of Exhibit E.

4.14. Secretary’s Certificate. The Secretary of the Company shall have delivered to the Purchaser at the Closing a certificate certifying (i) the certificate of incorporation and bylaws of the Company, and (ii) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements.

4.15. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Purchaser, and Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates.

5. Conditions of the Company’s Obligations at Closing. The obligations of the Company to sell Shares to the Purchaser at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

5.1. Representations and Warranties. The representations and warranties of the Purchaser contained in Section 3 shall be true and correct in all material respects as of such Closing.

5.2. Performance. The Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before such Closing.

5.3. Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Stock pursuant to this Agreement shall be obtained and effective as of the Closing. Without limiting the foregoing, approval for the

valid listing of the Shares with NYSE Alternext U.S. shall not have been modified or withdrawn and shall not require stockholder approval.

5.4. Joint Certificate. The Purchaser shall have executed the Joint Certificate.

5.5. Credit Agreement and Security Agreement. The Purchaser shall have entered into an amendment to the Credit Agreement in substantially the form of Exhibit A, and an amendment to the related Amended and Restated Security Agreement in substantially the form of Exhibit B.

5.6. Supply Agreement. The Purchaser shall have entered into an amendment to the Supply Agreement in substantially the form of Exhibit C.

5.7. Investor Rights Agreement. The Purchaser shall have entered into an amendment to the Investor Rights Agreement in substantially the form of Exhibit D.

6. Survival of Representations and Warranties; Indemnity.

6.1. Survival of Warranties. The representations, warranties, covenants and agreements made by the parties in this Agreement or in any agreement, certificate, instrument or other document executed and delivered by a party pursuant to this Agreement will survive the Closing. The representations and warranties contained in this Agreement will expire on the date 18 months after the date of Closing, except that (i) the representations and warranties contained in Sections 2.2, 2.4 and 2.5 will not expire, and (ii) a representation or warranty will not expire until resolution of any pending claims arising out of or relating to such representation or warranty. Each party, acknowledging that the other is entitled to rely on its representations, warranties, covenants and agreements in this Agreement (qualified only by the disclosures in the Disclosure Letter) in order to preserve the benefit of the bargain otherwise represented by this Agreement, agrees that neither the survival of such representations, warranties, covenants and agreements, nor their enforceability nor any remedies for breaches of them will be affected by any knowledge of a party regardless of when or how such party acquired such knowledge, specifically including knowledge of a breach obtained before the Closing occurs.

6.2. Indemnification. Each party will indemnify, defend and hold the other harmless for any Loss (as defined below) incurred or suffered by the other party as a result of or involving a breach by the other party of a representation, warranty, covenant or agreement set forth in this Agreement or in the Disclosure Letter or in any certificate referred to in Sections 4.3, 4.5., 4.14 or 5.4 (but for purposes of this Section, disregarding materiality and knowledge qualifiers in such representations or warranties and provisions in such representations and warranties that limit them to acts or omissions or facts or circumstances after a specified date). “Loss” means any liability, loss, cost, damage or expense, including reasonable attorneys’ fees and expenses.

6.3. Certain Limitations and Other Provisions. Notwithstanding the foregoing:

(a) No party will be required to indemnify the other party pursuant to the foregoing unless the party claiming the right to be indemnified gives notice to the other party of facts which it in good faith thinks constitute a reasonable basis for indemnification pursuant to this Section 6 on a date no later than 18 months after the date of Closing (but such limitation does not apply to breaches of the representations and warranties in Sections 2.2, 2.4 or 2.5).

(b) Neither the Company nor the Purchaser will be required to indemnify the other party pursuant to Section 6.2 unless the aggregate amount of the agreed to or adjudicated indemnification claims against such party for breaches of representations and warranties exceed an amount equal to 1% of the Aggregate Purchase Price (the “Threshold”); provided that once the agreed to or adjudicated indemnification claims against such party exceeds the Threshold, the entire amount of the Losses will be recoverable, not just the amount in excess of the Threshold.

(c) Neither the Company nor the Purchaser will be obligated to make indemnification payments for breaches of representations or warranties pursuant to Section 6.2 which in the aggregate exceed an amount equal to the Aggregate Purchase Price.

(d) When a Loss as to which a notice has been timely given in accordance with Section 6.3(a) is paid or is otherwise fixed or determined, then the person claiming the right to be indemnified (the “Indemnified Party”) will give the person from whom it is claiming indemnification (the “Indemnifying Party”) notice of such Loss, in reasonable detail and specifying the amount of such Loss. If the Indemnifying Party is permitted to dispute such claim, it will, within 30 days after receipt of notice of the claim of Loss against it pursuant to this Section, give counternotice, setting forth the basis for disputing such claim, to the Indemnified Party. If no such counternotice is given within such thirty-day period or if the Indemnifying Party acknowledges liability for indemnification pursuant to Section 6.3(e) or otherwise, then such Loss will be satisfied within three business days as provided in Section 6.4. If, within 30 days after the receipt of counternotice by the Indemnified Party (during which time the parties will negotiate in good faith to resolve the dispute) the parties have not reached agreement as to the claim in question, then either party may pursue any remedy available to it at law or in equity.

(e) If a claim or demand for indemnification is based upon an asserted liability or obligation to a person not a party nor a successor or assign of a party (a “Third Party Claim”), then the Indemnified Party will undertake in good faith to give prompt notice of any such Third Party Claim to the Indemnifying Party; provided, however, that a failure to provide such notice of a Third Party Claim will not prejudice any right to indemnification under this Agreement except to the extent that the Indemnifying Party is prejudiced by such failure. The Indemnifying Party will defend such claims or actions at its expense with lawyers chosen (with the Indemnified Party’s consent, which will not be unreasonably withheld or delayed) and paid by it and will give written notice of defense to the Indemnified Party within 10 days after the date such notice of a Third Party Claim (or such shorter period of time as may be necessary to preserve all rights under the Third Party Claim) is deemed received acknowledges that (i) the Indemnifying Party is liable under this Section 6 for the claim, and (ii) the Indemnifying Party is defending the claim with the retained lawyer identified therein. If the Indemnifying Party does not duly give such notice of defense as provided above or is not defending a Third Party Claim

for any reason, then it will be deemed to have irrevocably waived its right to defend or settle such claims. The Indemnifying Party may not settle any such claim or action without the consent of the Indemnified Party (which consent will not be unreasonably withheld or delayed; provided that any such consent shall contain a full release for the Indemnified Party, its officers, directors, employees agents and Affiliates).

(f) Notwithstanding anything to the contrary in this Section 6.3: (i) the Indemnified Party will be entitled to participate in the defense of such claim or action and to employ lawyers of its choice for such purpose at its own expense, and (ii) the Indemnified Party will be entitled to assume control of the defense and resolution of such claim, and the Indemnifying Party will pay the reasonable fees and expenses of lawyers retained by the Indemnified Party (excluding the fees and expenses of the Indemnified Party's lawyers before the date of such assumption of the defense), if: (A) the Indemnified Party reasonably believes that such claim or action could be reasonably expected to have a material adverse effect on the Indemnified Party’s assets, business or reputation; (B) the Indemnified Party reasonably believes that there exists or could arise a conflict of interest that, under applicable principles of legal ethics, could prohibit a single lawyer or law firm from representing both the Indemnified Party and the Indemnifying Party in such claim or action; (C) the Indemnifying Party either failed to give a Notice of Defense or has failed or is failing to prosecute or defend vigorously such claim or action; or (D) criminal penalties or injunctive relief could be imposed on the Indemnified Party in connection with such claim or action.

(g) The indemnification obligations in this Article 6 (i) are for the benefit of the stated indemnified persons, their permitted successors and assigns and their officers, directors, employees, agents and affiliates; and (ii) do not limit in any way the rights and remedies of the parties under the Credit Agreement, the Supply Agreement, the Investor Rights Agreement or related documents and agreements. The phrase “breach of a representation” includes a misrepresentation, a representation’s or warranty’s being inaccurate, and the omission of a fact necessary to make any representation or warranty not misleading. Indemnification payments will be treated for Tax purposes as adjustments to the Aggregate Purchase Price.

6.4. Satisfaction of Claim. Subject to the procedures and limitations set forth above, claims for indemnified Losses will be satisfied by paying the amount of the Loss to the Indemnified Party within two business days after the Loss is agreed to or determined by a court proceeding. Payments pursuant to the foregoing will be by wire transfer or by check, as the recipient may direct.

7. Miscellaneous.

7.1. Transfer; Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective 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.

7.2. Governing Law; Integration; Amendment; Waiver; Remedies Cumulative. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its principles of conflicts of laws. This Agreement supersedes all prior negotiations, agreements and understandings between the parties as to its subject matter, constitute the entire agreement between the parties as to its subject matter, and may not be altered or amended except in writing signed by the parties. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same; and no waiver by any party of any provision (or of a breach of any provision) of this Agreement, whether by conduct or otherwise, in any one or more instances will be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision (or of a breach of any other provision) of this Agreement. The remedies of a party provided in this Agreement are cumulative and will not exclude any other remedies to which any party may be lawfully entitled under this Agreement or applicable law, and the exercise of a remedy will not be deemed an election excluding any other remedy (any such claim by the other party being hereby waived).

7.3. Counterparts. This Agreement may be executed in two counterparts, both of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.

7.4. Certain Rules of Construction. 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. For purposes of this Agreement: (a) “Article,” “Section,” “Subsection,” “Exhibit” or “Schedule” refers to such item of or to this Agreement; (b) “business day” means any day other than Saturday, Sunday or any day on which banks located in the State of New York are authorized or obligated to close; (c) “contract” means any written or oral contract of any kind whatsoever and all related amendments, modifications, supplements, waivers and consents; (d) “copy” or “copies” means that the copy or copies of the material to which it relates are true, correct and complete; (e) “including” and any other words or phrases of inclusion will not be construed as terms of limitation, so that references to “included” matters will be regarded as non-exclusive, non-characterizing illustrations; (f) “lease” means any written or oral lease, sublease, rental contract or similar contract and all amendments, modifications, supplements, waivers and consents to or under them pursuant to which a person leases or rents, either as lessee or tenant, any property; (g) “party” and “parties” means each or all, as appropriate, of the persons who have executed and delivered this Agreement; and each such term and each defined term referring to a party also refers to each permitted successor or assign of such a party, and when appropriate to effect the binding nature of this Agreement for the benefit of another party, any other successor or assign of such a party; (h) “person” means any individual, sole proprietorship, partnership, joint venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a Governmental Authority; (i) “plan” means any plan, program or policy and all related amendments, modifications, supplements, waivers and consents; (j) “will” has the same meaning as “shall” and thus means an obligation and an imperative and not a futurity; (k) titles and captions of or in this Agreement, the cover sheet and table of contents of this Agreement, are inserted only as a matter of convenience and in no way define, limit, extend or

describe the scope of this Agreement or the intent of any of its provisions; (l) whenever the context requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other genders; (m) each exhibit referred to in this Agreement and the Disclosure Letter is hereby incorporated by reference into, and is made a part of, this Agreement as if set out in full in the first place that reference is made to it; and a matter disclosed in one Section of the Disclosure Letter is not deemed disclosed in any other Section of the Disclosure Letter unless a specific cross-reference is included in such other Section; (n) any reference to any statutory provision includes each successor provision and all Applicable Law as to such provision; and (o) acknowledging that the parties have participated jointly in the negotiation and drafting of this Agreement, if an ambiguity or question of intent or interpretation arises as to any aspect of this Agreement, then it will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

7.5. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page, or to such facsimile number or address as subsequently modified by written notice given in accordance with this Section 7.5. If notice is given to the Company, a copy shall also be sent to Bryan Cave LLP, 700 13^th Street, N.W., Washington DC 20005, attention LaDawn Naegle, Esq., fax: 202.508.6200; and if notice is given to the Purchaser, a copy shall also be given to General Counsel, Siemens Corporation, 153 East 53^rd Street, 56^th Floor, New York, NY 10022, fax:212.258.4490.

7.6. Fees and Expenses. Each party will bear its respective costs and expenses in connection with the negotiation, execution and delivery of this Agreement and the other Transaction Documents. This Section 7.7 is not a limitation on the indemnification rights of the parties under Section 6.

7.7. Severability. The invalidity of unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

7.8. Forum; Waiver of Jury Trial. All actions or proceedings relating to this Agreement (whether to enforce a right or obligation or obtain a remedy or otherwise) will be brought solely in the state or federal courts located in or for the Borough of Manhattan, New York, New York. Each party hereby unconditionally and irrevocably consents to the jurisdiction of such courts and waives its rights to bring any action or proceeding against the other party except in such courts. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. If any party seeks to enforce any right under this Agreement by joining another party to a judicial proceeding before a jury in which such third

party is a party, the parties will request the court to try the claims between the parties to this Agreement without submitting the matter to the jury.

[Remainder of Page Intentionally Left Blank]

The parties have executed this Stock Purchase Agreement as of the date first written above.

	THE COMPANY:
	HEARUSA, INC.

	By:	/s/ Stephen J. Hansbrough

	Name:	Stephen J. Hansbrough
	(print)
	Title:	Chief Executive Officer

	Address:	1250 Northpoint Parkway West Palm Beach, FL 33407 Attention: President Telecopy: 561.688.8893

	THE PURCHASER:
	SIEMENS HEARING INSTRUMENTS, INC.

	By:	/s/ Christi Pedra

	Name:	Christi Pedra
	(print)
	Title:	Chief Executive Officer

	By:	/s/ Nicolau Gaeta

	Name:	Nicolau Gaeta
	(print)
	Title:	Chief Financial Officer

	Address:	10 Constitution Avenue Piscataway, NJ 08855 Attention: President Telecopy: 732.562.6688

* * * *

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

EX-99.1 7 exh99-1.htm PRESS RELEASE

Exhibit 99.1

Company Contact:	Investor Relations
Stephen J. Hansbrough	Scott Liolios or Ron Both
Chairman and CEO	Liolios Group, Inc.
HearUSA, Inc	info@liolios.com
(561) 478-8770	(949) 574-3860

HearUSA and Siemens Amend Agreements

• Debt Consolidated into $50 Million Self-liquidating Revolving Credit Facility

• Siemens Purchases 6.4 Million Shares

• HearUSA’s Working Capital Improves by $17.2 Million

West Palm Beach, Fla. – December 23, 2008 -- HearUSA, Inc. (AMEX: EAR), the recognized leader in hearing care for the nation's top managed care providers through 200 company-owned hearing care centers and a network of over 1,900 affiliated providers, has amended its supply and revolving credit agreements with its key strategic partner, Siemens Hearing Instruments, Inc..

The amendments eliminated the prepayment of $7.2 million due December 19, 2008, consolidated that amount and approximately $6.2 million in trade payables into the existing revolving credit facility and converted approximately $3.8 million of trade payables into 6.4 million shares of HearUSA common stock.

Siemens’ previous conversion rights under the credit agreement have been eliminated.

As part of the changes, the parties consolidated and simplified the $50 million credit facility. Now all quarterly principal and interest due will be eligible for repayment with the rebates earned from sales of Siemens hearing aids. The Company remains committed to its strategic relationship with Siemens and its agreement to purchase at least 90% of the hearing aids sold by the Company from Siemens. The agreements with Siemens have been extended to February 2015.

Giving effect to the amendments, outstanding debt to Siemens under the credit agreement now totals approximately $47.4 million and amounts repaid will be available for borrowing to fund future acquisitions. HearUSA’s working capital has improved by approximately $17.2 million

“These amended terms substantially improve our cash flow and provide a ready source of capital for acquisitions on highly favorable terms, while leaving in place volume rebates and quarterly marketing coop dollars,” said HearUSA president and CFO, Gino Chouinard. “In addition, now that Siemens is a shareholder of the Company, our interests in growing the Company, both organically and through acquisitions, are even more closely aligned.”

Stephen J. Hansbrough, CEO of HearUSA added, “This revised agreement comes at an important time given the state of the current economy. It allows us, among other things, to take advantage of opportunities arising from these difficult economic times.”

Nic Gaeta, CFO of Siemens Hearing Instruments, added, “With the current industry downturn, this debt restructuring arrangement is intended to improve HearUSA's cash flow, working capital, and debt structure. The resulting improved financial position of HearUSA is very positive for both companies and for HearUSA's customers."

About HearUSA

HearUSA, Inc. provides hearing care to patients primarily through 200 company-owned hearing care centers, which offer a complete range of quality hearing aids with an emphasis on the latest digital technology. HearUSA Centers are located in California, Florida, New York, New Jersey, Massachusetts, Ohio, Michigan, Missouri, North Carolina, and the province of Ontario, Canada. The company also derives revenues from its HearUSA Hearing Care Network, comprised of 1,900 affiliated audiologists in 49 states, as well as its website that enables online purchases of hearing related products, such as batteries, hearing aid accessories and assistive listening devices. For further information, click on "investor information" at the HearUSA website: www.hearusa.com.

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