Exhibit 10.1
HearUSA, INC.
CONVERTIBLE SUBORDINATED NOTES
CONVERSION AGREEMENT
THIS CONVERSION AGREEMENT is made as
of the 9th day of April, 2007 (“Agreement”) by and
among HEARUSA, INC., a Delaware corporation (the
“Company”) and persons named on the signature page
hereto who were investors in the Company’s December 2003
private placement pursuant to that Purchase Agreement dated as of
December 18, 2003 (the “2003 Purchase Agreement”)
(each a “Purchaser” and collectively the
“Purchasers”).
Recitals
Pursuant to the 2003 Purchase
Agreement, the Purchasers purchased and the Company sold Units,
each Unit consisting of (i) $500,000 in principal amount of the
Company’s 2003 Convertible Subordinated Notes due
November 2008 (the “Notes”), which Notes are
convertible into shares of common stock of the Company, par value
$0.10 per share (the “Common Stock”), and (ii) a
warrant (“Warrant”) to purchase an aggregate of 142,850
shares of Common Stock;
The persons who are executing this
Agreement constitute all but one of the purchasers under the
Purchase Agreement, that person having purchased one Unit (the
“Non-Participating Purchaser”);
The parties hereto desire to
facilitate the immediate conversion of the Notes and exercise of
the related Warrants irrespective of the lack of participation in
this transaction by the Non-Participating Purchaser;
NOW THEREFORE, in consideration of
the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1.
Warrant Exercise Price . Effective on the Closing Date
(defined below), and subject to all transactions contemplated by
this Agreement being consummated as provided for in this Agreement,
the exercise price of the Warrants (the “Warrant
Price”) held by the Purchasers shall be reduced from $1.75
per share to $0.70 per share. The parties hereto expressly agree
that, notwithstanding any prior agreement to the contrary, and
specifically notwithstanding Section 3(c) of the Notes and
paragraph 9(a) of the Warrant, this reduction in the Warrant Price
shall not be deemed to be an event giving rise to any further
adjustment to the Warrant Price or an adjustment to the conversion
price of the Notes held by the Purchasers. The Purchasers
acknowledge that the warrant exercise price of the
Non-Participating Purchaser and the holders of finder warrants
issued in connection with the 2003 transaction shall by operation
of the terms of the Warrant be reduced to $0.70 per share.
2.
Elimination of Warrant Cashless Exercise Feature . Effective
on the Closing Date (defined below), and subject to all
transactions contemplated by this Agreement being consummated as
provided for in this Agreement, the parties agree that the Warrants
held by the Purchasers may be exercised only for cash and paragraph
3(c) of the Warrants shall be of no force and effect.
3.
Closing . On March 26, 2007, or such other date to be
determined by the parties (the “Closing Date”), at the
offices of Bryan Cave LLP, 700 13 th Street, N.W.,
Washington DC 20005, the following events will occur (the
“Closing”):
(a) Pre-payment of Note. The
Company shall pay to the Purchasers in cash an aggregate amount of
$409,314 in principal on the Notes, plus accrued and unpaid
interest up to the date of prepayment, to each Purchaser on a pro
rata basis, and shall pay to the Non-Participating Purchaser
principal and interest totaling $375,000, such that the total
principal amount outstanding on all Notes on the Closing Date will
not exceed $5,500,000. Attached as Schedule 1 is the
cash payment amount payable to each of the Purchasers and to the
Non-Participating Purchaser pursuant to this paragraph 3(a). Each
of the Purchasers waives its right to receive additional principal
payments as a result of the principal pre-payment to the
Non-Participating Purchaser.
(b) Conversion of Notes. Each
Purchaser, severally, shall convert all outstanding principal
amounts under its Note into Common Stock by delivering to the
Company a fully executed notice of conversion (using the form of
notice attached to the Note) (“Conversion Notice”) and
each such Note shall be converted into such number of fully paid,
validly issued and non-assessable shares of Common Stock as
determined by dividing the outstanding Principal Amount being
converted by the Conversion Price of $1.75. Attached as
Schedule 2 is the Note conversion schedule setting
forth the name of each Purchaser and the number of shares of Common
Stock into which its Note shall be converted pursuant to the
provisions of this Agreement. At the Closing, the Company shall
deliver to each of the Purchasers a certificate or certificates,
free of restrictive legend, representing the number of shares of
Common Stock being acquired upon the conversion of the Note
(“Note Shares”).
(c) Exercise of Options. Each
Purchaser, severally, shall exercise all of its Warrants into
Common Stock by delivering to the Company a fully executed Warrant
exercise notice (using the form of notice attached to the Warrant)
and payment in full of the Warrant Price (which for the purposes of
this Agreement shall be $0.70 multiplied by the number of shares
subject to such Warrant). Attached as Schedule 3 is the
Warrant exercise schedule setting forth the name of each Purchaser,
the amount of such Purchaser’s Warrant Price and the number
of shares of Common Stock such Purchaser will purchase upon
exercise of its Warrant (“Warrant Shares”). At the
Closing, the Company shall deliver to each of the Purchasers a
certificate or certificates, free of restrictive legend,
representing the Warrant Shares purchased by such Purchaser.
All
actions at the Closing and all transactions occurring at the
Closing shall be deemed to take place simultaneously and no
transactions shall be deemed to have been completed or any document
delivered until all such transactions
