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Exhibit 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT AND
FIRST
AMENDMENT TO INVESTOR RIGHTS AGREEMENT AND SUPPLY
AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND FIRST
AMENDMENT TO INVESTOR RIGHTS AGREEMENT AND SUPPLY AGREEMENT
(the “Amendment
” ) is entered into
as of September 24, 2007 (the “ Amendment Effective
Date ” ),
by and among HEARUSA, INC.
, a corporation organized under the laws of the
State of Delaware (“ Borrower ”), and
SIEMENS HEARING INSTRUMENTS, INC.
, a corporation organized under the laws of the
State of Delaware ( “Lender ”
).
R E C I T A L S
A. Borrower and
Lender are parties to (a) 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 (as amended, the “Credit
Agreement ” ); (b) that certain Investor Rights Agreement dated as of
December 30, 2006 (the “Investor
Rights Agreement ”
); and (c) that certain Amended and Restated Supply
Agreement dated as of December 30, 2006 (the
“Supply Agreement
”). Unless otherwise indicated herein, all
terms used with their initial letter capitalized are used herein
with their meaning as defined in the Credit Agreement, and all
Paragraph references are to Paragraphs in this
Amendment.
B. Borrower has
requested that Section
2.05(c) be amended to extend the date
by which the mandatory prepayment is required to be made thereunder
from September 24, 2007, to December 19, 2008.
C. Prior to the
Amendment Effective Date, the Tranche D Loans accrued interest at a
rate per annum equal at all times to 5.0%, payable on the first day
of each month, commencing February 1, 2007. Borrower and Lender
have agreed to, as of the Amendment Effective Date, retroactively
increase the interest accruing on the Tranche D Loans to a rate per
annum equal at all times to 9.5%, payable on the fifteenth day of
each month, commencing January 1, 2007. Pursuant to this
retroactive increase, Borrower shall pay to Lender on October 15,
2007, in addition to any and all interest accrued on the Tranche D
Loans during the prior month, an amount equal to $217,080,
representing the difference between the interest accrued on the
Tranche D Loans between January 1, 2007 and August 31, 2007 at a
rate per annum equal at all times to 5.0% and the amount of
interest that would have accrued on the Tranche D Loans at a rate
per annum equal at all times to 9.5% for that same period of
time.
D. Subject to
and upon the following terms and conditions, Lender is willing to
extend such mandatory prepayment date and to lend up to an
additional $3,000,000 for purposes of funding operating working
capital.
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:
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1.
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Amendments to Credit Agreement
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(a) The
definition of “Loans” in Section 1.01 is amended in its
entirety to read as follows:
“ Loans
” means, collectively, the Tranche A Loan, the
Tranche B Loans, the Tranche C Loans, the Tranche D Loans and the
Tranche E Loans.
(b)
The definition of “Notes” in
Section 1.01 is
amended in its entirety to read as follows:
“ Notes
” means, collectively, the Tranche A Note, the
Tranche B Note, the Tranche C Note, the Tranche D Note and the
Tranche E Note.
(c)
Section 1.01 of
the Credit Agreement is amended by adding the
following new defined terms:
“ Tranche E
Loan ” has the meaning set forth in
Section 2.01(h).
“ Tranche E
Note ” means the promissory note of
the Borrower payable to the order of the Lender in substantially
the form of Exhibit A-5
, evidencing the aggregate principal amount of the
Tranche E Loans by the Lender to the Borrower.
(d)
Section 2.01 of
the Credit Agreement is amended by adding the
following new clause (h):
(h) On the
terms and subject to the conditions contained in this Agreement,
the Lender shall make loans (“Tranche E Loans”) to the
Borrower from time to time prior to December 19, 2008, in the
aggregate principal amount outstanding of up to
$3,000,000.
(e)
Sections 2.02(a) of the Credit Agreement is amended in its entirety to read as
follows:
(a)
Notice of Borrowing .
Subject to the terms and conditions hereof, each Tranche B Loan,
Tranche C Loan, Tranche D Loan and Tranche E Loan shall be made on
notice given by the Borrower to the Lender by 11:00 A.M. (New York
City time) on the third Business Day prior to date of the proposed
making of such Loan. Each such notice (a “
Notice of Borrowing ”) shall be substantially in the form of
Exhibit B ,
specifying therein (i) the proposed date for the making of
such Loan, (ii) the amount of Loans constituting the Tranche B
Loan, the Tranche C Loan, the Tranche D Loan or the Tranche E Loan,
and (iii) that the Borrower has complied with the applicable terms
and conditions of this Section 2.02 and Article III.
(f)
Section 2.03 of
the Credit Agreement is amended by deleting clause (c)(ii) in its
entirety and substituting therefor the following:
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(ii) on
each Tranche C Loan Payment Date thereafter, a principal amount
equal to $500,000, together with accrued and unpaid interest as
provided in Section 2.06(b).
(g)
Section 2.03 of
the Credit Agreement is amended by adding the following new clause
(i):
(i)
Repayment of Tranche E Loans
. T he Borrower shall pay the
entire aggregate outstanding principal amount of the Tranche E
Loans, plus accrued and unpaid interest, on December 19,
2008.
(h)
Section 2.05 of
the Credit Agreement is amended by deleting clause (c) in its
entirety and substituting therefor the following:
(c) On or
prior to December 19, 2008, the Borrower shall make a prepayment of
the principal amount of the outstanding Tranche D Loans in the
amount of $4,200,000.
(i)
Section 2.06 of
the Credit Agreement is amended by deleting the first sentence of
clause (c) in its entirety and substituting therefor the
following:
(c) The
Tranche D Loans shall accrue interest at a rate per annum equal at
all times to 9.5% and shall be payable on the fifteenth day of each
month, commencing January 1, 2007. On October 15, 2007, the
Borrower shall pay to the Lender, in addition to any and all
interest accrued on the Tranche D Loans during the prior month, an
amount equal to $217,080.
(j)
Section 2.06 of
the Credit Agreement is amended by adding the following new clause
(d):
(d) The Tranche
E Loans shall accrue interest at a rate per annum equal at all
times to 9.5% and shall be payable on the fifteenth day of each
month, commencing on the fifteenth day of the month following the
first advance of the Tranche E Loans.
(k)
Section 2.10(a) of the Credit Agreement is amended in its entirety to read as
follows:
(a)
Conversion Right .
Subject to the terms hereof and restrictions and limitations
contained herein, including those in Section 2.10(e), the Lender
shall have the right, at the Lender’s option, at any time and
from time to time to convert to shares of Common Stock the
outstanding principal amount of and accrued interest on the Loans
in whole or in part from and after the earliest to occur of (i)
three (3) years after the Closing Date, (ii) the announcement of a
potential Change of Control (provided that any conversion of the
Loan pursuant to this clause (ii) shall occur only if and when such
Change of Control is consummated), (iii) the failure of the
Borrower to comply with its obligations
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under Section 2.05(c) or Section 2.03(i) (provided
that in the event of a cure of such failure prior to delivery of a
Conversion Notice, the Lender no longer shall have the right to
convert under this clause (iii)) and (iv) the Borrower’s
delivery of a notice to the Lender of a notice of prepayment
pursuant to Section 2.04, which prepayment would result in a
reduction of the outstanding Loan Balance below an amount that
would enable the Lender to convert the Loans to 19.9% of the number
of shares of Common Stock outstanding on the Closing Date (after
giving effect to any issuances of Common Stock on the Closing
Date). Any such partial conversion shall be of the Tranche A Loan,
the Tranche B Loan, the Tranche C Loan, the Tranche D Loan or the
Tranche E Loan or any combination of the foregoing in such order as
the Borrower shall elect in a written notice to the Lender
delivered not more than three (3) Business Days after the date of
conversion. Upon any conversion of the Loans, the Maximum
Commitment shall be permanently reduced by the aggregate principal
amount of the Loans so converted.
(l)
Section 5.06 of
the Credit Agreement is amended by adding the following new clause
(d):
(d) The Borrower
shall use the proceeds of any Tranche E Loans solely to finance the
Borrower’s working capital requirements.
(m) The Credit
Agreement is amended by adding a new Exhibit A-5 in the form
attached hereto as Exhibit A-5.
(n)
Exhibit B to the
Credit Agreement is amended in its entirety to read as set forth in
Exhibit B attached hereto.
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2.
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Amendments to Supply Agreement
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(a)
Section 4.1 of
the S
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