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EXHIBIT 10.3
CERTAIN INFORMATION (INDICATED BY ASTERISKS) IN THIS EXHIBIT HAS
BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.
EXHIBIT 10.3
AMENDED AND RESTATED SUPPLY AGREEMENT
This
Amended and Restated Supply Agreement, is made as of the 10th day
of
February, 2006 ("Execution Date"), among Siemens Hearing
Instruments, Inc., a
Delaware corporation, with an address at 10 Constitution Avenue,
Piscataway, New
Jersey 08855 ("SHI" or "Seller"), certain subsidiaries and
affiliates of Siemens
Aktiengesellschaft (collectively, the "Siemens Affiliates") and
HearUSA, Inc.
(formerly HEARx, Ltd.), a Delaware corporation, with an address at
1250
Northpoint Parkway, West Palm Beach, FL 33407 ("HearUSA" or
"Buyer").
WHEREAS, Buyer is a retail seller of hearing aids in the United
States and
also services hearing healthcare programs sponsored by HMOs and
insurance
companies; and
WHEREAS, Seller is a manufacturer of hearing aids and sells such
hearing
aids to retail resellers, including Buyer, for resale to consumers;
and
WHEREAS, Buyer and Seller determined that it would be in their
respective
best interests to assure a steady supply of hearing aids of various
styles and
capacities (the "Products") from Seller in order that Buyer may
efficiently and
economically distribute such Products through its current and
future retail
outlets ("Facilities") and, to that end, entered into a Supply
Agreement as of
December 7, 2001 (the "Original Supply Agreement"); and
WHEREAS, the parties have now determined that it would be in
their
respective best interests to amend and restate the Original Supply
Agreement,
extending their relationship until January 2011, all in accordance
with the
terms and conditions contained herein.
NOW,
THEREFORE, the parties hereto agree as follows:
1.
Purchase and Sale. Subject to the provisions contained in this
Agreement, Seller has agreed to sell and Buyer has agreed to buy
those Products
listed on Exhibit A to this Agreement during the term of this
Agreement. The
Siemens Affiliates manufacture or may manufacture certain of the
Products
offered hereunder, and those Products manufactured and supplied by
the Siemens
Affiliates and purchased by Buyer will be included within the
definition of
Products under this Agreement and included in the calculations set
forth in
Section 4 hereof. If any Siemens Affiliate shall sell any of the
Products to the
Buyer, such Siemens Affiliate shall execute and deliver a
counterpart,
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substantially in the form of Exhibit B, to SHI and the Buyer. Upon
the execution
of such counterpart, such Siemens Affiliate shall become a party
hereto and be
bound by all the terms and conditions hereof as a "Seller" to the
same extent as
though such Siemens Affiliate had originally executed this
Agreement. The
parties understand and agree that Exhibit A may be amended from
time to time,
upon mutual agreement of the Seller and Buyer, to add or delete
Products. In
addition, it is specifically understood that Buyer is purchasing
the Products
for the purpose of resale in all of Buyer's Facilities, including,
without
limitation, any new Facilities which may be or are owned, operated,
affiliated
with or managed by Buyer.
2.
Term. The term of this Agreement is five (5) years, commencing on
the
Execution Date (the "Term").
3.
Terms and Conditions of Sale. The Buyer will submit its orders
for
Products either on the forms provided therefor or via a website
provided by
Seller and payment shall be made by Buyer for products delivered
and accepted
within sixty (60) days from the date of statement by Seller.
4.
Ordering Process and Pricing. Buyer understands that Seller has
offered
special terms and pricing to Buyer as consideration for the
purchase compliance
levels committed to by Buyer, and that Seller is willing to
continue to provide
Products to Buyer in a manner consistent with the relationship
enjoyed to date
by Seller and Buyer. Subject to Section 3 hereof, Buyer agrees to
purchase, in
each Fiscal Quarter during the term of this Agreement (which, for
the purposes
of this calculation, shall be each of the three month periods
ending on the last
Saturday of the months of March, June, September and December), at
least ninety
percent (90%) of Buyer's quarterly purchases of hearing aid
products; provided
however, that:
(i) if the Buyer has purchased, on a cumulative basis from May 1,
2001
through the applicable Fiscal Quarter, 90% or more of the total
number of
hearing aids purchased by the Borrower, net of returns (the
"Minimum Purchase
Percentage"), the Buyer shall be deemed to have complied with the
minimum
purchase requirements of this Supply Agreement; and
(ii) in the event the Buyer has not complied with the provisions
of
4(i) above, if the Borrower has purchased, on a cumulative basis
from May 1,
2001 through the applicable Fiscal Quarter, eighty percent (80%) or
more of the
total number of hearing aids purchased by the Borrower but less
than ninety
percent (90%) of the total number of hearing aids purchased by the
Borrower in
each of the two preceding consecutive Fiscal Quarters, the Borrower
shall be
deemed to have complied with the minimum purchase requirements of
this Supply
Agreement.
For purposes of this Section 4, (A) the Fiscal Quarter in which
the
last day of the Term occurs (unless such day is the last day of a
Fiscal
Quarter), shall mean the period commencing on the first day of such
Fiscal
Quarter and ending on the last day of the Term (such period, the
"Final Contract
Fiscal Quarter"), (B) the "quarterly purchases"
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described above shall refer to such purchases made during the
applicable Final
Contract Fiscal Quarter, and (C) the 90% requirement shall be
reduced to a
number equal to the product of 90% multiplied by a fraction, the
numerator of
which is the number of days in the applicable Final Contract Fiscal
Quarter and
the denominator of which is the actual number of days in the Fiscal
Quarter in
which the last day of the Term occurs.
In exchange for this purchase commitment, Seller has offered to
sell
the Products to Buyer at the prices set forth on Exhibit A. During
the term of
this Agreement, upon written notice to Buyer not later than sixty
(60) days
prior to the effective date thereof, Seller may adjust the list
prices for the
Products, such adjustment to take effect on the date set forth on
such notice.
Seller may not change the list prices for the Products more often
than ****** in
any contract year and the prices shall not be increased more than
****** above
the then-current prices at the time of such change, unless Buyer
fails to meet
its purchase requirements set forth in Section 4, at which time the
parties
shall meet to discuss the adjustments which need to be made should
Buyer
continue not to meet such purchase requirements. In the event Buyer
defaults in
its obligation to meet the agreed purchase requirements, Seller, in
its sole
discretion, shall have the right to take any or all of the
following actions
hereunder: (i) adjust prices or terms and conditions of sale with
respect to the
provision of Products for the remaining contract years of the
Agreement, (ii)
seek reimbursement from Buyer for the difference between the
special pricing
offered in connection with this Agreement and the then-current list
prices for
the Products, (iii) obtain injunctive relief compelling Buyer to
refrain from
purchasing hearing aids from any vendor other than Seller until the
end of the
term of this Agreement, (iv) obtain injunctive relief compelling
Buyer to
purchase all its requirements for hearing aids from Seller until
the end of the
term of this Agreement, or (v) terminate this Agreement in
accordance with
Section 11 hereof.
Further, if Buyer meets the purchase commitments set out in
this
Agreement, Buyer is able to liquidate certain loans made by Seller
to Buyer
pursuant to that Amended and Restated Credit Agreement entered into
of even date
herewith by and between Buyer and Seller (the "Credit Agreement").
In the event
that the Tranche A Loan and all Tranche C Loans (as those terms are
defined in
the Credit Agreement) are repaid by Buyer prior to the Maturity
Date (as defined
in the Credit Agreement), so long as Buyer meets the Minimum
Purchase Percentage
set out above, Seller shall credit to Borrower hereunder
substantially
equivalent rebates of ******* annually through the term hereof for
so long as
such cumulative Minimum Purchase Percentage is achieved by
Buyer.
5.
Product Representations. Seller makes the following representations
and
warranties with respect to the Products sold hereunder:
(a)
Each Product shall be manufactured (i) in conformity with all
applicable requirements of the Food and Drug Administration ("FDA")
and (ii) in
accordance with all applicable United States federal, state and
local statutes,
ordinances and regulations, including but not limited to the Food,
Drug and
Cosmetic Act (21 USC 301 et seq.) (the "Act"), as amended from time
to time, and
the regulations thereunder, including Good Manufacturing Practice
Regulations,
which are currently in force or which are hereafter
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adopted. At the time of shipment of any Product, it will not be
adulterated or
misbranded within the meaning of the Act and will not be a product
which would
violate any section of the Act if introduced into interstate
commerce in the
United States.
(b)
Seller has good and marketable title to, and the right to sell,
the
Products.
(c)
The manufacture and sale of the Product, and its use in accordance
with
all applicable approvals theretofore obtained and Seller's
directions for use,
shall not, to the knowledge of Seller, infringe any intellectual
property rights
of any third parties.
6.
Covenants of Seller. Seller covenants and agrees as follows with
respect
to the Products:
(a)
Seller shall conduct its manufacturing operations in a safe and
prudent
manner, in compliance with all applicable laws and regulations,
including, but
not limited to, those dealing with occupational safety and health,
those dealing
with public safety and health, those dealing with protection of the
environment,
and those dealing with disposal of wastes and in compliance with
the applicable
provisions of this Agreement.
(b)
Seller shall use commercially reasonable efforts to have the
Products
listed on the "pick lists" maintained by each of the Canadian
provinces.
(c)
Seller shall use commercially reasonable efforts to (i) fill
Buyer's
orders for Products on time and (ii) deliver Products that function
as per
specifications and that meet the requirements of the orders
submitted by Buyer,
in each case consistent with past practices of Buyer and
Seller.
(d)
Seller shall use commercially reasonable efforts to remain one of
the
technology leaders in the field of hearing healthcare; provided
that nothing
contained herein shall limit or prohibit Seller from conducting its
business in
accordance with the policies and procedures established from time
to time by
Seller's Board of Directors or with the overall policies and
procedures of
Siemens Aktiengesellschaft.
7.
Indemnification by Seller.
(a)
Subject to the provisions of subsection 7(b) below, Seller agrees
to
indemnify, defend and hold harmless Buyer, its affiliates and their
respective
employees, agents and representatives, against any and all claims,
losses,
damages and liabilities, including reasonable attorneys' fees,
incurred by any
of them arising out of any breach of any representation by Seller,
resulting
from the actual adulteration or misbranding of Product, or any
defect in
materials or workmanship.
(b)
The foregoing indemnify shall not be effective to the extent any
such
claim, loss, damage or liability is based upon (i) any act of Buyer
or any of
its affiliates, agents or representatives, (ii) any act of Buyer or
any of its
affiliates, agents or representatives done jointly with any party
other than
Seller, or (iii) any claim arising as a result of any
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unauthorized alteration, modification or change to the Product by
any party
other than Seller.
8.
Indemnification by Buyer.
(a)
Subject to the provisions of subsection 8(b) below, Buyer agrees
to
indemnify, defend and hold harmless Seller, its affiliates and
their respective
employees, agents and representatives, against any and all claims,
losses,
damages and liabilities, including reasonable attorneys' fees,
incurred by any
of them arising out of any act of Buyer relative to the marketing,
distribution
and sale of Products.
(b)
The foregoing indemnity shall not be effective nor shall it be
enforceable in the event any such claim, loss, damage or liability
is based upon
(i) any act of Seller or any of its affiliates, agents or
representatives, (ii)
any act of Seller or any of its affiliates, agents or
representatives done
jointly with any party other than Buyer, or (iii) any claim arising
as a result
of any unauthorized alteration, modification or change to the
Product by any
party other than Buyer, or any defect in materials or
workmanship.
9.
Procedures Related to Indemnification.
(a)
A party seeking indemnification under the terms of this Agreement
shall
be referred to as the "indemnified party" and the person who is to
provide such
indemnification shall be referred to as the "indemnifying party."
The
indemnified party shall notify in writing the indemnifying party
with reasonable
promptness of its discovery of any matter giving rise to a claim of
indemnity.
The failure or delay in so notifying the indemnifying party shall
not relieve
indemnifying party of its obligations to indemnify unless, and only
to the
extent that, the indemnifying party's defense of such claim is
materially
prejudiced as a result of such delay. The indemnified party shall
provide the
indemnifying party as soon as practicable all information and
documentation
related to the matter for which the indemnified party seeks
indemnification. The
indemnifying party shall be given access to all books and records
in the
possession or under the control of the indemnified party that the
indemnifying
party reasonably determines to be related to such claim.
(b)
Promptly upon receipt of notice from the indemnified party, the
indemnifying party shall take over control of the defense of any
action, claim
or litigation arising out of the indemnification provisions of this
Agreement.
The indemnified party shall support and assist the indemnifying
party in the
defense, but all costs, expenses and related charges, including but
not limited
to attorneys' fees, shall be for the account of the indemnifying
party, except
to the extent such independent counsel is representing the
indemnified party for
defenses available to it but not available to the indemnifying
party. If the
indemnified party wishes to retain its own counsel to advise and
assist in the
defense of such claim, it may do so, but the expense of retaining
such
independent counsel shall be for the account of the indemnified
party and the
indemnifying party shall retain complete control over the defense.
If, after
receipt of notice, the indemnifying party does not defend the
interests of the
indemnified party or does not take appropriate
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action to defend and hold harmless the indemnified party, then, and
in that case
only, the indemnified party shall be entitled to retain counsel,
defend the
action, claim or litigation, and seek compensation for all of its
costs of
defense from the indemnifying party. The indemnified party shall
not, without
the prior consent of the indemnifying party, enter into any
settlement the
result of which would materially limit or modify the rights of the
indemnifying
party under this Agreement.
10.
Recall. In the event of any recall of any Product, whether
voluntary or
involuntary, Seller shall replace the recalled Product without
charge to Buyer.
In addition, Seller shall pay all of Buyer's reasonable out of
pocket expenses
incurred in connection with such recall. In no event shall Seller
be liable for
any loss of use, revenue or anticipated profits, loss of stored,
transmitted or
recorded data, or for any incidental, unforeseen, special, punitive
or
consequential damages arising out of or in connection with this
Agreement, or
the sale or use of the Products, or arising out of the actions
taken by Seller
in response to a recall or other action required by law, regulation
or agency
with oversight over the operations and business of Seller;
provided, however,
that nothing in this Section 10 shall limit Seller's
indemnification obligations
under Section 7 for losses incurred by Buyer for which Buyer is
entitled to
indemnification arising out of a claim by any third party.
11.
Termination.
(a)
Either party may terminate this Agreement in the event of a
material
breach by the other which remains uncured (or where significant
steps toward
effecting the cure shall not have been taken) within sixty (60)
days after
written notice is given to the breaching party specifying the
nature of the
breach. The parties agree that Buyer's failure to meet the purchase
requirements
set forth in Section 4 or to make payments as required under this
Agreement
shal
