Exhibit 10.1





Exhibit 10.1




 





ASSET PURCHASE AGREEMENT




AMONG




HELIX HEARING INC.




AND




HELIX HEARING CARE OF AMERICA CORP.




AND




3371727 CANADA INC.




April 27, 2009




 






 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE 1 - INTERPRETATION
	 	 	2	 
	1.1 Definitions
	 	 	2	 
	1.2 Currency
	 	 	8	 
	1.3 Sections and Headings
	 	 	8	 
	1.4 Number, Gender and Persons
	 	 	8	 
	1.5 Accounting Principles
	 	 	9	 
	1.6 Entire Agreement
	 	 	9	 
	1.7 Time of Essence
	 	 	9	 
	1.8 Applicable Law
	 	 	9	 
	1.9 Severability
	 	 	9	 
	1.10 Successors and Assigns
	 	 	9	 
	1.11 Amendment and Waivers
	 	 	9	 
	1.12 Exhibits
	 	 	10	 
	1.13 Schedules
	 	 	10	 
	 
	 	 	 	 
	ARTICLE 2 - PURCHASE AND SALE OF PURCHASED ASSETS
	 	 	11	 
	2.1 Transfer of Purchased Assets
	 	 	11	 
	2.2 Excluded Assets
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 3 - PURCHASE PRICE
	 	 	14	 
	3.1 Purchase Price
	 	 	14	 
	3.2 Satisfaction of Purchase Price and other Closing Payments
	 	 	14	 
	3.3 Assumption of Certain Liabilities by the Purchaser
	 	 	14	 
	3.4 Excluded Liabilities
	 	 	15	 
	3.5 Purchase Price Adjustments at Closing
	 	 	15	 
	3.6 Net Asset Adjustment to Purchase Price
	 	 	16	 
	3.7 Allocation of Purchase Price
	 	 	17	 
	3.8 ETA Election
	 	 	17	 
	3.9 ITA Elections
	 	 	17	 
	3.10 Transfer Taxes
	 	 	18	 
	 
	 	 	 	 
	ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
OF THE VENDOR
	 	 	18	 
	4.1 Organization
	 	 	18	 
	4.2 Authorization and Enforceability
	 	 	18	 
	4.3 Business and Affairs of 3371727
	 	 	18	 
	4.4 Corporate Records of 3371727
	 	 	19	 
	4.5 Tax Matters
	 	 	19	 
	4.6 Residency of Vendor
	 	 	21	 
	4.7 No Violation
	 	 	21	 
	4.8 Consents and Approvals
	 	 	21	 
	4.9 Accounts Receivable
	 	 	21	 
	4.10 Inventories
	 	 	22	 
	4.11 Title to Personal and other Property and Sufficiency of Assets
	 	 	22	 
	4.12 No other Agreement to Purchase
	 	 	22	 






 


(i)









 





	 	 	 	 	 
	4.13 Location of Real Property
	 	 	22	 
	4.14 Leased Property
	 	 	22	 
	4.15 Compliance with Laws; Permits
	 	 	23	 
	4.16 Litigation
	 	 	24	 
	4.17 Contracts
	 	 	24	 
	4.18 Insurance
	 	 	24	 
	4.19 Environmental
	 	 	24	 
	4.20 Intellectual Property
	 	 	25	 
	4.21 Labour Relations and Collective Agreements
	 	 	25	 
	4.22 Employees
	 	 	25	 
	4.23 Employee Plans
	 	 	27	 
	4.24 Balance Sheets
	 	 	27	 
	4.25 Books and Records
	 	 	28	 
	4.26 No Undisclosed Liabilities
	 	 	28	 
	4.27 Ordinary and Normal Course
	 	 	28	 
	4.28 No Bankruptcy or Insolvency
	 	 	28	 
	4.29 Tax Registrations
	 	 	28	 
	4.30 No Subsidiaries
	 	 	28	 
	4.31 Brokerage Fees
	 	 	28	 
	4.32 Bank Accounts
	 	 	29	 
	 
	 	 	 	 
	ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
	 	 	29	 
	5.1 Organization
	 	 	29	 
	5.2 Authorization
	 	 	29	 
	5.3 No Violation
	 	 	29	 
	5.4 Consents and Approvals
	 	 	29	 
	5.5 GST Registration
	 	 	30	 
	5.6 Brokerage Fees
	 	 	30	 
	5.7 No Bankruptcy or Insolvency
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 6 - SURVIVAL OF COVENANTS,
REPRESENTATIONS AND WARRANTIES
	 	 	30	 
	6.1 Survival of Representations and Warranties of the Vendor
	 	 	30	 
	6.2 Survival of the Representations and Warranties of the Purchaser
	 	 	31	 
	6.3 Survival of Covenants
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 7 - OTHER COVENANTS
	 	 	31	 
	7.1 Regulatory Approvals
	 	 	31	 
	7.2 Consents and Approvals
	 	 	31	 
	7.3 Bulk Sales Act
	 	 	31	 
	7.4 Accounts Receivable Trust Agreement
	 	 	31	 
	7.5 Delivery of Books and Records
	 	 	32	 
	7.6 Corporate Action
	 	 	32	 
	7.7 Employee Matters
	 	 	32	 
	7.8 Non-Transferable and Non-Assignable Assets.
	 	 	34	 
	7.9 Tax Returns
	 	 	35	 
	7.10 Leased Property
	 	 	35	 






 


(ii)









 





	 	 	 	 	 
	ARTICLE 8 - CONDITIONS OF CLOSING
	 	 	37	 
	8.1 Conditions of Closing in Favour of the Purchaser
	 	 	37	 
	8.2 Conditions of Closing in Favour of the Vendor
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 9 - CLOSING DATE AND TRANSFER
OF POSSESSION
	 	 	41	 
	9.1 Place of Closing
	 	 	41	 
	9.2 Further Assurances
	 	 	41	 
	 
	 	 	 	 
	ARTICLE 10 - INDEMNIFICATION
	 	 	41	 
	10.1 Indemnification by the Vendor
	 	 	41	 
	10.2 Indemnification by the Purchaser
	 	 	42	 
	10.3 Notice of Claim
	 	 	42	 
	10.4 Direct Claims
	 	 	43	 
	10.5 Third Party Claims
	 	 	44	 
	10.6 Settlement of Third Party Claims
	 	 	44	 
	10.7 Co-operation
	 	 	44	 
	10.8 Exclusivity
	 	 	44	 
	10.9 Limitations on Amount
	 	 	45	 
	10.10 Insurance Proceeds and Taxes
	 	 	45	 
	10.11 Right to Claim Escrow Amount
	 	 	45	 
	10.12 Other Limitations
	 	 	45	 
	 
	 	 	 	 
	ARTICLE 11 - GUARANTEE OF HEARUSA
	 	 	46	 
	11.1 Guarantee of HearUSA
	 	 	46	 
	11.2 Time of Essence
	 	 	46	 
	11.3 Severability
	 	 	46	 
	11.4 Further Assurances.
	 	 	46	 
	11.5 Successors and Assigns
	 	 	46	 
	11.6 Applicable Law
	 	 	47	 
	11.7 Notices
	 	 	47	 
	 
	 	 	 	 
	ARTICLE 12 - MISCELLANEOUS
	 	 	47	 
	12.1 Notices
	 	 	47	 
	12.2 Announcements
	 	 	48	 
	12.3 Disclosure
	 	 	49	 
	12.4 Reasonable Commercial Efforts
	 	 	49	 
	12.5 Expenses
	 	 	49	 
	12.6 Counterparts
	 	 	49	 







 


(iii)









 







ASSET PURCHASE AGREEMENT





THIS ASSET PURCHASE AGREEMENT made as of the 27th day of April, 2009,



AMONG:





HELIX HEARING INC., a corporation existing under the laws of Ontario, (hereinafter referred to as the “Purchaser”),



OF THE FIRST PART,




- and -





HELIX HEARING CARE OF AMERICA CORP., a corporation existing under the laws of
Canada,
(hereinafter referred to as the “Vendor”),



OF THE SECOND PART.




-and-





3371727 CANADA INC., a corporation existing under the laws of Canada,(hereinafter referred to as “3371727”)



OF THE THIRD PART




WHEREAS the Vendor has carried on in the Province of Ontario the business of marketing,
distribution and selling of hearing aids to product end-users (the “Business”);



AND WHEREAS the Purchaser is willing to purchase the Purchased Assets (as hereinafter
defined), and the Vendor is willing to sell the Purchased Assets to the Purchaser, on the terms and
conditions of this Agreement;



AND WHEREAS the Vendor is an indirect wholly-owned subsidiary of HearUSA, Inc., a Delaware
corporation, (“HearUSA”) and 3371727 is a direct wholly-owned subsidiary of the Vendor; and




AND WHEREAS HearUSA has agreed to guarantee the obligations of the Vendor hereunder.


 


 









 





NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants,
agreements, representations, warranties and indemnities of the parties
herein contained and for other good and valuable consideration (the receipt and sufficiency of
which are acknowledged by each party), the parties agree as follows:



ARTICLE 1 — INTERPRETATION





	1.1	 	Definitions






For the purposes of this Agreement, unless the context otherwise requires, the following terms
shall have the respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:




“3371727 Contract” means any Contract under which (a) 3371727 has or may acquire any rights
or benefits, (b) 3371727 has or may become subject to any obligation or liability, or (c)
3371727 or any of the assets owned or used by 3371727 is or may become bound;




“Accounting Records” means all of the Vendor’s books of account (including the general
ledger), records relating to Accounts Receivable, Inventory, Accounts Payable and Prepaid
Expenses, accounting records and other financial data and information relating to the
Business or the Purchased Assets, including Tax Returns;




“Accounts Receivable” means any and all accounts, accounts receivable, trade accounts,
notes, notes receivable, book debts or other debts due or accruing to a Company in
connection with the Business as reflected on the Closing Balance Sheet, including the
benefit of any security thereon, and any claim, right or remedy relating thereto;




“Accounts Receivable Trust Account Agreement” means the accounts receivable trust account
agreement to be entered into between the Vendor and the Purchaser, in the form attached
hereto as Exhibit C;




“Accounts Receivable Trust Bank Account” means the bank concentration deposit account of the
Vendor with the Royal Bank of Canada, Business Banking, Montreal Downtown, 1 Place
Ville-Marie, M-1, Montreal, QC H3C 3B5, identified as account number 008861052109;




“Affiliate” has the meaning attributed to that term in the Canada Business Corporations Act,
as amended from time to time;




“Applicable Law” means any law, statute, ordinance, regulation, rule, by-law, decree, writ
or order, protocol, code, guideline, treaty, policy, notice, direction and judicial,
arbitral, administrative, ministerial or departmental judgements, awards or requirements of
any Authority having jurisdiction over the Vendor or over any part of the Business or the
Purchased Assets and includes, without limitation, Environmental Laws;




“Assignment of Leases” means assignments of the Leases by the Vendor in favour of the
Purchaser, and an “Assignment of Lease” means an assignment of any one of the Leases;


 


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“Assumed Liabilities” means the liabilities and obligations of the Vendor assumed by the
Purchaser pursuant to Section 3.3;




“Authority” means any governmental or regulatory authority, department, body or agency or
any court, tribunal, bureau, commission, arbitrator or arbitration board or other similar
body, whether federal, provincial, state, municipal or other geographic or political
subdivision thereof;




“Books and Records” means all books, records, files and papers, manuals and data, sales and
advertising materials, lists of present and former suppliers, price lists, sales records,
personnel, employment and other records, customer data, documentary evidence of all
licenses, orders and permits, and all other correspondence, data and information, financial
or otherwise, in any format or media whatsoever, of the Vendor, including copies of all
Accounting Records and books and records required by Applicable Law to be retained by the
Vendor (the originals of which shall be retained by the Vendor), and all books and records
of 3371727, but excluding Tax Returns of the Vendor and books and records relating to the
Excluded Assets;




“Business” has the meaning set out in the Recitals of this Agreement;




“Business Day” means any day, other than a Saturday or a Sunday, on which chartered banks in
Toronto, Ontario are open for business;




“Cash” means, as of the Effective Time, the amount of cash and bank deposits as reflected in
a Company’s bank statements and certificates of deposit less escrowed amounts or other
restricted cash balances and less the amounts of any unpaid checks, drafts and wire
transfers issued on or prior to the date of determination, calculated in accordance with
GAAP. For avoidance of doubt, Cash shall (i) be calculated net of issued but uncleared
checks and drafts, (ii) include checks and drafts deposited for the account of the
Company’s, and (iii) be calculated net of overdrawn accounts.




“Claim” has the meaning set out in Section 10.3;




“Closing” has the meaning set out in Section 9.1;




“Closing Date” means April 27, 2009 or such other date as the Vendor and the Purchaser may
mutually determine;




“Closing Balance Sheet” means the unaudited consolidated balance sheet of the Companies as
at the Effective Time, in respect of the Business and the Purchased Assets, but excluding
the effect of any Excluded Assets and Excluded Liabilities, prepared pursuant to Section 3.6
on the same basis and applying the same accounting principles, policies and practices that
were used in preparing the Existing Balance Sheets;




“Companies” means collectively the Vendor and 3371727, and “Company” means either one of
them individually;


 


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“Contract” means any agreement, indenture, contract, deed of trust, licence, option, right,
promise, assurance, undertaking, whether written or oral, express or implied and whether or
not legally binding, but excluding the Leases;




“Current Assets” means Accounts Receivable, Inventories, Cash and Prepaid Expenses;




“Direct Claim” has the meaning set out in Section 10.3;




“Effective Time” means 11:59 p.m. as of Saturday, April 25, 2009;




“Employee Plans” has the meaning set out in Section 4.23;




“Employees” has the meaning set out in Section 4.22(a);




“Employment Legislation” means, collectively, the Ontario Human Rights Code, the
Occupational Health and Safety Act (Ontario), the Pay Equity Act (Ontario), the Employment
Standards Act, 2000 (Ontario) or predecessor to that Act, the Pension Benefits Act
(Ontario), the Workplace Safety and Insurance Act, 1997 (Ontario) or predecessor to that Act
and the Employment Insurance Act (Canada), all as amended from time to time;




“Encumbrance” means any encumbrance, lien, charge, hypothec, privilege, pledge, mortgage,
title retention agreement, security interest, reservation of title, easement, right of
occupation, any matter capable of registration against title, or any written agreement to
create any of the foregoing;




“Environmental Condition” means the presence of any Hazardous Substance on the Leased
Property attributable to the Vendor;




“Environmental Laws” means any Applicable Law governing pollution or the protection of the
environment in effect as of the Closing Date;




“Environmental Permits” means all licences, permits, approvals, consents, registrations,
certificates, authorizations or other similar approvals issued or granted or required by an
Authority pursuant to an Environmental Law;




“Equipment” has the meaning set out in Section 2.1(a);




“Escrow Agent” means The Bank of Nova Scotia Trust Company;




“Escrow Agreement” means the agreement to be entered into between the Vendor, the Purchaser,
and the Escrow Agent, in the form attached hereto as Exhibit B;




“Escrow Amount” has the meaning set out in Section 3.2(b);




“Estoppel and Consent Certificate” means the form of Estoppel and Consent Certificate
obtained by the Vendor from each landlord for each Leased Property substantially in the form
annexed hereto as Exhibit E;




“ETA” means Part IX of the Excise Tax Act (Canada), as amended from time to time;


 


- Page 4 -









 






“Excluded Assets” has the meaning set out in Section 2.2;




“Excluded Liabilities” has the meaning set out in Section 3.4;




“Existing Balance Sheets” means the annual unaudited consolidated balance sheet of the
Companies as at December 27, 2008, and the interim unaudited consolidated balance sheet of
the Companies as at March 28, 2009, both such balance sheets attached hereto as Schedule
1.1(a);




“GST” means all goods and services taxes payable under the ETA;




“Hazardous Substance” means any substance or waste which is defined as hazardous, toxic, a
pollutant or a contaminant under Environmental Law;




“HearUSA IP” means certain intellectual property and other assets of HearUSA set out in the
HearUSA Licence;




“HearUSA Licence” means the licence agreement between HearUSA and the Vendor dated with
effect on the day prior to the Closing Date in connection with the HearUSA IP, in the form
attached hereto as Schedule 1.1(b);




“including” (and having correlative meaning “include” and “includes”) means including
without limiting the generality of any description preceding such term;




“Indemnified Party” has the meaning set out in Section 10.3;




“Indemnifying Party” has the meaning set out in Section 10.3;




“Intellectual Property” means all rights in patents, patent applications, trade-marks,
trade-mark applications, trade-names, business names, domain names, inventions, technical
data, licensed and unlicensed know-how, copyright and industrial designs;




“Intellectual Property Assets” has the meaning set out in Section 2.1(j);




“Interim Occupancy Agreement” has the meaning set out in Section 7.10(e);




“Inventory” has the meaning set out in Section 2.1(l);




“ITA” means the Income Tax Act (Canada), as amended from time to time;




“knowledge of the Vendor” or similar expressions mean the actual knowledge of the individual
or individuals among Stephen Hansbrough, Gino Chouinard, Frank Puñal, Denise Pottlitzer and
Maggie Black, with responsibility for the relevant matter;




“Lease” means, collectively, all agreements to lease, offers to lease, lease, lease
amendments, renewal agreements, subleases and other rights or licenses granted to the Vendor
or its predecessors in title to possess or occupy the Leased Property or any part thereof as
at the date hereof, in each case amended, renewed or otherwise varied, and all material
correspondence or other agreements related thereto, and “Lease” shall mean any one of the
Leases;


 


- Page 5 -









 






“Leased Properties” means all lands and premises leased by the Vendor pursuant to the Leases
in connection with the operation of the Business, and “Leased Property” means any one of
them;




“Losses”, in respect of any matter, means all claims, demands, losses, damages, liabilities,
Taxes, deficiencies, costs and expenses (including, without limitation reasonable legal and
other professional fees and disbursements, interest, penalties and amounts paid in
settlement) arising as a result of such matter, but excluding any indirect, special,
punitive, exemplary or consequential losses or damages and losses of revenue or profit;




“Material Adverse Effect” means, when used in connection with the Business, any change,
event, violation, inaccuracy, circumstance or event that is materially adverse to the
business, assets, liabilities, financial condition, or results of operation of the Business,
but in each case shall not include the effect of (i) changes in GAAP or official
interpretations of the foregoing, (ii) changes in general economic, financial or market
conditions affecting the Business, (iii) any seasonal effects on the Business, or (iv)
changes arising from this Agreement or the transactions contemplated hereby or arising from
any actions or omissions of the Purchaser or the Companies if consented to in writing by the
Purchaser;




“Non-Assigned Lease” has the meaning set out in Section 7.10(b);




“Order” means any order, decree, instruction, direction, demand, proceeding or other
mandatory communication issued by an Authority or any notification of any intention to
issue or impose the same by an Authority where it could reasonably be concluded that the
notification may be part of a process whereby a mandatory communication having the force of
law will be issued;




“Permits” has the meaning set out in Section 2.1(i);




“Permitted Encumbrances” means:




	 	(i)	 	servitudes, easements, restrictions, rights-of-way and
other similar rights in real property or any interest therein (hereinafter,
collectively, the “Easements”) which do not materially impair its use in the
operation of the Business including, without limitation, any Easements
granted in respect of any sewers, electric lines, telegraphs and telephone
lines and other utilities and services, provided that, in each case, the
Easements have been complied with in all respects;







	 	(ii)	 	any statutory liens and other interests of the landlords
in any Leased Property and liens affecting the interests of the landlords in
any Leased Property, and as to other leased Purchased Assets any interests
of the lessor thereof;







	 	(iii)	 	liens for Taxes not due and payable;





 


- Page 6 -









 











	 	(iv)	 	undetermined or inchoate liens, charges and privileges
incidental to
current construction or current operations and statutory liens, charges,
adverse claims, security interests or encumbrances of any nature whatsoever
claimed or held by any Authority which have not at the time been filed or
registered against the title to the asset or served upon the Vendor,
pursuant to law or which relate to obligations not due or delinquent;







	 	(v)	 	security given in the ordinary course of the Business to
any public utility, municipality or government or to any statutory or public
authority in connection with the operations of the Business, other than
security for borrowed money;







	 	(vi)	 	the reservations in any original grants from the Crown of
any real property or interest therein and statutory exceptions to title
which do not materially detract from the value of the real property
concerned or materially impair its use in the operation of the Business;
and,







	 	(vii)	 	registered subdivision, site plan, development or other
municipal agreements which affect the Leased Property, provided that such
are complied with.







“Person” means any individual, estate, trust, firm, partnership, joint venture, corporation,
unlimited liability company, limited liability company, unincorporated association or
organization, government or any agency or ministry of any government, and includes any
successor to any of the foregoing;




“Prepaid Expenses” has the meaning set out in Section 2.1(m);




“Principal Sites” has the meaning set out in Section 7.10(a);




“Purchase Price” has the meaning set out in Section 3.1;




“Purchased Assets” has the meaning set out in Section 2.1;




“Purchased Shares” has the meaning set out in Section 2.1(r);




“Purchaser Employee Plans” has the meaning set out in Section 7.7(f);




“Returns Reserve” means the amount of $38,266.00, representing an agreed reserve for
products returned by customers within 45 days of sale in accordance with the Vendor’s
current return policy;




“Support Agreement” means the support agreement to be entered into between the Purchaser and
the Vendor, in the form attached hereto as Exhibit D;


 


- Page 7 -









 






“Tax” or “Taxes” means any and all taxes, charges, fees, levies, imposts, and other
assessments, including all income, sales, retail, use, goods and services, harmonized sales,
value added, corporation, premium, environmental, stamp, business, social services, royalty,
occupancy, property development, capital, capital gains, alternative, net
worth, transfer, land transfer, profits, withholding, payroll, employer health, social
security, excise, franchise, recapture, real property and personal property taxes, and any
other taxes, customs duties, tariffs, fees, assessments, reassessments or similar charges in
the nature of a tax, including provincial pension plan contributions, employment insurance
contributions, health services fund contributions and workers’ compensation premiums,
together with any instalments with respect thereto, and any interest, costs of any nature,
surtaxes, fines, penalties, additions to tax or other additional amounts, imposed, levied,
assessed, reassessed or collected by any governmental authority, including a Tax Authority;




“Tax Authority” means, with respect to any Tax, the Authority that imposes, assesses and
reassesses such Tax and the Authority charged with the collection of such Tax;




“Tax Return” means any return, declaration, report, election, form, notice, filing,
information return, or other document (whether in tangible, electronic or other form)
relating to Taxes, including any amendment thereof and including any attachment or
supplements thereto made, prepared, filed or required to be made, prepared or filed by
Applicable Law in respect of Taxes;




“Time of Closing” means 10:00 a.m. (Toronto time) on the Closing Date, or such other time on
the Closing Date as the Vendor and the Purchaser may mutually determine;




“Third Party Claim” has the meaning set out in Section 10.3;




“Transition Period” has the meaning set out in Section 7.7(f); and




“Vendor Contract” means any Contract under which: (a) Vendor has or may acquire any rights
or benefits, (b) Vendor has or may become subject to any obligation or liability, or (c)
Vendor or any of the Purchased Assets is or may become bound.




	1.2	 	Currency






Unless otherwise indicated, all dollar amounts in this Agreement are expressed in Canadian
funds.




	1.3	 	Sections and Headings






The division of this Agreement into sections and the insertion of headings are for convenience
of reference only and shall not affect the interpretation of this Agreement. Unless otherwise
indicated, any reference in this Agreement to a Section or Schedule refers to the specified Section
of or Schedule to this Agreement and any reference in this Agreement to a Section shall include a
subsection of such Section, as applicable.




	1.4	 	Number, Gender and Persons






In this Agreement, words importing the singular number only shall include the plural and vice
versa, words importing gender shall include all genders and words importing persons shall include
individuals, corporations, partnerships, associations, trusts, unincorporated organizations,
governmental bodies and other legal or business entities of any kind whatsoever.


 


- Page 8 -









 






	1.5	 	Accounting Principles






Any reference in this Agreement to generally accepted accounting principles or GAAP refers to
generally accepted accounting principles which have been established in the United States at the
relevant time applied on a consistent basis.




	1.6	 	Entire Agreement






This Agreement constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject matter hereof except as herein provided.




	1.7	 	Time of Essence







Time shall be of the essence in this Agreement.




	1.8	 	Applicable Law






This Agreement shall be construed, interpreted and enforced in accordance with, and the
respective rights and obligations of the parties shall be governed by, the laws of the Province of
Ontario and the federal laws of Canada applicable therein and, except as provided in this
Agreement, each party irrevocably attorns to the exclusive jurisdiction of the courts of such
province and all courts competent to hear appeals therefrom.




	1.9	 	Severability






If any provision of this Agreement is determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the
validity, legality or enforceability of the remaining provisions hereof, and each provision is
hereby declared to be separate, severable and distinct.




	1.10	 	Successors and Assigns






This Agreement shall enure to the benefit of and shall be binding on and enforceable by the
parties and, where the context so permits, their respective successors and permitted assigns. None
of the parties may assign any of its rights or obligations hereunder without the prior written
consent of the other parties.




	1.11	 	Amendment and Waivers






No amendment or waiver of any provision of this Agreement shall be binding on any party unless
consented to in writing by such party. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision, nor shall any waiver constitute a continuing waiver
unless otherwise provided.


 


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	1.12	 	Exhibits







The following Exhibits are attached to and form part of this Agreement.



	 	 	 	 	 	 	 
	 

	 	Exhibit A
	 	-
	 	Non-Competition Agreement
	 

	 	Exhibit B
	 	-
	 	Escrow Agreement
	 

	 	Exhibit C
	 	-
	 	Accounts Receivable Trust Agreement
	 

	 	Exhibit D
	 	-
	 	Support Agreement
	 

	 	Exhibit E
	 	-
	 	Estoppel and Consent Certificate
	 

	 	Exhibit F
	 	-
	 	Interim Occupancy Agreement







	1.13	 	Schedules






The following Schedules are attached to and form part of this Agreement. The schedules to the
extent reasonably practicable and applicable shall be organized by the Vendor for each individual
location of the Leased Property.



	 	 	 	 	 	 	 
	 

	 	Schedule 1.1(a)
	 	-
	 	Existing Balance Sheets
	 

	 	Schedule 1.1(b)
	 	-
	 	HearUSA Licence
	 

	 	Schedule 2.1(a)
	 	-
	 	Machinery and Equipment
	 

	 	Schedule 2.1(b)
	 	-
	 	Vendor Contracts
	 

	 	Schedule 2.1(c)
	 	-
	 	Leases
	 

	 	Schedule 2.1(g)
	 	-
	 	Furniture, Fixtures and Office Equipment
	 

	 	Schedule 2.1(i)
	 	-
	 	Licenses and Permits
	 

	 	Schedule 2.1(k)
	 	-
	 	Intellectual Property
	 

	 	Schedule 3.7
	 	-
	 	Purchase Price Allocation
	 

	 	Schedule 4.3(a)
	 	-
	 	Share Capital of 3371727
	 

	 	Schedule 4.3(b)
	 	-
	 	3371727 Contracts
	 

	 	Schedule 4.5
	 	-
	 	Tax Matters
	 

	 	Schedule 4.8(a)
	 	-
	 	Regulatory Consents
	 

	 	Schedule 4.8(b)
	 	-
	 	Contractual Consents
	 

	 	Schedule 4.13
	 	-
	 	Location of Leased Property
	 

	 	Schedule 4.16
	 	-
	 	Litigation
	 

	 	Schedule 4.18
	 	-
	 	Insurance
	 

	 	Schedule 4.19
	 	-
	 	Environmental Matters
	 

	 	Schedule 4.21
	 	-
	 	Labour Relations and Collective Agreements
	 

	 	Schedule 4.22
	 	-
	 	Employees
	 

	 	Schedule 4.23
	 	-
	 	Employee Plans
	 

	 	Schedule 4.32
	 	-
	 	Bank Accounts
	 

	 	Schedule 7.7(f)
	 	-
	 	Terminated Plans
	 

	 	Schedule 7.7(j)
	 	-
	 	Assumed Employee Plans






 


- Page 10 -









 





ARTICLE 2- PURCHASE AND SALE OF PURCHASED ASSETS





	2.1	 	Transfer of Purchased Assets






Subject to and upon the terms and conditions contained in this Agreement, the Vendor shall
sell, assign and transfer to the Purchaser and the Purchaser shall purchase from the Vendor, all
right, title and interest of the Vendor to all of the Vendor’s property and assets used in
connection with the Business (other than the Excluded Assets), including without limitation the
property and assets described in clauses (a) through (r) below (collectively, the “Purchased
Assets”), at the Closing Date, free and clear of all Encumbrances except Permitted
Encumbrances, if any:




	 	(a)	 	Equipment. All equipment owned or leased by the Vendor that is used or held
for use in the conduct of the Business, including audiology and medical equipment,
computer hardware, telephones, telephonic equipment and switches, electronic equipment
of any description, cell phones, automobiles, and postage meters (the “Equipment”)
including the Equipment described in Schedule 2.1(a);







	 	(b)	 	Contracts. Subject to Section 7.8, Vendor Contracts, including those set out
in Schedule 2.1(b) including, for greater certainty, all outstanding solicitations and
offers made to or by the Vendor to enter into any Vendor Contract;







	 	(c)	 	Leases. Subject to Section 7.10, all Leases, including, for greater certainty,
if permitted in accordance with the terms and conditions of the Leases, all prepaid
rents, security deposits, options to renew or purchase and rights of refusal contained
in the Leases or made pursuant thereto;







	 	(d)	 	Restrictive Covenants. Without limiting the effect of Section 2.1(b) above, and
to the extent transferable, the benefit of any restrictive covenants and other
contractual rights, including rights of indemnification and any rights of exclusive use
in respect of the Leased Property as more particularly set out in the Leases, if
applicable, obtained by the Vendor in the course of acquiring assets related to the
Business and the Purchased Assets from third parties;







	 	(e)	 	Leaseholds. All leasehold improvements to the Leased Property which were the
property of the Vendor as at the Time of Closing;







	 	(f)	 	Cash. All Cash of the Vendor as at the Effective Time in the Accounts
Receivable Trust Bank Account;







	 	(g)	 	Furniture, Fixtures and Office Equipment. All of the Vendor’s right, title and
interest to the furniture, fixtures and office equipment used in the Business,
including the furniture, fixtures and office equipment described in Schedule 2.1(g);










	 	(h)	 	Books and Records. All Books and Records;











	 	(i)	 	Licences and Permits. To the extent transferable, all rights under licences,
permits (including parking permits), approvals, consents, registrations, certificates
and other regulatory authorizations and enrolments currently held or necessary,
including under Applicable Law, for the lawful operation of the Business as now
conducted and the use or ownership of the Purchased Assets, and any pending
applications for or renewals of any of the foregoing (collectively, the “Permits”),
including those described in Schedule 2.1(i);







	 	(j)	 	Accounts Receivable. All Accounts Receivable of the Vendor;





 


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	 	(k)	 	Intellectual Property. All of the Vendor’s right, title and interest to all
Intellectual Property owned or licensed (as licensor or licensee) by the Vendor
relating to the Business and the Purchased Assets including:







	 	(i)	 	the Vendor’s name, all assumed fictional business names,
trade names, registered and unregistered trademarks, service marks and
applications for marks;







	 	(ii)	 	all patents, patent applications and inventions and
discoveries that may be patentable;







	 	(iii)	 	all registered and unregistered copyrights and
industrial designs in both published works and unpublished works;







	 	(iv)	 	all know-how, trade secrets, confidential or proprietary
information, software, technical information, data, manufacturing,
industrial and business processes and technology, plans, drawings and blue
prints;







	 	(v)	 	all rights in internet websites and internet domain names
owned by or registered in the name of the Vendor, whether or not presently
used, and all email addresses presently used by personnel of the Vendor for
purposes of the Business including email addresses provided by third party
service providers; and







	 	(vi)	 	the HearUSA Licence;







(collectively, the “Intellectual Property Assets”), including as set out in Schedule
2.1(k);




	 	(l)	 	Inventory. The inventory owned by the Vendor of or relating to the Business
(collectively, the “Inventory”) at the Effective Time, including finished goods,
supplies and replacement parts;







	 	(m)	 	Prepaid Expenses. Without limiting any of the foregoing, the benefit of
prepaid expenses relating to the Purchased Assets whether or not reflected on the
Balance Sheet (collectively, the “Prepaid Expenses”);







	 	(n)	 	Telephone Numbers. All telephone and facsimile numbers and other
communications numbers, address and points of contact of the Business;







	 	(o)	 	Customer, Patient and Supplier Files. All customer, patient and supplier lists,
records, files, and contact details and telephone numbers of the Business whether in
hard copy or electronic readable format;







	 	(p)	 	Goodwill. All goodwill relating to the Business, together with the exclusive
right for the Purchaser to represent itself as carrying on the Business in succession
to the Vendor and the right to use any words indicating that the Business is so carried
on;





 


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	 	(q)	 	 Warranty Rights. All warranty rights accruing to the Vendor;











	 	(r)	 	Purchased Shares. All of the issued and outstanding shares in the capital of
3371727 (the “Purchased Shares”).







	2.2	 	Excluded Assets






Notwithstanding anything in the foregoing Section 2.1, the Purchased Assets shall not include
any of the following property and assets (collectively, the “Excluded Assets”) and the Purchaser
shall in no way be construed to acquire any interest in any of the following:




	 	(a)	 	Taxes. All refundable or creditable Taxes of the Vendor, including income
taxes, sales taxes, and GST (or the right to receive such refunds or credits);








	 	(b)	 	Investments. All investments of the Vendor in marketable or other securities;










	 	(c)	 	Inter-Company Debt. All indebtedness of any Affiliate of the Vendor (other than
3371727) to the Vendor;







	 	(d)	 	Insurance. All property and public liability insurance policies of the Vendor
and all claims and rights thereunder;







	 	(e)	 	Corporate Records. All minute books, share certificate books, corporate seals
and other corporate records of the Vendor;







	 	(f)	 	Personnel Records. All personnel records and other records that the Vendor is
required by Applicable Law to retain, provided that the Purchaser shall be provided
with copies thereof;







	 	(g)	 	Employee Plans. Subject to Section 7.7(j), all rights in connection with the
assets of the Employee Plans; and







	 	(h)	 	Other. Accrued deferred compensation payable, retirement accounts and other
similar items accruing to the Vendor, that are not included as a Current Asset in the
Closing Balance Sheet.






If any of the Excluded Assets or any proceeds in respect thereof shall at any time come into the
possession of or under the control of the Purchaser or any of its employees, officers or agents,
such assets and/or proceeds, as applicable, shall be held by the Purchaser in trust for the benefit
of the Vendor. Within ten (10) Business Days from the date on which the Purchaser or any of its
employees, officers or agents, come into possession of or obtain control over any of such assets
and/or proceeds, as applicable, the Purchaser shall by notice in writing delivered to the Vendor in
accordance with the provisions hereof, so advise the Vendor. The Purchaser shall have a duty to
forthwith account and deliver over to the Vendor any of such assets and/or proceeds, as applicable.


 


- Page 13 -









 





ARTICLE 3 — PURCHASE PRICE




3.1 Purchase Price



Subject as hereinafter provided, the purchase price (the “Purchase Price”) payable by the
Purchaser to the Vendor for the Purchased Assets shall be $28,625,000.00.




	3.2	 	Satisfaction of Purchase Price and other Closing Payments






At the Time of Closing, the Purchaser shall satisfy the amount set forth in Section 3.1 as
follows:




	 	(a)	 	part of the Purchase Price shall be paid by the Purchaser as directed by Vendor
to the creditors of the Vendor disclosed pursuant to compliance with Section 4(1) of
the Bulk Sales Act (Ontario) and to such other Persons to whom payments are required to
be made at Closing;







	 	(b)	 	the amount of $1,000,000 of the Purchase Price (the “Escrow Amount”) shall be
paid by the Purchaser to the Escrow Agent to be held in accordance with the terms of
the Escrow Agreement; and







	 	(c)	 	the balance of the Purchase Price shall be paid by the Purchaser to the Vendor
or as it may direct.







	3.3	 	Assumption of Certain Liabilities by the Purchaser






Subject to the provisions of this Agreement, the Purchaser agrees to assume, pay, satisfy,
discharge, perform and fulfill, from and after the Time of Closing, the following liabilities and
obligations (the “Assumed Liabilities”) and no others:




	 	(a)	 	the liabilities and obligations of the Vendor that arise from and after the
Effective Time under Vendor Contracts (including purchase and sales orders) which were
entered into by the Vendor in the ordinary course of conducting the Business prior to
the Closing Date other than any liabilities or obligations arising out of or relating
to a breach that occurred prior to the Effective Time. For greater certainty, the
Purchaser shall not assume or be liable for any liabilities and obligations of the
Vendor that have accrued, even if not due, or become outstanding or otherwise relate to
events that have occurred prior to the Closing Date;







	 	(b)	 	any liabilities or obligations of the Vendor under written warranty agreements
given to customers in the ordinary course of business prior to the Closing Date other
than any liabilities or obligations arising out of or relating to a breach of such
warranty agreement that occurred prior to the Effective Time; and







	 	(c)	 	accrued and unused or unpaid vacation rights of the Employees in connection
with the Business as reflected on the Closing Balance Sheet.





 


- Page 14 -









 











	3.4	 	Excluded Liabilities






The Purchaser shall not assume, pay, satisfy, discharge, perform or fulfil and the Vendor
shall be solely responsible for all other liabilities and obligations of the Vendor whether related
to the Business and the Purchased Assets or otherwise (the “Excluded Liabilities”). For greater
certainty, the Vendor shall be responsible for all of its liabilities that are not Assumed
Liabilities.




	3.5	 	Purchase Price Adjustments at Closing







	 	(a)	 	For the purposes of determining the amount of applicable Excluded Liabilities,
any rents, reality taxes including local improvement rates, unmetered public or private
utility charges and unmetered cost of fuel, as applicable, and other applicable items
shall be apportioned on the basis that the Vendor will be responsible for a portion of
the total of such amounts for the calendar year in which the Closing Date occurs in the
ratio that the number of days in such calendar year up to and including the Closing
Date bears to 365. If any such amount has not been finally determined as of the
Closing Date, then the amount estimated and charged by the applicable payee, or in the
absence of such estimate the amount paid for the preceding calendar year, shall be used
to calculate such prorations. The aggregate pro rated amount shall be an adjustment to
the amount of cash due from the Purchaser to the Vendor at the Closing. The parties
shall readjust any such amounts within ten (10) business days following a request by
either party based on the actual amount of such item.







	 	(b)	 	For the purposes of making a preliminary determination of the Net Current Asset
Adjustment Amount, on the day prior to the Closing Date, the Vendor shall provide a pro
forma balance sheet reflecting (i) Current Assets as reflected in the Accounting
Records on the day prior to the Closing Date, and (ii) a reasonable accrual for Assumed
Liabilities. Based on the foregoing pro forma balance sheet, the parties acting
reasonably will determine an estimated Net Current Asset Adjustment Amount which, only
if positive, shall be an adjustment to the amount of cash due from the Purchaser to the
Vendor at the Closing.







	 	(c)	 	Following the Closing Date, the parties shall make an adjustment (the “Returns
Reserve Adjustment”) reflecting the impact on the Returns Reserve of any product sale
of Vendor that is (i) returned after the Closing Date and within 45 days of the
relevant sale and (ii) returned to the manufacturer by the Purchaser prior to the
expiry of the manufacturer’s return warranty period. To the extent that any portion of
the Returns Reserve remains unutilised after the expiry of 180 days following the
Closing Date, then such surplus shall be a Returns Reserve Adjustment and the Purchaser
shall pay such amount to the Vendor as an adjustment to the Purchase Price. To the
extent that product returns as set out above result in the Returns Reserve being
insufficient to satisfy all such returns, then any such deficiency shall be a Returns
Reserve Adjustment and shall be paid by the Vendor to the Purchaser as an adjustment to
the Purchase Price. The parties shall readjust any such amounts within ten (10)
business days following a request by either party based on the actual amount of such
item.





 


- Page 15 -









 











	3.6	 	Net Asset Adjustment to Purchase Price







	 	(a)	 	For the purposes hereof:







	 	(i)	 	“Net Current Asset Amount” means the amount, as of the
relevant time, calculated by subtracting the amount of accrued Assumed
Liabilities as of that date and the Returns Reserve from the value of the
Current Assets as of that date, all as set out in the Closing Balance Sheet.







	 	(ii)	 	“Net Current Asset Adjustment Amount” (which may be a
positive or negative number) will be equal to the amount determined by
subtracting the Net Current Asset Amount from the amount of $3,000,000.00.







	 	(b)	 	The Vendor shall prepare the Closing Balance Sheet and shall then determine the
Net Current Asset Amount as of the Effective Time. The Vendor shall deliver the
Closing Balance Sheet and its determination of the Net Current Asset Amount to the
Purchaser after forty-five (45) days but within sixty (60) days following the Closing
Date.







	 	(c)	 	If within thirty (30) days following delivery of the Closing Balance Sheet and
the Net Current Asset Amount calculation, the Purchaser has not given the Vendor
written notice of its objection as to the Net Current Asset Amount calculation (which
notice shall state the basis of the Purchaser’s objection), then the Net Current Asset
Amount calculation by the Vendor shall be binding and conclusive on the parties and
shall be used in computing the Net Current Asset Adjustment Amount.







	 	(d)	 	If the Purchaser duly gives the Vendor such notice of objection, and if the
Purchaser and the Vendor fail to resolve the issues outstanding with respect to the Net
Current Asset Amount calculation within thirty (30) days of the Vendor’s receipt of the
Purchaser’s objection notice the Vendor and the Purchaser shall submit the issues
remaining in dispute to PriceWaterhouse Coopers, Toronto (the “Independent
Accountants”) for resolution. If issues are submitted to the Independent Accountants
for resolution, (i) the Vendor and the Purchaser shall furnish or cause to be furnished
to the Independent Accountants such working papers and other documents and information
relating to the disputed issues as the Independent Accountants may request and are
available to that party or its agents and shall be afforded the opportunity to present
to the Independent Accountants any material relating to the disputed issues and to
discuss the issues with the Independent Accountants; (ii) the determination by the
Independent Accountants, as set forth in a notice to be delivered to both the Vendor
and the Purchaser within sixty (60) days of the submission to the Independent
Accountants of the issues remaining in dispute, shall be final, binding and conclusive
on the parties and shall be used in the calculation of the Net Current Asset Amount;
and (iii) the unsuccessful party in respect of the aggregate of the issues in dispute
shall bear the fees and costs of the Independent Accountants for such determination.





 


- Page 16 -









 











	 	(e)	 	If the Net Current Asset Adjustment Amount is positive, the Net Current Asset
Adjustment Amount shall be paid by wire transfer by the Vendor to an account
specified by the Purchaser. If the Net Current Asset Adjustment Amount is negative,
the Net Current Asset Adjustment Amount shall be paid by wire transfer by the
Purchaser to an account specified by the Vendor. Such payment shall be made within
three (3) business days after the calculation of the Net Current Asset Amount
becomes binding and conclusive on the parties pursuant to this Section 3.6. For
greater certainty, any amounts paid under this paragraph (e) by the Purchaser or the
Vendor, as applicable, shall be considered an adjustment to the Purchase Price.







	3.7	 	Allocation of Purchase Price






The Purchase Price shall be allocated among the Purchased Assets in the manner specified in
Schedule 3.7. The Purchaser and the Vendor agree to be bound by such allocation and to report the
purchase and sale of the Purchased Assets for all federal, provincial and local Tax purposes in a
manner consistent with such allocation.




	3.8	 	ETA Election






The Purchaser and the Vendor shall elect jointly under subsection 167(1) of the ETA, in the
form prescribed for the purposes of that provision, in respect of the sale and transfer hereunder
of the Purchased Assets, and the Purchaser shall file such election with the Canada Revenue Agency
on or before the time specified in subsection 167(1.1) of the ETA for this purpose.




	3.9	 	ITA Elections







	 	(a)	 	The Purchaser and the Vendor agree to make and file, in a timely manner, a
joint election to have the rules in section 22 of the ITA, and any equivalent or
corresponding provision under applicable provincial or territorial tax legislation,
apply in respect of the Accounts Receivable that are the subject of that election and
shall designate therein that portion of the Purchase Price allocated to the Accounts
Receivable that are the subject of such election in accordance with the procedures set
out in Section 3.7 of this Agreement as consideration paid by the Purchaser to the
Vendor.







	 	(b)	 	The Purchaser shall jointly elect with the Vendor in accordance with proposed
subsection 56.4(7) of the ITA to have the provisions of proposed subsection 56.4(5) of
the ITA apply to the restrictive covenants granted by the Vendor in the Non-Competition
Agreement. The Purchaser shall jointly elect with HearUSA, and the Vendor shall cause
HearUSA to so elect, in accordance with proposed subsection 56.4(7) of the ITA to have
the provisions of proposed subsection 56.4(5) of the ITA apply to the restrictive
covenants granted by HearUSA in the Non-Competition Agreement. Each of the foregoing
elections shall be filed in the manner and within the time prescribed in proposed
subsection 56.4(14) of the ITA.





 


- Page 17 -









 











	3.10	 	Transfer Taxes






The Purchaser shall be liable for and shall pay all federal and provincial sales taxes
(including any GST, retail sales taxes and land transfer taxes) and all other similar taxes,
duties, fees or other like charges of any jurisdiction payable in connection with the purchase of
the Purchased Assets. For greater certainty, the Vendor shall be responsible for all income taxes
payable by the Vendor as a result of the transactions contemplated herein.



ARTICLE 4 — REPRESENTATIONS AND WARRANTIES 

OF THE VENDOR




The Vendor represents and warrants, as of the date hereof, to the Purchaser with respect to
the Vendor and 3371727 as follows, and the Vendor acknowledges that the Purchaser is relying on
such representations and warranties in connection with its purchase of the Purchased Assets.




	4.1	 	Organization







	 	(a)	 	Each Company is a company validly existing under the laws of Canada and has the
corporate power to own or lease its property and to carry on the Business as now being
conducted by it and to execute and deliver and perform its obligations under this
Agreement.







	 	(b)	 	HearUSA is a company validly existing under the laws of Delaware and has the
corporate power to execute and deliver and perform its obligations under this
Agreement.







	4.2	 	Authorization and Enforceability







	 	(a)	 	All necessary corporate action has been taken by each of the Companies and
HearUSA to authorize the execution and delivery by it of, and the performance of its
obligations under, this Agreement.







	 	(b)	 	This Agreement has been duly executed and delivered by each Company and HearUSA
and constitutes a legal, valid and binding obligation of each of them, enforceable
against each of them by the Purchaser in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency and other laws affecting the
rights of creditors generally and except that equitable remedies may only be granted in
the discretion of a court of competent jurisdiction.







	4.3	 	Business and Affairs of 3371727







	 	(a)	 	The authorized, issued and outstanding capital of 3371727 is as described on
Schedule 4.3(a). The Vendor is, and at the Time of Closing will be, the registered and
beneficial holder of the Purchased Shares with good and marketable title thereto, free
and clear of all Encumbrances. There are no rights, subscriptions, warrants, options,
conversion rights, calls, commitments or plans or agreements of any kind outstanding
that would enable any person to purchase or otherwise acquire any shares or other
securities of 3371727, including any securities
convertible into or exchangeable or exercisable for shares or other securities of
3371727.





 


- Page 18 -









 











	 	(b)	 	The only assets of 3371727 are Cash and Accounts Receivable of 3371727 and
those 3371727 Contracts expressly described in Schedule 4.3(b). The only liabilities
of 3371727 are accounts payable in an amount not in excess of the Cash and Accounts
Receivable of 3371727, and liabilities and obligations of 3371727 that will arise from
and after the Effective Time under 3371727 Contracts which were entered into by 3371727
in the ordinary course of conducting the Business prior to the Closing Date.







	4.4	 	Corporate Records of 3371727






The minute books of the 3371727 contain true, correct and complete copies of its charter
documents, and its by-laws. The minutes of meetings of its board of directors and every committee
thereof and of its shareholders, including written resolutions of its directors and shareholders
and the share certificate book, register of shareholders, register of transfers and register of
directors and officers of the Corporation are complete and accurate in all material respects.




	4.5	 	Tax Matters







	 	(a)	 	Tax Matters of 3371727







	 	(i)	 	Tax Returns of 3371727. 3371727 has duly and timely
filed all Tax Returns required to be filed by it with the appropriate Tax
Authority. Each such Tax Return is correct and complete. 3371727 is not
required to make any filing in respect of Taxes in any jurisdiction outside
Canada.







	 	(ii)	 	Payment of Taxes. 3371727 has duly and timely paid all
Taxes, including all instalments on account of Taxes and all Taxes assessed
or reassessed by any Tax Authority, that are due and payable by it.
Adequate provision has been made in the Existing Balance Sheets for all
Taxes owing by 3371727 that relate to periods ending on or prior to March
28, 2009, whether or not reflected in the Tax Returns of 3371727. Adequate
provision will also be made in the Closing Balance Sheet for all Taxes owing
by 3371727 that relate to periods ending on or prior to the Closing Date.
The provisions for Taxes reflected in the Existing Balance Sheets and
Closing Balance Sheet are, or will be, as applicable, sufficient to cover
all liabilities for Taxes of 3371727, whether or not assessed, reassessed or
disputed, or that will accrue and be owing in respect of its operations and
property during the periods covered by such Existing Balance Sheets and
Closing Balance Sheet. For greater certainty, except to the extent reflected
in the provisions for Taxes in the Existing Balance Sheets and Closing
Balance Sheet, 3371727 is not liable, or will not be liable, as applicable,
for any Taxes or for the payment of any instalments in respect of Taxes due
in respect of its current taxation year.





 


- Page 19 -









 











	 	(iii)	 	Assessments and Reassessments. Except as disclosed in
Schedule 4.5, all Tax Returns required to be filed by 3371727 for periods
ending on or prior to the Closing Date have been assessed by the relevant
Tax Authority as filed and notices of assessment have been issued to 3371727
by the relevant Tax Authority. No notice of reassessment for Taxes has been
issued to 3371727 by a Tax Authority for periods ending on or prior to the
Closing Date except as disclosed in Schedule 4.5. 3371727 is not in the
process of negotiating any proposed assessment or reassessment with any Tax
Authority. 3371727 has not received any indication from any Tax Authority
that an assessment or reassessment is proposed in respect of any Taxes or
Tax Returns, regardless of its merits. To the knowledge of the Vendor,
there are no inquires, audits, investigations, disputes, objections, appeals
or other proceedings either in progress, pending or threatened against
3371727 in connection with any Taxes or Tax Return.







	 	(iv)	 	Extensions of Time. 3371727 has not requested, offered
to enter into, or entered into, any agreement or other arrangement, or
executed any waiver, providing for any extension of time within which (i) to
file any Tax Return covering any Taxes for which 3371727 is or may be
liable; (ii) to file any elections, designations or similar filings relating
to Taxes for which 3371727 is or may be liable; (iii) 3371727 is required to
pay or remit Taxes or amounts on account of Taxes; or (iv) any Tax Authority
may assess or collect Taxes for which 3371727 is or may be liable.







	 	(v)	 	Withholdings. 3371727 has duly and timely withheld all
Taxes and other amounts required by Applicable Law to be withheld by it,
including Taxes and other amounts required to be withheld by it in respect
of any amount paid or credited or deemed to be paid or credited by it to or
for the account or benefit of any Person, including any employees, officers
or directors and any non-resident Person, and has duly and timely remitted
to the appropriate Tax Authority such Taxes and other amounts required by
Applicable Law to be remitted by it.







	 	(vi)	 	Collection and Remittance of GST, Harmonized Sales Tax
and Provincial Sales Tax. 3371727 has duly and timely self-assessed and
collected all amounts on account of any sales or transfer taxes, including
goods and services, harmonized sales and provincial sales taxes, required by
Applicable Law to be self-assessed or collected by it, and has duly and
timely remitted to the appropriate Tax Authority any such amounts required
by Applicable Law to be remitted by it.







	 	(b)	 	Tax Matters of Vendor







The Vendor has paid all Taxes, including all instalments on account of Taxes for the
current year, that are due and payable by it, as well as all professional fees
incurred in connection with such Taxes, which are capable of forming or resulting in
an Encumbrance (other than a Permitted Encumbrance) on the Purchased Assets or the
Business or which could become a liability or obligation of the
Purchaser. To the knowledge of the Vendor there are no inquiries, audits,
investigations, disputes, objections, appeals or other proceedings either in
progress, pending or threatened in connection with any Taxes in respect of the
Business or the Purchased Assets.


 


- Page 20 -









 





4.6 Residency of Vendor




The Vendor is not a non-resident of Canada for the purposes of the ITA.




	4.7	 	No Violation







	 	(a)	 	The execution and delivery of this Agreement by each Company and HearUSA and,
subject to Section 4.8, the consummation of the transactions herein provided for will
not result in a breach or violation of any of the provisions of, or constitute a
material default under, or conflict with or cause the acceleration of any obligation of
such Company under: (i) any Contract listed on Schedules 2.1(b) and 4.3(b); (ii) any
provision of the constating documents or by-laws or resolutions of the board of
directors (or any committee thereof) or shareholders of such Company; (iii) any Permit
referred to on Schedule 2.1(g); or (iv) any Applicable Law.







	 	(b)	 	The execution and delivery of this Agreement by each Company and the
consummation of the transactions herein provided for will not result in the creation or
imposition of any Encumbrance on any of the Purchased Assets.







	4.8	 	Consents and Approvals







	 	(a)	 	Except as described in Schedule 4.8(a), there is no requirement for any Company
to make any filing with, give any notice to or obtain any Permit from any Authority as
a condition to the lawful consummation of the transactions contemplated by this
Agreement, other than those which relate solely to the identity of the Purchaser or the
nature of any business carried on by the Purchaser.







	 	(b)	 	There is no requirement under any Contract listed in Schedules 2.1(b) and
4.3(b) or under any Lease listed in Section 2.1(c) to give any notice to, or to obtain
the consent or approval of, any party to such agreement, instrument or commitment
relating to the consummation of the transactions contemplated by this Agreement, except
for the notifications, consents and approvals described in Schedule 4.8(b).







	4.9	 	Accounts Receivable






All Accounts Receivable that are reflected on the Closing Balance Sheet or on the Accounting
Records of the Vendor as of the Closing Date represent or will represent valid obligations arising
from sales actually made or services actually performed by the Vendor in the ordinary course of
business. Except to the extent paid prior to the Closing Date, such Accounts Receivable are or
will be as of the Closing Date current and collectable net of the respective reserves shown on the
Closing Balance Sheet (which reserves are adequate and calculated consistent with past practice and
will not represent a Material Adverse Effect in the composition of such Accounts Receivable in
terms of aging). Subject to such reserves, each of such Accounts
Receivable either has been or will be collected in full, without any set off within one
hundred eighty (180) days after the day on which it first becomes due and payable. There is no
contest, claim, defence or right of set off, other then returns in the ordinary course of business
of the Vendor, under any Contract with any account debtor of an Account Receivable relating to the
amount or validity of such Account Receivable.


 


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	4.10	 	Inventories






All items included in the Inventories consist of a quality and quantity useable and saleable
in the ordinary course of business of the Vendor, except for obsolete items and items of
below-standard quality, all of which shall be written off or written down to net realizable value
in the Closing Balance Sheet or in the Accounting Records of the Vendor as of the Closing Date, as
the case maybe. The Vendor is not in possession of any inventory not owned by the Vendor,
including goods already sold. All of the Inventories have been valued at the lower of cost or net
realizable value on a first in, first out basis. Inventories now on hand that were purchased after
the date of the Existing Balance Sheets were purchased in the ordinary course of business of the
Vendor at a cost not exceeding market prices prevailing at the time of purchase. The quantities of
each item of Inventories are not excessive but are reasonable in the present circumstances of the
Business.




	4.11	 	Title to Personal and other Property and Sufficiency of Assets






The Purchased Assets are owned beneficially by the Vendor with good title thereto, free and
clear of all Encumbrances, other than Permitted Encumbrances. The Purchased Assets constitute all
the assets sufficient for the Purchaser to operate the Business in the manner presently operated by
the Vendor, except as contemplated by the HearUSA License and the Support Agreement.




	4.12	 	No other Agreement to Purchase






No person other than the Purchaser has any written or oral agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement or option
for the purchase or acquisition from the Vendor of any of the Purchased Assets other than pursuant
to purchase orders accepted by the Vendor for products in the ordinary course of business.




	4.13	 	Location of Real Property






Schedule 4.13 sets forth the addresses and area descriptions of the Leased Property. Neither
Company owns any real property, and neither of them leases any real property other than the Leased
Property.




	4.14	 	Leased Property







	 	(a)	 	Neither Company is a party to any lease or agreement to lease in respect of any
real property, whether as a lessor or lessee, in connection with the Business, other
than the Leases. The Leases are in good standing and in full force and effect and
there are no existing defaults in respect of any covenants, conditions or obligations
contained in the Leases, except where such breach would not,
individually or in the aggregate with any other such breaches, have a Material
Adverse Effect.








	 	(b)	 	Use of the Leased Property for the various purposes for which it is presently
being used is permitted as of right under the Leases, and to the knowledge of the
Vendor all applicable zoning legal requirements. To the knowledge of the Vendor, all
Leased Property, including any improvements thereto are in compliance with all
applicable legal requirements, including those pertaining to zoning, building and the
disabled, are in good repair and in good condition, ordinary wear and tear accepted,
and are free from latent and patent defects.






 


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	 	(c)	 	To the knowledge of the Vendor, the Leased Property has not been taken or
expropriated by any Authority, nor has any written notice in respect thereof been
received by the Vendor.







	 	(d)	 	To the knowledge of the Vendor, the Leased Property has adequate rights of
ingress and egress for the operation of the Business in the ordinary course by a
reasonable and prudent owner and operator of the Business.







	 	(e)	 	The Vendor has not received any written notice, and to the knowledge of the
Vendor, is not aware, of any special assessments or levies (including local improvement
charges) on account of on or off site municipal services constructed to service the
Leased Property. All amounts due and owing by the Vendor to any Authority in respect
of the Leased Property have been paid.







	 	(f)	 	The Vendor has not received from any Authority having jurisdiction any written
notice or other information which would show that any of the buildings and other
installations or improvements on the Leased Property are or will become subject to any
outstanding work order or notice of defect or non-compliance from any Authority.







	 	(g)	 	Notwithstanding anything contained in this Agreement, in cases where the rights
and benefits of the Vendor to any of the Leased Properties arise out of a sublease, the
Vendor makes no representations regarding the force and effect of the head lease, the
compliance of the sublandlord with the terms and conditions of such head leases, or to
any default existing under such head leases which may result in the cancellation or
disclaimer of the related Leases. Subject to the foregoing, the Vendor has not
received any written notice in respect of any defaults under any such head leases.







	4.15	 	Compliance with Laws; Permits






Each Company has complied in all material respects with all Applicable Laws (save and except
for Environmental Laws, the compliance of which is dealt with in Section 4.19 hereto). Schedule
2.1(g) sets out a complete and accurate list of all Permits held or granted to each Company, which
Permits are all those necessary for the operation of the Business as currently conducted. All such
Permits are valid, subsisting and in good standing and the Vendor is not in default or breach of
any Permit, except where such default or breach would not have a Material
Adverse Effect and, to the knowledge of the Vendor, no proceeding is pending or threatened to
revoke or limit any Permits.


 


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	4.16	 	Litigation






Except as described in Schedule 4.16, there are no applications, orders, actions, suits,
proceedings, audits, investigations or complaints (whether or not purportedly on behalf of a
Company) pending or, to the knowledge of the Vendor, threatened, at law or in equity or before or
by any Authority affecting the Business, the Purchased Assets or the business and assets of
3371727.




	4.17	 	Contracts






Schedules 2.1(b) and 4.3(b), respectively, set out a complete list of the Vendor Contracts and
3371727 Contracts that will extend over a period of thirty (30) days or involve consideration in
excess of $5,000 and are necessary to operate the Business as at the date hereof. The Vendor has
made available to the Purchaser complete copies of such Vendor Contracts. Except as disclosed in
Schedule 2.1(b), all such Vendor Contracts are in good standing and in full force and effect and no
default has occurred thereunder, and, to the knowledge of the Vendor, no event, condition or
occurrence exists which, after notice or lapse of time or both, would constitute a default
thereunder, except in each case where such default would not, individually or in the aggregate with
all such other defaults, have a Material Adverse Effect.




	4.18	 	Insurance






The Vendor has all of its property and assets insured against loss or damage by all insurable
hazards or risks on a replacement cost basis and such insurance coverage will be continued in full
force and effect as of the Time of Closing. Copies of all applicable policies of insurance have
been provided by the Vendor to the Purchaser, a list of which is included in Schedule 4.18.




	4.19	 	Environmental






Except as disclosed in Schedule 4.19 (or the relevant portion thereof where so indicated
below):




	 	(a)	 	Except as described in Section 4.19(a) of Schedule 4.19, to the knowledge of
the Vendor, the Business and all operations on the Leased Property are in material
compliance with Environmental Laws, and, to the knowledge of the Vendor, there are no
orders under or pursuant to Environmental Laws by any Authority issued or pending with
respect to the Leased Property.







	 	(b)	 	To the knowledge of the Vendor, the Vendor has all material Environmental
Permits required under Environmental Laws for the operation of the Business, all of
which are described in Section 4.19(b) of Schedule 4.19, other than any Environmental
Permits included in the Excluded Assets. To the knowledge of the Vendor, each such
Environmental Permit is valid, subsisting and in good standing, and the Vendor is not
in default or breach of any such Environmental Permit.





 


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	 	(c)	 	Except as disclosed in Section 4.19(c) of Schedule 4.19, to the Vendor’s
knowledge, there are no underground storage tanks at any Leased Property that could
give rise to any claims against or obligations or liabilities for the Vendor under
Environmental Laws. To the knowledge of the Vendor, the Vendor has not removed, closed
or abandoned any underground storage tanks at the Leased Property in a manner that
could give rise to any claims against or obligations or liabilities for the Vendor
under Environmental Laws, and, to the Vendor’s knowledge, any and all underground
storage tanks that have been removed from the Leased Property have been removed or
closed in accordance with all Environmental Laws.







	4.20	 	Intellectual Property






Schedule 2.1(k) sets out all registered or pending Intellectual Property as of the Time of
Closing (including the HearUSA Licence but excluding commonly available software programs with an
individual value of less than $500 under which either Company is the licensee) owned or used by the
Vendor in connection with the Business, which Intellectual Property is all that is necessary for
the operation of the Business as currently conducted. The Vendor is the beneficial owner of or has
the right to use such Intellectual Property, without payment to any third party, and, except as set
out in Schedule 4.8(b), is not bound by any contract whatsoever that limits or impairs its ability
to sell, transfer, assign or convey, or that otherwise affects such Intellectual Property. The
Vendor has not granted any interest in or right to use all or any portion of such Intellectual
Property to any other person. The Vendor has not received any notice that the use of the
Intellectual Property infringes upon or breaches any industrial or intellectual property rights of
any other person.




	4.21	 	Labour Relations and Collective Agreements






None of the employees of the Companies is represented by a trade union or any other employee
association or organization. To the knowledge of the Vendor, other than as disclosed in Schedule
4.21, there are not any current attempts to organize or establish any trade union or employee
association with respect to any Employees of the Companies, nor is there any certification of any
such union with regard to a bargaining unit. There are no applications for certification pending
and no pending or outstanding applications, proceedings or orders of any labour relations board or
similar court, tribunal or board concerning any of the Employees. To the knowledge of the Vendor,
there are no threatened applications to be brought before any labour relations board or similar
court, tribunal or board concerning the Employees. Except as disclosed in Schedule 4.21, there are
no outstanding grievances or arbitration proceedings and there are no unsatisfied arbitration
awards to which the Vendor is a party. There are no grievances against the Vendor of which it has
received written notice under any collective agreement, other than as disclosed in Schedule 4.21.




	4.22	 	Employees







	 	(a)	 	Schedule 4.22 contains a complete and accurate list of all individuals by
employee number who are full-time, part-time or casual employees or individuals engaged
on contract to provide employment or consulting services to a Company in connection
with the Business (the “Employees”) as of March 31, 2009
specifying the length of hire, title or classification and rate of salary or hourly
pay and commission or bonus entitlements (if any) for each such Employee. The
Purchaser agrees to keep such employee information confidential.







	 	(b)	 	All employment, management and consulting Contracts pursuant to which Employees
have been engaged by each Company are set out in Schedule 2.1(b) and, except as
disclosed in Schedule 2.1(b), there are no incentives or special compensation
arrangements, contracts or agreements with respect to any Employees of the Companies.






 


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	 	(c)	 	Each Company has duly and timely made all deductions (including Tax deductions)
required by Applicable Law or by Contract to be made from employee wages, salaries or
benefits relating to a period ending on or prior to the Closing Date and has duly and
timely remitted the amounts deducted and all related employer contributions required to
the appropriate, insurers and Authorities for all periods ending on or prior to the
Closing Date.







	 	(d)	 	Each Company is in compliance in all material respects with all applicable
Employment Legislation.







	 	(e)	 	To the knowledge of the Vendor, there are no circumstances, claims or frequency
of claims which may expose the Purchaser to any charges or assessments on account of
workplace safety and insurance or workers’ compensation, other than the standard
charges or assessments for the rate group and classification of the Business.







	 	(f)	 	Except as disclosed in Schedule 4.22, no Employee or former Employee of either
Company is in receipt of and, to the knowledge of the Vendor, no Employee or former
Employee has threatened to make, a claim for any benefits under any weekly indemnity,
sickness and accident, long term disability or workers’ compensation plan or
arrangement or any other form of disability benefit program. All assessments,
penalties, fines, levies, charges, surcharges, Taxes, premiums or other amounts due and
payable and relating to any disability insurance arising on or prior to the Closing
Date or relating to a period ending on or prior to the Closing Date have been or will
be paid by a Company on or prior to the Time of Closing.







	 	(g)	 	Other than as disclosed in Schedule 4.22, there are no complaints,
applications, investigations, orders, prosecutions or proceedings against either
Company under the Pay Equity Act (Ontario).







	 	(h)	 	Any unpaid Taxes, penalties, interest or other amounts due under the Employer
Health Tax Act (Ontario) and payable by any of the Companies on or prior to the Closing
Date or relating to a period ending on or prior to the Closing Date have been paid or
will be paid by such Company on or prior to the Time of Closing. Each Company is in
compliance with the Employer Health Tax Act (Ontario).







 


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	4.23	 	Employee Plans







	 	(a)	 	Schedule 4.23 identifies each retirement, pension, supplemental pension
benefit, bonus, stock purchase, profit sharing, stock option, deferred compensation,
severance or termination pay, insurance, medical, hospital, dental, vision care, drug,
sick leave, disability, salary continuation, legal benefits, unemployment benefits,
vacation, pay equity, incentive or other compensation plan or arrangement or other
employee benefit which is maintained, or otherwise contributed to or required to be
contributed to, by the Vendor for the benefit of Employees (the “Employee Plans”).
Each Employee Plan has been maintained, administered and funded in material compliance
with its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Employee Plan. The Vendor has made
available to the Purchaser summaries or current and complete copies of all Employee
Plans.







	 	(b)	 	All material obligations of each Company required to be performed in connection
with the Employee Plans established therefor up to the date hereof have been performed,
and there are no outstanding defaults or violations by any party thereto. There have
been no improper withdrawals, applications or transfers of assets from any Employee
Plans.







	 	(c)	 	All required contributions and/or premiums to be made under the Employee Plans
have been fully paid to the date hereof in a timely fashion in accordance with the
terms of that Employee Plan and all Applicable Law, and no Taxes, penalties or fees are
owing or eligible under any Employee Plans.







	 	(d)	 	There are no outstanding actions, suits or claims pending or, to the knowledge
of the Vendor, threatened concerning the assets held in respect of the Employee Plans
(other than routine claims for the payment of benefits submitted by members or
beneficiaries in the normal course), and there is no litigation, legal action, suit,
investigation, claim, counterclaim or proceeding pending or, to the knowledge of the
Vendor, threatened concerning the Employee Plans.







	 	(e)	 	To the knowledge of the Vendor, no written or oral representations or promises
have been made to the Employees to establish new employee plans or to increase the
benefits under the existing Employee Plans.







	4.24	 	Balance Sheets






The Existing Balance Sheets fairly present (and the Closing Balance Sheet will fairly present)
in all material respects the financial condition of the Vendor as at the respective dates of such
balance sheets, all in accordance with GAAP. The Existing Balance Sheets and the Closing Balance
Sheet reflect and will reflect the consistent application of such accounting principles through out
the periods involved. The Existing Balance Sheets and the Closing Balance Sheet have been and will
be prepared from and are in accordance with the Accounting Records of the Vendor. The Vendor has
also delivered to the Purchaser copies of all letters from the Vendor’s accountants to the Vendor,
HearUSA, or the board of directors or audit committee of either of them, in connection with or
relating to the financial condition and results from operations, Accounting Records, Books and
Records, or financial statements of the Vendor, during the five
(5) years preceding the execution of this Agreement, together with copies of all responses
thereto.


 


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	4.25	 	Books and Records






The Books and Records, all of which have been made available to the Purchaser, are complete
and correct in all material respects and represent actual, bona fide transactions and have been
maintained in accordance with sound business practices, including the maintenance of an adequate
system of internal controls. The minute books of the Vendor, all of which have been made available
to the Purchaser, contain accurate and complete records in all material respects of all meetings
held, and corporate action taken, by the shareholders, the board of directors and committees of the
board of directors, and no meeting of any shareholders, board of directors or committee has been
held for which minutes have not been prepared or are not contained in such minute books.




	4.26	 	No Undisclosed Liabilities






The Vendor has no liability that would be required to be reflected or reserved against in a
balance sheet prepared in accordance with GAAP, except for liabilities reflected or reserved
against in the Existing Balance Sheets and current liabilities incurred in the ordinary course of
business of the Vendor since the respective dates of the Existing Balance Sheets.




	4.27	 	Ordinary and Normal Course






Since December 27, 2008, the Business has been carried on in the ordinary and normal course,
consistent with past practice, and there has been no Material Adverse Effect.




	4.28	 	No Bankruptcy or Insolvency






None of the Companies is an insolvent person nor has it committed an act of insolvency within
the meaning of the Bankruptcy and Insolvency Act (Canada), nor has it taken any steps to have
itself declared bankrupt or wound up, reorganized, or to have a receiver appointed over any of its
assets.




	4.29	 	Tax Registrations






The Vendor is a registrant for purposes of the ETA whose registration number is
141759308RT0001.




	4.30	 	No Subsidiaries






The Vendor does not own, either as registered or beneficial owner, shares or interests in any
other Person, save and except for 3371727. 3371727 does not own, either as registered or beneficial
owner, shares or interests in any other Person.




	4.31	 	Brokerage Fees






Neither HearUSA nor either of the Companies has entered into any agreement which would
entitle any Person to any valid claim against the Purchaser for a brokers’ commission,
finders’ fee or any like payment in respect of the purchase and sale of the Purchased Assets
or any other matter contemplated by this Agreement.


 


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	4.32	 	Bank Accounts






Schedule 4.32 sets out a complete and accurate list and particulars of all bank accounts
maintained and operated by the Companies in respect of the Business.



ARTICLE 5 — REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER




The Purchaser represents and warrants to the Vendor as follows and acknowledges and confirms
that the Vendor is relying on such representations and warranties in connection with its sale of
the Business and the Purchased Assets.




	5.1	 	Organization






The Purchaser is existing under the laws of Ontario and has the corporate power to enter into
this Agreement and to perform its obligations hereunder.




	5.2	 	Authorization






All necessary corporate action has been taken by the Purchaser to authorize the execution and
delivery by it of, and the performance of its obligations under, this Agreement. This Agreement
has been duly executed and delivered by the Purchaser. This Agreement is a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser by the Vendor in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that equitable remedies may only be granted
in the discretion of a court of competent jurisdiction.




	5.3	 	No Violation






The execution and delivery of this Agreement by the Purchaser and the consummation of the
transactions herein provided for will not result in a material breach or violation of any of the
provisions of, or constitute a material default under, or materially conflict with or cause the
acceleration of any obligation of the Purchaser under: (i) any material contract or agreement to
which the Purchaser is a party or by which it is or its properties are bound; (ii) any provision of
the constating documents or by-laws or resolutions of the board of directors (or any committee
thereof) or the shareholders of the Purchaser; (iii) any material judgment, decree, order, award,
law, statute, ordinance, regulation, rule or by-law of any Authority having jurisdiction over the
Purchaser, except where such breach, violation, default, conflict or acceleration would not prevent
the Purchaser from fulfilling its obligations under this Agreement.




	5.4	 	Consents and Approvals






There is no requirement for the Purchaser to make any filing with, give any notice to or
obtain from any Authority any licence, permit, approval, consent, registration, certificate or
other regulatory authorization as a condition to the lawful consummation of the transactions
contemplated by this Agreement. There is no requirement under any contract or agreement to
which the Purchaser is a party or by which it is bound to give any notice to, or to obtain the
consent or approval of, any party to such contract or agreement relating to the consummation of the
transactions contemplated by this Agreement, the failure of which to obtain would prevent the
Purchaser from fulfilling its obligations under this Agreement.


 


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	5.5	 	GST Registration






The Purchaser is a registrant for purposes of the ETA whose registration number is
814712824RT0001.




	5.6	 	Brokerage Fees






The Purchaser has not entered into any agreement which would entitle any person to any valid
claim against a HearUSA Company for a brokers’ commission, finders’ fee or any like payment in
respect of the purchase and sale of the Purchased Assets or any other matter contemplated by this
Agreement.




	5.7	 	No Bankruptcy or Insolvency






The Purchaser is not an insolvent person nor has it committed an act of insolvency within the
meaning of the Bankruptcy and Insolvency Act (Canada), nor has it taken any steps to have itself
declared bankrupt or wound up, reorganized, or to have a receiver appointed over any of its assets.



ARTICLE 6 — SURVIVAL OF COVENANTS,

REPRESENTATIONS AND WARRANTIES





	6.1	 	Survival of Representations and Warranties of the Vendor






The representations and warranties of the Vendor contained in the Article 4 or any other
agreement, certificate or instrument delivered pursuant to this Agreement shall survive the Closing
for a period of twenty-four (24) months from the Closing Date, except for:




	 	(a)	 	those matters set out in Sections 4.1, 4.2 and 4.3(a) which shall survive the
Closing Date indefinitely;







	 	(b)	 	the Vendor’s representations and warranties relating to tax matters arising in
or in respect of a particular period ending on, before or including the Closing Date
shall survive until the Tax Authorities shall no longer be entitled to assess or
reassess liability for Taxes against the Vendor or 3371727 for that particular period,
having regard, without limitation to any waivers given by the Vendor or 3371727 in
respect of any taxation year; and







	 	(c)	 	fraudulent or willfully false representations and warranties which shall
survive indefinitely,






and notwithstanding the Closing and any inspection or inquiries made by or on behalf of the
Purchaser, shall continue in full force and effect for the benefit of the Purchaser, after which
time the Vendor shall be released from all obligations in respect of such representations and
warranties except with respect to any Claims asserted by the Purchaser in accordance with Section
10.3 hereof before the expiration, as applicable, of such period.


 


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	6.2	 	Survival of the Representations and Warranties of the Purchaser






The representations and warranties of the Purchaser contained in this Agreement shall survive
the closing of the transactions contemplated herein until the day that is twenty-four (24) months
following the Closing Date, and notwithstanding the Closing and any inspection or inquiries made by
or on behalf of the Vendor, shall continue in full force and effect for the benefit of the Vendor,
after which time the Purchaser shall be released from all obligations in respect of such
representations and warranties except with respect to any Claims asserted by the Vendor in
accordance with Section 10.3 hereof before the expiration of such period.




	6.3	 	Survival of Covenants






To the extent that they were not required to be or have not been fully performed at or prior
to the Time of Closing, and have not been waived, if applicable, the covenants of the Vendor and
the Purchaser contained in this Agreement and any document executed or delivered by any party
hereto shall survive the Closing of the transactions contemplated herein in accordance with their
respective terms.



ARTICLE 7 — OTHER COVENANTS




	7.1	 	Regulatory Approvals






The Vendor shall cooperate with the Purchaser and render all necessary assistance required by
the Purchaser in connection with any application, notification or filing of the Purchaser in
connection with these transactions.




	7.2	 	Consents and Approvals






Subject to Section 7.10, the Vendor shall use its reasonable commercial efforts to give or
obtain, at the Vendor’s own expense, at or prior to the Time of Closing, the notices, consents and
approvals described in Schedule 4.8(a) and 4.8(b).




	7.3	 	Bulk Sales Act






The Vendor shall, on or before the Time of Closing, deliver to the Purchaser the statement as
to its creditors duly verified by affidavit in compliance with subsection 4(i) of the Bulk Sales
Act (Ontario), and shall take such steps as Purchaser may require, acting reasonably, to ensure
that adequate provision is made for the immediate payment in full following the Closing of all
creditors disclosed in the Vendor’s statement.




	7.4	 	Accounts Receivable Trust Agreement






The parties acknowledge that all bank accounts maintained by the Vendor in connection with the
Business are non-transferable. The parties acknowledge and agree that any and all cash deposits
made to such bank accounts after the Effective Time shall be received into such accounts for the
benefit of and on behalf of the Purchaser, and by the Vendor as bare trustee and
agent for the Purchaser. At the Time of Closing, the Vendor and the Purchaser shall each
execute and deliver the Accounts Receivable Trust Agreement, and shall perform its obligations
thereunder in accordance with its terms.


 


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	7.5	 	Delivery of Books and Records






At the Time of Closing there shall be delivered to the Purchaser by the Vendor all of the
Books and Records. The Purchaser agrees that it will maintain and preserve the Books and Records
so delivered to it for a period of eight (8) years from the Closing Date, or for such longer period
as is required by any Applicable Law, and will permit the Vendor or its authorized representatives
reasonable access thereto in connection with their affairs relating to its matters.




	7.6	 	Corporate Action






On or before the Time of Closing, each of the Companies shall take or cause to be taken all
necessary corporate action, steps and proceedings to approve or authorize the transfer of the
Purchased Assets to the Purchaser and the execution and delivery of this Agreement and the other
agreements and documents contemplated hereby and to cause all necessary meetings of directors and
shareholders, as applicable, of each of the Companies to be held for such purpose.




	7.7	 	Employee Matters







	 	(a)	 	The Vendor agrees to provide the Purchaser with an up-to-date list of the names
of the Employees at least two (2) Business Days and not more than four (4) Business
Days prior to the Closing Date. The Purchaser agrees that, as soon as practicable
following the Effective Time, it shall provide written offers of employment to all
Employees on such list effective as at the Effective Time, on terms and conditions of
employment substantially similar to, and at least as favourable as, the terms and
conditions of employment then applicable to the Employees. Except as provided in this
Section 7.7, the Purchaser shall not be obligated to any Employee who refuses the
Purchaser’s offer of employment. The Vendor shall approve the written offers of
employment prior to the Purchaser providing such letters to the Employees. Such
approval by the Vendor shall not be unreasonably withheld or delayed. The Vendor shall
render all reasonable assistance to encourage each Employee to accept the Purchaser’s
offer of employment.







	 	(b)	 	The Vendor shall employ all of the Employees set out in Schedule 4.16 until the
Time of Closing except for any Employees who prior to the Time of Closing: (i) are
terminated for cause; (ii) are terminated with the Purchaser’s consent, which consent
shall not be unreasonably withheld; (iii) voluntarily resign; or (iv) retire.







	 	(c)	 	During the period from March 28, 2009 to the Time of Closing, the Vendor shall
not have hired any employees or increased the wages of any Employees, except in the
normal course or as required by contract or Applicable Law, or with the written consent
of the Purchaser.





 


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	 	(d)	 	Within five (5) Business Days following the Closing Date, the Vendor shall
settle, and pay to each of the Employees, all salaries, commissions, bonuses, and other
amounts that may become payable to or receivable by such Employees for all periods
ending on or before the Closing Date, including accumulated vacation not provided
for as an Assumed Liability or on the Closing Balance Sheet with pay credits in
respect of their employment with the Business or any predecessor of the Business,
and all termination and severance payments and benefits claimed by any Employees who
do not accept offers of employment made by the Purchaser in accordance with Section
7.7(a).







	 	(e)	 	The Purchaser shall be solely responsible for, and shall indemnify the Vendor
from and against, all salaries, commissions, bonuses and other amounts payable to
Employees in relation to any period of employment by the Purchaser and all termination
and severance payments and benefits claimed by any Employees who are terminated or
permanently laid off by the Purchaser after the Closing Date.







	 	(f)	 	The Employees shall cease to participate in, accrue benefits under or be
covered by the Employee Plans set out in Schedule 7.7(f) (the “Terminated Plans”) as of
the Closing Date. Effective on the Closing Date, the Purchaser shall establish
employee plans (the “Purchaser Employee Plans”) which shall provide the Employees with
benefits that are substantially similar to and no less favourable than those of the
Terminated Plans in effect on the day prior to the Closing Date. As of the Closing
Date, the Employees shall commence participation in, accrue benefits under and be
covered by the Purchaser Employee Plans. In the event that the Purchaser Employee
Plans are not established as of the Closing Date, the Purchaser shall advise the Vendor
as far in advance of the Closing Date as is possible. In that event, the Vendor will
use commercially reasonable efforts to continue the Terminated Plans such that the
Employees shall be able to continue to participate in such Terminated Plans for a
period not exceeding 60 days from the Closing Date (the “Transition Period”). The
Vendor and the Purchaser shall cooperate to facilitate the transition of the member
data and history from the Terminated Plans to the Purchaser Employee Plans during the
Transition Period. The Purchaser shall be responsible for all administrative and
accounting procedures necessary to allow Employees to participate in the Terminated
Plans and shall be responsible for and pay all costs and expenses, including premiums,
incurred by the Vendor during the Transition Period in connection with such Terminated
Plans for the Employees.







	 	(g)	 	The Purchaser will ensure that evidence of insurability or pre-existing
conditions and eligibility periods in respect of the Purchaser Employee Plans are
waived. The Purchaser Employee Plans shall honour any deductible, co-payment,
coinsurance, or eligible out-of-pocket expenses paid or incurred by the Employees,
including with respect to their covered dependants, under the Terminated Plans from the
beginning of the current coverage period to the Closing Date, as though such amounts
had been paid in accordance with the terms and conditions of the Purchaser Employee
Plans.







	 	(h)	 	The Purchaser Employee Plans shall recognize service and earnings of the
Employees as recognized under the Terminated Plans for eligibility and determination of
benefits under the Purchaser Employee Plans.





 


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	 	(i)	 	The Vendor agrees that it is responsible under the Employee Plans for any non-
pension benefit related claims arising in respect of the Employees prior to the Closing
Date, in accordance with the terms of such Employee Plans and Applicable Law. The
Purchaser agrees that it is responsible for any non-pension benefits related claims
arising in respect of the Employees from and after the Closing Date in accordance with
the terms of the Purchaser Employee Plans and Applicable Law. For greater certainty,
the date on which a benefit claim arose will be:







	 	(i)	 	in the case of a death claim, the date of death;







	 	(ii)	 	in the case of extended health care benefits, including,
without limitation, dental and medical treatments, the date of treatment;







	 	(iii)	 	in the case of a claim for drug or vision care benefits,
the date the prescription is filled; and







	 	(iv)	 	in the case of a disability claim, the date on which the
disability occurred.







	 	(j)	 	The Vendor agrees to transfer and assign, and the Purchaser agrees to assume,
those Employee Plans specified in Schedule 7.7(j).







	7.8	 	Non-Transferable and Non-Assignable Assets.






To the extent that any of the Purchased Assets or any material assets of 3371727, or any
claim, right or benefit arising under or resulting from such assets (collectively, the “Rights”) is
not capable of being transferred without the approval, consent or waiver of any third Person, or if
the transfer of a Right would constitute a breach of any obligation under, or a violation of, any
agreement or any Applicable Law, unless the approval, consent or waiver of such third Person is
obtained and remedies such breach or violation, then except as expressly otherwise provided in this
Agreement and without limiting the rights and remedies of the Purchaser contained elsewhere in this
Agreement, this Agreement shall not constitute an agreement to transfer such Rights unless and
until such approval, consent or waiver has been obtained. After the Closing and until all such
Rights are transferred to the Purchaser, the Vendor shall respectively:




	 	(a)	 	maintain its existence and hold the Rights as bare trustee and agent for the
Purchaser;







	 	(b)	 	comply with the terms and provisions of the Rights as bare trustee and agent
for the Purchaser at the Purchaser’s cost and for the Purchaser’s benefit;







	 	(c)	 	cooperate with the Purchaser in any reasonable and lawful arrangements designed
to provide the benefits of such Rights to the Purchaser; and







	 	(d)	 	enforce, at the request of the Purchaser and at the expense and for the account
of the Purchaser, any rights of the Vendor arising from such Rights against any third
Person, including the right to elect to terminate any such rights in accordance with
the terms of such rights upon the written direction of the Purchaser.





 


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In order that the full value of the Rights may be realized for the benefit of the Purchaser,
the Vendor shall, at the request and at the Vendor’s expense and under the direction of the
Purchaser, in the name of the Vendor or otherwise as the Purchaser may specify, take all such
action and do or cause to be done all such things as are, in the opinion of the Purchaser acting
reasonably, necessary or proper in order that the obligations of the Vendor, under such Rights may
be performed in such manner that the value of such Rights is preserved and enures to the benefit of
the Purchaser, and that any moneys due and payable and to become due and payable to the Purchaser
in and under the Rights are received by the Purchaser. The Vendor shall promptly pay to the
Purchaser all moneys collected by or paid to it in respect of every such Right.




	7.9	 	Tax Returns







	 	(a)	 	The Vendor shall at its own expense duly and timely make or prepare all Tax
Returns required to be made or prepared by 3371727 and duly and timely file all Tax
Returns required to be filed by 3371727 with the appropriate Tax Authority for any
period ending before the acquisition of control of 3371727 by the Purchaser for which
Tax Returns have not already been filed. Each Tax Return to be prepared and filed in
accordance with this Section 7.9 shall be correct and complete. Such Tax Returns shall
be subject to reasonable review by the Purchaser.







	 	(b)	 	The Purchaser shall using commercially reasonable efforts to co-operate with
the Vendor in the preparation of any such Tax Returns, including, without limitation,
by providing access to any Books and Records or other documents required by the Vendor
in order to fully and completely prepare any such Tax Returns or other documentation.







	7.10	 	Leased Property







	 	(a)	 	The Vendor hereby acknowledges and agrees that it shall be a condition of
Closing that, on or before the Closing Date, the Vendor shall obtain the prior written
consent to the Assignment of Lease from each landlord in respect of each of the Leased
Properties listed in Section 1 of Schedule 4.13 hereto (hereinafter, collectively, the
“Principal Sites” and each, individually, a “Principal Site”). The Vendor shall use
reasonable commercial efforts to provide the Purchaser with an Estoppel and Consent
Certificate for each Principal Site.







	 	(b)	 	The Vendor further covenants and agrees that, immediately following the Closing
Date, the Vendor shall make written requests for the formal written consent of each
landlord to the Assignment of Lease in respect of each of the Leased Properties listed
in Section 2 of Schedule 4.13 hereto (hereinafter, collectively, the “Non-Assigned
Leases” and each, individually, a “Non-Assigned Lease”), and shall also use reasonable
commercial efforts to obtain and provide to the Purchaser an Estoppel and Consent
Certificate from each landlord in respect of each Non-Assigned Lease. Until such time
as such consents have been obtained in respect of the Non-Assigned Leases as aforesaid,
the following provisions shall apply:







	 	(i)	 	The Vendor shall use continuous reasonable commercial
efforts, at its sole cost and expense, to obtain and provide to the
Purchaser the written consent to the Assignment of Lease, from each landlord
for each of the Non-Assigned Leases within twelve (12) months from the
Closing Date;







 


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	 	(ii)	 	The Non-Assigned Leases shall remain in the name of the
Vendor and the Vendor shall hold its interest in the Non-Assigned Leases and
the Leased Properties associated therewith in trust as bare trustee for the
benefit of the Purchaser and shall deal with such Non-Assigned Leases, and
the Vendor’s interest thereunder, as the Purchaser shall in writing
reasonably direct;







	 	(iii)	 	The Vendor shall continue to pay all rent and other
payments due and owing by the Vendor, as tenant under the Non-Assigned
Leases, and shall continue to observe and perform all of the obligations and
covenants of the tenant under such Non-Assigned Leases (including, without
limitation, maintenance and repair obligations, and the obligations of the
Vendor, as tenant, to maintain insurance as more particularly set out
thereunder);







	 	(iv)	 	The Vendor shall use continuous reasonable commercial
efforts to provide the Purchaser with continuous, uninterrupted access to,
and the right to use and occupy, those Leased Properties which form the
subject of the Non-Assigned Leases, so as to enable the Purchaser to conduct
the Business from such Leased Property in the manner consistent, to the
greatest extent possible, with the manner in which the Business was
conducted by the Vendor prior to the Time of Closing;







	 	(c)	 	The Purchaser shall use continuous reasonable commercial efforts to cooperate
and assist the Vendor, at the Vendor’s reasonable request, to obtain the written
consent to the Assignment of Lease from each landlord for each of the Non-Assigned
Leases; provided, for greater certainty that the Purchaser shall not be required to
incur any out-of-pocket expense in providing such cooperation and assistance.







	 	(d)	 	In respect of each of the Non-Assigned Leases, the Vendor and the Purchaser
shall enter into an interim occupancy agreement (each an “Interim Occupancy
Agreement”), as of the Closing Date, substantially in the form annexed hereto as
Exhibit F, providing for the terms under which Purchaser will occupy such Leased
Property and such additional assurances relating to such Leased Property as may be
requested of the Vendor by the Purchaser from time to time, and the Vendor shall take,
or cause to be taken, such reasonable actions, either in the Vendor’s name or otherwise
as the Purchaser may reasonably require, so as to provide the Purchaser with, and not
to deprive the Purchaser of, the right to conduct the Business from each such Leased
Property





 


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	 	(e)	 	The Vendor shall indemnify and save harmless the Purchaser, and its directors,
officers, employees, agents and successors, from and against any Losses suffered or
incurred by any of them as a result of the Purchaser being required to vacate
any Leased Property that is occupied by the Purchaser under an Interim Occupancy
Agreement upon termination of, or interruption or interference with, its use,
occupancy and enjoyment of any portion of such Leased Property within a period of
twelve (12) months from the Closing Date.







	 	(f)	 	The obligations of this Section 7.10 shall survive the Closing Date and the
said obligations shall not merge but shall remain in full force and effect as of the
Closing Date and thereafter.






ARTICLE 8 — CONDITIONS OF CLOSING





	8.1	 	Conditions of Closing in Favour of the Purchaser






The purchase and sale of the Business and the Purchased Assets is subject to the following
terms and conditions for the exclusive benefit of the Purchaser, to be performed or fulfilled at or
prior to the Time of Closing:




	 	(a)	 	Representations and Warranties. The representations and warranties of the
Vendor contained in this Agreement or any certificate or other document delivered
pursuant hereto shall be true and correct at the Time of Closing in all material
respects with the same force and effect as if such representations and warranties were
made at and as of such time, except for any such representations and warranties that
refer to or are expressed to be made as of a specific date, including the date of this
Agreement, in which case such representations shall be true and correct in all material
respects as of such date, and a certificate executed by the Vendor dated the Closing
Date, to that effect shall have been delivered to the Purchaser;







	 	(b)	 	Covenants. All of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Vendor at or before the Time of Closing shall have
been complied with or performed in all material respects, and a certificate executed by
a senior officer of the Vendor, dated the Closing Date, to that effect shall have been
delivered to the Purchaser;







	 	(c)	 	Regulatory Consents. There shall have been obtained from all appropriate
Authorities such consents and approvals as are required to be obtained by the Vendor to
permit the change of ownership of the Purchased Assets contemplated hereby, including,
without limitation, those described in Schedule 4.8(a);







	 	(d)	 	Required Contractual Consents. Subject to Section 7.10, the Vendor shall have
given or obtained the notices, consents and approvals described in Schedule 4.8(b);







	 	(e)	 	No Action or Proceeding. No legal or regulatory action or proceeding shall be
pending or threatened by any person to enjoin, restrict or prohibit the purchase and
sale of the Purchased Assets contemplated hereby or the performance of any party’s
obligations in this Agreement;





 


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	 	(f)	 	Workplace Safety and Insurance. The Vendor shall provide a clearance
certificate or other similar documentary evidence from the Workplace Safety and
Insurance Board or similar authority in each jurisdiction where the Vendor carries on
the Business certifying that there are no outstanding assessments, penalties, fines,
levies, charges, surcharges or other amounts due or owing to those authorities;







	 	(g)	 	Retail Sales Tax. The Vendor shall deliver to the Purchaser on the Closing
Date a certificate issued by the Minister of Finance of Ontario under subsection 6(1)
of the Retail Sales Tax Act (Ontario);







	 	(h)	 	Concurrent Transactions. The transactions set forth under the HearUSA Licence
shall be completed in escrow with effect immediately prior to these transactions, such
that the Purchaser shall at the Closing acquire by assignment the HearUSA Licence;







	 	(i)	 	Delivery of Conveyancing Documents. The Vendor shall deliver to the Purchaser
all necessary deeds, conveyances, bills of sale, assurances, transfers, assignments and
any other documentation reasonably required by the Purchaser to transfer the Purchased
Assets to the Purchaser with a good title, free and clear of all Encumbrances, except
for Permitted Encumbrances.







	 	(j)	 	Closing Documents. Without limiting the generality of any other provision of
this Section 8.1, the Purchaser shall have received at or before the Time of Closing
sufficient duly executed original copies of the following:







	 	(i)	 	certified copies of resolutions of: (i) the board of
directors of HearUSA, (ii) the board of directors of 3371727, and (iii) the
board of directors and shareholders of the Vendor, approving the transfer of
the Purchased Assets and this Agreement and the transactions contemplated
under this Agreement, as applicable;







	 	(ii)	 	a certificate of an officer of each the Companies
confirming the matters contemplated in Section 8.1(a) and confirming that
all conditions under this Agreement in favour of the Vendor have been either
fulfilled or waived;







	 	(iii)	 	certificates of incumbency of each of the Companies and
HearUSA;







	 	(iv)	 	certificates of status/compliance of each of the
Companies and HearUSA;







	 	(v)	 	certified copies of the articles of incorporation and
by-laws of each of HearUSA and the Companies;







	 	(vi)	 	share certificates representing the Purchased Shares duly
endorsed for transfer;







	 	(vii)	 	all of the books and records, including minute books and
share certificate books of 3371727;





 


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	 	(viii)	 	a DVD in containing all data, current as of not more than three (3)
Business Days prior to the Closing Date, constituting the Helix Database (as
such term is defined in the Support Agreement);







	 	(ix)	 	the Escrow Agreement executed by the Vendor and the
Escrow Agent;







	 	(x)	 	the Non-Competition Agreement executed by each of HearUSA
and the Vendor;







	 	(xi)	 	the Accounts Receivable Trust Agreement executed by the
Vendor and, for the purposes only of its guarantee therein, HearUSA;







	 	(xii)	 	the Support Agreement executed by HearUSA;







	 	(xiii)	 	the Assignment of Leases for each of the Principal Sites, each on terms
acceptable to the Purchaser, acting reasonably, executed by the Vendor and
each applicable landlord;







	 	(xiv)	 	the Interim Occupancy Agreements, for those Leased
Properties that are the subject of Non-Assigned Leases, executed by the
Vendor;







	 	(xv)	 	an assignment of the HearUSA License by the Vendor in
favour of the Purchaser, on terms acceptable to the Purchaser acting
reasonably.







	 	(xvi)	 	an opinion dated the Closing Date from counsel for the
Companies confirming the matters warranted in subsections 4.1 Organization,
4.2(a) Authorization, 4.2(b) Enforceability of Obligations and 4.3(a)
Authorized Capital of 3571727, and of HearUSA confirming the matters
warranted in subsection 4.2(b) Enforceability of Obligations, and such other
matters as Purchaser’s counsel may require.






If any of the conditions contained in this Section 8.1 shall not be performed or fulfilled at
or prior to the Time of Closing to the satisfaction of the Purchaser, acting reasonably, the
Purchaser may, by notice to the Vendor, terminate this Agreement and the obligations of the Vendor
and the Purchaser under this Agreement, other than the obligations contained in Sections 12.2 and
12.3 and any confidentiality agreement entered into by the parties shall be terminated. Any such
condition may be waived in whole or in part by the Purchaser without prejudice to any claims it may
have for breach of covenant, representation or warranty.




	8.2	 	Conditions of Closing in Favour of the Vendor






The purchase and sale of the Purchased Assets is subject to the following terms and conditions
for the exclusive benefit of the Vendor, to be performed or fulfilled at or prior to the Time of
Closing:




	 	(a)	 	Representations and Warranties. The representations and warranties of the
Purchaser contained in this Agreement or any certificate or other document delivered
pursuant hereto shall be true and correct in all material respects at the Time of
Closing with the same force and effect as if such representations and
warranties were made at and as of such time, and a certificate executed by the
Purchaser, dated the Closing Date, to that effect shall have been delivered to the
Vendor;





 


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	 	(b)	 	Covenants. All of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Purchaser at or before the Time of Closing shall have
been complied with or performed in all material respects, and a certificate executed by
a senior officer of the Purchaser, dated the Closing Date, to that effect shall have
been delivered to the Vendor; and







	 	(c)	 	No Action or Proceeding. No legal or regulatory action or proceeding shall be
pending or threatened by any person to enjoin, restrict or prohibit the purchase and
sale of the Purchased Assets contemplated hereby or the performance of any party’s
obligations under any agreement contemplated in this Agreement to be executed and
delivered by either party at the Time of Closing;







	 	(d)	 	Concurrent Transactions. Concurrently with the Closing, HearUSA, as vendor, and
2186935 Ontario Inc., as purchaser, shall have completed the purchase and sale of a
payment stream under the Support Agreement, on terms and conditions satisfactory to
HearUSA;







	 	(e)	 	Closing Documents. Without limiting the generality of any other provision of
this Section 8.2, the Vendor shall have received at or before the Time of Closing
sufficient duly executed original copies of the following:







	 	(i)	 	certified copies of resolutions of the board of directors
of the Purchaser, approving the purchase of the Purchased Assets and this
Agreement and the transactions contemplated under this Agreement;







	 	(ii)	 	a certificate of an officer of the Purchaser confirming
the matters contemplated in Section 8.2(a) and confirming that all
conditions under this Agreement in favour of the Purchaser have been either
fulfilled or waived;







	 	(iii)	 	a certificate of Jeffrey Geigel confirming that as of
the Closing Date he has no actual knowledge of any existing breach of the
representations and warranties of the Vendor contained in Article 4;







	 	(iv)	 	certificates of incumbency of the Purchaser;







	 	(v)	 	certificates of status/compliance of each of the
Purchaser;







	 	(vi)	 	certified copies of the articles of incorporation and
by-laws of the Purchaser;







	 	(vii)	 	the Assignment of Leases for each of the Principal
Sites, each on terms acceptable to the Vendor, acting reasonably;





 


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	 	(viii)	 	the Interim Occupancy Agreements executed by the Purchaser for those
Leased Properties that are the subject of the Non-Assigned Leases;







	 	(ix)	 	the Escrow Agreement executed by the Purchaser and the
Escrow Agent;







	 	(x)	 	the Support Agreement executed by the Purchaser; and







	 	(xi)	 	an assumption of the HearUSA License by the Purchaser.






If any of the conditions contained in this Section 8.2 shall not be performed or fulfilled at
or prior to the Time of Closing to the satisfaction of the Vendor acting reasonably, the Vendor
may, by notice to the Purchaser, terminate this Agreement and the obligations of the Vendor and the
Purchaser under this Agreement, other than the obligations contained in Sections 12.2, 12.3 and any
confidentiality agreement entered into by the parties, shall be terminated. Any such condition may
be waived in whole or in part by the Vendor without prejudice to any claims it may have for breach
of covenant, representation or warranty.



ARTICLE 9 — CLOSING DATE AND TRANSFER

OF POSSESSION





	9.1	 	Place of Closing






The closing of the purchase and sale of the Purchased Assets (the “Closing”) shall take place
at the Time of Closing at the offices of Miller Thomson LLP, 58th Floor, Scotia Plaza,
40 King Street West, Toronto, Ontario M5H 3S1.




	9.2	 	Further Assurances






From time to time subsequent to the Closing Date, each party to this Agreement covenants and
agrees that it will at all times after such date, at the expense of the requesting party, promptly
execute and deliver all such documents, including, without limitation, all such additional
conveyances, transfers, consents and other assurances and do all such other acts and things as the
other party, acting reasonably, may from time to time request be executed or done in order to
better evidence or perfect or effectuate any provision of this Agreement or of any agreement or
other document executed pursuant to this Agreement or any of the respective obligations intended to
be created hereby or thereby.



ARTICLE 10 — INDEMNIFICATION





	10.1	 	Indemnification by the Vendor






Subject to the terms set forth in this Article 10, the Vendor agrees to indemnify and save
harmless the Purchaser from and against any or all Losses suffered or incurred by the Purchaser as
a result of:




	 	(a)	 	any breach by the Vendor of any representation or warranty of the Vendor
contained in this Agreement;





 


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	 	(b)	 	any breach or non-performance by the Vendor of any covenant to be performed by
it which is contained in this Agreement;







(c) any Excluded Assets or the Excluded Liabilities; and




	 	(d)	 	any failure by the Vendor to pay, satisfy, discharge, perform or fulfil any of
the Excluded Liabilities and non-compliance by the Vendor with the Bulk Sales Act
(Ontario).






Notwithstanding the foregoing, the Vendor shall not be required to indemnify or save harmless
the Purchaser in respect of any Loss referred to in Section 10.1(a) or Section 10.1(b) unless the
Purchaser shall have provided notice to the Vendor in accordance with Section 10.3 on or prior to
the expiration of the applicable time period related to such representation or warranty set out in
Section 6.1 or such covenant set out in Section 6.3.




	10.2	 	Indemnification by the Purchaser






Subject to the terms set forth in this Article 10, the Purchaser agrees to indemnify and save
harmless the Vendor from and against any or all Losses suffered or incurred by the Vendor as a
result of:




	 	(a)	 	any breach by the Purchaser of any representation or warranty contained in this
Agreement;







	 	(b)	 	any breach or non-performance by the Purchaser of any covenant to be performed
by it which is contained in this Agreement; and







	 	(c)	 	any failure by the Purchaser to pay, satisfy, discharge, perform or fulfil any
of the Assumed Liabilities or any liabilities and obligations of the Business after
Closing.






Notwithstanding the foregoing, the Purchaser shall not be required to indemnify or save
harmless the Vendor in respect of any Loss referred to in Section 10.2(a) or Section 10.2(b),
unless the Vendor shall have provided notice to the Purchaser in accordance with Section 10.3 on or
prior to the expiration of the applicable time period related to such representation or warranty
set out in Section 6.2 or such covenant set out in Section 6.3.




	10.3	 	Notice of Claim






In the event that a party (the “Indemnified Party”) shall become aware of any claim,
proceeding or other matter (a “Claim”) in respect of which the other party (the “Indemnifying
Party”) has agreed to indemnify the Indemnified Party pursuant to this Agreement, the Indemnified
Party shall promptly give written notice thereof to the Indemnifying Party. Such notice shall
specify whether the Claim arises as a result of a claim by a person against the Indemnified Party
(a “Third Party Claim”) or whether the Claim does not so arise (a “Direct Claim”), and shall also
specify with reasonable particularity (to the extent that the information is available), the
factual basis for the Claim and the amount of the Claim, if known. If, through the fault of the
Indemnified Party, the Indemnifying Party does not receive notice of any Claim in time effectively
to contest the determination of any liability susceptible of being contested, the
Indemnifying Party shall be entitled to set off against the amount claimed by the Indemnified
Party the amount of any Losses incurred by the Indemnifying Party resulting from the Indemnified
Party’s failure to give such notice on a timely basis.


 


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	10.4	 	Direct Claims







	 	(a)	 	With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have sixty (60) Business
Days (for the purposes of this Section, the “Investigation Period”) to make such
investigation of the Claim as is considered necessary or desirable. For the purpose of
such investigation, the Indemnified Party shall make available to the Indemnifying
Party the information relied upon by the Indemnified Party to substantiate the Claim,
together with all such other information as the Indemnifying Party may reasonably
request. If both parties agree at or prior to the expiration of the Investigation
Period (or any mutually agreed upon extension thereof) to the validity and amount of
such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim. If the parties are unable to resolve the dispute
within a reasonable time, and in any event within thirty (30) Business Days of such
written request, the dispute shall, at the request of either party, be determined by a
court of competent jurisdiction.







	 	(b)	 	In connection with a Direct Claim arising out of a breach by the Vendor of its
representation and warranty contained in Section 4.9, during the Investigation Period,
the parties shall investigate the Claim for the purposes of making a determination as
to whether or not any uncollected Accounts Receivable are in fact ultimately
collectible. A Direct Claim in respect of such matter shall only be deemed to be valid
to the extent that there is not a substantial likelihood that such Accounts Receivable
are collectible through reasonable commercial efforts. If the parties are unable to
resolve the dispute within a reasonable time, and in any event within thirty (30) days
of such written request, the Vendor and the Purchaser shall submit the issues remaining
in dispute to PriceWaterhouse Coopers, Toronto (the “Independent Accountants”) for
resolution. If issues are submitted to the Independent Accountants for resolution, (i)
the Vendor and the Purchaser shall furnish or cause to be furnished to the Independent
Accountants such working papers and other documents and information relating to the
disputed issues as the Independent Accountants may request and are available to that
party or its agents and shall be afforded the opportunity to present to the Independent
Accountants any material relating to the disputed issues and to discuss the issues with
the Independent Accountants; (ii) the determination by the Independent Accountants, as
set forth in a notice to be delivered to both the Vendor and the Purchaser within
thirty (30) days of the submission to the Independent Accountants of the issues
remaining in dispute, shall be final, binding and conclusive on the parties and shall
be determinative of the amount of the Purchaser’s Direct Claim; and (iii) the
unsuccessful party in respect of the aggregate of the issues in dispute shall bear the
fees and costs of the Independent Accountants for such determination. The determined
amount of the Direct Claim, if any, shall be paid within three (3)
Business Days after the Independent Accountant’s determination becomes binding and
conclusive on the parties pursuant to this Section 10.4(b).





 


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	10.5	 	Third Party Claims






With respect to any Third Party Claim, the Indemnifying Party shall have the right, at its
expense, to participate in or assume control of the negotiation, settlement or defence of the Claim
and, in such event, the Indemnifying Party shall reimburse the Indemnified Party for all the
Indemnified Party’s reasonable and substantiated out-of-pocket expenses as a result of such
participation or assumption. If the Indemnifying Party elects to assume such control, the
Indemnified Party shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf, provided that the fees and
disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party
consents to the retention of such counsel or unless the named parties to any action or proceeding
include both the Indemnifying Party and the Indemnified Party and the representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the
actual or potential differing interests between them (such as the availability of different
defences). If the Indemnifying Party, having elected to assume such control, thereafter fails to
defend the Third Party Claim within a reasonable time, the Indemnified Party shall be entitled to
assume such control, and the Indemnifying Party shall be bound by the results obtained by the
Indemnified Party with respect to such Third Party Claim.




	10.6	 	Settlement of Third Party Claims






If the Indemnifying Party fails to assume control of the defence of any Third Party Claim, the
Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed.
Whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of
any Third Party Claim, the Indemnifying Party shall not settle any Third Party Claim without the
written consent of the Indemnified Party, which consent shall not be unreasonably withheld or
delayed; provided, however, that the liability of the Indemnifying Party shall be limited to the
proposed settlement amount if any such consent is not obtained for any reason.




	10.7	 	Co-operation






The Indemnified Party and the Indemnifying Party shall co-operate fully with each other with
respect to Third Party Claims, and shall keep each other fully advised with respect thereto
(including supplying copies of all relevant documentation promptly as it becomes available).




	10.8	 	Exclusivity






Except for the rights of the Vendor pursuant to Article 11, the provisions of this Article 10
and any other indemnification provisions of this Agreement shall be the sole and exclusive remedies
for any Claim for breach of any covenant, representation, warranty, indemnity or other provision of
this Agreement or any certificate delivered pursuant to this Agreement (other than a claim for
specific performance or injunctive relief or a claim based upon fraud or wilful misconduct) with
the intent that all such Claims shall be subject to the limitations and other provisions contained
in this Article 10.


 


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	10.9	 	Limitations on Amount






The Vendor shall have no liability (for indemnification or otherwise) with respect to claims
made under Section 10.1 until (a) with respect to claims made during the first one hundred and
twenty (120) days after the Closing, the total of all Losses with respect to such matters exceeds
$50,000.00 (in this Section, the “Threshold Amount”), and upon the aggregate amount of all such
claims exceeding the Threshold Amount, the Vendor shall be required to pay all amounts of such
Losses including the first $50,000.00; and (b) with respect to claims made after the first one
hundred and twenty (120) days after the Closing, the total of all Losses with respect to such
claims exceeds $100,000.00 (in this Section, the “Basket”), upon the aggregate amount of all such
claims exceeding the Basket, the Vendor shall only be required to pay all amounts in excess of the
Basket. Any materiality qualification contained in a representation of the Vendor in this
Agreement will not be taken into account in the determination of the magnitude of the Losses
occasioned by the breach of such representation for the purposes of determining whether the
Threshold Amount or the Basket has been exceeded; provided, that the claims based upon the
prorations, Purchase Price adjustments or the Non-Assigned Leases in Sections 3.5, 3.6 and 7.10,
respectively, shall not be subject to the Threshold Amount or the Basket. The aggregate liability
of the Vendor (for indemnification or otherwise) with respect to Claims made under this Agreement
shall not exceed $15,000,000. Provided further that none of the limitations in this Section 10.9
shall apply to Claims under this Agreement with respect to breaches of Vendor’s representations and
warranties in Sections 4.1, 4.2, 4.3(a), 4.5(a) and 4.19 or based upon fraud or wilful misconduct.




	10.10	 	Insurance Proceeds and Taxes






The amount of the Indemnifying Party’s liability under this Agreement shall be determined
taking into account any applicable insurance proceeds and other savings, including tax savings,
that reduce the overall impact of the Losses upon the Indemnified Party. Any payment under this
Article 10 shall be treated for tax purposes as an adjustment to the Purchase Price to the extent
such characterization is proper and permissible under Applicable Law.




	10.11	 	Right to Claim Escrow Amount






The Purchaser may give notice of a claim in any amount to which it may be entitled under this
Article 10 under the Escrow Agreement. Neither the giving of notice of a claim under the Escrow
Agreement nor the failure to do so will constitute an election of remedies or limit the Purchaser
in any manner in the enforcement of any other remedies that may be available to it.




	10.12	 	Other Limitations






No amounts shall be payable under this Article 10 for Losses to the extent such Losses were
accounted for in favour of the Indemnified Party in the calculation of any adjustment to the
Purchase Price pursuant to Sections 3.5 or 3.6.


 


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ARTICLE 11 — GUARANTEE OF HEARUSA




For good and valuable consideration, the receipt and sufficiency of which is hereby
conclusively acknowledged, HearUSA agrees with the Purchaser, as follows:




	11.1	 	Guarantee of HearUSA






HearUSA hereby unconditionally guarantees to the Purchaser the full and punctual payment and
performance when due whether by required payment, declaration, demand or otherwise, of all present
and future indebtedness, liabilities and payment obligations of the Vendor to the Purchaser
pursuant to this Agreement and the Escrow Agreement, at any time owing or remaining unpaid by the
Vendor to the Purchaser, including the payment of all costs and expenses incurred by the Purchaser
in enforcing any rights under this Section (hereinafter in this Section, collectively the
“Guaranteed Obligations”). If any or all of the Guaranteed Obligations are not duly paid by the
Vendor and are not recoverable under the preceding sentence of this Section for any reason
whatsoever, HearUSA will, as a separate and distinct obligation, indemnify and save harmless the
Purchaser from and against all losses resulting from the failure of the Vendor to pay or perform
such Guaranteed Obligations. The Purchaser may proceed to enforce the obligations of HearUSA under
this Section without first pursuing or exhausting any right or remedy which the Purchaser may have
against the Vendor, its successors or assigns or any other person, upon the Vendor failing to pay
or perform when due (subject to any applicable cure period) any of the Guaranteed Obligations. The
obligation of HearUSA to perform its obligations under this Section shall arise and HearUSA shall
perform such obligations immediately upon written demand being provided by the Purchaser; provided,
however, that, before making demand on HearUSA, the Purchaser shall be required to make a claim
under the Escrow Agreement to the extent that a sufficient portion of the Escrow Amount remains
available to satisfy all outstanding claims. HearUSA’s obligations under this Section are
continuing, unconditional and absolute and are not subject to set-off, but for greater certainty
are subject to all defences, limitations and rights available to the Vendor.




	11.2	 	Time of Essence






Time shall be of the essence in this guarantee.




	11.3	 	Severability






If any provision of this guarantee is determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the
validity, legality or enforceability of the remaining provisions hereof, and each provision is
hereby declared to be separate, severable and distinct.




	11.4	 	Further Assurances.






HearUSA shall forthwith, at its own expense and from time to time, do or file, or cause to be
done or filed, all such things and shall execute and deliver all such documents, agreements,
opinions, certificates and instruments reasonably requested by the Purchaser or its counsel as may
be necessary or desirable to give effect to this guarantee and carry out its provisions and
intention.




	11.5	 	Successors and Assigns






This guarantee shall enure to the benefit of the Purchaser and its successors and assigns and
shall be binding on HearUSA and its successors, provided that HearUSA shall not have the right to
assign any of its rights or obligations hereunder.


 


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	11.6	 	Applicable Law






This guarantee shall be construed, interpreted and enforced in accordance with, and the rights
and obligations of HearUSA shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein and HearUSA irrevocably attorns to the exclusive
jurisdiction of the courts of such province and all courts competent to hear appeals therefrom.




	11.7	 	Notices






Any notice or other communication required or permitted to be given to HearUSA hereunder shall
be provided in accordance with Section 12.1 hereof.



ARTICLE 12 — MISCELLANEOUS





	12.1	 	Notices







	 	(a)	 	Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be delivered by personal delivery, by overnight courier,
by telecopy or by registered mail addressed as follows:







If to the Vendor and/or HearUSA:




c/o HearUSA Inc.

1250 Northpoint Parkway

West Palm Beach, FL 33407




Attention: Gino Chouinard, President

Fax No.: 561.688.8893




With a copy (which shall not constitute notice) to:




Bryan Cave LLP

700 13th Street NW

Washington, DC 20005




Attention: LaDawn Naegle, Esq.

Fax: 202.220.7346




and to:




Ogilvy Renault LLP

Barristers and Solicitors

Suite 3800, Royal Bank Plaza, South Tower

200 Bay Street

Toronto, ON M5J 2Z4




Attention: Pierre Soulard

Fax: 416.216.3930


 


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If to the Purchaser:




Helix Hearing Inc.

290 McGill Street, Suite A

Hawkesbury, ON K6A 1P8





Attention: Chief Executive Officer

Fax No.: 613.632.5714




With a copy (which shall not constitute notice) to:




Miller Thomson LLP

Barristers and Solicitors

Scotia Plaza, 40 King Street West

Suite 5800, P.O. Box 1011

Toronto, ON M5H 3S1





Attention: James Klotz

Fax No: 416.595.8695




	 	(b)	 	Any such notice or other communication delivered by personal delivery or
overnight courier shall be deemed to have been given and received on the day on which
it was delivered (or, if such day is not a Business Day, on the next following Business
Day), and if transmitted by telecopier, on the day of transmission thereof if such day
is a Business Day and is received before 5:00 pm (local time to the recipient) or
otherwise on the next Business Day after the day of transmittal, provided that the
party so transmitting the notice has received confirmation of its successful
transmittal, and if mailed or sent by registered mail, on the fifth Business Day
following the date of mailing; provided, however, that if at the time of mailing or
within three Business Days thereafter there is or occurs a labour dispute or other
event which might reasonably be expected to disrupt the delivery of documents by mail,
any notice or other communication hereunder shall be delivered or transmitted by means
personal delivery, telecopier or recorded electronic communication as aforesaid. Either
party may at any time change its address for service from time to time by giving notice
to the other party in accordance with this Section 12.1.







	12.2	 	Announcements






The parties shall consult with each other before issuing any press release or making any other
public announcement with respect to this Agreement or the transactions contemplated hereby and,
except as required by any applicable law or regulatory requirement, neither of them shall issue any
such press release or make any such public announcement without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed.


 


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	12.3	 	Disclosure






Prior to any public announcement of the transaction contemplated hereby pursuant to Section
12.2, neither party shall disclose this Agreement or any aspects of such transaction except to its
board of directors, its senior management, its legal, accounting, financial or other professional
advisors, any financial institution contacted by it with respect to any financing required in
connection with such transaction and counsel to such institution, or as may be required by any
applicable law or any regulatory authority or stock exchange having jurisdiction.




	12.4	 	Reasonable Commercial Efforts






The parties acknowledge and agree that, for all purposes of this Agreement, an obligation on
the part of either party to use reasonable commercial efforts to obtain any waiver, consent,
approval, permit, licence or other document shall not require such party to make any payment to any
person for the purpose of procuring the same, other than payments for amounts due and payable to
such person, payments for incidental expenses incurred by such person and payments required by any
applicable law or regulation.




	12.5	 	Expenses






Each party shall bear all expenses incurred by it in connection with the negotiation and
entering into of the Agreement and the transactions contemplated therein, including without
limitation, the fees and expenses of their respective counsel, accountants and financial advisors.




	12.6	 	Counterparts






This Agreement may be executed in counterparts, each of which shall constitute an original and
all of which taken together shall constitute one and the same instrument. Execution may be made by
facsimile signature which, for all purposes, shall be deemed to be an original.



IN WITNESS WHEREOF this Agreement has been executed by the parties.



	 	 	 	 	 
	 	HELIX HEARING INC.

 	 
	 	Per:  	“Jeffrey Geigel”
 	 
	 	 	Name:  	Jeffrey Geigel 	 
	 	 	Title:  	President

I/We have the authority to bind the corporation 	 



 


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	 	HELIX HEARING CARE OF AMERICA CORP.

 	 
	 	Per:  	“Stephen J. Hansborough”
 	 
	 	 	Name:  	Stephen J. Hansborough 	 
	 	 	Title:  	Chairman & CEO

I/We have the authority to bind the company 	 



	 	 	 	 	 
	 	3371727 CANADA INC.

 	 
	 	Per:  	“Stephen J. Hansborough”
 	 
	 	 	Name:  	Stephen J. Hansborough 	 
	 	 	Title:  	Chairman & CEO

I/We have the authority to bind the corporation 	 




HearUSA, Inc. hereby joins in the execution of this Agreement solely for the purposes of agreeing
to be bound by Article 11, and hereby further acknowledges receipt of an executed copy of this
Agreement.



	 	 	 	 	 
	 	HEARUSA, INC.

 	 
	 	Per:  	“Stephen J. Hansborough”
 	 
	 	 	Name:  	Stephen J. Hansborough 	 
	 	 	Title:  	Chairman & CEO

I/We have the authority to bind the corporation 	 




 


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