exv10w1



 






Exhibit 10.1




ASSET PURCHASE AGREEMENT




This Asset Purchase Agreement (the “Agreement”) is made and entered into as of this 16th day
of June, 2005 (the “Effective Date”), by and between Sonus-USA, Inc., a Washington corporation
(“Buyer”) and HearUSA, Inc., a Delaware corporation (“Seller”).



RECITALS





	A.	 	Seller owns and operates certain retail hearing aid sales and service outlets in the States
of Minnesota, Wisconsin, and Washington at the locations (the “Premises”) listed on the
attached Exhibit A (the “Business”).
	 
	B.	 	Seller desires to sell and Buyer desires to purchase certain assets of Seller used in the
Business in accordance with the terms and conditions contained herein.





AGREEMENTS





	1.	 	Assets to be Purchased. Subject to the terms and the conditions set forth in this
Agreement, on the Closing Date, Seller shall sell, transfer and assign to Buyer and Buyer
agrees to purchase, receive and accept from Seller, all of Seller’s right, title and interest
in and to the following assets (the “Assets”):






	 	(a)	 	All of the customer files, customer histories, and customer records associated
with the Business (collectively, the “Customer Records”);
	 
	 	(b)	 	The personal property listed on the attached Exhibit B (the “Personal
Property”);
	 
	 	(c)	 	All of the goodwill and going concern value associated with the Business (the
“Goodwill”);
	 
	 	(d)	 	To the extent transferable, Seller’s rights, if any, to any leasehold
improvements located at the Premises (the “Leasehold Improvements”);
	 
	 	(e)	 	All the rights and interests of Seller in, or pursuant to, the Assumed
Contracts (as herein defined) and leasehold interests in the Premises and leases
therefore set forth on Exhibit E (“Leases”); and
	 
	 	(f)	 	To the extent transferable, all licenses and permits held by Seller relating to
the Business or operations of the Premises.






	2.	 	excluded assets. Notwithstanding anything contained in Section 1, Buyer is
not purchasing Seller’s cash, bank deposits, promissory notes, certificates of deposit, and
marketable securities; Seller’s accounts receivable arising from and accounts payable incurred
for, the operation of the Business for the period prior to the Closing Date; any of Seller’s
right, title and interest in and to any patents, copyrights, trademarks, know-how, trade
secrets, confidential or proprietary information, technical information, internet websites,
service marks, trade names including the trade name “HearUSA” or “HEARx” and any variation
thereof, licenses computer software, internet domain names, permits and other intangible
property rights and interests applied for, issued to or owned by Seller, whether registered or
unregistered, or under which Seller is licensed; or any other assets owned by Seller that are
not used solely in connection with the Business. Buyer acknowledges that Seller shall retain
all rights to use the trade names “HearUSA” and “HEARx”, and any variations thereof, and any
related service marks and trademarks and agrees that Buyer shall not use such trade names,
service marks or trademarks following the Closing Date.
	 
	3.	 	Purchase Price. As consideration for its purchase of the Assets, Buyer shall
pay to Seller a total price of One Million One Hundred Thousand Dollars ($1,100,000), which
amount shall be subject to adjustment under certain circumstances as set forth herein (the
“Purchase Price”). Subject to Section 12(e), Buyer shall pay the Purchase Price at the
Closing by wire transfer of immediately available




 









 












funds in accordance with the written instructions of Seller. The Purchase Price shall be
allocated among the Assets as follows:




	 	(a)	 	For the Customer Records, $108,000;
	 
	 	(b)	 	For the Personal Property, $120,000;
	 
	 	(c)	 	For the Leasehold Improvements, $10,000;
	 
	 	(d)	 	For the Assumed Contracts and licenses and permits, $1.00
	 
	 	(e)	 	For the Restrictive Covenant set forth in Section 12(b), $200,000; and
	 
	 	(f)	 	For the Seller’s Goodwill $661,999.





The parties agree to report this transaction for federal and state tax purposes in accordance with
the allocations set forth in this Section 3.




	4.	 	prorations. The income and expenses attributable to the operation of the
Business before the Effective Time (as defined below in Section 13) shall be for the account
of Seller, and the income and expenses attributable to the operation of the Business on and
after the Effective Time shall be for the account of Buyer. All prorations of income and
expense between Seller and Buyer shall be made in accordance with generally accepted
accounting principles as of the Effective Time, the proration to be estimated (such estimate
to be provided to Buyer by Seller in writing five (5) days prior to the Closing Date) and
paid, insofar as feasible, on the Closing Date, with a final settlement ninety (90) days after
the Closing Date. For purposes of calculating such prorations of income and expenses, income
and expenses for products delivered before the Effective Time shall be for the account of
Seller and income and expenses for products delivered after the Effective Time (whether
ordered before or after the Effective Time) shall be for the account of Buyer.
	 
	5.	 	accounts receivable. Seller’s accounts receivable arising or accruing before
the Effective Time shall remain the property of Seller, and Buyer shall not acquire any right
or interest therein. Notwithstanding the foregoing, Seller’s accounts receivable shall not
include any customer accounts where product has been ordered by a customer of Seller but has
not been delivered as of the Effective Time. For example, Seller’s accounts receivable shall
not include hearing aid sales where a customer has made a down payment, but the hearing aid
has not been delivered as of the Effective Time. For a period of ninety (90) days after
Closing Date (the “Collection Period”), Buyer and Seller shall cooperate with each other and
use their respective commercially reasonable efforts to collect the account receivables of the
Business in the ordinary course of business. All amounts collected from the Business’s
account debtors shall be applied to the oldest account first, unless such account debtor
disputes an older account and designates the payment to a newer account. Any amounts relating
to the accounts receivable of Seller that are paid directly to Seller shall be retained by
Seller. Buyer shall not discount, adjust or otherwise compromise any account receivable of
Seller and Buyer shall refer any disputed account receivable to Seller. Within ten (10) days
after the end of each month, Buyer shall deliver to Seller a report showing account receivable
collections for the prior month and Buyer shall make a payment to Seller equal to the amount
of all such collections. At the end of the Collection Period, any remaining accounts
receivable of Seller shall be returned to Seller for collection.
	 
	6.	 	Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer as follows:






	 	(a)	 	Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and authority to
enter into and perform its obligations under this Agreement. Seller is duly qualified
to transact business as a foreign corporation and is in good standing in the states of
Minnesota, Wisconsin and Washington. All documents executed and to be executed by
Seller and delivered in accordance with the terms of




 









 












	 	 	this Agreement have been duly authorized and are and will be valid obligations of
Seller, enforceable in accordance with their respective terms.
	 
	(b)	 	Seller owns the Assets to be sold hereunder and has good, valid and marketable
title to such Assets free and clear of all liens, encumbrances, claims, third-party
interests and charges whatsoever, except for (i) the security interests set forth on
Exhibit C. Except as set forth on Exhibit C, Seller has the free and unrestricted
right to sell, transfer and assign such Assets in accordance with the terms of this
Agreement without the consent or approval of any other person, except for the Assumed
Contracts which require third-party consent for assignment to Buyer.
	 
	(c)	 	Except as set forth in Exhibit D, this Agreement, the transactions contemplated
hereby and the performance hereof by Seller does not and will not result in the
violation of any contract, undertaking or agreement to which Seller is a party or by
which the Assets or the Business is bound.
	 
	(d)	 	There is no litigation or proceeding pending or, to Seller’s knowledge,
threatened against or relating to Seller, the Assets or the Business, nor does Seller
know of, or have any reasonable grounds to know of, any basis for any such action or of
any governmental investigation relating to Seller, the Assets or the Business.
	 
	(e)	 	No third parties have or have been granted any rights to inspect or use the
Customer Records (other than the customers themselves).
	 
	(f)	 	Exhibit E contains an accurate and complete list of all agreements, contracts,
Leases and commitments to which the Seller is a party which are material to the
financial condition or operations of the Business (the “Contracts”). By way of
example, and not limitation, Exhibit E shall list all leases and payer contracts and
agreements including those for private insurance, workers’ compensation, state medical,
unions, or employer contracts (“Payer Agreements”). Except as expressly disclosed in
Exhibit E, (i) each of the Contracts is freely assignable without the consent of any
third party; (ii) Seller has performed all material obligations required to be
performed by Seller to date under each such Contract; (iii) to Seller’s knowledge,
neither Seller nor any other party is in default under any Contract; (iv) no event has
occurred which, after the giving of notice or the lapse of time or otherwise, would
constitute a default, or result in a breach by Seller or, to Seller’s knowledge, any
other party, under any Contract; (v) each Contract is considered valid and binding on
the parties to it in accordance with its respective terms; and (vi) each Contract is
terminable according to its terms without penalty, cost of liability (whether, express,
implied or by operation of law) on notice not exceeding 30 calendar days. True,
complete and correct copies of all Contracts referred to in the exhibits have been
delivered to Buyer; there are no amendments to or modifications of, or agreements of
the parties relating to, any such Contracts which have not been delivered to Buyer.
	 
	(g)	 	Seller has provided to Buyer a true and complete copy of unaudited profit and
loss statements for the Business for the period of September 2002 through May 31, 2005,
copies of which are attached hereto as Exhibit F (the “Financial Statements”). The
Financial Statements fairly present in all material respects the profits and losses of
the Business as of the represented dates thereof.
	 
	(h)	 	Seller possesses all material permits and licenses that are necessary to
conduct the Business in its present form. Exhibit H contains an accurate and complete
list of all licenses and permits of the Seller which are material to the financial
condition or operations of the Business (the “Permits”). All of the Permits are in
full force and effect, Seller is not in violation of any of the Permits and Seller has
not received any notice that any of the Permits will lapse or be terminated by action
of any governmental authority or otherwise.




 









 












	 	(i)	 	All purchase orders signed prior to the Closing Date for delivery of products
after the Effective Time, which are being assumed by Buyer, arose out of bona fide,
arms length transactions in the ordinary course of business.
	 
	 	(k)	 	Without limiting the representations and warranties as to specific classes of
assets, the Assets are sufficient for the continued conduct of the Business immediately
after the Closing in substantially the same manner as conducted prior to the Closing.
All of the tangible personal property included in the Assets has been maintained in
accordance with normal industry practice and in compliance in all material respects
with all applicable laws and requirements of applicable contracts and are in good
operating condition, normal wear and tear excepted.






	 	 	The foregoing representations and warranties shall survive the execution and delivery of
this Agreement and the Closing in accordance with Section 15(a).
	 
	7.	 	Representations and Warranties of Buyer. Buyer hereby represents and warrants to
Seller as follows:






	 	(a)	 	Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Washington, and has full corporate power and authority
to enter into and perform its obligations under this Agreement.
	 
	 	(b)	 	All documents executed and to be executed by Buyer and delivered in accordance
with the terms of this Agreement have been duly authorized and are and will be the
valid obligations of Buyer enforceable in accordance with their respective terms.






	 	 	The foregoing representations and warranties shall survive the execution and delivery of
this Agreement and the Closing in accordance with Section 15(a).
	 
	8.	 	Conditions to Obligations of Buyer. The obligations of Buyer hereunder shall be
subject to the following:






	 	(a)	 	The representations and warranties of Seller set forth in Section 6 shall be
true and correct in all material respects on the Closing Date;
	 
	 	(b)	 	Seller shall have, from the Effective Date through the Closing Date, conducted
the Business only in the ordinary course, shall pay obligations of the Business as they
become due, and shall use its reasonable best efforts to preserve the goodwill of the
Business;
	 
	 	(c)	 	There shall have occurred no material loss of, or damage or destruction to, any
of the Assets;
	 
	 	(d)	 	No event shall have occurred between the Effective Date and Closing Date that
has a material adverse effect on the business, assets, results of operations and
condition (financial or otherwise) of the Business or the Assets;
	 
	 	(e)	 	Seller shall have delivered all items pursuant to Section 13(b) hereof; and
	 
	 	(f)	 	Seller shall have caused the valid termination of all employees of the Business
in accordance with the provisions of Section 14.






	9.	 	Condition to Obligations of Seller. The obligations of Seller hereunder shall be
subject to the following:






	 	(a)	 	The representations and warranties of Buyer set forth in Section 7 hereof shall
be true and correct in all material respects on the Closing Date;
	 
	 	(b)	 	Buyer shall have delivered all items pursuant to Section 13(a) hereof.




 









 












	10.	 	Liabilities. At the Closing, Buyer shall assume, and shall from the Closing Date
thereafter pay, perform and discharge the following, but no other, liabilities and obligations
of Seller (such liabilities and obligations hereinafter collectively called the “Assumed
Liabilities”):






	 	(a)	 	Contracts. All liabilities and obligations of Seller
arising or accruing after the Effective Time under the Contracts specifically
set forth on the attached Exhibit K (together, the “Assumed Contracts”);
	 
	 	(b)	 	Purchase Orders. Commitments of Seller to fill all
orders for hearing aids and other products that are specifically set forth on
the attached Exhibit L; and
	 
	 	(c)	 	Exchanges. All obligations of Seller with respect to
patient exchanges of hearing aids and other products sold prior to the Effective
Time; provided that Seller shall remain liable for patient refunds for hearing
aids or other products sold and delivered prior to the Effective Time that are
returned in accordance with Seller’s normal return policy. For purposes hereof,
an “exchange” shall include any return by a patient of a hearing aid or other
product for a refund for which Seller would be responsible hereunder if such
patient purchases a hearing aid or other replacement product from Buyer within
thirty (30) days of such return.






	 	 	Buyer shall not assume any other liabilities, obligations or undertakings of Seller of any
kind or nature whatsoever, whether fixed or contingent, known or unknown, determined or
determinable, due or not yet due. Seller shall be and remain responsible for all
liabilities and obligations of Seller and the Business other than the Assumed Liabilities
(the “Excluded Liabilities”), and Buyer shall have no responsibility therefore whatsoever.
	 
	11.	 	termination events. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned as follows:






	 	(a)	 	At any time, by the mutual written agreement of Buyer and Seller;
	 
	 	(b)	 	By either Buyer or Seller, upon written notice to the other, if the other is in
material breach or default of its respective covenants, agreements, or other
obligations herein, or if any of its representations herein are not true and accurate
in all material respects when made or when otherwise required by this Agreement to be
true and accurate, and such breach, default or failure, if curable, is not cured within
thirty (30) days of receipt of notice that such breach, default or failure exists or
has occurred;
	 
	 	(c)	 	By either Buyer or Seller upon written notice to the other on or after July 31,
2005 if any conditions to its obligations set forth in Sections 8 and 9, respectively,
shall not have been satisfied on or before such date, provided that the failure of such
conditions shall not be the fault of the party seeking termination.






	 	 	No party may terminate this Agreement after the Closing has occurred. If this Agreement is
terminated pursuant to this Section 11, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Section 12(f). Termination of this
Agreement shall not limit or impair any remedies that Buyer or Seller may have with respect
to a breach or default by the other of its covenants, agreements or obligations hereunder.
	 
	12.	 	Use of Customer Records; Restrictive Covenant; Sales Tax; Consents; Further
Assurances.
	 
	 	 	(a) Use of Customer Records. Except in connection with the operation of
Buyer’s business and as may otherwise be consented to by Buyer in writing, from and after
the Closing Date Seller shall not




 









 











disclose or use any of the Customer Records in any way in connection with any business or
solicitation and will not disclose any of such information to any third parties except as
required by law; provided, however, such covenant shall not apply to any independent hearing
aid sellers that are affiliated with the HearUSA Hearing Care Network.



(b) Restrictive Covenant. During the period commencing on the Closing Date and
ending three years thereafter, Seller will not, without the express written consent of
Buyer, directly or indirectly, commence, own, consult with, operate or otherwise be
affiliated in any way with any hearing aid sales and/or service business located within a
25-mile radius of any of the Premises; provided, however, such covenant shall not apply to
any independent hearing aid sellers that are affiliated with the HearUSA Hearing Care
Network.



(c) Remedies. Seller acknowledges that the restrictions contained in this Section
12 are reasonable and necessary to protect the legitimate interests of Buyer, and that any
violation of this Section 12 will result in irreparable injury to Buyer and that money
damages would not provide an adequate remedy to Buyer, and, therefore, Buyer shall be
entitled to preliminary and permanent injunctive relief in any court of competent
jurisdiction and to an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which the Buyer may be entitled. If any portion of the covenants or
agreements contained in this Section 12 or the application thereof is held to be invalid or
unenforceable, then the other portions of such covenants or agreements or the application
thereof shall not be affected and shall be given full force and effect without regard to the
invalid or unenforceable portions. If any covenant or agreement herein is held to be
unenforceable because of the area covered, the duration thereof, or the scope thereof, then
the court making such determination shall have the power to reduce the area and/or duration
and/or limit the scope thereof, and the covenant or agreement shall then be enforceable in
its reduced form.



(d) Sales and Use Tax. Seller and Buyer shall be jointly responsible for payment of
all sales or use tax assessable with respect to the transactions herein. The parties shall
cooperate to obtain all exemptions from such taxes.



(e) Consents.




(i) Seller shall use its reasonable best efforts to obtain and deliver to Buyer
prior to the Closing Date the consent of the landlords of the Premises to the
assignment by the Seller to Buyer of the Lease for said Premises substantially
in the form attached hereto as Exhibit J (the “Landlord Consent”). With respect
to any written consents required for the assignment of the Assumed Contracts to
Buyer including the Landlord Consents (the “Required Consents”) that are not
obtained as of the Closing Date, Seller shall remain obligated to take all
commercially reasonable steps following the Closing as necessary to obtain the
Required Consents. As each Required Consent is obtained and each required
notice is given, Seller shall promptly deliver a copy of such instrument to
Buyer. Seller further agrees to respond promptly to all requests for
information and documentation made by any party that must consent to the
transactions contemplated by this Agreement. If any such consent is not
obtained, Seller shall cooperate with Buyer in any reasonable arrangement
designed to keep such Assumed Contracts or Leases in effect and shall give Buyer
the benefit of such Assumed Contract or Lease including enforcement at the cost
and for the account of Buyer of any rights of Seller against the other party
thereto.




(ii) If on the Closing Date, Seller has delivered to Buyer less than all of the
Landlord Consents required for the assignment of the Leases to Buyer, Buyer
shall pay to Seller at the Closing a pro rata portion of the Purchase Price
based upon the percentage that the number of Landlord Consents delivered at the
Closing represents to the total number of Landlord Consents required to be
delivered hereunder. Thereafter, upon Seller’s delivery to Buyer of additional
Landlord Consents, Buyer shall pay, within three (3) days of such



 









 






delivery to Seller, the pro rata portion of the Purchase Price based upon the
percentage that the number of Landlord Consents then delivered represents to the
total number of Landlord Consents required to be delivered hereunder until such
time as Seller delivers to Buyer all of such Landlord Consents. All payments to
Seller hereunder shall be by wire transfer of immediately available funds.




(iii) Notwithstanding anything contained in this Agreement to the contrary, this
Agreement shall not constitute an assignment or an attempted assignment of any
contract, lease, license, commitment, agreement or purchase or sale order or any
claim or right or any benefit arising thereunder or resulting therefrom if such
assignment or attempted assignment thereof, without the consent from a third
party thereto, would constitute a material breach thereof or in any way
materially adversely affect the rights of Buyer thereunder.




(f) Confidentiality. Seller and Buyer acknowledge and agree that they shall
continue to abide by and comply with terms of that certain confidentiality agreement, dated
April 12, 2005, which continues to be in full force and legal effect.




(g) Access to Information. During the period prior to the Closing Date, Seller
shall give to Buyer and its attorneys, accountants or other authorized representatives, full
access to all of the property, books, contracts, commitments and records of Seller’s
Business at the Premises. By way of example, and not limitation, Seller shall have provided
all Payer Agreements in effect on the Closing Date. Seller shall furnish to Buyer during
such period all such information concerning Seller and its Business at the Premises as Buyer
may request.




(h) Further Assurances. Each party shall, at the request and expense of the
requesting party but without further consideration, do, execute, acknowledge, deliver and
file, or shall cause to be done, executed, acknowledged, delivered or filed, all such
further acts, deeds, transfers, conveyances, assignments or assurances as may be reasonably
requested to consummate the transactions and otherwise fulfill Seller’s obligations as
contemplated by this Agreement.




	13.	 	Closing Date. The consummation of the purchase and sale of the Assets contemplated
hereby (the “Closing”) shall, subject to the conditions hereof, occur on June 22, 2005, or
such other date as Seller and Buyer shall agree (the “Closing Date”) by facsimile transmission
of the documents to be delivered pursuant to subsections (a) and (b) below. If the Closing
shall occur, it shall be deemed to be effective as of 12:01 a.m., Central Time (the “Effective
Time”) on the Closing Date.






	 	(a)	 	Buyer’s Obligations. On the Closing Date, Buyer shall deliver the following to
Seller:






	 	(i)	 	Subject to the limitations in 12(e), the Purchase Price;
	 
	 	(ii)	 	An Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit M executed by Buyer; and
	 
	 	(iii)	 	Such other documents as Seller may reasonably request.






	 	(b)	 	Seller’s Obligations. On the Closing Date, Seller shall deliver the following
to Buyer:






	 	(i)	 	An Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit M;
	 
	 	(ii)	 	A Bill of Sale substantially in the form attached hereto as
Exhibit N executed by Seller transferring and assigning to Buyer all of the
Personal Property;
	 
	 	(iii)	 	Physical possession of the Personal Property and Customer
Records;
	 
	 	(iv)	 	Updated lists of purchase orders; and
	 
	 	(v)	 	Such other documents as Buyer may reasonably request.




 









 












	14.	 	Seller’s Employees. Buyer currently expects to employ, at its option, certain of
the employees of Seller. Seller shall take all action required by law or otherwise to cause
the valid termination of employment at the Closing Date of all employees of the Business.
Seller shall be solely responsible for any and all liability arising from any termination of
employment of those employees. Nothing in this Agreement is intended to confer upon any
employee of the Business any rights or remedies, including, without limitation, any rights of
employment of any nature or kind whatsoever.
	 
	15.	 	survival; indemnification; certain remedies






	 	(a)	 	The representations and warranties of Seller and Buyer contained in this
Agreement shall survive the Closing for the period of one year after the Closing
Date (the “Indemnification Deadline”); provided, however, that the representations
and warranties of Seller shall survive the Closing and continue in full force and
effect forever thereafter in the event of (a) any intentional or willful breaches of
the representations or warranties set forth in Section 6, (b) any intentional or
willful failure to perform any covenant hereunder, (c) any Excluded Liabilities or
(d) any other intentional fraud committed by Seller under this Agreement or
otherwise. It being understood that in the event notice of any claim for
indemnification under Section 15(b) or Section 15(d) hereof has been given (within
the meaning of Section 15) prior to the Indemnification Deadline, the
representations and warranties that are the subject of such indemnification claim
shall survive with respect to such claim until such time as such claim is finally
resolved.
	 
	 	(b)	 	Seller hereby agrees that from and after the Closing it shall indemnify,
defend and hold harmless Buyer and its directors, officers, shareholders, agents,
representatives and employees and their heirs, successors and permitted assigns,
each in their capacity as such (the “Buyer Indemnified Parties” collectively with
the Seller Indemnified Parties, the “Indemnified Parties”) from, against and in
respect of any damages, losses, charges, liabilities, claims, demands, actions,
suits, proceedings, payments, judgments, settlements, assessments, deficiencies,
taxes, interest, penalties, and costs and expenses (including removal costs,
remediation costs, closure costs, fines, penalties and expenses of investigation and
ongoing monitoring, reasonable attorneys’ fees, and reasonable out of pocket
disbursements) (collectively, “Losses”) imposed on, sustained, incurred or suffered
by, or asserted against, any of the Buyer Indemnified Parties, whether in respect of
third party claims, claims between the parties hereto, or otherwise, directly or
indirectly relating to, arising out of or resulting from, subject to Section 15(c),
(i) any breach of any representation or warranty made by Seller contained in this
Agreement for the period such representation or warranty survives and (ii) any
breach of any covenant or agreement of Seller contained in this Agreement.
	 
	 	(c)	 	Seller shall not be liable to the Buyer Indemnified Parties for any
Losses with respect to the matters contained in Section 15(b) unless the Losses
therefrom exceed an aggregate amount equal to $10,000. Once Losses exceed the
aggregate amount of $10,000, Seller shall be liable to Buyer for all amounts
incurred by such Losses. Seller’s liability for Buyer’s Losses relating to
unintentional breaches of the representations and warranties set forth in Section 6
will not exceed the aggregate amount of $1,100,000; provided, however, that there
shall be no limitation on Seller’s indemnification obligations hereunder with
respect to any Losses that Buyer suffers resulting from (a) any intentional or
willful breaches of the representations or warranties set forth in Section 6, (b)
any intentional or willful failure to perform any covenant hereunder, (c) any
Excluded Liabilities or (d) any other intentional fraud committed by Seller under
this Agreement or otherwise.
	 
	 	(d)	 	Buyer hereby agrees that from and after the Closing it shall indemnify,
defend and hold harmless Seller and its directors, officers, shareholders, agents,
representatives and employees and their heirs, successors and permitted assigns,
each in their capacity as such (the “Seller Indemnified Parties”) from, against and
in respect of any Losses imposed on, sustained, incurred or suffered by, or asserted
against, any of the Seller Indemnified Parties, whether in respect of third party




 









 












	 	 	claims, claims between the parties hereto, or otherwise, directly or indirectly
relating to, arising out of or resulting from (i) any breach of any representation or
warranty made by Buyer contained in this Agreement for the period such representation
or warranty survives, (ii) any of the Assumed Liabilities, (iii) any breach of a
covenant or agreement of Buyer contained in this Agreement, and (iv) Buyer’s
operation or ownership of the Assets or the Business following the Closing.
	 
	(e)	 	Buyer shall not be liable to the Seller Indemnified Parties for any
Losses with respect to the matters contained in Section 15(d) unless the Losses
therefrom exceed an aggregate amount equal to $10,000. Once Losses exceed the
aggregate amount of $10,000, Buyer shall be liable to Seller for all amounts
incurred by such Losses. Buyer’s liability for Seller’s Losses relating to
unintentional breaches of the representations and warranties set forth in Section 7
will not exceed the aggregate amount of $1,100,000; provided, however, that there
shall be no limitation on Buyer’s indemnification obligations hereunder with respect
to any Losses that Seller suffers resulting from (a) any intentional or willful
breaches of the representations or warranties set forth in Section 7, (b) any
intentional or willful failure to perform any covenant hereunder, (c) any Assumed
Liabilities or (d) any other intentional fraud committed by Seller under this
Agreement or otherwise.
	 
	(f)	 	In the event that any written claim or demand for which an indemnifying
party (an “Indemnifying Party”) may have liability to any Indemnified Party
hereunder is asserted against or sought to be collected from any Indemnified Party
by a third party (a “Third Party Claim”), such Indemnified Party shall promptly, but
in no event more than ten days following such Indemnified Party’s receipt of a Third
Party Claim, notify the Indemnifying Party in writing of such Third Party Claim, the
amount or the estimated amount of damages sought thereunder to the extent then
ascertainable (which estimate shall not be conclusive of the final amount of such
Third Party Claim), any other remedy sought thereunder, any relevant time
constraints relating thereto and, to the extent practicable, any other material
details pertaining thereto (a “Claim Notice”); provided, however, that the failure
timely to give a Claim Notice shall affect the rights of an Indemnified Party
hereunder only to the extent that such failure has a material prejudicial effect on
the defenses or other rights available to the Indemnifying Party with respect to
such Third Party Claim. The Indemnifying Party shall have 30 days (or such lesser
number of days set forth in the Claim Notice as may be required by court proceeding
in the event of a litigated matter) after receipt of the Claim Notice (the “Notice
Period”) to notify the Indemnified Party that it desires to defend the Indemnified
Party against such Third Party Claim.
	 
	(g)	 	In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against a
Third Party Claim, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to direct
and control such defense at its expense. Once the Indemnifying Party has duly
assumed the defense of a Third Party Claim, the Indemnified Party shall have the
right, but not the obligation, to participate in any such defense and to employ
separate counsel of its choosing. The Indemnified Party shall participate in any
such defense at its expense unless (i) the Indemnifying Party and the Indemnified
Party are both named parties to the proceedings and the Indemnified Party shall have
reasonably concluded that representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them, or
(ii) the Indemnified Party assumes the defense of a Third Party Claim after the
Indemnifying Party has failed to diligently pursue a Third Party Claim it has
assumed, as provided in the first sentence of Section 15(h). The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any Third Party Claim on a basis that
would result in (i) the imposition of a consent order, injunction or decree that
would restrict the future activity or conduct of the Indemnified Party or any of its
affiliates, (ii) a finding or admission of a violation of law or violation of the
rights of any person by the Indemnified Party or any of its affiliates, (iii) a
finding or admission that would have an adverse effect on other claims made or
threatened against the Indemnified Party or any of its affiliates, or




 









 












(iv) any monetary liability of the Indemnified Party that will not be promptly paid
or reimbursed by the Indemnifying Party.




	 	(h)	 	If the Indemnifying Party (i) elects not to defend the Indemnified Party
against a Third Party Claim, whether by not giving the Indemnified Party timely
notice of its desire to so defend or otherwise or (ii) after assuming the defense of
a Third Party Claim, fails to take reasonable steps necessary to defend diligently
such Third Party Claim within ten days after receiving written notice from the
Indemnified Party to the effect that the Indemnifying Party has so failed, the
Indemnified Party shall have the right but not the obligation to assume its own
defense; it being understood that the Indemnified Party’s right to indemnification
for a Third Party Claim shall not be adversely affected by assuming the defense of
such Third Party Claim. The Indemnified Party shall not settle a Third Party Claim
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
	 
	 	(i)	 	Notwithstanding anything to the contrary contained in this Agreement, no
Person shall be liable under this Section 15 for any consequential, punitive,
special, incidental or indirect damages, including lost profits, except to the
extent awarded by a court of competent jurisdiction in connection with a Third Party
Claim.
	 
	 	(j)	 	The rights and remedies of Seller and Buyer under this Section 15 are
exclusive and in lieu of any and all other rights and remedies that Seller and Buyer
may have under this Agreement or otherwise against each other with respect to the
transactions contemplated hereby for monetary relief with respect to (i) any breach
of any representation or warranty or any failure to perform any covenant or
agreement set forth in this Agreement, other than those which are intentional or
willful, and (ii) the Assumed Liabilities or the Excluded Liabilities, and Buyer and
Seller each expressly waives any and all other rights or causes of action it or its
affiliates may have against the other party or its affiliates now or in the future
under any law with respect to the subject matter hereof.






	16.	 	Notices. All notices required hereunder shall be in writing and shall be
delivered to the parties as follows:





	 	 	 	 	 	 	 
	 

	 	To Seller:
	 	HearUSA, Inc.
	 	 
	 

	 	 	 	1250 Northpoint Parkway	 	 
	 

	 	 	 	West Palm Beach, Florida 33407	 	 
	 

	 	 	 	Attn: Gino Chouinard	 	 
	 

	 	 	 	Facsimile: (561) 478-9603	 	 
	 
	 	 	 	 	 	 
	 	 	With copy (which shall not constitute notice) to:
	 
	 	 	 	 	 	 
	 

	 	 	 	Bryan Cave LLP	 	 
	 

	 	 	 	700 13th Street N.W.	 	 
	 

	 	 	 	Washington, DC 20005	 	 
	 

	 	 	 	Attn: Phillip A. Quatrini, Esq.	 	 
	 

	 	 	 	Facsimile: (202) 508-6200	 	 
	 
	 	 	 	 	 	 
	 

	 	To Buyer:
	 	Sonus-USA, Inc.	 	 
	 

	 	 	 	5000 Cheshire Lane North	 	 
	 

	 	 	 	Plymouth, Minnesota, 55446	 	 
	 

	 	 	 	Attn: President	 	 
	 

	 	 	 	Facsimile: (763) 268-4280	 	 
	 
	 	 	 	 	 	 
	 	 	With copy (which shall not constitute notice) to:






 









 






	 	 	 	 	 	 	 
	 

	 	 	 	Fredrikson & Byron P.A.	 	 
	 

	 	 	 	200 South Sixth Street, Suite 4000	 	 
	 

	 	 	 	Minneapolis, Minnesota 55402-1425	 	 
	 

	 	 	 	Attention: Ryan S. Johnson, Esq.	 	 
	 

	 	 	 	Facsimile: (612) 492-7077	 	 







	 	 	Such addresses may be changed by written notice to the other party. Such notices shall be
effective upon receipt if delivered personally or by facsimile transmission, with
confirmation of transmission; three business days after mailing if delivered by registered
or certified mail; or one business day after mailing if delivered by overnight courier
service.
	 
	16.	 	Agreement. This Agreement contains the entire agreement of the parties concerning
the subject matter hereof, and supersedes all prior communications, understandings and
agreements. No representations, promises or agreements, oral or otherwise, not contained
herein shall be of any force or effect.
	 
	17.	 	Governing Law; Remedies; Consent to Jurisdiction. This Agreement shall be
governed by and construed under the laws of the State of Minnesota. Any controversy relating
to this Agreement or any modification or extension of it and any proceeding relating thereto
shall be held in Minneapolis, Minnesota. The parties hereby submit to jurisdiction
for any enforcement of this Agreement in Minnesota.
	 
	18.	 	Counterparts. This Agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if the signatures thereto
were on the same instrument. The delivery by a party of an executed facsimile of this
Agreement shall constitute effective and binding execution.
	 
	19.	 	Assignment. Neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by Seller (whether by operation of law or otherwise) without the
prior written consent of the Buyer. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns, heirs, personal representatives and executors.
	 
	20.	 	No Third Party Benefit. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties to this Agreement or their respective
successors or assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
	 
	 	 	IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
written above.





	 	 	 	 	 	 	 
	Sonus-USA, Inc.

	 	 
	 	HearUSA, Inc.
	 	 
	 
	 	 	 	 	 	 
	By: /s/ Scott Klein

	 	 	 	By: /s/ Stephen J. Hansbrough	 	 
	 

	 	 	 	 	 	 
	   Its: Sr. Vice President

	 	 	 	   Its: President & CEO