Document:

ex10-4

 

Exhibit 10.4

RELEASE

     This RELEASE is made as of December 13, 2001 by and between HEARx Ltd., a
Delaware corporation (the “Company”) and Advantage Fund II Ltd. (the
“Investor”).

RECITALS

     A.     Pursuant to a Convertible Preferred Stock Purchase Agreement dated as
of May 9, 2000 (the “Original Purchase Agreement”), the Company issued and sold
to the Investor, and the Investor purchased from the Company, 500 shares of the
Company’s 7% Series I Convertible Preferred Stock, par value $1.00 per share
(the “Original Preferred Stock”), which are convertible into shares of the
Company’s common stock, par value $.10 per share (the “Common Stock”), and
warrants to purchase 203,390 shares of Common Stock (the “Original Warrants”).

     B.     In connection with the Original Purchase Agreement, the Company filed a
Certificate of Designations with the Secretary of State of Delaware containing
the rights, preferences and privileges of the Original Preferred Stock (the
“Original Certificate of Designations”), and the Company and the Investor
entered into a Registration Rights Agreement dated as of May 9, 2000 (the
“Original Registration Rights Agreement”). The Original Purchase Agreement,
Original Certificate of Designations, Original Warrants and Original
Registration Rights Agreement are, collectively, the “Original Transaction
Documents”.

     C.     The Investor currently holds 418 shares of the Original Preferred
Stock, the Original Warrants and 129,470 shares of Common Stock (collectively,
the “Existing Investor Securities”).

     D.     The Investor and the Company desire that the Investor exchange all of
the Existing Investor Securities for a combination of cash, shares of a newly
issued non-convertible preferred stock of the Company and shares of Common
Stock (the “Exchange”) upon the terms and subject to the conditions set forth
in an exchange agreement between the Company and the Investor of even date
herewith (the “Exchange Agreement”).

     E.     The Exchange Agreement contemplates that the Company and the Investor
will execute and deliver this Release as a condition to the closing of the
Exchange and this Release is a material inducement to the parties entering into
the Exchange Agreement.

AGREEMENT

     NOW, THEREFORE, in consideration of the Exchange and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and the
Investor agree as follows:

 

 

     1.     Company Release. The Company, for itself and its agents,
representatives, successors and assigns (the “Company Releasors”), does hereby
remise, release and forever
discharge the Investor, its affiliates, employees, officers, directors, agents,
representatives, successors and assigns and each of their respective
affiliates, employees, officers, directors, agents, representatives, successors
and assigns (collectively, the “Investor Releasees”) from all actions, causes
of action, suits, debts, dues, assessments, late fees, sums of money, expenses,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, obligations, duties, claims, matters, liabilities, violations of
law, fines, penalties, responsibilities, attorneys’ fees, costs, and demands
whatsoever, in law, admiralty, or equity (“Claims”), which against the Investor
Releasees (or any of them) the Company Releasors ever had, now have, or
hereafter can, shall, or may have, for, upon or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the date of this
Release, except for claims under the Exchange Agreement and the Exchange.

     2.     Investor Release. The Investor, for itself and its agents,
representatives, successors and assigns (the “Investor Releasors”), does hereby
remise, release and forever discharge the Company, its affiliates, employees,
officers, directors, agents, representatives, successors and assigns and each
of their respective affiliates, employees, officers, directors, agents,
representatives, successors and assigns (collectively, the “Company Releasees”)
from all Claims, which against the Company Releasees (or any of them) the
Investor Releasors ever had, now have, or hereafter can, shall, or may have,
for, upon or by reason of any matter, cause or thing whatsoever from the
beginning of the world to the date of this Release, except for claims under the
Exchange Agreement and the Exchange.

     3.     Further Acts. Each party to this Release agrees to perform any further
acts or execute and deliver any additional documents that may be reasonably
necessary to carry out the provisions and intent of this Release.

     4.     Amendments; Waivers. No provision of this Release may be waived or
amended except in a written agreement signed, in the case of an amendment, by
the Company and the Investor or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought.

     5.     Severability. In case any one or more of the provisions of this
Release shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Release shall not
in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Release.

     6.     Governing Law. This Release shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflicts of law thereof.

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     7.     Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall
become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature page were an original thereof.

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     IN WITNESS WHEREOF, the parties hereto have caused this Release to be duly
executed by their respective authorized signatories as of the date first
indicated above.

	 	 	 
	 	HEARx LTD
	 
	 	By:	/s/ Paul A Brown
	 	 	

Paul A. Brown, M.D.

Chairman and Chief Executive Officer
	 
	 	ADVANTAGE FUND II LTD
	 
	 	By: 	Genesee International Inc.

as General Manager
	 
	 	 	/s/ Donald R. Morken

Donald R. Morken

President

4ex10-1

 

EXHIBIT 10.1

CREDIT AGREEMENT

Dated as of December 7, 2001

Between

HEARX LTD.,

as Borrower,

and

SIEMENS HEARING INSTRUMENTS, INC.,

as Lender

$51,875,000

 

 

                    CREDIT AGREEMENT, dated as of December 7, 2001, between HEARx Ltd., a
Delaware corporation (the “Borrower”), and Siemens Hearing Instruments, Inc., a
Delaware corporation (the “Lender”),

W I T N E S S E T H:

                    WHEREAS, the Borrower has requested that the Lender make loans to the
Borrower, in an aggregate amount not to exceed $51,875,000, for the purposes
hereinafter specified; and

                    WHEREAS, the Lender is willing to make funds available for such purposes
upon the terms and subject to the conditions set forth herein; and

                    WHEREAS, the Borrower and the Lender are parties to the Supply Agreement
(as hereinafter defined), which provides for, among other things, the sale of
hearing aids to the Borrower and its Affiliates by the Lender or its
Affiliates;

                    NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

          Section 1.01. Defined Terms.

                    As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):

                    “Acquisition Target” has the meaning specified in Schedule I hereto.

                    “Affiliate” means, as to any Person, any Subsidiary of such Person and any
other Person which, directly or indirectly, controls, is controlled by or is
under common control with such Person and includes each officer or director or
general partner of such Person, and each Person who is the beneficial owner of
5% or more of any class of Voting Stock of such Person. For the purposes of
this definition, “control” means the possession of the power to direct or cause
the direction of management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

                    “Agreement” means this Credit Agreement, together with all Exhibits and
Schedules hereto, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

                    “Business Day” means a day of the year on which banks are not required or
authorized to close in New York City.

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                    “Cash Equivalents” means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States government or any agency thereof, (b) certificates of deposit,
eurodollar time deposits, overnight bank deposits and bankers’ acceptances of
any Lender or by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia that (i) is
at least “adequately capitalized” (as defined in the regulations of its primary
Federal banking regulator) and (ii) has Tier 1 capital (as defined in such
regulations) of not less than $100,000,000, having maturities of one year or
less from the date of acquisition, (c) commercial paper of an issuer rated at
least “A-1” by Standard & Poors or “P-1” by Moody’s, or carrying an equivalent
rating by a nationally recognized rating agency if both of Standard and Poors
and Moody’s cease publishing ratings of investments, and (d) shares of any
money market mutual fund that (i) has substantially all of its assets invested
continuously in the types of investments referred to in clause (a) above, (ii)
has net assets of not less than $500,000,000, and (iii) has the highest rating
obtainable from either S&P or Moody’s; and (e) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause (b) of
this definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government.

                    “Change of Control” means (a) the sale, lease, transfer, conveyance or
other disposition of all or substantially all of the assets of the Borrower to
any “person” or “group” (within the meaning of Sections 13(d)(3) and 14(d)(2)
of the Exchange Act or any successor provision to either of the foregoing,
including any group acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act)
(except in connection with a liquidation or dissolution of the Borrower that
does not constitute a Change of Control under clause (b) below), (b) the
approval by the requisite shareholders of the Borrower of a plan of liquidation
or statutory dissolution (which shall not be construed to include a plan of
merger or consolidation) of the Borrower, or (c) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Borrower’s Board of Directors (together with any new directors whose
election or appointment by such board or whose nomination for election by the
stockholders of the Borrower was not approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Borrower’s Board
of Directors then in office; provided, however, that those individuals that
will be appointed to Borrower’s Board of Directors in furtherance of the Merger
Agreement with Helix shall not be considered new directors in determining a
Change of Control.

                    “Closing Date” means the date on which the first Loan is made by the
Lender to the Borrower.

                    “Collateral Documents” means the Security Agreement and any other document
or instrument executed and delivered by a Person granting a Lien on any of its
property to secure payment of the Obligations.

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                    “Commitments” means, collectively, the Tranche A Loan Commitment, the
Tranche B Loan Commitment, the Tranche C Loan Commitment and the Tranche D Loan
Commitment.

                    “Consolidated Net Income” means, for any period with respect to any
specified Person or operations for which financial statements are prepared, the
net income of such Person or operations and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; provided that the
net income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that net income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its shareholders.

                    “Current Assets” means, with respect to any Person at any date, the total
consolidated current assets of such Person and its Subsidiaries on a
consolidated basis at such date, determined in conformity with GAAP.

                    “Current Liabilities” means, with respect to any Person at any date, the
total consolidated current liabilities of such Person and its Subsidiaries on a
consolidated basis at such date, determined in conformity with GAAP.

                    “Default” means any event which with the passing of time or the giving of
notice or both would become an Event of Default.

                    “Dollars” and the sign “$” each mean the lawful money of the United States
of America.

                    “EBITDA” means, with respect to any Person or operations for which
financial statements are prepared, at any time, for the then most recently
completed four fiscal quarters of such Person or operations, the sum of the
following amounts (without duplication) in respect of such Person and its
Subsidiaries or such operations, determined on a consolidated basis in
accordance with GAAP:

                    (a)       Consolidated Net Income for such period;

                    (b)       all amounts deducted from net revenues in determining such
Consolidated Net Income for such period on account of (i) Interest Expense and
interest on the Loans and (ii) Taxes payable in respect of income of such
Person;

                    (c)       all charges or deductions for depreciation or amortization for such
period to the extent deducted in determining Consolidated Net Income for such
period; and

                    (d)       all non-recurring losses and all losses from investments recorded
using the equity method for such period to the extent deducted in determining
Consolidated Net Income for such period;

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                    less the amount of all non-recurring gains and all gains from investments
recorded using the equity method for such period to the extent included in
determining Consolidated Net Income for such period.

                    “Environmental Laws” means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including, without limitation, any judicial or
administrative order, consent decree or judgment relating to the regulation and
protection of human health, safety, the environment or natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation).

                    “ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and all rules and
regulations from time to time promulgated thereunder.

                    “Event of Default” has the meaning specified in Section 7.01.

                    “Excess Cash Flow” means for the Borrower, (i) for the period commencing
on the Closing Date and ending on December 28, 2002, EBITDA of the Borrower for
such period minus the sum of (without duplication) scheduled and mandatory
cash principal and interest payments on Indebtedness made by the Borrower or
any of its Subsidiaries (other than the Loans) during such period to the extent
such other Indebtedness is permitted herein and such payments are permitted
herein to be made, and (ii) thereafter, EBITDA of the Borrower for such period.

                    “Existing Loan Agreement” means that Letter of Intent between Lender and
Borrower dated as of April 23, 2001 providing up to $7,500,000 in debt
financing to Borrower and which, on the Closing Date, had an unpaid principal
balance of $6,875,000 due from Borrower to Lender.

                    “Fiscal Quarter” means each of the three month periods ending on the last
Saturday during the months of March, June, September and December.

                    “GAAP” means generally accepted accounting principles in the United States
of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board.

                    “Governmental Authority” means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

                    “HEARx West” means HEARx West LLC, a Delaware limited liability company.

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                    “Helix” means Helix Hearing Care of America Corp., a Canada corporation,
and its wholly-owned Subsidiaries.

                    “Indebtedness” means, as to any Person: (a) indebtedness created, issued,
existing or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities); (b) obligations of such Person to pay
the deferred purchase or acquisition price of property or services, other than
trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within sixty (60) days from the date Borrower
receives statement for such goods or services and other than trade accounts
payable that are being contested in good faith, by proper proceedings, if
adequate reserves therefor have been established on the books of such Person in
conformity with GAAP; (c) Indebtedness of others secured by a Lien on the
property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for the account of such Person; (e) capital lease
obligations of such Person; and (f) Indebtedness of others guaranteed by such
Person.

                    “Indemnified Matters” has the meaning specified in Section 8.04(b).

                    “Indemnitee” has the meaning specified in Section 8.04(b).

                    “Initial Tranche C Repayment Period” has the meaning specified in Section
2.03(c)(i).

                    “Interest Expense” means, for any fiscal period, for any Person or
operations for which financial statements are prepared, all interest expense
calculated on a consolidated basis for such Person and its Subsidiaries or such
operations in respect of Indebtedness, including any commitment, standby,
agency or other fees charged in respect of the provision of any such
Indebtedness, any fee payable in respect of the issuance of any letter of
credit or letter of guarantee, the imputed interest component of any bankers’
acceptance or other security issued by any such Person or in respect of such
operations, the interest component under any capital lease or under any lease,
or under any interest rate protection agreement entered into by any such Person
or in respect of such operations, all as determined in accordance with GAAP.

                    “Investment” has the meaning specified in Section 6.12.

                    “Lien” means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing, under the UCC or
comparable law of any jurisdiction, of any financing statement evidencing a
valid lien naming the owner of the asset to which such Lien relates as debtor.

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                    “Loan Documents” means, collectively, this Agreement, the Notes, the
Collateral Documents and each certificate, agreement or document executed by
the Borrower or any other Person (other than the Lender) and delivered to the
Lender in connection with or pursuant to any of the foregoing.

                    “Loans” means, collectively, the Tranche A Loan, the Tranche B Loans, the
Tranche C Loan and the Tranche D Loans.

                    “Material Adverse Change” means a material adverse change in any of (a)
the legality, validity or enforceability of any Loan Document, (b) the ability
of the Borrower to repay the Obligations or to perform its obligations under
any Loan Document, or (c) the rights and remedies of the Lender under any of
the Loan Documents.

                    “Material Adverse Effect” means an effect that results in or causes, or
has a reasonable likelihood of resulting in or causing, a Material Adverse
Change.

                    “Maturity Date” means the fifth anniversary of the Closing Date.

                    “Merger Agreement” means the Amended and Restated Merger Agreement, dated
as of November 6, 2001, by and between the Borrower and Helix.

                    “Merger Date” means the date of the consummation of the merger of the
Borrower and Helix in accordance with the terms of the Merger Agreement.

                    “Minimum Purchase Percentage” has the meaning specified in Section
2.03(a)(i).

                    “Net Income (Loss)” means, for any Person for any period, the aggregate of
net income (or loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis in conformity with GAAP.

                    “Notes” means, collectively, the Tranche A Note, the Tranche B Note, the
Tranche C Note and the Tranche D Note.

                    “Notice of Borrowing” has the meaning specified in Section 2.02(a).

                    “Obligations” means the Loans, the Notes and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender or any Indemnitee, of every type and description, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under this Agreement or under any other Loan Document, whether or not for the
payment of money, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term “Obligations” includes,
without limitation, all interest, charges, expenses, fees, attorneys’ fees and
disbursements and any other sum chargeable to the Borrower under this Agreement
or any other Loan Document.

                    “Other Taxes” has the meaning specified in Section 2.09(b).

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                    “Participant” has the meaning specified in Section 8.11.

                    “Permit” means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Requirement of Law.

                    “Permitted Liens” means Liens permitted under Section 6.01 of this
Agreement.

                    “Permitted Senior Indebtedness” means senior Indebtedness of Borrower to
non-Affiliates of the Borrower that satisfies each of the following conditions:

                    (a)       in the reasonable judgment of the Lender, the Borrower will be able to
service the Permitted Senior Indebtedness without substantially jeopardizing
the ability of the Borrower to pay all principal and interest on its
Indebtedness under reasonably adverse business circumstances;

                    (b)       there are no sinking fund or mandatory payments or prepayments of
principal due in respect of such Indebtedness prior to the Maturity Date;

                    (c)       after giving effect to the incurrence of such Indebtedness, the
Borrower’s ratio of (i) Total Debt to (ii) the sum of (A) its Total Debt plus
(B) its Stockholders’ Equity shall be, on a pro forma basis, equal to or
greater than 2.5:1.0;

                    (d)       after giving effect to the incurrence of such Indebtedness, the
Borrower’s ratio of EBITDA to the Borrower’s aggregate interest expense
(including, without limitation, interest paid hereunder) shall be, on a pro
forma basis, equal to or greater than 3.0:1.0;

                    (e)       the other terms and conditions of such Indebtedness, shall be, in the
Lender’s reasonable judgment, at then prevailing market standards for companies
similarly situated.

For purposes of this definition, “pro forma” means, for any calculation, on the
basis of the most recently completed rolling four-Fiscal Quarter period, but
assuming the incurrence of the proposed Indebtedness on the first day of such
period.

                    “Permitted Subordinated Indebtedness” means subordinated unsecured
Indebtedness of the Borrower that satisfies each of the following conditions:

          (a)       the final maturity of such Indebtedness is later than the Maturity
Date;

          (b)       there are no sinking fund or mandatory payments or prepayments of
principal due in respect of such Indebtedness prior to the Maturity Date; and

          (c)       the other terms and conditions of such Indebtedness shall be, in
Lender’s reasonable opinion, at then prevailing market standards for companies
similarly situated, including limited acceleration rights, priority in
bankruptcy to the Obligations, payover provisions and waiver of defenses.

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                    “Person” means an individual, partnership, corporation (including, without
limitation, a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.

                    “Prime Rate” means the rate of interest per annum publicly announced from
time to time by Citibank, N.A. as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective.

                    “Required Tranche B Payment” shall have the meaning specified in Section
2.03(b).

                    “Required Tranche C Payment” shall have the meaning specified in Section
2.03(c).

                    “Requirement of Law” means, as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of
such Person, and all federal, state and local laws, rules and regulations,
including, without limitation, federal, state or local securities, antitrust
and licensing laws, all health and safety laws, including, without limitation,
Environmental Laws, and ERISA, and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

                    “Responsible Officer” means, with respect to any Person, any of the
principal executive officers of such Person.

                    “Security Agreement” means an agreement, in substantially the form of
Exhibit C, as such agreement may be amended, supplemented or modified from time
to time.

                    “Solvent” means, with respect to any Person, that the value of the assets
of such Person (at book value) is, on the date of determination, greater than
the total amount of liabilities (including, without limitation, contingent and
unliquidated liabilities) of such Person as of such date and that, as of such
date, such Person is able to pay all liabilities of such Person as such
liabilities mature and does not have unreasonably small capital. In computing
the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

                    “Stock” means shares of capital stock, beneficial, membership or
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, limited liability company, partnership or
other entity, whether voting or non-voting, and includes, without limitation,
common stock and preferred stock.

                    “Stock Equivalents” means all securities convertible into or exchangeable
for Stock, and all warrants, options or other rights to purchase or subscribe
for any Stock, whether or not presently convertible, exchangeable or
exerciseable.

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                    “Subsidiary” means, with respect to any Person, any corporation,
partnership or other business entity of which an aggregate of 50% or more of
the outstanding Stock having ordinary voting power to elect a majority of the
board of directors, managers, trustees or other controlling persons, is, at the
time, directly or indirectly, owned or controlled by such Person
and/or one or more Subsidiaries of such Person (irrespective of whether,
at the time, Stock of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency).

                    “Supply Agreement” means, collectively, the Supply Agreement, dated as of
December 7, 2001, between the Borrower and the Lender, and any other supply or
similar agreement entered into by the Lender or any of its Affiliates and the
Borrower or any of its Affiliates for the provision of hearing aids by the
Lender or any of its Affiliates to the Borrower or any of its Affiliates, in
each case, as amended, restated, supplemented or otherwise modified from time
to time.

                    “Taxes” has the meaning specified in Section 2.09(a).

                    “Tranche A Loan” has the meaning specified in Section 2.01(a).

                    “Tranche A Loan Commitment” the commitment of the Lender to make the
Tranche A Loan to the Borrower pursuant to Section 2.01(a) in an aggregate
principal amount not to exceed $10,875,000.

                    “Tranche A Loan Payment Date” has the meaning specified in Section
2.03(a).

                    “Tranche A Note” means the promissory note of the Borrower payable to the
order of the Lender in an aggregate principal amount equal to the Tranche A
Loan Commitment, in substantially the form of Exhibit A-1, evidencing the
aggregate principal amount of the Tranche A Loan by the Lender to the Borrower.

                    “Tranche B Loan” has the meaning specified in Section 2.01(b).

                    “Tranche B Loan Commitment” the commitment of the Lender to make the
Tranche B Loans to the Borrower pursuant to Section 2.01(b) in an aggregate
principal amount not to exceed $25,000,000.

                    “Tranche B Loan Payment Date” has the meaning specified in Section
2.03(b).

                    “Tranche B Note” means the promissory note of the Borrower payable to the
order of the Lender in an aggregate principal amount equal to the Tranche B
Loan Commitment, in substantially the form of Exhibit A-2, evidencing the
aggregate principal amount of the Tranche B Loans by the Lender to the
Borrower.

                    “Tranche C Loan” has the meaning specified in Section 2.01(c).

                    “Tranche C Loan Closing Date” means the date on which the Tranche C Loan
is made.

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                    “Tranche C Loan Commitment” the commitment of the Lender to make the
Tranche C Loan to the Borrower pursuant to Section 2.01(c) in an aggregate
principal amount not to exceed $3,000,000.

                    “Tranche C Loan Payment Date” has the meaning specified in Section
2.03(c).

                    “Tranche C Note” means the promissory note of the Borrower payable to the
order of the Lender in an aggregate principal amount equal to the Tranche C
Loan Commitment, in substantially the form of Exhibit A-3, evidencing the
aggregate principal amount of the Tranche C Loan by the Lender to the Borrower.

                    “Tranche D Loan” has the meaning specified in Section 2.01(d).

                    “Tranche D Loan Commitment” the commitment of the Lender to make the
Tranche D Loans to the Borrower pursuant to Section 2.01(d) in an aggregate
principal amount not to exceed $13,000,000.

                    “Tranche D Loan Payment Date” has the meaning specified in Section
2.03(d).

                    “Tranche D Note” means the promissory note of the Borrower payable to the
order of the Lender in an aggregate principal amount equal to the Tranche D
Loan Commitment, in substantially the form of Exhibit A-4, evidencing the
aggregate principal amount of the Tranche D Loans by the Lender to the
Borrower.

                    “UCC” means the Uniform Commercial Code, as in effect in any applicable
jurisdiction.

                    “Voting Stock” means Stock or similar interests, of any class or classes
(however designated), the holders of which at the time entitled, as such
holders to vote for the election of a majority of the directors (or persons
performing similar functions) of the Person involved, whether or not the right
to so vote exists by reason of the happening of a contingency.

                    “Working Capital” means, for any Person at any date, the amount by which
the Current Assets of such Person at such date exceeds the Current Liabilities
of such Person at such date.

          Section 1.02. Computation of Time Periods.

                    In this Agreement, in the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including” and
the words “to” and “until” each mean “to but excluding” and the word “through”
means “to and including”.

          Section 1.03. Accounting Terms.

                    All accounting terms not specifically defined herein shall be construed in
conformity with GAAP and all accounting determinations required to be made
pursuant hereto shall, unless expressly otherwise provided herein, be made in
conformity with GAAP.

10

 

          Section 1.04. Certain Terms.

                    (a)       The words “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole, and not to any particular
Article, Section, subsection or clause in this Agreement. References herein to
an Exhibit, Schedule, Article, Section, subsection or clause refer to the
appropriate Exhibit or Schedule to, or Article, Section, subsection or clause
in this Agreement.

                    (b)       The term “Lender” includes its successors and assigns.

ARTICLE II

AMOUNTS AND TERMS OF THE LOAN

          Section 2.01. The Commitments and the Loans.

                    (a)       Tranche A Loan. On the terms and subject to the conditions contained
in this Agreement, the Lender agrees to make a single loan (the “Tranche A
Loan”) to the Borrower, which Tranche A Loan (i) shall be made only on the
Closing Date, (ii) may, at the option of the Borrower, be repaid pursuant to
Section 2.04 hereof, but once repaid may not be reborrowed, and (iii) shall not
exceed the amount of the Tranche A Loan Commitment. The Tranche A Loan shall
be evidenced by the Tranche A Note.

                    (b)       Tranche B Loans. On the terms and subject to the conditions contained
in this Agreement, the Lender agrees to make loans (each, a “Tranche B Loan”
and collectively, the “Tranche B Loans”) to the Borrower, which Tranche B Loans
(i) may be made on the Closing Date and from time to time thereafter on any
Business Day prior to the Maturity Date, (ii) may, at the option of the
Borrower, be repaid pursuant to Section 2.04 hereof, and once repaid pursuant
to Section 2.04 may be reborrowed, and (iii) shall not exceed, at any time
outstanding, the amount of the Tranche B Loan Commitment. The aggregate
Tranche B Loans shall be evidenced by the Tranche B Note.

                    (c)       Tranche C Loan. On the terms and subject to the conditions contained
in this Agreement, the Lender agrees to make a single loan (the “Tranche C
Loan”) to the Borrower, which Tranche C Loan (i) shall be made only on a
Business Day at least three Business Days after the Merger Date but prior to
the Maturity Date, (ii) may, at the option of the Borrower, be repaid pursuant
to Section 2.04 hereof, but once repaid may not be reborrowed, and (iii) shall
not exceed the amount of the Tranche C Loan Commitment. The Tranche C Loan
shall be evidenced by the Tranche C Note.

                    (d)       Tranche D Loans. On the terms and subject to the conditions contained
in this Agreement, the Lender agrees to make loans (each, a “Tranche D Loan”
and collectively, the “Tranche D Loans”) to the Borrower, which Tranche D Loans
(i) may be made on the Closing Date and from time to time thereafter on any
Business Day prior to the Maturity Date, (ii) may, at the option of the
Borrower, be repaid pursuant to Section 2.04 hereof, but once repaid may not

11

 

 be
reborrowed, and (iii) shall not exceed the amount of the Tranche D Loan
Commitment. The Tranche D Loans shall be evidenced by the Tranche D Note.

                    (e)       The Borrower may, from time to time, upon at least three Business
Days’ prior notice to the Lender, terminate in whole or reduce in part the
unused portions of the Tranche B Loan Commitment, the Tranche C Loan Commitment
and the Tranche D Loan Commitment. Each partial reduction shall be in an
amount of not less than $250,000 or an integral multiple of $250,000 in excess
thereof and shall reduce permanently the Tranche B Loan Commitment, Tranche C
Loan Commitment or Tranche D Loan Commitment, as the case may be, then in
effect.

                    (f)       The Tranche A Loan Commitment shall terminate on the Closing Date.
The Tranche B Loan Commitment and the Tranche D Loan Commitment shall terminate
on the Maturity Date. Subject to clause (e) above, the Tranche C Loan
Commitment shall terminate on the date of the making of the Tranche C Loan.

          Section 2.02. Making the Loans.

                    (a)       Subject to the terms and conditions hereof, each Loan shall be made on
notice given by the Borrower to the Lender by 11:00 A.M. (New York City time)
on the third Business Day prior to date of the proposed making of such Loan.
Each such notice (a “Notice of Borrowing”) shall be substantially in the form
of Exhibit B, specifying therein (i) the proposed date for the making of such
Loan, (ii) the amount of Loans constituting the Tranche A Loan, a Tranche B
Loan, the Tranche C Loan and/or a Tranche D Loan, and (iii) that the Borrower
has complied with the applicable terms and conditions of Article III.

                    (b)       Each Tranche B Loan shall be in an amount equal to a portion of the
purchase price for the purchase or acquisition of Acquisition Targets completed
in accordance with the guidelines set forth on Schedule I hereto negotiated by
the Lender and the Borrower.

                    (c)       Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify the Lender against any loss, cost or
expense incurred by the Lender as a result of any failure to fulfill on or
before the date specified in such Notice of Borrowing for such proposed Loan,
the applicable conditions set forth in Article III, including, without
limitation, any loss (excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by the Lender to fund the Loan, which, as a result of such
failure, is not made on such date.

          Section 2.03. Repayments.

                    (a)       Repayment of Tranche A Loans. On the 20th day after the last day of
each Fiscal Quarter after the Closing Date (for purposes of this Section
2.03(a), a “Tranche A Loan Payment Date”), commencing on the first full Fiscal
Quarter after the Closing Date and ending on the Maturity Date, the Borrower
shall pay the principal amount of the outstanding Tranche A Loan in 20 equal
installments of $575,000 each, plus accrued and unpaid interest thereon;
provided, however, that:

12

 

		
	 	            (i)      if, as of any Tranche A Loan Payment Date, the Borrower
has purchased, on a cumulative basis from May 1, 2001 through the
applicable Tranche A Loan Payment Date, 90% or more of the total
number of hearing aids purchased by the Borrower, net of returns
(such cumulative amount determined as a percentage, the “Minimum
Purchase Percentage”), pursuant to the Supply Agreement, the
Borrower shall be deemed to have repaid the Tranche A Loan on such
Tranche A Loan Payment Date in an amount equal to $575,000 plus
accrued and unpaid interest thereon;
	 
	 	            (ii)     If the Borrower has purchased, on a cumulative basis from
the May 1, 2001 through the applicable Tranche A Loan Payment Date,
eighty percent (80.0%) or more of the total number of hearing aids
purchased by the Borrower but less than ninety percent (90.0%) of
the total number of hearing aids purchased by the Borrower pursuant
to the Supply Agreement in any Fiscal Quarter, the Borrower shall
be deemed to have repaid the Tranche A Loan on such Tranche A Loan
Payment Date in an amount equal to $575,000 plus accrued and unpaid
interest thereon;
	 
	 	            (iii)     if the Borrower has purchased, on a cumulative basis
from the May 1, 2001 through the applicable Tranche A Loan Payment
Date, eighty percent (80.0%) or more of the total number of hearing
aids purchased by the Borrower but less than ninety percent (90.0%)
of the total number of hearing aids purchased by the Borrower
pursuant to the Supply Agreement in each of the two preceding
consecutive Fiscal Quarters, the Borrower shall pay an amount, in
cash, on the Tranche A Loan Payment Date at the end of such second
Fiscal Quarter equal to the product of (i) $575,000 plus accrued
and unpaid interest thereon times (ii) the difference of (A) the
Minimum Purchase Percentage and (B) the cumulative percentage of
purchases of hearing aid products made by the Borrower under the
Supply Agreement during such second Fiscal Quarter; and
	 
	 	            (iv)     if the Borrower has not purchased, on a cumulative basis
from the May 1, 2001 through the applicable Tranche A Loan Payment
Date, at least eighty percent (80.0%) of the total number of
hearing aids purchased by the Borrower pursuant to the Supply
Agreement, the Borrower shall pay, in cash, $575,000 plus accrued
and unpaid interest thereon on the applicable Tranche A Loan
Payment Date.

                    Notwithstanding the foregoing, the Borrower shall pay the outstanding
principal amount of the Tranche A Loan on the Maturity Date.

                    (b)       Repayment of Tranche B Loans. On the 20th day after the last day of
each Fiscal Quarter after the Closing Date (for purposes of this Section
2.03(b), a “Tranche B Loan Payment Date”), commencing on the first full Fiscal
Quarter after the Closing Date and ending on the Maturity Date, the Borrower
shall pay the principal amount of the aggregate outstanding Tranche B Loans in
an amount equal to five percent (5.0%) of the aggregate outstanding Tranche

13

 

 B Loans plus accrued and unpaid interest thereon (each such amount, the
“Required Tranche B Payment”); provided, however, that:

		
	 	            (i)      if, as of any Tranche B Loan Payment Date, the Borrower
has purchased, on a cumulative basis from the Closing Date through
the applicable Tranche B Loan Payment Date, the Minimum Purchase
Percentage pursuant to the Supply Agreement, the Borrower shall be
deemed to have repaid the Tranche B Loan on such Tranche B Loan
Payment Date in an amount equal to the Required Tranche B Payment;
	 
	 	            (ii)     If the Borrower has purchased, on a cumulative basis from
the Closing Date through the applicable Tranche B Loan Payment
Date, eighty percent (80.0%) or more of the total number of hearing
aids purchased by the Borrower but less than ninety percent (90.0%)
of the total number of hearing aids purchased by the Borrower
pursuant to the Supply Agreement in any Fiscal Quarter, the
Borrower shall be deemed to have repaid the Tranche B Loan on such
Tranche B Loan Payment Date in an amount equal to the Required
Tranche B Payment;
	 
	 	            (iii)     if the Borrower has purchased, on a cumulative basis
from the Closing Date through the applicable Tranche B Loan Payment
Date, eighty percent (80.0%) or more of the total number of hearing
aids purchased by the Borrower but less than ninety percent (90.0%)
of the total number of hearing aids purchased by the Borrower
pursuant to the Supply Agreement in each of the two preceding
consecutive Fiscal Quarters, the Borrower shall pay an amount, in
cash, on the Tranche B Loan Payment Date at the end of such second
Fiscal Quarter equal to the product of (i) the Required Tranche B
Payment times (ii) the difference of (A) the Minimum Purchase
Percentage and (B) the cumulative percentage of purchases of
hearing aid products made by the Borrower under the Supply
Agreement during such second Fiscal Quarter; and
	 
	 	            (iv)     if the Borrower has not purchased, on a cumulative basis
from the Closing Date through the applicable Tranche B Loan Payment
Date, at least eighty percent (80.0%) of the total number of
hearing aids purchased by the Borrower pursuant to the Supply
Agreement, the Borrower shall pay, in cash, the Required Tranche B
Payment on the applicable Tranche B Loan Payment Date.

                    Notwithstanding the foregoing, the Borrower shall pay the outstanding
principal amount of the Tranche B Loan on the Maturity Date.

                    (c)       Repayment of Tranche C Loans. On the 20th day after the last day of
each Fiscal Quarter after the Tranche C Loan Closing Date (for purposes of this
Section 2.03(b), a “Tranche C Loan Payment Date”), commencing on the first full
Fiscal Quarter after the Tranche C Loan is made and ending on the Maturity
Date, the Borrower shall pay the principal amount of the outstanding Tranche C
Loan in substantially equal amounts (each such amount, the

14

 

“Required
Tranche C Payment”) based on the number of Fiscal Quarters from the
Tranche C Loan Closing Date to the Maturity Date; provided, however, that:

		
	 	            (i)      if, as of any Tranche C Loan Payment Date during the
period commencing on the Tranche C Loan Closing Date through
December 28, 2002 (the “Initial Tranche C Repayment Period”), the
Borrower has purchased, on a cumulative basis from the Tranche C
Loan Closing Date through the applicable Tranche C Loan Payment
Date, eighty percent (80.0%) or more of the Borrower’s total
purchases of hearing aids, the Borrower shall be deemed to have
repaid the Tranche C Loan on such Tranche C Loan Payment Date in an
amount equal to the Required Tranche C Payment plus accrued and
unpaid interest thereon;
	 
	 	            (ii)     if, as of any Tranche C Loan Payment Date during the
period after the Initial Tranche C Repayment Period through the
Maturity Date (such period, the “Final Tranche C Repayment
Period”), the Borrower has purchased, on a cumulative basis from
the Tranche C Loan Closing Date through the applicable Tranche C
Loan Payment Date, the Minimum Purchase Percentage pursuant to the
Supply Agreement, the Borrower shall be deemed to have repaid the
Tranche C Loan on such Tranche C Loan Payment Date in an amount
equal to the Required Tranche C Payment plus accrued and unpaid
interest; and
	 
	 	            (iii)     If, as of any Tranche C Loan Payment Date during the
Final Tranche C Repayment Period, the Borrower has purchased, on a
cumulative basis from the Closing Date through the applicable
Tranche C Loan Payment Date, eighty percent (80.0%) or more of the
total number of hearing aids purchased by the Borrower but less
than ninety percent (90.0%) of the total number of hearing aids
purchased by the Borrower pursuant to the Supply Agreement in any
Fiscal Quarter, the Borrower shall be deemed to have repaid the
Tranche C Loan on such Tranche C Loan Payment Date in an amount
equal to the Required Tranche C Payment plus accrued and unpaid
interest thereon;
	 
	 	            (iv)     if, as of any Tranche C Loan Payment Date during the
Final Tranche C Repayment Period, the Borrower has purchased, on a
cumulative basis from the Closing Date through the applicable
Tranche C Loan Payment Date, eighty percent (80.0%) or more of the
total number of hearing aids purchased by the Borrower but less
than ninety percent (90.0%) of the total number of hearing aids
purchased by the Borrower pursuant to the Supply Agreement in each
of the two preceding consecutive Fiscal Quarters, the Borrower
shall pay an amount, in cash, on the Tranche C Loan Payment Date at
the end of such second Fiscal Quarter equal to the product of (i)
the Required Tranche C Payment plus accrued and unpaid interest
thereon times (ii) the difference of (A) the Minimum Purchase
Percentage and (B) the cumulative percentage of purchases of
hearing aid products made by the Borrower under the Supply
Agreement during such second Fiscal Quarter; and

15

 

		
	 	            (v)      if the Borrower has not purchased, on a cumulative basis
from the Closing Date through the applicable Tranche C Loan Payment
Date, at least eighty percent (80.0%) of the total number of
hearing aids purchased by the Borrower pursuant to the Supply
Agreement, the Borrower shall pay the Required Tranche C Payment on
the applicable Tranche C Loan Payment Date.

                    Notwithstanding the foregoing, the Borrower shall pay the outstanding
principal amount of the Tranche C Loan on the Maturity Date.

                    (d)       Repayment of Tranche D Loan. The Borrower shall pay the outstanding
principal amount of the Tranche D Loan on the Maturity Date.

          Section 2.04. Optional Prepayments.

                    The Borrower may, upon at least three Business Days’ prior irrevocable
written notice to the Lender (including, without limitation a notice of the
type contemplated in Sections 2.08, 2.09 and 2.10) stating the proposed date
(which shall be a Business Day) and aggregate principal amount of the
prepayment, prepay the outstanding principal amount of the Loans, in whole or
in part, without premium or penalty, together with accrued interest to the date
of such prepayment on the principal amount of the Loans prepaid; provided,
however, that that each partial prepayment shall be in an aggregate amount not
less than $1,000,000 or integral multiples of $1,000,000 in excess thereof (or
a lesser amount if such lesser amount constitutes the entire outstanding
principal balance of such Loan). Upon the giving of such notice of prepayment,
the principal amount of the Loans specified to be prepaid, together with
accrued interest thereon, shall become due and payable on the date specified
for such prepayment. All optional prepayments made pursuant to this Section
2.04 shall be applied to the Loans so specified to reduce the remaining
installments thereof in the actual order of their maturities.

          Section 2.05. Mandatory Prepayment of Loans.

                    (a)       The Borrower shall forthwith prepay the Tranche D Loans upon receipt
by the Borrower or any of its Subsidiaries of the net proceeds of any issuance
of Stock or Stock Equivalents by the Borrower or any of its Subsidiaries (other
than the proceeds received by the Borrower in connection with the exercise by
any of the Borrower’s or its Subsidiaries’ employees of any option issued
pursuant to any of the Borrower’s or its Subsidiaries’ stock option plans), in
an amount equal to 25% of such net proceeds, together with accrued interest to
the date of such prepayment on the principal amount prepaid.

                    (b)       The Borrower shall prepay the Tranche D Loans, within 120 days after
the last day of each fiscal year, in an amount equal to 20% of Excess Cash Flow
for such fiscal year, together with accrued interest to the date of such
prepayment on the principal amount prepaid.

                    (c)       Any amounts prepaid hereunder shall be applied to reduce the remaining
installments of the outstanding Tranche D Loans in the inverse order of their
maturities.

16

 

                    (d)       If at any time the aggregate principal amount of Tranche B Loans
outstanding exceeds the Tranche B Loan Commitment, the Borrower shall forthwith
prepay the
Tranche B Loans then outstanding in an amount equal to such excess,
together with accrued interest thereon.

          Section 2.06. Interest.

                    (a)       The Borrower shall pay interest on the unpaid principal amount of each
of the Tranche A Loan, Tranche B Loans and the Tranche C Loan from the date
made until the principal amount thereof shall be paid in full, at a rate per
annum equal at all times to 10.0%, payable on the 20th day after the end of each
Fiscal Quarter of each year commencing on the first such date after the date
hereof and on the Maturity Date. With respect to the calculation of interest
on the unpaid principal amount of the Tranche B Loans, each Tranche B Loan
shall be deemed to be made on the first day of the Fiscal Quarter in which such
Tranche B Loan is made.

                    (b)       The Borrower shall accrue interest on the unpaid principal amount of
the Tranche D Loans from the date made until the principal amount thereof shall
be paid in full, at a rate per annum equal at all times to the Prime
Rate plus 1.0%. Lender
shall make such accrued interest calculations on the 20th day after the end of
each Fiscal Quarter of each year commencing on the first such date after the
date hereof and on the Maturity Date.

          Section 2.07. Illegality.

                    Notwithstanding any other provision of this Agreement, if the introduction
of or any change in or in the interpretation of any law or regulation shall
make it unlawful, or any central bank or other Governmental Authority shall
assert that it is unlawful, for the Lender to make or continue the Loans, then,
on notice thereof and demand therefor by the Lender to the Borrower, (a) the
obligation of the Lender to make or to continue the Loans shall terminate and
(b) the Borrower shall forthwith prepay in full the Loans then outstanding,
together with interest accrued thereon.

          Section 2.08. Payments and Computations.

                    (a)       The Borrower shall make each payment hereunder and under the Notes not
later than 11:00 A.M. (New York City time) on the day when due, in Dollars, to
the Lender at its address referred to in Section 8.02 in immediately available
funds without set-off or counterclaim. Payment received by the Lender after
1:00 PM (New York City time) shall be deemed to be received on the next
Business Day.

                    (b)       The Borrower hereby authorizes the Lender, if and to the extent
payment owed to the Lender is not made when due hereunder, to charge from time
to time against any or all of the Borrower’s accounts with the Lender any
amount so due.

                    (c)       All computations of interest hereunder shall be made by the Lender on
the basis of a year of 365/6 days and number of days elapsed.

17

 

                    (d)       Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding
Business Day, and such extension of time shall in such case be included in
the computation of payment of interest.

          Section 2.09. Taxes.

                    (a)       Any and all payments by the Borrower under each Loan Document shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of the Lender taxes
measured by its net income, and franchise taxes imposed on it, by the
jurisdiction of the Lender’s applicable lending office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
“Taxes”). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to the Lender (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including, without limitation, deductions applicable to additional sums
payable under this Section 2.09) the Lender receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law.

                    (b)       In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made under any
Loan Document or from the execution, delivery or registration of, or otherwise
with respect to, any Loan Document (collectively, “Other Taxes”).

                    (c)       The Borrower will indemnify the Lender for the full amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.09) paid by the Lender
and any liability (including, without limitation, for penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification
shall be made within 30 days from the date the Lender makes written demand
therefor, accompanied by reasonable supporting documentation and calculations.

                    (d)       Within 30 days after the date of any payment of Taxes or Other Taxes,
the Borrower will furnish to the Lender, at its address referred to in Section
8.02, the original or a certified copy of a receipt evidencing payment thereof.

                    (e)       Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.09 shall survive the payment in full of the other Obligations.
Lender agrees that, as promptly as practicable after the officer of Lender
responsible for administering its Loans becomes aware of the occurrence of an
event or the existence of a condition that would entitle Lender to receive
payments under this Section 2.09, it will, to the extent not inconsistent with
the internal policies of such Lender and any applicable legal or regulatory
restrictions, use reasonable efforts to (a)

18

 

 make, issue, fund or maintain its
applicable Commitments or Loans through another office of Lender, or (b) take
such other measures as Lender may deem reasonable, if as a result thereof the
circumstances which would cause the additional amounts which would
otherwise be required to be paid to Lender pursuant to this Section 2.09 would
be reduced and if, as determined by Lender in its reasonable discretion, the
making, issuing, funding or maintaining of such Commitments or Loans through
such other office or in accordance with such other measures, as the case may
be, would not otherwise adversely affect such Commitments or Loans or the
interests of Lender.

ARTICLE III

CONDITIONS OF LENDING

          Section 3.01. Conditions Precedent to the Loans Made on the Closing Date.

                    The obligation of the Lender to make the Loans on the Closing Date is
subject to satisfaction of the conditions precedent that the Lender shall have
received, on the Closing Date, the following, each dated the Closing Date
unless otherwise indicated, in form and substance satisfactory to the Lender:

                    (a)       The Notes, duly executed by the Borrower.

                    (b)       The Supply Agreement, duly executed by the parties thereto.

                    (c)       Copies of (i) the resolutions of the Board of Directors of the
Borrower approving each Loan Document to which it is a party, (ii) all
documents evidencing other necessary corporate action and required governmental
and third party approvals, licenses and consents with respect to each Loan
Document and the transactions contemplated thereby and (iii) a copy of the
Certificate of Incorporation and the By-laws of the Borrower certified by a
Secretary or an Assistant Secretary of the Borrower as being true and correct
and in full force and effect as of the Closing Date.

                    (d)       A copy of the Articles or Certificate of Incorporation of the Borrower
certified as of a recent date by the Secretary of State of the state of
incorporation of the Borrower, together with certificates of such official
attesting to the good standing of the Borrower.

                    (e)       A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of each officer of the
Borrower who has been authorized to execute and deliver any Loan Document or
other document required hereunder to be executed and delivered by or on behalf
of the Borrower.

                    (f)       A favorable opinion of Bryan Cave LLP, counsel to the Borrower, that
the Loan Documents have been validly executed and delivered by the Borrower and
constitute a valid and binding obligation of the Borrower and are enforceable
against the Borrower in accordance with their terms.

19

 

                    (g)       The Security Agreement, duly executed by the Borrower, together with
copies of Uniform Commercial Code financing statements in respect of the
collateral covered by such security agreement.

                    (h)       A certificate, signed by a Responsible Officer of the Borrower,
stating that each of the conditions specified in Section 3.03 and Section 3.02,
if applicable, has been satisfied.

                    (i)       Such additional documents, information and materials as the Lender may
reasonably request.

          Section 3.02. Conditions Precedent to the Tranche B Loans.

                    (a)       Each of the conditions precedent set forth in Section 3.01 shall have
been satisfied.

                    (b)       The purchase or acquisition of the related Acquisition Target shall
comply with the guidelines set forth on Schedule I.

          Section 3.03. Additional Conditions Precedent to Making All Loans.

                    The obligation of the Lender to make any Loan (including the Loans to be
made on the Closing Date) is subject to the further conditions precedent that:

                    (a)       The following statements shall be true on the date of such Loan,
before and after giving effect to the making of such Loan and to the
application of the proceeds therefrom (and the acceptance by the Borrower of
the proceeds of such Loan shall constitute a representation and warranty by the
Borrower that on such date such statements are true):

		
	 	            (i)      The representations and warranties of the Borrower
contained in Article IV and in each of the other Loan Documents are
true and correct in all material respects on and as of such date as
though made on and as of such date;
	 
	 	            (ii)      No Default or Event of Default is continuing or will
result from the Loan being made on such date; and
	 
	 	            (iii)     All necessary governmental and material third party
approvals required to be obtained by the Borrower and its
Subsidiaries in connection with the transactions contemplated
hereby and by each of the other Loan Documents have been obtained
and remain in full force and effect.

                    (b)       All costs and accrued and unpaid fees and expenses required to be paid
to the Lender on or before such date, to the extent then due and payable, shall
have been paid.

                    (c)       The making of Loans on such date does not violate any Requirement of
Law and is not enjoined, temporarily, preliminarily or permanently.

20

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

                    To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender that:

          Section 4.01. Corporate Existence; Compliance with Law.

                    The Borrower and each of its Subsidiaries (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; (b) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where such
qualification is necessary, except for failures which in the aggregate have no
Material Adverse Effect; (c) has all requisite corporate power and authority
and the legal right to own, pledge, mortgage and operate its properties, to
lease the property it operates under lease and to conduct its business as now
or currently proposed to be conducted; (d) is in compliance with its
Certificate of Incorporation and By-laws; (e) is in compliance with all other
applicable Requirements of Law except for such non-compliances as in the
aggregate have no Material Adverse Effect; and (f) has all Permits or consents
from or by, has made all necessary filings with, and has given all necessary
notices to, each Governmental Authority having jurisdiction, to the extent
required for such ownership, operation and conduct, except for Permits or
consents which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
Material Adverse Effect.

          Section 4.02. Corporate Power; Authorization; Enforceable Obligations.

                    (a)       The execution, delivery and performance by the Borrower of the Loan
Documents and the consummation of the transactions related to the transactions
contemplated hereby and thereby:

		
	 	            (i)      are within such Person’s corporate powers;
	 
	 	            (ii)      have been duly authorized by all necessary corporate
action;
	 
	 	            (iii)     do not and will not (A) contravene such Person’s
Certificate of Incorporation or By-laws or other comparable
governing documents, (B) violate any other applicable Requirement
of Law (including, without limitation, Regulations T, U and X of
the Board of Governors of the Federal Reserve System), or any order
or decree of any Governmental Authority or arbitrator, (C) conflict
with or result in the breach of, or constitute a default under, or
result in or permit the termination or acceleration of, any
contractual obligation of such Person, or (D) result in the
creation or imposition of any Lien upon any of the property of such
Person, other than Liens for the benefit of the Lender; and
	 
	 	            (iv)      do not require the consent of, authorization by, approval
of, notice to, or filing or registration with, any Governmental
Authority or any other Person,

21

 

		
	 	other than those which have been
obtained or made and copies of which have
been or will be delivered to the Lender pursuant to Section
3.01, and each of which on the Closing Date and on each subsequent
lending date will be in full force and effect.

                    (b)       This Agreement and the Supply Agreement have been, and each of the
other Loan Documents will be upon delivery thereof, duly executed and delivered
by the Borrower. This Agreement and the Supply Agreement are, and the other
Loan Documents will be, when delivered hereunder, the legal, valid and binding
obligation of the Borrower enforceable against it in accordance with its terms.

          Section 4.03. Full Disclosure.

                    No written statement prepared or furnished by or on behalf of the Borrower
or any of its Affiliates in connection with any of the Loan Documents or the
consummation of the transactions contemplated thereby, and no financial
statement delivered pursuant hereto or thereto, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.

          Section 4.04. Financial Matters.

                    (a)       Each of the financial statements described below (copies of which have
heretofore been provided to the Lender), have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby, are complete
and correct in all material respects and present fairly the financial condition
and results from operations of the entities and for the periods specified
(subject in the case of interim company-prepared statements to normal year-end
adjustments and the absence of footnotes):

		
	 	            (i)      The consolidated balance sheet of the Borrower and its
Subsidiaries as of December 29, 2000, and the related consolidated
statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the fiscal year then ended,
audited by BDO Seidman, LLP, copies of which have been furnished to
the Lender, fairly present the consolidated financial condition of
the Borrower and its Subsidiaries as of and for such dates and the
consolidated results of the operations of the Borrower and its
Subsidiaries for the period ended on such dates, all in conformity
with GAAP.
	 
	 	            (ii)      after the Closing Date, the annual and quarterly
financial statements provided in accordance with Sections 5.07(a)
and 5.07(b).

                    (b)       Since September 29, 2001, there has been no Material Adverse Change,
and there have been no events or developments that in the aggregate have had a
Material Adverse Effect.

                    (c)       The Borrower is, and on a consolidated basis the Borrower and its
Subsidiaries are, Solvent.

22

 

          Section 4.05. Litigation.

                    (a)       The performance of any action by the Borrower or any of its
Subsidiaries required or contemplated by any of the Loan Documents is not
restrained or enjoined (either temporarily, preliminarily or permanently), and
no material adverse condition has been imposed by any Governmental Authority or
arbitrator upon any of such transactions.

                    (b)       There are no pending or, to the knowledge of the Borrower, threatened
actions, investigations or proceedings affecting the Borrower or any of its
Subsidiaries before any court, arbitrator or other Governmental Authority,
other than those that in the aggregate, if adversely determined, would have no
Material Adverse Effect.

          Section 4.06. Margin Regulation.

                    The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock.

          Section 4.07. No Default.

                    No Default or Event of Default has occurred and is continuing.

          Section 4.08. Investment Company Act.

                    The Borrower is not an “investment company” or an “affiliated person” of,
or “promoter” or “principal underwriter” for, an “investment company”, as such
terms are defined in the Investment Company Act of 1940, as amended. The
making of the Loans by the Lender, the application of the proceeds and
repayment thereof by the Borrower and the consummation of the transactions
contemplated by the Loan Documents will not violate any provision of such Act
or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.

          Section 4.09. Use of Proceeds.

                    (a)       The proceeds of the Tranche A Loan will be used by the Borrower as
follows: (i) $6,875,000 shall be used to repay in full existing Indebtedness
owed by the Borrower to the Lender under the Existing Loan Agreement, (ii)
$2,000,000 will be loaned by the Borrower to Helix as part of a transaction
wherein Helix purchases all or substantially all of the issued and outstanding
shares of Auxiliary Health Benefits Corporation, and (iii) $2,000,000 will be
used by the Borrower as part of a transaction wherein the Borrower redeems all
of the Series I Convertible Preferred Stock.

                    (b)       The proceeds of the Tranche B Loans shall be used by the Borrower
solely to pay a negotiated portion of the purchase price in connection with the
purchase or acquisition of Acquisition Targets completed in accordance with the
guidelines set forth on Schedule I.

23

 

                    (c)       The proceeds of the Tranche C Loan shall be used by the Borrower
solely for general working capital purposes.

                    (d)       The proceeds of the Tranche D Loans will be used by the Borrower as
follows: (i) $6,800,000 will be used by the Borrower to repay debt listed on
Schedule 6.02(g) and (ii) the remainder may be used by the Borrower solely for
general working capital purposes.

          Section 4.10. Pari Passu Obligations.

                    The Obligations constitute the direct, unconditional and general
obligations of the Borrower, and rank at least pari passu with all other
Indebtedness and other obligations of the Borrower.

          Section 4.11. Compliance with Agreements.

                    The Borrower and each of its Subsidiaries is in compliance with all
material indentures, material agreements (including the Supply Agreement) and
other material instruments binding upon it or any of their respective property.

ARTICLE V

AFFIRMATIVE COVENANTS

                    As long as any of the Obligations or the Commitments remain outstanding,
the Borrower agrees with the Lender that:

          Section 5.01. Compliance with Laws, Etc.

                    The Borrower shall comply, and shall cause each of its Subsidiaries to
comply, in all material respects, with all Requirements of Law, contractual
obligations, commitments, instruments, licenses, permits and franchises,
including, without limitation, all Permits.

          Section 5.02. Conduct of Business.

                    The Borrower shall (a) conduct, and shall cause each of its Subsidiaries
to conduct, its business in the ordinary course and consistent with past
practice, and (b) perform and observe, in all material respects, and cause each
of its Subsidiaries to perform and observe, in all material respects, all the
terms, covenants and conditions required to be performed and observed by it
under its contractual obligations, and do, and cause its Subsidiaries to do,
all things necessary to preserve and to keep unimpaired its rights under such
contractual obligations; provided, however, that the foregoing shall not
require Borrower nor any of its Subsidiaries to perform or observe any
contractual obligation the nonperformance or nonobservation of which would have
no Material Adverse Effect.

24

 

          Section 5.03. Preservation of Corporate Existence, Etc.

                    The Borrower shall, and shall cause each of its Subsidiaries to, preserve
and maintain its corporate existence, rights (charter and statutory) and
franchises; provided, however, that the foregoing shall not require Borrower
nor any of its Subsidiaries to preserve or maintain any rights or franchises
which are no longer used by Borrower or its Subsidiaries in the conduct of
their respective businesses or where the preservation or maintenance of such
rights or franchises is no longer economically feasible, in Borrower’s
reasonable discretion.

          Section 5.04. Access.

                    The Borrower shall, at any reasonable time and from time to time, with
reasonable prior notice permit the Lender or representatives thereof, to (a)
examine and make copies of and abstracts from the records and books of account
of the Borrower and each of its Subsidiaries, (b) visit the properties of the
Borrower and each of its Subsidiaries, (c) discuss the affairs, finances and
accounts of the Borrower and each of its Subsidiaries with any of their
respective officers or directors, and (d) communicate directly with the
Borrower’s independent certified public accountants; provided that the Borrower
is present during such communications or has given its consent (such consent
not to be unreasonably withheld) for such communications to occur without the
presence of the Borrower. The Borrower shall authorize its independent
certified public accountants to disclose to the Lender any and all financial
statements and other information of any kind, including, without limitation,
copies of any management letter, or the substance of any oral information that
such accountants may have with respect to the business, financial condition,
results of operations or other affairs of the Borrower or any of its
Subsidiaries, subject to the Lender’s agreement to preserve the confidentiality
of such information.

          Section 5.05. Keeping of Books.

                    The Borrower shall keep, and shall cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary.

          Section 5.06. Application of Proceeds.

                    The Borrower shall use the proceeds of the Loans as provided in Section 4.09.

          Section 5.07. Financial Statements.

                    The Borrower shall furnish to the Lender:

                    (a)       as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, an audited consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such year and the related
audited consolidated statements of income, retained earnings and cash flows of
the Borrower and its Subsidiaries for such fiscal year, all prepared in
conformity with GAAP and the independent auditor’s report thereon without

25

 

qualification by BDO Seidman, LLP or other independent public accountants of
recognized
national standing, together with a certificate of such accounting firm
stating that in the course of the regular audit of the consolidated financial
statements of the Borrower and its Subsidiaries, which audit was conducted by
such accounting firm in accordance with generally accepted auditing standards,
such accounting firm has obtained no knowledge that a Default or Event of
Default has occurred and is continuing, or, if in the opinion of such
accounting firm, a Default or Event of Default (insofar as they relate to
accounting and auditing matters) has occurred and is continuing, a statement as
to the nature thereof.

                    (b)       as soon as available and in any event within 75 days after the end of
each of the first three fiscal quarters of each fiscal year, a consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such
quarter and consolidated statements of income and cash flows of the Borrower
and its Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such fiscal quarter, all prepared in
conformity with GAAP (subject to normal year-end adjustments) and certified by
the chief financial officer of the Borrower as fairly presenting the financial
condition and results of operations of the Borrower and its Subsidiaries as of
such date and for such period, together with (i) a certificate of said officer
stating that no Default or Event of Default has occurred and is continuing or,
if a Default or an Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action which the Borrower proposes to take
with respect thereto, and (ii) a written discussion and analysis by the
management of the Borrower of the financial statements furnished in respect of
such fiscal quarter.

          Section 5.08. Reporting Requirements.

                    The Borrower shall furnish to the Lender:

                    (a)       Promptly, and in any event within ten Business Days after receipt of
written notice of the commencement thereof, notice of all actions, suits and
proceedings before any domestic or foreign Governmental Authority or
arbitrator, affecting the Borrower or any of its Subsidiaries, except those
which in the aggregate, if adversely determined, would have no Material Adverse
Effect;

                    (b)       promptly and in any event within ten Business Days after the Borrower
becomes aware of the existence of (i) any Default or Event of Default, (ii) any
breach or non-performance of, or any default under, any contractual obligation
which is material to the business, prospects, operations or financial condition
of the Borrower and its Subsidiaries taken as one enterprise, or (iii) any
Material Adverse Change after the Closing Date or any event, development or
other circumstance which has any reasonable likelihood of causing or resulting
in a Material Adverse Change, telephonic notice in reasonable detail specifying
the nature of the Default, Event of Default, breach, non-performance, default,
event, development or circumstance, including, without limitation, the
anticipated effect thereof, which notice shall be promptly confirmed in writing
within five days;

                    (c)       as soon as available and in any event within 30 days after the end of
each fiscal year, an update of the existing five year forecast of annual
purchases, sales, earnings,

26

 

 capital expenditures, working capital requirements and projected cash flow
results of the Borrower and its Subsidiaries on a consolidated basis through
the Maturity Date; and

                    (d)       promptly such other information as the Lender may reasonably request
from time to time.

          Section 5.09. Insurance.

                    The Borrower shall maintain or cause to be maintained with financially
sound and reputable insurers, insurance with respect to its properties and
business, and the properties and business of its Subsidiaries, against loss or
damage of the kinds customarily insured against by reputable companies in the
same or similar businesses, such insurance to be of such types and in such
amounts (with such deductible amounts) as is customary for such companies under
similar circumstances, and furnish the Lender on request full information as to
all such insurance.

          Section 5.10. Payment of Taxes and Claims.

                    The Borrower shall pay, and cause each of its Subsidiaries to pay, (a) all
Taxes, assessments and governmental charges imposed upon it or upon its
property, and (b) all genuine claims (including claims for labor, materials,
supplies or services) that might, if unpaid, become a Lien upon its property or
assets, unless, in each case, the validity or amount thereof is being contested
in good faith by appropriate proceedings and the Borrower or such Subsidiary
has maintained adequate reserves in accordance with GAAP with respect thereto
or has posted a bond in respect thereof satisfactory to the Lender.

          Section 5.11. Compliance with Agreements.

                    The Borrower shall, and shall cause each of its Subsidiaries to, (i)
perform and observe all the terms, covenants and conditions required to be
performed and observed by it under its contractual obligations and (ii) do all
things necessary to preserve and keep unimpaired its rights under such
contractual obligations; provided, however, that the foregoing shall not
require Borrower nor any of its Subsidiaries to perform or observe any
contractual obligation the nonperformance or nonobservation of which would have
no Material Adverse Effect.

          Section 5.12. Further Documents.

                    The Borrower shall, and shall cause each of its Subsidiaries to, execute
and deliver or to cause to be executed and delivered to the Lender from time to
time such consents and such other documents, instruments or agreements as the
Lender may reasonably request, that are, in the Lender’s reasonable judgment,
necessary or desirable to obtain or preserve for the Lender the benefit of the
Loan Documents.

27

 

          Section 5.13. Repayment of Certain Indebtedness.

                    Simultaneously with the borrowing thereof, the Borrower shall use the
proceeds of the Tranche A Loan to permanently repay or prepay the Indebtedness
outstanding under the Existing Loan Agreement.

          Section 5.14. Collateral Documents.

                    (a)       The Borrower, at its sole cost and expense, shall take all actions
necessary or reasonably requested by the Lender to maintain each Collateral
Document in full force and effect and enforceable in accordance with its terms,
including (i) making filings and recordations, (ii) making payments of fees and
other charges, (iii) issuing, and if necessary, filing or recording
supplemental documentation, including continuation statements, (iv) discharging
all claims or other Liens (other than Liens permitted by Section 6.01)
adversely affecting the rights of the Lender in the Collateral, and (v)
publishing or otherwise delivering notice to third parties.

                    (b)       The Borrower shall use its best efforts to release the Lien on the
assets of HEARx West that secure the obligations of HEARx West under that
certain Credit and Security Agreement dated as of November 5, 1998 between
HEARx, Ltd. and HEARx West LLC, and upon the release of such Lien, the Borrower
shall promptly, and in any event, within five Business Days after such release,
take all actions necessary to pledge all such assets in favor of the Lender.

ARTICLE VI

NEGATIVE COVENANTS

                    As long as any of the Obligations or the Commitments remain outstanding,
the Borrower agrees with the Lender that:

          Section 6.01. Liens, Etc.

                    The Borrower shall not create or suffer to exist, and shall not permit any
of its Subsidiaries to create or suffer to exist, any Lien upon or with respect
to any of its or such Subsidiary’s properties, whether now owned or hereafter
acquired, or assign any right to receive income, except for:

                    (a)       Liens created pursuant to the Loan Documents;

                    (b)       Purchase money Liens or purchase money security interests upon or in
any property acquired or held by the Borrower or any such Subsidiary of the
Borrower in the ordinary course of business to secure the purchase price of
such property or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property (and any refinancings thereof), and
Liens existing on such property at the time of its acquisition (other than any
such Lien created in contemplation of such acquisition); provided, however,
that the

28

 

 aggregate principal amount of the Indebtedness secured by the Liens
referred to in this clause (b) and in clause (h) below shall not exceed
$75,000,000 in the aggregate at any time outstanding;

                    (c)       Liens arising by operation of law (statutory or common) in favor of
materialmen, mechanics, warehousemen, carriers, lessors or other similar
Persons incurred by the Borrower or any such Subsidiary in the ordinary course
of business which secure its obligations to such Person; provided, however,
that (i) the Borrower or such Subsidiary is not in default with respect to such
payment obligation to such Person, unless the Borrower or such Subsidiary is in
good faith and by appropriate proceedings diligently contesting such obligation
and adequate provision is made for the payment thereof, and (ii) all such
defaults in the aggregate have no Material Adverse Effect;

                    (d)       Liens (excluding environmental liens) securing taxes, assessments or
governmental charges or levies; provided, however, that (i) neither the
Borrower nor any such Subsidiary is in default in respect of any payment
obligation with respect thereto unless the Borrower or such Designated
Subsidiary is in good faith and by appropriate proceedings diligently
contesting such obligation and adequate provision is made for the payment
thereof and (ii) all such defaults in the aggregate have no Material Adverse
Effect;

                    (e)       Liens incurred or pledges and deposits made in the ordinary course of
business in connection with workers’ compensation, unemployment insurance,
old-age pensions and other social security benefits;

                    (f)       Liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations, surety
and appeal bonds and other obligations of like nature, incurred as an incident
to and in the ordinary course of business, and judgment liens; provided,
however, that all such Liens in the aggregate have no Material Adverse Effect;

                    (g)       Zoning restrictions, easements, licenses, reservations, restrictions
on the use of real property or minor irregularities incident thereto which do
not in the aggregate materially detract from the value or use of the property
or assets of the Borrower or any such Subsidiary or impair, in any material
manner, the use of such property for the purposes for which such property is
held by the Borrower or any such Subsidiary; and

                    (h)       Liens to secure capitalized lease obligations; provided, however,
that: (i) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including, without limitation, the cost of construction) of the property
subject thereto, (ii) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of such cost, and (iii) such Lien does not extend to
or cover any other property other than such item of property and any
improvements on such item and (iv) the aggregate principal amount of
Indebtedness secured by the Liens referred to in this clause (h) and in clause
(b) above shall not exceed $75,000,000 in the aggregate at any time
outstanding.

29

 

                    (i)       Any Liens to secure the performance of obligations in respect to
Permitted Senior Indebtedness.

                    (j)       Any Liens to secure the performance of obligations in respect to
Permitted Subordinated Indebtedness.

                    (k)       Those existing Liens set forth on Schedule 6.01(k).

          Section 6.02. Indebtedness.

                    The Borrower shall not create or suffer to exist, or permit any of the
Subsidiaries to create or suffer to exist, any Indebtedness except:

                    (a)       the Obligations;

                    (b)       current liabilities in respect of taxes, assessments and governmental
charges or levies incurred, or claims for labor, materials, inventory,
services, supplies and rentals incurred, or for goods or services purchased, in
the ordinary course of business consistent with the past practice of the
Borrower and such Subsidiaries;

                    (c)       Indebtedness incurred in connection with the purchase or acquisition
of Acquisition Targets completed in accordance with the procedures set forth on
Schedule I; provided that the terms and conditions of such Indebtedness shall
comply with the requirements set forth on Schedule I;

                    (d)       Permitted Subordinated Indebtedness incurred by the Borrower;

                    (e)       Permitted Senior Indebtedness incurred by the Borrower; provided that
such Indebtedness may only be incurred after the second anniversary of the
Closing Date;

                    (f)       Indebtedness secured by Permitted Liens;

                    (g)       Indebtedness incurred in furtherance of the Merger Agreement with
Helix set forth on Schedule 6.02(g);

                    (h)       Indebtedness of any Subsidiary to Borrower or to any other Subsidiary;

                    (i)       Indebtedness which may be deemed to exist pursuant to any guaranties,
performance bonds, surety bonds, statutory, appeal or similar obligations
incurred in the ordinary course of business;

                    (j)       extensions or renewals of Indebtedness set forth on Schedule 6.02(g);
and

                    (k)       Indebtedness of Borrower to any Subsidiary incurred in the ordinary
course of business.

30

 

          Section 6.03. Mergers, Sale of Assets, Etc.

                    The Borrower shall not, other than in the ordinary course of its business,
and shall not permit any of its Subsidiaries to, (a) merge with any Person
(other than the merger of Helix with and into the Borrower pursuant to the
Merger Agreement), (b) consolidate with any Person
or (c) sell, lease, transfer or otherwise dispose of, whether in one
transaction or in a series of transactions all or substantially all of its
assets.

          Section 6.04. Change in Nature of Business.

                    The Borrower shall not, and shall not permit any of its Subsidiaries to,
make any material change in the nature or conduct of its business as carried on
at the date hereof.

          Section 6.05. Modification of Material Agreements.

                    The Borrower shall not, and shall not permit any of its Subsidiaries to,
alter, amend, modify, rescind, terminate or waive any of their respective
rights under, or fail to comply in all material respects with, any of its
material contractual obligations; provided, however, that, with respect to any
contractual obligation, the Borrower shall not be deemed in default of this
Section if all such alterations, amendments, modifications, rescissions,
terminations, waivers or failures in the aggregate have no Material Adverse
Effect; and provided, further, that in the event of any breach or event of
default by a Person other than the Borrower or any of its Subsidiaries, the
Borrower shall promptly notify the Lender of any such breach or event of
default and take all such action as may be reasonably necessary in order to
endeavor to avoid having such breach or event of default have a Material
Adverse Effect.

          Section 6.06. Cancellation of Indebtedness Owed to the Borrower.

                    The Borrower shall not cancel, or permit any of its Subsidiaries to
cancel, any claim or material Indebtedness owed to it except for adequate
consideration and in the ordinary course of business; provided that
Indebtedness not exceeding $100,000 shall not be deemed to be “material” for
purposes hereof and provided, further, that neither the Borrower nor its
Subsidiaries shall cancel claims or material Indebtedness more than one time in
any Fiscal Quarter and provided further that the foregoing shall not in any way
limit the Borrower’s or its Subsidiaries’ ability to negotiate and effect
adjustments to trade accounts receivable or other customer payables, including
the granting of credits, rebates and adjustments, in the ordinary course of
business.

          Section 6.07. Capital Structure.

                    The Borrower shall not make, and shall not permit any of its Subsidiaries
to make, any change in its capital structure (including, without limitation, in
the terms of its outstanding Stock) or amend its Certificate of Incorporation
or By-laws other than for amendments which in the aggregate have no Material
Adverse Effect.

31

 

          Section 6.08. Accounting Changes.

                    The Borrower shall not make, nor permit any of its Subsidiaries to make,
any change in accounting treatment and reporting practices or tax reporting
treatment, except as required by GAAP or law and disclosed to the Lender.

          Section 6.09. Restricted Payments.

                    The Borrower shall not, and shall not permit any of its Subsidiaries to
(x) purchase, redeem, prepay, defease or otherwise acquire for value or make
any payment on account or in respect of any principal amount of Indebtedness
for borrowed money (other than the Loans), now or hereafter outstanding, or (y)
declare or make any dividend payment or distribution of assets, properties,
cash, rights, obligations or securities on account or in respect of any of its
Stock or Stock Equivalents except (i) to the Borrower or a Subsidiary of the
Borrower and (ii) payments with respect to the Borrower’s Series I Convertible
Preferred Stock, Series J Preferred Stock, and 1998 Convertible Preferred Stock
in accordance with the Borrower’s Certificate of Incorporation in effect as of
the date hereof.

          Section 6.10. Acquisitions.

                    The Borrower shall not complete, and shall not permit any of its
Subsidiaries to complete, the acquisition (whether by purchase of Stock or
assets or by merger consolidation or otherwise) of any Person using the
proceeds of the Tranche B Loans unless such acquisition meets the guidelines on
Schedule I hereto.

          Section 6.11. Investments in Other Persons.

                    The Borrower shall not, directly or indirectly, make or permit any of its
Subsidiaries to make, any loan or advance to any Person, or purchase or
otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise
acquire, any Stock, Stock Equivalents, other equity interests, obligations or
other securities of, or any assets constituting the purchase of a business or
line of business, or make, or permit any of its Subsidiaries to make, any
capital contribution to, or otherwise invest in, any Person (including, without
limitation, any Subsidiary of the Borrower) (any such transaction being an
“Investment”), except (a) Investments in Cash Equivalents, (b) Investments by
the Borrower made to Helix, (c) in the ordinary course of the Borrower’s
business, and (d) unless as is otherwise permitted or provided for in this
Agreement.

32

 

ARTICLE VII

EVENTS OF DEFAULT

          Section 7.01. Events of Default.

                    Each of the following events shall be an “Event of Default”:

                    (a)       The Borrower shall fail to pay any principal (including, without
limitation, mandatory prepayments of principal) of, or interest on, the Loans,
any other amount due hereunder or under the other Loan Documents or any other
Obligations hereunder when the same becomes due and payable; or

                    (b)       Any representation or warranty made or deemed made by the Borrower in
any Loan Document or by the Borrower (or any of its officers) in connection
with any Loan Document shall prove to have been materially incorrect when made
or deemed made; or

                    (c)       (i) The Borrower or any of its Subsidiaries shall fail to perform or
observe any term, covenant or agreement contained in Articles V or VI, or (ii)
the Borrower or any of its Subsidiaries shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement or in any other
Loan Document if such failure under this clause (ii) shall remain unremedied
for 30 days after the earlier of the date on which (A) a Responsible Officer of
the Borrower becomes aware of such failure or (B) written notice thereof shall
have been given to the Borrower by the Lender; or

                    (d)       The Borrower or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Indebtedness of the Borrower or any
such Subsidiary having a principal amount of $100,000 or more (excluding
indebtedness evidenced by the Notes), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure to pay continues for a period of 45 days; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Indebtedness; or any such Indebtedness shall become or be declared to be
due and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), or the Borrower or any of its Subsidiaries shall be
required to repurchase or offer to repurchase such Indebtedness, prior to the
stated maturity thereof; or

                    (e)       The Borrower or any of its Subsidiaries shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors, or any proceeding shall be instituted by or against
any the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a custodian,
receiver, trustee or other similar official for it or for any substantial part
of its property and, in the case of any such proceedings instituted against the
Borrower or any of its Subsidiaries (but not instituted by it), either such
proceedings

33

 

 shall remain undismissed or unstayed for a period of 30 days or any
of the actions sought in such proceedings shall occur; or the Borrower or any
of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this subsection (e); or

                    (f)       One or more judgments or order for the payment of money in excess of
$100,000 in the aggregate to the extent not fully covered by insurance shall be
rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon any such
judgment or order, or (ii) there shall be any period of 10 consecutive days
during which a stay of enforcement of any such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or

                    (g)       The Borrower shall be in default under the Supply Agreement beyond any
grace or cure period specified therein, or the Supply Agreement shall be
cancelled, terminated, revoked or rescinded in accordance with the terms
thereof other than due to the (i) breach thereof by the Lender, (ii) mutual
agreement of the parties thereto or (iii) the expiration of the term thereof,
or any action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind the Supply Agreement shall be commenced by or on behalf of
the Borrower, or any court
or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, the Supply Agreement is illegal, invalid
or unenforceable in any material respect in accordance with the terms thereof;
or

                    (h)       There shall occur a Change of Control.

          Section 7.02. Remedies.

                    If there shall occur and be continuing any Event of Default, the Lender
may (a) by notice to the Borrower, cancel the Commitments and declare the
obligation of the Lender to make the Loans to be terminated, whereupon the same
shall forthwith be canceled and terminated; and (b) by notice to the Borrower,
declare the Loans, all interest thereon and all other amounts and Obligations
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts and Obligations shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that upon the occurrence of the Event of Default specified
in subparagraph (e) above, (i) the Commitments shall automatically be canceled
and the obligation of the Lender to make the Loans shall automatically be
terminated and (ii) the Loans, all such interest and all such amounts and
Obligations shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower. In addition to the remedies set forth above,
the Lender may exercise any remedies provided by applicable law or in equity.

34

 

ARTICLE VIII

MISCELLANEOUS

          Section 8.01. Amendments, Etc.

                    No amendment or waiver of any provision of this Agreement nor consent to
any departure by the Borrower therefrom shall in any event be effective unless
the same shall be in writing and signed by the Lender and the Borrower, and
then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

          Section 8.02. Notices.

                    Except as otherwise provided herein, all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

	 	 	 
	(i)	 	
if to the Borrower:
	 
	 	 	
HEARx Ltd.
	 	 	
1250 Northpoint Parkway
	 	 	
West Palm Beach, FL 33407
	 	 	
Attention: President
	 	 	
Telecopy No. (561) 688-8893

		
	 	     With a copy to the Borrower’s General Counsel at the address
above and with an additional copy to:

	 	 	 
	 	 	
Helix Hearing Care of America Corp.
	 	 	
7100 Jean Talon Suite 610
	 	 	
Montreal Quebec
	 	 	
Canada H1M 3S3
	 	 	
Attention: President
	 	 	
Telecopy No. (514) 353-0029
	 
	 
	(ii)	 	
if to the Lender:
	 
	 	 	
Siemens Hearing Instruments, Inc.
	 	 	
10 Constitution Avenue
	 	 	
Piscataway, New Jersey 08855
	 	 	
Attention: Chief Financial Officer
	 	 	
Telecopy No. (732) 562-6688

                    Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other

35

 

 parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

          Section 8.03. No Waiver; Remedies.

                    No failure on the part of the Lender to exercise, and no delay in
exercising, and no course of dealing with respect to, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law or in
equity.

          Section 8.04. Costs; Expenses; Indemnities.

                    (a)       Each of the parties hereto shall bear its own expenses (including,
without limitation, fees and expenses of the counsel, accountants, appraisers,
consultants or industry experts or other experts) incurred by it in connection
with the preparation, negotiation, execution, delivery, administration,
modification and amendment of this Agreement, each of the other Loan Documents
and each of the other documents to be delivered hereunder and thereunder and
the transactions contemplated hereby and thereby.

                    (b)       The Borrower agrees to indemnify and hold harmless the Lender and its
Affiliates, and the directors, officers, employees, agents, attorneys,
consultants and advisors of or
to any of the foregoing (each of the foregoing being an “Indemnitee”) from
and against any and all claims, damages, liabilities, obligations, losses,
penalties, actions, judgments, suits, costs, disbursements and expenses of any
kind or nature (including, without limitation, fees and disbursements of
counsel to any such Indemnitee) which may be imposed on, incurred by or
asserted against any such Indemnitee in connection with or arising out of any
investigation, litigation or proceeding, whether or not any such Indemnitee is
a party thereto, whether direct, indirect, or consequential and whether based
on any federal, state or local law or other statutory regulation, securities or
commercial law or regulation, or under common law or in equity, or on contract,
tort or otherwise, in any manner relating to or arising out of this Agreement,
any other Loan Document, any Obligation, or any act, event or transaction
related or attendant to any thereof, (collectively, the “Indemnified Matters”);
provided, however, that the Borrower shall not have any obligation under this
Section 8.04(b) to an Indemnitee with respect to any Indemnified Matter caused
by or resulting from the gross negligence or willful misconduct of that
Indemnitee.

                    (c)       The Borrower, at the request of any Indemnitee, shall have the
obligation to defend against such investigation, litigation or proceeding, and
the Borrower, in any event, may participate in the defense thereof with legal
counsel of the Borrower’s choice. In the event that such Indemnitee requests
the Borrower to defend against such investigation, litigation or proceeding,
the Borrower shall promptly do so, and such Indemnitee shall have the right to
have legal counsel of its choice participate in such defense, and all costs and
expenses of such counsel shall be borne by the Borrower. No action taken by
legal counsel chosen by such Indemnitee in defending against any such
investigation, litigation or proceeding, shall vitiate or in any way impair the
Borrower’s obligation and duty hereunder to indemnify and hold harmless such
Indemnitee.

36

 

                    (d)       The Borrower agrees that any indemnification or other protection
provided to any Indemnitee pursuant to this Agreement (including, without
limitation, pursuant to this Section 8.04) or any other Loan Document shall (i)
survive payment of the Obligations and (ii) inure to the benefit of any Person
who was at any time an Indemnitee under this Agreement or any other Loan
Document.

          Section 8.05. Right of Set-off.

                    Upon the occurrence and during the continuance of any Event of Default the
Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against any and all of the Obligations now or hereafter
existing whether or not the Lender shall have made any demand under this
Agreement, the Notes or any other Loan Document and although such Obligations
may be unmatured. The Lender agrees promptly to notify the Borrower after any
such set-off and application made by the Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Lender under this Section are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which the Lender may have.

          Section 8.06. Binding Effect.

                    This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lender and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights or delegate its
obligations hereunder or any interest herein without the prior written consent
of the Lender.

          Section 8.07. Governing Law.

                    THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO AND THERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 and 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW).

          Section 8.08. Severability.

                    Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

37

 

     Section 8.09. Submission to Jurisdiction; Service of Process.

                    (a)       Any legal action or proceeding with respect to this Agreement or the
Notes or any other Loan Document may be brought in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and, by execution and delivery of this Agreement, each of the Borrower
and the Lender hereby accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. The
parties hereto hereby irrevocably waive any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which any of them may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions.

                    (b)       Each of the Borrower and the Lender irrevocably consents to the
service of process of any of the aforesaid courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower, or the Lender, as the case may be, at its
address provided herein.

                    (c)       Nothing contained in this Section 8.09 shall affect the right of the
Lender or any holder of the Notes to serve process in any other manner
permitted by law or commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction.

          Section 8.10. Waiver of Jury Trial.

                    EACH OF THE PARTIES HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY
HERETO.

          Section 8.11. Section Titles.

                    The Section titles contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.

          Section 8.12. Execution in Counterparts.

                    This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and both of which taken together
shall constitute one and the same agreement.

          Section 8.13. Survival.

                    The representations and warranties of the Borrower contained in each of
the Loan Documents shall survive the execution and delivery of the Loan
Documents and the making of the Loans.

38

 

          Section 8.14. Entire Agreement.

                    This Agreement, together with the Exhibits and Schedules hereto and all of
the other Loan Documents and all certificates and documents delivered hereunder
or thereunder, embody the entire agreement of the parties and supersedes all
prior agreements and understandings, either oral or written, relating to the
subject matter hereof.

[SIGNATURE PAGE FOLLOWS.]

39

 

                    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

	 	HEARX LTD., as Borrower

	 	By: /s/ Stephen J. Hansbrough          

Name: Stephen J Hansbrough

Title: President and Chief Operating

Officer

	 	SIEMENS HEARING INSTRUMENTS, INC., as

Lender

	 	By: /s/ John R. Krauter                    

Name: John R. Krauter

Title: President and Chief Financial

Officer

218962

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 
	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	 
	 	Section 1.01. Defined Terms
	 	 	1	 
	 	Section 1.02. Computation of Time Periods
	 	 	10	 
	 	Section 1.03. Accounting Terms
	 	 	10	 
	 	Section 1.04. Certain Terms
	 	 	11	 
	 
	ARTICLE II AMOUNTS AND TERMS OF THE LOAN
	 	 	11	 
	 
	 	Section 2.01. The Commitments and the Loans
	 	 	11	 
	 	Section 2.02. Making the Loans
	 	 	12	 
	 	Section 2.03. Repayments
	 	 	12	 
	 	Section 2.04. Optional Prepayments
	 	 	16	 
	 	Section 2.05. Mandatory Prepayment of Loans
	 	 	16	 
	 	Section 2.06. Interest
	 	 	17	 
	 	Section 2.07. Illegality
	 	 	17	 
	 	Section 2.08. Payments and Computations
	 	 	17	 
	 	Section 2.09. Taxes
	 	 	18	 
	 
	ARTICLE III CONDITIONS OF LENDING
	 	 	19	 
	 
	 	Section 3.01. Conditions Precedent to the Loans Made on the Closing Date
	 	 	19	 
	 	Section 3.02. Conditions Precedent to the Tranche B Loans
	 	 	20	 
	 	Section 3.03. Additional Conditions Precedent to Making All Loans
	 	 	20	 
	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES
	 	 	21	 
	 
	 	Section 4.01. Corporate Existence; Compliance with Law
	 	 	21	 
	 	Section 4.02. Corporate Power; Authorization; Enforceable Obligations
	 	 	21	 
	 	Section 4.03. Full Disclosure
	 	 	22	 
	 	Section 4.04. Financial Matters
	 	 	22	 
	 	Section 4.05. Litigation
	 	 	23	 
	 	Section 4.06. Margin Regulation
	 	 	23	 
	 	Section 4.07. No Default
	 	 	23	 
	 	Section 4.08. Investment Company Act
	 	 	23	 
	 	Section 4.09. Use of Proceeds
	 	 	23	 
	 	Section 4.10. Pari Passu Obligations
	 	 	24	 
	 	Section 4.11. Compliance with Agreements
	 	 	24	 
	 
	ARTICLE V AFFIRMATIVE COVENANTS
	 	 	24	 
	 
	 	Section 5.01. Compliance with Laws, Etc.
	 	 	24	 
	 	Section 5.02. Conduct of Business
	 	 	24	 
	 	Section 5.03. Preservation of Corporate Existence, Etc.
	 	 	25	 
	 	Section 5.04. Access
	 	 	25	 
	 	Section 5.05. Keeping of Books
	 	 	25	 

i

 

	 	 	 	 	 	 
	 	Section 5.06. Application of Proceeds
	 	 	25	 
	 	Section 5.07. Financial Statements
	 	 	25	 
	 	Section 5.08. Reporting Requirements
	 	 	26	 
	 	Section 5.09. Insurance
	 	 	27	 
	 	Section 5.10. Payment of Taxes and Claims
	 	 	27	 
	 	Section 5.11. Compliance with Agreements
	 	 	27	 
	 	Section 5.12. Further Documents
	 	 	27	 
	 	Section 5.13. Repayment of Certain Indebtedness
	 	 	28	 
	 	Section 5.14. Collateral Documents
	 	 	28	 
	 
	ARTICLE VI NEGATIVE COVENANTS
	 	 	28	 
	 
	 	Section 6.01. Liens, Etc.
	 	 	28	 
	 	Section 6.02. Indebtedness
	 	 	30	 
	 	Section 6.03. Mergers, Sale of Assets, Etc.
	 	 	31	 
	 	Section 6.04. Change in Nature of Business
	 	 	31	 
	 	Section 6.05. Modification of Material Agreements
	 	 	31	 
	 	Section 6.06. Cancellation of Indebtedness Owed to the Borrower
	 	 	31	 
	 	Section 6.07. Capital Structure
	 	 	31	 
	 	Section 6.08. Accounting Changes
	 	 	32	 
	 	Section 6.09. Restricted Payments
	 	 	32	 
	 	Section 6.10. Acquisitions
	 	 	32	 
	 	Section 6.11. Investments in Other Persons
	 	 	32	 
	 
	ARTICLE VII EVENTS OF DEFAULT
	 	 	33	 
	 
	 	Section 7.01. Events of Default
	 	 	33	 
	 	Section 7.02. Remedies
	 	 	34	 
	 
	ARTICLE VIII MISCELLANEOUS
	 	 	35	 
	 
	 	Section 8.01. Amendments, Etc.
	 	 	35	 
	 	Section 8.02. Notices
	 	 	35	 
	 	Section 8.03. No Waiver; Remedies
	 	 	36	 
	 	Section 8.04. Costs; Expenses; Indemnities
	 	 	36	 
	 	Section 8.05. Right of Set-off
	 	 	37	 
	 	Section 8.06. Binding Effect
	 	 	37	 
	 	Section 8.07. Governing Law
	 	 	37	 
	 	Section 8.08. Severability
	 	 	37	 
	 	Section 8.09. Submission to Jurisdiction; Service of Process
	 	 	38	 
	 	Section 8.10. Waiver of Jury Trial
	 	 	38	 
	 	Section 8.11. Section Titles
	 	 	38	 
	 	Section 8.12. Execution in Counterparts
	 	 	38	 
	 	Section 8.13. Survival
	 	 	38	 
	 	Section 8.14. Entire Agreement
	 	 	39	 

ii

 

	 	 	 
	EXHIBITS	 	 
	 
	Exhibit A-1	 	
Form of Tranche A Note
	Exhibit A-2	 	
Form of Tranche B Note
	Exhibit A-3	 	
Form of Tranche C Note
	Exhibit A-4	 	
Form of Tranche D Note
	Exhibit B	 	
Form of Notice of Borrowing
	Exhibit C	 	
Form of Security Agreement
	 
	SCHEDULES	 	 
	 
	Schedule I	 	
Acquisition Procedures and Requirements
	Schedule 6.01(k)	 	
Existing Liens
	Schedule 6.02(g)	 	
Certain Indebtedness

iii

 

EXHIBIT A-1

FORM OF TRANCHE A NOTE

	 	 	 
	U.S. $10,875,000	 	
Dated: December 7, 2001

                    FOR VALUE RECEIVED, the undersigned, HEARX LTD., a Delaware corporation
(the “Borrower”), HEREBY PROMISES TO PAY to the order of SIEMENS HEARING
INSTRUMENTS, INC. (the “Lender”) the principal sum of TEN MILLION EIGHT HUNDRED
SEVENTY-FIVE THOUSAND United States Dollars ($10,875,000), or, if less, the
aggregate unpaid principal amount of the Tranche A Term Loan (as defined in the
Credit Agreement referred to below) of the Lender to the Borrower, payable at
such times, and in such amounts, as are specified in the Credit Agreement.

                    The Borrower promises to pay interest on the unpaid principal amount of
the Tranche A Loan from the date made until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

                    Both principal and interest are payable in lawful money of the United
States of America to the Lender at the Wachovia Bank of North Carolina, in
Atlanta GA (or such other bank as may be deemed by Lender), in immediately
available funds. The Tranche A Loan made by the Lender to the Borrower, and
all payments made on account of the principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on this Tranche A Note.

                    This Note is the Tranche A Note referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of December 7, 2001 (said
agreement, as it may be amended, supplemented or otherwise modified from time
to time, being the “Credit Agreement”), between the Borrower and the Lender,
and the other Loan Documents referred to therein and entered into pursuant
thereto. The Credit Agreement, among other things, (a) provides for the making
of the Tranche A Loan by the Lender to the Borrower in an aggregate amount not
to exceed at any time outstanding the United States Dollar amount first above
mentioned (as the same may be adjusted pursuant to the terms of the Credit
Agreement), the indebtedness of the Borrower resulting from such Tranche A Loan
being evidenced by this Tranche A Note, and (b) contains provisions for
acceleration of the maturity of the unpaid principal amount of this Tranche A
Note upon the happening of certain stated events and also for prepayments on
account of the principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

                    Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.

A-1-1

 

                    THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 and 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).

	 	HEARX LTD.

	 	By:_________________________

Name:

Title:

A-1-2

 

LOANS AND PAYMENTS OF PRINCIPAL

	 	 	Amount of	 	 	Amount of Principal
	Date	 	Tranche A Loan	 	 	Paid or Prepaid	 	 	Notation Made by
	
	 	
	 	 	
	 	 	

A-1-3

 

EXHIBIT A-2

FORM OF TRANCHE B NOTE

	 	 	 
	U.S. $25,000,000	 	
Dated: December 7, 2001

                    FOR VALUE RECEIVED, the undersigned, HEARX LTD., a Delaware corporation
(the “Borrower”), HEREBY PROMISES TO PAY to the order of SIEMENS HEARING
INSTRUMENTS, INC. (the “Lender”) the principal sum of TWENTY-FIVE MILLION
United States Dollars ($25,000,000), or, if less, the aggregate unpaid
principal amount of the Tranche B Loan (as defined in the Credit Agreement
referred to below) of the Lender to the Borrower, payable at such times, and in
such amounts, as are specified in the Credit Agreement.

                    The Borrower promises to pay interest on the unpaid principal amount of
the Tranche B Loan from the date made until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

                    Both principal and interest are payable in lawful money of the United
States of America to the Lender at the Wachovia Bank of North Carolina, in
Atlanta, GA (or such other bank as may be deemed by Lender), in immediately
available funds. The Tranche B Loan made by the Lender to the Borrower, and
all payments made on account of the principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on this Tranche B Note.

                    This Note is the Tranche B Note referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of December 7, 2001 (said
agreement, as it may be amended, supplemented or otherwise modified from time
to time, being the “Credit Agreement”), between the Borrower and the Lender,
and the other Loan Documents referred to therein and entered into pursuant
thereto. The Credit Agreement, among other things, (a) provides for the making
of the Tranche B Loan by the Lender to the Borrower in an aggregate amount not
to exceed at any time outstanding the United States Dollar amount first above
mentioned (as the same may be adjusted pursuant to the terms of the Credit
Agreement), the indebtedness of the Borrower resulting from such Tranche B Loan
being evidenced by this Tranche B Note, and (b) contains provisions for
acceleration of the maturity of the unpaid principal amount of this Tranche B
Note upon the happening of certain stated events and also for prepayments on
account of the principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

                    Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.

A-2-1

 

                    THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 and 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).

	 	HEARX LTD.

	 	By:_______________________

Name:

Title:

A-2-2

 

LOANS AND PAYMENTS OF PRINCIPAL

	 	 	Amount of	 	 	Amount of Principal
	Date	 	Tranche B Loan	 	 	Paid or Prepaid	 	 	Notation Made by
	
	 	
	 	 	
	 	 	

A-2-3

 

EXHIBIT A-3

FORM OF TRANCHE C NOTE

	 	 	 
	U.S. $3,000,000	 	
Dated: December 7, 2001

                    FOR VALUE RECEIVED, the undersigned, HEARX LTD., a Delaware corporation
(the “Borrower”), HEREBY PROMISES TO PAY to the order of SIEMENS HEARING
INSTRUMENTS, INC. (the “Lender”) the principal sum of THREE MILLION United
States Dollars ($3,000,000), or, if less, the aggregate unpaid principal amount
of the Tranche C Loan (as defined in the Credit Agreement referred to below) of
the Lender to the Borrower, payable at such times, and in such amounts, as are
specified in the Credit Agreement.

                    The Borrower promises to pay interest on the unpaid principal amount of
the Tranche C Loan from the date made until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

                    Both principal and interest are payable in lawful money of the United
States of America to the Lender at the Wachovia Bank of North Carolina, in
Atlanta, GA (or such other bank as may be deemed by Lender), in immediately
available funds. The Tranche C Loan made by the Lender to the Borrower, and
all payments made on account of the principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on this Tranche C Note.

                    This Note is the Tranche C Note referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of December 7, 2001 (said
agreement, as it may be amended, supplemented or otherwise modified from time
to time, being the “Credit Agreement”), between the Borrower and the Lender,
and the other Loan Documents referred to therein and entered into pursuant
thereto. The Credit Agreement, among other things, (a) provides for the making
of the Tranche C Loan by the Lender to the Borrower in an aggregate amount not
to exceed at any time outstanding the United States Dollar amount first above
mentioned (as the same may be adjusted pursuant to the terms of the Credit
Agreement), the indebtedness of the Borrower resulting from such Tranche C Loan
being evidenced by this Tranche C Note, and (b) contains provisions for
acceleration of the maturity of the unpaid principal amount of this Tranche C
Note upon the happening of certain stated events and also for prepayments on
account of the principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

                    Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.

A-3-1

 

                    THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 and 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).

	 	HEARX LTD.

	 	By:_________________________

Name:

Title:

A-3-2

 

LOANS AND PAYMENTS OF PRINCIPAL

	 	 	Amount of	 	 	Amount of Principal
	Date	 	Tranche C Loans	 	 	Paid or Prepaid	 	 	Notation Made by
	
	 	
	 	 	
	 	 	

A-3-3

 

EXHIBIT A-4

FORM OF TRANCHE D NOTE

	 	 	 
	U.S. $13,000,000	 	
Dated: December 7, 2001

                    FOR VALUE RECEIVED, the undersigned, HEARX LTD., a Delaware corporation
(the “Borrower”), HEREBY PROMISES TO PAY to the order of SIEMENS HEARING
INSTRUMENTS, INC. (the “Lender”) the principal sum of THIRTEEN MILLION United
States Dollars ($13,000,000), or, if less, the aggregate unpaid principal
amount of the Tranche D Loan (as defined in the Credit Agreement referred to
below) of the Lender to the Borrower, payable at such times, and in such
amounts, as are specified in the Credit Agreement.

                    The Borrower promises to pay interest on the unpaid principal amount of
the Tranche D Loan from the date made until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

                    Both principal and interest are payable in lawful money of the United
States of America to the Lender at the Wachovia Bank of North Carolina, in
Atlanta, GA (or such other bank as may be deemed by Lender), in immediately
available funds. The Tranche D Loan made by the Lender to the Borrower, and
all payments made on account of the principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on this Tranche D Note.

                    This Note is the Tranche D Note referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of December 7, 2001 (said
agreement, as it may be amended, supplemented or otherwise modified from time
to time, being the “Credit Agreement”), between the Borrower and the Lender,
and the other Loan Documents referred to therein and entered into pursuant
thereto. The Credit Agreement, among other things, (a) provides for the making
of the Tranche D Loan by the Lender to the Borrower in an aggregate amount not
to exceed at any time outstanding the United States Dollar amount first above
mentioned (as the same may be adjusted pursuant to the terms of the Credit
Agreement), the indebtedness of the Borrower resulting from such Tranche D Loan
being evidenced by this Tranche D Note, and (b) contains provisions for
acceleration of the maturity of the unpaid principal amount of this Tranche D
Note upon the happening of certain stated events and also for prepayments on
account of the principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

                    Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.

A-4-1

 

                    THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 and 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).

	 	HEARX LTD.

	 	By:_________________________

Name:

Title:

A-4-2

 

LOANS AND PAYMENTS OF PRINCIPAL

	 	 	Amount of	 	 	Amount of Principal
	Date	 	Tranche D Loan	 	 	Paid or Prepaid	 	 	Notation Made by
	
	 	
	 	 	
	 	 	

A-4-3

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