Document:

Exhibit 10.5

 

 

 

 

EXECUTION COPY

 

 

 

 

 

 

 

 

SIEMENS HEARING INSTRUMENTS, INC.

HEARUSA, INC.

STOCK PURCHASE AGREEMENT

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

Page

 

	
            1.
 	
            Purchase and Sale of Common Stock
 	
            1
 
	
             
 	
            1.1
 	
            Sale and Issuance of Common Stock
 	
            1
 
	
             
 	
            1.2
 	
            Closing; Delivery; Form of Payment
 	
            1
 
	
             
 	
            1.3 
 	
            Defined Terms Used in this Agreement
 	
            1
 
	
            2.
 	
            Representations and Warranties of the Company
 	
            4
 
	
             
 	
            2.1
 	
            Organization, Good Standing, Corporate Power and Qualification
 	
            4
 
	
             
 	
            2.2
 	
            Capitalization
 	
            4
 
	
             
 	
            2.3
 	
            Subsidiaries
 	
            5
 
	
             
 	
            2.4
 	
            Authorization
 	
            5
 
	
             
 	
            2.5
 	
            Valid Issuance of Shares; Listing
 	
            5
 
	
             
 	
            2.6
 	
            Governmental Consents and Filings
 	
            5
 
	
             
 	
            2.7
 	
            Non-Contravention
 	
            6
 
	
             
 	
            2.8
 	
            Reports and Financial Statements
 	
            6
 
	
             
 	
            2.9
 	
            Litigation
 	
            7
 
	
             
 	
            2.10
 	
            Compliance with Law
 	
            7
 
	
             
 	
            2.11
 	
            Taxes
 	
            8
 
	
             
 	
            2.12
 	
            Intellectual Property
 	
            8
 
	
             
 	
            2.13
 	
            Conflicts of Interest
 	
            8
 
	
             
 	
            2.14
 	
            Disclosure
 	
            9
 
	
             
 	
            2.15
 	
            Credit Agreement
 	
            9
 
	
            3.
 	
            Representations and Warranties of the Purchaser
 	
            9
 
	
             
 	
            3.1
 	
            Authorization
 	
            9
 
	
             
 	
            3.2
 	
            Purchase for Own Account; No Solicitation; Unregistered Shares
 	
            9
 
	
             
 	
            3.3
 	
            Disclosure of Information; Etc.
 	
            10
 
	
            4.
 	
            Conditions to the Purchaser’s Obligations at Closing
 	
            10
 
	
             
 	
            4.1
 	
            Representations and Warranties
 	
            10
 
	
             
 	
            4.2
 	
            Performance
 	
            10
 
	
             
 	
            4.3
 	
            Compliance Certificate
 	
            10
 
	
             
 	
            4.4
 	
            Qualifications
 	
            10
 
	
             
 	
            4.5 
 	
            Joint Certificate
 	
            10
 
	
             
 	
            4.6 
 	
            Certain Payments
 	
            10
 
	
             
 	
            4.7
 	
            Credit Agreement and Security Agreement
 	
            10
 
	
             
 	
            4.8 
 	
            Supply Agreement
 	
            11
 
	
             
 	
            4.9 
 	
            Investor Rights Agreement
 	
            11
 
	
             
 	
            4.10 
 	
            Certain Contractual Commitments
 	
            11
 
	
             
 	
            4.11 
 	
            Approvals
 	
            11
 
	
             
 	
            4.12
 	
            Due Diligence
 	
            11
 
	
             
 	
            4.13
 	
            Opinion of Company Counsel
 	
            11
 
	
             
 	
            4.14
 	
            Secretary’s Certificate
 	
            11
 
	
             
 	
            4.15
 	
            Proceedings and Documents
 	
            11
 
	
            5.
 	
            Conditions of the Company’s Obligations at Closing
 	
            11
 
	
             
 	
            5.1
 	
            Representations and Warranties
 	
            11
 
	
             
 	
            5.2
 	
            Performance
 	
            11
 

 

i

 

TABLE OF CONTENTS

(continued)

Page

 

 

 

 

	
             
 	
            5.3
 	
            Qualifications
 	
            11
 
	
             
 	
            5.4 
 	
            Joint Certificate
 	
            12
 
	
             
 	
            5.5
 	
            Credit Agreement and Security Agreement
 	
            12
 
	
             
 	
            5.6 
 	
            Supply Agreement
 	
            12
 
	
             
 	
            5.7 
 	
            Investor Rights Agreement
 	
            12
 
	
            6.
 	
            Survival of Representations and Warranties; Indemnity
 	
            12
 
	
             
 	
            6.1
 	
            Survival of Warranties
 	
            12
 
	
             
 	
            6.2 
 	
            Indemnification
 	
            12
 
	
             
 	
            6.3 
 	
            Certain Limitations and Other Provisions
 	
            12
 
	
             
 	
            6.4 
 	
            Satisfaction of Claim
 	
            14
 
	
            7.
 	
            Miscellaneous
 	
            14
 
	
             
 	
            7.1
 	
            Transfer; Successors and Assigns
 	
            14
 
	
             
 	
            7.2
 	
            Governing Law; Integration; Amendment; Waiver; Remedies Cumulative
 	
            14
 
	
             
 	
            7.3
 	
            Counterparts
 	
            15
 
	
             
 	
            7.4
 	
            Certain Rules of Construction
 	
            15
 
	
             
 	
            7.5
 	
            Notices
 	
            16
 
	
             
 	
            7.6
 	
            Fees and Expenses
 	
            16
 
	
             
 	
            7.7
 	
            Severability
 	
            16
 
	
             
 	
            7.8
 	
            Forum; Waiver of Jury Trial
 	
            16
 

 

	
            Exhibit A
 	
            Form of Amendment to Credit Agreement
 

	
            Exhibit B
 	
            Form of Amendment to Security Agreement
 

	
            Exhibit C
 	
            Form of Amendment to Supply Agreement
 

	
            Exhibit D
 	
            Form of Amendment to Investor Rights Agreement
 

	
            Exhibit E
 	
            Form of Legal Opinion of Company Counsel
 

 

 

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STOCK PURCHASE AGREEMENT

 

This is a Stock Purchase Agreement (the “Agreement”) made as of the 23rd day of December, 2008 by and between HearUSA, Inc., a Delaware corporation (the “Company”), and Siemens Hearing Instruments, Inc., a Delaware corporation (the “Purchaser”), and by which the Company and the Purchaser, in consideration of the agreements set forth below (the mutuality, adequacy and sufficiency of which are hereby acknowledged), hereby agree as follows: 

	
             
 	
            1.
 	
            Purchase and Sale of Common Stock.
 

1.1.      Sale and Issuance of Common Stock. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase, and the Company agrees to sell and issue to the Purchaser, 6,400,000 shares of the common stock, $0.10 par value, of the Company (the “Common Stock”) at a purchase price of $0.60 per share. The shares of Common Stock issued to the Purchaser pursuant to this Agreement shall be referred to in this Agreement as the “Shares,” and the aggregate purchase price payable for the Shares shall be referred to in this Agreement as the “Aggregate Purchase Price.”

1.2.      Closing; Delivery; Form of Payment.

(a)       The payments and deliveries contemplated by Section 1 (the “Closing”) shall occur at the offices of Sutherland Asbill & Brennan LLP, 999 Peachtree Street, Atlanta Georgia 30309 commencing at 9:00 a.m., local time, on December 23, 2008, or at such other time and place upon which the Company and the Purchaser mutually agree.  

(b)       At the Closing, the Company shall deliver to the Purchaser a certificate representing the Shares against payment of the Aggregate Purchase Price by cancellation of indebtedness of the Company to the Purchaser. The certificate shall also represent a like number of rights under the Shareholder Rights Plan.

(c)       At the Closing, the Purchaser shall cancel Trade Debt  in a face amount equal to the Aggregate Purchase Price. The Trade Debt to be cancelled shall be selected by the Purchaser based on ageing, so that the oldest Trade Debt (other than the Trade Debt based on the July Invoices) shall be the first selected for cancellation.

1.3.       Defined Terms Used in this Agreement.  In addition to the terms defined in the rules of construction set forth in Section 7.4, the following terms used in this Agreement shall have the meanings set forth or referenced below.

“Aggregate Purchase Price” has the meaning assigned to it in Section 1.1. 

“Affiliate” means, with respect to any person, any other person directly or indirectly controlled by, controlling, or under common control with such person; and for purposes of this definition, "control" (including the concept of "control" when used in the terms "controlled by" and "controlled") means the possession, directly or indirectly, of the power to 

 

direct or cause the direction of management and policies of such other person, whether through the ownership of voting securities, by contract or otherwise means with respect to any person.

“Applicable Law” means each applicable provision of any constitution, statute, law, ordinance, code, rule, regulation, decision, order, decree, judgment, release, license or other official legally binding pronouncement of, or agreement with, any Governmental Authority.

“Closing” has the meaning assigned to it in Section 1.2(a).

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” has the meaning assigned to it in Section 1.1. 

“Company SEC Documents” has the meaning assigned to it in Section 2.8(a).

“Credit Agreement” means the Second Amended and Restated Credit Agreement dated as of December 30, 2006 between the Company and the Purchaser, as amended by the First Amendment to Credit Agreement, dated June 27, 2007, and by the Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement, dated September 24, 2007.

“Disclosure Letter” means the Disclosure Letter of even date herewith delivered by the Company to the Purchaser.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means United States generally accepted accounting principles.

“Governmental Authority” means any federal, state, local or non-U.S. legislative, executive, judicial, quasi-judicial or other public authority, agency, department, bureau, division, unit, court or other public body.

“Joint Certificate” has the meaning assigned to it in Section 4.5.

“July Invoices” means the invoices issued in July, 2008 under the Supply Agreement giving rise to Trade Debt otherwise due on October 31, 2008. 

“Indemnified Party” and “Indemnifying Party” have the meanings assigned to them in Section 6.3(d).

“Investor Rights Agreement” means Investor Rights Agreement dated as of December 30, 2006 between the Company and the Purchaser, as amended by the Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement, dated September 24, 2007.

 “Knowledge” means, when referring to the Company’s knowledge, the knowledge of the following persons after due inquiry: Stephen J. Hansbrough, Chairman of the Board and Chief Executive Officer, or Gino Chouinard, Chief Financial Officer.

 

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“Lien” means any mortgage, deed to secure debt, security interest, lien, pledge, encumbrance or adverse claim of any kind whatsoever, including the interest of a lessor under any capital lease.

“Loss” has the meaning assigned to it in Section 6.2.

 “Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, prospects or results of operations of the Company and its Subsidiaries, taken as a whole.

“Permit” means any license, permit, authorization or certificate issued by a Governmental Authority.

“Restriction” means any option, right of refusal or similar right or other restriction of any nature whatsoever

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shareholder Rights Plan” means the Rights Agreement between the Company and the Bank of New York dated December 14, 1999, as amended and restated pursuant to the Amended and Restated Rights Agreement filed May 7, 2002, as the same may have been further amended, restated or modified.

“Shares” has the meaning assigned to it in Section 1.1.

“Subsidiary” means, when used to determine the relationship of one person to another person, a person of which an aggregate of 50% or more of the stock of any class or 50% or more of other ownership interests is owned of record or beneficially by such person, or by one or more subsidiaries of such person, or by any combination of such party and one or more subsidiaries of such person.

“Supply Agreement” means the Amended and Restated Supply Agreement dated as of December 30, 2006, as amended by the Second Amendment to Credit Agreement and First Amendment to Investor Rights Agreement and Supply Agreement dated September 24, 2007.

“Tax” or “Taxes” means each or all, as applicable, taxes, assessments, charges, duties, fees, levies or other governmental charges, including all federal, state, local, foreign or other income, profits, unitary, business, franchise, capital stock, real property, personal property, intangible taxes, withholding, FICA, unemployment compensation, disability, transfer, sales, use, excise and other taxes, assessments, charges, duties, fees, or levies of any kind whatsoever (whether or not requiring the filing of returns) and all deficiency assessments, additions to tax, penalties and interest.

“Threshold” has the meaning assigned to it in Section 6.3(b).

“Third Party Claim” has the meaning assigned to it in Section 6.3(e).

 

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“Trade Debt” means indebtedness outstanding under the Supply Agreement arising out of the sale of goods or services to or for the benefit of the Company or based on its orders.

“Transaction Agreements” means this Agreement, the amendments to the Credit Agreement, the Supply Agreement and the Investor Rights Agreement referred to in Sections 5 and 6, and any other agreements, instruments or documents entered into in connection with this Agreement.

2.   Representations and Warranties of the Company.  The Company hereby represents and warrants to the Purchaser as follows:

2.1.      Organization, Good Standing, Corporate Power and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. Each Subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the state of its organization and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted.  Each Subsidiary of the Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. 

2.2.      Capitalization.  

 (a)       The authorized capital stock of the Company consists of (i) 75,000,000 shares of $0.10 par value common stock, of which 37,904,384 shares are issued and outstanding and 523,662 shares are held in the Company’s treasury; and (ii) 7,500,000 shares of $1.00 par value preferred stock, of which 233 shares of Series J preferred stock are issued and outstanding and 0 shares are held in the Company’s treasury. Except as set forth in Section 2.2 of the Disclosure Letter: (i) all shares or other interests of the Company’s capital stock were legally and validly authorized and issued, fully-paid and nonassessable, without violation of any preemptive or dissenters’ or similar rights and in full compliance with federal and state securities laws and other Applicable Law; (ii) the Company has complied with the terms of its capital
stock; (iii) all of the Company’s capital stock acquired by it was purchased from funds appropriate for the repurchase of shares of capital stock and otherwise in accordance with its certificate of incorporation, bylaws and Applicable Law; (iv) no options, warrants, subscriptions, puts, calls or other rights, commitments, undertakings or understandings to acquire, dispose of or restrict the transfer of, any of the Company’s capital stock or other securities of any kind or class or rights, obligations or undertakings convertible into the Company securities of any kind or class are authorized or outstanding; and (vi) neither the Company nor any of its Subsidiaries is subject to any obligation to purchase, redeem or otherwise acquire any of the Company’s capital stock or securities (or of any options or rights or obligations described in the preceding sentence) upon the occurrence of a specified event (and assuming that specified time periods have passed and
appropriate notices have been given) or otherwise. 

 

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(b)       The Company has reserved (i) 503,061 shares of Common Stock in respect of the rights of the holders of exchangeable stock issued by its Subsidiary HEARx Canada, Inc.; and (ii) 5,835,455 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to the stock or option plans described on Section 2.2 of the Disclosure Letter, all of which plans have been duly adopted by the Board of Directors and approved by the Company stockholders.  Except as described in the preceding sentence or in respect of the conversion right granted to the Purchaser under the Credit Agreement, the Company has not reserved any shares of capital stock for issuance.

2.3.      Subsidiaries.  Except as set forth on Section 2.3 of the Disclosure Letter, the Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. Section 2.3 of the Disclosure Letter lists (i) the name of each Subsidiary of the Company, along with its state of organization and the percentage ownership of the Company in the Subsidiary, and (ii) the name of any joint venture, partnership or similar arrangement to which the Company is a party, along with its state of organization and the percentage ownership of the Company therein. 

2.4.      Authorization.  All corporate action required to be taken by the Company’s Board of Directors in order to authorize the Company to enter into the Transaction Agreements, and to issue the Shares at the Closing, has been taken.  All action on the part of the officers of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the issuance and delivery of the Shares, has been taken. No action on the part of the Company’s stockholders is required in connection with the issuance of the Shares or the execution, delivery or performance of the Transaction Agreements under the Company’s certificate of incorporation, bylaws or Applicable Law. The
Transaction Agreements constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Laws relating to creditors’ rights generally.

2.5.      Valid Issuance of Shares; Listing.  The Shares, when issued, sold and delivered for the consideration set forth in Section 1.1, will be validly issued, fully paid and nonassessable and free of any Liens or Restrictions, other than Restrictions imposed by applicable federal and state securities laws. Assuming the accuracy of the representations of the Purchaser in Section 3 of this Agreement, the Shares will be issued in compliance with all applicable federal and state securities laws and other Applicable Laws. The Company has filed a listing application with NYSE Alternext U.S. in respect of the Shares, such exchange has duly approved the listing without material condition, and no action has been taken to
revoke, release or otherwise alter or amend in any way the listing.  

2.6.      Governmental Consents and Filings.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of the Company or any of its Subsidiaries in connection with the consummation of the transactions contemplated by this Agreement which 

 

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has not already been taken, other than the registration of the Shares for resale under the Securities Act and applicable state securities laws as required by the Investor Rights Agreement.

2.7.      Non-Contravention. Except as set forth in Section 2.7 of the Disclosure Letter the execution, delivery or performance by the Company of this Agreement and the other Transaction Agreements and the issuance of the Shares do not and will not with the passage of time or the giving of notice or both: (a) violate, conflict with, constitute a default of, require any consent or payment under, or permit a termination of, or create or impose any Lien or Restriction upon any of the Company’s or any of its Subsidiaries’ assets or liabilities or the Company or any of its Subsidiaries under: (i) any term or provision of the Company’s or any of its Subsidiaries’ certificate or articles of incorporation or bylaws or other governing or charter documents; (ii) any loan document, lease or other contract
to which the Company or any of its Subsidiaries is a party or bound or to which any of them or any of their properties is subject or bound; (iii) any Permit, judgment, decree or order of any Governmental Authority to which the Company or any of its Subsidiaries or any of their properties are subject or bound; or (iv) any Applicable Law; (b) create, or cause the acceleration of the maturity of, any of the Company’s or any of its Subsidiaries’ liabilities or obligations; or (c) cause the Company or any of its Subsidiaries not to have all of the rights, titles and interests that the Company or such Subsidiary currently has, unaltered and unimpaired, in and to any of its assets. Without limiting the foregoing, (i) the resolutions adopted by the Board of Directors of the Company authorizing the transactions contemplated by this Agreement expressly approved the purchase of the Shares by the Purchaser; (ii) such resolutions were duly adopted by action of at least a majority of the
members of the Board of Directors; (iii) this Agreement constitutes the “Prior Written Approval of the Company,” as defined in the Shareholder Rights Plan; and (iv) the issuance of the Shares does not vest rights issued under, or terminate the right of the Company or its Subsidiary to redeem rights at nominal cost under, the Shareholder Rights Plan or the shareholder rights plan adopted by HEARx Canada, Inc. 

2.8.      Reports and Financial Statements.

 (a)       The Company has timely filed all forms, documents, statements and reports required to be filed by it with the SEC since January 1, 2007 (the forms, documents, statements and reports filed with the SEC since January 1, 2007, including any amendments thereto, the “Company SEC Documents”). No Subsidiary is required to file any forms, documents, statements and reports with the SEC or any other Governmental Authority regulating securities matters.  As of their respective dates, or, if amended or superseded by a subsequent filing made prior to the date hereof, as of the date of the last such amendment or superseding filing prior to the date hereof, the Company SEC Documents, including all schedules included or documents incorporated by reference therein, complied in all material respects with
the requirements of the Securities Act and the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder.  As of the time of filing with the SEC, none of the Company SEC Documents so filed contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent that the information in such Company SEC Document has been amended or superseded by a later Company SEC Document filed prior to the date hereof.  As of the date hereof, there are no outstanding or unresolved comments in comment letters received 

 

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from the SEC staff with respect to the Company SEC Documents. The Common Stock is listed on the NYSE Alternext and there are no actions or proceedings pending or, to the knowledge of HearUSA, threatened by NYSE Alternext that could have the effect of prohibiting or terminating the listing of Common Stock on NYSE Alternext.

(b)       The financial statements (including all related notes and schedules) of the Company and its Subsidiaries included in the Company SEC Documents complied as to the form in all material respects with the published rules and regulations of the SEC with respect thereto, fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments expressly described therein, including the notes thereto, which adjustments were not and are not expected to be material in amount).  The financial statements (including all related notes and schedules) of the Company
and its Subsidiaries have been derived from the accounting books and records of the Company and its Subsidiaries and were prepared in conformity with GAAP (except, in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be expressly indicated therein or in the notes thereto). The Company has established and maintains disclosure controls and procedures and internal controls over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) that comply in all respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer of the Company, or Persons performing similar functions.

(c)       Except (i) as reflected or reserved against in the Company’s consolidated balance sheet as of September 27, 2008 (or the notes thereto) included in the Company SEC Documents, (ii) as set forth in Section 2.8(d) of the Disclosure Letter, and (iii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since September 27, 2008, neither the Company nor any Subsidiary of the Company has any material liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent, changing, known, unknown, determinable, indeterminable, liquidated, unliquidated or otherwise and whether due or to become due).

2.9.      Litigation.  Except as set forth in Section 2.9 of the Disclosure Letter or in the Company SEC Documents, there is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Company’s knowledge, threatened against the Company or any of its Subsidiaries or any officer or director of any of them (i) that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (ii) that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.  Neither the Company any of its Subsidiaries nor, to the Company’s knowledge, any of their respective officers or directors, is a party or is named as subject
to the provisions of any order, writ, injunction, judgment or decree of any Governmental Authority.  

2.10.      Compliance with Law. Except as set forth in Section 2.10 of the Disclosure Letter: The Company and each of its Subsidiaries: (i) is (and since January 1, 2007 

 

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has been) in compliance with all Medicare and Medicaid Applicable Laws and in material compliance with all other Applicable Laws (including those involving antitrust, unfair competition, trade regulation, antipollution, environmental, employment, plant downsizing, relocation, closing or safety); and (ii) since January 1, 2007 has received no written notice of any non-compliance with any Applicable Law.  Neither the Company nor any of its Subsidiaries has at any time made any illegal payments for political contributions, any illegal or improper payments for referrals, or any bribes, illegal kickback payments or other illegal payments.  Neither the Company nor any of its Subsidiaries is disqualified, for any reason, from operating its business including receiving reimbursements from third party payors in any location in which is operates or has operated by a Governmental Authority or customer by reason of the
Company’s or any of its Subsidiaries’ acts or omissions.

2.11.    Taxes. Except as set forth in Section 2.11 of the Disclosure Letter:  (a) all returns of every nature of Taxes required to be filed by the Company and its Subsidiaries have been timely and otherwise properly filed, and no extensions of time in which to file any such returns are in effect; (b) the Company and each of its Subsidiaries has paid and satisfied on or before their respective due dates all Taxes for periods covered by such returns; (c) all Taxes and other amounts that the Company or any of its Subsidiaries is or was required by Applicable Law to withhold or collect have been duly withheld and collected and have been paid over to the proper Governmental Authorities in accordance with Applicable Law; (d) there are no Liens for Taxes on any of the Company's or any of its Subsidiaries’ assets
other than any Lien imposed by Applicable Law for property Taxes for the current Tax period that are not yet due and payable; and (e) no audit of the returns of the Company's or any of its Subsidiaries’ Taxes is currently being conducted.

2.12.    Intellectual Property.    Either the Company or a Subsidiary of the Company owns, or is licensed or otherwise possesses all rights necessary to use, all trademarks, trade names, service marks, service names, mark registrations or applications, logos, assumed names, domain names, registered and unregistered copyrights, patent registrations or applications and registrations, and trade secrets used in their respective businesses (collectively, the “Intellectual Property”).  There are no pending or, to the Knowledge of the Company, threatened claims by any person alleging infringement or misappropriation by the Company or any of its Subsidiaries for their use of the Intellectual Property of the Company or any of its Subsidiaries. To the Knowledge of the Company,
the conduct of the business of the Company and its Subsidiaries does not infringe or misappropriate any intellectual property rights of any person. 

2.13.    Conflicts of Interest. Except as set forth in Section 2.13 of the Disclosure Letter:  

(a)       Other than (i) employee benefits generally made available to all employees, (ii) director and officer indemnification agreements approved by the Board of Directors, and (iii) as disclosed in the Company SEC Filings, there are no agreements, understandings or proposed transactions between the Company or any of its Subsidiaries, on the one hand, and any of their officers, directors, or key employees, or any Affiliate of any of the foregoing, on the other.

 

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(b)       Neither the Company nor any of its Subsidiaries is indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing. None of the Company’s or any of its Subsidiaries’ directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing, to the Company’s knowledge, have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except ownership of stock in (but not exceeding two percent of the outstanding capital stock of) publicly traded companies that may compete with the Company. To the Company’s knowledge, none of the
Company’s or any of its Subsidiaries’ directors, officers or employees or any members of their immediate families or any Affiliate of any of the foregoing are, directly or indirectly, interested in any material contract with the Company. None of the directors or officers of the Company or any of its Subsidiaries, or any members of their immediate families, has any material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s or its Subsidiaries’ major business relationship partners, service providers, joint venture partners, licensees and competitors.

2.14.    Disclosure.  No representation or warranty of the Company contained in this Agreement, as qualified by the Disclosure Letter, and no certificate furnished or to be furnished to Purchaser at the Closing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.  

2.15.    Credit Agreement. The representations and warranties of the Company contained in the Credit Agreement are true and correct on and as of the date hereof as if made on the date hereof. The Company is in compliance as of the date hereof with all of its covenants and agreements contained in the Credit Agreement, as modified by the amendments contemplated by the Transaction Documents.

3.         Representations and Warranties of the Purchaser.  The Purchaser hereby represents and warrants to the Company that:

3.1.      Authorization.  The Purchaser has full power and authority to enter into the Transaction Agreements.  The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Laws relating to creditors’ rights generally.

3.2.      Purchase for Own Account; No Solicitation; Unregistered Shares.  The Shares are being acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the public resale or distribution of any part thereof. The Purchaser to its knowledge has received no public solicitation or advertisement concerning an offer to sell the Shares. The Purchaser has been advised that the Shares are not being registered under the Securities Act on the grounds that this transaction is exempt from registration, and that reliance by the Company on such exemption is predicated in part on its representations in this Agreement.

 

9

 

 

3.3.      Disclosure of Information; Etc.  The Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Shares with the Company’s management. The foregoing, however, does not limit or modify in any respect the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchaser to rely thereon. The Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D. The Purchaser is not a broker, a dealer or an entity engaged in the business of being a broker dealer.

4.         Conditions to the Purchaser’s Obligations at Closing.  The obligations of the Purchaser to purchase Shares at the Closing are subject to the fulfillment, on or before such Closing, of each of the following conditions, unless otherwise waived:

4.1.      Representations and Warranties.  The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects as of such Closing, except that any such representations and warranties shall be true and correct in all respects where such representation and warranty is qualified with respect to materiality in Section 2, as the case may be.

4.2.      Performance.  The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before such Closing.

4.3.      Compliance Certificate.  The President of the Company shall deliver to the Purchaser at such Closing a certificate certifying that the conditions specified in Sections 4.1, 4.2 and 4.4 have been fulfilled.

4.4.      Qualifications.  All authorizations, approvals or permits, if any, of any Governmental Authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of such Closing. Without limiting the foregoing, approval for the valid listing of the Shares with NYSE Alternext U.S. shall not have been modified or withdrawn and shall not require stockholder approval.

4.5.      Joint Certificate. The Company shall have executed a Joint Certificate (the “Joint Certificate”) with the Purchaser certifying (a) the amount of the purchase price per share of Common Stock; (b) the Trade Debt deemed satisfied pursuant to Section 1.2(c); (c) the Trade Debt converted into loans under the amendment to the Credit Agreement referred to in Section 4.7; (d) the amounts outstanding under each tranche of loans outstanding under the Loan Agreement and (e) the amount of Trade Debt based on the July Invoices.

4.6.      Certain Payments. The Trade Debt based on the July Invoices, and all accrued but unpaid interest on the outstanding principal amounts of the Tranche D and Tranche E Loans (as defined in the Credit Agreement), shall have been paid in full in cash.

4.7.      Credit Agreement and Security Agreement. The Company shall have entered into an amendment to the Credit Agreement in substantially the form of Exhibit A, and an amendment to the related Amended and Restated Security Agreement in substantially the form of Exhibit B.

 

10

 

 

4.8.      Supply Agreement. The Company shall have entered into an amendment to the Supply Agreement in substantially the form of Exhibit C.

4.9.      Investor Rights Agreement. The Company shall have entered into an amendment to the Investor Rights Agreement in substantially the form of Exhibit D.

4.10.    Certain Contractual Commitments. The Company shall have demonstrated full funding for its obligations under certain of its contractual commitments to the reasonable satisfaction of the Purchaser. 

4.11.    Approvals. The Purchaser shall have received all required approvals for entering into the Transaction Agreements from its Affiliates.

4.12.    Due Diligence. The Purchaser shall have completed its financial and legal (including compliance) due diligence with respect to the Company.

4.13.    Opinion of Company Counsel.  The Purchaser shall have received from Bryan Cave LLP, counsel for the Company, an opinion, dated as of the Initial Closing, in substantially the form of Exhibit E.

4.14.    Secretary’s Certificate.  The Secretary of the Company shall have delivered to the Purchaser at the Closing a certificate certifying (i) the certificate of incorporation and bylaws of the Company, and (ii) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements.

4.15.    Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Purchaser, and Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested.  Such documents may include good standing certificates.

5.   Conditions of the Company’s Obligations at Closing.  The obligations of the Company to sell Shares to the Purchaser at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

5.1.                  Representations and Warranties.  The representations and warranties of the Purchaser contained in Section 3 shall be true and correct in all material respects as of such Closing.

5.2.                  Performance.  The Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before such Closing.

5.3.                  Qualifications.  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Stock pursuant to this Agreement shall be obtained and effective as of the Closing. Without limiting the foregoing, approval for the 

 

11

 

 

valid listing of the Shares with NYSE Alternext U.S. shall not have been modified or withdrawn and shall not require stockholder approval.

5.4.                  Joint Certificate. The Purchaser shall have executed the Joint Certificate.

5.5.                  Credit Agreement and Security Agreement. The Purchaser shall have entered into an amendment to the Credit Agreement in substantially the form of Exhibit A, and an amendment to the related Amended and Restated Security Agreement in substantially the form of Exhibit B.

5.6.                  Supply Agreement. The Purchaser shall have entered into an amendment to the Supply Agreement in substantially the form of Exhibit C.

5.7.                  Investor Rights Agreement. The Purchaser shall have entered into an amendment to the Investor Rights Agreement in substantially the form of Exhibit D.

6.   Survival of Representations and Warranties; Indemnity.

6.1.                  Survival of Warranties. The representations, warranties, covenants and agreements made by the parties in this Agreement or in any agreement, certificate, instrument or other document executed and delivered by a party pursuant to this Agreement will survive the Closing.  The representations and warranties contained in this Agreement will expire on the date 18 months after the date of Closing, except that (i) the representations and warranties contained in Sections 2.2, 2.4 and 2.5 will not expire, and (ii) a representation or warranty will not expire until resolution of any pending claims arising out of or relating to such representation or
warranty. Each party, acknowledging that the other is entitled to rely on its representations, warranties, covenants and agreements in this Agreement (qualified only by the disclosures in the Disclosure Letter) in order to preserve the benefit of the bargain otherwise represented by this Agreement, agrees that neither the survival of such representations, warranties, covenants and agreements, nor their enforceability nor any remedies for breaches of them will be affected by any knowledge of a party regardless of when or how such party acquired such knowledge, specifically including knowledge of a breach obtained before the Closing occurs.

6.2.                  Indemnification.  Each party will indemnify, defend and hold the other harmless for any Loss (as defined below) incurred or suffered by the other party as a result of or involving a breach by the other party of a representation, warranty, covenant or agreement set forth in this Agreement or in the Disclosure Letter or in any certificate referred to in Sections 4.3, 4.5., 4.14 or 5.4  (but for purposes of this Section, disregarding materiality and knowledge qualifiers in such representations or warranties and provisions in such representations and warranties that limit them to acts or omissions or facts or circumstances after a specified
date).  “Loss” means any liability, loss, cost, damage or expense, including reasonable attorneys’ fees and expenses.

6.3.                  Certain Limitations and Other Provisions. Notwithstanding the foregoing:

 

12

 

 

(a)       No party will be required to indemnify the other party pursuant to the foregoing unless the party claiming the right to be indemnified gives notice to the other party of facts which it in good faith thinks constitute a reasonable basis for indemnification pursuant to this Section 6 on a date no later than 18 months after the date of Closing (but such limitation does not apply to breaches of the representations and warranties in Sections 2.2, 2.4 or 2.5).  

(b)       Neither the Company nor the Purchaser will be required to indemnify the other party pursuant to Section 6.2 unless the aggregate amount of the agreed to or adjudicated indemnification claims against such party for breaches of representations and warranties exceed an amount equal to 1% of the Aggregate Purchase Price (the “Threshold”); provided that once the agreed to or adjudicated indemnification claims against such party exceeds the Threshold, the entire amount of the Losses will be recoverable, not just the amount in excess of the Threshold.

(c)       Neither the Company nor the Purchaser will be obligated to make indemnification payments for breaches of representations or warranties pursuant to Section 6.2 which in the aggregate exceed an amount equal to the Aggregate Purchase Price.

(d)       When a Loss as to which a notice has been timely given in accordance with Section 6.3(a) is paid or is otherwise fixed or determined, then the person claiming the right to be indemnified (the “Indemnified Party”) will give the person from whom it is claiming indemnification (the “Indemnifying Party”) notice of such Loss, in reasonable detail and specifying the amount of such Loss.  If the Indemnifying Party is permitted to dispute such claim, it will, within 30 days after receipt of notice of the claim of Loss against it pursuant to this Section, give counternotice, setting forth the basis for disputing such claim, to the Indemnified Party.  If no such counternotice is given within such
thirty-day period or if the Indemnifying Party acknowledges liability for indemnification pursuant to Section 6.3(e) or otherwise, then such Loss will be satisfied within three business days as provided in Section 6.4.  If, within 30 days after the receipt of counternotice by the Indemnified Party (during which time the parties will negotiate in good faith to resolve the dispute) the parties have not reached agreement as to the claim in question, then either party may pursue any remedy available to it at law or in equity.

(e)       If a claim or demand for indemnification is based upon an asserted liability or obligation to a person not a party nor a successor or assign of a party (a “Third Party Claim”), then the Indemnified Party will undertake in good faith to give prompt notice of any such Third Party Claim to the Indemnifying Party; provided, however, that a failure to provide such notice of a Third Party Claim will not prejudice any right to indemnification under this Agreement except to the extent that the Indemnifying Party is prejudiced by such failure. The Indemnifying Party will defend such claims or actions at its expense with lawyers chosen (with the Indemnified Party’s consent, which will not be
unreasonably withheld or delayed) and paid by it and will give written notice of defense to the Indemnified Party within 10 days after the date such notice of a Third Party Claim (or such shorter period of time as may be necessary to preserve all rights under the Third Party Claim) is deemed received acknowledges that (i) the Indemnifying Party is liable under this Section 6 for the claim, and (ii) the Indemnifying Party is defending the claim with the retained lawyer identified therein.  If the Indemnifying Party does not duly give such notice of defense as provided above or is not defending a Third Party Claim 

 

13

 

 

for any reason, then it will be deemed to have irrevocably waived its right to defend or settle such claims.  The Indemnifying Party may not settle any such claim or action without the consent of the Indemnified Party (which consent will not be unreasonably withheld or delayed; provided that any such consent shall contain a full release for the Indemnified Party, its officers, directors, employees agents and Affiliates). 

(f)        Notwithstanding anything to the contrary in this Section 6.3: (i) the Indemnified Party will be entitled to participate in the defense of such claim or action and to employ lawyers of its choice for such purpose at its own expense, and (ii) the Indemnified Party will be entitled to assume control of the defense and resolution of such claim, and the Indemnifying Party will pay the reasonable fees and expenses of lawyers retained by the Indemnified Party (excluding the fees and expenses of the Indemnified Party's lawyers before the date of such assumption of the defense), if:  (A) the Indemnified Party reasonably believes that such claim or action could be reasonably expected to have a material adverse effect on the Indemnified Party’s assets, business or reputation; (B) the Indemnified Party reasonably believes that there
exists or could arise a conflict of interest that, under applicable principles of legal ethics, could prohibit a single lawyer or law firm from representing both the Indemnified Party and the Indemnifying Party in such claim or action; (C) the Indemnifying Party either failed to give a Notice of Defense or has failed or is failing to prosecute or defend vigorously such claim or action; or (D) criminal penalties or injunctive relief could be imposed on the Indemnified Party in connection with such claim or action.

(g)       The indemnification obligations in this Article 6 (i) are for the benefit of the stated indemnified persons, their permitted successors and assigns and their officers, directors, employees, agents and affiliates; and (ii) do not limit in any way the rights and remedies of the parties under the Credit Agreement, the Supply Agreement, the Investor Rights Agreement or related documents and agreements.  The phrase “breach of a representation” includes a misrepresentation, a representation’s or warranty’s being inaccurate, and the omission of a fact necessary to make any representation or warranty not misleading.   Indemnification payments will be treated for Tax purposes as adjustments to the Aggregate Purchase Price.

6.4.                  Satisfaction of Claim.  Subject to the procedures and limitations set forth above, claims for indemnified Losses will be satisfied by paying the amount of the Loss to the Indemnified Party within two business days after the Loss is agreed to or determined by a court proceeding.  Payments pursuant to the foregoing will be by wire transfer or by check, as the recipient may direct.

7.   Miscellaneous.

7.1.                  Transfer; Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

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7.2.                  Governing Law; Integration; Amendment; Waiver; Remedies Cumulative.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its principles of conflicts of laws. This Agreement supersedes all prior negotiations, agreements and understandings between the parties as to its subject matter, constitute the entire agreement between the parties as to its subject matter, and may not be altered or amended except in writing signed by the parties.  The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same; and no waiver by any party of any
provision (or of a breach of any provision) of this Agreement, whether by conduct or otherwise, in any one or more instances will be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision (or of a breach of any other provision) of this Agreement.  The remedies of a party provided in this Agreement are cumulative and will not exclude any other remedies to which any party may be lawfully entitled under this Agreement or applicable law, and the exercise of a remedy will not be deemed an election excluding any other remedy (any such claim by the other party being hereby waived).

7.3.                  Counterparts.  This Agreement may be executed in two counterparts, both of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed and delivered by facsimile signature and in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.

7.4.                  Certain Rules of Construction.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. For purposes of this Agreement: (a) “Article,” “Section,” “Subsection,” “Exhibit” or “Schedule” refers to such item of or to this Agreement; (b) “business day” means any day other than Saturday, Sunday or any day on which banks located in the State of New York are authorized or obligated to close; (c) “contract” means any written or oral contract of any kind whatsoever and all related amendments, modifications, supplements, waivers and consents; (d) “copy” or
“copies” means that the copy or copies of the material to which it relates are true, correct and complete; (e) “including” and any other words or phrases of inclusion will not be construed as terms of limitation, so that references to “included” matters will be regarded as non-exclusive, non-characterizing illustrations; (f) “lease” means any written or oral lease, sublease, rental contract or similar contract and all amendments, modifications, supplements, waivers and consents to or under them pursuant to which a person leases or rents, either as lessee or tenant, any property; (g) “party” and “parties” means each or all, as appropriate, of the persons who have executed and delivered this Agreement; and each such term and each defined term referring to a party also refers to each permitted successor or assign of such a party, and when appropriate to effect the binding nature of this Agreement for the benefit of another
party, any other successor or assign of such a party; (h) “person” means any individual, sole proprietorship, partnership, joint venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a Governmental Authority; (i) “plan” means any plan, program or policy and all related amendments, modifications, supplements, waivers and consents; (j) “will” has the same meaning as “shall” and thus means an obligation and an imperative and not a futurity; (k) titles and captions of or in this Agreement, the cover sheet and table of contents of this Agreement, are inserted only as a matter of convenience and in no way define, limit, extend or 

 

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describe the scope of this Agreement or the intent of any of its provisions; (l) whenever the context requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other genders; (m) each exhibit referred to in this Agreement and the Disclosure Letter is hereby incorporated by reference into, and is made a part of, this Agreement as if set out in full in the first place that reference is made to it; and a matter disclosed in one Section of the Disclosure Letter is not deemed disclosed in any other Section of the Disclosure Letter unless a specific cross-reference is included in such other Section; (n) any reference to any statutory provision includes each successor provision and all Applicable Law as to such provision; and (o) acknowledging that the parties have participated jointly in the negotiation and drafting of this Agreement, if an
ambiguity or question of intent or interpretation arises as to any aspect of this Agreement, then it will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party  by virtue of the authorship of any provision of this Agreement.

7.5.                  Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their address as set forth on the signature page, or to such
facsimile number or address as subsequently modified by written notice given in accordance with this Section 7.5.  If notice is given to the Company, a copy shall also be sent to Bryan Cave LLP, 700 13th Street, N.W., Washington DC 20005, attention LaDawn Naegle, Esq., fax: 202.508.6200; and  if notice is given to the Purchaser, a copy shall also be given to General Counsel, Siemens Corporation, 153 East 53rd Street, 56th Floor, New York, NY 10022, fax:212.258.4490.

7.6.                  Fees and Expenses.  Each party will bear its respective costs and expenses in connection with the negotiation, execution and delivery of this Agreement and the other Transaction Documents. This Section 7.7 is not a limitation on the indemnification rights of the parties under Section 6.

7.7.                  Severability.  The invalidity of unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

7.8.                  Forum; Waiver of Jury Trial.  All actions or proceedings relating to this Agreement (whether to enforce a right or obligation or obtain a remedy or otherwise) will be brought solely in the state or federal courts located in or for the Borough of Manhattan, New York, New York. Each party hereby unconditionally and irrevocably consents to the jurisdiction of such courts and waives its rights to bring any action or proceeding against the other party except in such courts.  EACH OF THE PARTIES IRREVOCABLY WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.  If any party seeks to enforce any right under this Agreement by joining
another party to a judicial proceeding before a jury in which such third 

 

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party is a party, the parties will request the court to try the claims between the parties to this Agreement without submitting the matter to the jury. 

[Remainder of Page Intentionally Left Blank]

The parties have executed this Stock Purchase Agreement as of the date first written above.

 

 

	
             
 	
            THE COMPANY:
 
	
             
 	
            HEARUSA, INC.
 
	
             
 	
             
 	
             
 
	
             
 	
            By:
 	
            /s/ Stephen J. Hansbrough
 
	
             
 	
             
 	
             
 
	
             
 	
            Name:
 	
            Stephen J. Hansbrough
 
	
             
 	
            (print)
 	
             
 
	
             
 	
            Title:
 	
            Chief Executive Officer
 
	
             
 	
             
 	
             
 
	
             
 	
            Address:
 	
            1250 Northpoint Parkway
 West Palm Beach, FL 33407
 Attention: President
 Telecopy: 561.688.8893
 

 

 

	
             
 	
            THE PURCHASER:
 
	
             
 	
            SIEMENS HEARING INSTRUMENTS, INC.
 
	
             
 	
             
 	
             
 
	
             
 	
            By:
 	
            /s/ Christi Pedra
 
	
             
 	
             
 	
             
 
	
             
 	
            Name:
 	
            Christi Pedra
 
	
             
 	
            (print)
 	
             
 
	
             
 	
            Title:
 	
            Chief Executive Officer
 
	
             
 	
             
 	
             
 
	
             
 	
            By:
 	
            /s/ Nicolau Gaeta
 
	
             
 	
             
 	
             
 
	
             
 	
            Name:
 	
            Nicolau Gaeta
 
	
             
 	
            (print)
 	
             
 
	
             
 	
            Title:
 	
            Chief Financial Officer
 
	
             
 	
             
 	
             
 
	
             
 	
            Address:
 	
            10 Constitution Avenue
 Piscataway, NJ 08855
 Attention: President
 Telecopy: 732.562.6688
 

 

*        *        *        *

 

 

 

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

 

17EX-4.2

Exhibit 4.2

UST # 0180

WARRANT TO PURCHASE COMMON STOCK

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS
OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER OF THESE SECURITIES AND THE INVESTOR REFERRED
TO THEREIN, A COPY OF WHICH IS ON FILE WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS
INSTRUMENT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT. ANY
SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID.

WARRANT

to purchase

635,504

Shares of Common Stock

of Green Bankshares, Inc.

Issue Date: December 23, 2008

     1. Definitions. Unless the context otherwise requires, when used herein the following
terms shall have the meanings indicated.

     “Affiliate” has the meaning ascribed to it in the Purchase Agreement.

     “Appraisal Procedure” means a procedure whereby two independent appraisers, one chosen by the
Company and one by the Original Warrantholder, shall mutually agree upon the determinations then
the subject of appraisal. Each party shall deliver a notice to the other appointing its appraiser
within 15 days after the Appraisal Procedure is invoked. If within 30 days after appointment of the
two appraisers they are unable to agree upon the amount in question, a third independent appraiser
shall be chosen within 10 days thereafter by the mutual consent of such first two appraisers. The
decision of the third appraiser so appointed and chosen shall be given within 30 days after the
selection of such third appraiser. If three appraisers shall be appointed and the determination of
one appraiser is disparate from the middle determination by more than twice the amount by which the
other determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and conclusive upon the

 

 

Company
and the Original Warrantholder; otherwise, the average of all three determinations shall be binding
upon the Company and the Original Warrantholder. The costs of conducting any Appraisal Procedure
shall be borne by the Company.

     “Board of Directors” means the board of directors of the Company, including any duly
authorized committee thereof.

     “Business Combination” means a merger, consolidation, statutory share exchange or similar
transaction that requires the approval of the Company’s stockholders.

     “business day” means any day except Saturday, Sunday and any day on which banking institutions
in the State of New York generally are authorized or required by law or other governmental actions
to close.

     “Capital Stock” means (A) with respect to any Person that is a corporation or company, any and
all shares, interests, participations or other equivalents (however designated) of capital or
capital stock of such Person and (B) with respect to any Person that is not a corporation or
company, any and all partnership or other equity interests of such Person.

     “Charter” means, with respect to any Person, its certificate or articles of incorporation,
articles of association, or similar organizational document.

     “Common Stock” has the meaning ascribed to it in the Purchase Agreement.

     “Company” means the Person whose name, corporate or other organizational form and jurisdiction
of organization is set forth in Item 1 of Schedule A hereto.

     “conversion” has the meaning set forth in Section 13(B).

     “convertible securities” has the meaning set forth in Section 13(B).

     “CPP” has the meaning ascribed to it in the Purchase Agreement.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

     “Exercise Price” means the amount set forth in Item 2 of Schedule A hereto.

     “Expiration Time” has the meaning set forth in Section 3.

     “Fair Market Value” means, with respect to any security or other property, the fair market
value of such security or other property as determined by the Board of Directors, acting in good
faith or, with respect to Section 14, as determined by the Original Warrantholder acting in good
faith. For so long as the Original Warrantholder holds this Warrant or any portion thereof, it may
object in writing to the Board of Director’s calculation of fair market value within 10 days of
receipt of written notice thereof. If the Original Warrantholder and the Company are
unable to agree on fair market value during the 10-day period following the delivery of the
Original Warrantholder’s objection, the Appraisal Procedure may be invoked by either party to

2

 

determine Fair Market Value by delivering written notification thereof not later than the
30th day after delivery of the Original Warrantholder’s objection.

     “Governmental Entities” has the meaning ascribed to it in the Purchase Agreement.

     “Initial Number” has the meaning set forth in Section 13(B).

     “Issue Date” means the date set forth in Item 3 of Schedule A hereto.

     “Market Price” means, with respect to a particular security, on any given day, the last
reported sale price regular way or, in case no such reported sale takes place on such day, the
average of the last closing bid and ask prices regular way, in either case on the principal
national securities exchange on which the applicable securities are listed or admitted to trading,
or if not listed or admitted to trading on any national securities exchange, the average of the
closing bid and ask prices as furnished by two members of the Financial Industry Regulatory
Authority, Inc. selected from time to time by the Company for that purpose. “Market Price” shall be
determined without reference to after hours or extended hours trading. If such security is not
listed and traded in a manner that the quotations referred to above are available for the period
required hereunder, the Market Price per share of Common Stock shall be deemed to be (i) in the
event that any portion of the Warrant is held by the Original Warrantholder, the fair market value
per share of such security as determined in good faith by the Original Warrantholder or (ii) in all
other circumstances, the fair market value per share of such security as determined in good faith
by the Board of Directors in reliance on an opinion of a nationally recognized independent
investment banking corporation retained by the Company for this purpose and certified in a
resolution to the Warrantholder. For the purposes of determining the Market Price of the Common
Stock on the “trading day” preceding, on or following the occurrence of an event, (i) that trading
day shall be deemed to commence immediately after the regular scheduled closing time of trading on
the New York Stock Exchange or, if trading is closed at an earlier time, such earlier time and (ii)
that trading day shall end at the next regular scheduled closing time, or if trading is closed at
an earlier time, such earlier time (for the avoidance of doubt, and as an example, if the Market
Price is to be determined as of the last trading day preceding a specified event and the closing
time of trading on a particular day is 4:00 p.m. and the specified event occurs at 5:00 p.m. on
that day, the Market Price would be determined by reference to such 4:00 p.m. closing price).

     “Ordinary Cash Dividends” means a regular quarterly cash dividend on shares of Common Stock
out of surplus or net profits legally available therefor (determined in accordance with generally
accepted accounting principles in effect from time to time), provided that Ordinary Cash Dividends
shall not include any cash dividends paid subsequent to the Issue Date to the extent the aggregate
per share dividends paid on the outstanding Common Stock in any quarter exceed the amount set forth
in Item 4 of Schedule A hereto, as adjusted for any stock split, stock dividend, reverse stock
split, reclassification or similar transaction.

     “Original Warrantholder” means the United States Department of the Treasury. Any actions
specified to be taken by the Original Warrantholder hereunder may only be taken by such Person and
not by any other Warrantholder.

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     “Permitted Transactions” has the meaning set forth in Section 13(B).

     “Person” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

     “Per Share Fair Market Value” has the meaning set forth in Section 13(C).

     “Preferred Shares” means the perpetual preferred stock issued to the Original Warrantholder on
the Issue Date pursuant to the Purchase Agreement.

     “Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any
Affiliate thereof pursuant to (A) any tender offer or exchange offer subject to Section 13(e) or
14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (B) any other offer available
to substantially all holders of Common Stock, in the case of both (A) or (B), whether for cash,
shares of Capital Stock of the Company, other securities of the Company, evidences of indebtedness
of the Company or any other Person or any other property (including, without limitation, shares of
Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination
thereof, effected while this Warrant is outstanding. The “Effective Date” of a Pro Rata Repurchase
shall mean the date of acceptance of shares for purchase or exchange by the Company under any
tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any
Pro Rata Repurchase that is not a tender or exchange offer.

     “Purchase Agreement” means the Securities Purchase Agreement — Standard Terms incorporated
into the Letter Agreement, dated as of the date set forth in Item 5 of Schedule A hereto, as
amended from time to time, between the Company and the United States Department of the Treasury
(the “Letter Agreement”), including all annexes and schedules thereto.

     “Qualified Equity Offering” has the meaning ascribed to it in the Purchase Agreement.

     “Regulatory Approvals” with respect to the Warrantholder, means, to the extent applicable and
required to permit the Warrantholder to exercise this Warrant for shares of Common Stock and to own
such Common Stock without the Warrantholder being in violation of applicable law, rule or
regulation, the receipt of any necessary approvals and authorizations of, filings and registrations
with, notifications to, or expiration or termination of any applicable waiting period under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder.

     “SEC” means the U.S. Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations promulgated thereunder.

     “Shares” has the meaning set forth in Section 2.

     “trading day” means (A) if the shares of Common Stock are not traded on any national or
regional securities exchange or association or over-the-counter market, a business day or (B) if
the shares of Common Stock are traded on any national or regional securities exchange or

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association or over-the-counter market, a business day on which such relevant exchange or quotation
system is scheduled to be open for business and on which the shares of Common Stock (i) are not
suspended from trading on any national or regional securities exchange or association or
over-the-counter market for any period or periods aggregating one half hour or longer; and (ii)
have traded at least once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the shares of Common Stock.

     “U.S. GAAP” means United States generally accepted accounting principles.

     “Warrantholder” has the meaning set forth in Section 2.

     “Warrant” means this Warrant, issued pursuant to the Purchase Agreement.

     2. Number of Shares; Exercise Price. This certifies that, for value received, the
United States Department of the Treasury or its permitted assigns (the “Warrantholder”) is
entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from the
Company, in whole or in part, after the receipt of all applicable Regulatory Approvals, if any, up
to an aggregate of the number of fully paid and nonassessable shares of Common Stock set forth in
Item 6 of Schedule A hereto, at a purchase price per share of Common Stock equal to the Exercise
Price. The number of shares of Common Stock (the “Shares”) and the Exercise Price are subject to
adjustment as provided herein, and all references to “Common Stock,” “Shares” and “Exercise Price”
herein shall be deemed to include any such adjustment or series of adjustments.

     3. Exercise of Warrant; Term. Subject to Section 2, to the extent permitted by
applicable laws and regulations, the right to purchase the Shares represented by this Warrant is
exercisable, in whole or in part by the Warrantholder, at any time or from time to time after the
execution and delivery of this Warrant by the Company on the date hereof, but in no event later
than 5:00 p.m., New York City time on the tenth anniversary of the Issue Date (the “Expiration
Time”), by (A) the surrender of this Warrant and Notice of Exercise annexed hereto, duly completed
and executed on behalf of the Warrantholder, at the principal executive office of the Company
located at the address set forth in Item 7 of Schedule A hereto (or such other office or agency of
the Company in the United States as it may designate by notice in writing to the Warrantholder at
the address of the Warrantholder appearing on the books of the Company), and (B) payment of the
Exercise Price for the Shares thereby purchased:

          (i) by having the Company withhold, from the shares of Common Stock that would otherwise be
delivered to the Warrantholder upon such exercise, shares of Common stock issuable upon exercise of
the Warrant equal in value to the aggregate Exercise Price as to which this Warrant is so exercised
based on the Market Price of the Common Stock on the trading day on which this Warrant is exercised
and the Notice of Exercise is delivered to the Company pursuant to this Section 3, or

          (ii) with the consent of both the Company and the Warrantholder, by tendering in cash, by
certified or cashier’s check payable to the order of the Company, or by wire transfer of
immediately available funds to an account designated by the Company.

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     If the Warrantholder does not exercise this Warrant in its entirety, the Warrantholder will be
entitled to receive from the Company within a reasonable time, and in any event not exceeding three
business days, a new warrant in substantially identical form for the purchase of that number of
Shares equal to the difference between the number of Shares subject to this Warrant and the number
of Shares as to which this Warrant is so exercised. Notwithstanding anything in this Warrant to the
contrary, the Warrantholder hereby acknowledges and agrees that its exercise of this Warrant for
Shares is subject to the condition that the Warrantholder will have first received any applicable
Regulatory Approvals.

     4. Issuance of Shares; Authorization; Listing. Certificates for Shares issued upon
exercise of this Warrant will be issued in such name or names as the Warrantholder may designate
and will be delivered to such named Person or Persons within a reasonable time, not to exceed three
business days after the date on which this Warrant has been duly exercised in accordance with the
terms of this Warrant. The Company hereby represents and warrants that any Shares issued upon the
exercise of this Warrant in accordance with the provisions of Section 3 will be duly and validly
authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges
(other than liens or charges created by the Warrantholder, income and franchise taxes incurred in
connection with the exercise of the Warrant or taxes in respect of any transfer occurring
contemporaneously therewith). The Company agrees that the Shares so issued will be deemed to have
been issued to the Warrantholder as of the close of business on the date on which this Warrant and
payment of the Exercise Price are delivered to the Company in accordance with the terms of this
Warrant, notwithstanding that the stock transfer books of the Company may then be closed or
certificates representing such Shares may not be actually delivered on such date. The Company will
at all times reserve and keep available, out of its authorized but unissued Common Stock, solely
for the purpose of providing for the exercise of this Warrant, the aggregate number of shares of
Common Stock then issuable upon exercise of this Warrant at any time. The Company will (A) procure,
at its sole expense, the listing of the Shares issuable upon exercise of this Warrant at any time,
subject to issuance or notice of issuance, on all principal stock exchanges on which the Common
Stock is then listed or traded and (B) maintain such listings of such Shares at all times after
issuance. The Company will use reasonable best efforts to ensure that the Shares may be issued
without violation of any applicable law or regulation or of any requirement of any securities
exchange on which the Shares are listed or traded.

     5. No Fractional Shares or Scrip. No fractional Shares or scrip representing
fractional Shares shall be issued upon any exercise of this Warrant. In lieu of any fractional
Share to which the Warrantholder would otherwise be entitled, the Warrantholder shall be entitled
to receive a cash payment equal to the Market Price of the Common Stock on the last trading day
preceding the date of exercise less the pro-rated Exercise Price for such fractional share.

     6. No Rights as Stockholders; Transfer Books. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a stockholder of the Company prior to the
date of exercise hereof. The Company will at no time close its transfer books against transfer
of this Warrant in any manner which interferes with the timely exercise of this Warrant.

6

 

     7. Charges, Taxes and Expenses. Issuance of certificates for Shares to the
Warrantholder upon the exercise of this Warrant shall be made without charge to the Warrantholder
for any issue or transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.

     8. Transfer/Assignment.

          (A) Subject to compliance with clause (B) of this Section 8, this Warrant and all rights
hereunder are transferable, in whole or in part, upon the books of the Company by the registered
holder hereof in person or by duly authorized attorney, and a new warrant shall be made and
delivered by the Company, of the same tenor and date as this Warrant but registered in the name of
one or more transferees, upon surrender of this Warrant, duly endorsed, to the office or agency of
the Company described in Section 3. All expenses (other than stock transfer taxes) and other
charges payable in connection with the preparation, execution and delivery of the new warrants
pursuant to this Section 8 shall be paid by the Company.

          (B) The transfer of the Warrant and the Shares issued upon exercise of the Warrant are subject
to the restrictions set forth in Section 4.4 of the Purchase Agreement. If and for so long as
required by the Purchase Agreement, this Warrant shall contain the legends as set forth in Sections
4.2(a) and 4.2(b) of the Purchase Agreement.

     9. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the Warrantholder to the Company, for a new warrant or warrants of like tenor and
representing the right to purchase the same aggregate number of Shares. The Company shall maintain
a registry showing the name and address of the Warrantholder as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise in accordance with its terms, at
the office of the Company, and the Company shall be entitled to rely in all respects, prior to
written notice to the contrary, upon such registry.

     10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and in the case of any such loss, theft or destruction, upon receipt of a bond, indemnity
or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company shall make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of Shares as provided for in such lost, stolen,
destroyed or mutilated Warrant.

     11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a business day,
then such action may be taken or such right may be exercised on the next succeeding day that is a
business day.

     12. Rule 144 Information. The Company covenants that it will use its reasonable best
efforts to timely file all reports and other documents required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations promulgated by the SEC

7

 

thereunder (or, if the Company is not required to file such reports, it will, upon the request of any
Warrantholder, make publicly available such information as necessary to permit sales pursuant to
Rule 144 under the Securities Act), and it will use reasonable best efforts to take such further
action as any Warrantholder may reasonably request, in each case to the extent required from time
to time to enable such holder to, if permitted by the terms of this Warrant and the Purchase
Agreement, sell this Warrant without registration under the Securities Act within the limitation of
the exemptions provided by (A) Rule 144 under the Securities Act, as such rule may be amended from
time to time, or (B) any successor rule or regulation hereafter adopted by the SEC. Upon the
written request of any Warrantholder, the Company will deliver to such Warrantholder a written
statement that it has complied with such requirements.

     13. Adjustments and Other Rights. The Exercise Price and the number of Shares issuable
upon exercise of this Warrant shall be subject to adjustment from time to time as follows;
provided, that if more than one subsection of this Section 13 is applicable to a single event, the
subsection shall be applied that produces the largest adjustment and no single event shall cause an
adjustment under more than one subsection of this Section 13 so as to result in duplication:

          (A) Stock Splits, Subdivisions, Reclassifications or Combinations. If the Company
shall (i) declare and pay a dividend or make a distribution on its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify the outstanding shares of Common Stock into a smaller number
of shares, the number of Shares issuable upon exercise of this Warrant at the time of the record
date for such dividend or distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Warrantholder after such date shall
be entitled to purchase the number of shares of Common Stock which such holder would have owned or
been entitled to receive in respect of the shares of Common Stock subject to this Warrant after
such date had this Warrant been exercised immediately prior to such date. In such event, the
Exercise Price in effect at the time of the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be adjusted to the number
obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this
Warrant before such adjustment and (2) the Exercise Price in effect immediately prior to the record
or effective date, as the case may be, for the dividend, distribution, subdivision, combination or
reclassification giving rise to this adjustment by (y) the new number of Shares issuable upon
exercise of the Warrant determined pursuant to the immediately preceding sentence.

          (B) Certain Issuances of Common Shares or Convertible Securities. Until the earlier of
(i) the date on which the Original Warrantholder no longer holds this Warrant or any portion
thereof and (ii) the third anniversary of the Issue Date, if the Company shall issue shares of
Common Stock (or rights or warrants or other securities exercisable or convertible into or
exchangeable (collectively, a “conversion”) for shares of Common Stock) (collectively, “convertible
securities”) (other than in Permitted Transactions (as defined below) or a transaction to which
subsection (A) of this Section 13 is applicable) without consideration or at a
consideration per share (or having a conversion price per share) that is less than 90% of the
Market Price on the last trading day preceding the date of the agreement on pricing such shares (or
such convertible securities) then, in such event:

8

 

(A) the number of Shares issuable upon the exercise of this Warrant immediately
prior to the date of the agreement on pricing of such shares (or of such convertible
securities) (the “Initial Number”) shall be increased to the number obtained by
multiplying the Initial Number by a fraction (A) the numerator of which shall be the
sum of (x) the number of shares of Common Stock of the Company outstanding on such
date and (y) the number of additional shares of Common Stock issued (or into which
convertible securities may be exercised or convert) and (B) the denominator of which
shall be the sum of (I) the number of shares of Common Stock outstanding on such
date and (II) the number of shares of Common Stock which the aggregate consideration
receivable by the Company for the total number of shares of Common Stock so issued
(or into which convertible securities may be exercised or convert) would purchase at
the Market Price on the last trading day preceding the date of the agreement on
pricing such shares (or such convertible securities); and

(B) the Exercise Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Exercise Price in effect immediately prior to the date of the
agreement on pricing of such shares (or of such convertible securities) by a
fraction, the numerator of which shall be the number of shares of Common Stock
issuable upon exercise of this Warrant prior to such date and the denominator of
which shall be the number of shares of Common Stock issuable upon exercise of this
Warrant immediately after the adjustment described in clause (A) above.

     For purposes of the foregoing, the aggregate consideration receivable by the Company in
connection with the issuance of such shares of Common Stock or convertible securities shall be
deemed to be equal to the sum of the net offering price (including the Fair Market Value of any
non-cash consideration and after deduction of any related expenses payable to third parties) of all
such securities plus the minimum aggregate amount, if any, payable upon exercise or conversion of
any such convertible securities into shares of Common Stock; and “Permitted Transactions” shall
mean issuances (i) as consideration for or to fund the acquisition of businesses and/or related
assets, (ii) in connection with employee benefit plans and compensation related arrangements in the
ordinary course and consistent with past practice approved by the Board of Directors, (iii) in
connection with a public or broadly marketed offering and sale of Common Stock or convertible
securities for cash conducted by the Company or its affiliates pursuant to registration under the
Securities Act or Rule 144A thereunder on a basis consistent with capital raising transactions by
comparable financial institutions and (iv) in connection with the exercise of preemptive rights on
terms existing as of the Issue Date. Any adjustment made pursuant to this Section 13(B) shall
become effective immediately upon the date of such issuance.

          (C) Other Distributions. In case the Company shall fix a record date for the making of
a distribution to all holders of shares of its Common Stock of securities, evidences of
indebtedness, assets, cash, rights or warrants (excluding Ordinary Cash Dividends, dividends of its
Common Stock and other dividends or distributions referred to in Section 13(A)), in each
such case, the Exercise Price in effect prior to such record date shall be reduced immediately
thereafter to the price determined by multiplying the Exercise Price in effect immediately prior to
the reduction by the quotient of (x) the Market Price of the Common Stock on the last trading day
preceding the first date on which the Common Stock trades regular way on the principal

9

 

national
securities exchange on which the Common Stock is listed or admitted to trading without the right to
receive such distribution, minus the amount of cash and/or the Fair Market Value of the securities,
evidences of indebtedness, assets, rights or warrants to be so distributed in respect of one share
of Common Stock (such amount and/or Fair Market Value, the “Per Share Fair Market Value”) divided
by (y) such Market Price on such date specified in clause (x); such adjustment shall be made
successively whenever such a record date is fixed. In such event, the number of Shares issuable
upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the
product of (1) the number of Shares issuable upon the exercise of this Warrant before such
adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise
to this adjustment by (y) the new Exercise Price determined in accordance with the immediately
preceding sentence. In the case of adjustment for a cash dividend that is, or is coincident with, a
regular quarterly cash dividend, the Per Share Fair Market Value would be reduced by the per share
amount of the portion of the cash dividend that would constitute an Ordinary Cash Dividend. In the
event that such distribution is not so made, the Exercise Price and the number of Shares issuable
upon exercise of this Warrant then in effect shall be readjusted, effective as of the date when the
Board of Directors determines not to distribute such shares, evidences of indebtedness, assets,
rights, cash or warrants, as the case may be, to the Exercise Price that would then be in effect
and the number of Shares that would then be issuable upon exercise of this Warrant if such record
date had not been fixed.

          (D) Certain Repurchases of Common Stock. In case the Company effects a Pro Rata
Repurchase of Common Stock, then the Exercise Price shall be reduced to the price determined by
multiplying the Exercise Price in effect immediately prior to the Effective Date of such Pro Rata
Repurchase by a fraction of which the numerator shall be (i) the product of (x) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the Market
Price of a share of Common Stock on the trading day immediately preceding the first public
announcement by the Company or any of its Affiliates of the intent to effect such Pro Rata
Repurchase, minus (ii) the aggregate purchase price of the Pro Rata Repurchase, and of which the
denominator shall be the product of (i) the number of shares of Common Stock outstanding
immediately prior to such Pro Rata Repurchase minus the number of shares of Common Stock so
repurchased and (ii) the Market Price per share of Common Stock on the trading day immediately
preceding the first public announcement by the Company or any of its Affiliates of the intent to
effect such Pro Rata Repurchase. In such event, the number of shares of Common Stock issuable upon
the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product
of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment, and
(2) the Exercise Price in effect immediately prior to the Pro Rata Repurchase giving rise to this
adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding
sentence. For the avoidance of doubt, no increase to the Exercise Price or decrease in the number
of Shares issuable upon exercise of this Warrant shall be made pursuant to this Section 13(D).

          (E) Business Combinations. In case of any Business Combination or reclassification of
Common Stock (other than a reclassification of Common Stock referred to in
Section 13(A)), the Warrantholder’s right to receive Shares upon exercise of this Warrant
shall be converted into the right to exercise this Warrant to acquire the number of shares of stock
or other securities or property (including cash) which the Common Stock issuable (at the time of
such Business Combination or reclassification) upon exercise of this Warrant immediately prior

10

 

to
such Business Combination or reclassification would have been entitled to receive upon consummation
of such Business Combination or reclassification; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably
be, to the Warrantholder’s right to exercise this Warrant in exchange for any shares of stock or
other securities or property pursuant to this paragraph. In determining the kind and amount of
stock, securities or the property receivable upon exercise of this Warrant following the
consummation of such Business Combination, if the holders of Common Stock have the right to elect
the kind or amount of consideration receivable upon consummation of such Business Combination, then
the consideration that the Warrantholder shall be entitled to receive upon exercise shall be deemed
to be the types and amounts of consideration received by the majority of all holders of the shares
of common stock that affirmatively make an election (or of all such holders if none make an
election).

          (F) Rounding of Calculations; Minimum Adjustments. All calculations under this Section
13 shall be made to the nearest one-tenth (1/10th) of a cent or to the nearest one hundredth
(1/100th) of a share, as the case may be. Any provision of this Section 13 to the contrary
notwithstanding, no adjustment in the Exercise Price or the number of Shares into which this
Warrant is exercisable shall be made if the amount of such adjustment would be less than $0.01 or
one-tenth (1/10th) of a share of Common Stock, but any such amount shall be carried forward and an
adjustment with respect thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or amounts so carried forward,
shall aggregate $0.01 or 1/10th of a share of Common Stock, or more.

          (G) Timing of Issuance of Additional Common Stock Upon Certain Adjustments. In any
case in which the provisions of this Section 13 shall require that an adjustment shall become
effective immediately after a record date for an event, the Company may defer until the occurrence
of such event (i) issuing to the Warrantholder of this Warrant exercised after such record date and
before the occurrence of such event the additional shares of Common Stock issuable upon such
exercise by reason of the adjustment required by such event over and above the shares of Common
Stock issuable upon such exercise before giving effect to such adjustment and (ii) paying to such
Warrantholder any amount of cash in lieu of a fractional share of Common Stock; provided, however,
that the Company upon request shall deliver to such Warrantholder a due bill or other appropriate
instrument evidencing such Warrantholder’s right to receive such additional shares, and such cash,
upon the occurrence of the event requiring such adjustment.

          (H) Completion of Qualified Equity Offering. In the event the Company (or any
successor by Business Combination) completes one or more Qualified Equity Offerings on or prior to
December 31, 2009 that result in the Company (or any such successor) receiving aggregate gross
proceeds of not less than 100% of the aggregate liquidation preference of the Preferred Shares (and
any preferred stock issued by any such successor to the Original
Warrantholder under the CPP), the number of shares of Common Stock underlying the portion of
this Warrant then held by the Original Warrantholder shall be thereafter reduced by a number of
shares of Common Stock equal to the product of (i) 0.5 and (ii) the number of shares underlying

11

 

the Warrant on the Issue Date (adjusted to take into account all other theretofore made adjustments
pursuant to this Section 13).

          (I) Other Events. For so long as the Original Warrantholder holds this Warrant or any
portion thereof, if any event occurs as to which the provisions of this Section 13 are not strictly
applicable or, if strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Company, fairly and adequately protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then the Board of Directors
shall make such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the
Board of Directors, to protect such purchase rights as aforesaid. The Exercise Price or the number
of Shares into which this Warrant is exercisable shall not be adjusted in the event of a change in
the par value of the Common Stock or a change in the jurisdiction of incorporation of the Company.

          (J) Statement Regarding Adjustments. Whenever the Exercise Price or the number of
Shares into which this Warrant is exercisable shall be adjusted as provided in Section 13, the
Company shall forthwith file at the principal office of the Company a statement showing in
reasonable detail the facts requiring such adjustment and the Exercise Price that shall be in
effect and the number of Shares into which this Warrant shall be exercisable after such adjustment,
and the Company shall also cause a copy of such statement to be sent by mail, first class postage
prepaid, to each Warrantholder at the address appearing in the Company’s records.

          (K) Notice of Adjustment Event. In the event that the Company shall propose to take
any action of the type described in this Section 13 (but only if the action of the type described
in this Section 13 would result in an adjustment in the Exercise Price or the number of Shares into
which this Warrant is exercisable or a change in the type of securities or property to be delivered
upon exercise of this Warrant), the Company shall give notice to the Warrantholder, in the manner
set forth in Section 13(J), which notice shall specify the record date, if any, with respect to any
such action and the approximate date on which such action is to take place. Such notice shall also
set forth the facts with respect thereto as shall be reasonably necessary to indicate the effect on
the Exercise Price and the number, kind or class of shares or other securities or property which
shall be deliverable upon exercise of this Warrant. In the case of any action which would require
the fixing of a record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15 days prior to the
taking of such proposed action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.

          (L) Proceedings Prior to Any Action Requiring Adjustment. As a condition precedent to
the taking of any action which would require an adjustment pursuant to this Section 13, the Company
shall take any action which may be necessary, including obtaining regulatory, New York Stock
Exchange, NASDAQ Stock Market or other applicable national securities exchange or stockholder
approvals or exemptions, in order that the Company may thereafter
validly and legally issue as fully paid and nonassessable all shares of Common Stock that the
Warrantholder is entitled to receive upon exercise of this Warrant pursuant to this Section 13.

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          (M) Adjustment Rules. Any adjustments pursuant to this Section 13 shall be made
successively whenever an event referred to herein shall occur. If an adjustment in Exercise Price
made hereunder would reduce the Exercise Price to an amount below par value of the Common Stock,
then such adjustment in Exercise Price made hereunder shall reduce the Exercise Price to the par
value of the Common Stock.

     14. Exchange. At any time following the date on which the shares of Common Stock of
the Company are no longer listed or admitted to trading on a national securities exchange (other
than in connection with any Business Combination), the Original Warrantholder may cause the Company
to exchange all or a portion of this Warrant for an economic interest (to be determined by the
Original Warrantholder after consultation with the Company) of the Company classified as permanent
equity under U.S. GAAP having a value equal to the Fair Market Value of the portion of the Warrant
so exchanged. The Original Warrantholder shall calculate any Fair Market Value required to be
calculated pursuant to this Section 14, which shall not be subject to the Appraisal Procedure.

     15. No Impairment. The Company will not, by amendment of its Charter or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in taking of all such action
as may be necessary or appropriate in order to protect the rights of the Warrantholder.

     16. Governing Law. This Warrant will be governed by and construed in accordance with
the federal law of the United States if and to the extent such law is applicable, and otherwise in
accordance with the laws of the State of New York applicable to contracts made and to be performed
entirely within such State. Each of the Company and the Warrantholder agrees (a) to submit to the
exclusive jurisdiction and venue of the United States District Court for the District of Columbia
for any civil action, suit or proceeding arising out of or relating to this Warrant or the
transactions contemplated hereby, and (b) that notice may be served upon the Company at the address
in Section 20 below and upon the Warrantholder at the address for the Warrantholder set forth in
the registry maintained by the Company pursuant to Section 9 hereof. To the extent permitted by
applicable law, each of the Company and the Warrantholder hereby unconditionally waives trial by
jury in any civil legal action or proceeding relating to the Warrant or the transactions
contemplated hereby or thereby.

     17. Binding Effect. This Warrant shall be binding upon any successors or assigns of
the Company.

     18. Amendments. This Warrant may be amended and the observance of any term of this
Warrant may be waived only with the written consent of the Company and the Warrantholder.

     19. Prohibited Actions. The Company agrees that it will not take any action which
would entitle the Warrantholder to an adjustment of the Exercise Price if the total number of
shares of Common Stock issuable after such action upon exercise of this Warrant, together with

13

 

all
shares of Common Stock then outstanding and all shares of Common Stock then issuable upon the
exercise of all outstanding options, warrants, conversion and other rights, would exceed the total
number of shares of Common Stock then authorized by its Charter.

     20. Notices. Any notice, request, instruction or other document to be given hereunder
by any party to the other will be in writing and will be deemed to have been duly given (a) on the
date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on
the second business day following the date of dispatch if delivered by a recognized next day
courier service. All notices hereunder shall be delivered as set forth in Item 8 of Schedule A
hereto, or pursuant to such other instructions as may be designated in writing by the party to
receive such notice.

     21. Entire Agreement. This Warrant, the forms attached hereto and Schedule A hereto
(the terms of which are incorporated by reference herein), and the Letter Agreement (including all
documents incorporated therein), contain the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.

[Remainder of page intentionally left blank]

14

 

[Form of Notice of Exercise]

Date: _________

	 	 	 
	TO:

	 	Green Bankshares, Inc.
	 
	 	 
	RE:

	 	Election to Purchase Common Stock

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby agrees to
subscribe for and purchase the number of shares of the Common Stock set forth below covered by such
Warrant. The undersigned, in accordance with Section 3 of the Warrant, hereby agrees to pay the
aggregate Exercise Price for such shares of Common Stock in the manner set forth below. A new
warrant evidencing the remaining shares of Common Stock covered by such Warrant, but not yet
subscribed for and purchased, if any, should be issued in the name set forth below.

Number of Shares of Common Stock                                                                 
  
              

Method of Payment of Exercise Price (note if cashless exercise pursuant to Section 3(i) of the
Warrant or cash exercise pursuant to Section 3(ii) of the Warrant, with consent of the Company and
the Warrantholder)                                                                             
    

Aggregate Exercise Price:                                                                  
               

	 	 	 	 	 	 	 	 	 
	 

	 	Holder:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

15

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by a duly
authorized officer.

Dated: December 23, 2008

	 	 	 	 	 
	 	COMPANY: GREEN BANKSHARES, INC.

 	 
	 	By:  	/s/
James E. Adams 	 
	 	 	Name:  	James E. Adams 	 
	 	 	Title:  	Executive Vice President and

Chief Financial Officer 	 
	 
	 	Attest:

 	 
	 	By:  	/s/
R. Stan Puckett 	 
	 	 	Name:  	R. Stan Puckett 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

[Signature Page to Warrant]

16

 

SCHEDULE A

Item 1

Name: Green Bankshares, Inc.

Corporate or other organizational form: Corporation
Jurisdiction of organization: Tennessee

Item 2

Exercise Price:1 $17.06

Item 3

Issue Date: December 23, 2008

Item 4

Amount of last dividend declared prior to the Issue Date: $0.13

Item 5

Date of Letter Agreement between the Company and the United States Department of the

Treasury: December 23, 2008

Item 6

Number of shares of Common Stock: 635,504

Item 7

	 	 	 
	Company’s address:

	 	100 North Main Street
	 

	 	P.O. Box 1120
	 

	 	Greeneville, TN 37743

Item 8

	 	 	 	 	 
	Notice information:	 	100 North Main Street
	 	 	P.O. Box 1120
	 	 	Greeneville, TN 37743
	 

	 	Attn:
	 	James E. Adams
	 

	 	 	 	Chief Financial Officer
	 

	 	 	 	Telephone: (423) 278-3050
	 

	 	 	 	Facsimile: (423) 278-3090

 

			
	1	 	Initial exercise price to be calculated based on the
average of closing prices of the Common Stock on the 20 trading days ending on
the last trading day prior to the date the Company’s application for
participation in the Capital Purchase Program was approved by the United States
Department of the Treasury.

17

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