NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES MAY BE EXCHANGED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE...
Exhibit 4.4
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES MAY BE EXCHANGED HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
2005 7% SUBORDINATED NOTE DUE ___________, 2008
OF
HEARUSA, INC.
Note No.: ______________________ | Original Principal Amount: ______________________ | |
Issuance Date: ______________________, 2005 |
This Note (“Note”) is one of a duly authorized issue of Notes of HEARUSA, INC., a
corporation duly organized and existing under the laws of the State of Delaware (the
“Company”), designated as the Company’s 2005 7%
Subordinated Notes Due _____________, 2008 (“Maturity
Date”) in an aggregate principal amount (when taken together with the original principal amounts of
all other Notes) of up to Five Million Five Hundred Thousand U.S. Dollars (U.S. $5,500,000) (the
“Notes”).
For Value Received, the Company hereby promises to pay to the order of
___________________________________________ or its registered assigns or successors-in-interest
(“Holder”) the principal sum of ________________
Dollars (U.S. $_____________), together with all
accrued but unpaid interest thereon, if any, on the Maturity Date, to the extent such principal
amount and interest has not been repaid in accordance with the terms hereof. Interest on the
unpaid principal balance hereof shall accrue at the rate of 7% per annum from the date of original
issuance hereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date,
or such earlier date upon acceleration or by redemption or payment in accordance with the terms
hereof. Interest on this Note shall accrue daily commencing on the Issuance Date and shall be
computed on the basis of a 360-day year, 30-day months and actual days elapsed and shall be payable
in accordance with Section 1 hereof. Notwithstanding anything contained herein, this Note shall
bear interest on the due and unpaid Principal Amount from and after the occurrence and during the
continuance of an Event of Default pursuant to Section 4(a) at the rate (the “Default Rate”) equal
to the lower of fifteen percent (15%) per annum or the highest rate permitted by law. Unless
otherwise agreed or required by applicable law, payments will be applied first to any unpaid
collection costs, then to unpaid interest and fees and any remaining amount to principal.
All payments of principal and interest on this Note shall be made in lawful money of the
United States of America by wire transfer of immediately available funds to such account as the
Holder may from time to time designate by written notice in accordance with the provisions of this
Note or by Company check. At any time, and from time to time, the Company may prepay, in whole or
in part, the original Principal Amount of this Note, without penalty, after providing written
notice of such prepayment. Whenever any amount expressed to be due by the terms of this Note is
due on any day which is not a Business Day (as defined below), the same shall instead be due on the
next succeeding day which is a Business Day.
Capitalized terms used herein and not otherwise defined shall have the meanings set forth in
the Purchase Agreement dated on or about the Issuance Date pursuant to which the Notes were
originally issued (the “Purchase Agreement”). For purposes hereof the following terms shall have
the meanings ascribed to them below:
“Bankruptcy Event” means any of the following events: (a) the Company commences a case or
other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any subsidiary thereof; (b) there is commenced against the Company any such case or
proceeding that is not dismissed within 60 days after commencement; (c) the Company is adjudicated
insolvent or bankrupt or any order of relief or other order approving any such case or proceeding
is entered; (d) the Company suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within 60 days; (e) the Company
makes a general assignment for the benefit of creditors; (f) the Company fails to pay, or states
that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the
Company calls a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company, by any act or failure to act, expressly indicates
its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other
action for the purpose of effecting any of the foregoing.
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial
banks in the City of New York are authorized or required by law or executive order to remain
closed.
“Change in Control Transaction” will be deemed to exist if (i) there occurs any consolidation,
merger or other business combination of the Company with or into any other corporation or other
entity or person (whether or not the Company is the surviving corporation), or any other corporate
reorganization or transaction or series of related transactions in which in any of such events the
voting stockholders of the Company prior to such event cease to own 50% or more of the voting
power, or corresponding voting equity interests, of the surviving corporation after such event
(including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant
to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated pursuant to the
Exchange Act for 20% or more of the Company’s Common Stock), (ii) any person (as defined in Section
13(d) of the Exchange Act), together with its affiliates and associates (as such terms are defined
in Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as described in
Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 50% of
the Company’s voting power, (iii) there is a replacement of more than one-half of the members of
the Company’s Board of Directors which is not approved by those individuals who are members of the
Company’s Board of Directors on the date thereof, (iv) in one or a series of related transactions,
there is a sale or transfer of all or substantially all of the assets of the Company, determined on
a consolidated basis, or (v) the Company enters into any agreement providing for an event set forth
in (i), (ii), (iii) or (iv) above.
2
“Common Stock” shall mean the Company’s Common Stock, par value $.10 per share.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Payment
Date” shall mean each __________, __________, __________
and __________ of each year, provided
that if any such day is not a Trading Day, then such Payment Date shall mean the next succeeding
day which is a Trading Day.
“Principal Amount” shall refer to (i) the original principal amount of this Note, plus (ii)
any default payments owing under the Agreements but not previously paid or added to the Principal
Amount, less (iii) all amounts of principal previously repaid or exchanged.
“Principal Market” shall mean the American Stock Exchange or such other principal market or
exchange on which the Common Stock is then listed for trading.
“Trading Day” shall mean a day on which there is trading on the Principal Market.
The following terms and conditions shall apply to this Note:
Section 1. Payments of Principal and Interest.
(a) Interest Only Payments. On each Payment Date beginning on ___until the Maturity
Date, the Company shall pay to the Holder all interest accrued to date on the entire outstanding
Principal Amount of this Note (“Interest Amount”), less amounts prepaid pursuant to Section 1(b)
below in accordance with this Section 1.
(b) Interest Prepayment. On the Issuance Date, the Company shall prepay to the Holder all
interest that would have accrued on the entire Principal Amount of
this Note through __________, but
for the fact that it was prepaid pursuant hereto.
(c) Quarterly Payments. On each Payment Date beginning on __________, 2005, the Company shall
repay eight percent (8%) of the original Principal Amount (including accrued but unpaid interest to
that date), plus a premium equal to two percent (2%) of the Principal Amount being repaid.
(d) Acceleration. All outstanding Principal Amount of this Note, including any interest due
hereon, shall become due and payable immediately upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company.
(e) Certain Additional Payments by the Company. Any payment by the Company to the Holder
hereunder, whether for principal, interest or otherwise, shall not be subject to any deduction,
withholding or offset for any reason whatsoever except to the extent required by law, and the
Company represents that to its best knowledge no deduction, withholding or offset is so required
for any tax or any other reason.
(f) Cancellation. After all of the Principal Xxxxxx has been paid in full or exchanged into
equity securities pursuant to Section 4 hereof, this Note shall automatically be deemed cancelled,
and the Holder shall promptly surrender the Note to the Company.
3
Section 2. Subordinated/Subsequent Debt. The Notes are and shall be subordinated to
the debt owed by the Company to Siemens Hearing Instruments, Inc. pursuant to the agreements in
effect on the Issuance Date, and shall be pari-passu with the Company’s 2003 Convertible
Subordinated Notes due November 30, 2008. So long as any Principal Amount is outstanding, the
Company and its subsidiaries shall not directly or indirectly, without the written approval of the
holders of at least 51% of the outstanding Principal Amount of all of the Notes then outstanding,
(a) redeem any shares of the Company’s capital stock (other than shares of the Company’s E Series
Convertible Preferred Stock), or (b) incur or permit to exist additional indebtedness which is
senior to the Notes (except for (i) indebtedness and liens to Siemens Hearing Instruments, Inc.
pursuant to the agreements currently in effect on the Issuance Date; (ii) in connection with the
acquisition by the Company, by whatever means, of any business, assets or technologies; (iii) to
any strategic investor, vendor, customer, lease or similar arrangement; or (iv) pursuant to any
unsecured commercial borrowing, lending or lease financing transaction).
Section 3. Redemption Right.
(a) Upon consummation of a Change in Control Transaction prior to the Maturity Date, the
Holder shall have the right thereafter to require the Company or its successor to redeem this Note,
in whole but not in part, at a redemption price equal to (i) if prior to or on the first
anniversary of the Issuance Date, 115% of the outstanding Principal Amount (plus all accrued and
unpaid interest, if any), (ii) if between the first and second anniversaries of the Issuance Date,
110% of the outstanding Principal Amount (plus all accrued and unpaid interest, if any); or (iii)
if after the second anniversary of the Issuance Date, 105% of the outstanding Principal Amount
(plus all accrued and unpaid interest, if any).
(b) In the event of the death of the Company’s Chairman, Xxxx X. Xxxxx, M.D., the Holder shall
have the right to require the Company to redeem up to sixty percent (60%) of the original Principal
Amount of the Note (the “Redeemable Percentage”) at a redemption price equal to the pro rata
portion of the original Principal Amount. The Redeemable Percentage shall be subject to reduction
on a pro rata basis with the Redeemable Percentage of other outstanding Notes in the event proceeds
from the existing $3 million key man life insurance policy relating to the Company’s Chairman, Xxxx
X. Xxxxx, M.D. are not sufficient to pay the redemption price for all the Notes as to which this
redemption right has been exercised.
(c) Upon the happening of an event that triggers a redemption right hereunder, the Holder
shall have five (5) days to exercise its redemption right by providing this Note and written notice
of election to the Company.
Section 4. Exchange.
(a) Right to Exchange. Subject to the exclusions herein, at any time there is an
outstanding Principal Amount, if the Company closes a private placement of its equity securities at
a price equal to or greater than $3.00 per share of Common Stock (subject to adjustment for stock
splits, stock dividends and recapitalizations), then the Holder shall have the right to exchange
the outstanding Principal Amount of this Note (plus accrued but unpaid interest, if any), in whole
or in part, for the type of equity securities issued in such placement to the extent such issuance
to the Holder would comply with applicable securities laws and stock exchange regulations. The
number of securities received by the Holder shall be determined by the outstanding Principal Amount
being
4
exchanged (plus accrued but unpaid interest, if any). By way of illustration, the Holder may
exchange $1 million of outstanding Principal Amount (plus accrued but unpaid interest, if any) for
that number of securities that could be acquired for a purchase price of $1 million had the Holder
participated in the private placement.
(b) Exchange Notice. Upon the triggering of an exchange right hereunder, the Holder
shall have five (5) days to exercise its exchange right by providing this Note and written notice
of exchange to the Company.
(c) No Fractions. Upon an exchange hereunder, in lieu of issuing a stock certificate
representing a fraction of a share of Common Stock, the Company may (if otherwise permitted) make a
cash payment in respect of any final fraction of a share based in the closing price of a share of
Common Stock at such time.
(d) Charges, Taxes and Expenses. Issuance of certificates for securities upon the
exchange of this Note shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of which shall be paid
by the Company; provided, however, that the Company shall not be required to pay any tax which may
be payable in respect of any transfer of certificates to be issued in a name other than the name of
the Holder.
(e) Exchange Limitation. Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be beneficially acquired by the Holder upon exchange
pursuant to the terms hereof shall not exceed a number that, when added to the total number of
shares of Common Stock deemed beneficially owned by such Holder (other than by virtue of the
ownership of securities or rights to acquire securities (including the Notes and Warrants) that
have limitations on the Holder’s right to exchange, exercise or purchase similar to the limitation
set forth herein), together with all shares of Common Stock deemed beneficially owned at such time
(other than by virtue of the ownership of securities or rights to acquire securities that have
limitations on the right to exchange, exercise or purchase similar to the limitation set forth
herein) by the holder’s “affiliates” at such time (as defined in Rule 144 of the Act) (“Aggregation
Parties”) that would be aggregated for purposes of determining whether a group under Section 13(d)
of the Securities Exchange Act of 1934 as amended, exists, would exceed 9.9% of the total issued
and outstanding shares of the Common Stock (the “Restricted Ownership Percentage”). Each holder
shall have the right (w) at any time and from time to time to reduce its Restricted Ownership
Percentage immediately upon notice to the Company and (x) (subject to waiver) at any time and from
time to time, to increase its Restricted Ownership Percentage immediately in the event of the
announcement as pending or planned, of a Change in Control Transaction.
Section 5. Defaults and Remedies.
(a) Events of Default. An “Event of Default” is: (i) a default in payment of any
amount due hereunder which default continues for more than 5 business days after written notice
thereof has been received by the Company; (ii) failure by the Company for seven (7) days after
written notice has been received by the Company to remedy any material breach by the Company of its
covenants, representations or warranties in the Purchase Agreement, Registration Rights Agreement
or Warrants; (iii) if the Company is subject to any Bankruptcy Event; or (iv)
5
failure of the
Company to list any of its equity securities on the American Stock Exchange or Nasdaq Stock Market.
(b) Remedies. If an Event of Default occurs and is continuing with respect to any of
the Notes, the Holder may declare all of the then outstanding Principal Amount of this Note and all
other Notes held by the Holder, including any interest due thereon, to be due and payable
immediately. In the event of such acceleration, the amount due and owing to the Holder shall be
115% of the outstanding Principal Amount of the Notes held by the Holder (plus all accrued and
unpaid interest, if any). The Company shall pay interest on such amount in cash at the Default
Rate to the Holder if such amount is not paid within 7 days of Holder’s request. The remedies
under this Note shall be cumulative.
Section 6. General.
(a) Payment of Expenses. The Company agrees to pay all reasonable charges and
expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in
successfully enforcing this Note and/or collecting any amount due under this Note.
(b) Savings Clause. In case any provision of this Note is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such
provision shall be adjusted rather than voided, if possible, so that it is enforceable to the
maximum extent possible, and the validity and enforceability of the remaining provisions of this
Note will not in any way be affected or impaired thereby. In no event shall the amount of interest
paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable
by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess
collected shall be applied to reduce the principal debt. If the interest actually collected
hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.
(c) Amendment. Neither this Note nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the Company and the Holder.
(d) Assignment, Etc. The Holder may assign or transfer this Note to any transferee.
The Holder shall notify the Company of any such assignment or transfer promptly. This Note shall
be binding upon the Company and its successors and shall inure to the benefit of the Holder and its
successors and assigns.
(e) No Waiver. No failure on the part of the Holder to exercise, and no delay in
exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other
or future exercise of any other right, remedy or power. Each and every right, remedy or power
hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not
exclusive of any other, and may be exercised by the Holder from time to time.
(f) Governing Law; Jurisdiction.
(i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK
6
WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD
OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) NO JURY TRIAL. THE COMPANY HERETO KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT
MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH, THIS NOTE.
(g) Replacement Notes. This Note may be exchanged by Holder at any time and from time
to time for a Note or Notes with different denominations representing an equal aggregate
outstanding Principal Amount, as reasonably requested by Xxxxxx, upon surrendering the same. No
service charge will be made for such registration or exchange. In the event that Xxxxxx notifies
the Company that this Note has been lost, stolen or destroyed, a replacement Note identical in all
respects to the original Note (except for registration number and Principal Amount, if different
than that shown on the original Note), shall be issued to the Holder, provided that the Holder
executes and delivers to the Company an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with the Note.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on the day and in the
year first above written.
HEARUSA, INC. |
||||
By: | ||||
Name: | ||||
Title: | ||||
Attest:
Sign: ________________________________
Print Name:
Print Name:
7