STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 26th day of
January, 1996 by and among HEARx Ltd., a Delaware corporation (the "Company"),
Invemed Associates, Inc., a New York corporation ("Invemed") and the investors
listed on Schedule A hereto (each, together with Invemed, an "Investor" and
collectively the "Investors").
In consideration of the mutual promises made herein, the parties hereto
agree as follows:
1. Definitions. The following terms, as used herein, have the following
meanings:
1.1 "Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person.
1.2 "Agreements" means this Agreement, the Registration Rights Agreement
and the Sell Along Rights Agreement.
1.3 "Closing" means the consummation of the transaction contemplated by
this Agreement, which shall occur simultaneously with the execution hereof.
1.4 "Common Stock" means the Common Stock, par value $0.10 per share, of
the Company.
1.5 "Invemed Warrants" means warrants to purchase up to 2,250,000 shares of
Common Stock at an exercise price of $0.63 per share, exercisable for a period
of five years from the date of issuance, the form of which is attached hereto as
Exhibit D.
1.6 "Investor Warrants" means Class A Warrants to purchase up to an
aggregate of 10,909,090 shares of Common Stock at an exercise price of $0.55 per
share, exercisable for a period of five years from the date of issuance, the
form of which is attached hereto as Exhibit E-1; and Class B Warrants to
purchase up to an aggregate of 4,000,000 shares of Common Stock at an exercise
price of $0.55 per share, exercisable for a period of one year beginning on the
fourth anniversary of the date of this Agreement and non-detachable from the
1996 Preferred Stock until exercisable, the form of which is attached hereto as
Exhibit E-2.
1.7 "Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations or
prospects of the Company and its subsidiaries, taken as a whole.
1.8 "Person" means an individual, corporation, partnership, trust, business
trust, association, joint stock company, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.
1.9 "1996 Preferred Stock" means the 1996 Senior Preferred Stock, par value
$1.00 per share, of the Company, having the rights and preferences and subject
to the terms and conditions stated in the Certificate of Designation,
Preferences and Rights of 1996 Senior Preferred Stock of even date herewith,
attached hereto as Exhibit A.
1.10 "Registration Rights Agreement" means the Registration Rights
Agreement relating to the Common Stock issuable pursuant to the exercise of the
Warrants, in the form attached hereto as Exhibit B, to be entered into as of the
date hereof.
1.11 "SEC Filings" has the meaning set forth in Section 3.5.
1.12 "Securities" means the 1996 Preferred Stock, the Warrants and the
Common Stock issuable upon the exercise of Warrants.
1.13 "Sell Along Rights Agreement" means the Sell Along Rights Agreement to
be entered into pursuant to Section 6.2 hereof, in the form attached hereto as
Exhibit C, to be entered into as of the date hereof.
1.14 "Warrants" means the Invemed Warrants and the Investor Warrants.
1.15 "1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
1.16 "1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
2. Purchase and Sale of 1996 Preferred Stock and Warrants and Issuance
of Invemed Warrants. Subject to the terms and conditions of this Agreement, the
Investors hereby purchase and the Company hereby sells and issues to the
Investors 6,000 shares of 1996 Preferred Stock and the Investor Warrants at an
aggregate purchase price of $6,000,000, the receipt of which is hereby
acknowledged. Furthermore, the Company hereby issues the Invemed Warrants to
Invemed and the officers and employees of Invemed and the shareholders of
Invemed's parent corporation, all as set forth in Schedule A hereto (each of
whom, together with Invemed shall also be considered an
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"Investor" for purposes of this Agreement), in consideration for services that
have been provided by Invemed in connection with this transaction. The
respective numbers of shares of Preferred Stock and shares underlying the
Investor Warrants, and the consideration paid therefor, and the respective
numbers of shares underlying Invemed Warrants with respect to each Investor is
set forth in Schedule A.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that:
3.1 Organization, Good Standing 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 power and authority to carry on
its business as now conducted. The copies of the Certificate of Incorporation,
as amended (the "Certificate of Incorporation"), and By-Laws, as amended (the
"By-Laws") of the Company delivered to the Investors are true and complete and
have not, since the respective dates of such Certificate of Incorporation, and
By-Laws, been amended or repealed (except for the Certificate of Designations,
Preferences and Rights of 1996 Senior Preferred Stock in the form set forth as
Exhibit A to this Agreement which was not included therein and is filed
concurrently herewith with the Secretary of State of the State of Delaware). The
Company and each of its subsidiaries is duly qualified as a foreign corporation
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification necessary unless
the failure to so qualify would not have a Material Adverse Effect.
3.2 Authorization. All requisite action on the part of the Company, its
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of this Agreement and the Registration Rights Agreement,
(ii) the performance of all obligations of the Company hereunder or thereunder
and (iii) the authorization, issuance (or reservation for issuance) and delivery
of the Securities has been taken, and this Agreement and the Registration Rights
Agreement constitute the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with their terms.
3.3 Valid Issuance; Fully Diluted Common Stock Before Closing.
(i) The authorized capital stock, and the outstanding capital stock, of the
Company consists, in each case immediately prior to the Closing, solely of the
shares indicated in part 1 of Exhibit F to this Agreement. Immediately following
the sale to the Investors at the Closing contemplated hereby, the authorized
capital stock, and the outstanding capital stock, of the Company will consist in
each case solely of the shares indicated in part 2 of Exhibit F to this
Agreement. The voting powers, designations, preferences and relative,
participating, optional and other rights of the 1996 Preferred Stock, and the
qualifications, limitations or restrictions thereof are as fully set forth in
Exhibit A to this Agreement. All of the outstanding shares of capital stock
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indicated in part 2 of Exhibit F are duly authorized and are fully paid and
nonassessable and, assuming the representations of the Investors in Sections
4.3, 4.6 and 4.9 of this Agreement are correct, issued in compliance with all
applicable securities laws. Except as set forth in part 3 of Exhibit F, no one
is entitled to preemptive or similar statutory or contractual rights with
respect to any securities of the Company. All necessary and appropriate waivers
of stockholders with respect to the consummation of the transactions and the
performance of the obligations of the Company contemplated hereby have been
obtained, and the Company shall promptly obtain any necessary waivers not
heretofore obtained. Except as disclosed in part 4 of Exhibit F to this
Agreement, there are no outstanding warrants, options, convertible securities or
other rights, agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any kind, or to
transfer any equity securities of any kind, and the Company and its subsidiaries
do not have any present plan or intention to issue any equity securities of any
kind, or to transfer any equity securities of any kind owned by them. Except as
disclosed in part 5 of Exhibit F, the Company does not know of any voting
agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among any of the securityholders of the Company
relating to the securities held by them. The Company has not agreed, and has no
present intention, to register any of its securities under the Securities Act of
1933, as amended, except as provided in the agreements listed in part 6 of
Exhibit F.
(ii) The number of outstanding shares of Common Stock immediately prior to
the Closing, as indicated in part 1 of Exhibit F of this Agreement, plus the
number of shares of Common Stock issuable pursuant to outstanding rights and
agreements on a fully diluted basis immediately prior to the Closing, assuming
the complete exercise or conversion of all rights to acquire capital stock of
the Company until such rights and subsequent rights incident to exercise or
conversion are fully exercised or converted for Common Stock, together represent
less than 75 million shares of Common Stock immediately prior to the Closing.
3.4 Governmental Consents. The execution, delivery and performance by the
Company of the Agreements require no action by or in respect of, or filing with,
any governmental body, agency, or official other than filings that have been
made pursuant to applicable state securities laws and post-sale filings pursuant
to applicable state and federal securities laws, which the Company undertakes to
file within the applicable time periods.
3.5 Delivery of SEC Filings. The Company has delivered or made available to
the Investors (i) its Annual Report on Form 10-K for its fiscal year ended
December 31, 1994, (ii) its quarterly reports on Form 10-Q for each fiscal
quarter subsequent to that fiscal year end, and (iii) any other documents filed
with the Securities and Exchange Commission (the "SEC") since December 31, 1994
(collectively, the "SEC Filings").
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3.6 Use of Proceeds. The proceeds of the sale of the Securities hereunder
shall be used by the Company for the build-out and opening of hearing care
centers in the New York area to comply with the Company's agreement with Oxford
Healthcare, completion and installation of the Company's point-of-sale and
database management system, retirement of debt listed in Schedule 3.6 hereto and
general corporate purposes.
3.7 No Material Adverse Change. Except as set forth in Schedule 3.7, since
September 30, 1995, there has not been:
(i) any change in the consolidated assets, liabilities, financial condition
or operating results of the Company from that reflected in the financial
statements included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, except changes in the ordinary course of
business which have not had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any authorization or
payment of any distribution, on any of the capital stock of the Company, or any
redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not covered by
insurance to any assets or properties of the Company or any of its subsidiaries;
(iv) any waiver by the Company or any of its subsidiaries of a valuable
right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company or any of its subsidiaries, except in
the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
(vi) any material change or amendment to a material contract or arrangement
by which the Company or any of their subsidiaries or any of its assets or
properties is bound or subject;
(vii) any material change in any compensation arrangement or agreement with
any employee of the Company or any of its subsidiaries who now earns, or who
would earn as a result of such change, in excess of $100,000 per annum or any
other officer of the Company or any of its subsidiaries;
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(viii) any labor difficulties or labor union organizing activities with
respect to employees of the Company or any of its subsidiaries;
(ix) any transaction entered into by the Company or any of its subsidiaries
other than in the ordinary course of business; or
(x) any other event or condition of any character which might have a
Material Adverse Effect, which is not reflected in the SEC Filings.
3.8 SEC Filings; Material Contracts. (i) As of its filing date, each report
filed by the Company with the SEC pursuant to the 1934 Act, complied as to form
in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(ii) Each registration statement and any amendment thereto filed by the
Company pursuant to the 1933 Act and the rules and regulations thereunder, as of
the date such statement or amendment became effective, complied as to form in
all material respects with the 1933 Act and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and each
prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue
date and as of the closing of any sale or securities pursuant thereto did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(iii) Except as listed in Schedule 3.8 hereto, there are no agreements or
instruments currently in force and effect that constitute a "material contract"
(as such term is defined in Item 601(b)(10) of Regulation S-K) of the Company or
that constitute a warrant, option, convertible security or other right,
agreement or arrangement of any character under which the Company is or may be
obligated to issue any equity security of any kind, or to transfer any equity
security of any kind. The Company has delivered to the Investors prior to the
Closing full and complete copies of all agreements indicated in Schedule 3.8
hereto.
3.9 Reservation of Shares. The Company has reserved a sufficient number of
shares of Common Stock for issuance upon exercise of the Warrants, and such
shares, when issued in accordance with the terms of the Warrants, will be duly
authorized, validly issued, fully paid, non-assessable and free and clear of all
encumbrances and restrictions, except for restrictions on transfer imposed by
applicable securities laws.
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3.10 Disclosures. No representation or warranty made under any Section
hereof and no information furnished by the Company pursuant hereto, or in any
other document delivered by the Company to an Investor or any authorized
representative of an Investor, pursuant to the Agreements or in connection
therewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the respective statements contained herein or
therein, in light of the circumstances under which the statements were made, not
misleading.
3.11 Registration Rights. The registration rights granted to the Investors
pursuant to the Registration Rights Agreement are at least as favorable to the
Investors as those granted to any holder of any securities of the Company are to
such holder.
3.12 No Breach, Violation or Default. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement and the
issuance and sale of the Securities will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any statute,
any rule, regulation (assuming, for this purpose, that the representations of
the Investors in Sections 4.3, 4.6 and 4.9 are correct) or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is bound or
to which any of the properties of the Company or any such subsidiary is subject,
or the Certificate of Incorporation or By-Laws of the Company or any such
subsidiary.
3.13 Title to Properties. Except as disclosed in the SEC Filings, the
Company and its subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and its subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
3.14 Certificates, Authorities and Permits. The Company and its
subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them and have not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
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3.15 No Labor Disputes. No labor dispute with the employees of the Company
or any subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
3.16 Intellectual Property. The Company and its subsidiaries own, possess
or can acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential information
and other intellectual property (collectively, "Intellectual Property Rights")
necessary to conduct the business now operated by them, or presently employed by
them, and have not received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property Rights that,
if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
3.17 Environmental Matters. Neither the Company nor any of its subsidiaries
is in violation of any statute, any rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim would individually or
in the aggregate have a Material Adverse Effect; and the Company is not aware of
any pending investigation which might lead to such a claim.
3.18 Litigation. Except as disclosed in the SEC Filings, there are no
pending actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Securities; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
3.19 Financial Statements. The financial statements included in each SEC
Filing present fairly the consolidated financial position of the Company and its
subsidiaries as of the dates shown and their consolidated results of operations
and cash flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles applied
on a consistent basis.
3.20 Insurance Coverage. The Company and its subsidiaries maintain
insurance coverage that is standard for comparably situated companies for the
business being conducted, and properties owned or leased, by the Company and its
subsidiaries.
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4. Representations and Warranties of the Investors. Each of the Investors
hereby represents and warrants, as to itself only, to the Company that:
4.1 Organization and Existence. If such Investor is a corporation or
partnership, such Investor is a validly existing corporation or partnership and
has all requisite corporate or partnership power and authority to invest in the
Securities of the Company pursuant to this Agreement.
4.2 Authorization. The execution, delivery and performance by such Investor
of the Agreements have been duly authorized. Upon execution and delivery, the
Agreements will each constitute the valid and legally binding obligation of such
Investor, enforceable against such Investor in accordance with such agreement's
terms.
4.3 Purchase Entirely for Own Account. The Securities to be received by
such Investor hereunder will be acquired for investment for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that subject to the following proviso, such Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities; an Investor that is a corporate entity may
distribute Securities to its executive officers, directors or shareholders or,
in the case of Invemed, to its employees who are registered representatives
under the 1934 Act; an Investor that is a partnership may distribute Securities
to its partners; and Invemed may transfer Invemed Warrants to its designee to
serve on the Company's Board of Directors.
4.4 Investment Experience. Such Investor acknowledges that it can bear the
economic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated hereby.
4.5 Disclosure of Information. Such Investor has had an opportunity to ask
questions and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities.
4.6 Restricted Securities. Such Investor understands that the Securities
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances. In this connection, such Investor represents that
it understands the resale limitations imposed by the 1933 Act.
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4.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, each Investor further agrees (except as
otherwise set forth in Section 4.3) not to make any disposition of all or any
portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) Such Investor shall have notified the Company of the proposed
disposition, and (ii) if reasonably requested by the Company, such Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company and its counsel, that such disposition will not
require registration of such shares under the 1933 Act. This subsection shall be
inapplicable to dispositions made pursuant to Rule 144.
4.8 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends (until such time as the
Securities may be freely transferred pursuant to Rule 144(k), at which time such
legends shall be removed at the request of the Investor or its assignee):
(a) "These securities have not been registered under the Securities Act of
1933 (the "Act"). They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under the Act or an exemption from the registration
requirements of the Act."
(b) If required by the authorities of any state in connection with the
issuance of sale of the Securities, the legend required by such state authority.
4.9 Accredited Investor. Such Investor is an accredited investor as defined
in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
4.10 Confidentiality. Such Investor shall maintain in confidence, and shall
not use or disclose without the prior written consent of the Company, any
information clearly marked "confidential" that is furnished to such Investor by
the Company in connection with this Agreement. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no act or failure to act by such Investor that was not authorized
in writing by the Company, or (b) lawfully disclosed to such Investor by a third
party who possessed such information without any obligation of confidentiality
to the Company.
4.11 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of such Investor, threatened against or
affecting, such Investor before any court or arbitrator or any governmental
body, agency or official
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which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement.
4A. Additional Representation and Warranty of Invemed. Invemed hereby
represents and warrants that (i) it is a registered broker-dealer under the 1934
Act, and is similarly registered pursuant to the applicable securities laws in
the states of California, Connecticut, Florida, Georgia, New Jersey, New York
and Pennsylvania (the "Investor States"); (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and G. ▇▇▇▇▇
▇▇▇▇▇▇ did not solicit any persons in connection with the offering of the
Securities and are not receiving Invemed Warrants in connection with soliciting
any persons in connection with the offering of the Securities; (iii) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ are registered representatives with the National
Association of Securities Dealers and hold similar qualifications in each of the
Investor States; and (iv) Carlisle ▇▇▇▇▇ is a registered representative with the
National Association of Securities Dealers and holds similar qualifications in
all of the Investor States other than Georgia, and did not solicit any Georgia
residents in connection with the offering of the Securities.
5. Registration Rights Agreement. The parties acknowledge and agree that
part of the inducement for each Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
6. Other Covenants and Agreements.
6.1 Board of Directors Representation. The Company hereby agrees that for
so long as Invemed or any of its executive officers or directors are the
registered and beneficial owners of any Securities and prior to redemption of
all outstanding 1996 Preferred Stock, the Company will nominate and use its best
efforts to cause to be elected one designated representative of Invemed to serve
on the Company's Board of Directors. If Invemed does not specify a nominee to
the Company within 30 days of the Closing, Invemed shall return to the Company
Invemed Warrants to purchase 250,000 shares of Common Stock.
6.2 Limitation on Sales by Certain Management. ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇ (the
Company's founder, Chief Executive Officer and Chairman of the Board) hereby
agrees that, in the event he proposes to transfer in one transaction or a series
of related transactions five percent (5%) of the shares of the Company's Common
Stock owned by him (other than sales effected on Nasdaq, through the NASD
Bulletin Board, or on a national securities exchange pursuant to Rule 144 under
the 1933 Act), ▇▇. ▇▇▇▇▇ shall permit the Investors to sell the same
proportionate number of shares of Common Stock held by the Investors (and/or
underlying the Investor Warrants that may then be exercised) as ▇▇. ▇▇▇▇▇ shall
sell for the same consideration and otherwise on the same terms and conditions
to be received by ▇▇. ▇▇▇▇▇ in the proposed sale. ▇▇. ▇▇▇▇▇ and
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the Investors acknowledge and agree that simultaneously with the execution
hereof, they have duly executed a Sell Along Rights Agreement detailing the
parties respective rights and obligations in respect to this matter, as set
forth in Exhibit C attached hereto.
6.3 Return of Confidential Information. Each Investor shall return to the
Company information subject to Section 4.11 of this Agreement upon request by
the Company. Such Investor agrees that it will restrict access to the Company's
confidential information among its officers, directors, partners, employees,
agents and representatives to those persons with a need to use such information.
6.4 Reverse Stock Split. The Company hereby agrees that it shall effect a
1-for-15 reverse stock split of its Common Stock no later than the next annual
meeting of shareholders of the Company. In no event, however, shall such meeting
be held later than May 31, 1996.
6.5 No Dividends. The Company hereby agrees that it shall not declare or
pay any dividends prior to the redemption of all outstanding 1996 Preferred
Stock.
6.6 Opinion of Counsel. The Company has delivered, simultaneously with the
execution and delivery of this Agreement, the opinion of ▇▇▇▇▇ ▇▇▇▇ LLP, its
counsel, in the form attached hereto as Exhibit G. Within a reasonable time
after the Closing, but in no event more than 60 days after the date hereof, the
Company shall deliver the opinion of ▇▇▇▇▇ ▇▇▇▇ LLP in the form attached hereto
as Exhibit H.
6.7 Reservation of Common Stock Pursuant to Exercise of Warrants. The
Company hereby agrees to at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
permitting exercise of the Warrants, such number of shares of Common Stock as
shall from time to time be sufficient to permit the exercise of all Warrants in
accordance with the terms of the Warrants.
6.8 Relative Equity Interest Represented By the Warrants. In entering into
this Agreement, the Investors have relied upon, among other things, the
representation and warranty set forth in Section 3.3(ii) hereto concerning the
outstanding capital stock of the Company and rights to acquire capital stock of
the Company immediately prior to the Closing. In the event it is later
determined that the representation and warranty in Section 3.3(ii) hereto is
untrue and the sum expressed therein is greater than 75 million, the Company
shall notify each Investor within ten days of discovery and prepare, execute and
deliver to the Investors, within ten days thereafter, such additional documents
and certificates in order to equitably adjust the Warrants for the benefit of
the Investors. The adjustment referenced in the preceding sentence shall involve
the issuance of additional Warrants and/or the reduction of the exercise price
of the Warrants, which adjustment shall be approved in writing by the holders of
a majority of the Warrants.
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7. Survival.
7.1 Survival of Provisions. All representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements as of the date hereof and shall survive the execution and
delivery of this agreement for a period of five years and six months from the
date of this Agreement; provided, however, that the provisions contained in
Section 6 hereof shall survive in accordance therewith.
8. Miscellaneous.
8.1 Successors and Assigns. This Agreement may not be assigned by either
party without the prior written consent of the other party hereto, except that
without the prior written consent of the Company, but after notice duly given,
an Investor may assign its rights and delegate its duties hereunder to an
Affiliate or to any permitted assignee under Section 4.3, and without the prior
written consent of Investor, but after notice duly given, the Company may assign
its rights and delegate its duties hereunder to any successor-in-interest
corporation in the event of a merger or consolidation of the Company with or
into another corporation, or any merger or consolidation of another corporation
with or into the Company which results directly or indirectly in an aggregate
change in the ownership or control of more than 50% of the voting rights of the
equity securities of the Company, or the sale of all or substantially all of the
Company's assets. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted 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.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.3 Titles and Subtitles. 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.
8.4 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified, or if sent by telex or
telecopier, upon receipt of the correct answer back, or upon deposit with the
United States Post Office, by registered or certified mail, or upon deposit with
an overnight air courier, in each case postage prepaid and addressed to the
party to be notified at the address as
-13-
follows, or at such other address as such party may designate by ten days'
advance written notice to the other party:
If to the Company:
HEARx Ltd.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to the Investors:
Invemed Associates, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
8.5 Finder's Fee. Each party represents that (except for the delivery by
the Company of the Invemed Warrants pursuant to this Agreement) it neither is
nor will be obligated for any finder's fee or commission in connection with this
transaction.
8.6 Expenses. The Company shall pay all costs and expenses incurred with
respect to the negotiation, execution, delivery and performance of the
Agreements, including, without limitation, the fees of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP, counsel to Invemed.
8.7 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of at least 662/3% of the
Securities
-14-
other than the Invemed Warrants (for this purpose, each share of Preferred Stock
shall be deemed to be 1,000 Securities and each share of Common Stock underlying
the Investor Warrants shall be deemed to be one Security). Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such securities, and the Company. Notwithstanding the
foregoing, the provisions of Section 6.1 hereto shall be amended only with the
consent of the Company and Invemed.
8.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
8.9 Entire Agreement. This Agreement, including the Exhibits and Schedules
hereto, the Registration Rights Agreement and the Sell Along Rights Agreement,
constitute the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.
8.10 Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
8.11 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
* * *
-15-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company
HEARx LTD.
By:_________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Title: Chairman of the Board
Invemed INVEMED ASSOCIATES, INC.
By:_________________________
Name:
Title:
The Investors
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ Erlbaum
-----------------------------
▇▇▇▇▇▇ Erlbaum
-16-
The Investors ------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
-17-
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ Erlbaum
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Carlisle ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-18-
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
G. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
-19-
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇▇
The undersigned joins in this Agreement
for the purpose of being bound by the
provisions of Section 6.2 hereof.
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
-20-
SCHEDULE A
# of Shares of # of Class A # of Class B # of
Amount 1996 Preferred Investor Investor Invemed
Name Invested Stock Warrants Warrants Warrants
----- -------- -------------- ------------ ------------ ---------
▇▇▇▇▇▇▇ ▇. $1,000,000 1,000 1,818,182 666,667 1,359,150
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ A. 258,000 258 469,092 172,000
▇▇▇▇▇
▇▇▇▇▇▇ M. 150,000 150 272,727 100,000
▇▇▇▇▇
▇▇▇▇▇▇▇ 250,000 250 454,546 166,667
▇▇▇▇▇▇
▇▇▇▇▇▇ 25,000 25 45,454 16,667
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 50,000 50 90,909 33,333 50,000
▇▇▇▇▇ ▇. 100,000 100 181,818 66,667
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ H. 117,000 117 212,727 78,000 292,500
▇▇▇▇▇▇
▇▇▇▇ Erlbaum 150,000 150 272,727 100,000
▇▇▇▇▇▇▇ 50,000 50 90,909 33,333
Erlbaum
▇▇▇▇▇▇ 50,000 50 90,909 33,333
Erlbaum
▇▇▇▇▇▇ ▇. 100,000 100 181,818 66,667
▇▇▇▇▇▇
▇▇▇▇ M. 50,000 50 90,909 33,333
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ R. 25,000 25 45,454 16,667
Taussig and
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. 25,000 25 45,454 16,667
▇▇▇▇▇▇
▇▇▇▇ A. 25,000 25 45,454 16,667
▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
-21-
▇▇▇▇▇▇ ▇. 25,000 25 45,454 16,667
▇▇▇▇▇
▇▇▇▇▇▇ 50,000 50 90,909 33,333
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ 75,000 75 136,364 50,000
▇▇▇▇▇▇ ▇. 200,000 200 363,636 133,333
▇▇▇▇▇▇▇
▇▇▇▇ 1,000,000 1,000 1,818,182 666,667
▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ 50,000 50 90,909 33,333
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 250,000 250 454,546 166,667
▇▇▇▇▇▇▇▇▇ 300,000 300 545,455 200,000
▇▇▇▇▇▇
▇▇▇▇▇▇▇ 35,000 35 63,636 23,333
Nechamkin
▇▇▇▇ ▇▇▇▇▇▇▇ 15,000 15 27,273 10,000
▇▇▇▇ ▇▇▇▇▇▇ 20,000 20 36,364 13,333
▇▇▇▇▇▇ ▇▇▇▇▇ 1,540,000 1,540 2,800,000 1,026,666
▇▇▇▇▇▇▇ ▇. 15,000 15 27,273 10,000
Neus
Invemed
Associates, Inc. 250,000
▇▇▇▇▇▇ ▇. 99,450
▇▇▇▇▇▇
G. ▇▇▇▇▇
▇▇▇▇▇▇ 198,900
-22-
SCHEDULE 3.6
Indebtedness to be Repaid by the Company
with a Portion of the Offering Proceeds
Creditor Name Amount of Debt
------------- --------------
Minnesota Mining and Manufacturing $308,000
Company
Siemens Hearings Instruments, Inc. and 200,000
Rexton, Inc. (in the aggregate)
Dr. ▇▇▇▇ ▇▇▇▇▇ 100,000
▇▇▇▇▇ ▇▇▇▇ LLP 100,000
-23-
EXHIBIT A
HEARx LTD.
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
1996 SENIOR PREFERRED STOCK
Pursuant to Section 151 of the General
Corporation Law of the
State of Delaware
HEARx Ltd., a corporation organized on April 11, 1986 and existing under
the laws of the State of Delaware ("Corporation"), the Restated Certificate of
Incorporation of which was filed in the office of the Secretary of State of
Delaware on February 5, 1987, does by its Chairman and its Secretary hereby
certify:
That pursuant to the authority vested in the Board of Directors by the
Restated Certificate of Incorporation, the Board, at a meeting duly held on
January 18, 1996, adopted the following resolutions:
RESOLVED, that pursuant to the authority so conferred upon it, the Board of
Directors hereby authorizes the issuance of 6,000 shares of 1996 Senior
Preferred Stock, par value $1.00 per share ("1996 Preferred"), in connection
with a Stock Purchase Agreement to be entered into by the Corporation; and
RESOLVED, that the voting powers, preferences and relative rights and
privileges and other rights granted to the 1996 Preferred and the
qualifications, limitations or restrictions imposed thereon be, and they hereby
are, as follows:
A. Dividends and Distributions. The holders of the 1996 Preferred shall be
entitled to receive dividends or other distributions of the Corporation, other
than liquidating distributions, only as and when declared by special resolution
of the Corporation's Board of Directors.
B. Voting Rights; Separate Vote of 1996 Preferred Required to Approve
Certain Corporate Actions. The holders of the 1996 Preferred shall have 2,485
votes per share of 1996 Preferred held by them and shall have voting rights and
powers equal to the voting rights and powers of Common Stock, except as set
forth below. Except as may be required by law or as set forth below, the holders
of the 1996
Preferred shall not vote separately as a class but shall instead vote with the
holders of Common Stock on all matters as to which stockholders are entitled to
vote under Delaware law.
Notwithstanding the foregoing, without the affirmative vote or written
consent of the holders of a majority of the outstanding shares of 1996
Preferred, voting separately as a class, the Corporation may not:
(a) Issue any securities (including any debt or equity securities) or any
indebtedness, other than pursuant to a Permitted Issuance (as defined below).
(b) Repay any indebtedness due to Dr. ▇▇▇▇ ▇▇▇▇▇ (on the date hereof, the
Chairman of the Board and Chief Executive Officer of the Corporation) or his
assignees, other than indebtedness (including accrued interest) in the aggregate
amount of $100,000.
As used herein, a "Permitted Issuance" is any one of the following:
(i) The issuance of up to 1,500,000 shares of Common Stock, $.10 par value,
pursuant to employee stock options issued subsequent to the date hereof, subject
to appropriate adjustment in the event of stock splits, stock dividends,
combinations, reclassifications or similar events (e.g., in the event of a
1-for-15 reverse stock split, the total number of shares issuable pursuant to
this clause (i) shall be 100,000).
(ii) The issuance of any securities of the Corporation pursuant to the
exercise or conversion of options, warrants and preferred stock outstanding on
the date hereof or pursuant to the terms of agreements existing on the date
hereof, in accordance with the terms of such securities and agreements in effect
on the date hereof.
(iii) The issuance of Common Stock of the Corporation pursuant to the
conversion of Senior Preferred Stock, Series C ("Senior C Preferred") in
accordance with the terms of such security on the date hereof, and which Senior
C Preferred is issued pursuant to the exercise of warrants outstanding on the
date hereof, in accordance with terms of such warrants in effect on the date
hereof.
(iv) The incurring of any trade indebtedness or short term (i.e., maturity
of less than one year) bank financing (the term "bank" shall have the meaning
set forth in clauses (A), (B) and (C) of Section 3(a)(6) of the Securities
Exchange Act of 1934, as amended).
C. Priority. The 1996 Preferred shall be senior to all shares of capital
stock of the Corporation other than the Senior Preferred Stock, Series A, par
value $1.00 per share ("Senior A Preferred"); Senior Preferred Stock, Series B,
par value $1.00 per share ("Senior B Preferred"); the Senior Preferred Stock,
Series C, par value $1.00 per
A-2
share ("Senior C Preferred"); the Senior Preferred Stock, Series D, par value
$1.00 per share ("Senior D Preferred"); the Senior Preferred Stock, Series E,
par value $1.00 per share ("Senior E Preferred"); the Senior Preferred Stock,
Series G, par value $1.00 per share ("Senior G Preferred"); and the 1994
Convertible Preferred Stock, par value $1.00 per share (the "1994 Convertible
Preferred") (the Senior A, B, C, D, E and G Preferred and the 1994 Convertible
Preferred being together called the "Senior Preferred") and shall rank pari
passu with the Senior Preferred in liquidation only, provided that the
Corporation may authorize and issue additional classes or series of Preferred
Stock that rank pari passu with the 1996 Preferred with the prior written
consent of the holders of the majority of the shares of outstanding 1996
Preferred.
D. No Conversion. Shares of the 1996 Preferred shall not be convertible at
any time into shares of Common Stock.
E. Redemption. The shares of 1996 Preferred shall be redeemed by the
Corporation, in whole but not in part, at the redemption price of $1,000 per
share, at such time as is determined by the Corporation. The Corporation shall
treat such redemption payment as a payment made in exchange for the 1996
Preferred and not as a dividend for U.S. Federal income tax purposes.
At least 10 days prior to the date fixed for redemption under this
paragraph E, the Corporation shall send notice of such redemption to each holder
of record of the 1996 Preferred, by registered or certified mail enclosed in a
postage paid envelope addressed to such holder at such holder's address as the
same shall appear on the books of the Corporation. Such notice shall (a) state
that the Corporation is redeeming such shares, (b) state the date fixed for the
redemption thereof, (c) state the per share redemption price, and (d) call upon
each holder to surrender to the Corporation on or after said date at the place
designated in such notice, the certificate or certificates representing the
shares to be redeemed in accordance with such notice. On or after the date fixed
in such notice of redemption, each holder of shares of 1996 Preferred to be so
redeemed shall present and surrender the certificate or certificates for such
shares duly endorsed for transfer to the Corporation at the place within the
United States of America designated in said notice and thereupon the redemption
price of such shares shall be paid to, or to the order of, the person whose name
appears on such certificate or certificates as the owner thereof.
From and after the date fixed as the day of redemption of the 1996
Preferred, unless default shall be made by the Corporation in providing for the
payment of the redemption price pursuant to such notice, all rights of the
holders of the 1996 Preferred as shareholders of the Corporation, except the
right to receive the redemption price, shall cease and terminate, provided,
however, that the Corporation shall deposit the amount required for the payment
of any part of the redemption price not claimed on the redemption date with a
bank or trust company doing business in the State of Florida and having a
capital and surplus of at least $50,000,000. Any interest allowed on moneys
A-3
so deposited shall be paid to the Corporation. Any moneys so deposited which
shall remain unclaimed by the holders of the 1996 Preferred at the end of six
years after the redemption date shall be paid by such bank or trust company to
the Corporation, but the Corporation shall remain obligated to make payment
thereof to the holders of 1996 Preferred entitled thereto (subject to any
applicable escheat or similar laws). Any shares of 1996 Preferred redeemed by
the Corporation shall be retired and shall not be reissued, and the Corporation
may from time to time take such appropriate corporate action as may be necessary
to reduce the authorized 1996 Preferred.
F. Liquidation, Dissolution or Winding Up.
1. Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of any class or series of Preferred
Stock ranking junior to the 1996 Preferred or to the holders of Common Stock of
the Corporation unless the holders of the Senior A Preferred, the Senior B
Preferred, the Senior C Preferred, the Senior D Preferred, the Senior E
Preferred, the Senior G Preferred, the 1994 Convertible Preferred and the 1996
Preferred shall have received an aggregate amount equal to $50, $67, $50, $67,
$62, $67, $200 and $1,000, per share, respectively.
2. In the event the assets to be distributed to the holders of the Senior
Preferred, the 1996 Preferred and any other class or series of Preferred Stock
ranking pari passu with the Senior Preferred and the 1996 Preferred shall be
insufficient to permit the payment of the full preferential amount owed to the
holders of the Senior Preferred, the 1996 Preferred and any class or series of
Preferred Stock ranking pari passu with the Senior Preferred and the 1996
Preferred, then all the assets of the Corporation to be so distributed shall be
distributed to the holders of the Senior Preferred, the 1996 Preferred and such
other pari passu Preferred Stock on a pro rata basis in proportion to the
respective amounts that would otherwise be payable in respect of the shares held
by them upon such distribution if all amounts payable on or with respect to such
shares were paid in full.
3. In the event that assets of the Corporation remain after distribution to
holders of Senior Preferred and 1996 Preferred and any other class or series of
Preferred Stock ranking pari passu with the Senior Preferred and 1996 Preferred
in accordance with subparagraph 1 of this paragraph F, the holders of the Common
Stock and the holders of Preferred Stock ranking junior to the Senior Preferred,
the 1996 Preferred and any other class or series of Preferred Stock ranking pari
passu with the Senior Preferred and 1996 Preferred shall be entitled to
distribution of such assets in accordance with their respective rights thereto.
A-4
IN WITNESS WHEREOF, the Corporation has caused the foregoing
certificate to be signed by ▇▇▇▇ ▇. ▇▇▇▇▇, its Chairman of the Board on January
26, 1996.
HEARx Ltd.
By:
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Chairman of the Board
A-5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered as
of this 26th day of January, 1996, by and among HEARx LTD, a Delaware
corporation (the "Company"), Invemed Associates, Inc., a New York corporation
("Invemed"), and the Investors listed on Schedule A hereto pursuant to the Stock
Purchase Agreement (the "SPA") dated as of the date hereof, by and among the
Company, Invemed and the Investors.
The parties hereby agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall have the following
meanings:
"Common Stock" shall mean the Common Stock, par value $0.10 per share, of
the Company.
"Invemed Warrants" means warrants to purchase up to 2,250,000 shares of
Common Stock issued pursuant to the SPA.
"Investors" shall mean the Investors as defined in the SPA.
"Investor Warrants" means warrants to purchase up to an aggregate of
14,909,090 shares of Common Stock issued pursuant to the SPA.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"1996 Preferred Stock" shall mean the 1996 Senior Preferred Stock, par
value $1.00 per share, of the Company.
"Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or ordering
of effectiveness of such registration statement or document.
"Registrable Securities" shall mean (i) the Common Stock acquired upon the
exercise of the Investor Warrants or the Invemed Warrants and (ii) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which its rights under this Agreement are not
assigned.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Warrants" means the Invemed Warrants and the Investor Warrants.
2. Demand Registration.
(a) Request for Registration. The holders of more than 50% of the
Registrable Securities (computed in accordance with the provisions of the third
and fourth sentence of Section 9(b)) may request registration under the 1933 Act
of those Registrable Securities described in the notice to the Company
requesting such registration. Within ten days after receipt of any such request,
the Company will give written notice of such request to all other holders of
Registrable Securities and will include in such registration all Registrable
Securities with respect to which the holder has given notice to the Company of
such holder's request for inclusion therein within 30 days after the receipt by
such holder of the Company's notice. The holders of those Registrable Securities
who originally requested registration and the holders who, in the manner
specified above, thereafter requested to be included in such registration shall
be collectively referred to herein as the "Participating Holders." If adverse
tax consequences to the holder might result from exercise of the Warrant and the
subsequent sale of the Common Stock acquired pursuant to the Warrant, the
Company will use its best efforts to cause the underwriter of any underwritten
Demand Registration or underwritten Piggyback Registration to purchase and
exercise such Warrant or portion thereof as may be proffered by the holder
thereof so that the holder may sell the Warrant or a portion thereof.
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(b) Demand Registration. The holders of Registrable Securities will
collectively be entitled to only one demand registration as provided in
subsection (a) above (the "Demand Registration") and that demand may be made at
any time specified in subsection (a) by the holders of at least 50% of all
outstanding Registrable Securities. The Company will pay all Registration
expenses associated therewith, excluding discounts, commissions, or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities or fees
or expenses of counsel to the holders in excess of $15,000. The Demand
Registration will be a short-form registration on Form S-3 or any successor form
thereof if the Company is permitted to use such short form. No securities other
than Registrable Securities shall be included in the Demand Registration without
the consent of the holders of at least 50% of all outstanding Registrable
Securities.
(c) Restrictions on Registration. The Company will not be obligated to
effect any long-form Registration within six months after the effective date of
a registration in which the holders of Registrable Securities were given
piggyback rights pursuant to paragraph 3. The Company may postpone for up to
three months the filing or the effectiveness of a registration statement for the
Demand Registration if the Company's Board of Directors determines in good faith
that the Demand Registration can be reasonably expected to have a materially
adverse effect on any proposal or plan by the Company or any of its subsidiaries
to engage in a transaction or series of transactions that are or may be material
to the Company; provided that the Company may exercise this right only once in
any 180 day period; and, provided further, that in the event the Company
exercises this right, the Participating Holders will be entitled to withdraw
such request and, if such request is withdrawn, such demand will not count as
the Demand Registration.
(d) Selection of Underwriters. The Participating Holders, by action of the
holders of a majority of the Registrable Securities to be included in such
registration, will have the right to select one or more investment banker(s) and
manager(s), reasonably acceptable to the Company, to administer the offering.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of
its securities under the 1933 Act, other than (i) pursuant to the Demand
Registration, (ii) any other demand registration now outstanding to other
holders of the Company's securities (which holders have the right to exclude
holders of Registrable Securities from such registration) or (iii) registration
on Form S-8, the Company will give 30 days prior written notice to all holders
of Registrable Securities of the intention to effect such a registration and,
subject to the provisions of subsection (c) hereof, will include in such
registration all Registrable Securities with respect to which the holder has
given notice of request for inclusion therein to the Company within 15 days
after the
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receipt of the Company's notice (a "Piggyback Registration" and such requesting
holders of Registrable Securities being herein referred to as "Piggyback
Holders").
(b) Piggyback Expenses. The Company will pay all Registration expenses of
the Piggyback Holders, excluding discounts, commissions, or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities and
excluding fees or expenses of counsel to the holders in excess of $5,000.
(c) Priority on Piggyback Registration. If in respect of an underwritten
Piggyback Registration, the managing underwriters advise the Company in writing
that in their opinion, the number of securities to be included in such
registration exceeds the number which can be sold in such offering, the priority
of registration will be as follows: (i) first, the shares sought by the Company
to be registered shall be included in such registration; and (ii) second, if all
such shares are so included, all Registrable Securities requested by the
Piggyback Holders to be included in such registration shall be so included along
with other registrable securities of other holders exercising or otherwise given
piggyback registration rights, pro rata on the basis of the number of shares
requested to be included in each registration by such holders.
(d) Selection of Underwriters. The Company will have the right to select
one or more investment banker(s) and manager(s) to administer the offering.
4. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect any public
sale or distribution of equity securities of the Company, or any securities
convertible into or exercisable for such securities, during the seven days prior
to and the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which such
holder's Registrable Securities are included (except as part of such
underwritten registration) unless the underwriters managing the registered
public offering otherwise agree; provided, that in no event shall a holder of
Registrable Securities be subject to a limitation on sale or distribution that
covers a period longer than that to which any other securityholder whose
securities are included in the registration is subject.
(b) The Company agrees (i) not to effect any public sale or distribution of
its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registration on Form S-8), unless the
underwriters managing the registered public offering otherwise agree, and (ii)
to cause each holder of at least 5% of any class of its equity securities, or
any person that would own 5% of the Company's outstanding
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equity securities on conversion, exchange or exercise of securities convertible
into or exchangeable or exercisable for such securities, purchased from the
Company at any time after the date of this Agreement (other than in a registered
public offering made subsequent to such offering) to agree not to effect any
public sale or distribution of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
5. Registration Procedures. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company will use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:
(a) prepare and file with the SEC a Registration Statement with respect to
such Registrable Securities and use its reasonable best efforts to cause such
Registration Statement to become effective and to remain continuously effective
for a period which will terminate when all Registrable Securities covered by
such Registration Statement, as amended from time to time, have been sold or a
period of one year, whichever is shorter;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in Section
5(a) and to comply with the provisions of the 1933 Act and the 1934 Act with
respect to the distribution of all Registrable Securities; provided that, at a
time reasonably prior to the filing of a Registration Statement or Prospectus,
or any amendments or supplements thereto, the Company will furnish to the
Participating Holders or the Piggyback Holders, as the case may be, copies of
all documents proposed to be filed, which documents will be subject to the
comments of the Participating Holders or the Piggyback Holders, as the case may
be, and their counsel;
(c) notify the Participating Holders or the Piggyback Holders, as the case
may be, promptly, and confirm such advice in writing, (i) when the Prospectus or
any supplement or post-effective amendment has been filed, and with respect to
the Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC for amendments or supplements
to the Registration Statement or the Prospectus or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose, and (iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose;
B-5
(d) make reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement;
(e) furnish to the Participating Holders or the Piggyback
Holders, as the case may be, at least five copies of the Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(f) deliver to each Participating Holder or Piggyback Holder, as
the case may be, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities;
(g) prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the
Participating Holders or the Piggyback Holders, as the case may be, and the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as the Participating
Holders or the Piggyback Holders, as the case may be, or any underwriter
reasonably requests in writing and do any and all other reasonable acts or
things necessary or advisable to enable the distribution in such jurisdictions
of the Registrable Securities covered by the Registration Statement; provided
that the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(h) cause all Registrable Securities covered by the Registration Statement
to be listed on each securities exchange, interdealer quotation system or other
market on which similar securities issued by the Company are then listed;
(i) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, usual and customary in
form, with the managing underwriter of such offering; the Participating Holders
or the Piggyback Holders, as the case may be, shall also enter into and perform
their obligations under such agreement, usual and customary in form; the Company
shall take such other actions as the underwriters reasonably request in order to
expedite or facilitate a disposition of the Registrable Securities;
(j) upon request, furnish to each Participating Holder or Piggyback Holder,
as the case may be, a signed counterpart, addressed to such holder, of (i) an
opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting agreement), and
(ii) a "comfort" letter, dated
B-6
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), signed by the independent public accountants who
have certified the Company's financial statements included in such registration
statement, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter, such other
financial matters, as the principal underwriter with respect to such
registration may reasonably request (or, if such registration does not involve
an underwritten offering, as may reasonably (i.e., in conformity with Statement
on Auditing Standards No. 72, as amended, or any successor statement thereto) be
requested by holders of a majority of the Registrable Securities included in
such registration);
(k) immediately notify each Participating Holder or Piggyback Holder, as
the case may be, at any time when a Prospectus relating thereto is required to
be delivered under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which, the Prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such holder, promptly
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(l) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such
other actions as may be reasonably necessary to facilitate the registration or
the disposition of the Registrable Securities hereunder; and make available to
its security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at least twelve months, beginning after the effective date of the applicable
Registration Statement, which earnings statement shall satisfy the provisions of
subsection 11(a) of the 1933 Act (for the purpose of this subsection 5(b),
"Availability Date" means the 45th day following the end of the fourth fiscal
quarter that includes the effective date of such Registration Statement, except
that, if such fourth fiscal quarter is the last quarter of the Company's fiscal
year, "Availability Date" means the 90th day after the end of such fourth fiscal
quarter).
B-7
6. Indemnification.
(a) Indemnification by Company. The Company agrees to indemnify and hold
harmless, to the fullest extent permitted by law, each Participating Holder or
Piggyback Holder as the case may be, such holder's officers, directors, partners
and employees and each person who controls such holder (within the meaning of
the ▇▇▇▇ ▇▇▇) and each underwriter, if any (including any broker or dealer which
may be deemed an underwriter) and each person who controls any underwriter of
the Registrable Securities against all losses, claims, damages, liabilities,
costs (including, without limitation, reasonable attorney's fees) and expenses
caused by (i) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or any preliminary
prospectus or any amendment or supplement thereto or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based upon any information furnished in writing to the Company by such
holder, expressly for use therein, or (ii) any violation by the Company of any
federal, state or common law, rule or regulation applicable to the Company in
connection with any Registration Statement, Prospectus or any preliminary
prospectus, or any amendment or supplement thereto, and shall reimburse, as
incurred, each of the foregoing persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claims. The foregoing is subject to the condition that, insofar as the foregoing
indemnities relate to any untrue statement, alleged untrue statement, omission
or alleged omission made in any preliminary prospectus or Prospectus which is
eliminated or remedied in any Prospectus or amendment or supplement thereto, the
above indemnity obligations of the Company shall not inure to the benefit of any
indemnified party if a copy of such final Prospectus or amendment or supplement
thereto had been made available to such indemnified party and was not sent or
given by such indemnified party at or prior to the time such action is required
of such indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 4(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities.
(b) Indemnification by Holder of Registrable Securities. In connection with
any registration pursuant to the terms of this Agreement, the holder of
Registrable Securities included in such registration will furnish to the Company
in writing such information as the Company reasonably requests concerning the
holder or the proposed manner of distribution for use in connection with any
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the fullest extent permitted by law, the Company, its directors and officers
and each person who controls the Company (within the meaning of the ▇▇▇▇ ▇▇▇)
against any losses, claims, damages, liabilities and expense resulting from any
untrue statement of a material fact or any
B-8
omission of a material fact required to be stated in the Registration Statement
or Prospectus or preliminary prospectus or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information furnished in writing by
the holder of Registrable Securities to the Company specifically for inclusion
in such Registration Statement or Prospectus and that such information was
substantially relied upon by the Company in preparation of the Registration
Statement or Prospectus or any amendment or supplement thereto. In no event
shall the liability of the holder of Registrable Securities hereunder be greater
in amount than the dollar amount of the proceeds (net of all expense paid by
such holder and the amount of any damages such holder has otherwise been
required to pay by reason of such untrue statement or omission) received by such
holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest may
exist between such person and the indemnifying party with respect to such claims
(in which case, if the person notifies the indemnifying party in writing that
such person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys (in addition to local counsel) at any time for all such indemnified
parties. No indemnifying party will, except with the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(d) Contribution. If for any reason the indemnification provided for in the
preceding clauses (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the
B-9
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from
any person not guilty of such fraudulent misrepresentation. In no event shall
the contribution obligation of a holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses paid by such
holder and the amount of any damages such holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities giving rise
to such contribution obligation.
7. Holders Entitled to Equivalent Rights. If the registration rights of the
holders of Registrable Securities granted pursuant to this Agreement are less
favorable to such holders than registration rights available to any other holder
("Other Holder") of securities of the Company on the date hereof ("Other
Rights") are to such Other Holder, this Agreement shall be immediately and
automatically amended, without the requirement of any action by the parties
hereto, to provide the holders of Registrable Securities under this Agreement
with registration rights at least as favorable as such Other Rights.
8. Termination. The Company shall be under no obligation to effect any
registration under this Agreement with respect to any Registrable Securities
that may be sold pursuant to Rule 144(k) under the 1933 Act, and this Agreement
shall terminate with respect to those securities.
9. Miscellaneous.
(a) Remedies. If the Company shall breach its obligations to register the
Registrable Securities pursuant to this Agreement, the Investors shall be
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, or in equity, including specific performance.
(b) Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of at least 662/3% or more of the shares of Registrable Securities (and,
in the case of any amendment, action or omission to act that affects adversely
any specific holder of Registrable Securities or a specific group of holders of
Registrable Securities, the written consent of each such holder or holders of
75% or more of the Registrable Securities held by such group). Each holder of
any Registrable Securities at the time and any subsequent holder of Registrable
Securities shall be bound by any consent authorized by
B-10
this subsection 9(b), whether or not such Registrable Securities shall have been
marked to indicate such consent. The percentage of Registrable Securities held
by a holder or holders for purposes of this paragraph shall be based on the sum
of the shares then currently issuable upon exercise of Warrants held by such
holder or holders plus shares issuable upon exercise of Warrants which such
holder or holders would be holding if Warrants for such shares owned by such
holder or holders had not been exercised. Warrants and shares issued upon the
exercise of Warrants that are not Registrable Securities will be excluded from
the computation set forth in the preceding sentence. Notwithstanding the
foregoing, this Agreement shall automatically be amended in accordance with the
provisions of Section 7.
(c) Notices. All notices and other communications provided for or permitted
hereunder shall be made as set forth in Section 8.4 of the SPA.
(d) Assignments and Transfers by Investors. This Agreement and all the
rights and obligations of the Investors hereunder may not be assigned or
transferred to any transferee or assignee except as set forth herein. Each
Investor may make such assignment or transfer to any transferee or assignee of
any Registrable Securities, provided, that (i) such transfer is made expressly
subject to this Agreement and the transferee agrees in writing to be bound by
the terms and conditions hereof, and (ii) the Company is provided with written
notice of such assignment. The Investors may assign or transfer their rights and
obligations hereunder to each other, so long as the Company is provided with
written notice of any such assignment or transfer. In addition, the Company
hereby expressly consents to transfers or assignments of this Agreement and all
the rights and obligations of an Investor hereunder by the Investor that is a
partnership to its partners, pro rata in accordance with their ownership
interests in the Investor, by an Investor that is a corporation, to its
executive officers, directors, or shareholders, and by an Investor that is an
individual to his or her spouse or children, provided, however, that (i) such
transfer is made expressly subject to this Agreement and each transferee agrees
in writing to be bound by the terms and conditions hereof, and (ii) the Company
is provided with written notice of any such assignment.
(e) Assignments and Transfers by the Company. This Agreement may not be
assigned by the Company without the prior written consent of Investors, except
that without the prior written consent of the Investors, but after notice duly
given, the Company shall assign its rights and delegate its duties hereunder to
any successor-in-interest corporation, and such successor-in-interest shall
assume such rights and duties, in the event of a merger or consolidation of the
Company with or into another corporation, or any merger or consolidation of
another corporation with or into the Company which results directly or
indirectly in an aggregate change in the ownership or control of more than 50%
of the voting rights of the equity securities of the Company, or the sale of all
or substantially all of the Company's assets.
B-11
(f) Benefits of the Agreement. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
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.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) Titles and Subtitles. 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.
(i) Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
(j) Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(k) Further Assurances. The Parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
(l) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(m) Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of law.
B-12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The Company: HEARx LTD.
By:_________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Title: Chairman of the Board
Invemed: INVEMED ASSOCIATES, INC.
By:_________________________
Name:
Title:
The Investors:
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▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ Erlbaum
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Carlisle ▇▇▇▇▇
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G. ▇▇▇▇▇ ▇▇▇▇▇▇
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B-17
EXHIBIT C
SELL ALONG RIGHTS AGREEMENT
This Sell Along Rights Agreement (the "Agreement") is made and entered into
as of this 26th day of January, 1996, by and among ▇▇▇▇ ▇. ▇▇▇▇▇, M.D. (the
"Control Shareholder"), a principal shareholder of HEARx Ltd., a Delaware
corporation (the "Company"), and Invemed Associates, Inc., a New York
corporation and the investors listed on Schedule A hereto ("Investors" under
that Stock Purchase Agreement of even date herewith).
The parties hereto agree as follows:
1. In the event that the Control Shareholder proposes to transfer, in one
or more related transactions, more than five percent (5%) of the shares of
Common Stock of the Company, par value $.10 per share (the "Common Stock")
(which for purposes of this Agreement shall be deemed to include all securities
convertible into or exchangeable for Common Stock), held by the Control
Shareholder (a "Sale of Securities") other than sales effected on Nasdaq,
through the NASD Bulletin Board, or a national securities exchange pursuant to
Rule 144 under the Securities Act of 1933, as amended, then the Control
Shareholder shall permit the Investors, or cause the Investors to be permitted,
to sell the same proportionate number of shares of Common Stock (which for
purposes hereof shall include all securities exchangeable for or convertible
into Common Stock) held by Investors as such Control Shareholder shall sell for
the same consideration and otherwise on the same terms and conditions to be
received by such Control Shareholder in the Sale of Securities.
2. The obligations of the Control Shareholder under this Agreement to
afford the Investors, or cause the Investors to be afforded, the rights referred
to herein will be discharged if the Investors are given written notice which
specifies the terms of the proposed transfer by the Control Shareholder and
which allows the Investors ten business days to exercise such rights (by written
reply addressed to such person as may be designated in the written notice, and
if requested in such written notice, sent by registered mail, return receipt
requested), and within such ten business day period the Investors have not given
notice of exercise of such rights, provided, that in the event the terms of the
proposed transfer change, the Investors shall be entitled to receive a new
written notice and to reply to such notice in accordance with the provisions of
this Section 2.
3. The provisions of this Agreement may not be amended, modified or
supplemented without the written consent of the parties hereto. This Agreement
and all the rights and obligations of the Investors hereunder may not be
assigned or transferred
C-1
to any transferee or assignee except as set forth herein. The Investors may
assign or transfer their rights and obligations hereunder to each other, so long
as the Control Shareholder is provided with written notice of any such
assignment or transfer. In addition, the Control Shareholder hereby expressly
consents to transfers or assignments of this Agreement and all the rights and
obligations of an Investor hereunder by an Investor that is a partnership to its
partners, pro rata in accordance with their ownership interests in the Investor,
by an Investor that is a corporation, to its executive officers, directors, or
shareholders, and by an Investor that is an individual to his or her spouse or
children, provided, however, that (i) such transfer is made expressly subject to
this Agreement and each transferee agrees in writing to be bound by the terms
and conditions hereof, and (ii) the Company is provided with written notice of
any such assignment.
4. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5. This Agreement and Section 6.2 of the Stock Purchase Agreement
referenced in the preamble hereof, constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
6. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
The Control Shareholder:
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▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Invemed: INVEMED ASSOCIATES, INC.
By:
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Name:
Title:
C-2
The Investors:
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C-3
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▇▇▇▇ Erlbaum
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Carlisle ▇▇▇▇▇
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C-6
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C-7
EXHIBIT D
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME ON [ ] ("EXPIRATION
DATE").
HEARx LTD.
WARRANT TO PURCHASE [ ] SHARES OF
COMMON STOCK, PAR VALUE $0.10 PER SHARE
This is to certify that, for VALUE RECEIVED, [ ] ("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from HEARx
Ltd., a Delaware corporation ("Company"), at any time not later than 5:00 P.M.,
New York time, on the Expiration Date, at the exercise price of Sixty-three
cents ($0.63) per share (the exercise price in effect being herein called the
"Warrant Price"), [ ] shares ("Warrant Shares") of Common Stock, par value $0.10
per share ("Common Stock"), of the Company. The number of Warrant Shares
purchasable upon exercise of this Warrant and the Warrant Price shall be subject
to adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer from time
to time, the Warrant, upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any
D-1
such transfer, and a new Warrant shall be issued to the transferee and the
surrendered Warrant shall be cancelled by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached thereto, to the Company, at or prior to 5:00 P.M. New
York Time on the Expiration Date, together with payment of the Warrant Price, as
such may be adjusted from time to time in accordance with Section 9, for the
number of Warrant Shares in respect of which the Warrant is then exercisable. To
the extent that any Warrant Shares remain outstanding at 5:01 P.M. on the
Expiration Date, such outstanding Warrant Shares shall automatically expire and
be of no further force and effect, and the holders thereof shall have no further
right to exercise or transfer the same. Payment of the Warrant Price shall be
made (x) in cash or by certified check payable in United States dollars, to the
order of the Company and/or (y) through conversion of the Warrant, effected by
the surrender to the Company of this Warrant. Upon surrender of the Warrant to
the Company as payment of the Warrant Price, the holder thereof shall be
entitled to receive a number of Warrant Shares arrived at by dividing the
difference between the aggregate Market Price (as hereinafter defined) of the
Warrant Shares issuable in respect of the Warrant surrendered and the aggregate
Warrant Price in respect of the Warrant so surrendered by the Market Price per
share of the Warrant Shares. "Market Price" as used herein shall mean, on any
day, as of such day, the average of the reported closing sale price, regular
way, in either case on any national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading any such exchange, as reported by the Nasdaq Stock Market,
or if such shares are not then so listed or admitted to trading, the average of
the bid and asked prices as reported by the NASD OTC Bulletin Board Service, if
so reported, or if not so reported, then as furnished by National Quotation
Bureau Incorporated or any similar organization selected from time to time by
the Company for the purpose.
Subject to Section 5, upon such surrender of the Warrant and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered to
the Warrantholder or to such other person as the Warrantholder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrant, together with cash, as provided in Section 10
hereof in respect of any fraction of a Warrant Share otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued, and the person to whom they are issued shall be deemed to have become a
holder of record of the Warrant Shares, as of the date of the surrender of the
Warrant and payment of the Warrant Price as aforesaid unless counsel for the
Company advises the Company in writing that an earlier date is permissible for
purposes of applicable securities laws. The rights of purchase represented by
the Warrant shall be exercisable, at the election of the Warrantholder either as
an entirety or from time to time for part only of the Warrant Shares and, in the
D-2
event that the Warrant is exercised in respect of less than all of the Warrant
Shares specified herein at any time prior to the Expiration Date, a new Warrant
will be issued to Warrantholder for the remaining number of Warrant Shares
specified in the Warrant so surrendered within five business days.
Section 4. Exercise and Transfer to Company with the Securities Act of
1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with the
Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with the
provisions of this Section 4 with respect to any resale or other disposition of
such security. The Company may cause the legend set forth on the first page of
this Warrant to be set forth on each Warrant or any security issued or issuable
upon exercise of this Warrant, unless counsel for the Company is of the opinion
as to any such security that such legend is unnecessary or such security may
then be sold pursuant to Rule 144(k) under the Securities Act of 1933.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the American Stock Transfer & Trust Company, the
transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of any of the right of purchase aforesaid shall
be irrevocably authorized and directed at all times
D-3
to reserve such number of authorized and unissued shares of Common Stock as
shall be requisite for such purpose. The Company agrees that all Warrant Shares
issued upon exercise of the Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of the Company. The Company will
keep a conformed copy of this Warrant on file with the Transfer Agent and with
every subsequent transfer agent for the Common Stock or other shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrant. The Company will supply from time to time the
Transfer Agent with duly executed stock certificates required to honor the
outstanding Warrant. After the Expiration Date, no Common Stock shall be subject
to reservation in respect to such Warrant Shares which shall have expires.
Section 8. Warrant Price. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter. If the adjustment provisions contained in this Section 9 are less
favorable to the holders of this warrant than adjustment provisions available to
any other holder (the "Other Holder") of convertible securities of the Company
or warrants, options or similar rights exercisable for Common Stock of the
Company with respect to such securities ("Other Rights") are to any such Other
Holder, this Warrant shall be immediately and automatically amended, without the
requirement of any action by the holder or the Company, to provide the holder of
this Warrant with adjustment rights at least as favorable as such Other Rights.
(a) If the Company shall at any time or from time to time while the Warrant
is outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares into a smaller number
of shares or issue by reclassification of its outstanding shares of Common Stock
any shares of its capital stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then the number of Warrant Shares purchasable upon exercise of the
Warrant and the Warrant Price in effect immediately prior to the date upon which
such change shall become effective, shall be adjusted by the Company so that the
Warrantholder thereafter exercising the Warrant shall be entitled to receive the
number of shares of Common Stock or other capital stock which the Warrantholder
would have received if the Warrant had been exercised immediately prior to such
event. Such adjustment shall be made successively whenever any event listed
above shall occur.
D-4
(b) If any capital reorganization, reclassification of the capital stock of
the Company, consolidation or merger of the Company with another corporation, or
sale, transfer or other disposition of all or substantially all of the Company's
properties to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or properties as may be issuable or payable
with respect to or in exchange for a number of outstanding Warrant Shares equal
to the number of Warrant Shares immediately theretofore issuable upon exercise
of the Warrant, had such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition not taken place, and in any such
case appropriate provision shall be made with respect to the rights and
interests of each Warrantholder to the end that the provisions hereof
(including, without limitations, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in
relation to any shares of stock, securities or properties thereafter deliverable
upon the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant.
The above provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such current Market Price
D-5
per share of Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed.
(d) (i) After the date hereof, if the Company shall at any time or from
time to time while the Warrant is outstanding, issue or sell any shares of
Common Stock (other than Excluded Stock, as hereinafter defined) for a
consideration per share less than the Warrant Price in effect immediately prior
to the time of such issue or sale then, forthwith upon such issue or sale, the
Warrant Price shall be reduced (but not increased) to the consideration per
share received by the Company for such shares of Common Stock issued or sold.
Such adjustment shall be made successively whenever such issuance or sale is
made. No adjustment of the Warrant Price, however, shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment. In no event shall the Warrant Price be adjusted so that the Warrant
Price per share is less than the then par value per share of Common Stock. For
purposes hereof, the term "Excluded Stock" shall mean (i) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants and preferred
stock outstanding on the date hereof or pursuant to the terms of agreements
existing on the date hereof, in accordance with the terms of such securities and
agreements in effect on the date hereof, (ii) shares of Common Stock issued
pursuant to the conversion of Senior Preferred Stock, Series C ("Senior C
Preferred") in accordance with the terms of such security on the date hereof,
and which Senior C Preferred is issued pursuant to the exercise of warrants
outstanding on the date hereof, in accordance with terms of such warrants in
effect on the date hereof and (iii) up to 1,500,000 shares of Common Stock
issued pursuant to the exercise of employee stock options granted subsequent to
the date hereof pursuant to the Company's employee stock option plan, subject to
appropriate adjustment in the event of stock splits, stock dividends,
combinations, reclassifications or similar events (e.g., in the event of a
1-for-15 reverse stock split, the total number of shares of Common Stock
issuable pursuant to this clause (iii) shall be 100,000).
(ii) Upon each adjustment of the Warrant Price, the Warrantholder shall
thereafter be entitled to purchase at the Warrant Price resulting from such
adjustment, that number of Warrant Shares obtained by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment. Upon each adjustment of the Warrant Price, the number of Warrant
Shares represented by this Warrant shall be adjusted to equal the number of
shares of Common Stock purchasable by the Warrantholder.
(iii) For purposes of Section 9(d)(i), the following paragraphs (A) to (F),
inclusive, shall be applicable:
D-6
(A) Issuance of Rights, Options or Warrants. In case at any time after the
date hereof the Company shall in any manner grant any rights to subscribe for or
to purchase, any options or warrants (other than subscription rights or warrants
subject to the provisions of Section 9(c)) for the purchase of shares of Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such rights, options or warrants or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon the exercise of such rights, options or warrants, or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights, options or warrants, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of such rights, options or warrants, plus, in the case
of such rights, options or warrants which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights, options or warrants or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights, options or warrants) shall be less than the Warrant
Price in effect immediately prior to the time of the granting of such rights,
options or warrants, as the case may be, then the maximum number of shares of
Common Stock issuable upon the exercise of such rights, options or warrants or
upon conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i). Except as provided in subparagraph (C), no further adjustment of the
Warrant Price shall be made upon the actual issue of such shares of Common Stock
or of such Convertible Securities upon exercise of such rights, options or
warrants or upon the actual issue of such shares of Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at any time after the date
hereof the Company shall in any manner issue or sell any Convertible Securities,
whether or not the right to exchange or convert thereunder is immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon such conversion or exchange (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Warrant Price in effect immediately prior to the time of
such issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall be deemed
to be outstanding as of the date of the issue or sale of such
D-7
Convertible Securities and to have been issued for such price per share, with
the effect on the Warrant Price specified in Section 9(d)(i); provided, however,
that (a) except as otherwise provided in subparagraph (C), no further adjustment
of the Warrant Price shall be made upon the actual issue of such shares of
Common Stock upon conversion or exchange of such Convertible Securities, and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any rights to subscribe for or to purchase or any option or warrant to
purchase any such Convertible Securities for which adjustments of the Warrant
Price are made pursuant to the provisions of subparagraph (A), no further
adjustment of the Warrant Price shall be made by reason of such issue or sale.
(C) Decrease in Option Price or Conversion Rate. Upon the happening of any
of the following events, namely, if the purchase price provided for in any
right, option or warrant referred to in subparagraph (A), or the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraphs (A) or (B) shall decrease,
or the rate at which any Convertible Securities referred to in subparagraphs (A)
or (B) are convertible into or exchangeable for shares of Common Stock shall
increase, the Warrant Price then in effect hereunder shall forthwith be
decreased to the Warrant Price which would have been in effect at such time had
such rights, options, warrants or Convertible Securities provided for such
changed purchase price, reduced consideration or increased conversion rate, as
the case may be, at the time they had initially been granted, issued or sold.
(D) Consideration for Stock. In case at any time shares of Common Stock or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration therefor shall be deemed to be the amount of cash paid therefor
before deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof. In case at any time any shares of Common
Stock, Convertible Securities or any rights, options or warrants to purchase any
such shares of Common Stock or Convertible Securities shall be issued or sold
for consideration other than cash, the amount of consideration other than cash
received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. In case at any time any shares of Common Stock,
Convertible Securities or any rights, options or warrants to purchase any shares
of Common Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration received therefor shall be deemed to be the fair value,
as determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may reasonably and in good faith
determine to be attributable to such shares of Common Stock. Convertible
Securities, rights, options or warrants, as the case may be. In case at any time
any rights, options or warrants to purchase any shares of Common
D-8
Stock or Convertible Securities shall be issued in connection with the issue and
sale of other securities of the Company, together comprising one integral
transaction in which no consideration is allocated to such rights, options or
warrants by the parties thereto, such rights, options or warrants shall be
deemed to have been issued without consideration.
(e) An adjustment shall become effective immediately after the record date
in the case of each dividend or distribution and immediately after the effective
date of each other event which requires an adjustment.
(f) The form of Warrant need not be changed because of any change pursuant
to this Section 9, and Warrants issued after such change may state the same
Warrant Price and the same number of Warrant Shares as is stated in the Warrant
initially issued pursuant hereto. However, subject to the consent of the
Warrantholder, which shall not be unreasonably withheld, the Company may at any
time in its sole discretion make any change on the Warrant that the Company may
deem appropriate which does not affect the substance thereof, and any Warrants
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Shares or otherwise, may be in the form as so changed.
(g) In the event that, as a result of an adjustment made pursuant to
Section 8(a), the holder of the Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of the Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(h) Shares of Common Stock owned by or held for the account of the Company
or any majority-owned subsidiary shall not be deemed outstanding for the purpose
of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon the exercise of the Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the current
market value of such fraction based upon the current Market Price (determined
pursuant to Section 3) of a Warrant Share. All calculations under this Section
10 shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal
D-9
or equitable right, remedy or claim, it being agreed that this Warrant shall be
for the sole and exclusive benefit of the Company and the Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public accountants shall be conclusive evidence of the correctness of any
computation made, absent manifest error. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity of
the subject adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is American Stock Transfer & Trust Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇. Forthwith upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant, the Company
will mail to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
HEARx LTD.
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Chairman and Chief Executive Officer
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on
the Warrantholder shall be sufficiently given or made if sent by certified mail,
return receipt requested, postage prepaid, to the address set forth on the books
of the Company or, as to each of the Company and the Warrantholder, at such
other address as shall be designated by such party by written notice to the
other party complying as to delivery with the terms of this Section 14. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
D-10
Section 15. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant without the approval of the Warrantholder in
order to cure any ambiguity or to correct or supplement any provisions contained
herein which may be defective or inconsistent with any other provision herein or
to make any other provisions in regard to matters or questions arising hereunder
which shall not be inconsistent with the provisions of the Warrant and which
shall not in any manner adversely affect the interests of the Warrantholder.
Section 16. Successors. All the covenants and provisions hereof by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
HEARx LTD.
By:___________________________
▇▇▇▇ ▇. ▇▇▇▇▇ M.D.
Chairman of the Board
Attest:
------------------------------
D-11
HEARx LTD.
WARRANT EXERCISE FORM
HEARx LTD.
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) [] payment by cash or certified check; []
conversion of the within Warrant by surrender of the Warrant, _______________
shares of Common Stock* ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:
-------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares
* NOTE: If conversion of the Warrant is made by surrender of the
Warrant and the number of shares indicated exceeds the maximum
number of shares to which a holder is entitled, the Company
will issue such maximum number of shares.
D-12
purchasable upon exercise of the Warrant be registered in the name of the
undersigned Warrantholder or the undersigned's Assignee as below indicated and
delivered to the address stated below.
Dated:___________________, ____
Signature:______________________________
------------------------------
Name (please print)
------------------------------
Address
------------------------------
------------------------------
Federal Identification or
Social Security No.
Note: The above signature must
correspond with the name of the
registered holder as written
on the first page of the
Warrant in every particular,
without alteration or
enlargement or any change
whatever, unless the Warrant
has been assigned.
D-13
EXHIBIT E-1
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME ON [ ] ("EXPIRATION DATE").
HEARx LTD.
CLASS A WARRANT TO PURCHASE [ ] SHARES OF
COMMON STOCK, PAR VALUE $0.10 PER SHARE
This is to certify that, for VALUE RECEIVED, [ ] ("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from HEARx
Ltd., a Delaware corporation ("Company"), at any time not later than 5:00 P.M.,
New York time, on the Expiration Date, at the exercise price of Fifty-five cents
($0.55) per share (the exercise price in effect being herein called the "Warrant
Price"), [ ] shares ("Warrant Shares") of Common Stock, par value $0.10 per
share ("Common Stock"), of the Company. The number of Warrant Shares purchasable
upon exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer from time
to time, the Warrant, upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any
E-1
such transfer, and a new Warrant shall be issued to the transferee and the
surrendered Warrant shall be cancelled by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached thereto, to the Company, at or prior to 5:00 P.M. New
York Time on the Expiration Date, together with payment of the Warrant Price, as
such may be adjusted from time to time in accordance with Section 9, for the
number of Warrant Shares in respect of which the Warrant is then exercisable. To
the extent that any Warrant Shares remain outstanding at 5:01 P.M. on the
Expiration Date, such outstanding Warrant Shares shall automatically expire and
be of no further force and effect, and the holders thereof shall have no further
right to exercise or transfer the same. Payment of the Warrant Price shall be
made (x) in cash or by certified check payable in United States dollars, to the
order of the Company and/or (y) through conversion of the Warrant, effected by
the surrender to the Company of this Warrant. Upon surrender of the Warrant to
the Company as payment of the Warrant Price, the holder thereof shall be
entitled to receive a number of Warrant Shares arrived at by dividing the
difference between the aggregate Market Price (as hereinafter defined) of the
Warrant Shares issuable in respect of the Warrant surrendered and the aggregate
Warrant Price in respect of the Warrant so surrendered by the Market Price per
share of the Warrant Shares. "Market Price" as used herein shall mean, on any
day, as of such day, the average of the reported closing sale price, regular
way, in either case on any national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading any such exchange, as reported by the Nasdaq Stock Market,
or if such shares are not then so listed or admitted to trading, the average of
the bid and asked prices as reported by the NASD OTC Bulletin Board Service, if
so reported, or if not so reported, then as furnished by National Quotation
Bureau Incorporated or any similar organization selected from time to time by
the Company for the purpose.
Subject to Section 5, upon such surrender of the Warrant and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered to
the Warrantholder or to such other person as the Warrantholder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrant, together with cash, as provided in Section 10
hereof in respect of any fraction of a Warrant Share otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued, and the person to whom they are issued shall be deemed to have become a
holder of record of the Warrant Shares, as of the date of the surrender of the
Warrant and payment of the Warrant Price as aforesaid unless counsel for the
Company advises the Company in writing that an earlier date is permissible for
purposes of applicable securities laws. The rights of purchase represented by
the Warrant shall be exercisable, at the election of the Warrantholder either as
an entirety or from time to time for part only of the Warrant Shares and, in the
E-2
event that the Warrant is exercised in respect of less than all of the Warrant
Shares specified herein at any time prior to the Expiration Date, a new Warrant
will be issued to Warrantholder for the remaining number of Warrant Shares
specified in the Warrant so surrendered within five business days.
Section 4. Exercise and Transfer to Company with the Securities Act of
1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with the
Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with the
provisions of this Section 4 with respect to any resale or other disposition of
such security. The Company may cause the legend set forth on the first page of
this Warrant to be set forth on each Warrant or any security issued or issuable
upon exercise of this Warrant, unless counsel for the Company is of the opinion
as to any such security that such legend is unnecessary or such security may
then be sold pursuant to Rule 144(k) under the Securities Act of 1933.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the American Stock Transfer & Trust Company, the
transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of any of the right of purchase aforesaid shall
be irrevocably authorized and directed at all times
E-3
to reserve such number of authorized and unissued shares of Common Stock as
shall be requisite for such purpose. The Company agrees that all Warrant Shares
issued upon exercise of the Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of the Company. The Company will
keep a conformed copy of this Warrant on file with the Transfer Agent and with
every subsequent transfer agent for the Common Stock or other shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrant. The Company will supply from time to time the
Transfer Agent with duly executed stock certificates required to honor the
outstanding Warrant. After the Expiration Date, no Common Stock shall be subject
to reservation in respect to such Warrant Shares which shall have expires.
Section 8. Warrant Price. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter. If the adjustment provisions contained in this Section 9 are less
favorable to the holders of this warrant than adjustment provisions available to
any other holder (the "Other Holder") of convertible securities of the Company
or warrants, options or similar rights exercisable for Common Stock of the
Company with respect to such securities ("Other Rights") are to any such Other
Holder, this Warrant shall be immediately and automatically amended, without the
requirement of any action by the holder or the Company, to provide the holder of
this Warrant with adjustment rights at least as favorable as such Other Rights.
(a) If the Company shall at any time or from time to time while the Warrant
is outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares into a smaller number
of shares or issue by reclassification of its outstanding shares of Common Stock
any shares of its capital stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then the number of Warrant Shares purchasable upon exercise of the
Warrant and the Warrant Price in effect immediately prior to the date upon which
such change shall become effective, shall be adjusted by the Company so that the
Warrantholder thereafter exercising the Warrant shall be entitled to receive the
number of shares of Common Stock or other capital stock which the Warrantholder
would have received if the Warrant had been exercised immediately prior to such
event. Such adjustment shall be made successively whenever any event listed
above shall occur.
E-4
(b) If any capital reorganization, reclassification of the capital stock of
the Company, consolidation or merger of the Company with another corporation, or
sale, transfer or other disposition of all or substantially all of the Company's
properties to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or properties as may be issuable or payable
with respect to or in exchange for a number of outstanding Warrant Shares equal
to the number of Warrant Shares immediately theretofore issuable upon exercise
of the Warrant, had such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition not taken place, and in any such
case appropriate provision shall be made with respect to the rights and
interests of each Warrantholder to the end that the provisions hereof
(including, without limitations, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in
relation to any shares of stock, securities or properties thereafter deliverable
upon the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant.
The above provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such current Market Price
E-5
per share of Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed.
(d) (i) After the date hereof, if the Company shall at any time or from
time to time while the Warrant is outstanding, issue or sell any shares of
Common Stock (other than Excluded Stock, as hereinafter defined) for a
consideration per share less than the Warrant Price in effect immediately prior
to the time of such issue or sale then, forthwith upon such issue or sale, the
Warrant Price shall be reduced (but not increased) to the consideration per
share received by the Company for such shares of Common Stock issued or sold.
Such adjustment shall be made successively whenever such issuance or sale is
made. No adjustment of the Warrant Price, however, shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment. In no event shall the Warrant Price be adjusted so that the Warrant
Price per share is less than the then par value per share of Common Stock. For
purposes hereof, the term "Excluded Stock" shall mean (i) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants and preferred
stock outstanding on the date hereof or pursuant to the terms of agreements
existing on the date hereof, in accordance with the terms of such securities and
agreements in effect on the date hereof, (ii) shares of Common Stock issued
pursuant to the conversion of Senior Preferred Stock, Series C ("Senior C
Preferred") in accordance with the terms of such security on the date hereof,
and which Senior C Preferred is issued pursuant to the exercise of warrants
outstanding on the date hereof, in accordance with terms of such warrants in
effect on the date hereof and (iii) up to 1,500,000 shares of Common Stock
issued pursuant to the exercise of employee stock options granted subsequent to
the date hereof pursuant to the Company's employee stock option plan, subject to
adjustment in the event of stock splits, stock dividends, combinations,
reclassifications or similar events (e.g., in the event of a 1-for-15 reverse
stock split, the total number of shares of Common Stock issuable pursuant to
this clause (iii) shall be 100,000).
(ii) Upon each adjustment of the Warrant Price, the Warrantholder shall
thereafter be entitled to purchase at the Warrant Price resulting from such
adjustment, that number of Warrant Shares obtained by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment. Upon each adjustment of the Warrant Price, the number of Warrant
Shares represented by this Warrant shall be adjusted to equal the number of
shares of Common Stock purchasable by the Warrantholder.
(iii) For purposes of Section 9(d)(i), the following paragraphs (A) to (F),
inclusive, shall be applicable:
E-6
(A) Issuance of Rights, Options or Warrants. In case at any time after the
date hereof the Company shall in any manner grant any rights to subscribe for or
to purchase, any options or warrants (other than subscription rights or warrants
subject to the provisions of Section 9(c)) for the purchase of shares of Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such rights, options or warrants or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon the exercise of such rights, options or warrants, or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights, options or warrants, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of such rights, options or warrants, plus, in the case
of such rights, options or warrants which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights, options or warrants or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights, options or warrants) shall be less than the Warrant
Price in effect immediately prior to the time of the granting of such rights,
options or warrants, as the case may be, then the maximum number of shares of
Common Stock issuable upon the exercise of such rights, options or warrants or
upon conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i). Except as provided in subparagraph (C), no further adjustment of the
Warrant Price shall be made upon the actual issue of such shares of Common Stock
or of such Convertible Securities upon exercise of such rights, options or
warrants or upon the actual issue of such shares of Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at any time after the date
hereof the Company shall in any manner issue or sell any Convertible Securities,
whether or not the right to exchange or convert thereunder is immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon such conversion or exchange (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Warrant Price in effect immediately prior to the time of
such issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall be deemed
to be outstanding as of the date of the issue or sale of such
E-7
Convertible Securities and to have been issued for such price per share, with
the effect on the Warrant Price specified in Section 9(d)(i); provided, however,
that (a) except as otherwise provided in subparagraph (C), no further adjustment
of the Warrant Price shall be made upon the actual issue of such shares of
Common Stock upon conversion or exchange of such Convertible Securities, and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any rights to subscribe for or to purchase or any option or warrant to
purchase any such Convertible Securities for which adjustments of the Warrant
Price are made pursuant to the provisions of subparagraph (A), no further
adjustment of the Warrant Price shall be made by reason of such issue or sale.
(C) Decrease in Option Price or Conversion Rate. Upon the happening of any
of the following events, namely, if the purchase price provided for in any
right, option or warrant referred to in subparagraph (A), or the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraphs (A) or (B) shall decrease,
or the rate at which any Convertible Securities referred to in subparagraphs (A)
or (B) are convertible into or exchangeable for shares of Common Stock shall
increase, the Warrant Price then in effect hereunder shall forthwith be
decreased to the Warrant Price which would have been in effect at such time had
such rights, options, warrants or Convertible Securities provided for such
changed purchase price, reduced consideration or increased conversion rate, as
the case may be, at the time they had initially been granted, issued or sold.
(D) Consideration for Stock. In case at any time shares of Common Stock or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration therefor shall be deemed to be the amount of cash paid therefor
before deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof. In case at any time any shares of Common
Stock, Convertible Securities or any rights, options or warrants to purchase any
such shares of Common Stock or Convertible Securities shall be issued or sold
for consideration other than cash, the amount of consideration other than cash
received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. In case at any time any shares of Common Stock,
Convertible Securities or any rights, options or warrants to purchase any shares
of Common Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration received therefor shall be deemed to be the fair value,
as determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may reasonably and in good faith
determine to be attributable to such shares of Common Stock. Convertible
Securities, rights, options or warrants, as the case may be. In case at any time
any rights, options or warrants to purchase any shares of Common
E-8
Stock or Convertible Securities shall be issued in connection with the issue and
sale of other securities of the Company, together comprising one integral
transaction in which no consideration is allocated to such rights, options or
warrants by the parties thereto, such rights, options or warrants shall be
deemed to have been issued without consideration.
(e) An adjustment shall become effective immediately after the record date
in the case of each dividend or distribution and immediately after the effective
date of each other event which requires an adjustment.
(f) The form of Warrant need not be changed because of any change pursuant
to this Section 9, and Warrants issued after such change may state the same
Warrant Price and the same number of Warrant Shares as is stated in the Warrant
initially issued pursuant hereto. However, subject to the consent of the
Warrantholder, which shall not be unreasonably withheld, the Company may at any
time in its sole discretion make any change on the Warrant that the Company may
deem appropriate which does not affect the substance thereof, and any Warrants
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Shares or otherwise, may be in the form as so changed.
(g) In the event that, as a result of an adjustment made pursuant to
Section 8(a), the holder of the Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of the Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(h) Shares of Common Stock owned by or held for the account of the Company
or any majority-owned subsidiary shall not be deemed outstanding for the purpose
of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable
upon the exercise of the Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the current market
value of such fraction based upon the current Market Price (determined pursuant
to Section 3) of a Warrant Share. All calculations under this Section 10 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal
E-9
or equitable right, remedy or claim, it being agreed that this Warrant shall be
for the sole and exclusive benefit of the Company and the Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public accountants shall be conclusive evidence of the correctness of any
computation made, absent manifest error. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity of
the subject adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is American Stock Transfer & Trust Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇. Forthwith upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant, the Company
will mail to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
HEARx LTD.
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Chairman and Chief Executive Officer
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if sent by certified mail,
return receipt requested, postage prepaid, to the address set forth on the books
of the Company or, as to each of the Company and the Warrantholder, at such
other address as shall be designated by such party by written notice to the
other party complying as to delivery with the terms of this Section 14. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
E-10
Section 15. Supplements and Amendments. The Company may from time to
time supplement or amend this Warrant without the approval of the Warrantholder
in order to cure any ambiguity or to correct or supplement any provisions
contained herein which may be defective or inconsistent with any other provision
herein or to make any other provisions in regard to matters or questions arising
hereunder which shall not be inconsistent with the provisions of the Warrant and
which shall not in any manner adversely affect the interests of the
Warrantholder.
Section 16. Successors. All the covenants and provisions hereof by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
HEARx LTD.
By:___________________________
▇▇▇▇ ▇. ▇▇▇▇▇ M.D.
Chairman of the Board
Attest:
------------------------------
E-11
HEARx LTD.
WARRANT EXERCISE FORM
HEARx LTD.
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) [] payment by cash or certified check; []
conversion of the within Warrant by surrender of the Warrant, _______________
shares of Common Stock* ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:
-------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares
* NOTE: If conversion of the Warrant is made by surrender of the
Warrant and the number of shares indicated exceeds the maximum
number of shares to which a holder is entitled, the Company
will issue such maximum number of shares.
E-1
purchasable upon exercise of the Warrant be registered in the name of the
undersigned Warrantholder or the undersigned's Assignee as below indicated and
delivered to the address stated below.
Dated:___________________, ____
Signature:______________________________
------------------------------
Name (please print)
------------------------------
Address
------------------------------
------------------------------
Federal Identification or
Social Security No.
Note: The above signature must
correspond with the name of the
registered holder as written
on the first page of the
Warrant in every particular,
without alteration or
enlargement or any change
whatever, unless the Warrant
has been assigned.
E-2
EXHIBIT E-2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
EXERCISABLE COMMENCING AT 12:01 A.M., NEW YORK TIME ON [ ] ("EXERCISE
DATE"). VOID AFTER 5:00 P.M. NEW YORK TIME ON [ ] ("EXPIRATION DATE").
HEARx LTD.
CLASS B WARRANT TO PURCHASE [ ] SHARES OF
COMMON STOCK, PAR VALUE $0.10 PER SHARE
This is to certify that, for VALUE RECEIVED, [ ] ("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from HEARx
Ltd., a Delaware corporation ("Company"), at any time beginning at 12:01 A.M. on
the Exercise Date and not later than 5:00 P.M., New York time, on the Expiration
Date, at the exercise price of Fifty-five cents ($0.55) per share (the exercise
price in effect being herein called the "Warrant Price"), [ ] shares ("Warrant
Shares") of Common Stock, par value $0.10 per share ("Common Stock"), of the
Company. The number of Warrant Shares purchasable upon exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time as
described herein. Notwithstanding the foregoing, this Warrant is subject to
redemption, in whole or in part, prior to the Exercise Date, as set forth in
Section 11 hereof.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such
E-1
restrictions and the provisions of Section 11, the Company shall transfer from
time to time, the Warrant, upon the books to be maintained by the Company for
that purpose, upon surrender thereof for transfer properly endorsed or
accompanied by appropriate instructions for transfer upon any such transfer, and
a new Warrant shall be issued to the transferee and the surrendered Warrant
shall be cancelled by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached thereto, to the Company, beginning at 12:01 A.M. on the
Exercise Date until 5:00 P.M. New York Time on the Expiration Date, together
with payment of the Warrant Price, as such may be adjusted from time to time in
accordance with Section 9, for the number of Warrant Shares in respect of which
the Warrant is then exercisable. To the extent that any Warrant Shares remain
outstanding at 5:01 P.M. on the Expiration Date, such outstanding Warrant Shares
shall automatically expire and be of no further force and effect, and the
holders thereof shall have no further right to exercise or transfer the same.
Payment of the Warrant Price shall be made (x) in cash or by certified check
payable in United States dollars, to the order of the Company and/or (y) through
conversion of the Warrant, effected by the surrender to the Company of this
Warrant. Upon surrender of the Warrant to the Company as payment of the Warrant
Price, the holder thereof shall be entitled to receive a number of Warrant
Shares arrived at by dividing the difference between the aggregate Market Price
(as hereinafter defined) of the Warrant Shares issuable in respect of the
Warrant surrendered and the aggregate Warrant Price in respect of the Warrant so
surrendered by the Market Price per share of the Warrant Shares. "Market Price"
as used herein shall mean, on any day, as of such day, the average of the
reported closing sale price, regular way, in either case on any national
securities exchange on which the Common Stock is listed or admitted to trading,
or if the Common Stock is not listed or admitted to trading any such exchange,
as reported by the Nasdaq Stock Market, or if such shares are not then so listed
or admitted to trading, the average of the bid and asked prices as reported by
the NASD OTC Bulletin Board Service, if so reported, or if not so reported, then
as furnished by National Quotation Bureau Incorporated or any similar
organization selected from time to time by the Company for the purpose.
Subject to Section 5, upon such surrender of the Warrant and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered to
the Warrantholder or to such other person as the Warrantholder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrant, together with cash, as provided in Section 10
hereof in respect of any fraction of a Warrant Share otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued, and the person to whom they are issued shall be deemed to have become a
holder of record of the Warrant Shares, as of the date of the surrender of the
Warrant and payment of the Warrant Price as aforesaid unless counsel for the
Company advises the Company in writing that an earlier date is
E-2
permissible for purposes of applicable securities laws. The rights of purchase
represented by the Warrant shall be exercisable, at the election of the
Warrantholder either as an entirety or from time to time for part only of the
Warrant Shares and, in the event that the Warrant is exercised in respect of
less than all of the Warrant Shares specified herein at any time prior to the
Expiration Date, a new Warrant will be issued to Warrantholder for the remaining
number of Warrant Shares specified in the Warrant so surrendered within five
business days.
Section 4. Exercise and Transfer to Company with the Securities Act of
1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with the
Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with the
provisions of this Section 4 with respect to any resale or other disposition of
such security. The Company may cause the legend set forth on the first page of
this Warrant to be set forth on each Warrant or any security issued or issuable
upon exercise of this Warrant, unless counsel for the Company is of the opinion
as to any such security that such legend is unnecessary or such security may
then be sold pursuant to Rule 144(k) under the Securities Act of 1933.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the American Stock Transfer & Trust Company, the
transfer agent for the
E-3
Common Stock ("Transfer Agent"), and every subsequent transfer agent for the
Common Stock or other shares of the Company's capital stock issuable upon the
exercise of any of the right of purchase aforesaid shall be irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued shares of Common Stock as shall be requisite for such purpose. The
Company agrees that all Warrant Shares issued upon exercise of the Warrant shall
be, at the time of delivery of the certificates for such Warrant Shares, duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
of the Company. The Company will keep a conformed copy of this Warrant on file
with the Transfer Agent and with every subsequent transfer agent for the Common
Stock or other shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrant. The Company will supply
from time to time the Transfer Agent with duly executed stock certificates
required to honor the outstanding Warrant. After the Expiration Date, no Common
Stock shall be subject to reservation in respect to such Warrant Shares which
shall have expires.
Section 8. Warrant Price. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter. If the adjustment provisions contained in this Section 9 are less
favorable to the Warrantholders than adjustment provisions available to any
other holder (the "Other Holder") of convertible securities of the Company or
warrants, options or similar rights exercisable for Common Stock of the Company
with respect to such securities ("Other Rights") are to any such Other Holder,
this Warrant shall be immediately and automatically amended, without the
requirement of any action by the Warrantholders or the Company, to provide the
Warrantholders with adjustment rights at least as favorable as such Other
Rights.
(a) If the Company shall at any time or from time to time while the Warrant
is outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares into a smaller number
of shares or issue by reclassification of its outstanding shares of Common Stock
any shares of its capital stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then the number of Warrant Shares purchasable upon exercise of the
Warrant and the Warrant Price in effect immediately prior to the date upon which
such change shall become effective, shall be adjusted by the Company so that the
Warrantholder thereafter exercising the Warrant shall be entitled to receive the
number of shares of Common Stock or other capital stock which the Warrantholder
would have received if the Warrant had been exercised immediately prior to such
event. Such adjustment shall be made successively whenever any event listed
above shall occur.
E-4
(b) If any capital reorganization, reclassification of the capital stock of
the Company, consolidation or merger of the Company with another corporation, or
sale, transfer or other disposition of all or substantially all of the Company's
properties to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or properties as may be issuable or payable
with respect to or in exchange for a number of outstanding Warrant Shares equal
to the number of Warrant Shares immediately theretofore issuable upon exercise
of the Warrant, had such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition not taken place, and in any such
case appropriate provision shall be made with respect to the rights and
interests of each Warrantholder to the end that the provisions hereof
(including, without limitations, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in
relation to any shares of stock, securities or properties thereafter deliverable
upon the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the Warrantholder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Warrantholder may be entitled to purchase and the other obligations under this
Warrant.
The above provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such current Market Price
E-5
per share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed.
(d) (i) After the date hereof, if the Company shall at any time or from
time to time while the Warrant is outstanding, issue or sell any shares of
Common Stock (other than Excluded Stock, as hereinafter defined) for a
consideration per share less than the Warrant Price in effect immediately prior
to the time of such issue or sale then, forthwith upon such issue or sale, the
Warrant Price shall be reduced (but not increased) to the consideration per
share received by the Company for such shares of Common Stock issued or sold.
Such adjustment shall be made successively whenever such issuance or sale is
made. No adjustment of the Warrant Price, however, shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment. In no event shall the Warrant Price be adjusted so that the Warrant
Price per share is less than the then par value per share of Common Stock. For
purposes hereof, the term "Excluded Stock" shall mean (i) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants and preferred
stock outstanding on the date hereof or pursuant to the terms of agreements
existing on the date hereof, in accordance with the terms of such securities and
agreements in effect on the date hereof, (ii) shares of Common Stock issued
pursuant to the conversion of Senior Preferred Stock, Series C ("Senior C
Preferred") in accordance with the terms of such security on the date hereof,
and which Senior C Preferred is issued pursuant to the exercise of warrants
outstanding on the date hereof, in accordance with terms of such warrants in
effect on the date hereof and (iii) up to 1,500,000 shares of Common Stock
issued pursuant to the exercise of employee stock options granted subsequent to
the date hereof pursuant to the Company's employee stock option plan, subject to
appropriate adjustment in the event of stock splits, stock dividends,
combinations, reclassifications or similar events (e.g., in the event of a
1-for-15 reverse stock split, the total number of shares of Common Stock
issuable pursuant to this clause (iii) shall be 100,000).
(ii) Upon each adjustment of the Warrant Price, the Warrantholder shall
thereafter be entitled to purchase at the Warrant Price resulting from such
adjustment, that number of Warrant Shares obtained by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment. Upon each adjustment of the Warrant Price, the number of Warrant
Shares represented by this Warrant shall be adjusted to equal the number of
shares of Common Stock purchasable by the Warrantholder.
(iii) For purposes of Section 9(d)(i), the following paragraphs (A) to (F),
inclusive, shall be applicable:
E-6
(A) Issuance of Rights, Options or Warrants. In case at any time after the
date hereof the Company shall in any manner grant any rights to subscribe for or
to purchase, any options or warrants (other than subscription rights or warrants
subject to the provisions of Section 9(c)) for the purchase of shares of Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such rights, options or warrants or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon the exercise of such rights, options or warrants, or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights, options or warrants, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of such rights, options or warrants, plus, in the case
of such rights, options or warrants which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights, options or warrants or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights, options or warrants) shall be less than the Warrant
Price in effect immediately prior to the time of the granting of such rights,
options or warrants, as the case may be, then the maximum number of shares of
Common Stock issuable upon the exercise of such rights, options or warrants or
upon conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i). Except as provided in subparagraph (C), no further adjustment of the
Warrant Price shall be made upon the actual issue of such shares of Common Stock
or of such Convertible Securities upon exercise of such rights, options or
warrants or upon the actual issue of such shares of Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at any time after the date
hereof the Company shall in any manner issue or sell any Convertible Securities,
whether or not the right to exchange or convert thereunder is immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon such conversion or exchange (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Warrant Price in effect immediately prior to the time of
such issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall be deemed
to be outstanding as of the date of the issue or sale of such
E-7
Convertible Securities and to have been issued for such price per share, with
the effect on the Warrant Price specified in Section 9(d)(i); provided, however,
that (a) except as otherwise provided in subparagraph (C), no further adjustment
of the Warrant Price shall be made upon the actual issue of such shares of
Common Stock upon conversion or exchange of such Convertible Securities, and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any rights to subscribe for or to purchase or any option or warrant to
purchase any such Convertible Securities for which adjustments of the Warrant
Price are made pursuant to the provisions of subparagraph (A), no further
adjustment of the Warrant Price shall be made by reason of such issue or sale.
(C) Decrease in Option Price or Conversion Rate. Upon the happening of any
of the following events, namely, if the purchase price provided for in any
right, option or warrant referred to in subparagraph (A), or the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraphs (A) or (B) shall decrease,
or the rate at which any Convertible Securities referred to in subparagraphs (A)
or (B) are convertible into or exchangeable for shares of Common Stock shall
increase, the Warrant Price then in effect hereunder shall forthwith be
decreased to the Warrant Price which would have been in effect at such time had
such rights, options, warrants or Convertible Securities provided for such
changed purchase price, reduced consideration or increased conversion rate, as
the case may be, at the time they had initially been granted, issued or sold.
(D) Consideration for Stock. In case at any time shares of Common Stock or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration therefor shall be deemed to be the amount of cash paid therefor
before deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof. In case at any time any shares of Common
Stock, Convertible Securities or any rights, options or warrants to purchase any
such shares of Common Stock or Convertible Securities shall be issued or sold
for consideration other than cash, the amount of consideration other than cash
received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. In case at any time any shares of Common Stock,
Convertible Securities or any rights, options or warrants to purchase any shares
of Common Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration received therefor shall be deemed to be the fair value,
as determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may reasonably and in good faith
determine to be attributable to such shares of Common Stock. Convertible
Securities, rights, options or warrants, as the case may be. In case at any time
any rights, options or warrants to purchase any shares of Common
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Stock or Convertible Securities shall be issued in connection with the issue and
sale of other securities of the Company, together comprising one integral
transaction in which no consideration is allocated to such rights, options or
warrants by the parties thereto, such rights, options or warrants shall be
deemed to have been issued without consideration.
(e) An adjustment shall become effective immediately after the record date
in the case of each dividend or distribution and immediately after the effective
date of each other event which requires an adjustment.
(f) The form of Warrant need not be changed because of any change pursuant
to this Section 9 or Section 11, and Warrants issued after such change may state
the same Warrant Price and the same number of Warrant Shares as is stated in the
Warrant initially issued pursuant hereto. However, subject to the consent of the
Warrantholder, which shall not be unreasonably withheld, the Company may at any
time in its sole discretion make any change on the Warrant that the Company may
deem appropriate which does not affect the substance thereof, and any Warrants
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Shares or otherwise, may be in the form as so changed.
(g) In the event that, as a result of an adjustment made pursuant to
Section 8(a), the Warrantholder shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of the Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.
(h) Shares of Common Stock owned by or held for the account of the Company
or any majority-owned subsidiary shall not be deemed outstanding for the purpose
of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable
upon the exercise of the Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the current market
value of such fraction based upon the current Market Price (determined pursuant
to Section 3) of a Warrant Share. All calculations under this Section 10 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
Section 11. Non Transferability Separately From 1996 Senior Preferred Stock
Prior to Exercise Date; Redemption of Warrant Upon Redemption of Preferred
Stock. The Warrant initially is being issued together with shares of the
Company's 1996 Senior
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Preferred Stock ("1996 Preferred"), and prior to the Exercise Date may only be
transferred together with the 1996 Preferred so that for each share of 1996
Preferred transferred, this Warrant must be transferred with respect to 662/3
Warrant Shares (subject to adjustment as set forth in Section 9), purchasable
upon exercise of this Warrant and vice versa.
In the event that, prior to the Exercise Date, the Company redeems the 1996
Preferred, it shall also redeem this Warrant, at the redemption price of $.01
per Warrant Share underlying the Warrant to be redeemed.
As part of the notice sent to holders of 1996 Preferred advising such
holders of the redemption of 1996 Preferred, the Company shall also include
notice of redemption of the Warrant. Such notice shall (a) state that the
Company is required to redeem the Warrant, (b) state the date fixed for the
redemption thereof, (c) state the redemption price per Warrant Share underlying
the Warrant and (d) call upon each Warrantholder to surrender the Warrant to the
Company on or after said date at the place designated in such notice. On or
after the date fixed in such notice of redemption, the holder of the Warrant
shall present and surrender the Warrant duly endorsed for transfer to the
Company at the place designated on said notice and thereupon the redemption
price of the Warrant Shares underlying the Warrant shall be paid to, or to the
order of, the person whose name appears on the Warrant as the Warrantholder
thereof.
Following the Exercise Date, the provisions of this Section 11 shall
terminate and be of no further force or effect.
Section 12. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
Section 13. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public accountants shall be conclusive evidence of the correctness of any
computation made, absent manifest error. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity of
the subject adjustment.
Section 14. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is American Stock Transfer & Trust Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇. Forthwith upon the appointment of any subsequent transfer agent for
the
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Common Stock or other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrant, the Company will
mail to the Warrantholder a statement setting forth the name and address of such
transfer agent.
Section 15. Notices. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
HEARx LTD.
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Chairman and Chief Executive Officer
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 13.
Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if sent by certified mail,
return receipt requested, postage prepaid, to the address set forth on the books
of the Company or, as to each of the Company and the Warrantholder, at such
other address as shall be designated by such party by written notice to the
other party complying as to delivery with the terms of this Section 15. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
Section 16. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant without the approval of the Warrantholder in
order to cure any ambiguity or to correct or supplement any provisions contained
herein which may be defective or inconsistent with any other provision herein or
to make any other provisions in regard to matters or questions arising hereunder
which shall not be inconsistent with the provisions of the Warrant and which
shall not in any manner adversely affect the interests of the Warrantholder.
Section 17. Successors. All the covenants and provisions hereof by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns hereunder.
Section 18. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State.
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
HEARx LTD.
By:___________________________
▇▇▇▇ ▇. ▇▇▇▇▇ M.D.
Chairman of the Board
Attest:
------------------------------
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HEARx LTD.
WARRANT EXERCISE FORM
HEARx LTD.
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) [] payment by cash or certified check; []
conversion of the within Warrant by surrender of the Warrant, _______________
shares of Common Stock* ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:
-------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares
* NOTE: If conversion of the Warrant is made by surrender of the
Warrant and the number of shares indicated exceeds the maximum
number of shares to which a Warrantholder is entitled, the
Company will issue such maximum number of shares.
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purchasable upon exercise of the Warrant be registered in the name of the
undersigned Warrantholder or the undersigned's Assignee as below indicated and
delivered to the address stated below.
Dated:___________________, ____
Signature:______________________________
------------------------------
Name (please print)
------------------------------
Address
------------------------------
------------------------------
Federal Identification or
Social Security No.
Note: The above signature must
correspond with the name of the
registered holder as written
on the first page of the
Warrant in every particular,
without alteration or
enlargement or any change
whatever, unless the Warrant
has been assigned.
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EXHIBIT F
FORM OF LEGAL OPINION - AT CLOSING
Ladies and Gentlemen:
[INTRO]
1. The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and authority to carry
on its business and to own its properties as described in the SEC Filings. To
our knowledge, the Company and each of its subsidiaries is duly qualified as a
foreign corporation and is in good standing in all jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
2. The authorized capital stock of the Company consists as of the date
hereof of __________ shares of Common Stock and _________ shares of Preferred
Stock [describe each class or series]. To our knowledge [except as noted in such
opinion] there are no outstanding securities of the Company other than as set
forth in Part 2 of Exhibit F. No one is entitled to statutory preemptive or
similar statutory rights with respect to any securities of the Company.
3. The execution, delivery and performance of the Stock Purchase Agreement
and the Registration Rights Agreement have been duly authorized by all requisite
corporate action on the part of the Company, and no other action is necessary
for the due authorization of such execution, delivery and performance. The Stock
Purchase Agreement and the Registration Rights Agreement have been duly executed
on behalf of the Company and the Sell Along Rights Agreement has been duly
executed by Dr. ▇▇▇▇ ▇▇▇▇▇ and, respectively, constitute the valid and binding
obligations of the Company and ▇▇. ▇▇▇▇▇, enforceable against the Company and
▇▇. ▇▇▇▇▇ in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors' rights and to general
equity principles. The shares of Preferred Stock sold pursuant to the Stock
Purchase Agreement are duly authorized, validly issued, fully paid,
nonassessable and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
4. The Warrants have been duly authorized, executed and delivered by the
Company.
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5. The Warrants will be exercisable for Common Stock in accordance with the
terms of the Warrants and at the prices therein provided; the shares of Common
Stock issuable upon the exercise of the Warrants have been duly authorized and
reserved for issuance upon such exercise, and such shares, when issued upon such
exercise in accordance with the terms of the Warrants, will be duly authorized,
validly issued, fully paid and non-assessable; and there are no statutory
preemptive or similar statutory rights or, to our knowledge, contractual
preemptive or similar contractual rights to subscribe for or to purchase, nor
any restriction (other than as may exist under Section 5 under the Securities
Act of 1933, as amended or applicable state securities law) upon the voting or
transfer or, any shares of Common Stock issuable upon exercise of the Warrants
pursuant to applicable law, the Company's charter or by-laws or, to our
knowledge, any agreement or other instrument to which the Company or any of its
subsidiaries are a party.
6. No consent, authorization, approval, permit or order of, or declaration
to or filing with, any governmental or regulatory authority that has not already
been obtained or made is required in connection with the execution, delivery and
performance of the Stock Purchase Agreement or Registration Rights Agreement by
the Company, and/or the Sell Along Rights Agreement by ▇▇. ▇▇▇▇▇ or the offer,
issuance, sale or delivery of the Securities pursuant to the Stock Purchase
Agreement.
7. Neither the execution, delivery or performance of the Stock Purchase
Agreement or the Registration Rights Agreement nor the offer, issuance, sale or
delivery of the Securities to the Investors pursuant to the Stock Purchase
Agreement or the issuance, sale and delivery of the Common Stock issuable upon
exercise of the Warrants with or without the giving of notice or passage of
time, or both, will violate, or result in any breach of, or constitute a default
under, or result in the imposition of any encumbrance upon any asset of the
Company pursuant to (a) any provision of its Articles of Incorporation or
By-Laws, each as amended to date or (b) to the knowledge of such counsel, any
material agreement or instrument to which the Company or any of its subsidiaries
is a party or by which any of their properties are bound.
8. Except as disclosed in the Stock Purchase Agreement, to our knowledge,
there are no legal actions, suits, arbitrations or other legal, administrative
or governmental proceedings pending or threatened against the Company or against
any other officer, director or shareholder of the Company in their capacity as
such.
9. [Except as set forth in such opinion], to our knowledge, the Company is
not in default under any material contract, commitment or instrument, and to our
knowledge, no event or condition has occurred which with the giving of notice or
passage of time, or both, would constitute such a default.
F-2
EXHIBIT G
POST-CLOSING FORM OF LEGAL OPINION
1. The authorized capital stock of the Company consists as of the date
hereof of __________ shares of Common Stock and _________ shares of Preferred
Stock [describe each class or series]. All of such shares have been duly
authorized validly issued and are fully paid and nonassessable. To our knowledge
[except as noted in such opinion] there are no outstanding securities of the
Company other than s set forth in Part 2 of Exhibit F. No one is entitled to
statutory preemptive or similar statutory rights, or to our knowledge,
contractual preemptive or similar contractual rights with respect to any
securities of the Company. Except as set forth in the Stock Purchase Agreement,
there are, to our knowledge, no outstanding warrants, options, convertible
securities or other agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any kind, or to
transfer any equity securities of any kind owned by it. Except as set forth in
the Stock Purchase Agreement, to our knowledge, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among any of the securityholders of the Company relating
to the securities held by them. To our knowledge, the Company has not agreed to
register any of its securities under the Securities Act of 1933, as amended,
except as provided in the Stock Purchase Agreement.
G-1