As filed with the Securities and Exchange Commission on August 15, 1996
Registration No. 333-4639
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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HEARx LTD.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
22-2748248
(I.R.S. Employer Identification No.)
1250 Northpoint Parkway
West Palm Beach, Florida 33407
(407) 478-8770
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Paul A. Brown, M.D.
Chairman and Chief Executive Officer
HEARx LTD.
1250 Northpoint Parkway
West Palm Beach, Florida 33407
(407) 478-8770
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all correspondence to:
William F. Bavinger, Esq.
LaDawn Naegle, Esq.
Bryan Cave LLP
700 13th Street, N.W., Suite 700
Washington, D.C. 20005-3960
(202) 508-6000
Approximate date of commencement of proposed sale to public: From time to time
after this Registration Statement becomes effective.
<PAGE>
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 15, 1996
PRELIMINARY PROSPECTUS
3,000,000 Shares
HEARx LTD.
Common Stock
This Prospectus relates to 3,000,000 shares (the "Shares") of common stock,
par value $.10 per share (the "Common Stock"), of HEARx LTD., a Delaware
corporation (the "Company"). The Company issued the Shares in January and April
1996 upon the conversion of shares of the Company's convertible preferred stock
and the exercise of warrants issued in December 1994. See "Selling
Shareholders."
The Company will not receive any proceeds from the sale of Shares by the
Selling Shareholders. All expenses incurred in connection with this offering are
being borne by the Company, other than any commissions or discounts paid or
allowed by the Selling Shareholders to underwriters, dealers, brokers or agents
and legal fees of counsel to the Selling Shareholders in excess of $15,000.
The Selling Shareholders have not advised the Company of any specific plans
for the distribution of the Shares, but it is anticipated that the Shares may be
sold from time to time in transactions (which may include block transactions) on
the American Stock Exchange (the "AMEX") at the market prices then prevailing.
Sales of the Shares may also be made through negotiated transactions or
otherwise. The Selling Shareholders and the brokers and dealers through which
the sales of the Shares may be made may be deemed to be "underwriters" within
the meaning set forth in the Securities Act of 1933, as amended (the "Securities
Act"), and their commissions and discounts and other compensation may be
regarded as underwriters' compensation. See "Plan of Distribution."
The Common Stock is traded on the AMEX under the symbol "EAR." The closing
price of the Common Stock as reported on the AMEX on July 31, 1996, was $3.94
per share.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION UNDER "RISK
FACTORS" ON PAGES 6 THROUGH 10.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is August ___, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Electronic filings of such
documents are publicly available on the Commission's Web Site at
http://www.sec.gov. Copies of such materials also can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, copies are available for
inspection at the American Stock Exchange, 86 Trinity Place, New York, New York
10006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement or the exhibits thereto.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document filed or incorporated by reference as
an exhibit to the Registration Statement are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement. For further information,
reference is hereby made to the Registration Statement and exhibits thereto,
copies of which may be inspected at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 or obtained from the Commission at the same
address at prescribed rates.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
(1) Annual Report on Form 10-K for the fiscal year ended December 29, 1995,
filed pursuant to Section 13(a) of the Exchange Act, as amended on Form
10-K/A and as further amended on Form 10-K/A2 (the "1995 Form 10-K");
(2) Quarterly Report on Form 10-Q for the quarter ended March 29, 1996,
filed pursuant to Section 13(a) of the Exchange Act as amended on Form
10-Q/A and as further amended on Form 10-Q/A2;
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(3) Current Report on Form 8-K dated May 17, 1996, filed pursuant to
Section 13(a) of the Exchange Act;
(4) Quarterly Report on Form 10-Q for the quarter ended June 28, 1996,
filed pursuant to Section 13(a) of the Exchange Act; and
(5) The description of Common Stock which is contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
shall hereby be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents. See "Available
Information." Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document incorporated or
deemed to be incorporated herein by reference, which statement is also
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST CLASS MAIL WITHOUT
CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST BY SUCH PERSON TO HEARx LTD., 1250 NORTHPOINT PARKWAY, WEST PALM BEACH,
FLORIDA 33407, ATTENTION: TOMMY KEE, SECRETARY (TELEPHONE: (407) 478-8770).
No person has been authorized in connection with this offering to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company,
the Selling Shareholders or any other person. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, any
securities other than those to which it relates, nor does it constitute an offer
to sell or a solicitation of an offer to purchase by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Prospectus contains certain "forward looking" statements. The Company
desires to take advantage of the new "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and is including this statement for the
express purpose of availing itself of the protections of such safe harbor with
respect to all of such forward-looking statements. Specifically, the Company
refers to the forward-looking statements about the Company's future growth and
expansion (see "Risk Factors -- Recent and Future Expansion; Management of
Growth").
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RISK FACTORS
The following factors should be carefully considered in evaluating the
Company and its business before purchasing any of the Shares offered hereby.
Recent and Future Expansion; Management of Growth
The Company has expanded its network of hearing care centers recently and
plans to continue such expansion. The Company intends to fund this expansion
with the proceeds from the offering of Preferred Stock, earnings and, to the
extent available on favorable terms to the Company, commerical lines of credit.
The Company's operating results will be adversely affected if revenues do not
increase sufficiently to compensate for the increase in operating expenses
resulting from this expansion. In addition, this expansion will increase the
demands on the Company's management, technical, financial and other resources.
If the Company is unable to manage growth effectively, or to integrate fully its
infrastructure systems throughout its network of hearing care centers, its
operating results may be adversely affected.
History of Operating Losses
The Company has incurred losses in each year since its organization. There
can be no assurance that the Company will achieve profitability in the near or
long term.
Use of Proceeds
The Company will not receive any proceeds from the offer or sale of the
Shares by the Selling Shareholders.
No Dividends
The Company has not paid any cash dividends on its Common Stock and does
not anticipate paying any such dividends in the foreseeable future.
Reliance on Senior Management
The operations of the Company are dependent in large part upon the efforts
of Paul A. Brown, M.D., Chairman of the Board and Chief Executive Officer, and
Stephen J. Hansbrough, President and Chief Operating Officer. The loss of the
services of Dr. Brown or Mr. Hansbrough could adversely affect the conduct and
operation of the Company's business. The Company has purchased a "key man"
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insurance policy on Dr. Brown's life in the amount of $3,000,000 for the benefit
of the Company.
Competition
The hearing care industry is highly fragmented with approximately 11,000
practitioners providing testing and dispensing products and services. Most
competitors are small retailers generally focusing on the sale of hearing aids
without providing comprehensive audiometric testing and other professional
services. Among the larger distributors of hearing aids are: (i) Bausch & Lomb
Inc., a hearing aid manufacturer whose distribution system is through a national
network of over 1,000 franchised stores (Miracle Ear) including 400 located in
Sears Roebuck & Co. stores; and (ii) Beltone Electronics Corp., a
privately-owned hearing aid manufacturer that distributes its products primarily
through its network of approximately 600 franchised dealers. A number of these
stores and dealers are located in the areas the Company serves. Although the
Company believes it offers more comprehensive services and products, there can
be no assurance that these large, established companies, which have far greater
resources than the Company, will not capture the market targeted by the Company.
Nor can there be any assurance that the hearing care market can be consolidated
successfully by the Company or its competitors.
Renewal of Agreements with Health Insurance and Managed Care Organizations
Since 1991, the Company has entered into agreements with certain health
insurance and managed care organizations to provide hearing care products and
services, and has established hearing care centers in the related market areas.
The terms of a number of these agreements are to be renegotiated annually, and
most of these agreements may be terminated by either party on 90-days notice at
any time. The early termination or failure to renew the agreements could
adversely affect the operation of the hearing care centers located in the
related market areas. In addition, the early termination or failure to renew the
agreements which provide for payment to the Company on a per capita basis would
cause the Company to lower its estimates of revenues to be received over the
life of the agreements and could have an adverse effect on the Company's results
of operations. As previously disclosed, effective May 31, 1996, Humana Health
Care Plans of Florida ("Humana") declined to renew its contract with the Company
to provide coverage to Humana medicare members living on the east coast of
Florida (the contract to service Humana medicare members on the west coast of
Florida was unaffected). Total revenues from Humana east coast members were
approximately $2 million in 1995, or 18% of the Company's total revenues. While
the Company has obtained new contracts in other markets which should more than
offset the loss of revenues represented by the Humana east coast contract
non-renewal, there can be no assurance that other contracts will not be the
subject of a non-renewal or early termination. The Company is aware of no other
potential contract terminations at this time.
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Reliance on Manufacturers and Qualified Audiologists
Through its hearing care centers, the Company makes available to customers
hearing aids supplied by approximately six major manufacturers, as well as
hearing enhancement devices manufactured by other companies. The Company relies
on these manufacturers to supply such products and a significant disruption in
supply from any or all of these manufacturers could adversely affect the
Company's business. There are currently approximately 40 manufacturers of
hearing aids and related hearing enhancement devices worldwide however, so that
in the event of disruption of supply from one or more of the Company's current
suppliers, the Company believes it could obtain comparable products from other
manufacturers. There can be no assurance, however, that such products could be
obtained at prices favorable to the Company or on a timely basis. The Company
has not experienced any significant disruptions in supply in the past. In
addition, the Company's centers employ audiologists, and the Company
distinguishes itself in the industry by having qualified audiologists available
in all of the Company's centers to provide on-site patient diagnosis and related
service. The inability of the Company to attract and retain qualified
audiologists may reduce the Company's ability to distinguish itself from
competing networks of hearing aid retailers and thus adversely affect its
business. There are currently 2,000 audiologists in the United States and
approximately 200 educational institutions in the United States which offer
audiology degree/certification programs. Management believes that it will be
able to attract and retain qualified audiologists sufficient to staff its
centers for the foreseeable future.
Product and Professional Liability
In the ordinary course of its business, the Company may be subject to
product and professional liability claims alleging the failure of or adverse
effect claimed to have been caused by, products sold or services provided by the
Company. The Company maintains insurance at a level which the Company believes
to be adequate. A successful claim in excess of the policy limits of the
Company's liability insurance could adversely affect the Company. As the
distributor of products manufactured by others, the Company believes it would
properly have recourse against the manufacturer in the event of a product
liability claim; however, there can be no assurance that recourse against a
manufacturer by the Company would be successful, or that any manufacturer will
maintain adequate insurance or otherwise be able to pay such liability.
Regulation
The practice of audiology and the dispensing of hearing aids are not
presently regulated on the Federal level. The sale of hearing aids, however, is
subject to certain limited regulations promulgated by the United States Food and
Drug Administration. Generally, state regulations, where they exist, are
concerned primarily with the formal licensure of audiologists and of those who
dispense hearing aids and with practices and procedures involving the fitting
and dispensing of hearing aids. There can be no assurance that regulations do
not exist in jurisdictions in which the Company plans to open centers or will
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not be promulgated in states in which the Company currently operates centers or
at the Federal level which may have a material adverse effect upon the Company.
Such regulations might include stricter licensure requirements for dispensers of
hearing aids, inspection of centers for the dispensing of hearing aids and the
regulation of advertising by dispensers of hearing aids. The Company knows of no
current or proposed regulations with which it, as currently operated, could not
comply.
Possible Volatility of Prices
The market price of the Common Stock has changed significantly since
October 1995. The highest bid and the lowest offer on the Nasdaq Bulletin Board
from October 2, 1995 until the Company's Common Stock was listed on the American
Stock Exchange on March 15, 1996 was $5.8125 and $.82 per share, respectively.
Since the stock began trading on the American Stock Exchange and through July
31, 1996, the stock has traded as high as $7.375 and as low as $3.31 per share.
Future changes in the market price of the Common Stock may bear no relation to
the Company's results of operations.
Potential Dilution; Shares Eligible for Future Sales; Possible Effect on
Additional Equity Financing
A substantial number of shares of Common Stock are or will be issuable by
the Company upon the conversion of convertible preferred stock and the exercise
of warrants and options which the Company has issued or agreed to issue, which
would result in substantial dilution to a shareholder's percentage ownership
interest in the Company and could adversely affect the market price of the
Common Stock. Under the applicable conversion formulas of the convertible
preferred stock, (i) the number of shares of Common Stock issuable upon
conversion is inversely proportional to the market price of the Common Stock at
the time of conversion (i.e., the number of shares increases as the market price
of the Common Stock decreases); (ii) there is no cap on the number of shares of
Common Stock which may be issuable; and (iii) a minimum of 10,020,000 shares are
issuable (based on a fixed conversion price of $5.00 per share). In addition,
the number of shares issuable upon the conversion of the convertible preferred
stock and the exercise of the warrants and options is subject to adjustment upon
the occurrence of certain dilutive events.
On July 12, 1996, there were issued and outstanding a total of 66,940,738
shares of Common Stock. If all convertible preferred stock, warrants and options
which the Company has issued or agreed to issue were deemed converted and
exercised, as the case may be, as of July 12, 1996 (based on the fixed
conversion price of $5.00 per share), there would be issuable 31,706,183 shares
of Common Stock. Upon such conversion and exercise, there would be outstanding
98,895,696 shares of Common Stock. Of these, the Company has registered for
resale 21,483,728 shares (including the Shares offered hereby) and has granted
demand registration rights in respect of approximately 30,774,908 additional
shares. The sale or availability for sale of a significant number of shares of
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Common Stock in the public market could adversely affect the market price of the
Common Stock. In addition, certain holders of outstanding securities of the
Company have rights to approve and/or participate in certain types of future
equity financing by the Company. The availability to the Company of additional
equity financing, and the terms of any such financing, may be adversely affected
by the foregoing.
Continued AMEX Listing
The Common Stock was listed and began trading on the AMEX on March 15,
1996. The AMEX will consider delisting a company's securities if, among other
things, the company fails to maintain stockholder's equity of at least
$2,000,000 if the company has sustained losses from continuing operations or net
losses in two of its three most recent fiscal years; the company fails to
maintain stockholder's equity of $4,000,000 if the company has sustained losses
from continuing operations or net losses in three of its four most recent fiscal
years; or the company has sustained losses from continuing operations or net
losses in its five most recent fiscal years. If, for any reason, the Company
were unable to meet such requirements, the Common Stock could be delisted from
the AMEX. In that event, trading, if any, in the Common Stock would be conducted
in the over-the-counter market and the ability of holders to sell or otherwise
dispose of such shares could be adversely affected. In addition, if such
delisting were to occur, transactions in shares of the Common Stock could become
subject to the Commission's "penny stock" regulations. The Company has no reason
to believe that its Common Stock may be delisted from the AMEX.
"Penny Stock" Regulations
The Commission has adopted regulations that define a "penny stock" to
include any over-the-counter equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. The regulations require the
delivery, prior to any transaction in a penny stock, of a disclosure schedule
prescribed by the Commission relating to the penny stock market, subject to
certain exemptions. A broker-dealer effecting transactions in penny stocks must
disclose the commissions payable to both the broker-dealer and any registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing the recent price information for the penny stock held in
the account and information on the limited market in penny stocks. If the penny
stock regulations were to become applicable to transactions in shares of the
Common Stock, they could adversely affect the ability of holders to sell or
otherwise dispose of such shares.
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Potential Change in Voting Control of the Company
As of March 29, 1996, the directors and executive officers of the Company
beneficially owned, as a group, approximately 20.2% of the 65,909,183 shares of
Common Stock. If all convertible preferred stock, warrants and options which the
Company has issued or agreed to issue were deemed converted and/or exercised on
July 12, 1996, the directors and executive officers would beneficially own
approximately 13% of the then outstanding Common Stock. See "-- Potential
Dilution; Shares Eligible for Future Sales; Possible Effect on Additional Equity
Financing." In the event of a change in voting control of the Company, the
current directors and officers of the Company could be replaced.
THE COMPANY
The Company operates a network of hearing care centers which provide a full
range of audiological products and services for the hearing impaired. The
Company's strategy focuses on contracting with managed care and health insurance
companies to provide to their members and beneficiaries high quality hearing
care utilizing state-of-the-art facilities with a full range of diagnostic and
rehabilitative services, qualified professional staff and hearing education
learning programs. The Company also provides such quality hearing care to the
general population at the Company's centers.
The Company currently operates more than 50 centers primarily located in
Connecticut, Florida, New York, and New Jersey. Over the next several years, the
Company's primary emphasis, depending on the availability of capital, will be
opening (or selectively acquiring) additional Company-owned centers in these
states.
The Company's principal executive offices are located at 1250 Northpoint
Parkway, West Palm Beach, Florida 33407, and its telephone number is (407)
478-8770.
RECENT DEVELOPMENTS
In February 1996 the Company applied for listing of its Common Stock on the
American Stock Exchange (the "AMEX"). The AMEX approved the Company's
application, and on March 15, 1996, the Company's Common Stock began trading on
the AMEX. Pursuant to the terms of the preferred stock held by Minnesota Mining
and Manufacturing Company ("3M") or for which 3M had options or warrants, upon
the listing of the Company's Common Stock on the AMEX, all such preferred stock
automatically converted into Common Stock. All such preferred stock has now been
cancelled.
In an effort to obtain funding for the expansion of the Company's centers
in compliance with its managed care and other institutional provider contracts,
the Company entered into agreements for a side-by-side offering of its
securities pursuant to Regulation D and Regulation S, each promulgated under the
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Securities Act of 1933, as amended. The Preferred Stock and Warrants were the
subject of the Regulation D offering. The first of two contemplated closings of
the Regulation D offering was completed on May 7, 1996. In that closing, the
Company sold to the investors a total of 7,500 shares of Series B-1 Preferred
Stock and 4,950 shares of Series B-2 Preferred Stock for an aggregate purchase
price of $12,450,000. The second closing was completed on August 13, 1996. In
that closing, the Company sold to the investors an additional 7,500 shares of
Series B-1 Preferred Stock and 4,950 shares of Series B-2 Preferred Stock for an
aggregate purchase price of $12,450,000.
In the related Regulation S offering, the Company sold 5,100 shares of a
convertible preferred stock (the "Series A Preferred Stock") for a total
purchase price of $5,100,000.
Certain of the proceeds from the May 1996 financing, plus some of the
Company's then existing funds, were used to redeem all of the shares of the 1996
Senior Preferred Stock and certain related warrants (a total redemption price to
the Company of $6,040,000). As a result of the redemption of the 1996 Senior
Preferred Stock, the only outstanding preferred stock of the Company is that
which was issued in connection with the May 1996 financing.
The balance of the net proceeds to the Company from the May 1996 financing,
and the proceeds from the closing on August 13, 1996, will be used by the
Company to fund its expansion program and for general corporate purposes.
In connection with these private placements, the Company has recorded a
noncash charge against earnings (loss) available to common stockholders of
approximately $9,000,000 during 1996. This charge relates to the discounted
conversion price for the shares of Common Stock issuable on conversion of the
preferred stock, and will only impact the calculation of earnings per share
related to the Common Stock.
Effective May 31, 1996, Humana Health Care Plans of Florida ("Humana")
declined to renew its contract with the Company to provide coverage to Humana
Medicare members living on the east coast of Florida. The contract between
Humana and the Company to provide hearing care to its Medicare members on the
west coast of Florida remains in place at this time and is unaffected by this
non-renewal. While the cancellation represents the loss of approximately
$2,000,000 in annual revenues, the Company has obtained in 1996 sufficient new
business with other providers to replace those lost Humana revenues.
Nevertheless, there can be no assurance that other contracts will not be the
subject of a non-renewal or early termination. The Company is aware of no other
potential contract terminations at this time.
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SELLING SHAREHOLDERS
None of the Selling Shareholders is an affiliate of the Company or has had
any position, office or other material relationship with the Company within the
past three years except as a shareholder of the Company. The following table
sets forth information with respect to the Selling Shareholders, based upon
information provided by them.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Name of Selling Shareholder Prior to Offering Shares Being Offered After Offering <F1>
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Aeneas Venture Corporation 337,539 186,187 151,352
MBL Assurance Company 335,576 185,104 150,472
AVA Partners 315,016 173,763 141,253
Cornell University 281,284 155,156 126,128
Ziff Investors Partnership L.P.-II 277,354 152,989 124,365
John H. Foster 183,744 101,353 82,391
1950 Associates 168,769 93,093 75,676
Foster & Foster 151,188 83,395 67,793
Mison Nominees Limited 123,193 67,953 55,240
Frederic C. Hamilton 119,259 65,783 53,476
Irwin Lehrhoff Trust 115,886 63,923 51,963
Ropima Inc. 115,331 63,617 51,714
Dartmouth College 112,513 62,062 50,451
Anstalt Vestro 112,513 62,062 50,451
Schetty AG 112,513 62,062 50,451
A.B.S. Securities, S.A. 110,548 60,978 49,570
Island Partners 108,585 59,896 48,689
Stephen F. Nagy 99,392 54,825 44,567
Madina Navegacion S.A. 84,385 46,547 37,838
Trust U/W John W.B. Hadley 81,439 44,922 36,517
Mison Nominees Limited -CP 1735 70,321 38,789 31,532
Madrinvest Inc. 68,600 37,840 30,760
Saw Island Partners 64,689 35,682 29,007
PR Venture Partners L.P. 56,256 31,031 25,225
Monarch Life Insurance Company 56,256 31,031 25,225
Orgavia Familienstiftung 56,256 31,031 25,225
Richardson Pratt, Jr. 54,292 29,947 24,345
Hollyhill Inc. 52,312 28,855 23,457
Caroline H. Fleming 50,573 27,896 22,677
Gale Warren Moser 44,722 24,669 20,053
L. Scott Frantz 44,300 24,436 19,864
William T. Frantz 44,300 24,436 19,864
T/U/A 1983 f/b/o Laing P. Foster 41,425 22,850 18,575
T/U/A 1983 f/b/o Virginia B. Foster 41,425 22,850 18,575
Dalimor Holdings SA 43,388 23,933 19,455
Gamma-Nest Company Ltd. 43,035 23,738 19,297
Marion Ventures 37,842 20,874 16,968
M. Jamil Al-Dahlawi Company 36,932 20,372 16,560
MAK International Investment Co. 35,550 19,609 15,941
Alkin Partnership 29,815 16,446 13,369
11
<PAGE>
Peter A. Miller 28,129 15,516 12,613
Jeffrey S. Levitt 28,129 15,516 12,613
Edward D. Arioli 27,147 14,974 12,173
Trust U/W Frank E. Payne 27,147 14,974 12,173
Burlington Retirement System 27,147 14,974 12,173
Industrie-und Handelsbank 27,147 14,974 12,173
Landmark Equity Partners V, L.P. 27,147 14,974 12,173
Killarney Investments Ltd. 20,239 11,164 9,075
Lucy S. Moore 17,526 9,667 7,859
Leocorn Foundation 17,526 9,667 7,859
Rocklane Partners (II) 16,877 9,309 7,568
Abbstar Investment Co. Ltd. 16,866 9,303 7,563
Ethel S. Pratt 16,457 9,078 7,379
Priscilla P. Hurd 16,288 8,984 7,304
Shing Kwan Investment Co., Ltd. 15,917 8,780 7,137
William Feldman 15,414 8,502 6,912
Burton C. Gray Trust 15,177 8,372 6,805
Lucille G. Murchison 15,505 8,553 6,952
SAKX Holdings Company Limited 14,908 8,223 6,685
Robert S. Schlesinger 14,401 7,944 6,457
William P. Nicoletti 14,064 7,758 6,306
Corning Associates VC-1 13,845 7,637 6,208
Grange Nominees Limited No. 2 13,573 7,487 6,086
Lynn A. Foster 13,573 7,487 6,086
Gateled Inc. 13,573 7,487 6,086
Laure-Anne Brown 12,544 6,919 5,625
Red Sea Global Investment Co. Ltd. 12,265 6,765 5,500
Buckland Holdings, Inc. 12,068 6,657 5,411
Heidi Nitze 11,730 6,470 5,260
William A. Nitze 11,561 6,377 5,184
Helen S. Fitzgerald 11,252 6,207 5,045
Gianni Ragazzi 11,252 6,207 5,045
Victor Elbaz 11,252 6,207 5,045
Orley Investments Inc. 10,858 5,989 4,869
Susan Hurd Cummings 10,858 5,989 4,869
Elisabeth Saint-Armand Trust 10,624 5,860 4,764
N. Alexander Saint-Armand Trust 10,624 5,860 4,764
Nicole Marie Blaise 10,548 5,818 4,730
Patrick van der Rest 10,548 5,818 4,730
Henry Paul van der Rest 10,548 5,818 4,730
Oliver van der Rest 10,548 5,818 4,730
Fostervest, Inc. 10,120 5,582 4,538
Corning Inc. Pension Master Trust 10,120 5,582 4,538
Superior Partners 10,120 5,582 4,538
Edward M. Lamont 9,114 5,027 4,087
Philip Jennison Trust U/W Lucile B. 8,675 4,785 3,890
Red Sea Insurance Company, Ltd. 8,433 4,652 3,781
Chastethorpe Securities Ltd. 8,433 4,652 3,781
C. Boyden Gray 8,144 4,492 3,652
Keeler Motor Car Company, L.P. 8,144 4,492 3,652
Cynthia C. Saint-Armand Trust 7,738 4,268 3,470
12
<PAGE>
Marion Ventures II 7,253 4,001 3,252
Andrew J. Beck 7,190 3,966 3,224
Greenhouse Associates 6,746 3,721 3,025
R. Gregg Stone Trust 6,300 3,475 2,825
Laing P. Foster 1983 Trust,
Stephen C. Curley, Esq., Trustee 6,086 3,357 2,729
Virginia B. Foster 1983 Trust,
Stephen C. Curley, Esq., Trustee 6,086 3,357 2,729
William B. Churchman III 5,767 3,181 2,586
David Chew Stephenson 5,767 3,181 2,586
Philip D. Jennison 5,767 3,181 2,586
Charles B. Delafield 5,767 3,181 2,586
Neil A. Crane 5,767 3,181 2,586
Timothy F. Moore/D.B. Stone, Cust. 5,695 3,141 2,554
William S. Osier/D.B. Stone, Cust. 5,695 3,141 2,554
John C. Garbarino 5,625 3,103 2,522
Helen S. Fitzgerald Trust 5,625 3,103 2,522
David A. Barrett 5,625 3,103 2,522
William B. Chappell 5,625 3,103 2,522
Jennifer P. Stone Trust 5,625 3,103 2,522
Timothy B. Stone Trust 5,625 3,103 2,522
David Ian Purvis 5,625 3,103 2,522
Bruce M. Dresner - IRA 5,625 3,103 2,522
Salim Jacob Shashoua 5,625 3,103 2,522
Alexander R. Sarratt, III 5,625 3,103 2,522
Catherine S. Osier Trust 5,625 3,103 2,522
R. Gregg Stone 5,625 3,103 2,522
Lucy S. Moore Trust 5,625 3,103 2,522
Family Ventures V L.P. 5,625 3,103 2,522
Zilverenhoek Stiftung 5,430 2,995 2,435
Alexander Keeler 5,430 2,995 2,435
Simone M. King 1979 Trust 5,430 2,995 2,435
Grange Nominees Limited No. 1 5,430 2,995 2,435
Peter Nitze 5,430 2,995 2,435
H. Clayton Cook, Jr. 5,430 2,995 2,435
George E. H. Comte 5,430 2,995 2,435
Henrietta Holsman Fore 5,430 2,995 2,435
Nanette L. Simmons 5,430 2,995 2,435
Sobinaz Foundation, Vaduz 5,059 2,791 2,268
Overseas International Limited 5,059 2,791 2,268
Anne K.R. Nitze 4,579 2,526 2,053
J. William Barba Trust 4,525 2,496 2,029
Galen L. Stone 3,517 1,940 1,577
Ann B. Stone 3,516 1,939 1,577
James C. Dudley 3,373 1,860 1,513
Aulis & Co. 3,373 1,860 1,513
Stephen Partnership 3,373 1,860 1,513
Island Partners II 3,373 1,860 1,513
United Gulf Bank 3,373 1,860 1,513
Nichop Inc. 3,373 1,860 1,513
Tecloni Inc. 3,373 1,860 1,513
13
<PAGE>
Brandon Associates 3,373 1,860 1,513
Amico International Holdings Inc. 3,373 1,860 1,513
Abouco International Inc. 3,373 1,860 1,513
Hasan Dahlawi 3,373 1,860 1,513
Ghasco International Inc. 3,373 1,860 1,513
Stathis Andris 3,150 1,738 1,412
Osier, Hannah Wood/D.B. Stone, Cust. 2,982 1,645 1,337
Richard M. Claflin 1985 Trust,
Stephen C. Curley, Esq., Trustee 2,882 1,590 1,292
John A. Claflin 1985 Trust,
Stephen C. Curley, Esq., Trustee 2,882 1,590 1,292
William H.G. Fitzgerald,
RG Stone, Cust. 2,882 1,590 1,292
Jane L. Richards 2,882 1,590 1,292
Phoebe B. Stone Trust 2,813 1,552 1,261
Edward I. Rudman Revocable Trust 2,813 1,552 1,261
Genevra L. Stone Trust 2,813 1,552 1,261
Frances G. Beck 2,813 1,552 1,261
Anthony D. Pell 2,813 1,552 1,261
Thomas M. Haythe 2,793 1,540 1,253
Monique K. Kitinoja 2,713 1,496 1,217
Robert P. Schwartz, Trustee 2,698 1,488 1,210
Robert P. Schwartz 2,109 1,163 946
James E. Schwartz 2,109 1,163 946
William G. Becker, Jr. 1,809 998 811
William K. Lewis 1,809 998 811
Stephen C. Curley 1,733 956 777
Heintz Investment Company 1,686 930 756
Thor H. Ramsing Trust 1,686 930 756
Banque de Luxembourg S.A. 1,686 930 756
Simon S.L. Cheng,
1991 Trust/Stone Cust. 1,686 930 756
Winds Group Inc. 1,686 930 756
Daza S.A. 1,686 930 756
A.S.R. Corporation 1,686 930 756
William A. Nitze Trust 1,526 842 684
George G. Monks, Jr. 1,357 749 608
Ellen M. Higgins 1,357 749 608
William F.K. Monks 1,357 749 608
Robert A.G. Monks 1,357 749 608
Colombus Developments Ltd. 1,350 745 605
Rokia Malatani 1,350 745 605
Rand International Corp. 1,281 707 574
Bidwell Family Partnership 1,163 642 521
Robert A. Ouimette 1,087 600 487
Harmony Holdings S.A. 1,013 559 454
James J. Casey 1,013 559 454
Lynn A. Foster Trust 1,013 559 454
Leonard S. Baum 995 549 446
Nathan Hale 875 482 393
Khalco Enterprises, Inc. 844 466 378
14
<PAGE>
Faisalco International, Inc. 844 466 378
Dianco Enterprises, Inc. 844 466 378
John D. Macomber 844 466 378
Nadco Enterprises, Inc. 844 466 378
Marion R. Stone "B" Trust 844 466 378
Howard A. Knight 844 466 378
Russell S. Reynolds 844 466 378
Miroslav M. Fajt 750 414 336
Ralf International Corporation 675 372 303
Hardwick Simmons 675 372 303
Yadane Holding, N.V. 675 372 303
Mansour Badr 675 372 303
Abdullah S.M. Balghonaim 675 372 303
Marwan Khaki 675 372 303
Anne L. Hill 675 372 303
Thomas M. Haythe R/O IRA 675 372 303
National Gardens Sub-Trust
Schwartz Children 675 372 303
Dr. Mansour I. Al-Turki 675 372 303
John J. Butler 646 356 290
David Wawro 646 356 290
Bradley C. Cost 611 338 273
Caseem Ltd. 506 279 227
Jerry V. Smith 412 227 185
VanGus Resources Inc. 337 186 151
Richard & Cynthia Wheatland 337 186 151
Susan V. Barba Trustee 337 186 151
Top Honour Investment Corp. 337 186 151
Geoffrey B. Baker 337 186 151
Michael R. Chase 337 186 151
Gray Abbingdon Partners 337 186 151
Frederick H. Prince 337 186 151
Earnshaw Investment Corp. 337 186 151
JTR Partnership 337 186 151
Hurd Family Partnership L/P 337 186 151
Bernard Gitlow 337 186 151
Gallicano Investment Corp. 337 186 151
Joseph Fitzpatrick 337 186 151
Michael Segal 337 186 151
Leonard L. Silverstein 337 186 151
Harry C. Cook Jr. IRA 337 186 151
Michael B. Davies 337 186 151
Arthur R. Schmauder 337 186 151
Noel Z. Feldman/R.A. Baime, Trustee 253 140 113
Allison P. Feldman/R.A. Baime, Trustee 253 140 113
Sarah S. Fitzgerald/RG Stone, Cust. 169 93 76
Robert Godfrey Stone 1990 Trust 169 93 76
Desmond S. Fitzgerald/RG Stone, Cust. 169 93 76
Americorp Financial, Inc. 169 93 76
Andrew A. Moore/D.B. Stone, Cust. 169 93 76
T/U/A 1992 f/b/o Laura Nagy 35 19 16
15
<PAGE>
T/U/A 1992 f/b/o Andrea Nagy 35 19 16
T/U/A 1992 f/b/o George Nagy 35 19 16
- -------------------------------------------------------------------------------------------------------------------
5,438,722 3,000,000 2,438,722
- ----------
<FN>
<F1> Assumes all shares offered hereby are sold to persons who are not affiliates of the Selling Shareholders. The
Selling Shareholders may, but are not required to, sell all shares offered hereby.
</TABLE>
On December 30, 1994, the Company acquired certain assets and assumed
certain liabilities of 18 Florida hearing care centers from Hearing Health
Services, Inc., a Delaware corporation ("HHS"), for consideration consisting of
2,500 shares of the Company's convertible preferred stock and warrants to
purchase 2,500,000 shares of Common Stock at an exercise price of $0.25 per
share. On January 29, 1996, HHS exercised the warrants, surrendering 250,000
warrants in payment of the exercise price, and received 2,250,000 shares of
Common Stock. On December 30, 1994, the Company also sold 2,500 shares of the
Company's convertible preferred stock to three limited partnerships affiliated
with HHS (collectively the "Partnerships") for a total price of $500,000. In
April 1996, HHS and the Partnerships converted their shares of convertible
preferred stock into a total of 5,000,000 shares of Common Stock. Pursuant to a
series of transactions by HHS and the Partnerships (i) HHS transferred all of
the Common Stock held by it to its wholly owned subsidiary, Brown's Creek, Inc.,
a Delaware corporation ("BCI"); (ii) BCI transferred 3,250,000 shares of such
Common Stock to the Partnerships; and (iii) the Partnerships distributed all of
their 5,750,000 shares of Common Stock to their partners. In connection with the
December 1994 transactions, the Company granted certain registration rights to
HHS and the Partnerships, which also were transferred ultimately to the partners
of the Partnerships who are the Selling Shareholders.
PLAN OF DISTRIBUTION
The Shares offered hereby may be offered and sold from time to time by the
Selling Shareholders, or by pledgees, donees, transferees or other successors in
interest. Such offers and sales may be made from time to time on the AMEX or
otherwise, at prices and on terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. The methods by which
the shares may be sold may include, but not be limited to, the following: (a) a
block trade in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(e) privately negotiated transactions; (f) short sales; and (g) a combination of
any such methods of sale. In effecting sales, brokers or dealers engaged by the
Selling Shareholders may receive commissions or discounts from the Selling
Shareholders or from the purchasers in amounts to be negotiated immediately
16
1
<PAGE>
prior to the sale. The Selling Shareholders may also sell shares in accordance
with Rule 144 under the Securities Act.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the Shares offered hereby until the earlier
of the date upon which all of the Shares offered hereby have been sold or a
period of one year, whichever is shorter.
The Selling Shareholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of the Securities Act. There can be
no assurance that the Selling Shareholders will sell any or all of the Shares
offered hereby.
The Company is bearing all of the costs relating to the registration of the
Shares, except commissions, discounts or other fees payable to a broker, dealer,
underwriter, agent or market maker in connection with the sale of any of the
Shares and legal fees of the Selling Shareholders in an amount in excess of
$15,000, all of which will be borne by the Selling Shareholders. The Company
will not receive any of the proceeds from this offering.
Pursuant to the registration rights granted to the Selling Shareholders,
the Company has agreed to indemnify the Selling Shareholders and any person who
controls a Selling Shareholder against certain liabilities and expenses arising
out of or based upon the information set forth or incorporated by reference in
this Prospectus, and the Registration Statement of which this Prospectus is a
part, including liabilities under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any broker, dealer, underwriter, agent
or market maker and, if any such broker, dealer, underwriter, agent or market
maker purchases any of the Shares as principal, any profits received on the
resale of such Shares, may be deemed to be underwriting commissions or discounts
under the Securities Act.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been passed
upon for the Company by Bryan Cave LLP, Washington, D.C.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 29, 1995, and December 30, 1994, and for the years ended December 29,
1995, December 30, 1994, and September 30, 1993, and the three months ended
December 31, 1993, have been audited by BDO Seidman, LLP, independent certified
public accountants, as indicated in their report with respect thereto, and are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1995, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving said
reports.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by the Company in connection with the sale and distribution
of the shares registered hereby:
SEC registration fee .......................................... $ 6,144.83
Accounting fees and expenses .................................. 500.00
Legal fees and expenses ....................................... 10,000.00
Miscellaneous expenses ........................................ 1,000.00
-------------
Total ..................................................... $ 17,644.83
=============
Item 15. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware (the "DGCL") empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
II-1
<PAGE>
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such persons' heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under Section 145.
Article VII of the Company's By-laws provides that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by the DGCL.
Section 102(b)(7) of DGCL provides that a certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit. Article 7 of the
Company's Certificate of Incorporation provides that the directors of the
Company shall have no personal liability to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent provided by Section 102(b)(7).
Item 16. Exhibits
See Exhibit Index.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Form S-3 Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of West Palm Beach, State of Florida, on
August 15, 1996.
HEARx LTD.
By: /S/ PAUL A. BROWN, M.D.
-------------------------------------
Name: Paul A. Brown, M.D.
Title: Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
/S/ PAUL A. BROWN, M.D. Chairman of the Board; Chief Executive Officer and August 15, 1996
Director
- -----------------------------------------
Paul A. Brown, M.D.
/S/ JAMES W. PEKLENK Vice President and Principal Financial and August 15, 1996
Accounting Officer
- -----------------------------------------
James W. Peklenk
/S/ PAUL A. BROWN, Director August 15, 1996
Attorney in Fact
- -----------------------------------------
Fred N. Gerard
/S/ PAUL A. BROWN, Director August 15, 1996
Attorney in Fact
- -----------------------------------------
David J. McLachlan
/S/ PAUL A. BROWN, Director August 15, 1996
Attorney in Fact
- -----------------------------------------
Thomas W. Archibald
</TABLE>
II-4
<PAGE>
HEARx LTD.
EXHIBIT INDEX
Exhibit Number Description
- -------------- --------------------------------------------------------------
4.1 Specimen of Certificate representing Common Stock*
5.1 Opinion of Bryan Cave LLP
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Bryan Cave LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included in signature page of original
filing)
- ----------
* Filed as an Exhibit to the Company's Registration Statement on Form S-18
(Registration No. 33-17041-NY).
II-5
2
EXHIBIT 5.1
BRYAN CAVE LLP
700 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20005-3960
(202) 508-6000
FACSIMILE: (202) 508-6200
August 15, 1996
HEARx Ltd.
1250 Northpoint Parkway
West Palm Beach, Florida 33407
Ladies and Gentlemen:
We have acted as counsel to HEARx Ltd. (the "Company") in connection
with the registration by the Company of 3,000,000 shares of the Company's common
stock, par value $.10 per share (the "Shares"), issued by the Company upon the
conversion of the shares of the Company's 1994 Convertible Preferred Stock and
exercise of certain related common stock purchase warrants issued in December
1994.
In connection herewith we have examined and relied as to matters of
fact upon such certificates of public officials, such certificates of officers
of the Company and originals or copies certified to our satisfaction of the
Certificate of Incorporation and Bylaws of the Company (each amended through the
date hereof), proceedings of the Board of Directors of the Company and other
corporate records, documents, certificates and instruments as we have deemed
necessary or appropriate in order to enable us to render the opinion expressed
below.
In rendering the following opinion, we have assumed the genuineness of
all signatures on all documents examined by us, the authenticity of all
documents submitted to use as originals and the conformity to authentic
originals of all documents submitted to us as certified or photostatted copies,
and we have relied as to matters of fact upon statements and certifications of
officers of the Company. In addition, we have assumed that the certificates for
the Shares conform to the specimen thereof examined by us and have been duly
registered and countersigned by the Company's transfer agent, assumptions which
we are not independently verifying by inspection.
Based on the foregoing, we are of the opinion that the Shares are duly
and validly authorized and issued, fully paid and non-assessable.
<PAGE>
HEARx Ltd.
August 15, 1996
Page 2
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
aforesaid Registration Statement on Form S-3 and to the use of our name under
the caption "Legal Opinions" in the Prospectus filed as a part thereof.
Very truly yours,
/s/ Bryan Cave LLP
Bryan Cave LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 relating to the
registration of 3,000,000 shares of Common Stock, par value $.10 per share, of
HEARx LTD. ("Registrant") of our report dated April 5, 1996, relating to the
consolidated financial statements and schedule of the Registrant and its
subsidiaries appearing in the Registrant's Annual Report on Form 10-K for the
year ended December 29, 1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/S/ BDO SEIDMAN, LLP
West Palm Beach, Florida
August 15, 1996
