UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
HEARx Ltd.
----------------------------
(Name of Issuer)
Common Stock, $0.10 Par Value
-----------------------------------
(Title of Class of Securities)
422360107
--------------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
(212) 872-1000
-----------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 13, 1997
-----------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter disclosure
provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Continued on following page(s)
Page 1 of 27 Pages
Exhibit Index: Page 8
<PAGE>
SCHEDULE 13D
CUSIP No. 422360107 Page 2 of 27 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
SFM Investments LDC
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [_]
3 SEC Use Only
4 Source of Funds*
OO
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Cayman Islands
7 Sole Voting Power
Number of 10,574,832
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 10,574,832
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
10,574,832
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
11.13%
14 Type of Reporting Person*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 27 Pages
This statement on Schedule 13D relates to shares of common stock,
$0.10 par value (the "Shares"), of HEARx Ltd. (the "Issuer"), a Delaware
corporation. This statement on Schedule 13D is being filed by the Reporting
Person (as defined below) to report a recent transfer of currently exercisable
warrants from existing warrant holders as a result of which the Reporting Person
may be deemed the beneficial owner of more than 5% of the outstanding Shares.
Item 1. Security and Issuer.
This Schedule 13D relates to the Shares. The address of the principal
executive offices of the Issuer is 1250 Northpoint Parkway, West Palm Beach,
Florida 33407.
Item 2. Identity and Background.
This statement is being filed on behalf of SFM Investments LDC, an
exempted limited duration company organized and existing under the laws of the
Cayman Islands (the "Reporting Person"), with its principal business address at
888 Seventh Avenue, 33rd Floor, New York, New York 10106. The principal business
of the Reporting Person is investment in securities. Current information
concerning the directors of the Reporting Person is set forth in Annex A hereto,
which is incorporated by reference in response to this Item 2 and elsewhere, as
applicable.
During the past five years, neither the Reporting Person nor, to the
best of the Reporting Person's knowledge, any other person identified in
response to this Item 2 has been (a) convicted in a criminal proceeding, or (b)
a party to any civil proceeding as a result of which he has been subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to federal or state securities laws, or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On May 13, 1997, certain persons (the "Contributors") entered into a
Contribution Agreement with the Reporting Person, a copy of which is attached
hereto as Exhibit A and incorporated by reference in response to this Item 3,
pursuant to which the Contributors transferred to the Reporting Person all of
their respective rights, title and interest in and to securities of the Issuer.
The assets contributed to the Reporting Person consisted of two types of
warrants: (i) Class A Warrants to purchase an aggregate of 8,595,991 Shares (the
"Class A Warrants") a copy of the form of which is attached hereto as Exhibit B,
and (ii) Warrants to purchase an aggregate of 1,978,841 Shares (the "$0.63
Warrants") a copy of the form of which is attached hereto as Exhibit C. In
exchange for their contribution of such warrants, the Reporting Person will
issue to each Contributor, in proportion to their respective contributions,
shares of Class A common stock of the Reporting Person, par value $0.01 per
share, which shares of Class A common stock represent all of the issuable and
outstanding shares of Class A common stock of the Reporting Person.
The securities of the Issuer held for the account of the Reporting
Person may be held through margin accounts maintained with brokers, which extend
margin credit as and when required to open or carry positions in their margin
accounts, subject to applicable federal margin regulations, stock exchange rules
and such firms' credit policies. The Shares which may be held in the margin
accounts are pledged as collateral security for the repayment of debit balances
in the account.
<PAGE>
Page 4 of 27 Pages
Item 4. Purpose of Transaction.
All of the securities reported herein as having been acquired for the
account of the Reporting Person were acquired for investment purposes. The
Reporting Person does not have any plans or proposals that relate to or would
result in any of the transactions described in subparagraphs (a) through (j) of
Item 4 of Schedule 13D.
The Reporting Person reserves the right to acquire additional
securities of the Issuer, to dispose of such securities at any time, or to
formulate other purposes, plans or proposals regarding the Issuer or any of its
securities, to the extent deemed advisable in light of general investment and
trading policies, market conditions and other factors.
Item 5. Interest in Securities of the Issuer.
(a) The aggregate number of Shares of which the Reporting Person may
be deemed a beneficial owner is 10,574,832 (approximately 11.13% of the total
number of Shares outstanding assuming the exercise of all currently exercisable
warrants of the Issuer held for the account of the Reporting Person). This
number consists of: (i) 8,595,991 Shares issuable upon conversion of the Class A
Warrants and (ii) 1,978,841 Shares issuable upon conversion of the $0.63
Warrants.
(b) The Reporting Person has the sole power to direct the voting and
disposition of the Shares issuable upon the exercise of all the warrants held
for the account of the Reporting Person.
(c) Except as described in Item 3 hereof, which is incorporated in
this Item 5(c) by reference, there have been no transactions in the Shares
effected since March 24, 1997 (60 days prior to the date hereof).
(d) The shareholders of the Reporting Person have the right to
participate in the receipt of dividends from, or proceeds from the sale of, the
Shares held for the account of the Reporting Person in accordance with their
ownership interests in the Reporting Person.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Pursuant to a Registration Rights Agreement, a copy of which is
attached hereto as Exhibit D (the "Registration Rights Agreement"), the Issuer
granted certain registration rights to Investors (including the Contributors)
who hold 50% of the Registrable Securities (as such is defined in the
Registration Rights Agreement) with respect to Shares acquired upon the exercise
of the Class A Warrants, $0.63 Warrants, as well as any Shares issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such Shares. The Registration Rights Agreement grants to the
Investors certain demand registration rights in addition to "piggy-back"
registration rights, each as set forth in the Registration Rights Agreement.
Pursuant to the terms of the Contribution Agreement the Reporting Person became
the assignee of the rights and obligations of the Contributors as set forth in
the Registration Rights Agreement.
<PAGE>
Page 5 of 27 Pages
Except as set forth above and as described in Item 3 hereto, which is
incorporated in this Item 6 by reference, the Reporting Person does not have any
contracts, arrangements, understandings or relationships with respect to any
securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
(a) Contribution Agreement, dated May 13, 1997, between the Reporting
Person and the Contributors.
(b) Form of the Class A Warrants.
(c) Form of the $0.63 Warrants.
(d) Registration Rights Agreement, dated January 26, 1996 between
HEARx Ltd., Invemed Associates, Inc. and the Investors (as such are defined in
the Agreement).
<PAGE>
Page 6 of 27 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: May 23, 1997 SFM INVESTMENTS LDC
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Director
<PAGE>
Page 7 of 27 Pages
ANNEX A
Directors of SFM Investments LDC
Name/Title/Citizenship Principal Occupation Business Address
- ---------------------- -------------------- ----------------
Gary Gladstein Managing Director of 888 Seventh Avenue
Shareholder/Director Soros Fund Management 33rd Floor
(United States) LLC, a Delaware limited New York, NY 10106
liability company
("SFM LLC")
Michael C. Neus Assistant General Counsel 888 Seventh Avenue
Shareholder/Director of SFM LLC 33rd Floor
(United States) New York, NY 10106
Sean C. Warren Managing Director of 888 Seventh Avenue
Shareholder/Director SFM LLC 33rd Floor
(United States) New York, NY 10106
To the best of the Reporting Persons' knowledge:
(a) None of the above persons directly owns any Shares of the Issuer.
(b) Except with respect to their ownership of shares of the Reporting
Person, none of the above persons has any contracts, arrangements,
understandings or relationships with respect to the Shares.
<PAGE>
Page 8 of 27 Pages
INDEX OF EXHIBITS
EXHIBIT PAGE
- ------- ----
A Contribution Agreement, dated May 13,1997, between
SFM Investments LDC and the Contributors (as
defined therein)...................................................9
B The form of the Class A Warrants (filed as Exhibit
4.2 to the Issuer's Form S-3 (Registration No.
333-25169) and incorporated herein by reference).
C The form of the $0.63 Warrants (filed as Exhibit
4.3 to the Issuer's Form S-3 (Registration No.
333-25169) and incorporated herein by reference).
D Registration Rights Agreement, dated January 26,
1996 between HEARx Ltd., Invemed Associates, Inc.
and the Investors (as such are defined in the
Agreement)........................................................13
Page 9 of 27 Pages
EXHIBIT A
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT dated as of May 13, 1997, by and between each
of the persons whose signatures are set forth below (each such person, a
"Contributor"), and SFM Investments LDC, an exempted limited duration company
organized and existing under the laws of the Cayman Islands (the "Issuer").
Recitals:--
A. The Contributors have formed the Issuer for the purpose of making
investments from time to time in securities and other financial
instruments as provided in the Memorandum and Articles of Association
of the Issuer.
B. In connection with the initial investment by the Issuer, the
Contributors and the Issuer wish to provide for the transfer to the
Issuer of all of the Contributors' right, title and interest in and to
the securities and assets listed on Schedule A annexed hereto
(including all rights associated with such securities and assets) (the
"Transferred Assets") and the issuance by the Issuer to the
Contributors, in consideration for their contribution of the
Transferred Assets, of Class A shares, par value $0.01 per share (the
"Shares"), of the Issuer to the Contributors, which issuance shall be
effected to the Contributors in proportion to their respective
contributions to the Issuer.
C. The Issuer desires to acquire and accept, all of the Contributors'
right, title and interest in and to the Transferred Assets.
D. The Contributors desire to assign, and the Issuer desires to assume,
any and all obligations and liabilities of the Contributors relating
to or arising from the Transferred Assets (such liabilities, the
"Transferred Liabilities").
E. It is the intention of the Contributors and the Issuer that, from and
after the date hereof, the Issuer will enjoy the legal and economic
entitlements relating to the Transferred Assets.
In consideration of the mutual promises contained herein, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereby agree as follows:
1
<PAGE>
Page 10 of 27 Pages
1 Issuance of Shares and Transfer of Transferred Assets
(a) The Contributors hereby irrevocably and unconditionally transfer,
assign and convey to Issuer all of their rights, title and
interests in and to the Transferred Assets.
(b) Issuer hereby assumes and agrees to pay, perform and discharge as
and when they become due, the Transferred Liabilities.
(c) As consideration for the activities described in paragraphs (a)
and (b) above, Issuer agrees to issue to the Contributors the
Shares, which shall be issued in the name of the Contributors in
proportion to their respective contributions.
2 Representations
The Contributors represent to the Issuer as follows: Upon the
completion of the transactions contemplated hereby, the Issuer
will have acquired from the Contributors all of the Contributors'
rights, title and interest in, inter alia, the warrants and/or
rights to the securities listed on Schedule A annexed hereto,
assets which are beneficially owned by the Contributors prior to
the completion of the transactions contemplated hereby.
3 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
4 Entire Agreement
Except as otherwise expressly set forth herein, this document,
including Schedule A annexed hereto, embodies the complete
agreement and understanding among the parties hereto with respect
to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the
subject matter hereof in any way.
2
<PAGE>
Page 11 of 27 Pages
5 Counterparts
This Agreement may be executed in separate counterparts each of
which shall be an original and all of which taken together shall
constitute one and the same agreement.
6 Descriptive Headings
The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
SFM INVESTMENTS LDC
By: /S/ GARY S. GLADSTEIN
-----------------------------
Gary S. Gladstein,
Director
THE CONTRIBUTORS
/S/ SCOTT BESSENT
----------------------------------
Scott Bessent
/S/ BUZZ BURLOCK
----------------------------------
Buzz Burlock
/S/ STAN DRUCKENMILLER
----------------------------------
Stan Druckenmiller
/S/ ARMINIO FRAGA
----------------------------------
Arminio Fraga
3
<PAGE>
Page 12 of 27 Pages
/S/ GARY GLADSTEIN
----------------------------------
Gary Gladstein
/S/ ELIZABETH LARSON
----------------------------------
Elizabeth Larson
/S/ MICHAEL NEUS
----------------------------------
Michael Neus
/S/ GEORGE SOROS
----------------------------------
George Soros
/S/ SEAN WARREN
----------------------------------
Sean Warren
/S/ CRISTINA H. KEPNER
----------------------------------
Cristina H. Kepner
/S/ KENNETH G. LANGONE
----------------------------------
Kenneth G. Langone
/S/ THOMAS L. TEAGUE
----------------------------------
Thomas L. Teague
/S/ G. ALLEN MEBANE
----------------------------------
G. Allen Mebane
4
Page 13 of 27 Pages
EXHIBIT D
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.
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Page 14 of 27 Pages
"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.
(b) Demand Registration. The holders of Registrable
Securities will collectively be entitled to only one demand registration as
-2-
<PAGE>
Page 15 of 27 Pages
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 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.
-3-
<PAGE>
Page 16 of 27 Pages
(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 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:
-4-
<PAGE>
Page 17 of 27 Pages
(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 Page 1 of 27 Pages 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;
(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
-5-
<PAGE>
Page 18 of 27 Pages
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 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
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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).
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 1933 Act) 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.
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<PAGE>
Page 20 of 27 Pages
(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 1933 Act) against any losses, claims, damages, liabilities and
expense resulting from any untrue statement of a material fact or any 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.
-8-
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Page 21 of 27 Pages
(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 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 66 2/3% 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
this subsection 9(b), whether or not such Registrable Securities shall have been
marked to indicate such consent. The percentage of Registrable Securities held
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<PAGE>
Page 22 of 27 Pages
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 forthin 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.
(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.
-10-
<PAGE>
Page 23 of 27 Pages
(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.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
The Company: HEARx LTD.
By: /S/ PAUL A. BROWN, M.D.
----------------------------------
Name: Paul A. Brown, M.D.
Title: Chairman of the Board
Invemed: INVEMED ASSOCIATES, INC.
By: /S/
----------------------------------
Name:
Title:
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<PAGE>
Page 24 of 27 Pages
The Investors:
/S/ HARRIS BERENHOLZ
---------------------------------------
Harris Berenholz
/S/ SCOTT BESSENT
---------------------------------------
Scott Bessent
/S/ ARTHUR M. BLANK
---------------------------------------
Arthur M. Blank
/S/ RONALD M. BRILL
---------------------------------------
Ronald M. Brill
/S/ ELLIOT P. BRODY
---------------------------------------
Elliot P. Brody
/S/ WALTER E. BURLOCK
---------------------------------------
Walter E. Burlock
/S/ WALTER CHANNING
---------------------------------------
Walter Channing
/S/ STANLEY DRUCKENMILLER
---------------------------------------
Stanley Druckenmiller
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<PAGE>
Page 25 of 27 Pages
/S/ JOHN A. EHINGER
---------------------------------------
John A. Ehinger
/S/ MARIANNE EHINGER
---------------------------------------
Marianne Ehinger
/S/ GARY ERLBAUM
---------------------------------------
Gary Erlbaum
/S/ ARMINIO FRAGA
---------------------------------------
Arminio Fraga
/S/ GARY GLADSTEIN
---------------------------------------
Gary Gladstein
/S/ JOHN M. HENNESSY
---------------------------------------
John M. Hennessy
/S/ CARLISLE JONES
---------------------------------------
Carlisle Jones
/S/ CRISTINA H. KEPNER
---------------------------------------
Cristina H. Kepner
/S/ BRUCE M. LANGONE
---------------------------------------
Bruce M. Langone
/S/ KENNETH G. LANGONE
---------------------------------------
Kenneth G. Langone
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<PAGE>
Page 26 of 27 Pages
/S/ ELIZABETH LARSON
---------------------------------------
Elizabeth Larson
/S/ STEPHEN A. LEVIN
---------------------------------------
Stephen A. Levin
/S/ BERNARD MARCUS
---------------------------------------
Bernard Marcus
/S/ G. ALLEN MEBANE
---------------------------------------
G. Allen Mebane
/S/ CHARLES J. MURPHY
---------------------------------------
Charles J. Murphy
/S/ GABRIEL NECHAMKIN
---------------------------------------
Gabriel Nechamkin
/S/ MARK SONNINO
---------------------------------------
Mark Sonnino
/S/ GEORGE SOROS
---------------------------------------
George Soros
/S/ ANDREW R. TAUSSIG
---------------------------------------
Andrew R. Taussig
/S/ SUSAN F. TAUSSIG
---------------------------------------
Susan F. Taussig
/S/ THOMAS L. TEAGUE
---------------------------------------
Thomas L. Teague
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<PAGE>
Page 27 of 27 Pages
/S/ SEAN WARREN
---------------------------------------
Sean Warren
/S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
/S/ MICHAEL ERLBAUM
---------------------------------------
Michael Erlbaum
/S/ STEVEN ERLBAUM
---------------------------------------
Steven Erlbaum
-15-
