As filed with the Securities and Exchange Commission on April 14, 1997
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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
(561) 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
(561) 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:
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. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
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Title of each class of securities Amount to be Proposed maximum Proposed maximum Amount of
to be registered registered offering price aggregate offering registration fee(2)
per unit (1) price (1)
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<S> <C> <C> <C> <C>
Common Stock, $.10 par value per share 13,353,758 shares $2.00 $26,707,516.00 $8,094.00
====================================================================================================================================
<FN>
(1) Estimated solely for purposes of determining the registration fee pursuant to Rule 457(c), based upon the average of the high
and low sales prices for the Common Stock as reported on the American Stock Exchange on April 8, 1997.
</TABLE>
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>
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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.
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SUBJECT TO COMPLETION, DATED APRIL 14, 1997
PRELIMINARY PROSPECTUS
13,353,758 SHARES
HEARx LTD.
COMMON STOCK
This Prospectus relates to 13,353,758 shares (the "Shares") of common
stock, par value $.10 per share (the "Common Stock"), of HEARx LTD., a Delaware
corporation (the "Company"). The Shares are issuable by the Company upon the
exercise of certain warrants (the "Class A Investor Warrants") issued to
purchasers of the Company's 1996 Senior Preferred Stock, par value $1.00 per
share (the "1996 Senior Preferred Stock") and certain warrants initially issued
to Invemed Associates, Inc. and certain persons associated with it as
compensation in connection with the sale of the 1996 Senior Preferred Stock (the
"Invemed Warrants" and, together with the Class A Investor Warrants, the
"Warrants"). See "Selling Shareholders." Additional Shares that may become
issuable as a result of the anti-dilution provisions of the Warrants are offered
hereby pursuant to Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act").
The Company will not receive any proceeds from the sale of Shares by the
Selling Shareholders, but will receive the exercise price payable upon the
exercise of the Warrants if those Warrants are exercised for cash. The Warrants
may be exercised pursuant to a "cashless exercise" provision that provides for
the conversion of the Warrant into a specified number of shares of Common Stock.
The number of shares issuable upon conversion is determined generally by (i)
computing the difference between (a) the aggregate market price, on the date of
the cashless exercise, of the number of shares (the "Warrant Shares") that would
be issuable if the Warrant were exercised for cash and (b) the aggregate
exercise price for the Warrant Shares and (ii) dividing the remainder by the
market price per share of the Warrant Shares. There can be no assurance that all
or any part of the Warrants will be exercised or that they will be exercised for
cash. 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 $5,000. There can be no
assurance that the Selling Shareholders will sell any or all of the Shares
offered hereby.
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 April 11, 1997 was $2.00
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 4 THROUGH 9.
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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 April __, 1997.
<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 can also 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 27, 1996,
filed pursuant to Section 13(a) of the Exchange Act (the "1996 Form
10-K"); and
(2) Current Report on Form 8-K dated March 26, 1997 filed pursuant to
Section 13(a) of 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 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
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<PAGE>
subsequently filed document incorporated or deemed to be incorporated herein by
reference modifies or supersedes such statement. Any statement contained herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in any subsequently filed document
incorporated or deemed to be 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, CORPORATE SECRETARY (TELEPHONE: (561)
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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<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Prospectus, as well as information incorporated by reference herein,
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. Such forward-looking statements
include, without limitation, statements about the Company's future growth and
expansion, the manner in which such expansion will be funded and demands on
Company resources relating to the expansion (see "Risk Factors -- Recent and
Future Expansion; Management of Growth", below, and "Business -- Growth
Strategy" in the Company's annual report on Form 10-K for the fiscal year ended
December 27, 1996 (the "Form 10-K")); the Company's ability to obtain comparable
products from other manufacturers in the event of disruption of supply from one
or more of the Company's current suppliers (see "Risk Factors - Reliance on
Manufacturers and Qualified Audiologists"); the adequacy of the Company's
insurance and the ability to have recourse against a manufacturer in the event
of a product liability claim (see "Risk Factors - Product and Professional
Liability"); the Company's ability to continue to establish relationships with
health organizations and physicians that promote HEARx to the hearing impaired
(see "Business -- Products -- Customers and Marketing" in the Form 10-K); the
number of centers expected to be opened in early 1997 (see "Business -- Growth
Strategy -- Company Owned Centers" in the Form 10-K); the ability to meet
capital needs for currently anticipated growth with funds raised in 1996 and
early 1997 (see "Business -- Growth Strategy -- Management of Growth" in the
Form 10-K); the continued competitiveness with the Company's centers of certain
networks of hearing aid stores or distributors (see "Business -- Competition" in
the Form 10-K); the effect of a new federal or state physician referral mandate
on the Company (see "Business - Regulation -- Federal" in the Form 10-K); and
the effect on the Company of the loss of any single managed care contract (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" in the Form 10-K). Actual events or results may differ
materially from those discussed in the forward looking statements as a result of
various factors, including those discussed in "Risk Factors," below and
generally in the Form 10-K and other documents incorporated by reference herein.
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<PAGE>
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 existing capital, the proceeds from the recent offering of the Company's
1997 Convertible Preferred Stock, earnings and, to the extent necessary and
available on favorable terms to the Company (of which there can be no
assurance), commercial 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, but will receive the exercise price payable
upon exercise of the Warrants, if the Warrants are exercised for cash. The
Company intends to use the proceeds, if any, from the exercise of the Warrants
to fund the operations of the Company. There can be no assurance that any of the
Warrants will be exercised or that they will be exercised for cash.
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
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<PAGE>
Company has purchased a "key man" 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 Company's larger competitors 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 1,000 "authorized" distributors. A number of these
franchises and distributors 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 expand and change
their operations to 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, or that associations of independent audiologists
will not form and compete successfully for the Company's targeted market.
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
materially 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 a material 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 not
aware of any current intention on the part of any health insurance or managed
care organization to terminate any current contracts with the Company.
5
<PAGE>
RELIANCE ON MANUFACTURERS AND QUALIFIED AUDIOLOGISTS
Through its hearing care centers, the Company makes available to customers
hearing aids supplied by approximately five 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 materially 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 believes
that it 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 or 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 materially 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
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
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<PAGE>
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 in the jurisdictions in which it operates 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 March
24, 1997, the stock has traded as high as $7.375 and as low as $1.75 per share.
Future changes in the market price of the Common Stock may bear no relation to
the Company's results of operations. Quarterly operating results, changes in the
condition of the economy generally or in the healthcare industry, or
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially.
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, 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 Company's currently outstanding
convertible preferred stock if the market price of the Company's Common Stock is
less than $5.00 per share, 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); and except with respect to certain redemption
rights of the Company for the Company's 1997 Convertible Preferred Stock, there
is no cap on the number of shares of Common Stock which may be issuable. In
addition, the number of shares issuable upon the conversion of the convertible
preferred stock and the exercise of warrants and options is subject to
adjustment upon the occurrence of certain dilutive events.
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<PAGE>
On March 17, 1997, there were issued and outstanding a total of 84,133,158
shares of Common Stock. If all convertible preferred stock, warrants and options
which the Company has issued were deemed converted and exercised, as the case
may be, as of March 17, 1997, there would be issuable 28,608,650 shares of
Common Stock. Upon such conversion and exercise, there would be outstanding
112,741,808 shares of Common Stock. Of these, the Company currently has
registered for resale 37,827,576 shares (including the Shares offered hereby)
and has granted demand registration rights in respect of approximately 2,547,200
additional shares. The sale or availability for sale of a significant number of
shares of 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. In the event the Company's Common
Stock was delisted from the AMEX, 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 is
unaware of any intention on the part of the AMEX to delist its Common Stock.
"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 to the Exchange 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 17, 1997, the directors and executive officers of the Company
beneficially owned, as a group, approximately 14.8% of the 84,133,158 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
March 17, 1997, the directors and executive officers would beneficially own
approximately 13.4% 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 72 centers primarily located in
Connecticut, Florida, New York, New Jersey, and Pennsylvania. Over the next
several years, the Company's primary emphasis will be opening (or selectively
acquiring) additional Company-owned centers in these states and others where the
Company has obtained contracts to provide services and products.
The Company's principal executive offices are located at 1250 Northpoint
Parkway, West Palm Beach, Florida 33407, and its telephone number is (561)
478-8770.
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<PAGE>
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 or as noted below. The
following table sets forth information with respect to the Selling Shareholders,
based upon information provided to the Company by them.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Being Shares Beneficially Owned
Name of Selling Shareholder Prior to Offering (1) Offered (1) After Offering (2)
- --------------------------- ------------------------- ------------ -------------------------
<S> <C> <C> <C>
Harris Berenholz 92,254 92,254 0
Scott Bessent 138,381 138,381 0
Arthur M. Blank 276,762 276,762 0
Ronald M. Brill 46,126 46,126 0
Elliott B. Broidy 184,508 184,508 0
Walter E. Burlock 369,016 369,016 0
Walter Channing 46,126 46,126 0
Stanley Druckenmiller 1,845,080 1,845,080 0
John A. Ehinger 46,126 46,126 0
and Marianne Ehinger
Gary Erlbaum 276,762 276,762 0
Michael Erlbaum 92,254 92,254 0
Steven Erlbaum 92,254 92,254 0
Arminio Fraga 92,254 92,254 0
Gary Gladstein 461,271 461,271 0
John M. Hennessy 92,254 92,254 0
Carlisle Jones 142,993(3) 142,993(3) 0
Cristina H. Kepner 512,700(3) 512,700(3) 0
Kenneth G. Langone 3,408,840(3) 3,408,840(3) 0
Elizabeth Larson 553,525 553,525 0
Stephen A. Levin 476,032 476,032 0
Bernard Marcus 714,969(3) 714,969(3) 0
G. Allen Mebane 201,842(3) 201,842(3) 0
Charles J. Murphy 46,126 46,126 0
Gabriel Nechamkin 64,577 64,577 0
Michael C. Neus 27,677 27,677 0
Mark Sonraino 27,677 27,677 0
George Soros 2,841,423 2,841,423 0
Andrew R. Taussig 46,126 46,126 0
and Susan F. Taussig
Thomas L. Teague 100,921(3) 100,921(3) 0
Sean Warren 36,902 36,902 0
- --------------------------- ------------------------- ------------ -------------------------
Total 13,353,758 13,353,758 0
=========================== ========================= ============ =========================
- ---------------
<FN>
(1) Assumes that all the Warrants held by the Selling Shareholders are exercised for cash.
(2) 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.
(3) Includes for each of Messrs. Jones, Langone, Marcus, Mebane and Teague and for Ms. Kepner,
50,739, 1,379,252, 253,698, 201,842, 100,921 and 296,826, respectively, shares which are
issuable upon the exercise of the Invemed Warrants issued as compensation in connection
with the private placement of the 1996 Senior Preferred Stock.
</TABLE>
10
<PAGE>
Of the Shares offered hereby, 11,070,480 are issuable upon the exercise of
the Class A Investor Warrants, and 2,283,278 are issuable upon exercise of the
Invemed Warrants. The Class A Investor Warrants may be exercised at any time
prior to 5:00 P.M., New York time, on January 26, 2001 at an exercise price of
$0.55 per share. The Invemed Warrants may be exercised at any time prior to 5:00
P.M., New York time, on January 26, 2001 at an exercise price of $0.63 per
share. (Additional shares that may become issuable as a result of the
anti-dilution provisions of the Warrants are also offered hereby pursuant to
Rule 416 under the Securities Act.)
The foregoing summary is qualified in its entirety by the terms of the
Warrants, which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
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 at negotiated prices. 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
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 until
the date on which the Shares may be sold without registration, 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. 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.
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 excess of $5,000 all of
which will be borne by the Selling Shareholders. The Company will
11
<PAGE>
not receive any of the proceeds from this offering. There can be no assurance
that the Selling Shareholders will sell any or all of the Shares offered hereby.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been passed
upon for the Company by Bryan Cave LLP, Washington, D.C.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 27, 1996, and December 29, 1995, and for the years ended December 27,
1996, December 29, 1995, and December 30, 1994, have been audited by BDO
Seidman, LLP, independent certified public accountants, as indicated in their
report with respect thereto, and are included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 27, 1996, and are incorporated
herein by reference, in reliance upon the authority of such firm as experts in
accounting and auditing in giving said reports.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by the Company in connection with the sale and distribution
of the shares registered hereby:
SEC registration fee..........................................$ 8,094.00
Accounting fees and expenses.................................. 2,000.00
Legal fees and expenses....................................... 10,000.00
Miscellaneous expenses........................................ 0.00
-------------
Total.........................................................$ 20,094.00
=============
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.
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
13
<PAGE>
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) 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;
14
<PAGE>
(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.
15
<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 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 April 11,
1997.
HEARx LTD.
By: Paul A. Brown, M.D.
------------------------------------
Name: Paul A. Brown, M.D.
Title: Chairman and Chief Executive
Officer
16
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Paul A. Brown, M.D. and Stephen J. Hansbrough, and each of them (with full power
to each of them to act alone), his or her true and lawful attorneys in fact and
agents for him or her and on his or her behalf and in his or her name, place and
stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits and any and all other documents filed with respect thereto, with
the Securities and Exchange Commission (or any other governmental or regulatory
authority), granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he or she might or could do if personally present,
hereby ratifying and confirming all that said attorneys in fact and agents, or
any of them, may lawfully do or cause to be done by virtue hereof.
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.
Name Title Date
- --------------------------------------------------------------------------------
Chairman of the Board; Chief Executive
Paul A. Brown, M.D. Officer and Director April 11, 1997
- ---------------------
Paul A. Brown, M.D.
President and Chief Operating Officer
Stephen J. Hansbrough and Director April 11, 1997
- ---------------------
Stephen J. Hansbrough
Vice President and Principal Financial
James W. Peklenk and Accounting Officer April 11, 1997
- ---------------------
James W. Peklenk
Fred N. Gerard Director April 11, 1997
- ---------------------
Fred N. Gerard
David J. McLachlan Director April 11, 1997
- ---------------------
David J. McLachlan
Thomas W. Archibald Director April 11, 1997
- ---------------------
Thomas W. Archibald
17
<PAGE>
HEARX LTD.
EXHIBIT INDEX
Exhibit Number Description
- -------------- ----------------------------------------------------------------
4.1 Specimen of Certificate representing Common Stock*
4.2 Form of Class A Investor Warrant
4.3 Form of Invemed Warrant
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)
- ---------------
* Filed as an Exhibit to the Company's Registration Statement on Form S-18
(Registration No. 33-17041-NY).
** To be filed by amendment.
18
EXHIBIT 4.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME ON JANUARY 26, 2001 ("EXPIRATION DATE").
HEARx LTD.
CLASS A WARRANT TO PURCHASE [_____] SHARES OF
COMMON STOCK, PAR VALUE $0.10 PER SHARE
This is to certify that, for VALUE RECEIVED, _____ ("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from HEARx
Ltd., a Delaware corporation ("Company"), at any time not later than 5:00 P.M.,
New York time, on the Expiration Date, at the exercise price of Fifty-five cents
($0.55) per share (the exercise price in effect being herein called the "Warrant
Price"), _____ shares ("Warrant Shares") of Common Stock, par value $0.10 per
share ("Common Stock"), of the Company. The number of Warrant Shares purchasable
upon exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer from time
to time, the Warrant, upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any such transfer, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be cancelled
by the Company.
<PAGE>
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached thereto, to the Company, at or prior to 5:00 P.M. New
York Time on the Expiration Date, together with payment of the Warrant Price, as
such may be adjusted from time to time in accordance with Section 9, for the
number of Warrant Shares in respect of which the Warrant is then exercisable. To
the extent that any Warrant Shares remain outstanding at 5:01 P.M. on the
Expiration Date, such outstanding Warrant Shares shall automatically expire and
be of no further force and effect, and the holders thereof shall have no further
right to exercise or transfer the same. Payment of the Warrant Price shall be
made (x) in cash or by certified check payable in United States dollars, to the
order of the Company and/or (y) through conversion of the Warrant, effected by
the surrender to the Company of this Warrant. Upon surrender of the Warrant to
the Company as payment of the Warrant Price, the holder thereof shall be
entitled to receive a number of Warrant Shares arrived at by dividing the
difference between the aggregate Market Price (as hereinafter defined) of the
Warrant Shares issuable in respect of the Warrant surrendered and the aggregate
Warrant Price in respect of the Warrant so surrendered by the Market Price per
share of the Warrant Shares. "Market Price" as used herein shall mean, on any
day, as of such day, the average of the reported closing sale price, regular
way, in either case on any national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading any such exchange, as reported by the Nasdaq Stock Market,
or if such shares are not then so listed or admitted to trading, the average of
the bid and asked prices as reported by the NASD OTC Bulletin Board Service, if
so reported, or if not so reported, then as furnished by National Quotation
Bureau Incorporated or any similar organization selected from time to time by
the Company for the purpose.
Subject to Section 5, upon such surrender of the Warrant and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered to
the Warrantholder or to such other person as the Warrantholder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrant, together with cash, as provided in Section 10
hereof in respect of any fraction of a Warrant Share otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued, and the person to whom they are issued shall be deemed to have become a
holder of record of the Warrant Shares, as of the date of the surrender of the
Warrant and payment of the Warrant Price as aforesaid unless counsel for the
Company advises the Company in writing that an earlier date is permissible for
purposes of applicable securities laws. The rights of purchase represented by
the Warrant shall be exercisable, at the election of the Warrantholder either as
an entirety or from time to time for part only of the Warrant Shares and, in the
event that the Warrant is exercised in respect of less than all of the Warrant
Shares specified herein at any time prior to the Expiration Date, a new Warrant
will be issued to Warrantholder for the remaining number of Warrant Shares
specified in the Warrant so surrendered within five business days.
-2-
<PAGE>
Section 4. Exercise and Transfer to Company with the Securities Act of
1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with the
Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with the
provisions of this Section 4 with respect to any resale or other disposition of
such security. The Company may cause the legend set forth on the first page of
this Warrant to be set forth on each Warrant or any security issued or issuable
upon exercise of this Warrant, unless counsel for the Company is of the opinion
as to any such security that such legend is unnecessary or such security may
then be sold pursuant to Rule 144(k) under the Securities Act of 1933.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the American Stock Transfer & Trust Company, the
transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of any of the right of purchase aforesaid shall
be irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares of Common Stock as shall be requisite for such
purpose. The Company agrees that all Warrant Shares issued upon exercise of the
Warrant
-3-
<PAGE>
shall be, at the time of delivery of the certificates for such Warrant Shares,
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of the Company. The Company will keep a conformed copy of this Warrant on
file with the Transfer Agent and with every subsequent transfer agent for the
Common Stock or other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrant. The Company will
supply from time to time the Transfer Agent with duly executed stock
certificates required to honor the outstanding Warrant. After the Expiration
Date, no Common Stock shall be subject to reservation in respect to such Warrant
Shares which shall have expires.
Section 8. Warrant Price. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter. If the adjustment provisions contained in this Section 9 are less
favorable to the holders of this warrant than adjustment provisions available to
any other holder (the "Other Holder") of convertible securities of the Company
or warrants, options or similar rights exercisable for Common Stock of the
Company with respect to such securities ("Other Rights") are to any such Other
Holder, this Warrant shall be immediately and automatically amended, without the
requirement of any action by the holder or the Company, to provide the holder of
this Warrant with adjustment rights at least as favorable as such Other Rights.
(a) If the Company shall at any time or from time to time while the
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation, or sale, transfer or other disposition of all or substantially all
of the Company's properties to another
-4-
<PAGE>
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or properties as may be issuable or payable with respect to or
in exchange for a number of outstanding Warrant Shares equal to the number of
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
had such reorganization, reclassification, consolidation, merger, sale, transfer
or other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Warrantholder to
the end that the provisions hereof (including, without limitations, provision
for adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or properties thereafter deliverable upon the exercise thereof. The Company
shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall assume, by written
instrument executed and delivered to the Company, the obligation to deliver to
the holder of the Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase and the other obligations under this Warrant.
The above provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such current Market Price per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed.
-5-
<PAGE>
(d) (i) After the date hereof, if the Company shall at any time or
from time to time while the Warrant is outstanding, issue or sell any shares of
Common Stock (other than Excluded Stock, as hereinafter defined) for a
consideration per share less than the Warrant Price in effect immediately prior
to the time of such issue or sale then, forthwith upon such issue or sale, the
Warrant Price shall be reduced (but not increased) to the consideration per
share received by the Company for such shares of Common Stock issued or sold.
Such adjustment shall be made successively whenever such issuance or sale is
made. No adjustment of the Warrant Price, however, shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment. In no event shall the Warrant Price be adjusted so that the Warrant
Price per share is less than the then par value per share of Common Stock. For
purposes hereof, the term "Excluded Stock" shall mean (i) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants and preferred
stock outstanding on the date hereof or pursuant to the terms of agreements
existing on the date hereof, in accordance with the terms of such securities and
agreements in effect on the date hereof, (ii) shares of Common Stock issued
pursuant to the conversion of Senior Preferred Stock, Series C ("Senior C
Preferred") in accordance with the terms of such security on the date hereof,
and which Senior C Preferred is issued pursuant to the exercise of warrants
outstanding on the date hereof, in accordance with terms of such warrants in
effect on the date hereof and (iii) up to 1,500,000 shares of Common Stock
issued pursuant to the exercise of employee stock options granted subsequent to
the date hereof pursuant to the Company's employee stock option plan, subject to
adjustment in the event of stock splits, stock dividends, combinations,
reclassifications or similar events (e.g., in the event of a 1- for-15 reverse
stock split, the total number of shares of Common Stock issuable pursuant to
this clause (iii) shall be 100,000).
(ii) Upon each adjustment of the Warrant Price, the Warrantholder
shall thereafter be entitled to purchase at the Warrant Price resulting from
such adjustment, that number of Warrant Shares obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment
and dividing the product thereof by the Warrant Price resulting from such
adjustment. Upon each adjustment of the Warrant Price, the number of Warrant
Shares represented by this Warrant shall be adjusted to equal the number of
shares of Common Stock purchasable by the Warrantholder.
(iii) For purposes of Section 9(d)(i), the following paragraphs
(A) to (F), inclusive, shall be applicable:
(A) Issuance of Rights, Options or Warrants. In case at any
time after the date hereof the Company shall in any manner grant any rights to
subscribe for or to purchase, any options or warrants (other than subscription
rights or warrants subject to the provisions of Section 9(c)) for the purchase
of shares of Common Stock or any stock or
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PH02/101849.1
<PAGE>
securities convertible into or exchangeable for Common Stock (such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such rights, options or warrants or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which shares of Common Stock are issuable upon the
exercise of such rights, options or warrants, or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the granting of
such rights, options or warrants, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights, options or warrants, plus, in the case of such rights, options or
warrants which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such rights, options or warrants or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
rights, options or warrants) shall be less than the Warrant Price in effect
immediately prior to the time of the granting of such rights, options or
warrants, as the case may be, then the maximum number of shares of Common Stock
issuable upon the exercise of such rights, options or warrants or upon
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i). Except as provided in subparagraph (C), no further adjustment of the
Warrant Price shall be made upon the actual issue of such shares of Common Stock
or of such Convertible Securities upon exercise of such rights, options or
warrants or upon the actual issue of such shares of Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at any time
after the date hereof the Company shall in any manner issue or sell any
Convertible Securities, whether or not the right to exchange or convert
thereunder is immediately exercisable, and the price per share for which shares
of Common Stock are issuable upon such conversion or exchange (determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Warrant Price in effect
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to be outstanding as of the date of the
issue or sale of such Convertible Securities and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i); provided, however, that (a)
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<PAGE>
except as otherwise provided in subparagraph (C), no further adjustment of the
Warrant Price shall be made upon the actual issue of such shares of Common Stock
upon conversion or exchange of such Convertible Securities, and (b) if any such
issue or sale of such Convertible Securities is made upon exercise of any rights
to subscribe for or to purchase or any option or warrant to purchase any such
Convertible Securities for which adjustments of the Warrant Price are made
pursuant to the provisions of subparagraph (A), no further adjustment of the
Warrant Price shall be made by reason of such issue or sale.
(C) Decrease in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any right, option or warrant referred to in subparagraph (A), or the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraphs (A) or (B) shall decrease,
or the rate at which any Convertible Securities referred to in subparagraphs (A)
or (B) are convertible into or exchangeable for shares of Common Stock shall
increase, the Warrant Price then in effect hereunder shall forthwith be
decreased to the Warrant Price which would have been in effect at such time had
such rights, options, warrants or Convertible Securities provided for such
changed purchase price, reduced consideration or increased conversion rate, as
the case may be, at the time they had initially been granted, issued or sold.
(D) Consideration for Stock. In case at any time shares of
Common Stock or Convertible Securities or any rights or options to purchase any
such shares of Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration therefor shall be deemed to be the amount of cash
paid therefor before deducting therefrom any discounts, commissions or other
expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof. In case at any time
any shares of Common Stock, Convertible Securities or any rights, options or
warrants to purchase any such shares of Common Stock or Convertible Securities
shall be issued or sold for consideration other than cash, the amount of
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration, as determined reasonably and in good faith by
the Board of Directors of the Company. In case at any time any shares of Common
Stock, Convertible Securities or any rights, options or warrants to purchase any
shares of Common Stock or Convertible Securities shall be issued in connection
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration received therefor shall be deemed to be
the fair value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board of Directors may reasonably and in good
faith determine to be attributable to such shares of Common Stock. Convertible
Securities, rights, options or warrants, as the case may be. In case at any time
any rights, options or warrants to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction in
which no consideration is allocated to such rights, options or warrants by the
parties thereto, such rights, options or warrants shall be deemed to have been
issued without consideration.
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<PAGE>
(e) An adjustment shall become effective immediately after the record
date in the case of each dividend or distribution and immediately after the
effective date of each other event which requires an adjustment.
(f) The form of Warrant need not be changed because of any change
pursuant to this Section 9, and Warrants issued after such change may state the
same Warrant Price and the same number of Warrant Shares as is stated in the
Warrant initially issued pursuant hereto. However, subject to the consent of the
Warrantholder, which shall not be unreasonably withheld, the Company may at any
time in its sole discretion make any change on the Warrant that the Company may
deem appropriate which does not affect the substance thereof, and any Warrants
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Shares or otherwise, may be in the form as so changed.
(g) In the event that, as a result of an adjustment made pursuant to
Section 9(a), the holder of the Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of the Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(h) Shares of Common Stock owned by or held for the account of the
Company or any majority-owned subsidiary shall not be deemed outstanding for the
purpose of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable
upon the exercise of the Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the current market
value of such fraction based upon the current Market Price (determined pursuant
to Section 3) of a Warrant Share. All calculations under this Section 10 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public
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<PAGE>
accountants shall be conclusive evidence of the correctness of any computation
made, absent manifest error. Failure to give such notice to the Warrantholder or
any defect therein shall not affect the legality or validity of the subject
adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is American Stock Transfer & Trust Company, 99 Wall Street, New York, New
York 10005. Forthwith upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant, the Company
will mail to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
HEARx LTD.
Attention: Paul A. Brown, M.D.
Chairman and Chief Executive Officer
471 Spencer Drive
West Palm Beach, Florida 33409
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if sent by certified mail,
return receipt requested, postage prepaid, to the address set forth on the books
of the Company or, as to each of the Company and the Warrantholder, at such
other address as shall be designated by such party by written notice to the
other party complying as to delivery with the terms of this Section 14. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
Section 15. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant without the approval of the Warrantholder in
order to cure any ambiguity or to correct or supplement any provisions contained
herein which may be defective or inconsistent with any other provision herein or
to make any other provisions in regard to matters or questions arising hereunder
which shall not be inconsistent with the provisions of the Warrant and which
shall not in any manner adversely affect the interests of the Warrantholder.
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<PAGE>
Section 16. Successors. All the covenants and provisions hereof by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
HEARx LTD.
By:
------------------------------------
Paul A. Brown M.D.
Chairman of the Board
Attest:
- ------------------------------
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<PAGE>
HEARx LTD.
WARRANT EXERCISE FORM
HEARx LTD.
471 Spencer
West Palm Beach, Florida 33409
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) [] payment by cash or certified check; []
conversion of the within Warrant by surrender of the Warrant, _______________
shares of Common Stock* ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
----------------------------------------
----------------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of the Warrant be registered in the
name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
* NOTE: If conversion of the Warrant is made by surrender of the Warrant
and the number of shares indicated exceeds the maximum number of shares
to which a holder is entitled, the Company will issue such maximum
number of shares.
<PAGE>
Dated: ,
------------------- ----
Signature:
------------------------------
----------------------------------------
Name (please print)
----------------------------------------
Address
----------------------------------------
----------------------------------------
Federal Identification or
Social Security No.
Note: The above signature must
correspond with the name of the
registered holder as written on
the first page of the Warrant in
every particular, without
alteration or enlargement or any
change whatever, unless the
Warrant has been assigned.
EXHIBIT 4.3
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME ON JANUARY 26, 2001 ("EXPIRATION DATE").
HEARx LTD.
WARRANT TO PURCHASE [_____] SHARES OF
COMMON STOCK, PAR VALUE $0.10 PER SHARE
This is to certify that, for VALUE RECEIVED, _____("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from HEARx
Ltd., a Delaware corporation ("Company"), at any time not later than 5:00 P.M.,
New York time, on the Expiration Date, at the exercise price of Sixty-three
cents ($0.63) per share (the exercise price in effect being herein called the
"Warrant Price"), [_____] shares ("Warrant Shares") of Common Stock, par value
$0.10 per share ("Common Stock"), of the Company. The number of Warrant Shares
purchasable upon exercise of this Warrant and the Warrant Price shall be subject
to adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer from time
to time, the Warrant, upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any such transfer, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be cancelled
by the Company.
<PAGE>
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached thereto, to the Company, at or prior to 5:00 P.M. New
York Time on the Expiration Date, together with payment of the Warrant Price, as
such may be adjusted from time to time in accordance with Section 9, for the
number of Warrant Shares in respect of which the Warrant is then exercisable. To
the extent that any Warrant Shares remain outstanding at 5:01 P.M. on the
Expiration Date, such outstanding Warrant Shares shall automatically expire and
be of no further force and effect, and the holders thereof shall have no further
right to exercise or transfer the same. Payment of the Warrant Price shall be
made (x) in cash or by certified check payable in United States dollars, to the
order of the Company and/or (y) through conversion of the Warrant, effected by
the surrender to the Company of this Warrant. Upon surrender of the Warrant to
the Company as payment of the Warrant Price, the holder thereof shall be
entitled to receive a number of Warrant Shares arrived at by dividing the
difference between the aggregate Market Price (as hereinafter defined) of the
Warrant Shares issuable in respect of the Warrant surrendered and the aggregate
Warrant Price in respect of the Warrant so surrendered by the Market Price per
share of the Warrant Shares. "Market Price" as used herein shall mean, on any
day, as of such day, the average of the reported closing sale price, regular
way, in either case on any national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading any such exchange, as reported by the Nasdaq Stock Market,
or if such shares are not then so listed or admitted to trading, the average of
the bid and asked prices as reported by the NASD OTC Bulletin Board Service, if
so reported, or if not so reported, then as furnished by National Quotation
Bureau Incorporated or any similar organization selected from time to time by
the Company for the purpose.
Subject to Section 5, upon such surrender of the Warrant and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered to
the Warrantholder or to such other person as the Warrantholder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrant, together with cash, as provided in Section 10
hereof in respect of any fraction of a Warrant Share otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued, and the person to whom they are issued shall be deemed to have become a
holder of record of the Warrant Shares, as of the date of the surrender of the
Warrant and payment of the Warrant Price as aforesaid unless counsel for the
Company advises the Company in writing that an earlier date is permissible for
purposes of applicable securities laws. The rights of purchase represented by
the Warrant shall be exercisable, at the election of the Warrantholder either as
an entirety or from time to time for part only of the Warrant Shares and, in the
event that the Warrant is exercised in respect of less than all of the Warrant
Shares specified herein at any time prior to the Expiration Date, a new Warrant
will be issued
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<PAGE>
to Warrantholder for the remaining number of Warrant Shares specified in the
Warrant so surrendered within five business days.
Section 4. Exercise and Transfer to Company with the Securities Act of
1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with the
Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with the
provisions of this Section 4 with respect to any resale or other disposition of
such security. The Company may cause the legend set forth on the first page of
this Warrant to be set forth on each Warrant or any security issued or issuable
upon exercise of this Warrant, unless counsel for the Company is of the opinion
as to any such security that such legend is unnecessary or such security may
then be sold pursuant to Rule 144(k) under the Securities Act of 1933.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the American Stock Transfer & Trust Company, the
transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of any of the right of purchase aforesaid shall
be irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares of Common Stock as shall be requisite for such
purpose. The Company agrees that all Warrant Shares issued upon
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<PAGE>
exercise of the Warrant shall be, at the time of delivery of the certificates
for such Warrant Shares, duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock of the Company. The Company will keep a
conformed copy of this Warrant on file with the Transfer Agent and with every
subsequent transfer agent for the Common Stock or other shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant. The Company will supply from time to time the Transfer Agent
with duly executed stock certificates required to honor the outstanding Warrant.
After the Expiration Date, no Common Stock shall be subject to reservation in
respect to such Warrant Shares which shall have expires.
Section 8. Warrant Price. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter. If the adjustment provisions contained in this Section 9 are less
favorable to the holders of this warrant than adjustment provisions available to
any other holder (the "Other Holder") of convertible securities of the Company
or warrants, options or similar rights exercisable for Common Stock of the
Company with respect to such securities ("Other Rights") are to any such Other
Holder, this Warrant shall be immediately and automatically amended, without the
requirement of any action by the holder or the Company, to provide the holder of
this Warrant with adjustment rights at least as favorable as such Other Rights.
(a) If the Company shall at any time or from time to time while the
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation, or sale, transfer or other disposition of all or substantially all
of the Company's properties to another corporation shall be effected, then, as a
condition of such reorganization,
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<PAGE>
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or properties as may be issuable or payable with respect to or
in exchange for a number of outstanding Warrant Shares equal to the number of
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
had such reorganization, reclassification, consolidation, merger, sale, transfer
or other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Warrantholder to
the end that the provisions hereof (including, without limitations, provision
for adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or properties thereafter deliverable upon the exercise thereof. The Company
shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall assume, by written
instrument executed and delivered to the Company, the obligation to deliver to
the holder of the Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase and the other obligations under this Warrant.
The above provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such current Market Price per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed.
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<PAGE>
(d) (i) After the date hereof, if the Company shall at any time or
from time to time while the Warrant is outstanding, issue or sell any shares of
Common Stock (other than Excluded Stock, as hereinafter defined) for a
consideration per share less than the Warrant Price in effect immediately prior
to the time of such issue or sale then, forthwith upon such issue or sale, the
Warrant Price shall be reduced (but not increased) to the consideration per
share received by the Company for such shares of Common Stock issued or sold.
Such adjustment shall be made successively whenever such issuance or sale is
made. No adjustment of the Warrant Price, however, shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment. In no event shall the Warrant Price be adjusted so that the Warrant
Price per share is less than the then par value per share of Common Stock. For
purposes hereof, the term "Excluded Stock" shall mean (i) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants and preferred
stock outstanding on the date hereof or pursuant to the terms of agreements
existing on the date hereof, in accordance with the terms of such securities and
agreements in effect on the date hereof, (ii) shares of Common Stock issued
pursuant to the conversion of Senior Preferred Stock, Series C ("Senior C
Preferred") in accordance with the terms of such security on the date hereof,
and which Senior C Preferred is issued pursuant to the exercise of warrants
outstanding on the date hereof, in accordance with terms of such warrants in
effect on the date hereof and (iii) up to 1,500,000 shares of Common Stock
issued pursuant to the exercise of employee stock options granted subsequent to
the date hereof pursuant to the Company's employee stock option plan, subject to
appropriate adjustment in the event of stock splits, stock dividends,
combinations, reclassifications or similar events (e.g., in the event of a
1-for-15 reverse stock split, the total number of shares of Common Stock
issuable pursuant to this clause (iii) shall be 100,000).
(ii) Upon each adjustment of the Warrant Price, the Warrantholder
shall thereafter be entitled to purchase at the Warrant Price resulting from
such adjustment, that number of Warrant Shares obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment
and dividing the product thereof by the Warrant Price resulting from such
adjustment. Upon each adjustment of the Warrant Price, the number of Warrant
Shares represented by this Warrant shall be adjusted to equal the number of
shares of Common Stock purchasable by the Warrantholder.
(iii) For purposes of Section 9(d)(i), the following paragraphs
(A) to (F), inclusive, shall be applicable:
(A) Issuance of Rights, Options or Warrants. In case at any
time after the date hereof the Company shall in any manner grant any rights to
subscribe for or to purchase, any options or warrants (other than subscription
rights or warrants subject to the provisions of Section 9(c)) for the purchase
of shares of Common Stock or any stock
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or securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such rights, options or warrants or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which shares of Common Stock are issuable upon the
exercise of such rights, options or warrants, or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the granting of
such rights, options or warrants, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights, options or warrants, plus, in the case of such rights, options or
warrants which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such rights, options or warrants or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
rights, options or warrants) shall be less than the Warrant Price in effect
immediately prior to the time of the granting of such rights, options or
warrants, as the case may be, then the maximum number of shares of Common Stock
issuable upon the exercise of such rights, options or warrants or upon
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i). Except as provided in subparagraph (C), no further adjustment of the
Warrant Price shall be made upon the actual issue of such shares of Common Stock
or of such Convertible Securities upon exercise of such rights, options or
warrants or upon the actual issue of such shares of Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at any time
after the date hereof the Company shall in any manner issue or sell any
Convertible Securities, whether or not the right to exchange or convert
thereunder is immediately exercisable, and the price per share for which shares
of Common Stock are issuable upon such conversion or exchange (determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Warrant Price in effect
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to be outstanding as of the date of the
issue or sale of such Convertible Securities and to have been issued for such
price per share, with the effect on the Warrant Price specified in Section
9(d)(i); provided, however, that (a) except as otherwise provided in
subparagraph (C), no further adjustment of the Warrant Price shall be made upon
the actual issue of such shares of Common Stock upon conversion or
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<PAGE>
exchange of such Convertible Securities, and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any rights to subscribe for
or to purchase or any option or warrant to purchase any such Convertible
Securities for which adjustments of the Warrant Price are made pursuant to the
provisions of subparagraph (A), no further adjustment of the Warrant Price shall
be made by reason of such issue or sale.
(C) Decrease in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any right, option or warrant referred to in subparagraph (A), or the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraphs (A) or (B) shall decrease,
or the rate at which any Convertible Securities referred to in subparagraphs (A)
or (B) are convertible into or exchangeable for shares of Common Stock shall
increase, the Warrant Price then in effect hereunder shall forthwith be
decreased to the Warrant Price which would have been in effect at such time had
such rights, options, warrants or Convertible Securities provided for such
changed purchase price, reduced consideration or increased conversion rate, as
the case may be, at the time they had initially been granted, issued or sold.
(D) Consideration for Stock. In case at any time shares of
Common Stock or Convertible Securities or any rights or options to purchase any
such shares of Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration therefor shall be deemed to be the amount of cash
paid therefor before deducting therefrom any discounts, commissions or other
expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof. In case at any time
any shares of Common Stock, Convertible Securities or any rights, options or
warrants to purchase any such shares of Common Stock or Convertible Securities
shall be issued or sold for consideration other than cash, the amount of
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration, as determined reasonably and in good faith by
the Board of Directors of the Company. In case at any time any shares of Common
Stock, Convertible Securities or any rights, options or warrants to purchase any
shares of Common Stock or Convertible Securities shall be issued in connection
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration received therefor shall be deemed to be
the fair value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board of Directors may reasonably and in good
faith determine to be attributable to such shares of Common Stock. Convertible
Securities, rights, options or warrants, as the case may be. In case at any time
any rights, options or warrants to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction in
which no consideration is allocated to such rights, options or warrants by the
parties thereto, such rights, options or warrants shall be deemed to have been
issued without consideration.
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<PAGE>
(e) An adjustment shall become effective immediately after the record
date in the case of each dividend or distribution and immediately after the
effective date of each other event which requires an adjustment.
(f) The form of Warrant need not be changed because of any change
pursuant to this Section 9, and Warrants issued after such change may state the
same Warrant Price and the same number of Warrant Shares as is stated in the
Warrant initially issued pursuant hereto. However, subject to the consent of the
Warrantholder, which shall not be unreasonably withheld, the Company may at any
time in its sole discretion make any change on the Warrant that the Company may
deem appropriate which does not affect the substance thereof, and any Warrants
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Shares or otherwise, may be in the form as so changed.
(g) In the event that, as a result of an adjustment made pursuant to
Section 9(a), the holder of the Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of the Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(h) Shares of Common Stock owned by or held for the account of the
Company or any majority-owned subsidiary shall not be deemed outstanding for the
purpose of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable
upon the exercise of the Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the current market
value of such fraction based upon the current Market Price (determined pursuant
to Section 3) of a Warrant Share. All calculations under this Section 10 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the
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Company, stating the adjusted Warrant Price and the adjusted number of Warrant
Shares resulting from such event and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
certificate of the Company's independent certified public accountants shall be
conclusive evidence of the correctness of any computation made, absent manifest
error. Failure to give such notice to the Warrantholder or any defect therein
shall not affect the legality or validity of the subject adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is American Stock Transfer & Trust Company, 99 Wall Street, New York, New
York 10005. Forthwith upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant, the Company
will mail to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
HEARx LTD.
Attention: Paul A. Brown, M.D.
Chairman and Chief Executive Officer
471 Spencer Drive
West Palm Beach, Florida 33409
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if sent by certified mail,
return receipt requested, postage prepaid, to the address set forth on the books
of the Company or, as to each of the Company and the Warrantholder, at such
other address as shall be designated by such party by written notice to the
other party complying as to delivery with the terms of this Section 14. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
Section 15. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant without the approval of the Warrantholder in
order to cure any ambiguity or to correct or supplement any provisions contained
herein
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which may be defective or inconsistent with any other provision herein or to
make any other provisions in regard to matters or questions arising hereunder
which shall not be inconsistent with the provisions of the Warrant and which
shall not in any manner adversely affect the interests of the Warrantholder.
Section 16. Successors. All the covenants and provisions hereof by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
HEARx LTD.
By:
-------------------------------------
Paul A. Brown M.D.
Chairman of the Board
Attest:
- ------------------------------
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<PAGE>
HEARx LTD.
WARRANT EXERCISE FORM
HEARx LTD.
471 Spencer
West Palm Beach, Florida 33409
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) [] payment by cash or certified check; []
conversion of the within Warrant by surrender of the Warrant, _______________
shares of Common Stock* ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
----------------------------------------
----------------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of the Warrant be registered in the
name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
* NOTE: If conversion of the Warrant is made by surrender of the Warrant
and the number of shares indicated exceeds the maximum number of shares
to which a holder is entitled, the Company will issue such maximum
number of shares.
<PAGE>
Dated: ,
------------------- ----
Signature:
------------------------------
----------------------------------------
Name (please print)
----------------------------------------
Address
----------------------------------------
----------------------------------------
Federal Identification or
Social Security No.
Note: The above signature must
correspond with the name of the
registered holder as written on
the first page of the Warrant
in every particular, without
alteration or enlargement or
any change whatever, unless the
Warrant has been assigned.
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