SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential. For use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HEARx Ltd.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
<PAGE>
HEARX LTD.
1250 NORTHPOINT PARKWAY
WEST PALM BEACH, FLORIDA 33407
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HEARx Ltd., a
Delaware corporation ("Company"), will be held at the HEARx Center, 9960 N.
Central Park Boulevard, Third Floor, Boca Raton, Florida 33428, on May 22, 1997,
at 2:00 P.M. Eastern Time, to consider and act upon:
1. The election of five directors of the Company, each to hold office until
the next Annual Meeting of Stockholders and thereafter until his
successor is duly elected and qualified, or as otherwise provided by the
Bylaws or statute;
2. The ratification of the selection of BDO Seidman LLP as the Company's
independent certified public accountants for its fiscal year ending
December 26, 1997; and
3. The transaction of such other business as may properly come before the
meeting.
The close of business on March 28, 1997, has been fixed as the record date for
the determination of stockholders who are entitled to notice of, and to vote at,
the meeting. The voting rights of the stockholders are described in the Proxy
Statement.
By order of the Board of Directors,
Tommy E. Kee
Vice President,
Secretary and Treasurer
April 15, 1997
PLEASE SPECIFY YOUR CHOICES, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING SO
THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
<PAGE>
HEARx LTD.
1250 Northpoint Parkway
West Palm Beach, Florida 33407
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be held on May 22, 1997
This Proxy Statement, with the accompanying proxy card, is being mailed or
given to stockholders commencing on or about April 15, 1997, in connection with
the solicitation of proxies by the Board of Directors of HEARx Ltd. ("Company")
to be used at the Annual Meeting of Stockholders of the Company to be held at
the HEARx Center, 9960 N. Central Park Boulevard, Third Floor, Boca Raton,
Florida, on Thursday, May 22, 1997, at 2:00 P.M. Eastern Time and at any
adjournment or adjournments thereof.
PROXY PROCEDURE
If the enclosed proxy card is properly executed and returned prior to the
meeting, the shares represented thereby will be voted in accordance with the
stockholder's directions or, if no directions are indicated, the shares will be
voted in accordance with the recommendations of the Board of Directors as
specified in this Proxy Statement. The Board of Directors does not know of any
other business to be brought before the meeting, but it is intended that, as to
any such other business, a vote may be cast pursuant to the proxy in accordance
with the judgment of the person or persons acting thereunder. Any stockholder
executing a proxy may revoke that proxy at any time prior to the voting thereof
either by delivering written notice to the Secretary of the Company or by voting
in person at the meeting.
PROXY SOLICITATION
All costs of the solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by the use of the mails, the Company may
utilize the services of some of the officers and regular employees of the
Company (who will receive no compensation therefor in addition to their regular
salaries) to solicit proxies personally and by telephone. The Company will
request banks, brokers, custodians, nominees and fiduciaries to forward copies
of the proxy solicitation materials to beneficial owners of shares held of
record and to request authority for the execution of proxies. The Company will
reimburse such persons or entities for their expenses in so doing.
3
<PAGE>
VOTING AT MEETING
Holders of record of shares of Common Stock, par value $.10 per share
("Common Stock"), as of the close of business on March 28, 1997, are entitled to
notice of, and to vote at, the meeting. As of that date the holders of the
shares of Common Stock were entitled to a total of 84,371,783 votes. The holders
of a majority of the shares of Common Stock issued and outstanding as of the
close of business on March 28, 1997, will constitute a quorum at the meeting.
The affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the meeting is required to approve each
matter presented to the meeting.
Under Section 216 of the Delaware General Corporation Law, any stockholder
who abstains from voting on any particular matter described herein will be
counted for purposes of determining a quorum. Shares of Common Stock represented
by proxies which are marked "withhold authority" with respect to the election of
one or more nominees for director and abstentions with respect to the other
proposals have the same effect as if the shares represented thereby were voted
against such nominee or nominees and against such other matters, respectively.
Broker non-votes will be treated as not represented at the meeting as to any
matter for which a non-vote is indicated on the broker's proxy.
The Company's principal executive offices are located at 1250 Northpoint
Parkway, West Palm Beach, Florida 33407.
4
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL NO. 1
Five directors of the Company are to be elected at the meeting, each to
hold office until the next Annual Meeting of Stockholders and until his
successor is elected and qualified, or as otherwise provided by the Company's
By-Laws or by statute.
The Board of Directors has nominated the five persons hereinafter named for
election as directors, all of whom are presently serving as such. Mr. Hansbrough
was appointed to the Board by the Board of Directors in February, 1997. All
other members of the Board have been previously elected as directors by the
Company's stockholders. It is intended that the shares represented by the
enclosed proxy will be voted for the election of these five nominees (unless
such authority is withheld by a stockholder). In the event that any of the
nominees should become unable or unwilling to serve as a director (which is not
anticipated), it is intended that the proxy will be voted for the election of
such person or persons, if any, as shall be designated by the Board of
Directors.
The nominees for election as directors are:
Director Position with
Names and Ages Since the Company
- ---------------------------------- -------- ----------------------------------
Paul A. Brown, M.D. 1986 Chairman of the Board and
(59) Chief Executive Officer
Stephen J. Hansbrough 1997 President, Chief Operating
(50) Officer and Director
Thomas W. Archibald 1993 Director
(59)
Fred N. Gerard, Esq. 1986 Director
(67)
David J. McLachlan 1986 Director
(58)
Paul A. Brown, M.D., holds an A.B. from Harvard College and an M.D. from
Tufts University School of Medicine. From 1970 to 1984, Dr. Brown was Chairman
of the Board of MetPath Inc., a New Jersey-based corporation offering a full
range of clinical laboratory services to physicians and hospitals, which he
founded in 1967 while a resident in pathology at Columbia Presbyterian Medical
Center in New York City. MetPath developed into the largest clinical lab in the
world with over 3,000 employees and was listed on the American Stock Exchange
prior to being sold to Corning in 1982 for $140 million. Dr. Brown is the past
Chairman of the Board of Overseers of Tufts University School of Medicine as
well as an emeritus member of the Board of Trustees of Tufts University, a
member of the Visiting Committee of the Boston University School of Medicine and
a part-time lecturer in pathology at Columbia University of Physicians and
Surgeons. Dr. Brown has also served as a member of the Board of Directors of
UroCor, Inc. since 1988.
5
<PAGE>
Stephen J. Hansbrough, President, Chief Operating Officer and Director
joined the Company in December 1993. Mr. Hansbrough has an extensive background
in the retail arena. He served as Chairman and Chief Executive Officer of Dart
Drug Stores until 1988. Subsequently and prior to joining the Company, he was an
independent consultant specializing in turn-around and start-up operations
primarily in the retail field.
Thomas W. Archibald attended the London School of Economics and received a
B.A. degree in economics from Denison University and a Juris Doctor degree from
the Ohio State University of Law School. He retired from The Bank of New York in
1995 where he served as Executive Vice President of the Personal Trust Sector.
He had held that position at Irving Trust Company when it merged with The Bank
of New York in 1988. Mr. Archibald is a past Director of Group Health
Incorporated, the only not-for-profit health insurance carrier chartered to
operate throughout New York State.
Fred N. Gerard holds an A.B. Degree from the City University of New York
and an LL.B. Degree from Columbia Law School. He has been counsel since November
1992 to Bryan Cave LLP in that firm's Phoenix office. Previously during 1991 and
1992, he was with the law firms of Scult, Lazarus, French, Zwillinger and Smock;
and Gallagher & Kennedy, Phoenix, Arizona. He is a member of the Board of
Directors of Bowmar Instrument Corporation.
David J. McLachlan holds an A.B. Degree in engineering from Harvard College
and an M.B.A. Degree from Harvard Graduate School of Business Administration. He
has been the Executive Vice President of Genzyme Company since December 1989.
Prior to that he was the Vice President, Treasurer and Chief Financial Officer
of Adams-Russell Co., Inc., which owned and operated CATV systems and
Adams-Russell Electronics, Inc., which was a defense electronics manufacturer.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF ALL THE ABOVE-NAMED NOMINEES AS DIRECTORS OF THE COMPANY.
DIRECTORS' COMPENSATION, MEETING ATTENDANCE AND COMMITTEES
The Board of Directors received no cash compensation during the fiscal year
ended December 27, 1996, and will not receive any such compensation during the
current fiscal year. The Company does reimburse out-of-pocket expenses for
attendance at meetings.
Each non-management director (i.e., Messrs. Archibald, Gerard and
McLachlan) received on June 14, 1996, pursuant to the Company's stockholder
approved Non-Qualified Stock Option Plan for Non-Employee Directors, an option
to acquire 15,000 shares of Common Stock at a price of $5.875 per share (the
then fair market value of such shares). These options are for a period of ten
years and vested immediately. Under that Plan each non-employee director elected
at the 1997 Annual Meeting will be entitled to options for 15,000 shares at
their then fair value. There were seven meetings of the Board of Directors
during the fiscal year ended December 27, 1996. Each of the incumbent directors
attended at least 75% of the meetings of the Board of Directors, and of the
meetings of the committee on which they serve, held while they were on the Board
and such committee in the year ended December 27, 1996.
6
<PAGE>
The standing committee of the Board of Directors is the Audit Committee.
The Board has not appointed a nominating committee or a compensation committee.
Messrs. Archibald, Gerard and McLachlan are members of the Audit Committee.
The functions of the Audit Committee are to review the adequacy of systems and
procedures for preparing the financial statements of the Company as well as the
suitability of internal financial controls, and to review and approve the scope
and performance of the independent auditors' work. The Audit Committee met once
during the fiscal year ended December 27, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than ten
percent of any class of equity security of the Company to file with the
Securities and Exchange Commission initial reports of such ownership and reports
of changes in such ownership. Officers, directors and such beneficial owners are
required by Securities and Exchange Commission regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, during the fiscal year ended December 27,
1996, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than ten-percent beneficial owners were complied
with except as follows: Paul A. Brown filed three late reports, one relating to
the sale of 40,000 shares that was filed on March 11, 1996, one relating to the
sale of 60,000 shares that was filed on April 15, 1996 and one relating to the
sale of 20,000 shares that was filed on September 16, 1996; and Stephen J.
Hansbrough filed two late reports, one relating to the sale of 10,000 shares
that was filed on April 15, 1996 and one relating to an exercise of 50,000 stock
options that was filed on September 16, 1996.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company. These officers have been elected to terms
which will expire at the next annual meeting of the Board and until their
successors are elected and qualified.
Officer
Name Age Since Titles
- --------------------- --- ------- -------------------------------------------
Paul A. Brown, M.D. 59 1986 Chairman of the Board and
Chief Executive Officer
Stephen J. Hansbrough 50 1993 President, Chief Operating
Officer and Director
James W. Peklenk 51 1996 Vice President - Finance
Chief Financial Officer
7
<PAGE>
Biographical information relating to Dr. Brown and Mr. Hansbrough follows
the table listing nominees for election as directors.
James W. Peklenk, Vice President - Finance and Chief Financial Officer,
joined the Company in November 1995 as Controller and became Vice President -
Finance/CFO in June 1996. He has a B.S. in Accounting from the University of
Louisville. Prior to joining HEARx, from 1991 Mr. Peklenk was Vice President,
Finance/CFO for Shooters International, Inc., an international restaurant
operator and franchisor of Shooters Waterfront Cafes. Prior to 1991, Mr. Peklenk
was Director of Internal Audit for Chi-Chi's Mexican Restaurants, a $500M
restaurant operator (300 units) and franchisor. Prior to 1983, Mr. Peklenk was
an Audit Partner with the international CPA firm of Grant Thornton.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services rendered in all capacities to the Company and its subsidiaries during
the 1996, 1995 and 1994 fiscal years, of those persons who were at fiscal
year-end 1996 (i) the chief executive Officer and (ii) the other executive
officers whose salary and bonus exceeded $100,000 (these three persons are
hereafter referred to as the "Named Executive Officers"):
================================================================================
SUMMARY COMPENSATION TABLE
================================================================================
Options/ All Other
Name and Year Salary Bonus SARs Compensation
Principal Position ($) ($) (#)(1) ($)
- ------------------------------ ---- -------- ------- --------- ------------
Paul A. Brown, M.D. (2) 1996 $100,000 -0- -0- -0-
Chairman and Chief 1995 -0- -0- -0- -0-
Executive Officer 1994 -0- -0- -0- -0-
Stephen J. Hansbrough 1996 $151,462 $18,510 175,000 -0-
President and Chief 1995 124,000 62,000 1,100,000 -0-
Operating Officer 1994 100,000 -0- 700,000 -0-
James W. Peklenk 1996 $ 83,846 $20,000 125,000 -0-
Vice President - Finance 1995 N/A N/A N/A N/A
Chief Financial Officer 1994 N/A N/A N/A N/A
- ---------------
(1) The Company did not award any SARs during the three fiscal years.
(2) Dr. Brown began receiving an annual salary of $200,000 beginning
July 1, 1996.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the grants of
options to the Named Executive Officers to purchase Common Stock during the
fiscal year ended December 27, 1996:
<TABLE>
==================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
==================================================================================================
<CAPTION>
Individual Grants Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
For Option Term
-------------------------------------------- -----------------------------
Name Options Percent of Exercise Expiration 5% 10%
SARs Total Options Price Date
Granted Granted to
(#) Employees
(1) in Fiscal
Year
- --------------------- ------- ------------- -------- ---------- ------------- --------------
<C> <C> <C> <C> <C> <C> <C>
Paul A. Brown, M.D. -0- N/A --- --- --- ---
Stephen J. Hansbrough 175,000 10% $ 2.875 10/1/06 $528,281 $553,438
James W. Peklenk 15,000 7% $ 1.49 1/18/06 $ 23,468 $ 24,585
110,000 $ 2.875 10/1/06 332,063 347,875
------- ------------ --------------
125,000 $355,531 $372,460
======= ============ ==============
- --------------------------------------------------------------------------------------------------
<FN>
(1) The Company did not award any SARs during the fiscal year.
==================================================================================================
</TABLE>
9
<PAGE>
OPTION EXERCISES AND AGGREGATED FISCAL YEAR END OPTION VALUES
The following table sets forth information with respect to stock option
exercises, unexpired options to purchase shares of the Company's Common Stock
and the value of such unexercised options granted in fiscal years prior to 1996
and held by the Named Executive Officers as of the end of fiscal 1996:
<TABLE>
=============================================================================================================
OPTION EXERCISE AND AGGREGATED FISCAL YEAR-END OPTION VALUES
=============================================================================================================
<CAPTION>
Shares Acquired Value Number of Unexercised Value of Unexercised
on Exercise Realized Options at In-the-Money
(#) ($) Fiscal Year-End Options at
(#) Fiscal Year-End
($)
--------------- ----------- ------------------------- -------------------------
Name & Principal Position Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------- ------------------------- -------------------------
<C> <C> <C> <C> <C>
Paul A. Brown, M.D. -0- -0- 100,000/ -0- $106,250 / -0-
Chairman and Chief
Executive Officer
Stephen J. Hansbrough 70,000 $194,594 505,000/1,412,500 $1,135,031/ $2,736,765
President, Chief
Operating Officer and
Director
James W. Peklenk -0- -0- 12,500/162,500 $27,844/$127,744
Vice President - Finance
Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
REPORT OF THE BOARD OF DIRECTORS ON COMPENSATION
Compensation decisions are made by the full Board of Directors. In addition
to base salary, compensation for the Company's executive officers may include
bonuses, stock options pursuant to the Company's stock option plan and otherwise
and stock grants pursuant to the Company's stock bonus plan. It is the intention
of the Board of Directors to use salary and bonuses as compensation for current
and past performance, while using stock options and restricted stock grants to
provide incentives for superior long-term performance.
The Board of Directors does not use any formulae or other objective
criteria to establish compensation for its executive officers. Instead, the
decisions are based on subjective performance evaluations and, with respect to
executive officers other than Dr. Brown, the Company's Chief Executive Officer,
the salary and bonus recommendations of Dr. Brown. In consideration of the
Company's financial position, in 1993 Dr. Brown determined to waive payment of
any cash compensation to him until the Company could achieve two successive
quarters of profitability. Based on advice from the Company's former independent
auditors to remedy an unintended adverse financial consequence to the Company of
Dr. Brown's salary waiver, the Company granted Dr. Brown an option in fiscal
1993 to purchase 100,000 shares of the Company's Common Stock at a purchase
price of $2.00 per share. No options were granted to Dr. Brown in fiscal 1994,
1995 or 1996. In 1996, however, in light of the improved financial position of
the Company as a result of the successful completion of the combined $30 million
private placement of the Company's securities and the fourteen additional
contracts that were signed with health care providers in 1996, the Board of
Directors determined to reinstate Dr. Brown's cash compensation at an annual
rate of $200,000. Dr. Brown's cash compensation for 1996 was therefore $100,000.
The Board of Directors believes that cash compensation of Dr. Brown is now
appropriate.
BOARD OF DIRECTORS
Paul A. Brown, M.D. Chairman
Stephen J. Hansbrough
Thomas W. Archibald
Fred N. Gerard, Esq.
David J. McLachlan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Brown is the Chairman of the Board of Directors and the Company's Chief
Executive Officer. Mr. Hansbrough is the President and Chief Operating Officer
of the Company. The other members of the Board of Directors are not employees or
former employees of the Company.
COMMON STOCK PERFORMANCE
As part of the executive compensation information presented in this Proxy
Statement, the Securities and Exchange Commission requires a five-year
comparison of stock performance for the Company with stock performance of other
companies. The closing price of the Common Stock at December 27, 1996 was
$3.0625 per share. The Common Stock has been traded on the American Stock
Exchange since March 15, 1996. Prior thereto, the Common stock was traded on the
over-
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<PAGE>
the-counter market with prices being reported by the National Association of
Securities Dealers, Inc., OTC Bulletin Board Service. The stock performance
graph used by the Company last year compared the cumulative total return of the
Company's Common Stock with the Nasdaq Stock Market-US Index and the Nasdaq
Non-Financial Index. In light of the Company's listing on the American Stock
Exchange beginning in March of 1996, the Company believes a change in the
comparison indexes is necessary. Accordingly, the Company has selected as
appropriate each of the AMEX Market Value Index and the Hambrecht & Quist
Healthcare (excluding biotechnology) Index. The graph below reflects all
comparison indexes (both those used last year and the ones now appropriate in
light of the American Stock Exchange listing). The following chart depicts a
comparison of five-year cumulative total returns for each of the Company, the
NASDAQ Stock Market - US Index, the AMEX Market Value Index, NASDAQ
Non-Financial Index and the Hambrecht and Quist Healthcare Index, excluding
biotechnology.
COMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN*
AMONG HEARX LTD., THE NASDAQ STOCK MARKET-US INDEX, THE AMEX
MARKET VALUE INDEX, THE NASDAQ NON-FINANCIAL INDEX AND THE
HAMBRECHT AND QUIST HEALTHCARE INDEX, EXCLUDING BIOTECHNOLOGY
[PERFORMANCE GRAPH APPEARS HERE]
Cumulative Total Return
----------------------------------------
12/91 12/92 12/93 12/94 12/95 12/96
----- ----- ----- ----- ----- -----
HEARx Ltd. 100 93 67 73 137 300
Nasdaq Sotck Market -- US 100 116 134 131 185 227
AMEX Market Value 100 101 121 110 139 148
Nasdaq Non-Financial 100 109 126 121 169 206
Hambrecht & Quist Healthcare --
Excluding Biotechnology 100 84 60 64 107 119
12
<PAGE>
RELATED PARTY TRANSACTIONS
In January, 1996, a payment of $100,000 was made to the principal
stockholder/officer on the $270,000 advanced by him to the Company during 1995.
The remaining $170,000 of the advance plus $63,000 of accrued interest were
converted into a three-year note payable bearing interest at prime plus 3%. In
January, 1996, cumulative dividends of $214,666 associated with the conversion
of the Series C Preferred Stock were converted into a promissory note payable to
the principal stockholder/officer. In addition, the principal
stockholder/officer held a note payable of the Company in the amount of
$1,675,000 which was subordinated to all other indebtedness of the Company. The
interest rate was prime plus 3%. During August, 1996, each of the three notes
payable to the principal stockholder/officer was paid in full. At December 27,
1996 the Company had no other amounts due to the principal stockholder/officer.
Pursuant to a series of agreements, the first of which was executed in
October, 1991, between the Company and Minnesota Mining and Manufacturing
Company ("3M"), 3M acquired from the Company or obtained options to acquire from
the Company a total of seven series of Senior Preferred Stock, par value $1.00
per share, at varying purchase prices. The Company also entered into a number of
different arrangements with 3M pursuant to which the Company became an
authorized distributor of hearing aids manufactured by 3M. This arrangement
terminated as a result of the divestiture by 3M of its hearing aid operation.
The terms of each series of Senior Preferred Stock subscribed for or
optioned to 3M provided that upon the listing of the Common Stock on the
American Stock Exchange, the outstanding Senior Preferred Stock and the right to
acquire shares of Senior Preferred Stock would be automatically converted into
shares of Common Stock and the right to acquire shares of Common Stock,
respectively. Accordingly, on March 15, 1996, when the Common Stock was listed
on the American Stock Exchange, 3M's holdings of Senior Preferred Stock were
automatically converted into 8,882,400 shares of Common Stock. 3M continues to
have options to acquire 1,900,000 shares of Common Stock. At the end of fiscal
1995, the Company was indebted to 3M in the approximate amount of $808,000 for
trade payables incurred by the Company through its purchases from 3M. During
1996, the Company paid all of the $808,000 indebtedness.
Fred N. Gerard, who has served as a Director of the Company since 1986, is
counsel in Bryan Cave LLP, a law firm retained by the Company in 1996 and which
the Company intends to retain in 1997.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 28, 1997, the names of all
persons known by the Company to be the beneficial owners of more than five
percent of the Common Stock. On March 28, 1997, there were 84,371,783 shares of
Common Stock issued and outstanding.
Amount and Nature Percent
Title Name and Address of of Beneficial of
Class Beneficial Owner Ownership Class
- -------- ----------------------------------- --------------------- ----------
Common Minnesota Mining and 10,782 400 (1) 12.5%
Stock Manufacturing Company
3M Center
St. Paul, MN 55144
Common Paul A. Brown, M.D. 11,924,317 (2) 14.1%
Stock 1250 Northpoint Parkway
West Palm Beach, FL 33407
- ---------------
(1) Includes 1,900,000 shares of Common Stock subject to options and warrants,
all of which are presently exercisable.
(2) Includes 100,000 shares of Common Stock subject to non-qualified options,
all of which are currently exercisable.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 28, 1997, the number of shares
of Common Stock owned beneficially by each director, each Named Executive
Officer and by all directors and executive officers as a group.
Amount and Nature of Percent of
Name Beneficial Ownership (1) Class
- ----------------------- -------------------------------- ---------------------
Paul A. Brown, M.D. 11,924,317 (2) 14.1%
Stephen J. Hansbrough 685,363 (3) (9)
James W. Peklenk 16,350 (4) (9)
Fred N. Gerard, Esq. 155,000 (5) (9)
(Continued)
14
<PAGE>
Amount and Nature of Percent of
Name Beneficial Ownership (1) Class
- ----------------------- -------------------------------- ---------------------
David J. McLachlan 385,459 (6) (9)
Thomas W. Archibald 246,700 (7) (9)
All directors and
executive officers
as a group (6 persons) 13,413,189 (8) 15.7%
- ---------------
(1) The named individuals have both sole investment power and sole voting power
with respect to all securities listed as beneficially owned by them.
(2) See footnote (2) to the preceding table.
(3) Includes 530,000 employee stock options which are currently exercisable (or
exercisable within 60 days).
(4) Includes 16,250 employee stock options which are currently exercisable (or
exercisable within 60 days).
(5) Includes (i) 105,000 shares of Common Stock issuable upon the exercise of
non-qualified options, all of which are currently exercisable, and (ii)
3,750 shares of Common Stock issuable upon the exercise of Common Stock
purchase warrants, which warrants were purchased as part of a 1993 private
placement.
(6) Includes (i) 105,000 shares of Common Stock issuable upon the exercise of
non-qualified options, all of which are currently exercisable, and (ii)
30,000 shares of Common Stock issuable upon the exercise of Common Stock
purchase warrants which warrants were purchased as part of a 1989 private
placement.
(7) Includes (i) 60,000 shares of Common Stock issuable upon the exercise of
non-qualified options, all of which are currently exercisable, and (ii)
37,500 shares of Common Stock issuable upon the exercise of warrants
acquired as part of the 1994 private placement.
(8) Includes shares of Common Stock issuable upon the exercise of options and
warrants which are currently exercisable or exercisable within 60 days.
(9) Does not exceed 1% of the class.
15
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
PROPOSAL NO. 2
The Board of Directors has selected the accounting firm of BDO Seidman LLP
as the Company's independent certified public accountants for its fiscal year
ending December 26, 1997. BDO Seidman LLP has served as the Company's
independent certified public accountants since the 1993 fiscal year. Stockholder
ratification of the selection is not required under the laws of the State of
Delaware, but the Board has nevertheless decided to ascertain the views of
stockholders in this regard. If the selection of such firm is not ratified at
the meeting, the Board will consider the selection of other auditors.
One or more representatives of BDO Seidman LLP are expected to be present
at the meeting and will have the opportunity to make a statement if they desire
to do so. In addition, they will be available to respond to appropriate
questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF BDO SEIDMAN LLP AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR ITS FISCAL YEAR ENDED DECEMBER 26, 1997.
OTHER MATTERS
As of the date hereof, the Board of Directors know of no other matters
which are likely to be presented for consideration at the meeting. However, in
the event any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote said proxy in
accordance with their best judgment.
16
<PAGE>
STOCKHOLDER PROPOSALS
All proposals of stockholders of the Company intended to be presented at
the 1998 Annual Meeting of Stockholders must be received by the Company no later
than December 16, 1997, in order to be included in the Company's Proxy Statement
and form of proxy relating to that meeting.
By Order of the Board of Directors,
Tommy E. Kee
Vice President,
Secretary and Treasurer
April 15, 1997
A copy of the Company's Annual Report on Form 10-K for its fiscal year
ended December 27, 1996, filed with the Securities and Exchange Commission is
available without charge to those stockholders who wish more detailed
information concerning the Company. The exhibits to the Form 10-K will also be
furnished to any stockholder who so requests and pays a fee equal to the
Company's reasonable expenses in furnishing such exhibits. If you wish a copy of
the Form 10-K, the exhibits or both, please write to Tommy E. Kee, Vice
President, Secretary and Treasurer of the Company, at 1250 Northpoint Parkway,
West Palm Beach, Florida 33407.
17
<PAGE>
ANNEX
FORM OF PROXY
[FRONT]
HEARx LTD.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
for the Annual Meeting
To Be Held On May 22, 1997
The undersigned stockholder(s) of HEARx Ltd. ("Company") hereby apoint(s)
Paul A. Brown, M.D., Stephen J. Hansbrough and Tommy E. Kee, and each of them,
proxies with full power to vote all shares which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held at the HEARx Center, 9960 N. Central Park Boulevard,
Third Floor, Boca Raton, Florida 33428, on Thursday, May 22, 1997, at 2:00 P.M.,
Eastern Time, and at any and all adjournments thereof, on the following matters:
PLEASE DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED REPLY ENVELOPE.
(Continued and to be SIGNED on the reverse side)
SEE REVERSE
SIDE
<PAGE>
[BACK]
[X] Please mark your votes as this example
1. The election of the following nominees as directors of the Company:
[ ] FOR all nominees as a group
[ ] WITHHOLD authority to vote for all nominees as a group
Nominees: Paul A. Brown, M.D.,
Stephen J. Hansbrough,
Thomas W. Archibald,
Fred N. Gerard, Esq. and
David J. McLachlan.
2. With respect to the ratification of the selection of the auditors referred to
in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The transaction of such other business as may properly come before the
meeting and any and all adjournments thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S
DIRECTIONS HEREIN, BUT WHERE NO DIRECTIONS ARE INDICATED, SAID SHARES WILL BE
VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED ON REVERSE SIDE, FOR
THE PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY, FOR THE
RATIFICATION OF THE SELECTION OF THE AUDITORS, AND, IN THE DISCRETION OF THE
PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, ALL IN
ACCORDANCE WITH THE COMPANY'S PROXY STATEMENT, RECEIPT OF WHICH IS HEREBY
ACKNOWLEDGED.
Signature(s) of Stockholder(s) Date , 1997
-------------------------- -------------
(Please sign exactly as your name(s) appear(s) hereon. Joint holders must each
sign. Persons signing as executors, administrators, trustee, guardians, etc.
will please so indicate when signing.)
