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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] 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)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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.
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PRELIMINARY COPY
HEARx LTD.
1250 NORTHPOINT PARKWAY
WEST PALM BEACH, FLORIDA 33407
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of HEARx
Ltd., a Delaware corporation ("Company"), will be held at The Crowne Plaza, 1601
Belvedere Road, West Palm Beach, Florida 33406, on June 6, 2000 at 10:00 A.M.
local time, to consider and act upon:
1. A proposed amendment to the Company's Amended and Restated Certificate of
Incorporation to provide for a classified board of directors;
2. The election of five directors of the Company; if Proposal No. 1 is
approved, two will be elected to serve for a one-year term, one to serve
for a two-year term and two to serve for a three-year term; if Proposal No.
1 is not approved, all will serve for a one-year term;
3. A proposed amendment to the HEARx 1995 Flexible Stock Plan to increase the
number of shares of common stock available under the Plan; and
4. The transaction of such other business as may properly come before the
meeting.
The close of business on April 14, 2000 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
accompanying proxy statement.
By order of the Board of Directors,
Barbara A. Bachman
Secretary/Controller
April 21, 2000
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.
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PRELIMINARY COPY
HEARx LTD.
1250 NORTHPOINT PARKWAY
WEST PALM BEACH, FLORIDA 33407
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To be held on June 6, 2000
This Proxy Statement with the accompanying proxy card, is being mailed
or given to shareholders commencing on or about April 21, 2000, 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 Crowne Plaza, 1601 Belvedere Road, West Palm Beach, Florida
33406, on Tuesday, June 6, 2000 at 10:00 A.M. local time and any adjournments
thereof.
The Company's principle executive offices are located at 1250
Northpoint Parkway, West Palm Beach, Florida 33407.
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 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 and to request
authority for the execution of proxies. The Company will reimburse such persons
or entities for their expenses in doing so.
VOTING AT MEETING
Holders of record of shares of the Company's common Stock, par value
$.10 per share ("Common Stock"), as of the close of business on April 14, 2000,
are entitled to notice of, and to vote at, the meeting. As of that date, there
were outstanding [11,934,515] shares of Common Stock. Each holder of Common
Stock is entitled to one vote for each share held. The holders of a majority of
the shares of Common Stock issued and outstanding as of the close of business on
April 14, 2000, will constitute a quorum at the meeting.
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Under the Delaware General Corporation Law, any stockholder who abstains from
voting on a particular matter described herein will still be counted for
purposes of determining a quorum.
AMENDMENT OF CERTIFICATE OF INCORPORATION
PROPOSAL NO. 1
GENERAL
On March 16, 2000, the Board of Directors approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to provide for the
classification of the Board of Directors into three classes (the "Classified
Board Amendment"). Under Delaware law, the adoption of an amendment to the
certificate of incorporation is subject to the approval of the Company's
stockholders. The Board recommends that the stockholders approve the Classified
Board Amendment.
Currently, the Company's Board of Directors is comprised of a single
class of five directors, all of whom are elected at each annual meeting of
stockholders. The Classified Board Amendment would provide for the
classification of the Board of Directors into three separate classes as nearly
equal in number as possible, with one class being elected each year to serve a
staggered three-year term.
EFFECT OF THE CLASSIFIED BOARD AMENDMENT
The Board of Directors believes that classification of the Board will
promote continuity of membership and stability of management and policies.
Absent the removal or resignation of directors, two annual elections would be
required to replace a majority of directors on the classified board and effect a
forced change in the business and affairs of the Company. The Classified Board
Amendment may, therefore, discourage an individual or entity from acquiring a
significant position in the stock of the Company with the intention of obtaining
immediate control of the Board of Directors. The acquiror, however, could
immediately effect a change of control by amending the Amended and Restated
Certificate of Incorporation, to eliminate classification of the Board of
Directors with a vote of a majority of all the outstanding shares entitled to
vote.
The Classified Board Amendment is intended to encourage persons seeking
to acquire control of the Company to initiate such an acquisition through arms'
length negotiations with the Company's management and Board of Directors. If
adopted, the Classified Board Amendment also could have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its stockholders.
The Classified Board Amendment could make more difficult or discourage
a proxy contest or the assumption of control of the Company by a holder of a
substantial block of the Company's outstanding shares, also made more difficult
by the existence of the Company's Rights Plan, discussed below, or the change of
control of the Board of Directors and could thus have the effect of entrenching
incumbent management. At the same time, the existence of the Company's Rights
Plan would discourage a third party from acquiring a substantial block of the
Company's common stock without first entering into negotiations with the
Company's Board of Directors. On the other hand, the Classified Board Amendment
would help to ensure that the Board of Directors and management, if confronted
with a proposal by a third party, would have time to review the proposal and
appropriate alternatives to the proposal. The Board of Directors believes the
Classified Board Amendment would reduce the possibility that a third party could
effect a sudden
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change in control of the Board of Directors without the support of a majority of
the then incumbent Board of Directors.
Pursuant to the Delaware General Corporation Law and the current Bylaws
of the Company, members of the Board of Directors may be removed, with or
without cause, at any time during their term of office by the holders of a
majority of the shares of common stock then entitled to vote at an election of
directors. The Delaware General Corporation Law, however, also provides that the
directors serving on a classified board of directors may be removed prior to the
expiration of their terms by the holders of a majority of the shares of a
company's voting stock only for cause, unless otherwise provided by the
certificate of incorporation. Accordingly, in the absence of a change to the
Company's Amended and Restated Certificate of Incorporation, the directors
serving on the Company's classified Board of Directors could be removed only for
cause.
The Company has in place a Shareholder Rights Agreement. On December
14, 1999, the Board of Directors of the Company declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of common
stock on December 31, 1999. The Rights are only exercisable in the event a
person or group of persons has acquired or obtained the right to acquire 15% or
more of the outstanding shares of the Company's voting stock without the prior
consent of the Company's Board of Directors, or the commencement of a tender
offer or exchange offer involving the potential acquisition of 15% or more of
the outstanding shares of the Company's voting stock without the prior consent
of the Board. The Rights will expire, if not previously exercised, on December
31, 2009, unless extended or the rights are earlier redeemed or exchanged by the
Company.
If ever the Rights become exercisable, each Right, except those held by
an acquiring person, would entitle each holder of a Right to acquire shares of
the Company's Common Stock (or common stock equivalent) at essentially half of
the then market price of the common stock of the Company. If any person or group
acquires more than 15% but less than 50% of the outstanding common stock of the
Company without the prior consent of the Board, each Right (except those held by
the acquiring person) may be exchanged by the Board of Directors for one share
of the Company's common stock (or common stock equivalent). If the Company were
to be acquired in a merger or other business combination where the Company is
not the surviving corporation or where the Company's common stock is exchanged
or changed or 50% or more of the Company's assets or earnings power is sold in
one or several transactions without the prior consent of the Board of Directors,
each Right would entitle the holder thereof (except for the acquiring person) to
receive shares of the acquiring company's common stock at half of the then
market price of such common stock.
Accordingly, if a person attempts to take over the Company without the
Board's approval, each shareholder (other than the acquiring person) will be
entitled to purchase additional shares of HEARx for half of the then market
price, thereby diluting the acquiring person's interest and increasing the cost
of the acquiring person's acquisition of the Company. If the Board converts the
Rights into the right to receive a share of common stock (or a common stock
equivalent), that also will have the effect of diluting the acquiring person's
interest and increasing the cost of its takeover of the Company.
The Board of Directors adopted this Shareholder Rights Plan to protect
the Company's shareholders against abusive takeover tactics which can unfairly
deprive stockholders of their opportunity to profit from the long term potential
of the Company and can pressure stockholders to act hastily by threatening to
squeeze them out of their investments at less than fair value.
The Shareholder Rights Plan is not intended to prevent a tender offer
or other acquisition proposal for the Company, although it could have such
effect. It could also have the effect of
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entrenching current management of the Company and the Board of Directors by
discouraging such tender offers or other acquisitions of the Company not
approved in advance by the Board.
In addition to the Shareholder Rights Plan, the Company's Bylaws
contain certain advance notice provisions which could make it more difficult for
a stockholder to nominate candidates for election to the Board of Directors and
to make proposals for inclusion in the Company's proxy statement soliciting
proxies for the annual meeting of stockholders. Specifically, the Bylaws provide
that a stockholder wishing to nominate a candidate for election to the Board of
Directors must deliver or mail such nomination such that it is received by the
Secretary of the Company not less than 90 days nor more than 120 days prior to
the anniversary of the last annual meeting of stockholders. The Bylaws set forth
certain requirements for the content of the stockholder's nominating notice. The
Bylaws also provide that in order for a stockholder proposal to be properly
brought before a meeting, the stockholder must provide written notice of such
proposal at least 90 days but not more than 120 days prior to the anniversary of
the last annual meeting of stockholders. These advance notice provisions may
make non-Board sponsored proposals and director nominations more difficult.
The Board of Directors is asking the stockholders to consider and adopt
the Classified Board Amendment to encourage any person intending to attempt a
takeover or restructuring to try first to negotiate with the Board and
management. In this way, the Board of Directors believes that it and management
would be better able to protect the interests of all stockholders by ensuring
that the best price is obtained in any transaction involving the Company.
The foregoing summary description of the Classified Board Amendment is
qualified by reference to Appendix A, which contains the complete text of the
Classified Board Amendment.
VOTE REQUIRED FOR APPROVAL
Under Delaware corporation law, the affirmative vote of the holders of
a majority of all of the Company's outstanding shares of Common Stock entitled
to vote, is required to adopt the amendment to the Amended and Restated
Certificate of Incorporation concerning classification of the Board. As required
by Delaware corporation law, the amendment has been already been approved by a
resolution of the Board of Directors and, upon requisite stockholder approval,
will become effective upon the filing of a certificate of amendment with the
Delaware Secretary of State.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THIS PROPOSAL TO AMEND THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF THE COMPANY TO PROVIDE FOR THE CLASSIFICATION
OF THE BOARD OF DIRECTORS.
ELECTION OF DIRECTORS
PROPOSAL NO. 2
The Board of Directors currently consists of five directors, and five
directors of the Company are to be elected at the meeting. As set forth above,
the Board of Directors is also proposing to stagger the terms of directors of
the Company by classifying the Board into three separate classes. If Proposal
No. 1 is approved, the Board of Directors will divide the Board into three
separate classes, as nearly equal in number as possible, with terms expiring in
2001 for Class I, 2002 for Class II and 2003 for Class III. If Proposal I is not
approved, each of the five
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directors will 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 Bylaws or by Delaware law.
The Board of Directors has nominated the five persons named below for
election as directors, all of whom are presently serving as such. All 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) as described herein. 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, who shall be designated by the Board of
Directors.
The nominees for election as directors are as follows:
CLASS I DIRECTORS FOR A TERM EXPIRING IN 2001
THOMAS W. ARCHIBALD, AGE 62. 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 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 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.
JOSEPH L. GITTERMAN III, AGE 63. Joseph L. Gitterman III attended the
University of Virginia and Columbia University. He is the manager of EIP Group
LLC, an investing, trading and consulting firm which he founded in 1994. Until
1994, he was the Senior Managing Director of LeBranche & Co. He was a member of
the New York Stock Exchange for over thirty years and was appointed a Governor
in 1986. At the New York Stock Exchange, he served on more than fourteen
committees, serving as chairman of some of them. He is director of Classic Turf
Co., Intrepid International, Mill Bridge Inc. and Custom Data Services. He is
also a trustee of the Margaret Bartlett Foundation, the Steep Rock Association
and the Westminster School.
CLASS II DIRECTOR FOR A TERM EXPIRING IN 2002
DAVID J. MCLACHLAN, AGE 61. David J. McLachlan holds an A.B. Degree in
engineering from Harvard College and a M.B.A. Degree from Harvard Graduate
School of Business Administration. Since June 1999, he has served as a
consultant to Genzyme Company. Until his retirement in June 1999, Mr. McLachlan
was the Executive Vice President of Genzyme Company, a position he held since
December 1989. Prior to that he was the Vice President, Treasurer and Chief
Financial Officer of Adams-Russell Co., Inc., an owner and operator of cable
television systems and Adams-Russell Electronics, Inc. a defense electronics
manufacturer.
CLASS III DIRECTORS FOR A TERM EXPIRING IN 2003
PAUL A. BROWN, M.D., AGE 62. 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
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Boston University School of Medicine and a part-time lecturer in pathology at
Columbia University of Physicians and Surgeons.
STEPHEN J. HANSBROUGH, AGE 53. 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.
There are no family relationships between or among any directors or
executive officers of the Company.
VOTE REQUIRED
The five director nominees receiving the greatest number of votes of
the Common Stock represented at the meeting (in person or by proxy) will be
elected directors assuming a quorum is present at the meeting. Shares of Common
Stock represented by proxies that are marked "without authority" with respect to
the election of one or more nominees for director have no effect on the outcome
of the election.
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 31, 1999 for their services as directors. The Company
reimburses directors for their out-of-pocket expenses for attendance at meetings
of the Board. Messrs. Archibald, McLachlan and Gitterman each received on June
7, 1999 an option to acquire 1,500 shares of Common Stock at a price of $5.00
per share (the then per share fair market value of the Company's Common Stock),
pursuant to the Company's stockholder-approved Non-Qualified Stock Option Plan
for Non-Employee Directors. These options were immediately exercisable for a
period of ten years. Under the Plan, each non-employee director elected at the
2000 Annual Meeting will be entitled to receive options for 1,500 shares of
Common Stock, exercisable at the then fair market value.
There were seven meetings of the Board of Directors during the fiscal
year ended December 31, 1999. Each of the incumbent directors attended all
meetings of the Board of Directors and all the meetings of the committee on
which they serve, held while they were on such committee, during the year ended
December 31,1999.
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, McLachlan and Gitterman 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 31, 1999.
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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 31,
1999, all Section 16(a) filing requirements applicable to its executive officers
and directors were made except as follows: each of Paul A. Brown, Stephen J.
Hansbrough and James W. Peklenk reported one transaction late for the 1999
fiscal year.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for services rendered in all capacities to the Company during the 1999, 1998 and
1997 fiscal years of those persons who were at fiscal year-end 1999 (i) the
Chief Executive Officer and (ii) the other executive officers whose salary and
bonus exceeded $100,000 (these three persons are collectively referred to herein
as the "Named Executive Officers"):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Annual Compensation
-----------------------------
Name and Year Salary Bonus Options
Principal Position ($) ($) (#)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul A. Brown, M.D. 1999 $250,000 $125,000 100,000
Chairman and Chief 1998 225,000 75,000 -0-
Executive Officer 1997 200,000 85,000 -0-
Stephen J. Hansbrough 1999 $225,000 $112,500 113,246
President and Chief 1998 200,000 100,000 -0-
Operating Officer 1997 175,000 60,000 -0-
James W. Peklenk 1999 $150,000 $75,000 20,000
Vice President - Finance 1998 125,000 25,000 20,000
Chief Financial Officer 1997 100,000 25,000 25,000
- --------------------------------------------------------------------------------
</TABLE>
The Company has entered into an employment agreement with Dr. Paul
Brown to serve as Chairman of the Board and Chief Executive Officer for an
initial five-year term ending in 2004. The Company has entered into a
substantially similar employment agreement with Stephen J. Hansbrough to serve
as President and Chief Operating Officer for an initial five-year term ending in
2004. Each of the employment agreements provide that the executive will be
entitled to receive base compensation and performance bonuses and to participate
in and receive benefits under the Company's welfare benefit and similar employee
benefit plans generally made available by the Company to other key employees.
Dr. Brown's base compensation for the first year of the agreement is $300,000
per year, and Mr. Hansbrough's base compensation for the first year of the
agreement is $275,000 per year. Such annual compensation is subject to review
annually by the Board. In respect of annual bonuses, if in any calendar year the
Company achieves the net income targets approved by the Board, the Company has
agreed to pay the executive a bonus
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equal to at least 50% of the executive's base salary. In addition, if in any
calendar year the Company achieves the target net income approved by the Board
for such year, the executive is entitled to receive a cash bonus equal to 1% of
such net income for such year. Each executive is entitled to reimbursement of
his reasonable and necessary business expenses in connection with the
performance of his duties consistent with guidelines established by the
Company's Board of Directors. Concurrent with the execution of the employment
agreements, and pursuant to the terms of the agreements, each executive was
granted an option to purchase shares of the Company's common stock. Dr. Brown
was granted an option to acquire 100,000 shares and Mr. Hansbrough was granted
an option to acquire 113,246 shares. Each option vests ratably over four years
and was granted with an exercise price equal to the market value of the common
stock on the date of grant.
Each of the employment agreements contains termination and change in
control provisions. If the executive is termined with "cause" or if the
executive terminates without good reason before or after a change in control,
the Company will be required to pay only amounts earned through the date of
termination. If the executive terminates because the Company has breached the
employment agreement or if the Company terminates the executive without cause
(before a change in control), the Company must pay the executive an amount equal
to the base salary in effect for the duration of the term as in effect
immediately before the date of termination or, if more than three years of the
term have elapsed on the date of such termination, an amount equal to one year's
salary. In addition, the executive is entitled to payment of a bonus equal to
one times the average of all bonus and other incentive payments made by the
Company to the executive over the then prior two years plus the pro rata portion
of the bonsus payable for the year of the termination. In such circumstances,
the Company will be obliged to continue the executive's medical, dental, life
and other insurance and benefit program coverage for 18 months, and the
executive shall be fully vested in all options and similar rights previously
granted to him and shall have a period of two years within which to exercise
such rights.
Each of the employment agreements provides that in the event the
executive is terminated by the Company without cause on or after a change in
control or if the executive terminates with good reason after a change in
control, the Company must pay the executive a minimum of three times the
executive's base salary plus an amount equal to three times the average of all
bonus and other incentive payments made by the Company to the executive over the
then preceding two years. All options and other rights will then be fully vested
and the executive will have three years within which to exercise such rights.
The Company also will be responsible for maintining the executive's medical,
dental, life and other insurance and benefit program coverage for a three year
period.
In the event of the executive's death or termination because of
disability, all then outstanding options and similar rights shall become fully
vested and the executive or his legal representatives may exercise such rights
for a one year period following the executive's death or termination for
disability.
The agreements provide for "gross up"payments to the executive to cover
the executive's incremental tax liabilities in the event payments made under the
agreements are subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the grants
of options to the Named Executive Officers during the fiscal year ended December
31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Potential
Realizable Value at
Percent of Assumed Annual
Options Total Options Rates of Stock
Granted Granted to Price Appreciation
Employees in Exercise Expiration For Option Term
Name (#) Fiscal Year Price Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Paul A. Brown 100,000 28.84% $3.875 12/13/04 $ 406,875 $ 426,250
Stephen J. Hansbrough 113,246 32.66% $3.875 12/13/04 $ 460,770 $ 482,711
James W. Peklenk 20,000 2.88% $3.875 12/13/04 $ 36,905 $ 42,625
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION EXERCISES AND AGGREGATED FISCAL YEAR END OPTION VALUES
The following table sets forth certain information with respect to
stock option exercises and unexpired stock options granted in fiscal years prior
to 1999 and held by the Named Executive Officers as of the end of fiscal 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Shares Number of Value of Unexercised
Acquired Value Unexercised Options In-the-Money Options at
On Exercise Realized Fiscal Year-End Fiscal Year-End
(#) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul A. Brown, M.D. -0- -0- 10,000/100,000 -0-/117,500
Stephen J. Hansbrough -0- -0- 182,377/180,123 113,213/133,064
James W. Peklenk -0- -0- 16,501/15,501 -0-/11,750
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
REPORT OF THE BOARD OF DIRECTORS ON COMPENSATION
The Company's executive compensation program is administered by the
Board of Directors. In addition to base salary, compensation for the Company's
executive officers may include annual performance 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.
9
<PAGE> 12
To establish compensation for the Company's executive officers for
1999, the Board of Directors used subjective performance evaluations,
compensation statistics of other similar size health care organizations, and
with respect to executive officers other than Dr. Brown, the salary and bonus
recommendations of Dr. Brown. In respect of the bonus opportunity for the
Company's executive officers, the Board set certain performance criteria, the
attainment of which could entitle the executive officer to earn a cash bonus
equal to one half of his base salary. The performance criteria were both
objective and subjective. The objective performance criteria were met for 1999
and each executive officer was awarded the full bonus amount.
BOARD OF DIRECTORS
Paul A. Brown M.D. - Chairman
Stephen J. Hansbrough
Thomas W. Archibald
David L. McLachlan
Joseph L. Gitterman III
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.
10
<PAGE> 13
COMMON STOCK PERFORMANCE
As part of the executive compensation information presented in the
proxy statement, the Securities and Exchange Commission requires a five-year
comparison of the stock performance for the Company with stock performance of
other companies. The closing price of the Common Stock at December 31, 1999 was
$4.6875 per share. The Common Stock has been traded on the American Stock
Exchange since March 15, 1996. Prior thereto, the Company's stock was traded on
the over-the-counter market with prices being reported by the National
Association of Securities Dealers, Inc., OTC Bulletin Board Service. The Company
has selected each of the AMEX market Value Index and the Hambrecht & Quist
Healthcare (excluding biotechnology) Index. The graph on the following page
reflects all comparison indexes and depicts a comparison of five-year cumulative
total returns for each of the Company, the AMEX Market Value and the Hambrecht
and Quist Healthcare Index, excluding biotechnology.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG HEARx LTD., THE AMEX MARKET VALUE INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE-EXCLUDING BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
DOLLARS
<S> <C> <C> <C> <C> <C> <C>
HEARx LTD. 100 186 409 227 82 68
AMEX MARKET VALUE 100 129 131 163 175 224
HAMBRECHT & QUIST 100 167 185 220 268 234
HEALTHCARE-EXCLUDING
BIOTECHNOLOGY
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
11
<PAGE> 14
RELATED PARTY TRANSACTIONS
None.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 16, 2000, the names of all
persons known by the Company to be beneficial owners of more than five percent
of the Common Stock. On March 16, 2000, there were 11,934,515 shares of Common
Stock issued and outstanding.
<TABLE>
<CAPTION>
Amount and Nature
Title Name and Address of Of Beneficial Percent of
Class Beneficial Owner Ownership Class
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Paul A. Brown, M.D. 1,219,318 (1) 10.2%
1250 Northpoint Parkway
West Palm Beach, Fl 33407
Common Stock Minnesota Mining and 896,993 7.5%
Manufacturing Company
3M Center
St. Paul, MN 55144
</TABLE>
(1) Includes 10,000 shares of Common Stock subject to options which are
currently exercisable (or exercisable within 60 days).
12
<PAGE> 15
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 16, 2000, the number of
shares of Common Stock owned beneficially by each director, each Named Executive
Officer and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Beneficial Ownership (1) Class
- ----------------------------------------------------------------------------------
<S> <C> <C>
Paul A. Brown, M.D. 1,219,318 (2) 10.2%
Stephen J. Hansbrough 184,252 (3) 1.5%
James W. Peklenk 8,876 (4) *
David J. McLachlan 59,045 (5) *
Thomas W. Archibald 99,100 (6) *
Joseph L. Gitterman III 179,749 (7) 1.5%
All directors and executive 2,019,214 (8) 16.9%
officers as a group (6 persons)
- ----------------------------------------------------------------------------------
</TABLE>
(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) Includes 10,000 shares of Common Stock subject to options which are
currently exercisable (or exercisable within 60 days).
(3) Includes 154,252 employee stock options which are currently exercisable
(or exercisable within 60 days).
(4) Includes 8,876 employee stock options which are currently exercisable
(or exercisable within 60 days).
(5) Includes (i) 15,000 shares of Common Stock issuable upon the exercise
of non-qualified options, all of which are currently exercisable, and
(ii) 3,000 shares of Common Stock issuable upon the exercise of Common
Stock purchase warrants acquired as part of a 1989 private placement.
(6) Includes 10,000 shares of Common Stock issuable upon the exercise of
non-qualified options, all of which are currently exercisable.
(7) Includes (i) 3,000 shares of Common Stock issuable upon the exercise of
non-qualified options, all of which are currently exercisable, and (ii)
12,750 shares of Common Stock issuable upon the exercise of Common
Stock purchase warrants acquired as part of a 1993 private placement.
(8) Includes 217,378 shares of Common Stock issuable upon the exercise of
options and warrants, which are currently exercisable (or exercisable
within 60 days)
13
<PAGE> 16
AMENDMENT TO THE COMPANY'S 1995 FLEXIBLE STOCK PLAN
PROPOSAL NO. 3
The Company's Board of Directors has approved and adopted an amendment
to the HEARx Ltd. 1995 Flexible Stock Plan, calling for an increase of 500,000
shares in the number of shares of the Company's stock available under the plan.
At the direction of the Board, the amendment is presented to the stockholders of
HEARx at this meeting for their consideration and approval.
GENERAL
The proposal to amend the plan and increase the number of shares
available under the plan enables HEARx to continue the plan and to further its
stated purposes. That purpose is to attract, retain, motivate and reward
employees of HEARx and its subsidiaries and to encourage ownership of the
Company's common stock by the eligible participants. Eligible participants in
the plan are employees of the Company and affiliated entities with which the
Company or its affiliates have business relationships. Approximately 332
individuals are eligible for awards under the plan.
The plan became effective on June 16, 1995. On and after the effective
date of the plan, the total number of shares of common stock which could have
been issued in connection with all possible benefits under the plan was limited
to 250,000 shares (adjusted to reflect the reverse stock split in 1999), plus an
automatic annual increase of 10% of the number of shares subject to the plan as
of the prior year, beginning in fiscal 1996. The current number of post-reverse
split shares authorized under the plan is 402,628. As of March 16, 2000, 23,027
shares remained available for awards under the plan. The shares currently
authorized under the plan have been registered under the federal securities laws
on Form S-8 and if this amendment to the stock plan is approved, HEARx intends
to register the additional 500,000 shares under the federal securities laws.
DESCRIPTION OF THE 1995 FLEXIBLE STOCK PLAN
Set forth below is a description of the essential features of the plan.
This description is subject to and qualified in its entirety by the full text of
the plan.
The plan provides awards to eligible participants in the form of stock
options, stock appreciation rights, restricted stock, performance shares, and
other stock-based awards. Any award of an option or a similar right to acquire
shares of common stock to a person who is a Company officer or a Company
director, or the beneficial holder of more than 10% of the stock of the Company,
and subject to Section 16 of the Securities Exchange Act of 1934, as amended,
shall not be transferable other than by will or the laws of descent and
distribution or the provisions of a qualified domestic relations order.
If an option or stock appreciation right expires, terminates or is
surrendered without having been fully exercised, or if shares of restricted
stock or performance shares are forfeited, the unpurchased shares or forfeited
shares subject to the option, stock appreciation right or grant of restricted
stock or performance shares shall again be made available for purposes of the
plan. The closing price of a share of Common Stock on the American Stock
Exchange on March 31, 2000 was $4.1875.
14
<PAGE> 17
ADMINISTRATION
The plan is administered by a committee consisting either of the entire
Board of Directors or of two or more members of the Board of Directors who were
not (during the one year prior to service as a member of the committee or are
not during such service) granted or awarded equity securities pursuant to the
plan or any other discretionary stock award plan of the Company. The members of
the committee are appointed by and serve at the pleasure of the Board. The Board
may also appoint members to fill vacancies in the committee. The plan currently
is administered by the full Board of Directors.
Authority of the Committee
The committee has discretionary authority to determine which
participants will receive awards, the type, amount, and timing of awards
granted, and the terms, conditions, restrictions and provisions of awards
granted.
The committee may also interpret and construe the plan and all
agreements under the plan, employ agents, attorneys and accountants as it deems
necessary or desirable, and do and perform all acts it deems necessary and
appropriate for the administration of the plan.
AMENDMENT, TERMINATION AND CHANGE IN CONTROL
The Board of Directors may amend the plan at any time, but stockholder
approval is required if such amendment would cause options which are intended to
qualify as incentive stock options under the Internal Revenue Code (described
below) to fail to so qualify, would cause the plan to fail to meet the
requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, or would violate applicable law.
The plan has no fixed termination date and continues in effect until
terminated by the Board of Directors.
In the event of a change of control (as defined below), of the Company,
the committee may provide such protection as it deems necessary to maintain a
participant's rights. The committee may, among other things provide for the
acceleration of the exercise or realization of any benefit, provide for purchase
of a benefit upon the Participant's request for an amount in cash equal to the
amount which could have been attained upon the exercise or realization of the
benefit had it been currently exercisable or payable, make such adjustment to
the benefit as the Committee deems appropriate, and/or cause the benefits to be
assumed by the surviving company.
"Change in Control" means: the acquisition, after the effective date of
the plan, without the approval of the Board of Directors, by any person, other
than the Company and certain related entities, of more than 20% of the
outstanding shares of Common Stock; the liquidation or dissolution of the
Company following a sale or other disposition of substantially all of its
assets; a merger or consolidation involving the Company in which the Company is
not the surviving company; or a change in the majority of the members of the
Board of Directors of the Company during any two year period not approved by at
least two-thirds of the members of the Board of Directors who were members at
the beginning of the two-year period.
15
<PAGE> 18
AWARDS UNDER THE PLAN
STOCK OPTIONS
Stock options granted under the plan intended to qualify for special
tax treatment under Section 422 of the Internal Revenue Code of 1986 ("Code")
are referred to as incentive stock options, and options not intended to so
qualify are referred to as non-qualified stock options. The option price per
share in the case of non-qualified stock options shall be the fair market value
of the shares on the date the option is granted. Except as provided for grant to
persons who beneficially own in excess of 10% of the Company's common stock, the
per share option price in the case of incentive stock options shall be the fair
market value of the shares on the date the option is granted. For greater than
10% shareholders, the option price shall be no less than 110% of the fair market
value on the date of grant.
The other terms of options shall be determined by the committee, and,
in the case of options intended to qualify as incentive stock options, such
terms shall meet all requirements of Section 422 of the Code.
Payment for shares purchased pursuant to the exercise of options may be
made either (i) in cash, or (ii) with the consent of the committee, (a) by
exchanging shares of the Company's common stock having an aggregate fair market
value equal to the cash exercise price of the option being exercised, (b) in
other property or (c) by any combination of the foregoing.
STOCK APPRECIATION RIGHTS
The committee may grant stock appreciation rights. A stock appreciation
right is the right to receive an amount equal to the appreciation, if any, in
the fair market value of a share of common stock from the date of grant to the
date of payment. Payment shall be made in cash, in shares or in any combination
thereof, as determined by the committee.
The committee may grant stock appreciation rights to an employee in
tandem with a stock option, in which case the exercise of the option shall cause
a correlative reduction in stock appreciation rights then standing to a
participant's credit which were granted in tandem with the option, and the
payment of a stock appreciation right shall cause a correlative reduction in
shares under such option.
RESTRICTED STOCK AWARDS
The committee may grant shares of restricted stock at no cost to the
participant. Such shares shall be issued and delivered at the time of the grant
but shall be subject to forfeiture until those conditions set forth in the
restricted stock agreement are satisfied. Stock certificates representing shares
of restricted stock shall bear a legend referring to the plan, noting the risk
of forfeiture of the shares and stating that such shares are nontransferable
until all restrictions have been satisfied. As of the date restricted stock is
granted, the grantee shall be entitled to full voting and dividend rights with
respect to all shares of such stock.
PERFORMANCE SHARES
The committee may grant awards of performance shares, which represent
the right to receive common stock or cash equal to the fair market value of the
shares at a future date in accordance with the terms of such grant. Generally,
such right shall be based upon the attainment of targeted profit and/or other
performance objective.
16
<PAGE> 19
OTHER STOCK-BASED AWARDS
The committee may grant other stock-based awards at such time, in such
amounts and subject to such terms and conditions as it deems appropriate.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the Federal income tax consequences of
options which may be granted under the plan, based upon the Company's
understanding of current income tax laws, regulations and rulings. Any time a
participant exercises an option, the Company may withhold from such payment any
amount necessary to satisfy Federal, state and local income tax withholding
requirements with respect to the exercise, if any. Such withholding may be in
cash or in shares.
Non-Qualified Stock Options. Although a participant will not recognize
income upon the original grant of options, if the participant chooses to
exercise the options, he or she will recognize ordinary income in an amount
equal to the difference between the fair market value of the shares of common
stock on the date of exercise and the aggregate exercise price for such shares.
To the extent, and in the year, that the participant recognizes income, the
Company may take a deduction. The participant's tax basis in the shares received
will equal the fair market value of such shares on the date of exercise.
If the participant disposes of shares purchased pursuant to a
non-qualified option, any gain or loss will be short-term or long-term capital
gain or loss, depending upon the period during which such shares were held. See
capital Gains and Losses below. If a participant surrenders previously acquired
shares to pay for a non-qualified option, the excess, if any, of the fair market
value of the newly-acquired shares over the fair market value of the surrendered
shares will be includable in his or her income. No gain or loss will be
recognized on the surrender of the previously acquired shares.
A participant does not recognize income when he or she receives
restricted shares pursuant to the exercise of a non-qualified option (unless he
or she elects to do so within thirty days of the transfer of restricted shares).
Upon the lapse of the restriction, the participant will recognize income in an
amount equal to the fair market value of the shares on the date the restriction
lapses, and the Company will be entitled to a tax deduction of the same amount.
If the participant elects to recognize income within thirty days of receipt of
the shares, the participant will recognize income in an amount equal to the fair
market value of the shares on the date of receipt of the restricted shares, and
the Company will be entitled to an income tax deduction of the same amount.
Incentive Stock Options. Participants who receive incentive stock
options are not required to recognize income, and the Company may not take a
deduction upon the grant of such options. Similarly, when a participant
exercises any incentive stock options, provided he or she does not dispose of
the shares for at least one year after exercise and at least two years after the
date of grant, the participant will not be required to recognize income, and the
Company may not take a deduction. The participant's basis in the shares of
common stock received upon exercise will equal the aggregate exercise price that
the participant paid for such shares.
Furthermore, the participant must include in his or her alternative
minimum taxable income the difference between the fair market value of the
shares of the Company's common stock received on the date of exercise and the
aggregate exercise price of such shares. Section 55 of the Internal Revenue Code
imposes an alternative minimum tax equal to the excess, if any, of a percentage
of the participant's alternative minimum taxable income over his or her
irregular federal income tax. Alternative minimum taxable income is determined
by adding (a) the difference between the fair market value of the participant's
shares of the common stock received on the date of exercise of an incentive
stock option and the aggregate exercise price of such
17
<PAGE> 20
shares, plus (b) other items of tax preference, to the participant's adjusted
gross income, and then subtracting certain allowable deductions and an exemption
amount.
If a participant pays the exercise price of an incentive stock option
with previously acquired shares, the participant does not recognize gain or loss
on the exercise of such option. If the participant pays for the exercise of a
current incentive stock option with shares previously acquired upon the exercise
of an incentive stock option, however, and the participant did not hold the
stock for at least the one-year-after-exercise or two-years-from-grant holding
period, the disposition will be disqualified. In this case, the participant will
recognize ordinary income on the disqualifying disposition equal to the
difference between the fair market value of such shares on the date of exercise
of the prior incentive stock option and the amount paid for such shares (but not
in excess of the gain realized on the disqualifying disposition).
Capital Gains and Losses. If a participant holds shares for more than
twelve months and, in the case of shares acquired by exercise of an incentive
stock option, does not dispose of such shares for at least two years after the
date of the underlying option grant, upon a subsequent disposition, the
participant will realize long term capital gain or loss equal to the difference
between the amount received upon such disposition and his or her basis in the
shares.
Except in the case of shares acquired by exercise of an incentive stock
option, if a participant disposes of the shares twelve months or less after he
or she acquired them, the participant will realize short term capital gain or
loss equal to the difference between the amount received upon such disposition
and his or her basis in the shares.
If a participant disposes of shares acquired through exercise of an
incentive stock option within two years from the date of grant or within two
years from the date of exercise, the participant will recognize ordinary income
equal to the excess, if any, of the lesser of (a) the amount received on such
disposition, or (b) the fair market value of the shares on exercise of the
incentive stock option, over the option price. The amount received, if any, in
excess of the amount of ordinary income recognized upon such disposition, will
be long term or short term capital gain, depending upon whether the participant
has held the shares for more than twelve months.
To the extent that a participant recognizes ordinary income, the
Company is allowed to take a deduction.
VOTE REQUIRED FOR APPROVAL
The amendment to the plan will become effective if approved by a
majority of the shares of outstanding common stock entitled to vote, present in
person or by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THIS PROPOSAL TO AMEND THE HEARx 1995 FLEXIBLE STOCK PLAN.
OTHER MATTERS
As of the date hereof, the Board of Directors knows of no other matters
which are likely to be presented for consideration at the meeting. In the event
any other matters properly come before the meeting, however, it is the intention
of the persons named in the enclosed proxy to vote said proxy in accordance with
their best judgment.
18
<PAGE> 21
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2001 annual
meeting of stockholders must be received by us no later than December 24, 2000
for inclusion, if appropriate and included in the Company's proxy statement and
form of proxy for that meeting.
In order for a stockholder to nominate a candidate for director
election at the 2001 annual meeting of stockholders, a stockholder must provide
timely notice of the nomination. Such notice must be given not less than 90 nor
more than 120 days prior to the anniversary of the 2000 annual meeting of
stockholders. The stockholder must include information about the nominee, such
as his or her name, address and occupation, all as provided by the Company's
Bylaws.
In order for a stockholder to bring any other business before the 2001
annual meeting of stockholders, the stockholder must provide advance notice as
provided in the Bylaws in respect of such proposal. The notice must be given not
less than 90 nor more than 120 days prior to the anniversary date of the 2000
annual meeting of stockholders. These time limits apply in determining whether
notice is timely for purposes of rules adopted by the Securities and Exchange
Commission relating to the exercise of discretionary voting authority by the
Company's designated proxies. The notice must contain specific information as
prescribed by the Company's bylaws. These requirements are separate from and in
addition to those requirements imposed by the federal securities laws concerning
inclusion of a stockholder proposal in the proxy statement and form of proxy for
the meeting.
In each case, the notice must be given to the Company's Secretary at
the Company's principal offices, 1250 North Point Parkway, West Palm Beach,
Florida 33407. Any stockholder desiring a coy of the Company's Amended and
Restated Certificate of Incorporation or Bylaws will be furnished a copy without
charge upon written request to the Company's Secretary.
April 21, 2000
19
<PAGE> 22
APPENDIX A
CLASSIFIED BOARD AMENDMENT
The Amended and Restated Certificate of Incorporation is
hereby amended by adding the following new second paragraph to Article 5:
"The number of directors which shall constitute the entire Board of
Directors shall be fixed by, or in the manner provided in, the by-laws of the
Corporation. The Board of Directors shall be divided into three classes, with
the number of directors in each class as nearly equal as possible. The classes
shall be designated as Class I, Class II and Class III, and the directors
elected to each class shall generally serve a term of three years; provided,
however, that the Board of Directors may designate the first Class I, Class II
and Class III directors to serve initial class terms of one, two and three
years, respectively, and until their respective successors are elected and have
qualified or until their earlier resignation, removal or otherwise. Each class
of directors elected subsequent to the respective first Class I, Class II and
Class III, shall serve a term of three years, until their respective successors
are elected and have qualified or until their earlier resignation, removal or
otherwise. A director elected to fill a vacancy shall hold office for the
remaining term of the predecessor director and until his or her successor is
elected and has qualified, or until his or her earlier resignation, removal or
otherwise."
1
<PAGE> 23
APPENDIX
<PAGE> 24
APPENDIX
HEARx LTD.
1995 FLEXIBLE STOCK PLAN
ARTICLE I - NAME AND PURPOSE
1.1 Name. The name of the Plan is the "HEARx Ltd. 1995 Flexible Stock
Plan."
1.2 Purpose. The Company has established the Plan to attract, retain,
motivate and reward Employees and other individuals, to encourage
ownership of the Company's Common Stock by Employees and other
individuals, and to promote and further the best interests of the
Company.
ARTICLE II - DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions. The following words and phrases, when used in the
Plan, unless otherwise specifically defined or unless the context
clearly otherwise requires, shall have the following respective
meanings:
(a) Agreement. The document which evidences the grant of any
Benefit under the Plan and which sets forth the Benefit and
the terms, conditions and provisions of, and restrictions
relating to, such Benefit.
(b) Benefit. Any benefit granted to a Participant under the Plan.
(c) Board. The Board of Directors of the Company.
(d) Change of Control. The acquisition after the Effective Date,
without the approval of the Board, by any person or entity,
other than the Company or a Related Entity, of more than 20%
of the outstanding Shares through a tender offer, exchange
offer or otherwise; the liquidation or dissolution of the
Company following a sale or other disposition of all or
substantially all of its assets; a merger or consolidation
involving the Company which results in the Company not being
the surviving parent corporation; or any time during any
two-year period in which individuals who constituted the board
at the start of such period (or whose election was approved by
at least two-thirds of the then members of the Board who were
members at the start of the two-year period) do not constitute
at least 50% of the Board for any reason. A Related Entity is
a Subsidiary or any employee benefit plan (including a trust
forming a part of such a plan) maintained by the Company or a
Subsidiary.
(e) Code. The Internal Revenue Code of 1986, as amended. Any
reference to the Code includes the regulations promulgated
pursuant to the Code.
(f) Company. HEARx Ltd.
(g) Committee. The Committee described in Section 5.1.
(h) Common Stock. The Company's Common Stock, $.10 par value.
(i) Effective Date. The date that the Plan is approved by the
shareholders of the Company, which must occur within one year
after approval by the Board. Any grants of Benefits prior to
the approval by the shareholders of the Company shall be void
if such approval is not obtained.
1
<PAGE> 25
(j) Employee. Any person employed by the Employer.
(k) Employer. The Company and all Subsidiaries.
(l) Exchange Act. The Securities Exchange Act of 1934, as amended.
(m) Fair Market Value. The last reported sale price, regular way,
of the Shares on any day or, in case no such reported sale
takes place on such day, the average of the reported closing
bid and asked prices, regular way, in either case on the
principal national securities exchange on which the Shares are
listed or if the Shares are not listed on a national
securities exchange and are listed on the Nasdaq Stock Market,
the sale price determined in the same fashion or, if the
Shares are not so listed on any of the foregoing, the average
of the bid and asked prices on such day as furnished by
dealers in the Shares in the over-the-counter market. All
calculations of the current market price shall be made to the
nearest cent.
(n) Fiscal Year. The taxable year of the Company which ends on the
Saturday closest to December 31 of each year.
(o) ISO. An Incentive Stock Option as defined in Section 422 of
the Code.
(p) NQSO. A Non-Qualified Stock Option, which is an Option that
does not qualify as an ISO.
(q) Option. An option to purchase Shares granted under the Plan.
(r) Other Stock Based Award. An award under ARTICLE XVII that is
valued in whole or in part by reference to, or is otherwise
based on, Common Stock.
(s) Participant. A person who is granted a Benefit under the Plan.
Benefits may be granted only to Employees, employees and
owners of entities which are not Subsidiaries but which have a
direct or indirect ownership interest in an Employer or in
which an Employer has a direct or indirect ownership interest,
persons who, and employees and owners of entities which, are
customers and suppliers of an Employer, persons who, and
employees and owners of entities which, render services to an
Employer, and persons who, and employees and owners of
entities, which have ownership or business affiliations with
any persons or entity previously described.
(t) Performance Share. A Share awarded to a Participant under
ARTICLE XVI of the Plan.
(u) Plan. The HEARx Ltd. 1995 Flexible Stock Plan and all
amendments and supplements to it.
(v) Restricted Stock. Shares issued under ARTICLE XV of the Plan.
(w) Rule 16b-3. Rule 16b-3 promulgated by the SEC pursuant to
Section 16(b) of the Exchange Act, as such rule may be
amended, or any successor rule in effect from time to time.
(x) SEC. The Securities and Exchange Commission.
(y) Share. A share of Common Stock.
2
<PAGE> 26
(z) SAR. A Stock Appreciation Right, which is the right to receive
an amount equal to the appreciation, if any, in the Fair
Market Value of a Share from the date of the grant of the
right to the date of its payment.
(aa) Subsidiary. Any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of
grant of an Option or other Benefit, each of the corporations,
other than the last corporation in the unbroken chain, owns
stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in such chain.
2.2 Other Definitions. In addition to the above definitions, certain words
and phrases used in the Plan and any Agreement may be defined in other
portions of the Plan or in such Agreement.
2.3 Conflicts in Plan. In the case of any conflict in the terms of the Plan
relating to a Benefit, the provisions in the ARTICLE of the Plan which
specifically grants such Benefit shall control those in a different
ARTICLE.
ARTICLE III - COMMON STOCK
3.1 Number of Shares. The number of Shares which could be issued or sold or
for which Options, SARs or Performance Shares could be granted under
the Plan was initially 250,000 Shares (adjusted after the 1999
ten-for-one reverse stock split). Such number of shares increased
annually, by virtue of the terms of this Plan as originally adopted, by
a number of Shares equal to 10% of the number of Shares subject to the
Plan during the preceding Fiscal Year. Subject to approval of the
Company's stockholders at the 2000 annual meeting of stockholders, the
number of Shares which may be issued or sold or for which Options, SARs
or Performance Shares may be granted under the Plan shall be increased
by 500,000 Shares effective for Fiscal Year 2000. Thereafter, the
number of Shares shall increase annually, effective as of the first day
of each Fiscal Year, by a number of Shares equal to 10% of the total
number of Shares subject to the Plan during the preceding Fiscal Year.
Such Shares may be authorized but unissued Shares, Shares held in the
treasury, or both.
3.2 Reusage. If an Option or SAR expires or is terminated, surrendered, or
canceled without having been fully exercised, if Restricted Shares or
Performance Shares are forfeited, or if any other grant results in any
Shares not being issued, the Shares covered by such Option or SAR,
grant of Restricted Shares, Performance Shares or other grant, as the
case may be, shall again be available for use under the Plan, to the
fullest extent permitted under Rule 16b-3.
3.3 Adjustments. If there is any change in the Common Stock of the Company
by reason of any stock dividend, spin-off, split-up, spin-out,
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares, the number of SARs and number and class of shares
available for Options and grants of Restricted Stock, Performance
Shares and Other Stock Based Awards and the number of Shares subject to
outstanding Options, SARs, grants of Restricted Stock and Performance
Shares which are not vested, and Other Stock Based Awards, and the
price thereof, as applicable, shall be appropriately adjusted by the
Committee.
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ARTICLE IV - ELIGIBILITY
4.1 Determined By Committee. The Participants and the Benefits they receive
under the Plan shall be determined solely by the Committee. In making
its determinations, the Committee shall consider past, present and
expected future contributions of Participants and potential
Participants to the Employer, including, without limitation, the
performance of, or the refraining from the performance of, services.
ARTICLE V - ADMINISTRATION
5.1 Committee. The Plan shall be administered by the Committee. The
Committee shall consist of the full Board of Directors or, if
determined by the full Board, of two or more members of the Board who
are "Non-Employee Directors" as defined in Rule 16b-3. The members of
the Committee shall be appointed by and shall serve at the pleasure of
the Board, which may from time to time appoint members in substitution
for members previously appointed and fill vacancies, however caused, in
the Committee. The Committee may select one of its members as its
Chairman and shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by
a majority of the members shall be fully as effective as if it had been
made by a majority vote at a meeting duly called and held.
5.2 Authority. Subject to the terms of the Plan, the Committee shall have
discretionary authority to: (a) determine the individuals to whom
Benefits are granted, the type and amounts of Benefits to be granted
and the time of all such grants; (b) determine the terms, conditions
and provisions of, and restrictions relating to, each Benefit granted;
(c) interpret and construe the Plan and all Agreements; (d) prescribe,
amend and rescind rules and regulations relating to the Plan; (e)
determine the content and form of all Agreements; (f) determine all
questions relating to Benefits under the Plan; (g) maintain accounts,
records and ledgers relating to Benefits; (h) maintain records
concerning its decisions and proceedings; (i) employ agents, attorneys,
accountants or other persons for such purposes as the Committee
considers necessary or desirable; (j) take, at any time, any action
permitted by Section 9.1 irrespective of whether any Change of Control
has occurred or is imminent; and (k) do and perform all acts which it
may deem necessary or appropriate for the administration of the Plan
and carry out the purposes of the Plan.
5.3 Delegation. Except as required by Rule 16b-3 with respect to grants of
Options, Stock Appreciation Awards, Performance Shares, Other Stock
Based Awards, or other Benefits to individuals who are subject to
Section 16 of the Exchange Act or as otherwise required for compliance
with Rule 16b-3 or other applicable law, the Committee may delegate all
or any part of its authority under the Plan to any Employee, Employees
or committee.
5.4 Adjudication of Claims. The Committee shall have discretionary
authority to make all determinations as to the right to Benefits under
the Plan. In the event that a Participant believes he has not received
the Benefits to which he is entitled under the Plan, a claim shall be
made in writing to the Committee. The claim shall be reviewed by the
Committee. If the claim is approved or denied, in full or in part, the
Committee shall provide a written notice of approval or denial within
90 days with, in the case of a denial, the specific reasons for the
denial and specific reference to the provisions of the Plan and/or
Agreement upon which the denial is based. A claim shall be deemed
denied if the Committee does not take any action within the aforesaid
90 day period. If a claim is denied or deemed denied and a review is
desired, the Participant shall notify the Committee in writing within
60 days of the receipt of notice of denial or the date on which the
claim is deemed to be denied, as the case may be. In requesting a
review, the Participant may review the Plan or any document relating to
it
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and submit any written issues and comments he may deem appropriate. The
Committee shall then review the claim and provide a written decision
within 60 days. This decision, if adverse to the Participant, shall
state the specific reasons for the decision and shall include reference
to specific provisions of the Plan and/or Agreement on which the
decision is based. The Committee's decision on review shall be final.
ARTICLE VI - AMENDMENT
6.1 Power of Board. Except as hereinafter provided, the Board shall have
the sole right and power to amend the Plan at any time and from time to
time.
6.2 Limitation. The Board may not amend the Plan, without approval of the
shareholders of the Company: (a) in a manner which would cause Options
which are intended to qualify as ISOs to fail to qualify; (b) in a
manner which would cause the Plan to fail to meet the requirements of
Rule 16b-3; or (c) in a manner which would violate applicable law.
ARTICLE VII - TERM AND TERMINATION
7.1 Term. The Plan shall commence as of the Effective Date and, subject to
the terms of the Plan, including those requiring approval by the
shareholders of the Company and those limiting the period over which
ISOs or any other Benefits may be granted, shall continue in full force
and effect until terminated.
7.2 Termination. The Plan may be terminated at any time by the Board.
ARTICLE VIII - MODIFICATION OR TERMINATION OF BENEFITS
8.1 General. Subject to the provisions of Section 8.2, the amendment or
termination of the Plan shall not adversely affect a Participant's
right to any Benefit granted prior to such amendment or termination.
8.2 Committee's Right. Any Benefit granted may be converted, modified,
forfeited or canceled, in whole or in part, by the Committee if and to
the extent permitted in the Plan or applicable Agreement or with the
consent of the Participant to whom such Benefit was granted.
ARTICLE IX - CHANGE OF CONTROL
9.1 Right of Committee. In order to maintain a Participant's rights in the
event of a Change of Control, the Committee, in its sole discretion,
may, in any Agreement evidencing a Benefit, or at any time prior to, or
simultaneously with or after a Change in Control, provide such
protection as it may deem necessary. Without, in any way, limiting the
generality of the foregoing sentence or requiring any specific
protection, the Committee may:
(a) provide for the acceleration of any time periods relating to
the exercise or realization of such Benefit so that such
Benefit may be exercised or realized in full on or before a
date fixed by the Committee;
(b) provide for the purchase of such Benefit, upon the
Participant's request, for an amount of cash equal to the
amount which could have been attained upon the exercise or
realization of such Benefit had such Benefit been currently
exercisable or payable;
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<PAGE> 29
(c) make such adjustment to the Benefits then outstanding as the
Committee deems appropriate to reflect such transaction or
change; and/or
(d) cause the Benefits then outstanding to be assumed, or new
Benefits substituted therefor, by the surviving corporation in
such change.
ARTICLE X - AGREEMENTS AND CERTAIN BENEFITS
10.1 Grant Evidenced by Agreement. The grant of any Benefit under the Plan
may be evidenced by an Agreement which shall describe the specific
Benefit granted and the terms and conditions of the Benefit. The
granting of any Benefit shall be subject to, and conditioned upon, the
recipient's execution of any Agreement required by the Committee.
Except as otherwise provided in an Agreement, all capitalized terms
used in the Agreement shall have the same meaning as in the Plan, and
the Agreement shall be subject to all of the terms of the Plan.
10.2 Provisions of Agreement. Each Agreement shall contain such provisions
that the Committee shall determine to be necessary, desirable and
appropriate for the Benefit granted which may include, but not be
limited to, the following with respect to any Benefit: description of
the type of Benefit; the Benefit's duration; its transferability; if an
Option, the exercise price, the exercise period and the person or
persons who may exercise the Option; the effect upon such Benefit of
the Participant's death or termination of employment; the Benefit's
conditions; when, if, and how any Benefit may be forfeited, converted
into another Benefit, modified, exchanged for another Benefit or
replaced; and the restrictions on any Shares purchased or granted under
the Plan.
10.3 Certain Benefits. Any Benefit granted to an individual who is subject
to Section 16 of the Exchange Act shall be not transferable other than
by will or the laws of descent and distribution and shall be
exercisable during his lifetime only by him, his guardian or his legal
representative.
ARTICLE XI - REPLACEMENT AND TANDEM AWARDS
11.1 Replacement. The Committee may permit a Participant to elect to
surrender a Benefit in exchange for a new Benefit.
11.2 Tandem Awards. Awards may be granted by the Committee in tandem.
However, no Benefit may be granted in tandem with an ISO except SARs.
ARTICLE XII - PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING
12.1 Payment. Upon the exercise of an Option or in the case of any other
Benefit that requires a payment to the Company, the amount due the
Company is to be paid:
(a) in cash;
(b) by the tender to the Company of Shares owned by the optionee
and registered in his name having a Fair Market Value equal to
the amount due to the Company;
(c) in other property, rights and credits, including the
Participant's promissory note; or
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<PAGE> 30
(d) by any combination of the payment methods specified in (a),
(b) and (c) above.
Notwithstanding the foregoing, any method of payment other than (a) may
be used only with the consent of the Committee or if and to the extent
so provided in an Agreement. The proceeds of the Sale of Common Stock
purchased pursuant to an Option and any payment to the Company for
other Benefits shall be added to the general funds of the Company or to
the Shares held in treasury, as the case may be, and used for the
corporate purposes of the Company as the Board shall determine.
12.2 Dividend Equivalents. Grants of Benefits in Shares or Share equivalents
may include dividend equivalent payments or dividend credit rights.
12.3 Deferral. The right to receive any Benefit under the Plan may, at the
request of the Participant, be deferred for such period and upon such
terms as the Committee shall determine, which may include crediting of
interest on deferrals of cash and crediting of dividends on deferrals
denominated in Shares.
12.4 Withholding. The Company, at the time any distribution is made under
the Plan, whether in cash or in Shares, may withhold from such
distribution any amount necessary to satisfy federal, state and local
income tax withholding requirements with respect to such distribution.
Such withholding shall be in cash or, in the Committee's sole
discretion, Shares.
ARTICLE XIII - OPTIONS
13.1 Types of Options. It is intended that both ISOs and NQSOs may be
granted by the Committee under the Plan.
13.2 Grant of ISOs and Option Price. Each ISO must be granted to an Employee
and granted within ten years from the Effective Date. The purchase
price for Shares under any ISO shall be no less than the Fair Market
Value of the Shares at the time the Option is granted.
13.3 Other Requirements for ISOs. The terms of each Option which is intended
to qualify as an ISO shall meet all requirements of Section 422 of the
Code.
13.4 NQSOs. The terms of each NQSO shall provide that such Option will not
be treated as an ISO. The purchase price for Shares under any NQSO
shall be the Fair Market Value of the Shares at the time the Option is
granted.
13.5 Determination by Committee. Except as otherwise provided in Section
13.2 through Section 13.5, the terms of all Options shall be determined
by the Committee.
ARTICLE XIV - SARS
14.1 Grant and Payment. The Committee may grant SARs. Upon electing to
receive payment of a SAR, a Participant shall receive payment in cash,
in Common Stock, or in any combination of cash and Common Stock, as the
Committee shall determine.
14.2 Grant of Tandem Award. The Committee may grant SARs in tandem with an
Option, in which case: the exercise of the Option shall cause a
correlative reduction in SARs standing to a Participant's credit which
were granted in tandem with the Option; and the payment of SARs shall
cause a correlative reduction of the Shares under such Option.
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14.3 ISO Tandem Award. When SARs are granted in tandem with an ISO, the SARs
shall have such terms and conditions as shall be required for the ISO
to qualify as an ISO.
14.4 Payment of Award. SARs shall be paid, to the extent payment is elected
by the Participant (and is otherwise due and payable), as soon as
practicable after the date on which such election is made.
ARTICLE XV - RESTRICTED STOCK
15.1 Description. The Committee may grant Benefits in Shares available under
ARTICLE III of the Plan as Restricted Stock. Shares of Restricted Stock
shall be issued and delivered at the time of the grant but shall be
subject to forfeiture until provided otherwise in the applicable
Agreement or the Plan. Each certificate representing Shares of
Restricted Stock shall bear a legend referring to the Plan and the risk
of forfeiture of the Shares and stating that such Shares are
nontransferable until all restrictions have been satisfied. The grantee
shall be entitled to full voting and dividend rights with respect to
all shares of Restricted Stock from the date of grant.
15.2 Cost of Restricted Stock. Grants of Shares of Restricted Stock shall be
made at no cost to the Participant.
15.3 Non-Transferability. Shares of Restricted Stock shall not be
transferable until after the removal of the legend with respect to such
Shares.
ARTICLE XVI - PERFORMANCE SHARES
16.1 Description. Performance Shares are the right of an individual to whom
a grant of such Shares is made to receive Shares or cash equal to the
Fair Market Value of such Shares at a future date in accordance with
the terms of such grant. Generally, such right shall be based upon the
attainment of targeted profit and/or performance objectives.
16.2 Grant. The Committee may grant an award of Performance Shares. The
number of Performance Shares and the terms and conditions of the grant
shall be set forth in the applicable Agreement.
ARTICLE XVII - OTHER STOCK BASED AWARDS AND OTHER BENEFITS
17.1 Other Stock Based Awards. The Committee shall have the right to grant
Other Stock Based Awards which may include, without limitation, the
grant of Shares based on certain conditions, the payment of cash based
on the performance of the Common Stock, and the grant of securities
convertible into Shares.
17.2 Other Benefits. The Committee shall have the right to provide types of
Benefits under the Plan in addition to those specifically listed, if
the Committee believes that such Benefits would further the purposes
for which the Plan was established.
ARTICLE XVIII - MISCELLANEOUS PROVISIONS
18.1 Underscored References. The underscored references contained in the
Plan are included only for convenience, and they shall not be construed
as a part of the Plan or in any respect affecting or modifying its
provisions.
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18.2 Number and Gender. The masculine and neuter, wherever used in the Plan,
shall refer to either the masculine, neuter or feminine; and, unless
the context otherwise requires, the singular shall include the plural
and the plural the singular.
18.3 Governing Law. This Plan shall be construed and administered in
accordance with the laws of the State of Delaware.
18.4 Purchase for Investment. The Committee may require each person
purchasing Shares pursuant to an Option or other award under the Plan
to represent to and agree with the Company in writing that such person
is acquiring the Shares for investment and without a view to
distribution or resale. The certificates for such Shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for Shares delivered under
the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under all applicable
laws, rules and regulations, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate
references to such restrictions.
18.5 No Employment Contract. The adoption of the Plan shall not confer upon
any Employee any right to continued employment nor shall it interfere
in any way with the right of the Employer to terminate the employment
of any of its Employees at any time.
18.6 No Effect on Other Benefits. The receipt of Benefits under the Plan
shall have no effect on any benefits to which a Participant may be
entitled from the Employer, under another plan or otherwise, or
preclude a Participant from receiving any such benefits.
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<PAGE> 33
<TABLE>
<S> <C>
1. To approve an amendment to the Company's Amended and Restated Certificate of Incorporation to provide for the classification of
the Board of Directors into three classes.
FOR { } AGAINST { } ABSTAIN { }
2. The election of the following FOR all nominees { } WITHHOLD AUTHORITY to vote { } *EXCEPTIONS { }
nominees as directors of the listed below for all nominees listed below
Company.
Nominees: Paul A. Brown, M.D., Stephen J. Hansbrough, Thomas W. Archibald, David J. McLachlan and Joseph L. Gitterman III.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)
*Exceptions
-----------------------------------------------------------------------------------------------------------------------
3. To approve an amendment to the Company's 1995 Flexible Stock Plan to increase the number of shares of common stock available
under the Plan.
FOR { } AGAINST { } ABSTAIN { }
4. The transaction of such other business as may properly come before the meeting and any and all adjournments thereof.
Change of Address and { }
Or Comments Mark Here
(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.)
Date: , 2000
--------------------------------------
--------------------------------------------------
Signature(s) of Stockholder(s)
--------------------------------------------------
Signature(s) of Stockholder(s)
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
PLEASE DATE, SIGN AND MAIL THIS PROXY
PROMPTLY IN THE ENCLOSED REPLY ENVELOPE
</TABLE>
<PAGE> 34
HEARX LTD.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING TO BE HELD ON JUNE 6, 2000
The undersigned stockholder(s) of HEARx Ltd. ("Company") hereby
appoint(s) Paul A. Brown, M.D., and Stephen J. Hansbrough, 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 Crowne Plaza, 1601 Belvedere Road, West Palm
Beach, Florida 33406 on Tuesday June 6, 2000 at 10:00 A.M., Eastern Time, and
any and all adjournments thereof, on the following matters.
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 APPROVAL OF AMENDMENTS TO THE COMPANY'S AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF
DIRECTORS, FOR THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED ON THE REVERSE
SIDE, FOR THE PROPOSED AMENDMENT TO THE COMPANY'S 1995 FLEXIBLE STOCK PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE PLAN 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.
HEARx Ltd.
P.O. Box 11319
New York, N.Y. 10203-0319
(Continued and to be SIGNED on the reverse side)
