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EXHIBIT A
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the
26th day of January, 1996 by and among HEARx Ltd., a Delaware corporation (the
"Company"), Invemed Associates, Inc., a New York corporation ("Invemed") and
the investors listed on Schedule A hereto (each, together with Invemed, an
"Investor" and collectively the "Investors").
In consideration of the mutual promises made herein, the
parties hereto agree as follows:
1. Definitions. The following terms, as used herein, have the
following meanings:
1.1 "Affiliate" means, with respect to any person, any
other person which directly or indirectly controls, is controlled by, or is
under common control with, such Person.
1.2 "Agreements" means this Agreement, the Registration
Rights Agreement and the Sell Along Rights Agreement.
1.3 "Closing" means the consummation of the transaction
contemplated by this Agreement, which shall occur simultaneously with the
execution hereof.
1.4 "Common Stock" means the Common Stock, par value
$0.10 per share, of the Company.
1.5 "Invemed Warrants" means warrants to purchase up to
2,250,000 shares of Common Stock at an exercise price of $0.63 per share,
exercisable for a period of five years from the date of issuance, the form of
which is attached hereto as Exhibit D.
1.6 "Investor Warrants" means Class A Warrants to
purchase up to an aggregate of 10,909,090 shares of Common Stock at an exercise
price of $0.55 per share, exercisable for a period of five years from the date
of issuance, the form of which is attached hereto as Exhibit E-1; and Class B
Warrants to purchase up to an aggregate of 4,000,000 shares of Common Stock at
an exercise price of $0.55 per share, exercisable for a period of one year
beginning on the fourth anniversary of the date of this Agreement and
non-detachable from the 1996 Preferred Stock until exercisable, the form of
which is attached hereto as Exhibit E-2.
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1.7 "Material Adverse Effect" means a material adverse
effect on the condition (financial or otherwise), business, assets, results of
operations or prospects of the Company and its subsidiaries, taken as a whole.
1.8 "Person" means an individual, corporation,
partnership, trust, business trust, association, joint stock company, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically listed
herein.
1.9 "1996 Preferred Stock" means the 1996 Senior
Preferred Stock, par value $1.00 per share, of the Company, having the rights
and preferences and subject to the terms and conditions stated in the
Certificate of Designation, Preferences and Rights of 1996 Senior Preferred
Stock of even date herewith, attached hereto as Exhibit A.
1.10 "Registration Rights Agreement" means the
Registration Rights Agreement relating to the Common Stock issuable pursuant to
the exercise of the Warrants, in the form attached hereto as Exhibit B, to be
entered into as of the date hereof.
1.11 "SEC Filings" has the meaning set forth in Section
3.5.
1.12 "Securities" means the 1996 Preferred Stock, the
Warrants and the Common Stock issuable upon the exercise of Warrants.
1.13 "Sell Along Rights Agreement" means the Sell Along
Rights Agreement to be entered into pursuant to Section 6.2 hereof, in the form
attached hereto as Exhibit C, to be entered into as of the date hereof.
1.14 "Warrants" means the Invemed Warrants and the Investor
Warrants.
1.15 "1934 Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
1.16 "1933 Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of 1996 Preferred Stock and Warrants and
Issuance of Invemed Warrants. Subject to the terms and conditions of this
Agreement, the Investors hereby purchase and the Company hereby sells and
issues to the Investors 6,000 shares of 1996 Preferred Stock and the Investor
Warrants at an aggregate purchase price of $6,000,000, the receipt of which is
hereby acknowledged. Furthermore, the Company hereby issues the Invemed
Warrants to Invemed and the officers and employees of Invemed and the
shareholders of Invemed's parent corporation, all as set forth in Schedule A
hereto (each of whom, together with Invemed shall also be considered an
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"Investor" for purposes of this Agreement), in consideration for services that
have been provided by Invemed in connection with this transaction. The
respective numbers of shares of Preferred Stock and shares underlying the
Investor Warrants, and the consideration paid therefor, and the respective
numbers of shares underlying Invemed Warrants with respect to each Investor is
set forth in Schedule A.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investors that:
3.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to carry on its business as now conducted. The copies of the
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
and By- Laws, as amended (the "By-Laws") of the Company delivered to the
Investors are true and complete and have not, since the respective dates of
such Certificate of Incorporation, and By-Laws, been amended or repealed
(except for the Certificate of Designations, Preferences and Rights of 1996
Senior Preferred Stock in the form set forth as Exhibit A to this Agreement
which was not included therein and is filed concurrently herewith with the
Secretary of State of the State of Delaware). The Company and each of its
subsidiaries is duly qualified as a foreign corporation in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification necessary unless the failure to so
qualify would not have a Material Adverse Effect.
3.2 Authorization. All requisite action on the part of
the Company, its officers, directors and stockholders necessary for (i) the
authorization, execution and delivery of this Agreement and the Registration
Rights Agreement, (ii) the performance of all obligations of the Company
hereunder or thereunder and (iii) the authorization, issuance (or reservation
for issuance) and delivery of the Securities has been taken, and this Agreement
and the Registration Rights Agreement constitute the valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
their terms.
3.3 Valid Issuance; Fully Diluted Common Stock Before
Closing.
(i) The authorized capital stock, and the
outstanding capital stock, of the Company consists, in each case immediately
prior to the Closing, solely of the shares indicated in part 1 of Exhibit F to
this Agreement. Immediately following the sale to the Investors at the Closing
contemplated hereby, the authorized capital stock, and the outstanding capital
stock, of the Company will consist in each case solely of the shares indicated
in part 2 of Exhibit F to this Agreement. The voting powers, designations,
preferences and relative, participating, optional and other rights of the 1996
Preferred Stock, and the qualifications, limitations or restrictions thereof are
as fully set forth in Exhibit A to this Agreement. All of the outstanding
shares of capital stock
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indicated in part 2 of Exhibit F are duly authorized and are fully paid and
nonassessable and, assuming the representations of the Investors in Sections
4.3, 4.6 and 4.9 of this Agreement are correct, issued in compliance with all
applicable securities laws. Except as set forth in part 3 of Exhibit F, no one
is entitled to preemptive or similar statutory or contractual rights with
respect to any securities of the Company. All necessary and appropriate
waivers of stockholders with respect to the consummation of the transactions
and the performance of the obligations of the Company contemplated hereby have
been obtained, and the Company shall promptly obtain any necessary waivers not
heretofore obtained. Except as disclosed in part 4 of Exhibit F to this
Agreement, there are no outstanding warrants, options, convertible securities
or other rights, agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any kind, or
to transfer any equity securities of any kind, and the Company and its
subsidiaries do not have any present plan or intention to issue any equity
securities of any kind, or to transfer any equity securities of any kind owned
by them. Except as disclosed in part 5 of Exhibit F, the Company does not know
of any voting agreements, buy-sell agreements, option or right of first
purchase agreements or other agreements of any kind among any of the
securityholders of the Company relating to the securities held by them. The
Company has not agreed, and has no present intention, to register any of its
securities under the Securities Act of 1933, as amended, except as provided in
the agreements listed in part 6 of Exhibit F.
(ii) The number of outstanding shares of Common
Stock immediately prior to the Closing, as indicated in part 1 of Exhibit F of
this Agreement, plus the number of shares of Common Stock issuable pursuant to
outstanding rights and agreements on a fully diluted basis immediately prior to
the Closing, assuming the complete exercise or conversion of all rights to
acquire capital stock of the Company until such rights and subsequent rights
incident to exercise or conversion are fully exercised or converted for Common
Stock, together represent less than 75 million shares of Common Stock
immediately prior to the Closing.
3.4 Governmental Consents. The execution, delivery and
performance by the Company of the Agreements require no action by or in respect
of, or filing with, any governmental body, agency, or official other than
filings that have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws,
which the Company undertakes to file within the applicable time periods.
3.5 Delivery of SEC Filings. The Company has delivered
or made available to the Investors (i) its Annual Report on Form 10-K for its
fiscal year ended December 31, 1994, (ii) its quarterly reports on Form 10-Q
for each fiscal quarter subsequent to that fiscal year end, and (iii) any other
documents filed with the Securities and Exchange Commission (the "SEC") since
December 31, 1994 (collectively, the "SEC Filings").
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3.6 Use of Proceeds. The proceeds of the sale of the
Securities hereunder shall be used by the Company for the build-out and opening
of hearing care centers in the New York area to comply with the Company's
agreement with Oxford Healthcare, completion and installation of the Company's
point-of-sale and database management system, retirement of debt listed in
Schedule 3.6 hereto and general corporate purposes.
3.7 No Material Adverse Change. Except as set forth in
Schedule 3.7, since September 30, 1995, there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995, except changes in
the ordinary course of business which have not had, in the aggregate, a
Material Adverse Effect;
(ii) any declaration or payment of any dividend,
or any authorization or payment of any distribution, on any of the capital
stock of the Company, or any redemption or repurchase of any securities of the
Company;
(iii) any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of the Company
or any of its subsidiaries;
(iv) any waiver by the Company or any of its
subsidiaries of a valuable right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien,
claim or encumbrance or payment of any obligation by the Company or any of its
subsidiaries, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating results or
business of the Company and its subsidiaries taken as a whole (as such business
is presently conducted and as it is proposed to be conducted);
(vi) any material change or amendment to a
material contract or arrangement by which the Company or any of their
subsidiaries or any of its assets or properties is bound or subject;
(vii) any material change in any compensation
arrangement or agreement with any employee of the Company or any of its
subsidiaries who now earns, or who would earn as a result of such change, in
excess of $100,000 per annum or any other officer of the Company or any of its
subsidiaries;
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(viii) any labor difficulties or labor union
organizing activities with respect to employees of the Company or any of its
subsidiaries;
(ix) any transaction entered into by the Company
or any of its subsidiaries other than in the ordinary course of business; or
(x) any other event or condition of any
character which might have a Material Adverse Effect, which is not reflected in
the SEC Filings.
3.8 SEC Filings; Material Contracts. (i) As of its
filing date, each report filed by the Company with the SEC pursuant to the 1934
Act, complied as to form in all material respects with the requirements of the
1934 Act and did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(ii) Each registration statement and any amendment thereto
filed by the Company pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and each prospectus filed pursuant to Rule 424(b) under the
1933 Act, as of its issue date and as of the closing of any sale or securities
pursuant thereto did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(iii) Except as listed in Schedule 3.8 hereto, there are no
agreements or instruments currently in force and effect that constitute a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K) of the Company or that constitute a warrant, option, convertible security
or other right, agreement or arrangement of any character under which the
Company is or may be obligated to issue any equity security of any kind, or to
transfer any equity security of any kind. The Company has delivered to the
Investors prior to the Closing full and complete copies of all agreements
indicated in Schedule 3.8 hereto.
3.9 Reservation of Shares. The Company has reserved a
sufficient number of shares of Common Stock for issuance upon exercise of the
Warrants, and such shares, when issued in accordance with the terms of the
Warrants, will be duly authorized, validly issued, fully paid, non-assessable
and free and clear of all encumbrances and restrictions, except for
restrictions on transfer imposed by applicable securities laws.
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3.10 Disclosures. No representation or warranty made
under any Section hereof and no information furnished by the Company pursuant
hereto, or in any other document delivered by the Company to an Investor or any
authorized representative of an Investor, pursuant to the Agreements or in
connection therewith contains any untrue statement of a material fact or omits
to state a material fact necessary to make the respective statements contained
herein or therein, in light of the circumstances under which the statements
were made, not misleading.
3.11 Registration Rights. The registration rights granted
to the Investors pursuant to the Registration Rights Agreement are at least as
favorable to the Investors as those granted to any holder of any securities of
the Company are to such holder.
3.12 No Breach, Violation or Default. The execution,
delivery and performance of this Agreement and the Registration Rights
Agreement and the issuance and sale of the Securities will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation (assuming, for this purpose,
that the representations of the Investors in Sections 4.3, 4.6 and 4.9 are
correct) or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the Company
or any such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company or any
such subsidiary is subject, or the Certificate of Incorporation or By- Laws of
the Company or any such subsidiary.
3.13 Title to Properties. Except as disclosed in the SEC
Filings, the Company and its subsidiaries have good and marketable title to all
real properties and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or currently planned to
be made thereof by them; and except as disclosed in the SEC Filings, the
Company and its subsidiaries hold any leased real or personal property under
valid and enforceable leases with no exceptions that would materially interfere
with the use made or currently planned to be made thereof by them.
3.14 Certificates, Authorities and Permits. The Company
and its subsidiaries possess adequate certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to conduct the
business now operated by them and have not received any notice of proceedings
relating to the revocation or modification of any such certificate, authority
or permit that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect.
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3.15 No Labor Disputes. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent that might have a Material Adverse Effect.
3.16 Intellectual Property. The Company and its
subsidiaries own, possess or can acquire on reasonable terms, adequate
trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property
(collectively, "Intellectual Property Rights") necessary to conduct the
business now operated by them, or presently employed by them, and have not
received any notice of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property Rights that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect.
3.17 Environmental Matters. Neither the Company nor any
of its subsidiaries is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), owns or operates any real property contaminated with any substance that
is subject to any Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability
or claim would individually or in the aggregate have a Material Adverse Effect;
and the Company is not aware of any pending investigation which might lead to
such a claim.
3.18 Litigation. Except as disclosed in the SEC Filings,
there are no pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect or would
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, or which are otherwise material in the
context of the sale of the Securities; and to the Company's knowledge, no such
actions, suits or proceedings are threatened or contemplated.
3.19 Financial Statements. The financial statements
included in each SEC Filing present fairly the consolidated financial position
of the Company and its subsidiaries as of the dates shown and their
consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the generally
accepted accounting principles applied on a consistent basis.
3.20 Insurance Coverage. The Company and its subsidiaries
maintain insurance coverage that is standard for comparably situated companies
for the business being conducted, and properties owned or leased, by the
Company and its subsidiaries.
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4. Representations and Warranties of the Investors. Each of the
Investors hereby represents and warrants, as to itself only, to the Company
that:
4.1 Organization and Existence. If such Investor is a
corporation or partnership, such Investor is a validly existing corporation or
partnership and has all requisite corporate or partnership power and authority
to invest in the Securities of the Company pursuant to this Agreement.
4.2 Authorization. The execution, delivery and
performance by such Investor of the Agreements have been duly authorized. Upon
execution and delivery, the Agreements will each constitute the valid and
legally binding obligation of such Investor, enforceable against such Investor
in accordance with such agreement's terms.
4.3 Purchase Entirely for Own Account. The Securities to
be received by such Investor hereunder will be acquired for investment for the
Investor's own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same. By executing this Agreement, such
Investor further represents that subject to the following proviso, such
Investor does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to such person or to any
third person, with respect to any of the Securities; an Investor that is a
corporate entity may distribute Securities to its executive officers, directors
or shareholders or, in the case of Invemed, to its employees who are registered
representatives under the 1934 Act; an Investor that is a partnership may
distribute Securities to its partners; and Invemed may transfer Invemed
Warrants to its designee to serve on the Company's Board of Directors.
4.4 Investment Experience. Such Investor acknowledges
that it can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby.
4.5 Disclosure of Information. Such Investor has had an
opportunity to ask questions and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities.
4.6 Restricted Securities. Such Investor understands
that the Securities are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that it understands the resale limitations imposed by the
1933 Act.
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4.7 Further Limitations on Disposition. Without in any
way limiting the representations set forth above, each Investor further agrees
(except as otherwise set forth in Section 4.3) not to make any disposition of
all or any portion of the Securities unless and until:
(a) There is then in effect a registration
statement under the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(b) (i) Such Investor shall have notified the
Company of the proposed disposition, and (ii) if reasonably requested by the
Company, such Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company and its counsel, that such
disposition will not require registration of such shares under the 1933 Act.
This subsection shall be inapplicable to dispositions made pursuant to Rule
144.
4.8 Legends. It is understood that the certificates
evidencing the Securities may bear one or all of the following legends (until
such time as the Securities may be freely transferred pursuant to Rule 144(k),
at which time such legends shall be removed at the request of the Investor or
its assignee):
(a) "These securities have not been registered
under the Securities Act of 1933 (the "Act"). They may not be sold, offered
for sale, pledged or hypothecated in the absence of a registration statement in
effect with respect to the securities under the Act or an exemption from the
registration requirements of the Act."
(b) If required by the authorities of any state
in connection with the issuance of sale of the Securities, the legend required
by such state authority.
4.9 Accredited Investor. Such Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.
4.10 Confidentiality. Such Investor shall maintain in
confidence, and shall not use or disclose without the prior written consent of
the Company, any information clearly marked "confidential" that is furnished to
such Investor by the Company in connection with this Agreement. This
obligation of confidentiality shall not apply, however, to any information (a)
in the public domain through no act or failure to act by such Investor that was
not authorized in writing by the Company, or (b) lawfully disclosed to such
Investor by a third party who possessed such information without any obligation
of confidentiality to the Company.
4.11 Litigation. There is no action, suit, investigation
or proceeding pending against, or to the knowledge of such Investor, threatened
against or affecting, such Investor before any court or arbitrator or any
governmental body, agency or official
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which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement.
4A. Additional Representation and Warranty of Invemed. Invemed
hereby represents and warrants that (i) it is a registered broker-dealer under
the 1934 Act, and is similarly registered pursuant to the applicable securities
laws in the states of California, Connecticut, Florida, Georgia, New Jersey,
New York and Pennsylvania (the "Investor States"); (ii) Xxxxxx X. Xxxxxx and G.
Xxxxx Xxxxxx did not solicit any persons in connection with the offering of the
Securities and are not receiving Invemed Warrants in connection with soliciting
any persons in connection with the offering of the Securities; (iii) Xxxxxxx X.
Xxxxxxx and Xxxxxxxx X. Xxxxxx are registered representatives with the National
Association of Securities Dealers and hold similar qualifications in each of
the Investor States; and (iv) Carlisle Xxxxx is a registered representative
with the National Association of Securities Dealers and holds similar
qualifications in all of the Investor States other than Georgia, and did not
solicit any Georgia residents in connection with the offering of the
Securities.
5. Registration Rights Agreement. The parties acknowledge and
agree that part of the inducement for each Investor to enter into this
Agreement is the Company's execution and delivery of the Registration Rights
Agreement. The parties acknowledge and agree that simultaneously with the
execution hereof, the Registration Rights Agreement is being duly executed and
delivered by the parties thereto.
6. Other Covenants and Agreements.
6.1 Board of Directors Representation. The Company
hereby agrees that for so long as Invemed or any of its executive officers or
directors are the registered and beneficial owners of any Securities and prior
to redemption of all outstanding 1996 Preferred Stock, the Company will
nominate and use its best efforts to cause to be elected one designated
representative of Invemed to serve on the Company's Board of Directors. If
Invemed does not specify a nominee to the Company within 30 days of the
Closing, Invemed shall return to the Company Invemed Warrants to purchase
250,000 shares of Common Stock.
6.2 Limitation on Sales by Certain Management. Xx. Xxxx
X. Xxxxx (the Company's founder, Chief Executive Officer and Chairman of the
Board) hereby agrees that, in the event he proposes to transfer in one
transaction or a series of related transactions five percent (5%) of the shares
of the Company's Common Stock owned by him (other than sales effected on
Nasdaq, through the NASD Bulletin Board, or on a national securities exchange
pursuant to Rule 144 under the 1933 Act), Xx. Xxxxx shall permit the Investors
to sell the same proportionate number of shares of Common Stock held by the
Investors (and/or underlying the Investor Warrants that may then be exercised)
as Xx. Xxxxx shall sell for the same consideration and otherwise on the same
terms and conditions to be received by Xx. Xxxxx in the proposed sale. Xx.
Xxxxx and
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the Investors acknowledge and agree that simultaneously with the execution
hereof, they have duly executed a Sell Along Rights Agreement detailing the
parties respective rights and obligations in respect to this matter, as set
forth in Exhibit C attached hereto.
6.3 Return of Confidential Information. Each Investor
shall return to the Company information subject to Section 4.11 of this
Agreement upon request by the Company. Such Investor agrees that it will
restrict access to the Company's confidential information among its officers,
directors, partners, employees, agents and representatives to those persons
with a need to use such information.
6.4 Reverse Stock Split. The Company hereby agrees that
it shall effect a 1-for-15 reverse stock split of its Common Stock no later
than the next annual meeting of shareholders of the Company. In no event,
however, shall such meeting be held later than May 31, 1996.
6.5 No Dividends. The Company hereby agrees that it
shall not declare or pay any dividends prior to the redemption of all
outstanding 1996 Preferred Stock.
6.6 Opinion of Counsel. The Company has delivered,
simultaneously with the execution and delivery of this Agreement, the opinion
of Xxxxx Xxxx LLP, its counsel, in the form attached hereto as Exhibit G.
Within a reasonable time after the Closing, but in no event more than 60 days
after the date hereof, the Company shall deliver the opinion of Xxxxx Xxxx LLP
in the form attached hereto as Exhibit H.
6.7 Reservation of Common Stock Pursuant to Exercise of
Warrants. The Company hereby agrees to at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of permitting exercise of the Warrants, such number of shares of Common
Stock as shall from time to time be sufficient to permit the exercise of all
Warrants in accordance with the terms of the Warrants.
6.8 Relative Equity Interest Represented By the Warrants.
In entering into this Agreement, the Investors have relied upon, among other
things, the representation and warranty set forth in Section 3.3(ii) hereto
concerning the outstanding capital stock of the Company and rights to acquire
capital stock of the Company immediately prior to the Closing. In the event it
is later determined that the representation and warranty in Section 3.3(ii)
hereto is untrue and the sum expressed therein is greater than 75 million, the
Company shall notify each Investor within ten days of discovery and prepare,
execute and deliver to the Investors, within ten days thereafter, such
additional documents and certificates in order to equitably adjust the Warrants
for the benefit of the Investors. The adjustment referenced in the preceding
sentence shall involve the issuance of additional Warrants and/or the reduction
of the exercise price of the Warrants, which adjustment shall be approved in
writing by the holders of a majority of the Warrants.
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7. Survival.
7.1 Survival of Provisions. All representations,
warranties and agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements as of the date hereof and shall
survive the execution and delivery of this agreement for a period of five years
and six months from the date of this Agreement; provided, however, that the
provisions contained in Section 6 hereof shall survive in accordance therewith.
8. Miscellaneous.
8.1 Successors and Assigns. This Agreement may not be
assigned by either party without the prior written consent of the other party
hereto, except that without the prior written consent of the Company, but after
notice duly given, an Investor may assign its rights and delegate its duties
hereunder to an Affiliate or to any permitted assignee under Section 4.3, and
without the prior written consent of Investor, but after notice duly given, the
Company may assign its rights and delegate its duties hereunder to any
successor-in-interest corporation in the event of a merger or consolidation of
the Company with or into another corporation, or any merger or consolidation of
another corporation with or into the Company which results directly or
indirectly in an aggregate change in the ownership or control of more than 50%
of the voting rights of the equity securities of the Company, or the sale of
all or substantially all of the Company's assets. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.2 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.3 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.4 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified,
or if sent by telex or telecopier, upon receipt of the correct answer back, or
upon deposit with the United States Post Office, by registered or certified
mail, or upon deposit with an overnight air courier, in each case postage
prepaid and addressed to the party to be notified at the address as
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follows, or at such other address as such party may designate by ten days'
advance written notice to the other party:
If to the Company:
HEARx Ltd.
000 Xxxxxxx Xxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xx. Xxxx X. Xxxxx
with a copy to
Xxxxx Xxxx LLP
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: XxXxxx Xxxxxx, Esq.
If to the Investors:
Invemed Associates, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxx
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx, Esq.
8.5 Finder's Fee. Each party represents that (except for
the delivery by the Company of the Invemed Warrants pursuant to this Agreement)
it neither is nor will be obligated for any finder's fee or commission in
connection with this transaction.
8.6 Expenses. The Company shall pay all costs and
expenses incurred with respect to the negotiation, execution, delivery and
performance of the Agreements, including, without limitation, the fees of
Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to Invemed.
8.7 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least 66 2/3% of the
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15
Securities other than the Invemed Warrants (for this purpose, each share of
Preferred Stock shall be deemed to be 1,000 Securities and each share of Common
Stock underlying the Investor Warrants shall be deemed to be one Security).
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at
the time outstanding, each future holder of all such securities, and the
Company. Notwithstanding the foregoing, the provisions of Section 6.1 hereto
shall be amended only with the consent of the Company and Invemed.
8.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
8.9 Entire Agreement. This Agreement, including the
Exhibits and Schedules hereto, the Registration Rights Agreement and the Sell
Along Rights Agreement, constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter hereof and thereof.
8.10 Further Assurances. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.
8.11 Applicable Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of laws.
* * *
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company
HEARx LTD.
By:
--------------------------
Name: Xxxx X. Xxxxx, M.D.
Title: Chairman of the Board
Invemed INVEMED ASSOCIATES, INC.
By:
--------------------------
Name:
Title:
The Investors
-----------------------------
Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxx Erlbaum
-----------------------------
Xxxxxx Erlbaum
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17
The Investors
-----------------------------
Xxxxxx Xxxxxxxxx
-----------------------------
Xxxxx Xxxxxxx
-----------------------------
Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxxx
-----------------------------
Xxxxxx Xxxxxxxx
-----------------------------
Xxxxxxx Xxxxxxxxxxxxx
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18
-----------------------------
Xxxx X. Xxxxxxx
-----------------------------
Xxxxxxxx Xxxxxxx
-----------------------------
Xxxx Erlbaum
-----------------------------
Xxxxxxx Xxxxx
-----------------------------
Xxxx Xxxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxx
-----------------------------
Carlisle Xxxxx
-----------------------------
Xxxxxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxxx
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19
-----------------------------
Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxxxx Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxx
-----------------------------
Xxxxxxx Xxxxxx
-----------------------------
G. Xxxxx Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx Xxxxxxxxx
-----------------------------
Xxxx Xxxxxxx
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20
-----------------------------
Xxxxxx Xxxxx
-----------------------------
Xxxxxx X. Xxxxxxx
-----------------------------
Xxxxx X. Xxxxxxx
-----------------------------
Xxxxxx X. Xxxxxx
-----------------------------
Xxxx Xxxxxx
The undersigned joins in this Agreement
for the purpose of being bound by the
provisions of Section 6.2 hereof.
---------------------------------
Xxxx X. Xxxxx
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SCHEDULE A
# of Shares of # of Class A # of Class B # of Invemed
Amount 1996 Preferred Investor Investor Warrants
------ -------------- -------- -------- --------
Name Invested Stock Warrants Warrants
---- -------- ----- -------- --------
Xxxxxxx X. $1,000,000 1,000 1,818,182 666,667 1,359,150
Xxxxxxx
Xxxxxxx A. 258,000 258 469,092 172,000
Xxxxx
Xxxxxx M. Blank 150,000 150 272,727 100,000
Xxxxxxx Xxxxxx 250,000 250 454,546 166,667
Xxxxxx Xxxxxxxx 25,000 25 45,454 16,667
Carlisle Xxxxx 50,000 50 90,909 33,333 50,000
Xxxxx X. 100,000 100 181,818 66,667
Xxxxxxx
Xxxxxxxx H. 117,000 117 212,727 78,000 292,500
Xxxxxx
Xxxx Erlbaum 150,000 150 272,727 100,000
Xxxxxxx Erlbaum 50,000 50 90,909 33,333
Xxxxxx Erlbaum 50,000 50 90,909 33,333
Xxxxxx X. 100,000 100 181,818 66,667
Xxxxxx
Xxxx M. 50,000 50 90,909 33,333
Xxxxxxxx
Xxxxxx R. 25,000 25 45,454 16,667
Taussig and
Xxxxx X.
Xxxxxxx
Xxxxxxx X. 25,000 25 45,454 16,667
Xxxxxx
Xxxx X. Xxxxxxx 25,000 25 45,454 16,667
and Xxxxxxxx
Xxxxxxx
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# of Shares of # of Class A # of Class B # of Invemed
Amount 1996 Preferred Investor Investor Warrants
------ -------------- -------- -------- --------
Name Invested Stock Warrants Warrants
---- -------- ----- -------- --------
Xxxxxx X. Xxxxx 25,000 25 45,454 16,667
Xxxxxx 50,000 50 90,909 33,333
Xxxxxxxxx
Xxxxx Xxxxxxx 75,000 75 136,364 50,000
Xxxxxx X. 200,000 200 363,636 133,333
Xxxxxxx
Xxxx 1,000,000 1,000 1,818,182 666,667
Xxxxxxxxxxxxx
Xxxxxxx Xxxxx 50,000 50 90,909 33,333
Xxxx Xxxxxxxxx 250,000 250 454,546 166,667
Xxxxxxxxx 300,000 300 545,455 200,000
Xxxxxx
Xxxxxxx 35,000 35 63,636 23,333
Nechamkin
Xxxx Xxxxxxx 15,000 15 27,273 10,000
Xxxx Xxxxxx 20,000 20 36,364 13,333
Xxxxxx Xxxxx 1,540,000 1,540 2,800,000 1,026,666
Xxxxxxx X. Xxxx 15,000 15 27,273 10,000
Invemed
Associates, 250,000
Inc.
Xxxxxx X. 99,450
Xxxxxx
G. Xxxxx Xxxxxx 198,900
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SCHEDULE 3.6
INDEBTEDNESS TO BE REPAID BY THE COMPANY
WITH A PORTION OF THE OFFERING PROCEEDS
Creditor Name Amount of Debt
------------- --------------
Minnesota Mining and Manufacturing Company $308,000
Siemens Hearings Instruments, Inc. and Rexton, Inc. 200,000
(in the aggregate)
Dr. Xxxx Xxxxx 100,000
Xxxxx Xxxx LLP 100,000
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