THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
EXCEPT AS OTHERWISE SET FORTH HEREIN, NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT OR
AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
EXERCISABLE ON OR BEFORE 5:00 P.M.,
NEW YORK TIME, MARCH 17, 2002
No. 1997W-___
Right to Purchase $___________ Shares
of Common Stock, par value $.10 per share
HEARX LTD.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _________________ or its
registered assigns, is entitled to purchase from HEARx LTD., a Delaware
corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, _________(____) fully paid and nonassessable
shares of the Company's Common Stock, par value $.10 per share (the "Common
Stock"), at an exercise price equal to $5.00 per share ("Exercise Price"),
subject to the conditions set forth herein and in that certain Placement Agency
Agreement dated as of March 17, 1997 by and among the Company and Zanett
Securities, Inc. (the "Placement Agency Agreement"). The term "Warrant Shares,"
as used herein, refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof. The Warrant evidenced by this Warrant Certificate is part of
a duly authorized issue of warrants issued pursuant to the Placement Agency
Agreement. The term Warrants as used herein means this Warrant and the other
warrants issued pursuant to the Placement Agency Agreement.
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in
part, by the surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "Exercise Agreement"), to the Company
during normal business hours on any business day at the Company's principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), and upon (i) payment to the Company
in cash, by certified or official bank check or by wire transfer for the account
of the Company of the Exercise Price for the Warrant Shares specified in the
Exercise Agreement or (ii) if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), delivery to the
Company of a written notice of an election to effect a "Cashless Exercise" (as
defined in Paragraph 11(c) below) for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued
to the holder hereof or such holder's designee, as the record owner of such
shares, as of the close of business on the date on which this Warrant shall have
been surrendered (or evidence of loss, theft or destruction thereof), the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding two (2) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
Notwithstanding anything in this Warrant to the contrary, in no event
shall the Holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unconverted portion of the Preferred Stock) and
(ii) the number of shares of Common Stock issuable upon exercise of the Warrants
(or portions thereof) with respect to which the determination described herein
is being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder (collectively, "Section
13(d)"), except as otherwise provided in clause (i) thereof. The restriction
contained in the first sentence of this Paragraph 1 shall not be altered,
amended, deleted or changed in any manner whatsoever unless the holders of a
majority of the Company's Common Stock, voting as a separate class, and each
holder of Warrants shall approve such alteration, amendment, deletion or change.
2
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and before
5:00 p.m., New York City time on the fifth (5th) anniversary of the date of
issuance (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly
issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient number
of shares of Common Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon
each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to
official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so
list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be
listed on such national securities exchange or automated quotation
system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed by it hereunder, but will at all times in good faith assist
in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder
of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent
with the tenor and purpose of this Warrant. Without limiting the
generality of the foregoing, the Company (i) will not increase the par
value of any shares of Common Stock receivable upon the exercise of
this Warrant above the Exercise Price then in effect, and (ii) will
take all such actions as may be necessary or appropriate in order that
3
the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs
4(c) and 4(e) hereof, if and whenever on or after the date on which
this Warrant is issued, the Company issues or sells, or in accordance
with Paragraph 4(b) hereof is deemed to have issued or sold, any shares
of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market
Price (as hereinafter defined) on the date of issuance (a "Dilutive
Issuance"), then effective immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance by
a fraction, (i) the numerator of which is an amount equal to the sum of
(x) the number of shares of Common Stock Deemed Outstanding (as
hereinafter defined) immediately prior to the Dilutive Issuance, plus
(y) the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance,
divided by the Market Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of
shares of Common Stock Deemed Outstanding immediately after the
Dilutive Issuance.
4
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof,
the following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in
any manner issues or grants any warrants, rights or options,
whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or other securities convertible into or
exchangeable for Common Stock ("Convertible Securities") (such
warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the
Market Price on the date of issuance, then the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options will, as of the date of the issuance or grant
of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon the exercise of such
Options" is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration
for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Options,
plus, in the case of Convertible Securities issuable upon the
exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options) and
the price per share for which Common Stock is issuable upon
such conversion or exchange is less than the Market Price on
the date of issuance, then the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities will, as of the date of the
issuance of such Convertible Securities, be deemed to be
outstanding and to have been
5
issued and sold by the Company for such price per share. For
the purposes of the preceding sentence, the "price per share
for which Common Stock is issuable upon such conversion or
exchange" is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration
for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or exchange
thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a change at any time in (i) the amount of additional
consideration payable to the Company upon the exercise of any
Options; (ii) the amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed
conversion rate, as the case may be, at the time initially
granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of
shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is
not, in fact, issued and the rights to exercise such Option or
to convert or exchange such Convertible Securities shall have
expired or terminated, the Exercise Price then in effect will
be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock
issued upon exercise or conversion thereof), never been
issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible Securities are issued,
granted or sold for
6
cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor,
before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance,
grant or sale. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will
be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount
of consideration received by the Company will be the Market
Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in
connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of
Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the
exercise of any warrants, options or convertible securities
issued and outstanding as of the date which this Warrant is
issued; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any
employee benefit plan of the Company now existing or to be
implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority
of the members of a committee of independent directors
established for such purpose; or (iii) upon the exercise of
this Warrant or the other warrants issued pursuant to the
Placement Agency Agreement, or issuance or conversion of the
Company's 1996 Series B-1 Convertible Stock, 1996 Series B-2
Convertible Preferred Stock and 1997 Convertible Preferred
Stock.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the
shares of Common Stock acquirable hereunder into a greater number of
shares, then, after the date of record for effecting such subdivision,
the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced. If the Company at any time combines (by
reverse stock split, recapitalization, reorganization, reclassification
or otherwise) the shares of Common Stock acquirable hereunder into a
smaller number of shares, then, after the date of
7
record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately
increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the
number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of shares
of Common Stock issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into any
other corporation, or in case of any sale or conveyance of all or
substantially all of the assets of the Company other than in connection
with a plan of complete liquidation of the Company, then as a condition
of such consolidation, merger or sale or conveyance, adequate provision
will be made whereby the holder of this Warrant will have the right to
acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of
this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of
shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation, merger
or sale or conveyance not taken place. In any such case, the Company
will make appropriate provision to insure that the provisions of this
Paragraph 4 hereof will thereafter be applicable as nearly as may be in
relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor corporation (if other than the
Company) assumes by written instrument the obligations under this
Paragraph 4 and the obligations to deliver to the holder of this
Warrant such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to
such distribution, but prior to the date of distribution, the holder of
this Warrant shall be entitled upon exercise of this Warrant for the
purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the
holder had such holder been the holder of such shares of Common Stock
on the record date for the determination of stockholders entitled to
such distribution.
8
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder of this
Warrant, which notice shall state the Exercise Price resulting from
such adjustment and the increase or decrease in the number of Warrant
Shares purchasable at such price upon exercise, setting forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the
Exercise Price in effect at the time such adjustment is otherwise
required to be made, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional share which
would otherwise be issuable in an amount equal to the same fraction of
the Market Price of a share of Common Stock on the date of such
exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make
any other distribution (other than dividends or distributions
payable in cash out of retained earnings) to the holders of
the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares
of stock of any class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or
consolidation or merger of the Company with or into, or sale
of all or substantially all its assets to, another corporation
or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining
9
the holders of Common Stock entitled to receive any such dividend, distribution,
or subscription rights or for determining the holders of Common Stock entitled
to vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not
expressly provided for by such provisions, the Company will give notice
of such event as provided in Paragraph 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of shares of Common Stock acquirable upon exercise
of this Warrant so that the rights of the Holder shall be neither
enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "Common Stock Deemed Outstanding" shall mean the
number of shares of Common Stock actually outstanding (not
including shares of Common Stock held in the treasury of the
Company), plus (x) the number of shares of Common Stock
issuable upon exercise or conversion of all Options and
Convertible Securities outstanding at such time and which were
outstanding as of the date which this Warrant is issued
(including other warrants issued on such date and the 1997
Convertible Preferred Stock), plus (y) in the case of
Paragraph 4(b)(i) hereof, the maximum total number of shares
of Common Stock issuable upon the exercise of the Options
issued in the transaction for which the adjustment is required
under this Paragraph 4, calculated as of the date of such
issuance or grant of such Options, if any, and (z) in the case
of Paragraph 4(b)(ii) hereof, the maximum total number of
shares of Common Stock issuable upon conversion or exchange of
the Convertible Securities issued in the transaction for which
the adjustment is required under this Paragraph 4, calculated,
as of the date of issuance of such Convertible Securities, if
any.
(ii) "Market Price," as of any date, (i) means the
average of
10
the last reported sale prices for the shares of Common Stock
as reported by AMEX for the ten (10) trading days immediately
preceding such date, or (ii) if AMEX is not the principal
trading market for the shares of Common Stock, the average of
the last reported sale prices on the principal trading market
for the Common Stock during the same period, or (iii) if
market value cannot be calculated as of such date on any of
the foregoing bases, the Market Price shall be the average
fair market value as reasonably determined in good faith by
the Board of Directors of the Company. The manner of
determining the Market Price of the Common Stock set forth in
the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market
value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph
4, includes the Common Stock, par value $.10 per share, and
any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant
shall include only shares of Common Stock, par value $.10 per
share, in respect of which this Warrant is exercisable, or
shares resulting from any subdivision or combination of such
Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(e) hereof, the stock or
other securities or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
11
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part,
upon surrender of this Warrant, together with a properly executed
assignment in the form attached hereto, at the office or agency of the
Company referred to in Paragraph 7(e) below, provided, however, that
any transfer or assignment shall be subject to the conditions set forth
in Paragraph 7(f) hereof. The benefits of this Warrant and the rights
of any holder hereof shall inure to any transferee or assignee of this
Warrant. Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered holder
hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof
at the office or agency of the Company referred to in Paragraph 7(e)
below, for new Warrants of like tenor representing in the aggregate the
right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by the holder
hereof at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this Warrant and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any
such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement
as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal
expenses, if any, incurred by the Holder or transferees) and charges
payable in connection with the preparation, execution, and delivery of
Warrants pursuant to this Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this
Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name
and address of each transferee and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the
12
surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or, in the case of
any exercise, the Warrant Shares issuable hereunder), shall not be
registered under the Securities Act and under applicable state
securities or blue sky laws, the Company may require, as a condition of
allowing such exercise, transfer, or exchange, (i) that the holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel, which opinion and counsel are reasonably
acceptable to the Company, to the effect that such exercise, transfer,
or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the
transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion,
letter or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities
Act. The first holder of this Warrant, by taking and holding the same,
represents to the Company that such holder is acquiring this Warrant
for investment and not with a view to the distribution thereof. For the
purposes of this paragraph, beneficial ownership shall be determined in
accordance with Section 13(d).
8. REGISTRATION RIGHTS.
The initial holder of this Warrant (and assignees thereof) is entitled
to the benefit of such registration rights in respect of the Warrant Shares as
are set forth in Section 2 of the Registration Rights Agreement, dated as of
March 17, 1997 by and among the Company and the other signatories thereto
(including, without limitation, Paragraph 2(c) thereof). The Warrant Shares
shall constitute "Registrable Securities" under the Registration Rights
Agreement.
9. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 000 Xxxxxxx Xxxxx, Xxxx
Xxxx Xxxxx, XX 00000, Attention: Xxxx X. Xxxxx, M.D., Chairman, or at such other
address as shall have been furnished to the holder of this Warrant by notice
from the Company. Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally
13
delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice (or upon such
person's refusal to accept such notice) at the address of such person for
purposes of this Paragraph 9, or, if mailed by registered or certified mail or
with a recognized overnight mail courier upon deposit with the United States
Post Office or such overnight mail courier, if postage is prepaid and the
mailing is properly addressed, as the case may be.
10. GOVERNING LAW.
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE
BODY OF LAW CONTROLLING CONFLICTS OF LAW. THE PARTIES HERETO HEREBY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW
YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of
reference only, and shall not affect the meaning or construction of any
of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares
by the holder is not then registered pursuant to an effective
registration statement under the Securities Act, this Warrant may be
exercised by presentation and surrender of this Warrant to the Company
at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon
such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for
that number of shares of Common Stock determined by multiplying the
number of Warrant Shares to which it would otherwise be entitled by a
fraction, the numerator of which shall be the difference between the
then current Market Price per share of the Common Stock and the
Exercise Price, and the denominator of which shall be the then
14
current Market Price per share of Common Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
HEARX LTD.
By:
------------------------------------
Name: Xxxx X. Xxxxx, M.D.
Title: Chairman
Agreed to and Accepted
By:
---------------------------------
, Initial Holder
Dated as of March 17, 1997
16
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Paragraph 11(c) of
the Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:________________________________
Signature:___________________________
Address:_____________________________
_____________________________________
Note: The above signature should
correspond exactly with the
name on the face of the within
Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
------------------------ ---------------------------------------- ------------
, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _____________________, ____,
In the presence of
___________________________________
Name: _____________________________________
Signature: ________________________________
Title of Signing Officer or Agent (if any):
___________________________________________
Address: _________________________________
___________________________________________
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
