SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JULY 9, 1997
INAMED CORPORATION
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(Exact name of registrant as specified in its charter)
FLORIDA 1-9741 59-0920629
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3800 Howard Hughes Parkway, Suite 900
Las Vegas, Nevada 89109
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Address of principal executive offices
Registrant's telephone number, including area code: (702) 791-3380
N/A
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(Former name or former address, if changed since last report.)
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Item 5. OTHER EVENTS.
On July 9, 1997, Inamed Corporation (the "Company") issued a
news release, disclosing that it has reached a comprehensive settlement
agreement with Appaloosa Management L.P. and its affiliates (collectively,
"Appaloosa"). As a result of this settlement, the Company has amended certain
provisions of its 11% Secured Convertible Notes due 1999 (the "Notes"). The
purpose of this restructuring was to cure and waive all past defaults and
provide certainty as to the conversion price of the Notes, which the Company has
agreed to fix at $5.50 per share instead of 85% of market.
In accordance with the settlement, the Company, Appaloosa and
Donald K. McGhan, the Company's Chief Executive Officer and Chairman, have
entered into a letter agreement providing for certain standstill and voting
restrictions relating to their respective holdings of the Company's securities
for a three-month period. In addition, the Company has (i) issued an aggregate
of 1,846,071 warrants with an exercise price of $8.00 per share (subject to
adjustment), and (ii) amended its Shareholder Rights Plan to permit Appaloosa to
convert its existing Notes and Warrants without being deemed an "Acquiring
Person" and thereby triggering the issuance of the Rights.
For additional information concerning the comprehensive
settlement, reference is made to the news release, the standstill letter
agreement, the Second Supplemental Indenture, Consent and Waivers relating to
the Second Supplemental Indenture, the Warrant Agreement, and Amendment No. 2 to
the Rights Agreement, which are each attached hereto as exhibits.
Page 2
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(c) EXHIBITS.
10.1 Letter Agreement dated as of July 2, 1997 by and
among Inamed Corporation, Appaloosa Management L.P.
and Donald K. McGhan.
10.2 Second Supplemental Indenture, dated as of July 2,
1997, between Inamed Corporation and Santa Barbara
Bank & Trust.
10.3 Letter of Representation of Inamed Corporation dated
as of July 2, 1997 in favor of holders of 11% Secured
Convertible Notes due 1999.
10.4 Consent and Waiver of certain holders of 11% Secured
Convertible Notes due 1999 dated as of July 8, 1997.
10.5 Letter executed by Appaloosa Investment Limited
Partnership, Ferd L.P. and Palimino Fund Ltd.
withdrawing the notice of default under the
Indenture.
10.6 Warrant Agreement dated as of July 2, 1997 by and
among Inamed Corporation and U.S. Stock Transfer
Corporation.
10.7 Amendment No. 2 to Rights Agreement, dated as of July
2, 1997, between Inamed Corporation and U.S. Stock
Transfer Corporation.
99 News Release of Inamed Corporation dated July 9,
1997.
Page 3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INAMED CORPORATION
Dated: July 14, 1997 By:/s/ Donald K. McGhan
----------------------------------
Name: Donald K. McGhan
Title: Chairman and Chief
Executive Officer
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EXHIBIT LIST
10.1 Letter Agreement dated as of July 2, 1997 by and
among Inamed Corporation, Appaloosa Management L.P.
and Donald K. McGhan.
10.2 Second Supplemental Indenture, dated as of July 2,
1997, between Inamed Corporation and Santa Barbara
Bank & Trust.
10.3 Letter of Representation of Inamed Corporation dated
as of July 2, 1997 in favor of holders of 11% Secured
Convertible Notes due 1999.
10.4 Consent and Waiver of certain holders of 11% Secured
Convertible Notes due 1999 dated as of July 8, 1997.
10.5 Letter executed by Appaloosa Investment Limited
Partnership, Ferd L.P. and Palimino Fund Ltd.
withdrawing the notice of default under the
Indenture.
10.6 Warrant Agreement dated as of July 2, 1997 by and
among Inamed Corporation and U.S. Stock Transfer
Corporation.
10.7 Amendment No. 2 to Rights Agreement, dated as of July
2, 1997, between Inamed Corporation and U.S. Stock
Transfer Corporation.
99 News Release of Inamed Corporation dated July 9,
1997.
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INAMED CORPORATION
3800 HOWARD HUGHES PARKWAY
SUITE 1800
LAS VEGAS, NEVADA 89109
July 2, 1997
Mr. David A. Tepper
President
Appaloosa Management L.P.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Dear Mr. Tepper:
This letter agreement will confirm the understandings between
Appaloosa Management L.P. and its affiliates and associates (collectively,
"Appaloosa"), Donald K. McGhan and his affiliates (collectively, "McGhan"), and
INAMED Corporation (the "Company") concerning certain standstill and voting
arrangements relating to securities of the Company. This letter agreement is
being entered into concurrently with the execution and delivery of (i)
documentation by the Company, Appaloosa and other securitiesholders pertaining
to certain amendments to the indenture (the "Indenture") for the Company's 11%
Secured Convertible Notes due 1999 (as amended, the "Notes"), and the issuance
of certain warrants (the "Warrants") to purchase shares of the Company's Common
Stock, and (ii) Amendment No. 2 to the Rights Agreement dated as of July 2, 1997
between the Company and U.S. Stock Transfer Corporation, as Rights Agent.
1. STANDSTILL. During the Term (as defined in Section 4
below), Appaloosa will not alone or in concert with others:
(i) by purchase, conversion of a derivative security, or
otherwise, acquire, or agree to acquire, ownership (including, but not limited
to, beneficial ownership) of any shares of Common Stock of the Company, or any
notes, debentures or other securities which may be convertible or exchangeable
into Common Stock of the Company, provided, however, that Appaloosa may convert
any Notes and Warrants which it currently holds and may exercise any of its
preemptive rights under Section 8.12 of the Indenture governing any Notes which
it currently holds;
(ii) make any public announcement with respect to (i) any
proceeding under the bankruptcy laws (whether or not consensual), or (ii) the
acquisition of beneficial ownership of
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Common Stock, or (iii) any extraordinary transaction or merger consolidation,
sale of substantial assets or business combination involving the Company or any
of its affiliates;
(iii) make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are defined or used in Regulation 14A
under the Securities Exchange Act of 1934 (the "Exchange Act")), or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange Act) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any voting securities of the
Company or any of its affiliates;
(iv) form, join or in any way participate in a "group" (as
such term is used in Section 13d(3) of the Exchange Act) to take any action
otherwise prohibited under this letter agreement;
(v) publicly initiate or propose any shareholder proposals
for submission to a vote of shareholders, whether by action at a shareholder
meeting or by written consent, with respect to the Company or any of its
affiliates or propose the removal of any member of the Board of Directors; or
(vi) publicly request the Company (or its directors,
officers, employees or agents) to amend or waive any provision of this letter
agreement or otherwise seek any modification to or waiver of any of the
agreements or obligations hereunder.
2. VOTING. During the Term, with respect to each matter
submitted to the shareholders of the Company for a vote, whether at a meeting or
pursuant to any consent of shareholders, Appaloosa and McGhan agree to vote
(whether by proxy or otherwise) all shares of Common Stock owned by each of them
in proportion to the vote of all other shareholders of the Company's Common
Stock.
3. ADDITIONAL COVENANT OF MCGHAN. During the Term, McGhan
shall not by purchase, conversion of a derivative security, or otherwise,
acquire, or agree to acquire, ownership (including, but not limited to,
beneficial ownership) of any shares of Common Stock of the Company, or any
notes, debentures or other securities which may be convertible or exchangeable
into Common Stock of the Company; provided, however, that McGhan may convert any
Notes, Warrants or options which he holds as of June 30, 1997. In addition,
notwithstanding the foregoing, following the Company's public disclosure of the
hiring of a new Chief Financial Officer, McGhan may become the "Beneficial
Owner" of up to, but not exceeding, 19.9% of the outstanding shares of the
Company's Common Stock.
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4. THE TERM. The term of this letter agreement (the "Term")
shall be from the date hereof until the earliest to occur of: (i) September 30,
1997, (ii) the occurrence and continuance of an Event of Default under the
Indenture, (iii) a determination that defaults existed under the Indenture for
the year ended December 31, 1996 and the quarter ended March 31, 1997, but were
not disclosed to Appaloosa in connection herewith, (iv) the failure of the
Company at any time to properly disclose material events in its filings with the
Securities and Exchange Commission, (v) a breach by the Company of any covenants
set forth in this letter agreement or in any other agreement entered into with
Appaloosa in connection herewith, or (vi) the date on which Appaloosa makes a
reasonable and good faith determination that the Company's maximum exposure in
the breast implant litigation is materially greater than the amount previously
disclosed to Appaloosa in connection with this letter agreement.
5. MISCELLANEOUS. This letter agreement shall be subject to
New York law and shall be enforceable in any federal or state court in
Manhattan; and all of the parties hereto consent to personal jurisdiction. In
the event of a breach, the offended party can seek injunctive relief as well as
monetary damages; and the prevailing party shall be entitled to recover its
legal costs to enforce this letter agreement. This letter agreement cannot be
modified or amended except in a writing signed by all parties; can be signed in
counterparts (including by fax).
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If this letter agreement correctly sets forth the
understanding between us, please so indicate by signing and returning to the
undersigned copy.
Very truly,
INAMED CORPORATION
By:/s/ Donald K. McGhan
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Donald K. McGhan
Chairman and President
Accepted and agreed as of
the date first written above
/s/ Donald K. McGhan
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DONALD K. MCGHAN
APPALOOSA MANAGEMENT L.P.
By: APPALOOSA PARTNERS INC.
By: /s/ David A. Tepper
-----------------------------
David A. Tepper
President
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INAMED CORPORATION
AND
SANTA BARBARA BANK & TRUST
TRUSTEE
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF JULY 2, 1997
TO
INDENTURE
DATED AS OF JANUARY 2, 1996
11% SECURED CONVERTIBLE NOTES
DUE 1999
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of July 2, 1997, by and between
Inamed Corporation, a corporation duly organized and existing under the laws of
the State of Florida (the "Company") and Santa Barbara Bank & Trust, as trustee,
a banking corporation duly organized and existing under the laws of the State of
California (the "Trustee").
WITNESSETH:
WHEREAS, the Company and the Trustee are parties to an Indenture (as
amended, modified, and supplemented from time to time, the "Indenture" and
capitalized terms used herein not otherwise defined shall have the meanings
ascribed thereto in the Indenture), dated as of January 2, 1996, pursuant to
which the Company issued its 11% Secured Convertible Notes due 1999 (the
"Securities") in the aggregate principal amount of $35,000,000;
WHEREAS, in connection with the Indenture and the issuance of the
Securities, the Company and the Trustee entered into two Escrow Agreements
pursuant to which $10 and $5 million, respectively (the "Escrow Funds"), were
placed in escrow (the "Escrows") for the purpose of establishing a dedicated
source of funds for use in connection with the anticipated settlement of the
Silicon Gel Breast Implant Products Liability Litigation (MDL 926) (the
"Litigation") to which the Company is a party;
WHEREAS, certain events have caused material delays in the anticipated
resolution of the Litigation and the Company has requested the cooperation of
the Holders of the Securities in effecting a release of the funds and a
redemption of the Securities in accordance with Article 9 of the Indenture and
the establishment of an alternate source of funds for use in connection with the
anticipated settlement of the Litigation;
WHEREAS, certain of the Holders and the Company have negotiated certain
additional amendments to the Indenture that will facilitate the return of the
Escrow Funds, the redemption of certain of the outstanding Securities and the
reduction in the Company's interest costs as a result thereof;
WHEREAS, concurrently herewith the Escrow Funds will be paid over to the
holders of the Securities on the date hereof in accordance with the terms of
those certain Consents and Waivers, each dated as of July 2, 1997, between the
Company and the Holders of more than 66-2/3% in principal amount of Outstanding
Securities (the "Consents and Waivers");
WHEREAS, Section 7.2 of the Indenture provides that the Company and the
Trustee may amend the Indenture and the Securities with the written consent of
the Holders of at least a majority in principal amount of Outstanding Securities
and Section
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4.4 of the Indenture provides that the Holders of at least a majority in
principal amount of Outstanding Securities may waive an existing Default or
Event of Default under the Indenture;
WHEREAS, pursuant to the Consents and Waivers signed and delivered by the
Holders of at least a majority in principal amount of Outstanding Securities as
of July 2, 1997 (the "Record Date"), in accordance with Section 7.2 of the
Indenture, such Holders consented to the amendment of Section 8.16, Section 10.1
and Section 10.5 of the Indenture to modify the financial covenant contained in
Section 8.16 and the conversion terms of the Securities contained in Section
10.1 and 10.5 and the events under which the Conversion Price of the Securities
will be adjusted contained in Section 10.5 and, in accordance with Section 4.4
of the Indenture, waived any Default or Event of Default ("Default") by the
Company relating to periods through the period ending March 31, 1997 under
Section 8.6, relating to prior periods under former Section 8.16, relating to
the delivery of the reports required under Section 8.18 for the periods ended
December 31, 1996 and March 31, 1997, relating to the delivery of opinions under
Section 12.2 for periods prior to the date hereof and relating to Section 2.18
of the Note Purchase Agreement with respect to the requirement that
approximately $10 million of the proceeds from the issuance of the Securities be
used for long-term capital investments and improvements, subject to the
execution and delivery of this Second Supplemental Indenture and the documents
to be executed and delivered in connection herewith;
WHEREAS, in accordance with Section 7.2 of the Indenture, the Company and
the Trustee may enter into this Second Supplemental Indenture, the Trustee
having obtained the authorization and instruction of the Holders of at least a
majority in principal amount of Outstanding Securities through the Consents and
Waivers to amend the Indenture pursuant to the terms of said Consents and
Waivers; and
WHEREAS, all acts and proceedings required by law, by the Indenture, and by
the Certificate of Incorporation of the Company, necessary to constitute this
Second Supplemental Indenture a valid and binding agreement for the uses and
purposes herein set forth, in accordance with its terms, have been done and
taken, and the execution and delivery of this Second Supplemental Indenture have
been in all respects duly authorized.
NOW, THEREFORE, in consideration of the premises and for the purposes
hereinabove expressed, the Company hereby covenants and agrees with the Trustee,
for the equal and proportionate benefit of the present and future Holders of the
Securities, as follows:
2
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ARTICLE ONE
Section 1.1. Pursuant to Section 7.6 of the Indenture, the Trustee hereby
acknowledges its receipt of the Officer's Certificate dated as of July 2, 1997
attaching copies of the Consents and Waivers signed by the Holders of greater
than a majority in principal amount of Outstanding Securities as of the
respective Record Dates.
ARTICLE TWO
Section 2.1. (a) Section 1.1 of the Indenture is hereby amended to include
a definition of the term "Warrants" by amending Section 1.1 by adding to the end
thereof the following definition:
"Warrants" means the warrants issued to the
Holders pursuant to that certain Warrant Agreement,
dated as of July 2, 1997 (as amended from time to
time, the "Warrant Agreement"), between the Company
and the Warrant Agent identified therein and in
connection with the execution and delivery of the
Second Supplemental Indenture to this Indenture.
(b) Section 1.1 of the Indenture is hereby further amended by modifying
the definition of "Documents" to include after the phrase "the Guarantee
Agreement" in the second line thereof, the phrase "the Warrant Agreement, the
Warrant."
Section 2.2. (a) The third paragraph of Section 2.2 of the Indenture is
hereby amended by deleting the words "check mailed to the address" and replacing
them with the words "wire transfer or other transfer of immediately available
funds to the bank account."
(b) The first paragraph of Section 2.12(2) of the Indenture is hereby
amended and restated to read in its entirety as follows:
(2) The Company shall make payment of any
Defaulted Interest by wire transfer or other
transfer of immediately available funds.
Section 2.3. Section 2.14 of the Indenture is hereby amended to add to the
end thereof the following sentence: "Subject to Section 9.6, the Trustee shall
cancel and the Company shall not reissue any Securities that have been
surrendered for payment, redemption or conversion.
3
<PAGE>
Section 2.4. The financial covenant contained in Section 8.16 of the
Indenture is hereby modified by deleting the text of Section 8.16 and amending
and restating Section 8.16 of the Indenture in its entirety and for all periods
as follows:
Section 8.16 Operating Profit.
The Company's consolidated earnings before
interest and taxes and before any charges relating
to the Bristol, Baxter, 3M, McGhan and Union Carbide
Revised Settlement Program, the mandatory class
under Rule 23(b)(i)(B) of the Federal Rules of Civil
Procedure relating to the Silicone Gel Breast
Implant Products Liability Litigation (MDL 926) or
any other administration, settlement or discharge of
products liability litigation ("Operating Profit")
shall be: (i) greater than $10 million for the
twelve month period ending December 31, 1997, and
for each twelve month period thereafter ending on
each March 31, June 30 and September 30, and
December 31 (i.e., rolling 12-month periods) and
(ii) greater than $1.5 million for the three month
period ending December 31, 1997, and for each three
month period thereafter ending on March 31, June 30,
September 30 and December 31. Operating Profit shall
also exceed $2.0 million for the quarters ended June
30 and September 30, 1997, respectively.
Notwithstanding the foregoing, in the event of
non-compliance with the financial covenant contained
in this Section 8.16 for any period, the Company may
at any time before 30 days after the date for
issuance of any Officers' Certificate with respect
to compliance for such period cure the Default by
raising cash through the issuance of any securities
junior in right of payment to the Securities in an
amount which if added to Operating Profit would have
made the Company in compliance with the covenant for
such period. Notwithstanding anything to the
contrary contained herein, any accounting charge,
expense or liability incurred by the Company and
relating to the Issuance (as defined in the First
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Supplemental Indenture dated as of June 20, 1996) or
the amendments of the Indenture pursuant to the
Second Supplemental Indenture dated as of July 2,
1997 shall be disregarded for purposes of
calculating Operating Profit under this Section 8.16
Section 2.5. The text of Section 8.18 of the Indenture is hereby
amended and restated in its entirety as follows:
From and after the fiscal quarter of the
Company ending June 30, 1997, the Company will
deliver to the Trustee, within 30 days of the end of
any quarterly period (including the quarterly period
ending at the end of the fiscal year of the
Company), an Officers' Certificate, certifying
whether or not to the best knowledge of the signers
thereof the Company is in default in the performance
and observance of any of the terms, provisions and
conditions of Section 8.1 to 8.17, inclusive, and if
the Company shall be in default, specifying all such
defaults and the nature and status thereof of which
they may have knowledge. Notwithstanding the
foregoing, at the Company's option, the Officers'
Certificate to be delivered in respect of the last
fiscal quarter of each fiscal year of the Company
may exclude therefrom the certification required by
the immediately preceding sentence regarding Section
8.17 and regarding the Operating Profit for "rolling
12-month periods" referred to in Section 8.16, and
instead such certification shall be delivered in a
separate Officers' Certificate delivered to the
Trustee within 90 days of the end of the fiscal year
of the Company.
Section 2.6. Section 10.1 of the Indenture is hereby amended to adjust the
Conversion Price by deleting the text of the first sentence thereof and amending
and such sentence in its entirety as follows:
Subject to and upon compliance with the
provisions of this Indenture, each Holder of
Securities shall have the right, at his or her
option, at any time on or after 90 days from the
Closing of the offering of Securities and prior to
the close of business on the last trading day prior
to the Maturity Date (except that, with respect to
any Security or portion of a Security
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which is called for redemption, such right shall
terminate, except as provided in the fourth
paragraph of Section 10.2, at the close of business
on the last trading day prior to the Redemption Date
of such Security or portion of a Security unless the
Holder thereof fails to receive the redemption
payment therefor under the Escrow Agreement or
unless such Holder elects to waive such mandatory
redemption on or prior to the close of business on
the third Business Day following the Redemption
Date) to convert the principal amount of any
Security held by such Holder, or any portion of such
principal amount which is $10,000 or an integral
multiple of $1,000 in excess thereof, into that
number of fully paid and non assessable shares of
Common Stock (as such shares shall then be
constituted) obtained by dividing 103% of the
principal amount of the Security or portion thereof
surrendered for conversion by the Conversion Price
in effect at such time, by surrender of the Security
so to be converted in whole or in part in the manner
provided in Section 10.2.
Section 2.7. Section 10.5 of the Indenture is hereby amended to add the
following paragraph to the end of subparagraph (d) and to adjust the Conversion
Price by adding the following new subparagraph (k) and amending the existing
subparagraph therein to become subparagraph (1) of Section 10.5:
The Company has entered into that certain
Rights Agreement dated June 2, 1997 between the
Company and the U.S. Stock Transfer Corporation (as
amended, the "Rights Agreement"). The Company shall
not, without the consent of the Holders of a
majority in principal amount of the Outstanding
Securities, amend, modify or supplement the Rights
Agreement or adopt any new rights plan unless any
such amendment, modification or supplement is for
the purpose of: (i) redeeming the rights issued
thereunder; (ii) increasing the exercise price of
the rights or (iii) providing that the rights will
not be exercisable to permit transactions approved
by the Board of Directors of the Company.
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(k) In the event the Company shall, at any time
or from time to time, issue or sell any shares of
Common Stock (including treasury shares) (x) for
consideration per share equal to $5.50 or less
(subject to any appropriate proportionate
adjustments as a result of the occurrence of certain
events relating to the capital stock as contemplated
in this Section 10.5, and other than Common Stock
issued pursuant to the conversion of the Securities
or other outstanding Convertible Securities) or (y)
outside the United States in a transaction or series
of transactions pursuant to Regulation S of the
Securities Act or any successor regulation, then,
forthwith upon such issue or sale in the event the
Conversion Price at such time is greater than the
price paid or to be paid for such Common Stock
pursuant to clause (x) or (y), the Conversion Price
shall be reduced to a price equal to the
consideration per share paid for such Common Stock.
For purposes of this paragraph the following four
subparagraphs shall apply:
(i) In the event the Company shall, in any
manner, grant any right to subscribe for or to
purchase, or any option for the purchase of,
Common Stock or any stock or other securities
convertible into or exchangeable for Common
Stock (such convertible or exchangeable stock
or securities being hereinafter referred to as
"Convertible Securities"), whether or not such
rights or options are immediately exercisable,
and the minimum price per share for which
Common Stock is issuable pursuant to such
rights or options or upon conversion or
exchange of such Convertible Securities
(determined by dividing (A) the total amount,
if any, received or receivable by the Company
as consideration for the granting of such
rights or options, plus the minimum aggregate
amount of additional consideration payable upon
the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock
issuable
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upon the exercise of such rights or options or
upon the conversion or exchange of all such
Convertible Securities) shall be less than the
Conversion Price in effect for the Securities
immediately prior to the time of the granting
of such rights or options, then for the
purposes of determining the Conversion Price
for such Securities, the Company shall be
deemed to have issued shares of Common Stock at
such price per share as of the date of granting
of such rights or options, and the adjustment
of the Conversion Price required by this
paragraph shall be made as of the date of
granting of such rights or options; provided,
however, that no further adjustment of such
Conversion Price shall be made upon the actual
issue of Common Stock or Convertible Securities
upon the exercise of such rights or options or
upon the issue of such Common Stock upon
conversion or exchange of such Convertible
Securities and provided further that upon the
expiration or termination of all such rights,
options or Convertible Securities without the
issuance of any Common Stock in respect of any
such rights, options or Convertible Securities
or the conversion of any Securities, the
Conversion Price shall be increased to the
price which would have been in effect at the
time of such grant had such rights, options or
Convertible Securities never been issued.
(ii) In the event the Company shall in any
manner issue or sell any Convertible Securities
whether or not the rights to convert or
exchange thereunder are immediately
exercisable, and the price per share for which
shares of Common Stock are issuable upon the
conversion or exchange of such Convertible
Securities (determined by dividing (A) the
total amount, if any received or receivable by
the Company in consideration of the issue or
sale
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of such Convertible Securities, plus the
minimum aggregate amount of additional
consideration, if any, payable to the Company
upon conversion or exchange thereof by (B) the
total number of shares of Common Stock issuable
upon the conversion or exchange of all such
Convertible Securities) shall be less than the
Conversion Price in effect for the Securities
immediately prior to the time of the issue or
sale of such Convertible Securities, then for
purposes of determining the Conversion Price,
the Company shall be deemed to have issued
shares of Common Stock at such price per share
as of the date of the issue or sale or such
Convertible Securities, and the adjustment of
the Conversion Price required by this paragraph
shall be made as of the date of the issue or
sale of such Convertible Securities, provided,
however, that no further adjustment of such
Conversion Price shall be made upon the actual
conversion or exchange of such convertible
securities and provided further that upon the
expiration or termination of all such
Convertible Securities without the issuance of
any Common Stock in respect of any such
Convertible Securities or the conversion of any
Securities, the Conversion Price shall be
increased to the price which would have been in
effect at the time of such issuance had such
Convertible Securities never been issued.
(iii) In the event any shares of Common
Stock or Convertible Securities or any rights
or options to purchase any such Stock or
securities shall be issued for cash, the
consideration received therefor less any
out-of-pocket expenses incurred and any
underwriting commissions or concessions paid or
allowed by the Company in connection therewith,
shall be deemed to be the amount of
consideration received by the Company therefor.
The Board of Directors of the Company shall
determine
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(irrespective of any treatment thereof on the
books of account of the Company) the fair value
of any consideration other than money received
upon any such issue, and shall, in case any of
the foregoing is issued with other stock,
securities or assets of the Company, determine
what part of the consideration received
therefor is applicable to the issue of the
Common Stock, Convertible Securities or rights
or options for the purchase thereof.
(iv) In the event that (A) there shall be
any decrease in the purchase price provided for
in any right or option referred to in the
preceding subparagraph (i) or the additional
consideration, if any, payable upon the
conversion or exchange of any Convertible
Securities referred to in the preceding
subparagraph (i) or subparagraph (ii), or (B)
there shall be any increase in the rate at
which any Convertible Securities referred to in
the preceding subparagraph (i) or subparagraph
(ii) are convertible into or exchangeable for
shares of Common Stock, the Conversion Price in
effect at the time of such decrease or increase
shall forthwith be reduced to the Conversion
Price which would have been in effect at such
time had such outstanding rights or options or
Convertible Securities provided for such
decreased purchase price or additional
consideration or increased conversion rate, as
the case may be, at the time initially granted,
issued or sold, provided that upon any
subsequent upward adjustment of the purchase
price or consideration or decrease in the
conversion rate, as the case may be, in all
such rights, options or Convertible Securities
the Conversion Price shall be appropriately
readjusted in accordance with the other
provisions of this Section 10.5(k).
10
<PAGE>
The Warrants shall be deemed not to have
been distributed for purposes of this Section
10.5 (and no adjustment to the Conversion Price
under this Section 10.5 shall be required) with
respect to such issuance or the issuance of
Common Stock upon the exercise thereof.
Section 2.8. Section 10.5 of the Indenture is hereby amended to adjust the
Conversion Price by adding to the end of such Section the following new Section
10.5(m):
(m) Notwithstanding anything to the contrary in
this Article 10 (including, without limitation,
Sections 10.1 and 10.4), effective as of July 2,
1997 the Conversion Price of each respective
Security is adjusted to equal a price equal to $5.50
per share, as further adjusted from time to time as
provided in this Section 10.5; provided, however,
that no Holder may convert more than forty percent
(40%) of the initial aggregate principal amount of
Securities held by such Holder or its predecessor in
interest (after giving effect to the partial
redemption of Securities pursuant to Section 9.2) in
any 60-day period and provided further that the
foregoing limitation shall not be applicable to the
extent that a Holder holds Securities in an
aggregate principal amount less than $100,000 (the
"De Minimis Amount") and the De Minimis Amount did
not result from a previous conversion made when such
Holder held Securities in excess of the De Minimis
Amount.
Section 2.9. Section 10.7 of the Indenture is hereby amended by deleting
such section and replacing it with the following:
"INTENTIONALLY OMITTED."
Section 2.10. Section 11.15 of the Indenture is hereby amended to correct
the cross-reference therein by deleting in the second paragraph thereof the text
"Section 6.5" and replacing it with the text "Section 5.7".
Section 2.11. Section 13.13 of the Indenture is hereby amended to replace
the word "Nevada" with the words "New York."
11
<PAGE>
Section 2.12. (a) After the date of this Second Supplemental Indenture,
any Securities authenticated and delivered in substitution for, or in lieu of,
Securities then outstanding and all Securities presented or delivered to the
Trustee on and after such date for such purposes shall (unless textually revised
as hereinafter provided) be stamped with a notation substantially as follows:
The Indenture dated as of January 2, 1996 referred to in this
Security has been amended by a First Supplemental Indenture
dated as of June 20, 1996 and by a Second Supplemental Indenture
dated as of July 2, 1997 to provide for the modification of
certain covenants contained therein. Reference is hereby made to
said Supplemental Indentures, copies of which are on file with
Santa Barbara Bank & Trust, as Trustee, for a statement of the
amendments therein made.
Such notation may be combined with any similar notations.
(b) Any Securities hereafter authenticated and delivered in substitution
for, or in lieu of, Securities now or hereafter outstanding shall, if the
Company so elects, be textually revised as approved by the Trustee to refer to
this Second Supplemental Indenture.
(c) Anything herein contained to the contrary notwithstanding, the Trustee
shall not at any time be under any responsibility to require or cause any
Security now or hereafter outstanding to be presented or delivered to it for any
purpose provided for this Section 2.12.
Section 2.13. The Company hereby covenants and warrants that by reason of
the Consents and Waivers having been received and the amendments to the
Indenture being made no condition or event exists or shall exist which
constitutes a Default (as defined in the Indenture).
Section 2.14. Section 13.18 of the Indenture is hereby amended to delete
from the second sentence therein the words, "LAS VEGAS, NEVADA," and replace
them with the words, "NEW YORK, NEW YORK."
Section 2.15. The Company hereby agrees that it shall not make any
payments or enter into transactions, agreements or other arrangements with any
entity (including, without limitation, Medical Device Alliance, Inc. or McGhan
Management, Inc.) affiliated with or related to the Company's senior executive
officers or the Company's
12
<PAGE>
directors, or any of their immediate family members, unless such payments or
transactions are expressly approved by Resolutions of the Company's Board of
Directors.
Section 2.16. The Company shall deliver, on or before the 30th day
following the date of this Second Supplemental Indenture, an opinion of counsel
satisfying the requirements of Section 12.2(ii) of the Indenture (with the
exception of the date of delivery of such opinion which shall satisfy this
Section 2.16) and the Company shall record or submit such document to the United
States Patent and Trademark Office to reflect the assignment for security of the
Company's patents and trademarks and obtain an appropriate notification on such
patent and trademark records reflecting such security interest.
ARTICLE THREE
Section 3.1. This Second Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of a Security heretofore or
hereafter authenticated and delivered shall be bound hereby.
Section 3.2. For all purposes of this Second Supplemental Indenture,
except as otherwise herein expressly provided or unless the context otherwise
requires: (i) the terms and expressions used herein shall have the same meanings
as corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof," and "hereby" and other words of similar import used in this
Second Supplemental Indenture refer to this Second Supplemental Indenture as a
whole and not to any particular Section hereof.
Section 3.3. This Second Supplemental Indenture shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with, and governed by, the laws of said State
(without giving effect to the conflicts-of-law provisions thereof).
Section 3.4. Nothing in this Second Supplemental Indenture, express or
implied, shall give to any person, firm, or corporation other than the parties
hereto and the Holders of the Securities, any right, remedy, or claim under or
by reason of this Second Supplemental Indenture or any covenant, condition, or
stipulation hereof; all the covenants, stipulations, promises, and agreements
contained in this Second Supplemental Indenture are and shall be for the sole
and exclusive benefit of the parties hereto and their successors and the Holders
of the Securities.
13
<PAGE>
Section 3.5. This Second Supplemental Indenture may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 3.6. This Second Supplemental Indenture is executed by the Company
and the Trustee pursuant to Article Seven of the Indenture and shall be deemed
to be a part of the Indenture for all purposes, including, without limitation,
for purposes of the Collateral Documentation. The Trustee accepts the amendments
of the Indenture executed by this Second Supplemental Indenture, but only upon
the terms and conditions set forth in the Indenture, including the terms and
provisions defining the liabilities and responsibilities of the Trustee, which
terms and provisions define and limit its liabilities and responsibilities in
the performance of the terms of the Indenture as hereby amended. The Trustee
makes no representation as to the validity or sufficiency of this Second
Supplemental Indenture.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed and delivered, and the respective
seals to be hereunto affixed and attested, all as of the day and year first
written above.
Attest: INAMED CORPORATION
By: /s/ Carol A. Brennan By: /s/ Donald K. McGhan
------------------------- ------------------------------------
Donald K. McGhan
Chief Executive Officer and Chairman
SANTA BARBARA BANK &
TRUST
Attest:
By: /s/ [Illegible] By: /s/ Jay D. Smith
------------------------ -------------------------------------
15
<PAGE>
THE FOREGOING AMENDMENTS ARE CONSENTED TO:
MCGHAN MEDICAL FLOWMATRIX
CORPORATION CORPORATION
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
MEDISYN TECHNOLOGIES CUI CORPORATION
CORPORATION
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
BIOPLEXUS CORPORATION INAMED DEVELOPMENT
CORPORATION
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, CEO Donald K McGhan, Chairman
IOENTERICS CORPORATION BIODERMIS CORPORATION
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, CEO & Donald K McGhan, CEO &
Chairman Chairman
16
<PAGE>
THE FOREGOING AMENDMENTS ARE CONSENTED TO:
BIODERMIS LTD. BIOENTERICS LTD.
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, CEO & Donald K McGhan, CEO &
Chairman Chairman
CHAMFIELD LTD. INAMED B.V.
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
INAMED B.V.B.A. INAMED DO BRASIL LTD.
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
INAMED GmbH INAMED LTD.
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
INAMED S.A. INAMED S.R.L.
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
INAMED S.A.R.L. McGHAN LIMITED
By: /s/ Donald K. McGhan By: /s/ Donald K. McGhan
------------------------ --------------------------
Donald K. McGhan, Chairman Donald K McGhan, Chairman
17
LETTER OF REPRESENTATION
This letter of representation is made by Inamed Corporation, a Florida
corporation (the "Company"), in favor of the Holders of its 11% Secured
Convertible Notes due 1999 (the "Secured Notes"). Terms used but not defined
herein shall have the respective meanings, if any, ascribed thereto in the
Indenture governing the Secured Notes (as amended from time to time, the
"Indenture"). Inamed represents and warrants to the Holders that on the date
hereof:
1.1 ORGANIZATION AND AUTHORITY OF THE COMPANY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and each
Guarantor is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and each of the Company and each
such Guarantor has all requisite power and authority to own or hold under lease
the property it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this document and the
Secured Notes, the Indenture, the Warrants, the Warrant Agreement governing the
terms thereof, the Collateral Documentation, the Guarantee Agreements and all
other documents and agreements contemplated thereby (this document, and all such
other documents and agreements, collectively, the "Transaction Documents") and
to perform the provisions thereof and to consummate the transactions
contemplated hereby and thereby. Each of the Company and each Guarantor is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the character of the properties owned or held under lease by it or the
nature of the business transacted by it requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the business, prospects, properties, assets, operations or financial condition
of the Company.
(b) The execution, delivery and performance of the Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by the Company and, with respect
to each such agreement to which it is a party, each Guarantor. The Transaction
Documents to which it is a party have each been duly authorized, executed and
delivered by, and each is the valid and binding obligation of, the Company and
each Guarantor, enforceable against the Company and such Guarantor in accordance
with its terms, except as may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or by legal or
equitable principles relating to or limiting creditors' rights generally.
1.2 BUSINESS, PROPERTIES AND OTHER INFORMATION REGARDING THE
COMPANY.
(a) The Company previously provided the Confidential Offering
Memorandum dated January 10, 1996 that when read in conjunction with the Note
Purchase Agreement dated as of January 23, 1996 and the schedules and exhibits
thereto, and the public filings thereafter, including the Company's Annual
Reports (or drafts thereof) on Form 10-K, as amended, for the years ended
December 31, 1995 and 1996, the Company's Quarterly Reports (or drafts thereof)
on Form 10-Q, as amended, for the quarters ended March 31, June 30 and
<PAGE>
September 30, 1996, and March 31, 1997, and the Company's Current Reports on
Form 8-K filed February 6, 1996, April 19, 1996, May 31, 1996, April 1, 1997,
June 10, 1997, June 12, 1997 and June 26, 1997 (as amended or supplemented,
collectively, the "Disclosure Documents"), describes, among other things, in all
material respects the business, prospects, properties, assets, operations and
financial condition of the Company.
(b) As of their respective dates, neither the Disclosure
Documents nor any certificate executed by the Company or any Guarantor in
connection with the transactions contemplated thereby, contained and, as of the
date hereof, no Disclosure Document contains any untrue statement of a material
fact or omitted to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since January 23, 1996, except as disclosed in the Disclosure
Documents, there has been no material adverse change in the business, prospects,
properties, assets, operations or financial condition of the Company or any
Guarantor not described in the Disclosure Documents. Neither the Company nor any
Guarantor has actual knowledge, except as disclosed in the Disclosure Documents,
of any fact that materially adversely affects or, so far as the Company or any
Guarantor can now reasonably foresee, will materially adversely affect the
business, prospects, properties, assets, operations or financial condition of
the Company or the Guarantors, or the ability of the Company or the Guarantors
to perform its respective obligations under the Transaction Documents.
1.3 CAPITAL STOCK.
(a) On the date hereof, the authorized capital stock of the
Company consists of 20,000,000 shares of common stock, no par value (the "Common
Stock"). On the date hereof, 8,444,666 shares of Common Stock are issued and
outstanding.
(b) As of July 1, 1997, the Company had reserved for issuance
an aggregate of approximately 564,500 shares of Common Stock issuable pursuant
to: (i) outstanding vested and non-vested options, warrants and similar rights;
and (ii) contingent obligations to issue additional shares (other than pursuant
to conversion of the Secured Notes or the Company's 4% Convertible Debenture due
2000). The Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its capital stock or other
securities or obligation evidencing the right of the holder thereof to purchase
any of its capital stock or other securities.
1.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The consummation
of the transactions contemplated by the Transaction Documents and the
performance of the terms and provisions of the Transaction Documents did not and
will not (i) contravene, result in any breach of, or constitute a default under,
or result in the creation of any Lien (except for Liens created under the
Indenture or the Collateral Documentation) in respect of any property of the
Company or any Guarantor under, any other material agreement or instrument to
which the Company or any Guarantor is a party or by which the Company or any
Guarantor, or any of its respective properties is bound, (ii) conflict with any
provision of any of the certificate of incorporation or bylaws or comparable
organizational documents of the Company or any Guarantor or conflict with or
result
2
<PAGE>
in a breach of any of the terms, conditions or provisions of any order of any
court, arbitrator or governmental entity applicable to the Company or any
Guarantor or (iii) violate any material provision of any statute or other rule
or regulation of any governmental entity applicable to the Company or any
Guarantor.
1.5 GOVERNMENTAL AUTHORIZATIONS, ETC. Except for the registration
of the Warrants and the shares of Common Stock underlying the Warrants and the
Secured Notes under the Securities Act of 1933, as amended, no consent, approval
or authorization of, or registration, filing or declaration with, any
governmental entity or third party was required for the issuance of the Secured
Notes or the Warrants or the valid execution and delivery of the Secured Notes
and the Warrants or for the performance by the Company or the Guarantors of the
Transaction Documents, other than the filings, registrations or qualifications
under the securities laws or "blue sky" laws of any State that may be required
to be made or obtained in connection with the offer, issuance, sale or delivery
of the Secured Notes, the Warrants, the shares of Common Stock underlying the
Warrants and the Secured Notes or any interest therein, including the Company's
registration of the common stock issuable upon conversion of the Secured Notes
or upon exercise of the Warrants.
1.6 LITIGATION; OBSERVANCE OF STATUTES, REGULATIONS AND ORDERS.
(a) Except as disclosed or referred to in the Company's
Disclosure Documents, or other reports filed with the Securities and Exchange
Commission, or with respect to which resolution has been or will be effected
with the proceeds of the Secured Note offering (the "Offering"), there are no
actions, suits or proceedings pending or, to the knowledge of the Company or any
Guarantor and other than with respect to the Company's 4% Convertible Debentures
due 2000, threatened against or involving the Company or any Guarantor or any
property of the Company or any Guarantor in any court or before any arbitrator
of any kind or before or by any governmental entity except actions, suits or
proceedings arising in the ordinary course of business that individually or in
the aggregate, if adversely determined, would not materially adversely affect
the business, operations, prospects, properties, assets or financial condition
of the Company or any Guarantor or the ability of the Company or any Guarantor
to perform its obligations under the Transaction Documents.
(b) Neither the Company nor any Guarantor is in default under
or in breach of any order of any court, arbitrator or governmental entity, and
neither the Company nor any Guarantor is subject to or a party to any order of
any court or governmental entity arising out of any action, suit or proceeding
under any statute or other law respecting antitrust, monopoly, restraint of
trade, unfair competition or similar matters. Neither the Company nor any
Guarantor is in violation of any law or statute, or other rule or regulation of
any governmental entity, including without limitation laws relating to the
production, use, storage or disposal of hazardous materials (the "Hazardous
Materials Laws"), the violation of which would materially adversely affect the
business, operations, prospects, properties, assets or financial condition of
the Company or any Guarantor or the ability of the Company or any Guarantor to
perform its obligations under the Transaction Documents, provided, however, that
the Company is delinquent in payment of its federal payroll taxes.
3
<PAGE>
1.7 TAXES. Except for approximately $1,368,000 in unpaid payroll
taxes and $1,296,000 in accrued income taxes reflected in the Company's balance
sheet dated March 31, 1997 (subject to normal year-end adjustments) and except
for the allocation of payments by taxing authorities to unpaid taxes, the
Company and each Guarantor has filed all tax returns that are required to have
been filed by it in any jurisdiction, and has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments payable by the
Company or any Guarantor to the extent the same have become due and payable,
except for any taxes and assessments the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company has set aside on its books reserves
(segregated to the extent required by GAAP) deemed by it in its reasonable
discretion to be adequate. Except as provided above, neither the Company nor any
Guarantor has actual knowledge of any proposed material tax assessment against
the Company or any Guarantor (although the Company is currently undergoing tax
audits by the State of California, the outcome if which is currently
undetermined), and in the opinion of the Company all tax liabilities of the
Company and the Guarantors are adequately provided for on the books of the
Company. The Company has paid to the Internal Revenue Service all amounts
determined by the Company to be due for payroll taxes, interest and penalties
for the period ended December 31, 1996.
1.8 TITLE TO PROPERTY. The Company and each Guarantor has good and
marketable title to its respective real properties and good and merchantable
title to each of its other respective assets and properties, except as sold or
otherwise disposed of in the ordinary course of business. Except as expressly
permitted by the Indenture, all assets and properties of the Company and each
Guarantor are owned by the Company or such Guarantor free and clear of all
Liens.
The Company and each Guarantor enjoys full and undisturbed
possession under all leases necessary in any material respect for the operation
of its respective businesses (the "Leases"). None of the Leases contains any
provisions that, individually or in the aggregate, would materially impair the
operation of the businesses of the Company or the Guarantors. The Leases are
valid and subsisting and are in full force and effect, and there are no existing
material defaults by the Company or events that with notice or lapse of time or
both would constitute material defaults by the Company under any of the Leases.
1.9 LICENSES, PERMITS, ETC. The Company and each Guarantor
possesses all material licenses, permits, franchises, authorizations, patents,
copyrights, trademarks and trade names and any other tangible or intangible
intellectual property rights, or rights thereto, required to conduct its
respective business substantially as now conducted and as currently proposed to
be conducted, without known conflict with the rights of others.
1.10 COMPLIANCE WITH ERISA. Neither the Company nor any of its
Subsidiaries has any employee benefit plan established or maintained by the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries has made contributions that is subject to Part 3 of Subtitle B of
Title 1 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 412 of the Internal Revenue Code of 1954, as amended (the
"Code").
4
<PAGE>
1.11 EXISTING INDEBTEDNESS. The Company's December 31, 1996
balance sheet includes all Indebtedness of the Company and its Subsidiaries on a
consolidated basis as of the date thereof, including the aggregate principal
amount outstanding. Except with respect to any defaults under the Indenture as
described in the consent letters dated July 2, 1997, neither the Company nor any
Guarantor is in default in the performance or observance of any of the terms,
covenants or conditions contained in any material instrument evidencing such
Indebtedness or pursuant to which such Indebtedness was issued or secured and
has not requested any waiver in respect of any default and no event has occurred
and is continuing which, with notice or the lapse of time or both, would
constitute such a default.
1.12 INVESTMENT COMPANY ACT. Neither the Company nor any Guarantor
is an investment company subject to registration under the Investment Company
Act of 1940, as amended.
1.13 ENVIRONMENTAL MATTERS.
(a) None of the Company, any Guarantor or, to the Company's
best knowledge, any previous owner, lessee, tenant, occupant or user of any real
property owned or leased on or prior to the date hereof by the Company or any
Guarantor (such real property and any and all buildings and other improvements
thereon being herein referred to as the "Property") used, generated,
manufactured, treated, handled, refined, processed, released, discharged, stored
or disposed of any Hazardous Materials on, under, in or about the Property, or
transported any Hazardous Materials to or from the Property in violation of any
Hazardous Materials Laws. "Hazardous Materials" as used herein, refers to any
flammable explosives, radioactive materials, asbestos, compounds known as
polychlorinated byphenyls, chemicals now known to cause cancer or reproductive
toxicity, pollutants, contaminants, hazardous wastes, toxic substances or
related materials, including, without limitation, any substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," or "toxic substances" under the Hazardous Materials Laws.
No underground tanks or underground deposits or Hazardous Materials, to the
Company's best knowledge, existed on, under, in or about any Property previously
owned or leased by the Company or any Guarantor on or prior to the date that fee
or leasehold title to such Property was transferred to a third party by the
Company or any Guarantor. No underground tanks or underground deposits or
Hazardous Materials, to the Company's best knowledge, exist on, under, in or
about any Property that is currently owned or leased by the Company or any
Guarantor.
(b) While any Property was owned or leased by the Company or
any Guarantor, the Company or such Guarantor kept and maintained such Property,
including, without limitation, the groundwater on or under such Property, and
conducted its businesses in material compliance with all applicable Hazardous
Materials Laws and other applicable federal, state and local laws, ordinances or
regulations, now or previously in effect, relating to environmental conditions,
industrial hygiene or Hazardous Materials on, under, in or about such Property.
5
<PAGE>
(c) As of the date hereof there are no (i) enforcement,
clean-up, removal, mitigation or other governmental or regulatory actions
instituted, contemplated or threatened pursuant to any Hazardous Materials Laws
affecting any of the Property, (ii) claims made or threatened by any person or
governmental entity relating to the Property against the Property, the Company
or any Guarantor relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from any Hazardous Materials nor (iii) to the Company's
best knowledge, any occurrence or condition on any Property that is currently
owned or leased by the Company or any Guarantor that could subject the Company,
any Guarantor or such Property to any material restrictions on occupancy,
transferability or use of any Property under any Hazardous Materials Laws.
1.14 SECURITY DOCUMENTS. The lien of the Collateral Documentation
constitutes a fully perfected security interest in all right, title and interest
of the Company or such Domestic Guarantor, as the case may be, in and to the
personal property therein prior to any other security interests against such
property or interests therein other than Permitted Liens.
1.15 LABOR RELATIONS. No unfair labor practice complaint for sex,
age, race or other discrimination claim has been brought during the last three
years against the Company or any Guarantor before the National Labor Relations
Board, the Equal Employment Opportunity Commission or any other governmental
entity. During such period, the Company and each Guarantor has complied in all
material respects with all applicable laws relating to the employment of labor
including without limitation those relating to wages, hours and collective
bargaining.
1.16 REPORTS. Since December 31, 1993, except with respect to its
Annual Report for the year ended December 31, 1996 and its Quarterly Report for
the period ended March 31, 1997, the Company has filed all forms, reports and
documents with the Securities and Exchange Commission (the "SEC") required to be
filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which have complied in all material respects with
all applicable requirements of the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations
promulgated thereunder (collectively, as amended the "SEC Reports"). None of the
SEC Reports, including without limitation, any financial statements or schedules
included therein and all documents incorporated therein by reference, at the
time filed contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
The balance sheets and the related statements of income,
shareholders' equity and cash flows (including the related notes thereto) of the
Company included in the SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
(except as otherwise noted therein), and presented fairly the financial position
of the Company as of their respective dates, and the results of its operations
and its cash flows for the periods presented therein (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments).
6
<PAGE>
1.17 SOLVENCY. The Company and each Guarantor is solvent.
1.18 USE OF PROCEEDS. The Company has applied and will apply the
proceeds of the Offering in compliance with all applicable laws, rules and
regulations. No part of the proceeds from the sale of the Secured Notes has been
or will be used, directly or indirectly, for the purpose of buying or carrying
any "margin stock" within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System (12 CFR ' 207), or for the purpose of buying or
carrying or trading in any securities under such circumstances as to involve the
Company in a violation of Regulation X of said Board (12 CFR ' 224) or to
involve any broker or dealer in a violation of Regulation T of said Board (12
CFR ' 220). The assets of the Company do not include any margin stock, and the
Company does not have any present intention of acquiring any margin stock.
1.19 LITIGATION SETTLEMENT. The Company represents and warrants
that, to the best of its knowledge, the unappealed certification and
implementation of a Mandatory (non "opt-out" Limited Fund) Class under Rule
23(b)(1)(B) of the Federal Rules of Civil Procedure in the Company's and certain
of its Subsidiaries' litigation pending in the United States District Court for
the Northern District of Alabama, Southern Division stylized as "Silicone Gel
Breast Implant Products Liability Litigation (MDL 926)" will preclude further
litigation by all persons who are within the scope of the class and whose claims
arise during the class period.
This Letter of Representation is executed as of the 2nd day of
July 1997.
INAMED CORPORATION
By: /s/ Donald K. McGhan
--------------------------------
Title: CEO & Chairman
7
INAMED CORPORATION
11% Secured Convertible Notes Due 1999
CONSENT AND WAIVER
This Consent and Waiver is delivered in connection with the Indenture
(as amended, modified, and supplemented and in effect from time to time, the
"Indenture") dated as of January 2, 1996 between Inamed Corporation, a Florida
corporation (the "Company") and Santa Barbara Bank & Trust, as trustee (the
"Trustee") pursuant to which the Company issued its 11% Secured Convertible
Notes due 1999 (the "Securities") in the aggregate principal amount of
$35,000,000. This Consent and Waiver is delivered by Holders of record on July
2, 1997 (the "Record Date"), the record date set by the Company pursuant to
Section 7.4 of the Indenture for purposes of this Consent and Waiver and
supersedes the consents of the Holders issued on or about February 27, 1997.
Capitalized terms used but not defined herein shall have the meanings ascribed
therein in the Indenture.
For the year ended December 31, 1996 and the quarters therein and for
the quarter ended March 31, 1997, the Company was in default in the performance
or observance of the terms, provisions and conditions of (i) Section 8.6 of the
Indenture relating to the timely payment of taxes, (ii) Section 8.16 requiring
that the Operating Profit of the Company for such period be in excess of $10.0
million and in excess of $2.5 million and $2.75 million for the quarters ended
June 30 and September 30, 1996, (iii) Section 8.18 requiring the Company to
deliver within 120 days after the end of each fiscal year of the Company and
within 30 days of the end of March 31, 1997 a certificate regarding defaults in
the performance and observance certain terms, provisions and conditions of the
Indenture, and (iv) Section 12.2 requiring the Company to deliver opinions
regarding the Collateral. The Company has also not filed with the United States
Patent and Trademark Office any document reflecting the assignment of the
Company's patents and trademarks and the Company was made aware in 1996 of a
default judgment entered in 1995 which had not, prior to its discovery by the
Company, been publicly disclosed or reported.
The Company has requested that the Holders waive the defaults
described above in accordance with Section 4.4 of the Indenture, any default
under Section 2.18 of the Note Purchase Agreement (the "Note Purchase
Agreement") between the Company and the purchasers of the Securities arising
prior to the date hereof by reason of the failure of the Company to apply the
proceeds from the issuance of the Securities in accordance with clauses (iii)
and (iv) of such Section 2.18 and any defaults under any of the Documents
arising therefrom or from failure to disclose or report the default judgment. In
connection with such request and in consideration of the granting of such waiver
by the Holders, simultaneously herewith (i) the Company and the Trustee are
amending the Indenture dated as of the date hereof, (ii) the Company is issuing
to the Holders Warrants to purchase Common Stock as provided in the form of
Warrant Agreement dated as of the date hereof, and (iii) the Holders are
consenting to amendments of the Indenture pursuant to Section 7.2 of the
Indenture as contained in the form of Second Supplemental Indenture dated as of
the date hereof.
The undersigned Holder, by its signature below and delivery of this
Consent and Waiver and pursuant to Section 4.4 of the Indenture, hereby waives
the Company's compliance with the covenants contained in Sections 8.6, 8.16,
8.18 and 12.2 of the Indenture with respect to the year ended December 31, 1996
and the quarter ended March 31, 1997 and
<PAGE>
events during such periods, waives compliance with Section 2.18 of the Note
Purchase Agreement, waives the requirement of filing of a document with the
Patent and Trademark Office described above (subject to compliance with the
requirement to file the same as provided in the form of Second Supplemental
Indenture), and waives any requirement for prior disclosure of the default
judgment described above, and waives any Default or Event of Default (in each
case solely to the extent expressly described in paragraph 2 above) under the
Documents resulting therefrom (it being understood that such waiver relates
solely to the failure to disclose such default judgment and shall not be deemed
to be a waiver of any default which may arise under Section 4.1(5) of the
Indenture by reason of the existence of such default judgment). Such waivers
shall relate solely to the Company's compliance with such covenants,
representations and warranties with respect to the periods described and shall
not constitute a waiver with respect to any other period or any other Default or
Event of Default in existence as of the date hereof, or in any other instance.
Such waiver is not, and shall not be deemed to constitute a waiver of any
material misstatement of fact or misrepresentation in any certificate submitted
to the Holders prior to the date hereof or in the Letter of Representation of
the Company delivered to the Holders concurrently herewith. The undersigned
hereby represents and warrants that it is not aware of any Default or Event of
Default in existence as of the date hereof or any events which with the giving
of notice or the passage of time would become a Default or an Event of Default
with respect to the periods ended December 31, 1996 and March 31, 1997 and that
to the best of its actual knowledge it is not aware of any Default or Event of
Default in existence as of the date hereof or any events which with the giving
of notice or the passage of time would become a Default or an Event of Default
with respect to the period after March 31, 1997.
The undersigned Holder, by its signature below and delivery of this
Consent and Waiver and pursuant to Section 7.2 of the Indenture, hereby consents
and agrees to the amendment of the Indenture to provide for the modifications of
the Indenture as contained in the form of Second Supplemental Indenture. The
undersigned Holder, by its signature below and delivery of this Consent and
Waiver, hereby authorizes and instructs the Trustee, pursuant to Section 7.6 of
the Indenture, and the Company, on its behalf and on behalf of the Guarantors,
by its use of this Consent and Waiver agrees, to enter into and sign such
supplemental indentures (together with the Guarantors) as shall be appropriate
to reflect such amendments to the Indenture. The undersigned Holder, by its
signature below and delivery of this Consent and Waiver, hereby consents and
agrees to and instructs the Trustee and the Escrow Agent to cooperate in
effecting the redemption of the Securities contemplated under Section 10.6 of
the Indenture originally scheduled for January 22, 1997 and previously postponed
with the consent of the Holders holding more than 66-2/3% of the Outstanding
Securities.
The undersigned hereby represents and warrants that the name and
address of the undersigned printed in the designated space below is the name and
address of the registered Holder of the Securities identified below.
The undersigned hereby represents and warrants that the undersigned
either has full power and authority to issue the foregoing consents and waivers
or is delivering a duly executed Consent and Waiver from a person or entity
having such power and authority.
The foregoing waivers and consents shall be conditioned upon the
receipt by the Company of, and delivery to the Trustee of an Officers'
Certificate with respect to, Consents and Waivers (including this Consent and
Waiver) relating to the matters described herein signed
2
<PAGE>
by the Holders of a majority in principal amount of Outstanding Securities. All
authority conferred or agreed to be conferred in this Consent and Waiver shall
not be affected by, and shall survive, the death, incapacity, dissolution,
liquidation or bankruptcy of the undersigned and any obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, legal representatives, successors and assigns of the
undersigned.
The undersigned understands that this Consent and Waiver constitutes a
binding agreement between the undersigned and the Company upon the terms
specified above.
3
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: APPALOOSA INVESTMENT LIMITED PARTNERSHIP I
------------------------------------------
(Please print)
by: Appaloosa Management LP
its General Partner
by: Appaloosa Partners Inc.
its General Partner
NAME: JAMES E. BOLIN
-------------------------------
TITLE: VICE PRESIDENT
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$10,032,700
---------------------------------
Signature: /S/ James E. Bolin
----------------------------------
Title (if acting in representative capacity):
----------------------------------
4
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: PALOMINO FUND LTD.
------------------------------------------
(Please print)
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$ 8,163,100
---------------------------------
Signature: /S/ James E. Bolin
----------------------------------
Title (if acting in representative capacity):
by: Appaloosa Management LP
its Investment Advisor
by: Appaloosa Partners Inc.
its General Partner
NAME: JAMES E. BOLIN
-------------------------------
TITLE: VICE PRESIDENT
4
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: FERD L.P
------------------------------------------
(Please print)
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$ 2,304,200
---------------------------------
Signature: /S/ James E. Bolin
----------------------------------
Title (if acting in representative capacity):
by: Appaloosa Management LP
its General Partner
by: Appaloosa Partners Inc.
its General Partner
NAME: JAMES E. BOLIN
-------------------------------
JAMES E. BOLIN
TITLE: VICE PRESIDENT
4
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: /s/ ORACLE PARTNERS, LP
----------------------------------
(Please print)
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$ 3,150,000
---------------------------------
Signature: /s/ Larry Feinberg
----------------------------------
Title (if acting in representative capacity):
Managing General Partner
----------------------------------
4
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: ORACLE INSTITUTIONAL PARTNERS, L.P.
------------------------------------------
(Please print)
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$ 490,000
---------------------------------
Signature: /s/ Larry Feinberg
----------------------------------
Title (if acting in representative capacity):
MANAGING GENERAL PARTNER
-----------------------------------
4
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: QUASAR INTERNATIONAL PARTNERS, C.V.
------------------------------------------
(Please print)
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$ 840,000
---------------------------------
Signature: /s/ Larry Feinberg
----------------------------------
Title (if acting in representative capacity):
-------------------------------------
MANAGING GENERAL PARTNER
4
<PAGE>
The undersigned has duly signed and delivered this Consent and Waiver
as of the date set forth below.
DATED: July 8, 1997
Name of Holder: GSAM ORACLE FUND
------------------------------------------
(Please print)
Principal Amount of Securities
As to Which Consent and Waiver Granted:
$ 2,520,000
---------------------------------
Signature: /s/ Larry Feinberg
----------------------------------
Title (if acting in representative capacity):
-------------------------------------
MANAGING GENERAL PARTNER
4
APPALOOSA MANAGEMENT L.P.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
July 2, 1997
Inamed Corporation
3800 Howard Hughes Parkway, Suite 900
Las Vegas, Nevada 89109
Attention: Mr. Donald McGhan, President
Santa Barbara Bank & Trust, Trustee
1021 Anacapa Street
Santa Barbara, California 93101
Attention: Jay Donald Smith, Esq.
Gentlemen:
Reference is made to: (i) the Indenture between Inamed Corporation (the
"Company") and Santa Barbara Bank and Trust, as Trustee (the "Trustee"), dated
as of January 2, 1996, as amended (the "Indenture"); (ii) the Notice of Default,
dated June 10, 1997, from Appaloosa Management L.P. ("Appaloosa") to the Company
and the Trustee (the "Notice of Default"); and (iii) the Consent and Waiver,
between the Company and certain Holders of Securities, being delivered
simultaneously herewith in connection with the Indenture (the "Consent and
Waiver"). Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to them in the Indenture.
The undersigned (collectively, the "Appaloosa Partnerships")
collectively hold in excess of 50% in principal amount of the Outstanding
Securities. The Appaloosa Partnerships are hereby withdrawing the Notice of
Default in consideration of the execution and delivery simultaneously herewith
of (i) the Consent and Waiver, (ii) the Second Supplemental Indenture to the
Indenture, (iii) the Warrant Agreement between the Company and U.S. Stock
Transfer Corporation as Warrant Agent, (iv) the letter of the Company to
Appaloosa, dated the date hereof, and (v) the Standstill Agreement, dated as of
the date hereof, between the Company and Appaloosa. The foregoing withdrawal
<PAGE>
shall be deemed to be effective as of June 10, 1997 and, accordingly, the Notice
of Default shall be void ab initio.
Very truly yours,
Appaloosa Investment Limited
Partnership I
By: Appaloosa Management L.P.,
its general partner
By: Appaloosa Partners Inc.
By: /s/ JAMES E. BOLIN
--------------------------
James E. Bolin, VP
Ferd L.P.
Appaloosa Management L.P.,
its General Partner
By: Appaloosa Partners Inc.
By: /s/ JAMES E. BOLIN
-----------------------------
James E. Bolin, VP
Palomino Fund Ltd.
Appaloosa Management L.P.,
its General Partner
By: Appaloosa Partners Inc.
By: /s/ JAMES E. BOLIN
------------------------------
James E. Bolin, VP
cc: T.R. Maloney, Esq.
Ilan Reich, Esq.
-2-
- --------------------------------------------------------------------------------
INAMED CORPORATION
and
U.S. STOCK TRANSFER CORPORATION
As Warrant Agent
WARRANT AGREEMENT
DATED AS OF JULY 2, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1 APPOINTMENT OF WARRANT AGENT......................................1
SECTION 2 WARRANT SERIES....................................................1
SECTION 3 WARRANT CERTIFICATES..............................................2
SECTION 4 EXECUTION OF WARRANT CERTIFICATES.................................2
SECTION 5 REGISTRATION AND COUNTERSIGNATURE.................................2
SECTION 6 REGISTRATION OF TRANSFERS AND EXCHANGES...........................3
SECTION 7 TERMS OF WARRANTS; EXERCISE OF WARRANTS; USE OF PROCEEDS..........4
SECTION 8 PAYMENT OF TAXES..................................................6
SECTION 9 MUTILATED OR MISSING WARRANT CERTIFICATES.........................7
SECTION 10 RESERVATION OF WARRANT SHARES.....................................7
SECTION 11 OBTAINING STOCK EXCHANGE LISTINGS.................................8
SECTION 12 ADJUSTMENT OF EXERCISE PRICE; REGISTRATION; AND NUMBER OF
WARRANT SHARES ISSUABLE.......................................8
SECTION 13 REDEMPTION OF WARRANTS...........................................15
SECTION 14 RIGHTS OF WARRANT HOLDERS........................................16
SECTION 15 FRACTIONAL INTERESTS.............................................16
SECTION 16 NOTICES TO WARRANT HOLDERS.......................................17
SECTION 17 MERGER, CONSOLIDATION OR CHANGE OF NAME OF
WARRANT AGENT................................................17
SECTION 18 WARRANT AGENT....................................................18
SECTION 19 CHANGE OF WARRANT AGENT..........................................20
SECTION 20 NOTICES TO COMPANY AND WARRANT AGENT.............................20
SECTION 21 SUPPLEMENTS AND AMENDMENTS.......................................21
SECTION 22 SUCCESSORS.......................................................21
SECTION 23 TERMINATION......................................................21
SECTION 24 GOVERNING LAW....................................................21
SECTION 25 BENEFITS OF THIS AGREEMENT.......................................22
SECTION 26 COUNTERPARTS.....................................................22
SECTION 27 REMEDIES.........................................................22
Exhibit A Form of Warrant Certificate
Exhibit B Form of Election for Exercise
i
<PAGE>
WARRANT AGREEMENT dated as of July 2, 1997 between Inamed
Corporation, a Florida corporation (the "Company"), and U.S. Stock Transfer
Corporation, as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue Common Stock Purchase
Warrants, as hereinafter described (the "Warrants"), to purchase up to an
aggregate of 1,846,071 shares of Common Stock, par value $.01 (the "Common
Stock"), of the Company (the Common Stock issuable on exercise of the Warrants
being referred to herein as the "Warrant Shares");
WHEREAS, the Company is a party to certain litigation (the
"Litigation") pending in the United States District Court for the Northern
District of Alabama, Southern Division stylized as "Silicone Gel Breast Implant
Products Liability Litigation (MDL 926)";
WHEREAS, the Company has in the Litigation applied for an
order certifying Inamed Corporation's Mandatory (non "opt-out" Limited Fund)
Class under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure, pursuant
to which the Company would be required to deposit approximately $10 million into
the limited fund thereby established; and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance of Warrant Certificates (as defined below) and other matters
as provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1 APPOINTMENT OF WARRANT AGENT
The Company hereby appoints the Warrant Agent to act as agent
for the Company in accordance with the instructions set forth hereinafter in
this Agreement, and the Warrant Agent hereby accepts such appointment.
SECTION 2 WARRANT SERIES
The Warrants shall be issued in one series, and shall be
exercisable by any holder of Warrants at a price of $8.00 per Warrant Share (as
it may be adjusted as described herein, the "Exercise Price"), with an aggregate
exercise price of $14,768,571.
<PAGE>
SECTION 3 WARRANT CERTIFICATES
The certificates evidencing the Warrants (the "Warrant
Certificates") to be delivered pursuant to this Agreement shall be in registered
form only and shall be substantially in the form set forth in Exhibit A attached
hereto.
SECTION 4 EXECUTION OF WARRANT CERTIFICATES
Warrant Certificates shall be signed on behalf of the Company
by its Chairman of the Board or its President or a Vice President and by its
Secretary or an Assistant Secretary under its corporate seal, if any. Each such
signature upon the Warrant Certificates may be in the form of a facsimile
signature of the present or any future Chairman of the Board, President, Vice
President, Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been Chairman
of the Board, President, Vice President, Secretary or Assistant Secretary,
notwithstanding the fact that at the time the Warrant Certificates shall be
countersigned and delivered or disposed of he or she shall have ceased to hold
such office. The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company, and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
SECTION 5 REGISTRATION AND COUNTERSIGNATURE
The Warrant Agent, on behalf of the Company, shall number and
register the Warrant Certificates in a register as they are issued by the
Company.
Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Company, initially
countersign, issue and
2
<PAGE>
deliver Warrants entitling the holders thereof to purchase not more than the
number of Warrant Shares referred to above in the first recital hereof and shall
countersign and deliver Warrants as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the
registered holder(s) of the Warrant Certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone), for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.
SECTION 6 REGISTRATION OF TRANSFERS AND EXCHANGES
The Warrant Agent shall from time to time register the
transfer of any outstanding Warrant Certificates upon the records to be
maintained by it for that purpose, upon surrender thereof accompanied (if so
required by it) by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney and accompanied by such evidence as the Warrant Agent
shall require that such transfer is in compliance with applicable securities
laws. Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant Certificate shall be
canceled by the Warrant Agent. Canceled Warrant Certificates shall thereafter be
disposed of in a manner satisfactory to the Company.
Warrant Certificates may be exchanged at the option of the
holder(s) thereof, when surrendered to the Warrant Agent at its office for
another Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. Warrant Certificates
surrendered for exchange shall be canceled by the Warrant Agent. Such canceled
Warrant Certificates shall then be disposed of by such Warrant Agent in a manner
satisfactory to the Company.
The Warrant Agent is hereby authorized to countersign, in
accordance with the provisions of this Section 6 and of Section 5, the new
Warrant Certificates required pursuant to the provisions of this Section 6.
3
<PAGE>
SECTION 7 TERMS OF WARRANTS; EXERCISE OF WARRANTS; USE OF PROCEEDS
Subject to the terms of this Agreement, each Warrant holder
shall have the right, which may be exercised from and after August 15, 1997
until 5:00 p.m., New York City time on March 31, 2000, to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the Exercise Price. Each Warrant not exercised prior to 5:00 p.m.,
New York City time, on March 31, 2000, shall become void and all rights
thereunder and all rights in respect thereof under this Agreement shall cease as
of such time. No adjustments as to dividends will be made upon exercise of the
Warrants.
To exercise a Warrant the Warrant holder must elect and sign
the exercise election on the reverse side of the Warrant Certificate and deliver
to the Warrant Agent (a) the Warrant Certificate or Warrant Certificates
evidencing the Warrants to be exercised and (b) cash or a certified or official
bank check payable to the Company for the Exercise Price for such Warrants. The
signature on the form of election shall be guaranteed by an Eligible Guarantor
Institution as defined under Rule 17Ad- 15 under the Securities Exchange Act of
1934, as amended.
Subject to the provisions of Section 8 hereof, upon an
exercise of a Warrant, the Company shall issue and cause to be delivered with
all reasonable dispatch to or upon the written order of the holder and in such
name or names as the Warrant holder may designate, a certificate or certificates
for the number of full Warrant Shares issuable upon the exercise of such
Warrants; provided, however, that if any consolidation, merger or lease or sale
of substantially all of its assets is proposed to be effected by the Company, or
a tender offer or an exchange offer for shares of Common Stock of the Company
shall be made, upon such exercise as aforesaid, the Company shall, as soon as
possible, but in any event not later than two business days thereafter, issue
and cause to be delivered the full number of Warrant Shares issuable upon the
exercise of such Warrants in the manner described in this sentence. Such Warrant
Certificate or Warrant Certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price.
The Warrants shall be exercisable at the election of any
holder thereof, either in full or from time to time in part (but in no event for
less than one whole share of Common Stock) and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new Warrant Certificate evidencing the remaining Warrant or
Warrants with respect to whole shares of Common Stock issuable upon exercise
will be issued, and the Warrant Agent is hereby irrevocably
5
<PAGE>
authorized to countersign and to deliver the required new Warrant Certificate or
Certificates pursuant to the provisions of this Section 7 and of Section 3
hereof, and the Company, whenever required by the Warrant Agent, will supply the
Warrant Agent with Warrant Certificates duly executed on behalf of the Company
for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise of
such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
A holder of Warrant Shares issued upon the exercise of
Warrants, in whole or in part (other than a holder who acquires such shares
after the same have been publicly sold pursuant to a Registration Statement
under the Securities Act of 1933, as amended (the "Act"), or sold pursuant to
Rule 144 thereunder), shall continue to be entitled with respect to such Warrant
Shares to all rights to which it would have been entitled as holder of the
Warrants under Section 12 and the other provisions of this Agreement. The
Company will, at the time of each exercise of any Warrants, in whole or in part,
upon the request of the holder of the Warrant Shares issued upon such exercise
hereof, acknowledge in writing, in form reasonably satisfactory to such holder,
its continuing obligation to afford to such holder all such rights; provided,
however, that if such holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
holder all such rights.
The Company shall not by any action including, without
limitation, amending its articles of incorporation or By-Laws, 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 of this Agreement, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of a holder of Warrants against impairment. Without limiting the
generality of the foregoing but expressly excluding any rights to anti-dilution
protection except as expressly set forth in Section 12, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of the Warrants above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and
5
<PAGE>
nonassessable shares of Common Stock upon the exercise of the Warrants, and (c)
use its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Agreement.
The proceeds to the Company from the exercise of any Warrants
shall be transferred directly to and deposited in an escrow fund (the "Escrow
Fund") to be maintained at a depository institution (the "Escrow Agent") as a
trust fund maintained for the sole purpose of extinguishing the Litigation and
other breast implant litigation, on the terms and subject to the conditions of
this Agreement. Concurrently with the occurrence of either of the events
described in the second paragraph of Section 13 or another event giving rise to
the extinguishment of one or more breast implant litigation actions, the Company
will deliver to the Escrow Agent: (1) a certificate (the "Certificate") duly
completed and executed by the Company stating that such event has occurred; and
(2) a conformed or certified copy of the order(s) issued by or settlement
agreements reached in the appropriate court(s) having jurisdiction over such
litigation. Upon receipt of the Certificate, the Escrow Agent shall be entitled
to rely conclusively upon the statements and instructions set forth in the
Certificate and shall transfer the funds from the Escrow Fund as instructed in
the Certificate for purposes of extinguishing such litigation. If the Escrow
Agent shall not receive the Certificate before the close of business on December
31, 2004, the Escrow Agent shall deliver the funds in the Escrow Fund to the
Company, to be held by the Company and used solely for the purpose of
extinguishing breast implant litigation, including the Litigation.
SECTION 8 PAYMENT OF TAXES
The Company will pay all documentary stamp taxes attributable
to the issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any Warrant Certificates for Warrant Shares in a name other than
that of the registered holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
6
<PAGE>
SECTION 9 MUTILATED OR MISSING WARRANT CERTIFICATES
In case any of the Warrant Certificates shall be mutilated,
lost, stolen or destroyed, the Company may in its discretion issue and the
Warrant Agent may countersign, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence satisfactory to the Company and the
Warrant Agent of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also satisfactory to them. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or the Warrant
Agent may prescribe.
SECTION 10 RESERVATION OF WARRANT SHARES
The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed certificates for such purposes.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
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SECTION 11 OBTAINING STOCK EXCHANGE LISTINGS
The Company will from time to time take all action which may
be necessary so that the Warrant Shares, immediately upon their issuance upon
the exercise of Warrants, will be listed on, and freely eligible for resale
under, the principal securities exchanges and markets within the United States
of America on which other shares of Common Stock are then listed.
SECTION 12 ADJUSTMENT OF EXERCISE PRICE; REGISTRATION; AND NUMBER OF
WARRANT SHARES ISSUABLE
(a) The Exercise Price and the number of Warrant Shares
issuable upon the exercise of each Warrant are subject to adjustment upon events
enumerated in this Section 12.
(b) The Company has agreed to (i) use its best efforts to
register with the Securities and Exchange Commission ("SEC") on an appropriate
form under the Act, as soon as practicable after issuance of the Warrants (or
cause an appropriate post-effective amendment to be made to any existing
registered registration statement on or prior to such date), and to use its best
efforts to cause to become effective as soon as practicable thereafter, such
registration statement with respect to the Warrants and the Warrant Shares and
(ii) keep such registration statement effective for a period of time required
for the disposition of such Warrants or Warrant Shares. Notwithstanding that the
Company may have used its best efforts, if the Company fails to cause such
registration statement to be filed on or before July 31, 1997, then the Exercise
Price shall be reduced by $.50 per share and if the Company fails to cause such
registration statement to be declared effective on or before October 31, 1997,
then the Exercise Price shall be reduced by $.50 per share.
(c) In connection with registration of the Warrants and the
Warrant Shares under the Act pursuant to this Section 12, the Company shall
indemnify and hold harmless each holder of such Warrants and such Warrant
Shares, each such holder's directors and officers, and each other individual,
corporation, partnership or other entity (collectively, a "Person") who
participated in the offering of such Warrants and Warrant Shares and each other
Person, if any, who controls such holder or such participating Person within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or participating
Person or controlling Person may become subject under the Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
such holder or such director, officer or participating Person or controlling
Person for any legal or any other expenses reasonably incurred by such holder or
such director, officer or participating Person or controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any alleged untrue statement or alleged omission
made in such registration statement, preliminary prospectus, prospectus or
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such holder specifically for use therein
and provided further that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises from or is
based upon the failure by any holder of Warrants or Warrant Shares to deliver a
required prospectus or prospectus supplement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such holder or such director, officer or participating Person or controlling
Person, and shall survive the transfer of such securities by such holder.
(d) Each holder of Warrants or Warrant Shares registered under
the Act in accordance with the provision of this Section 12, severally and not
jointly, agrees to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director or officer or any such Person
may become subject under the Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon information in writing provided to the Company by
such holder of Warrants or Warrant Shares specifically for use in any
registration statement under which securities were registered under the Act for
resale by such holder, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto or the failure of such holder to
deliver any required prospectus or prospectus supplement; provided, however,
that the indemnification obligations of such holder shall be limited to the
gross proceeds from the offering of such Warrants or Warrant Shares, as the case
may be, received by such holder.
(e) If the indemnification provided for in this Section 12
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well
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as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding provided, however, that the
contribution obligation of any holder shall be limited to the gross proceeds
from the offering of the Warrants or the Warrant Shares, as the case may be,
received by any such holder.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 12(e) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(f) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Exercise Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the Record Date
(as defined in Section 12(j)) fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
Record Date. If any dividend or distribution of the type described in this
Section 12(f) is declared but not so paid or made, the Exercise Price shall
again be adjusted to the Exercise Price which would then be in effect if such
dividend or distribution had not been declared.
(g) If the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Exercise Price on the Record Date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Exercise Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Exercise Price in effect at the opening of business prior
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to such Record Date by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the Record Date,
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Exercise Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
close of business on the Record Date plus the total number of additional shares
of Common Stock so offered for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day following
the Record Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights or warrants and no Warrants are exercised during the
period such rights or warrants are outstanding, upon the expiration or
termination of such rights or warrants the Exercise Price shall be readjusted to
the Exercise Price which would then be in effect had the adjustments made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered. If such rights or
warrants are not so issued and during such adjustment period no Warrants are
exercised, the Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the Holders to subscribe for
or purchase shares of Common Stock at less than such Exercise Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights or
warrants, with the value of such consideration, if other than cash, to be
determined by the Board of Directors.
(h) If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Exercise Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Exercise Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(i) If the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 12(f)
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants of a type referred to in
Section 12(g) and dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 7 applies) (the
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foregoing hereinafter in this Section 12(i) called the "Distributed
Securities"), then, in each such case, the Exercise Price shall be reduced so
that the same shall be equal to the price determined by multiplying the Exercise
Price in effect immediately prior to the close of business on the Record Date)
with respect to such distribution by a fraction of which the numerator shall be
the Exercise Price on such date less the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in a
Board Resolution) on such date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the denominator shall be
such Exercise Price, such reduction to become effective immediately prior to the
opening of business on the day following the Record Date; provided, however,
that in the event the then fair market value (as so determined) of the portion
of the Distributed Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Exercise Price on the Record Date, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
holder of Warrants shall have the right to receive upon exercise of a Warrant
(or any portion thereof) the amount of Distributed Securities such holder would
have received had such holder exercised such Warrant (or portion thereof)
immediately prior to such Record Date. If such dividend or distribution is not
so paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price which would then be in effect if such dividend or distribution had not
been declared.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's Capital Stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this Section 12 (and no adjustment to the Exercise
Price under this Section 12 shall be required) until the occurrence of the
earliest Trigger Event, whereupon such rights and warrants shall be deemed to
have been distributed and an appropriate adjustment to the Exercise Price under
this Section 12 shall be made. If any such rights, or warrants, including any
such existing rights or warrants distributed prior to the date of this Warrant
Agreement, are subject to subsequent events, upon the occurrence of each of
which such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the occurrence of
each such event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of the
existing rights or warrants without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event with respect thereto, that was counted for
purposes of calculating a distribution amount for which an adjustment to the
Exercise Price under this Section 12 was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Exercise Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by any
holders
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thereof, the Exercise Price shall be readjusted as if such rights and warrants
had not been issued.
Notwithstanding any other provision of this Section 12 to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash or
other assets (including, without limitation, any rights distributed pursuant to
any stockholder rights plan) shall be deemed not to have been distributed for
purposes of this Section 12 if the Company makes proper provision so that each
holder of Warrants who exercises a Warrant or any portion thereof after the date
fixed for determination of stockholders entitled to receive such distribution
shall be entitled to receive upon such exercise, in addition to the shares of
Common Stock issuable upon such exercise, the amount and kind of such
distributions that such holder would have been entitled to receive if such
holder had, immediately prior to such determination date, exercised such
Warrant.
For purposes of this Section 12(i) and Sections 12(f) and (g),
any dividend or distribution to which this Section 12(i) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 12(g) applies (or both), shall
be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or rights or warrants to which Section 12(g) applies
(and any Exercise Price reduction required by this Section 12(i) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Exercise Price reduction required by Sections 12(f)
and (g) with respect to such dividend or distribution shall then be made),
except that (a) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 12(f) and as "the
date fixed for the determination of stockholders entitled to receive such rights
or warrants", "the Record Date fixed for the determination of the stockholders
entitled to receive such rights or warrants" and "such Record Date" within the
meaning of Section 12(g) and (b) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of Section
12(f).
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(j) For purposes of this Section 12, the following terms shall
have the meanings indicated:
(1) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length
transaction.
(2) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which the
holders of Common Stock have the right to receive any cash, securities
or other property or in which the Common Stock (or other applicable
security) is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for determination of
stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(k) The Company may make such reductions in the Exercise
Price, in addition to those required by Sections 12(f), (g), (h) or (i), as the
Board of Directors considers to be advisable to avoid or diminish any income tax
to holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Exercise Price by any amount for any period of time
if the period is at least 20 days, the reduction is irrevocable during the
period and the Board of Directors has made a determination that such reduction
would be in the Company's best interests, which determination shall be
conclusive and described in a Board Resolution. Whenever the Exercise Price is
reduced pursuant to the preceding sentence, the Company shall mail to the
holders of Warrants at such holder's last address appearing on the register of
holders maintained for such purpose a notice of the reduction at least 15 days
prior to the date the reduced Exercise Price takes effect, and such notice shall
state the reduced Exercise Price and the period during which it will be in
effect.
(l) No adjustment in the Exercise Price under Sections 12(f),
12(g), 12(h) or 12(i) shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price; provided, however, that any
adjustments which by reason of this Section 12(l) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 12 shall be made by the Company and shall be
made to the nearest cent or to the nearest one hundredth of a share, as the case
may be.
(m) In any case in which this Section 12 provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may
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defer until the occurrence of such event issuing to the holder of any Warrant
exercised after such Record Date and before the occurrence of such event the
additional shares of Common Stock issuable upon such exercise by reason of the
adjustment required by such event over and above the Common Stock issuable upon
such exercise before giving effect to such adjustment.
(n) For purposes of this Section 12, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
shall not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
SECTION 13 REDEMPTION OF WARRANTS
The Warrants are subject to redemption at the election of the
Company prior to their expiration as provided in this Section 13.
From and after (a) the earlier of (i) the issuance by the
United States District Court, Northern District of Alabama, Southern Division
(or any successor court with jurisdiction over the Litigation), of a Final Order
(as defined in the Indenture governing the Company's Senior Secured Notes due
1999) certifying the Company's Mandatory (non-"opt-out" Limited Fund) Class
under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure or (ii) the date
on which the order (the "Order") approving the Baxter, Bristol-Myers, 3M, McGhan
and Union Carbide Revised Settlement Program has become "Final" within the
meaning of the Order and ninety seven percent (97%) of the "Current Claimants",
as defined in the Order, as of the date of this Agreement, have settled under
the terms of the Revised Settlement Program and/or settled with the Company in
whatever way is determined by the Board of Directors of the Company to be in the
best interest of the Company, and (b) after the occurrence of the earlier of the
events described in the preceding clause (a), the closing volume weighted
average trading price of the Common Stock, as reported on the Bloomberg Nasdaq
Market Reporting System (or any successor thereto), shall average $10.00 or more
per share for twenty (20) consecutive trading days or more, the Company shall
have the right to redeem from the Warrant holders the Warrants at a redemption
price of $.01 per Warrant.
With respect to any redemption, the Company shall mail by
first class mail, postage prepaid, not later than 30 days prior to the date set
for redemption (the "Redemption Date"), a notice of redemption to each Warrant
holder whose Warrants are to be redeemed, and shall deliver a copy of such
notice to the Warrant Agent.
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The notice shall identify the Warrants to be redeemed and
shall state: (1) the Redemption Date; (2) the portion of the number of whole
Warrant Shares issuable upon exercise of such Warrant to be redeemed and that,
after the Redemption Date, upon surrender of such Warrant Certificate, a new
Warrant Certificate or Certificates evidencing the unredeemed Warrant or
Warrants will be issued; (3) the name and address of any paying agent, if other
than the Warrant Agent; (4) that the Warrant Certificates called for redemption
must be surrendered to the paying agent or the Warrant Agent, as applicable, to
collect the redemption price; (5) that the right to exercise the Warrants called
for redemption ceases on and after the Redemption Date; (6) that such holder may
elect to exercise such Warrant at any time prior to the Redemption Date by
following the procedures set forth in Section 7 of this Warrant Agreement for
exercise, including surrendering such Warrant Certificates with duly signed
Elections for Exercise and payment of the Exercise Price, prior to such date;
and (7) that payments upon presentation of Warrant Certificates shall be made as
soon as practicable after presentation to the Warrant Agent or other paying
agent.
At the Company's written request, the Warrant Agent shall give
the notice of redemption in the Company's name and at its expense.
Upon surrender of a Warrant Certificate that is redeemed in
part, the Company shall issue and the Warrant Agent shall authenticate for the
holder at the expense of the Company a new Warrant Certificate evidencing the
unredeemed Warrant or Warrants of the Warrant Certificate surrendered. Each
redemption under this Section 13 shall be pro rata to all holders of Warrants,
by lot or by such other means as the Company shall determine.
SECTION 14 RIGHTS OF WARRANT HOLDERS
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed prior to the date of surrender of the Warrants
in accordance with Section 7 as conferring upon the holders thereof the right to
vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 15 FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants. If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. If any fraction of a Warrant Share would,
except for the provisions of this
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Section 15, be issuable on the exercise of any Warrants (or specified portion
thereof), the Company shall pay an amount in cash equal to the Exercise Price on
the day immediately preceding the date the Warrant is presented for exercise,
multiplied by such fraction.
SECTION 16 NOTICES TO WARRANT HOLDERS
Upon any adjustment of the Exercise Price pursuant to Section
12, the Company shall promptly thereafter (i) cause to be filed with the Warrant
Agent an officers' certificate setting forth the Exercise Price after such
adjustment and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based and setting forth the number of
Warrant Shares (or portion thereof) issuable after such adjustment in the
Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise
Price, which certificate shall be conclusive evidence of the correctness of the
matters set forth therein, and (ii) cause to be given to each of the registered
holders of the Warrant Certificates at its address appearing on the Warrant
register written notice of such adjustments by first-class mail, postage
prepaid. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
SECTION 17 MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 19. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement, and in case at that
time any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant
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Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 18 WARRANT AGENT
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrants, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the
Warrant Agent assumes no responsibility for the correctness of any
of the same except such as describe the Warrant Agent or action
taken or to be taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in
this Agreement or in the Warrant Certificates to be complied with
by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate in respect of
any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant
Certificate for any action taken in reliance on any Warrant
Certificate, certificate of shares, notice, resolution, waiver
consent order certificate or other paper, document or instrument
believed by it to be genuine and to have been signed sent or
presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any
kind and nature incurred by the Warrant Agent in the execution of
this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant
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Agent in the execution of this Agreement except as a result of its
negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one or more
registered holders of Warrant Certificates shall furnish the Warrant
Agent with reasonable security and indemnity for any costs and expenses
which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the
Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant
Agent and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or
interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniary interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for
anything which it may do or refrain from doing in connection with
this Agreement except for its own negligence or bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant Certificate to make
or cause to be made any adjustment of the Exercise Price or other
securities or property deliverable as provided in this Agreement,
or to determine whether any facts exist which may require any of
such adjustments, or with respect to the nature or extent of any
such adjustments, when made, or with respect to the method employed
in making the same. The Warrant Agent shall not be accountable with
respect to the validity or value or the kind or amount of any
Warrant Shares or of any securities or property which may at any
time be issued or delivered upon the exercise of any Warrant or
with respect to whether any such
20
<PAGE>
Warrant Shares or other securities will when issued be validly
issued and fully paid and nonassessable, and makes no
representation with respect thereto.
SECTION 19 CHANGE OF WARRANT AGENT
If the Warrant Agent shall become incapable of acting as
Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such incapacity by the Warrant Agent or by
the registered holder of a Warrant Certificate, then the registered holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to such Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company. The holders of
Warrants exercisable for in excess of 50% of the aggregate number of Warrant
Shares then purchasable upon exercise of all Warrants, whether or not then
exercisable (the "Majority Holders"), shall be entitled at any time to remove
the Warrant Agent and appoint a successor to such Warrant Agent. Such successor
to the Warrant Agent need not be approved by the Company or the former Warrant
Agent. After appointment the successor to the Warrant Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section 18, however, or any defect therein,
shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.
SECTION 20 NOTICES TO COMPANY AND WARRANT AGENT
Any notice or demand authorized by this Agreement to be given
or made by the Warrant Agent or by the registered holder of any Warrant
Certificate to or on the Company shall be sufficiently given or made when and if
deposited in the mail, first class or registered, postage prepaid, addressed
(until another address is filed in writing by the Company with the Warrant
Agent), as follows:
Inamed Corporation
3800 Howard Hughes Parkway, Suite 900
Las Vegas, Nevada 89109
Attention: Chief Executive Officer
In case the Company shall fail to maintain such office or agency or shall fail
to give such notice of the location or of any change in the location thereof,
presentations may
20
<PAGE>
be made and notices and demands may be served at the principal office of the
Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder(s) of any Warrant Certificate to the Warrant
Agent shall be sufficiently given when and if deposited in the mail, first-class
or registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, California 91204-2991
Attention: President
SECTION 21 SUPPLEMENTS AND AMENDMENTS
The Company and the Warrant Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Warrant Certificates in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which, in each case described in this Section 21,
shall not in any way affect the interests of the holders of Warrant
Certificates. In all other instances, this Agreement may only be modified or
amended or the provisions hereof waived with the written consent of Company and
the Majority Holders; provided that this Agreement may not be modified or
amended to reduce the number of shares of Common Stock for which the Warrants
are exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrants (before giving effect to any adjustment as
provided therein) without the prior written consent of each holder of the
Warrants.
SECTION 22 SUCCESSORS
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 23 TERMINATION
This Agreement shall terminate at 5:00 p.m., New York City
time on March 31, 2000. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised.
21
<PAGE>
SECTION 24 GOVERNING LAW
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the internal laws of
said State.
SECTION 25 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrant Agent and the
registered holders of the Warrant Certificates any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrant Certificates.
SECTION 26 COUNTERPARTS
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
SECTION 27 REMEDIES
Each holder of Warrants and Warrant Shares, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under Section 12
of this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of Section 12 of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
INAMED CORPORATION, a Florida
corporation
By: /s/ Donald K. McGhan
--------------------
Donald K. McGhan
CEO & Chairman
U.S. STOCK TRANSFER
CORPORATION, as Warrant Agent:
By: /s/ John E. Stein
--------------------
John E. Stein
President
23
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
UNDERLYING COMMON STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS
AMENDED, THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND ALL APPLICABLE
STATE SECURITIES LAWS.
No. _____ Warrant Certificate
INAMED CORPORATION
This Warrant Certificate certifies that ________________ or
registered assigns, is the registered holder of _______ Warrants expiring March
31, 2000 (the "Warrants") to purchase Common Stock, par value $.01 (the "Common
Stock"), of Inamed Corporation, a Florida corporation (the "Company"), at an
exercise price of $8.00 per share of Common Stock, subject to adjustment (the
"Exercise Price").
To exercise this Warrant the Warrant holder must elect and
sign the exercise election on the reverse side of this Warrant Certificate and
deliver to the Warrant Agent (a) this Warrant Certificate and (b) cash or a
certified or official bank check payable to the Company for the Exercise Price
for the Warrants. The signature on the form of election shall be guaranteed by
an Eligible Guarantor Institution as defined under Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended.
The Exercise Price of the Warrants is subject to adjustment
and the Warrants are subject to certain redemption rights in favor of the
Company upon the occurrence of certain events set forth in the Warrant
Agreement.
No Warrant may be exercised prior to August 15, 1997 or after
5:00 p.m., New York City Time on March 31, 2000, and to the extent not exercised
by such time such Warrants shall become void.
A-1
<PAGE>
Reference is hereby made to the further provisions and defined
terms of this Warrant Certificate set forth on the reverse hereof and such
further provisions and defined terms shall for all purposes have the same effect
as though fully set forth at this place. This Warrant Certificate shall not be
valid unless countersigned by the Warrant Agent, as such term is used in the
Warrant Agreement.
This Warrant Certificate shall be governed and
construed in accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, Inamed Corporation has caused this
Warrant Certificate to be signed by its President and by its Secretary, each by
a facsimile of his signature, and has caused a facsimile of its corporate seal
to be affixed hereunto or imprinted hereon.
Dated: July 2, 1997
INAMED CORPORATION, a
Florida corporation
By: ________________________
Donald K. McGhan
CEO & Chairman
By: ________________________
Carol A. Brennan
Assistant Secretary
Countersigned:
U.S. STOCK TRANSFER CORPORATION,
as Warrant Agent
By: ______________________
Authorized Signature
A-2
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring March 31, 2000, entitling the
holder on exercise to receive shares of Common Stock, par value $.01, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of July 2, 1997 (the "Warrant Agreement"), duly
executed and delivered by the Company to U.S. Stock Transfer Corporation, as
warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time after August 15, 1997
and before March 31, 2000 as described on the other side of this certificate.
In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant. The Warrant Agreement provides that upon
the occurrence of certain events the Exercise Price set forth on the face hereof
may, subject to certain conditions, be adjusted.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants. Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except, under the circumstances set forth in the Warrant
Agreement, for any tax or other governmental charge imposed in connection
therewith.
A-3
<PAGE>
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-4
<PAGE>
EXHIBIT B
[Form of Election for Exercise]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive ___________ shares of
Common Stock and herewith tenders payment for such shares in the amount of
$______ in accordance with the terms of the Warrant Agreement dated as of July
2, 1997. The undersigned requests that a certificate for such shares be
registered in the name of ___________________, whose address is
__________________________________ and that such shares be delivered to
________________________________ whose address is
_______________________________________. If said number of shares is less than
all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such whole shares be registered in the name of ___________________________,
whose address is _______________________________________________________________
and that such Warrant Certificate be delivered to, whose address is
________________________________________________.
Signature:
Date:
Signature Guaranteed
B-1
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
This second amendment, dated as of July 2, 1997, amends the Rights
Agreement dated as of June 2, 1997, as amended by Amendment No. 1 dated as of
June 13, 1997 (the "Rights Agreement") between Inamed Corporation (the
"Company") and U.S. Stock Transfer Corporation, as Rights Agent (the "Rights
Agent"). Terms defined in the Rights Agreement and not otherwise defined herein
are used herein as so defined.
W I T N E S S E T H
WHEREAS, on May 23, 1997, the Board of Directors of the Company
authorized the issuance of Rights to purchase, on the terms and subject to the
provisions of the Rights Agreement, one share of the Company's Common Stock; and
WHEREAS, the Board of Directors of the Company authorized and declared
a dividend distribution of one Right for every share of Common Stock of the
Company outstanding on June 13, 1997 and authorized the issuance of one Right
(subject to certain adjustments) for each share of Common Stock of the Company
issued between the Record Date and the Distribution Date; and
WHEREAS, simultaneously herewith the Company is entering into a letter
agreement (the "Letter Agreement") dated July 2, 1997 with Appaloosa Management,
L.P. ("Appaloosa") and Donald K. McGhan, pursuant to which the Company has
agreed to amend certain provisions of the Rights Agreement; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Continuing
Directors now unanimously desire to amend certain provisions of the Rights
Agreement in order to supplement certain provisions therein;
NOW, THEREFORE, the Rights Agreement is hereby amended as follows:
1. Section 1(a) is hereby amended by deleting Section 1(a)
in its entirety and substituting the following therefor:
"(a) "Acquiring Person" shall mean any Person (as
such term is hereinafter defined) who or which,
together with all Affiliates and Associates (as
such terms are hereinafter defined) of such Person,
after the date hereof, shall become the Beneficial
Owner (as such term is hereinafter defined) of 15%
or more of the Common Shares of the Company then
outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of
the Company, any employee benefit plan of the
<PAGE>
Company or of any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the
terms of any such plan.
Notwithstanding anything in this Agreement
that might otherwise be deemed to the contrary; (i)
no Person shall become an "Acquiring Person" as the
result of an acquisition of Common Shares by the
Company which, by reducing the number of shares
outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or
more of the Common Shares of the Company then
outstanding; provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of
the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall,
after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of
the Company, then such Person shall be deemed to be
an "Acquiring Person"; (ii) if the Board of Directors
of the Company determines in good faith that a Person
who would otherwise be an "Acquiring Person" has
become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common
Shares so that such Person would no longer be an
"Acquiring Person," then such Person shall not be
deemed to be an "Acquiring Person" for any purposes
of this Agreement; (iii) no officer or director of
the Company who or which, together with all
Affiliates of such Person, is the Beneficial Owner of
15% or more of the outstanding shares of Common Stock
of the Company as of the Record Date shall be deemed
an "Acquiring Person" for any purpose of this
Agreement, provided, that such officer or director
together with his Affiliates does not become the
Beneficial Owner of 20% or more of the outstanding
shares of Common Stock of the Company, and provided
further that such officer or director need not
continue in such capacity after the Record Date; and
(iv) Appaloosa Management L.P. and its affiliated
entities identified in the Schedule 13D filing dated
May 13, 1997 (collectively, "Appaloosa") shall not be
deemed an "Acquiring Person" for any purpose of this
Agreement with respect to Beneficial Ownership of 15%
or more of the outstanding shares of the Company's
Common Stock arising solely from the conversion by
Appaloosa of any of the Company's Senior Notes or
Convertible Debentures which were held by Appaloosa
on the Record Date, the exercise of any Warrants
issued to Appaloosa arising from its ownership of
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<PAGE>
Convertible Debentures, or the exercise of any
preemptive rights of Appaloosa under Section 8.12 of
the Indenture governing the Convertible Debentures,
it being understood that the exception provided in
this clause (iv) shall not apply to (x) any
transferees who may acquire any securities from
Appaloosa, or (y) shares of the Company's Common
Stock, Notes, Convertible Debentures or other
securities of the Company which may be acquired
(other than through conversion or exercise of the
instruments or rights described above) by Appaloosa
after the Record Date."
2. Section 1(g) is hereby deleted in its entirety.
3. Section 23(a) is hereby amended to delete the following
text from the last sentence of such section:
"; provided, however, if the Board of Directors of the Company
authorized redemptions of the Rights then there must be
Continuing Directors then in office and such authorization
shall require the concurrence of a majority of such Continuing
Directors".
4. Section 27 is hereby amended by deleting Section 27 in
its entirety and substituting the following therefor:
"Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may (and
the Rights Agent shall at the direction of the Company) from
time to time supplement or amend this Agreement without the
approval of any holders of Right Certificates in order to cure
any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with
any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem
necessary or desirable, any such supplement or amendment to be
evidenced by a writing signed by the Company and the Rights
Agent. This Agreement shall not be amended or supplemented in
any manner which would adversely affect the interests of the
holders of Rights (other than an Acquiring Person or Affiliate
or Associate of an Acquiring Person). Upon delivery of a
certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Notwithstanding
the foregoing, the Company shall not amend, modify supplement
or replace provision (iv) of Section 1(a) or otherwise amend,
modify or supplement any other provision of this Agreement
which adversely affects the rights and benefits of Appaloosa
under such provision, in any such
-3-
<PAGE>
case without the prior written consent of Appaloosa. It is
understood and agreed that Appaloosa is a third party
beneficiary to this Rights Agreement and may enforce the
provisions of this Section as if it were a party to the Rights
Agreement."
5. Section 29 is hereby amended to delete each reference to the
following text from such section:
"(with, where specifically provided for herein, the
concurrence of the Continuing Directors)".
6. Section 31 is hereby amended to delete the last sentence from
such section which reads as follows:
"Without limiting the foregoing, if any provision requiring a
majority of the Board of Directors of the Company to be
Continuing Directors to act is held by any court of competent
jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the
Board of Directors of the Company in accordance with
applicable law and the Company's Articles of Incorporation and
By-Laws."
7. Except as expressly herein set forth, the remaining provisions
of the Rights Agreement shall remain in full force and effect.
8. This Amendment may be executed in any number of counterparts,
and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together
constitute but one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 2 has been signed to be
effective as of the close of business on this 2nd day of July, 1997 by
authorized representatives of each of the Company and the Rights Agent.
INAMED CORPORATION
By:/s/ Donald K. McGhan
------------------------
Donald K. McGhan
Chairman and
Chief Executive Officer
U.S. STOCK TRANSFER CORPORATION
By:/s/ Richard C. Brown
---------------------------
Richard C. Brown
Vice President
-5-
INAMED INAMED CORPORATION
3800 Howard Hughes Parkway
Suite 900
Las Vegas, NV 89109
(702) 791-3388
Fax: (702) 791-1922
NEWS RELEASE
FOR IMMEDIATE RELEASE
COMPANY CONTACT: DONALD K. MCGHAN
(702) 791-3388
AGENCY CONTACT: JIMMY CAPLAN
(805) 569-0076
INAMED CORPORATION REACHES SETTLEMENT AGREEMENT
WITH APPALOOSA; RESTRUCTURES
11% SECURED CONVERTIBLE NOTES DUE 1999
LAS VEGAS, NV - July 9, 1997 - INAMED Corporation, (OTC Bulletin Board: IMDC;
PCX: INA), a global medical and surgical device company headquartered here,
announced today that it has reached a comprehensive settlement agreement with
Appaloosa Management L.P. ("Appaloosa"). As a result, the Company has agreed to
amend certain provisions of its 11% Secured Convertible Notes due 1999 (the
"Notes").
The restructuring of the Notes is the result of extensive negotiations with
Appaloosa and its affiliates, who are holders of approximately 60% in principal
amount of the Notes. The purpose of this restructuring was to cure and waive all
past defaults and provide certainty as to the conversion price of the Notes,
which the Company has agreed to fix at $5.50 per share instead of 85% of market.
The restructuring also reduces the Company's debt by approximately $15 million
through the redemption of Notes with the proceeds of the escrow fund. Those
monies would be replaced when needed to fund the settlement of the breast
implant litigation with the capital raised through the manadatory redmeption of
warrants with an exercise price of $8.00 per share (subject to adjustment) at
the Company's option, if the Common Stock maintains a value of at least $10.00
per share for a specified measurement period.
In connection with the restructuring of the Notes, Appaloosa and Donald K.
McGhan, the Company's Chief Executive Officer and Chairman, have agreed to
certain standstill and voting
<PAGE>
restrictions relating to their respective holdings of the Company's securities
for a three-month period. The standstill provisions generally prohibit Appaloosa
and McGhan from increasing their respective beneficial ownership in the
Company's securities and prohibits Appaloosa from soliciting proxies and
initiating or publicly proposing matters for a submission of a vote of
shareholders. The voting provisions require that for the duration of the
agreement, Appaloosa and McGhan will vote all their respective shares in
proportion with the vote of all other shareholders of the Company's Common
Stock.
Finally, as part of the overall settlement with Appaloosa, the Company has
amended its Shareholder Rights Plan to permit Appaloosa to convert its existing
Notes and Warrants without being deemed an "Acquiring Person" and thereby
triggering the issuance of the Rights. However, Appaloosa could not transfer
those securities to another party without triggering the Rights if the result of
such transfer would be an ownership level in excess of the 15% threshold set
forth in the Shareholder Rights Plan.
Mr. McGhan stated "We are pleased that the Company and Appaloosa have been able
to resolve their disputes and we look forward to the opportunity to work
constructively with Appaloosa toward enhancing the value of the Company. In that
regard, we hope in the near future that a representative of Appaloosa will join
our Board of Directors. The compromises reached will enable the Board of
Directors and management to focus their full attention on the business of the
Company. We believe this arrangement will be beneficial to both the Company and
the holders of the Notes and will assist the Company in moving forward with its
primary objective of enhancing shareholder value."
The Company also announced that the Pacific Stock Exchange, at the July 1st
meeting of its Equity Listing Committee, granted an extension for the listing of
the Company's Common Stock through August 31, 1997.
INAMED has 26 operating subsidiaries in the United States, Europe, Mexico, Latin
America and Asia. The subsidiaries are engaged in the development, manufacturing
and marketing of medical devices for the plastic and reconstructive, bariatric
and general surgery markets.
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