Current Report on Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------
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): April 6, 1998
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: 702/791-3388
N/A
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(Former name or former address, if changed since last report.)
Item 5. OTHER EVENTS.
On April 6, 1998, INAMED Corporation (the "Issuer") issued a
news release announcing that it had reached a class settlement of
breast implant litigation.
Concurrently with the class settlement agreement, the Issuer
entered into a letter agreement with Appaloosa Management L.P.
concerning their consent to certain subordination provisions in
the Convertible Subordinated Note which is an exhibit to the
class settlement agreement, and the Issuer's agreement to make
the holders of the Issuer's 11% senior secured notes the Issuer's
designee for the right to call the $3 million of common stock to
be issued in connection with the class settlement agreement.
On April 16, 1998, the Issuer issued a news release
announcing that it had reached a provisional agreement with 3M
Corporation resolving certain indemnity claims by 3M. This
agreement requires the Issuer to pay $3 million to 3M and to
assume certain limited indemnification obligations in the future.
No payment to 3M will become due sooner than April 30, 1999 or 90
days after the Court's final order with respect to the class
settlement becomes non-appealable, whichever is later.
The cost of this agreement with 3M is already incorporated
in the anticipated $35 million or greater charge against the
Issuer's 1997 results of operations, which was announced on April
6, 1998.
For additional information concerning the settlements,
reference is made to the settlement documents and news releases,
which are attached hereto as exhibits.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(c) EXHIBITS
10.26 Class Settlement Agreement dated April 2, 1998
10.27 Letter agreement with Appaloosa Management L.P. dated
April 2, 1998
99.1 News Release of INAMED Corporation dated April 6, 1998.
99.2 News Release of INAMED Corporation dated April 16, 1998.
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: April 16, 1998 By: /s/ Richard G. Babbitt
_______________________________
Name: Richard G. Babbitt
Title: Chairman and Chief
Executive Officer
EXHIBIT INDEX
10.26 Class Settlement Agreement dated April 2, 1998
10.27 Letter agreement with Appaloosa Management L.P. dated
April 2, 1998
99.1 News Release of INAMED Corporation dated April 6, 1998.
99.2 News Release of INAMED Corporation dated April 16, 1998.
Exhibit 10.26
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
________________________________
) Master File No.
) CV 92-P-10000-S
In re: )
)
SILICONE GEL BREAST IMPLANT )
PRODUCTS LIABILITY LITIGATION ) This document relates to all
(MDL-926) ) cases
)
________________________________ )
)
) CASE NO. CV 97-P-11441-S
SANDY ALTRICHTER, JANELL CRUMLEY )
BLACK, DARLENE DAVIS, LOIS )
HAMILTON, ROSE MARIE HODGES, and )
GLORIA JONES, on Behalf of )
Themselves and All Others )
Similarly Situated, )
)
Plaintiffs, )
)
v. )
)
INAMED CORPORATION, McGHAN )
MEDICAL CORPORATION, CUI )
CORPORATION, and DONALD K. )
McGHAN, )
)
Defendants. )
________________________________
SETTLEMENT AGREEMENT
Representative Plaintiffs, through their undersigned counsel,
and INAMED Corporation (collectively, "the Parties") hereby enter
into this Settlement Agreement (the "Agreement") providing for
settlement of the claims described below, under the terms and
conditions set forth below, subject to the approval of the Court.
WHEREAS, claims have been filed against INAMED and other
defendants regarding Breast Implants, many of which claims have
been transferred to the Court in the above-styled case (the
"Court") for all pretrial purposes;
WHEREAS, the Court appointed a national Plaintiffs' Steering
Committee ("PSC") and the undersigned counsel were selected from
the PSC to conduct settlement negotiations with INAMED with the
advice and counsel of the PSC and other interested counsel;
WHEREAS, the Class Action Complaint filed in Altrichter, et
al. v. INAMED Corporation, et al. (the "Complaint") alleges claims
for compensatory and punitive damages and equitable relief against
INAMED and related parties for alleged Breast Implant Related
injuries;
WHEREAS, INAMED and the other persons named as defendants in
the Complaint and/or other similar actions have denied and
continue to deny Plaintiffs' claims, have denied any wrongdoing or
liability to Plaintiffs of any kind, and have raised many
affirmative defenses;
WHEREAS, the Parties have investigated the facts and law
relating to the matters set forth in the Complaint and other
similar actions and have conducted extensive pretrial discovery on
the claims and defenses asserted in this matter;
WHEREAS, the Parties have investigated INAMED Corporation's
financial resources and ability to defend against or satisfy
Breast Implant Related claims;
WHEREAS, the Parties have engaged in extensive, arm's-length
negotiations regarding the settlement of claims against INAMED;
WHEREAS, based upon analysis of the facts and the law
applicable to Breast Implant Related claims, taking into account
the burdens and expense of litigation, including the risks and
uncertainties associated with protracted trials and appeals and
with INAMED Corporation's ability to defend and satisfy Breast
Implant Related claims, as well as the fair, cost-effective, and
assured method of resolving claims of the Settlement Class
provided in this Agreement, Settlement Class Counsel have
concluded that this Agreement provides substantial benefits to the
Settlement Class and is fair, reasonable, and in the best
interests of the Settlement Class;
WHEREAS, the Settlement Class Counsel have also concluded
that defense costs and damages in cases brought by individual
Settlement Class Members could substantially impair or impede the
ability of other Settlement Class Members to protect their
interests in claims for damages and thus lead to a small number of
Settlement Class Members obtaining full recovery of damages to the
detriment of other Settlement Class Members;
WHEREAS, INAMED has concluded that entering this Agreement is
desirable to avoid the time, risk, and expense of defending
multiple and protracted litigation, and to resolve finally and
completely the pending and potential claims of Settlement Class
Members;
WHEREAS, INAMED has insisted, as a condition of settlement,
on the dismissal of all claims against the Released Parties;
WHEREAS, INAMED intends by this Agreement to resolve all
Breast Implant Related claims of all Settlement Class Members
against INAMED and the Released Parties under the terms of this
Agreement;
NOW, THEREFORE, the Parties stipulate and agree that all
Settled Claims of the Settlement Class shall be finally settled
and resolved on the terms and conditions set forth below, subject
to Court approval of this Agreement as a good faith, fair,
reasonable, and adequate settlement under Fed. R. Civ. P. 23(e).
I. DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings set forth below. Terms used in the singular shall be
deemed to include the plural and vice versa.
"Breast Implant" shall mean any breast implant device
containing or consisting of saline, silicone, silicone gel and/or
an elastomer made of silicone, including devices designed for
temporary implantation in the breast (i.e., tissue expanders).
"Breast Implant Recipients" shall mean persons in whose
bodies one or more Breast Implants have been or are now implanted
in an operation that occurred before June 1, 1993, whether or not
any such Breast Implant has been or may in the future be removed.
"Breast Implant Related" shall mean arising out of, based
upon, relating to, or involving Breast Implants.
"Claim for Contribution and/or Indemnification" shall mean
any claim asserted in any court or tribunal (or any judgment
entered on such a claim) by any Non-INAMED Defendant or other
third party alleging that INAMED or any Released Party is or may
be liable to said Non-INAMED Defendant or other third party for
all or part of a claim for damages or other relief asserted
against said Non-INAMED Defendant or other third party by, on
behalf of, in connection with, or with respect to any Settlement
Class Member for any Breast Implant Related claim, including but
not limited to claims for personal injury or death, damages of any
kind, payment of medical expenses and/or lost income, medical
monitoring, or other injunctive or equitable relief. "Claims for
Contribution and/or Indemnification" include, without limiting the
generality of the foregoing, any liability, loss, cost, expense,
fee or damage (including claims for attorney's fees and expenses).
For purposes of this Agreement, "Claims for Contribution and/or
Indemnification" do not include "3M Indemnity Claims" as defined
below.
"Common Stock" shall mean common stock of INAMED, valued
using the average closing bid price of such stock (as quoted on
NASDAQ or the principal exchange on which such stock is traded)
for the twenty trading day period (x) commencing five trading days
after the date of Preliminary Approval (in the case of Section
IV(B)(2)), (y) ending five trading days before the maturity date
of the Subordinated Note (in the case of Section IV(B)(6));
provided, however, if such stock is not then quoted on NASDAQ or
any other stock exchange, such stock shall be assumed to have a
value of $5 per share.
"Complaint" shall mean the Class Action Complaint filed in
Altrichter, et al. v. INAMED Corporation, et al., as an action
included in In re Breast Implant Products Liability Litigation,
MDL Docket No. 926, including any amendments thereto.
"Court" shall mean the United States District Court for the
Northern District of Alabama and the Honorable Sam C. Pointer, Jr.
or his successor.
"Final" shall mean that no timely appeals have been taken or
that all appeals from the Final Order and Judgment approving this
Agreement (including any petitions for rehearing, rehearing en
banc or review by the United States Supreme Court) have been
resolved favorably to the judgment.
"Final Order and Judgment" shall mean the Order to be entered
by the Court, approving the Agreement as fair, adequate, and
reasonable under Fed. R. Civ. P. 23(e), confirming the Settlement
Class Certification under Fed. R. Civ. P. 23(a) and 23(b)(1)(B),
barring Claims for Contribution and/or Indemnification, and making
such other findings and determinations as the Court deems
necessary and appropriate to effectuate the terms of this
Agreement.
"Formal Fairness Hearing" shall mean the hearing conducted by
the Court to determine the fairness, adequacy, and reasonableness
of this Agreement under Fed. R. Civ. P. 23(e). The date of the
Formal Fairness Hearing shall be set by the Court and communicated
to the Settlement Class in a Court-approved INAMED Breast Implant
Litigation Settlement Notice ("Notice").
"INAMED" shall mean INAMED Corporation, its divisions,
subsidiaries and affiliates (including but not limited to McGhan
Medical Corporation, a California corporation ("MMC"), CUI
Corporation ("CUI") and the other affiliated entities listed in
Exhibit A), and their predecessors, successors and assigns;
provided that Minnesota Mining and Manufacturing Company ("3M")
and McGhan Medical Corporation, a Delaware corporation, also known
as McGhan Medical/3M ("MMC/3M"), insofar as they may be considered
predecessors of MMC, are expressly excluded from the definition of
"INAMED" herein. "INAMED" shall also mean INAMED's current and
former officers, directors, employees, agents and attorneys,
acting in their capacities as such and/or in connection with
INAMED or INAMED Breast Implants.
"INAMED Breast Implant" shall mean a Breast Implant
manufactured, distributed, designed, fabricated, produced, sold,
or otherwise placed into the stream of commerce by INAMED,
including but not limited to the products listed in Exhibit B.
For purposes of this Agreement, and solely for purposes of
ensuring that the releases extended to INAMED and Released Parties
under this Agreement encompass successor liability or other claims
against INAMED or Released Parties based upon implants
manufactured by 3M or MMC/3M, "INAMED Breast Implant" shall also
include Breast Implants manufactured by 3M or MMC/3M whose
recipients have asserted or may assert claims or have obtained
judgments against INAMED on account of such Breast Implants.
"INAMED Breast Implant Recipient" shall mean a Breast Implant
Recipient who has been implanted with one or more INAMED Breast
Implants. INAMED Breast Implant Recipient shall also mean, as
applicable, persons who assert rights derivatively to an INAMED
Breast Implant Recipient.
"INAMED Settlement Fund" shall mean the fund described in
Section IV of this Agreement.
"Non-INAMED Defendant" shall mean any person or entity, other
than INAMED or a Released Party, named as a defendant in any past,
pending or future action or litigation alleging injury or damage
as a result of the implantation of any Breast Implant.
"Plaintiffs" shall mean the individuals named as plaintiffs
in actions asserting Breast Implant Related claims against INAMED
and/or a Released Party.
"Preliminary Approval" shall mean the Court's conditional
certification of the Settlement Class and preliminary approval of
this Agreement under Fed. R. Civ. P. 23(a), 23(b)(1)(B), 23(c)(1),
and 23(e).
"Preliminary Approval Hearing" shall mean the hearing, if
any, required by the Court in connection with a determination of
Preliminary Approval.
"Released Party/Parties" shall mean and shall be limited to
those persons and entities listed on Exhibit D to this Agreement.
"Representative Plaintiffs" shall mean Sandy Altrichter,
Janell Crumley Black, Darlene Davis, Lois Hamilton, Rose Marie
Hodges, and Gloria Jones, and/or such additional or other persons
as may be so designated and appointed by the Court, in their
capacities as representatives of the Settlement Class.
"Revised Settlement Program" shall mean the revised
settlement program approved in Lindsey, et al. v. Dow Corning
Corporation, et al., Case No. CV94-P-11558-S, Pretrial Order No.
27.
"Settled Claims" shall mean any and all Breast Implant
Related claims, including assigned claims (e.g., subrogation
claims of workers' compensation insurers, employers, and/or health
care insurers or providers), whether known or unknown, asserted or
unasserted, regardless of the legal theory, that are or may be
asserted now or in the future by any and/or all Settlement Class
Members against any or all of INAMED and the Released Parties.
"Settled Claims" include, without limitation: (1) any and all
claims of personal injury and/or bodily injury, damage, death,
emotional or mental harm; (2) any and all claims for alleged
economic or other injury or loss or for statutory damages under
any state statute; (3) any and all claims for medical monitoring
and claims for injunctive or declaratory relief based on, arising
out of, or relating to Breast Implants; (4) any and all claims for
loss of support, services, consortium, companionship, and/or
society by spouses, parents, children, other relatives or
"significant others" of persons implanted with Breast Implants;
(5) any and all claims for conspiracy or concert of action; (6)
any and all wrongful death or survival actions; and (7) any and
all claims for punitive or exemplary damages based on or arising
out of or related to Breast Implants.
"Settlement Class" shall mean all persons and entities
wherever located, who have or may in the future have any
unsatisfied claim (whether filed or unfiled, pending or reduced to
judgment, existing or contingent, and specifically including
claims for alleged injuries and damages not yet known or
manifest), including assigned claims (e.g., subrogation claims by
workers, compensation insurers, employers, and/or health care
insurers or providers), against any or all of INAMED and the
Released Parties arising out of, based upon, related to, or
involving INAMED Breast Implants that were implanted in an
operation that occurred before June 1, 1993, including (1) all
persons who have been implanted with one or more INAMED Breast
Implants before June 1, 1993 (whether or not any such Breast
Implant has been or may be removed) and (2) all persons, including
spouses, parents, children, relatives, "significant others" where
warranted by law, representatives, and estates that, because of a
personal relationship with any Breast Implant Recipient in whom an
INAMED Breast Implant was implanted before June 1, 1993, have or
may have Breast Implant Related claims. The Settlement Class
specifically includes persons who have or may have claims with
respect to injuries not yet manifested.
"Settlement Class Counsel" shall mean, subject to their
appointment by the Court, the undersigned counsel for the
Representative Plaintiffs, together with any other counsel the
Court may appoint to represent the interests of the proposed
Settlement Class and to commence and complete the settlement
approval process described in Section III of this Agreement.
"Settlement Class Members" shall mean all persons included in
the Settlement Class.
"Subordinated Note" shall mean the subordinated note of
INAMED Corporation in the form attached as Exhibit C hereto.
"3M Indemnity Claims" shall mean any claims that have been or
may be asserted under the Agreement dated August 3, 1984 between
3M and MMC concerning indemnity for product liability matters
arising from the plastic surgery business acquired by MMC from 3M
on that date.
II. PURPOSE
A. The Parties understand that numerous claims have arisen
following the implantation of Breast Implants, including INAMED
Breast Implants. Actions have been filed by Breast Implant
Recipients in various federal and state courts throughout the
United States and its territories and possessions, including in
the Court, as well as in courts of foreign countries. Actions
filed in various United States District Courts have been
transferred to the Court under 28 U.S.C. 1407 and have been
coordinated under the caption, In re Silicone Gel Breast Implant
Products Liability Litigation, MDL Docket No. 926.
B. INAMED is a party to the Revised Settlement Program,
which obliges it to pay 20% of the benefits payable to eligible
"post-8/84 McGhan" claimants under that program. However, INAMED
has advised Settlement Class Counsel and the Court that in light
of the continuing expense and exposure of litigation with
thousands of INAMED Breast Implant recipients who have opted out
of the Revised Settlement Program, the company is unable to raise
funds sufficient to meet its projected obligations under the
Revised Settlement Program and will have no choice but to default
on those obligations when its payments for current disease claims
(estimated in the range of $15 million) come due. Settlement
Class Counsel believe that in the event of such a default and in
light of INAMED's current financial condition, the replacement
settlement structure embodied herein constitutes the best
available alternative for recovery of claims against INAMED both
by INAMED Breast Implant recipients who elected to participate in
the Revised Settlement Program (and whose entitlement to payments
from other defendants under that program remains unaffected by
INAMED's default) and by INAMED Breast Implant Recipients who
elected to opt out of the Revised Settlement Program.
C. Breast Implant Recipients have asserted claims seeking
hundreds of millions of dollars in damages against INAMED and
other defendants. INAMED and the Released Parties deny all claims
and all liability. As a compromise, and without admitting
liability, INAMED has agreed to settle and resolve, under Fed. R.
Civ. P. 23(b)(1)(B), all Breast Implant Related claims against
INAMED and the Released Parties for the consideration set forth
below.
D. INAMED and the Released Parties maintain that their
conduct at all times has been legal and proper. They deny any
fault or liability whatsoever. This Agreement, the settlement,
and any proceedings in connection with the settlement shall not be
construed as an admission of liability nor shall they be construed
by anyone for any purpose whatsoever as an admission or
presumption of any wrongdoing by INAMED, the Released Parties, or
any other person. This Agreement, the settlement, the terms of
the settlement, and any papers or testimony related to the
settlement shall not be offered or received in evidence or in any
way referred to in any civil, criminal, or administrative action
or proceeding, including proceedings before the United States Food
and Drug Administration, other than such proceedings as may be
necessary to consummate or enforce this Agreement and any rights
hereunder, including any rights hereunder that may arise in the
event of an INAMED bankruptcy.
III. REQUIRED EVENTS; COOPERATION
A. As soon as reasonably possible following execution of
this Agreement and satisfaction of the conditions precedent
specified in paragraph C below, the Parties shall submit this
Agreement to the Court for its Preliminary Approval and shall move
the Court for an order that shall:
1. Appoint Representative Plaintiffs as the
Representatives of the Settlement Class;
2. Appoint the undersigned counsel and any other
Plaintiffs' counsel deemed reasonably necessary by the Court
as Settlement Class Counsel;
3. Preliminarily and conditionally certify the
Settlement Class under Fed. R. Civ. P. 23(a), 23(b)(1)(B) and
23(e) and preliminarily approve this Agreement for purposes
of issuing Notice;
4. Determine or approve the form, contents, method of
dissemination and schedule for dissemination of the formal
Notice to be given to the potential members of the Settlement
Class and the date of the Formal Fairness Hearing;
5. Schedule appropriate objection and other settlement-
related dates and deadlines for inclusion in the Notice;
6. Temporarily enjoin all Settlement Class Members
from initiating, asserting, or prosecuting any Breast Implant
Related actions against INAMED or the Released Parties.
7. Schedule the Formal Fairness Hearing to review
comments regarding this Agreement, to consider its fairness,
reasonableness, and adequacy under Fed. R. Civ. P. 23(e), and
to enter its Final Order and Judgment approving this
Agreement.
B. The Parties shall cooperate, assist, and undertake all
reasonable actions to accomplish the actions set forth in
paragraph A above and in Subsection VI(A) of this Agreement,
according to the schedule set forth in that subsection or by the
Court, including without limitation, the expediting of any
appeals.
C. The following shall be conditions precedent to submittal
of this Agreement for approval by the Court:
1. The Court shall have issued an order declaring
INAMED to be in final default under the Revised Settlement
Program and releasing INAMED, pursuant to the default
provisions of the Revised Settlement Program, from any
obligations with respect to that Program;
2. 3M and MMC shall have entered into an agreement
conditionally releasing MMC's obligations under the 3M
Indemnity in exchange for MMC's agreement, inter alia, to pay
3M $3 million after the Final Order and Judgment becomes
Final, subject to the condition that within 60 days after
Preliminary Approval (which deadline may be extended 30 days
at MMC's request), conditional releases shall have been
obtained of an agreed minimum number of claims against 3M by
INAMED Breast Implant Recipients who opted out of the Revised
Settlement Program (the "3M Condition").
3. INAMED shall have delivered to Settlement Class
Counsel an opinion of counsel, acceptable to Settlement Class
Counsel, to the effect that this Agreement has been duly
authorized and executed on behalf of INAMED and constitutes a
legal, valid and binding obligation of INAMED.
IV. SETTLEMENT CLASS AND SETTLEMENT FUND
A. Certification of Settlement Class
1. Subject to the Court's approval, the Parties stipulate
that the Settlement Class be certified, for settlement purposes
only, under Fed. R. Civ. P. 23(a), 23(b)(1)(B), and 23(e), in
Altrichter, et al. v. INAMED Corporation, et al. in MDL Docket No.
926, without prejudice to the Parties' ability to contest or
oppose class certification in any other action or for any other
purpose.
2. The Parties agree that Settlement Class Counsel or their
agents received or will receive from INAMED all information deemed
reasonably necessary to an examination of INAMED's financial
condition in connection with Preliminary Approval. The Parties
further agree to cooperate in good faith on any additional
discovery that may be necessary on these issues in connection with
the Formal Fairness Hearing. All confidential information
provided by INAMED shall remain confidential, for use only as the
Court may require for purposes of certifying a class action under
Fed. R. Civ. P. 23(a) and 23(b)(1)(B), or as otherwise required
for consummating or enforcing this agreement or any rights
hereunder, including any rights that may arise hereunder in the
event of an INAMED bankruptcy. Any such confidential information
filed with the Court shall be filed under seal to the extent
permitted by the Court and shall be available for inspection only
under such conditions as the Court may impose.
B. Monetary Terms/Establishment Of INAMED Settlement Fund
1. Subject to all of the conditions contained in this
Agreement, INAMED Corporation or its designee(s) shall be
obligated to take the following actions in consideration for this
Agreement.
2. Following Preliminary Approval, and within 30 days after
satisfaction or waiver of the 3M Condition and prior to the
dissemination of Notice to Settlement Class Members, INAMED
Corporation shall pay $31.5 million into the court-supervised fund
described below, to be known as the INAMED Settlement Fund, as
follows:
a. $3 million of cash;
b. $3 million of Common Stock; and
c. $25.5 million in principal amount of a Subordinated
Note.
3. The INAMED Settlement Fund shall be established and
maintained as a "qualified settlement fund" as defined in Section
468B of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder. The INAMED
Settlement Fund shall be administered by Edgar C. Gentle, III,
Esq., or such other person as the Court may appoint (the "Fund
Agent"), under the continuing jurisdiction and supervision of the
Court and for the benefit of the settlement class. Any and all
interest, dividends and earnings on cash or securities deposited
in the INAMED Settlement Fund shall be for the benefit of the
INAMED Settlement Fund, and all income taxes or other liabilities
with respect to such interest, dividends and earnings shall be the
responsibility of the INAMED Settlement Fund. Cash deposited in
the INAMED Settlement Fund shall be invested in federal government
obligations, in a manner intended to achieve maximum earnings
consistent with safety and appropriate liquidity to pay claims
without undue delay. INAMED may, in its discretion and at its own
cost, seek a private letter ruling from the Internal Revenue
Service regarding the tax status of the INAMED Settlement Fund.
The parties agree to negotiate in good faith any changes to this
Agreement necessary to maintain the INAMED Settlement Fund's tax-
qualified status and to preserve the tax-deductible status of
INAMED's payments thereto.
4. INAMED and the Released Parties shall have no interest
in or responsibility for allocations or distributions from the
INAMED Settlement Fund and do not guarantee any earnings from the
INAMED Settlement Fund assets that may be invested to generate
income to satisfy claims.
5. INAMED Corporation's funding obligations under this
Agreement are not intended to and shall not create or be deemed to
create any joint or joint and several obligations on the part of
any other person or entity, including the Released Parties.
6. If at the maturity date of the Subordinated Note the
Common Stock does not have a value at least equal to $3 million
(computed in accordance with the definition of Common Stock set
forth in Section I), then the Fund Agent shall have the right to
"put" all of that Common Stock to INAMED or its designee in
exchange for the payment of $3 million in cash (such payment to be
made within 2 business days after exercise of the put).
Alternatively, if at the maturity date of the Subordinated Note
the Common Stock has a value greater than $3 million (computed in
accordance with the definition of Common Stock set forth in
Section I), then INAMED or its designee shall have the right to
"call" all of that Common Stock from the Fund Agent in exchange
for the payment of $3 million in cash (such payment to be made
within 2 business days after exercise of the call). These put and
call rights shall be exercised no later than 10 business days
after the maturity date of the Subordinated Note. If the put
right is invoked by the Fund Agent and INAMED fails to deliver the
required cash within 2 business days after exercise of the put,
then the Fund Agent shall have the right to immediately exchange
all of its Common Stock for $3 million in principal amount of a
Subordinated Note, whereupon the principal amount of the
Subordinated Note shall be deemed increased to $28.5 million.
C. Additional Obligations
1. U.S. Government Claims
The Parties shall cooperate with each other and use their
respective best efforts to assist each other in negotiating with
the U.S. government with respect to its reimbursement or other
claims against INAMED relating to Breast Implants, so as to
minimize (as much as possible) the cost to INAMED of such claims.
2. Reports of Breast Implant Studies
Upon request by Settlement Class Counsel, INAMED agrees to
provide the Settlement Class Counsel or their designees access to
interim or other reports received from time to time by INAMED, its
attorneys, consultants, or persons or entities to whom INAMED has
contracted studies or research, of studies concerning Breast
Implants, or materials, ingredients, or components thereof, in
whole or in part, including reports to the Federal Food and Drug
Administration.
3. Consultant's Expense
Within 60 days after Preliminary Approval, INAMED agrees to
pay to Ernst & Young LLP ("E&Y") $150,000 in lieu of all fees and
expenses of E&Y for services rendered to Settlement Class Counsel.
D. Disbursements From INAMED Settlement Fund
1. Compensation Program
The INAMED Settlement Fund shall be used to compensate
Settlement Class Members as specified in Section V of this
Agreement.
2. Settlement Class Costs, Expenses, and Fees
All assessments required to be paid to the Common Benefit
Fund pursuant to Pretrial Order 13 in MDL Docket No. 926 and all
costs of administering this Agreement, including fund
administration and claims administration, shall be paid from the
INAMED Settlement Fund and shall not constitute an additional
obligation of INAMED or the Released Parties. All awards or
reimbursements of costs, expenses and attorney's fees that the
Court may approve to Settlement Class Counsel or other Plaintiffs'
counsel will be paid from the Common Benefit Fund or the INAMED
Settlement Fund, as determined by the Court, and shall not
constitute an additional obligation of INAMED or the Released
Parties.
E. Conditions To Disbursements From Settlement Fund
1. Until the Final Order and Judgment becomes Final, no
monies paid into the INAMED Settlement Fund shall be used or
disbursed for any purpose other than fund administration expenses
(including any tax payments) incurred by the Fund Agent and
approved by the Court; provided, however, that this requirement of
finality may be waived in a writing signed by all parties. INAMED
Corporation shall advance all costs incurred in providing the
Notice to Settlement Class Members ("Notice Expenses"), and shall
be entitled to recoup such Notice Expenses from the INAMED
Settlement Fund, in advance of any payments to Settlement Class
Members, upon application to the Court after the Final Order and
Judgment becomes Final.
2. No funds shall be disbursed from the INAMED Settlement
Fund to a specific INAMED Breast Implant Recipient until the
occurrence of the following conditions:
a. The Final Order and Judgment becomes Final
(provided, however, that this requirement of finality may be
waived in a writing signed by all parties).
b. The INAMED Breast Implant Recipient has complied
with the distribution procedures to be developed under
Section V of this Agreement.
V. ALLOCATION AND DISTRIBUTION OF SETTLEMENT FUND
Except as otherwise provided in this Agreement, the monies in
the INAMED Settlement Fund shall be used solely to compensate
Settlement Class Members, on an equitable basis reflecting the
limited funds available, for their Settled Claims. Distribution
procedures shall be designed, to the extent feasible, to utilize
the existing MDL 926 claims database and claims processing
facilities so as to minimize the costs of claims administration
and maximize benefits. The allocation and distribution procedures
shall be developed after entry of the Final Order and Judgment
with the advice of the Settlement Class Counsel and shall be
approved by the Court in an order separate and apart from the
Final Order and Judgment. In conjunction with those proceedings,
the Court shall retain jurisdiction to make such other orders as
it deems appropriate to ensure that relevant interests are
afforded adequate representation and the opportunity to be heard.
VI. TERMINATION OF AGREEMENT
A. Termination of Agreement
If: (a) any of the required events specified in Section III
of this Agreement do not occur; (b) the Court does not give
Preliminary Approval to this Agreement within 60 days after this
Agreement's execution by all parties; (c) the 3M Condition is not
satisfied or waived within 120 days after Preliminary Approval;
(d) the Court does not enter the Final Order and Judgment
substantially as provided in Section XI below within 180 days
after the satisfaction or waiver of the 3M Condition; or (e) the
Final Order and Judgment does not become Final within three years
after its entry; then this Agreement shall be deemed null and void
and shall have no further force or effect unless (i) the Parties
agree in writing to keep the Agreement in force despite the
occurrence or non-occurrence of the stated event, or (ii) the
Court, on application of a Party, and after notice and hearing,
extends the time for the occurrence or non-occurrence of the
stated event. If a motion for extension is filed with the Court
before the occurrence of a deadline set forth in this Subsection
VI(A), the running of the deadline shall be tolled pending the
Court's decision on whether to extend the deadline. If such a
motion is denied, the deadline shall be deemed to occur on the
later of (x) entry of the order denying the motion or (y) the
deadline as specified above in this Subsection VI(A).
B. Effect of Termination
In the event of termination under this Section or Section
XII, (a) all Parties shall be restored to their respective
positions immediately before execution of this Agreement; (b) all
monies paid by INAMED into the INAMED Settlement Fund, plus all
interest actually earned or accrued, less any Court-approved
disbursements for fund administration expenses, shall be returned
to INAMED; and (c) Breast Implant Related litigation against
INAMED and the Released Parties shall revert to its status before
the execution of this Agreement as if related orders, releases and
papers and the efforts leading to the Agreement had not been
entered, prepared, executed or taken.
VII. EFFECT OF PRIOR SETTLEMENTS AND JUDGMENTS
A. Settlement Class Members who individually settled Breast
Implant Related claims with INAMED or the Released Parties before
the date of execution of this Agreement shall not be eligible to
receive any benefit under this Agreement.
B. Settlement Class Members who had Breast Implant Related
claims against INAMED finally dismissed with prejudice before the
date of execution of this Agreement shall not be eligible to
receive any benefit under this Agreement.
C. Settlement Class Members who have obtained and collected
judgments for damages against INAMED or the Released Parties, and
Settlement Class Members against whom final judgments have been
entered in favor of INAMED or the Released Parties, shall not be
eligible to receive any benefit under this Agreement.
VIII. EXCLUSIVE REMEDY/DISMISSAL OF ACTION/JURISDICTION
OF COURT
A. Exclusive Remedy/Settled Claims
This Agreement shall be the exclusive remedy against INAMED
and the Released Parties for any and all Settled Claims of
Settlement Class Members and for any claims of Settlement Class
Members against INAMED and the Released Parties arising out of the
subject matter of this Agreement and the Complaint. INAMED and
the Released Parties shall not be subject to liability or expense
of any kind to any Settlement Class Member with respect to any
Settled Claim or for any claim arising out of the subject matter
of this Agreement, except as provided in this Agreement. When the
Final Order and Judgment becomes Final, each of the Settlement
Class Members shall be barred from initiating, asserting, or
prosecuting any Settled Claims against INAMED and the Released
Parties.
B. Dismissal/Stay of Actions
When the Final Order and Judgment becomes Final, the
Complaint shall be dismissed as to INAMED and the Released
Parties, subject to the reactivation of claims as provided in
Section VI of this Agreement. The Court will also dismiss INAMED
and the Released Parties from all actions coordinated before the
Court in MDL Docket No. 926. Settlement Class Counsel shall
cooperate with INAMED and the Released Parties to dismiss any
other action of any Settlement Class Member pending in state or
federal court or, as appropriate, to dismiss INAMED and the
Released Parties from such actions.
C. Continuing Jurisdiction of The Court
The Court shall retain exclusive and continuing jurisdiction
of the Complaint, the Parties, all Settlement Class Members,
INAMED and the Released Parties, and over this Agreement with
respect to the performance of the terms and conditions of this
Agreement, to assure that all disbursements are properly made, and
to interpret and enforce the terms, conditions, and obligations of
this Agreement. The Court shall have the power to approve the
designation, appointment, and removal of auditors, consultants,
and disbursing agents, and the execution of contracts as necessary
and appropriate to assure the administration of this Agreement.
Any dispute that arises under this Agreement shall be submitted to
the Court. If any dispute is so submitted, each party concerned
shall be entitled to fifteen days' written notice (or otherwise as
the Court may for good cause direct) and the opportunity to submit
evidence and to be heard on oral argument as the Court may direct.
To the extent that additional or different procedures for dispute
resolution are provided, or standards to be applied in connection
therewith are devised, under any other provision of this
Agreement, such other provisions shall control. In the event
that, prior to the performance of all its obligations under this
Agreement, including without limitation under the Subordinated
Note, INAMED becomes the subject of a case under the Federal
Bankruptcy Code, INAMED agrees not to oppose or otherwise contest
a motion to transfer the venue of the bankruptcy case to the
Court.
IX. RELEASE
A. Good Faith
The Parties agree that this Agreement is made in good faith
and in accordance with the laws of states in which Breast Implant
Related lawsuits have been filed. If required by any court or
tribunal, Settlement Class Counsel agree to cooperate with INAMED
and the Released Parties by providing affidavits and/or testimony
concerning the circumstances of this settlement and attesting to
the fact that it is a good faith settlement.
B. Release of Settled Claims
Except as otherwise provided in Section VI(B), after the
Court approves this Agreement as a good faith, fair, adequate and
reasonable settlement, every Settled Claim of each Settlement
Class Member shall be conclusively compromised, settled, and
released as to INAMED and each Released Party. Said releases
shall remain effective regardless of changes in the circumstances
or condition of INAMED, the Released Parties or Settlement Class
Members, discovery of new or additional facts, or changes in
applicable law. In making such releases the Settlement Class
expressly acknowledges and waives the provisions of Section 1542
of the Civil Code of the State of California, which provides that
"[a] general release does not extend to claims which the creditor
does not know or suspect exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor," as well as any similar
provisions of other states. Consistent with the provisions of
Section X of this Agreement, the releases herein shall extinguish
any Claims for Contribution and/or Indemnification against INAMED
or the Released Parties, and Settlement Class Members agree that
if they bring suits against Non-INAMED Defendants and said Non-
INAMED Defendants assert Claims for Contribution and/or
Indemnification against INAMED or the Released Parties, INAMED and
the Released Parties will not have to pay, either directly or
indirectly, any sum in excess of the amount said Settlement Class
Members recover from the INAMED Settlement Fund. As further
provided in Section X below, Settlement Class Members agree to
reduce any judgments they may obtain against Non-INAMED Defendants
to the extent necessary to assure that INAMED and the Released
Parties do not have to pay anything further.
C. Reservation of Rights Against Non-INAMED Defendants
Except as provided in Section X of this Agreement, nothing in
this Agreement shall prejudice or in any way interfere with (1)
the rights of the Settlement Class Members to pursue all of their
rights and remedies against Non-INAMED Defendants, or (2) the
rights of Settlement Class Members under the Revised Settlement
Program with respect to the payment obligations of Non-INAMED
Defendants thereunder.
D. No Effect on Rights of United States
Nothing in this agreement shall be construed to diminish or
alter any Breast Implant Related claims, in the nature of
subrogation or otherwise, belonging to the United States
government.
E. Subrogation Claims
To the extent not foreclosed by prior agreement, subrogation
claims by workers' compensation insurers, employee, and/or health
care insurers or providers shall be submitted to the Claims
Administrator or, if one is not yet appointed, to the Court (with
a copy directed by certified mail to Settlement Class Counsel),
within ninety days of first publication of Notice. All such
claims shall be stamped "Subrogation Claim" and shall specifically
identify respective individual Claimants by name and social
security numbers and shall include with specificity the
particulars of the subrogation claims for each individual
Claimant. After the expiration of the deadline for filing
subrogation claims, the court shall consider the payment of timely
subrogation claims, after notice and opportunity to be heard by
interested parties, from the amounts allocated from the INAMED
Settlement Fund to the respective individual Claimants against
whom subrogation has been asserted. The failure of workers'
compensation insurers or health care insurers or providers to
timely assert claims as set forth above shall constitute a waiver
of such claims.
X. ENTRY OF GOOD FAITH BAR ORDER
A. The Parties shall request that the Court enter an order
finding this Agreement to be a good faith settlement and barring
and enjoining, to the extent permitted by applicable law, the
commencement and prosecution of any Contribution and/or
Indemnification claim or action by any Non-INAMED Defendant or
other third party against INAMED or any Released Party for
reimbursement for payments made or to be made to or on behalf of
any Settlement Class Member for Breast Implant Related claims,
actions or injuries, or for expenses incurred in defending against
any such claims or actions. INAMED and the Released Parties shall
be entitled to dismissal with prejudice of any claims against them
by Non-INAMED Defendants or other third parties that violate or
are inconsistent with this bar. However, nothing herein shall
preclude such Non-INAMED Defendants or other third parties from
asserting any rights to set-off, credit, or reduction that may be
allowed under applicable law.
B. Additionally, the Parties agree that:
1. No Settlement Class Member shall recover, directly
or indirectly, any sums from INAMED or any Released Party
other than those received under this Agreement.
2. Settlement Class Members shall move jointly with
INAMED and/or the Released Parties, or any of them, for
severance and continuance of the trial of Claims for
Contribution and/or Indemnification.
3. With respect to any Claims for Contribution and/or
Indemnity not barred (or claimed not to be barred) by the
Court's Final Order and Judgment, this Agreement, or a
judgment or order of another court having jurisdiction over
affected parties, any Settlement Class Member's claim or
judgment against a Non-INAMED defendant or third party who
possesses such a Claim for Contribution and/or
Indemnification shall be reduced by a percentage, or amount,
sufficient under applicable law to bar, discharge, forever
release or otherwise eliminate any Claim for Contribution
and/or Indemnification against INAMED or any Released Party
arising from the prosecution of such Settlement Class
Member's claim against such Non-INAMED Defendant or third
party. Settlement Class Members reserve the right to take
such actions as may be available under applicable law,
including waiver of any participation in the distribution of
settlement funds or agreement to nonsuit, to minimize the
extent of any judgment reduction necessary to carry out the
intent of the preceding sentence.
XI. COURT'S SETTLEMENT APPROVAL ORDER
This Agreement is subject to and conditioned upon the
issuance by the Court, following the Formal Fairness Hearing, of a
Final Order and Judgment granting final approval of the Agreement
in accordance with Fed. R. Civ. P. 23(e) and providing the below-
specified relief, which relief shall be subject to the terms and
conditions of this Agreement and the Parties' performance of their
continuing rights and obligations hereunder. The Final Order and
Judgment shall, supported by appropriate findings:
1. Confirm the certification of the Settlement Class
under Fed. R. Civ. P. 23(a), 23(b)(1)(B), and 23(e) for
settlement purposes;
2. Determine in accordance with the case law under
Fed. R. Civ. P. 23(b)(1)(B) that defense costs and potential
damages in cases brought by individual Settlement Class
Members could substantially impair or impede the ability of
other Settlement Class Members to protect their interests in
claims for damages and thus lead to a small number of
Settlement Class Members obtaining full recovery of damages
to the detriment of other Settlement Class Members.
3. Enter a judgment of dismissal, with prejudice and
without costs, on the Complaint and all other actions now
existing or hereafter brought upon the Settled Claims by any
Settlement Class Members;
4. Bar and enjoin all Settlement Class Members from
asserting or presenting any and all Settled Claims;
5. Release INAMED and the Released Parties from the
Settled Claims of all Settlement Class Members and in
accordance with the provisions of Section IX above;
6. Bar and enjoin the commencement or prosecution of
any Claims for Contribution and/or Indemnity against INAMED
or any Released Party for reimbursement of payments made to
or on behalf of a Settlement Class Member for Breast Implant
Related claims or injuries;
7. Provide that this Agreement is entered into in good
faith, is reasonable, fair, and adequate, in the best
interests of the Settlement Class, and is non-collusive; and
8. Reserve the Court's continuing and exclusive
jurisdiction over the Parties to this Agreement, including
INAMED and the Released Parties, and all Settlement Class
Members, to administer, supervise, construe, and enforce the
Agreement in accordance with its terms for the mutual benefit
of the Parties and the Settlement Class.
XII. EFFECT OF DEFAULT BY INAMED
A. If INAMED fails to perform any of its obligations under
this Agreement or under any of the provisions of the Subordinated
Note (except the provisions of Paragraph 10 thereof), within any
grace period provided for such performance, Settlement Class
Counsel shall have the right to notify INAMED of such failure or
breach by sending such notification to INAMED by fax and regular
mail at the addresses and numbers specified in Section XIV(E)(1)
of this Agreement. If, in the event of a payment breach, the
breach is not cured within 10 days after receipt by INAMED of such
notice, INAMED shall be in default under this Agreement; provided,
however, that if INAMED is unable to make any interest payment due
under the Subordinated Note prior to the Maturity Date (as defined
therein) because of the subordination provisions of the
Subordinated Note (the "Subordination Provisions"), such failure
shall not constitute a default under this Agreement if the payment
is made thereafter on the earlier of (x) the fifth business day
after the date payment is no longer precluded by the Subordination
Provisions or (y) the Maturity Date. If, in the event of any
other such failure or breach, such failure or breach is not cured
within 20 days after receipt by INAMED of such notice, INAMED
shall be in default under this Agreement. INAMED shall also be in
default under this Agreement if (i) a holder or holders of
indebtedness of INAMED aggregating in excess of $750,000 seek(s)
to exercise its(their) remedies on default, (ii) INAMED suffers a
judgment or judgments against it aggregating in excess of
$1,000,000 which constitute(s) lien(s) on INAMED assets, (iii)
INAMED becomes the subject of a case under the Bankruptcy Code, or
a dissolution or liquidation proceeding, (iv) a trustee, receiver,
or custodian is appointed for all or a substantial portion of
INAMED's assets, or (v) INAMED breaches any of the covenants in
Paragraph 10 of the Subordinated Note.
B. In the event of a default under this Agreement,
Settlement Class Counsel shall have the right at their option to
declare this Agreement terminated or to declare immediately due
and payable, subject to any applicable subordination agreements,
all amounts owing by INAMED under this Agreement and seek the
entry of judgment by the Court in favor of the Settlement Class
for such amounts.
XIII. REPRESENTATIONS AND WARRANTIES
A. The undersigned counsel represent and warrant that they
have the authority to enter into this Agreement on behalf of the
Representative Plaintiffs.
B. INAMED represents and warrants that it has all requisite
corporate power and authority to execute, deliver, and perform
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance by INAMED of this
Agreement and the consummation by INAMED of the actions
contemplated herein have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly
executed and delivered by INAMED and constitutes its legal, valid,
and binding obligation.
XIV. MISCELLANEOUS PROVISIONS
A. This Agreement is binding upon any and all successors
and heirs of all parties.
B. The headings of the sections and paragraphs of this
Agreement are included for convenience only and shall not be
deemed to constitute part of this Agreement or to affect its
construction or interpretation.
C. This Agreement, including all exhibits, constitutes the
entire agreement by and among the Parties with regard to the
subject matter of this Agreement and shall supersede any previous
agreements and understandings between the Parties on the subject
matter of this Agreement. This Agreement may not be modified or
amended except in a writing signed by all Parties.
D. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
E. Any notice, request, instruction, or other document to
be given by any party to this Agreement to any other party to this
Agreement (other than class notification) shall be in writing and
delivered personally or sent by registered or certified mail,
postage prepaid, as follows:
1. If to INAMED or the Released Parties,
Ilan K. Reich
INAMED Corporation
3800 Howard Hughes Parkway
Suite 900
Las Vegas, NV 89109
Fax: 702-791-1922 and 212-935-1787
Charles C. Lifland
O'MELVENY & MYERS LLP
400 South Hope Street
Los Angeles, CA 90071
Fax: 213-669-6407
2. If to Settlement Class Counsel,
Ralph I. Knowles, Jr.
Leslie J. Bryan
DOFFERMYRE, SHIELDS, CANFIELD, KNOWLES & DEVINE
Suite 1600
1355 Peachtree Street
Atlanta, GA 30309
Fax: 404-881-3007
Elizabeth Cabraser
LIEFF, CABRASER, HEIMANN & BERNSTEIN
Embarcadero Center West
275 Battery Street, 30th Floor
San Francisco, CA 94111
Fax: 415-956-1008
Dianna Pendleton
BLIZZARD & McCARTHY
Lyric Centre
400 Louisiana
Suite 1710
Houston, TX 77002-1689
Fax: 713-844-3755
Ernie Hornsby
FARMER PRICE HORNSBY & WEATHERFORD
115 West Adams Street
Dothan, AL 36302
Fax: 334-793-6624
3. Any party may change the person to whom notice is
to be sent by sending a registered, return receipt-requested
letter to each of the other persons listed above.
F. All applications for Court approval or Court Orders
required under this Agreement shall be made on notice to all
signatories.
IN WITNESS HEREOF, the Parties signify their agreement by
their signatures below.
DATED: April 2, 1998
INAMED CORPORATION
By: /s/ Ilan K. Reich
____________________________
Ilan K. Reich
Executive Vice President
SETTLEMENT CLASS COUNSEL
By: /s/ Ralph I. Knowles, Jr.
____________________________
Ralph I. Knowles, Jr.
By: /s/ Leslie J. Bryan
____________________________
Leslie J. Bryan
By: /s/ Elizabeth Cabraser
____________________________
Elizabeth Cabraser
By: /s/ Dianna Pendleton
____________________________
Dianna Pendleton
By: /s/ Ernie Hornsby
____________________________
Ernie Hornsby
Exhibit A
SUBSIDIARIES AND AFFILIATES OF INAMED CORPORATION
Biodermis Corporation
Biodermis Ltd.
BioEnterics Corporation
BioEnterics Latin America
BioEnterics, Ltd.
Bioplexus Corporation
Bioplexus Ltd.
Chamfield Ltd.
CUI Corporation
(f/k/a Cox-Uphoff International Corporation)
(a/k/a Cox-Uphoff Corporation)
Flowmatrix Corporation
INAMED B.V.
INAMED B.V.B.A.
INAMED B.V.(R.O.R.)
INAMED Corporation
INAMED do Brasil LTDA
INAMED Development Company
INAMED GmbH
INAMED Japan
INAMED Ltd.
INAMED Medical Group
INAMED S.A.
INAMED S.A.R.L.
INAMED S.R.L.
Innovative Surgical Products, Inc.
McGhan Limited
McGhan Medical Asia/Pacific
McGhan Medical Corporation
McGhan Medical Mexico, S.A. de C.V.
Medisyn Technologies Corporation
Medisyn Technologies Ltd.
Silicone Engineering, Inc.
Specialty Silicone Fabricators, Inc.
Exhibit B
IMPLANT BRANDS OF INAMED AND AFFILIATED COMPANIES:
BioCell
BioDimensional
BioSpan
Cox Uphoff
CZV/CRS (Croissant Versafil Low Profile)
DRI
DRIE
EHP (Enhanced High Profile)
FZV/SFV (Round Versafil LP Tissue Expander)
Gibney
Intrashiel (manufactured after 8/2/84)
Intravent
IOC (Cylindrical Intraoperative Tissue Expander)
IOM (Intravent Intraoperative Expander)
IOS (Spherical Intraoperative Tissue Expander)
Magna-Site
Maxwell
McGhan (manufactured after 8/2/84)
MFE (Man Facelift Expander)
MicroCell
OHP (Oval High Profile)
OLP (Oval Low Profile)
RCP (Round Conical Profile)
RCR (Ruiz-Cohen Expanders)
RDD (Reserve Double Lumen DRIE)
RDL (Reverse Double Lumen)
RDL-XPAND
RDX (Round Double Lumen)
Reverse Double Lumen
RHD (Round High Profile)
RHP (Round High Profile)
RLD (Round Low Profile DRIE)
RLP (Round Low Profile)
RTV/RTT (Smooth/Textured)
Ruiz-Cohen
RZV/SRV (Rectangular Versafil Tissue Expander)
SCC (Cylindrical Tissue Expander)
SCS (Crescent Tissue Expander)
SEE (Mini-crescent Tissue Expander)
SFS (Saline Fill Skin and Tissue Expander)
SGO (Saline Gel Oval)
SGR (Saline Gel Round)
SLP (Single Lumen Adjustable)
SLS (Longitudinally Curved Tissue Expander)
SOE (Small Oval Tissue Expander)
SOS (Ear Shaped Tissue Expander)
SPS (Pear Shaped Tissue Expander)
SRS (Rectangular Tissue Expander)
SSS (Spherical Tissue Expander)
SWS (Wedge Shaped Tissue Expander)
SZR (Round Low Profile Sizer)
TLL (Triple Lumen Round)
Tri-Lumen
TRL (Tri-Lumen Implants)
TSO (Triple Lumen Low Profile Oval)
TSR (Triple Lumen Round Low Profile)
UHP
Ultra High Performance
Versafil
IMPLANT BRANDS OF 3M and MMC/3M (HERE DEFINED AS INAMED IMPLANTS
FOR THE LIMITED PURPOSE OF RELEASING CLAIMS AGAINST INAMED AND THE
RELEASED PARTIES BASED ON SUCH IMPLANTS):
3M
McGhan (manufactured before 8/3/84)
Intrashiel (manufactured before 8/3/84)
Natrashiel
Exhibit C
FORM OF SUBORDINATED NOTE
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
Atlanta, Georgia
[Date of Preliminary Approval]
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned,
INAMED Corporation (herein called "Maker"), a corporation
organized under the laws of the State of Florida, promises to pay
to the order of EDGAR C. GENTLE, III, ESQ., as "Fund Agent" (as
defined in that Settlement Agreement of even date between the
Maker and the Settlement Class Counsel signatory thereto, a copy
of which is attached as Exhibit "A" (the "Settlement Agreement"))
(capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to them in the Settlement Agreement), or
such other Person (as defined in Paragraph 12) as the Court may
appoint as Fund Agent pursuant to the Settlement Agreement, the
principal sum of TWENTY FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($25,500,000), such principal sum being subject to increase to
TWENTY EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($28,500,000)
under the conditions set forth in Subsection IV(B)(6) of the
Settlement Agreement.
2. Interest. Except as otherwise provided in this
Paragraph 2, from and after the date of Preliminary Approval,
interest shall accrue on the unpaid principal balance outstanding
hereunder from time to time at the rate of six percent (6%) per
annum until the principal hereof shall have become due and
payable, and on any overdue payment of principal at the rate of
eleven percent (11%) per annum. Notwithstanding the foregoing, if
this Note has not been paid in full by September 1, 1999, interest
shall accrue thereafter on the unpaid principal balance
outstanding hereunder from time to time at the rate of eleven
percent (11%) per annum until the principal hereof shall have been
paid in full. Interest shall be calculated hereunder on the basis
of a 360-day year and actual days elapsed and shall be payable in
arrears on the 15th day of January and July of each year,
commencing July 15, 1998, and continuing to be due on the same day
of each January and July thereafter so long as this Note is
outstanding.
3. Principal. All principal, together with all accrued,
unpaid interest, shall be payable on the later of (x) April 30,
1999, or (y) ninety-one (91) days after the date on which the
Final Order and Judgment becomes Final (the "Maturity Date");
provided that if such day is not a business day, then the Maturity
Date shall be the first business day after the later of (x) or (y)
occurs. Payments of principal and interest are to be made at the
offices of the Fund Agent, at 1928 First Avenue, North, 1500
Colonial Bank Building, Birmingham, Alabama 35203, or at such
other place as the holder hereof may designate to Maker in
writing, in lawful money of the United States of America.
4. Settlement Agreement. This Note (hereinafter "this
Note" or "the Note") is issued pursuant to the Settlement
Agreement, and the holder of this Note is entitled to the benefits
of the Settlement Agreement, including but not limited to the
provisions for convertibility of this Note at the option of
Settlement Class Counsel into Common Stock (as defined in
Subparagraph 5A), as more particularly set forth hereinafter. At
any time prior to the Maturity Date, Maker shall be entitled to
prepay in full this Note at its option, but only if Maker shall
give the holder of this Note irrevocable written notice of any
such prepayment not less than five (5) days prior to the
prepayment date (and at least six (6) days prior to the Maturity
Date), which notice shall state the prepayment date. Such notice
having been given, the principal amount of the Note shall become
due and payable on such prepayment date, together with all unpaid
interest accrued through such date.
5. Conversion Rights.
5A. Right to Convert into Common Stock.
Conversion Price. On the Maturity Date, but not
sooner, if the Note has not previously been paid in full, the
holder of the Note, at such holder's option, shall have the right
(the "Conversion Right") to convert all or a portion of the
principal of the Note into shares of the common stock of Maker
("Common Stock"). The number of shares of Common Stock to be
issued upon exercise of the Conversion Right shall be determined
by dividing the amount of the indebtedness so converted by the
Conversion Price. Subject to adjustment under Subparagraph 5C
below, the Conversion Price shall be $7.50 if the average closing
bid price for said Common Stock as quoted on NASDAQ (or the
principal exchange on which such stock is traded) during any
twenty (20) consecutive trading day period during the three month
period preceding the date of conversion is at least equal to $7.50
per share; otherwise, the Conversion Price shall be $6.00. If
partially converted, the Note may be converted only in multiples
of $1,000.
5B. Exercise of Conversion Rights.
(1) Notice of Exercise. The Conversion Rights
herein provided may be exercised by any holder of the Note by
giving written notice not later than three business days before
the Maturity Date that such holder elects to convert all or a
portion of the outstanding principal balance under the Note into
Common Stock, whereupon the payment of principal due on the
Maturity Date shall be reduced by the amount of indebtedness being
converted to stock pursuant to such notice.
(2) Conversion Procedure. Within ten (10) days
following receipt of the written notice referred to in
Subparagraph 5B(1), Maker shall issue and deliver, or cause to be
issued and delivered, to such holder, registered in the name of
such holder, a certificate or certificates for the number of
shares of Common Stock issuable upon the conversion of
indebtedness as specified in said notice. Nothing set forth in
this paragraph shall extend the time for payment beyond the
Maturity Date for such portion of the indebtedness owing under the
Note as to which notice of conversion has not been given on or
prior to the Maturity Date.
5C. Adjustment of Conversion Price.
The Conversion Price shall be adjusted from time to time
as provided in this Subparagraph 5C. The adjustments set forth in
this Subparagraph 5C shall apply if any of the events specified in
subparagraphs (a) through (d) below occur on or after March 1,
1998 (the "Commencement Date"). In determining the adjusted
Conversion Price, the following adjustments, if applicable, will
be applied retroactively to the Conversion Price determined under
Subparagraph 5A ($7.50 or $6.00) as if such Conversion Price had
been in effect on the Commencement Date and subsequently adjusted
pursuant to the following provisions of this Subparagraph 5C:
(a) If Maker shall after the Commencement Date pay a
dividend or make a distribution to all holders of the outstanding
Common Stock ("Common Holders") in shares of Common Stock (or
declare any such dividend or distribution based on a Record Date
(as defined below) prior to the Maturity Date and a payment date
after the Maturity Date), the Conversion Price shall be adjusted
so that the same shall equal the price determined by multiplying
such Conversion 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 (hereinafter any record date will
be referred to as the "Record Date") 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.
(b) If Maker shall after the Commencement Date (1)
adjust the Conversion Price of the existing Warrants to purchase
Common Stock issued, on July 2, 1997, to a price per share less
than the Conversion Price on the date of such adjustment (the
"Adjustment Date"), (2) agree directly or indirectly to issue
Common Stock in respect of notes or other indebtedness to related
parties such as the McGhan entities, including without limitation
any Person controlled by Donald K. McGhan or any member of his
family, at a price per share less than the Conversion Price on the
date of such agreement (the "Agreement Date"), or (3) issue to all
Common Holders, through a rights offering or similar mechanism,
any shares of Common Stock at a price per share less than the
Conversion Price on the date (the "Issuance Date") of such
issuance (the price per share in each of the instances described
in clauses 1, 2 and 3 of this Subparagraph 5C(b) being referred to
hereinafter as the "Exercise Price"; the rights to acquire Common
Stock pursuant to such adjustment, agreement or issuance, as the
case may be, being referred to hereinafter as the "Rights"), the
Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect
on the Adjustment Date, Agreement Date or Issuance Date, as the
case may be, by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of
business on the Adjustment Date, Agreement Date or Issuance Date,
as the case may be, plus the total number of additional shares of
Common Stock that could be purchased pursuant to the Rights if the
Exercise Price were equal to the Conversion Price, and of which
the denominator shall be the number of shares of Common Stock
outstanding on the close of business on the Agreement Date,
Adjustment Date or Issuance Date, as the case may be, plus the
total number of additional shares of Common Stock that could be
purchased pursuant to the Rights at the Exercise Price. If any
Rights expire without having been exercised, any adjustment to the
Conversion Price triggered by their issuance or creation shall be
nullified, and any subsequent adjustments to the Conversion Price
shall be calculated as if such nullified adjustment had never
occurred. The adjustment required by this subsection (b) shall
apply to any distribution to be made after the Maturity Date based
on a Record Date prior to the Maturity Date.
(c) If the outstanding shares of Common Stock shall
after the Commencement Date be subdivided into a greater number of
shares of Common Stock, the Conversion 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
Conversion 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.
(d) If Maker shall after the Commencement Date, by
dividend or otherwise, distribute to all Common Holders, shares of
any class of capital stock of Maker (other than any dividends or
distributions to which subparagraph (a) applies) or evidences of
its indebtedness, cash or other assets (including securities but
excluding any capital stock, evidences of indebtedness, cash or
assets distributed upon a merger or consolidation) (the
"Distributed Property"), then, in each such case, the Conversion
Price shall be reduced so that the same shall be equal to the
Conversion Price in effect immediately prior to the close of
business on the Record Date less the cash, or in the case of a non-
cash distribution, 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 Property so distributed, in each case, applicable
to one share of Common Stock; provided, however, that in the event
the cash or the then fair market value (as so determined) of the
portion of the Distributed Property so distributed applicable to
one share of Common Stock is equal to or greater than the
Conversion Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that the holder of
this Note shall have the right to receive upon conversion of the
Note (or any portion thereof) in addition to shares of Common
Stock the amount of Distributed Property the holder would have
received had the holder converted this Note (or portion thereof)
immediately prior to such Record Date. The adjustment required by
this subsection (d) shall apply to any distribution to be made
after the Maturity Date based on a Record Date prior to the
Maturity Date.
Notwithstanding any other provision of this subsection
(d) 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 subparagraph (d) if Maker makes proper provision
so that the holder of this Note who converts the Note (or any
portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the
shares of Common Stock issuable upon such conversion, 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, converted this Note into Common Stock.
(e) Notwithstanding anything to the contrary in this
Subparagraph 5C, if Maker engages in a transaction requiring an
adjustment of the Conversion Price, such conversion shall in no
event result in the holder of this Note being in an economic
position less favorable than prior to such conversion.
5D. Effect of Reclassification, Consolidation, Merger
or Sale.
If any of the following events occur on or after the Commencement
Date: (i) any reclassification or change of the outstanding
shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of Maker with another
corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common
Stock, or (iii) any sale or conveyance of the properties and
assets of Maker as, or substantially as, an entirety to any other
corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common
Stock, then the Note shall be convertible into the kind and amount
of shares of stock and other securities or property or assets
(including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder
of the number of shares of Common Stock issuable upon conversion
of the Note immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance. Subsequent
adjustments to the Conversion Price shall be as nearly equivalent
as may be practicable to the adjustments provided for in
Subparagraph 5C.
The above provisions of this Subparagraph 5D shall similarly
apply to successive reclassifications, changes, consolidations,
mergers, combinations, sales and conveyances.
6. Registration Rights.
For a period beginning upon conversion of this Note and
ending two years thereafter, the holder shall have the following
registration rights with respect to the shares of Maker's Common
Stock issuable upon conversion of this Note ("Registrable
Shares"), which rights shall be transferable to assignee(s) of
Registrable Shares: (a) in one instance upon the request of the
holder of this Note, Maker, at Maker's expense, shall use its
best efforts to file promptly with the Securities and Exchange
Commission (the "Commission"), and shall use its best efforts, at
its expense, to cause to become effective, as soon as practicable,
a registration statement on Form S-3, or, if use of Form S-3 is
not then available to Maker for such purpose, other appropriate
form of the Commission with respect to the resale by the holder of
the Registrable Shares; and (b) in two instances at any time Maker
proposes to register any of its securities on a registration form
that would also permit the registration of Registrable Securities,
and after notice thereof to the holder of this Note such holder
elects to have all or some of the Registrable Shares included in
such registration, Maker shall use its best efforts, at Maker's
expense, to cause all of the Registrable Shares requested by the
holder to be included in the registration to be so included.
Maker shall keep such registration statement on Form S-3 effective
as long as permissible under the securities laws and shall keep
any such registration statement on Form S-1 (or other form) filed
under (a) above effective for one hundred-eighty (180) days.
Prior to filing with the Commission any such registration
statement including Registrable Shares, or prospectus or any
amendments or supplements thereto, Maker shall furnish the selling
holder of such Registrable Shares copies of all such documents
proposed to be filed, and it shall address objections or
reasonable changes requested by such selling holder prior to such
filing, or by amendment thereafter. Maker shall promptly notify
the selling holder of the effectiveness of any registration of
Registrable Shares and furnish the selling holder such number of
copies of the prospectus included in the registration statement,
supplements thereto and such other documents as reasonably
requested to facilitate the disposition of the Registrable Shares.
The use by the selling holder of a prospectus under any
registration hereunder shall be subject to temporary suspension
from time-to-time and at such times as Maker may reasonably
require to avoid the use thereof when the registration statement
contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading. If a
registration under (b) above is an underwritten primary
registration on behalf of Maker and the managing underwriter
advises Maker in writing that the inclusion of all or some of the
Registrable Shares proposed to be included in such registration
reasonably would be expected to cause a detrimental effect on the
success of the offering, as to price or otherwise, then such
Registrable Shares may be excluded, but only if no other selling
stockholders are allowed to include shares in such registration.
If Registrable Shares are included in a registration statement,
Maker and the selling holder each shall agree to indemnify the
other as to the potential liabilities typically covered by such an
indemnification with respect to a registration of securities for
resale by a selling holder.
7. Subordination. This Note is subordinated in right of
payment of principal and interest and upon liquidation to Maker's
11.00% Secured Convertible Notes, due March 31, 1999, issued
pursuant to that Indenture dated as of January 2, 1996 (the
"Indenture"), designating Santa Barbara Bank & Trust as Trustee
(the "Senior Secured Notes") and to any other senior secured notes
issued by Maker for new money, as permitted under Subparagraphs
10A(ii) and (iii), after the date hereof ("New Senior Secured
Notes"); provided, however, that such subordination will terminate
only as to the right of the holder to payment of principal and
interest on the ninetieth (90th) day after the Final Order and
Judgment becomes Final. Maker shall provide promptly to
Settlement Class Counsel satisfactory evidence that the holder(s)
of the Senior Secured Notes has consented to the termination of
subordination provided for immediately above.
8. Events of Default. The occurrence of a default under
the Settlement Agreement shall constitute an Event of Default
hereunder. Upon the occurrence of an Event of Default, Settlement
Class Counsel, on behalf of the Settlement Class, shall have the
rights and remedies set forth in Subsection 12(B) of the
Settlement Agreement and such other rights and remedies as are
available under applicable law.
9. Affirmative Covenants. For so long as any principal or
accrued interest is outstanding on this Note, Maker agrees to be
bound by and comply with all of the provisions of this Paragraph
9.
9A. Maintenance of Insurance. Maker covenants that it
and each Subsidiary will maintain, with responsible insurers,
insurance with respect to its properties and business against such
casualties and contingencies (including public liability, larceny,
embezzlement or other criminal misappropriation) and in such
amounts as has been its historical practice and as is customary in
the case of similarly situated corporations engaged in the same or
similar businesses, and upon request at any time, Maker will
deliver to Settlement Class Counsel an officer's certificate
specifying the details of such insurance in effect.
9B. Maintenance of Corporate Existence, Properties,
Franchises, Etc. Maker covenants that it and each Subsidiary will
do or cause to be done all things necessary to preserve, renew and
keep in full force and effect the corporate existence of Maker and
its Subsidiaries and promptly comply in all material respects with
all laws and regulations applicable to it and its Subsidiaries; at
all times maintain, preserve and protect all material patents,
trademarks, service marks, trade names, service names, copyrights,
licenses, certificates, permits, certificates of need, franchises
and other rights and preserve all the remainder of its material
properties and assets used or useful in the conduct of its
business and keep the same in good repair, working order and
condition, and from time to time, make, or cause to be made, all
needful and proper repairs, renewals, replacements, betterments
and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted.
9C. Payment of Taxes and Claims. Maker covenants that
it and each Subsidiary will pay and discharge or cause to be paid
and discharged all taxes, assessments and governmental charges or
levies imposed upon it or upon its respective income and profits
or upon any of its properties or assets, real, personal or mixed
or upon any part thereof, before the same shall become in default
as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien upon such
properties or any part thereof, provided that Maker and its
Subsidiaries shall not be required hereunder to pay and discharge
or cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and it shall
set aside on its books adequate reserves with respect to any such
tax, assessment, charge, levy or claim, so contested; and
provided, further, that payment with respect to any such tax,
assessment, charge, levy or claim shall be made before any of its
properties or assets shall be seized or sold in satisfaction
thereof.
9D. Legal Proceedings. Maker covenants that it will
give prompt written notice to Settlement Class Counsel of any
proceedings instituted against it or any Subsidiary by or in any
foreign, federal or state court or before any commission or other
regulatory body, whether foreign, federal, state or local, which,
if adversely determined, would have a material adverse effect upon
its business, operations, properties, assets, condition or
prospects, financial or otherwise.
9E. Other Notices. Maker covenants that it will
promptly notify Settlement Class Counsel in writing of any
material adverse change in the condition or prospects, financial
or otherwise, of Maker, or the occurrence of an Event of Default,
describing the nature and period of existence thereof and the
action which Maker has taken, is taking or proposes to take with
respect thereto.
10. Negative Covenants. For so long as any principal or
accrued interest is outstanding on this Note, Maker covenants that
it will not and will not permit any Subsidiary to:
10A. Debt. After March 1, 1998, create, incur or assume
any Debt (as hereinafter defined in Paragraph 12) except:
(i) Debt represented by this Note;
(ii) Debt incurred to refinance the Senior Secured Notes,
including without limitation Debt incurred pursuant to
New Senior Secured Notes; or
(iii) up to $5,000,000 in senior secured debt
to a financial institution for working capital
as permitted under the Indenture;
provided, however, that Maker and its Subsidiaries may incur
unsecured Debt in addition to that permitted immediately above if
the first Fifteen Million Dollars ($15,000,000) of proceeds
thereof is reserved for payment of the Subordinated Note (the
"Reserved Funds") and any additional sums are used only to fund
working capital and capital expenditure requirements and are not
used to retire other indebtedness, including without limitation
indebtedness to Affiliates or Substantial Stockholders, or settle
or otherwise satisfy other claims. Maker shall not permit any of
the Reserved Funds to be or become subject to any security
interests, liens (including without limitation judgment liens) or
restrictions on payment (including without limitation any
agreements regarding subordination).
10B. Investments. Acquire any stock, securities or
equity interest in, or otherwise invest in, any Person (as defined
in Paragraph 12), other than by the purchase of (i) federally
insured money market funds or U.S. government security backed
repurchase obligations maturing within one year after investment;
(ii) obligations of, or guaranteed as to interest and principal
by, the United States government maturing within one year after
investment; (iii) open market commercial paper of any corporation
incorporated under the laws of the United States or any state
thereof rated "prime-1" or its equivalent by Moody's Investor
Service, Inc. or "A-1" or its equivalent by Moody's Investor
Service, Inc. or "A-1" or its equivalent by Standard & Poor's
Corporation; (iv) certificates of deposit maturing within one year
after such investment issued by domestic offices of commercial
banks organized under the laws of the United States or any
political subdivision thereof having a combined capital and
surplus in excess of $75,000,000; provided that the certificate of
deposit issued by any one bank shall not be in excess of the
lesser of $10,000,000 or 2.5% of such bank's capital and surplus;
or (v) Eurodollar time deposits maturing within six months after
such investment issued by commercial banks with a short term debt
rating of "prime-1" or its equivalent by Moody's Investor Service,
Inc. or "A-1" or its equivalent by Standard & Poor's Corporation;
provided that the commercial bank is ranked in the top 100 banks
in the world as determined by total assets; provided further, that
in any event, the sum of all Eurodollar time deposits issued by
any one bank shall not be in excess of the lesser of $5,000,000 or
2.5% of such bank's capital and surplus.
10C. Transactions With Affiliates or Substantial
Stockholders. Directly or indirectly purchase, acquire or lease
any property from, or sell, transfer or lease any property to, or
render any service for or obtain any services from, or otherwise
deal with, in the ordinary course of business or otherwise (i) any
Affiliate (as hereinafter defined), or (ii) any Substantial
Stockholder (as hereinafter defined), provided that Maker may (a)
permit any such Affiliate or Substantial Stockholder to be a
director, officer or employee of Maker and pay reasonable
compensation in connection therewith, and (b) enter into
transactions with Affiliates and/or Substantial Stockholders for
the benefit of Maker on terms no less favorable to Maker than if
no relationship existed, provided that such transactions are
approved by a majority of the disinterested board members of
Maker.
10D. Business of Maker and its Subsidiaries. Engage in
any business other than the business engaged in on the date of
this Note.
10E. Dividends. Maker shall not, directly or
indirectly, declare, pay or make any dividend, distribution or
payment in respect of its capital stock, and Maker shall not,
directly or indirectly, redeem, purchase or otherwise acquire any
of its capital stock.
10F. Capital Expenditures. Make Capital Expenditures,
on a consolidated basis, in excess of the aggregate sum of
$15,000,000 in any one fiscal year.
10G. Business Combination. Whether in one transaction or
in a series of transactions, engage in any of the following
transactions:
(a) Be or become a party to any consolidation,
reorganization (including, without limitation, the types referred
to in Section 368 of the Internal Revenue Code of 1986, as
amended), merger or statutory share exchange;
(b) In any twelve month period, on a consolidated
basis, sell, lease, assign, transfer or otherwise dispose of any
of its assets (other than in the ordinary course of business), the
value of which as reflected in Maker's then most recent
consolidated balance sheet equals or exceeds an amount equal to
the lesser of ten percent (10%) of the value of Maker's and its
Subsidiaries' assets, as reflected in such most recent
consolidated balance sheet, or $1,000,000.
(c) Purchase or otherwise acquire or become
obligated for the purchase of the assets or business interests of
any Person, firm, corporation or other business enterprise of any
nature whatsoever for which the price paid by Maker or any
Subsidiary for the assets or business interest equals or exceeds
an amount equal to the lesser of ten percent (10%) of the value of
Maker's and its Subsidiaries' assets, as reflected in Maker's then
most recent consolidated balance sheet, or $1,000,000.
(d) Liquidate, dissolve, discontinue business,
reclassify any of its capital stock or other securities, undergo
any recapitalization or effect any other change in its capital
structure (other than through the incurrence of Debt within the
limits of Paragraph 10A), amend its certificate of incorporation
in any material respect which would adversely affect the rights of
the Common Holders, or take any action with a view towards of any
of the foregoing.
11. Miscellaneous.
11A. No Improper Charges. In no event shall any agreed
to or actual interest or exaction charged, reserved, paid or taken
by the holder pursuant to or in connection with this Note exceed
the limits (if any) imposed or provided by the law applicable from
time to time to this Note for the use or detention of money or for
forbearance in seeking its collection; holder hereby waives any
right to demand such excess. In the event that the interest
provisions of this Note or any exactions provided for in this Note
or the Settlement Agreement shall result at any time or for any
reason in an effective rate of interest on any obligation under
this Note that exceeds the maximum interest rate permitted by
applicable law (if any), then without further agreement or notice
such obligation shall be automatically reduced to such limit, and
all sums received by holder in excess of those lawfully
collectible as interest shall be applied against the principal of
this Note immediately upon receipt by holder, with the same force
and effect as though Maker had specifically designated such extra
sums to be so applied to principal and holder had agreed to accept
such extra payment(s) as a premium-free prepayment or prepayments.
During any time that this Note bears interest at the maximum
lawful rate, the interest shall be computed on the basis of the
actual number of days elapsed and the actual number of days in the
respective calendar year.
11B. Attorney's Fees and Costs. In case this Note is
collected by or through an attorney-at-law, all costs of
collection, including reasonable attorney's fees, shall be paid by
Maker.
11C. Waiver by Maker. Demand, presentment, notice,
notice of demand, notice of payment, protest and notice of
dishonor are hereby waived by each and every maker, guarantor,
surety and other person or entity primarily or secondarily liable
on this Note.
11D. Non-Waiver By Holder. Holder shall not be deemed
to waive any of its rights unless such waiver be in writing and
signed by holder. No delay or omission by holder in exercising
any of its rights shall operate as a waiver of such rights, and a
waiver in writing on one occasion shall not be construed as a
consent to or a waiver of any right or remedy on any future
occasion.
11E. Governing Law. This Note is executed and delivered
in, and is intended to be performed in, the State of Georgia and
shall be construed and enforced in accordance with the law of such
State. Time limits and due dates for payment and performance
under the Note and the Settlement Agreement are intended to be
strictly adhered to.
12. Definitions. For the purpose of this Note, the
following terms shall have the meanings specified with respect
thereto below:
"Affiliate" when used with respect to any Person shall
mean any other Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with,
such person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities,
by contract or otherwise.
"Capital Expenditures" shall mean all expenditures (by
the expenditure of cash or the incurrence of Debt) by Maker for
any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under
generally accepted accounting principles.
"Debt" shall mean and include without duplication:
(i) any obligation for borrowed money (and any
notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed
money);
(ii) any obligation payable more than one year from
the date of creation thereof, which under generally accepted
accounting principles is shown on the balance sheet as a
liability (including capitalized lease obligations but
excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute
an obligation);
(iii) indebtedness or any other obligation
payable more than one year from the date of creation thereof
which is secured by a lien on, or payable out of the proceeds
of production from the property of, Maker whether or not the
indebtedness or obligations secured thereby shall have been
assumed by Maker;
(iv) guaranties, endorsements (other than
endorsements of negotiable instruments for collection in the
ordinary course of business) and other contingent liabilities
(whether direct or indirect) in connection with the
obligations, stock or dividends of any Person;
(v) obligations under any contract providing for
the making of loans, advances or capital contributions to any
Person, or for the purchase of any property from any Person,
in each case in order to enable such a Person primarily to
maintain working capital, net worth or any other balance
sheet condition or to pay debts, dividends or expenses;
(vi) obligations under any contract for the
purchase of materials, supplies or other property or services
if such contract (or any related document) requires that
payment for such materials, supplies or other property or
services shall be made regardless of whether or not delivery
of such materials, supplies or other property or services is
ever made or tendered;
(vii) obligations under any contract to rent or
lease (as lessee) any real or personal property if such
contract (or any related document) provides that the
obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in
commercial leases then in general use or requires that the
lessee purchase or otherwise acquire securities or
obligations of the lessor;
(viii) obligations under any contract for the
sale or use of materials, supplies or other property or
services if such contract (or any related document) requires
that payment for such materials, supplies or other property
or services, or the use thereof, shall be subordinated to any
indebtedness (of the purchaser or user of such materials,
supplies or other property or the Person entitled to the
benefit of such services) owed or to be owed to any Person;
and
(ix) obligations under any other contract which, in
economic effect, is substantially equivalent to a guarantee;
all as determined in accordance with generally accepted accounting
principles.
"Person" shall include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Subsidiary" shall mean any corporation a majority of
the total voting power of the voting stock of which shall, at the
time as of which any determination is being made, be owned,
directly or indirectly, by Maker or by one or more Subsidiaries of
Maker.
"Substantial Stockholder" shall mean each of (i) any
Person owning, directly or indirectly, either individually or
together with all other Persons to whom such Person is related by
blood, adoption or marriage, stock of Maker (of any class having
ordinary voting power for the election of directors) aggregating
5% or more of such voting power, or (ii) any Person related by
blood, adoption or marriage to any Person or any officer, director
or employee of any Person described or coming within the
provisions of clause (i) of this paragraph.
IN WITNESS WHEREOF, the undersigned has executed this Note by
and through its duly authorized representative and caused its seal
to be affixed hereon, as of the date, month and year first above
written.
INAMED CORPORATION
By: ________________________________
Name:
__________________________
Title:
__________________________
(CORPORATE SEAL)
ATTEST:
_____________________________
Name: _______________________
Title: _______________________
Exhibit D
RELEASED PARTIES
BioDermis Corporation
BioDermis Ltd.
BioEnterics Corporation
BioEnterics Latin America
BioEnterics, Ltd.
Bioplexus Corporation
Bioplexus Ltd.
Lawrence Birnbaum
Chamfield Ltd.
CUI Corporation
(f/k/a Cox-Uphoff International Corporation)
(a/k/a Cox-Uphoff Corporation)
Jack Fisher
Flowmatrix Corporation
INAMED B.V.
INAMED B.V.B.A.
INAMED B.V.(R.O.R.)
INAMED Corporation
INAMED do Brasil LTDA
INAMED Development Company
INAMED GmbH
INAMED Japan
INAMED Ltd.
INAMED Medical Group
INAMED S.A.
INAMED S.A.R.L.
INAMED S.R.L.
Innovative Surgical Products, Inc.
Ron E. Iverson
G. Patrick Maxwell
Donald K. McGhan
McGhan Limited
McGhan Medical Asia/Pacific
McGhan Medical Corporation
McGhan Medical Mexico, S.A. de C.V.
Medisyn Technologies Corporation
Medisyn Technologies Ltd.
Silicone Engineering, Inc.
Scott L. Spear
Specialty Silicone Fabricators, Inc.
John B. Tebbetts
John L. Williams
Corporate "Released Parties" listed above include said Released
Parties' respective parents, subsidiaries and affiliates, each of
said entities' predecessors, successors and assigns (provided
that 3M and MMC/3M, insofar as they may be considered
predecessors of MMC, are expressly excluded from the definition
of "Released Parties" herein), and each of said entities' current
and former officers, directors, employees, agents and attorneys,
acting in their capacities as such and/or in connection with
INAMED or INAMED Breast Implants.
Exhibit 10.27
INAMED CORPORATION
3800 Howard Hughes Parkway
Suite 900
Las Vegas, Nevada 89109
(702) 791-3388
(702) 791-1922 Fax
April 2, 1998
Mr. James Bolin
Appaloosa Management L.P.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Dear Jim:
Today the Company is entering into a formal settlement agreement
with the Plaintiffs' Settlement Class Counsel (the "PSCC"), which
provides for a limited fund mandatory class action settlement of
the breast implant litigation. A copy of that agreement is
attached.
The Convertible Subordinated Promissory Note, which appears as
Exhibit C to the settlement agreement, includes as Section 7 a
provision which was requested by the PSCC; namely, that
subordination in right of payment of principal and interest to
the Company's existing 11% senior secured debt and any new senior
secured debt would terminate as of the 90th day after the Final
Order becomes final and non-appealable. This provision does not
impair the priority in the event of liquidation which the
existing senior debt would hold with respect to the Subordinated
Note.
In consideration for Appaloosa and its affiliates prospectively
consenting to this provision with respect to the current
indenture and to the contemplated future modification or
refinancing of the Company's senior debt, the Company agrees to
make the holders of the Company's 11% senior secured notes the
Company's designee for the right to call the $3 million of Common
Stock, which arises under Section IV.B.6 of the settlement
agreement. The purpose of this letter is to confirm that consent
and agreement.
Very truly yours,
INAMED CORPORATION
By: /s/ Ilan K. Reich
Ilan K. Reich
Executive Vice President
Agreed and accepted as of
the date first written above
Appaloosa Management L.P.
By: Appaloosa Partners, Inc.
Its general partner
By: /s/ James E. Bolin
James E. Bolin
Vice President
Exhibit 99.1
INAMED "Innovation and Medicine" 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: Richard G. Babbitt
(702) 791-3388
Ilan K. Reich
(702) 791-3388
INAMED CORPORATION ANNOUNCES
CLASS SETTLEMENT OF BREAST IMPLANT LITIGATION
LAS VEGAS, NEVADA - April 6, 1998 - INAMED Corporation (OTC
Bulletin Board: IMDC) announced today that it has entered into
an agreement for a mandatory non-opt-out class settlement of
breast implant litigation against INAMED and its subsidiaries.
The settlement, which is subject to Court approval, provides for
INAMED to pay $31.5 million to settle all claims arising from
breast implants which were implanted before June 1, 1993.
The settlement agreement will be filed shortly with Judge Sam C.
Pointer, Jr. in the Federal District Court in Birmingham, Alabama
for his consideration and approval. At the same time, the
parties will request the Court to stay all litigation in federal
and state courts against INAMED, its subsidiaries such as McGhan
Medical Corporation and CUI Corporation, and certain related
parties pending completion of the settlement.
Under the class settlement agreement, $31.5 million of
consideration, consisting of $3 million of cash, $3 million of
common stock and $25.5 million principal amount of a 6%
subordinated note, will be deposited in an escrow account
approximately 90 days after preliminary approval by the Court.
The parties will then request the Court to authorize the mailing
of a notice of the proposed settlement to all class members and
schedule a fairness hearing, which would probably be held in the
third quarter of 1998.
In the event the Court grants final approval of the settlement,
the consideration held in the escrow account will then be
released, once the Court's final order becomes non-appealable, to
the court-appointed settlement office for distribution to the
plaintiff class, and the $25.5 million subordinated note will
mature and become payable in cash. However, this payment will
not become due before April 30, 1999 or 90 days after the Court's
final order becomes non-appealable, whichever is later. In the
event the subordinated note is still outstanding on September 1,
1999, the interest rate will increase to 11%.
INAMED contemplates financing the cost of the proposed class
settlement through a combination of new senior secured debt, the
issuance of $3 million of common stock, and the application of
approximately $15 million in proceeds to be received upon
exercise of the warrants to purchase common stock which were
issued for this general purpose in July 1997.
INAMED has discussed its financing plans with Appaloosa
Management L.P. and its affiliates, who are jointly the largest
holders of INAMED's 11% senior secured notes. Those entities
have indicated their willingness to provide the new financing,
subject to negotiation of satisfactory terms, covenants and legal
documentation, including amendments to the existing indenture and
a new maturity date for the existing senior debt.
INAMED plans to incur substantial charges against its 1997
results of operations to reflect the total costs of the class
settlement and a proposed restructuring plan, which is now being
prepared by the new management team. INAMED had previously
reserved $9.5 million in connection with an earlier settlement
plan for the breast implant litigation. It is anticipated that
the new charges will aggregate more than $35 million. Further
details will be available in INAMED's 1997 Form 10-K, which the
Company anticipates filing by July 1, 1998.
Counsel for the proposed class under the settlement agreement
consists of the following lawyers who represent numerous women
that have filed claims: Ralph I. Knowles, Jr. and Leslie J.
Bryan of Doffermyre, Shields, Canfield, Knowles & Devine in
Atlanta, Georgia; Elizabeth Cabraser of Lieff, Cabraser, Heimann
& Bernstein in San Francisco, California; Dianna Pendleton of
Blizzard & McCarthy in Houston, Texas; and Ernie Hornsby of
Farmer Price Hornsby & Weatherford in Dothan, Alabama.
INAMED Corporation is a global surgical and medical device
company engaged in the development, manufacturing and marketing
of medical devices for the plastic and reconstructive, bariatric
and general surgery markets.
Exhibit 99.2
INAMED "Innovation and Medicine" 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: Richard G. Babbitt
(702) 791-3388
Ilan K. Reich
(702) 791-3388
INAMED CORPORATION REACHES
A PROVISIONAL AGREEMENT WITH 3M CORPORATION
LAS VEGAS, NEVADA - April 16, 1998 - INAMED Corporation (OTC
Bulletin Board: IMDC) announced today that it has entered into
an agreement with Minnesota Mining & Manufacturing Corporation
("3M") to resolve certain indemnity claims by 3M arising from the
1984 sale of its plastic surgery business to McGhan Medical
Corporation. This agreement requires INAMED to pay a sum to 3M
and to assume certain limited indemnification obligations in the
future.
The agreement with 3M Corporation, however, is subject to INAMED
obtaining Court approval of a provisional class settlement of
INAMED's breast implant litigation, which was announced last
week. No payment to 3M will become due sooner than April 30,
1999 or 90 days after the Court's final order with respect to the
class settlement becomes non-appealable, whichever is later.
The cost of this agreement with 3M Corporation is already
incorporated in the anticipated $35 million charge against
INAMED's 1997 results of operations, which was announced last
week.
INAMED Corporation is a global surgical and medical device
company engaged in the development, manufacturing and marketing
of medical devices for the plastic and reconstructive, bariatric
and general surgery markets.
