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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 16, 1998
Q-MED, INC.
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(Exact name of registrant as specified in its Charter)
DELAWARE 0-11411 22-2468665
- ---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
100 METRO PARK SOUTH, LAURENCE HARBOR, NEW JERSEY 08878
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 566-2666
N/A
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(Former Name or former address, if changed since last report.)
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<PAGE>
ITEM 5. OTHER EVENTS
On November 16, 1998, qmed, Inc. (the "Company") sold an aggregate of
1,926,702 shares (the "Shares") of its common stock $.001 par value ("Common
Stock") for $3,217,626.10, in a private placement to investors led by Galen
Partners III, L.P. The Company received gross cash proceeds of $2,020,936.13
from the sale of Shares and the balance was paid by Galen Partners III, L.P. and
two affiliated funds (the "Galen Funds") by converting $1,050,000 of $2,000,000
principal amount of 8% Convertible Notes due December 18, 2002 (the "Notes") and
accrued interest of $146,657 into shares of Common Stock. The remaining $950,000
principal amount of the Notes were amended to increase the interest rate to 16%
per annum, and to grant the Galen Funds a security interest in substantially all
of the Company's assets. In addition, in order to induce the Funds to convert a
portion of the Notes and invest an additional $1,000,000 in cash, the Company
issued the Galen Funds, pro rata, an aggregate of 500,000 seven year warrants
(the "Warrants") to purchase additional shares of Common Stock. The exercise
price of the Warrants and the conversion price of the remaining Notes will be
fixed at a price equal to the average closing price for the ten trading days
ending December 1, 1998 (the "Initial Price"). Interest on the Notes is
capitalized annually and will be due at maturity. The Company may redeem the
Notes for cash or Common Stock:
(i) in the event the average closing price of shares of the Company's
Common Stock equals or exceeds twice the Initial Price for a period of twenty
consecutive trading days at the following times with the following premiums:
Year Redemption Price
---- ----------------
1998 ...................... 105%
1999 ...................... 104%
2000 ...................... 103%
2001 ...................... 102%
2002 ...................... 100%; or
(ii) at the following times without condition for the following premiums:
Year Redemption Price
---- ----------------
1998 ...................... 112.1%
1999 ...................... 125.6%
2000 ...................... 140.8%
2001 ...................... 157.7%
2002 ...................... 176.8%
The Company is required to redeem the Notes at higher premiums in the event of a
change of control. The Note Agreement prohibits the Company from paying
dividends until the Notes are paid.
<PAGE>
In connection with the sale of the Shares, the Company granted certain
rights to the purchasers, including registration rights and the right to cause
the Company to purchase the Shares at the following prices in certain events,
such as bankruptcy, a default on significant debt or if the Company is no longer
listed on the NASDAQ Small Cap Market at the following prices:
Year Redemption Price
---- ----------------
1998 ...................... $2.0875
1999 ...................... $2.0040
2000 ...................... $1.9205
2001 ...................... $1.8370
2002 and thereafter ....... $1.6700
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
None
(b) Pro Forma Financial Information
Pro Forma Balance Sheet as of August 31, 1998
(c) Exhibits
99.1 Amendment dated as of November 16, 1998 to Note Purchase
Agreement between qmed, Inc. and Galen Partners III, L.P.,
Galen Partners International III, L.P., Galen Employee
Fund III, L.P. dated as of December 18, 1997.
99.2 Form of 16% Convertible Subordinated Note.
99.3 Form of Registration Rights Agreement between qmed, Inc.
and several stockholders dated as of November 16 1998.
99.4 Form of Shareholder and Voting Rights Agreement.
99.5 Form of Option Agreement
99.6 Form of Warrant Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1932, as
amended, Q-med, Inc. has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: December 1, 1998 Q-MED, INC.
By: /s/ MICHAEL W. COX
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Michael W. Cox, President
<PAGE>
PRO FORMA BALANCE SHEET
The following pro forma balance sheet of qmed, Inc. (the "Registrant")
gives effect to the Registrant's sale of shares of common stock for
consideration consisting of cash and the conversion and modification of
outstanding debt on November 16, 1998. In connection with the sale of shares,
the Company gave the purchasers the right to require the Company to purchase the
shares at certain prices upon the occurrence of certain events such as
bankruptcy, default on significant debt and the failure of the Company to
maintain its listing on the NASDAQ Small Cap Market.
The following pro forma balance sheet should not be indicative of the
future financial position of the Registrant and does not take into consideration
the effect of changes in financial position and results of operations since
August 31, 1998, other than the financing. It should be read in conjunction with
the historical financial statements and notes of the Registrant contained in
prior filings with the Securities and Exchange Commission.
<PAGE>
<TABLE>
Q-MED, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET
AUGUST 31, 1998
(Unaudited)
<CAPTION>
Historical Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .................. $ 548,519 $ 1,000,000 (2) $ 2,469,032
1,020,936 (3)
(100,423)(4)
Accounts receivable, net of
allowances of approximately $409,000 ..... 185,215 185,215
Inventories ................................ 539,032 539,032
Prepaid expenses and other current assets .. 114,260 114,260
----------- -----------
1,387,026 3,307,539
Debt issue costs ........................... 37,566 37,566
Product software development costs ......... 41,392 41,392
Property and equipment, net ................ 637,786 637,786
Other assets ............................... 173,555 173,555
----------- -----------
Total assets ........................... $ 2,277,325 $ 4,197,838
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses ....... $ 701,683 (146,657)(1) 555,026
----------- -----------
701,683 555,026
8% Convertible notes ........................ 2,000,000 (2,000,000)(1) -0-
16% Convertible notes ....................... 950,000 (1) 950,000
Leases payable - long term .................. 120,435 120,435
Deferred warranty revenue ................... 25,157 25,157
----------- -----------
Total liabilities ....................... 2,847,275 1,650,618
Temporary equity: Put option agreement
Common stock, 1,926,702 shares outstanding
1,495,821 (1) 4,021,990
1,249,999 (2)
1,276,170 (3)
Stockholders' equity
Common stock $.001 par value; 20,000,000
shares authorized; 9,659,519 shares
issued and 9,637,519 outstanding ........ 9,660 9,660
Paid-in capital ............................. 18,057,155 (299,163)(1) 17,152,335
(250,000)(2)
(255,234)(3)
(100,423)(4)
Accumulated deficit ......................... (18,561,140) (18,561,140)
----------- -----------
(494,325) (1,399,145)
Less: treasury stock at cost, 22,000
common shares ......................... (75,625) (75,625)
----------- -----------
Total stockholders' equity .................. (569,950) (1,474,770)
----------- -----------
$ 2,277,325 $ 4,197,838
=========== ===========
</TABLE>
See Notes to Proforma Consolidated Balance Sheet
<PAGE>
NOTES TO PROFORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
(1) To reflect the issuance of 716,561 shares of Common Stock, subject to a
contingent put option, in exchange for the retirement of $1,050,000
outstanding principal amount 8% Convertible Notes and $146,657 for accrued
interest.
(2) To reflect the issuance of 598,802 shares of common stock, subject to a
contingent put option, in exchange for cash from Galen Associates.
(3) To reflect the issuance of 611,339 shares of common stock, subject to a
contingent put option, in exchange for cash from private investors.
(4) To record fees in connection with the closing of the above transaction.
AMENDMENT TO
NOTE PURCHASE AGREEMENT
AMENDMENT TO NOTE PURCHASE AGREEMENT, dated as of November 16, 1998, among
Q-Med, Inc., a Delaware corporation (the "Company"), and Galen Partners III,
L.P., a Delaware limited partnership, Galen Partners International III, L.P., a
Delaware limited partnership, and Galen Employee Fund III, L.P., a Delaware
limited partnership (collectively, the "Purchaser").
WHEREAS, the parties have heretofore entered into that certain Note
Purchase Agreement dated as of December 18, 1997 (the "Note Purchase Agreement")
whereby, inter alia, the Purchaser purchased from the Company 8.00% Subordinated
Convertible Notes due December 18, 2002 in the aggregate original
principal amount of $2,000,000 (the "Notes");
WHEREAS, subject to the terms and conditions specified in that certain
Common Stock Purchase Agreement entered into as of the date hereof between the
Company and certain investors including the Purchaser (the "Stock Purchase
Agreement"), the Purchaser has agreed to purchase from the Company, and the
Company has agreed to issue and sell to the Purchaser, shares of the Common
Stock, $.001 par value per share (the "Shares"), of the Company, and the
Purchaser has agreed to surrender a portion of the Notes in exchange for the
issuance of certain of the Shares;
WHEREAS, subject to the terms and conditions specified in that certain
Option Agreement entered into as of the date hereof between the Company, the
Purchaser and certain other holders of the Shares of Common Stock (the "Option
Agreement"), the Company has agreed to purchase Shares from the Purchaser under
certain conditions;
WHEREAS, in consideration of, and as a material inducement to, the
agreement of the Purchaser to surrender a portion of the Notes and to enter into
the transactions contemplated under the Stock Purchase Agreement, the Company
has agreed to provide to the Purchaser the benefit of certain collateral
security to secure the payment by the Company of the remaining Notes to be held
by the Purchaser following consummation of the transactions under the Stock
Purchase Agreement, to secure the performance by the Company of its obligations
to the Purchaser under the Option Agreement, and to issue to the Purchaser an
aggregate of 500,000 warrants to purchase shares of Common Stock pro rata
according to the principal amounts of the original Notes held by the respective
Purchasers;
<PAGE>
WHEREAS, the parties hereto desire to amend the Note Purchase Agreement as
hereinafter set forth in order to reflect the foregoing amendments and other
agreements of the parties;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree to amend the Note Purchase Agreement as set forth
below.
1. Definitions. All capitalized terms used herein, and not otherwise
defined herein, shall have the meanings for such terms as set forth in the Note
Purchase Agreement. In addition, Section 12 of the Note Purchase Agreement shall
be amended to add or amend the following defined terms:
"Accounts" and Accounts Receivable" shall include, without limitation,
"accounts" as defined in the UCC, and also all: accounts, accounts receivable,
credit card receipts, notes, drafts, acceptances, and other forms of obligations
and receivables and rights to payment for credit extended and for goods sold or
leased, or services rendered, whether or not yet earned by performance; all
Inventory which gave rise thereto, and all rights associated with such
Inventory; all reclaimed, returned, rejected or repossessed Inventory (if any)
the sale of which gave rise to any Account.
"Equipment" shall include, without limitation, "equipment" as defined
in the UCC, and also all motor vehicles, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, store fixtures, furniture, and
other goods, property, and assets which are used and/or were purchased for use
in the operation or furtherance of any of the Company's or any Subsidiary's
business, and any and all accessions, additions thereto, and substitutions
therefor.
"General Intangibles" shall mean "general intangibles" as defined in
the UCC.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind (excluding, however, payments or advances received in
connection with the sale of the Company's disease management services, referred
to as "Disease Management Payments"), (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person under conditional sale or other title retention
agreements relating to property purchased by such Person including sale
leasebacks, (iv) all obligations of such Person issued or assumed as the
deferred purchase price of property or services (other than accounts payable to
suppliers, Disease Management Payments, deferred Warranty revenue and similar
accrued liabilities incurred in the
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ordinary course of business and paid or discharged in a manner consistent with
prior practice), (v), all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any lien or security interest on property owned or acquired by
such Person whether or not the obligations secured thereby have been assumed,
(vi) all Capitalized Lease Obligations of such Person, (vii) all Guarantees of
such Person (excluding, however, those guarantees related to the performance of
the Company's disease management services), (viii) all obligations (including
but not limited to reimbursement obligations) relating to the issuance of
letters of credit for the account of such Person, (ix) all obligations arising
out of foreign exchange contracts, and (x) all obligations arising out of
interest rate and currency swap agreements, cap, floor and collar agreements,
interest rate insurance, currency spot and forward contracts and other
agreements or arrangements designed to provide protection against fluctuations
in interest or currency exchange rates.
"Initial Conversion Price" shall mean the average of the closing prices
of a share of Common Stock for the 10 Trading Days following the date hereof as
certified by the Chief Financial Officer of the Company. For purposes of this
definition, the closing price per share of Common Stock shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the transaction reporting system applicable to securities designated
as a "national market system security" or "small cap market security" on NASDAQ.
"Inventory" shall include, without limitation, "inventory" as defined
in the UCC and also all: goods, wares, merchandise, raw materials, work in
process, finished goods, and all packaging, advertising, and shipping materials
and documents related to any of the foregoing, and all labels, and other
devices, names or marks affixed or to be affixed thereto for identifying or
selling the same, and other personal property of every description held for sale
or lease or furnished or to be furnished under a contract or contracts of sale
or service by the Company or any Subsidiary, or used or consumed or to be used
or consumed in the Company's or any Subsidiary's business, and all goods of said
description which are in transit, and all returned, repossessed and rejected
goods of said description, and all such goods of said description which are
detained from or rejected for entry into the United States, and all documents
(whether or not negotiable) which represent any of the foregoing.
"Proceeds" include, without limitation, "Proceeds" as defined in the
UCC and each type of property described in Section 6A.1.
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"UCC" shall mean the Uniform Commercial Code as presently in effect in
the State of New Jersey.
2. Surrender and Exchange of Notes. (a) At and upon the closing of the
transactions contemplated under the Stock Purchase Agreement, the Purchaser
shall surrender to the Company Notes in an aggregate principal amount of
$2,000,000 (plus all accrued and unpaid interest on the Notes from the date of
issuance thereof to the date of such closing) in exchange for (i) the issuance
by the Company of certain shares of the Common Stock, all in accordance with the
terms and provisions as specified in the Stock Purchase Agreement, and (ii) the
new Notes described below. Upon surrender for exchange of the Notes, the Company
shall execute and deliver, at its expense, new Notes registered in the names of
Galen Partners III, L.P., Galen Partners International III, L.P. and Galen
Employee Fund III, L.P., in an aggregate principal amount of $950,000; such new
Notes to be issued to the payees thereof in the respective principal amounts in
the same proportion as the original Notes.
(b) As an additional inducement for the Purchaser to enter into this
Amendment, the Company, at and upon the closing of the transactions contemplated
by the Stock Purchase Agreement, will issue and deliver at its expense, warrants
substantially in the form annexed hereto as Exhibit I to purchase an aggregate
of 500,000 shares of Common Stock to the payees of the Notes in the respective
principal amounts as the original Notes without the payment of any consideration
therefor.
3. Amendments to Note Purchase Agreement.
Subject to Section 5 hereof, the Note Purchase Agreement is hereby
amended as set forth below:
I. Section 6.3 is hereby amended to reflect a change in the interest
rate payable on the Notes from 8.00% to 16.00% per annum effective on the
date of issuance of the new Notes described in Section 2.
II. New Section 6A is added to the Note Purchase Agreement to read in
full as follows:
6A. Grant of Security Interest
6A.1. Grant of Security Interest. (a) as collateral security for the
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the obligations of the
Company under the Notes and such obligations owed to the Purchaser
under the Option Agreement, the Company hereby assigns, pledges and
transfers to the Purchaser and hereby grants to the Purchaser a
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continuing security interest in, and a lien upon, all of the Company's
right, title and interest in, to and under the following (all of which
being hereinafter referred to, collectively, as the "Collateral"):
(i) All Accounts and Accounts Receivable;
(ii) All Inventory;
(iii) All General Intangibles;
(iv) All Equipment; and
(v) All Proceeds and products of any or all of the
foregoing.
(b) The grant of the security interest herein shall continue in
full force and effect applicable to all obligations of the Company
under the Notes and such obligations owed to the Purchaser under the
Option Agreement until all such obligations have been paid and/or
satisfied in full.
6A.2. Special Representations and Warranties of the Company. The
Company represents and warrants to the Purchaser as of the date hereof, as
follows:
(a) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required either (i) for the grant by the Company of the security
interest granted hereby or for the execution, delivery or performance
of this Amendment to Note Purchase Agreement, or (ii) for the
perfection of or the exercise by the Purchaser of its rights and
remedies hereunder, except for such financing statements as may be
filed in favor of the Purchaser relating to the security interest
granted hereunder.
(b) Except as reserved in the Company's financial statements,
the Company has no knowledge of any impairment of the validity or
collectibility of any of the Accounts of the Company or any Subsidiary
and shall notify the Purchaser of any such fact promptly upon becoming
aware of any such impairment.
(c) Except for the security interest granted to the Purchaser
hereunder, and as set forth on Schedule 6A.2 attached hereto, the
Company is the separate and absolute owner of each item of the
Collateral, free and clear of any and all mortgages,
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<PAGE>
liens, security interests, encumbrances, claims or rights of others.
(d) Except as set forth in Schedule 6A.2 attached hereto, no
security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of the
Collateral is on file or of record in any public office, except such as
may have been filed by the Company in favor of the Purchaser hereunder.
The Company has not in the past and does not now conduct business under
any name other than its registered corporate name.
(e) The security interest granted herein constitutes a valid
and enforceable first priority security interest in the Collateral in
favor of the Purchaser, prior to all other liens, encumbrances,
security interests, and rights of others, and is enforceable as such
against creditors of and purchasers from the Company. All filings and
other action necessary to protect and perfect such security interest in
each item of the Collateral has been duly taken.
(f) The place where the Company's records concerning the
Accounts are kept is the principal office of the Company listed in
Section 13.6 of the Note Purchase Agreement, and the Company will not
change such location or remove such records until (i) the Company shall
have given to the Purchaser not less than 60 days' prior notice of its
intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Purchaser may
reasonably request and (ii) with respect to such new location, the
Company shall have taken all action reasonably satisfactory to the
Purchaser to maintain the security interest in the Collateral intended
to be granted hereby at all times fully perfected and in effect.
6A.3. Special Covenants of the Company. The Company
covenants that from and after the date hereof and for so long as any of the
Notes are outstanding or the Purchaser shall retain rights under the Option
Agreement:
(a) At any time and from time to time, upon the written
request of the Purchaser, and at the sole expense of the Company, the
Company promptly and duly shall execute and deliver any and all such
further instruments and documents and take such further action as the
Purchaser reasonably may deem desirable in
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obtaining the full benefits of the security interest granted hereunder and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the UCC in effect
in any jurisdiction with respect to the liens and security interests
granted hereby. At the request of the Purchaser, the Company shall deliver
to the Purchaser an opinion of the Company's legal counsel each year during
the term of this Agreement opining as to the continued perfection of the
lien and security interest granted herein. The Company also hereby
authorizes the Purchaser to file any such financing or continuation
statement without the signature of the Company to the extent permitted by
applicable law. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged to the
Purchaser, duly endorsed in a manner satisfactory to the Purchaser.
(b) For the further security of the Purchaser, the Company
agrees that the Purchaser shall have a special property interest in all
of the Company's books and records pertaining to the Collateral and the
Company shall provide access to any such books and records to the
Purchaser or to its representatives for the purpose of examining the
same (including taking extracts therefrom and making photocopies
thereof) during normal business hours upon reasonable advance notice.
(c) The Company will pay promptly when due, all taxes,
assessments and governmental charges or levies imposed upon, or which
at any time are or may become a lien, charge or encumbrance upon, the
Collateral or in respect of its income or profits therefrom, as well as
all claims of any kind, except that no such charge need be paid if (i)
the validity thereof is being contested in good faith by appropriate
proceedings, (ii) such proceedings do not involve any danger of the
sale, forfeiture or loss of any of the Collateral or any interest
therein and (iii) such charge is adequately reserved against in
accordance with generally accepted accounting principles.
(d) The Company will not (i) create, permit or suffer to
exist, and will defend the Collateral against and take such other
action as is necessary to remove, any lien, security interest,
encumbrance, claim or right, in or to the Collateral, other than the
security interest created hereunder, and will defend
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the right, title and interest of the Purchaser in and to any of the
Company's rights under the Collateral and in and to the Proceeds and
products thereof against the claims and demands of all persons
whomsoever, or (ii) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral.
(e) The Company will advise the Purchaser promptly, in
reasonable detail (i) of any lien, security interest, encumbrance or
claim made or asserted against any of the Collateral, (ii) of any
material change in the nature or type of the Collateral, and (iii) of
the occurrence of any other event which would have a material adverse
effect on the aggregate value of the Collateral or on the security
interest created hereunder.
6A.4. Appointment of the Purchaser as Attorney-in-Fact.
(a) Upon the occurrence and during the continuation of an
Event of Default, the Company hereby irrevocably constitutes and
appoints the Purchaser and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the
Company and in the name of the Company or in its own name, from time to
time in the Purchaser's discretion, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, hereby gives the Purchaser
the power and right, on behalf of the Company, without notice to or
assent by the Company to do the following:
(i) to ask, demand, collect, receive and give acquittance
and receipts for any and all moneys due and to become due under any
Account, and, in the name of the Company or its own name or otherwise,
to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due
under any Account and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Purchaser for the purpose of collecting any and all
such moneys due under any Account whenever payable;
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(ii) to pay or discharge taxes, liens, security interests
or other encumbrances levied or placed on or threatened against the
Collateral; and
(iii)(A) to direct any party liable for any payment under
any of the Accounts to make payment of any and all moneys due and to
become due thereunder directly to the Purchaser or as it shall direct;
(B) to receive payment of and receipt for any and all moneys, claims
and other amounts due and to become due at any time in respect of or
arising out of the Accounts; (C) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral; (D) to defend any
suit, action or proceeding brought against the Company with respect to
any Collateral; (E) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give such
discharges or releases as the Purchaser may deem appropriate; and (F)
generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as
though the Purchaser were the absolute owner thereof for all purposes,
and to do, at the Purchaser's option and the Company's expense, at any
time, or from time to time, all acts and things which the Purchaser
deems necessary to protect, preserve or realize upon the Collateral and
the Purchaser's security interest therein, in order to effect the
intent of this Agreement.
The Company hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable.
(b) The powers conferred on the Purchaser hereunder are solely
to protect the interests of the Purchaser in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Purchaser shall be
accountable only for amounts that it actually receives in such capacity as
a result of the exercise of such powers and neither it nor any of its
members, partners, employees or agents shall be responsible to the Company
for any act or failure to act, except for its own gross negligence or
willful misconduct.
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(c) The Company also authorizes the Purchaser, following the
occurrence of an Event of Default, (i) to communicate in its own name with
any party to an Account with regard to any matter relating thereto and (ii)
to execute, in connection with the sale provided for in paragraph (b) of
Section 6A.6. hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
6A.5. Performance by the Purchaser of the Company's Obligations. If
the Company fails to perform or comply with any of its agreements contained
herein and the Purchaser, as provided for by the terms hereof, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement), the expenses of the Purchaser incurred in connection with such
performance or compliance, together with interest thereon at the annual
default rate specified in Section 8.3 of the Note Purchase Agreement, shall
be payable by the Company on demand and shall constitute obligations of the
Company under the Notes secured hereby.
6A.6. Remedies, Rights Upon An Event of Default.
(a) If an Event of Default shall occur and be continuing:
(i) All payments received by the Company under or in
connection with any of the Collateral shall be held by them in
trust for the Purchaser, shall be segregated from other funds of
the Company and shall forthwith upon receipt by any of them, be
turned over to the Purchaser, in the same form as received by it
(duly endorsed to the Purchaser, if required); and
(ii) Any and all such payments so received by the
Purchaser may, in the sole discretion of the Purchaser, be held
by the Purchaser as collateral security for, and/or then or at
any time thereafter applied in whole or in part by the
Purchaser, against all or any part of the obligations of the
Company under the Notes or under the Option Agreement in such
order as the Purchaser shall elect. Any balance of such payments
held by the Purchaser and remaining after payment in full of all
such obligations shall be paid over to the Company.
(b) If any Event of Default shall occur and be continuing, the
Purchaser may exercise in addition to all other rights and remedies
granted to it
10
<PAGE>
hereunder and in any other instrument or agreement securing, evidencing
or relating to the obligations under the Notes or under the Option
Agreement, all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, the Company expressly
agrees that in any such event the Purchaser, without demand of
performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or
private sale) to or upon the Company or any other person (all and each
of which demands, advertisements and/or notices are hereby expressly
waived), may forthwith collect, receive appropriation and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any
part thereof, at public or private sale or sales, at any place or time
and at such prices and on such terms as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk.
The Purchaser shall have the right upon any such public sale or sales,
and to the extent permitted by law, upon any such private sale or sales
to purchase the whole or any part of said Collateral so sold, free of
any right or equity or redemption in the Company, which right or equity
is hereby expressly released. The Purchaser shall apply the net
proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses
of every kind incurred therein or incidental to the care, safekeeping
or otherwise of any or all of the Collateral or in any way relating to
the rights of the Purchaser hereunder, including reasonable attorneys'
fees and legal expenses, to the payment in whole or in part of the
obligations under the Notes or under the Option Agreement, in such
order as the Purchaser may elect, the Company remaining liable for any
deficiency remaining unpaid after such application, and only after so
paying over such net proceeds and after the payment by the Purchaser of
any other amount required by any provision of law, need the Purchaser
account for the surplus, if any, to the Company. To the extent
permitted by applicable law, the Company waives all claims, damages,
and demands against the Purchaser arising out of the collection,
retention or sale of the Collateral. The Company agrees that the
Purchaser need not give more than ten (10) days' notice (which
notification shall be deemed given when mailed, postage prepaid,
addressed to the Company at its address set forth in Section 13.6
hereof) of the time and place of any public sale or of the time after
which a private
11
<PAGE>
sale may take place and that such notice is reasonable notification of
such matters. The Company shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are insufficient
to pay all amounts to which the Purchaser is entitled, the Company also
being liable for the reasonable fees of any attorneys employed by the
Purchaser to collect such deficiency.
(c) Nothing in this Agreement is intended, nor shall it be
construed, to preclude the Purchaser from pursuing any other remedy
provided by law for the collection of any or all of the obligations of
the Company under the Notes or under the Option Agreement or for the
recovery of any other sum to which the Purchaser may be or becomes
entitled in connection with a breach of the Note Purchase Agreement or
the Option Agreement.
(d) The Company hereby waives presentment, demand, protest or
any notice (to the extent permitted by applicable law) of any kind in
connection with any Collateral.
6A.7. Limitation on Duty of the Purchaser in Respect of Collateral.
Beyond the safe custody thereof, the Purchaser shall not have any duty as
to any Collateral in its possession or control or in the possession or
control of any agent or nominee of it or any income thereon or as to the
preservation of rights against prior partes or any other rights pertaining
thereto.
III. Section 7.1 is hereby amended by designating the existing
provision as paragraph (a), deleting the sum of $3,000,000 therefrom and
inserting the sum of $1,000,000 in its place, and adding a new paragraph
(b) to read in full as follows:
(b) The Company will not, either alone or together with its
Subsidiaries, incur, create or permit to exist at any time outstanding
expenses relating to leases of any kind and accounts payable of any
kind of more than $900,000 in the aggregate.
IV. Section 7.14 is hereby amended by adding paragraph (c) thereto to
read as follows:
(c) The Company shall use its best efforts to cause (i) the
Board of Directors of the Company to be composed of no more than six
members; and (ii) each of the audit committee and the compensation
committee
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<PAGE>
of the Board of Directors to include as one of its members the
Purchaser Designee.
V. Section 7.16 is hereby amended by adding clauses (e) and (f) to the
end thereto to read as follows:
or (e) create, incur or assume Indebtedness of the Company or
any of its Subsidiaries, or
(f) authorize or approve any transaction or series of related
transactions resulting in or constituting a Change in Control.
VI. Section 7.2 is hereby amended by adding to the end of clause (ii)
thereof the following:
, except for any purchase or redemption of shares of Common
Stock under the terms of the Option Agreement.
VII. Section 7.10 is hereby amended by adding a paragraph (v) thereto
to read as follows:
and (v) it will, not later than 30 days prior to the beginning
of each fiscal year, submit to the Board of Directors and the Purchaser
a detailed operating plan with respect to such fiscal year; such
operating plan to include operating, market and competitive
information, as well as supporting internal financial statements
(including a balance sheet, income statement, a statement of cash flows
and cost and expense details), in such form as shall be specified by
the Board of Directors.
VIII. Section 9.1 is hereby amended by deleting the existing provision
in its entirety and inserting in lieu thereof the following:
9.1 Optional Redemption. (a) Subject to the last sentence of this
Section 9.1(a) and the Purchaser's right of conversion set forth in Section
10, the Company shall have the right, at its sole option and election made
in accordance with Section 9.3(d) and subject to Section 9.3(d), to redeem
the Notes, in whole but not in part, at the following Redemption Prices
(plus accrued and unpaid interest):
13
<PAGE>
Redemption Price
Year (as % of principal)
---- -------------------
1998 ........................................ 105%
1999 ........................................ 104%
2000 ........................................ 103%
2001 ........................................ 102%
2002 ........................................ 100%
Notwithstanding the foregoing, the Company shall have the right to redeem
the Notes pursuant to this Section 9.1(a), only if (x) the Current Market
Price for the Common Stock is equal to or greater than two times the
Initial Conversion Price (subject to appropriate adjustments for stock
splits, combinations and similar transactions) for at least 20 consecutive
Trading Days prior to delivery of the notice of redemption and (y) the
Current Market Price of the Common Stock is equal to or greater than two
times the Initial Conversion Price (subject to appropriate adjustments for
stock splits, combinations and similar transactions) on the date and at the
time of redemption.
(b) Subject to the Purchaser's right of conversion set forth in
Section 10, at any time the Current Market Price for the Common Stock is
less than two times the Initial Conversion Price (subject to appropriate
adjustments for stock splits, combinations and similar transactions), the
Company shall have the right, at its sole option and election made in
accordance with Section 9.3(d) and subject to Section 9.3(d), to redeem the
Notes, in whole but not in part, at the following Redemption Prices (plus
accrued and unpaid interest):
Redemption Price
Year (as % of principal)
---- -------------------
1998 ........................................ 112.1%
1999 ........................................ 125.6%
2000 ........................................ 140.8%
2001 ........................................ 157.7%
2002 ........................................ 176.8%
IX. Section 10.6(b) is hereby amended by adding to the end of the
first paragraph thereof the following:
Notwithstanding the foregoing, in case the Company shall have issued
shares of Common Stock or any Convertible Securities after the Closing
Date at a price per share (or having a conversion, exercise or
exchange price per share) less than the Initial Conversion Price then,
and in such event, the Conversion Price in effect on the day
immediately prior to such issue shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) that
14
<PAGE>
is equal to such lower price per share (or conversion, exercise or
exchange price) applicable to such newly issued shares of Common Stock
or Convertible Securities.
4. Waiver of Adjustment to Conversion Price. The Purchaser hereby waives
the adjustment to the Conversion Price, as calculated in accordance with Section
10.6(b), that otherwise would be required by the issuance of the Shares pursuant
to the terms of the Stock Purchase Agreement.
5. Effectiveness. This Amendment shall not become effective unless and
until (i) the closing under the Stock Purchase Agreement; provided, that, there
shall not exist at that time an Event of Default hereunder (and no event shall
have occurred which, with the giving of notice or the passage of time or both,
would become an Event of Default) and the Chief Executive Officer of the Company
shall have delivered to the Purchaser a certificate attesting to the absence of
any such Event of Default or event; and (ii) Michael W. Cox (either singly or
together with his spouse) shall have purchased in the aggregate 59,880 shares of
Common Stock under terms and conditions reasonably acceptable to the Purchaser.
6. Effect on Note Purchase Agreement. Except as specifically amended above,
the Note Purchase Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
7. Governing Law. This Amendment shall be governed by, and be construed and
interpreted in accordance with, the laws of the State of New York excluding
choice of law principles of such State that would require the application of the
laws of a jurisdiction other than such State.
8. Expenses. The Company shall pay (x) all reasonable costs and expenses of
Purchaser and each Person who controls the Purchaser (including, without
limitation, their respective fees and expenses of their counsel and accountants)
(collectively, "Expenses") and (y) indemnify the Purchaser and each Person who
controls the Purchaser from all Covered Damages, in each case incurred in
connection with the negotiation, execution and delivery of this Amendment and
the consummation of the transactions contemplated hereby; provided, that, in no
event shall the Company's liability under subclause (x) exceed $40,000.
15
<PAGE>
9. Miscellaneous. The headings in this Amendment are for purposes of
reference only and shall not limit or define the meaning hereof. This Amendment
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
Q-MED, INC.
By: /s/ MICHAEL COX
--------------------------------
Name: Michael Cox
Title: President
GALEN PARTNERS III, L.P.
By: Claudius, L.L.C.
By: /s/ BRUCE F. WESSON
--------------------------------
Name: Bruce F. Wesson
Title: Senior Managing Member
GALEN PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C.
By: /s/ BRUCE F. WESSON
--------------------------------
Name: Bruce F. Wesson
Title: Senior Managing Member
GALEN EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc.
By: /s/ BRUCE F. WESSON
--------------------------------
Name: Bruce F. Wesson
Title: President
17
THE TRANSFER OF THIS NOTE IS RESTRICTED BY AND PURSUANT TO A NOTE PURCHASE
AGREEMENT DATED AS OF DECEMBER 18, 1997, AS AMENDED, A COPY OF WHICH IS ON FILE
AT THE OFFICES OF THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
Q-MED, INC.
16.00% CONVERTIBLE SUBORDINATED NOTE DUE DECEMBER 18, 2002
No. ____ December 18, 1997
FOR VALUE RECEIVED, the undersigned, Q-MED, INC. (herein called the
"Company"), corporation duly organized and existing under the laws of the State
of Delaware, hereby promises to pay to GALEN PARTNERS III, L.P., a Delaware
limited partnership (the "Purchaser"), or its registered assigns on December 18,
2002 (the "Maturity Date") the sum of the Principal Amount (as defined below),
plus accrued and unpaid interest on the Principal Amount of this Note as of such
date. The outstanding principal amount of this Note shall initially be the sum
of ______________________________________________________ ($_____________) and
shall be increased on each anniversary of the date hereof by the interest
accrued but unpaid under this Note as of such date (the "Principal Amount").
Interest will accrue on the unpaid Principal Amount, at the rate of 16% per
annum (computed on the basis of a 360-day year of twelve 30-day months) until
the Maturity Date. If any Event of Default shall have occurred, to the extent
permitted by law, from and including the date of such Event of Default to, but
not including, the date such Event of Default is cured or waived, interest will
accrue at the rate of 20% per annum (computed on the basis of a 360-day year of
twelve 30-day months). If the date on which any such payment is required to be
made pursuant to the provisions of this Note occurs on a day other than a
Business Day, such payment shall be due and payable on the next succeeding
Business Day.
Payments of principal of, and interest and premium on, this Note, are to be
made in lawful money of the United States of America, or at the Purchaser's
option, in the number of shares of Common Stock determined by dividing the
payment to be made by the Conversion Price then in effect, at the address
specified by such holder for such purpose in Section 6.1 to the Note Purchase
Agreement (as defined below).
<PAGE>
This Note is being issued pursuant to a Note Purchase Agreement, dated as
of December ___, 1997 as amended (the "Note Purchase Agreement"), between the
Company and the Purchaser. Defined terms used herein which are defined in the
Note Purchase Agreement shall have the same meaning as such terms have in the
Notes Purchase Agreement. This Note is entitled to the benefits of, and is
subject to the terms contained in, the Note Purchase Agreement. The provisions
of the Note Purchase Agreement are hereby incorporated in this Note to the same
extent as if set forth at length herein.
The Company may deem and treat the person in whose name this Note is
registered pursuant to Section 5 of the Note Purchase Agreement as the holder
and owner hereof for the purpose of receiving payments and for all other
purposes whatsoever, notwithstanding any notations of ownership or transfer
hereon and notwithstanding that this Note is overdue, and the Company shall not
be affected by any notice to the contrary until presentation of this Note for
registration of transfer as provided in Section 5 of the Agreement. This Note
may be transferred or exchanged and, if lost, stolen, damaged or destroyed, this
Note may be replaced, only in the manner and upon the conditions set forth in
the Note Purchase Agreement.
This Note is subject to redemption, in whole but not in part, only under
certain circumstances, and to the extent provided, in the Note Purchase
Agreement.
In case an Event of Default shall happen and be continuing, the principal
amount of this Note, the premium, and all accrued interest may become or be
declared due and payable only in the manner and with the effect provided in the
Note Purchase Agreement.
In certain circumstances involving the occurrence of a Change in Control,
the holder of this Note has the right to require the Company to repurchase the
Note at the price specified in the Note Purchase Agreement.
Subject to and upon compliance with the provisions of the Note Purchase
Agreement, the holder of this Note is entitled to convert this Note into fully
paid and non-assessable shares of Common Stock of the Company at the conversion
price, subject to adjustment, specified in the Note Purchase Agreement.
The indebtedness evidenced by this Note and the payment of the principal of
(and premium, if any) and interest on, and other obligations in respect of, this
Note, to the extent and in the manner provided in the Note Purchase Agreement,
(i) are secured by a security interest in certain of the Company's assets and
(ii) are subordinate and subject in right of payment to the prior payment in
full in cash of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Note Purchase Agreement with respect thereto. The holder of
this Note, by accepting the same, agrees to and shall be bound by such
provisions.
No reference herein and no provision of this Note or of the Note
Purchase Agreement shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place and rate, and in
2
<PAGE>
the coin or currency, as prescribed herein and in the Note Purchase Agreement,
or to convert this Note as provided in the Note Purchase Agreement.
No service charge shall be made of any registration of transfer, exchange
or conversion, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of New York.
Q-MED, INC.
By:
-------------------------
Michael W. Cox
President
3
REGISTRATION RIGHTS AGREEMENT
by and between
Q-MED, INC.
and
THE HOLDERS OF THE 16.00% SUBORDINATED CONVERTIBLE NOTES
DUE DECEMBER 18, 2002,
AND THE COMMON STOCK LISTED
ON THE SIGNATURE PAGES HERETO
Dated as of November 16, 1998
<PAGE>
TABLE OF CONTENTS
Page No.
--------
1. Certain Definitions.................................................... 1
2. Registration Rights.................................................... 3
2.1 Demand Registrations............................................. 3
2.2 Piggyback Registrations.......................................... 5
2.3 Registration Procedures.......................................... 6
2.4 Registration Expenses............................................ 11
2.5 Certain Limitations on Registration Rights....................... 11
2.6 Limitations on Sale or Distribution of Other Securities.......... 12
2.7 No Required Sale................................................. 12
2.8 Indemnification.................................................. 13
3. Underwritten Offerings................................................. 16
3.1 Requested Underwritten Offerings................................. 16
3.2 Piggyback Underwritten Offerings................................. 16
4. General................................................................ 17
4.1 Adjustments Affecting Registrable Securities..................... 17
4.2 Rule 144......................................................... 17
4.3 Amendments and Waivers........................................... 17
4.4 Notices.......................................................... 17
4.5 No Inconsistent Agreements....................................... 18
4.6 Miscellaneous.................................................... 19
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of November 16, 1998, by and
between Q-Med, Inc. a Delaware corporation (the "Company") and the persons
listed as "Investors") on the signature pages hereto (the "Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, simultaneously herewith, the Company and the Investors are
entering into a Common Stock Purchase Agreement (the "Purchase Agreement"),
pursuant to which the Company is issuing, and the Investors are purchasing up to
1,926,702 shares of the Stock, $.001 par value per share (the "Common Stock"),
of the Company; and
WHEREAS, Galen Partners, III, L.P., Galen Partners International III, L.P.
and Galen Employee Fund III, L.P., (collectively the "Galen Funds") have
heretofore entered into a Registration Rights Agreement dated December 18, 1997
relating to shares of Common Stock issuable to the Galen Funds upon the
conversion of the 16.00% Convertible Subordinated Notes due December 18, 2002 of
the Company (the "Notes"); and
WHEREAS the Galen Funds have agreed to purchase shares of Common Stock and
have agreed to surrender a portion of the Notes in exchange for the issuance of
certain of the shares of Common Stock pursuant to an Amendment to Note Purchase
dated as of November 16, 1998; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Affiliate" means (i) with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) with respect to any individual, shall
also mean the spouse, sibling, child, step-child, grandchild, niece, nephew or
parent of such Person, or the spouse thereof.
<PAGE>
"Common Stock" means the Common Stock, $.001 par value per share, of the
Company and any equity securities issued or issuable with respect to the Common
Stock in connection with a reclassification, recapitalization, merger,
consolidation or other reorganization.
"Common Stock Equivalents" means any warrants, options or other securities
convertible into, or exchangeable or exercisable for, shares of Common Stock.
"Conversion Shares" means the shares of Common Stock or other equity
securities issued or issuable upon conversion of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar Federal statute, and the rules and regulations of the SEC
thereunder, as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar statue.
"Holder" or "Holders" means the Investors and any party who shall hereafter
acquire and hold Registrable Securities.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"Registrable Securities" means any (i) shares of Common Stock owned by the
Investors including, without limitation, shares of Common Stock issued or
issuable upon exercise of any Common Stock Equivalents owned by the Investors,
(ii) Conversion Shares owned by the Investors, and (iii) shares of Common Stock
issued or issuable, directly or indirectly, with respect to the Common Stock
referenced in clause (i) and clause (ii) above by way of stock dividend, stock
split or combination of shares. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, or (ii) such securities shall
have been sold (other than in a privately negotiated sale) pursuant to Rule 144
(or any successor provision) under the Securities Act.
"Requisite Percentage of Outstanding Holders" means the Holders of
Registrable Securities who, assuming conversion of all of the then outstanding
Notes into Conversion Shares, would hold 50.1% or more of the total Registrable
Securities that would then be outstanding.
"Requisite Percentage of Participating Holders" means Holders of
Registrable Securities participating in the registration who, assuming
conversion of all then outstanding
2
<PAGE>
Notes into Conversion Shares, would hold a majority of the total Registrable
Securities that would then be held by all Holders participating in the
registration.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration Rights.
2.1 Demand Registrations.
(a) Request for Registration. Subject to Section 2.1(d), at any time
and from time to time after May 15, 1999, one or more Holders of Registrable
Securities representing the Requisite Percentage of Outstanding Holders shall
have the right to require the Company to file a registration statement under the
Securities Act covering all or any part of their respective Registrable
Securities (but, if the anticipated offering price is less than $1,000,000, not
less than 25% of the Registrable Securities owned by them assuming conversion of
all the then outstanding Notes), by delivering a written request therefor to the
Company specifying the number of Registrable Securities to be included in such
registration by such Holder(s) and the intended method of distribution thereof.
All such requests pursuant to this Section 2.1(a) are referred to herein as
"Demand Registration Requests," and the registrations so requested are referred
to herein as "Demand Registrations" (with respect to any Demand Registration,
the Holder(s) making such demand for registration being referred to as the
"Initiating Holder"). As promptly as practicable, but no later than 15 days
after receipt of a Demand Registration Request, the Company shall give written
notice (the "Demand Exercise Notice") of such Demand Registration Request to all
Holders of record of Registrable Securities.
(b) Registration of Other Securities. The Company shall include in a
Demand Registration (i) the Registrable Securities of the Initiating Holder and
(ii) the Registrable Securities of any other Holder which shall have made a
written request to the Company for inclusion thereof in such registration (which
request shall specify the maximum number of Registrable Securities intended to
be disposed of by such Holder(s)) within 30 days after the receipt of the Demand
Exercise Notice.
(c) Registration. The Company shall, as expeditiously as possible
following a Demand Registration Request use its best efforts to (i) effect such
registration under the Securities Act (including, without limitation, by means
of a shelf registration pursuant to Rule 415 under the Securities Act if so
requested and if the Company is then eligible to use such a registration) of the
Registrable Securities which the Company has been so requested to register, for
distribution in accordance with such intended method of distribution, and (ii)
if requested by the Initiating Holder, obtain acceleration of the effective date
of the registration statement relating to such registration.
3
<PAGE>
(d) Limitations on Requested Registrations. The rights of Holders of
Registrable Securities to request Demand Registrations pursuant to Section
2.1(a) are subject to the following limitations: (i) the Company shall not be
obligated to effect a Demand Registration within six-months after the effective
date of any other registration of securities (other than pursuant to a
registration on Form S-4 or S-8 or any successor or similar form which is then
in effect), and (ii) in no event shall the Company be required to effect more
than two Demand Registrations pursuant to this Section 2.1.
(e) Cutbacks. If the managing underwriter of any underwritten
offering shall advise the Holders participating in a Demand Registration that
the Registrable Securities covered by the registration statement cannot be sold
in such offering within a price range acceptable to the Requisite Percentage of
Participating Holders, then the Holders representing the Requisite Percentage of
Participating Holders shall have the right to notify the Company in writing that
they have determined that the registration statement be abandoned or withdrawn,
in which event the Company shall abandon or withdraw such Registration
Statement. If the managing underwriter of any underwritten offering shall advise
the Company in writing that in its opinion, the number of securities requested
to be included in a Demand Registration exceeds the number which can be sold in
such offering within a price range acceptable to the Requisite Percentage of
Participating Holders, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, Registrable Securities requested to be included in such registration,
pro rata among the Holders requesting such registration in accordance with the
number of Registrable Securities held by each such Holder so requested to be
registered.
(f) Selection of Underwriters. The managing underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Requisite Percentage of Participating
Holders (and shall be reasonably acceptable to the Company).
(g) Postponement. The Company shall be entitled once to postpone for
a reasonable period of time (but not to exceed 90 days) the filing of any
registration statement required to be prepared and filed by it pursuant to this
Section 2.1 if a nationally recognized investment bank (which investment bank
shall be selected by and be mutually agreeable to both an investment bank
selected by the Company and an investment bank selected by the Requisite
Percentage of Participating Holders) shall advise the Company in writing that,
in its opinion, the Company is unable to effect an underwritten offering due to
then currently prevailing market conditions or due to circumstances affecting
the financial condition, business or operations of the Company. Promptly (but in
no event more than 30 days) after receipt of such opinion, the Company shall
give the participating Holders written notice of its determination to postpone
the filing of any registration statement, and an approximation of the
anticipated delay. If the Company shall so postpone the filing of a registration
statement the participating Holders representing the Requisite Percentage of
Participating Holders shall have the right to withdraw the request for
registration by giving written notice to the Company within 20 days after
receipt of the notice of postponement
4
<PAGE>
and, in the event of such withdrawal, such request shall not be counted toward
the number of Demand Registrations (including for purposes of paragraph (d) of
this Section 2.1).
2.2 Piggyback Registrations.
(a) Piggyback Registrations. If, at any time, the Company proposes or
is required to register any of its equity securities or securities convertible
or exchangeable for equity securities under the Securities Act (other than
pursuant to (i) registrations on such form or similar form(s) solely for
registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger, consolidation or acquisition or (ii) a
Demand Registration under Section 2.1) on a registration statement on Form S-1,
Form S-2 or Form S-3 (or an equivalent general registration form then in
effect), whether or not for its own account, the Company shall give prompt
written notice of its intention to do so to each of the Holders of record of
Registrable Securities. Upon the written request of any Holder, made within 15
days following the receipt of any such written notice (which request shall
specify the maximum number of Registrable Securities intended to be disposed of
by such Holder and the intended method of distribution thereof), the Company
shall use its best efforts to cause all such Registrable Securities, the Holders
of which have so requested the registration thereof, to be registered under the
Securities Act (with the securities which the Company at the time proposes to
register) to permit the sale or other disposition by the Holders (in accordance
with the intended method of distribution thereof) of the Registrable Securities
to be so registered. There is no limitation on the number of such piggyback
registrations pursuant to the preceding sentence which the Company is obligated
to effect. No registration effected under this Section 2.2(a) shall relieve the
Company of its obligations to effect Demand Registrations.
(b) Abandonment or Delay. If, at any time after giving written notice
of its intention to register any equity securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such equity securities, the Company may, at its election, give
written notice of such determination to all Holders of record of Registrable
Securities and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such abandoned registration, without prejudice, however, to the rights of
Holders under Section 2.1, and (ii) in the case of a determination to delay such
registration of its equity securities, shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such other equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw; provided, however, that (i) such request
must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect to
such registration, and (ii) such withdrawal shall be irrevocable and, after
making such withdrawal,
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a Holder shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
(d) Cutbacks. If the managing underwriter of any underwritten
offering shall inform the Company by letter of its belief that the number of
Registrable Securities requested to be included in a registration under this
Section 2.2 would materially adversely affect such offering, then the Company
will include in such registration, first the securities proposed by the Company
to be sold for its own account and, second the Registrable Securities and all
other securities of the Company to be included in such registration to the
extent of the number and type, if any, which the Company is so advised can be
sold in (or during the time of) such offering, pro rata among the Holders
participating in such offering in accordance with the number of Registrable
Securities held by each such Holder, but in no event shall the number of
Registrable Securities in the offering represent less than 33-1/3% of all
securities being offered in the offering.
2.3 Registration Procedures. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement on an
appropriate registration form of the SEC for the disposition of such Registrable
Securities in accordance with the intended method of disposition thereof, which
form (i) shall be selected by the Company and (ii) shall, in the case of a shelf
registration, be available for the sale of the Registrable Securities by the
selling Holders thereof and such registration statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith, and
the Company shall use its best efforts to cause such registration statement to
become effective (provided, however, that before filing a registration statement
or prospectus or any amendments or supplements thereto, or comparable statements
under securities or blue sky laws of any jurisdiction, the Company will furnish
to one counsel for the Holders participating in the planned offering (selected
by the Requisite Percentage of Participating Holders) and the underwriters, if
any, copies of all such documents proposed to be filed (including all exhibits
thereto), which documents will be subject to the reasonable review and, in the
case of a registration pursuant to Section 2.1, reasonable comment of such
counsel, and the Company shall not file any registration statement or amendment
thereto of any prospectus or supplement thereto pursuant to Section 2.1 to which
the holders of a majority of the Registrable Securities covered by such
registration statement or the underwriters, if any, shall reasonably object in
writing);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for such period
(which shall not be required to exceed 150 days in the case of a registration
pursuant to Section 2.1 or 120 days
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in the case of a registration pursuant to Section 2.2) as any seller of
Registrable Securities pursuant to such registration statement shall request and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Securities covered by such registration
statement in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement;
(c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits), and
the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller (the Company hereby consenting to the use in
accordance with applicable law of each such registration statement (or amendment
or post-effective amendment thereto) and each such prospectus (or preliminary
prospectus or supplement thereto) by each such seller of Registrable Securities
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such registration statement or prospectus);
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as any sellers of Registrable Securities
or any managing underwriter, if any, shall reasonably request in writing, and do
any and all other acts and things which may be reasonably necessary or advisable
to enable such sellers or underwriter, if any, to consummate the disposition of
the Registrable Securities in such jurisdictions, except that in no event shall
the Company be required to qualify to do business as a foreign corporation in
any jurisdiction where it would not but for the requirements of this paragraph
(d), be required to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) promptly notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any:
(i) when the registration statement, any pre-effective amendment, the prospectus
or any prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; (v) of the
existence of any fact of which the Company becomes aware which results in the
registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue
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statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statement therein not misleading; and
(vi) if at any time the representations and warranties contemplated by Section 3
below cease to be true and correct in all material respects; and, if the
notification relates to an event described in clause (v), the Company shall
promptly prepare and furnish to each such seller and each underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading;
(f) comply with all applicable rules and regulations of the SEC, and
make generally available to its security holders, as soon as reasonably
practicable after the effective date of the registration statement (and in any
event within 16 months thereafter), an earnings statement (which need not be
audited) covering the period of at least twelve consecutive months beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(g) (i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, to either cause
all such Registrable Securities to be listed on a national securities exchange
or to secure designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC
or, failing that, secure NASDAQ authorization for such shares and, without
limiting the generality of the foregoing, take all actions that may be required
by the Company as the issuer of such Registrable Securities in order to
facilitate the managing underwriter's arranging for the registration of at least
two market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc. (the "NASD");
(h) provide and cause to be maintained a transfer agent and registrar
for all such Registrable Securities covered by such registration statement not
later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if applicable,
an underwriting agreement) and take such other actions as the Requisite
Percentage of Participating Holders shall reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(j) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants in customary form and
covering
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such matters as are customarily covered by such opinions and "cold comfort"
letters delivered to underwriters in underwritten public offerings, which
opinion and letter shall be reasonably satisfactory to the underwriters, if any,
participating in such offering, and furnish to each Holder participating in the
offering and to each underwriter, if any, a copy of such opinion and letter
addressed to such Holder (in the case of the opinion) and underwriter (in the
case of the opinion and the "cold comfort" letter);
(k) deliver promptly to counsel for the selling Holders participating
in the offering and each underwriter, if any, copies of all correspondence
between the Commission and the Company, its counsel or auditors and any
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement, other than those portions of any such memoranda
which contain information subject to attorney-client privilege with respect to
the Company, and, upon receipt of such confidentiality agreements as the Company
may reasonably request, make reasonably available for inspection by any seller
of such Registrable Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(l) use its best efforts to promptly obtain the withdrawal of any
order suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;
(n) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;
(o) promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of such
document to counsel for the selling holders of Registrable Securities and to
each managing underwriter, if any, and make the Company's representatives
reasonably available for discussion of such document and make such changes in
such document concerning the selling holders prior to the filing thereof as
counsel for such selling holders or underwriters may reasonably request;
(p) furnish to each Holder participating in the offering and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any
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<PAGE>
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(q) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities;
(r) take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.3 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (v) of paragraph (e) of this Section 2.3, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(e) of this Section 2.3 and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. In the
event the Company shall give any such notice, the applicable period mentioned in
paragraph (b) of this Section 2.3 shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph (e) of this Section 2.3.
If any such registration statement or comparable statement under
"blue sky" laws refers to any Holder by name or otherwise as the Holder of any
securities of the Company, then such Holder shall have the right to require (i)
the insertion therein of language, in form and substance satisfactory to such
Holder and the Company, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by
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name or otherwise is not in the judgment of the Company, as advised by counsel,
required by the Securities Act or any similar federal statute or any state "blue
sky" or securities law then in force, the deletion of the reference to such
Holder.
2.4 Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses incident to
the Company's performance of or compliance with this Article 2, including,
without limitation: (i) SEC, stock exchange or NASD registration, listing and
filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses of compliance with state securities
or "blue sky" laws and in connection with the preparation of a "blue sky"
survey, including without limitation, reasonable fees and expenses of blue sky
counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) expenses incurred in connection with any road show, (vi) fees and
disbursements of counsel for the Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s) (selected by the Requisite Percentage of Participating
Holders), (viii) fees and disbursements of all independent public accountants
(including the expenses of any audit and/or "cold comfort" letter) and fees and
expenses of other persons, including special experts, retained by the Company,
(ix) fees and expenses payable to the investment banks referred to in Section
2.1(g) and (x) any other fees and disbursements of underwriters, if any,
customarily paid by issuers or sellers of securities (collectively, "Expenses").
(b) The Company shall pay all Expenses with respect to any Demand
Registration whether or not it becomes effective or remains effective for the
period contemplated by Section 2.3(b) and with respect to any registration under
Section 2.2 whether or not it becomes or remains effective.
(c) Notwithstanding the foregoing, (x) the provisions of this Section
2.4 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state in which the offering is
made and (y) in connection with any registration hereunder, each Holder of
Registrable Securities being registered shall pay all underwriting discounts and
commissions, pro rata in accordance with the number of shares sold in the
offering by such Holder, and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
2.5 Certain Limitations on Registration Rights. In the case of any
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Section 2.2 if the Company has determined to enter
into an underwriting agreement in connection therewith, all securities to be
included in such registration shall be subject to an underwriting agreement and
no Person may participate in such registration unless such Person agrees to sell
such Person's securities on the basis provided therein and completes
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and executes all reasonable questionnaires and other documents (including
custody agreements and powers of attorney) which must be executed in connection
therewith, and provides such other information to the Company or the underwriter
as may be necessary to register such Person's securities.
2.6 Limitations on Sale or Distribution of Other Securities.
(a) To the extent requested in writing by a managing underwriter, if
any, of any registration effected pursuant to Section 2.1, each Holder of
Registrable Securities agrees not to sell, transfer or otherwise dispose of,
including any sale pursuant to Rule 144 under the Securities Act, any Common
Stock, or any other equity security of the Company or any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than as part of such underwritten public offering) during the time period
reasonably requested by the managing underwriter, not to exceed 90 days (and the
Company hereby also so agrees (except that the Company may effect any sale or
distribution of any such securities pursuant to a registration on Form S-4 (if
reasonably acceptable to such managing underwriter) or Form S-8, or any
successor or similar form which is then in effect or upon the conversion,
exchange or exercise of any then outstanding Common Stock Equivalent) to use its
reasonable best efforts to cause each holder of any equity security or any
security convertible into or exchangeable or exercisable for any equity security
of the Company purchased from the Company at any time other than in a public
offering so to agree). Each managing underwriter shall be entitled to rely on
the agreements of each Holder of Registrable Securities set forth in this
Section 2.6(a) and shall be a third party beneficiary of the provisions of this
Section 2.6(a).
(b) The Company hereby agrees that, if it shall previously have
received a request for registration pursuant to Section 2.1 or 2.2, and if such
previous registration shall not have been withdrawn or abandoned, the Company
shall not sell, transfer, or otherwise dispose of, any Common Stock, or any
other equity security of the Company or any security convertible into or
exchangeable or exercisable for any equity security of the Company (other than
as part of such underwritten public offering, a registration on Form S-4 or Form
S-8 or any successor or similar form which is then in effect or upon the
conversion, exchange or exercise of any then outstanding Common Stock
Equivalents), until a period of 90 days shall have elapsed from the effective
date of such previous registration; and the Company (provided there are
Registrable Securities outstanding) shall so provide in any registration rights
agreements hereafter entered into with respect to any of its securities.
2.7 No Required Sale. Nothing in this Agreement shall, be deemed to create
an independent obligation on the part of any Holder to sell any Registrable
Securities pursuant to any effective registration statement.
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2.8 Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to this Article 2, the Company will, and
hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, each Holder of Registrable Securities, its directors, officers, affiliates,
employees, stockholders, members and partners (and the directors, officers,
affiliates, employees, stockholders, members and partners thereof), each other
Person who participates as an underwriter or a Qualified Independent
Underwriter, if any, in the offering or sale of such securities, each officer,
director, employee, stockholder, member or partner of such underwriter or
Qualified Independent Underwriter, and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
actions or proceedings (whether commenced or threatened) in respect thereof
("Claims") and expenses (including reasonable fees of counsel and any amounts
paid in any settlement effected with the Company's consent, which consent shall
not be unreasonably withheld or delayed) to which each such indemnified party
may become subject under the Securities Act or otherwise, insofar as such Claims
or expenses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such securities were registered under the Securities Act, together
with the documents incorporated by therein or the omission or alleged omission
to state therein a material fact required to be stated the rein or necessary to
make the statements therein not misleading, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary, final
or summary prospectus or any amendment or supplement thereto, together with the
documents incorporated by reference therein, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, m the light of the circumstances under
which they were made, not misleading; provided, however, that the Company shall
not be liable to any such indemnified party in any such case to the extent such
Claim or expense arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact made in such registration statement or amendment thereof or
supplement thereto or in any such prospectus or any preliminary, final or
summary prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such indemnified party specifically
for use therein. Such indemnity and reimbursement of expenses shall remain in
full force and effect regardless of any investigation made by as on behalf of
such indemnified party and shall survive the transfer of such securities by such
seller.
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2.1 or 2.2 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or 2.2, any underwriter and Qualified Independent Underwriter, if
any) shall, severally and not jointly, indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 2.8)
to the extent permitted by law the Company, its officers and directors, each
Person controlling the
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Company within the meaning of the Securities Act and all other prospective
sellers and their directors, officers, general and limited partners and
respective controlling Persons with respect to any untrue statement or alleged
untrue statement of any material fact in, or omission or alleged omission of any
material fact from, such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company or its representatives by or on behalf of such Holder or underwriter or
Qualified Independent Underwriter, if any, specifically for use therein and
reimburse such indemnified party for any legal or other expenses reasonably
incurred in connection with investigating or defending any such Claim as such
expenses are incurred; provided, however, that the aggregate amount which any
such Holder shall be required to pay pursuant to this Section 2.8(b) and
Sections 2.8(c) and (e) shall in no case be greater than the amount of the net
proceeds received by such person upon the sale of the Registrable Securities
pursuant to the registration statement giving rise to such claim. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.8 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement shall
notify promptly the indemnifying party in writing of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 2.8, but the failure of any indemnified party to
provide such notice shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 2.8, except to the extent the
indemnifying party is materially prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Article 2. In case any action or proceeding is brought
against an indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, unless in the reasonable opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof jointly with any other indemnifying party similarly notified, to the
extent that it chooses, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
that it so chooses, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that (i) if the indemnifying party
fails to take reasonable steps necessary to defend diligently the action or
proceeding within 20 days after receiving notice from such indemnified party
that the indemnified party believes
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it has failed to do so; or (ii) if such indemnified party who is a defendant in
any action or proceeding which is also brought against the indemnifying party
reasonably shall have concluded that there may be one or more legal defenses
available to such indemnified party which are not available to the indemnifying
party; or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct,
then, in any such case, the indemnified party shall have the right to assume or
continue its own defense as set forth above (but with no more than one firm of
counsel for all indemnified parties in each jurisdiction who shall be approved
by the Requisite Percentage of Participating Holders in such registration in
respect of which such indemnification is sought), and the indemnifying party
shall be liable for any expenses therefor. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (A) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (B) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.8(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and the indemnified party, on the other hand, with respect to such
offering of securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission If, however, the allocation
provided in the second preceding sentence is not permitted by applicable law,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative faults but also the relative benefits of the indemnifying party
and the indemnified party as well as any other relevant equitable
considerations. The parties hereto agree that it would not be just and equitable
if contributions pursuant to this Section 2.8(e) were to be determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the preceding sentences of this
Section 2.9(e). The amount paid or payable in respect of any Claim shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Notwithstanding
anything in this Section 2.8(e) to the contrary, no indemnifying party (other
than the Company) shall be required pursuant to this Section 2.8(e) to
contribute any amount in
15
<PAGE>
excess of the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate, less the amount of any
indemnification payment made by such indemnifying party pursuant to Sections
2.8(b) and (c).
(f) The indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution which any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made or omitted by or on behalf
of any indemnified party and shall survive the transfer of the Registrable
Securities by any such party.
(g) The indemnification and contribution required by this Section 2.8
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
3. Underwritten Offerings.
3.1 Requested Underwritten Offerings. If requested by the underwriters
for any underwritten offering by the Holders pursuant to a registration
requested under Section 2.1, the Company shall enter into a customary
underwriting agreement with the underwriters. Such underwriting agreement shall
be satisfactory in form and substance to the Requisite Percentage of
Participating Holders and shall contain such representations and warranties by,
and such other agreements on the part of, the Company and such other terms as
are generally included in the standard underwriting agreement of such
underwriters, including, without limitation, indemnities and contribution
agreements. Any Holder participating in the offering shall be a party to such
underwriting agreement and may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder and that any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holder; provided, however that
the Company shall not be required to make any representations or warranties with
respect to written information specifically provided by a selling Holder for
inclusion in the registration statement. Such underwriting agreement shall also
contain such representations and warranties by the participating Holders as are
customary in agreements of that type.
3.2 Piggyback Underwritten Offerings. In the case of a registration
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into an underwriting agreement in connection therewith, all of the Holders'
Registrable Securities to be included in such registration shall be subject to
such underwriting agreement. Any Holder participating in such registration may,
at its option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
16
<PAGE>
Holder and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be conditions precedent to
the obligations of such Holder. Such underwriting agreement shall also contain
such representations and warranties by the participating Holders as are
customary in agreements of that type.
4. General.
4.1 Adjustments Affecting Registrable Securities. The Company agrees that
it shall not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration.
4.2 Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act in respect of the
Common Stock or securities of the Company convertible into or exchangeable or
exercisable for Common Stock, the Company covenants that (i) so long as it
remains subject to the reporting provisions of the Exchange Act, it will timely
file the reports required to be filed by it under the Securities Act or the
Exchange Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under
the Securities Act), and (ii) will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (A) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (B) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
4.3 Amendments and Waivers. This Agreement may be amended, modified,
supplemented or waived only upon the written agreement of the Company and the
holders of not less than a majority of the shares of Registrable Securities
(treating all of the Notes as having been converted at the conversion price then
in effect).
4.4 Notices. Except as otherwise provided in this Agreement, all notices,
requests, consents and other communications hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in person
or by telecopy, nationally recognized overnight courier or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other addresses
may hereafter be designated in writing by such party to the other parties:
17
<PAGE>
(i) if to the Company, to:
Q-Med, Inc.
100 Metro Park South
Laurence Harbor, New Jersey 08878
Telecopy: (908) 566-0912
Attention: Michael W. Cox
with a copy to:
Sommer & Schneider LLP
600 Old Country Road
Garden City, New York 11530
Telecopy: (516) 228-8211
Attention: Herbert H. Sommer, Esq.
(ii) if to the Investors to the address set forth below
their names on the signature pages hereto.
with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telecopy: (212) 603-2001
Attention: Peter K. Anglum, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
4.5 No Inconsistent Agreements. (a) The Company represents and warrants
that without the prior written consent of the holders of not less than a
majority of the shares of Registrable Securities (treating all of the Notes as
having been converted at the conversion price then in effect), it will not, on
or after the date of this Agreement, (a) grant any registration rights in
respect of the Company's securities, except pursuant to an amendment to this
Agreement and (b) enter into any agreement with respect to its securities which
is inconsistent with the rights granted in this Agreement or otherwise conflicts
with the provisions hereof, other than any lock-up agreement with the
underwriters in connection with any registered offering effected hereunder,
pursuant to which the Company shall agree not to register for sale, and the
Company shall agree not to sell or otherwise dispose of, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, for
a specified period following the registered offering.
18
<PAGE>
(b) This Agreement shall supersede and replace that Registration
Rights Agreement dated December 18, 1997 between the Company and the Galen Funds
relating to shares of Common Stock issuable to the Galen Funds upon the
conversion of the Notes.
4.6 Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and the respective successors, personal
representatives and assigns of the parties hereto, whether so expressed or not.
If any Person shall acquire from any Holder more than 25% of such Holder's
Registrable Securities, in any manner, whether by sale, operation of law or
otherwise, such transferee shall promptly notify the Company and such
Registrable Securities acquired from such Holder shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement. If the Company shall so request, any
such successor or assign shall agree in writing to acquire and hold the
Registrable Securities acquired from such Holder subject to all of the terms
hereof. If any Holder shall acquire additional Registrable Securities, such
Registrable Securities shall be subject to all of the terms, and entitled to all
the benefits, of this Agreement. No Person other than a Holder shall be entitled
to any benefits under this Agreement, except as otherwise expressly provided
herein. In all events, this Agreement and all rights hereunder shall be
assignable by a Holder that is a limited or general partnership to its partners
in connection with the distribution of Registrable Securities held by the Holder
to its partners.
(b) This Agreement (with the documents referred to herein or
delivered pursuant hereto) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. All section
references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
(f) Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of
19
<PAGE>
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.
(g) The parties hereto acknowledge that there would be no adequate
remedy at law if any party fails to perform any of its obligations hereunder,
and accordingly agree that each party, in addition to any other remedy to which
it may be entitled at law or in equity, shall be entitled to injunctive relief,
including specific performance, to enforce such obligations without the posting
of any bond, and, if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date set forth above.
Q-MED, INC.
By: /s/ MICHAEL W. COX
----------------------------
Name: Michael W. Cox
Title: President
THE INVESTORS:
GALEN PARTNERS III, L.P.
By: Claudius, L.L.C.
By:
----------------------------
Name: Bruce F. Wesson
Title: President
Address: 610 Fifth Avenue
New York, NY 10020
20
<PAGE>
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.
(g) The parties hereto acknowledge that there would be no adequate
remedy at law if any party fails to perform any of its obligations hereunder,
and accordingly agree that each party, in addition to any other remedy to which
it may be entitled at law or in equity, shall be entitled to injunctive relief,
including specific performance, to enforce such obligations without the posting
of any bond, and, if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date set forth above.
Q-MED, INC.
By:
----------------------------
Name: Michael W. Cox
Title: President
THE INVESTORS:
GALEN PARTNERS III, L.P.
By: Claudius, L.L.C.
By: /s/ BRUCE F. WESSON
----------------------------
Name: Bruce F. Wesson
Title: President
Address: 610 Fifth Avenue
New York, NY 10020
20
<PAGE>
GALEN PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C.
By: /s/ BRUCE F. WESSON
----------------------------
Name: Bruce F. Wesson
Title: President
Address: 610 Fifth Avenue
New York, NY 10020
GALEN EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc.
By: /s/ BRUCE F. WESSON
----------------------------
Name: Bruce F. Wesson
Title: President
Address: 610 Fifth Avenue
New York, NY 10020
Other Investors:
By:_____________________________
Name:_______________________
Title:______________________
Address:____________________
21
SHAREHOLDERS' AND VOTING AGREEMENT
by and among
Q-MED, INC.
and
THE SHAREHOLDERS THAT
ARE SIGNATORIES HERETO
Dated as of November 16, 1998
<PAGE>
TABLE OF CONTENTS
Page No.
---------
Section 1. Definitions............................................ 1
Section 2. Methodology for Calculations........................... 3
Section 3. Voting Agreement....................................... 3
Section 4. Restrictions on Transfers of Stock..................... 3
Section 5. Rights of First Offer.................................. 3
Section 6. Tag-Along Rights....................................... 5
6.1. Tag-Along.............................................. 5
6.2. Tag-Along Obligations.................................. 5
6.3. Closing................................................ 5
6.4. Limitations............................................ 5
Section 7. Certain Covenants...................................... 5
7.1. Financial Statements, Other Information and Access..... 5
7.2. Management Reports..................................... 6
Section 8. Conflicting Agreements................................. 6
Section 9. Legend................................................. 6
Section 10. Representations and Warranties......................... 7
Section 11. Duration of Agreement.................................. 8
Section 12. Further Assurances..................................... 8
Section 13. Amendment and Waiver................................... 8
Section 14. Severability........................................... 8
Section 15. Entire Agreement; Effect on Prior Agreement............ 8
Section 16. Successors and Assigns................................. 9
Section 17. Counterparts........................................... 9
Section 18. Remedies............................................... 9
Section 19. Notices................................................ 9
Section 20. Governing Law, Consent to Jurisdiction................. 10
Section 21. Miscellaneous.......................................... 10
Section 22. Construction........................................... 10
-ii-
<PAGE>
SHAREHOLDERS' AND VOTING AGREEMENT
THIS SHAREHOLDERS' AND VOTING AGREEMENT (the "Agreement") is made as of
November 16, 1998 by and among Q-MED, INC., a Delaware corporation (the
"Company"), and each of the shareholders of the Company executing one of the
signature pages attached hereto.
W I T N E S S E T H :
WHEREAS, as of the date hereof, Galen Partners III, L.P., Galen Partners
International III, L.P. and Galen Employee Fund III, L.P. (the "Galen
Investors"), and certain other Persons that are signatories hereto, are
purchasing up to 1,926,702 shares of the Company's Common Stock, par value $.001
per share (the "Common Stock"),pursuant to a Common Stock Purchase Agreement
(the "Purchase Agreement"); and
WHEREAS, the parties hereto deem it to be in their best interests to enter
into an agreement establishing and setting forth their agreement with respect to
certain rights and obligations associated with ownership of shares of capital
stock of the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
Section 1. Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and (ii) with respect to any
individual, shall also mean the spouse, parent, sibling, child, step-child, or
grandchild of such Person, or the spouse thereof.
"By-laws" means the By-laws of the Company as in effect on the date
hereof, as they may be amended from time to time hereafter.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.001 per share of the
Company and any equity securities issued or issuable with respect to the Common
Stock in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Common Stock Equivalents" means any warrants, options or other securities
convertible into, or exchangeable or exercisable for, shares of Common Stock.
"Company" has the meaning assigned to it in the Preamble.
"Excluded Securities" means (a) options issued by the Company to a
director, officer or employee of the Company pursuant to any stock option or
similar plan (and any shares of Common Stock issuable thereunder) existing or
outstanding as of the date hereof, or to the extent such arrangements are
approved by the Board of Directors after the date hereof, or (b) shares of
Common Stock issuable upon conversion, exchange or exercise of any Common Stock
Equivalent outstanding as of the date hereof or other Common Stock Equivalent
approved by the vote of the Board of Directors after the date hereof in the
manner set forth in clause (a) above.
"First Offer Percentage" means, as to each Offered Shareholder, the
quotient obtained (expressed as a percentage) by dividing (i) the number of
shares of Common Stock owned by such Offered Shareholder on the first day of the
Shareholder Acceptance Period by (ii) the aggregate number of shares of Common
Stock owned
<PAGE>
on the first day of the Shareholder Acceptance Period by all Offered
Shareholders who exercise their option to purchase Refused Stock.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended.
"Investors" means the Galen Investors, and each other Person listed as an
Investor on the signature pages attached hereto.
"Offered Shareholder" has the meaning assigned to it in Section 5(a).
"Permitted Transfer" means, with respect to any Person, (i) a Transfer to
a trust for the benefit of such Person's spouse or issue or to a family
partnership, limited liability company or similar entity of which the members
are solely such Person. or such Person's spouse or issue and as to which such
Person exercises voting control, (ii) a Transfer to an Affiliate of such Person,
(iii) a Transfer between Shareholders, or (iv) if such Person is a limited or
general partnership, a Transfer to its partners in connection with a
distribution of securities held by such Person to its partners.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust. unincorporated organization or government or any agency or political
subdivisions thereof
"Public Sale" means a Transfer pursuant to a bona fide underwritten public
offering pursuant to an effective registration statement filed under the
Securities Act, pursuant to Rule 144 under the Securities Act, or pursuant to
any other provisions of the Securities Act or rules thereunder where subsequent
Transfers would not be subject to Transfer restrictions thereunder.
"Purchase Agreement" has the meaning assigned to it in the Recitals.
"Registration Agreement" means the Registration Rights Agreement, dated as
of the date hereof, between the Company and the other parties thereto as it may
be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Management Shareholder" means each of Michael W. Cox and Richard
I. Levin.
"Shareholders" means the parties to this Agreement (other than the
Company) and any other subsequent holder of Stock who agrees to be bound by the
terms of this Agreement.
"Stock" means (i) any shares of Common Stock and (ii) any Common Stock
Equivalents, in each case, whether owned on the date hereof or acquired
hereafter by a Shareholder.
"Subsidiary" means with respect to any Person, (i) any corporation,
partnership or other entity of which shares of capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other similar managing body of such corporation, partnership or
other entity are at the time owned by such Person, or (ii) the management of
which is otherwise controlled, directly or indirectly, through one or more
intermediaries by such Person.
"Transfer" as to any Stock, means to sell, or in any other way directly or
indirectly transfer, assign, distribute, pledge, encumber or otherwise dispose
of, either voluntarily or involuntarily.
"Voting Shares" means any securities of the Company the holders of which
are generally entitled to vote for members of the Board.
2
<PAGE>
Section 2. Methodology for Calculations. For purposes of this Agreement,
the Transfer of a Common Stock Equivalent shall be treated as the Transfer of
the shares of Common Stock into which such Common Stock Equivalent can be
converted, exchanged or exercised. Except as otherwise provided in this
Agreement, for purposes of calculating (i) the amount of outstanding Common
Stock as of any date, (ii) the amount of Common Stock owned by a Person
hereunder and (iii) related percentages, all Common Stock Equivalents shall be
treated as having been converted, exchanged or exercised.
Section 3. Voting Agreement. Each Shareholder shall vote all of its Voting
Shares and shall take all other necessary or desirable actions within its
control (including, without limitation, attending all meetings in person or by
proxy for purposes of obtaining a quorum, executing all written consents in lieu
of meetings and voting to remove members of the Board, as applicable), and the
Company shall take all necessary and desirable actions within its control to
cause to be elected to the Board of Directors the person designated from time to
time by the Galen Investors (including any person designated as a successor to
fill any vacancy arising by reason of the resignation, death, removal or
inability to serve of any designee of the Galen Investors) pursuant to their
rights contained in the Note Purchase Agreement dated December 18, 1997, as
amended, by and among the Company and the Galen Investors.
Section 4. Restrictions on Transfers of Stock. (a) No Senior Management
Shareholder shall Transfer any Stock, whether owned on the date hereof or
acquired hereafter, without first, if applicable, complying with the provisions
of Section 5 hereof and then, in each case as applicable, complying with the
provisions of Section 6 hereof if, after giving effect to such Transfer, such
Senior Management Shareholder shall have Transferred in the aggregate an amount
of Common Stock in excess of 5% of the outstanding Common Stock held by such
Senior Management Shareholder as of the date hereof, except that (i) any Senior
Management Shareholder may Transfer Stock in connection with the bona fide
merger of the Company or bona fide sale of all or substantially all of the
assets or equity securities of the Company, (ii) any Senior Management
Shareholder may Transfer Stock in connection with a Permitted Transfer, and
(iii) any Senior Management Shareholder may make the Transfers required by
Section 7 and any Transfer pursuant to a Public Sale.
(b) Except in connection with a Public Sale, any Transfer by a
Shareholder of Stock to any transferee (including any transferee that is an
Affiliate of a transferor) who is not a Shareholder shall upon consummation
of, and as a condition to, such Transfer execute and deliver to the Company
(which the Company shall then deliver to all other Shareholders) an
agreement in form and substance satisfactory to the Company pursuant to
which it agrees to be bound by the terms of this Agreement for the benefit
of the parties hereto and such transferee shall thereafter be deemed to be
a Shareholder for all purposes of this Agreement.
(c) Any Transfer or attempted Transfer of Stock in violation of any
provision of this Agreement shall be void, and the Company shall not record
such Transfer on its books or treat any purported transferee of such Stock
as the owner of such Stock for any purpose.
Section 5. Rights of First Offer. In addition to and not in limitation of
any other restrictions on Transfers of Stock contained in this Agreement, any
Transfers of Stock by a Senior Management Shareholder shall be consummated only
in accordance with the following procedures:
(a) The transferring Senior Management Shareholder shall first deliver
to the Company and each Shareholder (the "Offered Shareholders") a written
notice (an "Offer Notice"), which shall (i) state the transferring Senior
Management Shareholder's intention to Transfer Stock to one or more Persons
in a bona fide, arm's length transaction, the amount and type of Stock to
be Transferred (the "Subject Stock"), the purchase price therefor (which
shall be payable in cash) and a summary of the other material terms of the
proposed Transfer and (ii) offer the Company and the Offered Shareholders
the option to acquire all or a portion of such Subject Stock upon the terms
and subject to the conditions of the proposed Transfer as set forth in the
Offer Notice (the "Offer"), provided that such Offer may provide that it
must be accepted by the Company and the Offered Shareholders (in the
aggregate) on an all or nothing basis (an "All or Nothing Sale").
3
<PAGE>
The Offer shall remain open and irrevocable for the periods set forth below
(and, to the extent the Offer is accepted during such periods, until the
consummation of the sale contemplated by the Offer). The Company shall have
the right and option, for a period of 15 days after delivery of the Offer
Notice (the "Company Acceptance Period"), to accept all or any part of the
Subject Stock at the cash purchase price and on the terms stated in the
Offer Notice. Such acceptance shall be made by delivering a written notice
to the transferring Senior Management Shareholder and each of the Offered
Shareholders within the Company Acceptance Period.
(b) If the Company shall fail to accept all of the Subject Stock
offered pursuant to, or shall reject in writing, the Offer (the Company
being required to notify in writing the transferring Senior Management
Shareholder and each of the Offered Shareholders of its rejection or
failure to accept in the event of the same), then, upon the earlier of the
expiration of the Company Acceptance Period or the giving of such written
notice of rejection or failure to accept such offer by the Company, each
Offered Shareholder shall have the right and option, for a period of 30
days thereafter (the "Shareholder Acceptance Period"), to accept all or any
part of the Subject Stock so offered and not accepted by the Company (the
"Refused Stock") at the cash purchase price and on the terms stated in the
Offer Notice; provided, however, that, if the Offer contemplated an All or
Nothing Sale, the Offered Shareholders, in the aggregate, may accept,
during the Shareholder Acceptance Period, all, but not less than all, of
the Refused Stock, at the cash purchase price and on the terms stated in
the Offer Notice. Such acceptance shall be made by delivering a written
notice to the Company and the transferring Senior Management Shareholder
within the Shareholder Acceptance Period specifying the maximum number of
shares such Offered Shareholder will purchase (the "First Offer Shares").
If, upon the expiration of the Shareholder Acceptance Period, the aggregate
amount of First Offer Shares exceeds the amount of Refused Stock, the
Refused Stock shall be allocated among the Offered Shareholders as follows:
(i) first, each Offered Shareholder shall be entitled to purchase no more
than its First Offer Percentage of Refused Stock; (ii) second, if any
shares of Refused Stock have not been allocated for purchase pursuant to
(i) above (the "Remaining Shares"), each Offered Shareholder (an
"Oversubscribed Shareholder") which had offered to purchase a number of
shares of Refused Stock in excess of the amount of stock allocated for
purchase to it in accordance with previous allocations of such shares of
Refused Stock, shall be entitled to purchase an amount of Remaining Shares
equal to no more than its First Offer Percentage (treating only
Oversubscribed Shareholders as Offered Shareholders for these purposes) of
the Remaining Shares; and (iii) third, the process set forth in (ii) above
shall be repeated with respect to any shares of Refused Stock not allocated
for purchase until all shares of Refused Stock are allocated for purchase.
(c) If effective acceptance shall not be received pursuant to Sections
5(a) and/or 5(b) above with respect to all of the Subject Stock offered for
sale pursuant to the Offer Notice, then the transferring Senior Management
Shareholder may Transfer all or any portion of the Stock so offered for
sale and not so accepted (or, in the case of an All or Nothing Sale, all,
but not less than all, of the Subject Stock offered for sale pursuant to
the Offer Notice), at a cash price not less than the price, and on terms
not more favorable to the purchaser thereof than the terms, stated in the
Offer Notice at any time within 90 days after the expiration of the
Shareholder Acceptance Period (the "Sale Period"). In the event that all of
the Stock is not sold by the transferring Shareholder during the Sale
Period, the right of the transferring Senior Management Shareholder to
Transfer such Stock shall expire and the obligations of this Section 5
shall be reinstated.
(d) All Transfers of Subject Stock to the Company and/or the Offered
Shareholders pursuant to this Section 5 shall be made free and clear of all
liens and shall be consummated contemporaneously at the offices of the
Company on the later of (i) a mutually satisfactory business day within 30
days after the expiration of the later of the Company Acceptance Period or
the Shareholder Acceptance Period, as applicable, and (ii) the fifth
business day following the expiration or termination of all waiting periods
under the HSR Act applicable to such Transfers, or at such other time
and/or place as the parties may agree. The delivery of certificates or
other instruments evidencing such Subject Stock duly endorsed for transfer
shall be made on such date against payment of the purchase price for such
Subject Stock.
4
<PAGE>
(e) The requirements of this Section 5 shall not apply to (i) any
Permitted Transfer of Stock by a Senior Management Shareholder or (ii) any
Transfer pursuant to a Public Sale.
Section 6. Tag-Along Rights.
6.1. Tag-Along. No Senior Management Shareholder shall Transfer any Stock
owned by such Senior Management Shareholder without complying with the terms and
conditions set forth in this Section 6 (after having complied with the
provisions of Section 5).
6.2. Tag-Along Obligations. Any Senior Management Shareholder (the
"Tag-Along Initiator") desiring to Transfer any shares of Stock shall, after
expiration of all required notice periods under Section 5, give not less than 20
days prior written notice of such intended Transfer to each other Shareholder
("Tag-Along Offeree") and to the Company. Such notice (the "Tag-Along Notice")
shall set forth the terms and conditions of such proposed Transfer, including
the name of the proposed transferee, the number of shares proposed to be
transferred by the Tag-Along Initiator (the "Tag-Along Shares"), the purchase
price per share proposed to be paid therefor and the payment terms and type of
transfer to be effectuated. Within 10 days after delivery of the Tag-Along
Notice by the Tag-Along Initiator to each Tag-Along Offeree and to the Company,
each Tag-Along Offeree shall, by written notice to the Tag-Along Initiator and
the Company, have the opportunity and right to sell to the transferee in such
proposed Transfer (upon the same terms and conditions as the Tag-Along
Initiator) up to that number of shares of such Stock owned by the Tag-Along
Offeree as shall equal the product of (x) a fraction, the numerator of which is
the number of shares of such Stock owned by the Tag-Along Offeree as of the date
of the Tag-Along Notice and the denominator of which is the aggregate number of
shares of such Stock owned as of the date of the Tag-Along Notice by the
Tag-Along Initiator and all of the Tag-Along Offerees, times (y) the number of
shares of such Stock owned as of the date of the Tag-Along Notice by the
Tag-Along Offeree; provided, however, that the number of shares of Stock to be
sold by any Tag-Along Offeree shall not exceed the same proportion as the number
of shares of Stock to be Transferred by the Tag-Along Initiator bears to the
number of shares of Stock held by the Tag-Along Initiator. The amount of
Tag-Along Shares to be sold by any Tag-Along Initiator shall be reduced to the
extent necessary to provide for such sales of shares by Tag- Along Offerees. No
Person may Transfer shares in any transaction that is subject to this Section 6
unless the transferee agrees to be bound by and complies with the terms of this
Agreement.
6.3. Closing. At the closing of any proposed Transfer in respect of which
a Tag-Along Notice has been delivered, the Tag-Along Initiator together with all
Tag-Along Offerees electing to sell shares, shall deliver, free and clear of all
liens, to the proposed transferee certificates evidencing the shares to be sold
thereto duly endorsed with transfer powers and shall receive in exchange
therefore the consideration to be paid or delivered by the proposed transferee
in respect of such shares as described in the Tag-Along Notice.
6.4. Limitations. The provisions of this Section 6 shall not apply to (x)
any Public Sale, (y) any Permitted Transfer by a Shareholder, or (z) any
Transfers pursuant to Section 5.
Section 7. Certain Covenants.
7.1. Financial Statements, Other Information and Access. (a) So long as
Investors hold in the aggregate at least 1,000,000 shares of Common Stock (as
such number may be adjusted to reflect any stock split, combination, dividend or
other similar transaction), the Company shall deliver to each Investor:
(i) within 50 days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, statements of consolidated
operations and cash flows and a statement of consolidated stockholder's
equity of the Company and its Subsidiaries for the period from the
beginning of the then current fiscal year to the end of such quarterly
period, and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding
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period or date in the preceding fiscal year, all in reasonable detail and
certified by the Chief Financial Officer of the Company, subject to changes
resulting from year-end adjustments; provided, however, that delivery
pursuant to clause (iii) below of a copy of the Quarterly Report on Form
10-Q of the Company for such quarterly period filed with the Commission
shall be deemed to satisfy the requirements of this clause (i);
(ii) within 105 days after the end of each fiscal year, statements of
consolidated operations and cash flows and a statement of changes in
consolidated stockholder's equity of the Company and its Subsidiaries for
such year, and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such year, setting forth in each case in
comparative form the corresponding figures from the preceding fiscal year,
all in reasonable detail and examined and certified, without qualification
by independent public accountants of recognized national standing selected
by the Company; provided, however, that delivery pursuant to clause (iii)
below of a copy of the Annual Report on Form 10-K of the Company for such
fiscal year filed with the Commission shall be deemed to satisfy the
requirements of this clause (ii);
(iii) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports it sends to its
stockholders and copies of all such registration statements (without
exhibits), other than registration statements relating to employee benefit
or dividend reinvestment plans, and all such regular and periodic reports
as it shall file with the Commission; and
(iv) with reasonable promptness, such other information and financial
data concerning the Company as any Person entitled to receive information
under this Section 10.1 may reasonably request.
(b) The Company will permit each Investor and its representatives, upon
reasonable advance notice, to visit and inspect, during normal business hours
and at the Investor's expense, any of the properties of the Company and its
Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the senior management officers of the Company as well as
the accountants of the Company; provided, that, without the Company's consent,
which shall not be unreasonably withheld, the Investors' right to visit and
inspect the Company's properties shall not exceed four times a year.
7.2. Management Reports. So long as Investors hold in the aggregate at
least 1,000,000 shares of Common Stock (as such number may be adjusted to
reflect any stock split, combination, dividend or other similar transaction),
the Company shall promptly deliver to each Investor (but in any event with ten
(10) business days) after the end of each month, a monthly operations report
including a month to month comparative analysis of revenues and expenses against
budget and significant business matters, as well as copies of all reports or
other information provided to the members of the Board and/or senior management
of the Company during such month.
Section 8. Conflicting Agreements. Each Shareholder represents and
warrants that such Shareholder has not granted and is not a party to any proxy,
voting trust or other agreement which is inconsistent with or conflicts with any
provision of this Agreement, and no holder of Stock shall grant any proxy or
become party to any voting trust or other agreement which is inconsistent with
or conflicts with any provision of this Agreement.
Section 9. Legend. (a) Each Shareholder and the Company shall take all
such action necessary (including exchanging with the Company certificates
representing shares of Stock issued prior to the date hereof)
6
<PAGE>
to cause each certificate representing outstanding shares of Stock beneficially
owned by such Shareholder to bear a legend containing the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED,
SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF (i)
UNLESS (A) REGISTERED UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES AND "BLUE SKY" LAWS OR (B) AN OPINION OF COUNSEL
SATISFACTORY TO Q-MED, INC. (THE "COMPANY") THAT SUCH REGISTRATION IS
NOT NECESSARY HAS BEEN DELIVERED TO THE COMPANY OR (ii) UNLESS SOLD
PURSUANT TO AND IN COMPLIANCE WITH RULE 144 OF SUCH ACT AND APPLICABLE
SECURITIES OR "BLUE SKY" LAWS."
"IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER AND TO THE VOTING AGREEMENTS
SET FORTH IN THE SHAREHOLDERS' AGREEMENT DATED AS OF NOVEMBER 16,1998
BY THE COMPANY AND THE PARTIES THERETO, A COPY OF WHICH IS ON FILE IN
THE OFFICE OF THE COMPANY."
(b) The requirement that the above securities legend be placed upon
certificates evidencing shares of Stock shall cease and terminate upon the
earliest of the following events: (i) when such shares are transferred in an
underwritten public offering, (ii) when such shares are transferred pursuant to
Rule 144 under the Securities Act or (iii) when such shares are transferred in
any other transaction if the seller delivers to the Company an opinion of its
counsel, which counsel and opinion shall be reasonably satisfactory to the
Company to the effect that such legend is no longer necessary in order to
protect the Company against a violation by it of the Securities Act upon any
sale or other disposition of such shares without registration thereunder. The
requirement that the above legend regarding this Agreement be placed upon
certificates evidencing shares of Stock shall cease and terminate upon the sale
of such shares of Stock pursuant to a Public Sale. Upon the consummation of any
event requiring the removal of a legend hereunder, the Company, upon the
surrender of certificates containing such legend, shall, at its own expense,
deliver to the holder of any such shares as to which the requirement for such
legend shall have terminated, one or more new certificates evidencing such
shares not bearing such legend.
Section 10. Representations and Warranties.
(a) Each party hereto represents and warrants to the other parties
hereto as follows:
(i) It has full power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) This Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally.
(iii) The execution, delivery and performance of this Agreement
by it does not (x) violate, conflict with, or constitute a breach of
or default under its organizational documents, if any, or any
7
<PAGE>
material agreement to which it is a party or by which it is bound or (y) violate
any law, regulation, order, writ, judgment, injunction or decree applicable to
it.
(iv) No consent or approval of, or filing with, any governmental
or regulatory body is required to be obtained or made by it in
connection with the transactions contemplated hereby.
(v) It is not a party to any agreement which is inconsistent with
the rights of any party hereunder or otherwise conflicts with the
provisions hereof.
(b) Each Senior Management Shareholder represents and warrants to the
Investors that Schedule 10(b) hereto sets forth a list of all securities of
the Company (including, without limitation, shares of capital stock,
convertible securities, debentures, etc.) held of record or beneficially
owned by such Senior Management Shareholder immediately after the date
hereof. All such securities are free and clear of any liens, encumbrances,
rights of first refusal or other rights of third parties of any nature with
respect thereto.
(c) Each Shareholder represents and warrants to the Investors that,
except as set forth on Schedule 10(b) hereto and other than this Agreement
and the Registration Agreement, such Shareholder is not a party to any
contract or agreement, written or oral, (i) with respect to the securities
of the Company (including, without limitation, any voting agreement, voting
trust, stockholder's agreement, registration rights agreement, etc.) or
(ii) otherwise with or relating to the Company, except for employment
agreements entered into in the ordinary course of business.
Section 11. Duration of Agreement. The rights and obligations of a
Shareholder under this Agreement shall terminate at such time as such
Shareholder no longer is the beneficial owner of any shares of Stock. This
Agreement shall terminate five years after the date hereof, except that the
terms of Sections 8, 15 and 22 shall survive until, by their respective terms,
they are no longer operative.
Section 12. Further Assurances. At any time or from time to time after the
date hereof, the parties agree to cooperate with each other, and at the request
of any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
Section 13. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or any Shareholder unless such modification,
amendment or waiver is approved in writing by the Company, and Shareholders
owning at least a majority of the outstanding shares of Stock. The failure of
any party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
Section 14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
Section 15. Entire Agreement; Effect on Prior Agreement. Except as
otherwise expressly set forth herein, this document and the other documents
dated the date hereof embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may
8
<PAGE>
have related to the subject matter hereof in any way. Without limiting the
generality of the foregoing, to the extent that any of the terms hereof are
inconsistent with the rights or obligations of any Shareholder under any other
agreement with the Company, the terms of this Agreement shall govern.
Section 16. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and each Shareholder and their respective
successors, assigns, heirs and personal representatives, so long as they hold
Stock. Except pursuant to a Permitted Transfer or a Transfer of Stock in
compliance with Section 4, no Shareholder shall have the right to assign its
rights and obligations under this Agreement, without the consent of each of the
other Shareholders.
Section 17. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
Section 18. Remedies. Each Shareholder shall be entitled to enforce its
rights under this Agreement specifically to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that each party may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
Section 19. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the signature pages hereto and to any
subsequent holder of Stock subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Company's address
is:
Q-Med, Inc.
100 Metro Park South
Laurence Harbor, New Jersey 08878
Telecopy: (908) 566-0912
Attention: Michael W. Cox
with a copy to:
Sommer & Schneider LLP
600 Old Country Road
Garden City, New York 11530
Telecopy: (516) 228-8211
Attention: Herbert H. Sommer, Esq.
The Shareholders' address for notice purposes is:
The address set forth below their respective names on
the signature pages hereto;
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<PAGE>
with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telecopy: (212) 603-2001
Attention: Peter K. Anglum, Esq.
Section 20. Governing Law, Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflicts of law thereof.
Section 21. Miscellaneous. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
This Agreement is intended to be a voting agreement among stockholders as
permitted by Section 218(c) of the Delaware General Corporation Law.
Section 22. Construction. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders'
and Voting Agreement on the day and year first above written.
Q-MED, INC.
By:
---------------------------------------
Name:
Title:
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GALEN PARTNERS III, L.P.
By: Claudius, L.L.C.
By:
---------------------------------------
Name:
Title:
Address: 610 Fifth Avenue
New York, NY 10020
GALEN PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C.
By:
---------------------------------------
Name:
Title:
Address: 610 Fifth Avenue
New York, NY 10020
GALEN EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc.
By:
---------------------------------------
Name: Bruce F. Wesson
Title: President
Address: 610 Fifth Avenue
New York, NY 10020
------------------------------------------
Michael W. Cox
19 Bay Point Harbor
Point Pleasant, NJ 08742
------------------------------------------
Richard I. Levin, M.D.
245 East 93rd Street
New York, NY 10128
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Other Shareholders:
-------------------------------------------
Name:
---------------------------------------
Address:
-----------------------------------
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Schedule 10(b)
SECURITIES HOLDINGS OF
SENIOR MANAGEMENT SHAREHOLDERS
13
Purchaser's Name: ________________________
Number of Shares: ____________________
OPTION AGREEMENT
OPTION AGREEMENT, dated as of ______________, 1998 between Q-Med, Inc., a
Delaware company (the "Company") and the purchaser (the "Purchaser") of certain
shares of the Company's common stock, $.001 par value ("Common Stock") whose
name appears on the signature page hereof.
WHEREAS, subject to the terms and conditions specified in that certain
Common Stock Purchase Agreement entered into on one or more dates including the
date hereof between the Company and certain investors (the "Investors")
including the Purchaser (the "Stock Purchase Agreement"), the Purchaser has
agreed to purchase from the Company and the Company has agreed to issue and to
sell to the Purchaser the number of shares of Common Stock set forth above (the
"Shares"),
WHEREAS, the Investors as a group will purchase and the Company will issue
and sell to the Investors an aggregate of up to 1,914,168 shares of Common Stock
(the "Total Shares").
WHEREAS, in consideration of, and as a material inducement to, the
agreement of the Purchaser to enter into the transactions contemplated under the
Stock Purchase Agreement, the Company has agreed to provide the Purchaser with
the benefits of certain mandatory redemption, preemptive adjustment and other
rights set forth herein,
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
All capitalized terms used herein and not otherwise defined herein shall
have the meanings for such terms as set forth in the Stock Purchase Agreement.
In addition, the following terms shall have the meanings indicated for the
purposes of this Option Agreement:
"Beneficially Own" shall mean, with respect to any securities, having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open for
business.
"Change in Control" shall mean:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"))
<PAGE>
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of the combined voting power of the then
outstanding voting capital stock of the Company, but excluding, for this
purpose, any such acquisition by (i) the Company or any Subsidiary, (ii)
any employee benefit plan (or related trust) of the Company or any
Subsidiary, or (iii) any corporation with respect to which, following such
acquisition, 50% or more of the combined voting power of the then
outstanding voting capital stock of such corporation is then beneficially
owned, directly or indirectly, by individuals and entities who were the
beneficial owners of voting capital stock of the Company immediately prior
to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the combined voting
power of the then outstanding voting capital stock of the Company; or
(b) a reorganization, merger or consolidation, in each case, with
respect to which all or substantially all the Persons who were the
respective Beneficial Owners of the voting capital stock of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation Beneficially Own,
directly or indirectly, more than 50% of the combined voting power of the
then outstanding voting capital stock of the Company resulting from such
reorganization, merger or consolidation; or
(c) the Incumbent Board shall cease for any reason to constitute at
least 50% of the members of the Board; or
(d) the sale, lease or other disposition of all or substantially all
of the Company's assets in one transaction or a series of related
transactions.
"Common Stock Equivalent" means securities (including, without limitation,
options, warrants and evidences of indebtedness) that are outstanding at the
time of a determination that are directly or indirectly convertible into, or
exchangeable or exercisable for, shares of Common Stock.
"Current Market Price" when used with reference to shares of Common Stock
or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. If the Common Stock or such other securities are
listed or admitted to trading on a national securities exchange, the closing
price shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Stock or such other securities are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting systems with respect to securities
listed on the principal national securities exchange on which the Common Stock
or such other securities are listed or admitted to trading or, if the Common
Stock or such other securities are not so listed on any national securities
exchange, as reported in the transaction reporting system applicable to
securities designated, as a "national market system security" or "small cap
market security" on the NASDAQ. If the Common Stock
2
<PAGE>
or such other securities are not publicly held or so listed or designated,
"Current Market Price" shall mean the Fair Market Value per share of Common
Stock or of such other securities as determined in good faith by the Board based
on an opinion of an independent investment banking firm with an established
national reputation with respect to the valuation of securities.
"Discounted Value" means the amount, expressed in dollars, that is equal
to the stated percentage set forth below of the value per share of the Common
Stock, expressed in dollars, at the time of, and after giving effect to, a
Liquidity Event. The value per share will, for these purposes, be (a) the value
of the consideration payable per share of Common Stock (which shall equal the
amount of any cash plus the Fair Market Value of any other property constituting
consideration payable or distributable to a holder of a share of Common Stock)
if the Liquidity Event is an acquisition described in paragraph (a) of the
definition of Change in Control, or is a reorganization, merger, or
consolidation that would otherwise constitute a Change in Control, and (b) the
amount (which shall equal the amount of any cash plus the Fair Market Value of
any other property constituting consideration payable or distributable to a
holder of a share of Common Stock) if the Liquidity Event is a sale, lease or
other disposition of all or substantially all of the assets of the Company. For
purposes of this definition, if the Liquidity Event occurs on or before the
second anniversary of the Issue Date, the stated percentage shall be 70%, if the
Liquidity Event occurs after the second anniversary, but on or before the third
anniversary, of the Issue Date the stated percentage shall be 60% and if the
Liquidity Event occurs after the third anniversary of the Issue Date the stated
percentage shall be 50%.
"Excluded Securities" means
(a) options issued by the Company to a director, officer or employee of
the Company pursuant to any stock option or similar plan (and any shares of
Common Stock issuable thereunder) existing or outstanding as of the Issue Date
or to the extent such arrangements are approved by the Board after the Issue
Date,
(b) shares of Common Stock issuable upon conversion, exchange or exercise
of any Common Stock Equivalent outstanding as of the Issue Date,
(c) shares of Common Stock issuable upon exercise of the Warrants,
(d) shares of Common Stock the issuance of which is approved by the Board
after the Issue Date provided the issue price thereof is not less than the
greater of (i) ninety percent (90%) of the Current Market Price, or (ii) the
then applicable Exercise Price,
(e) shares of Common Stock consideration issued for cash in a transaction
in which the proceeds are applied to pay principal or interest on originally
issued Notes issued on December 18, 1997 to Galen Partners III, L.P., a Delaware
limited partnership ("Galen Partners III"), Galen Partners International III,
L.P., a Delaware limited partnership ("Galen International III") or Galen
Employee Fund III, L.P., a Delaware limited partnership ("Galen Employee Fund";
together with Galen Partners III and Galen International III, the "Galen Funds")
or to
3
<PAGE>
purchase shares of Common Stock issued to the Galen Funds or other
Investors pursuant to the terms of this Option Agreement; or
(f) shares of Common Stock issued to any entity or to the holders of
equity interests of any entity in which 10% of such equity interests are owned
in the aggregate beneficially, directly or indirectly by the Galen Funds or
their respective affiliates.
"Fair Market Value" of the Common Stock or any other property means the
fair market value of such Common Stock or other property as determined (unless
expressly otherwise provided herein) by mutual agreement between the Company and
the Investors holding not less than 50% of the Total Shares purchased pursuant
to the Stock Purchase Agreement or, if the parties are unable to agree, as
determined by a nationally recognized independent investment banking firm
selected by mutual agreement between the Company and the Investors holding not
less than 50% of the Total Shares.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended.
"Incumbent Board" shall mean the individuals who, immediately after the
Issue Date, constitute the Board of Directors of the Company; provided, however,
that any individual becoming a director subsequent to the Issue Date whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board.
"Indebtedness" shall mean, with respect to any Person:
(a) all obligations of such Person for borrowed money, or with respect
to deposits or advances of any kind (excluding, however, payments or
advances received in connection with the sale of the Company's disease
management services, referred to as "Disease Management Payments"),
(b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments,
(c) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person
including sale leasebacks,
(d) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (other than accounts payable to
suppliers, Disease Management Payments, deferred warranty revenue and
similar accrued liabilities incurred in the ordinary course of business and
paid or discharged in a manner consistent with prior practice),
(e) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any lien or security
4
<PAGE>
interest on property owned or acquired by such Person whether or not the
obligations secured thereby have been assumed,
(f) all capitalized lease obligations of such Person,
(g) all guarantees of such Person (excluding, however, those
guarantees related to the performance of the Company's disease management
services),
(h) all obligations not otherwise excluded herein, including but not
limited to reimbursement obligations relating to the issuance of letters of
credit for the account of such Person,
(i) all obligations arising out of foreign exchange contracts, and
(j) all obligations arising out of interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance,
currency spot and forward contracts and other agreements or arrangements
designed to provide protection against fluctuations in interest or currency
exchange rates.
"Issue Price" shall equal $1.67 at the Issue Date, and thereafter shall
be subject to adjustment as provided in Section 4.
"Liquidity Event" means transaction or a series of related transactions
resulting in or constituting a Change in Control.
"Permitted Transfer" means, with respect to any Person, (i) a Transfer to
a trust for the benefit of such Person's spouse or issue or to a family
partnership, limited liability company or similar entity of which the members
are solely such Person. or such Person's spouse or issue and as to which such
Person exercises voting control, (ii) a Transfer to an Affiliate of such Person,
(iii) a Transfer between Shareholders, or (iv) if such Person is a limited or
general partnership, a Transfer to its partners in connection with a
distribution of securities held by such Person to its partners.
"Person" means any individual, Company, limited liability company, limited
or general partnership, joint venture, association, joint-stock company or other
business entity, trust, unincorporated organization or government or any agency
or political subdivisions thereof
"Pre-emptive Percentage" means, at any time, as to each Investor, the
quotient obtained (expressed as a percentage) by dividing (i) the aggregate
number of shares of Common Stock owned by such Investor as of the date of the
Pre-emptive Notice by (ii) the aggregate number of shares of Common Stock owned
as of the Pre-emptive Notice by all the then Investors.
"Public Sale" means a Transfer pursuant to a bona fide underwritten public
offering pursuant to an effective registration statement filed under the
Securities Act, pursuant to Rule 144 under the Securities Act, or pursuant to
any other provisions of the Securities Act or
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rules thereunder where subsequent Transfers would not be subject to
Transfer restrictions thereunder.
"Registration Agreement" means the Registration Rights Agreement, dated as
of the date hereof, between the Company and the other parties thereto as it may
be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock" means (i) any shares of Common Stock and (ii) any Common Stock
Equivalents, in each case, whether owned on the date hereof or acquired
hereafter by a Shareholder.
"Subsidiary" of any Person means any Company or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"Trading Day" means a Business Day or, if the Common Stock is listed or
admitted to trading on any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" as to any Stock, means to sell, or in any other way directly or
indirectly transfer, assign, distribute, pledge, encumber or otherwise dispose
of, either voluntarily or involuntarily.
"Voting Shares" means any securities of the Company the holders of which
are generally entitled to vote for members of the Board.
2. Put Option.
(a) Subject to the conditions set forth in this Section 2 and prior to the
termination o of these rights set forth in Section 3, below, upon notice from
the Investors holding a majority of the outstanding Total Shares, such holders
shall have the right to require the Company, to the extent the Company shall
have sufficient funds legally available therefor as reasonably determined by the
Board, to redeem all outstanding Shares, in whole but not in part, at an amount
per share, payable in cash, determined in accordance with the following
redemption prices (plus, in each instance, all declared and unpaid dividends):
Year Redemption Price
---- -----------------
1998 $2.0875
1999 $2.0040
2000 $1.9205
2001 $1.8370
2002 and thereafter $1.6700
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Notwithstanding the foregoing, the holders shall have the right to require
redemption of the Shares pursuant to this Section 2 only upon the occurrence of
any of the following events during any twelve-month period beginning on the
Issue Date and each anniversary of the Issue Date in any of the years indicated
above:
(i) If the Company shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to the Federal
Bankruptcy Code of 1978, as amended, or under any similar present or future
federal law or the law of any other jurisdiction or shall be adjudicated a
bankrupt or become insolvent, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or for all or any
substantial part of its property, or the Company shall make an assignment
for the benefit of its creditors, or shall admit in writing its inability
to pay its debts generally as they become due, or shall take any corporate
action, as the case may be, in furtherance of any of the foregoing; or
(ii) If a petition or answer shall be filed proposing the adjudication
of the Company as a bankrupt or its reorganization or arrangement, or any
composition, readjustment, liquidation, dissolution or similar relief with
respect to it pursuant to the Federal Bankruptcy Code of 1978, as amended,
or under any similar present or future federal law or the law of any other
jurisdiction applicable to the Company, and the Company shall consent to or
acquiesce in the filing thereof, or such petition or answer shall not be
discharged or denied within 60 days thereof; or
(iii) If a decree or order is entered by a court having jurisdiction
(A) for the appointment of a receiver or custodian or liquidator or trustee
or sequestrator or assignee (or similar official) in bankruptcy or
insolvency of the Company or of all or a substantial part of its property,
or for the winding-up or liquidation of its affairs, and such decree or
order shall have remained in force undischarged and unstayed for a period
of 60 days, or (B) for the sequestration or attachment of any property of
the Company without its return to the possession of the Company or its
release from such sequestration or attachment within 60 days thereafter; or
(iv) The Company shall (A) default in the payment of principal or
interest on any Indebtedness owed to any Person of $100,000 or more beyond
the applicable period of grace, if any, or (B) fail to observe or perform
any covenant or agreement contained in any agreement(s) or instrument(s)
relating to any Indebtedness of $100,000 or more in the aggregate within
any applicable grace period, or any other event shall occur, if the effect
of such failure or other event is to accelerate, or to permit the holder of
such Indebtedness or any other person to accelerate, the maturity of
$100,000 or
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<PAGE>
more in the aggregate of such Indebtedness; or $100,000 or more in the
aggregate of any Indebtedness shall be, or if as a result of such failure
or other event may be, required to be prepaid (other than by regularly
scheduled required prepayment) in whole or in part prior to its stated
maturity; or
(v) If the Purchaser is one of the Galen Funds, the failure of a
representative or designee of the Galen Funds to be serving as a director
of the Company under the terms of The Note Purchase Agreement dated
December 18, 1997 between the Company and the Galen Funds, as amended (the
"Note Agreement"), which situation continues for a period of five days or
more, provided that such failure is not the result of the Galen Funds'
failing to designate such a representative or designee.
(vi) A final judgment or judgments entered by a court of competent
jurisdiction for the payment of money aggregating in excess of $100,000 is
or are outstanding against the Company and any one such judgment in excess
of $100,000 has, or such judgments aggregating in excess of $100,000 have,
remained unpaid, unvacated, unbonded, or unstayed by appeal or otherwise
for a period of 30 days from the date of entry; or
(vii) The failure of the Common Stock to be listed on the NASDAQ
National Market System or Small Cap Market (unless the Common Stock is then
listed on the New York Stock Exchange or the American Stock Exchange); or
(viii) If there occurs a Change in Control.
(b) The Company shall notify each Investor promptly following the
occurrence of any of the foregoing events. All outstanding Shares shall be
redeemed 30 days after receipt by the Company of the notice from the Investors
(the "Mandatory Redemption Date"). If the Company does not have sufficient
available funds for redemption pursuant to this Section 2, as reasonably
determined by the Board, to redeem all outstanding Shares, the Company shall
redeem such number of Shares as determined by the Board. Periodically, and at
least at each anniversary date of the initial redemption date of the Shares the
Company shall redeem such additional number of Shares, as determined by the
Board at such time, until all Shares held by Investors on the date such notice
is given by Investor are redeemed. During the period beginning on the date the
Company receives a written request for redemption pursuant to this Section 2 and
until all Shares held by Investors have been redeemed, the Company shall not,
without the written consent of holders of a majority of the outstanding Shares
owned by Investors, (i) make any capital expenditures in excess of the amount
approved by the Board in the Company's annual budget or (ii) acquire any entity
or any assets of any business in any transaction or series of related
transactions if the aggregate acquisition price is greater than $1,000,000.
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(c) In the event that, within six months after the date of redemption of
Shares owned by Investors pursuant to this Section 2, there shall be (i) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
Beneficial Owners of the Company immediately prior to such reorganization,
merger or consolidation do not, following such reorganization, merger or
consolidation, Beneficially Own, directly or indirectly, more than 50% of the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the Company resulting from such
reorganization, merger or consolidation, (ii) an acquisition by any Person or
"group" (as that term is defined in Section 13(d) (3) of the Exchange Act) of
more than 30% of the capital stock, assets or property of the Company
(determined by the net book value of such assets or property as of the most
recently prepared balance sheet of the Company, (iii) a plan of liquidation
approved by the Board, or (iv) a public announcement of any of the transactions
specified in (i) through (iii) above, and such transaction is consummated within
six months after the date of such public announcement, then the Company shall
promptly pay to the holders of the Shares whose shares were redeemed, an amount
in respect of each share of Common Stock as of the date of redemption equal to
the excess, if any, of (in the case of a transaction described in clause (i) or
(iii)) the Fair Market Value of the consideration per share of Common Stock
received or receivable in such transaction by the Company or the holders of the
Company's capital stock, or (in the case of a transaction described in clause
(ii)) the Current Market Price for the five Trading Days immediately preceding
the date of consummation of the transaction over the redemption price of the
Shares held by Investors paid to such holders in accordance with the terms of
Section 2.
3. Termination of Put Option.
The rights of all Investors under Section 2 shall terminate and be of no
further force or effect if:
(a) less than 600,000 in the aggregate Shares are held by Investors;
or
(b) at any time the Current Market Price equals or exceeds $5.00 per
share (subject to adjustment for dividends, stock splits, reclassifications
and other transactions which would require adjustment pursuant to Section 4
hereof) for at least 20 consecutive Trading Days during which the average
weekly volume of Common Stock as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Common Stock is listed
or admitted to trading or, if the Common Stock is not so listed on any
national securities exchange, as reported in the transaction reporting
system applicable to securities designated as a "national market system
security" or "small cap market security" on the National Association of
Securities Dealers, Inc. Automated quotation System ("NASDAQ"), is not less
than 100,000 shares and either (i) one year has elapsed from the date of
this Agreement or (ii) the Shares may be freely sold pursuant to an
effective registration under the Securities Act; or
(c) The Company makes a bona fide written offer to purchase ("Purchase
Offer") all of the Shares for not less than $5.00 per share for cash, which
contemplates closing within 30
9
<PAGE>
days of such Purchase Offer combined with a written statement from a
nationally recognized independent banking firm that the financing for such
offer has been or will be available to the Company within such time and the
Purchaser does not accept the Purchase Offer.
4. Antidilution Provisions.
(a) Except with respect to Excluded Securities, in case the Company shall
have issued shares of Common Stock or upon any exercise of Common Stock
Equivalents at any time or from time to time after the Issue Date at a price per
share (or having a conversion, exercise or exchange price per share) less than
$1.67 (subject to equitable adjustment for stock dividends, stock splits,
reclassification or similar transaction, as so adjusted the "Purchase Price"),
the Company will issue additional shares to the Investor in accordance with the
form set forth in Section 4(b) without payment of any consideration therefor.
(b) The Company will issue the number of additional shares to the Investor
determined by dividing the consideration paid by the Investor to purchase shares
pursuant to the Stock Purchase Agreement by the price per share applicable to
such newly issued shares of Common Stock or Common Stock Equivalents, and
subtracting from the quotient the number of shares purchased by the Investor
pursuant to the Stock Purchase Agreement. Upon the issuance thereof, such
additional shares will be deemed fully paid and nonassessable.
(c) For purposes of this Section 4, the price per share consideration
receivable by the Company in connection with the issuance of shares of Common
Stock and/or Common Stock Equivalents shall be deemed to be equal to the sum of
the aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties, if any) of all such Common
Stock and/or Common Stock Equivalents plus the minimum aggregate amount, if any,
payable upon conversion, exchange or exercise of any such Common Stock
Equivalents. If the consideration received by the Company in connection with the
sale or issuance of shares of Common Stock (or Common Stock Equivalents)
consists, in whole or in part, of property other than cash or its equivalent,
the value of such property shall be the Fair Market Value.
5. Pre-emptive Rights
So long as 1,000,000 of the Total Shares are owned by the Investors as a
group, the Company shall not issue, sell or exchange, or agree to issue, sell or
exchange (collectively, "Issue," and any issuance, sale or exchange resulting
therefrom, an "Issuance") any shares of Stock (other than Excluded Securities),
except as authorized by the Board and in accordance with the following
procedures:
(a) The Company shall deliver to each Investor a written notice (a
"Pre-emptive Notice"), which shall (i) state the Company's intention to
Issue Stock to one or more Persons, the amount and type of Stock to be
Issued (the "Issuance Stock"), the purchase price therefor and a summary of
the other material terms of the proposed Issuance and (ii) offer each of
the Investors the option to acquire all or any part of the Issuance Stock
(the "Pre-emptive Offer"). The
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<PAGE>
Pre-emptive Offer shall remain open and irrevocable for the periods set
forth below (and, to the extent the Pre-emptive Offer is accepted during
such periods, until the consummation of the Issuance contemplated by the
Pre-emptive Offer). Purchaser shall have the right and option, for a period
of 10 days after delivery of the Pre-emptive Notice (the "Pre-emptive
Acceptance Period"), to accept all or any part of the Issuance Stock at the
purchase price and on the terms stated in the Pre-emptive Notice. Such
acceptance shall be made by delivering a written notice to the Company by
Purchaser within the Pre-emptive Acceptance Period specifying the maximum
number of shares of the Issuance Stock such Investor will purchase (the
"Accepted Shares"). If, upon the expiration of the Pre-emptive Acceptance
Period, the aggregate amount of Accepted Shares exceeds the amount of
Issuance Stock, the amount of Issuance Stock, shall be allocated among the
Investors as follows: (i) first, each Investor shall be entitled to
purchase no more than its Pre-emptive Percentage of Issuance Stock; (ii)
second, if any shares of Issuance Stock have not been allocated for
purchase pursuant to (i) above (the "Remaining Pre-emptive Shares"), each
Investor (an "Oversubscribed Pre-emptive Shareholder") which had offered to
purchase a number of shares of Issuance Stock in excess of the amount of
stock allocated for purchase to it in accordance with previous allocations
of such shares of Issuance Stock, shall be entitled to purchase an amount
of Remaining Pre-emptive Shares equal to no more than its Pre-emptive
Percentage (treating only Oversubscribed Pre-emptive Shareholders as
Investors for these purposes) of the Remaining Pre-emptive Shares; and
(iii) third, the process set forth in (ii) above shall be repeated with
respect to any shares of Issuance Stock not allocated for purchase until
all shares of Issuance Stock are allocated for purchase. The Company and
the Investors shall use their good faith efforts to conclude the foregoing
reallocation process within 10 days.
(b) If effective acceptance shall not be received pursuant to Section
5(a) above with respect to all of the Issuance Stock offered for sale
pursuant to the Pre-emptive Notice, then the Company may Issue all or any
portion of such Stock so offered for sale and not so accepted, at a price
not less than the price, and on terms not more favorable to the purchaser
thereof than the terms, stated in the Pre-emptive Notice at any time within
90 days after the expiration of the Pre-emptive Acceptance Period (the
"Issuance Period"). In the event that all of the Issuance Stock is not
Issued by the Company during the Issuance Period, the right of the Company
to Issue such unsold Issuance Stock shall expire and the obligations of
this Section 5 shall be reinstated.
(c) All sales of Issuance Stock to the Investors subject to any
Pre-emptive Notice shall be consummated contemporaneously at the offices of
the Company on the later of (i) a mutually satisfactory business day within
10 days after the expiration of the Pre-emptive Acceptance Period or (ii)
the fifth business day following the expiration or termination of all
waiting periods under the HSR Act, applicable to such Issuance, or at such
other time and/or place as the Company and the participating Investors may
agree. The delivery of certificates or other instruments evidencing such
Issuance Stock shall be made by the Company on such date against payment of
the purchase price for such Issuance Stock.
(d) The provision of this Section 5 shall terminate at such time
Purchaser is no longer the Beneficial Owner of any Shares or five years
after the date hereof, whichever is earlier.
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<PAGE>
6. Holdback Agreement; Adjustments
Purchaser agrees that so long as it owns 25% or more of the shares of
Stock owned by such Shareholder as of the date hereof, (i) to the extent
requested in writing by a managing underwriter of any underwritten public
offering effected pursuant to a demand registration request under the
Registration Agreement, it will not Transfer any Stock or any other equity
security of the Company or any security convertible into or exchangeable or
exercisable for any equity security of the Company (other than as part of such
underwritten public offering) during the time period reasonably requested by the
managing underwriter, not to exceed 180 days, and (ii) to the extent requested
in writing by a managing underwriter of any underwritten public offering
effected by the Company for its own account, it will not Transfer after such
offering any of the Stock or any other equity security of the Company or any
security convertible into or exchangeable or exercisable for any equity security
of the Company (other than as part of such underwritten public offering) during
the time period reasonably requested by the managing underwriter, which period
shall (x) not exceed 180 days, in the event that it participates in such public
offering pursuant to "piggyback" registration rights granted under the
Registration Agreement, and (y) not exceed 90 days, in the event that it does
not so participate in such public offering. The provisions of this Section 6
shall terminate upon the earlier of (i) the third anniversary of the date hereof
and (ii) such time as there are no longer any outstanding Registrable Securities
(as defined in the Registration Agreement).
7. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement and such exhibits shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
(b) Specific Enforcement. The Purchaser, on the one hand, and the Company,
on the other, acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or equity.
(c) Methodology for Calculations. For purposes of this Agreement, the
Transfer of a Common Stock Equivalent shall be treated as the Transfer of the
shares of Common Stock into which such Common Stock Equivalent can be converted,
exchanged or exercised. Except as otherwise provided in this Agreement, for
purposes of calculating (i) the amount of outstanding Common Stock as of any
date, (ii) the amount of Common Stock owned by a Person hereunder
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<PAGE>
and (iii) related percentages, all Common Stock Equivalents shall be treated as
having been converted, exchanged or exercised.
(d) Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the transactions contemplated hereby.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(f) Notices and Other Communications. All notices, consents, requests,
instructions, approvals, financial statements, proxy statements, reports and
other communications provided for herein shall be deemed given, if in writing
and delivered personally, by telecopy or sent by registered mail, postage
prepaid, if to:
If to Q-Med, Inc., to:
Q-Med, Inc.
100 Metro Park South
Laurence Harbor, New Jersey 08878
Telephone: (908) 566-2666
Facsimile: (908) 566-0912
Attention: Michael W. Cox
With a copy to:
Sommer & Schneider LLP
600 Old Country Road
Garden City, New York 11530
Telephone: (516) 228-8181
Facsimile: (516) 228-8211
Attention: Herbert H. Sommer, Esq.
If to the Purchaser at the address set forth on the signature page hereof.
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. All such notices, requests, consents and
other communications, if sent via facsimile shall be deemed to have been given
when received, if sent by overnight courier shall be deemed to have been given
one (1) business day after deposit with such overnight courier and if sent via
U.S. mail, shall be deemed to have been given three (3) business days after
deposit in a U.S. postal depository.
(g) Amendments; Waiver. This Agreement may be amended as to the Purchaser,
any holder of the Shares and their respective successors and assigns, if the
Company shall obtain the
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<PAGE>
written consent of the registered holders of not less than a majority of the
outstanding Total Shares. No provision of this Agreement may be waived, or
discharged orally, but only by an agreement in writing signed by the party or
parties against whom enforcement of any waiver or discharge is sought or by
parties with the right to consent to such waiver or discharge on behalf of such
party.
(h) Cooperation; Further Assurances.
(i) The Purchasers and the Company agree to take, or cause to be
taken, all such further or other actions as shall reasonably be
necessary to make effective and consummate the transactions
contemplated by this Agreement.
(ii) The Company shall take all actions necessary to ensure that
the Certificate of Incorporation and By-Laws of the Company do not at
any time conflict with the provisions of this Agreement.
(i) Successors and Assigns. All covenants and agreements contained herein
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
(j) Survival. All covenants, agreements, representations and warranties
contained herein and in any certificates delivered pursuant hereto in connection
with the transactions occurring on the Closing shall survive the Closing and the
delivery of the Transaction Documents, regardless of any investigation made by
or on behalf of any party.
(k) Governing Law. THIS AGREEMENT AND THE SECURITIES SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF DELAWARE EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN SUCH STATE.
(l) Submission to Jurisdiction. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States of America, in
each case located in the County of New York, for any action, proceeding or
investigation in any court or before any governmental authority ("Litigation")
arising out of or relating to the transactions contemplated hereby (and agrees
not to commence any Litigation relating thereto except in such courts), and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in this Agreement shall be
effective service of process for any Litigation brought against it in any such
court. Each of the parties hereto hereby irrevocably and unconditionally waives
any objection to the laying of venue of any Litigation arising out of this
Agreement or the transactions contemplated hereby in the courts of the State of
New York or the United State of America, in each case located in the County of
New York, and hereby further irrevocably and
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<PAGE>
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
(m) Service of Process. Nothing herein shall affect the right of any
holder of any Securities to serve process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction.
(n) Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
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8. Signatures. This Agreement shall be effective upon delivery of original
signature pages or facsimile copies thereof executed by each of the parties
hereto.
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed and delivered by their respective officers or partners
thereunto duly authorized.
Q-MED, INC.
By:
---------------------------------------
Name: Michael W. Cox
Title: President
------------------------------------------
Name of Purchaser - Please Print)
------------------------------------------
(Address)
------------------------------------------
-------------------------------------------
(Signature of Purchaser)
16
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT ARE TRANSFERABLE ONLY IN ACCORDANCE
WITH PARAGRAPH H HEREOF.
Void after 5:00 P.M., New York Time, on November ____, 2005
Warrant to Purchase
_______ Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
This is to Certify That, FOR VALUE RECEIVED, ________________________________, a
Delaware limited partnership having an office at 610 Fifth Avenue, New York, New
York 10020 (the "Holder") is entitled to purchase, subject to the provisions of
this Warrant, from Q-Med, Inc., a Delaware Company, having an office at 100
Metro Park South, Laurence Harbor, New Jersey 08878 (the "Company"), an
aggregate of ________ shares (the "Warrant Shares") of the Company's Common
Stock, par value $.001 per share ("Common Stock") at a price equal to the
average of the market price for the ten (10) trading days following issuance as
certified by the CFO of the Company (the "Initial Exercise Price") per share (or
such other price computed by applying all adjustments made on or before November
15, 2005, in accordance with Section F. hereof, to $______ as if it had been the
initial Exercise Price per share hereunder) at any time on or after November 16,
1998 until 5:00 P.M. New York Time, on November 15, 2005. The number of shares
of Common Stock to be received upon the exercise of this Warrant and the price
to be paid for a share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price." The Warrants represented by this agreement
are part of a class of 500,000 Warrants of like tenor issued November ___, 1998
(the "Issue Date").
A. EXERCISE OF WARRANT. Subject to the following conditions precedent and the
provisions of Section G hereof, this Warrant may be exercised in whole or
in part at any time or from time to time on or after November 16, 1998, and
before 5:00 P.M. New York Time on November 15, 2005, or, if either such day
is a day on which banking institutions are authorized by law to close, then
on the next succeeding day which shall not be such a day, by presentation
and surrender hereof to the Company at any office maintained by it in
Laurence Harbor, New Jersey, or at the office of its Warrant Agent, if any,
with the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares specified in such
form. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance
of the shares purchasable hereunder. Upon receipt by the
<PAGE>
Company of this Warrant at its office, or by the Warrant Agent of the
Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificate representing such shares
of Common Stock shall not then be actually delivered to the Holder.
B. RESERVATION OF SHARES. The Company hereby agrees that at all times there
shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of its Common Stock as shall be required for
issuance of delivery upon exercise of this Warrant.
C. FRACTIONAL SHARES. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. With respect to
any fraction of a share called for upon exercise hereof, the Company shall
issue to the Holder the next whole share.
D. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and
surrender hereof to the company or at the office of the Warrant Agent for
other Warrants of different denominations entitling the Holder thereof to
purchase in aggregate the same number of shares of Common Stock purchasable
hereunder. The term Warrant as used herein includes any Warrants into which
this Warrant may be divided or exchanged. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and
deliver a new Warrant of like tenor and date. Any such new warrant executed
and delivered shall constitute an additional contractual obligation on the
part of the Company, whether or not this Warrant so lost stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
E. RIGHTS OF THE HOLDER. The Holder shall not, by virtue here of, be entitled
to any rights of a shareholder in the Company, either at law or equity, and
the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth
herein.
F. STOCK DIVIDENDS, RECLASSIFICATION, REORGANIZATION, ANTI-DILUTION
PROVISIONS, ETC. This Warrant is subject to the following further
provisions:
1. In case the Company shall have at any time or from time to time after
the Issue Date (a) paid a dividend, or made a distribution, on the
outstanding shares of Common Stock in shares of Common Stock, (b)
subdivided the outstanding shares of Common Stock, (c) combined the
outstanding shares of Common Stock into a smaller number of shares or
(d) issued by reclassification of the shares of
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Common Stock any shares of capital stock of the Company, then, and
with respect to each such case, the Exercise Price shall be adjusted
so that the Holder shall be entitled to purchase upon exercise the
number of shares of Common Stock or other securities of the Company
which such Holder would have owned or have been entitled to receive
immediately prior to such events or the record date therefor,
whichever is earlier, assuming the Warrants had been exercised into
Common Stock, it being the intention of the foregoing, to provide the
Holders with the same benefits and securities as such Holder would
have received as a Holder of Common Stock if the Warrant had been
exercised into Common Stock at the Exercise Price on the Issue Date
and such Holder had continued to hold such Common Stock.
2. Except with respect to Excluded Securities, in case the Company shall
have issued shares of Common Stock or any Common Stock Equivalents
after the Issue Date at a price per share (or having a conversion,
exercise or exchange price per share) less than the greater of (a) the
Initial Exercise Price (subject to adjustment for stock dividends,
stock splits, reclassifications and other transactions which would
require adjustment pursuant to Section F(1)) and (b) the Current
Market Price per share of Common Stock as of the date of issuance of
such shares (or, in the case of Common Stock Equivalents, less than
the greater of (a) the Initial Exercise Price (subject to adjustment
for stock dividends, stock splits, reclassifications and other
transactions which would require adjustment pursuant to Section F(1))
and (b) the Current Market Price as of the date of issuance of the
Common Stock Equivalents in respect of which shares of Common Stock
were issued, then and in such event, the Exercise Price in effect on
the day immediately prior to such issue shall be reduced, concurrently
with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction, the
numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issue plus (ii) the
number of shares of Common Stock purchasable at the greater of (a) the
Initial Exercise Price (subject to adjustment for stock dividends,
stock splits, reclassifications and other transactions which would
require adjustment pursuant to Section F(1)) and (b) the then Current
Market Price per share with the aggregate consideration receivable by
the Company for the total number of shares of Common Stock then being
issued (or into or for which the Common Stock Equivalents then being
issued may be converted or be exercised or exchanged) and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of shares
of Common Stock then being issued (or into or for which the Common
Stock Equivalents then being issued may convert or be exercised or
exchanged). Notwithstanding the foregoing, except for Excluded
Securities, in case the Company shall have issued shares of Common
Stock or any Common Stock Equivalents after the Issue Date at a price
per share (or having a conversion, exercise or exchange price per
share) less than the Initial Exercise Price (subject to adjustment for
stock dividends, stock splits, reclassifications and
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other transactions which would require adjustment pursuant to Section
F(1)) then, and in such event, the Exercise Price in effect on the day
immediately prior to such issue shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) that is equal
to such lower price per share (or conversion, exercise or exchange
price) applicable to such newly issued shares of Common Stock or
Common Stock Equivalents.
3. In case the Company shall have at any time or from time to time after
the Issue Date declared, ordered, paid or made a dividend or other
distribution (including, without limitation, any distribution of stock
or other securities or property or rights or warrants to subscribe for
securities of the Company or any of its subsidiaries by way of
dividend or spin-off), on its Common Stock, other than dividends or
distributions of shares of Common Stock which are referred to in
clause (1) of this Section F, then the Holder shall be entitled to
receive upon exercise hereof their pro rata share of any such dividend
or other distribution on an as exercised basis; provided, however,
that any plan or declaration of a dividend or distribution shall not
have been abandoned or rescinded.
4. For purposes of this Section F, the aggregate consideration receivable
by the Company in connection with the issuance of shares of Common
Stock and/or Common Stock Equivalents shall be deemed to be equal to
the sum of the aggregate offering price (before deduction of
underwriting discounts or commissions and expenses payable to third
parties, if any) of all such Common Stock and/or Common Stock
Equivalents plus the minimum aggregate amount, if any, payable upon
conversion, exchange or exercise of any such Common Stock Equivalents.
If the consideration received by the Company in connection with the
sale or issuance of shares of Common Stock (or Common Stock
Equivalents) consists, in whole or in part, of property other than
cash or its equivalent, the value of such property shall be the Fair
Market Value.
5. For the purposes of this Section F, the number of shares of Common
Stock at any time outstanding shall mean the aggregate of all shares
of Common Stock then outstanding (other than any shares of Common
Stock then owned or held by or for the account of the Company)
treating for purposes of this calculation all Common Stock Equivalents
then outstanding as having been fully converted, exercised or
exchanged to the extent that such Common Stock Equivalents are vested
and could be converted, exchanged or exercised (and for these purposes
all of the Warrants shall be treated as if they had been fully
exercised into shares of Common Stock immediately prior to such
issuance). In no event shall any shares to be issued because of an
issuance described in F (2) as a result of the operation of the
antidilution provision of any securities outstanding prior to the
issuance described in F (2) of this Section F be taken into account in
computing adjustments pursuant to Section F (2) hereof.
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6. Upon the expiration unexercised of any Common Stock Equivalents
for which an adjustment has been made pursuant to this Section F,
the adjustments shall forthwith be reversed to effect such rate
of conversion as would have been in effect at the time of such
expiration or termination had such Common Stock Equivalents, to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
7. If any event occurs as to which, in the opinion of the Board, the
provisions of this Section 7 are not strictly applicable or if
strictly applicable would not fairly protect the rights of the
Holders in accordance with the essential intent and principles of
such provisions, the Board shall make an adjustment in the
application of such provisions, in accordance with such essential
intent and principles, so as to protect such rights of the
Holders.
8. If the Company shall be a party to any transaction including
without limitation, a merger, consolidation, sale of all or
substantially all of the Company's assets or a reorganization,
reclassification or recapitalization of the capital stock of the
Company but excluding any transaction for which provision for
adjustment is otherwise made in this Section F (each of the
foregoing, except as excluded as provided above, being referred
to as a "Transaction"), in each case, as a result of which shares
of Common Stock are converted into the right to receive stock,
securities or other property (including cash or any combination
thereof), each Warrant shall thereafter be entitled to purchase
the number of shares of stock or other securities or property to
which a Holder of the number of shares of Common Stock of the
Company deliverable upon exercise of such Warrant would have been
entitled upon such Transaction; and, in any such case,
appropriate adjustment (as determined by the Board) shall be made
in the application of the provisions set forth in this Section F,
with respect to the rights and interest thereafter of the holders
of the Warrants, to the end that the provisions set forth in this
Section F shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property
thereafter deliverable upon the exercise of the Warrants. The
Company shall not effect any Transaction (other than a
consolidation or merger in which the Company is the continuing
Company) unless prior to or simultaneously with the consummation
thereof the Company, or the successor Company or purchaser, as
the case may be, shall provide that each Warrant shall entitle
the Holder to purchase such shares of stock, securities or
property as, in accordance with the foregoing provisions, each
such Holder is entitled to purchase. The provisions of this
paragraph (8) shall similarly apply to successive Transactions.
9. Upon the occurrence of each adjustment or readjustment of the
Conversion Price and the Conversion Ratio pursuant to this
Section F, the Company, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms
hereof, and furnish to each Holder of Warrants a certificate
setting forth the
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amount of such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request at any time of any
Holder, furnish or cause to be furnished to such Holder a like
certificate setting forth (i) such adjustments and readjustments,
(ii) the Exercise Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the exercise of
the Warrants.
10. In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or
other distribution, the Company shall mail to each Holder of
Warrants a notice specifying the date on which any such record is
to be taken for the purpose of such dividend or distribution at
least ten (10) days prior to such record date.
G. REDEMPTION.
1. Subject to the last sentence of this Section G(1) and to the
Holders' right of exercise set forth in Section A, commencing on
the Issue Date, the Company shall have the right upon 30 days
prior written notice, to redeem all (but not less than all) of
the Warrants for $.01 per Warrant, payable in cash.
Notwithstanding the foregoing, the Company shall have the right
to redeem the Warrants pursuant to this Section G(1), only if (a)
the Current Market Price for the Common Stock is equal to or
greater than three times the Exercise Price for at least 10
consecutive Trading Days prior to delivery of the notice of
redemption (and during such period the average weekly trading
volume of Common Stock as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if the Common Stock is
not so listed on any national securities exchange, as reported in
the transaction reporting system applicable to securities
designated as a "national market system security" or "small cap
market security" on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), is not less
than 100,000 shares) and (b) the Current Market Price of the
Common Stock is equal to or greater than three times the Exercise
Price on the date and at the time of redemption.
2. Notice by the Company to redeem Warrants pursuant to Section G(1)
shall be given by certified mail, return receipt requested,
postage prepaid, mailed to each Holder of record of the shares to
be redeemed at such Holder's address as the same appears on the
Company's records; provided that neither the failure to give such
notice nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or
the validity of the proceedings for redemption with respect to
the other holders. Each such notice shall state: (a
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the exchange or redemption date, (b) that all outstanding
Warrants are being redeemed by the Company, (c) the place or
places where certificates for such Warrants are to be surrendered
for payment of the redemption price. From and after the
redemption date, except as otherwise provided herein, all rights
of the Holders thereof as Holders of the Warrants shall cease
(except the right to receive from the Company the redemption
price without interest thereon, upon surrender and endorsement of
their certificates). Upon surrender in accordance with notice
given pursuant to Section G (1) of the certificates for any
Warrants so redeemed (properly endorsed or assigned for transfer,
if the Board shall so require and the notice shall so state),
such shares shall be redeemed by the Company at the redemption
price aforesaid.
H. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. Neither this Warrant,
the Warrant Shares, nor any other security issued or issuable upon exercise
of this Warrant may be sold or otherwise disposed or except as follows:
1. to a person who, in the opinion of counsel reasonably satisfactory to
the Company, is a person to whom the Warrant or Warrant Shares may
legally be transferred without registration and without the delivery
of a current prospectus under the Securities Act of 1933, as amended
(the "Act") with respect thereto and then only against receipt of an
agreement of such person to comply with the provisions of this Section
H. with respect to any resale or other disposition of such securities;
or
2. to any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.
I. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Holder as follows:
1. The Company is duly organized and, as of the date of the original
issuance hereof, validly existing and in good standing under the laws
of the state of Delaware.
2. The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuing
Warrant Shares upon the exercise of this Warrant, such shares as may
be issuable upon the exercise hereof.
3. Warrant Shares, when issued and paid for in accordance with the terms
of this Warrant, will be fully paid and not assessable.
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4. This Warrant has been duly authorized and approved by all
required corporate action by the Company and does not violate the
certificate of incorporation or by-laws of the Company.
J. DEFINITIONS. In addition to any other terms defined herein, the following
terms shall have the meanings indicated for purposes of this Warrant.
"Common Stock Equivalent" means securities (including, without
limitation, options, warrants and evidences of indebtedness) that
are outstanding at the time of a determination that are directly
or indirectly convertible into, or exchangeable or exercisable
for, shares of Common Stock.
"Current Market Price" when used with reference to shares of
Common Stock or other securities on any date, shall mean the
closing price per share of Common Stock or such other securities
on such date and, when used with reference to shares of Common
Stock or other securities for any period shall mean the average
of the daily closing prices per share of Common Stock or such
other securities for such period. If the Common Stock or such
other securities are listed or admitted to trading on a national
securities exchange, the closing price shall be the last sale
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Common Stock or such other securities are not listed or admitted
to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting systems with respect
to securities listed on the principal national securities
exchange on which the Common Stock or such other securities are
listed or admitted to trading or, if the Common Stock or such
other securities are not so listed on any national securities
exchange, as reported in the transaction reporting system
applicable to securities designated, as a "national market system
security" or "small cap market security" on the NASDAQ. If the
Common Stock or such other securities are not publicly held or so
listed or designated, "Current Market Price" shall mean the Fair
Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board based on an
opinion of an independent investment banking firm with an
established national reputation with respect to the valuation of
securities.
"Excluded Securities" means (i) options issued by the Corporation
to a director, officer or employee of the Corporation pursuant to
any stock option or similar plan (and any shares of Common Stock
issuable thereunder) existing or outstanding as of the Issue Date
or to the extent such arrangements are approved by the Board
after the Issue Date, (ii) shares of Common Stock issuable upon
conversion, exchange or exercise of any Common Stock Equivalent
outstanding as of the Issue Date, (iii) shares of Common Stock
issuable upon exercise of the
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Warrants, (iv) shares of Common Stock the issuance of which is
approved by the Board after the Issue Date provided the issue
price thereof is not less than the greater of (a) ninety percent
(90%) of the Current Market Price, or (b) the then applicable
Exercise Price, (v) shares of Common Stock consideration issued
for cash in a transaction in which the proceeds are applied to
pay principal or interest on originally issued Notes issued on
December 18, 1997 to Galen Partners III, L.P., a Delaware limited
partnership ("Galen Partners III"), Galen Partners International
III, L.P., a Delaware limited partnership ("Galen International
III") or Galen Employee Fund III, L.P., a Delaware limited
partnership ("Galen Employee Fund"; together with Galen Partners
III and Galen International III, the "Galen Funds") or to
purchase shares of Common Stock issued to the Galen Funds or
other investors pursuant to Option Agreements dated November ___,
1998; or (vi) shares of Common Stock issued to any entity or the
holders of equity interests of any entity in which 10% of such
equity interests are owned in the aggregate beneficially,
directly or indirectly by the Galen Funds or their respective
affiliates.
"Fair Market Value" of the Common Stock or any other property
means the fair market value of such Common Stock or other
property as determined (unless expressly otherwise provided
herein) by mutual agreement between the Corporation and the
holders of not less than 50% of the Warrants or, if the parties
are unable to agree, as determined by a nationally recognized
independent investment banking firm selected by mutual agreement
between the Corporation and the holders of not less than 50% of
the Warrants.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities
exchange, a day on which such exchange is open for the
transaction of business.
[SIGNATURE PAGE FOLLOWS]
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Q-MED, INC.
[CORPORATE SEAL]
By:____________________________
Michael W. Cox, President
Dated:
ATTEST:
- ---------------------------------
Debra Fenton, Assistant Secretary
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PURCHASE FORM
TO BE EXECUTED
UPON EXERCISE OF WARRANTS
TO: Q-Med, Inc.
100 Metro Park South
Laurence Harbor, NJ 08878
The undersigned hereby exercises, according to the terms and conditions
thereof, the right to purchase _____________ Shares of Common Stock, evidenced
by the within Warrant Certificate, and herewith makes payment of the purchase
price in full.
Dated:_____________________________________
Name:______________________________________
Address:___________________________________
Signature:_________________________________
UPON EXERCISE OF THIS WARRANT PAYMENT SHOULD BE MADE TO THE ORDER OF
Q-MED, INC.
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