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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) August 25, 1999
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Q-MED, INC.
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(Exact name of registrant as specified in its Charter)
DELAWARE 0-11411 22-2468665
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(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 August 25, 1999, the holders of $950,000 principal amount of the
Company's 16% Convertible Notes due December 18, 2002 (the "Notes") converted
$900,000 of the principal into 538,922 shares of common stock and 500,000 common
stock purchase warrants exercisable at $1.67 per share (subject to adjustment in
the manner described below) until November 15, 2002. As a result of the
conversion and adjustment, the Company will realize a one time non-cash charge
to operations of $731,135 in the period ended August 31, 1999. In addition,
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 "Galen Funds")
invested an additional $250,000 in exchange for 95,238 shares of the Company's
common stock and 75,000 common stock purchase warrants exercisable at $1.67 per
share until November 15, 2002. The exercise price of all the warrants issued and
amended may be adjusted in certain circumstance to protect the holders against
dilution. The note purchase agreements between the Company and the funds
represented by Galen were further amended to eliminate the Company's ability to
prepay the remaining $50,000 principal and $118,407.34 due on the Notes and to
reduce the conversion price of the Notes to $2.87. In the event the closing
price of the Company's common stock equal or exceeds $8.61 for twenty
consecutive days and the average trading volume during the two weeks preceding
the notice of redemption is equal or greater than 100,000 shares per week then
the Notes may be redeemed by the Company at the following prices
Year Redemption Price
- ---- ----------------
1999 104%
2000 103%
2001 102%
2002 100%
The Notes continue to bear interest at the rate of 16% per annum on the
remaining principal (which is capitalized annually and due upon maturity) and
payment is secured by a lien on substantially all of the Company's assets.
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 May 31, 1999
<PAGE>
(c) Exhibits
4.1 Form of common stock purchase warrants exercisable at $1.67 per share until
November 15, 2005 (Incorporated by reference to Exhibit 4.1 to the
Company's Form 8-K Current Report dated May 17, 1999).
4.2 Form of common stock purchase warrants exercisable at $2.625 per share
until November 15, 2005.
99.1 Second Amendment dated as of August 25, 1999 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 Securities 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 August 25, 1999.
<PAGE>
PRO FORMA BALANCE SHEET
The following pro forma balance sheet of qmed, Inc. (the "Registrant")
gives effect to the Registrant's issuance of 538,922 shares of common stock and
500,000 warrants upon the conversion of $900,000 outstanding principal amount of
16% Convertible Notes and the sale of 95,238 shares of common stock and 75,000
common stock purchase warrants for $250,000.
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 May
31, 1999, other than the refinancing. 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.
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<TABLE>
<CAPTION>
Q-MED, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
May 31, 1999
(Unaudited)
ASSETS
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 372,493 215,000(1) $ 587,493
Investments 1,000,000 1,000,000
Accounts receivable, net of
allowances of approximately $500,000 182,015 182,015
Inventories 465,879 465,879
Prepaid expenses and other current assets 148,129 148,129
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2,168,516 2,383,516
Product software development costs 21,785 21,785
Property and equipment, net 508,477 508,477
Other assets 189,216 189,216
Total assets $ 2,887,994 $ 3,102,994
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 563,527 $ 563,527
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563,527 563,527
Convertible long tern debt 950,000 (900,000)(2) 50,000
Leases payable - long term 87,357 87,357
Deferred warranty revenue 18,779 18,779
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Total liabilities 1,619,663 719,663
Stockholders' equity
Common stock $.001 par value; 20,000,000
shares authorized; 11,590,989 and 12,225,149
proforma shares issued and 11,568,989 and
12,203,149 proforma shares outstanding 11,591 539(2) 12,225
95(1)
Paid-in capital 21,183,828 214,905(1) 23,035,329
899,461(2)
737,135(3)
Accumulated deficit (19,839,900) (737,135)(3) (20,577,035)
Accumulated other comprehensive income
Unrealized holding loss/gain on
available-for-sale securities (11,563) (11,563)
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1,343,956 2,458,956
Less: treasury stock at cost, 22,000
common shares (75,625) (75,625)
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Total stockholders' equity 1,268,331 2,383,331
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$ 2,887,994 $ 3,102,994
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See Accompanying Notes to Proforma Consolidated Financial Statements
</TABLE>
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NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) To record the issuance of 95,238 shares of common stock for $250,000 cash
net of legal fees.
(2) To record the issuance of 538,922 shares of common stock upon the
conversion of $900,000 principal amount of the 16% Convertible Subordinated
Notes due December 18, 2002.
(3) To record the impact of common stock issued at a conversion rate which is
lower than the original conversion rate of the Convertible Subordinated
Notes.
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 15, 2005
Warrant to Purchase
AMOUNT Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
This is to Certify That, FOR VALUE RECEIVED, NAME (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 AMOUNT shares (the "Warrant
Shares") of the Company's Common Stock, par value $.001 per share ("Common
Stock") for $2.625 per Warrant Share (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 the Initial Exercise
Price as if it had been the initial Exercise Price per share hereunder) at any
time on or after the Issue Date (defined below) 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 Exercise
Price shall be increased to $3.00 per share (subject to adjustment in accordance
with Section F. hereof) in the event the Company has entered into contracts with
managed healthcare organizations in the aggregate covering 1,000,000 lives by
August 1, 1999 which shall be evidenced by a certificate of the Company's Chief
Executive Officer. 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 75,000 Warrants of like tenor issued May ___, 1999 (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 the Issue Date, 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
<PAGE>
hereof to purchase the balance of the shares purchasable hereunder. Upon
receipt by the 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 other
transactions which would require adjustment pursuant
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<PAGE>
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.
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
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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 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
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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) 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
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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.
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.
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"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
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")
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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 (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]
9
<PAGE>
Q-MED, INC.
[CORPORATE SEAL]
By:____________________________
Michael W. Cox, President
Dated: May ____, 1999
ATTEST:
____________________________
Herbert H. Sommer, Secretary
10
<PAGE>
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.
11
SECOND AMENDMENT TO
NOTE PURCHASE AGREEMENT
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT, dated as of August 25, 1999,
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 "Purchasers").
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 Purchasers 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, the parties have heretofore entered into an amendment to the Note
Purchase Agreement dated as of November 15, 1998 (the "First Amendment")
whereby, inter alia, the Purchasers surrendered a portion of the Notes such that
the amount of principal outstanding is $950,000;
WHEREAS, the Company has requested that the Purchasers surrender a portion
of the Notes in exchange for 538,922 shares (the "New Shares") of the Common
Stock, $.001 par value per share, of the Company and the Purchasers, subject to
Section 5 hereof, have agreed to surrender a portion of the Notes for the New
Shares, and
WHEREAS, in consideration of, and as a material inducement to, the
agreement of the Purchasers to surrender a portion of the Notes in exchange for
the New Shares, the Company has agreed to issue to the Purchasers an aggregate
of 500,000 warrants (the "New Warrants") to purchase shares of Common Stock pro
rata according to the principal amounts of the Notes held by the respective
purchasers and to amend the Note Purchase Agreement as heretofore set forth.
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
amend the following defined term:
"Initial Conversion Price" shall mean $2.87.
2. Surrender and Exchange of Notes. Subject to Section 5, (a) The
Purchasers shall surrender to the Company Notes in an aggregate principal amount
of $900,000 in exchange for (i) the issuance by the Company of an aggregate of
538,922 shares of the Common Stock, and
<PAGE>
(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 $50,000;
such new Notes to be issued to the payees thereof in the respective principal
amounts in the same proportion as the Notes surrendered. The Company
acknowledges that, as of August 26, 1999, the new Notes carry accrued but unpaid
interest in the amount of $118,407.34.
(b) As an additional inducement for the Purchasers to enter into this
Amendment, the Company will issue and deliver at its expense, New 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 pro rata in the
respective principal amounts as the Notes surrendered without the payment of any
additional consideration therefor.
3. Amendments to Note Purchase Agreement. Subject to Section 5 hereof, the
Note Purchase Agreement is hereby amended as set forth below:
Amended Section 9.1 is hereby further amended by deleting the existing
provision in its entirety and inserting in lieu thereof the following:
9.1 Optional Redemption. Subject to the last sentence of this Section 9.1
and the Purchasers' 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):
Redemption Price
Year (as % of principal)
---- -------------------
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 only if (x) the Current Market Price for the
Common Stock is equal to or greater than $8.61 (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;
(y) the Current Market Price of the Common Stock is equal to or greater than
$8.61 (subject to appropriate adjustments for stock splits, combinations and
similar transaction) on the date and at the time of redemption; and (z) the
average weekly trading volume reported for the Common Stock for the two calendar
weeks prior to delivery of the Notice of Redemption is equal to or greater than
100,000 shares.
4. Waiver of Adjustment to Conversion and Exercise Prices. The Purchasers
on behalf of themselves and each person that is a party to that Option Agreement
dated November
2
<PAGE>
16, 1998, as amended on May 17, 1999 (the "Option Agreement") hereby waive the
adjustment to the Conversion Price or Exercise Price of Warrants issued to the
Purchasers, as calculated in accordance with Section 10.6(b) and the adjustment
of exercise prices of outstanding Warrants, or right to additional shares, as
the case may be, made on the date of this Amendment, that otherwise would be
required by the issuance of the Shares and New Warrants pursuant to the terms of
this Amendment or the Option Agreement.
5. Effectiveness. This Amendment shall not become effective unless and
until the Company shall have received written confirmation from NASDAQ that the
completion of the transactions described in the letter of Sommer & Schneider LLP
dated April 9, 1999 would result in the Company presently complying with all
applicable Maintenance Requirements for continued listing on the NASDAQ Small
Cap Market. The parties agree that such confirmation has been received in the
form of a decision of the NASDAQ Listing Qualifications Panel dated August 10,
1999.
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
Purchasers and each Person who controls the Purchasers (including, without
limitation, their respective fees and expenses of their counsel and accountants)
(collectively, "Expenses") and (y) indemnify the Purchasers and each Person who
controls the Purchasers 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 $10,000.
9. Miscellaneous. (a) 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.
(b) The new address for Sommer & Schneider LLP is:
Sommer & Schneider LLP
595 Stewart Avenue, Suite 710
Garden City, NY 11530
Attn: Herbert H. Sommer, Esq.
[SIGNATURE PAGE FOLLOWS]
3
<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 W. Cox
--------------------------------------
Name: Michael W. 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 of
Claudius, L.L.C., General Partner
GALEN PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C.
By: /s/ Bruce F. Wesson
--------------------------------------
Name: Bruce F. Wesson
Title: : Senior Managing Member of
Claudius, L.L.C., General Partner
GALEN EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc.
By: /s/ Bruce F. Wesson
--------------------------------------
Name: Bruce F. Wesson
Title: President
4
SECURITIES PURCHASE AGREEMENT
This Common Stock Purchase Agreement, dated as of August 25, 1999 (this
"Agreement"), between Q-Med, Inc., a Delaware corporation (the "Company"), and
the purchasers listed on Schedule I hereto (collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions specified herein, the
Purchasers wish to purchase from the Company, and the Company wishes to issue
and sell to the Purchasers, 95,238 shares of Common Stock, $.001 par value
("Common Stock") and warrants (the "Warrants") to purchase an additional 75,000
shares of Common Stock for an aggregate of $250,000; and
WHEREAS, the Purchasers and the Company desire to provide for such purchase
and sale and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein set forth, the parties hereto
agree as follows:
1. ISSUANCE AND SALE OF SHARES.
1.1. The Purchase.
On the terms and subject to the conditions set forth in this Agreement,
each of the Purchasers shall purchase from the Company, and the Company shall
sell to each of the Purchasers, the number of Shares and Warrants set forth
opposite each Purchasers' name on Schedule I for the aggregate purchase price of
$250,000. The Company's agreement with each of the Purchasers is a separate
agreement, and the sale to each of the Purchasers is a separate sale. The
aggregate consideration for the Shares and the Warrants (collectively the
"Securities") will be paid in immediately available funds at the time this
Agreement is executed by all parties (the "Closing").
1.2. The Closing.
(a) Subject to the satisfaction (or waiver) of the conditions listed in
Section 2.1, the Closing of the transactions contemplated by Section 1.1 (the
"Closing") shall take place concurrently with the execution of this Agreement at
the offices of Sommer & Schneider LLP, 595 Stewart Avenue, Suite 710, Garden
City, New York 11530, or at such other time, date and place as are mutually
agreeable to the Purchasers representing the majority of the Securities being
purchased and the Company. At the Closing, the Company will deliver to each of
the Purchasers certificates for the number of Shares and Warrants (which
Warrants shall be in the form annexed hereto as Exhibit A) being purchased by
such Purchaser, registered in the name of such Purchasers against payment to the
Company of the purchase price therefore in immediately available funds to the
Company by wire transfer to an account designated by the Company. If at the
Closing, any of the conditions specified in Section 2.1 shall not have been
fulfilled, each of
<PAGE>
the Purchasers shall, at his, her or its election be relieved of all of his,
hers or its obligations under this Agreement.
(b) The Closing shall be deemed to have taken place in the State of New
York.
1.3. Definitions. Certain capitalized terms used in this Agreement are
defined in Section 7 hereof.
2. CONDITIONS OF CLOSING.
2.1. Conditions to the Closing. The obligation of the Purchasers to
consummate the transactions contemplated herein at the Closing are subject to
the satisfaction (or waiver by the Purchasers) of the following conditions:
(i) the representations and warranties of the Company contained in
this Agreement shall be true and correct as of the date of the
Closing; the Company shall have performed, satisfied and complied
with all covenants, agreements, and conditions required by this
Agreement to be performed, satisfied or complied with by it at or
before the Closing;
(ii) all consents, approvals, authorizations, exemptions and waivers
from Governmental Entities that shall be required in order to
enable the Purchasers to consummate the transactions contemplated
hereby shall have been obtained (except for such consents,
approvals, authorizations, exemptions and waivers, the absence of
which would not prohibit consummation of such transactions or
render such consummation illegal);
(iii) there shall not have been issued any injunction, order or other
decree or enacted any Law which prevents the consummation of the
transactions contemplated by any of the Transaction Documents;
(iv) there shall not have been instituted, pending or threatened any
action, suit or proceeding by or before any court or Governmental
Entity (A) which may be reasonably expected to enjoin consummation
of the transactions contemplated by any of the Transaction
Documents or (B) otherwise affecting the Purchasers, the Company
or any of their respective subsidiaries or affiliates which may
reasonably be expected to have a material adverse effect on the
Purchasers or a Material Adverse Effect;
(v) there shall not have occurred after May 31, 1999 any material
adverse change or any development involving a prospective material
adverse change (including as a result of any change in the Law)
which has caused or is reasonably likely to cause a Material
Adverse Effect except for those disclosed in Schedule 3.5;
2
<PAGE>
(vi) Sommer & Schneider LLP, counsel to the Company, shall have
delivered to the Purchasers an opinion dated the date of the
Closing, in form reasonably satisfactory to the Purchasers, with
respect to the matters set forth in Exhibit B hereto;
(vii) all corporate proceedings taken in connection with the
transactions contemplated hereby, and all documents necessary to
the consummation thereof, shall be reasonably satisfactory in form
and substance to the Purchasers and counsel to the Purchasers;
(viii) the Company shall have received from The Nasdaq Stock Market, Inc.
confirmation that the consummation of the transactions
contemplated herein, including the issuance and sale of the
Securities, the surrender and exchange by the Galen Funds (defined
below) of the Notes (defined below) for shares of the Company's
Common Stock and Common Stock Purchase Warrants and the Amendment
(defined below) of the Option Agreements, will permit the Company
to retain its Common Stock listing on the National Association of
Securities Dealers, Inc. Automated Quotation System Small Cap
Market; and
(ix) Galen Partners III, L.P., a Delaware limited partnership, and the
Company shall have executed and delivered the amendment to certain
option agreements in the form annexed hereto as Exhibit C (the
"Amendment") and the Galen Funds shall have exchanged $900,000 of
the principal amount of the Notes for shares of the Company's
Common Stock and Warrants.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each of the Purchasers as of the date hereof, as follows:
3.1. Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction of its incorporation and each has the power to own
its respective property and to carry on its respective business as now being
conducted and as contemplated to be conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the respective
business conducted or property owned by it makes such qualification necessary
and where the failure to so qualify would individually or in the aggregate have
or reasonably be expected to have a Material Adverse Effect.
3.2. Due Authorization. The Company has all right, power and authority to
enter into the Transaction Documents and to consummate the transactions
contemplated thereby. The execution and delivery of each of the Transaction
Documents and the issuance and sale of the Shares by the Company and compliance
by the Company with all the provisions of each of
3
<PAGE>
the Transaction Documents and consummation by the Company of the transactions
contemplated hereby (i) are within the corporate power and authority of the
Company; (ii) do not or will not require the approval or consent of the
stockholders of the Company; and (iii) have been authorized except as set forth
in the preceding clause, by all requisite corporate proceedings on the part of
the Company. This Agreement, has been duly executed and delivered by the Company
and constitutes (and upon the due execution and delivery by the Company at the
Closing of the Warrants, such agreements will constitute) valid and binding
agreements of the Company, enforceable in accordance with their respective
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The Shares being purchased by the Purchasers
pursuant to this Agreement, when issued, sold and delivered in accordance with
the terms of this Agreement, will be duly and validly issued and outstanding,
fully paid, and nonassessable free of any liens, encumbrances and restrictions
(other than restrictions under any Transaction Document) and, based in part upon
the representations of the Purchasers set forth in Sections 4.5 and 4.7, will be
issued in compliance with all applicable federal and state securities laws. The
Board of Directors of the Company has unanimously approved the transactions
contemplated hereby for the purposes of Section 203 of General Corporation Law
of the State of Delaware (the "DGCL"), pursuant to Section 203(a)(1) thereof.
The Company has furnished to the Purchasers true and correct copies of the
Company's Certificate of Incorporation and By-Laws as in effect on the date of
this Agreement.
3.3. Capitalization. The authorized Capital Stock of the Company consists
of 20,000,000 shares of Common Stock, of which, as of August 23, 1999,
11,582,621 shares were outstanding. The Company does not have any class of
authorized stock other than Common Stock. All of the outstanding shares of
Common Stock have been validly issued and are fully paid and nonassessable. No
class of Capital Stock of the Company is entitled to preemptive rights. Except
for the options and warrants, listed on Schedule 3.3, there are no outstanding
option, warrants, subscription rights, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, shares of any
class of Capital Stock of the Company, or Contracts, by which the Company is or
may become bound to issue additional shares of its Capital Stock or options,
warrants or other rights to purchase or acquire any shares of its Capital Stock.
Except for the agreement between the Company and the Galen Funds with respect to
the surrender for exchange of a portion of the principal amount of and all
accrued interest on the Notes as payment for Shares, there are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
securities of the Company. Except as set forth in Schedule 3.3 there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or to which the Company is bound relating to the
shares of Capital Stock of the Company. Except for the Notes, the Company has no
outstanding bonds, debentures, notes or other obligations, the holders of which
have the right to vote (or convertible or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter. Except as set
forth in Schedule 3.3 hereto, the Company has not declared or paid any dividend
or made any other distribution of cash, stock or other property to its
stockholders or purchased or otherwise redeemed any shares of its Capital Stock.
The issuance of the Shares will
4
<PAGE>
not result in any anti-dilution adjustment under any security of the Company
currently outstanding.
3.4. SEC Reports. The Company has filed all proxy statements, reports and
other documents required to be filed by it under the Exchange Act from and after
December 1, 1995 and has made available to the Purchasers true and complete
copies of all annual reports, quarterly reports, proxy statements and other
reports under the Exchange Act filed by the Company from and after such date,
each as filed with the Commission (collectively, the "SEC Reports"). Each SEC
Report was in compliance in all material respects with the requirements of its
respective report form and did not on the date of filing contain any 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, and as of the date
hereof there is no fact or facts not disclosed in the SEC Reports which
individually or in the aggregate may have a Material Adverse Effect.
3.5. Financial Statements. The financial statements (including any
related schedules and/or notes) included in the SEC Reports have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently followed (except as indicated in the notes thereto) throughout the
periods involved and fairly present in all material respects the consolidated
financial condition, results of operations and changes in stockholders' equity
of the Company as of the respective dates thereof and for the respective periods
then ended (in each case subject, as to interim statements, to changes resulting
from year-end adjustments, none of which were material in amount or effect).
Except as set forth in Schedule 3.5, the Company has no liabilities or
obligations, contingent or otherwise, except (i) liabilities and obligations in
the respective amounts reflected or reserved against in the Company's balance
sheet as of May 31, 1999 included in the SEC Reports or (ii) liabilities and
obligations incurred in the ordinary course of business since May 31, 1999 which
individually or in the aggregate do not have a Material Adverse Effect. Since
May 31, 1999, the Company has operated its business only in the ordinary course
and there has not been individually or in the aggregate any Material Adverse
Change, other than changes disclosed in the SEC Reports or otherwise set forth
in Schedule 3.5 hereto.
3.6. Litigation. Except as set forth in Schedule 3.6 hereto, there is no
action, suit, investigation or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its properties or assets by or
before any court, arbitrator or other Governmental Entity. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or Governmental Entity.
3.7. Title To Properties; Insurance. The Company and its Subsidiaries
have good and valid title to, or, in the case of property leased by them as
lessee, a valid and subsisting leasehold interest in, its properties and assets,
free of all liens and encumbrances other than as set forth in Schedule 3.7
hereto and those referred to in the financial statements of the Company (or the
notes thereto) for the period ended May 31, 1999 included in the SEC Reports,
except in each case for such defects in title and such other liens and
encumbrances which do not individually or in the aggregate materially detract
from the value to the Company of the properties and assets of
5
<PAGE>
the Company and its Subsidiaries taken as a whole. The assets and properties
owned by, or leased to, the Company and its Subsidiaries, are all of the assets
and properties necessary for the Company and its Subsidiaries to operate their
respective businesses as now being conducted and as contemplated to be
conducted. The Company and its Subsidiaries maintain insurance in such amounts
(to the extent available in the public market), including self-insurance,
retainage and deductible arrangements, and of such a character as is reasonable
and customary for companies engaged in the same or similar business.
3.8. Consents. Assuming the accuracy of the representations of the
Purchasers set forth in Sections 4.5 and 4.7, except as set forth on Schedule
3.8, the Company is not required to obtain any consent, approval or
authorization of, or to make any declaration or filing with, any Governmental
Entity or any other Person as a condition to or in connection with the valid
execution and delivery of any of the Transaction Documents or the valid offer,
issue, sale or delivery of the Securities, or the performance by the Company of
its obligations in respect of any of the Transaction Documents, except for
filings required pursuant to state and federal securities laws to effect any
registration of any of the Securities pursuant to the Registration Rights
Agreement and except for the filings required pursuant to Section 13 of the
Exchange Act and Regulation D under the Securities Act to report the
consummation of the transaction contemplated hereby.
3.9. Holding Company Act and Investment Company Act. Neither the Company
nor any of its Subsidiaries is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
3.10. Taxes. The Company and its Subsidiaries have timely filed all Tax
Returns required to be filed. All such Tax Returns are true, correct and
complete, except for such instances which individually or in the aggregate would
not have or reasonably be expected to have a Material Adverse Effect. All Taxes
of the Company and its Subsidiaries which are (i) shown as due on such Returns,
(ii) otherwise due and payable or (iii) claimed or asserted by any taxing
authority to be due, have been paid, except for those Taxes being contested in
good faith and for which adequate reserves have been established in the
financial statements included in the SEC Reports. Neither the Company nor any of
its Subsidiaries know of any proposed or threatened Tax claims or assessments
which, if upheld, would individually or in the aggregate have or reasonably be
expected to have a Material Adverse Effect. The Company and its Subsidiaries
have withheld and paid over to the relevant taxing authority all Taxes required
to have been withheld and paid in connection with payments to employees,
independent contractors, creditors, stockholders or other third parties, except
for such Taxes which individually or in the aggregate would not have or
reasonably be expected to have a Material Adverse Effect.
6
<PAGE>
3.11. Employee Benefit Plans. Neither the Company, any Subsidiary nor any
ERISA Affiliate presently sponsors, maintains, contributes to, nor is the
Company, any Subsidiary or any ERISA Affiliate required to contribute to, nor
has the Company, any Subsidiary or any ERISA Affiliate ever sponsored,
maintained, contributed to, or been required to contribute to any "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) or any
"multiemployer plan" (within the meaning of Section 3(37) or Section 4001(a)(3)
of ERISA). The execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events, including, but not limited to, the conversion
of Shares (i) constitute an event that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee, or (ii) result in the payment of an
"excess parachute payment" (within the meaning of Section 280G(b)(1) of the
Code). Except as set forth in Schedule 3.11, each "employee benefit plan" (as
defined in Section 3(3) of ERISA) maintained or contributed to by the Company
for the benefit of its Employees (an "Employee Plan") has been maintained in
accordance with its terms and all provisions of applicable law. To the best
knowledge of the Company, no "prohibited transaction" (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) has occurred with respect to
any Employee Plan.
3.12. Intellectual Property Rights.
(a) The Company and each of its Subsidiaries owns the entire right, title
and interest in and to the Intellectual Property free and clear of any claims,
liens or encumbrances of any kind, except as would not have or would not
reasonably be expected to have a Material Adverse Effect. All patent, copyright
and trademark registrations with respect to the Intellectual Property are valid,
subsisting, enforceable and in full force and effect, and all patent
applications, copyright applications and trademark applications with respect to
the Intellectual Property are pending and in good standing, all without
challenge of any kind and no aspect thereof is subject to any outstanding order,
ruling, decree, judgment or stipulation by or with any governmental authority or
arbitrator, in each case, except as would not have or would not reasonably be
expected to have a Material Adverse Effect. The Company and each of its
Subsidiaries has taken and is presently taking all steps necessary to prevent
any impairment of its right to make use of the Intellectual Property, and the
Company and each of its Subsidiaries has filed all appropriate renewals,
extensions, affidavits of continued use and/or incontestability and has paid all
fees associated therewith, necessary to maintain the Intellectual Property,
except where such failure would not have or would not reasonably be expected to
have a Material Adverse Effect. There is no claim or demand of any Person or
dispute with any Person with respect to any Intellectual Property, except where
such claim or demand would not have and would not reasonably be expected to have
a Material Adverse Effect.
(b) To the best of the Company's knowledge, neither the Company nor any
of its Subsidiaries has interfered with, infringed upon or misappropriated any
intellectual property right of any third party nor does any interference,
infringement, or misappropriation result from the development, use, or sale of
any of the Company's or any of its Subsidiaries' products. Neither the Company
nor any of its Subsidiaries has received any charge, complaint, claim,
7
<PAGE>
demand or notice alleging any such interference, infringement or
misappropriation (including any claim that it must license or refrain from using
any intellectual property right of any third party), nor does the Company nor
any of its Subsidiaries have knowledge or any basis for any such claim. To the
best knowledge of the Company and each of its Subsidiaries, no third party has
interfered with, infringed upon, misappropriated or otherwise used (whether or
not such use constitutes infringement) any Intellectual Property, except where
such interference, infringement or misappropriation would not have or would not
reasonably be expected to have a Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries has disclosed any of
its proprietary information that, if disclosed, would materially adversely
affect its business other than (i) in the regular and ordinary course of
business, to employees and consultants having "a need to know" the contents
thereof in connection with the performance of their duties to the Company, (ii)
in connection with entering into this Agreement, (iii) to governmental
authorities from time to time as requested or (iv) to other Persons subject to
agreements regarding the confidential treatment thereof.
(d) All personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the conception and
development of the Intellectual Property on behalf of the Company or its
Subsidiaries either: (i) have been party to a "work-for-hire" arrangement or
agreement with the Company or any of its Subsidiaries, in accordance with
applicable federal and state law, that has accorded the Company or its
Subsidiaries full, effective, exclusive, and original ownership of all tangible
and intangible property and rights thereby arising; or (ii) have executed
appropriate instruments of assignment in favor of the Company or its
Subsidiaries as assignee that have conveyed to the Company or its Subsidiaries
full, effective, and exclusive ownership of all tangible and intangible property
and rights thereby arising.
(e) As used in this Agreement, "Intellectual Property" means all
intellectual property owned, leased, licensed, or used by the Company or any of
its Subsidiaries, including without limitation, (i) all world wide inventions
and discoveries (whether patentable or unpatentable and whether or not reduced
to practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, renewals and derivative in connection therewith, (iii) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (iv) all mask works and all applications,
registrations and renewals in connection therewith, (v) all know-how, trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, addresses, phone numbers, pricing and cost
information, and business and marketing plans and proposals), (vi) all computer
software and computer programs, (vii) all other proprietary rights of any type
of description (regardless of whether the same have been formally
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registered), (viii) all copies and tangible embodiments thereof (in whatever
form or medium) and (ix) all licenses, sublicenses and agreements in connection
with the foregoing.
3.13. Possession of Franchises, Licenses, Etc. The Company and its
Subsidiaries possess all franchises, certificates, licenses, permits and other
authorizations from Governmental Entities and other rights, free from burdensome
restrictions, that are necessary for the ownership, maintenance and operation of
its respective properties and assets, except for those the absence of which
would not individually or in the aggregate have or reasonably be expected to
have a Material Adverse Effect, and neither the Company nor its Subsidiaries is
in violation of any thereof, except for violations which individually or in the
aggregate would not have or reasonably be expected to have a Material Adverse
Effect.
3.14. Compliance with Laws. The Company and its Subsidiaries are, and at
all times have been, in compliance with all applicable Laws including, without
limitation, those relating to protection of the environment, employment
opportunity and employee safety, except where the failure to comply would not
individually or in the aggregate have or reasonably be expected to have a
Material Adverse Effect.
3.15. Conflicting Agreements and Charter Provisions. Neither the Company
nor its Subsidiaries is a party to any Contract or subject to any charter or
By-Law provision or any judgment or decree which individually or in the
aggregate has or is reasonably likely to have a Material Adverse Effect. Neither
the execution and delivery of any of the Transaction Documents, nor the issuance
of any of the Securities, nor the fulfillment of or compliance with the terms
and provisions hereof or thereof, will conflict with or result in a breach of
the terms, conditions, or provisions of, or give rise to a right of termination
under, or constitute a default under, or result in any violation of, the
Certificate of Incorporation or By-Laws of the Company or any of its
Subsidiaries or any Contract of the Company or any of its Subsidiaries. Each of
the Contracts of the Company and its Subsidiaries is a legal and binding
agreement of the Company or Subsidiary party thereto enforceable in accordance
with its terms and is in full force and effect, except where such failure would
not individually or in the aggregate have or reasonably be expected to have a
Material Adverse Effect. Neither the Company nor its Subsidiaries is in default
under any outstanding indenture or other debt instrument or with respect to the
payment of the principal of or interest on any outstanding obligations for
borrowed money, or is in default under any other Contracts, except for defaults
under such other Contracts which would not individually or in the aggregate have
or reasonably be expected to have a Material Adverse Effect.
3.16. Subsidiaries. Except as set forth in Schedule 3.16, the Company
does not own, directly or indirectly, any capital stock or other proprietary
interest in any corporation, limited liability company, association, trust,
partnership, joint venture or other entity. Except as set forth in Schedule
3.16, all of the outstanding shares of capital stock of each Subsidiary are
owned by the Company. There are no outstanding options, warrants, subscription
rights, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any class of capital stock of
any Subsidiary, or Contracts by which any Subsidiary is or may become bound to
issue additional shares of its capital stock or options, warrants or other
9
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rights to purchase or acquire any shares of its capital stock. No Subsidiary has
declared or paid any dividend or made any other distribution of cash, stock or
other property to its stockholders or purchased or otherwise redeemed any shares
of its capital stock. Except as set forth in Schedule 3.16, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Subsidiaries are a party or to which the Subsidiaries are bound
relating to the voting of any shares of capital stock of any of the
Subsidiaries.
3.17. Disclosure. Neither this Agreement nor any Schedule hereto, nor any
certificate furnished to Purchasers by or on behalf of the Company in connection
with the transactions contemplated hereby, contains any untrue statement of a
material fact or, taken as a whole, omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact which the Company has not disclosed to the Purchasers or its counsel
in writing and of which the Company is aware which materially and adversely
affects or which could reasonably be expected to materially and adversely affect
the Company or its Subsidiaries or the business, financial condition,
operations, property, affairs or prospects of the Company or its Subsidiaries or
the ability of the Company or its Subsidiaries to perform its obligations under
the Agreement or any of the Transaction Documents.
3.18. Offering of Securities. Neither the Company nor any Person acting
on its behalf has offered the Securities or any similar securities of the
Company for sale to, solicited any offers to buy the Securities or any similar
securities of the Company from or otherwise approached or negotiated with
respect to the Company with any Person other than the Purchasers and other
"accredited investors" (as defined in Rule 501(a) under the Securities Act).
Neither the Company nor any Person acting on its behalf has taken or, except as
contemplated by the Registration Rights Agreement will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of the Securities under the Securities Act) which could reasonably
be expected to subject the offering, issuance or sale of the Securities to the
registration requirements of Section 5 of the Securities Act or violate the
provisions of any securities, "blue sky", or similar law of any applicable
jurisdiction.
3.19. Products.
(a) Except as set forth in Schedule 3.19, each of the products currently
being produced or sold by the Company and its Subsidiaries (i) is in compliance
in all material respects with all applicable Laws and (ii) conforms in all
material respects to any promises or affirmations of fact made on the container
or label for such product or in connection with its sale.
(b) Except as set forth in Schedule 3.19, the Company does not know of
any claim, or the basis of any claim against the Company or any of its
Subsidiaries for injury to person or property, employees or any third parties
suffered as a result of the sale of any product or performance of any service by
the Company or any of its Subsidiaries including claims arising out of the
defective or unsafe use or unsafe nature of its products or services, which has
had or is reasonably likely to have a Material Adverse Effect.
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(c) Schedule 3.19 sets forth a list of all licenses and approvals granted
by or pending with any Governmental Entity in any country to market any product
of the Company and its Subsidiaries (the "Company Product Registrations"). All
products sold under the Company Product Registrations are manufactured and
marketed in all material respects in accordance with the specifications and
standards contained in the Company Product Registrations. The Company and its
Subsidiaries have the sole rights under the Company Product Registrations and
such registrations are in full force and effect.
(d) Except as disclosed in Schedule 3.19, since December 1, 1995 there
have been no statements, citations, warning letters, FDA Forms 483, or decisions
by any Governmental Entity that any product produced, manufactured, marketed or
distributed at any time by the Company or any of its Subsidiaries is defective
or fails to meet any applicable standards promulgated by any such Governmental
Entity. Except as disclosed in Schedule 3.19, there is no proceeding by the FDA
or any other Governmental Entity, including, but not limited to, a grand jury
investigation, a 405 hearing or a civil penalty proceeding, pending, or to the
Company's knowledge threatened, against the Company or any of its Subsidiaries,
and no such proceedings have been brought at any time in the past relating to
the safety or efficacy of the products of the Company and its Subsidiaries and,
to the Company's knowledge, there is no basis for such a proceeding.
3.20. Use of Proceeds.
(a) The net cash proceeds of the sale of the Securities will be used by
the Company for general working capital.
(b) The Company does not own, directly or indirectly, any "margin
security", as defined in Regulation G issued by the Board of Governors of the
Federal Reserve System (12 CFR Part 207); and the Company will not use any
proceeds from the sale of the Notes to purchase or carry any "security", as
defined in Section 3(a)(10) of the Exchange Act, or for any other purpose which
would result in any transaction contemplated by this Agreement constituting a
"purpose credit" within the meaning of said Regulation G, or which would involve
a violation of Section 7 of the Exchange Act or Regulation T, U or X of said
Board of Governors (12 CFR Parts 220, 221 and 224, respectively).
(c) The Company does not intend to apply and will not apply any part of
the proceeds of the sale of the Securities in any manner which is unlawful or
which would involve a violation of Law.
3.21. Brokers or Finders. Except as set forth in Schedule 3.21, no agent,
broker, investment banker or other Person is or will be entitled to any broker's
fee or any other commission or similar fee from the Company in connection with
any of the transactions contemplated by this Agreement.
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3.22 Labor Agreements and Actions.
(a) Neither the Company nor any Subsidiary is bound by or subject to (and
none of their assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the knowledge of the Company, has
sought to represent any of the employees, representatives, or agents of the
Company or any Subsidiary. There is no strike, or other labor dispute involving
the Company or any Subsidiary pending, or to the knowledge of the Company
threatened, which could have a Material Adverse Effect on the assets,
properties, financial condition, operating results, or business of the Company
of any Subsidiary (as such business is presently conducted and as it is proposed
to be conducted), nor is the Company aware of any labor organization activity
involving its employees. Neither the Company nor any Subsidiary is aware that
any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any of the foregoing. Subject to general principles related to wrongful
termination of employees, the employment of each officer and employee of the
Company and its Subsidiaries is terminable at the will of the Company or a
Subsidiary.
(b) Except for regular salary payments and fringe benefits under an
individual's compensation package with the Company or any Subsidiary, none of
the officers, employees, directors, shareholders, or other affiliates of the
Company or any Subsidiary, or members of their families is a party to any
agreements, understandings or proposed transactions with the Company or any
Subsidiary. Neither the Company nor any Subsidiary has guaranteed or assumed any
obligations of the Company's or any Subsidiary's officers, directors, employees
or affiliates.
(c) To the Company's knowledge, no employee of the Company or any
Subsidiary is, or is now expected to be, in violation of any term of any
employment contract, patent assignment agreement, or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by the
Company or any Subsidiary because of the nature of the business conducted, or to
be conducted, by the Company or any Subsidiary or to the use of trade secrets or
proprietary information of others, and, to the Company's knowledge, the
employment of the Company's and each Subsidiary's employees does not subject the
Company or any Subsidiary to any material liability. There is neither pending
nor, to the Company's best knowledge, threatened any actions, suits proceedings
or claims with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers severally represent and warrant as of the date hereof as follows:
4.1. Organization and Qualification. Such Purchaser, if it is not a
natural person, is duly organized and existing in good standing under the laws
of the state of its organization and has the requisite power to own its
respective property and to carry on its
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business as now being conducted and as contemplated to be conducted. Such
Purchaser is duly qualified to do business and in good standing in every
jurisdiction in which the nature of the respective business conducted or
property owned by it makes such qualification necessary, except where the
failure to so qualify would not prevent consummation of the transactions
contemplated hereby or have a material adverse effect on the Purchaser's ability
to perform its obligations hereunder.
4.2. Due Authorization. Such Purchaser has all right, power and authority
(corporate and otherwise) to enter into this Agreement, and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
by such Purchaser and the compliance by such Purchaser with all of the
provisions of this Agreement, and consummation by such Purchaser of the
transactions contemplated hereby (i) are within the partnership, individual or
corporate powers of such Purchaser and (ii) have been duly authorized by all
necessary partnership or corporate action on behalf of such Purchaser. This
Agreement has been duly executed and delivered by such Purchaser and constitutes
the valid and binding agreements of such Purchaser enforceable in accordance
with its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.3. Consents. Except as set forth on Schedule 4.3, such Purchaser is not
required to obtain any consent, approval or authorization of, or to make any
declaration or filing with, any Governmental Entity or any other Person as a
condition to or in connection with the valid execution, delivery of either this
Agreement, the performance by such Purchaser of its obligations in respect
hereof and thereof except for filings after the Closing under the Exchange Act
and any filings required pursuant to Section 13 of the Exchange Act or under the
HSR Act which may be required in connection with the purchase and sale of the
Shares.
4.4. Conflicting Agreements. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and provisions
hereof, will conflict with or result in a breach of the terms, conditions or
provisions of, or give rise to a right of termination under, or constitute a
default under, or result in any violation of the organizational documents of
such Purchaser or any Contract to which such Purchaser or any of its respective
properties is subject.
4.5. Acquisition For Investment. Such Purchaser is acquiring the
Securities being purchased by it for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof except in compliance with all applicable securities Laws.
Such Purchaser acknowledges that the Securities have not been registered under
the Securities Act or any state securities laws, and may be sold or disposed of
in the absence of such registration only pursuant to an exemption from such
registration and in accordance with this Agreement.
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4.6. Brokers or Finders. No agent, broker, investment banker or other
Person is or will be entitled to any broker's fee or any other commission or
similar fee from the Purchaser in connection with any of the transactions
contemplated by this Agreement for which the Company will be responsible.
4.7. Accredited Investor. Such Purchaser is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act.
5. REGISTRATION, EXCHANGE AND TRANSFER OF SECURITIES. Upon surrender for
exchange or registration of transfer of any certificate representing Shares at
the office of the Company's transfer agent, the Company shall execute and
deliver, at its expense, one or more new certificates representing Shares as
requested by the holder of the surrendered certificate registered in the name of
such Person or Persons as shall be designated in writing by such holder. Every
certificate representing Shares surrendered for registration of transfer shall
be duly endorsed, or be accompanied by a written instrument of transfer duly
executed, by the holder of such certificate or by his attorney duly authorized
in writing, with a signature guarantee from a bank or brokerage firm, and an
opinion of counsel reasonably acceptable to the Company that such transfer is
exempt from registration under the Securities Act. The Company may also
condition the issuance of any new certificate representing Shares to a Person
other than the holder thereof on the payment of a sum sufficient to cover any
stamp tax or other governmental charge imposed in respect of such transfer. The
registration, exchange and transfer of the Warrants shall be subject to the
provision of the Warrant Agreement.
6. RESERVED
7. INTERPRETATION.
7.1. Definitions.
"AFFILIATE" and "ASSOCIATE" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
"BENEFICIALLY OWN" with respect to any securities shall mean 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" shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
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"CAPITAL STOCK" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"CLOSING" shall have the meaning ascribed thereto in Section 1.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON SHARES" shall have the meaning ascribed thereto in the recitals.
"COMMON STOCK" shall have the meaning ascribed thereto in the recitals.
"COMPANY" shall have the meaning ascribed thereto in the recitals and
shall include all Subsidiaries of the Company.
"CONTRACTS" shall mean all agreements, contracts, leases, purchase
orders, arrangements, commitments and licenses to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound.
"COVERED DAMAGES" means any and all costs, expenses, damages or other
liabilities resulting from any legal, administrative or other proceedings
arising out of the consummation of the transactions contemplated hereby, other
than such costs, expenses, damages or other liabilities resulting from the
violation by the Purchasers of any legal investment laws or other laws
restricting or governing the Purchasers' investments generally, from the
violation or alleged violation by the Purchasers of any of its agreements
contained herein or from the gross negligence or willful misconduct of the
Purchasers or any person who controls the Purchasers.
"DGCL" shall have the meaning ascribed thereto in Section 3.2.
"EMPLOYEE PLAN" shall have the meaning ascribed thereto in Section 3.11.
"EMPLOYEE" means each current, former, or retired employee, officer,
consultant, independent contractor, agent or director of the Company or any
Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any regulations promulgated or proposed thereunder.
"ERISA AFFILIATE" means each business or entity which is a member of
"controlled group of corporations, under "common control" or an "affiliated
service group" with the Company within the meaning of Sections 414(b), (c) or
(m) of the code, or required to be aggregated with the Company under Section
414(o) of the Code, or is under "common control" with the Company, within the
meaning of Section 4001(a)(14) of ERISA.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such successor
federal statute.
"GALEN FUNDS" shall mean Galen Partners III L.P., Galen Partners
International III L.P. and Galen Employees Fund III L.P., each a Delaware
limited partnership.
"GOVERNMENTAL ENTITY" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.
"INTELLECTUAL PROPERTY" shall have the meaning ascribed thereto in
Section 3.12(l).
"LAW" shall include any foreign, federal, state, or local law, statute,
ordinance, rule, regulation, order, judgment or decree.
"MATERIAL ADVERSE CHANGE" shall mean a change that has or may reasonably
be expected to have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
properties, business, prospects, operations, earnings, assets, liabilities or
the condition (financial or otherwise) of the Company or any of its
Subsidiaries, whether or not in the ordinary course of business.
"NOTES" shall have the meaning ascribed thereto in Section 2.1.
"PERSON" shall mean any individual, firm, corporation, limited liability
company, partnership, company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"PURCHASERS" shall have meaning ascribed thereto in the recitals.
"SEC REPORTS" shall have the meaning ascribed thereto in Section 3.4.
"SECURITIES" shall have the meaning ascribed thereto in the recitals.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"SHARES" shall have the meaning ascribed thereto in the recitals.
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"SUBSIDIARY" of any Person shall mean any corporation or other entity of
which a majority of the voting power or the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"TAX RETURN" means any return, report or similar statement required to be
filed with respect to any tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
"TAXES" shall mean all federal, state, local or foreign taxes, including
but not limited to income, gross receipts, windfall profits, value added,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the Warrant.
"VOTING SECURITIES" shall mean at any time shares of any class of Capital
Stock of the Company (or other corporation) which are then entitled to vote
generally in the election of directors of the Company (or such other
corporation).
"WARRANTS" shall have the meaning ascribed thereto in the recitals.
7.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Agreement, and any consolidation or
other accounting computation required to be made pursuant to this Agreement, and
the construction of any definition in this Agreement containing a financial
term, shall be determined or made, as the case may be, in accordance with
generally accepted accounting principles, to the extent applicable, unless such
principles are inconsistent with the express requirements of this Agreement.
8. MISCELLANEOUS.
8.1. Payments. The Company agrees that, so long as the Purchasers shall
hold any Shares, it will make all cash dividend payments thereon in immediately
available funds in such manner as the Purchasers may reasonably request in
writing.
8.2. Severability. If any term, provision, covenant or restriction of
this Agreement or any exhibit hereto 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.
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8.3. Specific Enforcement. The Purchasers, 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.
8.4. Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) contains the entire understanding of the parties with respect
to the transactions contemplated hereby.
8.5. 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.
8.6. 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
595 Stewart Avenue
Garden City, New York 11530
Telephone: (516) 228-8181
Facsimile: (516) 228-8211
Attention: Herbert H. Sommer, Esq.
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If to the Galen Funds, to:
Galen Associates
610 Fifth Avenue, 5th Floor
New York, New York 10020
Telephone: (212) 218-4965
Facsimile: (212) 218-4998
Attention: Bruce F. Wesson
With a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telephone: (212) 603-2000
Facsimile: (212) 603-2001
Attention: Peter Anglum, Esq.
If to the other Purchasers, to:
The respective addresses set forth on Schedule I hereto.
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.
8.7. Amendments; Waiver. This Agreement may be amended as to the
Purchasers, any holder of the Securities and their respective successors and
assigns, , if the Company shall obtain the written consent of the registered
holders of not less than a majority of the outstanding 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.
8.8. Cooperation; Further Assurances.
(a) 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.
(b) 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.
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8.9. 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.
8.10. Indemnification. Each party (an "Indemnifying Party") hereto agrees
to indemnify and hold harmless the other party (an "Indemnified Party") against
and in respect of any and all claims, demands, losses, costs, expenses
obligations, liabilities, damages, recoveries, and deficiencies, including
reasonable attorneys' fees, that such Indemnified Party shall incur or suffer,
that arise, result from, or relate to any breach of, or failure by such
Indemnifying Party to perform, any of its representations, warranties,
covenants, or agreements set forth in any of the Transaction Documents.
8.11. 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.
8.12. Transfer of Securities.
(a) Each Purchaser understands and agrees that the Securities have not
been registered under the Securities Act or the securities laws of any state and
that they may be sold or otherwise disposed of in one or more transactions
registered under the Securities Act and, where applicable, such laws or
transactions as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws are available. Each Purchaser
acknowledges that, except as provided in the Registration Rights Agreement, the
Purchaser has no right to require the Company to register the Securities. Each
Purchaser understands and agrees that each certificate representing the
Securities shall bear the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE 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."
(b) The requirement that the above securities legend be placed upon any
certificate representing the Securities shall cease and terminate when such
securities are transferred in any transaction if the seller delivers to the
Company an opinion of its counsel, which counsel and opinion shall be reasonably
satisfactory to the Company, a "no-action" letter from the staff of the
Commission, or a representation letter from such seller, addressed to the
Company, in each case, to the effect that such legend is no longer necessary in
order to protect
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the Company against a violation by it of the Securities Act upon any sale or
other disposition of such securities without registration thereunder. Upon the
consummation of any event requiring the removal of a legend hereunder, the
Company, upon the surrender of certificates or instruments containing such
legend, shall, at its own expense, deliver to the holder of any such securities
as to which the requirement for such legend shall have terminated, one or more
new certificates or instruments evidencing such securities not bearing such
legend.
8.13. 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.
8.14. 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 Transaction Documents and the transactions
contemplated thereby (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
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.
8.15. 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.
8.16. 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 OR ANY OF THE SECURITIES.
8.17. Public Announcements. Neither the Company nor the Purchasers shall
make any public statements, including, without limitation, any press releases,
with respect to this Agreement and the transactions contemplated hereby without
the prior written consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by law.
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If a public statement is required to be made by law, the parties shall consult
with each other in advance as to the contents and timing thereof.
8.18. 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 Purchasers have caused this
Agreement to be executed and delivered by their respective officers or partners
thereunto duly authorized.
Q-MED, INC.
By: /s/ Michael W. Cox
------------------------------
Name: Michael W. Cox
Title: President
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SCHEDULE I
Shares Warrants
- ------ --------
87,006 68,517 GALEN PARTNERS III, L.P.
By: Claudius, L.L.C.
By: /s/ Bruce F. Wesson
--------------------------------------
Name: Bruce F. Wesson
Title: Senior Managing Member of
Claudius, L.L.C., General Partner
7,876 6,202 GALEN PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C.
By: /s/ Bruce F. Wesson
--------------------------------------
Name: Bruce F. Wesson
Title: Senior Managing Member of
Claudius, L.L.C., General Partner
356 281 GALEN EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc.
By: /s/ Bruce F. Wesson
--------------------------------------
Name: Bruce F. Wesson
Title: President
Galen Associates
610 Fifth Avenue, 5th Floor
New York, New York 10020
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