Q MED INC
8-K, 1999-05-20
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   -----------

                                    FORM 8-K

                                 CURRENT REPORT

                         PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
          Date of Report (date of earliest event reported) May 17, 1999

                                   -----------

                                   Q-MED, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its Charter)

         DELAWARE                    0-11411                      22-2468665    
- ----------------------------       -----------               -------------------
(State or other jurisdiction       (Commission                  (IRS Employer
     of incorporation)              File No.)                Identification No.)

100 METRO PARK SOUTH, LAURENCE HARBOR, NEW JERSEY                        08878
- -------------------------------------------------                     ----------
    (Address of principal executive offices)                          (Zip Code)

        Registrant's telephone number, including area code (732) 566-2666

                                       N/A
                         -------------------------------
                         (Former Name or former address,
                         if changed since last report.)


================================================================================


<PAGE>



Item 5. Other Events

     Galen Partners III, L.P. ("Galen") representing the holders of rights under
option agreements given in November 1998 to require the Company to redeem
1,926,702 shares of common stock upon the occurrence of an event of default
(such as bankruptcy or Nasdaq delisting) agreed to amend the option agreements
to eliminate such redemption rights in exchange for 290,000 common stock
purchase warrants exercisable at $1.67 per share and 200,000 warrants
exercisable at $2.87 per share (each subject to adjustment in the manner
described below) until November 15, 2005 to be distributed pro rata among such
holders. As a condition to the foregoing, Galen requested and the Company agreed
to reduce the exercise price of approximately 865,000 outstanding warrants held
by affiliates and employees of Galen, as well as certain other holders. The
exercise price of all the warrants issued and amended may be adjusted in certain
circumstances to protect the holders against dilution and will increase to $3.00
in the event the Company has executed binding contracts to manage 1,000,000 or
more lives by August 31, 1999. In management's opinion, this transaction should
enable the Company to pursue new accounts more aggressively, and improve the
prospects of entering into new contracts.

      In addition to improving the Company's financial position, this action was
taken as part of a previously submitted plan to continue to meet Nasdaq's
minimum requirements for net tangible assets, in the absence of market
capitalization of at least $35 million. The Company's market capitalization,
measured by multiplying the number of shares outstanding by the closing bid
price, has been above $35 million for each of the last ten trading days. The
Company has requested a hearing to determine whether this transaction, together
with a proposed conversion of $900,000 of convertible Notes held by Galen and
certain affiliated investment proposed partnerships and the investment by Galen
and such affiliated partnerships of $250,000 of additional financing
demonstrates the Company's ability to sustain compliance with Nasdaq's net
tangible asset maintenance criteria of $2 million, independent of its market
capitalization. The proposed conversion and additional financing by Galen and
affiliates is conditioned upon a determination that the Company, on a pro forma
basis, can meet such maintenance criteria.

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 February 28, 1999

     (c) Exhibits

         4.1   Form of common stock purchase warrants exercisable at $1.67 per
               share until November 15, 2005.

         4.2   Form of common stock purchase warrants exercisable at $2.87 per
               share until November 15, 2005.

         20.1  Notice of consent requested and given to award certain option
               agreements.

         99.1  Amendment of option agreement dated May 17, 1999.


<PAGE>



                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1932, as
amended, Q-Med, Inc. has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


Dated: May 19, 1999                  Q-MED, INC.



                                     By: /s/ MICHAEL W. COX
                                     -------------------------
                                     Michael W. Cox, President


<PAGE>



                             PRO FORMA BALANCE SHEET

     The following pro forma balance sheet of Q-Med, Inc. (the "Registrant")
gives effect to the elimination of all redemption rights relating to the
1,926,702 shares sold in November 1998.

     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
February 28, 1999, other than the elimination of the redemption rights. It
should be read in conjunction with the historical financial statements and notes
of the Registrant contained in prior filings with the Securities and Exchange
Commission.


<PAGE>


<TABLE>
<CAPTION>
                          Q-MED, INC. AND SUBSIDIARIES
                       PROFORMA CONSOLIDATED BALANCE SHEET
                                February 28, 1999
                                   (Unaudited)


                                                    Historical      Adjustments       Pro Forma 
ASSETS                                              ----------      -----------       --------- 
<S>                                                <C>              <C>              <C>        
Current assets
  Cash and cash equivalents                        $   661,071                       $   661,071
  Investments                                        1,006,560                         1,006,560
  Accounts receivable, net of
    allowances of approximately $500,000               262,473                           262,473
  Inventories                                          484,604                           484,604
  Prepaid expenses and other current assets             93,848                            93,848
                                                   -----------                       -----------
                                                     2,508,556                         2,508,556

Product software development costs                      28,320                            28,320
Property and equipment, net                            547,352                           547,352
Other assets                                           194,956                           194,956
                                                   -----------                       -----------
  Total assets                                     $ 3,279,184                       $ 3,279,184
                                                   ===========                       ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable and accrued expenses            $   604,140                           604,140
                                                   -----------                       -----------
                                                       604,140                           604,140

Convertible long term debt                             950,000                           950,000
Leases payable-long term                                96,976                            96,976
Deferred warranty revenue                               22,552                            22,552
                                                   -----------                       -----------
  Total liabilities                                  1,673,668                         1,673,668

Temporary equity-put option                          4,021,991      (4,021,991)(1)            --

Stockholders' equity
  Common stock $.001 par value; 20,000,000
    shares authorized; 11,590,989 shares issued
    and 11,568,989 shares outstanding                   11,591                            11,591
  Paid-in capital                                   17,161,836        4,021,991(1)    21,183,827
  Accumulated deficit                              (19,509,274)                      (19,509,274)
  Accumulated other comprehensive income
    Unrealized holding loss/gain on
      available-for-sale securities                     (5,003)                           (5,003)
                                                   -----------                       -----------
                                                    (2,340,850)                        1,681,141
  Less: treasury stock at cost, 22,000
    common shares                                      (75,625)                          (75,625)
                                                   -----------                       -----------
  Total stockholders' equity                        (2,416,475)                        1,605,516
                                                   -----------                       -----------
                                                   $ 3,279,184                       $ 3,279,184
                                                   ===========                       ===========
</TABLE>

      See Accompanying Notes to Proforma Consolidated Financial Statements


<PAGE>



               NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS


(1)  To record the cancellation of the put option related to the "Notes" upon
     the issuance of 489,711 warrants to purchase common stock - See "Item 5 -
     Other Events".

(2)  Common stock purchase warrants exercisable at less than fair market value
     and certain repriced outstanding warrants included in above transaction
     were considered part of cost of issuance of warrants and netted in
     stockholders equity.




              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 $1.67 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 790,000 Warrants of like tenor authorized by the Company's board of directors
on April 13, 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


                                       2
<PAGE>



            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


                                       3
<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


                                       4
<PAGE>



            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


                                       5
<PAGE>



            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


                                       6
<PAGE>



            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.


                                       7
<PAGE>



            "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")


                                       8
<PAGE>

            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





              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 $2.87 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 790,000 Warrants of like tenor authorized by the Company's board of directors
on April 13, 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


                                       2
<PAGE>



            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


                                       3
<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



                                       4
<PAGE>

            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


                                       5
<PAGE>



            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


                                       6
<PAGE>



            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.


                                       7
<PAGE>



            "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")


                                       8
<PAGE>



            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





                                   Q-MED, INC.
                     --------------------------------------

                        Notice of Consent Requested and
                    Given to Amend Certain Option Agreements
                     --------------------------------------

                               Dated May 17, 1999
                     --------------------------------------


      Reference is made to the Option Agreement between you and Q-Med, Inc. (the
"Company") dated November 16, 1998 (the "Option Agreement"). The Company has
requested and obtained the consent of Galen Partners III, L.P. ("Galen") to
amend the Option Agreements held by you and all participants in the Company's
November 1998 financing (the "Financing") to eliminate all rights to require the
Company to redeem shares issued to you. The Company requested the Amendment in
order to substantially increase the Company's stockholders' equity reported on
its balance sheet to improve the Company's prospects in negotiating contracts
with managed care organizations, among other things. By the terms of the Option
Agreements, such an amendment may be made by the Company with the consent of the
holders of a majority of the outstanding shares of the Company's common stock
issued as part of the Financing. Galen owns 1,201,870 of 1,866,821 such shares
and therefore is the only investor from whom a consent was requested.

NO CONSENT IS REQUESTED FROM YOU AND YOU NEED NOT REPLY TO THIS NOTICE.

      In exchange for relinquishing the rights described above, Galen requested
and the Company agreed to issue an aggregate of 290,000 warrants exercisable at
$1.67 per share and 200,000 warrants exercisable at $2.87 per share, pro rata to
the investors that participated in the Financing. Both warrants are exercisable
until November 15, 2005 and the warrant exercise prices may be adjusted in
certain events to protect the warrant holders from dilution. In addition, the
warrant exercise prices will be increased to $3.00 in the event the Company has
entered into binding contracts with managed health care organizations managing
1,000,000 or more lives by August 31, 1999.

      Accompanying this Notice are a copy of the signed Amendment to the Option
Agreement, manually signed documents representing the Warrants. This Notice and
the enclosures should be kept in a safe place, together with your documents
related to the Financing.

                                          Very truly yours,

                                          /s/ Herbert H. Sommer
                                          ---------------------
                                          Herbert H. Sommer
                                          Secretary






                          AMENDMENT TO OPTION AGREEMENT


      AMENDMENT dated as of May 17, 1999 to the several Option Agreements dated
as of November 16, 1998 (the "Option Agreements") between Q-Med, Inc., a
Delaware corporation (the "Company") and the purchasers (each a "Purchaser" and
collectively the "Purchasers") of an aggregate of 1,926,702 shares of the
Company's Common Stock, $.001 par value ("Common Stock") whose names appear on
Schedule 1 to this Amendment.

      WHEREAS, the Company has requested that the Purchasers amend the Option
Agreements to eliminate certain mandatory redemption provisions contained
therein; and

      WHEREAS, pursuant to Section 7(g) of the Option Agreements, the Option
Agreements may be amended as to each Purchaser if the Company obtains the
written consent of the holders of not less than the majority of the outstanding
Total Shares (as defined in the Option Agreements); and

      WHEREAS, Galen Partners III L.P., which owns the majority of outstanding
Total Shares consents to the Amendment set forth herein but only in
consideration of the issuance, pro rata to the Purchasers in the proportion that
the Shares owned by them respectively bears to the Total Shares (less 59,881
shares owned by Michael W. Cox and Teri Cox, who have waived their right to any
benefit from this Amendment), of an aggregate 290,000 warrants to purchase
shares of Common Stock for $1.67 per share and an aggregate of 200,000 warrants
to purchase shares of the Company's Common Stock for $2.87 per share (the
"Warrants").

      NOW THEREFORE, in consideration of the agreements set forth in the
Amendment (defined below) and those contained in the Option Agreements, the
parties agree as follows:

A.    CERTAIN DEFINITIONS.

      (a) Except as otherwise provided in this agreement, all words and terms
defined in the Option Agreements, have the same meanings in this agreement as
such defined words and terms are given in the Option Agreements.

      (b) "Agreement" means the Option Agreements dated November 16, 1998, as
supplemented and amended by this agreement and as from time to time further
supplemented and amended.

      (c) "Amendment" means this agreement dated as of May 17, 1999.

      (d) From and after the date of this Amendment "Total Shares" as defined in
the Agreement shall mean an aggregate of up to 2,465,624 shares of Common Stock
consisting of 1,926,702 shares issued and sold to the Purchasers on November 16,
1998 and 538,922 shares, when, as and if issued to the Galen Funds upon
conversion of the principal amount of $900,000 of the Notes.


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<PAGE>



B.    DELETION OF PUT PROVISIONS.

      The Option Agreements are amended by deleting Sections 2 and 3 in their
entirety.

C.    AMENDMENT TO ANTIDILUTION PROVISIONS.

      Section 4(b) of the Option Agreements between the Company and the Galen
Funds is amended by including for purposes of the calculation therein, and the
antidilution protection afforded thereby, shares purchased pursuant to the Stock
Purchase Agreement as well as shares, when, as and if issued to the Galen Funds
upon conversion of the principal amount of $900,000 of the Notes.

D.    EFFECT OF ORIGINAL AGREEMENT.

      Except as supplemented and amended by this Amendment and such conforming
changes as necessary to reflect the modification herein, all of the provisions
of the Option Agreements shall remain in full force and effect from and after
the effective date of this Amendment.


                                          Q-MED, INC.


                                          By: /s/ Michael W. Cox 
                                              ---------------------------
                                              Michael W. Cox, President



                                          GALEN PARTNERS III, L.P.
                                          By: Claudius, L.L.C.


                                          By: /s/ Bruce F. Wesson 
                                              ---------------------------
                                              Name:    Bruce F. Wesson
                                              Title:   General Partner
                                              Address: 610 Fifth Avenue
                                                       New York, NY 10020


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