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 Xxxxx Partners
III, L.P., a Delaware limited partnership, Xxxxx Partners International III,
L.P., a Delaware limited partnership, and Xxxxx 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
(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 Xxxxx Partners III, L.P., Xxxxx Partners International III, L.P.
and Xxxxx 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
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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 Xxxxxx & Xxxxxxxxx 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 Xxxxxx & Xxxxxxxxx LLP is:
Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
[SIGNATURE PAGE FOLLOWS]
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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/ Xxxxxxx X. Xxx
--------------------------------------
Name: Xxxxxxx X. Xxx
Title: President
XXXXX PARTNERS III, L.P.
By: Claudius, L.L.C.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Managing Member of
Claudius, L.L.C., General Partner
XXXXX PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: : Senior Managing Member of
Claudius, L.L.C., General Partner
XXXXX EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
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