Q-MED, INC.
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of May 6, 1996, by and between Q-Med, Inc., a Delaware
corporation (the "Company") having an office at 000 Xxxxx Xxxx Xxxxx, Xxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000, and S. R. One, Limited, a Pennsylvania business trust,
having an office at Bay Colony Executive Park, 000 X. Xxxxxxxxxx Xxxx, Xxxxx, XX
00000 (the "Investor").
W I T N E S S E T H:
WHEREAS, the Company desires to sell up to an aggregate of 177,777 shares
(the "Shares") of its Common Stock, $.001 par value, (the "Common Stock") and
warrants (the "Warrants") to purchase an additional 63,492 shares of Common
Stock for an aggregate of $2,000,000 to the Investor, who is an "accredited
investor" within the meaning of Rule 501(a) adopted under the Securities Act of
1933 (the "Act"); and
WHEREAS, the Investor wishes, pursuant to the terms and conditions
hereinafter set forth, to purchase the Shares and Warrants referred to in the
proceeding paragraph (collectively the "Securities").
NOW THEREFORE, in consideration of the premises, and the respective
representations and warranties hereinafter set forth, the Company and the
Investor agree as follows:
1. SUBSCRIPTION.
The Investor, intending to be legally bound, hereby irrevocably subscribes
for and agrees to purchase the Securities.
2. PURCHASE AND CLOSING.
2.1 The Investor delivers herewith the sum of $2,000,000 (the "Purchase
Price") to the Company.
2.2 The Company hereby delivers the following to the Investor:
(a) a certificate, in due and proper form, representing the Shares
purchased upon which a legend substantially in the following form
will be endorsed:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE
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OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT"; and
(b) a duly executed Warrant Agreement in the form annexed hereto as
Exhibit A;
(c) a duly executed Registration Rights Agreement in the form annexed
hereto as Exhibit B;
(d) an opinion of the Company's counsel addressed to the Company which
indicates that the Investor may rely upon it as to the matters set
forth in Sections 6.1, 6.2, 6.3, 6.5, 6.6, 6.7 and 6.8 of this
Agreement; and
(e) a counterpart of this Agreement executed by the Company.
3. INVESTOR REPRESENTATIONS AND WARRANTIES.
The Investor hereby acknowledges, represents and warrants to, and agrees
with, the Company as follows:
3.1 The Investor is acquiring the Securities for its own account as
principal, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof, in whole or in part, and no other
person except the Investor's corporate parent has a direct or indirect
beneficial interest in such Securities;
3.2 The Investor acknowledges its understanding that the offering and sale
of the Securities is intended to be exempt from registration under the Act by
virtue of Section 4(2) of the Act and the provisions of Regulation D thereunder.
In furtherance thereof, the Investor represents and warrants to and agrees with
the Company as follows:
(a) the Investor has the financial ability to bear the economic risk of
its investment, has adequate means for providing for its current
needs and personal contingencies and has no need for liquidity with
respect to its investment in the Company;
(d) the Investor is a corporation, trust, estate benefit plan,
partnership other entity, which comes within a category of
"accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the Act (17 C.F.R. 230.501(a));
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3.3 The Investor:
(a) has been furnished with the Company's Report on Form 10-KSB for the
year ended November 30, 1995, including the Company's Annual Report
to Stockholders (which is annexed hereto as Exhibit C), the
Company's Report on Form 10-QSB for the period ended February 28,
1996, (which is annexed hereto as Exhibit D) the Company's Proxy
Statement dated April 26, 1996 (which is annexed hereto as Exhibit
E) which together with Exhibits C and D are referred to as the
"Documents") and any documents which may have been made available
upon request, and has carefully read the Documents and understands
and has evaluated the risks of a purchase of Securities, and has
relied solely (except as indicated in subsections (b) and (c) below)
on the information contained in the Documents;
(b) has been provided an opportunity to obtain additional information
concerning the Company and all other information to the extent the
Company possesses such information or can acquire it without
unreasonable effort or expense;
(c) has been given the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of this
investment, and has been given the opportunity to obtain such
additional information necessary to verify the accuracy of the
information contained in the Documents or that which was otherwise
provided in order for the Investor to evaluate the merits and risks
of purchase of the Securities to the extent the Company possesses
such information or can acquire it without unreasonable efforts or
expense, and has not been furnished any other offering literature or
prospectus except as mentioned herein;
(d) has not been furnished with any oral representation or oral
information in connection with the offering of the Securities which
is not contained in the Documents; and
(e) has determined that the Securities are a suitable investment and
that at this time the Investor could bear a complete loss of its
investment;
3.4 The Investor is not relying on the Company with respect to economic
considerations involved in this investment;
3.5 The Investor represents, warrants and agrees that it will not sell or
otherwise transfer the Securities unless registered under the Act or in reliance
upon an exemption therefrom, and fully understands and agrees that it must bear
the economic risk of its purchase for an indefinite period of time because,
among other reasons, the Securities or underlying securities have not been
registered under the Act or under the securities laws of certain states and,
therefore, cannot be resold, pledged, assigned or otherwise disposed of unless
they are subsequently registered under the Act and under the applicable
securities laws of such states or
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an exemption from such registration is available. The Investor also understands
that except as set forth in the Registration Rights Agreement and the Company's
independent obligation to remain current in its filings under the Securities
Exchange Act of 1934, as amended, the Company is under no obligation to register
the Securities on its behalf or to assist the Investor in complying with any
exemption from registration under the Act. The Investor further understands that
sales or transfers of the Securities or underlying securities are restricted by
the provisions of state securities laws;
3.6 The person signing this Subscription Agreement on behalf of such
entity has been duly authorized by such entity to do so;
3.7 No representation or warranties have been made to the Investor by the
Company, or any officer, employee, agent, affiliate or subsidiary of the
Company, other than the representations of the Company herein;
3.8 The execution and delivery by the Investor of, and the performance by
the Investor of its obligations under this Agreement, the Registration Rights
Agreement and the Warrant Agreement in accordance with their respective terms
will not contravene any provision of applicable law or the charter documents of
the Investor or any agreement or other instrument binding upon the Investor, or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Investor, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for the
performance by the Investor of its obligations under such Agreements in
accordance with their respective terms;
3.9 The Investor has been duly organized, is validly existing and is in
good standing under the laws of the Commonwealth of Pennsylvania. The Investor
has full corporate power and authority to enter into this Agreement, the Warrant
Agreement and the Registration Rights Agreement and this Agreement, the
Registration Rights Agreement and the Warrant Agreement have been duly and
validly authorized, executed and delivered by the Company and are valid and
binding obligations of the Investor, enforceable against the Investor in
accordance with their respective terms, except as such enforcement may be
limited by the United States Bankruptcy Code, laws effecting creditors rights,
generally and general equitable principles.
3.10 The foregoing representations, warranties and agreements shall
survive the Closing.
4. INVESTOR AWARENESS.
The Investor acknowledges, represents, agrees and is aware that:
4.1 No Federal or state agency has passed on the Securities or made any
finding or determination as to the fairness of this investment;
4.2 There are substantial risks incident to the purchase of Securities;
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4.3 The investment in the Company is an illiquid investment and the
Investor must bear the economic risk of investment in the Securities for an
indefinite period of time;
4.4 There are substantial restrictions on transferability of the
Securities;
4.5 The foregoing acknowledgments, representations, warranties and
agreements shall survive the Closing.
5. INDEMNITY.
The Investor agrees to indemnify and hold harmless the Company and each
other person, if any, who controls it within the meaning of Section 15 of the
Act against any and all loss, liability, claim, damage and expense whatsoever
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing for or defending against any litigation
commenced or threatened or any claim whatsoever) arising out of or based upon
any false representation or warranty or breach or failure by the Investor to
comply with any covenant or agreement made by the Investor herein.
6. COMPANY REPRESENTATIONS AND WARRANTIES.
The Company hereby acknowledges, represents and warrants to, and agrees
with the Investor (which representations and will be true and correct as of the
date of the Closing as if the Agreement were made on the date of Closing) as
follows:
6.1 The Company has been duly organized, is validly existing and is in
good standing under the laws of the State of Delaware. The Company has full
corporate power and authority to enter into this Agreement, the Warrant
Agreement and the Registration Rights Agreement and this Agreement, the
Registration Rights Agreement and the Warrant Agreement have been duly and
validly authorized, executed and delivered by the Company and are valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement may be
limited by the United States Bankruptcy Code, laws effecting creditors rights,
generally and general equitable principles.
6.2 Subject to the performance by the Investor of its obligations under
this Agreement and the accuracy of the representations and warranties of the
Investor, the offering and sale of the Securities will be exempt from the
registration requirements of the Act.
6.3 The execution and delivery by the Company of, and the performance by
the Company of its obligations under this Agreement in accordance with the terms
of this Agreement, including the execution and performance of the Registration
Rights Agreement and the Warrant Agreement, will not contravene any provision of
applicable law or the charter documents of the Company or any agreement or other
instrument binding upon the Company, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction
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over the Company, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement in accordance
with the terms of this Agreement.
6.4 The Documents did not, and through the date of the Closing will not,
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made and at the time of their filing, not misleading.
6.5 All of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable and
free of preemptive or similar rights. As of May 1, 1996, 20,000,000 shares of
Common Stock are authorized, of which 9,193,205 shares of Common Stock are
issued and outstanding, 22,000 shares of Common Stock are held as treasury
shares and approximately 1,700,000 shares are reserved for issuance under the
Company's stock option plans. The Company does not have any class of authorized
stock other than Common Stock. The Shares have been duly authorized and, when
issued and delivered as provided by this Agreement, will be validly issued and
fully paid and non-assessable, and the Shares are not subject to any preemptive
or similar rights. In addition, the shares of Common Stock issuable upon the
exercise of the Warrants, when issued as provided in the Warrant Agreement will
be validly issued and fully paid and non-assessable, and such shares are not
subject to any preemptive or similar rights. No further corporate action is
required on the Company's part to issue the shares of Common Stock upon exercise
of the Warrants.
6.6 The Company is not in violation of its charter or bylaws and is not in
default in the performance of any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust, license, contract, lease
or other instrument to which the Company is a party or by which it is bound, or
to which any of the property or assets of the Company is subject, except such as
have been waived or which would not have, singly or in the aggregate, a material
adverse effect on the Company, taken as a whole.
6.7 There is no material litigation or governmental proceeding pending, or
to the knowledge of the Company, threatened against, or involving the property
or the business of the Company, or, to the best knowledge of the Company which
would adversely affect the condition (financial or otherwise), business,
prospects or results of operations of the Company, taken as a whole.
6.8 The consolidated financial statements set forth in Exhibits C and D
fairly present the financial position and the results of operations of the
Company, at the dates and periods therein specified. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the respective periods involved and are
complete and accurate and are in accordance with the books and records of the
Company. Since February 29, 1996, the Company:
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(a) has not entered into any transaction outside of the ordinary course
of business except the agreement between the Company and SmithKline
Xxxxxxx Corporation ("SmithKline Xxxxxxx") effective April 1, 1996
and certain agreements to provide services to managed care
organizations and physician private groups; or
(b) suffered any material adverse change in its financial condition or
results of operations except as disclosed or contemplated in these
Documents.
6.9 The foregoing representations, warranties and agreements shall survive
the Closing.
7. ADVISORY BOARD REPRESENTATION
7.1 The Company agrees to appoint a representative of Investor, reasonably
acceptable to the Company, to serve as a member of the Company's Advisory Board
within 10 days of the Investor identifying such a candidate to the Company.
Initially the Investor has identified Xx. Xxxxxx X. Xxxxx as its representative
and the Company accepts this candidate. The Company will provide to the Investor
written notice of and other information with respect to such meetings as are
delivered to other members of the Advisory Board. The Company shall not
compensate Investor nor reimburse Investor for expenses incurred in exercising
its rights under this paragraph 7.1. The Investor and its representative shall
maintain the confidentiality of all financial, confidential and proprietary
information of the Company acquired by them in exercising the rights under this
paragraph 7.1.
7.2. The Investor agrees to provide the Company, with all information
reasonably requested by the Company, to ascertain whether the Investor's
representative is acceptable to the Company and agrees to permit the Company to
make disclosures concerning the representative's participation in the Advisory
Board.
7.3 The rights set forth under paragraph 7.1 and 7.2 shall expire on the
earlier of: (a) the occurrence of any transaction by which the Investor ceases
to own or have a beneficial interest in at least 102,635 shares of the Company's
Common Stock (including the shares issuable upon the exercise of the Warrants);
or (b) the termination of the Agreement between SmithKline Xxxxxxx and Q-Med.
8. MISCELLANEOUS.
8.1 Modification. Neither this Agreement nor any provisions hereof shall
be modified, discharged or terminated except by an instrument in writing signed
by the party against whom any waiver, change, discharge or termination is
sought.
8.2 Notices. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given
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if (a) deposited, postage prepaid, in a United States mail letter box,
registered or certified mail, return receipt requested, addressed to such
address as may be given herein, or (b) delivered personally at such address.
8.3 Counterparts. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
the parties, notwithstanding that all parties are not signatories to the same
counterpart.
8.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and assigns. If the
undersigned is more than one person, the obligation of the Investor shall be
joint and several, and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his heirs, executors, administrators and successors.
8.5 Entire Agreement. This instrument contains the entire agreement of the
parties, and there are no representations, covenants or other agreements except
as stated or referred to herein.
8.6 Assignability. This Agreement is not transferable or assignable by the
Investor except as may be provided herein.
8.7 Applicable Law. This Agreement shall be governed and construed under
the laws of the State of New Jersey.
9. REGULATORY NOTICES.
EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR THE SECURITIES BEING OFFERED
HEREBY AGREES NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE MONTHS AFTER
THE DATE OF PURCHASE.
UNDER PROVISION OF THE PENNSYLVANIA SECURITIES ACT OF 1972 (THE "1972
ACT"), EACH PENNSYLVANIA RESIDENT SHALL HAVE THE RIGHT TO WITHDRAW HIS
ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE COMPANY, UNDERWRITER (IF ANY)
OR ANY OTHER PERSON, WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE
COMPANY OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN
TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING
OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR
TELEGRAM TO THE COMPANY AT THE ADDRESS SET FOR AT THE BEGINNING OF THIS
AGREEMENT, INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM
SHOULD BE SENT AND
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POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IT IS
PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO
ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED. IF
THE REQUEST IS MADE ORALLY (IN PERSON OR BY TELEPHONE, TO THE COMPANY AT (908)
566-2666), A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE
REQUESTED.
10. EXECUTION.
The Investor has executed this Subscription Agreement on this sixth day of
May, 1996.
S. R. ONE, LIMITED
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, DVM
Vice President
Accepted this sixth day of May, 1996.
Q-MED, INC.
By: /s/ Xxxxxxx X. Xxx
--------------------------------
Xxxxxxx X. Xxx, President
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