<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________
Commission file number: 0-26487
WOMEN FIRST HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3919601
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12220 EL CAMINO REAL, SUITE 400, SAN DIEGO, CALIFORNIA 92130
(Address of principal executive offices)
Registrant's telephone number, including area code: (858) 509-1171
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
As of August 9, 1999, 17,252,395 shares of common stock, par value
$.001 per share, were outstanding.
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995 which provides a "safe harbor" for these types of statements. To the extent
statements in this Quarterly Report involve, without limitation, the Company's
expectations for growth, estimates of future revenue, expenses, profit, cash
flow, balance sheet items or any other guidance on future periods, these
statements are forward-looking statements. These risks and uncertainties include
those identified in Item 5 below under the heading "Factors that May Affect
Future Performance" and other risks identified from time to time in the
Company's filings with the Securities and Exchange Commission, press releases
and other communications. The Company assumes no obligation to update
forward-looking statements.
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WOMEN FIRST HEALTHCARE, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) PAGE
<S> <C>
Consolidated Balance Sheets.................................................................. 1
Consolidated Statements of Operations........................................................ 2
Consolidated Statements of Cash Flows........................................................ 3
Notes to Financial Statements................................................................ 4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................................... 7
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................................................... 13
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.................................................... 14
ITEM 5 - OTHER INFORMATION ........................................................................... 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K............................................................. 25
</TABLE>
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PART I
ITEM 1. FINANCIAL STATEMENTS
WOMEN FIRST HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,321,626 $ 4,438,445
Accounts receivable, net 444,513 1,114,283
Inventory 1,450,606 1,205,597
Receivable from related party 213,901 124,570
Offering proceeds receivable 45,885,000 --
Prepaid expenses and other current assets 407,448 548,999
------------ ------------
Total current assets 52,723,094 7,431,894
Property and equipment, net 853,271 690,912
Intangible assets, net 3,683,592 3,922,847
Other assets 1,325,614 458,010
------------ ------------
Total assets $ 58,585,571 $ 12,503,663
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,953,580 $ 1,473,674
Accrued salaries and employee benefits 1,303,340 1,307,167
Deferred business acquisition payment -- 1,059,897
Other accrued liabilities 1,746,142 227,415
Short-term notes payable 5,349,976 --
Short-term notes payable to related parties 1,948,986 --
------------ ------------
Total current liabilities 12,302,024 4,068,153
Commitments
Stockholders' equity:
Series A convertible preferred stock, $.01 par value; 2,200,000 shares
authorized; no shares issued and outstanding at June 30, 1999 and
1,650,000 shares issued and outstanding at December 31, 1998 -- 16,500
Series B convertible preferred stock, $.01 par value; 690,000 shares authorized;
no shares issued and outstanding at June 30, 1999 and 398,540 shares issued and
outstanding and 195,460 shares to be issued at December 31, 1998 -- 5,940
Common stock, $.001 par value at June 30, 1999 and $.01 par value at December 31,
1998; 40,000,000 shares authorized; 16,914,639 shares issued and
16,574,322 shares outstanding at June 30, 1999 and 8,026,310 shares
issued and 7,685,993 shares outstanding at December 31, 1998 16,574 76,860
Treasury stock (99,660) (96,597)
Additional paid-in capital 73,673,655 18,430,788
Deferred compensation (1,629,172) (615,598)
Accumulated deficit (25,677,850) (9,382,383)
------------ ------------
Total stockholders' equity 46,283,547 8,435,510
------------ ------------
Total liabilities and stockholders' equity $ 58,585,571 $ 12,503,663
============ ============
</TABLE>
See accompanying notes.
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WOMEN FIRST HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenue $ 5,064,863 $ 181,175 $ 9,367,554 $ 181,175
Costs and expenses:
Cost of sales (including purchases from
related party of $2,427,446 and
$4,220,720 for the three and six months
ended June 30, 1999) 3,461,918 112,702 6,244,771 112,702
Marketing and sales 5,315,242 498,447 10,300,981 816,432
General and administrative 2,379,056 851,727 4,978,141 1,284,048
Research and development 335,131 62,707 626,671 62,707
------------ ------------ ------------ ------------
Total costs and expenses 11,491,347 1,525,583 22,150,564 2,275,889
------------ ------------ ------------ ------------
Loss from operations (6,426,484) (1,344,408) (12,783,010) (2,094,714)
Interest income (expense), net (169,054) 117,580 (150,747) 236,398
------------ ------------ ------------ ------------
Net loss (6,595,538) (1,226,828) (12,933,757) (1,858,316)
Accretion of beneficial conversion feature
related to convertible preferred stock -- -- (3,361,710) --
------------ ------------ ------------ ------------
Net loss available to common stockholders $ (6,595,538) $ (1,226,828) $(16,295,467) $ (1,858,316)
============ ============ ============ ============
Net loss per share (basic and diluted) $ (0.83) $ (0.16) $ (2.08) $ (0.24)
============ ============ ============ ============
Weighted average shares used in computing
net loss per share (basic and diluted) 7,979,015 7,685,993 7,833,313 7,685,993
============ ============ ============ ============
</TABLE>
See accompanying notes.
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WOMEN FIRST HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(12,933,757) $ (1,858,316)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 103,828 15,258
Amortization of intangibles 239,255 --
Amortization of deferred compensation 696,745 25,324
Amortization of warrants issued with debt 83,579 --
Changes in operating assets and liabilities 1,111,001 (192,293)
------------ ------------
Net cash used in operating activities (10,699,349) (2,010,027)
INVESTING ACTIVITIES
Purchases of property and equipment (245,274) (329,311)
Deposit on facilities -- (505,957)
Acquisition of subsidiary (1,059,897) --
Acquisition of licenses and other assets, net (888,517) --
------------ ------------
Net cash used in investing activities (2,193,688) (835,268)
FINANCING ACTIVITIES
Issuance of Series A preferred stock 5,286,218 10,441,907
Issuance of common stock -- --
Issuance of short-term notes payable to related parties 2,000,000 --
Issuance of short-term notes payable 5,490,000 --
------------ ------------
Net cash provided by financing activities 12,776,218 10,441,907
------------ ------------
Net increase (decrease) in cash and cash equivalents (116,819) 7,596,612
Cash and cash equivalents at beginning of the period 4,438,445 567,300
------------ ------------
Cash and cash equivalents at end of the period $ 4,321,626 $ 8,163,912
============ ============
</TABLE>
See accompanying notes.
3
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WOMEN FIRST HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements of Women First HealthCare,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three- and six- month periods ended June 30, 1999 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999. These
financial statements should be read in conjunction with the financial statements
and notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations, contained in the Company's
Registration Statement on Form S-1.
Principles of Consolidation and Reporting
The consolidated financial statements presented herein include the
financial statements of Women First HealthCare, Inc. and the actual results of
As We Change from its purchase acquisition date on October 21, 1998 and the
results of Women First Pharmacy Services, Inc. since its incorporation in
September 1998. All significant intercompany transactions and balances have been
eliminated in consolidation. For the periods presented in the accompanying
financial statements, the Company has no items for which comprehensive loss
would differ from the reported net loss. The Company's management approach is to
review the operating results of the business as one operating segment which is a
specialty health care company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company records sales for its pharmaceutical and self-care products at
time of shipment. Adjustments to its pharmaceutical product sales are made for
estimated sales discounts it offers due to wholesaler chargebacks,
Medicaid-sponsored payor allowance discounts, and early payment discounts.
Adjustments to self-care product sales include an estimate of returns and
allowances. The Company provides for returns at the time of sale based on
estimated merchandise returns.
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Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted net loss per share, which would include
additional potential common shares issued related to outstanding options,
warrants and conversion of preferred stock, if dilutive, is unchanged from basic
loss per share due to the Company's net losses making the effect of these common
share equivalents anti-dilutive.
2. INVENTORY
Inventory consists of the following components:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Pharmaceutical products $ 85,633 $ 415,815
Self-care products 517,963 589,138
Video cassettes 847,010 200,644
---------- ----------
Total Inventory $1,450,606 $1,205,597
========== ==========
</TABLE>
3. INITIAL PUBLIC OFFERING
On July 1, 1999, the Company completed its initial public offering of
4,500,000 shares of the Company's common stock, providing the Company with
proceeds, net of underwriting fees and offering expenses, of approximately $44.5
million. All shares of convertible Preferred Stock outstanding on June 28, 1999
automatically converted into 4,388,329 shares of common stock upon the sale of
common stock in the offering. In July 1999, the underwriters exercised in full
their over-allotment option, and the Company issued an additional 675,000 shares
of common stock providing the Company with net proceeds of approximately $6.9
million.
4. CO-PROMOTION AGREEMENTS
Effective March 1, 1999, the Company obtained the right to co-promote the
cholesterol-lowering drug Pravachol(R) to OB/GYNs, primary care physicians
designated as OB/GYNs by Bristol-Myers Squibb, and nurse practitioners and
physician assistants associated with OB/GYN practices pursuant to a co-promotion
agreement with Bristol-Myers Squibb U.S. Pharmaceuticals Group. Under the
agreement, Bristol-Myers Squibb has agreed to pay specified costs associated
with the product samples and physician education. In addition, as compensation
for services rendered the Company will receive a percentage of net sales in
excess of a baseline as set forth in the agreement. The term of the contract is
for a period of three years from March 1, 1999 through March 31, 2002.
Bristol-Myers Squibb may terminate the agreement early upon failure of the
Company to meet certain minimums.
On May 27, 1999, the Company entered into a co-promotion agreement with
Ortho-McNeil Pharmaceutical, Inc., a related party, pursuant to which the
Company has agreed to co-promote Ortho Tri-Cyclen(R), a leading oral
contraceptive, and a new oral combination hormonal replacement therapy (HRT)
product, which is pending approval by the FDA. Ortho-McNeil will compensate the
Company for sales of the Ortho Tri-Cyclen(R) product with a performance fee
based on certain increases in market share. The
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Company will also receive minimum payments specified in the agreement commencing
in 2000 if minimum performance goals are met. Ortho-McNeil will compensate the
Company for sales of the new combination oral HRT product, if the product is
approved by the FDA, through a compensation arrangement based on certain net
sales of the product as set forth in the agreement. The agreement runs through
December 31, 2002 and may be extended by the Company for one additional year if
minimum sales goals are met.
5. SUBSEQUENT EVENT
On July 19, 1999, the Company entered into a distribution and license
agreement with Laboratoires Fournier S.A. under which the Company has the
exclusive right to market, use, distribute and sell the Esclim(TM) estrogen
transdermal system. The agreement requires the Company to pay Fournier a
non-refundable license fee of $1.45 million payable over a two-year period, with
$700,000 of this fee subject to certain sales objectives being reached. The
Company is also required to pay Fournier a royalty, which includes manufacturing
costs, based upon the net sales of the product. The agreement runs seven years
from the later of the date of the first commercial sale of the product or
January 1, 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report. This discussion may contain forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below in
"Item 5: Other Information -- Factors That May Affect Future Performance" as
well as those discussed in our Registration Statement on Form S-1 under the
heading "Risk Factors." We undertake no obligation to release publicly the
results of any revisions to these forward-looking statements or to reflect
events or circumstances arising after the date hereof.
OVERVIEW
Women First HealthCare is a specialty health care company dedicated to
improving the health of midlife women. Our mission is to help midlife women make
informed choices about their physical and emotional health and to provide
pharmaceutical products, self-care products, educational programs and support
systems to help midlife women improve the quality of their lives. We market
these products in the United States through a number of channels including our
dedicated sales force, our direct-to-consumer marketing programs and the
Internet. On July 1, 1999, we completed our initial public offering of 4,500,000
shares of our common stock, providing us with proceeds, net of underwriting fees
and offering expenses, of approximately $44.5 million. Also, in July 1999, the
underwriters exercised in full their over-allotment option, and we issued an
additional 675,000 shares of common stock providing us with net proceeds of
approximately $6.9 million.
We were engaged in development stage operations from November 1, 1996 (the
date of our inception) through December 31, 1997 and did not earn any revenue
during this period. Operations during this period consisted primarily of
formulating a marketing plan, conducting market research, developing strategic
relationships, acquiring equipment, performing administrative functions and
raising capital. In January 1998, we completed a financing of $22 million. Upon
completing the financing, we began to implement our plans for growth by actively
recruiting management, staff and sales personnel, consummating distribution
agreements, launching products and implementing previously planned educational
programs and support systems. We began selling and distributing the Ortho-Est(R)
oral estrogen product in July 1998 and acquired As We Change, LLC on October 21,
1998.
We have incurred significant losses since we were founded in November 1996.
We had an accumulated deficit of $25.7 million as of June 30, 1999, and we
expect to incur losses at least through the end of 2000. We believe that due to
our limited operating history we are unable to accurately predict our future
results of operations. Accordingly, our operating results should not be relied
upon as an indication of future performance. We review the operating results of
our business as a specialty health care company with one operating segment. The
results of operations include the results of our operations since our inception
and the actual results of operations of As We Change, LLC from its acquisition
date on October 21, 1998 in accordance with the purchase method of accounting.
RESULTS OF OPERATIONS
Net Revenue. For the three and six months ended June 30, 1999, total net
revenue was $5.1 million and $9.4 million, respectively, as compared to $181,000
for the same periods in 1998. Revenue for the
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three and six months ended June 30, 1999 was derived primarily from sales of the
Ortho-Est(R) oral estrogen pharmaceutical product of $3.1 million and $5.5
million, respectively, and sales from our subsidiary As We Change, LLC, a
national mail-order catalog and Internet retailer of $1.6 million and $3.2
million, respectively. We were in the development stage during 1997 and 1996 and
recorded no revenue through March 31, 1998. Revenue was derived primarily from
sales of our exercise video and contract revenue for the three months ended June
30, 1998.
Costs and Expenses. Costs and expenses increased $10.0 million to $11.5
million for the three months ended June 30, 1999 from $1.5 million for the three
months ended June 30, 1998. Costs and expenses increased $19.9 million to $22.2
million for the six months ended June 30, 1999 from $2.3 million for the six
months ended June 30, 1998. The increase in costs and expenses was due primarily
to the growth in commercial operations in the three and six months ended June
30, 1999 compared to limited development stage operations in the three and six
months ended June 30, 1998.
Cost of sales was $3.5 million, or 68.4% of net revenue, for the three
months ended June 30, 1999 as compared to $113,000, or 62.4% of net revenue, for
the same period in 1998. Cost of sales was $6.2 million, or 66.7% of net
revenue, for the six months ended June 30, 1999 as compared to $113,000, or
62.4% of net revenue for the same period in 1998. Cost of sales consists
primarily of the amounts we pay for products under supply agreements.
Marketing and sales expense increased $4.8 million to $5.3 million for the
three months ended June 30, 1999 from $498,000 for the three months ended June
30, 1998. Marketing and sales expense increased $9.5 million to $10.3 million
for the six months ended June 30, 1999 from $816,000 for the six months ended
June 30, 1998. The increase in these expenditures was primarily due to increases
in the number of employees and the corresponding increased salary expense
resulting from the establishment of a direct sales organization, the acquisition
of As We Change, LLC, costs associated with the Distinguished Professor
Conference, a component of our clinician education program, held in January
1999, increased travel and business entertainment expense and increased expenses
for market research, product literature and professional samples.
General and administrative expenses increased $1.5 million to $2.4 million
for the three months ended June 30, 1999 from $852,000 for the three months
ended June 30, 1998. General and administrative expenses increased $3.7 million
to $5.0 million for the six months ended June 30, 1999 from $1.3 for the six
months ended June 30, 1998. The increase in these expenses was primarily due to
increases in the number of employees and the increased salary and employee
benefits expense, implementation of a management incentive bonus plan, increased
professional fees and implementation of a depreciation and amortization expense
from capital expenditures and the purchase of intangible assets associated with
the acquisition of As We Change, LLC.
Research and development expense was $335,000 for the three months ended
June 30, 1999 compared to $63,000 in the comparable period in 1998. Research and
development expense was $627,000 for the six months ended June 30, 1999 compared
to $63,000 in the comparable period in 1998. Research and development expense
consists primarily of salaries and payments for contracted development programs.
Loss from Operations. For the reasons discussed above, the loss from
operations increased $5.1 million to $6.4 million for the three months ended
June 30, 1999 from $1.3 million for the three months ended June 30, 1998. Loss
from operations increased $10.7 million to $12.8 million for the six months
ended June 30, 1999 from $2.1 million for the six months ended June 30, 1998.
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Interest Income (Expense), net. Interest income (expense), net decreased
$287,000 to a net interest expense of $169,000 for the three months ended June
30, 1999 from net interest income of $118,000 for the three months ended June
30, 1998. Interest income (expense), net decreased $388,000 to a net interest
expense of $151,000 for the six months ended June 30, 1999 from net interest
income of $237,000 for the six months ended June 30, 1998. Interest income
(expense), net consists primarily of earnings on our cash and cash equivalents
and interest expense on our short-term notes issued in March 1999. The decrease
in interest income (expense), net was due primarily to reduced cash balances in
the three and six months ended June 30, 1999 as compared to the three and six
months ended June 30, 1998 and the interest expense on short-term notes issued
in March 1999.
Accretion of beneficial conversion feature related to convertible preferred
stock. A $3.4 million charge for the six months ended June 30, 1999 has been
recognized as an increase of the net loss available to common stockholders equal
to the intrinsic value of the beneficial conversion feature of the Series A
Preferred Stock issued in February 1999. The intrinsic value in these shares of
Series A Preferred Stock represents the difference between the conversion price
of the Series A Preferred Stock issued in February 1999 and the fair value of
our common stock at the time of issuance.
FACTORS AFFECTING RESULTS OF OPERATIONS
We incurred operating losses of $9.8 million in the year ended December 31,
1998 and $12.8 million in the six months ended June 30, 1999. Due to our short
operating history, our revenues have varied and are difficult to forecast on a
quarterly or annual basis. However, many of our expenses are fixed, especially
in the short term. In particular, we are obligated to make significant minimum
payments under some of our agreements, including an annual minimum purchase
($6.6 million for 1999 and decreasing annually for the balance of the contract)
for the Ortho-Est(R) oral estrogen product. In addition, we are an early stage
company and have experienced significant increases in operating expenses
associated with obtaining rights to market and distribute additional products
and the expansion of our sales and marketing and general and administrative
activities, and we expect that these increases will continue in the future. As a
result of this variability in revenues and increased expenses, our results of
operations have varied during our short operating history and we expect that
they will continue to fluctuate significantly in the future. In addition, other
factors may cause fluctuations in our revenues and results of operations,
including the following:
o the success of our sales force in distributing and/or co-promoting our
current product line and changes in market acceptance of those
products,
o our ability to introduce new products through co-promotion or
distribution agreements or otherwise,
o legislative changes that affect our products and the way we market
them and our ability to comply with new or existing regulations,
o the amount and timing of expenditures for the expansion of our
operations,
o changes in the competitive environment that could cause us to change
our pricing or marketing strategy,
o changes in the economic and market environment generally or in the
health care industry.
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To the extent our revenues do not increase in line with our expenses, we
may be unable to reduce spending commitments in a timely manner to compensate
for any unexpected revenue shortfall and may experience significant
unanticipated losses. As a result of these factors, our operating results in one
or more future periods may fail to meet the expectations of securities analysts
or investors. Failure to meet these expectations could have a material adverse
effect on our stock price.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, our working capital totaled $40.4 million compared to
$3.4 million at December 31, 1998. Cash and cash equivalents were $4.3 million
at June 30, 1999 compared to $4.4 million at December 31, 1998.
Our primary source of liquidity has been proceeds from private placements
of our equity securities and the initial public offering of common stock. In
January and May 1998, we issued 1,050,000 shares of Series A Preferred Stock
(equivalent to 1,921,500 shares of common stock) and warrants and 50,000 shares
of Series A Preferred Stock (equivalent to 91,500 shares of common stock) and
warrants for net proceeds of $10.0 million and $453,000, respectively. In
October 1998, we issued 550,000 shares of Series A Preferred Stock (equivalent
to 1,006,500 shares of common stock) and warrants for additional net proceeds of
$5.3 million. In February 1999, we issued an additional 550,000 shares of Series
A Preferred Stock (equivalent to 1,006,500 shares of common stock) and warrants
for additional net proceeds of $5.3 million.
In addition, in March 1999, we issued $7.5 million of short-term notes and
warrants to purchase 60,756 shares of common stock in a private placement for
net proceeds of $7.5 million. The notes bear interest at 9% per year, payable
quarterly, and mature on March 1, 2000. We may prepay the notes at any time
without penalty. We intend to repay the notes in the third quarter of 1999.
On July 1, 1999, we completed our initial public offering of 4,500,000
shares of our common stock, providing the Company with proceeds, net of
underwriting fees and offering expenses, of approximately $44.5 million. All
shares of convertible Preferred Stock outstanding on June 28, 1999 automatically
converted into 4,388,329 shares of common stock upon the sale of common stock in
the offering. In July 1999, the underwriters exercised in full their
over-allotment option, and we issued an additional 675,000 shares of common
stock providing us with net proceeds of approximately $6.9 million.
In addition to operating expenses, our primary use of funds has been and
will continue to be to fund capital expenditures, to obtain the rights to market
and distribute products and to acquire companies.
Net cash used in operating activities was $10.7 million for the six months
ended June 30, 1999 and was $2.0 million for the same period in 1998. Net cash
used in investing activities was $2.2 million for the six months ended June 30,
1999 and was $835,000 for the same period in 1998, consisting of the deferred
cash payment for the acquisition of As We Change, LLC in 1999 and net capital
expenditures. Net cash provided by financing activities was $12.8 million for
the six months ended June 30, 1999 and was $10.4 million for the same period in
1998, primarily consisting of the net proceeds from the issuance of equity
securities and, in 1999, the issuance of short-term notes payable.
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For the six-month period ended June 30, 1999, we made net capital
expenditures of $1.2 million for computer equipment, development of our Internet
site and acquisition of licenses and other assets including production of the
Benefit:Risk Assessment Model and RENEWAL a time for you(TM), a program that we
are developing in conjunction with Dr. Deepak Chopra. We made net capital
expenditures of $329,000 during the six months ended June 30, 1998, primarily
for furniture and fixtures and equipment. As of June 30, 1999, we have made firm
commitments of approximately $175,000 for remaining 1999 capital expenditures
primarily for the Benefit:Risk Assessment Model and expansion of the As We
Change, LLC facilities. In addition, in July 1999, we entered into a
distribution and license agreement with Laboratoires Fournier S.A. under which
we have the exclusive right (subject to exceptions) to market, use, distribute
and sell the Esclim(TM) estrogen transdermal system in various dosages in the
United States and Puerto Rico. The agreement requires us to pay Fournier a
non-refundable license fee of $1.45 million payable over a two-year period, with
$750,000 payable in 1999 and $700,000 of this fee subject to sales objectives
being reached in 2000 and 2001. With the expenses described above and the
potential addition of a product or a product line acquisition, we anticipate
making net capital expenditures of approximately $12.3 million for the full
year 1999.
Our product co-promotion agreements with Bristol-Myers Squibb and
Ortho-McNeil Pharmaceutical, Inc. require us to achieve minimum performance
levels to receive compensation or to prevent contract termination. Because we
only recently signed our co-promotion agreement with respect to the Pravachol(R)
cholesterol-lowering pharmaceutical product, we are currently evaluating our
ability to meet the minimum prescription levels in 1999. In addition, we have
only recently begun co-promoting the Ortho Tri-Cyclen(R) oral contraceptive and
have not yet begun promoting Ortho-McNeil's new oral combination hormonal
replacement therapy product, which is under review by the FDA. Accordingly, we
cannot estimate our success in co-promoting these products.
We have experienced a substantial increase in our expenditures since our
inception consistent with growth in our operations and staffing, and anticipate
that this growth will continue for the next several years. Our co-promotion
agreement with Ortho-McNeil Pharmaceutical, Inc. requires us to expand our field
sales force to at least 100 representatives in 1999 and to further significantly
expand our sales force if approval of the new oral combination hormonal
replacement therapy product covered by the agreement is received from the FDA.
We expect that our operating expenses will continue to increase as we obtain
rights to market and distribute additional products and we expand our sales and
marketing activities and our educational programs for clinicians and women.
We also are obligated to make significant minimum payments under certain of
our agreements with our collaborative partners. The minimum purchase commitment
for the Ortho-Est(R) oral estrogen product is $6.6 million for 1999 and
decreases annually over the remaining nine-year term of the contract for an
aggregate commitment of $40.1 million. We are also obligated under other
agreements to make additional payments of $1.0 million for 1999 and
approximately $380,000 thereafter under other agreements.
We believe that based on our current performance and present plans, the
proceeds from our initial public offering, together with existing cash balances,
will be sufficient to fund our operations, make planned capital expenditures and
meet our minimum purchase commitments through the end of fiscal 2000. Our
ability to fund our operations, to make planned capital expenditures and to meet
our minimum purchase commitments will depend on our future operating
performance, which is itself dependent on a number of factors, many of which we
cannot control, including prevailing economic conditions, availability of other
sources of liquidity, and financial, business, regulatory and other factors
affecting our business and operations.
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YEAR 2000 COMPLIANCE
The Year 2000 issue results from computer programs having been written
using two digits rather than four to define the applicable year. Any of our
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities. A system failure on the part of our key suppliers or customers could
result in our failing to receive adequate supplies of products or our being
unable to process sales.
Our plan to resolve the Year 2000 issue involves the following phases:
assessment, remediation, and confirmation through testing. To date, we have
completed our assessment of all internal systems and equipment that could be
significantly affected by the Year 2000. We have completed the remediation phase
and have completed approximately half of the activities in the testing and
readiness confirmation phases. Our assessment indicated that most of our
internal management information systems and other significant equipment will
correctly utilize dates beyond December 31, 1999 ("Year 2000 ready"). Costs
incurred to upgrade the components of our computing infrastructure have been
minimal.
Nature and Level of Importance of Third Parties and Their Exposure
to the Year 2000
Our electronic transactions with suppliers or customers currently are not
significant. Our electronic transactions with financial institutions have been
assessed, and we expect to confirm their Year 2000 readiness through testing
during the third quarter of 1999. We have queried our significant suppliers that
do not share information systems with us. To date, we have received assurances
from our major vendors that they are or will be Year 2000 ready prior to
December 31, 1999 and we are not aware of suppliers with a Year 2000 issue that
would materially impact our results of operations, liquidity or capital
resources. We have begun questioning customers and payors to assess their Year
2000 readiness. However, we have no means of ensuring that our vendors,
suppliers, customers or payors will be Year 2000 ready. The inability of
suppliers, customers and payors to complete their Year 2000 resolution process
in a timely fashion could have a material adverse effect on us.
Year 2000 Remediation Costs
We will utilize both internal and, if necessary, external resources to
reprogram or replace, test and implement our internal systems and equipment for
Year 2000 modifications. Expenditures required to make us Year 2000 compliant
will be expensed as incurred and are not expected to be material to our
consolidated financial position or results of operations. Actual costs incurred
to date have not been material.
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Contingency Plans
We have developed certain contingency plans to address failure of
remediation activities as applied to internal management information systems and
other significant equipment and the failure of our key suppliers to be Year 2000
ready. We have prioritized our critical suppliers and are developing plans to
provide for the continuance of product availability through accelerated
purchasing if we cannot obtain adequate assurances regarding a specific entity's
ability to become ready for the Year 2000. We also have considered the
implementation of manual order processing and fulfillment systems should the
electronic systems fail.
Risk to Us
We believe we have an effective program in place to test and confirm Year
2000 readiness in a timely manner. Based on our assessment, we do not believe
that our internal operations are subject to material exposure to Year 2000
issues. As noted above, however, we have not yet completed the final phases of
the Year 2000 program. In the event that our internal systems are not Year 2000
ready, or our suppliers or customers are not Year 2000 ready, we may be
temporarily unable to sell products in our current distribution channels or use
our financial systems to operate finance and accounting functions. As a result,
we may experience a material loss of revenues that would adversely affect our
results of operations. We consider this sort of interruption to be the most
reasonably likely unfavorable result of any failure by us or the third parties
upon whom we rely to become Year 2000 ready.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also materially adversely affect us. We could be subject to
litigation due to computer systems or product failure, including as a result of
equipment shutdown or failure to properly date business records. We cannot
reasonably estimate at this time the amount of potential liability and lost
revenue that could result from Year 2000 issues.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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PART II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 1999, Women First filed a registration statement under the
Securities Act of 1933 to sell up to 4.5 million shares of common stock in its
Initial Public Offering ("IPO"). The effective date of the registration
statement was June 28, 1999, under Commission File No. 333-74367. The offering
was managed by Allen & Company Incorporated and Needham & Company, Inc. and
closed on July 1, 1999 after Women First sold an aggregate of 4.5 million shares
of common stock at an initial public offering price per share of $11.00. On July
21, 1999, Women First sold an additional 675,000 shares of common stock at an
initial public offering price per share of $11.00 upon the underwriters'
exercise in full of their over-allotment option. The IPO, including the
underwriters' exercise of their over-allotment option, resulted in gross
proceeds to us of $56.9 million, $4.0 million of which was applied toward the
underwriting discount. Other expenses related to the offering totaled
approximately $1.5 million. Our net proceeds totaled $51.4 million, all of which
were deposited into our accounts in July 1999. As of June 30, 1999, none of the
offering proceeds had been received or applied by us. John Simon, a Director of
Women First, is a managing director with Allen & Company Incorporated.
ITEM 5. OTHER ITEMS
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
WE HAVE RECENTLY STARTED OPERATIONS AND HAVE EXPERIENCED LOSSES SINCE OUR
INCEPTION. OUR BUSINESS MUST EXPAND FOR US TO ATTAIN PROFITABILITY.
We are an early stage company with a history of losses. Through June 30,
1999, we have generated only $14.2 million in net revenues. We have incurred
significant losses since we were founded in November 1996. We have an
accumulated deficit of $25.7 million through June 30, 1999, and we expect to
incur losses at least through the end of 2000. We may not successfully complete
the transition to successful operations or profitability. Early stage companies
such as ours frequently encounter problems, delays and expenses. These include,
but are not limited to, unanticipated problems and additional costs related to
marketing, competition and product acquisitions and development. These problems
may be beyond our control, and in any event, could adversely affect our results
of operations. See "Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations."
WE HAVE A BROAD BUSINESS MODEL THAT WILL REQUIRE THE DEVELOPMENT OF MANY
DIFFERENT AREAS. IF WE FAIL TO IMPLEMENT ANY OF THE KEY ELEMENTS OF OUR BUSINESS
PLAN, OUR BUSINESS MAY NOT SUCCEED.
We have embarked on an ambitious plan to provide pharmaceutical and
self-care products, educational programs and support systems to women to help
them make better decisions regarding their health care in midlife. There is a
limited market awareness of our company and the products and services we offer.
To be successful, we must continue to develop, coordinate and balance various
elements of our business. Among other things, we must:
o generate market demand for the products we offer, prepare and
disseminate information about midlife women's health care and
establish the Women First(TM) brand name,
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o convince OB/GYNs and the nurse practitioners and physician assistants
focused on women's health to prescribe and recommend the products we
offer,
o maintain and obtain rights to market and distribute products and
integrate them into our business, and
o augment sales and marketing and manage different distribution channels
for the products we offer.
If we fail to implement any of these key elements of our business plan, our
business may not succeed.
MANY OF OUR PRODUCT AGREEMENTS REQUIRE US TO MAKE MINIMUM PAYMENTS OR MAKE A
MINIMUM NUMBER OF SALES CALLS. IF OUR SALES OF THESE PRODUCTS DO NOT EXCEED THE
COSTS OF THESE MINIMUM PAYMENTS OR WE DO NOT MAKE THE MINIMUM CALLS, OUR
MARKETING AND DISTRIBUTION OF THESE PRODUCTS WILL NOT BE PROFITABLE AND OUR
RESULTS OF OPERATIONS WILL BE HARMED.
We have acquired the right to market and sell many of the products we offer
through license or co-promotion agreements with third parties. Some of these
agreements require us to make minimum payments or make a minimum number of sales
calls regardless of our actual sales of product covered by the agreement. The
minimum payments we are required to make or our costs of making the minimum
number of sales calls under these agreements may exceed our sales of the
products to which these minimum payments or minimum sales calls relate, and, as
a result, our marketing and distribution of some or all of these products may
not be profitable. In particular, our distribution agreement for the
Ortho-Est(R) oral estrogen product requires us to make minimum aggregate
payments of $40.1 million to Ortho-McNeil Pharmaceutical, Inc. over the
remaining nine-year period of the contract, regardless of the actual sales
performance of this product. Under this agreement, we are required to make
minimum payments of $6.6 million during 1999. The minimum payments in future
years decrease annually based on a ten-year forecast that was determined at the
time the contract was executed.
Our co-promotion agreement with Ortho-McNeil Pharmaceutical, Inc. relating
to the Ortho Tri-Cyclen(R) oral contraceptive product and a new oral combination
hormonal replacement therapy (HRT) product requires us to make a significant
number of sales calls each year during the term of the agreement, with the
number increasing significantly if FDA approval of the product is received and
the product is launched. Ortho-McNeil will not be required to make the minimum
payments to us that are contemplated by the co-promotion agreement with respect
to the Ortho Tri-Cyclen(R) product if we fail to make a specified portion of the
required sales calls for that product or if the growth in Ortho-McNeil's market
share for oral contraceptives among the clinicians we call on does not exceed
the growth in Ortho-McNeil's market share among a control group of clinicians.
Ortho-McNeil also may reduce the payments otherwise required to be paid to us
under the agreement with respect to the new oral HRT product if we do not make a
specified portion of the minimum number of sales calls for that product. The
co-promotion agreement also limits the number of products other than Ortho Tri-
Cyclen(R) and the new HRT product that our sales force may present during the
same sales call as Ortho Tri-Cyclen(R) and the new HRT product.
In addition, our pharmacy management agreement with Health Script, a wholly
owned division of Dura Pharmaceuticals, Inc., requires us to pay a minimum
monthly management fee of $22,800 during the two-year term of the agreement. We
are also obligated to pay future development fees of $625,000 to CHPNC, LLC
prior to September 25, 2000 for the development of the Benefit:Risk Assessment
Model. In July 1999, we entered into a distribution and license agreement with
Laboratoires Fournier S.A. under which we have been granted the exclusive right
(subject to exceptions) to market, use, distribute and sell the Esclim(TM)
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estrogen transdermal system in various dosages in the United States and Puerto
Rico. The agreement requires us to pay Fournier a non-refundable license fee of
$1.45 million payable over a two-year period, with $700,000 of this fee subject
to sales objectives being reached. Our failure to generate sales exceeding the
specified minimum payments or the costs of the minimum sales calls under these
agreements could have a material adverse effect on our business and could give
the other parties to these agreements the right to terminate or modify the
contract.
MANY OF OUR PRODUCT AGREEMENTS MAY BE TERMINATED IF WE FAIL TO MAKE MINIMUM
PURCHASES, MAKE A MINIMUM NUMBER OF SALES CALLS OR FOR OTHER REASONS. THIS COULD
FORCE US TO DISCONTINUE SALES OF KEY PRODUCTS AND COULD HARM OUR RESULTS OF
OPERATIONS.
Our contracts relating to the products we offer contain various provisions
that allow the other party to terminate the contract, which, if exercised, could
force us to discontinue sales of the product and could have a material adverse
effect on our business. Our co-promotion agreement with Bristol-Myers Squibb
U.S. Pharmaceuticals Group relating to the cholesterol-lowering drug
Pravachol(R) provides that Bristol-Myers Squibb may terminate the agreement in
the event that Pravachol(R) prescriptions written in the United States by
designated OB/GYNs and the nurse practitioners and physician assistants in their
offices do not exceed specified minimum prescription amounts. These specified
minimum amounts increase quarterly in the first year and yearly from year to
year thereafter. Bristol-Myers Squibb may terminate the agreement in the event
that prescriptions for Pravachol(R) written by the clinicians covered by the
agreement do not exceed these minimum amounts for two consecutive quarters or
the yearly prescription forecasts for one year. September 30, 1999 is the end of
the first two consecutive quarter period under the agreement. These minimum
amounts require us to achieve a significant increase over the number of
prescriptions for this product currently written by the clinicians designated by
the agreement and substantially exceed the baseline amounts used for purposes of
calculating the performance fee under the contract. Furthermore, the
co-promotion agreement with Bristol-Myers Squibb contains a provision that
allows Bristol-Myers Squibb to terminate the agreement upon a change of control
of Women First. As a result, we could lose our rights to market and sell
Pravachol(R) if we fail to meet our minimum performance obligations or if we are
acquired.
Our co-promotion agreement with Ortho-McNeil Pharmaceutical, Inc. allows
Ortho-McNeil to terminate the contract if we fail to make a specified portion of
the required sales calls for three consecutive quarters. Ortho-McNeil also may
terminate the agreement if there is a change of control of Women First or if
either Edward F. Calesa, the Chairman of the Board, or David F. Hale, our
President and Chief Executive Officer, is no longer associated with Women First
(other than as a result of death or disability). In addition, the co-promotion
agreement covers a new oral hormonal replacement therapy (HRT) product which has
not yet been approved by the FDA. If the new HRT product has not been approved
by the FDA or the product has not been launched prior to October 1, 2000, either
party may terminate the agreement.
Our seven-year agreement with BioFilm for the ViAmor(TM) vaginal
moisturizer and our ten-year agreement with Price Invena ApS for the
SafeStart(TM) umbilical cord clamp/cutter also require us to make specified
minimum purchases. If we do not make the specified minimum purchases of the
ViAmor(TM) product, the agreement provides that BioFilm's exclusive remedy is
termination of the contract and $25,000 in liquidated damages. Under the
agreement for the SafeStart(TM) product, our failure to achieve a certain level
of purchases will result in our exclusive distribution rights becoming
non-exclusive.
In addition, our contract with Ortho-McNeil Pharmaceutical, Inc. relating
to the Ortho-Est(R) oral estrogen product allows Ortho-McNeil to terminate the
contract (1) upon one year's notice so long as
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Ortho-McNeil provides us with a one-year supply of the Ortho-Est(R) product and
uses reasonable commercial efforts to transfer the manufacturing and
distribution rights to the product to us or (2) immediately if the cost of FDA
revalidation, should it become necessary, exceeds $3 million. Most of our
contracts permit termination by the other party if we breach our obligations,
including our minimum payment commitments, under the contracts or enter
bankruptcy.
IF MIDLIFE WOMEN DO NOT USE AND/OR THEIR CLINICIANS DO NOT RECOMMEND THE
PRODUCTS WE OFFER, WE WILL CONTINUE TO EXPERIENCE SIGNIFICANT LOSSES.
The products we license, acquire or co-promote may not achieve market
acceptance. The market acceptance of these products will depend on, among other
factors:
o their advantages over existing competing products,
o their perceived efficacy and safety,
o the actual or perceived side effect profile of hormonal replacement
therapies,
o the reimbursement policies of the government and third-party payors,
and
o the ability of our sales specialists to convince OB/GYNs and nurse
practitioners and physician assistants in their offices to recommend
our products.
Our model assumes that our marketing programs and the growth in our target
market will result in increased demand for the products we offer. If our
marketing programs do not succeed in generating a substantial increase in demand
for our products, we will be unable to realize our operating objectives. In
addition, our business model seeks to build on the expanding roles of OB/GYNs
and the nurse practitioners and physician assistants focused on women's health,
and our marketing efforts are concentrated on this group. If the clinicians we
target do not recommend and prescribe the products we offer or if midlife women
do not regularly use these products, we will continue to experience significant
losses and our business will be adversely affected. Moreover, if we fail to
develop the market-wide brand identity for Women First that we are seeking, our
business will be adversely affected.
ANY FAILURE BY US TO OBTAIN RIGHTS TO ADDITIONAL PRODUCTS OR TO ACQUIRE
COMPANIES AND SUCCESSFULLY INTEGRATE THEM WILL LIMIT OUR GROWTH AND MAY HARM OUR
BUSINESS.
We plan to obtain rights to additional products through license,
co-promotion or acquisition agreements and may acquire companies that complement
our business. Our failure to obtain rights to market products or to acquire
products or companies on acceptable terms or to integrate these products or
companies into our organization could harm our business. We may not be able to
identify appropriate licensing, co-promotion or acquisition candidates in the
future. Even if we identify an appropriate candidate, competition for it may be
intense. We may not be able to successfully negotiate the terms of a license,
co-promotion or acquisition agreement on commercially acceptable terms. The
negotiation of agreements to obtain rights to additional products or to acquire
companies could divert our management's time and resources from our existing
business. Moreover, we may be unable to finance an acquisition or integrate a
new product or company into our existing business. If we use shares of our
common stock as consideration for one or more significant acquisitions, our
stockholders could suffer significant dilution of their ownership interests.
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OUR QUARTERLY FINANCIAL RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY
FAIL TO MEET OR EXCEED THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS,
WHICH COULD CAUSE THE PRICE OF OUR STOCK TO DECLINE SIGNIFICANTLY.
Our quarterly operating results may fluctuate significantly based on
factors such as:
o changes in the acceptance or availability of the products we offer,
o the timing of new product offerings, acquisitions or other significant
events by us or our competitors,
o regulatory approvals and legislative changes affecting the products we
offer or those of our competitors,
o the productivity of our sales force,
o the timing of expenditures for the expansion of our operations, and
o general economic and market conditions and conditions specific to the
health care industry.
Due to our short operating history and the difficulty of predicting demand
for the products we offer, we are unable to accurately forecast our revenues.
For example, we only recently began co-promoting the cholesterol-lowering drug
Pravachol(R) and the Ortho Tri-Cyclen(R) oral contraceptive and will not begin
promoting Ortho-McNeil Pharmaceutical, Inc.'s new oral combination hormonal
replacement therapy product until the product receives FDA approval and is
launched by Ortho-McNeil. Accordingly, we have little basis to estimate our
revenues from co-promoting these products. In addition, we plan to obtain rights
to additional products and fund additional sales and marketing and general and
administrative activities, all of which would increase our operating expenses.
Accordingly, we may experience significant, unanticipated quarterly losses.
Because of these factors, our operating results in one or more future quarters
may fail to meet the expectations of securities analysts or investors, which
could have a material adverse effect on our stock price. For a further
discussion of expenditures and other factors that could affect our results of
operations, see "Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations."
THE HEALTH CARE INDUSTRY AND THE MARKETS FOR THE PRODUCTS WE OFFER ARE VERY
COMPETITIVE. WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY, ESPECIALLY AGAINST
ESTABLISHED INDUSTRY COMPETITORS WITH SIGNIFICANTLY GREATER FINANCIAL RESOURCES.
The health care industry is highly competitive. Most of our competitors and
those of our collaborative partners are large well-known pharmaceutical, life
science and health care companies that have considerably greater financial,
sales, marketing and technical resources than we have. Additionally, these
competitors have research and development capabilities that may allow them to
develop new or improved products that may compete with product lines we market
and distribute. In addition, competitors may elect to devote substantial
resources to marketing their products to midlife women and may choose to develop
educational and information programs like those we have developed to support
their marketing efforts. Our business, financial condition and results of
operations could be materially and adversely affected by any one or more of such
developments.
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The pharmaceutical products we offer face significant competition. The
Ortho-Est(R) oral estrogen product, which has experienced declining sales and
market share and currently represents less than 1% of the market share of
estrogen replacement products sold in the United States, competes with the
Premarin(R) oral estrogen product and the Prempro(R) and Premphase(R)
combination oral estrogen and progestin products, all of which are marketed by
Wyeth-Ayerst Laboratories, Inc. The Ortho-Est(R) product also competes with
several other estrogen products, including branded and generic products, taken
orally and through transdermal patches and creams, as well as non-hormonal
replacement therapy products marketed by Merck & Co., Inc. and Eli Lilly &
Company. The Ortho Tri-Cyclen(R) product competes with other oral contraceptive
products marketed by Wyeth-Ayerst, Warner-Lambert Company, Organon Inc. and
Berlex Laboratories. Ortho Tri-Cyclen(R) also competes with other forms of
contraception including contraceptive implants, progestin injections,
intrauterine devices, spermicides, diaphragms, cervical caps, female condoms,
emergency contraception and sterilization. The new oral combination hormonal
replacement therapy product covered by our co-promotion agreement with
Ortho-McNeil Pharmaceutical, Inc., if approved and launched, will compete
primarily with Prempro(R) and Premphase(R) combination oral estrogen and
progestin products and a combination estrogen and progestin patch manufactured
by Noven Pharmaceuticals, Inc. and marketed by Rhone-Poulenc Rorer. The new oral
HRT product will also compete with oral estrogen and transdermal estrogen
products as well as oral progestin products. The Pravachol(R) brand competes
with other cholesterol-lowering products marketed by Merck, Warner-Lambert
Company/Pfizer, Inc., Novartis Pharmaceuticals Corporation and Bayer
Corporation. In addition, micronized progesterone and other hormonal replacement
therapy products compounded by Women First Pharmacy Services compete with
compounded hormonal replacement therapy products distributed by regional and
national pharmacies. In 1998, Solvay Pharmaceuticals, Inc. received FDA approval
to market an oral capsule containing micronized progesterone developed and
manufactured by Schering Plough Corporation. Products compounded by Women First
Pharmacy Services may also compete with FDA approved pharmaceutical products.
Competition for the self-care products we offer also is significant. The
ViAmor(TM) vaginal moisturizer competes against a number of well-known brands of
vaginal moisturizers and lubricants. The IntegraVie(TM) line of skin care
products faces competition from products from other cosmetics and dermatological
companies. As We Change, LLC competes with a number of catalog companies and
Internet retailers focusing on self-care products. Our educational products will
compete with products that have been developed by medical professionals and
non-professionals alike. Our Internet site, WOMENFIRST.COM, competes with other
Internet sites focused on women's health as well as sites focused on health in
general. Our failure to adequately respond to the competitive challenges faced
by the products we offer could have a material adverse effect on our business,
financial condition and results of operations.
IF WE DO NOT SUCCESSFULLY MANAGE ANY GROWTH WE EXPERIENCE, WE MAY EXPERIENCE
INCREASED EXPENSES WITHOUT CORRESPONDING REVENUE INCREASES.
Our business plan will, if implemented, result in rapid expansion of our
operations. This expansion may place a significant strain on our management,
financial and other resources. It also will require us to increase expenditures
before we generate corresponding revenues. Our ability to manage future growth,
should it occur, will depend upon our ability to identify, attract, motivate,
train and retain highly skilled managerial, financial, business development,
sales and marketing and other personnel. Competition for these employees is
intense. Moreover, the addition of products or businesses will require our
management to integrate and manage new operations and an increasing number of
employees and could require us to expand into new areas such as pharmaceutical
development. We may not be able to implement successfully
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and maintain our operational and financial systems or otherwise adapt to growth.
Any failure to manage growth, if attained, would have a material adverse effect
on our business.
WE MAY NOT BE ABLE TO OBTAIN REIMBURSEMENT FOR THE PHARMACEUTICAL PRODUCTS WE
OFFER. ANY FAILURE TO OBTAIN REIMBURSEMENT COULD REQUIRE US TO DISCONTINUE SALES
OF A PARTICULAR PRODUCT AND COULD HARM OUR RESULTS OF OPERATIONS.
Our ability to market new and existing pharmaceutical products depends in
part on whether health care payors, including government authorities, private
health insurers, health maintenance organizations and managed care
organizations, will provide sufficient reimbursement for the products we offer.
Third-party payors are increasingly challenging the prices of pharmaceutical
products and demanding data to justify the inclusion of new or existing products
in their formularies. Significant uncertainty exists regarding the reimbursement
status of pharmaceutical products, and we cannot predict whether additional
legislation or regulation affecting third-party coverage and reimbursement will
be enacted in the future, or what effect such legislation or regulation would
have on our business. Reimbursement may not be available for the products we
offer and reimbursement granted may not be maintained. In particular, sales of
the Ortho-Est(R) oral estrogen product may be adversely affected by formularies
that require substitution of generics on prescriptions written for the
Ortho-Est(R) product unless the physician indicates "dispense as written" on the
prescription. Additionally, sales through Women First Pharmacy Services may be
limited by pharmacy benefit management groups that restrict participation in
their networks. Moreover, limits on reimbursement available from third-party
payors may reduce the demand for, or adversely affect the price of, the products
we offer. The unavailability or inadequacy of third-party reimbursement for the
products we offer would have a material adverse effect on our results of
operations.
WE DO NOT CURRENTLY CONDUCT PHARMACEUTICAL RESEARCH AND DEVELOPMENT. THIS MAY
LIMIT THE RANGE OF PRODUCTS WE OFFER.
We do not presently conduct our own pharmaceutical research and development
programs. In addition, we do not presently anticipate conducting our own
discovery research for pharmaceutical products. However, we may obtain rights to
develop and market a product in clinical development. If that occurs, we
generally plan to rely on third parties to perform the development work. We may
not be able to obtain arrangements for development by contract organizations on
commercially reasonable terms, if at all, and this may limit the range of
products we are able to market and distribute.
TECHNOLOGICAL CHANGE COULD RENDER THE PHARMACEUTICAL PRODUCTS WE OFFER OBSOLETE.
The pharmaceutical products that we market and distribute could be rendered
obsolete or uneconomical by the development of new drugs or devices to treat the
conditions that they address. Technological advances affecting costs of
production or marketing also could adversely affect our ability to sell
products. In addition, our own licensing, acquisition, co-promotion or
development of additional products could adversely affect the demand for the
products we currently offer if the new product has the same or similar
indications as one or more of the products we currently offer.
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WE ARE DEPENDENT ON SINGLE SOURCES OF SUPPLY FOR ALL OF THE PRODUCTS WE OFFER.
IF ONE OF OUR SUPPLIERS FAILS TO SUPPLY ADEQUATE AMOUNTS OF A PRODUCT WE OFFER,
OUR SALES MAY SUFFER AND WE COULD BE REQUIRED TO ABANDON A PRODUCT LINE.
We are dependent on single sources of supply for all of the products we
offer. With respect to these products, we cannot guarantee that these third
parties will be able to provide adequate supplies of products in a timely
fashion. We also face the risk that one of our suppliers could become insolvent,
declare bankruptcy, lose its production facilities in a disaster, be unable to
comply with applicable government regulations or lose the governmental permits
necessary to manufacture the products it supplies to us. If we are unable to
renew or extend an agreement with a third-party supplier, if an existing
agreement is terminated or if a third-party supplier otherwise cannot meet our
needs for a product, we may not be able to obtain an alternative source of
supply in a timely manner or at all. In these circumstances, we may be unable to
continue to market products as planned and could be required to abandon or
divest ourselves of a product line on terms which would materially adversely
affect us.
WE MAY BE EXPOSED TO PRODUCT AND PROFESSIONAL LIABILITY CLAIMS NOT COVERED BY
INSURANCE THAT WOULD HARM OUR BUSINESS.
We may be exposed to product or professional liability claims. Although we
believe that we currently carry and intend to maintain appropriate product and
professional liability insurance, we cannot guarantee that this insurance will
be sufficient to cover all possible liabilities. A successful suit against us
could have an adverse effect on our business and financial condition if the
amounts involved are material.
WE ARE UNCERTAIN OF OUR ABILITY TO OBTAIN ADDITIONAL FINANCING FOR OUR FUTURE
CAPITAL NEEDS. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY NOT BE
ABLE TO CONTINUE TO OPERATE OUR BUSINESS.
We will require significant amounts of additional capital to achieve our
goals. We believe that the net proceeds from the offering, together with
existing cash balances, will be sufficient to meet our working capital, capital
expenditure requirements and minimum purchase commitments through the end of the
year 2000. Our future capital requirements will depend on many factors
including:
o the costs of our sales and marketing activities and our education
programs for clinicians and women,
o competing product and market developments,
o the costs of acquiring or developing new products,
o the costs of expanding our operations, and
o our ability to generate positive cash flow from our sales.
Additional funding may not be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to curtail significantly or
defer one or more of our marketing or educational programs or to limit or
postpone obtaining new products through license, acquisition or co-promotion
agreements. If we raise additional funds through the issuance of equity
securities, the percentage ownership of our then-current stockholders may be
reduced and such equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock. If we raise additional funds
through the
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issuance of debt securities, these new securities would have certain rights,
preferences and privileges senior to those of the holders of our common stock,
and the terms of these debt securities could impose restrictions on our
operations. For a further discussion of expenditures and other factors that
could affect our need for future capital, see "Item 2: Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
OUR INABILITY TO OBTAIN NEW PROPRIETARY RIGHTS OR TO PROTECT AND RETAIN OUR
EXISTING RIGHTS COULD IMPAIR OUR COMPETITIVE POSITION AND ADVERSELY AFFECT OUR
SALES.
We believe that the patents, trademarks, copyrights and other proprietary
rights that we own or license, or that we will own or license in the future,
will continue to be important to our success and competitive position. If we
fail to maintain our existing rights or cannot acquire additional rights in the
future, our competitive position may be harmed. Due to the length of time and
expense associated with bringing new pharmaceutical products to market, there
are benefits associated with acquiring or licensing products that are protected
by existing patents or for which patent protection can be obtained. While some
products we offer, such as the Pravachol(R) cholesterol-lowering drug, the Ortho
Tri-Cyclen(R) oral contraceptive, the new oral combination HRT product, the
SafeStart(TM) umbilical cord clamp/cutter and the IntegraVie(TM) line of skin
care products, incorporate patented technology, most of the products we sell are
not protected by patents. We have applied for registration of a number of key
trademarks and intend to introduce new trademarks, service marks and brand
names. We intend to take the actions that we believe are necessary to protect
our proprietary rights, but we may not be successful in doing so on commercially
reasonable terms, if at all. In addition, parties that license their proprietary
rights to us may face challenges to their patents and other proprietary rights
and may not prevail in any litigation regarding those rights. Moreover, our
trademarks and the products we offer may conflict with or infringe upon the
proprietary rights of third parties. If any such conflicts or infringements
should arise, we would have to defend ourselves against such challenges. We also
may have to obtain a license to use those proprietary rights or possibly cease
using those rights altogether. Any of these events could harm our business.
MUCH OF OUR BUSINESS IS SUBJECT TO REGULATION. REGULATORY BODIES COULD IMPAIR OR
ELIMINATE OUR ABILITY TO CONDUCT PORTIONS OF OUR BUSINESS.
Many of our activities are subject to extensive regulation by one or more
federal, state or local agencies. These regulatory bodies have the power to
restrict or eliminate many of our business activities, and to seek civil and
criminal penalties for noncompliance with applicable laws and regulations. For
example, products compounded by Women First Pharmacy Services will be subject to
legislation containing, among other elements, provisions restricting the
advertising of compounded products and strictly limiting the compounding of
pharmaceuticals. The FDA also has proposed a limit of 20% on interstate
shipments of compounded drugs with respect to total prescriptions dispensed and
a 5% limit on interstate shipments of any one compounded pharmaceutical product
by a given pharmacy. Changes in existing laws and regulations could adversely
affect our business.
OUR FAILURE TO RETAIN THE PRINCIPAL MEMBERS OF OUR MANAGEMENT TEAM OR TO HIRE
ADDITIONAL QUALIFIED EMPLOYEES WOULD ADVERSELY AFFECT OUR ABILITY TO IMPLEMENT
OUR BUSINESS PLAN.
Our success depends upon the retention of the principal members of our
management, technical and marketing staff, particularly Edward F. Calesa, the
Chairman of the Board, and David F. Hale, our President and Chief Executive
Officer. The loss of the services of Mr. Calesa, Mr. Hale or other key members
of our management team might significantly delay or prevent the achievement of
our development
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and strategic objectives. Our co-promotion agreement with Ortho-McNeil
Pharmaceutical, Inc. relating to the Ortho Tri-Cyclen(R) oral contraceptive and
a new oral combination hormonal replacement therapy product under review by the
FDA contains a provision that would allow Ortho-McNeil to terminate the
agreement if either Mr. Calesa or Mr. Hale is no longer associated with Women
First (except as a result of their death or disability). We have entered into
employment contracts with Mr. Calesa and Mr. Hale. We are the beneficiary of a
life insurance policy on the life of Mr. Calesa in the amount of $2.0 million.
We do not have life insurance policies on the lives of any other members of our
management team. Our success also depends on our ability to attract additional
qualified employees. Companies in the pharmaceutical and health care industries
compete intensely for qualified personnel. We have agreed not to solicit sales
representatives from Johnson & Johnson or any of its subsidiaries or from any
contractor of Ortho-McNeil Pharmaceutical, Inc. that provides a sales force that
calls on physicians. Our inability to retain our existing personnel or to hire
additional qualified employees would have a material adverse effect on our
company.
OUR MANAGEMENT AND EXISTING STOCKHOLDERS WILL RETAIN SUBSTANTIAL CONTROL OVER
OUR VOTING STOCK AND CAN MAKE DECISIONS THAT COULD ADVERSELY AFFECT OUR BUSINESS
AND OUR STOCK PRICE.
As of July 31, 1999, Edward F. Calesa and his family members jointly own
approximately 41.2% of our common stock. Johnson & Johnson Development
Corporation, a subsidiary of Johnson & Johnson, owns approximately 12.2% of our
common stock. Our present directors, executive officers and principal
stockholders as a group beneficially own approximately 56.9% of the outstanding
common stock. Accordingly, if all or certain of such stockholders were to act
together, they would be able to exercise significant influence over or control
the election of our Board of Directors, the management and policies of Women
First and the outcome of certain corporate transactions or other matters
submitted to our stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of our assets.
Management and our existing stockholders, acting together, will be able to
prevent or effect a change in control of Women First and will be able to amend
certain provisions of our certificate of incorporation and bylaws at any time.
The interests of management and our existing stockholders may conflict with the
interests of our other holders of common stock, and this concentration of
ownership may discourage others from initiating potential merger, takeover or
other change in control transactions.
OUR BUSINESS MAY BE INTERRUPTED BY YEAR 2000 PROBLEMS IF OUR VENDORS, CUSTOMERS
OR PAYORS ARE UNABLE TO CONVERT THEIR SYSTEMS OR IF ANY OF OUR INTERNAL SYSTEMS
ARE NOT COMPLIANT.
The Year 2000 issue results from computer programs having been written
using two digits rather than four to define the applicable year. Computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. If any
of our internal systems are affected by a Year 2000 problem, we may experience a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar normal business activities. In addition, we cannot predict
the extent to which the Year 2000 issue will affect our vendors, customers or
payors and other parties that provide us with significant products and services,
or the extent to which we would be vulnerable if these parties fail to resolve
any Year 2000 issues on a timely basis. Any failure on the part of these parties
to achieve Year 2000 compliance on a timely basis could materially adversely
affect us. For example, a system failure on the part of our key suppliers or
customers could result in our failing to receive adequate supplies of products
or our being unable to process sales.
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In addition, disruptions in the economy generally resulting from Year 2000
issues could also materially adversely affect us. We could be subject to
litigation due to computer systems or product failure, including as a result of
equipment shutdown or failure to properly date business records. We cannot
reasonably estimate at this time the amount of potential liability and lost
revenue that could result from Year 2000 issues. For more information concerning
Year 2000 issues that could affect our business, see "Item 2: Management's
Discussion and Analysis of Financial Condition and Results of Operation -- Year
2000 Compliance."
THE PUBLIC MARKET FOR OUR COMMON STOCK MAY BE VOLATILE, AND THE PRICE OF OUR
STOCK MAY FLUCTUATE FOR REASONS UNRELATED TO OUR OPERATING PERFORMANCE. A
SIGNIFICANT DECLINE IN THE PRICE OF OUR STOCK COULD LEAD TO A CLASS ACTION
LAWSUIT AGAINST US.
The market prices and trading volumes for securities of emerging companies,
like Women First, historically have been highly volatile and have experienced
significant fluctuations both related and unrelated to the operating performance
of those companies. The price of our common stock may fluctuate widely,
depending on many factors, including factors that may cause our quarterly
operating results to fluctuate as well as market expectations and other factors
beyond our control. In the past, following periods of volatility in the market
price of a company's securities, class action litigation has often been
instituted against that company by some of its stockholders. This type of
litigation, if instituted against us, could result in substantial costs and a
diversion of our management's attention and resources, which could materially
and adversely affect our results of operations and financial condition.
SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY IMPAIR OUR STOCK
PRICE.
Sales of substantial numbers of shares of our common stock, or the
perception that such sales could occur, could adversely affect the market price
of our common stock and make it more difficult for us to raise funds through
equity offerings in the future. A substantial number of outstanding shares of
common stock and shares of common stock issuable upon exercise of outstanding
stock options will become available for resale in the public market at
prescribed times. As of July 31, 1999, we had 17,252,395 shares of common stock
outstanding. The 5,175,000 shares sold in our recent initial public offering are
freely tradable under the Securities Act of 1933, as amended, unless held by our
"affiliates" as defined in Rule 144 under the Securities Act. Of the remaining
12,077,395 shares of common stock outstanding as of July 31, 1999, 9,702,066
will be eligible for sale under Rule 144 under the Securities Act, subject to
volume and other limitations, upon the expiration of 180-day lock-up agreements
described below. As of July 31, 1999, we had 2,277,435 shares of common stock
reserved for issuance upon the exercise of stock options granted or available
for grant under the Women First HealthCare Long-Term Incentive Plan and the
Women First Incentive Stock Plan and 541,128 shares reserved for issuance upon
exercise of outstanding warrants. Some of our stockholders have rights that
entitle them to register their common stock under the Securities Act at our
expense.
All of the shares of common stock that were outstanding prior to our
initial public offering, substantially all shares of common stock issued upon
the conversion of shares of preferred stock outstanding prior to the offering,
all shares of common stock issuable upon the exercise of warrants and the shares
of common stock issuable upon exercise of options held by Women First's
directors and officers are subject to lock-up agreements with the underwriters
for our initial public offering pursuant to which these directors, officers and
securityholders of Women First have agreed not to offer, sell, contract to sell
or otherwise dispose of, or enter into any hedging transactions with respect to,
any common stock or securities convertible into or exchangeable for common stock
for a period of 180 days after the date of the
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underwriting agreement. Allen & Company Incorporated may in its sole discretion
and at any time without notice release all or any portion of such securities
subject to the lock-up agreements. The underwriters do not presently intend to
grant permission to sell any securities subject to the lock-up agreements.
WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN ACQUISITION
OF OUR COMPANY AT A PREMIUM PRICE.
Provisions of our Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws may make it difficult for a third party to acquire
us and could discourage a third party from attempting to acquire us at a premium
price. These include provisions classifying our board of directors, prohibiting
stockholder action by written consent and requiring advance notice for
nomination of directors and stockholders' proposals. In addition, Section 203 of
the Delaware General Corporation Law also imposes restrictions on mergers and
other business combinations between us and any holders of 15% or more of our
common stock. Moreover, our new certificate of incorporation will allow our
board of directors to issue, without further stockholder approval, preferred
stock that could have the effect of delaying, deferring or preventing a change
in control. The issuance of preferred stock also could adversely affect the
voting power of the holders of our common stock, including the loss of voting
control to others. The provisions of our proposed new certificate of
incorporation and bylaws, as well as certain provisions of Delaware law, may
have the effect of discouraging or preventing an acquisition, or disposition of,
our business. Some of our key contracts contain provisions that would allow the
other party to the agreement to terminate the agreement upon a change of
control. These provisions also may diminish the opportunities for a stockholder
to participate in certain tender offers, including tender offers at prices above
the then-current fair market value of our common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Fourth Amended and Restated Certificate of Incorporation
3.2 Second Amended and Restated Bylaws
10.1 Distribution and License Agreement dated as of July 19, 1999
between Women First HealthCare, Inc. and Laboratoires
Fournier S.A.*
27.1 Financial Data Schedule
* Women First is seeking confidential treatment with respect to
portions of this agreement.
(b) No reports on Form 8-K were filed in the 3 month period ended
June 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly causes this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Women First HealthCare, Inc.
Date: August 12, 1999 By: /s/ DAVID F. HALE
------------------------------------------------
David F. Hale
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 12, 1999 By: /s/ DEBRA P. CRAWFORD
------------------------------------------------
Debra P. Crawford
Vice President, Chief Financial Officer and
Secretary (Principal Financial and
Accounting Officer)
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EXHIBIT 3.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WOMEN FIRST HEALTHCARE, INC.
Women First HealthCare, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. The Corporation's original Certificate of Incorporation was filed on
November 1, 1996 and the Corporation's original name was "Healthy Living for
Women, Inc."
2. That by action taken at a meeting of the Board of Directors on March
9, 1999 resolutions were duly adopted setting forth a proposed amendment and
restatement of the Certificate of Incorporation of the Corporation, declaring
said amendment and restatement to be advisable and directing its officers to
submit said amendment and restatement to the stockholders of the Corporation
for consideration thereof. The resolution setting forth the proposed amendment
and restatement is as follows:
"THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows, subject to the
required consent of the stockholders of the Corporation:
FIRST: The name of the Corporation (hereinafter the "Corporation") is
Women First HealthCare, Inc.
SECOND: The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle; and the name of the Registered
Agent of the Corporation in the State of Delaware is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue shall be forty-five million (45,000,000), divided as
follows: (i) forty million (40,000,000) shares of Common Stock with a par value
of $.001 per share, and (ii) five million (5,000,000) shares of Preferred Stock
with a par value of $.001 per share.
Shares of Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated in the resolution or
resolutions providing for the establishment of such series adopted by the Board
of Directors of the Corporation as hereinafter provided. Authority is hereby
expressly granted to the Board of Directors of the Corporation to
<PAGE> 2
issue, from time to time, shares of Preferred Stock in one or more series, and,
in connection with the establishment of any such series by resolution or
resolutions, to determine and fix such voting powers, full or limited, or no
voting powers, and such other powers, designations, preferences and relative,
participating, optional, and other special rights, and the qualifications,
limitations, and restrictions thereof, if any, including, without limitation,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated in such resolution or resolutions, all to the
fullest extent permitted by the General Corporation Law of the State of
Delaware (the "GCL"). Without limiting the generality of the foregoing, the
resolution or resolutions providing for the establishment of any series of
Preferred Stock may, to the extent permitted by law, provide that such series
shall be superior to, rank equally with or be junior to the Preferred Stock of
any other series. Except as otherwise expressly provided in the resolution or
resolutions providing for the establishment of any series of any series of
Preferred Stock, no vote of the holders of shares of Preferred Stock or Common
Stock shall be a prerequisite to the issuance of any shares of any series of
the Preferred Stock authorized by and complying with the conditions of this
Amended and Restated Certificate of Incorporation.
FIFTH: (1) The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors having that number of
directors set out in the Bylaws of the Corporation as adopted or as set forth
from time to time by a duly adopted amendment thereto by the Board of Directors
or stockholders of the Corporation.
(2) The directors of the Corporation, other than directors
elected by one or more series of Preferred Stock, shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
(other than directors elected by one or more series of Preferred Stock)
constituting the entire Board of Directors. Each director (other than directors
elected by one or more series of Preferred Stock) shall serve for a term ending
on the date of the third annual meeting of stockholders next following the
annual meeting at which such director was elected, provided that directors
initially designated as Class I directors shall serve for a term ending on the
date of the 2000 annual meeting, directors initially designated as Class II
directors shall serve for a term ending on the date of the 2001 annual meeting,
and directors initially designated as Class III directors shall serve for a term
ending on the date of the 2002 annual meeting. Notwithstanding the foregoing,
each director shall hold office until such director's successor shall have been
duly elected and qualified or until such director's earlier death, resignation
or removal. If the number of directors (other than directors elected by one or
more series of Preferred Stock) is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, but in no event will a decrease in the number
of directors shorten the term of any incumbent director. Vacancies on the Board
of Directors resulting from death, resignation, removal or otherwise and newly
created directorships resulting from any increase in the number of directors
(other than directors elected by one or more series of Preferred Stock) may be
filled solely by a majority of the directors then in office (although less than
a quorum) or by a sole remaining director, and each director so elected shall
hold office for a term that shall coincide with the remaining term of the class
to which such director shall have been elected. Whenever the holders of one or
more classes or series of Preferred Stock shall have the right, voting
separately as a class or series, to elect directors, the nomination, election,
term of office, filling of vacancies, removal and other features
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of such directorships shall not be governed by this ARTICLE FIFTH unless
otherwise provided for in the certificate of designation for such classes or
series.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation and for the further
definition of the powers of the Corporation and its directors and stockholders:
(1) The Board of Directors shall have the power to adopt, amend,
alter, rescind or repeal the bylaws of the Corporation. Notwithstanding the
foregoing, the stockholders may adopt, amend, alter, rescind or repeal the
bylaws with, in addition to any other vote required by law, the affirmative vote
of the holders of not less than 66 2/3% of the total voting power of all
outstanding securities of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class.
(2) Elections of directors need not be by written ballot unless
the bylaws of the Corporation so provide.
(3) Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken only upon the vote of stockholders
at an annual or special meeting duly noticed and called in accordance with
Delaware Law, and may not be taken by written consent of stockholders without a
meeting.
(4) Special meetings of stockholders may be called by the Board
of Directors, the Chairman of the Board of Directors, the President or the
Secretary of the Corporation and may not be called by any other person;
provided, however, that if and to the extent that any special meeting of
stockholders may be called by any other person or persons specified in any
provisions of the Certificate of Incorporation or any amendment thereto or any
certificate filed under Section 151(g) of the Delaware General Corporation Law,
then such special meeting may also be called by the person or persons, in the
manner, at the times and for the purposes so specified.
EIGHTH:(a) Subject to Article EIGHTH (c), the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably
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<PAGE> 4
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) Subject to Article EIGHTH (c), the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) Any indemnification under this Article EIGHTH (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Article EIGHTH (a) or Article EIGHTH (b), as the case may
be. Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders. To the extent,
however, that a present or former director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Article EIGHTH (a) or Article EIGHTH (b), or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
(d) Notwithstanding any contrary determination in the specific
case under Article EIGHTH (c), and notwithstanding the absence of any
determination thereunder, any present or former director or Officer of the
Corporation may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Article
EIGHTH (a) and Article EIGHTH (b). The basis of such indemnification by a court
shall be a determination by such court that indemnification of such person is
proper in the circumstances because he has met the applicable standards of
conduct set forth in Article EIGHTH (a) or Article EIGHTH (b), as the case may
be. Neither a contrary determination in the specific case under Article EIGHTH
(c) nor the absence of any determination thereunder shall be a defense to such
application or create a presumption that such person seeking indemnification has
not met any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Article EIGHTH (d) shall be given to the
Corporation promptly upon the filing
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<PAGE> 5
of such application. If successful, in whole or in part, such person seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.
(e) Expenses incurred by a person who is or was a director or
officer of the Corporation in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH.
(f) The indemnification and advancement of expenses provided by
or granted pursuant to this Article EIGHTH shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any Bylaw, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Article EIGHTH (a) and Article EIGHTH (b) shall be made to the
fullest extent permitted by law. The provisions of this Article EIGHTH shall not
be deemed to preclude the indemnification of any person who is not specified in
Article EIGHTH (a) or Article EIGHTH (b) but whom the Corporation has the power
or obligation to indemnify under the provisions of the GCL, or otherwise.
(g) The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article EIGHTH
or Section 145 of the GCL.
(h) For purposes of this Article EIGHTH, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, shall stand in the same
position under the provisions of this Article EIGHTH with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes of
this Article EIGHTH, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such person with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan
5
<PAGE> 6
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article EIGHTH. For purposes of any
determination under Article EIGHTH (c), a person shall be deemed to have acted
in good faith in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" is used in this Article EIGHTH (h)
shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which such person is or was serving
at the request of the Corporation as a director, officer, employee or agent. The
provisions of this Article EIGHTH (h) shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have met
the applicable standard of conduct set forth in Article EIGHTH (a) or (b), as
the case may be.
(i) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article EIGHTH shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director or officer of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(j) Notwithstanding anything contained in this Article EIGHTH to
the contrary, except for proceedings to enforce rights to indemnification (which
shall be governed by Article EIGHTH (d)), the Corporation shall not be obligated
to indemnify any person in connection with a proceeding (or part, thereof)
initiated by such person unless such proceeding (or part thereof) was authorized
or consented to by the Board of Directors of the Corporation.
(k) The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article EIGHTH to directors and officers of the
Corporation.
NINTH: A director shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this Article shall not eliminate or limit the liability
of a director (i) for any breach of his duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derives an improper personal benefit.
If the General Corporation law of the State of Delaware is
hereafter amended to authorize corporate action further limiting or eliminating
the personal liability of directors, then the liability of the director to the
Corporation shall be limited or eliminated to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended from time to
time. Any repeal or modification of this Article by the stockholders of the
6
<PAGE> 7
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
TENTH: Each reference in this Certificate of Incorporation to any
provision of the Delaware General Corporation Law refers to the specified
provision of the General Corporation Law of the State of Delaware, as the same
now exists or as it may hereafter be amended or superseded.
ELEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation; provided, however,
that no amendment, alteration, change or repeal may be made to Article FIFTH or
SEVENTH without the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding voting stock of the corporation,
voting together as a single class."
3. That said Amended and Restated Certificate of Incorporation
has been consented to and authorized by the holders of a majority of the issued
and outstanding stock entitled to vote by written consent given in accordance
with the provisions of Section 228 of the General Corporation Law of the State
of Delaware.
4. That said Amended and Restated Certificate of Incorporation
was duly adopted in accordance with the applicable provisions of Sections 242
and 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Women First HealthCare, Inc. has caused this
Certificate to be signed by David F. Hale, its President and Chief Executive
Officer and Debra P. Crawford, its Secretary, this 1st day of July, 1999.
Women First HealthCare, Inc.
a Delaware corporation
By: /s/ DAVID F. HALE
--------------------------------
Name: David F. Hale
Title: President and Chief Executive
Officer
ATTEST
/s/ DEBRA P. CRAWFORD
- --------------------------
Name: Debra P. Crawford
Title: Secretary
7
<PAGE> 1
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
BY-LAWS
OF
WOMEN FIRST HEALTHCARE, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. OFFICES...........................................................................1
Section 1. Registered Offices..............................................................1
Section 2. Other Offices...................................................................1
ARTICLE II. MEETINGS OF STOCKHOLDERS........................................................1
Section 1. Place of Meetings...............................................................1
Section 2. Annual Meeting of Stockholders..................................................1
Section 3. Quorum and Adjournment Meetings.................................................1
Section 4. Voting..........................................................................2
Section 5. Proxies.........................................................................2
Section 6. Special Meetings................................................................2
Section 7. Notice of Stockholder Meetings..................................................2
Section 8. Notice of Stockholder Business and Nominations..................................3
Section 9. Maintenance and Inspection of Stockholder List..................................3
ARTICLE III. DIRECTORS.......................................................................4
Section 1. Number of Directors.............................................................4
Section 2. Vacancies.......................................................................4
Section 3. Powers..........................................................................4
Section 4. Place of Directors' Meetings....................................................5
Section 5. Regular Meetings................................................................5
Section 6. Special Meetings................................................................5
Section 7. Quorum..........................................................................5
Section 8. Action Without Meeting..........................................................5
Section 9. Telephonic Meetings.............................................................6
Section 10. Committees of Directors........................................................6
Section 11. Minutes of Committee Meetings..................................................6
Section 12. Cooperation of Directors.......................................................6
ARTICLE IV. OFFICERS........................................................................7
Section 1. Officers........................................................................7
Section 2. Election of Officers............................................................7
Section 3. Subordinate Officers............................................................7
Section 4. Compensation of Officers........................................................7
Section 5. Term of Office; Removal and Vacancies...........................................7
Section 6. Chairman of the Board...........................................................7
Section 7. President.......................................................................8
Section 8. Vice Presidents.................................................................8
Section 9. Secretary.......................................................................8
Section 10. Assistant Secretary............................................................8
Section 11. Treasurer......................................................................9
Section 12. Assistant Treasurer............................................................9
ARTICLE V. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................................9
ARTICLE VI. CERTIFICATES OF STOCK..........................................................11
Section 1. Certificates...................................................................11
Section 2. Signatures on Certificates.....................................................12
Section 3. Statement of Stock Rights, Preferences, Privileges.............................12
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4. Lost Certificates............................................................12
Section 5. Transfers of Stock...........................................................12
Section 6. Fixing Record Date...........................................................12
Section 7. Registered Stockholder.......................................................13
ARTICLE VII. GENERAL PROVISIONS............................................................13
Section 1. Dividends....................................................................13
Section 2. Payment of Dividends; Directors' Duties......................................13
Section 3. Checks.......................................................................13
Section 4. Fiscal Year..................................................................13
Section 5. Corporate Seal...............................................................14
Section 6. Manner of Giving Notice......................................................14
Section 7. Waiver of Notice.............................................................14
ARTICLE VIII. AMENDMENTS...................................................................14
Section 1. Amendment by Directors or Stockholders.......................................14
</TABLE>
ii
<PAGE> 4
SECOND AMENDED AND RESTATED BY-LAWS
OF
WOMEN FIRST HEALTHCARE, INC.
ARTICLE I.
OFFICES
Section 1. Registered Offices. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within or outside the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. Annual Meeting of Stockholders. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. Quorum and Adjourned Meetings. A majority of the stock issued
and outstanding and entitled to vote at any meeting of stockholders, the holders
of which are present in person or represented by proxy, shall constitute a
quorum for the transaction of business except as otherwise provided by law, by
the Certificate of Incorporation, or by these Bylaws. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave less
than a quorum and the votes present may continue to transact business until
adjournment. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at such meeting.
Section 4. Voting. When a quorum is present at any meeting, in all
matters other than the election of directors, the vote of the holders of a
majority of the stock having voting
<PAGE> 5
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the Certificate of Incorporation, or these Bylaws, or any rule,
regulation or statutory provision applicable to the corporation, a different
vote is required in which case such express provision shall govern and control
the decision of such question. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors.
Section 5. Proxies. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him or her by proxy appointed by an instrument in
writing subscribed by such stockholder and bearing a date not more than three
years prior to said meeting, unless said instrument provides for a longer
period. All proxies must be filed with the Secretary of the corporation at the
beginning of each meeting in order to be counted in any vote at the meeting.
Each stockholder shall have one vote for each share of stock having voting
power, registered in his or her name on the books of the corporation on the
record date set by the Board of Directors as provided in Article V, Section 6
hereof.
Section 6. Special Meetings. Special meetings of the stockholders, for
any purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board or the
President and shall be called by the President or the Secretary at the request
in writing of a majority of the Board of Directors. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
Section 7. Notice of Stockholder Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written notice of any meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 8. Notice of Stockholder Business and Nominations.
(a) Nominations of persons for election to the Board of Directors
of the corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the corporation who was a stockholder
of record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a) of this Bylaw, the stockholder
2
<PAGE> 6
must have given timely notice thereof in writing to the Secretary of the
corporation and such other business must otherwise be a proper matter for
stockholder action. To be timely, a stockholder's notice shall be delivered to
the Secretary at the principal executive offices of the corporation not later
than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is not within 30 days before or after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which notice of the meeting was mailed or
public announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14A-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the nomination or
proposal is made and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (A)
the name and address of such stockholder, as they appear on the corporation's
books, and of such beneficial owner and (B) the class and number of shares of
the corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
Section 9. Maintenance and Inspection of Stockholder List. The officer
who has charge of the stock ledger of the corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
3
<PAGE> 7
ARTICLE III.
DIRECTORS
Section 1. Number of Directors. The number of directors which shall
constitute the whole Board shall be not less than three (3) nor more than
fifteen (15); the exact number of directors to be determined from time to time
solely by resolution adopted by the affirmative vote of a majority of the
directors. The directors need not be stockholders. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his or her
successor is elected and qualified; provided, however, that unless otherwise
provided by the Certificate of Incorporation, a director or the entire Board
of Directors may be removed only for cause from the Board of Directors at
any meeting of stockholders by a majority of the stock represented and entitled
to vote at such meeting.
Section 2. Vacancies. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled (other than directors elected by
one or more series of Preferred Stock) solely by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Each director so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. Powers. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
Section 4. Place of Directors' Meetings. The directors may hold their
meetings and have one or more offices, and keep the books of the corporation
outside of the State of Delaware.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on forty-eight
hours' notice to each
4
<PAGE> 8
director, either personally or by mail, telecopier, or other means of electronic
transmission at the address of such director on the books and records of the
corporation; special meetings shall be called by the Chairman or the Secretary
in like manner and on like notice on the written request of two directors unless
the Board consists of only one director, in which case special meetings shall be
called by the Chairman or Secretary in like manner or on like notice on the
written request of the sole director.
Section 7. Quorum. At all meetings of the Board of Directors a majority
of the then authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present at such meeting may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
If only one director is authorized, such sole director shall constitute a
quorum.
Section 8. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 9. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
Section 10. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets,
5
<PAGE> 9
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the Bylaws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 11. Minutes of Committee Meetings. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 12. Compensation of Directors. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV.
OFFICERS
Section 1. Officers. The officers of this corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary, and a
Treasurer. The corporation may also have at the discretion of the Board of
Directors such other officers as are desired, including a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries and Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. Election of Officers. The Board of Directors, at its first
meeting after each annual meeting of stockholders, shall choose the officers of
the corporation.
Section 3. Subordinate Officers. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. Compensation of Officers. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors.
Section 5. Term of Office; Removal and Vacancies. The officers of the
corporation shall hold office until their successors are chosen and qualify in
their stead. Any officer elected or appointed by the Board of Directors may be
removed at any time by the
6
<PAGE> 10
affirmative vote of a majority of the Board of Directors. If the office of any
officer becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him or her by the Board of Directors or prescribed by
these Bylaws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article IV.
Section 7. President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He or she shall preside at all meetings of the stockholders and, in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors. He or she shall be an ex-officio member of all
committees and shall have the general powers and duties of management usually
vested in the office of the President and Chief Executive Officer of
corporations, and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
Section 8. Vice Presidents. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 9. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He or she shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or these Bylaws. He or she
shall keep in safe custody the seal of the corporation, and when authorized by
the Board, affix the same to any instrument requiring it, and when so affixed it
shall be attested by his or her signature or by the signature of an Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature.
Section 10. Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary
7
<PAGE> 11
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 11. Treasurer. The Treasurer shall be the Chief Financial
Officer of the corporation and shall, subject to the control of the Board of
Directors, have the custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the corporation and shall deposit all moneys, and other valuable effects in the
name and to the credit of the corporation, in such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his or her transactions as Treasurer and of the financial condition of the
corporation. If required by the Board of Directors, he or she shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of the
duties of his or her office and for the restoration to the corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the corporation.
Section 12. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to
8
<PAGE> 12
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
(b) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal, administrative
or investigative action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he or she is
entitled to be indemnified by the corporation as authorized in this Article V.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification provided by this Article V shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of
9
<PAGE> 13
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) The Board of Directors may authorize, by a vote of a majority of a
quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liability under the provisions of this
Article V.
(h) For the purposes of this Article V, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he or she would have with
respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this Article, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
ARTICLE VI.
CERTIFICATES OF STOCK
Section 1. Certificates. Every holder of stock of the corporation shall
be entitled to have a certificate signed by, or in the name of the corporation
by, the Chairman or Vice Chairman of the Board of Directors, or the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer of the corporation, certifying the number of
shares represented by the certificate owned by such stockholder in the
corporation.
10
<PAGE> 14
Section 2. Signatures on Certificates. Any or all of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he or she were such officer, transfer agent, or registrar at
the date of issue.
Section 3. Statement of Stock Rights, Preferences, Privileges. If the
corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfers of Stock. Upon surrender to the corporation, or the
transfer agent of the corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of
11
<PAGE> 15
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 7. Registered Stockholder. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim or interest in such share on the part of any other person, whether or not
it shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
ARTICLE VII.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Payment of Dividends; Directors' Duties. Before payment of
any dividend there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 6. Manner of Giving Notice. Whenever, under the provisions of
the statutes or of the Certificate of Incorporation or of these Bylaws, or any
rule, regulation or statutory provision applicable to the corporation, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given (unless otherwise
provided) in writing, by mail, addressed to such director or stockholder, at his
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United
12
<PAGE> 16
States mail. Notice to directors may also be given by telecopier or other means
of electronic transmission at the address of such director on the books and
records of the corporation.
Section 7. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation or
of these Bylaws, or any rule, regulation or statutory provision applicable to
the corporation, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed to be equivalent thereto.
ARTICLE VIII.
AMENDMENTS
Section 1. Amendment by Directors or Stockholders. These Bylaws may be
altered, amended or repealed or new Bylaws may be adopted by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, or by the affirmative vote of not less than 66
2/3% of the total voting power of all outstanding securities of the Corporation
then entitled to vote generally in the election of directors, voting together as
a single class, at any regular meeting of the stockholders or the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
Bylaws be contained in the notice of such special meeting.
13
<PAGE> 1
EXHIBIT 10.1
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
DISTRIBUTION AND LICENSE AGREEMENT
THIS AGREEMENT, dated as of July 19, 1999 (the "Effective Date") by
and between WOMEN FIRST HEALTHCARE, INC., a Delaware corporation having its
principal place of business at 12220 El Camino Real, Suite 400, San Diego,
California 92130 ("WFHC"), and LABORATOIRES FOURNIER S.A., a French
corporation having its principal place of business at 42 rue de Longvic, 21300
Chenove, France ("Fournier"),
W I T N E S S E T H:
WHEREAS, WFHC is in the business of, inter alia, developing, marketing,
distributing and selling medical, consumer and educational products; and
WHEREAS, Fournier or its Affiliates (as hereinafter defined) own rights
in and to certain Products (as hereinafter defined); and
WHEREAS, WFHC desires to license from Fournier, and Fournier desires to
license to WFHC, certain rights to the Products in the Territory (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:
Article 1. DEFINITIONS
For purposes of this Agreement, the terms defined in this Section shall
have the meanings specified below:
1.1 "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under common control with a party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint fifty percent (50%) or more of
the members of the governing body of the corporation or other entity.
1.2 "Average Floor Price" shall mean the amount in euro calculated by
(i) multiplying the Floor Price of each Product form by the number of patches of
that form sold by Seller during the last calendar quarter, (ii) adding together
the multiplication results, and (iii) dividing the total by the aggregate number
of patches
<PAGE> 2
sold by Seller during said calendar quarter. Any Product form for which no Floor
Price shall have been determined yet shall not be considered in this
calculation.
1.3 "Change of Control" shall mean, with respect to a party, any event
resulting in a change of the corporation, person or entity that controls such
party according to any of the control criteria set forth in Section 1.1 above.
1.4 "CST" shall mean Cross Site Technologies SA, an Affiliate of
Fournier as of the date hereof.
1.5 "Discount" shall mean a reduction in the price of the Samples, such
reduction being * * * for the first Sales Year, * * * for the second Sales Year,
and * * * for the third Sales Year.
1.6 "Distributor" shall mean an entity to whom WFHC has contracted out
distribution of the Product.
1.7 "Estimated Net Selling Price" shall, for each Product form, mean the
Net Selling Price for the most recent calendar quarter as available to both WFHC
and Fournier.
1.8 "FDA" shall mean the US Food and Drug Administration or any
successor thereto.
1.9 "First Commercial Sale" shall mean the first sale of a Product
form by Seller to an independent customer.
1.10 "Floor Price" shall have the meaning set forth in Section 3.3
hereof.
1.11 "Initial Purchase Order" shall mean WFHC's first purchase order for
the Product attached hereto as Appendix 2. The "delivery dates" therein
specified shall mean the dates Fournier ships the Product.
1.12 "Minimal Amount" shall have the meaning set forth in Section 3.7
hereof.
1.13 "NDC number" or "National Drug Code number" shall mean the complete
identifying drug number maintained by the FDA, including labeler code, product
code and package size code.
1.14 "Net Sales" shall mean the gross invoiced sales of the Product
billed to independent customers by Seller, less, to the extent such amounts are
included in the invoiced sales price, actual credited allowances to such
independent customers for the Product which was spoiled, damaged or returned and
less actual (a) freight, postage, shipping and insurance costs incurred in
transporting such Product to such customers (but only to the extent that said
costs are separately delineated in Seller's
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 3
applicable invoice); (b) customary quantity and other trade discounts, rebates
and chargebacks actually allowed and taken in connection with the Product; (c)
VAT and other sales taxes assessed on the royalty-bearing sale of the Product;
provided that the aggregate of any deductions made pursuant to subparagraphs (a)
and (b) above shall never exceed * * * of said gross invoiced sales on an annual
basis.
1.15 "Net Selling Price" shall mean, with respect to any calendar
quarter, and for each dosage form of the Product, the Net Sales for such period
divided by the number of units sold during such period.
1.16 "Patent Rights" shall mean all patent applications heretofore or
hereafter filed or having legal force in the Territory owned by or licensed to
Fournier or to which Fournier otherwise acquires rights, which claim a Product
or the process of manufacture or use of a Product, together with any and all
patents that have issued or in the future issue therefrom, including utility
model and design patents, extensions or restorations, certificates of invention
and any and all divisions, continuations, continuations-in-part, reissues or
additions to any of the aforesaid patents and patent applications; all to the
extent and only to the extent that Fournier now has or hereafter will have the
right to grant licenses, immunities or other rights thereunder.
1.17 "Placebo Sample" shall mean a Sample for demonstration purposes
which contains no estradiol.
1.18 "Product(s)" shall mean the Esclim(TM) estrogen transdermal system,
consisting of a twice weekly patch in strengths of 25(mu)g/24h, 37.5(mu)g/24h,
50(mu)g/24h, 75(mu)g/24h and 100(mu)g/24h, as currently approved by the FDA,
together with any new dosage form thereof and a seven-day Esclim(TM) patch
(provided that Fournier makes no representation and gives no warranty that such
new forms or seven-day patch will be developed and FDA-approved), but excluding
any * * *.
1.19 "Quality Assurance Agreement" shall have the meaning set forth in
Section 7.4 hereof.
1.20 "Sample" shall mean a unit of Product that is not intended to be
sold but is intended to promote the sale of such Product.
1.21 "Sales Year" shall mean a period of twelve months commencing on
the first day of the first full calendar month following the First Commercial
Sale of the first form of Product, or on an anniversary thereof.
1.22 "Seller" shall mean WFHC or any WFHC Affiliate, sublicensee or
Distributor.
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 4
1.23 "Shipping Costs" shall mean the cost of shipping the Product from
Fournier's storage facility in Fontaine-les-Dijon, France to WFHC's distribution
facility in Newark, Delaware, i.e. the freight and freight insurance costs and
the fees and expenses of Fournier's forwarding agent.
1.24 "Term" shall mean seven (7) years from the later of (i) the date
of the First Commercial Sale of the first form of the Product, or (ii) January
1, 2000.
1.25 "Territory" shall mean the United States of America, including
its territories and possessions and the Commonwealth of Puerto Rico.
1.26 "Valid Patent Claim" shall mean either (a) a claim of an issued
and unexpired patent included within the Patent Rights, which has not been held
permanently revoked, unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which has not been admitted by the patent
holder to be invalid or unenforceable through reissue or disclaimer or otherwise
or (b) a claim of a pending patent application included within the Patent
Rights, which claim was filed in good faith and has not been abandoned or
finally disallowed without the possibility of appeal or refiling of said
application.
Article 2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Fournier.
(a) Corporate Power. Fournier is duly organized, validly existing and in
good standing under the laws of its place of incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof.
(b) Due Authorization. Fournier is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder. The person
executing this Agreement on Fournier' behalf has been duly authorized to do so
by all requisite corporate action.
(c) Binding Agreement; No Conflicts. This Agreement is a legal and valid
obligation binding upon Fournier and enforceable in accordance with its terms.
The execution, delivery and performance of this Agreement by Fournier does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any material law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it. Fournier is not a party to any contract the terms
of which would conflict with the terms of this Agreement or under which a
default or violation would arise as a result of the execution, entering into or
performance of this Agreement. Fournier has not
<PAGE> 5
currently granted any third party any rights which would conflict with the
rights granted to WFHC hereunder.
(d) Validity. Fournier is aware of no action, suit or inquiry or
investigation instituted by any governmental agency which questions or threatens
the validity of this Agreement.
(e) Consents. No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other document to
which Fournier is a party or by which it is bound is required or necessary for
the execution, delivery and performance of this Agreement by Fournier or the
consummation of the transactions contemplated hereby.
(f) Patents and other Proprietary Assets.
(i) To the best of its knowledge, Fournier (1) owns or has the
right to use, free and clear of all liens, claims and restrictions, all patents,
patent applications, trademarks, service marks, trade names, inventions, trade
secrets, copyrights, licenses and rights with respect to the foregoing, used in
or necessary for the transaction proposed to be conducted by it under this
Agreement, (2) in France and the Territory is not infringing and will not during
the Term infringe on the right or claimed right of any person or entity under or
with respect to any patent, trademark, service mark, trade name, invention,
trade secret, copyright, license or other intellectual property or right with
respect thereto.
(ii) To the best of Fournier's knowledge, Fournier or its
Affiliates own and have the unrestricted right to use all Product rights,
manufacturing rights, trade secrets, know-how, methods, techniques, processes,
inventions, designs, computer programs and technical data and all information
from which independent economic value is derived, not being substantially
available to the public or known by competitors and which Fournier has taken
reasonable steps to maintain in secret (all of the foregoing of which are
collectively referred to herein as "intellectual property") required for the
transactions to be conducted by it under this Agreement, free and clear of any
material right, lien or claim of others.
(iii) Since their organization, Fournier and CST have taken (and
will hereafter take) reasonable security measures to protect the secrecy,
confidentiality and value of all intellectual property developed and the rights
granted to WFHC hereunder.
(iv) As of the date hereof, Fournier is not aware that any of
Fournier's employees, advisors or consultants who have knowledge of intellectual
property or portion thereof is or will be in violation of his or her
confidentiality agreement or duty, and Fournier shall use reasonable efforts to
prevent any such violation. Fournier is not aware that any of Fournier'
employees or consultants is obligated under any contract (including licenses,
covenants or commitments of any
<PAGE> 6
nature) or other agreement, or subject to any judgment, decree or other of any
court or administrative agency, that would conflict with the transactions
contemplated by this Agreement.
(v) Fournier has not currently granted, and will not grant, any
license or right to use its proprietary information or intellectual property
inconsistent with WFHC's rights hereunder.
(g) Product. Fournier warrants (a) that in manufacturing or causing CST
to manufacture the Product it or CST, as the case may be, will comply with all
manufacturing instructions and the specification set forth in the New Drug
Application filed for the Product with the United States Food and Drug
Administration (the "FDA"); (b) that the Product will be produced in
accordance with such instructions and specifications and in compliance with the
Good Manufacturing Practices and Quality System Regulations of the FDA and other
applicable laws, rules and regulations; and (c) that the Product being delivered
will comply with said specification, will not be adulterated or misbranded, will
not have been misused, contaminated, tampered with or otherwise altered,
mishandled, subjected to negligence, and will have not less than the minimal
shelf life stated in Articles 3.5 and 3.6 hereof.
2.2 Representations and Warranties of WFHC.
(a) Corporate Power. WFHC is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and has
full corporate power and authority to enter into this Agreement and carry out
the provisions hereof.
(b) Due Authorization. WFHC is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder. The person executing
this Agreement on WFHC's behalf has been duly authorized to do so by all
requisite corporate action.
(c) Binding Agreement. No Conflicts. This Agreement is a legal and valid
obligation binding upon WFHC, and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by WFHC does not conflict
with any agreement, instrument or understanding, oral or written, to which it is
a party or by which it may be bound, nor violate any material law or regulation
of any court, governmental body or administrative or other agency having
jurisdiction over it. WFHC is not a party to any contract the terms of which
would conflict with the terms of this Agreement or under which a default or
violation would arise as a result of the execution, entering into or performance
of this Agreement. WFHC has not accepted from any third party any obligation
which would conflict with the obligations taken by WFHC hereunder, nor has WFHC
granted any third party any right so conflicting.
<PAGE> 7
(d) Validity. WFHC is aware of no action, suit or inquiry or
investigation instituted by any United States federal or state governmental
agency which questions or threatens the validity of this Agreement.
(e) Consents. No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other document to
which WFHC is a party or by which it is bound is required or necessary for the
execution, delivery and performance of this Agreement by WFHC or the
consummation of the transactions contemplated hereby.
2.3 Disclaimer of Warranties. EXCEPT AS SPECIFICALLY SET FORTH HEREIN,
NEITHER PARTY MAKES ANY REPRESENTATIONS OR GIVES ANY WARRANTY, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. EXCEPT AS A RESULT OF A BREACH OF ARTICLE 6 HEREOF,
NEITHER PARTY TO THIS AGREEMENT SHALL BE ENTITLED TO RECOVER FROM THE OTHER ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.
Article 3. LICENSE; ROYALTIES AND OTHER CONSIDERATION
3.1 License Grants to WFHC. (a) Fournier hereby grants to WFHC, and WFHC
hereby accepts, an exclusive (subject to Sections 3.11 and 3.12 hereof),
unrestricted (save as provided herein), irrevocable (except as provided in
Section 3.9 and Article 9 hereof) license, without the right to grant
sublicenses (except with the prior written consent of Fournier), to market, use,
distribute and sell Product in the Territory. (b) Fournier hereby grants to
WFHC, and WFHC hereby accepts, an exclusive (subject to Sections 3.11 and 3.12
hereof), unrestricted (save as provided herein), irrevocable (except as provided
in Sections 3.9 and Article 9 hereof) license, without the right to grant
sublicenses (except with the prior written consent of Fournier), to use the
trademark "Esclim(TM)" (the "Trademark"), in connection with the Product in
the Territory. Fournier covenants that it will not use or license any trademarks
confusingly similar to the Trademark in the Territory during the term of this
Agreement.
3.2 Initial License Fee. In consideration of the license granted to WFHC
herein, WFHC shall pay to Fournier a non-refundable initial license fee equal to
one million four hundred fifty thousand US dollars ($1,450,000), of which
$700,000 shall be conditional, payable as follows:
(a) $250,000 upon execution of this Agreement (provided that
the $250,000 payment made by WFHC on July 1, 1999 shall be
credited against this first installment); and
(b) $250,000 by July 31, 1999; and
<PAGE> 8
(c) $250,000 upon shipment by Fournier of the Product to be
shipped on November 5, 1999 as specified in Appendix 2;
and
(d) $350,000 within thirty (30) days after the close of the
first Sales Year if Seller has sold not less than * * *
patches of the Product in the Territory during that Sales
Year; and
(e) $350,000 within thirty (30) days after the close of the
second Sales Year if Seller has sold not less than * * *
patches of the Product in the Territory during that Sales
Year.
In the event that a delay in the shipment of the first Product
consignment is attributable to WFHC's negligence or willful
default, the $250,000 payment referred to in Subparagraph (c)
above shall be due and payable on November 22, 1999,
irrespective of the shipment of said Product, and without
prejudice to Fournier's other rights and remedies.
3.3 Royalties and Product Price. WFHC shall
(i) in further consideration of the license granted to WFHC herein pay
to Fournier a royalty quarterly during the Term equal to the greater of
(a) * * * of Net Sales or (b) * * * per patch ("Floor Royalty"), based on the
Product sold during the applicable quarter (including a patent royalty equal to
* * * of Net Sales), and
(ii) in consideration of the supply of Product pay to Fournier the
Shipping Costs and the greater of (a) * * * of Net Sales of the Product sold
during the applicable quarter or (b) the Floor Price (as defined below).
The Floor Price shall be (i) * * * per patch for the 25(mu)g, 37.5(mu)g and
50(mu)g dosage forms of the Product, and (ii) * * * per patch for the 75(mu)g
and 100(mu)g dosage forms of the Product. The Floor Price and the Floor Royalty
with respect to new dosage forms and the seven-day patch will be reasonably
determined by Fournier. The Floor Price for any Product form may be reasonably
adjusted by Fournier, not more than once per calendar year, in the event of a
change in its or CST's manufacturing costs. In the event Fournier desires to
make such an adjustment, it shall notify WFHC and the parties shall meet and use
reasonable efforts to agree on the amount of such adjustment. If the parties are
unable to agree notwithstanding such efforts, WFHC may at its expense designate
an independent public accountant reasonably acceptable to Fournier to review any
information which may justify such adjustment. The accountant shall report to
WFHC whether the information justifies the adjustment, but shall not disclose to
WFHC the content of any non-public information disclosed by Fournier or CST
during such review. If the accountant reports that the information justifies the
proposed adjustment or a smaller adjustment, the Floor Price shall be adjusted
accordingly. If (i) the parties are unable to agree notwithstanding said
efforts, and (ii) the aggregate of the royalty and
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<PAGE> 9
the new Average Floor Price as proposed by Fournier exceed * * * of the most
recent quarterly Net Sales as available to WFHC and Fournier on the date
Fournier first proposes the adjustment, either party may by giving not less than
three (3) months' prior written notice to the other terminate this Agreement.
During such notice period, all rights and licenses of WFHC hereunder shall be
deemed to be non-exclusive.
3.4 Responsibilities of Parties.
(a) Fournier. Fournier, by itself or through CST, shall be solely
responsible for the manufacture of the Product, including the identification,
contracting and sublicensing of any third parties to formulate, manufacture or
package the Product, and shall be solely responsible for all quality assurance,
quality control and other aspects of manufacturing the Product, provided that
Fournier shall after payment of the second installment of the above license fee
transfer to WFHC responsibility for the New Drug Application (the "NDA") filed
with the FDA with respect to the Product. In the event that Fournier or CST
believes that there will be some delay in shipping any purchase order for
Product, Fournier, by itself or through CST, shall provide a monthly report as
to the manufacturing status of each lot. The report shall describe any issues
that could impact delivery dates.
(b) WFHC. WFHC shall be solely responsible for US Customs
clearance, sales, marketing, advertising, distribution of the Product, GMP
compliance of the distribution facility, and for handling product complaints and
other regulatory matters with respect to the Product (other than NDA submissions
for new Product forms) in the Territory. WFHC shall not manufacture any Product,
except that it shall assume responsibility for the final packaging of the
Samples (subject to appropriate NDA changes). WFHC may entrust Fournier (under
separate terms) or a third party with such Sample packaging. WFHC acknowledges
that Fournier will not be under any obligation to disclose any manufacturing
information or data to WFHC, except (i) as is necessary for final Sample
packaging if not performed by Fournier or CST, or (ii) as required by applicable
law or regulation. WFHC shall sell, distribute and promote the Product under the
Trademark, to the exclusion of any other trademark (except WFHC's own corporate
name and, as the case may be, that of its sublicensees).
3.5 Supply of Products. Fournier shall supply Product to WFHC in
trade packs in finished form, packaged ready for sale and labeled in the English
language, C.I.F. WFHC's distribution facility in Newark, Delaware. WFHC will, at
its sole cost and expense, provide NDC numbers and designs for all labeling,
packaging and package inserts, subject to Fournier's and CST's production and
packaging constraints. As part of such constraints, each cardboard box of
Product shall contain eight (8) patches, one (1) patient package insert and one
(1) physician package insert, and the text printed onto each patch may be
modified only after mutual agreement on the effective date of the modification,
such date to be no later than February 1, 2000. All Product shipped to WFHC
shall have a minimum shelf life of eighteen (18) months. Fournier shall provide
a certificate of analysis to WFHC for its review and records with each shipment
of Products to WFHC.
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omitted portions.
<PAGE> 10
3.6 Samples. Fournier shall supply WFHC with a reasonable quantity of
Samples (to be agreed upon by the parties in good faith) for promotional
purposes, in the form of individual sachets containing one patch, for a price of
* * * per sachet (one patch), plus Shipping Costs and (as the case may be) final
packaging costs, C.I.F. WFHC's distribution facility in Newark, Delaware, for
the 25(mu)g, 37.5(mu)g and 50(mu)g dosage forms. For those quantities of Samples
which do not exceed the yearly aggregate amount set forth in Appendix 1 hereof
and are shipped during the first three Sales Years, the Discount shall apply to
the amount invoiced, unless Fournier is required to supply a quantity of 50(mu)g
Samples that exceeds 30% of the total Sample quantity in any binding purchase
order.. With respect to any Sales Year other than the first three ones, WFHC and
Fournier shall meet and consider possible discounts for such Year. All Samples
shipped to WFHC, including Placebo Samples, shall have a minimum shelf life of
twelve (12) months. The Sample price with respect to new dosage forms and the
seven-day patch will be reasonably determined by Fournier. The Sample price for
any Sample form may be reasonably adjusted by Fournier, in good faith, in the
event of a change in its or CST's manufacturing costs. In the event Fournier
desires to make such an adjustment, it shall notify WFHC and the parties shall
meet and agree on the amount of such adjustment. If the parties are unable to
agree, WFHC may at its expense designate an independent public accountant
reasonably acceptable to Fournier to review any information asserted by Fournier
to justify such adjustment. The accountant shall report to WFHC whether the
information justifies the adjustment, but shall not disclose to WFHC the content
of any non-public information disclosed by Fournier or CST during such review.
All Samples received shall be kept separate from other Products, shall be used
for Product promotion only and shall not be packaged or re-packaged for sale
purposes. Upon not less than five (5) working days' prior written notice, and no
more frequently than once each calendar year, WFHC shall permit, and shall cause
its Affiliates, sublicensees, subcontractors and Distributors to permit,
representatives of Fournier to have access, at all reasonable times during
regular business hours, to such records and warehouses as may be necessary to
verify compliance with these provisions.
Fournier shall, subject to regulatory requirements, supply WFHC with a
reasonable quantity of Placebo Samples (to be agreed upon by the parties in good
faith) for promotional purposes, in the form of individual sachets containing
one patch, for a price of * * * for 100,000 sachets (patches), plus Shipping
Costs and (as the case may be) final packaging costs, C.I.F. WFHC's distribution
facility in Newark, Delaware, for the 11cm(2) form of the Product. This price
shall be subject to adjustment as set forth above. The Discount shall not apply
to the price of Placebo Samples. Each order and each shipment for such Placebo
Samples shall amount to 100,000 sachets or an integral multiple of this amount.
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<PAGE> 11
3.7 Forecasts and Orders. WFHC shall provide Fournier a written twelve
(12) month rolling forecast at least ten (10) days prior to the first day of
each calendar month ("M"), such forecast to specify the requested quantity and
shipment dates for each Product form, including Samples and Placebo Samples.
Each forecast shall be binding upon WFHC with respect to orders forecast for the
Product (including Samples and Placebo Samples) to be delivered in the calendar
months M+3, M+4, M+5 and M+6. WFHC shall issue firm purchase orders for its
requirements of Product not less than ninety (90) days prior to the date of
requested shipment. Fournier shall not be obligated to ship a Product by the
shipment date set forth in any purchase order which is received by Fournier less
than ninety (90) days prior to such shipment date. Any firm purchase order for
each Product form (except Placebo Samples) shall amount to either (i) the
Minimal Amount (as defined below), (ii) an amount higher than the Minimal
Amount, or (iii) zero (0), but such order may be split into two or three
separate shipments within the M+3 through M+6 firm forecast period. In any case,
any order for the Product (except Placebo Samples) shall approximate 6,000,000
cm(2) (i.e. one manufacturing run) or an integral multiple thereof, in aggregate
for all Product forms including Samples but excluding Placebo Samples. Fournier
may by not more than 10% adjust the amounts of Product to be delivered, so that
such amounts correspond with one manufacturing run or an integral number
thereof. None of WFHC's standard terms of purchase and none of Fournier's
standard terms of sale or supply shall govern any supply of Product (including
Samples and Placebo Samples) under this Agreement, nor shall such terms
supplement or modify any terms and conditions thereof, despite possible
inclusion in any purchase order, order confirmation or other document.
The term "Minimal Amount" as used in this Section shall mean:
- - for the 25(mu)g dosage form of Product * * * patches
- - for the 37.5(mu)g dosage form of Product * * * patches
- - for the 50(mu)g dosage form of Product * * * patches
- - for the 75(mu)g dosage form of Product * * * patches
- - for the 100(mu)g dosage form of Product * * * patches
- - for any new dosage form of Product
or the 7 day patch amount to be reasonably determined
by Fournier
3.8 Diligence. During the term of this Agreement WFHC will use
commercially reasonable best efforts to maximize the sales of the Product in the
Territory. WFHC shall develop a marketing and sales policy to this effect. WFHC
shall use reasonable commercial efforts to make the First Commercial Sale of the
Product in the Territory no later than forty-five (45) days after the date WFHC
receives the first consignment of Product. In the event that WFHC has not made
such First Commercial Sale within said forty-five day period notwithstanding
such efforts, WFHC shall make such First Commercial Sale as soon as reasonably
possible thereafter, but no later than ninety (90) days after the date WFHC
receives
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<PAGE> 12
the first consignment of Product. The parties shall establish a joint marketing
committee to review marketing strategy for the Product so as to achieve
reasonable consistency in marketing strategy among the markets for the Product.
The committee shall consist of four (4) persons, with WFHC and Fournier each
being entitled to designate two (2) individuals. Each party shall bear the costs
and expenses of its designated members that are incurred in connection with
committee meetings. This committee shall meet not less than twice per Sales
Year, unless otherwise agreed.
3.9 Minimum Sales and Calls. A good faith sales forecast for each of the
first three (3) Sales Years is attached hereto as Appendix 1 and made an
integral part hereof. For each subsequent Sales Year, WFHC shall provide
Fournier, no later than sixty (60) days prior to the beginning of the relevant
Sales Year, with a good faith sales forecast for such Sales Year. WFHC shall
sell during each of the first two (2) Sales Years no less than thirty percent
(30%) of the sales forecast for the relevant Sales Year, and shall sell during
the first three (3) Sales Years, in the aggregate, at least fifty percent (50%)
of the sales forecast for such three (3) year period. In the event WFHC fails to
achieve such minimum sales in any Sales Year (or in the aggregate in first three
(3) Sales Years), Fournier may, upon six (6) months' written notice to WFHC, and
at its sole option, either terminate this Agreement or convert this Agreement
into a non-exclusive license. This termination or conversion right shall be
Fournier's sole and exclusive remedy for such failure, unless such failure
derives from WFHC's willful default.
During each of the four (4) calendar quarters immediately following the calendar
quarter in which the First Commercial Sale of the first form of Product was
made, WFHC shall carry out not less than * * * Calls (as defined and measured
below) and shall use commercially reasonable best efforts to carry out not less
than * * * Calls. In all such four (4) calendar quarters, WFHC shall carry out
not less than * * * Calls in the aggregate. If, according to WFHC's good-faith
records of the number of occasions on which a Sample of the Product was signed
for by a health care professional with prescribing authority, WFHC fails to
achieve either (a) * * * Calls in any one (1) of such calendar quarters or (b)
an aggregate of * * * Calls in all such four (4) calendar quarters, Fournier may
by written notice immediately terminate this Agreement or, at its sole option,
immediately convert this Agreement into a non-exclusive license. WFHC shall
within thirty (30) days after the end of each calendar quarter provide Fournier
with a written list of the health care professionals to whom a Sample has been
given during such quarter, such list to include the name of such professionals,
the date of each relevant Call and such other information as retained pursuant
to WFHC's Standard Operating Procedure under applicable FDA requirements. WFHC
shall permit Fournier representatives to have access, once in each calendar
quarter upon not less than five (5) business days' prior written notice, to the
original Sample distribution forms signed by such health care professionals as
Fournier may designate. This right of access shall lapse six (6) months after
the close of the last calendar quarter in which WFHC must perform such minimum
Calls. Failure by WFHC to provide Fournier with such list or original forms
shall be deemed to be evidence of a failure to perform the relevant Calls.
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<PAGE> 13
For purposes of the preceding Paragraph, a "Call" shall mean a face-to-face
meeting between a health care professional with prescribing authority and a
professional representative of WFHC during which a verbal presentation of the
key Product attributes is made to such health care professional and one or more
Samples are given to such health care professional.
In the event that Fournier elects to convert this Agreement into a non-exclusive
license pursuant to this Section, WFHC's license shall remain exclusive with
respect to the Esclim trademark, and WFHC shall at Fournier's request permit
Fournier's other licensees or distributors to cross-reference the NDA held by
WFHC.
3.10 Marketing and Sales. Fournier will, to the extent that it has the
right to do so (including but not limited to the appropriate copyright), provide
WFHC with a copy of such documents in the English language as are used by the
relevant Fournier Affiliate to train its sales force in Canada. WFHC shall be
solely responsible for any use thereof in the Territory. WFHC shall be
responsible for conducting all sales training of its sales force. At WFHC's
request and expense, Fournier will provide WFHC with reasonable assistance for
such training. WFHC shall define a marketing and sales plan for the Product on
an annual basis and shall submit each such plan to Fournier in writing no later
than eight (8) weeks prior to (i) the First Commercial Sale of the first form of
Product in the Territory, or (ii) the beginning of the implementation period of
such plan. Fournier shall have the right to reject such plan only if, in its
reasonable opinion, such plan significantly conflicts with Fournier's marketing
strategy outside the Territory, provided that Fournier shall exercise this right
no later than four (4) weeks after Fournier receives such plan, and provided
further that at the time Fournier exercises such right it shall give WFHC a
written statement articulating its reasons for rejecting such plan.
WFHC shall within thirty (30) days after the close of each calendar month
provide Fournier with a written report of all Product sales effected by Seller
in the Territory during that calendar month. This report shall show such sales
by volume and value for each Product form.
WFHC shall at its cost and expense prepare all advertisement and promotional
materials, documents and campaigns for the Product in the Territory, in
accordance with FDA requirements. WFHC shall, within ten (10) days of receipt of
a written request by Fournier, provide Fournier with a copy of such materials,
documents and campaign plans (including but not limited to any Internet document
and other electronic materials which refer to the Product) as were, are being or
will be used by WFHC or its Affiliates or sublicensees in the Territory.
3.11 Fournier's Co-Promotion Rights. Fournier shall have the right to
co-promote the Product in the Territory upon reasonable co-promotion terms to be
<PAGE> 14
negotiated in good faith with WFHC after Fournier's decision to exercise this
right. Fournier may assign this right to an Affiliate or a corporation,
partnership or other entity in respect of which Fournier or its Affiliates hold
not less than thirty percent (30%) of the stock or other ownership interest.
The term "co-promote" or "co-promotion" as used in this Section shall mean
marketing, promotion and advertisement of the Product under (a) the relevant
existing NDA and (b) the existing trademark.
3.12 * * * Fournier and/or CST are currently developing
* * * * * *. If and when any such * * * has been approved by the Food and Drug
Administration or any successor thereto for marketing in the Territory, Fournier
and/or CST may, at its sole option, either (a) enter into good faith
negotiations with WFHC for the purpose of granting WFHC marketing rights to such
system in the Territory and agreeing upon terms therefor, or (b) select another
licensee or distributor for such system in the Territory. In the (a) case, WFHC
shall be required to pay half of the research and development costs and expenses
relating to such system, and Fournier shall, with respect to such system, have
the same assignable co-promotion right as set forth in Article 3.11 hereof. In
the (b) case, Fournier shall so notify WFHC in writing, and WFHC's rights and
licenses hereunder shall immediately become non-exclusive. For the avoidance of
doubt, (i) the term "another licensee or distributor" as used above shall
include but shall not be limited to any Affiliate of Fournier, (ii) Fournier
will not during the term of this Agreement license any trademarks confusingly
similar to the Trademark to another licensee or distributor in the Territory,
and (iii) Fournier may identify and select another licensee or distributor at
any time prior to FDA approval of the * * * , provided that such
licensee or distributor shall not sell the Product in the Territory prior to
said approval and notification. WFHC shall at Fournier's request permit such
licensee or distributor to cross-reference the NDA held by WFHC.
3.13 No Competition. During the term of this Agreement neither WFHC nor
its Affiliates or sublicensees shall in the Territory develop, manufacture,
sell, distribute or promote any transdermal patch containing estradiol as the
sole active ingredient, provided that if WFHC wants to obtain marketing or
licensing rights with respect to a * * *, WFHC grants Fournier a
right of first negotiation so that Fournier may have priority in proposing its
* * * . For the avoidance of doubt, the word "distribute" as used
in this Section 3.13 shall not include the dispensing of a product by a
pharmacy.
3.14 Provisional Product Price and Reconciliation. WFHC shall pay the
Shipping Costs and the greater of (i) * * * of the Estimated Net Selling Price
or (ii) the Floor Price (as defined in Section 3.3 hereof) to Fournier for each
shipment and each form of Product within thirty (30) days of shipment. For the
first two calendar quarters in which such Product form is sold, WFHC shall pay
the Floor Price and the Shipping Costs. The provisional price as set forth above
and the
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<PAGE> 15
final Product price as set forth in Section 3.3 hereof shall be reconciled after
the close of each calendar quarter on the basis of the Net Sales of that
quarter, and the difference (if any) shall be paid by WFHC to Fournier within
forty-five (45) days of the close of that quarter (if reconciliation shows that
such difference is due to Fournier) or credited against future payments owed to
Fournier (if reconciliation shows that such difference is due to WFHC).
Notwithstanding the foregoing, within thirty (30) days after receipt of the
report provided for under Section 4.1 hereof in respect of the last calendar
quarter in each calendar year, Fournier shall pay WFHC the net amount of any
such credits related to such calendar year which have not been set off against
actual deliveries.
3.15 Licensed Territory. WFHC shall refrain, and shall cause its
Affiliates, sublicensees and Distributors to refrain, from selling and promoting
any Product outside the Territory.
Article 4. ROYALTY REPORTS AND ACCOUNTING
4.1 Reports, Exchange Rates. During the term of this Agreement following
the First Commercial Sale of the first form of Product, WFHC shall for each
calendar quarter furnish to Fournier a written report showing (i) the gross
sales by value and volume of each form of Product sold by WFHC and its
Affiliates, sublicensees and Distributors in the Territory during that calendar
quarter and the detailed calculation of Net Sales from such gross sales; (ii)
the royalties and the Product price (including reconciliation adjustments)
payable in United States dollars, which shall have accrued hereunder in respect
of such sales; (iii) withholding taxes, if any, required by law to be deducted
in respect of such sales, provided that WFHC will take reasonable action to seek
to minimize any withholding taxes payable by Fournier and provided further that
WFHC shall secure proof of payment of such taxes and provide Fournier with
appropriate receipts so that Fournier may credit such taxes against its own
income tax according to the applicable international tax convention; (iv) the
date of the First Commercial Sale of any Product in the Territory during the
reporting period; and (v) the exchange rates used in determining the amount of
United States dollars payable, where conversion is necessary according to the
provisions hereof. The conversion of euro to United States dollars shall be made
at the average of the rate published in the Wall Street Journal for the close of
business in New York for the last thirty (30) days of the calendar quarter for
which the payments are set. Reports shall be due on the forty-fifth (45th) day
following the close of each respective calendar quarter. If no royalty is due
for any royalty period hereunder, WFHC shall so report. WFHC shall keep accurate
records in sufficient detail to enable the royalties and prices payable
hereunder to be determined.
<PAGE> 16
4.2 Audits.
(a) Upon the written request of Fournier at Fournier' expense and not
more than once in each calendar year, WFHC shall permit an independent public
accountant selected by Fournier and reasonably acceptable to WFHC, to have
access during normal business hours to such of the records of WFHC and its
Affiliates, sublicensees and Distributors as may be reasonably necessary to
verify the accuracy of the royalty and price reports hereunder.
(b) In the event such accountant concludes that additional royalties or
amounts were owed during such period, the additional royalty or price shall be
paid within thirty (30) days of the date Fournier delivers to WFHC such
accountant's written report so concluding. The fees charged by such accountant
shall be paid by Fournier unless the audit discloses that the royalties payable
by WFHC for the audited period are more than one hundred five percent (105%) of
the royalties actually paid for such period, in which case WFHC shall pay the
reasonable fees and expenses charged by the accountant.
(c) If WFHC grants a sublicense pursuant to Section 3.1 of this
Agreement, or sells the Product through a Distributor, WFHC shall include in the
sublicense or distribution agreement a provision requiring the sublicensee or
Distributor to make reports to WFHC, to keep and maintain records of sales made
pursuant to such sublicense or distribution and to grant access to such records
by Fournier's independent accountant to the same extent required of WFHC under
this Agreement.
(d) Upon the expiration of forty-eight (48) months following the end of
any calendar year, the calculation of any royalties and Product price payable
with respect to such year shall be binding and conclusive upon Fournier, and
WFHC and its sublicensees and Distributors shall be released from any liability
with respect to such royalties and adjustments for such year, except in case of
fraud.
4.3 Confidential Financial Information. Fournier agrees that all
information subject to review under this Article 4 or under any sublicense
agreement is confidential and that Fournier shall cause its accountant to retain
all such information in confidence, subject to exceptions similar to those set
forth in Article 6.1 hereof.
4.4 Payment Terms. Royalties and Product price reconciliation
adjustments shown to have accrued by each report provided for under Section 4.1
hereof shall be due and payable on the date such report is due. Royalties
determined to be owing, and any overpayments to be credited, with respect to any
prior quarter shall be added, together with interest thereon under Section 4.7
below from the date of the report for the quarter for which such amounts are
owing, or credited, as the case may be, to the next quarterly payment hereunder.
4.5 Exchange Control. All royalties due and other payments hereunder
shall be paid in United States dollars. Any conversion of euro to US dollars
which
<PAGE> 17
may be necessary hereunder, other than that made pursuant to Section 4.1 hereof,
shall be made at the average of the rate published in the Wall Street Journal
for the close of business in New York on the last thirty (30) days of the
calendar month immediately preceding the month in which the relevant payment is
made. If at any time legal restrictions prevent the prompt remittance of part or
all royalties, payment shall be made through such lawful means or methods as the
parties may determine.
4.6 Payment Method. Except as provided in Section 4.5, all payments by
WFHC to Fournier under this Agreement shall be made by bank wire transfer in
immediately available funds to such accounts as Fournier specify to WFHC before
such payment is due.
4.7 Interest. If either party fails to pay any amount owed and payable
to the other party hereunder, such amount shall without notice bear interest
from the date it is due until payment is made to the other party at the base
rate of Bank of America NT & SA plus two (2) percentage points, without
prejudice to any other right or remedy available to that other party hereunder
or otherwise.
Article 5. INFRINGEMENT ACTIONS BY THIRD PARTIES
If Fournier or WFHC, or any Indemnitee (as defined in Article 10
hereof) shall be named as defendants, either jointly or individually in a legal
proceeding by a third party or shall be joined in the same litigation for
infringement of a patent or trademark because of the manufacture, use or sale of
Products, Fournier shall be entitled to control the defense of such suit. WFHC
shall have the right to be represented by counsel of its own selection, but at
its sole expense, and shall cooperate fully in the defense of such suit and
furnish to Fournier all evidence and assistance in its control. WFHC shall have
the right to consult with Fournier with respect to the defense of such suit and
to receive copies of all pleadings, correspondence and other documents relating
to such suit. Fournier shall not be entitled to settle such suit or otherwise
consent to an adverse judgment in such suit without the express written consent
of WFHC if such settlement or adverse judgment diminishes any right or interest
of WFHC hereunder, provided that such consent shall not be unreasonably
withheld.
Article 6. CONFIDENTIALITY
6.1 Nondisclosure Obligations. Except as otherwise provided in this
Article 6, and subject to Article 7 hereof, during the term of this Agreement
and for a period of ten (10) years thereafter, each party ("Recipient") shall
maintain in confidence and use only for purposes of this Agreement any
technical, scientific or business information and data relating to the other
party's research, development, inventions, products, production, manufacturing,
finances, marketing, customers, or business plans, including, but not limited
to, trade secrets, know-how, clinical and non-clinical
<PAGE> 18
data, formulas, processes, or other intellectual property, that is or has been
disclosed to or otherwise received or obtained by Recipient, whether or not in
connection with or pursuant to this Agreement.
For purposes of this Article 6, information and data described above
shall be referred to as "Information." To the extent it is reasonably
necessary or appropriate to fulfill its obligations or exercise its rights under
this Agreement, a party may disclose Information it is otherwise obligated under
this Section not to disclose to its Affiliates, sublicensees, consultants,
outside contractors and clinical investigators, on a need-to-know basis on
condition that such entities or persons agree to keep the Information
confidential for the same time periods and to the same extent as such party is
required to keep the Information confidential; and a party or its sublicensees
may, on a confidential basis wherever reasonably possible, disclose such
Information to government or other regulatory authorities to the extent that
such disclosure is reasonably necessary to obtain authorizations to conduct
clinical trials with and to commercially market the Product. The obligation not
to disclose and use Information shall not apply to any party of such Information
that (i) is or becomes available to the public other than by acts of Recipient
or its Affiliates or sublicensees in contravention of this Agreement; or (ii) is
lawfully disclosed to Recipient or its Affiliates or sublicensees by a third
party, provided such Information was not obtained by such third party directly
or indirectly from the other party under this Agreement or its Affiliates; or
(iii) prior to disclosure under this Agreement, was already in the possession of
Recipient or its Affiliates or sublicensees, provided such Information was not
obtained directly or indirectly from the other party under this Agreement or its
Affiliates; or (iv) can be shown by written documents to have been independently
developed by Recipient or its Affiliates without breach of any of the provisions
of this agreement.
6.2 Terms of This Agreement. Fournier and WFHC each agrees not to
disclose any terms or conditions of this Agreement to any third party during the
term thereof without the prior consent of the other party, except as required by
applicable law or to persons with whom WFHC or Fournier has entered into or
proposes to enter into a business relationship and who reasonably need to know
such terms or conditions for the purposes of such relationship or tentative
relationship, provided that any such disclosure shall be made on a confidential
basis if legally possible. Notwithstanding the foregoing, prior to execution of
this Agreement, WFHC and Fournier shall agree upon the substance of information
that can be used to describe the terms of this transaction, and WFHC and
Fournier may disclose such information, as modified by mutual agreement from
time to time, without the other party's consent.
<PAGE> 19
Article 7. TRIALS, ADVERSE EVENTS, RELATIONS WITH FDA, QUALITY
ASSURANCE, RECALLS
7.1 Trials. WFHC shall not perform or sponsor any clinical or
non-clinical trial or test on or with any Product, nor permit its Affiliates or
sublicensees to do so, unless Fournier's prior written consent has been
obtained. As an exception, WFHC and its authorized Affiliates and sublicensees
may without Fournier's prior consent perform or sponsor in the Territory any
phase IV clinical trials which do not require IND approval by the FDA and are
not meant to support any future IND. WFHC shall promptly provide Fournier with a
copy of all documents (including but not limited to draft protocols, signed
protocols, investigator's reports, draft publications and publications) and data
relating to or provided from any trial or test on or with any Product.
Notwithstanding the provisions of Article 6 hereof, such documents and data may
be used, disclosed or published by Fournier, its Affiliates or licensees for
purposes of Product promotion, subject to (i) WFHC's exclusive rights hereunder,
and (ii) third party rights.
In the event that WFHC wishes to publish the results of any clinical trial
performed or sponsored by WFHC on or with the Product, WFHC shall provide
Fournier with a copy of the draft publication and shall not make any submission
for publication unless Fournier's prior written approval has been obtained,
provided that such approval shall not be unreasonably withheld, and provided
further that any failure by Fournier to respond within one (1) month of receipt
shall be considered acceptance of the relevant publication. In the event that
Fournier wishes to publish the results of any clinical trial performed or
sponsored by Fournier on or with the Product in any British, Canadian or
American reputable scientific periodical, Fournier shall provide WFHC with a
copy of the draft publication prior to submission.
7.2 Adverse Events. Each party shall, during the term of this Agreement,
have a continuing obligation to notify the other party immediately and within
the reporting period imposed by any applicable governmental authority of any
adverse reaction or complaint reported to such party resulting from the use of a
Product.
During the term of this Agreement, WFHC shall be responsible for completion and
submission to the FDA of any report involving an adverse reaction involving a
Product. Fournier shall timely provide to WFHC any and all data relating to a
Product sold by Fournier or any Affiliate, licensee or distributor of Fournier,
which data is necessary for WFHC to timely complete and submit such report. WFHC
shall, simultaneously with the submission of such report to the FDA, provide
Fournier with a copy of such report. The parties shall execute a detailed
Standard Operating Procedure for purposes of adverse event reporting.
7.3 Dealings with FDA. WFHC shall, during the term of this Agreement and
for a period of ten (10) years after the date of termination of this Agreement,
immediately forward to Fournier a copy of any correspondence, information,
report or notification that it receives from the FDA or other governmental
authority relating to
<PAGE> 20
any Product. Except where precluded by any deadline imposed by the FDA, WFHC
shall consult with Fournier prior to any meeting or other contact with the FDA
and shall immediately forward to Fournier a copy of any letter, notification or
report which is sent by WFHC to the FDA. Fournier and its designated Affiliate
shall have the right to attend any meeting between WFHC and the FDA relating to
the Product.
In the event WFHC proposes, or is requested or directed by the FDA, to make any
change in the registration files for any Product, including, but not limited to,
a change in the labeling or package inserts, WFHC shall immediately notify
Fournier of such proposed change and, prior to requesting or accepting such
change, obtain Fournier's prior written approval (which approval shall not be
unreasonably withheld).
WFHC shall diligently file with the FDA any NDA amendments which Fournier has
prepared and may reasonably require in connection with the manufacturing of the
Product, including but not limited to any change in the suppliers of materials
or the manufacturing. In the event that the FDA requires any additional clinical
trial, the parties shall meet and decide whether such trial may reasonably be
performed and how the cost thereof will be allocated, as the case may be.
7.4 QA Agreement. The parties hereto shall as soon as reasonably
possible after execution hereof execute a Quality Assurance Agreement specifying
the pharmaceutical rules and procedures applicable to the supply of Product
hereunder. The terms of this Agreement shall prevail over any conflicting terms
contained in such Quality Assurance Agreement. Such Quality Assurance Agreement
may be updated, or superseded by a new version thereof, at all reasonable times
by mutual agreement.
7.5 QA Audits. Each party shall secure the right for the other party to
inspect any facility where the Product is manufactured, packaged or stored, at
all reasonable times during regular business hours and upon not less than five
(5) working days' prior written notice. Such inspections shall be for regulatory
and quality assurance purposes only.
7.6 Recalls. In the event either party has reason to believe that one or
more batches of any Product should be recalled or withdrawn from distribution,
such party shall immediately notify the other party. In the event a recall of a
Product is required because of any act or omission of, or a breach of this
Agreement by, WFHC, Seller or any third party acting on behalf of WFHC or
Seller, including, but not limited to, the handling, storage or distribution of
such Product, WFHC shall (i) immediately notify Fournier of such recall and (ii)
take such steps as may be necessary to effect such recall or as may be required
by any governmental authority. In the event a recall is required as a result of
a failure of a Product manufactured by Fournier or CST to conform to the
criteria set forth in Section 2.1 (g) hereof or a breach by Fournier of its
obligations hereunder, WFHC shall, after consultation with Fournier, take such
reasonable steps as may be necessary to effect such recall, and Fournier shall
reimburse WFHC for any reasonable documented costs associated
<PAGE> 21
with such recall. Upon request of WFHC, Fournier shall reasonably assist in such
recall, except that such assistance shall not impose, or be deemed to impose,
any liability on Fournier. In the event a recall is required because of an act
or omission of both parties, then the parties shall negotiate in good faith
which party shall undertake the recall and an appropriate allocation of the
costs and expenses of such recall.
Article 8. PATENTS AND TRADEMARK
8.1 No Technology Rights. Except as otherwise provided in this
Agreement, under no circumstances shall a party hereto, as a result of this
Agreement, obtain any ownership interest or other right in any technology,
know-how, patents, pending patent applications, trademarks, pending trademark
applications or products, including items owned, controlled or developed by the
other, or transferred by the other to said party at any time pursuant to this
Agreement. It is understood and agreed by the parties that this Agreement does
not grant to either party any license or other right in basic technology of the
other party except to the extent necessary to enable the parties to carry out
their party of this Agreement.
8.2 Enforcement of Patent Rights and Trademark. Fournier and WFHC shall
promptly notify the other in writing of any alleged or threatened infringement
of Patent Rights or Trademark in the Territory of which they become aware.
Fournier or its relevant Affiliate shall have the right to prosecute any
infringement described in this Section 8.2. If Fournier elects not to proceed
with enforcement activity within (i) ninety (90) days following the notice of
alleged infringement or (ii) ten (10) days before the time limit, if any, set
forth in the appropriate laws and regulations for the filing of such actions,
whichever comes first, then WFHC may act in its own name to commence litigation
with respect to the alleged or threatened infringement. In the event a party
brings an infringement action, the other party shall cooperate fully, including,
if required to bring such action, the furnishing of a power of attorney. If
Fournier or its relevant Affiliate brings an infringement action, WFHC and its
authorized sublicensees shall have the right to join in such action in order to
recover damages for injury to WFHC or such sublicensees resulting from the
infringement. Neither party shall have the right to settle any patent or
trademark infringement litigation under this Section 8.2 in a manner that
diminishes the rights or interests of the other party without the express
written consent of such other party, such consent not to be unreasonably
withheld.
The costs of any litigation commenced pursuant to this Section 8.2,
including attorneys' fees and expenses, shall be borne by the party commencing
such litigation, unless (i) the parties agree to a different cost sharing
arrangement in any particular matter, or (ii) WFHC or its authorized
sublicensees elect to join in an action instituted by Fournier or a Fournier
Affiliate, in which case WFHC and such sublicensees shall bear the fees and
expenses of their own legal counsel. Except as otherwise agreed to by the
parties as part of a cost sharing arrangement, any
<PAGE> 22
recovery realized as a result of any litigation under this Section 8.2 (except
joint action) shall be retained by the party who brought the infringement
action. In the event of a joint infringement action as aforesaid, the court
shall decide on the allocation of any compensatory damages, and any punitive
damages shall be shared equally by the parties.
Article 9. TERM, TERMINATION
9.1 Expiration. Unless terminated earlier pursuant to Sections 3.9, 9.2
or 9.3 hereof, this Agreement shall expire on the expiration of the Term.
9.2 Termination for Cause. Either party may terminate this Agreement
upon the occurrence of any of the following:
(a) Bankruptcy.
Either party may, in addition to any other remedies available to
it by law or in equity, terminate this Agreement by written notice to the other
party (the "Bankrupt Party") with immediate effect in the event there shall
have been appointed a trustee or receiver of the Bankrupt Party or for all or a
substantial part of its property, or any case or proceeding shall have been
commenced or other action taken by or against the Bankrupt Party in bankruptcy
or seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or there shall have been issued a
warrant of attachment, execution, distraint or similar process against any
substantial part of the property of the Bankrupt Party, and any such event shall
have continued for thirty (30) days undismissed, unbound and undischarged.
(b) Default. Upon the failure of either party to comply with any
material obligation set forth in this Agreement (a "Default"), the
non-defaulting party shall give to the defaulting party written notice (the
"Notice of Default") specifying the nature of the Default and requesting that
the defaulting party cures such Default within sixty (60) days. If the
defaulting party shall dispute the existence, extent or nature of any Default
set forth in a Notice of Default, the parties shall use good faith efforts to
resolve the dispute. In the event any Default shall not be cured within sixty
(60) days of the defaulting party's receipt of a Notice of Default, the
non-defaulting party shall be entitled to terminate this Agreement in its
entirety and the licenses granted hereunder by giving written notice to the
other party with immediate effect.
(c) Upon a Change of Control of the other party, on ninety (90) days'
written notice to such other party. This termination right may be exercised by a
party each time there is a Change of Control, whether or not exercised with
respect to an earlier Change of Control. The party subjected to a Change of
Control shall promptly notify the other party thereof in writing, giving all
relevant particulars of the Change of
<PAGE> 23
Control, and that other party may exercise this termination right within ninety
(90) days of receipt of such notice.
9.3 Immediate Termination.
(a) This Agreement may be terminated immediately by a party by
written notice if the other party: (i) admits in writing its inability to
fulfill its obligations as they become due, (ii) ceases or threatens to cease to
carry on business, whether hereunder or generally, or (iii) cannot maintain the
required insurance coverage under Section 10.4 hereof. This Agreement may be
terminated immediately by Fournier by written notice if WFHC fails to pay to
Fournier any of the amounts referred to in Section 3.2 (b), (c), (d) and (e)
hereof on the date such payment is due.
(b) This Agreement may be terminated immediately by WFHC by
written notice in the event that the shipment by Fournier of the amount of
Product specified for shipment November 5th, 1999 in Appendix 2 has not been
completed by November 5, 1999.
This termination right shall lapse on December 31, 1999.
9.4 Effect of Termination. Expiration or termination of this Agreement
shall not relieve the parties of any obligation accruing prior to such
expiration or termination and the provisions of Article 4, Article 6, Section
7.3, Article 10 and Section 11.5 (b) shall survive the termination or expiration
of this Agreement.
9.5 Remedies. Subject to section 11.5(b) hereof, the rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law or equity.
9.6 Other Consequences of Termination.
(a) Upon termination or expiration of this Agreement, WFHC shall,
within thirty (30) days from the date of receipt of a request from Fournier,
transfer, free of charge, to Fournier or such third party as Fournier may
designate each open IND and NDA held or obtained by WFHC or any Affiliate or
sublicensee of WFHC in connection with the Product. Failure by WFHC to promptly
transfer, without good cause, such IND or NDA in accordance with this Section
9.6 (a) shall entitle Fournier to seek any and all remedies to which Fournier is
entitled by law or in equity.
(b) All purchase orders for Product submitted by WFHC, which have
not been shipped prior to termination or expiration of this Agreement, shall
become automatically null and void, except for such orders which have been
submitted by WFHC to meet firm orders of any customer of WFHC or any Affiliate
of WFHC.
<PAGE> 24
(c) Fournier shall have the right to repurchase any Product owned
by WFHC, which, at the time of Fournier's request pursuant to Section 9.6 (a)
hereof, is fit for sale and has not less than twelve months' remaining shelf
life, at the price paid by WFHC to Fournier for such Product, subject to the
rights of any independent third party to or in such Product which existed prior
to such termination or expiration. Promptly following such termination or
expiration, but in no event later than thirty (30) days after such date of
termination or expiration, WFHC shall provide Fournier with a complete and
detailed list of the inventory of the Product (including but not limited to the
remaining shelf life for each unit of Product) and shall allow access of such
inventory by Fournier's representatives to enable Fournier to determine what
part, if any, of such inventory Fournier may repurchase. Such right of
repurchase shall lapse sixty (60) days after the date of receipt by Fournier of
such inventory of Product.
(d) In the event of termination pursuant to Section 9.3 (b)
hereof, WFHC shall within thirty (30) days of termination pay Fournier for the
Product (including Samples and Placebo Samples) then produced or then being in
the process of manufacture which had been ordered by WFHC, at the price of EUR
0.12 per patch. Such Product shall not be delivered to WFHC.
Article 10. INDEMNITY
10.1 Fournier's Right to Indemnification. WFHC shall indemnify and hold
harmless Fournier, its successors and assigns, CST and the directors, officers,
employees, agents, attorneys and representatives thereof (collectively
"Indemnitee(s)"), from and against any and all liabilities, damages, losses,
settlements, claims, actions, suits, penalties, fines, costs or expenses
(including, without limitation, reasonable attorneys' fees) of whatever kind or
nature, including, without limitation, any claim or liability based upon
negligence, warranty, strict liability, violation of government regulation or
infringement of patent or proprietary rights, fees and damages arising out of or
resulting from WFHC's handling, storage, shipment, promotion, marketing, use or
distribution of the Product, other than claims or liabilities for which Fournier
is required to indemnify WFHC pursuant to section 10.2 hereof.
10.2 WFHC's Right to Indemnification. Fournier shall indemnify and hold
harmless WFHC, its successors and assigns, and the directors, officers,
employees, agents, attorneys and representatives thereof (collectively
"Indemnitee(s)"), from and against any and all liabilities, damages, losses,
settlements, claims, actions, suits, penalties, fines, costs or expenses
(including, without limitation, reasonable attorneys' fees) of whatever kind or
nature, including, without limitation, any claim or liability based upon
negligence, warranty, strict liability, violation of government regulation or
infringement of patent or other proprietary rights, arising out of or resulting
from (a) the use of or administration of finished Product containing a defect
resulting from Fournier's negligence, willful misconduct or breach of its
warranties set forth in section 2.1 (g) hereof; or (b) infringement of the
Trademark or any third party
<PAGE> 25
intellectual property right covering the manufacture of the Product (subject to
Section 3.8 hereof). As used herein, the term "covering" shall mean, with
respect to any act, an act which would, in the absence of a license provided
hereunder, infringe a claim of a pending patent application, if issued as a
patent, or a patent which has not been finally held invalid or unenforceable by
a court of competent jurisdiction.
10.3 Procedure. Any Indemnitee that intends to claim indemnification
under this Article 10 shall promptly notify the other party (the "Indemnitor")
of any loss, claim, damage, liability or action in respect of which the
Indemnitee intends to claim such indemnification, and the Indemnitor shall
assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an Indemnitee shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity agreement in this Article 10 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 10, but the
omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
10. The Indemnitee under this Article 10, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
In the event that each party claims indemnity from the other and one party is
finally held liable to indemnify the other, the Indemnitor shall additionally be
liable to pay the reasonable legal costs and attorneys' fees incurred by the
Indemnitee in establishing its claim for indemnity.
10.4 Insurance. WFHC shall maintain insurance against such risks
(including product liability) and upon such terms (including coverages,
deductible limits and self-insured retentions) as is customary for the
activities to be conducted under this Agreement and is appropriate to cover its
indemnification obligation hereunder. WFHC shall carry comprehensive general
liability insurance, including product liability endorsements, in an amount of
not less than $5,000,000 per occurrence and $10,000,000 in the aggregate.
Article 11. MISCELLANEOUS
11.1 Force Majeure. Neither party shall be held liable or responsible to
the other party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party including but not limited to fire, floods,
embargoes, war, acts of war
<PAGE> 26
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions or
delays in acting by any governmental authority.
11.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party. Any
purported assignment in violation of the preceding sentences shall be void. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement.
11.3 Severability. Each party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the parties would not have entered into this Agreement
without the invalid provisions.
11.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid (where
applicable), addressed to such other party at its address indicated below, or to
such other address as the addressee shall have last furnished in writing to the
addressor and shall be effective upon receipt by the addressee.
If to Fournier: Laboratoires Fournier S.A.
50 rue de Dijon,
21121 Daix, France
Attention: Vice-President, Pharmaceutical Division
If to WFHC: Women First HealthCare, Inc.
12220 El Camino Real
Suite 400
San Diego, California 92130
Attention: President and Chief Executive Officer
<PAGE> 27
11.5 Applicable Law; Arbitration.
(a) Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of New York, without regard
to such state's conflicts of laws principles.
(b) Arbitration. Any disputes arising between the parties relating
to, arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either party of its obligations
hereunder, whether before or after termination of this Agreement, shall be
promptly presented to the Chief Executive Officers of Fournier and WFHC for
resolution and if the Chief Executive Officers cannot promptly resolve such
disputes, then such dispute shall be finally resolved by binding arbitration.
Whenever a party shall decide to institute arbitration proceedings, it shall
give written notice to that effect to the other party. The party giving such
notice shall refrain from instituting the arbitration proceedings for a period
of fifteen (15) days following such notice. Any arbitration hereunder shall be
conducted under the Rules of the American Arbitration Association. Each such
arbitration shall be conducted by one (1) arbitrator appointed and acting in
accordance with such rules. Any such arbitration shall be held in New York, New
York. The arbitrator shall have the authority to grant specific performance, and
to allocate between the parties the costs of arbitration in such equitable
manner as he/she determines. Judgment upon the award so rendered may be entered
in any court having jurisdiction or application may be made to such court for
judicial acceptance of any award and an order of enforcement, as the case may
be. Notwithstanding the foregoing, provisional measures may be applied for in
any court having jurisdiction.
11.6 Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior documents, correspondence, agreements, negotiations, offers, proposals,
understandings, warranties and representations, whether oral or written. This
Agreement may be amended, or any term hereof modified, only by a written
instrument duly executed by both parties hereto.
11.7 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
11.8 Independent Contractors. It is expressly agreed that Fournier and
WFHC shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither
Fournier nor WFHC shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the party to do so.
<PAGE> 28
11.9 Waiver. The waiver by either party hereto of any right hereunder or
the failure to perform or breach by the other party shall not be deemed a waiver
of any other right hereunder of any other breach or failure by said other party
whether of a similar nature or otherwise.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
LABORATOIRES FOURNIER S.A WOMEN FIRST HEALTHCARE, INC.
By: /s/ By: /s/ David F. Hale
-------------------------------- --------------------------------
Title: VP Pharmaceutical Title: President and Chief
----------------------------- Executive Officer
-----------------------------
<PAGE> 29
APPENDIX 1
Sales Year 1 Sales Year 2 Sales Year 3
Sales Forecast * * * * * * * * *
Samples * * * * * * * * *
All by number of patches
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,321,626
<SECURITIES> 0
<RECEIVABLES> 547,418
<ALLOWANCES> 102,905
<INVENTORY> 1,450,606
<CURRENT-ASSETS> 52,723,094
<PP&E> 1,102,694
<DEPRECIATION> 249,423
<TOTAL-ASSETS> 58,585,571
<CURRENT-LIABILITIES> 12,302,024
<BONDS> 0
0
0
<COMMON> 16,574
<OTHER-SE> 46,266,973
<TOTAL-LIABILITY-AND-EQUITY> 58,585,571
<SALES> 9,167,554
<TOTAL-REVENUES> 9,367,554
<CGS> 6,244,771
<TOTAL-COSTS> 6,244,771
<OTHER-EXPENSES> 15,905,793
<LOSS-PROVISION> 63,764
<INTEREST-EXPENSE> 276,113
<INCOME-PRETAX> (16,295,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,295,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,295,467)
<EPS-BASIC> (2.08)
<EPS-DILUTED> (2.08)
</TABLE>
