<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] 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: O-27576
ULTRAFEM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 33-0435037
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
500 Fifth Avenue, Suite 3620
New York, New York 10110
(Address of principal executive offices)
(Zip Code)
212-575-5740
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(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 _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At May 1, 1996, there were 5,460,223 shares of Common Stock, $.001 par
value, outstanding.
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
------------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements................................................................ 1
Balance Sheets as of March 31, 1996 (unaudited) and June 30, 1995................... 2
Statements of Operations for the Nine Months and Three Months Ended March 31, 1996
and 1995 (unaudited)............................................................... 3
Statements of Stockholders' Equity (Deficiency) for the Nine Months Ended March 31,
1996 (unaudited) and June 30, 1995................................................. 4-5
Statements of Cash Flows for the Nine Months Ended March 31, 1996 and 1995
(unaudited)........................................................................ 6-7
Notes to Financial Statements (unaudited)........................................... 8-13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 14-17
Part II. Other Information
Item 1. Legal Proceedings................................................................... 18
Item 2. Changes in Securities............................................................... 18
Item 3. Defaults upon Senior Securities..................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders................................. 18
Item 5. Other Information................................................................... 18
Item 6. Exhibits and Reports on Form 8-K.................................................... 18
Signatures ....................................................................................... 19
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that the following financial
statements be read in conjunction with the year end and six month end financial
statements and notes thereto for the year and six months ended June 30, 1995 and
December 31, 1995, respectively, included in the Company's Registration
Statement on Form S-1.
The results of operations for the three and nine month periods ended March
31, 1996, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
1
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1995
MARCH 31, ------------
1996
------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 28,991,697 $ 73,390
Prepaid expenses and other receivables.......... 558,023 10,714
------------ ------------
Total Current Assets.......................... 29,549,720 84,104
Equipment -- net.................................. 1,116,181 302,719
Other assets -- net............................... 892,258 380,136
------------ ------------
TOTAL ASSETS.................................. $ 31,558,159 $ 766,959
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Short-term debt................................. $ 1,171,290 $ 730,549
Current portion -- long-term debt............... -- 93,389
Accounts payable................................ 357,551 327,881
Accrued interest................................ 704,261 638,315
Accrued salaries................................ 1,219,428 391,534
Other accrued liabilities....................... 834,799 564,578
------------ ------------
Total Current Liabilities..................... 4,287,329 2,746,246
Long-term debt.................................... 3,675,000 4,032,493
------------ ------------
Total Liabilities............................. 7,962,329 6,778,739
------------ ------------
Stockholders' Equity (Deficiency):
Preferred stock, $.001 par value -- authorized,
5,000,000 shares $8 cumulative Convertible
Series A: issued and outstanding 5,801.3 and
6,532.5 shares stated at liquidation preference
of $580,125 and $653,250....................... 580,125 653,250
Common stock, $.001 par value -- authorized
20,000,000 shares; outstanding 5,460,223 and
1,389,412 shares, respectively (stated at)..... 9,628 5,558
Additional paid-in capital...................... 40,076,396 4,555,215
Deficit accumulated during development stage.... (17,070,319) (11,225,803)
------------ ------------
Total Stockholders' Equity (Deficiency)....... 23,595,830 (6,011,780)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)................................. $ 31,558,159 $ 766,959
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
2
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD
MARCH 22, 1990
NINE MONTHS ENDED THREE MONTHS ENDED (DATE OF
MARCH 31, MARCH 31, FORMATION)
---------------------------- ---------------------------- THROUGH
1996 1995 1996 1995 MARCH 31, 1996
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
General and administrative
expense......................... $ 4,370,891 $ 1,119,677 $ 1,904,835 $ 259,204 $ 11,057,058
Research and development......... 449,555 126,723 306,488 19,568 3,749,883
Depreciation and amortization.... 585,885 121,299 380,595 42,180 948,307
------------- ------------- ------------- ------------- ------------------
5,406,331 1,367,699 2,591,918 320,952 15,755,248
------------- ------------- ------------- ------------- ------------------
Interest expense................. 569,477 296,731 196,449 96,988 1,446,363
Interest income.................. (131,292) -- (131,292) -- (131,292)
------------- ------------- ------------- ------------- ------------------
438,185 296,731 65,157 96,988 1,315,071
------------- ------------- ------------- ------------- ------------------
Net loss......................... $ 5,844,516 $ 1,664,430 $ 2,657,075 $ 417,940 $ 17,070,319
------------- ------------- ------------- ------------- ------------------
------------- ------------- ------------- ------------- ------------------
Net loss per share............... $ 1.98 $ .61 $ .85 $ .15 $ --
------------- ------------- ------------- ------------- ------------------
------------- ------------- ------------- ------------- ------------------
Weighted average number of common
shares and equivalents
outstanding..................... 2,863,181 2,686,295 3,121,765 2,709,484 --
------------- ------------- ------------- ------------- ------------------
------------- ------------- ------------- ------------- ------------------
</TABLE>
See notes to financial statements.
3
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
DEFICIT
PREFERRED ACCUMULATED
STOCK COMMON STOCK ADDITIONAL DURING THE
CONVERTIBLE ---------------------- PAID-IN DEVELOPMENT
SERIES A SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Original Capitalization:
Initial issuance of stock ($0.228 to
$1.776 per share).................... 98,750 $ 395 $ 39,605 $ -- $ 40,000
Issuance of stock for technology
(valued at $0.00).................... 526,250 2,105 (2,105) -- --
Sales of stock (from $3.00 to $4.00
per share)........................... 142,500 570 559,430 -- 560,000
Net loss from date of formation (March
22, 1990) to June 30, 1991........... -- -- -- (617,359) (617,359)
---------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 1991.................. 767,500 3,070 596,930 (617,359) (17,359)
Stock warrants exercised ($.004 per
share)............................... 18,750 75 -- -- 75
Sales of stock (from $3.00 to $8.00
per share) net of costs of $416,346
in connection with such sales........ 462,562 1,850 2,882,304 -- 2,884,154
Issuances of stock for consulting
services (valued at $4.00 per
share)............................... 500 2 3,998 -- 4,000
Net loss for the year ended June 30,
1992................................. -- -- -- (3,831,536) (3,831,537)
---------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 1992.................. 1,249,312 4,997 3,483,232 (4,448,895) (960,666)
Sales of stock ($8.00 per share) net
of costs of $29,226 in connection
with such sale....................... 56,000 224 418,550 -- 418,774
Issuance of stock for consulting
services (valued at $8.00 per
share)............................... 7,500 30 59,970 -- 60,000
Net loss.............................. -- -- -- (2,091,903) (2,091,903)
---------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 1993.................. 1,312,812 5,251 3,961,752 (6,540,798) (2,573,795)
Issuance of stock for consulting
services (valued at $8.00 per
share)............................... 1,500 6 11,994 -- 12,000
Issuance of options and warrants
(valued at $.23529 per option and
warrant)............................. -- -- 132,021 -- 132,021
Net loss.............................. -- -- -- (2,303,940) (2,303,940)
---------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 1994.................. 1,314,312 5,257 4,105,767 (8,844,738) (4,733,714)
Sales of stock ($8.00 per share) net
of costs of $74,720 in connection
with such sale....................... 28,125 113 150,167 -- 150,280
Issuance of stock warrants ($.23529
per warrant)......................... -- -- 28,000 -- 28,000
Issuance of stock for consulting and
other services (valued at $8.00 to
$15.66 per share).................... 30,100 120 221,660 -- 221,780
Conversion of convertible debt ($8.00
per share)........................... 16,875 68 134,932 -- 135,000
Sales of Series A Preferred Stock
($100 per share) net of costs of
$100,505 in connection with such
sale................................. $ 653,250 -- -- (100,505) -- 552,745
Issuance of options and warrants
(valued at $.23529 per option and
warrant)............................. -- -- -- 15,194 -- 15,194
Net loss.............................. -- -- -- -- (2,381,065) (2,381,065)
----------- ---------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 1995.................. $ 653,250 1,389,412 $ 5,558 $ 4,555,215 ($11,225,803) $ (6,011,780)
</TABLE>
(continued)
See notes to financial statements.
4
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
<TABLE>
<CAPTION>
DEFICIT
PREFERRED ACCUMULATED
STOCK COMMON STOCK ADDITIONAL DURING THE
CONVERTIBLE ---------------------- PAID-IN DEVELOPMENT
SERIES A SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sales of stock ($10.00 per share) net
of costs of $5,014,389 in connection
with such sales...................... -- 3,910,000 3,910 34,081,701 -- 34,085,611
Exercise of stock options and warrants
(valued at $8.00 to $10.00 per option
and warrant)......................... -- 146,186 146 930,998 -- 931,144
Sale of warrants...................... 327 -- 327
Issuance of options and warrants...... -- -- -- 435,044 -- 435,044
Conversion of preferred stock to
common stock......................... (73,125) 14,625 14 73,111 -- --
Net loss.............................. -- -- -- -- (5,844,516) (5,844,516)
----------- ---------- ---------- ----------- ------------ ------------
BALANCE, MARCH 31, 1996 (unaudited)..... $ 580,125 5,460,223 $ 9,628 $40,076,396 ($17,070,319) $ 23,595,830
----------- ---------- ---------- ----------- ------------ ------------
----------- ---------- ---------- ----------- ------------ ------------
</TABLE>
See notes to financial statements.
5
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD
MARCH 22,
1990
(DATE OF
NINE MONTHS ENDED FORMATION)
MARCH 31, THROUGH
-------------------------- MARCH 31,
1996 1995 1996
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $ (5,844,516) $(1,664,430) $(17,070,319)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation........................ 48,548 47,195 242,115
Amortization principally of debt
issuance and patent costs.......... 537,337 74,104 706,192
Amortization of debt discount....... -- 32,610 87,058
Loss on disposal of equipment....... -- -- 5,598
Consulting services for stock....... -- 219,780 297,780
Non-employee stock based
compensation....................... 150,044 -- 150,044
Non-cash officers compensation...... 1,217,767 -- 1,277,925
Changes in operating assets and
liabilities........................ (464,202) 700,673 3,003,646
------------ ----------- ------------
Net Cash Used in Operating
Activities....................... (4,355,022) (590,068) (11,299,961)
------------ ----------- ------------
Cash flows from investing activities:
Purchase of and deposits on
manufacturing equipment and leasehold
improvements......................... (862,010) (1,514) (1,365,994)
Proceeds from sale of equipment....... -- -- 2,100
------------ ----------- ------------
Net Cash Used in Investing
Activities....................... (862,010) (1,514) (1,363,894)
------------ ----------- ------------
Cash flows from financing activities:
Proceeds from secured notes........... -- -- 1,850,000
Proceeds from issuance of subordinated
convertible debentures............... -- 225,000 225,000
Proceeds from sale of convertible
debentures........................... 2,125,000 -- 2,825,000
Proceeds from notes payable........... 2,227,870 135,000 2,598,880
Proceeds from sale of preferred stock
(net of related expenses)............ -- 431,138 552,745
Proceeds from sale of common stock
(net of related expenses)............ 34,085,611 150,280 38,138,894
Proceeds from exercise of stock
options and warrants................. 776,000 -- 776,000
Proceeds from sale of options and
warrants............................. 327 22,500 28,327
Repayment of borrowings............... (4,363,011) (75,000) (4,477,811)
Debt issue costs...................... (716,458) (50,875) (861,483)
------------ ----------- ------------
Net Cash Provided by Financing
Activities....................... 34,135,339 838,043 41,655,552
------------ ----------- ------------
</TABLE>
(Continued)
See notes to financial statements.
6
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD
MARCH 22,
1990
(DATE OF
NINE MONTHS ENDED FORMATION)
MARCH 31, THROUGH
-------------------------- MARCH 31,
1996 1995 1996
------------ ----------- ------------
<S> <C> <C> <C>
Net Increase in Cash.................... $ 28,918,307 $ 246,461 $28,991,697
Cash and Cash Equivalents, beginning of
period................................. 73,390 10,490 --
------------ ----------- ------------
Cash and Cash Equivalents, end of
period................................. $ 28,991,697 $ 256,951 $28,991,697
------------ ----------- ------------
------------ ----------- ------------
Changes in operating assets and
liabilities consist of:
Increase in prepaid expenses.......... $ (392,164) $ (27,847) $ (410,853)
Increase in other assets.............. (133,005) (56,304) (528,997)
Increase in accounts payable.......... 114,673 885,559 2,578,117
Increase (decrease) in accrued
liabilities.......................... (53,706) (100,735) 1,365,379
------------ ----------- ------------
$ (464,202) $ 700,673 $ 3,003,646
------------ ----------- ------------
------------ ----------- ------------
Supplementary information:
Cash paid during the year for:
Interest............................ $ 503,214 $ -- $ 682,339
------------ ----------- ------------
------------ ----------- ------------
Taxes............................... $ 6,367 $ 1,271 $ 11,656
------------ ----------- ------------
------------ ----------- ------------
Non-cash financing activities:
Conversion of accounts payable and
accrued liabilities to long-term
debt................................. $ -- $ 1,586,666 $ 1,960,221
------------ ----------- ------------
------------ ----------- ------------
Conversion of notes payable to common
stock................................ $ -- $ 135,000 $ 135,000
------------ ----------- ------------
------------ ----------- ------------
Issuance of warrants in connection
with debt offering................... $ -- $ -- $ 87,057
------------ ----------- ------------
------------ ----------- ------------
Conversion of secured notes and notes
payable to convertible debentures.... $ 850,000 $ -- $ 850,000
------------ ----------- ------------
------------ ----------- ------------
Conversion of secured notes to notes
payable.............................. $ 850,000 $ -- $ 850,000
------------ ----------- ------------
------------ ----------- ------------
Conversion of accounts payable to
warrants............................. $ 85,000 $ -- $ 85,000
------------ ----------- ------------
------------ ----------- ------------
Issuance of below market value options
and warrants in connection with
professional services and licensing
agreement............................ $ 350,044 $ -- $ 350,044
------------ ----------- ------------
------------ ----------- ------------
Conversion of preferred stock to
common stock......................... $ 73,125 $ -- $ 73,125
------------ ----------- ------------
------------ ----------- ------------
Amounts receivable from the issuance
of common stock...................... $ 155,145 $ -- $ 155,145
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
See notes to financial statements.
7
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
At March 31, 1996, planned principal operations had not yet commenced and no
revenue has been derived therefrom; accordingly, the Company is considered a
development stage enterprise.
The balance sheet as at March 31, 1996, and the statements of operations and
cash flows for the nine months ended March 31, 1996 and 1995 and for the period
March 22, 1990 (Date of Formation) through March 31, 1996 have been prepared by
the Company and are unaudited. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows for all periods
presented have been made. Certain items in the March 31, 1995 financial
statements have been reclassified to conform to March 31, 1996 classifications.
2. RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation". The standard encourages, but
does not require, companies to recognize compensation expense of grants for
stock, stock options and other equity instruments to employees based on fair
value accounting rules. SFAS No. 123 requires companies that choose not to adopt
the new fair value accounting rules to disclose pro forma net income and
earnings per share under the new method. The standard is effective for fiscal
years beginning after December 15, 1995. The Company has not yet determined if
it will adopt the accounting provisions of SFAS No. 123 or only the disclosure
provision. The Company has not determined the effect, if any, that adoption of
SFAS No. 123 will have on its results of operations.
3. LOSS PER SHARE
Loss per common and common equivalent share for the six months ended
December 31, 1995 and for the nine months ended March 31, 1995 were computed
using the weighted average number of common shares outstanding during the
period. The weighted average number of common shares outstanding during each
period includes incremental shares for the Common Stock, warrants and other
potentially dilutive securities issued and options granted to purchase Common
Stock which were issued at an exercise price or purchase price below an assumed
Initial Public Offering price of $10.00 per share within one year prior to the
initial filing of the Initial Public Offering registration statement. Such
incremental shares were determined utilizing the treasury stock method as if
they were outstanding for all periods presented; such incremental shares include
options issued on February 8, 1996. The effect of the assumed exercise of stock
options which were issued in periods prior to the one-year period previously
mentioned is not included because the effect is antidilutive. Loss per common
and common equivalent share for the three months ended March 31, 1996 was
computed using the weighted average number of common shares outstanding during
the period. The dilutive effect of outstanding options, warrants and common
stock equivalents were not considered as their effect was antidilutive.
8
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
------------- ------------
<S> <C> <C>
Machinery and equipment.......................................... $ 397,411 $ 392,049
Office furniture and equipment................................... 53,429 52,082
Laboratory equipment............................................. 49,766 49,766
Leasehold improvements........................................... 762 762
Deposits -- manufacturing equipment and leasehold improvements... 855,301 --
------------- ------------
1,356,669 494,659
Less accumulated depreciation.................................... (240,488) (191,940)
------------- ------------
Total Equipment -- net..................................... $ 1,116,181 $ 302,719
------------- ------------
------------- ------------
</TABLE>
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
------------- ------------
<S> <C> <C>
Patent and trademark costs....................................... $ 208,446 $ 164,632
Debt issuance costs.............................................. 971,490 232,817
Deferred debt and warrant offering costs......................... -- 137,273
Licensing costs.................................................. 400,000 --
Security deposits................................................ 18,515 14,270
------------- ------------
1,598,451 548,992
Less accumulated amortization.................................... (706,193) (168,856)
------------- ------------
$ 892,258 $ 380,136
------------- ------------
------------- ------------
</TABLE>
9
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. DEBT
Short-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
------------- -----------
<S> <C> <C>
Secured notes, due June 30, 1995, interest at 10% per year (a).... $ -- $ 200,000
Unsecured demand notes to former officers, interest at 6% per year
(b).............................................................. -- 206,010
Unsecured note to Johns Hopkins University, due March, 1995,
interest at 7.5% per year (c).................................... 124,539 324,539
Unsecured notes, due October 1996 to December 1996, interest at
10% per year (d)................................................. 368,488 --
Unsecured notes to former officer due September, 1996, interest at
10% per year (b)................................................. 103,125 --
Unsecured note to former officer due December, 1996, interest at
6% per year (b).................................................. 117,909 --
Unsecured notes to trade and other creditors, due March, 1997,
interest at 10% per year (d)..................................... 59,797 --
Subordinated convertible debentures, due on demand or due August,
1996 to November, 1996, interest at 10% per year (e)............. 397,432 --
------------- -----------
$ 1,171,290 $ 730,549
------------- -----------
------------- -----------
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
------------- -------------
<S> <C> <C>
Secured notes, interest at 10% per year (a)..................... $ -- $ 1,650,000
Secured convertible notes, due April, 1997, interest at 10% per
year (a)....................................................... 2,975,000 --
Convertible debentures, due December, 1998 to October, 1999,
interest compounded annually at 10.5% per year (f)............. 700,000 700,000
Unsecured notes to former officers, due December, 1995 to
January, 1997, interest at 6% or 10% per year (b).............. -- 476,680
Unsecured notes to officer/shareholder, due September, 1996,
interest at 10% per year (b)................................... -- 313,543
Unsecured notes to trade and other creditors, due October, 1996
to March, 1997, interest at 9% or 10% per year (d)............. -- 588,227
Subordinated convertible debentures, due August, 1996 to
November, 1996, interest at 10% per year (e)................... -- 397,432
------------- -------------
3,675,000 4,125,882
Less current maturities......................................... -- (93,389)
------------- -------------
Long-term debt.................................................. $ 3,675,000 $ 4,032,493
------------- -------------
------------- -------------
</TABLE>
10
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. DEBT (CONTINUED)
Annual maturities on long-term debt as of March 31, 1996 during the next
five years are:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
-------------
<S> <C>
1997............................................. $ --
1998............................................. 2,975,000
1999............................................. 250,000
2000............................................. 450,000
2001............................................. --
-------------
$ 3,675,000
-------------
-------------
</TABLE>
(a) During June, 1995, the Company entered into an Agreement with an
investment banking firm, Hampshire Securities Corporation ("Hampshire") for the
private placement of securities, which closed during July, 1995 and September,
1995 (the "1995 Unit Private Placement"), in which the Company raised $5,950,000
through the sale of Units. Each "Unit" consisted of one $50,000 non-convertible
promissory note bearing interest of 10% per annum (the "Non-Convertible Notes"),
one $50,000 convertible promissory note bearing interest at 10% per annum
convertible into shares of Common Stock at a conversion price per share equal to
$5.00 (the "Convertible Notes" and collectively with the Non-Convertible Notes,
the "Notes"), one Class A Warrant to purchase 10,000 shares of Common Stock at a
purchase price per share equal to $5.00 (the "Class A Warrant") and one Class B
Warrant to purchase 10,000 shares of Common Stock at a purchase price per share
equal to $12.50 (the "Class B Warrant"). Both Class A and Class B Warrants
expire five years from the date of issuance. The holders of $1,650,000 Secured
Notes agreed to amend and restate their promissory notes and invest the
principal amount of such notes in this private placement. On July 28, 1995,
other Existing Investors were paid their principal and interest in the amount
aggregating $222,557 from the proceeds of the 1995 Unit Private Placement. In
addition, through March 31, 1996, $186,281 of interest was paid related to the
$1,650,000 Secured Notes. The non-convertible notes in the amount of $2,975,000
plus interest in the amount of $162,319 were paid on February 27, 1996.
Under the terms of the 1995 Unit Private Placement, because the holders of
the $1,650,000 Secured Notes were not paid by December 31, 1995, they were
issued additional warrants to purchase a maximum of 165,000 shares of Common
Stock at an exercise price per share of $5.00. Holders of 350,000 existing
warrants issued under the 1993 private placement, which are exercisable at an
exercise price equal to $9 per share, were extended for three years, as the
holders of the warrants agreed not to dispose of the warrants or the underlying
Common Stock for eighteen (18) months after the effective date of a public
offering by the Company. Hampshire was paid $539,482 in connection with this
private placement on September 25, 1995.
(b) Unsecured notes to former officers and an officer/stockholder of the
Company represent loans made to the Company and accrued salaries which were
converted to promissory notes. Of such unsecured notes, principal in the amount
of $725,199 plus interest in the amount of $116,039 was paid through March 31,
1996.
(c) The unsecured note with a remaining balance in the principal amount of
$124,539 at March 31, 1996 represents amounts owed to The Johns Hopkins
University ("Johns Hopkins") by the
11
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. DEBT (CONTINUED)
Company under the terms of a research and development agreement which expired
June 30, 1993. $200,000 was paid on September 7, 1995 and $124,539 plus interest
of $58,999 was paid on April 19, 1996.
(d) During October, 1994 and March, 1995, the Company issued to certain
trade and other creditors unsecured notes in the principal amount of $588,227.
Of such unsecured notes, principal in the amount of $159,942 plus interest in
the amount of $15,142 was paid through March 31, 1996. In April 1996, the
Company made a payment on an unsecured note bearing interest at 10% per annum of
$373,856, which included interest of $9,119.
(e) During October 1994, the Company raised $450,000 through a Private
Placement sale of units composed in the aggregate of (i) $225,000 in
subordinated convertible debentures which accrue interest at 10% annually,
maturing on August 31, 1996 and convertible into 22,500 shares of Common Stock
at $10.00 per share, (ii) warrants, exercisable for a five-year period, to
purchase 47,813 shares of Common Stock at $10.00 per share, and (iii) 28,125
shares of Common Stock at $8.00 per share. These shares of Common Stock,
including those issuable upon the conversion of the debentures or the exercise
of the warrants, were registered in a concurrent offering with the Initial
Public Offering.
In October and November 1994, the Company issued to certain trade creditors
subordinated convertible debentures for a total principal amount of $172,432.
Each such debenture has a two-year term, bears interest at 10% per annum and is
convertible into Common Stock at $10.00 per share.
During 1994, the Company borrowed a total of $135,000 from nine individuals,
including four current Directors. The loans required payment of 10% interest per
annum until maturity. Each lender was granted (i) the option of receiving, in
lieu of the repayment of interest and principal, 1,875 shares of Common Stock at
a price of $8.00 per share and (ii) warrants to purchase 375 shares of Common
Stock at $10.00 per share for a five-year period expiring on June 30, 1999. As
of June 30, 1995, all of the nine individuals have converted their loans to
Common Stock.
(f) Between December, 1991 and October, 1992, the Company borrowed an
aggregate of $700,000 from the Montana Board of Science and Technology
Development ("MBSTD") evidenced by convertible debentures, of which $350,000 was
borrowed to fund expenditures relating to the Company's facility in Montana (the
foregoing loans are collectively referred to as the "MBSTD Loans").
The MBSTD Loans are convertible into shares of Common Stock at $5.00 per
share with accrued interest being waived upon conversion. The common stock
issuable upon conversion of the loans were registered concurrently with the
Initial Public Offering.
In January 1996, the Company raised an additional $100,000 through a private
placement to a single investor of a $100,000 non-convertible promissory note due
the earlier of January 26, 1997 or the closing of the Initial Public Offering,
bearing interest at a rate of 10% per annum and a warrant to purchase 20,000
shares of Common Stock at an exercise price of $8.00 per share (the "Class C
Warrant"). The Class C Warrant is not exercisable until the first anniversary of
the date of issuance and has a term of five years. The Company paid the entire
principal amount of $100,000 plus interest of $877 on February 27, 1996.
It is not practicable to estimate the fair value of the non-publicly traded
long-term debt.
12
<PAGE>
ULTRAFEM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. RELATED PARTY
A director and officers of the Company were issued options to purchase
624,862 shares of the Company's Common Stock at $4.35 and $6 per share,
resulting in compensation expense of approximately $3,348,000 which will be
amortized over the remaining life of their contract. The expense for the nine
months ended March 31, 1996 and for the period March 22, 1990 (Date of
Formation) through March 31, 1996 was $1,217,767. Accrued salaries as at March
31, 1996 includes the $1,217,767 discussed above.
A director and stockholder of the Company is the Chairman of the Executive
Committee of an advertising agency used by the Company which was paid $628,313
during the nine months ended March 31, 1996 and for the period March 22, 1990
(Date of Formation) through March 31, 1996. In addition, $145,175 and $121,875
owed to such agency is included in accrued liabilities at March 31, 1996 and
June 30, 1995, respectively.
8. OTHER ACCRUED LIABILITIES
Included in other accrued liabilities is approximately $294,000 of costs
incurred in connection with the Company's Initial Public Offering.
9. INCOME TAXES
Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" (SFAS 109), provides for the recognition of deferred assets
subject to a valuation allowance. At June 30, 1995 the Company established a
valuation allowance equal to the full amount of the tax effect of the net
operating loss and research and development credit carryforward.
The Tax Reform Act of 1986 provided for a limitation on the use of NOL
carryforwards, following certain ownership changes. The Company completed an
Initial Public Offering of Common Stock which is likely to trigger an ownership
change of greater than 50%. In addition, as a result of transactions in the
Company's stock during 1993 through 1994, a change of ownership of greater than
50%, as defined, also may have occurred. Under such circumstances, the potential
benefits from utilization of tax carryforward may be substantially limited or
reduced on an annual basis.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Ultrafem is a women's health care company dedicated to providing women with
a broader range of options to protect their reproductive health. The Company
recently completed an Initial Public Offering receiving net proceeds of $34.1
million to commence the launch of its first commercial product, INSTEAD-TM-, a
new feminine protection product designed as a more effective alternative to
tampons and pads.
The Company's activities during the quarter were focused on the launch of
INSTEAD-TM-, currently scheduled to commence in the Fall of 1996. The lead
market for the initial rollout is currently planned to cover approximately eight
percent of U.S. households in the Pacific Northwest, including the major markets
of San Francisco, Seattle and Portland. In May, the Company finalized the lead
market distribution network by contracting with Morgan & Sampson Pacific, a
retail broker with expertise in the Health & Beauty Aid business as well as the
feminine protection market segment.
Manufacturing activities to support the launch of INSTEAD-TM- progressed
during the quarter. Manufacturing space was leased and remodeling began.
Equipment orders were placed to complete the first manufacturing line. The
special thermoforming equipment required to manufacture INSTEAD-TM- successfully
completed high volume testing at Remmele Engineering and has now been received
at the Ultrafem Montana facility for installation.
In addition to INSTEAD-TM- launch activities, research and development
activities on new products continued. The buffer technology ("BufferGel")
developed by the Company's research and development partner, ReProtect, LLC, has
been selected by HIVNET for funding of clinical trials to test its use for the
prevention of AIDS and other sexually transmitted diseases (STDs). The Phase I
clinical trials are planned to begin in the summer of 1996.
The following table sets forth, for the periods indicated, the percentage
increase or decrease of items included in the Company's statements of
operations.
<TABLE>
<CAPTION>
INCREASE (DECREASE) FROM PRIOR PERIOD
------------------------------------------
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1996
COMPARED WITH 1995 COMPARED WITH 1995
--------------------- -------------------
<S> <C> <C>
General and administrative expense........................ 290.4% 634.9%
Research and development expense.......................... 254.8 1,466.3
Depreciation and amortization............................. 383.0 802.3
Interest expense.......................................... 91.9 102.6
Interest income........................................... * *
</TABLE>
- - ------------------------
* Percentage not meaningful.
14
<PAGE>
NINE MONTHS 1996 VS. NINE MONTHS 1995 AND THREE MONTHS 1996 VS. THREE MONTHS
1995
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense increased 290.4% to $4,370,891 during the
nine months ended March 31, 1996 from $1,119,677 for the nine months ended March
31, 1995. The increase is primarily due to expenses related to the launch of
INSTEAD-TM-, including market research, development of trade promotion plans and
package design, as well as non-cash charges resulting from the issuance of
options to purchase Common Stock to officers and a director of the Company.
Plans for the lead market geography were developed and the Company has
retained Morgan & Sampson Pacific to gain widespread distribution and
merchandising support of INSTEAD-TM- to retailers in the lead market. Staffing
additions to facilitate product launch and operations included a Vice-President
of Operations at the Montana facility, Senior Marketing Product Manager and a
Corporate Controller.
General and administrative expenses increased 634.9% to $1,904,835 during
the three months ended March 31, 1996 from $259,204 during the three months
ended March 31, 1995. The Company attributes this increase primarily to those
reasons set forth above.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased 254.8% to $449,555 during the
nine months ended March 31, 1996 from $126,723 for the nine months ended March
31, 1995. The increase is primarily attributable to increased travel expenses
and raw material costs in connection with production startup expenses, research
expenses paid to ReProtect, LLC, under the terms of the Company's research
agreement, research and testing expenses related to INSTEAD-TM- as well as legal
expenses.
Production startup expenses included procurement of a manufacturing facility
as well as successful completion of line testing. A lease was completed on
26,000 square feet of manufacturing space and 3,500 square feet of office space.
Remodeling began on the manufacturing space principally to create the controlled
environment module which will house the manufacturing equipment. Equipment
orders were placed for INSTEAD-TM-'s first manufacturing line with capacity for
a 3-shift operation producing approximately 4 million units per month. The first
piece of special equipment to manufacture the product, which is called the
thermoforming line, successfully completed testing at Remmele Engineering in
Minneapolis, Minnesota and has been received at the Ultrafem Montana facility
for installation. The line is anticipated to begin running on a limited basis in
May or June to produce marketing samples.
The buffer technology ("BufferGel") developed by the Company's research and
development partner, ReProtect, LLC, has been selected by HIVNET for funding of
clinical trials to test its use as a vaginal microbicide for the prevention of
AIDS and other sexually transmitted diseases (STDs). Furthermore, the Food and
Drug Administration (FDA) has permitted BufferGel to enter Phase I clinical
trials, which are currently scheduled to begin in the summer of 1996. BufferGel
is the first non-detergent AIDS prevention technology to be selected by HIVNET
to proceed to clinical trials.
Research and development expenses increased to $306,488 during the three
months ended March 31, 1996 from $19,568 during the three months ended March 31,
1995. The Company attributes this increase primarily to those reasons set forth
above.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization was $585,885 for the nine months ended March
31, 1996 and $121,299 for the nine months ended March 31, 1995. The 383%
increase for the nine months ended March 31, 1996 compared to the nine months
ended March 31, 1995 was attributable to increases in the amortization of
deferred debt issuance costs.
Depreciation and amortization was $380,595 for the three months ended March
31, 1996 and $42,180 for the three months ended March 31, 1995. The 802.3%
increase is primarily attributed to those reasons set forth above.
15
<PAGE>
INTEREST EXPENSE
Interest expense was $569,477 for the nine months ended March 31, 1996 and
$296,731 for the nine months ended March 31, 1995. The 91.9% increase for the
nine months ended March 31, 1996 compared to the nine months ended March 31,
1995 was attributable to the increase in debt incurred by the Company in the
nine months ended March 31, 1996. At March 31, 1996 the Company repaid
approximately $4.4 million of debt, which will reduce interest expense in future
periods.
Interest expense was $196,449 for the three months ended March 31, 1996 and
$96,988 for the three months ended March 31, 1995. The 102.6% increase is
primarily attributed to those reasons set forth above.
INTEREST INCOME
Interest income was $131,292 for the nine months ended March 31, 1996
compared to $-0- for the nine months ended March 31, 1995. The increase for the
nine months ended March 31, 1996 compared to the nine months ended March 31,
1995 was attributable to the money received by the Company during February 1996
from its Initial Public Offering which was invested in cash equivalents during
the period ended March 31, 1996.
Interest income was $131,292 for the three months ended March 31, 1996 and
$-0- for the three months ended March 31, 1995. The increase is attributed to
the reason set forth above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for funds has increased from period to period as it has
incurred expenses for among other things, preparing INSTEAD-TM- for market
introduction, research and development activities, engineering and design of
automated manufacturing systems, clinical testing, meeting domestic and
international regulatory requirements, applications for domestic and
international patent protection, applications for domestic trademark protection
and market research. Since inception, the Company has funded these needs through
private placements of its equity and debt securities. The Company has received
net proceeds in excess of approximately $12,300,000 through sales of these
securities from inception through December 31, 1995.
In February 1996, the Company received proceeds of $34,085,611, net of
related expenses of $5,014,389, in connection with the sale of 3,910,000 shares
of its common stock through an Initial Public Offering. During the first nine
months through March 31, 1996, the Company's cash position increased by $28.9
million, principally reflecting the net proceeds of approximately $34.1 million
from the Initial Public Offering and $4.3 million in net proceeds from the sale
of convertible and non-convertible promissory notes and exercise of stock
options and warrants. This was offset by repayment of debt of $4.4 million, $4.4
million used in operating activities and $.9 million used for deposits and
purchase of equipment.
The Company's working capital and capital requirements will depend on
numerous factors, including the progress of the staged market introduction of
INSTEAD-TM-, the Company's research and development activities, the level of
resources that the Company devotes to the marketing aspects of its products and
the extent, if any, to which strategic alliances with multinational
pharmaceutical or consumer product companies are formed. At March 31, 1996, the
Company has capital commitments in the amount of approximately $1,440,000, of
which $617,000 was unpaid, for the purchase of manufacturing equipment and
improvements to the manufacturing facility to support startup production.
The Company believes that the financial resources available to it, including
the net proceeds from the Initial Public Offering, together with additional
working capital or equipment lease financing (presently estimated at $5 to $8
million), will be sufficient to finance its planned operations and will enable
the Company to commence the introduction of INSTEAD-TM- into approximately 25%
of the United States market. The Company plans to raise additional capital from
other sources such as a
16
<PAGE>
second public offering as well as working capital or other available financing
to be able to expand distribution of INSTEAD-TM- into the total United States
market. Failure to raise such capital may adversely affect the Company's
operations and projects.
The Company's shareholders' equity increased by $29.6 million from June 30,
1995 to March 31, 1996 reflecting the net proceeds from the Initial Public
Offering of $34.1 million, proceeds from the exercise of stock options and
warrants of $.8 million, conversion of accounts payable to warrants, issuance of
below market value stock options and warrants in connection with professional
services and licensing agreements and conversion of preferred stock to common
stock of $.5 million, offset by the Company's net loss for the nine months ended
March 31, 1996 of $5.8 million.
This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes forward-looking statements that may or may not
materialize. Additional information on factors that could potentially affect the
Company's financial results may be found in the Company's filings with the
Securities and Exchange Commission.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER EXHIBIT
- - --------------- ------------------------------------------------------------
10.1 Equipment Agreement, dated October 17, 1995 between
Ultrafem, Inc. and Remmele Engineering, Inc.
10.2 Sales Contract, dated January 1, 1996 between Ultrafem, Inc.
and Shell Chemical Company.
10.3 Lease Agreement, dated January 28, 1996 between Ultrafem,
Inc. and Dennis R. Washington, d/b/a Western Trade Center.
10.4 Letter Agreement, dated March 14, 1996 between Ultrafem,
Inc. and The Elliott Company, as amended.
10.5 Letter Agreement, dated April 11, 1996 between Ultrafem,
Inc. and Meridian Consulting Group.
10.6 Employment Agreement, dated April 1, 1996 between Ultrafem,
Inc. and Gary Nordmann.
10.7 Option Agreement, dated March 8, 1996 between Ultrafem, Inc.
and Gary Nordmann.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
During the third quarter of 1996, the Company did not file a current
report on Form 8-K.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ULTRAFEM, INC.
By: /s/ John W. Andersen
-----------------------------------
John W. Andersen, President; Chief
Executive Officer; Director and
Chairman of the Board of Directors
By: /s/ Dori M. Reap
-----------------------------------
Dori M. Reap, Senior Vice
President
of Finance and Administration and
Chief Financial Officer
Dated: May 14, 1996
19
<PAGE>
CQ#95-739A-SAP
Page 1 of 9
REMMELE ENGINEERING INC.
AUTOMATION DIVISION
October 17, 1995
Ultrafem Inc.
415 N. Higgins, Suite 14
Missoula, MT 59802
ATTENTION: Mr. Wendell Guthrie
Remmele Engineering, Inc. is pleased to submit the following revised
quotation for Softcup-Registered Trademark- assembly equipment to be furnished
to Ultrafem Inc. for use at their facility in Missoula, Montana. This
quotation supersedes all previous proposals and quotations. All changes are
noted with lines in the left margin.
EQUIPMENT DESCRIPTION
Remmele Engineering will design, build and install equipment to support your
startup production. The equipment design will be based on the manufacturing
processes which have been developed and defined by Ultrafem.
Two independent, manually-loaded systems will be provided; a heat seal
station and a thermoforming system consisting of a pre-heat station and a
forming station. Each of these three stations will perform its operation of
forty (40) units per equipment cycle. (Refer to attached drawings:
SOFTCUP-Registered Trademark- HEAT SEAL STATION and VACUUM FORM
STATION/PRE-HEAT STATION.)
The cycle rate of these stations will be dependent on the rate of manual
loading and unloading as well as the rate of each process. Based on a
6-second heat sealing and vacuum forming cycle, a 15-second average station
cycle rate can be anticipated.
PLCs will be used to control all automatic functions. The heat seal station
will be controlled by its own PLC, and the thermoforming system will have one
PLC to control both the pre-heat station and the forming station.
Product will be carried to and from these stations in specially-designed
product carriers. These product carriers will be manually loaded with rims
upstream of the equipment and manually unloaded after assembly and forming.
Each carrier will hold forty (40) units in a 4 by 10 matrix. Twelve (12)
product carriers will be supplied with the equipment.
An operator will be required to load carriers to a manually-operated carrier
shuttle on each station. These carrier shuttles will be designed to allow the
operator to position the carrier without placing his hands in an unsafe
location. Pushing the shuttle to its fully inserted location will initiate
the station cycle; retracting the shuttle will reset the station.
<PAGE>
CQ#95-739A-SAP
Page 2 of 9
A simple non-powered conveyor system will be provided to convey carriers
through the assembly sequence. [Refer to attached drawing. PLAN VIEW.]
HEAT SEAL STATION
The Heat Seal Station will heat seal 10 mil Kraton film to Softcup-Registered
Trademark- rims.
The assembly of the film to the rim will be performed by tooling contained in
a heat sealing die set. Heat sealing will be accomplished by
electrically-heated dies mounted to a water-cooled platen. Cooling water will
be provided by a chiller supplied with the system.
Our preferred approach to the design of the die heating and mounting system
is to employ a replication of your system which uses one heater to heat five
dies. Eight (8) heater/die assemblies, providing a total of forty (40) dies,
will be incorporated in the die set.
We recognize your concern for maintaining temperature consistency between
dies. We will expedite the design and construction of this portion of the
system to provide maximum opportunity to take action, if necessary, to assure
acceptable performance of this heating system.
A film stripper and heat seal stripper, similar to your existing system, will
also be incorporated into the die set.
The Kraton film will be supplied to the system from a roll. The film will be
pulled between the heater dies and the product carrier by a manually-operated
crank.
One station operator will load a carrier to the carrier shuttle and push the
shuttle into position. With a segment of Kraton film in position, the heat
seal die will be automatically actuated when the carrier shuttle reaches its
fully inserted position. The sequence of heater and stripper operation will
be controlled automatically by the PLC. When this sequence is complete, a
second operator will be signaled to retract the shuttle to the load position.
This operator will remove the finished pallet from the shuttle and return it
to the conveyor. The operator will then manually index the film feeder to
present a new segment of film, preparing the station for the next cycle.
THERMOFORMING SYSTEM
The Thermoforming System will thermoform the product into its final
configuration. It will be able to accept product in the product carriers
immediately after processing by the Heat Seal System. The thermoforming
system will have a pre-heat station and a forming station, each of which will
be manned by an operator. The timing requirements for forming after pre-heat
are such that the carriers can be manually transferred between stations.
Pre-heating will be accomplished by a radiant heating system. This system
will provide a uniform watt density over the area of the product carrier. The
exact energy input to the product will be a function of distance from the
product to the heat source and time.
The pre-heat station operator will load a carrier onto the carrier shuttle
and push the shuttle into position. A timer will be initialized when the
carrier shuttle reaches its fully inserted position. After a programmed
period of time has elapsed, the operator will be signaled to retract the
shuttle to the load position. The operator will then pass the pre-heated
carrier down the conveyor to the forming station.
<PAGE>
CQ#95-739A-SAP
Page 3 of 9
The forming station operator will position the pre-heated carrier on the
carrier shuttle and push the shuttle into position. When the carrier shuttle
reaches its fully engaged position, the carrier will be lifted by a lower
platen and pressed against vacuum cavities mounted to a stationary upper
platen. This pressing action will create a seal between the rim and the
vacuum cavity. Once this is achieved, a second lower platen containing male
pushers will be elevated. These male pushers will both initiate the forming
of the film in the center of the rim and partially cool the film in the
center of the rim where the film experiences maximum deformation. All three
elements of this mechanism--the lower platen, the male pusher and the vacuum
cavity--will be temperature controlled to approximately -plus/minus-5 degrees
of a specified temperature.
When the male forming tool and lower platen are in position, vacuum will be
introduced in the vacuum cavity to form the Softcup-Registered Trademark-.
There will be no monitoring of the forming vacuum in this system, based on
your experience that defects can be detected visually with reliability. After
a programmed period of time has elapsed, vacuum will be turned off, the male
forming tool and lower platen will be returned to their starting position,
and the operator will be signaled to retract the shuttle to the load
position. The operator will then pass the completed carrier down the conveyor
for unloading.
GENERAL DESIGN CONSIDERATION FOR EQUIPMENT TO ASSEMBLE A MEDICAL DEVICE
We assume that the manual assembly modules will operate in a controlled
environment designed to minimize sources of product contamination. The
product to be assembled is a medical device and will be manufactured under
FDA GMP guidelines.
The assembly modules will be designed and constructed to operate while
minimizing introduction of contamination to the product, assuming the
equipment is maintained to specification standards and operated by trained
employees. Instructions and procedures for maintaining the equipment to these
standards shall be included in the equipment manual provided with the
equipment.
Tooling components which come in direct contact with the product shall either
be aluminum with a hard anodize or stainless steel. Two exceptions to this
shall be: 1) the heat seal tools, which will have a Silver Stone EMC 420 soft
textured finish, and 2) the vacuum cavities, which will be unfinished 6061-T6
aluminum.
FURTHER DEVELOPMENT OF HEAT SEALING TOOLS AND HEATING SYSTEM
As discussed during our meeting in Missoula on September 1, there may be ways
in which the design of the heat sealing tools and the heating system can be
improved, including the provision of individual heaters for each heat seal
tool. The ultimate design will optimize heat sealing performance of multiples
of up to one hundred (100) tools while minimizing the operating, maintenance
and replacement costs of the tools.
For the manual line proposed in this quotation, Remmele will commit to a heat
sealing heating system which will provide consistent and reliable performance
of the heat seal operation. This assumes a temperature tolerance of
approximately -plus/minus-5 degrees F., from an optimum setpoint at each tool.
The profile design of the weld tools in the area of the weld is considered
finalized and will be incorporated into the design of the manual equipment.
Throughout the development of this manual equipment, Remmele will be
considering ways to improve the design of the heat sealing system for
incorporation into the fully automated system.
<PAGE>
CQ#95-739A-SAP
Page 4 of 9
FINISH
The Equipment will be painted or otherwise finished for neat appearance and
to resist corrosion. It will be painted per Ultrafem's instructions for
meeting O.S.H.A. standards. Commercial components will be supplied with their
original finish.
SPECIFICATIONS
ELECTRICAL EQUIPMENT: 480-volt, 3-phase, 60 Hertz. All wiring will be done
in accordance with the National Electric Code, in
particular NEC Article 670, INDUSTRIAL MACHINERY,
and its referenced standard NFPA 79, ELECTRICAL
STANDARD FOR INDUSTRIAL MACHINERY.
PNEUMATIC EQUIPMENT: This equipment will operate off plant air supply at
approximately 80 P.S.I.G.
COOLING WATER: The equipment will require a supply of cooling
water; this will be supplied by Ultrafem.
PART DRAWINGS & Reference OP-1001-3, Part #0001 dated 8/11/93.
SPECIFICATIONS: Process parameters per list agreed upon by
Remmele and Ultrafem during meeting on 9/1/95
and supplied by Ultrafem via fax on 10/6/95.
GUARANTEE
The Equipment is guaranteed to conform to the description and specifications
as outlined herein during the length of the warranty period.
INSPECTION AND ACCEPTANCE
Remmele will notify Ultrafem when the Equipment is ready for inspection. We
request that you schedule an acceptance run as soon as possible after such
notification.
The acceptance run at Remmele's facility will be two (2) hours in length.
During this acceptance run, the equipment efficiency shall not be less than
90 percent of the gross production possible with a 15-second cycle. Two (2)
operators will man the heat seal station, one (1) operator will man the
pre-heat station, and one (1) operator will man the vacuum forming station.
Product- and process-induced failures shall not be included in this
calculation.
Product-induced failure incidents are defined as those resulting from product
materials supplied by Ultrafem being out of specification (e.g., holes or
foreign material in the film). Process-induced failure incidents are defined
as those resulting when a process is executed in accordance with
specifications supplied by Ultrafem and the resultant product is
unacceptable. Remmele assumes responsibility for incidents associated with
design and construction of the equipment which inadequately executes the
processes as defined by Ultrafem. The classification of failure incidents is
a responsibility shared by the Remmele Project Engineer and the Ultrafem
Project Manager. Both individuals must agree on the outcome. We would further
expect that simple operator mistakes would not be included in efficiency
calculations for acceptance.
<PAGE>
CQ#95-739A-SAP
Page 5 of 9
An identical acceptance run will be performed at Ultrafem's facility after
installation. The conditions existing during the acceptance run at Remmele's
facility, including the condition of samples and the environment in which the
Equipment is placed, shall be duplicated to the furthest extent possible
during the acceptance run at Ultrafem's facility. It shall be the joint
responsibility of Remmele and Ultrafem to inspect and recognize the
conditions existing during the acceptance run at Remmele's facility and to
duplicate those conditions during the acceptance run at Ultrafem's facility.
Upon successful completion of the acceptance run at Ultrafem's facility,
final acceptance will occur.
Remmele will thoroughly instruct Ultrafem's representatives in the proper
operation and maintenance of the Equipment during their visit to our plant.
TRYOUT PARTS:
To assure that Remmele can meet its delivery commitment and performance
guarantee, production part samples will be required according to the
following schedule:
(100) rims and (1) roll of Kraton film Two (2) weeks after receipt of order
to begin equipment design
(100,000) rims and (10) rolls of Kraton 10,000 units/week for four (4)
film for equipment development and weeks, commencing four (4) weeks
debug after receipt of order; remainder to
be supplied 30,000 units/month for
two (2) months, commencing eight
(8) weeks after receipt of order.
(40,000) rims and (4) rolls of Kraton Sixteen (16) weeks after receipt of
film for the acceptance run at order
Remmele's facility
(40,000) rims and (4) rolls of Kraton Twenty-two (22) weeks after receipt
film for the final acceptance run at of order
Ultrafem's facility
EQUIPMENT STARTUP AND SUPPORT
The Equipment price includes labor costs for installation and startup support
and final acceptance testing at Ultrafem's facility. Transportation and
living expenses for these services, including the cost of traveling to and
from the location of the Equipment, are not included in the Equipment price
and will be charged to Ultrafem at cost.
Remmele's representative in your area is Mr. Carmen Pistillo of Griot Group
Inc., 2230 S. McClintock Dr., Suite 1, Tempe, AZ 85282. His telephone number
is (602) 968-4428.
PRICE
$357,000.00 F.O.B. Remmele's dock skidded for domestic shipment.
<PAGE>
CQ#95-739A-SAP
Page 6 of 9
DOCUMENTATION
The Equipment price includes paper copies of the following documents:
electrical schematics, air schematics, timing diagrams and assembly drawings.
These will be drawn to ANSI Y14.5 standards on Remmele forms.
A Remmele standard equipment manual is included in the Equipment price. The
manual will include the following information:
- Safety
- Equipment overview
- Description of operations and controls
- Setup, calibration and adjustment
- Recommended spare parts list
- Fabricated parts list
- Purchased parts list
- Purchased part literature
These documents will become the property of Ultrafem.
PAYMENT TERMS
30% of total with order.
The balance is to be paid through progress payments at the following
milestones:
30% after an acceptable review at Remmele's facility of approximately
80% of the mechanical and electrical design -- (approximately 6 weeks
after receipt of order);
15% upon start of assembly -- (approximately 14 weeks after receipt of
order);
10% upon acceptance of the equipment at Remmele's facility --
(approximately 20 weeks after receipt of order; and
15% upon acceptance of the equipment at Ultrafem's facility, covered by
a Letter of Credit, Escrow Account, or other similar mutually-
acceptable instrument. This instrument must be presented upon
acceptance of the equipment at Remmele's facility; shipment of the
equipment from Remmele's facility will be contingent upon Remmele
receiving the mutually-acceptable instrument.
All payments are due net ten (10) days after receipt of invoice.
DELIVERY
Twenty (20) weeks from receipt of purchase order to acceptance at Remmele,
subject to confirmation at time of order.
This quotation includes and is subject to the attached Remmele Automation
Division Standard Conditions of Sale. In the event there are conflicts
between this quotation and the attached Standard Conditions of Sale, this
quotation will control. (This quotation and the attached Standard Conditions
of Sale will be referred to together as the "Quotation.")
<PAGE>
CQ#95-739A-SAP
Page 7 of 9
No statement or recommendation not contained or referenced herein shall have
any force or effect unless in an agreement signed by an officer or authorized
representative of Remmele Engineering, Incorporated.
Respectfully submitted:
SAINT PAUL, MINNESOTA REMMELE ENGINEERING, INC.
AUTOMATION DIVISION
October 17, 1995 By /s/ William F. Iacoe
------------------------------------
William F. Iacoe
Vice President and General Manager
We accept this Quotation and order the
items as quoted, and we accept the
attached Standard Conditions of Sale,
including all warranty provisions.
ULTRAFEM INC.
By /s/ John W. Andersen
------------------------------------
Title Chairman/CEO
---------------------------------
Dated Oct. 18, 1995
---------------------------------
REMMELE ENGINEERING, INC.
AUTOMATION DIVISION
CONDITIONS OF SALE
I. ACCEPTANCE OF THIS QUOTATION: This Quotation is an offer to sell which
is not binding upon Remmele until accepted by the Buyer. To accept this
Quotation, Buyer must return a fully executed copy of the Quotation to
Remmele within sixty (60) days from the date hereof. Buyer's acceptance of
this Quotation is limited to the terms of the Quotation. The contract
shall consist of all the terms and conditions set forth herein, unless
Remmele agrees in writing to other terms and conditions. If this Quotation
is not accepted within the sixty (60) day period, it shall no longer be
binding upon Remmele unless reaffirmed at the request of the Buyer.
II. CANCELLATION: The Buyer may cancel an order by submitting a written
notice of cancellation to Remmele before the Equipment is delivered. If
the Buyer cancels an order, it must compensate Remmele at Remmele's
standard rates and profit margins for the material and labor that Remmele
expended or committed, up to and including the date on which the written
notice of cancellation was received by Remmele. Upon cancellation and
payment by the Buyer, all parts will become the Buyer's property. All
designs, plans, drawings and specifications shall remain the property of
Remmele.
III. DELAYS: If a delay occurs in any of the events described in this
Quotation for which payment is due and such delay is not attributable to
Remmele but is, instead, attributable in substantial part to an act or
omission on the part of the Buyer, the Buyer will pay to Remmele eighty
percent (80%) of the amount due within sixty (60) days from the scheduled
completion date for such event. The remaining twenty percent (20%) will be
paid upon the actual completion of the event.
<PAGE>
CQ#95-739A-SAP
Page 8 of 9
If delays which substantially inhibit Remmele's performance under this
contract exceed one hundred twenty (120) days in the aggregate, and such
delays are not attributable to Remmele but are, instead, attributable in
substantial part to an act or omission on the part of the Buyer, Remmele
may, at its option, consider the order canceled by the Buyer and subject
to the cancellation provision contained in these Conditions of Sale.
IV. CHANGE REQUESTS AND CHANGE ORDERS: If the Buyer wishes to expand or
modify the work scope of the contract between Remmele and the Buyer, the
Buyer must submit a written work scope change request. Remmele will
respond promptly to such a request by stating in writing what effect, if
any, the request will have on the purchase price and delivery date of the
Equipment.
After Remmele and the Buyer agree upon a work scope change request and any
adjustments to the purchase price or delivery date, the Buyer shall submit
a written change order to Remmele, signed by an authorized representative
of the Buyer. A written change order must be received by Remmele before
any changes will be made to the present scope of work.
V. DELIVERY: Every effort will be made to ship orders by the date
promised, but REMMELE SHALL NOT BE LIABLE FOR ANY DAMAGES, WHETHER DIRECT,
INDIRECT, CONSEQUENTIAL OR INCIDENTAL, ARISING OUT OF ANY DELAY IN
DELIVERY.
VI. SAMPLES: The Buyer must send sufficient samples of product to Remmele
for design and test purposes. These samples must be clean and dry. They
should be shipped at the time of the order and will be provided at no
cost to Remmele. All products will be retuned with the completed
Equipment. It is understood that a portion of said products may be
damaged during setup and run-in of the Equipment.
As with any automated equipment, it is very important for the samples
to conform to specifications and to be consistent. For this reason, this
Quotation is based on the premise that the samples provided for
Remmele's design and test purposes will consistently conform to the
Buyer's production specifications/drawings in every respect and will be
consistently within specification/drawing limits. Failure to comply with
this premise could affect delivery time, project cost, functionality,
production rate, or all of these factors.
VII. SPARE PARTS: The purchase price of the Equipment does not include any
spare parts; however, upon request, Remmele will furnish the Buyer with
a list of parts which we would recommend that you stock for maintenance
purposes.
VIII. TAXES: Any tax or other federal, state or local governmental charge on
the production, sale or shipment of the Equipment, now or hereafter
imposed, shall be added to the price herein quoted and shall be paid by
the Buyer.
IX. SAFETY REQUIREMENTS: Remmele warrants that the goods covered by this
order will conform to nationally recognized standards under the
Occupational Safety and Health Act (O.S.H.A.) at the date of the
purchase order; however, Remmele does not assume any responsibility for
conformance to local codes or those codes not known by Remmele. Buyer
agrees to participate with Remmele in a review of the equipment for
compliance of nationally recognized codes.
Remmele will fully cooperate with the Buyer in the design, manufacture
or procurement of additional safety features or devices which are
deemed necessary under subsequent O.S.H.A. standards or any other
statute, ordinance or governmental regulation. The price at which all
such additional services and equipment shall be furnished by Remmele will
be at Remmele's standard rates or prices then in effect, or as mutually
agreed to by Remmele and the Buyer.
The Buyer agrees, at its own cost and expenses, to train all equipment
users not trained by Remmele to follow safe operating procedures and to
understand and retain the information contained in the operating
manuals, maintenance manuals and safety warning signs.
X. PERMITS: The Buyer shall be responsible for the procurement at its
expense of any special permits required for the design, fabrication,
testing, transport, installation or operation of the Equipment.
XI. TITLE AND ACCESS TO THE EQUIPMENT: Title to the Equipment shall pass
from Remmele to the Buyer at the time Equipment is delivered or shipped
under the F.O.B. terms contained in this Quotation. Prior to that time,
the Buyer will be given reasonable access to the Equipment.
In the event that this Quotation includes an acceptance test at the
Buyer's facility, the following shall apply: Although title shall pass
to the Buyer at the time of delivery or shipment, the Buyer will have no
right to work on or with the Equipment without Remmele's authorization
until final acceptance at the Buyer's facility. If the Buyer works on or
with the Equipment prior to final acceptance without Remmele's
authorization, all warranties, guarantees and remedies extended in this
Quotation are void, Remmele's obligations under this Quotation will be
deemed complete, and Remmele will not be in any way responsible for any
damage to the Equipment or other property or for any injury to any
person. After the Equipment is delivered to the Buyer, but before final
acceptance, the Buyer shall give Remmele reasonable access to the
Equipment for the purposes of: (1) installing the Equipment, in the
event that installation services are included in this Quotation; and
(2) preparing the Equipment for final acceptance testing. Remmele shall
have the right until final acceptance to take parts from the Equipment
back to its facility for purposes related to achieving final acceptance.
XII. WARRANTIES: Remmele warrants that the Equipment shall conform to the
description and specifications found in this Quotation. The warranty
period is one (1) year and begins on the date of final acceptance at
Buyer's facility.
THE EXPRESS WARRANTIES CONTAINED IN THIS QUOTATION ARE GIVEN IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, REMMELE EXCLUDES AND DISCLAIMS
ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR
PURPOSE.
In order for the warranties contained in this Quotation to remain in
effect, the Buyer must follow and demonstrate compliance with Remmele's
and any of Remmele's suppliers recommended maintenance procedures.
On all items purchased by Remmele, the warranties of the manufacturer
of those items shall apply to those items.
XIII. PATENT INFRINGEMENT: Remmele warrants that it is without knowledge that
the Equipment and its sale or intended use designated in this Quotation
according to Remmele's specifications or written recommendations, if any,
will infringe any third party patent rights; but Remmele makes no
warranty whatsoever for infringement of third party patents with respect
to Equipment incorporating designs or specifications furnished by the
Buyer to Remmele or to claims that the product produced by the Equipment
itself infringes or otherwise constitutes unauthorized use of any patent,
copyright, trade secret or other intellectual property right. Except as
limited below, Remmele shall indemnify and hold the Buyer harmless from
any infringement in breach of the above warranty, provided the Buyer
gives Remmele prompt notice of any claimed infringement and the right to
assume the defense of such claim. Furthermore, in the event of any such
claimed infringement, Remmele may, at its sole option, procure for the
Buyer, at Remmele's expense, the right to continue using the Equipment,
modify it so it becomes noninfringing, or remove the Equipment and refund
the total purchase price therefor plus the expenses incurred by the Buyer
in shipping the Equipment to the Buyer's facility. In no event shall
Remmele's cumulative liability for the above indemnity or for any past or
future royalties or damages exceed the purchase price of the Equipment.
<PAGE>
CQ#95-739A-SAP
Page 9 of 9
XIV. REMEDIES: Remmele shall repair or, at its option, replace any
Remmele-designed and manufactured item which, within one (1) year of
the date of shipment, proves defective in design or workmanship. All
claims relating to defects in the Equipment or in any of its parts must
be submitted to Remmele in writing within one (1) year of shipment. If
the defective item can be sent to Remmele, Remmele's responsibility to
repair or replace shall be contingent upon the Buyer returning the
defective item to Remmele. The Buyer will be invoiced for the
replacement part, and credit will be issued upon the return of the
defective part to Remmele.
Remmele will provide the Buyer with on-site warranty assistance,
provided the defective part cannot be sent to Remmele or the issue in
question cannot be resolved over the telephone. Remmele will make its
best reasonable effort to respond to any warranty issues in a timely
fashion to meet the Buyer's needs. If the Buyer and Seller mutually
agree that the situation could have been resolved by qualified Buyer
maintenance personnel and telephonic consultation with Seller project
personnel, transportation and living expenses incurred during these
warranty calls, including the cost of traveling to and from the
location of the Equipment, will be billed at cost.
Remmele's responsibility and liability to the Buyer is limited to the
repair and replacement remedy set forth in this section, provided,
however, that if the cost of repair or replacement exceeds the quoted
price of the Equipment, Remmele may, at its option, refund the quoted
price to the Buyer. These are the Buyer's sole and exclusive remedies.
If these limited remedies are held to have failed of their essential
purpose, or are otherwise held invalid or inapplicable, Remmele's
liability is limited to the purchase price of the Equipment, regardless
of the legal theory of any claim. IN NO EVENT AND UNDER NO CIRCUMSTANCES
SHALL REMMELE BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES.
XV. NON-WARRANTY SERVICE AGREEMENT: Service calls that are not related to
warranty work will be provided under Remmele's current service rates.
XVI. THIRD-PARTY INDEMNIFICATION: Remmele agrees, at its own cost and
expense, to defend and hold the Buyer harmless from any claim by any
person, firm, corporation or governmental unit which is caused by or
arises out of the intentional malfeasance or negligent acts or omissions
of Remmele.
The Buyer agrees, at its own cost and expense, to defend and hold
Remmele harmless from any claim by any person, firm, corporation or
governmental unit which is caused by or arises out of the intentional
malfeasance or negligent acts or omissions of the Buyer.
XVII. DRAWING AND DOCUMENT INDEMNIFICATION: In the event any claim arises
out of: (1) the negligent or careless use or intentional misuse of the
drawings and documents supplied pursuant to this Quotation by the Buyer
or the Buyer's employees in maintaining or supporting the Equipment; or
(2) any use of these drawings and documents, other than in maintaining
or supporting the Equipment, by the Buyer, the Buyer's employees, or
anyone else other than Remmele or its vendors, the Buyer hereby agrees
to defend, indemnify and hold Remmele harmless from all expense,
including payment of damage awards, settlements, costs and legal fees,
incurred by Remmele in the defense of said claim. In the event of an
indemnifiable claim, Remmele, at Remmele's sole option, may permit the
Buyer to treat said claim as if it had been brought directly against the
Buyer and to settle or defend said claim at the Buyer's expense and as
the Buyer sees fit.
XVIII. INTEGRATION: This Quotation sets forth the entire understanding and
agreement between Remmele and the Buyer relating to the Equipment and
merges all prior oral discussion between them. No modification,
extension, or waiver of these documents or any provision hereof shall be
binding unless mutually agreed to in writing.
XIX. FORCE MAJEURE: The obligations of Remmele and the Buyer to perform
shall be excused during each period of delay caused by matters which
are beyond the reasonable control of the party obligated to perform,
such as strikes, shortages of raw materials, government orders, or acts
of God, and the time for performance shall be extended for such period;
provided that if an event of FORCE MAJEURE occurs, the party who is
claiming to be excused from performance shall give prompt notice of the
event of FORCE MAJEURE to the other party; and provided further that if
an event of FORCE MAJEURE occurs which prevents performance of the
contract and continues for a period of more than one hundred twenty
(120) days, Remmele may, at its option, cancel the contract without
further liability to Remmele.
XX. HEADINGS: All section and paragraph titles and captions are asserted
for ease of reference only and are without contractual significance or
effect.
XXI. SEVERABILITY: If any provision of this Quotation is held unenforceable
or invalid or in conflict with the law of any competent jurisdiction,
it will be deemed severed from this Quotation and the remaining portions
of this Quotation shall remain in full force and effect.
XXII. APPLICABLE LAW: The Buyer and Remmele agree that this Quotation shall
be deemed to be executed in the State of Minnesota. The Buyer and
Remmele further agree that this Quotation shall be governed by and
shall be construed and interpreted in accordance with the laws of the
State of Minnesota.
XXIII. RESOLUTION OF DISPUTES: Any controversy, claim or dispute arising out
of or relating to this Quotation, or to the alleged breach of any
element of this Quotation either by Remmele or the Buyer, shall be
settled as follows: Both parties will first attempt in good faith to
promptly resolve the controversy, claim or dispute by negotiations
between senior executives of the parties who have authority to settle
the matter (and who do not have direct responsibility for administration
of this agreement). If the controversy, claim or dispute has not been
resolved by such negotiations within sixty (60) days after written
request by either party, the matter shall upon written request of either
party then be settled by binding arbitration before three (3)
arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA"), and judgment on the award
rendered by the Arbitrators may be entered in any court having
jurisdiction thereof. At least two of the three arbitrators shall be
experienced in and have knowledge of factory automation. The parties
agree that any arbitration hearing shall be held in Saint Paul,
Minnesota. Any claim in connection with this Quotation not made within
two (2) years after delivery of the Equipment shall be waived.
<PAGE>
Control No. 74110-96
SALES CONTRACT
[LOGO] DATED JANUARY 1, 1996
1. PARTIES.
Shell: SHELL CHEMICAL COMPANY, for itself and as agent for SHELL OIL
COMPANY ("Seller"), P. O. Box 2463, Houston, TX 77252-2463,
facsimile no. 713-241-6465.
Buyer: ULTRAFEM, INC., 500 Fifth Avenue, Suite 3620, New York, NY 10110
facsimile no. 212-575-5741
Minimum
Annual Shipment Price
2. PRODUCT Quantity FOB Point Quantity (Per Unit)
(thousand lbs.)
-------------------------------------------------------------------------
KRATON(R)
Compound Seller's Shipping See (1) See (1)
Grades:(2) Location below. below.
-------
GRP 6571 1996: 122.2
1997: 620.4
1998: 1,475.8
GRP 6582 1996: 527.8
1997: 2,679.6
1998: 6,374.2
-------------------------------------------------------------------------
(1) - For full truck loads delivered east of the Rockies, the price will
be $2.21/lb., freight prepaid from Seller's shipping location.
($0.03/lb. will be added for full truck load shipments delivered west of
Rockies). For less than full truck loads, the price will be $2.21/lb.
plus standard differential per Seller's pricing policy, freight collect.
An additional charge of $0.05/lb. will be added for GRP 6582-3075, as
described on Exhibit B.
(2) - See Exhibit B, "Product Description".
3. PERIOD. The period of this Contract will begin on January 1, 1996
and end on December 31, 1998, but will continue from year-to-year thereafter,
subject to termination on such ending date or on any date thereafter by
either party giving the other at least one hundred eighty (180) days prior
written notice.
4. PRICE AND PAYMENT TERMS. Price is subject to change by Seller from
time to time on at least fifteen (15) days' notice.
<PAGE>
Seller may institute or withdraw a Temporary Voluntary Allowance (TVA) or
other similar competitive allowance off the then current contract price
without notice and the institution or withdrawal of such an allowance will
not be deemed a change in price. Any tax (other than on income), duty or
other governmental charge now or hereafter imposed on the Product or on any
raw material used in manufacturing the Product (or on Seller, or required to
be paid or collected by Seller, by reason of the manufacture, transportation,
sale or use of such Product or raw material) will be paid by Buyer in
addition to the price. If Seller is prevented by law, regulation or
governmental action from increasing or continuing any price already in effect
under this Contract, Seller may terminate this Contract on ninety (90) days
written notice. If Buyer gives satisfactory evidence that it can purchase a
product of like quality and quantity produced in the United States (including
its territories or possessions) at a lower price and under terms and
conditions similar to those of this Contract and Seller elects not to meet
the lower price, all quantities actually purchased by Buyer at the lower
price will be deducted from the applicable remaining quantity obligation. If
Seller elects to meet the lower price, Seller may withdraw its lower price on
notice or immediately upon termination of the competitive lower price.
Payment terms are net thirty (30) days from date of invoice.
5. QUANTITY LIMITATION. During each year of the contract period,
Buyer will purchase the specified Annual Quantity or, if Buyer's requirements
are reduced, an annual quantity that bears the same ratio to the reduced
requirements as the specified Annual Quantity bore to Buyer's estimated total
requirements as of the date the Contract was executed. On or before the 15th
day of the month preceding each calendar quarter, Buyer shall provide Seller
with quarterly forecasts for expected Product needs for planning purposes. In
addition to Seller's right to apportion in an event excusing performance (as
provided in Article 8 below), Seller shall also have the right to limit the
quantity of Products to be supplied to Buyer as follows:
A. during the first three (3) years of the Period, Seller may limit
the quantity of Product(s) to be supplied in any month to one-third
(1/3) of the quarterly amount forecasted for the relevant calendar
quarter by Buyer; or
B. after the first three (3) years of the Period, Seller may limit
the quantity to be supplied in any month to one-twelfth (1/12) of the
Annual Quantity or, after the initial ninety (90) days of each Contract
year, the average of the monthly quantities shipped during the expired
months of that Contract year.
6. SHIPMENTS. Seller will select the origin of shipment and the
carrier. The quantity of all bulk rail and truck shipments will be determined
by Seller by outage tables with corrections for temperature or by
weighmaster's certificate as appropriate and Seller's quantity determination
will govern. Buyer will promptly unload each shipment at its own risk and
expense, including any demurrage or detention charges.
7. WARRANTIES. Seller warrants that each Product will meet
specifications designated as such in Exhibit A hereto. Shell warrants that it
will comply with all applicable laws and governmental rules, regulations and
orders. SHELL MAKES NO OTHER WARRANTIES, WHETHER OR MERCHANTABILITY, FITNESS
OR OTHERWISE, AND NONE WILL BE IMPLIED.
<PAGE>
8. EXCUSES FOR NONPERFORMANCE. Either Seller or Buyer will be excused
from the sale or purchase obligations of this Contract to the extent that
performance is delayed or prevented by any circumstance (except financial)
reasonably beyond its control or by fire, explosion, mechanical breakdown,
strikes or other labor trouble, plant shutdown, unavailability of or
interference with the usual means of transporting the Product or compliance
with any law, regulation, order, recommendation or request of any
governmental authority. In addition, Seller will be so excused in the event
it is unable to acquire from its usual sources and on terms it deems to be
reasonable, any material necessary for manufacturing the Product. If, because
of such circumstances, there should be a shortage of Product from any of the
Seller's sources, Shell will not be obligated to purchase Product in order to
perform this Contract and may apportion its available Product among all its
customers and its own internal uses in such manner as Seller finds fair and
reasonable; provided, however, that Seller will not be obligated to apportion
or otherwise make available to Buyer Product which Shell obtains by purchase
or exchange for their own internal uses. Quantities of Product consequently
not shipped will be deducted from the applicable remaining quantity
obligation unless the Parties agree otherwise.
9. SAFETY AND HEALTH COMMUNICATIONS. Seller will furnish to Buyer
Material Safety Data Sheets which include health, safety and other hazard
communication information on Product consistent with the Occupational Safety
and Health Administration's Hazard Communications Standard. Seller will also
furnish other health or safety information as available. Buyer will
disseminate appropriate health and safety information to all persons Buyer
foresees may be exposed to Product (including but not limited to Buyer's
employees, contractors and customers). If Product is further processed, mixed
or incorporated into another product, Buyer will likewise disseminate
appropriate health and safety information to all persons Buyer foresees may be
exposed.
10. LIABILITIES AND INDEMNITY. Seller expressly disclaims any
expertise or other special knowledge with regard to Buyer's intended
applications for utilizing Seller's Products and enters into this Contract on
the condition that Buyer assumes all responsibility for determining
suitability of same. Buyer expressly acknowledges that in selecting Seller's
Products for use in the manufacture of its products, Buyer has made its own
evaluation concerning the use of Seller's Products and has not relied on any
representation by any employee or agent of Shell Chemical Company, Shell Oil
Company, or any of their affiliates, parents and subsidiaries to determine
the suitability of Seller's Product for use in Buyer's applications. BUYER
ACKNOWLEDGES THAT IT IS SOLELY RESPONSIBLE FOR INDEPENDENTLY DETERMINING SUCH
SUITABILITY AND THAT BUYER IS RELYING SOLELY ON ITS OWN STUDIES, DATA AND
OTHER RELEVANT INFORMATION TO DETERMINE WHETHER BUYER'S PRODUCTS AND THE
MATERIALS CONTAINED THEREIN (INCLUDING SELLER'S PRODUCTS) ARE SAFE AND
EFFECTIVE FOR BUYER'S APPLICATIONS.
To the maximum extent permitted by applicable law, Buyer shall defend,
indemnify and hold harmless Shell Chemical Company, Shell Oil Company, their
affiliated, parent and subsidiary companies (inclusive of the directors,
officers and employees of each) against any loss, damage, claim, suit,
liability, judgment, and expense (including but not limited to reasonable
attorneys' fees and costs of litigation), and any fines, penalties and
assessments, arising out of bodily or personal injury, disease or death of
persons, damage to or loss of any property or violation of the applicable law
of any governmental authority which in any way arises, directly or indirectly,
out of Buyer's use of Seller's Products, Buyer's marketing and sales of its
products, or use by any person of
<PAGE>
Buyer's products; provided, however, that such indemnification obligation
shall not apply to the extent such loss, damage, claim, suit, liability,
judgment, or expense arises out of Seller's failure to meet specifications.
Seller shall have the right, but not the duty, to participate in the defense
of any such claim or suit with attorneys of its own selection (at Seller's
sole expense) without relieving Buyer of any obligations hereunder.
The obligations, indemnities and liabilities assumed by Buyer under this
Article shall not be limited by any provisions or limits of insurance
required in Article 11 below and shall survive the termination of this
Contract.
If it is judicially determined that any of the indemnity obligations (which
Buyer agrees shall be supported by insurance) under this Article or the
insurance obligations under Article 11 below are invalid, illegal or
unenforceable in any respect, the parties agree that said obligations shall
be automatically amended to conform to the maximum monetary limits and other
provisions in the applicable law for so long as such law is in effect.
11. INSURANCE. Buyer shall maintain at all times (beginning with the first
date of commercial manufacture of Buyer's products), at Buyer's expense and
with insurers satisfactory to Shell, General Liability Insurance (to be
inclusive of Product Liability coverage for Buyer's products and potential
defects therein) for bodily and personal injury and property damage, combined
limit of $5,000,000 (five million dollars) per occurrence. Whenever requested
by Shell, Buyer shall furnish evidence satisfactory to Shell that such
insurance is in effect. To the maximum extent permitted by law, and without
in any way limiting Buyer's obligations, indemnities or liabilities as set
out elsewhere in this Contract, all insurance policies maintained by Buyer as
described above as well as any other applicable insurance maintained by Buyer
shall name Shell Oil Company, Shell Chemical Company, and their affiliated,
parent and subsidiary companies (inclusive of the officers, directors and
employees of each) as additional insureds with respect to the applicable
insurance coverage. The policies shall also contain a waiver of subrogation
in favor of those same parties. All such policies shall be regarded as
primary insurance underlying any other insurance (including any insurance
maintained by Shell) and shall not be limited by the liability and indemnity
provisions contained elsewhere in this Contract.
12. CLAIMS AND LIMITATIONS. Neither Shell nor Buyer will have any liability
to the other for any claim (except for indebtedness of Buyer to Seller)
arising out of or in connection with this Contract unless claimant gives the
other Party notice of the claim, setting forth fully the facts on which it is
based, within ninety (90) days of the date such facts were discovered or
reasonably should have been discovered. Shell's liability for defective or
nonconforming Product, whether or not based on negligence, will not exceed
the purchase price of the Product involved in the claim. Except as may be
otherwise expressly provided herein, NEITHER PARTY WILL BE LIABLE FOR ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.
13. RESTRICTIONS.
A. USE OF SHELL MARKS. Buyer agrees that it will not utilize the
tradename "SHELL" or any trademarks (including, but not limited to,
"KRATON"), service marks, logos, emblems, trade dress or similar identifying
<PAGE>
characteristics pertaining to Shell Chemical Company, Shell Oil Company, or
any of their affiliated, parent or subsidiary companies in conjunction with
the marketing, advertising, promotion, sale, branding or display of Buyer's
products.
B. USE OF SHELL PRODUCT. Buyer agrees that it will utilize the Products
purchased hereunder exclusively for manufacture of the basic Ultrafem Softcup
product, and not for commercial production of a contraceptive version,
disease prevention/protection version or any other enhanced or
multiple-purpose version of the basic Softcup, unless Buyer obtains the prior
express, written consent of Shell.
14. RECORDS OF PRODUCT COMPLAINTS. For Shell's information only, Buyer agrees
to send to Shell, promptly after receipt by Buyer, copies of any written
complaints (and summaries of verbal complaints) received by Buyer from users
of its products and to keep Shell advised of the status of corrective actions
taken by Buyer in response to such complaints.
Shell agrees to hold such information in strictest confidence and will not
disclose it to any third party without Buyer's express consent, except to the
extent such disclosure is required by law or legal process, or requested by
any governmental entity having the legal authority to compel disclosure.
15. CONFIDENTIALITY. Seller agrees not to disclose Buyer's formulations for
GRP 6571 and GRP 6582 to any third party (including third parties engaged in
the manufacture of female hygiene products) and not to use the same except to
supply Buyer, in each case for a period of five (5) years from the contract
date, after which period Seller's obligation of non-use shall cease. Buyer
agrees that Seller may thereafter treat GRP 6571 and GRP 6582 in the same
manner as Seller treats its own proprietary and confidential information.
However, during the period of Seller's obligation of non-disclosure and
non-use, if Buyer's formulations are publicly disclosed by Buyer or any other
entity having the right to disclose same, Seller's obligation shall cease
immediately upon such disclosure.
16. REMEDIES. If Buyer fails to continuously maintain insurance as provided
under Article 11 above or utilizes an identifying characteristic in breach of
Article 13 above, Seller may, in addition to any other remedies, terminate
this Contract without liability to Buyer, such termination to become
effective upon receipt of written notice by Buyer. If Buyer fails to pay any
indebtedness to Seller when due, Seller may, in addition to any other
remedies, suspend shipments and/or change terms of payment immediately with
written notice to Buyer. In addition, Seller may send Buyer written demand
for payment and if payment (or other mutually agreed disposition) is not made
within thirty (30) days of Buyer's receipt of such notice, Seller may terminate
this Contract effective at any time upon or after expiration of said thirty (30)
day period. Buyer's obligation to perform will not be limited by any previous
waiver by Seller.
In addition to the foregoing, if at any time during the Period of this
Contract Shell reasonably concludes that (based on credible information
available to Shell) the continuation of supply of Products to Buyer poses an
unreasonable risk of significant financial exposure to Shell, Shell may
terminate this Contract effective sixty (60) days after receipt of written
notice by Buyer. Shell will
<PAGE>
use best efforts to assist Buyer's transition to an alternate supply of
material in substitution of Seller's Products.
17. NOTICES. Notice by either Shell or Buyer will be made only by facsimile
or similar electronic transmission, effective at the time sent to the number
set out in Article 1 with confirmation, or by letter or telegram addressed to
the other Party at its address in Article 1 and will be considered given as
of the time it is sent by facsimile transmission or deposited with the U.S.
Postal Service or the telegraph company, postage or charges prepaid.
18. GOVERNING LAW. THIS CONTRACT WILL BE INTERPRETED AND THE RIGHTS,
OBLIGATIONS AND LIABILITIES OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
19. ASSIGNABILITY. Neither this Contract (including all rights, duties and
obligations hereunder) nor any claim against Shell or Buyer arising directly
or indirectly out of or in connection with this Contract will be assignable
by Shell or Buyer or by operation of law, without the prior written consent
of the other Party, such consent not to be unreasonably withheld. However,
notwithstanding the above, Seller shall have the right to assign this
Contract to an affiliate or to a wholly-owned subsidiary of Seller without
the consent of Buyer.
20. ENTIRETY AND RELEASE. This Contract, as of the beginning date of its Period,
contains the complete and exclusive agreement of Shell and Buyer concerning
the Product identified in Article 2, merges and supersedes all prior
understandings and representations (oral or written) and terminates all prior
contracts between Shell and Buyer concerning the same product. Except for any
indebtedness or indemnity obligation of Buyer to Seller, each releases the
other from all claims arising in connection with any such prior contract.
Neither this Contract nor any agreement supplementing or amending this
Contract (including any purchase order or other document issued by Buyer)
will be binding unless signed by the Parties, and performance prior to such
execution will not constitute a waiver of this requirement.
EFFECTIVE ONLY if signed by Buyer and returned within thirty (30) days of the
contract date, and then signed by Seller. Any shipment of Product made during
the period of this Contract, but prior to execution, will be deemed to have
been made under the terms hereof.
ULTRAFEM, INC. SHELL CHEMICAL COMPANY
By Audrey Contente By James H. Johnson
------------------------ -----------------------------
Title Senior Vice President Title General Manager-Elastomers
--------------------- --------------------------
Date February 23, 1996 Date February 29, 1996
---------------------- ---------------------------
<PAGE>
LEASE
THIS LEASE, made and entered into this 28th day of January, 1996 by and
between DENNIS R. WASHINGTON, d/b/a WESTERN TRADE CENTER, of Missoula,
Montana, hereinafter referred to as "Lessor", and ULTRAFEM, INC., of
Missoula, Montana, hereinafter referred to as "Lessee" whether one or more.
RECITALS:
Lessor owns real property in Missoula, Montana, more particularly located
at 1600 North Avenue West and as and comprising approximately 24,000 square
feet as depicted on Exhibit "A" attached hereto and hereinafter referred to as
Premises.
Lessor is desirous of leasing such Premises to Lessee, who is desirous of
leasing the commercial premises pursuant to the negotiated terms of this
agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
premises and payment hereinafter provided, Lessor hereby leases to Lessee that
commercial space referenced in recital A and Lessee hereby leases from Lessor
said Premises pursuant to the following terms, conditions and covenants.
1. TERM. The parties hereto agree that the term of this Lease shall be
for a period of three years commencing February 1, 1996 and ending January
31, 1999, at that monthly rental amount hereinafter specified.
2. RENT. Lessee hereby covenants and agrees to pay Lessor, Western Trade
Center, Missoula, Montana, or such other person, firm or corporation, or at
such other place as Lessor from time to time may designate in writing a
monthly rental of Six Thousand Five Hundred Dollars ($6,500.00) which shall
be payable in advance on the first day of each and every month during the
term of this Lease. Rent for any partial calendar month during the term hereof
shall be prorated at the rate for such month, and shall be due and payable on
the first day of such month.
Lessor agrees to pay for the cost of heat. Lessee agrees to pay for all
lights and electricity.
3. ACCEPTANCE OF THE PREMISES. Except with respect to the act of
negligence or intentional misconduct of Lessor, Lessor shall not be
responsible nor have any liability whatsoever at any time for loss or damage
to Lessee's fixtures, equipment or other property of Lessee installed or
placed by Lessee on the Premises. By occupying the Premises, Lessee shall be
deemed conclusively to have accepted the same and to have acknowledged that
the Premises are in good and tenantable condition. Except as set forth in
this Lease, no representations have been made to Lessee by Lessor, or its
agents, with respect to the Premises or their fitness or suitability for
Lessee's use.
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4. MAINTENANCE AND REPAIRS. Lessor shall keep the foundation, the outer
walls, gutters, down spouts and roof of the Premises in good repair; provided
that Lessor shall not be obligated to make any repairs occasioned by the act
or negligence of Lessee, its employees, agents, servants, customers and other
invitees; and provided further that Lessor shall have no obligation to paint,
recover or refurbish exterior walls or the interior surfaces of the walls.
During the term hereof, at its sole cost and expense, Lessee shall keep all
parts of the interior of the Premises, including without limitations, the
doors, interior walls in good order, operating condition and repair. Lessee
shall also keep the Premises in a clean, sanitary and safe condition in
accordance with all directions, rules and regulations of any health officers,
building inspectors or other proper officers of the governmental agencies
having jurisdiction and shall dispose of all trash and waste materials in the
outside trash containers to be provided by Lessee for this purpose. Lessee
shall comply with all requirements of law, ordinances and other rules and
regulations that affect the Premises. Lessee shall permit no injury to the
Premises or the improvements of which they are a part, and Lessee shall, at
its own cost and expense, replace any light bulbs, frames and accessory parts
thereof on the Premises that may expire, be broken or damaged during the term
hereof. At the expiration of the term, Lessee shall surrender the Premises
broom clean and in as good order as the same are on the Lease Commencement
Date, reasonable wear and tear, excepted.
5. TAXES. Lessor specifically agrees to pay all real property taxes
assessed against the subject property and to carry sufficient structural
insurance.
6. INSURANCE. During the term hereof, Lessee shall, at its sole cost and
expense, maintain the following insurance with respect to the Premises: (a)
standard fire and extended coverage insurance insuring all of its fixtures,
furniture and equipment for the full replacement value thereof; and (b)
public liability insurance with limits of not less than One Million Dollars
($1,000,000) per person bodily injury, One Million Dollars ($1,000,000) per
occurrence bodily injury, and One Hundred Thousand Dollars ($100,000) for
property damage per occurrence, or a combined single limit of liability of
Five Hundred Thousand Dollars ($500,000), insuring against claims of any and
all personal injury, death or damage occurring in or about the Premises or
the sidewalks adjacent thereto. Each such insurance policy shall be issued by
an insurance company of recognized standing, authorized to do business in the
State of Montana and reasonably satisfactory to Lessor. The policies required
in the above paragraph shall name Lessor as an additional insured and where
applicable be payable to Lessor and Lessee as their interest may appear. If
required by Lessor, such policies shall also contain a loss payable
endorsement in favor of the holder of any mortgage affecting the Premises.
All such policies shall provide that no cancellation or termination thereof
or any material modification thereof shall be effective except on ten (10)
days' prior written notice to Lessor, and, if applicable, said mortgagee. From
time to time during the term hereof, Lessee will provide to Lessor current
certificates of insurance evidencing Lessee's compliance with the terms of
this section.
7. NO HAZARDOUS MATERIALS. Without Lessor's prior written consent, Lessee
shall not carry any stock of goods or do anything in or about the Premises
which would in any way tend to increase insurance rates or invalidate any
policy on the
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building retained for Lessor's use on the Premises. Lessee agrees to pay as
additional rent any increase in premiums for insurance against loss by
standard fire and extended coverage resulting from the business carried on in
the Premises by Lessee. If Lessee installs any electrical equipment that
overloads the power lines to the Premises, Lessee shall at its own expense
make whatever changes are necessary to comply with the requirements of
insurance underwriters and insurance rating bureaus and governmental
authorities having jurisdiction.
8. WAIVER OF SUBROGATION. Lessor and Lessee both hereby release the other
from any and all liability or responsibility to the other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or
damage to property caused by fire or any of the extended coverage or
supplementary contract casualties, even if such fire or other casualty shall
have been caused by the fault or negligence of the other party, or anyone for
whom such party may be responsible, provided, however, that this release
shall be applicable and in force and effect only with respect to loss or
damage occurring during such time as the releasor's policies shall contain a
clause or indorsement to the effect that any such release shall not adversely
affect or impair the policies or prejudice the right of the releasor to
recover thereunder.
9. SUBSTANTIAL DAMAGE. If, during the term of this Lease, the Premises
shall be damaged by fire or any other casualty insurable under standard fire
and extended coverage insurance then the same shall be repaired by Lessor at
Lessor's expense as soon as practical, due allowance being given for the time
taken for the settlement of insurance claims, but in any event within three
months from the date of such damage. In the event the Premises shall be
destroyed by fire or any other cause or be damaged to such an extent that in
the opinion of either of the parties, it is not practical to repair or
rebuild the same, then either party may terminate this Lease on thirty (30)
days written notice to the other and Lessee shall be liable for the rental
only to the date of such destruction or damage. If neither party gives notice
of termination of the Lease, then, this Lease shall continue in full force
and effect and Lessor, at Lessor's expense, shall rebuild the Leased Premises
as speedily as practical, but in any event, within one hundred and twenty
(120) days from the date of such damage. Monthly rental shall commence when
the Leased Premises are again suitable to occupancy by Lessee. In the event
of either damage or destruction to the Premises, Lessee shall be entitled to
an abatement of rent corresponding to the time during which the Premises may
not be used by Lessee after the occurrence of the damage or destruction and
before the repairs or rebuilding are completed. In the event of repairs or
rebuilding, the proceeds of insurance shall be used to accomplish the same.
10. ALTERATIONS AND ADDITIONS. Lessee shall not make any alterations or
additions to the Premises, including equipment or appliances installed in
connection with the transmission or delivery of the utilities, without first
procuring Lessor's written consent which consent shall not be unreasonably
withheld or delayed. Any contractor utilized by the Lessee to make such
alterations or additions shall be licensed by the City of Missoula and shall
maintain Worker's Compensation and Liability insurance. In the event that
Lessee does not receive a written response from Lessor within ten (10) days
of Lessor's receipt of such request, Lessee's request shall be deemed
approved. Lessee shall promptly pay for the costs of all such work and shall
indemnify Lessor
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<PAGE>
against liens, costs, damages and expenses incurred by Lessor in connection
therewith, including any reasonable attorneys' fees incurred by Lessor if
Lessor shall be joined in any action or proceeding involving such work.
Trade fixtures may be removed by Lessee provided that any damage to the
premises caused by such removal shall be repaired by Lessee.
All fixtures installed by Lessee in the Premises, including but not
limited to, manufacturing equipment, refrigeration machines and machinery and
the controls, piping and conduits appurtenant thereto, air-conditioning and
air-circulating machinery, lighting fixtures, and refrigerators shall be and
remain the property of Lessee and may be removed by it at any time during or
at the expiration of the term of this Lease. Any such fixtures remaining on
the premises after the expiration of the term of this shall be deemed
abandoned by Lessee and shall become the property of Lessor. At the
expiration of the term of this lease, Lessee shall be obligated to remove, at
its sole cost, any and all alterations or additions made to the Premises by
Lessee. Any ongrade concrete slab constructed by Lessee may remain. Any
additions which Lessor agrees may remain in the Premises shall not be so
removed. Further Lessee agrees to repair any damage resulting from such
removal.
Lessor agrees that the term "fixtures" as used in this paragraph
specifically shall include any machinery or equipment leased or borrowed by
Lessee, and Lessor agrees that the legal owner of such machinery or equipment
shall have the right to remove such machinery or equipment from the Premises
notwithstanding the manner or mode of attachment. In the event any removal of
machinery, equipment, or fixtures shall injure or damage the Premises, Lessee
agrees to repair such damage at its own expense.
11. INDEMNIFICATION. Lessee shall indemnify Lessor against all expenses,
liabilities, and claims of every kind, including reasonable attorney fees, by
or on behalf of any person or entity arising out of either:
a) Failure by Lessee to perform any of the terms or conditions of this
Lease;
b) Any injury or damage happening on or about the premises as a result
of the activities of Lessee, its employees, agents, servants, customers, or
other invitees;
c) Failure by Lessee to comply with any law of any governmental
authority; or
d) Any mechanic's lien or security interest filed against the premises
or equipment, materials or alterations of buildings or improvements thereon as
a result of the activities of Lessee. [All property kept, stored, or
maintained in the premises shall be so kept, stored or maintained at the risk
of Lessee only.]
Lessor, during the term of this Lease, shall indemnify and save harmless
Lessee from all expense, liability, and claims of every kind, including
reasonable attorney's fees
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arising out of the negligence of Lessor, its employees or agents, or any
injury or damage happening on or about the premises as a result of the
activities of Lessor thereon, its employees or agents, or the failure by Lessor
to perform any of the terms or conditions of this Lease. However, Lessor
shall not be responsible to Lessee, nor required to save Lessee harmless
from, any loss or damage which may be occasioned by or through the acts or
omission of the tenants, invitees or occupants of the premises and
improvements of which the premises are a part. Lessor shall not be deemed
negligent hereunder with respect to the repair or maintenance of any portions
of the premises required to be repaired or maintained by Lessor unless Lessor
shall neglect to make such repairs or perform such maintenance after due
notice in writing and a reasonable opportunity to correct the same.
12. ASSIGNMENT AND SUBLETTING. Lessee shall not assign, sell, pledge,
mortgage, encumber or in any other manner transfer this Lease or any interest
therein, without the prior written approval of Lessor, which approval shall
not be unreasonably withheld or delayed.
Lessee shall have the right, without Lessor's consent, to assign this
Lease or sublet the Premises, or any part thereof, to any corporation into
which or with which Lessee merges or consolidates and to any parent,
subsidiary, or affiliated corporation, provided that the resulting entity
from such merger or consolidation shall have a net worth not less than Lessee's
prior to the merger, and provided further that any such assignee shall
deliver to Lessor a counterpart original of a document whereby such assignee
agrees to assume and perform all of the terms and conditions of this Lease on
Lessee's part from and after the effective date of such assignment.
13. SALE BY LESSOR. In the event of any sale of the Premises, or real
property of which the premises are a part, by Lessor, including sales by
foreclosure or a deed in lieu thereof, Lessor shall be entirely freed and
relieved of all liability under any and all of its covenants and obligations
contained in or derived from this Lease arising out of any act or omission
occurring after the consummation of sale; and the purchaser shall, during the
period of its ownership be deemed without any further agreement between the
parties to have assumed and agreed to carry out any and all of the covenants
and obligations of Lessor under this Lease. All subsequent purchasers shall
similarly be agreed and relieved of all liability hereunder subsequent
to the date of such sale by them. In the event of any such sale Lessee agrees
to attorn to and become Tenant of Lessor's successor-in-interest, after
subsequent Lessor has agreed to assume all obligations of original Lessor.
14. DEFAULT. If Lessee shall at any time be in default in the payment of
rent herein reserved or in the performance of any of the covenants, terms,
conditions or provisions of this Lease, and Lessee shall fail to remedy such
default within thirty (30) days after written notice thereof from Lessor; or
if Lessee shall be adjudged a bankrupt, or shall make an assignment for the
benefit of creditors, or if a receiver of any property of Lessee in or upon
said premises be appointed in any action, suit or proceeding by or against
Lessee, or if the interest of Lessee in said premises shall be sold under
execution or other legal process, it shall be lawful for Lessor to enter upon
the Leased
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Premises and again have, repossess and enjoy the same as if this Lease had
not been made, and thereupon this Lease and everything contained herein on
the part of Lessors to be done and performed shall cease and terminate,
without prejudice, subject however, to the right of Lessor to recover from
Lessee all rent due up to the time of entry. In case of any such default and
entry by Lessor, Lessor may relet the Leased Premises for the remainder of
said term for the highest rent obtainable, and may recover from Lessees any
deficiency between the amount so obtained and the rent herein reserved. If
Notice of Default is sent, Lessee shall pay $75.00 attorney fee in addition
to the late payment penalty provided for in this Lease. Lessee agrees to pay
Lessor a late payment of $10.00 for each day the rental is not paid by the
10th of the month that the same is due. The parties agree that the postmark
shall constitute the date the payment was made for purposes of this provision.
15. SUBORDINATION. At the request of Lessor, or any lender, this Lease
shall at all times be subordinate to all ground or underlying leases, and the
lien of any mortgages now or hereafter placed upon Lessor's interest in the
Premises and to all renewals, modifications, consolidations, replacements and
extensions thereof. Lessee agrees to execute and deliver upon Lessor's
request such instruments subordinating this Lease to the lien of any such
mortgages, ground or underlying leases.
16. REPRESENTATIONS. Lessee acknowledges that it has inspected and
examined the property covered by this Lease and it is thoroughly familiar
with the same and acknowledge it is that entering into this Lease based upon
its own examination and inspection and that no representations of any kind or
character have been made by the Lessor or any person acting on the Lessor's
behalf to induce the Lessee to enter into this Lease.
17. AMENDMENTS OR MODIFICATIONS. No amendment or modification of this
Lease or any approvals or permissions of Lessor required under this Lease
shall be valid or binding unless reduced in writing and executed by the
parties hereto in the same manner as the execution of this Lease.
18. PERSONAL TAXES. If any personal property taxes attributable to the
Lessee's furniture, fixtures, merchandise, equipment or other personal
property situated on the Premises are levied against Lessor's property, and
if Lessor pays the same (which Lessor shall have the right to do so after
notice and Lessee's failure to pay within 30 days thereafter) or if the
assessed value of Lessor's premises is increased by the inclusion therein of
a value placed on such property, and if Lessor pays the taxes based on such
increased assessment (which Lessor shall have the right to do), Lessee upon
demand shall repay to Lessor the taxes so levied against Lessor of the
proportion of such taxes resulting from such increase in the assessment.
19. NON-WAIVER. No waiver of a condition or covenant of this Lease by
either party hereto shall be deemed to imply or constitute a further waiver
by such party of the same of any other condition or covenant. No act or
thing done by Lessor or Lessor's agents during the term hereof shall be
deemed an acceptance or a surrender of the Premises, and no agreement to
accept such surrender shall be valid unless in writing signed by Lessor. The
delivery of Lessee's keys to any employee or agent of
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Lessor shall not constitute a termination of this Lease unless a written
agreement has been entered into with Lessor to this effect. No payment by
Lessee, nor receipt from Lessor, of a lesser amount than the rent or other
charges herein stipulated shall be deemed to be other than on an account of
the earlier stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check, or payment as rent, be deemed an
accord and satisfaction, and Lessor shall accept such check for payment
without prejudice to Lessor's right to recover the balance of such rent or
pursue any other remedy available to Lessor.
20. COVENANTS OF LESSEE. Lessee does hereby covenant and agree that it
will:
(a) Pay the rent at the times and place and in the manner aforesaid;
(b) Use and occupy the Premises in a careful and proper manner and
for the purpose of a office, manufacturing, distribution and general business
activities;
(c) Not commit waste therein and to leave the Premises in a broom
clean condition upon termination of this Lease except as otherwise provided
herein;
(d) Not use or occupy the Premises for any unlawful purpose and
conform to and obey all present and future laws and ordinances and all rules,
regulations, requirements and orders of all governmental authorities or
agencies respecting the use and occupation of the Premises;
(e) Landlord, or landlord's designee may enter premises only after
checking in for registration with the Plant manager, or Plant manager's
designee. Exceptions are emergencies, and visits required by Government
regulation where Plant Manager or Plant Manager's designee is not available.
(f) Maintain any insurance Lessee deems necessary on Lessee's trade
fixtures and personal property in addition to the liability and fire insurance
specified above;
(g) Bear and pay all charges for janitorial services, for telephone
services, for garbage collection, and for any and all other services provided
at the request of Lessee to the Premises;
(h) Indemnify the Lessor against all liabilities, expenses, and losses
incurred by the Lessor as a result of:
(1) Failure by the Lessee to perform any covenant required
to be performed by the Lessee herein;
(2) Any mechanics's lien or security agreement, filed
against the Premises for any materials used in the
construction or alteration of the Premises.
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21. COVENANTS OF LESSOR. Lessor hereby covenants with the Lessee as
follows:
(a) It is the owner of the Premises;
(b) Supplementing the terms hereof, it will hold Lessee harmless
from any loss, damage and liability occasioned by or resulting from any
default or negligent act on the part of the Lessor, its agent or employees.
22. UNENFORCEABILITY. If any clause or provision of this Lease is found
by a court of competent jurisdiction illegal, invalid or unenforceable under
present or future laws effective during the term of this Lease, then and in
that event the remainder of this Lease shall not be affected thereby, and in
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there is hereby added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid or unenforceable
clause or provisions as may be possible and be legal, valid and enforceable.
23. ATTORNEY FEES AND COURT COSTS. In case suit or action is instituted
to enforce compliance with any of the terms, covenants, or conditions of this
Agreement there shall be paid to the prevailing party in such suit or action
by the other party the prevailing party's costs and such further sum as the
court may adjudge as reasonable attorney's fees and in the event any appeal
is taken from any judgement or decree in such suit or action, the prevailing
party on such appeal shall likewise recover from the other party costs and
reasonable attorney's fees on such appeal.
24. OPTION TO RENEW. Lessee, at its option, may extend the term of the
Lease for an additional three (3) years upon all the same terms and
conditions as herein contained by serving notice thereof upon Lessor at least
one hundred and eighty (180) days before the expiration of the term, and upon
the service of such notice, this Lease shall be extended upon its terms and
conditions for the extended term without the necessity of the execution of
any further instrument or document. During the Extension Term, if any, Lessee
shall pay to Lessor a monthly base rental calculated by adjusting the sum of
$6,500.00 by the percentage amount, if any, by which the Index (as defined
below) has increased from the first day of the Lease to the first day of the
Extention Term, provided, however, in no event shall the monthly base rental
due during the Extension Term be less than $6,500.00 nor increased by more
than ten percent (10%). For purposes hereof "Index" means the United States
Department of Labor, Bureau of Labor Statistics Consumer Price Index for all
Urban Consumers, West Urban, All Items, 1982-84 = 100. Should the Bureau of
Labor Statistics discontinue publication of the Index, then the computation
of the adjustment of monthly base rental for the Extension Term shall be made
using an index published by the Bureau or similar agency which is most nearly
equivalent to the Index.
25. LEASE CANCELLATION CLAUSE. Lessee may cancel this Lease by giving
at least sixty days' written notice to the Lessor, given by hand deliver,
overnight mail or certified mail, return requested, setting forth in such
notice the effective date of such cancellation (the "Notice"), in which event
this Lease shall terminate on the date set forth in the Notice (the
"Cancellation Date") with the same force and effect as though
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such date were initially set forth as the expiration date of this Lease, and
Lessee will quit and surrender the Premises on such date. Any rental that
Lessee has paid in advance for a period subsequent to the effective date of
cancellation shall be refunded by Lessor to Lessee.
On the Cancellation Date Lessee agrees to pay to Lessor, as
consideration for such early cancellation, a sum equal to the cost of
Lessor's improvements to the Premises on account of this Lease (such
improvement being the building of a wall and bringing sewer and water to
Lessee's offices), not to exceed $24,000.00, multiplied by a fraction, the
numerator of which is 36 minus the total number of full calendar months which
will have elapsed from February 1, 1996 through the Cancellation Date, and
the denominator of which is 36.
26. HOLDING OVER. In the event Lessee shall hold over and remain in
possession of the Premises after the expiration of this Lease without any
written renewal thereof, such holding over shall not be deemed to operate as
a renewal or extension of this Lease, but shall only create a tenancy from
month to month which may be terminated at any time by either party giving not
less than thirty (30) days prior written notice of the date of termination
which shall be on a calendar month end. The Rent during such holding over
shall be the same Rent in effect during the term of this Lease.
27. NOTICES. It is expressly agreed that all notices required under the
terms of this Lease shall be made by overnight mail or hand delivery or,
certified mail, postage prepaid, return receipt requested, at the following
addresses:
Lessor: Lessee:
Western Trade Center UltraFem, Inc.
PO Box 8182 1600 North Ave West
Missoula MT 59807 Missoula MT 59801
28. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Montana.
29. ADDENDUM. Attached as Addendum A to this agreement are points
mutually agreed upon by Lessor and Lessee. This addendum is part of the lease
agreement.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
and year first above written.
LESSOR; LESSEE;
WESTERN TRADE CENTER ULTRAFEM, INC.
By: /s/ By: /s/
------------- -------------
9
<PAGE>
Addendum A
The Lessee, UltraFem, Inc., requires that the following comprise items of
addendum to the lease agreement.
1. The Lessor, at Lessor's sole cost and expense, will build an end
wall across the space running east and west approximately at the
point of the current chain link fence to seal off the common area
from the space leased by UltraFem.
2. The Lessor, at Lessor's sole cost and expense, will bring sewer and
water connections from North Avenue back to the area in the west end
parking lot, accessible to the mobile offices to be installed by
UltraFem.
3. UltraFem requires the use of fenced area to the west of its leased
space, for the purpose of placing leased mobile office units and
surrounding decks and walkways, for employee parking, and for
shipping activities. It is understood that a subfenced area,
currently being used by the oil distributor and Pool & Spa business,
may be excluded from UltraFem's unrestricted use of the rest of the
area.
4. The Lessor, at Lessor's sole cost and expense, will bring the
established heating system in the space to good operating condition
(it is currently leaking extensively at the control area in the
southeast corner of the space).
5. At Lessor's sole cost and expense, any exposed asbestos present in
the space will be removed or sealed by the Lessor in accordance with
all laws and regulations.
6. UltraFem may, at its discretion, add signage to the North Avenue
side of the space and may repaint portions of the west face of the
space in colors harmonious with the Western Trade Center's current
appearance for the purpose of creating a consistent impression to
visitors approaching from the west, through the fenced common area,
including the mobile office units and deck that UltraFem may place
west of the space.
10
<PAGE>
THE ELLIOTT COMPANY
5 BURLINGTON WOODS DRIVE - SUITE 203 BURLINGTON, MASSACHUSETTS 01803-4542 U.S.A.
617-270-538 FAX 617-270-5375
March 14, 1996
MR. JOHN W. ANDERSEN
Chairman of the Board
& Chief Executive Officer
Ultrafem Inc.
500 Fifth Avenue, Suite 3620
New York, New York 10110
STRATEGIC RELATIONSHIPS
ENGAGEMENT CONTINUATION AGREEMENT
Dear John:
This letter serves to extend our previous engagement by Ultrafem to assist in
pursuing strategic relationships. The following outlines the very same
specific elements, details and terms for this engagement that have been
employed under the Agreement drawn by your lawyers and Dori Reap, dated July
12, 1995.
I PROJECT SCOPE / RESPONSIBILITY OF THE ELLIOTT COMPANY
The following activities reflect continuation and ongoing refinement of
what The Elliott Company had previously been engaged to undertake:
A. CORPORATE RELATIONSHIPS STRATEGY DEVELOPMENT AND PURSUIT
* Co-define relationship opportunities with Ultrafem management in
conjunction with the relevant Medical and International feminine
protection market
* Identify and prioritize target companies as prospects for Ultrafem
relationships
* Create a relevant approach and presentation tailored for each target
company
* Review the approaches and presentation materials with Ultrafem for
approval prior to meetings with/distribution to target companies
B. LEAD THE CONTACT WITH TARGET RELATIONSHIP COMPANIES. PARTICIPATE FULLY
WITH ULTRAFEM MANAGEMENT IN PRESENTATIONS AND NEGOTIATIONS WITH TARGET
COMPANIES. SUCCESSFULLY CONCLUDE STRATEGIC RELATIONSHIP DEAL(S)
The Elliott Company will not make contact with any target Strategic
Relationships without the prior approval of Ultrafem. The approved list
of target Strategic Relationships presently being pursued, and hence
applicable to the terms & conditions of this Continuation Agreement, is
provided in Exhibit I. Companies may be added, deleted, and/or
reintroduced to this list only through the written submission by The
Elliott Company and approval by Ultrafem, or through the sole direction
of Ultrafem. Nothing herein obligates Ultrafem to enter into a Strategic
Relationships Agreement with any person or entity.
II THE ELLIOTT COMPANY COMPENSATION
SEGMENT I.A. & SEGMENT I.B.
* Advance profession time billed at full value (for boutique activity,
professional billing rates range from $120 to $285 per hour, less for
project orientation), less 20% venture courtesy invoice reduction for
Ultrafem. Satisfactory progress must be mutually
<PAGE>
acknowledged by both parties prior to invoicing being accepted by
Ultrafem and supported with weekly and/or monthly progress reports
* This portion of The Elliott Company compensation will be deducted from
the Deal Completion Award payable to The Elliott Company upon the
successful conclusion of a Strategic Partner Agreement that has been
signed-off by both Ultrafem and the Strategic Partner
OUT-OF-POCKET EXPENSES
* For Business travel, lodging, telephone, special report production,
courier, etc. charged at cost to Ultrafem, (currency exchange, if
applicable, at date of expenditure), supported with appropriate
documentation and receipts.
* Out-of-pocket expenses cannot exceed $1,000 per month without the
consent of Ultrafem
DEAL COMPLETION AWARD TO THE ELLIOTT COMPANY
* 5% of the first $10 Million proceeds to Ultrafem (in the aggregate)
* 3% of the proceeds above $10 Million to Ultrafem
* Maximum Deal Completion Award Payable to The Elliott Company = $800,000
- AWARD BASIS - PROCEEDS
.. The Deal Completion Award is only payable upon the completion of a
Strategic Relationship Agreement and the receipt of cash proceeds by
Ultrafem (e.g. for licensure, etc.). Proceeds may be any combination
of: (1) Up-front cash payments or cash equivalent in the form of
common equity stock in the Strategic Relationship Partner;
(2) Deferred cash payments associated with milestone events; and/or
(3) Royalty payments, all of which may be structured as part of the
initial deal closure
- AWARD BASIS - STRATEGIC RELATIONSHIP PARTNERS
.. Only applicable for companies introduced by The Elliott Company
that have been agreed upon and are listed (Exhibit I herein) as
approved target Strategic Relationship Partners.
.. Companies previously on a list that may have been eliminated shall
NOT remain candidates for award basis. Companies may be added,
deleted, and/or reintroduced to this list only through the written
submission by The Elliott Company and approval by Ultrafem, or
through the sole direction of Ultrafem
III ENGAGEMENT TERM
The term of this Continuation Agreement is twelve (12) months (February 1,
1996 through January 31, 1997 inclusive). The term may be extended by the
mutual agreement of both parties.
* ENGAGEMENT CANCELLATION - With thirty (30) days written notice by
either party.
* DEAL COMPLETION AWARD AFTER ENGAGEMENT CANCELLATION - May be earned
under the following terms/conditions,
- Applicable only to Strategic Relationship Partners introduced to
Ultrafem that are on an approved list of targets (presently Exhibit 1)
<PAGE>
- Are determined by Ultrafem to be reasonable active at the time of
engagement cancellation
- A Strategic Relationship Agreement is completed within one (1) year
of the date of cancellation of this engagement with The Elliott Company
IV OTHER TERMS AND CONDITIONS
ADVANCE WORK - Basic professional fees and out-of-pocket expenses to be
billed monthly and payable by Ultrafem in thirty (30) days, within context
of agreed schedule and invoice amount courtesy reduction.
DEAL COMPLETION AWARD - Will be paid to The Elliott Company thirty (30)
days after the receipt of cash proceeds from the closure date of a
strategic relationship. In the case of deferred cash payments associated
with milestone events and/or royalty payments, The Elliott Company
similarly will be paid thirty (30) days after the actual receipt of the
cash payment by Ultrafem.
LAW - This Engagement Continuation Agreement is governed by New York
State law.
CURRENCY & SETTLEMENT - All figures in this Agreement, whether for
Advance Fees, Out-of-pocket expenses, and/or definition of Proceeds as well
as the Deal Completion Award, are stated in United States currency, and are
all-inclusive of taxes and surcharges.
ACCEPTANCE OF THIS LETTER OF ENGAGEMENT CONTINUATION AGREEMENT REQUIRES BOTH
SIGNATURES BELOW IN ORIGINAL FORM, AND EXCHANGE OF SIGNED DOCUMENTS.
ACCEPTANCE: DATE: 4/4/96
------------------------------------- -----------
John W. Andersen
CHAIRMAN & CHIEF EXECUTIVE OFFICER
ULTRAFEM, INC.
ACCEPTANCE: DATE: 3/14/96
------------------------------------- -----------
Roger S. Elliott
PRESIDENT
THE ELLIOTT COMPANY
<PAGE>
[ULTRAFEM LETTERHEAD]
April 11, 1996
Mr. Jeffrey Hill
Meridian Consulting Group
274 Riverside Avenue
Westport, CT 06880
Dear Jeff:
This letter agreement serves to memorialize our understanding with respect to
which you (Meridian Consulting Group) will provide on-going sales management
to us (Ultrafem, Inc.) for the introduction of INSTEAD-TM-. As you know, we
plan to introduce INSTEAD-TM- into approximately 8% of the United States
market in the Fall of 1996 and to complete introduction of INSTEAD-TM- into
approximately 25% of the United States market during the first half of
calendar year 1997.
If during the term of this agreement the launch to expanded geography (beyond
8%) results in a significant change in broker field sales activity levels,
then the terms of this agreement will be re-evaluated.
You have agreed to provide us with the full breadth of Sales Management,
Sales Merchandising and Trade Marketing capability which will be required in
connection with the introduction of INSTEAD-TM-. In this capacity your
responsibilities include:
I. DEVELOPING THE SALES STRATEGY: You will meet in person with brokers for
the following:
- Developing the Sell-In Strategy
- By Class of Trade/Customer
- Distribution Objectives
- Promotional Objectives
- Pricing Objectives (Feature and Everyday)
- Shelving Objectives
- Developing Short Term (Quarterly) Goals
- Developing Long Term (Annual) Goals
- Full Analysis at the Class of Trade Level by Market
-- Development of Fully Customized Key Account Presentations
<PAGE>
Mr. Jeffrey Hill
April 11, 1996
Page 2 of 4
- Which we Understand will be an Incremental $8K/Account plus a
one-time $15K Set-Up Fee
- Coordinating Introductory Headquarter Calls
- Follow Up/Summary to Introductory Presentations
-- Scorecard of Sell-In Acceptance
-- Assisting Development of Pipeline and On-Going Volume Goals
-- Assisting Development of SKU Breakout and On-Going SKU Sales
Volume
-- Attending/Supporting Headquarter Calls of National Accounts
II. MANAGEMENT REPORTING
- Summarize Status vs. Goal
- Identifying Risks/Opportunities In Objectives
-- Identify Programming to Address Barriers
-- Develop Contingency Plans
- Evaluating Broker Performance - Factory & Nielsen
-- Short Term Goals
-- Long Term Goals
- Identifying/Eliminating Unnecessary Spending
III. ON-GOING BROKER MANAGEMENT
- Executional Steps Required to Support the Business
-- Business Forecasting
- Sales Tracking - Actual vs. Forecast
- Monthly
- Quarterly
- Yearly
- Tracking Profitability with Regard to Trade Spending
- Participation in Key Account Presentations
- All Logistics and Customization of the Support Issues Between the
Customer and Ultrafem, Inc. to be Handled by Ultrafem, Inc.
- Communications of Promotions, Deals, Advertising, PR/Professional
Support, Ad Slicks, Displays, etc. (Specific Promotional Development
Will be Done Separately)
- Providing Sales Updates
<PAGE>
Mr. Jeffrey Hill
April 11, 1996
Page 3 of 4
In addition to providing sufficient resources to implement the foregoing, you
agree to hire one person who shall be satisfactory to us to serve as an
"acting Vice President of Sales." Such acting Vice President of Sales shall
devote his/her entire business time and effort during the term of this letter
agreement to the management of our on-going broker field sales and related
Sales activities. You agree to have this person commence employment no later
than May 1, 1996.
You agree to provide the services hereunder in a first rate, high quality
manner, consistent with your and our reputations and the image we are seeking
to establish for INSTEAD-TM-. The provision of your services hereunder shall
be subject to our supervision. Neither you nor any of your employees
(including without limitation the acting Vice President of Sales) shall have
the authority to bind us without our prior written consent.
The term of this letter agreement shall be twelve (12) months, commencing
with March 15, 1996. The term of this letter agreement may be extended at our
option; any such extension shall be based upon a mutually acceptable
responsibility and fee structure.
The fee for your services to be rendered hereunder shall be an amount equal
to $42,500 per month, payable as follows: (i) Upon receipt of a fully
executed agreement, you will be paid $280,500; (ii) $127,500 six months
thereafter; and (iii) $102,000 on March 14, 1997. In addition, you will be
reimbursed for the following out-of-pocket expenses:
1. Travel/related out-of-pocket expenses (which need to be agreed by
us in advance);
2. Any research/data collection costs associated with pursuing this
initiative (which need to be agreed by us in advance);
3. Any production charges associated with the activity (which need to
be agreed to by us in advance); and
4. Office expenses including: phone, fax, postage, etc.
All out-of-pocket expenses are due and payable within thirty (30) days
after invoicing.
It is understood that any cancellation of the arrangement prior to the twelve
(12) month period (3/15/96-3/14/97) would result in a cancellation fee equal
to the full unpaid balance of the annual agreement ($42,500/month or
$510,000/year), plus all unpaid out-of-pocket expenses, provided that prior
to the cancellation Meridian has complied with the terms of this agreement.
<PAGE>
Mr. Jeffrey Hill
April 11, 1996
Page 4 of 4
This letter agreement constitutes the entire agreement between the parties
and supersedes all prior agreements with respect to the subject matter hereof
except to the extent set forth in the following sentence. The letter
agreement dated August 10, 1995 between us shall remain in full force and
effect other than the sections entitled Managing Sales Effort and Further
Activity Selections/On-Going Sales Management which sections are superseded
hereby. This letter agreement shall be governed by the internal laws of the
State of New York.
If the foregoing correctly sets forth your understanding of our agreement,
please sign in the space provided below. An extra copy has been provided for
your files. If we do not receive a fully executed copy of this letter from
you on or before April 17, 1996, this letter agreement shall be deemed null
and void.
AGREED TO FOR MERIDIAN CONSULTING AGREED TO FOR ULTRAFEM, INC.
GROUP, INC.
By: /s/ Jeffrey Hill By: /s/ Dori M. Reap
------------------------------ --------------------------------
Title: Managing Director Title: SVP & Chief Financial Officer
--------------------------- -----------------------------
Date: 4/16/96 Date: April 12, 1996
---------------------------- ------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 1, 1996, by and between
ULTRAFEM, INC., a Delaware corporation (the "Company"), and GARY NORDMANN (the
"Employee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company desires to employ the Employee and to enter into
an agreement (the "Agreement") embodying the terms of such employment; and
WHEREAS, the Board of Directors of the Company approved the execution
of this Agreement on March 12, 1996;
WHEREAS, the Employee desires to accept such employment with the
Company and to enter into the Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and the Employee hereby
agree as follows:
1. EMPLOYMENT.
The Company hereby agrees to employ the Employee, and the Employee
hereby agrees to accept employment with the Company, for the Term (as defined in
Section 2 below), in the position and with the duties and responsibilities set
forth in Section 3 below, and upon the other terms and conditions hereinafter
stated.
2. TERM.
The term of the Agreement (the "Term") shall commence upon the date
hereof and shall end three years from such date or such shorter period as may be
provided for herein.
3. POSITION, DUTIES AND RESPONSIBILITIES.
3.1 APPOINTMENT AS VICE PRESIDENT, OPERATIONS
(a) During the Term, the Employee shall serve, and the Company
shall employ the Employee, as the Vice President, Operations of the Company. The
Employee shall have the authority, and be responsible for the duties, attendant
to such office, which authority and duties will be consistent with his position
as the Vice President, Operations of the Company, including, but not limited to,
the general supervision over the manufacturing operations of the
<PAGE>
Company, and shall have such other duties and responsibilities with the Company
and its subsidiaries or divisions as may be assigned by the Senior Vice
President of Manufacturing and Product Development, the Chief Executive Officer
and/or the Board of Directors of the Company (the "Board"). The Employee shall
report directly to the Senior Vice President of Manufacturing and Product
Development.
(b) During the Term, the Employee shall devote substantially all
of his working time, attention and energies to the business and affairs of the
Company. Without limiting the generality of the foregoing, the Employee shall
perform such duties and responsibilities as may be assigned to him by the Board
consistent with the Employee's position as Vice President, Operations of the
Company. Nothing in the Agreement shall preclude the Employee from engaging in
charitable and community affairs, serving on the boards of directors of a
reasonable number of other corporations, trade associations or charitable
organizations or giving attention to his personal investments; provided, such
activities do not interfere with the regular performance of his duties and
responsibilities under the Agreement.
3.2 REPRESENTATION.
In order to induce the Company to enter into the Agreement on the
terms and conditions set forth herein, the Employee hereby represents and
warrants to the Company that his execution of the Agreement and the performance
of his duties and responsibilities hereunder will not violate or result in a
breach of, or in any manner be prohibited or restricted by, the terms of any
agreement, arrangement, understanding (written or otherwise), order or decree to
which he is a party or by which he is bound.
4. COMPENSATION.
4.1 BASE SALARY.
Commencing on the date hereof, the Employee shall be paid a base
salary (the "Base Salary") at an annual rate of $140,000 which shall be payable
on a monthly basis. The Base Salary may be increased upon annual review in
accordance with the Company's policies and procedures.
4.2 ANNUAL BONUS.
The Company agrees that, at such time as the Company's Feminine
Protection Product (as defined below) becomes available for sale to the general
public, it shall use its best efforts to establish one or more incentive
programs in order to award annual bonuses to management of the Company based on
the Company's meeting certain financial and non-financial targets to be
determined by the Board. Employee shall be entitled to participate in such
bonus plans and any other plans in which the management of the Company
participate on the same terms and conditions; provided, any annual bonus awarded
to the Employee under any such
-2-
<PAGE>
bonus plans shall not exceed 40% of the Employee's then current Base Salary. The
"Feminine Protection Product" means the Company's product that provides women
with an alternative to currently available mass-marketed feminine protection
products such as tampons and pads.
5. EMPLOYEE BENEFITS.
Employee shall be entitled to participate in such compensation
and incentive plans and group life, health, accident, disability and
hospitalization insurance plans, pension plans, retirement plans and other
fringe benefit plans as are provided from time to time to other executive
officers of the Company.
Employee shall be entitled to vacations consistent with the
Company's current practices in respect thereof, which vacations shall be taken
at such time or times as shall not unreasonably interfere with Employee's
performance of his duties under this Agreement.
6. EXPENSE REIMBURSEMENT.
6.1 RELOCATION EXPENSES
If Employee decides to relocate his residence to the Montana
area, the Company shall reimburse Employee for all legal, brokerage and other
closing costs incurred in connection with such relocation during the term of
this Agreement, as well as all moving costs, temporary housing, and all
reasonable out-of-pocket expenses in connection therewith (the "Relocation
Expenses"). Employee shall also receive an additional amount (the "Gross-up
Amount") to cover any payment of federal and/or state income taxes on the
Relocation Expenses. The Gross-up Amount shall be calculated assuming a
combined federal and state tax rate applicable to Employee not to exceed 40%.
Thus, Employee shall receive an amount equal to the Relocation Expenses plus the
Gross-up Amount, which amount shall be paid only upon receipt by the Company of
a detailed accounting of all such Relocation Expenses, but in no event shall the
aggregate amount of Relocation Expense and Gross-up Amount payable under this
Paragraph exceed $50,000.
6.2 OTHER EXPENSES.
During the Term, the Company shall reimburse the Employee for all
reasonable travel and other out-of-pocket expenses incurred by him (in
accordance with the policies and procedures established by the Company for its
executives) in carrying out his duties and responsibilities hereunder.
7. DEATH OR DISABILITY OF THE EMPLOYEE.
7.1 DEATH.
-3-
<PAGE>
In the event of the death of the Employee during the Term, the
Agreement automatically shall be terminated as of the date of his death and the
Employee's designated beneficiary, or, in the absence of such designation, the
estate or other legal representative of the Employee shall be paid the
Employee's unpaid Base Salary through the month in which such termination occurs
and any bonuses awarded but not paid for any fiscal year of the Company ending
prior to the date of such termination. The Employee's beneficiary or estate or
legal representative, as the case may be, shall be reimbursed for all business
expenses incurred by the Employee prior to such termination and shall be
entitled to other death benefits in accordance with the terms of the Company's
benefit programs and plans.
7.2 DISABILITY.
In the event of the Disability (as hereinafter defined) of the
Employee during the Term, the Company shall be entitled to terminate the
Agreement. Upon such termination, the Employee shall be paid his unpaid Base
Salary through the month in which such termination occurs and any bonuses
awarded but not paid for any fiscal year of the Company ending prior to the date
of such termination. The Employee shall be reimbursed for all business expenses
incurred by the Employee prior to such termination and shall be entitled to
other disability compensation in accordance with the Company's benefit programs
and plans. "Disability," for purposes of the Agreement, shall mean the Employee
has failed as a result of his illness, physical or mental disability or other
incapacity, for a period of three consecutive months or 180 days during any 12-
month period of the Term to render the services provided in the Agreement, or
has been adjudicated an incompetent. Provided that the provisions of the
applicable employee benefit plan permits, the Employee shall continue to
participate in all employee benefit plans in which he was participating on the
date of termination until the earliest to occur of (a) the Employee's death, (b)
the cessation of the Employee's disability or (c) the end of the Term.
8. TERMINATION BY THE COMPANY FOR DUE CAUSE.
In addition to any other remedies available to it at law, in
equity or as set forth in this Agreement, the Company shall have the right, upon
written notice to the Employee, to immediately terminate his employment
hereunder if the Employee (a) breaches in any material respect any material
provision of this Agreement and such breach is not remedied within thirty (30)
days after written notice thereof from the Board of Directors or the Chief
Executive Officer of the Company setting forth in reasonable detail the matters
constituting such breach; or (b) willfully fails or refuses in any material
respect to perform such duties as may be assigned to him from time to time by
the Board of Directors, the Chief Executive Officer or the Senior Vice President
of Manufacturing and Product Development of the Company and fails to cure such
failure or refusal within thirty (30) days after receipt of notice from the
Board of Directors or the Chief Executive Officer of the Company stating with
specificity the nature of such failure or refusal; or (c) has been convicted of
a felony; or (d) has committed any act of fraud, misappropriation of funds or
embezzlement in connection with his employment hereunder. Termination as a
result of clauses (a) through (d) shall be for "Due Cause." Upon such
-4-
<PAGE>
termination, the Employee shall continue to receive his Base Salary only for the
period ending with the date of such termination and the obligation of the
Company to make any further payments, or to provide any benefits specified
herein, to the Employee shall thereupon cease and terminate.
9. TERMINATION OTHER THAN FOR DUE CAUSE.
9.1 TERMINATION.
The Agreement may be terminated (a) by the Company (in addition
to termination pursuant to Section 7 or 8) at any time and for any reason, (b)
by the Employee at any time and for any reason or (c) upon the expiration of the
Term.
9.2 SEVERANCE.
If the Agreement is terminated by the Company without Due Cause
the Company shall pay the Employee a severance payment equal to the Base Salary
in effect at the time of termination for a 6-month period commencing on the date
of termination. Such severance shall be payable in 6 equal monthly installments
commencing on the first day of the month following termination. In addition,
the Company shall pay the Employee his Base Salary through the date of
termination and any bonuses awarded but not paid for any fiscal year of the
Company ending prior to the date of such termination. The Employee shall be
reimbursed for all business expenses incurred by the Employee prior to such
termination and shall be entitled to continue to participate, subject to the
terms of such plans, in all employee benefit plans in which he was participating
on the date of his termination, including, but not limited to, the continuation
of all life, disability, accident and medical insurance benefits available to
him on such date as long as he is entitled to receive the severance payments
hereunder or until such earlier date as he receives equivalent coverage and
benefits under the plans and programs of a subsequent employer.
10. CONFIDENTIAL INFORMATION.
(a) The Employee agrees not to use, disclose or make accessible
to any other person, firm, partnership, corporation or any other entity any
Confidential Information (as hereinafter defined) pertaining to the business of
the Company except (i) while employed by the Company, in the business of and for
the benefit of the Company or (ii) when required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory authority
over the business of the Company, or by any administrative body or legislative
body (including a committee thereof) with jurisdiction to order the Company to
divulge, disclose or make accessible such information. "Confidential
Information," for purposes of the Agreement, shall mean non-public information
concerning the Company's financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer and
supplier lists, customer and supplier information, information relating to
governmental relations, discoveries, practices, processes, methods, trade
secrets, marketing plans and other non-public,
-5-
<PAGE>
proprietary and confidential information of the Company, that, in any case, is
not otherwise generally available to the public and has not been disclosed by
the Company to others not subject to confidentiality agreements. In the event
the Employee's employment is terminated hereunder for any reason, he immediately
shall return to the Company all tangible evidence of such Confidential
Information in his possession.
(b) The Employee and the Company agree that this covenant
regarding Confidential Information is a reasonable covenant under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction, such covenant is not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of this covenant which do not appear reasonable to such
court and to enforce the remainder of the covenant as so amended. The Employee
agrees that any breach of the covenant contained in this Section 10 would
irreparably injure the Company. Accordingly, the Employee agrees that the
Company, in addition to pursuing any other remedies it may have in law or in
equity, may obtain an injunction against the Employee from any court having
jurisdiction over the matter, restraining any further violation of this Section
10.
(c) The provisions of this Section 10 shall survive the
termination of the Agreement.
11. NON-COMPETITION; NON-SOLICITATION.
(a) The Employee agrees that, during the Term and for a period
of one year thereafter (herein referred to as the "Non-Competition Period"),
without the prior written consent of the Company: (i) he shall not, directly or
indirectly, either as principal, manager, agent, consultant, officer, director,
greater than 10% holder of any class or series of equity securities, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in or otherwise be connected with, any entity
which is now or at the time, engaged in any business activity competitive
(directly or indirectly) with the business of the Company and (ii) he shall not,
on behalf of any such competing entity, directly or indirectly, have any
dealings or contact with any suppliers or customers of the Company. Upon any
breach by the Employee of the covenants contained in this Section 11(a), in
addition to pursuing any other remedies the Company may have in law or in
equity, the Company may terminate the severance payment to the Employee due
under Section 9.
(b) During the Term and during the Non-Competition Period, the
Employee agrees that, without the prior written consent of the Company (and
other than on behalf of the Company), the Employee shall not, on his own behalf
or on behalf of any person or entity, directly or indirectly, solicit the
employment of any employee who has been employed by the Company at any time
during the one year immediately preceding such date of hiring or solicitation
and was also an employee of the Company at the time the Employee was employed by
the Company.
-6-
<PAGE>
(c) The Employee and the Company agree that these covenants
regarding non-competition and non-solicitation are reasonable covenants under
the circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction, such covenants are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants which shall not appear reasonable to
such court and to enforce the remainder of these covenants as so amended. The
Employee agrees that any breach of the covenants contained in Section 11(b)
would irreparably injure the Company. Accordingly, the Employee agrees that the
Company, in addition to pursuing any other remedies it may have in law or in
equity, may obtain an injunction against the Employee from any court having
jurisdiction over the matter, restraining any further violation of Section
11(b).
(d) The provisions of this Section 11 shall survive the
termination of the Agreement.
12. INDEMNIFICATION.
The Company will indemnify the Employee (and his legal
representatives or other successors) to the fullest extent permitted by the laws
of the State of Delaware and the Certificate of Incorporation and By-Laws of the
Company as then in effect, and the Employee shall be entitled to the protection
of any insurance policies the Company may elect to maintain generally for the
benefit of its directors and officers, against all costs, charges, and expenses
whatsoever incurred or sustained by him or his legal representatives in
connection with any action, suit, or proceeding to which he (or his legal
representatives or other successors) may be made a party by reason of him being
or having been a director or officer of the Company or any of its subsidiaries.
13. NOTICES.
All notices, requests, demands or other communications required
or permitted under the Agreement shall be in writing and shall be deemed duly to
have been given when mailed by registered or certified mail, return receipt
requested, postage prepaid, sent by facsimile or personally delivered by hand or
overnight courier to the address stated below or to such changed address as the
addressee may have given by similar notice.
To the Company: Ultrafem, Inc.
500 Fifth Avenue
Suite 3620
New York, New York 10110
Attention: John W. Andersen
With a copy to: Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
-7-
<PAGE>
Attention: Martin Nussbaum, Esq.
To the Employee: Gary Nordmann
15 Lloyd Harbor Road
Huntington, NY 11743
Communications delivered by hand or overnight courier or by facsimile shall be
deemed received on the date of delivery, and communications sent by registered
or certified mail shall be deemed received three business days after the sending
thereof.
14. ENTIRE AGREEMENT.
The Agreement contains the entire agreement between the parties
thereto with respect to the matters contemplated herein and supersedes all prior
agreements or understandings among the parties related to such matters.
15. BINDING EFFECT; ASSIGNMENT.
The Agreement shall be binding upon, and inure to the benefit of,
the Company and its successors and assigns and upon the Employee and his
successors and assigns. "Successors and assigns" shall mean, in the case of the
Company, any successor pursuant to a merger, consolidation, or sale or a
transfer of all or substantially all of the assets of the Company and, in the
case of the Employee, his and/or legal representatives as determined by will or
by operation of law. Neither the Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Employee (except by will
or by operation of law). The Company may assign the Agreement and all of its
rights hereunder to any of its successors and assigns.
16. AMENDMENT OR MODIFICATION; NON-WAIVER.
No provision of the Agreement may be amended or waived unless
agreed to in writing, signed by the parties thereto. The waiver of, or failure
to take action with regard to, any breach of any term or condition of the
Agreement shall not be deemed to constitute a continuing waiver or a waiver of
any other breach of the same or any other term or condition.
17. BENEFICIARIES; REFERENCES.
The Employee shall be entitled to select (and change, to the
extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Employee's
death, and may change such election by giving the Company written notice
thereof. In the event of the Employee's Death, Disability or a judicial
determination of his incompetence, reference in the Agreement to the Employee
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.
-8-
<PAGE>
18. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder
shall survive any termination of the Agreement to the extent necessary to the
intended preservation of such rights and obligations. The provisions of this
Section 18 are in addition to the survivorship provisions of any other section
of the Agreement.
19. GOVERNING LAW.
The validity, interpretation, construction, performance and
enforcement of the Agreement shall be governed by the laws of the State of New
York, without reference to rules relating to conflict of law.
20. SEVERABILITY.
If any provision of the Agreement shall be determined to be
invalid or unenforceable (in whole or in part) for any reason, the remaining
provisions of the Agreement shall be unaffected hereby and shall remain in full
force and effect to the fullest extent permitted by law. The provisions of this
Section 20 are in addition to the severability provisions of any other section
of the Agreement.
21. WITHHOLDING.
The Company shall withhold from any payments due to the Employee
hereunder, all taxes, FICA or other amounts required to be withheld pursuant to
any applicable law.
22. HEADINGS.
The headings contained in the Agreement are intended solely for
convenience of reference and shall not affect in any way the meaning or
interpretation of the Agreement.
23. COUNTERPARTS.
The Agreement may be executed in one or more counterparts, each
of which for all purposes shall be deemed to be an original, and all of which
when taken together shall constitute but one and the same instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties thereto have executed the Agreement as
of the day and year first above written.
ULTRAFEM, INC.
By:
-----------------------------------------
John Andersen
Chief Executive Officer
--------------------------------------------
GARY NORDMANN
-10-
<PAGE>
OPTION CERTIFICATE AND AGREEMENT
This Option Certificate and Agreement ("Certificate"), dated as of
March 8, 1996, certifies that Ultrafem, Inc., a Delaware corporation
("Ultrafem") was granted to GARY NORDMANN (the "Option Holder") an option
("Option") to purchase the following number of shares ("Option Shares") of
Ultrafem's $.001 par value Common Stock (the "Common Stock"). The grant of this
Option is expressly subject to the approval of the Board of Directors of
Ultrafem of the Employment Agreement, presently contemplated to be dated as of
April 1, 1996, between Ultrafem and the Option Holder.
Address of Option Holder: 15 Lloyd Harbor Road
Huntington, NY 11743
Number of Option Shares: 30,000 with an Exercise Price of $10.50
Option Expiration Date: Ten years, except as provided below.
This Option shall become exercisable in installments as follows: 33 1/3% upon
the shipment, on or prior to August 4, 1996, of a quantity of Instead-Registered
Trademark- (as determined by Senior Vice President of Sales and Marketing and
approved by the Chief Executive Officer of Ultrafem) into designated markets;
33 1/3% upon the successful completion (as determined by the Senior Vice
President of Manufacturing and Product Development and approved by the Chief
Executive Officer of Ultrafem) of the building-out (and the implementation of
structure for) Ultrafem's Missoula plant to "full capacity" (defined as two
semi-automated lines and one fully automated line running 3 shifts at an 80%
efficiency rate), including, without limitation, the development of the
following functions/systems: distribution, human resources, customer service,
operating systems, accounts receivable and manufacturing; 33 1/3% upon the
successful development (as determined by the Senior Vice President of
Manufacturing and Product Development and approved by the Chief Executive
Officer of Ultrafem) of the following strategic plans (x) a Master Plan for
completing distribution for the balance of the United States, (y) a Master Plan
for Medical Products, and (z) a Master Plan for International Strategic
Alliances.
Notwithstanding the foregoing, this Option shall become fully vested six (6)
months prior to the expiration of the term of the Employment Agreement, dated as
of April 1, 1996, between Ultrafem and the Option Holder, provided that such
Employment Agreement was not previously terminated by Ultrafem for Due Cause (as
defined therein).
Ultrafem has duly adopted the 1990 Stock Option Plan of Ultrafem, Inc. (the
"Plan"), the terms of which are hereby incorporated by reference. In the case
of any conflict between the provisions hereof and those of the Plan, the
provisions of the Plan shall be controlling. A copy of the Plan will be made
available for inspection during normal business hours at the principal office of
Ultrafem.
<PAGE>
The Option may be exercised only by delivery by registered or certified mail to
Ultrafem at its principal office of (1) written notice, signed by the Option
Holder, of exercise in form and substance identical to Exhibit I attached hereto
stating the number of Option Shares then being purchased; (2) payment of the
aggregate Exercise Price such payment shall be in the form of (A) certified
(unless such certification is waived by Ultrafem) check payable to the order of
Ultrafem, Inc. or cash in the amount of the Exercise Price for such Option
Share; (B) certificates duly endorsed for transfer (with all transfer taxes paid
or provided for) evidencing a number of shares of Common Stock of Ultrafem of
which the aggregate Fair Market Value (as defined below) on the date of exercise
is equal to the aggregate Option Exercise Price of the Option Shares being
purchased, or (C) a combination of these methods of payment; and (3) an executed
investment letter in form and substance substantially identical to Exhibit II
attached hereto. Delivery of said notice and such documentation shall
constitute an irrevocable election of the Option Holder to purchase the Option
Shares specified in said notice, and the date on which Ultrafem receives said
notice and documentation shall be the date as of which the Option Shares so
purchased shall be deemed to have been issued. Ultrafem shall issue and deliver
to the Option Holder a stock certificate or certificates evidencing the Option
Shares so purchased. The term "Fair Market Value" shall mean (i) if the shares
of Common Stock are listed on a registered securities exchange or quoted on the
National Market System, the closing price per share of Common Stock on such date
(or, if there was no trading reported on such date, on the next preceding day on
which there was trading reported); (ii) if the shares of Common Stock are not
listed on a registered securities exchange and not quoted on the National Market
System, but the bid and asked prices per share of Common Stock are provided by
NASDAQ, the National Quotation Bureau Incorporated or any similar organization,
the average of the closing bid and asked price per share of Common Stock on such
date (or, if there was no trading in the shares of Common Stock on such date, on
the next preceding day on which there was trading) as provided by such
organization; and (iii) if the shares of Common Stock are not traded on a
registered securities exchange and not quoted on the National Market System and
the bid and asked price per share of the shares of Common Stock are not provided
by NASDAQ, the National Quotation Bureau Incorporated or any similar
organization, as determined by the Board of Directors of Ultrafem (the "Board")
or a committee thereof in good faith.
The Option Holder agrees not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of any of the Option Shares unless and until all of the
following have occurred: (i) the Option Shares are disposed of pursuant to and
in conformity with an effective registration statement filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), or the Option Holder delivers to Ultrafem a written opinion of counsel,
satisfactory to Ultrafem and its counsel, to the effect that the proposed
disposition is exempt from the registration and prospectus delivery requirements
of that Act; and (ii) the Option Holder delivers to Ultrafem a written opinion
of counsel, satisfactory in form and substance to Ultrafem and its counsel, to
the effect that the proposed disposition will not result in a violation of the
securities laws of any state in the United States. Any attempted transfer and
breach of this paragraph shall be null and void, and of no force or effect
whatsoever.
-2-
<PAGE>
Subject to any required action by the stockholders of Ultrafem:
(i) if outstanding shares of Ultrafem's Common Stock (the "Outstanding
Shares") shall be divided into a greater number of Outstanding Shares
or a dividend in shares of Common Stock shall be paid in respect of
shares of Common Stock, the Exercise Price in effect immediately prior
to such subdivision or at the record date of such dividend shall,
simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend, be proportionately
reduced, and conversely if the Outstanding Shares shall be combined
into a smaller number of Outstanding Shares, the Exercise Price in
effect immediately prior to such combination shall, simultaneously
with the effectiveness of such combination, be proportionately
increased;
(ii) when any adjustment is required to be made in the Exercise Price, the
number of Option Shares purchasable upon the exercise of the Option
shall be changed and the number determined by dividing (A) an amount
equal to the number of Option Shares purchasable on the exercise of
the Option immediately prior to such adjustment multiplied by the
Exercise Price in effect immediately prior to such adjustment, by (B)
the Exercise Price in effect immediately after such adjustment;
(iii) in case of any capital reorganization, any reclassification of the
shares of Common Stock (other than a change in par value or as a
result of a stock dividend, subdivision, split up or combination of
shares of Common Stock), or a consolidation or merger of Ultrafem with
another person where Ultrafem is the surviving corporation
(collectively referred to as "Reorganizations"), the Option Holder
shall thereafter be entitled to purchase the kind and number of shares
of stock or other securities or property of Ultrafem receivable upon
such Reorganization by a stockholder holding the number of Option
Shares which the Option entitles the Option Holder to purchase from
Ultrafem prior to such Reorganization; and in any case appropriate
adjustment shall be made in the application of the provisions of this
Certificate to the end that the provisions set forth herein (including
the specified changes and other adjustments to the Exercise Price)
shall thereafter apply to any Option Shares or other property
thereafter purchasable upon exercises of the Option;
(iv) a dissolution or liquidation of Ultrafem, or a merger or consolidation
in which Ultrafem is not the surviving corporation, shall cause the
Option to terminate, except as otherwise provided herein in the event
of a Change of Control (as defined herein). The Option Holder may, in
such event, exercise at any time during a ten-day period ending on the
fifth day prior to such dissolution or liquidation, or merger or
consolidation in which Ultrafem is not the surviving corporation, the
Option in whole or in part; PROVIDED, however, that if such merger or
consolidation is to be consummated in whole or in part by the tender
of shares of Common Stock to the surviving corporation, the Option
Holder agrees to tender the Option Shares received upon exercise of
the Option to the surviving corporation on the
-3-
<PAGE>
same terms and subject to the same conditions as are applicable to
other stockholders of Ultrafem who are tendering their shares of
Common Stock;
(v) to the extent that the foregoing adjustments relate to stock or
securities of Ultrafem, such adjustments shall be made by the Board of
Directors of Ultrafem and its determination shall be final, binding
and conclusive;
(vi) the adjustments described in the foregoing paragraphs (i) through (v)
shall constitute the sole and exclusive adjustments to be made to the
Option, or the number of or Exercise Price of the Option Shares, with
respect to any of the events described in those paragraphs; and
(vii) the grant of the Option shall not affect in any way the right or power
of Ultrafem to make adjustments, reclassification, reorganizations or
changes in its capital or business structure, or to merge or
consolidate or to dissolve, liquidate or sell or transfer all or any
part of its business or assets.
For purposes of this Certificate, a "Change in Control" of Ultrafem
occurs if: (a) any "person" (defined as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) other than Audrey Contente is or becomes the beneficial owner, directly
or indirectly, of securities of Ultrafem representing 25% or more of the
combined voting power of Ultrafem's outstanding securities then entitled to vote
for the election of directors; or (b) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof; or (c)
the Board of Directors shall approve the sale of all or substantially all of the
assets of Ultrafem or any merger, consolidation, issuance of securities or
purchase of assets, the result of which would be the occurrence of any event
described in clause (a) or (b) above. In the event of a Change in Control of
Ultrafem, the Board or the Committee (as defined in the Plan), in its
discretion, may determine that, upon the occurrence of a Change in Control, this
Option shall terminate within a specified number of days after notice to the
Option Holder, and such Option Holder shall receive, with respect to each Option
Share subject to this Option, an amount of cash equal to the excess of the fair
market value of such Option Share immediately prior to the occurrence of such
transaction over the Exercise Price per share of this Option. The provisions
contained in the preceding sentence shall be inapplicable if this Option was
granted within six (6) months before the occurrence of a transaction described
above if the Option Holder is a director or officer of Ultrafem or a beneficial
owner of the capital stock of Ultrafem who is described in Section 16(a) of the
Exchange Act, unless such holder dies or becomes disabled (within the meaning of
Section 22(e)(3) of the Code) prior to the expiration of such six-month.
Alternatively, the Board or the Committee may determine, in its discretion, that
this Option shall immediately become exercisable upon a Change in Control.
-4-
<PAGE>
Without limiting the application or incorporation by reference of any other
provision of the Plan into this Certificate, the provisions of Section 13 of the
Plan, entitled "Termination of Employment," are hereby incorporated by
reference. In the event that the Option Holder, in accordance with the
provisions of Section 13 of the Plan, would have been able to exercise this
Option for a certain period after the termination of the Option Holder's
employment with Ultrafem, but, on the date of such termination, he is subject
to a lock-up agreement which prohibits any sale of shares of Common Stock held
by him, the vested portion of the Option shall be exercisable for a period of
ninety (90) days after expiration of such lock-up agreement.
Option Holder represents and agrees by signing this Certificate
representing the Option Shares that if he exercises this Option in whole or in
part, he will acquire the Option Shares upon such exercise for the purpose of
investment and not with a view to the resale or distribution of such Option
Shares, except as permitted by applicable securities laws, and that upon each
exercise of the Option he will furnish to Ultrafem, as provided above, a written
statement to such effect. The Option Holder will agree that Ultrafem may place
on each certificate representing the Option Shares an appropriate legend or
legends required by applicable federal and state securities laws.
The Option Holder shall have no rights as a stockholder with respect
to the Option Shares until the date of the issuance of a stock certificate or
stock certificates evidencing the Option Shares to the Option Holder. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.
Anything in this Agreement to the contrary notwithstanding, in no
event may the Option be exercisable if Ultrafem shall, at any time and in its
sole discretion, determine that (i) the listing, registration or qualification
of any shares otherwise deliverable upon such exercise, upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body or the satisfaction of withholding tax or other withholding
liabilities is necessary or desirable in connection with such exercise. In such
event, such exercise shall be held in abeyance and shall not be effective unless
and until such withholding, listing, registration, qualification or approval
shall have been affected or obtained free of any conditions not acceptable to
Ultrafem in its sole discretion, notwithstanding any termination of any Option
or any portion of any Option during the period when exercisability has been
suspended.
This Certificate shall be binding on and shall inure to the benefit of
the parties and their respective successors, assigns, heirs and personal
representatives. This Certificate shall be construed in accordance with the
laws of the State of New York. In the event any action, suit or other
proceedings instituted to interpret or enforce the terms of this Certificate,
the prevailing party shall be entitled to recover all costs, including
reasonable attorneys' fees.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered, or have
caused this Agreement to be executed and delivered by their authorized
representative as of the date above written.
ULTRAFEM, INC.
a Delaware corporation
By:
--------------------------------------------
Name: John Andersen
Title: Chief Executive Officer
----------------------------------------------
GARY NORDMANN
-6-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
(to be signed only upon exercise of the Option)
TO: Ultrafem, Inc.
The undersigned, the holder of the within Option, hereby irrevocably elects
to exercise the purchase right represented by such Option for, and to purchase
thereunder, ____________ shares of the Common Stock of Ultrafem, Inc. and
herewith makes payment of $________ therefor or surrenders the enclosed
certificates of Common Stock duly endorsed for transfer to Ultrafem, Inc.
Dated:
-------------
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Option)
---------------------------------------
Address
---------------------------------------
-7-
<PAGE>
EXHIBIT II
TO: Ultrafem, Inc.
500 Fifth Avenue Suite 3620
New York, NY 10110
Ladies and Gentlemen:
The undersigned understands that the shares of Common Stock ("Shares") of
Ultrafem, Inc., a Delaware corporation (the,"Company") that he has today
purchased, have not been registered under the Securities Act of 1933, as amended
(the "Securities Act").
The undersigned agrees not to sell, transfer, assign, pledge, hypothecate,
or otherwise dispose of any or all of the Shares otherwise than in accordance
with the terms and provisions of that certain Option Certificate and Agreement
dated ______________________, 19__ between the undersigned and Ultrafem, the
provisions of-which-are incorporated by reference herein. The undersigned
agrees that Ultrafem may issue stock transfer instructions to its transfer agent
with respect to the Shares to the effect that there are restrictions on transfer
as described above.
The undersigned understands that there is no market for the Shares and
there may never be a market for the Shares, and that even if a market develops
for the Shares, as a result of the foregoing restrictions on transfer and the
undersigned's representations and warranties hereunder and under aforementioned
Option Certificate and Agreement, the undersigned may never be able to sell or
dispose of the Shares and may thus have to bear the risk of his or her
investment in the Shares for a substantial period of time, or forever.
The undersigned further agrees to indemnify and hold Ultrafem harmless at
all times from and against any and all claims, actions, demands, liabilities,
losses, damages, costs and expenses incurred by Ultrafem as a result of the
sale, transfer, assignment, pledge, hypothecation or other disposition by the
undersigned of any or all of the Shares in violation of this letter, the
aforementioned Option Certificate and Agreement, the Securities Act, or any
other applicable law.
Very truly yours,
-------------------------------------
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ULTRAFEM, INC. FINANCIAL STATEMENTS AT MARCH 31, 1996 AND THE NINE
MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 28,991,697
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,549,720
<PP&E> 1,356,669
<DEPRECIATION> 240,488
<TOTAL-ASSETS> 31,558,159
<CURRENT-LIABILITIES> 4,287,329
<BONDS> 0
0
580,125
<COMMON> 9,628
<OTHER-SE> 23,006,077
<TOTAL-LIABILITY-AND-EQUITY> 31,558,159
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,406,331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 569,477
<INCOME-PRETAX> (5,844,516)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,844,516)
<EPS-PRIMARY> (1.98)
<EPS-DILUTED> 0
</TABLE>
