EXHIBIT 4.3
PRIVATE EQUITY LINE AGREEMENT
BY AND BETWEEN
KINGSBRIDGE CAPITAL LIMITED
AND
THE FEMALE HEALTH COMPANY
DATED AS OF NOVEMBER 19, 1998
NYB 55194.4
TABLE OF CONTENTS
Page
ARTICLE I Certain Definitions
Section 1.1 Average Daily Trading Volume......................... 2
Section 1.2 Bid Price............................................ 2
Section 1.3 Blackout Shares...................................... 2
Section 1.4 Capital Shares....................................... 2
Section 1.5 Ceiling Price........................................ 2
Section 1.6 Closing.............................................. 2
Section 1.7 Closing Date......................................... 2
Section 1.8 Commitment Period.................................... 2
Section 1.9 Common Stock......................................... 2
Section 1.10 Common Stock Equivalents............................. 2
Section 1.11 Condition Satisfaction Date.......................... 2
Section 1.12 Damages.............................................. 2
Section 1.13 Discount............................................. 2
Section 1.14 Effective Date....................................... 3
Section 1.15 Escrow Agreement..................................... 3
Section 1.16 Exchange Act......................................... 3
Section 1.17 Floor Price.......................................... 3
Section 1.18 Investment Amount.................................... 3
Section 1.19 Legend............................................... 3
Section 1.20 Market Price......................................... 3
Section 1.21 Maximum Commitment Amount............................ 3
Section 1.22 Maximum Commitment Amount............................ 3
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Section 1.23 Material Adverse Effect.............................. 3
Section 1.24 Maximum Put Amount................................... 3
Section 1.25 Minimum Put Amount................................... 3
Section 1.26 NASD................................................. 3
Section 1.27 Outlanding........................................... 3
Section 1.28 Person............................................... 4
Section 1.29 Preferred Stock...................................... 4
Section 1.30 Principal Market..................................... 4
Section 1.31 Purchase Price....................................... 4
Section 1.32 Put.................................................. 4
Section 1.33 Put Date............................................. 4
Section 1.34 Put Notice........................................... 4
Section 1.35 Put Shares........................................... 4
Section 1.36 Registrable Securities............................... 4
Section 1.37 Registration Rights Agreement........................ 5
Section 1.38 Registration Statement............................... 5
Section 1.39 Regulation D......................................... 5
Section 1.40 SEC.................................................. 5
Section 1.41 Section 4(2)......................................... 5
Section 1.42 Securities Act....................................... 5
Section 1.43 SEC Documents........................................ 5
Section 1.44 Subscription Date.................................... 5
Section 1.45 Trading Cushion...................................... 5
Section 1.46 Trading Day.......................................... 5
Section 1.47 Underwriter.......................................... 5
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Section 1.48 Valuation Event....................................... 6
Section 1.49 Valuation Period...................................... 6
Section 1.50 Warrant............................................... 6
Section 1.51 Warrant Shares........................................ 7
ARTICLE II
Section 2.1 Investments............................................ 7
Section 2.2 Mechanics.............................................. 7
Section 2.3 Closings............................................... 8
Section 2.4 Termination of Investment Obligation................... 8
Section 2.5 The Warrant............................................ 8
Section 2.6 Blackout Shares........................................ 8
Section 2.7 Liquidated Damages..................................... 9
ARTICLE III
Section 3.1 Intent................................................ 9
Section 3.2 Sophisticated Investor................................ 9
Section 3.3 Authority............................................. 9
Section 3.4 Not an Affiliate...................................... 10
Section 3.5 Organization and Standing............................. 10
Section 3.6 Absence of Conflicts.................................. 10
Section 3.7 Disclosure; Access to Information..................... 10
Section 3.8 Manner of Sale........................................ 10
ARTICLE IV
Section 4.1 Organization of the Company........................... 10
Section 4.2 Authority............................................. 10
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Section 4.3 Capitalization.......................................... 11
Section 4.4 Common Stock............................................ 11
Section 4.5 SEC Documents........................................... 11
Section 4.6 Exemption from Registration; Valid Issuances............. 12
Section 4.7 No General Solicitation or Advertising in Regard to
this Transaction................................................ 12
Section 4.8 Corporate Documents..................................... 12
Section 4.9 No Conflicts............................................. 12
Section 4.10 No Material Adverse Change.............................. 13
Section 4.11 No Undisclosed Liabilities.............................. 13
Section 4.12 No Undisclosed Events or Circumstances.................. 13
Section 4.13 No Integrated Offering.................................. 14
Section 4.14 Litigation and Other Proceedings........................ 14
Section 4.15 No Misleading or Untrue Communication................... 14
Section 4.16 Material Non-Public Information......................... 14
ARTICLE V
Section 5.1 Compliance with Law...................................... 14
Section 5.2 Limitation on Short Sales................................ 14
Section 6.1 Registration Rights...................................... 15
Section 6.2 Reservation of Common Stock.............................. 15
Section 6.3 Listing of Common Stock.................................. 15
Section 6.4 Exchange Act Registration................................ 15
Section 6.5 Legends.................................................. 15
Section 6.6 Corporate Existence...................................... 15
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Section 6.7 Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put............................... 15
Section 6.8 Expectations Regarding Put Notices....................... 16
Section 6.9 Consolidation; Merger................................... 16
Section 6.10 Issuance of Put Shares, Warrant Shares and Blackout
Shares.......................................................... 16
Section 6.11 Legal Opinion on Subscription Date...................... 17
Section 6.12 No Other Equity Lines................................... 17
ARTICLE VII
Section 7.1 Conditions Precedent to the Obligation of the Company
to Issue and Sell Common Stock.................................. 17
Section 7.2 Conditions Precedent to the Right of the Company to
Deliver a Put Notice and the Obligation of the Investor to
Purchase Put Shares............................................. 17
Section 7.3 Due Diligence Review; Non-Disclosure of Non-Public
Information..................................................... 20
ARTICLE VIII
Section 8.1 Legends................................................. 21
Section 8.2 No Other Legend or Stock Transfer Restrictions........... 22
Section 8.3 Investor's Compliance................................... 22
ARTICLE IX
Section 9.1 Indemnification.......................................... 22
Section 9.2 Method of Asserting Indemnification Claims............... 23
ARTICLE X
Section 10.1 Fees and Expenses....................................... 26
Section 10.2 Reporting Entity for the Common Stock................... 26
Section 10.3 Brokerage............................................... 26
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Section 10.4 Notices............................................... 27
Section 10.5 Assignment............................................ 28
Section 10.6 Amendment; No Waiver.................................. 28
Section 10.7 Annexes and Exhibits; Entire Agreement................ 28
Section 10.8 Termination; Survival................................. 28
Section 10.9 Severability.......................................... 29
Section 10.10 Title and Subtitles.................................. 29
Section 10.11 Counterparts......................................... 29
Section 10.12 Choice of Law........................................ 29
55194.4
EXHIBIT 4.3
PRIVATE EQUITY LINE AGREEMENT
BY AND BETWEEN
KINGSBRIDGE CAPITAL LIMITED
AND
THE FEMALE HEALTH COMPANY
DATED AS OF NOVEMBER 19, 1998
This PRIVATE EQUITY LINE AGREEMENT is entered into as of the 19th day of
November, 1998 (this "Agreement"), by and between KINGSBRIDGE CAPITAL LIMITED
(the "Investor"), an entity organized and existing under the laws of the British
Virgin Islands, and The Female Health Company, a corporation organized and
existing under the laws of the State of Wisconsin (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to
time as provided herein, and the Investor shall purchase, up to $6,000,000 of
the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in Common Stock to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Average Daily Trading Volume" Section 1.1 Average Daily Trading
Volume Section 1.1 Average Daily Trading Volume shall mean, with respect to any
date, the average of the daily trading volumes for the Common Stock on the
Principal Market for the twenty (20) Trading Days immediately preceding such
date.
Section 1.2 "Bid Price" Section 1.2 Bid Price Section 1.2 Bid Price shall mean
the closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the
Principal Market.
Section 1.3 "Blackout Shares" Section 1.3 Blackout Shares Section 1.3 Blackout
Shares shall have the meaning assigned to them in Section 2.6.
Section 1.4 "Capital Shares" Section 1.4 Capital Shares Section 1.4 Capital
Shares shall mean the Common Stock and any shares of any other class of common
stock whether now or hereafter authorized, having the right to participate in
the distribution of dividends (as and when declared) and assets (upon
liquidation of the Company).
Section 1.5 "Ceiling Price" shall mean one hundred fifty percent (150%) of the
Bid Price of the Common Stock on the Subscription Date.Section 1.5 "Ceiling
Price" shall mean one hundred fifty percent (150%) of the Bid Price of the
Common Stock on the Subscription Date.Section 1.5 "Ceiling Price" shall mean one
hundred fifty percent (150%) of the Bid Price of the Common Stock on the
Subscription Date.
Section 1.6 "Closing" shall mean one of the closings of a purchase and sale of
the Common Stock pursuant to Section 2.1.
Section 1.7 "Closing Date" Section 1.7 Closing Date Section 1.7 Closing Date
shall mean, with respect to a Closing, the third Trading Day following the Put
Date related to such Closing, provided all conditions to such Closing have been
satisfied on or before such Trading Day.
Section 1.8 "Commitment Period" Section 1.8 Commitment Period Section 1.8
Commitment Period shall mean the period commencing on the earlier to occur of
(i) the Effective Date or (ii) such earlier date as the Company and the Investor
may mutually agree in writing, and expiring on the earlier to occur of (x) the
date on which the Investor shall have purchased Put Shares pursuant to this
Agreement for an aggregate Purchase Price of the Maximum Commitment Amount, (y)
the date this Agreement is terminated pursuant to Section 2.4, or (z) the date
occurring twenty four (24) months from the date of commencement of the
Commitment Period.
Section 1.9 "Common Stock" Section 1.9 Common Stock Section 1.9 Common Stock
shall mean the Company's common stock, $.01 par value per share.
Section 1.10 "Common Stock Equivalents" Section 1.10 Common Stock Equivalents
Section 1.10 Common Stock Equivalents shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
Section 1.11 "Condition Satisfaction Date" Section 1.11 Condition Satisfaction
Date Section 1.11 Condition Satisfaction Date shall have the meaning set forth
in Section 7.2 of this Agreement.
Section 1.12 "Damages" Section 1.12 Damages Section 1.12 Damages shall mean any
loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements and costs and expenses
of expert witnesses and investigation).
Section 1.13 "Discount" Section 1.13 Discount Section 1.13 Discount shall mean
twelve percent (12%); provided, however, that if the Market Price of the Common
Stock for a Valuation Period is less than two dollars ($2.00) then the Discount
shall be eighteen percent (18%) in respect of the applicable Put.
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Section 1.14 "Effective Date" Section 1.14 Effective Date Section 1.14 Effective
Date shall mean the date on which the SEC first declares effective a
Registration Statement registering resale of the Registrable Securities as set
forth in Section 7.2(a).
Section 1.15 "Escrow Agreement" Section 1.15 Escrow Agreement Section 1.15
Escrow Agreement shall mean the escrow agreement in the form of Exhibit A
entered into pursuant to Section 7.2(o) hereof.
Section 1.16 "Exchange Act" Section 1.16 Exchange Act Section 1.16 Exchange Act
shall mean the Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder.
Section 1.17 "Floor Price" Section 1.17 Floor Price Section 1.17 Floor Price
shall mean one dollar ($1.00) per share.
Section 1.18 "Investment Amount" Section 1.18 Investment Amount Section 1.18
Investment Amount shall mean the dollar amount (within the range specified in
Section 2.2) to be invested by the Investor to purchase Put Shares with respect
to any Put Date as notified by the Company to the Investor in accordance with
Section 2.2 hereof.
Section 1.19 "Legend" Section 1.19 Legend Section 1.19 Legend shall have the
meaning specified in Section 8.1.
Section 1.20 "Market Price" Section 1.20 Market Price Section 1.20 Market Price
on any given date shall mean the average of the lowest intra-day bid prices of
the Common Stock over the Valuation Period. "Lowest intra-day bid price" shall
mean the lowest price bid for the Common Stock (as reported by Bloomberg L.P.)
during any Trading Day.
Section 1.21 "Maximum Commitment Amount" Section 1.21 Maximum Commitment Amount
Section 1.21 Maximum Commitment Amount shall mean $6,000,000.
Section 1.22 "Minimum Commitment Amount" Section 1.22 Minimum Commitment Amount
Section 1.22 Minimum Commitment Amount shall mean $1,000,000.
Section 1.23 "Material Adverse Effect" Section 1.23 Material Adverse Effect
Section 1.23 Material Adverse Effect shall mean any effect on the business,
operations, properties or financial condition of the Company that is material
and adverse to the Company or to the Company and such other entities controlling
or controlled by the Company, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform its obligations under any of
(i) this Agreement, (ii) the Registration Rights Agreement, (iii) the Escrow
Agreement and (iv) the Warrant.
Section 1.24 "Maximum Put Amount" Section 1.24 Maximum Put Amount Section 1.24
Maximum Put Amount shall mean with respect to any Put the amount determined in
accordance with the table set forth on Annex A hereto.
Section 1.25 "Minimum Put Amount" Section 1.25 Minimum Put Amount Section 1.25
Minimum Put Amount shall mean $100,000.
Section 1.26 "NASD" Section 1.26 NASD Section 1.26 NASD shall mean the National
Association of Securities Dealers, Inc.
Section 1.27 "Outstanding" Section 1.27 Outstanding Section 1.27 Outstanding
when used with reference to Common Shares or Capital Shares (collectively the
"Shares"), shall mean, at any date as of which the
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number of such Shares is to be determined, all issued and outstanding Shares,
and shall include all such Shares issuable in respect of outstanding scrip or
any certificates representing fractional interests in such Shares; provided,
however, that "Outstanding" shall not refer to any such Shares then directly or
indirectly owned or held by or for the account of the Company.
Section 1.28 "Person" Section 1.28 Person Section 1.28 Person shall mean an
individual, a corporation, a partnership, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.29 "Preferred Stock" Section 1.29 Preferred Stock Section 1.29
Preferred Stock shall mean the Company's Class A preferred stock, par value $.01
per share, in whatever series issued.
Section 1.30 "Principal Market" Section 1.30 Principal Market Section 1.30
Principal Market shall mean the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market or the New York Stock Exchange, whichever is
at the time the principal trading exchange or market for the Common Stock.
Section 1.31 "Purchase Price" Section 1.31 Purchase Price Section 1.31 Purchase
Price shall mean, with respect to a Put, the Market Price on the applicable Put
Date (or such other date on which the Purchase Price is calculated in accordance
with the terms and conditions of this Agreement) less the product of the
Discount and the Market Price; provided, however, that in no event shall the
Purchase Price be greater than the Ceiling Price.
Section 1.32 "Put" Section 1.32 Put Section 1.32 Put shall mean each occasion
the Company elects to exercise its right to tender a Put Notice requiring the
Investor to purchase a specified amount of the Company's Common Stock, subject
to the terms and conditions of this Agreement.
Section 1.33 "Put Date" Section 1.33 Put Date Section 1.33 Put Date shall mean
the Trading Day during the Commitment Period that a Put Notice to sell Common
Stock to the Investor is deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.34 "Put Notice" Section 1.34 Put Notice Section 1.34 Put Notice shall
mean a written notice to the Investor setting forth the Investment Amount that
the Company intends to require the Investor to purchase pursuant to the terms of
this Agreement.
Section 1.35 "Put Shares" Section 1.35 Put Shares Section 1.35 Put Shares shall
mean all shares of Common Stock issued or issuable pursuant to a Put that has
been exercised or may be exercised in accordance with the terms and conditions
of this Agreement.
Section 1.36 "Registrable Securities" Section 1.36 Registrable Securities
Section 1.36 Registrable Securities shall mean the (i) Put Shares, (ii) the
Warrant Shares, (iii) the Blackout Shares and (iv) any securities issued or
issuable with respect to any of the foregoing by way of exchange, stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) the Registration Statement has been declared
effective by the SEC and all Registrable Securities have been disposed of
pursuant to the Registration Statement, (x) all Registrable Securities have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, (y) such time as all Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under the
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Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(z) in the opinion of counsel to the Company, which counsel shall be reasonably
acceptable to the Investor, all Registrable Securities may be sold without
registration or the need for an exemption from any registration requirements and
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.37 "Registration Rights Agreement" Section 1.37 Registration Rights
Agreement Section 1.37 Registration Rights Agreement shall mean the registration
rights agreement in the form of Exhibit B hereto.
Section 1.38 "Registration Statement" Section 1.38 Registration Statement
Section 1.38 Registration Statement shall mean a registration statement on Form
SB-2 (if use of such form is then available to the Company pursuant to the rules
of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement,
the Registration Rights Agreement, and the Warrant and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
Section 1.39 "Regulation D" Section 1.39 Regulation D Section 1.39 Regulation D
shall have the meaning set forth in the recitals of this Agreement.
Section 1.40 "SEC" Section 1.40 SEC Section 1.40 SEC shall mean the Securities
and Exchange Commission.
Section 1.41 "Section 4(2)" Section 1.41 Section 4(2) Section 1.41 Section 4(2)
shall have the meaning set forth in the recitals of this Agreement.
Section 1.42 "Securities Act" Section 1.42 Securities Act Section 1.42
Securities Act shall have the meaning set forth in the recitals of this
Agreement.
Section 1.43 "SEC Documents" Section 1.43 SEC Documents Section 1.43 SEC
Documents shall mean the Company's latest Form 10-K as of the time in question,
all Forms 10-Q and 8-K filed thereafter, and the Proxy Statement for its latest
fiscal year as of the time in question until such time the Company no longer has
an obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
Section 1.44 "Subscription Date Section 1.44 Subscription Date Section 1.44
Subscription Date" shall mean the date on which this Agreement is executed and
delivered by the parties hereto.
Section 1.45 "Trading Cushion" Section 1.45 Trading Cushion Section 1.45 Trading
Cushion shall mean the mandatory twenty (20) Trading Days between Put Dates.
Section 1.46 "Trading Day" Section 1.46 Trading Day Section 1.46 Trading Day
shall mean any day during which the Principal Market shall be open for business.
Section 1.47 "Underwriter" Section 1.47 Underwriter Section 1.47 Underwriter
shall mean any underwriter participating in any disposition of the Registrable
Securities on behalf of the Investor pursuant to the Registration Statement.
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Section 1.48 "Valuation Event" Section 1.48 Valuation Event Section 1.48
Valuation Event shall mean an event in which the Company at any time during a
Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares, except for dividends paid with
respect to the Preferred Stock;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections
(a) and (b) above, at a price per share less, or for other
consideration lower, than the Bid Price in effect immediately prior
to such issuance, or without consideration;
(d) issues any warrants, options or other rights to subscribe for
or purchase any Additional Capital Shares and the price per share
for which Additional Capital Shares may at any time thereafter be
issuable pursuant to such warrants, options or other rights shall
be less than the Bid Price in effect immediately prior to such
issuance;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional
Capital Shares may at any time thereafter be issuable pursuant to
the terms of such convertible or exchangeable securities shall be
less than the Bid Price in effect immediately prior to such
issuance;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable
out of earnings or surplus legally available for dividends under
applicable law or any distribution to such holders made in respect
of the sale of all or substantially all of the Company's assets
(other than under the circumstances provided for in the foregoing
subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing
Subsections (a) through (f) hereof, inclusive, which in the opinion
of the Company's Board of Directors, determined in good faith,
would have a materially adverse effect upon the rights of the
Investor at the time of a Put or exercise of the Warrant.
Section 1.49 "Valuation Period" Section 1.49 Valuation Period Section 1.49
Valuation Period shall mean the period of five (5) Trading Days during which the
Purchase Price of the Common Stock is valued, which period shall be with respect
to the Purchase Price on any Put Date, the two (2) Trading Day preceding and the
two (2) Trading Days following the Trading Day on which the applicable Put
Notice is deemed to be delivered, as well as the Trading Day on which such
notice is deemed to be delivered; provided, however, that if a Valuation Event
occurs during any Valuation Period, a new Valuation Period shall begin on the
Trading Day immediately after the occurrence of such Valuation Event and end on
the fifth Trading Day thereafter.
Section 1.50 "Warrant" Section 1.50 Warrant Section 1.50 Warrant shall mean the
Warrant in the form of Exhibit C hereto issued pursuant to Section 2.5 of this
Agreement.
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Section 1.51 "Warrant Shares" Section 1.51 Warrant Shares Section 1.51 Warrant
Shares shall mean all shares of Common Stock issued or issuable pursuant to
exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF
OBLIGATIONS; WARRANT; BLACKOUT SHARES
Section 2.1 Investments Section 2.1 Investments Section 2.1 Investments.
(a) Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII
hereof), on any Put Date the Company may exercise a Put by the
delivery of a Put Notice. The number of Put Shares that the
Investor shall receive pursuant to such Put shall be determined by
dividing the Investment Amount specified in the Put Notice by the
Purchase Price with respect to such Put Date.
(b) Minimum Amount of Puts. The Company shall, in accordance with
Section 2.2(a), issue and sell Put Shares to the Investor and the
Investor shall purchase Put Shares from the Company totaling (in
aggregate Purchase Prices) at least the Minimum Commitment Amount.
If the Company for any reason (other than the failure of the
Investor to satisfy the conditions set forth in Section 7.1 hereof)
fails to issue and deliver such Put Shares during the Commitment
Period, on the first Trading Day after the expiration of the
Commitment Period, the Company shall wire to Investor a sum in
immediately available funds equal to the product of (X) the Minimum
Commitment Amount minus the aggregate Investment Amounts of the Put
Shares delivered to the Investor hereunder and (Y) the 12% Discount;
provided, however, that if this Agreement is terminated pursuant to
Section 2.4 hereof, the Discount shall be increased by five (5)
percentage points for purposes of this Section.
(c) Maximum Amount of Puts. Unless the Company obtains the
requisite approval of its shareholders in accordance with the
corporate laws of Wisconsin and the applicable rules of the
Principal Market, no more than 19.9% of the Outstanding shares of
Common Stock as of the Subscription Date may be issued and sold
pursuant to Puts.
Section 2.2 Mechanics Section 2.2 Mechanics Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period, the
Company may deliver a Put Notice to the Investor, subject to the
conditions set forth in Section 7.2; provided, however, the
Investment Amount for each Put as designated by the Company in the
applicable Put Notice shall be neither less than the Minimum Put
Amount nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00
noon
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New York time, or (ii) the immediately succeeding Trading Day if it
is received by facsimile or otherwise after 12:00 noon New York
time on a Trading Day or at any time on a day which is not a
Trading Day. No Put Notice may be deemed delivered, on a day that
is not a Trading Day.
Section 2.3 Closings Section 2.3 Closings Section 2.3 Closings. On each Closing
Date for a Put, (i) the Company shall deliver into escrow one or more
certificates, at the Investor's option, representing the Put Shares to be
purchased by the Investor pursuant to Section 2.1 herein, registered in the name
of the Investor and (ii) the Investor shall deliver into escrow the Investment
Amount specified in the Put Notice by wire transfer of immediately available
funds to the account provided for in the Escrow Agreement. In addition, on or
prior to such Closing Date, each of the Company and the Investor shall deliver
to the other all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein. Payment of the
Investment Amount to the Company and delivery of such certificate(s) to the
Investor shall occur out of escrow in accordance with the Escrow Agreement;
provided, however, that to the extent the Company has not paid the fees,
expenses and disbursements of the Investor's counsel in accordance with Section
12.1, the amount of such fees, expenses and disbursements shall be paid in
immediately available funds, at the direction of the Investor, to Investor's
counsel with no reduction in the number of Put Shares issuable to the Investor
on such Closing Date; provided, further, that so long as the Investor shall
maintain professional liability, errors and omissions and/or directors' and
officers' insurance for its activities related to the Put Shares, the Warrant
Shares or the Blackout Shares, three percent (3%) of such Investment Amount
shall be either (i) retained by the Investor in respect of such insurance or
(ii) paid in immediately available funds, at the direction of the Investor in
respect of such insurance, in either case, with no reduction in the number of
Put Shares issuable to the Investor on such Closing Date.
Section 2.4 Termination of Investment Obligation Section 2.4 Termination of
Investment Obligation Section 2.4 Termination of Investment Obligation. The
Investor's obligation to purchase shares of Common Stock hereunder shall
automatically terminate (including with respect to any Put, notice of which has
been given but the applicable Closing Date has not yet occurred) and the
Investor may, at its sole discretion, terminate this Agreement in the event that
(i) the Registration Statement is not effective within ninety (90) days
following the date required therefor in the Registration Rights Agreement or
(ii) there shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of sixty (60) Trading Days during the
Commitment Period, for any reason other than deferrals or suspension during a
Blackout Period in accordance with the Registration Rights Agreement, as a
result of corporate developments subsequent to the Subscription Date that would
require such Registration Statement to be amended to reflect such event in order
to maintain its compliance with the disclosure requirements of the Securities
Act or (iii) the Company shall at any time fail to comply with the requirements
of Section 6.3, 6.4, 6.5 or 6.6.
Section 2.5 The Warrant Section 2.5 The Warrant Section 2.5 The Warrant. On the
Subscription Date, the Company shall issue the Warrant to the Investor. The
Warrant shall be delivered by the Company to the Investor upon execution of this
Agreement by the parties hereto. The Warrant Shares shall be registered for
resale pursuant to the Registration Rights Agreement.
Section 2.6 Blackout Shares Section 2.6 Blackout Shares Section 2.6 Blackout
Shares. In the event that, (a) within five (5) Trading Days following any
Closing Date, the Company gives a Blackout Notice to the Investor of a Blackout
Period in accordance with the Registration Rights Agreement, and (b) the Bid
Price
8
NYB 55194.4
on the Trading Day immediately preceding such Blackout Period ("Old Bid Price")
is greater than the Bid Price on the first Trading Day following such Blackout
Period that the Investor may sell its Registrable Securities pursuant to an
effective Registration Statement ("New Bid Price"), then the Company shall issue
to the Investor the number of additional shares of Registrable Securities (the
"Blackout Shares") equal to the difference between (X) the product of the number
of Registrable Securities issued to the Investor in respect of such Closing Date
and held by Investor immediately prior to the Blackout Period multiplied by the
Old Bid Price, divided by the New Bid Price, and (Y) the number of Registrable
Securities issued to the Investor in respect of such Closing Date and held by
Investor immediately prior to the Blackout Period.
Section 2.7 Liquidated Damages Section 2.7 Liquidated Damages Section 2.7
Liquidated Damages. The parties hereto acknowledge and agree that the sum
payable under Section 2.1(b) and the requirement to issue Blackout Shares under
Section 2.6 above shall give rise to liquidated damages and not penalties. The
parties further acknowledge that (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, (b) the amounts
specified in such Sections bear a reasonable proportion and are not plainly or
grossly disproportionate to the probable loss likely to be incurred by the
Investor in connection with the failure by the Company to make Puts with
aggregate Purchase Prices totalling at least the Minimum Commitment Amount or in
connection with a Blackout Period under the Registration Rights Agreement, and
(c) the parties are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 Intent Section 3.1 Intent Section 3.1 Intent. The Investor is
entering into this Agreement for its own account and the Investor has no present
arrangement (whether or not legally binding) at any time to sell the Common
Stock to or through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold the Common Stock for
any minimum or other specific term and reserves the right to dispose of the
Common Stock at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.2 Sophisticated Investor Section 3.2 Sophisticated Investor Section
3.2 Sophisticated Investor. The Investor is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as
defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in Common Stock. The Investor acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
Section 3.3 Authority Section 3.3 Authority Section 3.3 Authority. Each of
this Agreement, the Registration Rights Agreement, and the Escrow Agreement has
been duly authorized by all necessary corporate action and no further consent or
authorization of the Investor, or its Board of Directors or stockholders is
required. Each of this Agreement, the Registration Rights Agreement, and the
Escrow Agreement was validly executed and delivered by the Investor and each is
a valid and binding agreement of the Investor enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the
9
NYB 55194.4
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
Section 3.4 Not an Affiliate Section 3.4 Not an Affiliate Section 3.4 Not an
Affiliate. The Investor is not an officer, director or "affiliate" (as that
term is defined in Rule 405 of the Securities Act) of the Company.
Section 3.5 Organization and Standing Section 3.5 Organization and Standing
Section 3.5 Organization and Standing. Investor is duly organized, validly
existing, and in good standing under the laws of the British Virgin Islands.
Section 3.6 Absence of Conflicts Section 3.6 Absence of Conflicts Section 3.6
Absence of Conflicts. The execution and delivery of this Agreement and any
other document or instrument contemplated hereby, and the consummation of the
transactions contemplated thereby, and compliance with the requirements thereof,
will not (a) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on Investor, (b) violate any provision of
any indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound, (c) conflict with
or constitute a material default thereunder, (d) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party, or (e) require the approval of any third-party (that has not
been obtained) pursuant to any material contract to which Investor is subject or
to which any of its assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information Section 3.7 Disclosure; Access to
Information Section 3.7 Disclosure; Access to Information. The Investor has
received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by Investor. The
Investor has reviewed or received copies of the SEC Documents. The Investor has
been afforded opportunities to ask questions and receive answers from management
of the Company.
Section 3.8 Manner of Sale Section 3.8 Manner of Sale Section 3.8 Manner of
Sale. At no time was Investor presented with or solicited by or through any
leaflet, public promotional meeting, television advertisement or any other form
of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 Organization of the Company Section 4.1 Organization of the Company
Section 4.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Except as set forth in the SEC Documents, the Company does not own more than
fifty percent (50%) of the outstanding capital stock of or control any other
business entity. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
Section 4.2 Authority Section 4.2 Authority Section 4.2 Authority. (i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Warrant and the Escrow Agreement and to issue the Put Shares, the Warrant,
the Warrant Shares and the Blackout Shares; (ii) the execution and delivery
10
NYB 55194.4
of this Agreement and the Registration Rights Agreement, and the execution,
issuance and delivery of the Warrant, by the Company and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (iii) each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered, and the Warrant has been duly executed, issued and delivered, by the
Company and constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
Section 4.3 Capitalization Section 4.3 Capitalization Section 4.3
Capitalization. As of June 30, 1998, the authorized capital stock of the
Company consisted of 15,000,000 shares of Common Stock, of which 10,415,757
shares were issued and outstanding, and 5,000,000 shares of blank-check
preferred stock designated as "Class A Preferred Stock," of which two series
have been designated, the first being Series 1, of which 1,040,000 shares have
been authorized and 680,000 shares were issued and outstanding and the second
being Series 2, of which 1,500,000 shares have been authorized and no shares
were issued and outstanding. Except for (i) options to purchase not more than
1,192,454 shares of Common Stock with purchase prices between $.01 and $15.25
per share (as more specifically described on Schedule 4.3 hereof); (ii) warrants
to purchase not more than 1,133,534 shares of Common Stock with purchase prices
between $1.848 and $5.72 per share (as more particularly described on Schedule
4.3 hereof) and (iii) Common Stock issuable in exchange for shares of Class A
Series 1 Preferred Stock on a one for one basis, there are no options, warrants,
or rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable (except as set forth in Wisconsin Statutes Section 180.0822(2)(b),
as interpreted).
Section 4.4 Common Stock Section 4.4 Common Stock Section 4.4 Common Stock.
The Company has registered its Common Stock pursuant to Section 12(b) or 12(g)
of the Exchange Act and is in full compliance with all reporting requirements of
the Exchange Act, and the Common Stock is currently listed or quoted on the
Principal Market. As of the date hereof, the Principal Market is the American
Stock Exchange.
Section 4.5 SEC Documents Section 4.5 SEC Documents Section 4.5 SEC Documents.
The Company has delivered or made available to the Investor true and complete
copies of the SEC Documents (including, without limitation, proxy information
and solicitation materials). The Company has not provided to the Investor any
information that, according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company, but which has
not been so disclosed. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and other federal, state and local laws, rules
and regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the
11
NYB 55194.4
Company included in the SEC Documents comply as to form and substance in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 4.6 Exemption from Registration; Valid Issuances Section 4.6 Exemption
from Registration; Valid Issuances Section 4.6 Exemption from Registration;
Valid Issuances. The sale and issuance of the Warrant, the Warrant Shares, the
Put Shares and any Blackout Shares in accordance with the terms and on the bases
of the representations and warranties set forth in this Agreement, may and shall
be properly issued pursuant to Rule 4(2), Regulation D and/or any applicable
state law. When issued and paid for as herein provided, the Put Shares, the
Warrant Shares and any Blackout Shares shall be duly and validly issued, fully
paid, and nonassessable (except as set forth in Wisconsin Statutes Section
180.0822(2)(b), as interpreted). Neither the sales of the Put Shares, the
Warrant, the Warrant Shares or any Blackout Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, or the Warrant shall (i) result in the creation or imposition
of any liens, charges, claims or other encumbrances upon the Put Shares, the
Warrant Shares, any Blackout Shares or any of the assets of the Company, or (ii)
entitle the holders of Outstanding Capital Shares to preemptive or other rights
to subscribe to or acquire the Capital Shares or other securities of the
Company. The Put Shares, the Warrant Shares and any Blackout Shares shall not
subject the Investor to personal liability by reason of the ownership thereof
(except as set forth in Wisconsin Statutes Section 180.0822(2)(b), as
interpreted).
Section 4.7 No General Solicitation or Advertising in Regard to this Transaction
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction Section 4.7 No General Solicitation or Advertising in Regard to
this Transaction. Neither the Company nor any of its affiliates nor any
distributor or any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to any of the Put Shares, the
Warrant, the Warrant Shares or any Blackout Shares, or (ii) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Common Stock issued to the
Investor hereunder under the Securities Act.
Section 4.8 Corporate Documents Section 4.8 Corporate Documents Section 4.8
Corporate Documents. The Company has furnished or made available to the
Investor true and correct copies of the Company's Certificate of Incorporation,
as amended and in effect on the date hereof (the "Certificate"), and the
Company's Amended and Restated By-Laws, as so amended and restated and in effect
on the date hereof (the "By-Laws").
Section 4.9 No Conflicts Section 4.9 No Conflicts Section 4.9 No Conflicts. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, including
without limitation the issuance of the Put Shares, the Warrant, the Warrant
Shares and the Blackout Shares do not and will not (i) result in a violation of
the Certificate or By-Laws or (ii) conflict with, or constitute a material
default (or an event that with
12
NYB 55194.4
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture, instrument or any "lock-up" or similar provision
of any underwriting or similar agreement to which the Company is a party, or
(iii) result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, conflict with or in default under any of
the foregoing; provided, however, that for purposes of the Company's
representations and warranties as to violations of foreign law, rule or
regulation referenced in clause (iii), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of the Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock or the Warrant in accordance with
the terms hereof (other than any SEC, NASD or state securities filings that may
be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval or filing required by the rules applicable to companies whose common
stock trades on the American Stock Exchange); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
Section 4.10 No Material Adverse Change Section 4.10 No Material Adverse Change
Section 4.10 No Material Adverse Change. Since December 31, 1997, to the
Company's knowledge, no event has occurred that would have a Material Adverse
Effect on the Company, except as disclosed in the SEC Documents.
Section 4.11 No Undisclosed Liabilities Section 4.11 No Undisclosed Liabilities
Section 4.11 No Undisclosed Liabilities. To the Company's knowledge, the
Company has no liabilities or obligations that are material, individually or in
the aggregate, and that are not disclosed in the SEC Documents or otherwise
publicly announced, other than those incurred in the ordinary course of the
Company's businesses since December 31, 1997 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances Section 4.12 No Undisclosed
Events or Circumstances Section 4.12 No Undisclosed Events or Circumstances.
Since December 31, 1997, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, prospects, operations or
financial condition, that, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company but
which has not been so publicly announced or disclosed in the SEC Documents.
13
NYB 55194.4
Section 4.13 No Integrated Offering Section 4.13 No Integrated Offering Section
4.13 No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
other than pursuant to this Agreement, under circumstances that would require
registration of the Common Stock issued to the Investor hereunder under the
Securities Act.
Section 4.14 Litigation and Other Proceedings Section 4.14 Litigation and Other
Proceedings Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would be reasonably likely to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
be reasonably likely to result in a Material Adverse Effect.
Section 4.15 No Misleading or Untrue Communication Section 4.15 No Misleading or
Untrue Communication Section 4.15 No Misleading or Untrue Communication. The
Company, any Person representing the Company, and, to the knowledge of the
Company, any other Person selling or offering to sell the Put Shares, the
Warrant, the Warrant Shares or the Blackout Shares in connection with the
transactions contemplated by this Agreement, have not made, at any time, any
oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.16 Material Non-Public Information Section 4.16 Material Non-Public
Information Section 4.16 Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed. Section 5.1 Compliance with Law. The Investor's trading
activities with respect to shares of the Company's Common Stock will be in
compliance with all applicable state and federal securities laws, rules and
regulations and the rules and regulations of the Principal Market on which the
Company's Common Stock is listed. Section 5.1 Compliance with Law. The
Investor's trading activities with respect to shares of the Company's Common
Stock will be in compliance with all applicable state and federal securities
laws, rules and regulations and the rules and regulations of the Principal
Market on which the Company's Common Stock is listed.
Section 5.2 Limitation on Short Sales. The Investor and its Affiliates shall
not engage in short sales of the Company's Common Stock; provided, however, that
the Investor may enter into any short sale or other hedging or similar
arrangement it deems appropriate with respect to Put Shares after it receives a
Put Notice with respect to such Put Shares so long as such sales or arrangements
do not involve more than the number of such Put Shares (determined as of the
date of such Put Notice).
14
NYB 55194.4
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights Section 6.1 Registration Rights Section 6.1
Registration Rights. The Company shall cause the Registration Rights Agreement
to remain in full force and effect and the Company shall comply in all respects
with the terms thereof.
Section 6.2 Reservation of Common Stock Section 6.2 Reservation of Common Stock
Section 6.2 Reservation of Common Stock. As of the date hereof, the Company has
available and the Company shall reserve and keep available at all times, free of
preemptive rights, 1,500,000 shares of Common Stock for the purpose of enabling
the Company to satisfy any obligation to issue the Put Shares, the Warrant
Shares and the Blackout Shares. The Company covenants and agrees to use its
reasonable best efforts to obtain shareholder approval for the authorization of
such additional shares of Common Stock as shall be necessary to fulfill the
Company's obligations to issue the Put Shares, the Warrant Shares and the
Blackout Shares.
Section 6.3 Listing of Common Stock Section 6.3 Listing of Common Stock Section
6.3 Listing of Common Stock. The Company shall use its reasonable best efforts
to maintain the listing of the Common Stock on a Principal Market, and as soon
as practicable (but in any event prior to the commencement of the Commitment
Period) will cause the Put Shares, the Warrant Shares and any Blackout Shares to
be listed on the Principal Market. The Company further shall, if the Company
applies to have the Common Stock traded on any other Principal Market, include
in such application the Put Shares, the Warrant Shares and any Blackout Shares,
and shall take such other action as is necessary or desirable in the opinion of
the Investor to cause the Common Stock to be listed on such other Principal
Market as promptly as possible. The Company shall use its reasonable best
efforts to continue the listing and trading of its Common Stock on the Principal
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the NASD and the Principal
Market.
Section 6.4 Exchange Act Registration Section 6.4 Exchange Act Registration
Section 6.4 Exchange Act Registration. The Company shall (i) cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
said Act, and will not take any action or file any document (whether or not
permitted by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act.
Section 6.5 Legends Section 6.5 Legends Section 6.5 Legends. The certificates
evidencing the Put Shares, the Warrant Shares and the Blackout Shares shall be
free of legends, except as provided for in Article VIII.
Section 6.6 Corporate Existence Section 6.6 Corporate Existence Section 6.6
Corporate Existence. The Company shall take all steps necessary to preserve and
continue the corporate existence of the Company.
Section 6.7 Notice of Certain Events Affecting Registration; Suspension of Right
to Make a Put Section 6.7 Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put Section 6.7 Notice of Certain Events Affecting
Registration; Suspension of Right to Make a Put. The Company shall immediately
notify the Investor upon the occurrence of any of the following events in
respect of a registration statement or related prospectus in respect of an
offering of Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the
15
NYB 55194.4
registration statement for amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.8 Expectations Regarding Put Notices Section 6.8 Expectations
Regarding Put Notices Section 6.8 Expectations Regarding Put Notices. Within
ten (10) days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the Company undertakes
to notify the Investor as to its reasonable expectations as to the dollar amount
it intends to raise during such calendar quarter, if any, through the issuance
of Put Notices. Such notification shall constitute only the Company's good
faith estimate with respect to such calendar quarter and shall in no way
obligate the Company to raise such amount during such calendar quarter or
otherwise limit its ability to deliver Put Notices during such calendar quarter
in amounts greater or less than the amount specified by the Company as its
reasonable expectations regarding such calendar quarter. The failure by the
Company to comply with this provision can be cured by the Company's notifying
the Investor at any time as to its reasonable expectations with respect to the
current calendar quarter.
Section 6.9 Consolidation; Merger Section 6.9 Consolidation; Merger Section 6.9
Consolidation; Merger. The Company shall not, at any time after the date
hereof, effect any merger or consolidation of the Company with or into, or a
transfer of all or substantially all of the assets of the Company to, another
entity unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to the Investor such
shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement and the Warrant.
Section 6.10 Issuance of Put Shares, Warrant Shares and Blackout Shares Section
6.10 Issuance of Put Shares, Warrant Shares and Blackout Shares Section 6.10
Issuance of Put Shares, Warrant Shares and Blackout Shares. The sale of the Put
Shares, the issuance of the Warrant Shares pursuant to exercise of the Warrant
and the issuance of any Blackout Shares shall be made in accordance with the
provisions and requirements of Regulation D and any applicable state law.
Issuance of the Warrant Shares pursuant to exercise of the Warrant through a
cashless exercise shall be made in accordance with the provisions and
requirements of Section 3(a)(9) under the Securities Act and any applicable
state law.
16
NYB 55194.4
Section 6.11 Legal Opinion on Subscription Date Section 6.11 Legal Opinion on
Subscription Date Section 6.11 Legal Opinion on Subscription Date. The
Company's independent counsel shall deliver to the Investor on the Subscription
Date an opinion in the form of Exhibit E.
Section 6.12 No Other Equity Lines Section 6.12 No Other Equity Lines Section
6.12 No Other Equity Lines. The Company shall refrain from entering into any
other agreements, arrangements or understandings granting to the Company the
right to put shares of its securities to one or more investors in private
placements.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue and
Sell Common Stock Section 7.1 Conditions Precedent to the Obligation of the
Company to Issue and Sell Common Stock Section 7.1 Conditions Precedent to the
Obligation of the Company to Issue and Sell Common Stock. The obligation
hereunder of the Company to issue and sell the Put Shares to the Investor
incident to each Closing is subject to the satisfaction, at or before each such
Closing, of each of the conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and
correct in all material respects as of the date of this Agreement
and as of the date of each such Closing as though made at each such
time.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Investor at or
prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a Put
Notice and the Obligation of the Investor to Purchase Put Shares Section 7.2
Conditions Precedent to the Right of the Company to Deliver a Put Notice and the
Obligation of the Investor to Purchase Put Shares Section 7.2 Conditions
Precedent to the Right of the Company to Deliver a Put Notice and the Obligation
of the Investor to Purchase Put Shares. The right of the Company to deliver a
Put Notice and the obligation of the Investor hereunder to acquire and pay for
the Put Shares incident to a Closing is subject to the satisfaction, on (i) the
applicable Put Date and (ii) the applicable Closing Date (each a "Condition
Satisfaction Date"), of each of the following conditions:
(a) Registration of the Registrable Securities with the SEC. As
set forth in the Registration Rights Agreement, the Company shall
have filed with the SEC a Registration Statement with respect to
the resale of the Registrable Securities by the Investor that shall
have been declared effective by the SEC prior to the first Put
Date, but in no event later than one hundred twenty (120) days
after Subscription Date.
(b) Effective Registration Statement. As set forth in the
Registration Rights Agreement, the Registration Statement shall
have previously become effective and shall remain effective on each
Condition Satisfaction Date and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration
Statement or that the
17
NYB 55194.4
SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or
intends or has threatened to do so (unless the SEC's concerns have
been addressed and the Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action), and
(ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or related prospectus
shall exist.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and
correct in all material respects as of each Condition Satisfaction
Date as though made at each such time (except for representations
and warranties specifically made as of a particular date).
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement, the
Registration Rights Agreement and the Warrant to be performed,
satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits the transactions contemplated
by this Agreement or otherwise has a Material Adverse Effect, and
no actions, suits or proceedings shall be in progress, pending or
threatened by any Person, that seek to enjoin or prohibit the
transactions contemplated by this Agreement or otherwise could
reasonably be expected to have a Material Adverse Effect. For
purposes of this paragraph (e), no proceeding shall be deemed
pending or threatened unless one of the parties has received
written or oral notification thereof prior to the applicable
Closing Date.
(f) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock shall not have been suspended by the
SEC, the Principal Market or the NASD and the Common Stock shall
have been approved for listing or quotation on and shall not have
been delisted from the Principal Market. The issuance of shares of
Common Stock with respect to the applicable Closing, if any, shall
not violate the shareholder approval requirements of the Principal
Market.
(g) Legal Opinion. The Company shall have caused to be delivered
to the Investor, within five (5) Trading Days of the effective date
of the Registration Statement, an opinion of the Company's
independent counsel in the form of Exhibit E hereto, addressed to
the Investor.
(h) Due Diligence. No dispute between the Company and the Investor
shall exist pursuant to Section 7.3 as to the adequacy of the
disclosure contained in the Registration Statement.
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NYB 55194.4
(i) Ten Percent Limitation. On each Closing Date, the number of
Put Shares then to be purchased by the Investor shall not exceed
the number of such shares that, when aggregated with all other
shares of Registerable Securities then owned by the Investor
beneficially or deemed beneficially owned by the Investor, would
result in the Investor owning more than 9.9% of all of such Common
Stock as would be outstanding on such Closing Date, as determined
in accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder. For purposes of this Section,
in the event that the amount of Common Stock outstanding as
determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date
than on the date upon which the Put Notice associated with such
Closing Date is given, the amount of Common Stock outstanding on
such Closing Date shall govern for purposes of determining whether
the Investor, when aggregating all purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares and Blackout
Shares, would own more than 9.9% of the Common Stock following such
Closing Date.
(j) Minimum Bid Price. The Bid Price equals or exceeds the Floor
Price throughout the applicable Valuation Period (or, with respect
to any Put Date, the portion of the Valuation Period preceding such
Put Date).
(k) Minimum Average Daily Trading Volume. The Average Daily
Trading Volume for the Common Stock with respect to the applicable
Put Date and Closing Date equals or exceeds 17,000 shares per
Trading Day.
(l) No Knowledge. The Company shall have no knowledge of any event
more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective
(which event is more likely than not to occur within the fifteen
Trading Days following the Trading Day on which such Notice is
deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed since
the immediately preceding Put Date.
(n) Shareholder Vote. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(o) Escrow Agreement. The parties hereto shall have entered into
the Escrow Agreement.
(p) Other. On each Condition Satisfaction Date, the Investor shall
have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested
by the Investor in order for the Investor to confirm the Company's
satisfaction of the conditions set forth in this Section 7.2.,
19
NYB 55194.4
including, without limitation, a certificate in substantially the
form and substance of Exhibit F hereto, executed in either case by
an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date
of each such certificate.
Section 7.3 Due Diligence Review; Non-Disclosure of Non-Public Information.
(a) The Company shall make available for inspection and review by
the Investor, advisors to and representatives of the Investor (who
may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any Underwriter, any
Registration Statement or amendment or supplement thereto or any
blue sky, NASD or other filing, all financial and other records, all
SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such
information reasonably requested by the Investor or any such
representative, advisor or Underwriter in connection with such
Registration Statement (including, without limitation, in response
to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of
enabling the Investor and such representatives, advisors and
Underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
(b) Each of the Company, its officers, directors, employees and
agents shall in no event disclose non-public information to the
Investor, advisors to or representatives of the Investor unless
prior to disclosure of such information the Company identifies such
information as being non-public information and provides the
Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review.
The Company may, as a condition to disclosing any non-public
information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form
reasonably satisfactory to the Company and the Investor.
(c) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the
contrary, the Company shall, as hereinabove provided, immediately
notify the advisors and representatives of the Investor and any
Underwriters of any event or the existence of any circumstance
(without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically
or generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in
the Registration Statement would cause
20
NYB 55194.4
such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 7.3
shall be construed to mean that such persons or entities other than
the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance
with the terms and conditions of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an
untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to
make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VIII
LEGENDS
Section 8.1 Legends Section 8.1 Legends Section 8.1 Legends. Each of the
Warrant and, unless otherwise provided below, each certificate representing
Registrable Securities will bear the following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND
HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE
HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE EQUITY LINE
AGREEMENT BETWEEN THE FEMALE HEALTH COMPANY AND KINGSBRIDGE
CAPITAL LIMITED DATED AS OF NOVEMBER 19, 1998. A COPY OF THE
PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY
BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
As soon as practicable after the execution and delivery hereof, but in any
event within 5 Trading Days hereafter, the Company shall issue to the transfer
agent for its Common Stock (and to any substitute or replacement transfer agent
for its Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) instructions in substantially the form of Exhibit G
hereto, with a copy to the Investor. Such instructions shall be irrevocable by
the
21
NYB 55194.4
Company from and after the date hereof or from and after the issuance thereof
to any such substitute or replacement transfer agent, as the case may be,
except as otherwise expressly provided in the Registration Rights Agreement. It
is the intent and purpose of such instructions, as provided therein, to require
the transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and
under the following circumstances and without consultation by the transfer
agent with the Company or its counsel and without the need for any further
advice or instruction or documentation to the transfer agent by or from the
Company or its counsel or the Investor:
(a) At any time after the Effective Date, upon surrender of one or
more certificates evidencing Common Stock that bear the Legend, to
the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered;
provided that (i) the Registration Statement shall then be
effective and (ii) if reasonably requested by the transfer agent
the Investor confirms to the transfer agent that the Investor has
complied with the prospectus delivery requirement.
(b) At any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered and
containing representations that (i) the Investor is permitted to
dispose of such Registrable Securities without limitation as to
amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such
Registrable Securities in a manner other than pursuant to an
effective registration statement, to a transferee who shall upon
such transfer be entitled to freely tradeable securities.
Section 8.2 No Other Legend or Stock Transfer Restrictions Section 8.2 No Other
Legend or Stock Transfer Restrictions Section 8.2 No Other Legend or Stock
Transfer Restrictions. No legend other than the one specified in Section 8.1 has
been or shall be placed on the share certificates representing the Common Stock
and no instructions or "stop transfers orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article VIII.
Section 8.3 Investor's Compliance Section 8.3 Investor's Compliance Section 8.3
Investor's Compliance. Nothing in this Article VIII shall affect in any way the
Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification Section 9.1 Indemnification Section 9.1
Indemnification. The Company agrees to indemnify and hold harmless the
Investor, its partners, affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any
22
NYB 55194.4
Damages, joint or several, and any action in respect thereof to which the
Investor, its partners, affiliates, officers, directors, employees, and duly
authorized agents, and any such Controlling Person becomes subject to, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, unless such
Damages result primarily from the Investor's gross negligence, recklessness or
bad faith in performing its obligations under this Agreement.
Section 9.2 Method of Asserting Indemnification Claims Section 9.2 Method of
Asserting Indemnification Claims Section 9.2 Method of Asserting Indemnification
Claims. All claims for indemnification by any Indemnified Party (as defined
below) under Section 9.1 shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 9.1 (an
"Indemnified Party") might seek indemnity under Section 9.1 is
asserted against or sought to be collected from such Indemnified
Party by a person other than the Company, the Investor or any
affiliate of the Company or (a "Third Party Claim"), the Indemnified
Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of
Section 12.2 against any person (the "Indemnifying Party"), together
with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party
Claim (a "Claim Notice") with reasonable promptness to the
Indemnifying Party. If the Indemnified Party fails to provide the
Claim Notice with reasonable promptness after the Indemnified Party
receives notice of such Third Party Claim, the Indemnifying Party
shall not be obligated to indemnify the Indemnified Party with
respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such
failure of the Indemnified Party. The Indemnifying Party shall
notify the Indemnified Party as soon as practicable within the
period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice
(as defined below) (the "Dispute Period") whether the Indemnifying
Party disputes its liability or the amount of its liability to the
Indemnified Party under Section 9.1 and whether the Indemnifying
Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires
to defend the Indemnified Party with respect to the Third
Party Claim pursuant to this Section 9.2(a), then the
Indemnifying Party shall have the right to defend, with
counsel reasonably satisfactory to the Indemnified Party, at
the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be
settled at the discretion of the Indemnifying Party (but only
with the consent of the Indemnified Party (which consent shall
not be unreasonably
23
NYB 55194.4
withheld) in the case of any settlement that provides for any
relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the
Indemnified Party shall not be indemnified in full pursuant
to Section 9.1). The Indemnifying Party shall have full
control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the
Indemnified Party, at any time prior to the Indemnifying
Party's delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other
pleadings or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate to protect
its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying Party
elects to contest. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this
clause (i), and except as provided in the preceding sentence,
the Indemnified Party shall bear its own costs and expenses
with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of
the defense or settlement of a Third Party Claim at any time
if it irrevocably waives its right to indemnity under Section
9.1 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.2(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within
the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent
will not be unreasonably withheld). The Indemnified Party
will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting.
Notwithstanding the foregoing provisions of this clause (ii),
if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party
disputes its liability or the amount of its liability
hereunder to the
24
NYB 55194.4
Indemnified Party with respect to such Third Party Claim and
if such dispute is resolved in favor of the Indemnifying
Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this
clause (ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party
pursuant to this clause (ii), and the Indemnifying Party
shall bear its own costs and expenses with respect to such
participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability or the amount of
its liability to the Indemnified Party with respect to the
Third Party Claim under Section 9.1 or fails to notify the
Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party with respect to such
Third Party Claim, the Loss in the amount specified in the
Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.1 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with
respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall
be resolved by arbitration in accordance with paragraph (c)
of this Section 9.2.
(b) In the event any Indemnified Party should have a claim under
Section 9.1 against the Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under Section 9.1 specifying
the nature of and basis for such claim, together with the amount
or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice")
with reasonable promptness to the Indemnifying Party. The failure
by any Indemnified Party to give the Indemnity Notice shall not
impair such party's rights hereunder except to the extent that the
Indemnifying Party demonstrates that it has been irreparably
prejudiced thereby.
(c) Any dispute under this Agreement or the Warrant shall be
submitted to arbitration (including, without limitation, pursuant
to this Section 12.3) and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of
three (3) members (the "Board of Arbitration") selected as
hereinafter provided. Each of the Indemnified Party and the
Indemnifying Party shall select one (1) member and the third member
shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement
25
NYB 55194.4
on a third member within twenty (20) days after their selection,
such third member shall thereafter be selected by the American
Arbitration Association upon application made to it for such purpose
by the Indemnified Party. The Board of Arbitration shall meet on
consecutive business days in New York County, New York or such other
place as a majority of the members of the Board of Arbitration
determines more appropriate, and shall reach and render a decision
in writing (concurred in by a majority of the members of the Board
of Arbitration) with respect to the amount, if any, which the
Indemnifying Party is required to pay to the Indemnified Party in
respect of a claim filed by the Indemnified Party. In connection
with rendering its decisions, the Board of Arbitration shall adopt
and follow such rules and procedures as a majority of the members of
the Board of Arbitration deems necessary or appropriate. To the
extent practical, decisions of the Board of Arbitration shall be
rendered no more than thirty (30) calendar days following
commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to the
Indemnified Party and the Indemnifying Party. Any decision made by
the Board of Arbitration (either prior to or after the expiration of
such thirty (30) calendar day period) shall be final, binding and
conclusive on the Indemnified Party and the Indemnifying Party and
entitled to be enforced to the fullest extent permitted by law and
entered in any court of competent jurisdiction. Each party to any
arbitration shall bear its own expense in relation thereto,
including but not limited to such party's attorneys' fees, if any,
and the expenses and fees of the Board of Arbitration shall be
divided between the Indemnifying Party and the Indemnified Party in
the same proportion as the portion of the related claim determined
by the Board of Arbitration to be payable to the Indemnified Party
bears to the portion of such claim determined not to be so payable.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses Section 10.1 Fees and Expenses Section 10.1 Fees
and Expenses. Each of the Company and the Investor agrees to pay its own
expenses incident to the performance of its obligations hereunder, except that
the Company shall pay the fees, expenses and disbursements of the Investor's
counsel incurred during the preparation, negotiation and execution of this
Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrant in an amount not to exceed $20,000.
Section 10.2 Reporting Entity for the Common Stock Section 10.2 Reporting Entity
for the Common Stock Section 10.2 Reporting Entity for the Common Stock. The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the purposes of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investor and the Company shall be required to employ any
other reporting entity.
Section 10.3 Brokerage Section 10.3 Brokerage Section 10.3 Brokerage. Each of
the parties hereto represents that it has had no dealings in connection with
this transaction with any finder or broker who will demand payment of any fee or
commission from the other party. The Company on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
harmless from
26
NYB 55194.4
any and all liabilities to any persons claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.4 Notices. Section 10.4 Notices. Section 10.4 Notices. All notices,
demands, requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice given
in accordance herewith. Any notice or other communication required or permitted
to be given hereunder shall be deemed effective (a) upon hand delivery or
delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
The Female Health Company
919 North Michigan Avenue
Suite 2208
Attention: O.B. Parrish
Chairman and Chief Executive Officer
Chicago, Illinois 60611
Telephone: (312) 280-2281
Facsimile: (312) 280
with a copy (which shall not constitute notice) to:
Reinhart, Boerner, Van Deuren, Norris & Rieselbach
1000 North Water Street
Suite 2100
Milwaukee, Wisconsin 53202
Attention: David Krosner, Esq.
Telephone: (414) 298-1000
Facsimile: (414) 298-8097
if to the Investor:
Kingsbridge Capital Limited
c/o Kingsbridge Corporate Services Limited
Main Street
Kilcullen, County Kildare
27
NYB 55194.4
Republic of Ireland
Attention: Adam Gurney
Telephone: 011-353-45-481-811
Facsimile: 011-353-45-482-003
with a copy (which shall not constitute notice) to:
Rogers & Wells LLP
200 Park Avenue, 52nd Floor
New York, NY 10166
Attention: Keith M. Andruschak, Esq.
Telephone: (212) 878-8570
Facsimile: (212) 878-8375
Either party hereto may from time to time change its address or facsimile
number for notices under this Section by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the
other party hereto.
Section 10.5 Assignment Section 10.5 Assignment Section 10.5 Assignment. Neither
this Agreement nor any rights of the Investor or the Company hereunder may be
assigned by either party to any other person. Notwithstanding the foregoing, (a)
the provisions of this Agreement shall inure to the benefit of, and be
enforceable by, any transferee of any of the Common Stock purchased or acquired
by the Investor hereunder with respect to the Common Stock held by such person,
and (b) the Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any other person or entity (including any affiliate of
the Investor) upon the prior written consent of the Company, which consent shall
not to be unreasonably withheld.
Section 10.6 Amendment; No Waiver Section 10.6 Amendment; No Waiver Section 10.6
Amendment; No Waiver. No party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by both parties hereto. The failure of the either party to insist on
strict compliance with this Agreement, or to exercise any right or remedy under
this Agreement, shall not constitute a waiver of any rights provided under this
Agreement, nor estop the parties from thereafter demanding full and complete
compliance nor prevent the parties from exercising such a right or remedy in the
future.
Section 10.7 Annexes and Exhibits; Entire Agreement Section 10.7 Annexes and
Exhibits; Entire Agreement Section 10.7 Annexes and Exhibits; Entire Agreement.
All annexes and exhibits to this Agreement are incorporated herein by reference
and shall constitute part of this Agreement. This Agreement, the Warrant, the
Registration Rights Agreement and the Escrow Agreement set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and thereof and supersede all prior and contemporaneous agreements, negotiations
and understandings between the parties, both oral and written, relating to the
subject matter hereof.
Section 10.8 Termination; Survival Section 10.8 Termination; Survival Section
10.8 Termination; Survival. This Agreement shall terminate on the earlier of
(i) twenty four (24) months after the commencement of the Commitment Period and
(ii) the date on which the Company has made Puts with an aggregate Investment
Amount equal to the Maximum Commitment Amount; provided, however, that the
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provisions of Articles VI, VIII, IX and X, and of Section 2.1(b) and Section
7.3, shall survive the termination of this Agreement.
Section 10.9 Severability Section 10.9 Severability Section 10.9 Severability.
In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that such severability shall be ineffective if it materially changes
the economic benefit of this Agreement to any party.
Section 10.10 Title and Subtitles Section 10.10 Title and Subtitles Section
10.10 Title and Subtitles. The titles and subtitles used in this Agreement are
used for the convenience of reference and are not to be considered in construing
or interpreting this Agreement.
Section 10.11 Counterparts Section 10.11 Counterparts Section 10.11
Counterparts. This Agreement may be executed in multiple counterparts, each of
which may be executed by less than all of the parties and shall be deemed to be
an original instrument which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one and
the same instrument.
Section 10.12 Choice of Law Section 10.12 Choice of Law Section 10.12 Choice of
Law. This Agreement shall be construed under the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
KINGSBRIDGE CAPITAL LIMITED
By: /s/ Adam Gurney
_____________________________
Adam Gurney
Director
THE FEMALE HEALTH COMPANY
By: /s/ O.B. Parrish
_____________________________
O.B. Parrish
Chairman
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ANNEX A
MAXIMUM PUT AMOUNT
The Maximum Put Amount with respect to a Put shall be determined based upon the
Average Daily Trading Volume of shares of Common Stock with respect to the
relevant Put Date and the Market Price as of such Put Date of shares of Common
Stock on such Put Date as follows:
AVERAGE DAILY TRADING VOLUME
Market Price
($ per share) 17,000-22,000 22,001-30,000 30,001-45,000 45,001-Above
====================== ============= ============= ============= ============
1.00-1.50 $100,000 $125,000 $175,000 $ 200,000
1.51-2.00 $125,000 $150,000 $200,000 $ 225,000
2.01-2.50 $200,000 $300,000 $400,000 $ 500,000
2.51-3.00 $250,000 $350,000 $450,000 $ 600,000
3.01-3.50 $300,000 $400,000 $450,000 $ 600,000
3.51-4.00 $350,000 $450,000 $500,000 $ 600,000
4.01-4.50 $350,000 $450,000 $550,000 $ 650,000
4.51-5.00 $400,000 $500,000 $600,000 $ 750,000
5.01-Above $450,000 $600,000 $750,000 $1,000,000
====================== ============= ============= ============= ============
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