UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 1-10352
COLUMBIA LABORATORIES, INC.
(Exact name of Company as specified in its charter)
DELAWARE 59-2758596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2875 NORTHEAST 191ST STREET, SUITE 400
AVENTURA, FLORIDA 33180
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 933-6089
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE
(Title of each class) (Name of exchange where registered)
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Columbia Laboratories, Inc. Common Stock,
$.01 par value, held by non-affiliates, computed by reference to the price at
which the stock was sold as of February 28, 1999: $126,733,625.
Number of shares of Common Stock of Columbia Laboratories, Inc. issued
and outstanding as of February 28, 1999: 28,684,687.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION OF BUSINESS
Columbia Laboratories, Inc. (the "Company") was incorporated as a
Delaware corporation in December 1986. The Company's objective is to develop
unique pharmaceutical products that treat female specific diseases and
conditions including infertility, dysmenorrhea, endometriosis, hormonal
deficiencies and the prevention of sexually transmitted diseases. Columbia's
research in endocrinology has also led to the development of a product to treat
"Andropause" in men. Columbia's products primarily utilize the Company's
patented bioadhesive delivery technology, the ("Bioadhesive Delivery System").
Formulated products utilizing the Bioadhesive Delivery System consist
principally of a polymer, polycarbophil, and an active ingredient. The
Bioadhesive Delivery System is based upon the principle of bioadhesion, a
process by which the polymer adheres to epithelial surfaces and to mucin, a
naturally occurring secretion of the mucous membranes. The polymer remains
attached to epithelial surfaces and/or the mucin and is discharged upon normal
cell turnover or upon the detachment of the mucin from the mucous membranes, a
physiological process which, depending upon the area of the body, occurs every
12 to 72 hours. This extended period of attachment permits the Bioadhesive
Delivery System to be utilized in products when extended duration of
effectiveness is desirable or required.
The Company has focused on women's health care because of the
significant number of women whose health and hygiene needs have not been met by
available products and because the Company has found vaginal delivery to be
particularly effective. The Company intends to continue to develop products that
improve the delivery of previously approved drugs.
The Company is currently engaged solely in one business segment -- the
development and sale of pharmaceutical products and cosmetics. See footnote 7 to
the consolidated financial statements for information on foreign operations.
The Company's principal executive offices are located at 2875 Northeast
191st Street, Suite 400, Aventura, Florida 33180, and its telephone number is
(305) 933-6089. The Company's subsidiaries, all of which are wholly-owned, are
Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia Laboratories
(France) SA ("Columbia France"), Columbia Laboratories (UK) Limited ("Columbia
UK") and Columbia Research Laboratories, Inc. ("Columbia Research").
Except for historical information contained herein, the matters
discussed in this document are forward looking statements made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products and prices, and other factors discussed
elsewhere in this report.
PRODUCTS
CRINONE/registered trademark/. The Company's first prescription drug is
a sustained release, vaginally delivered, natural progesterone product. Crinone
utilizes the Company's patented Bioadhesive Delivery System which enables the
progesterone to achieve a "First Uterine Pass Effect"/copyright/. Crinone is the
first product to deliver progesterone directly to the uterus, thereby maximizing
therapeutic benefit and avoiding side effects seen with orally-delivered
synthetic progestins.
In May 1997, the Company received U.S. marketing approval for Crinone
from the U.S. Food and Drug Administration ("FDA") for use as a progesterone
supplementation or replacement as part of an Assisted Reproductive Technology
(ART) treatment for infertile women with progesterone deficiency. In July 1997,
the Company received U.S. marketing approval for Crinone from the FDA for the
treatment of secondary amenorrhea (loss of menstrual period).
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Outside the U.S., Crinone has been approved for marketing for one or
more medical indications in the following countries: the United Kingdom,
Ireland, Finland, Argentina, Greece, Mexico, Colombia, Belgium, Italy, Germany
and France. The medical indications include the treatment of secondary
amenorrhea, progesterone supplementation or replacement as part of an ART
treatment for infertile women, the prevention of hyperplasia and endometrial
cancer in post-menopausal women receiving hormone replacement therapy ("HRT"),
the reduction of symptoms of premenstrual syndrome ("PMS"), menstrual
irregularities, dysmenorrhea and dysfunctional uterine bleeding.
In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP markets
Crinone. Under the terms of the agreement, the Company has earned $17 million in
milestone payments to date and will continue to receive additional milestone
payments. The Company also supplies Crinone to AHP at a price equal to 30% of
AHP's net selling price.
ADVANTAGE-S/trademark/. Advantage-S, the Company's female
contraceptive gel utilizes the Bioadhesive Delivery System with the active
ingredient nonoxynol-9 (the "Product") and it has been marketed in the United
States by the Company since July 1998 under an existing monograph for
nonoxynol-9 spermicidal products. The Product had been marketed in the United
States under the tradename Advantage 24/registered trademark/ by Lake
Pharmaceuticals, Inc. ("Lake"). In July 1997, the FDA alleged that the monograph
did not permit a claim for 24-hour effectiveness. Although, the Company believes
that its claim for 24-hour effectiveness was valid, it agreed with the FDA in
February 1998 to market the Product without a claim for 24-hour effectiveness
under the tradename of Advantage-S. During the period in which the Company was
disputing the FDA allegations, the Company terminated its license agreement with
Lake. In July 1998, the Company began marketing the Product in the United States
under the tradename Advantage-S. Among Advantage-S benefits is that it utilizes
the Company's Bioadhesive Delivery System, which enables the nonoxynol-9 to
adhere to the cervix.
In August 1998, the Company signed a distribution agreement with
Advantage Technology Development Co. Ltd. ("Advantech") for the distribution of
the Product in China under the tradename Advantage-LA/registered trademark/. An
introduction test was conducted by Advantech and was satisfactorily completed.
The product is now being sold in selected larger cities within China under an
agreement with the Chinese Health Authorities for what is known as "Trial
Sales". Upon successful completion of the "Trial Sales", which should be by
mid-1999, the Chinese Health Authorities will issue a Family Planning Import
Sales Certificate allowing distribution of Advantage-LA throughout China. In
Europe, the Company intends to register Advantage-S as an over-the-counter drug.
Broader claims relating to prevention of sexually transmitted diseases
(STD's) will be requested upon completion, if successful, of clinical studies
now underway. The United Nations Global Program on AIDS (formerly known
as the World Health Organization Global Program on AIDS) has completed a 600
women safety study on Advantage-S. Analysis of the data generated indicates that
Advantage-S, as used in the study, was free of any serious side effects. In
addition, Advantage-S was shown to be safer than any other nonoxynol-9 product
studied. Studies to determine the efficacy of Advantage-S in preventing the
heterosexual transmission of HIV and other STD's have begun in a National
Institute of Health sponsored study in Kenya. Additional U.N. studies are
underway in Thailand, India and the Ivory Coast.
REPLENS/registered trademark/. Replens replenishes vaginal moisture on
a sustained basis and relieves the discomfort associated with vaginal dryness.
Replens was the first product utilizing the Bioadhesive Delivery System. Replens
is marketed in the United States by the Company who reacquired the marketing
rights from the Warner-Lambert Company on April 1, 1998. Replens is marketed by
various pharmaceutical companies throughout the rest of the world.
OTHER PRODUCTS. The Company also markets Advanced Formula Legatrin
PM/registered trademark/, for the relief of occasional pain and sleeplessness
associated with minor muscle aches such as night leg cramps; Vaporizer in a
bottle/registered trademark/, a portable
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cough suppressant for the temporary relief of a cough due to the common cold;
and Diasorb/registered trademark/, a pediatric antidiarrheal product. These
products do not utilize the Bioadhesive Delivery System.
RESEARCH AND DEVELOPMENT
The Company expended $7.8 million in 1998, $9.1 million in 1997 and
$10.9 million in 1996, on research and development activities. The expenditures
are primarily the result of costs associated with contracting for, supervising
and administering the clinical studies on the Company's Crinone, Advantage-S,
Chronodyne and Testosterone Bioadhesive Tablet products. These studies are
coordinated from the Company's New York and Paris offices.
CHRONODYNE/registered trademark/. In June 1998, the Company announced
that it had been granted an Investigational New Drug Application ("IND") by the
FDA for terbutaline in Columbia's patented bioadhesive vaginal delivery system.
This product is intended to relax the uterus and prevent uterine dyskinesia
(abnormal contractions), and therefore may be useful in the treatment of
disorders such as dysmenorrhea, difficult and painful menstruation and for the
treatment and prevention of endometriosis, the growth of endometrial tissue
outside the uterus. Dysmenorrhea is a disorder that afflicts nearly 25 million
women in the U.S. which is more than 30% of all menstruating women.
Endometriosis effects 5 million women in the U.S. of whom 30 to 40% are
infertile.
This vaginal form of terbutaline, trademarked Chronodyne by Columbia,
takes advantage of the Company's patented "First Uterine Pass Effect" whereby
the drug is preferentially delivered to the uterus. This results in high
concentrations in the uterus, the target organ, and low concentrations in the
systemic circulation thereby minimizing the potential for side effects.
Pharmacokinetic studies have demonstrated that when Chronodyne is administered
vaginally the common side effects of tachycardia (rapid heart rate) and tremor
are avoided because the systemic serum levels of terbutaline are only a fraction
of that seen after oral administration.
Chronodyne represents a new approach in the treatment of dysmenorrhea.
Traditionally, analgesics are used by women after the pain occurs with the
result that only partial relief is obtained. Chronodyne can prevent pain from
occurring by addressing the root cause of dysmenorrhea painful uterine
contractions. Chronodyne would be used at the first sign of dysmenorrhea,
therefore preventing painful contractions.
It is a widely held theory that endometriosis is the result of
retrograde (backward-flowing) menstruation. Endometriosis occurs when
endometrial tissue flows backward through the fallopian tubes and attaches to
nearby pelvic structures, such as the ovary, and then grows. It has been shown
that women who develop endometriosis usually have a long history of
dysmenorrhea. The Company believes that Chronodyne not only slows uterine
contractility but also prevents retrograde menstrual flow thereby eliminating
the source of endometrial implants.
TESTOSTERONE BIOADHESIVE BUCCAL TABLET. In August 1998, the Company
announced that studies had been completed demonstrating that its patented
bioadhesive buccal tablet can completely replace the normal amount of
testosterone produced by men. The new bioadhesive buccal tablet which is only 9
mm in diameter and insensible after being inserted into the mouth, has been
shown to deliver physiologic levels of testosterone. This contrasts with large
transdermal patches which produce sub-physiologic levels because they deliver
only 5 mg per day.
Testosterone has traditionally been used to treat hypogonadel men.
Hypogonadism in men is characterized by a deficiency or absence of endogenous
testosterone production. However, recent data has demonstrated that men with low
levels of testosterone may be at a greater risk of having a heart attack. Like
the failure of the ovaries in menopausal women to produce estrogen, failure of
the testes to product sufficient testosterone in men results in increasing
levels of Follicle Stimulating Hormone (FSH) and Luteinizing Hormone (LH). The
advent of "Andropause" in men may have the same impact as menopause in women-
increased risk of cardiovascular disease, Alzheimer's disease and ultimately
osteoporosis.
Research sponsored by the Company has shown that testosterone
apparently plays the same role in men as estradiol does in women, i.e., it acts
as a potent coronary dilator. Acute administration of testosterone improves
exercise-induced myocardial ischemia in men with coronary artery disease.
Columbia's testosterone bioadhesive buccal tablet may play an important role in
the treatment of angina and in the secondary prevention of a heart attack.
4
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SPC3 (SYNTHETIC POLYMERIC CONSTRUCTION #3). In December 1993, the
Company entered into an Option and License Agreement with a French research
group based in Marseille, France, pursuant to which it was granted an option to
obtain an exclusive license to the North and South American rights to a
potential AIDS treatment. In May 1996, this agreement was amended such that the
Company had the right to obtain an exclusive license to the worldwide rights. A
phase I/II clinical trial in humans was conducted in the U.S. The purpose of
this trial was to determine the optimal dosage of SPC3 in late stage
seropositive patients. The Company did not exercise its options for the product
which expired in December 1998.
PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY INFORMATION
The Company purchased the patents underlying the Bioadhesive Delivery
System from Bio-Mimetics, Inc. ("Bio-Mimetics"). The basic patent that covers
the Bioadhesive Delivery System was issued in the United States in 1986 and by
the European Patent Office in 1992. The Company has the exclusive right to the
use of the Bioadhesive Delivery System subject to certain third party licenses
issued by Bio-Mimetics that have been assigned to the Company and certain
restrictions on the assignment of the patents. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."
During 1997, the Company was granted a United States patent covering
the technology used in its product Advantage-S, which potentiates the activity
of nonoxynol-9 against various organisms which can cause sexually transmitted
diseases, including AIDS, gonorrhea, chlamydia, trichomonal infections, syphilis
and genital herpes.
During 1996, the Company was granted United States patents covering
vaginal moisturization and the direct transport of progesterone to the uterus.
In addition, a patent covering the treatment of ischemia through the delivery of
Crinone was filed in the United States. The Company is continuing to develop the
core Bioadhesive Delivery System and has filed additional patent applications
covering tissue moisturization, vaginal moisturization and progesterone
delivery. While patent applications do not ensure the ultimate issuance of a
patent, it is the Company's belief that patents based on these applications will
issue.
Because the Company operates on a worldwide basis, the Company seeks
worldwide patent protection for its technology and products. While having patent
protection cannot ensure that no competitors will emerge, this is a fundamental
step in protecting the technologies of the Company.
The Company has filed "Replens", "Advantage 24", "Advantage-S",
"Advantage-LA", "Crinone" and "Chronodyne"as trademarks in countries throughout
the world. Applications for the registration of trademarks do not ensure the
ultimate registration of these marks. The Company believes these marks will be
registered. In addition, there can be no assurance that such trademarks will
afford the Company adequate protection or that the Company will have the
financial resources to enforce its rights under such trademarks.
The Company also relies on confidentiality and nondisclosure
agreements. There can be no assurance that other companies will not acquire
information which the Company considers to be proprietary. Moreover, there can
be no assurance that other companies will not independently develop know-how
comparable to or superior to that of the Company.
MANUFACTURING
Crinone, Advantage-S, Advantage 24, Advantage-LA and Replens are
currently being manufactured and packaged by third-party manufacturers in Europe
utilizing the "form, fill and seal" single step manufacturing process.
Medical grade, cross-linked polycarbophil, the polymer used in the
Company's products utilizing the Bioadhesive Delivery System, is currently
available from only one supplier, B.F. Goodrich Company ("Goodrich"). The
Company believes that Goodrich will supply as much of the material as the
Company may require because the Company's products rank among the highest
value-added uses of the polymer. There can be no assurance that Goodrich
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will continue to supply the product. In the event that Goodrich cannot or will
not supply enough of the product to satisfy the Company's needs, the Company
will be required to seek alternative sources of polycarbophil. There can be no
assurance that an alternative source of polycarbophil will be obtained.
All of the other raw materials used by the Company for its products
utilizing the Bioadhesive Delivery System are available from several sources.
OVER-THE-COUNTER DRUGS
The Company currently markets five over-the-counter drugs: Advanced
Formula Legatrin PM, for the relief of occasional pain and sleeplessness
associated with minor muscle aches such as night leg cramps; Diasorb, a
pediatric antidiarrheal product; and Vaporizer in a bottle, a portable cough
suppressant, Replens and Advantage-S. These over-the-counter drugs are
manufactured by third-party manufacturers. All of the raw materials for the new
Bioadhesive Delivery System products used by the Company for its
over-the-counter drugs are available from several sources.
The over-the-counter drugs are sold to drug wholesalers, mass
merchandisers and chain drug stores. The Company utilizes approximately 20 drug
manufacturers' representative firms to make calls on the Company's trade
customers. The manufacturers' representatives receive commissions based on sales
made within their respective territories. The Company supports the activities of
the manufacturers' representatives by advertising in consumer publications and
convention participation.
SALES
The following table sets forth the percentage of the Company's
consolidated net sales by product, for each product accounting for 15% or more
of consolidated net sales in any of the three years ended December 31, 1998.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Crinone 25% 68% -
Replens 40 10 12%
Advantage-S 4 3* 18*
Legatrin PM/Legatrin 26 15 55
Other products 5 4 15
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
- -----------
* Prior to July 1997 the tradename was Advantage 24.
The Company anticipates the percentage of sales attributable to
Legatrin PM and the other products to decrease in future years as additional
products utilizing the Bioadhesive Delivery System are introduced. AHP accounted
for approximately 25% and 68% of 1998 and 1997 consolidated net sales,
respectively, and Warner-Lambert accounted for approximately 4% and 5% of 1998
and 1997 consolidated net sales, respectively. A retail customer accounted for
approximately 15%, 5% and 18% of 1998, 1997 and 1996 consolidated net sales,
respectively. Another customer accounted for approximately 3% and 13% of 1997
and 1996 consolidated net sales, respectively.
COMPETITION
While the Company has entered into the strategic alliance agreements
for the marketing of its women's health care products, there can be no assurance
that the Company and its partners will have the ability to compete successfully.
The Company's success to a great extent is dependent on the marketing efforts of
its strategic alliance partners, over which the Company has limited ability to
influence. The markets which the Company and its strategic alliance partners
operate in or intend to enter are characterized by intense competition. The
Company and its partners compete against established pharmaceutical and consumer
product companies which market products addressing similar needs. In addition,
numerous companies are developing or, in the future, may develop enhanced
delivery systems and products competitive with the Company's present and
proposed products. Some of the Company's and its partners' competitors possess
greater financial, research and technical resources than the Company or its
partners.
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Moreover, these companies may possess greater marketing capabilities than the
Company or its partners, including the resources to implement extensive
advertising campaigns.
Crinone, although a natural progesterone product, competes in markets
with other progestins, both synthetic and natural, which may be delivered
orally, by injections or by suppositories. Some of the more successful orally
dosed products include Provera marketed by the Upjohn Company and Prempro and
Premphase marketed by AHP. Although the Company is not aware of any product
incorporating rate-controlled technology with respect to vaginal lubrication,
the Company believes that Replens competes in the same markets as K-Y
Jelly/registered trademark/ and Gyne-Moisturin/registered trademark/, vaginal
lubricants marketed by Johnson & Johnson Products, Inc. and Schering-Plough
Corporation, respectively. The Company also believes that Advantage-S, Legatrin
PM and Diasorb compete against numerous products in their respective categories
and that Vaporizer in a bottle/registered trademark/ competes against Vicks
Vaporsteam, a product distributed by Richardson-Vicks, Inc.
GOVERNMENT REGULATION
The Company is subject to both the applicable regulatory provisions of
the FDA in the United States and the applicable regulatory agencies in those
foreign countries where its products are manufactured and/or distributed.
As in the United States, a number of foreign countries require
premarketing approval by health regulatory authorities. Requirements for
approval may differ from country to country and may involve different types of
testing. There can be substantial delays in obtaining required approvals from
regulatory authorities after applications are filed. Even after approvals are
obtained, further delays may be encountered before the products become
commercially available.
In the United States, manufacturers of pharmaceutical products are
subject to extensive regulation by various Federal and state governmental
entities relating to nearly every aspect of the development, manufacture and
commercialization of such products. The FDA, which is the principal regulatory
authority in the United States for such products, has the power to seize
adulterated or misbranded products and unapproved new drugs, to require their
recall from the market, to enjoin further manufacture or sale and to publicize
certain facts concerning a product. As a result of FDA regulations, pursuant to
which new pharmaceuticals are required to undergo extensive and rigorous
testing, obtaining premarket regulatory approval requires extensive time and
cash expenditures. The manufacturing of the Company's products which are either
manufactured and/or sold in the United States, is subject to current Good
Manufacturing Practices prescribed by the FDA. The labeling of over-the-counter
drugs in the United States, as well as advertising relating to such products,
are subject to the review of the Federal Trade Commission ("FTC") pursuant to
the general authority of the FTC to monitor and prevent unfair or deceptive
trade practices.
PRODUCT LIABILITY
The Company may be exposed to product liability claims by consumers.
Although the Company presently maintains product liability insurance coverage in
the amount of $15 million, there can be no assurance that such insurance will be
sufficient to cover all possible liabilities. In the event of a successful suit
against the Company, insufficiency of insurance coverage could have a materially
adverse effect on the Company.
EMPLOYEES
As of February 28, 1999, the Company had 37 employees, 4 in
management, 15 in research and development administration, 5 in manufacturing, 3
in marketing, and 10 in support functions. None of the Company's employees are
represented by a labor union. The Company believes that its relationship with
its employees is satisfactory.
The Company has employment agreements with certain employees, some of
whom are also stockholders of the Company. See "Executive
Compensation--Employment Agreements."
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ITEM 2. PROPERTIES
As of February 28, 1999, the Company leases the following properties:
<TABLE>
<CAPTION>
ANNUAL
LOCATION USE SQUARE FEET EXPIRATION RENT
-------- --- ----------- ---------- ------
<S> <C> <C> <C> <C>
Aventura, FL Corporate office 4,580 June 2003 $119,000
Paris, France Research admin office 9,500 August 2001 324,000
Paris, France Business residence 2,600 June 2001 61,000
New York, NY Residential office 1,000 April 2000 50,000
Rockville Center, NY Research admin office 1,400 October 2000 35,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company filed an action in the United States District Court for the
Southern District of Florida in November 1997 seeking a declaratory judgement on
certain issues related to its relationship with Lake Pharmaceuticals, Inc.
("Lake") as governed in the contract between the Company and Lake. Lake filed an
action against the Company in the United States District Court, Northern
District of Illinois, for damages alleged by Lake to have been suffered by it as
a result of the FDA's allegations in July 1997 that the Company's nonoxynol-9
product, then marketed by Lake under the tradename Advantage 24, was not
permitted to be sold under the monograph. This action was dismissed by the
Illinois Court and transferred to the Florida Court for consolidation as a
counterclaim in the Florida action. The Company is vigorously defending the Lake
claims and believes that Lake's action will be dismissed without any damage
award to Lake and that the Company will prevail in its claims against Lake for
damages.
Other claims and law suits have been filed against the Company. In the
opinion of management and counsel, none of these lawsuits are material and they
are all adequately reserved for or covered by insurance or, if not so covered,
are without any or have little merit or involve such amounts that if disposed of
unfavorably would not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 annual meeting of shareholders was held on January 28, 1999
for the purpose of electing the following eight directors (with each nominee
receiving at least 24,645,914 votes out of a possible 28,729,620 votes):James J.
Apostolakis, William J. Bologna, Jean Carvais, M.D., Dominique de Ziegler, M.D.,
Norman M. Meier, Denis O'Donnell, M.D., Selwyn Oskowitz, M.D. and Robert C.
Strauss.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's $.01 par value Common Stock ("Common Stock") trades on
the American Stock Exchange under the symbol COB. The following table sets forth
the high and low sales prices of the Common Stock on the American Stock
Exchange, as reported on the Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1997
- -----------------------------------
First Quarter $17.13 $12.13
Second Quarter 19.50 10.25
Third Quarter 20.13 15.63
Fourth Quarter 18.88 12.25
FISCAL YEAR ENDED DECEMBER 31, 1998
- -----------------------------------
First Quarter $15.18 $11.25
Second Quarter 14.13 5.63
Third Quarter 8.94 2.50
Fourth Quarter 4.88 2.38
</TABLE>
At February 28, 1999, there were 434 shareholders of record of the
Company's Common Stock, although the Company estimates that there are
approximately 9,500 beneficial owners, 2 shareholders of record of the Company's
Series A Convertible Preferred Stock ("Series A Preferred Stock"), 3
shareholders of record of the Company's Series B Convertible Preferred Stock
("Series B Preferred Stock") and 24 shareholders of record of the Company's
Series C Convertible Preferred Stock ("Series C Preferred Stock").
On August 31, 1998 the Company granted to Value Management & Research
AG a warrant to purchase up to an aggregate of 120,000 shares of Common Stock at
an exercise price of $5.00 per share in exchange for consulting services
performed.
Between January 7, 1999 and February 1, 1999 the Company sold (i) 6,660
shares of Series C Convertible Preferred Stock, convertible into shares of the
Company's Common Stock, par value $.01 (the "Series C Convertible Preferred
Stock"), and (ii) warrants to purchase up to an aggregate of 233,100 shares of
Common Stock at an exercise price of $3.50 per share (the "Series C Warrants")
for an aggregate purchase price of $6,660,000. The Series C Preferred Stock may
be converted into Common Shares at a conversion price equal to the lesser of (i)
$3.50 and (ii) 100% of the average of the closing prices of the Common Shares as
reported on the AMEX for the three Trading Days immediately preceding the date
of conversion. In accordance with Rule 501 of Regulation D under the Securities
Act of 1933 (the "Securities Act"), it was not necessary in connection with the
offer, sale and delivery of the Series C Preferred Stock to register the Series
C Preferred Stock under the Securities Act.
On January 28, 1999 the Company granted to James Apostolakis, Shephard
Lane and Anthony Campbell, in exchange for services performed, warrants to
purchase up to an aggregate of 225,000 shares of Common Stock at an exercise
price of $4.8125 per share.
The Series A Preferred Stock pays cumulative dividends at a rate of 8%
per annum payable quarterly on the first business day of the subsequent quarter.
As of December 31, 1998, dividends of $1,860 were payable on January 4,
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1999. The Series C Preferred Stock issued in January 1999 pays cumulative
dividends at a rate of 5% per annum payable quarterly on the last day of the
quarter.
The Company has never paid a cash dividend on its Common Stock and does
not anticipate the payment of cash dividends in the foreseeable future. The
Company intends to retain any earnings for use in the development and expansion
of its business.
Applicable provisions of the Delaware General Corporation Law may
affect the ability of the Company to declare and pay dividends on its Common
Stock as well as on its Preferred Stock. In particular, pursuant to the Delaware
General Corporation Law, a company may pay dividends out of its surplus, as
defined, or out of its net profits, for the fiscal year in which the dividend is
declared and/or the preceding year. Surplus is defined in the Delaware General
Corporation Law to be the excess of net assets of the company over capital.
Capital is defined to be the aggregate par value of shares issued.
ITEM 6. SELECTED FINANCIAL DATA
The following consolidated selected financial data of the Company for
the five years ended December 31, 1998 (not covered by the auditors' report),
should be read in conjunction with the consolidated financial statements and
related notes thereto. See "Item 8. Financial Statements and Supplementary
Data."
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data: (000's)
Net sales $ 10,018 $ 16,547 $ 5,646 $ 9,905 $ 8,769
Net income ( loss) (1) (13,860) 763 (13,079) (959) (12,994)
Income (loss) per common share (0.48) 0.03 (0.47) (0.04) (0.58)
Weighted average number
of common shares outstanding-diluted 28,679 29,982 27,615 25,487 22,530
Balance Sheet Data: (000's)
Working capital (deficiency) ($ 1,401) $ 5,140 $ 720 ($ 1,968) ($ 3,858)
Total assets 11,880 15,002 9,980 7,687 6,808
Long-term debt 10,000 -- -- -- 6,218
Stockholders' equity (deficit) (4,333) 8,814 4,673 1,556 (6,192)
</TABLE>
- ------------
(1) 1998, 1997, 1996 and 1995 net income (loss) includes $73,000, $7.0 million,
$2.0 million and $8.1 million, respectively, of license fee income.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
FORWARD-LOOKING INFORMATION
The Company and its representatives from time to time make written or
verbal forward looking statements, including statements contained in this and
other filings with the Securities and Exchange Commission and in the Company's
reports to stockholders, which are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such statements
include, without limitation, the Company's expectations regarding sales,
earnings or other future financial performance and liquidity, product
introductions, entry into new geographic regions and general optimism about
future operations or operating results. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include, without limitation:
(i) increased competitive activity from companies in the pharmaceutical
industry, some of which have greater resources than the Company; (ii) social,
political and economic risks to the Company's foreign operations, including
changes in foreign investment and trade policies and regulations of the host
countries and of the United States; (iii) changes in the laws, regulations and
policies, including changes in accounting standards, that affect, or will
affect, the Company in the United States and abroad; (iv) foreign currency
fluctuations affecting the relative prices at which the Company and foreign
competitors sell their products in the same market; and (v) the ability of the
Company and third parties, including customers or suppliers, to adequately
address Year 2000 issues. Additional information on factors that may affect the
business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission. All forward-looking
statements should be considered in light of these risks and uncertainties. The
Company assumes no responsibility to update forward-looking statements made
herein or otherwise.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from approximately $2.3 million at
December 31, 1997 to approximately $315,000 at December 31, 1998. The Company
received $9.7 million, net of expenses, in March 1998 from the issuance of a
note to an institutional investor and approximately $356,000 from the exercise
of options and warrants. The Company paid $4.6 million in April 1998 to the
Warner-Lambert Company to reacquire the rights to the product Replens and used
approximately $7.5 million for operating activities.
In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP markets
Crinone. Under the terms of the agreement, as of February 28, 1999, the Company
has earned $17 million in milestone payments and will continue to receive
additional milestone payments. The Company also supplies Crinone to AHP at a
price equal to 30% of AHP's net selling price.
In July 1996, Columbia submitted a New Drug Application ("NDA") to the
U.S. Food and Drug Administration ("FDA") for clearance to market Crinone as a
hormonal therapy for patients with secondary amenorrhea (loss of menstrual
period). In November 1996, the Company submitted a second NDA for clearance to
market Crinone for use in Assisted Reproductive Technologies ("ART") procedures,
including IN-VITRO fertilization, ovum donation and stimulated cycles. The FDA
granted the ART filing a priority review. In addition, in February 1997, the FDA
approved the Company's Treatment Protocol under its IND for the use of Crinone
in assisted fertility procedures. As a result, through leads generated by the
Wyeth-Ayerst institutional sales force, the Company has begun distributing
Crinone to leading infertility clinics throughout the United States.
In May 1997, the Company received U.S. marketing approval for Crinone
from the FDA for use as a progesterone supplementation or replacement as part of
an Assisted Reproductive Technology (ART) treatment for infertile women with
progesterone deficiency. In July 1997, the Company received U.S. marketing
approval for Crinone from the FDA for the treatment of secondary amenorrhea
(loss of menstrual period).
In December 1993, the Company entered into an Option and License
Agreement with a French research group based in Marseille, France, pursuant to
which it was granted an option to obtain an exclusive license to the North and
South American rights to a potential AIDS treatment. In May 1996, this agreement
was amended such that the Company had the right to obtain an exclusive license
to the worldwide rights. A phase I/II clinical trial in humans was
11
<PAGE>
conducted in the U.S. The purpose of this trial was to determine the optimal
dosage of SPC3 in late stage seropositive patients. The Company did not exercise
its options for the product which expired in December 1998.
In connection with the 1989 purchase of the assets of Bio-Mimetics,
Inc., which assets consisted of the patents underlying the Company's Bioadhesive
Delivery System, other patent applications and related technology, the Company
pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of
products based on the Bioadhesive Delivery System, to an aggregate of $7.5
million. The Company is required to prepay a portion of the remaining royalty
obligation, in cash or stock at the option of the Company, if certain conditions
are met. Through December 31, 1998, the Company has paid approximately $1.3
million in royalty payments.
As of December 31, 1998, the Company has outstanding exercisable
options and warrants that, if exercised, would result in approximately $38.8
million of additional capital. However, there can be no assurance that such
options or warrants will be exercised.
Significant expenditures anticipated by the Company in the near future
are concentrated on research and development related to new products. The
Company anticipates it will spend approximately $7.5 million on research and
development in 1999 and an additional $400,000 on property and equipment.
As of December 31, 1998, the Company had available net operating loss
carryforwards of approximately $49 million to offset its future U.S. taxable
income.
In accordance with Statement of Financial Accounting Standards No.
109, as of December 31, 1998 and 1997, other assets in the accompanying
consolidated balance sheet include deferred tax assets of approximately $18
million and $16 million, respectively, (comprised primarily of a net operating
loss carryforward) for which a valuation allowance has been recorded since the
realizability of the deferred tax assets are not determinable.
In January 1999, the Company raised approximately $6.4 million, net of
expenses, from the issuance and sale of Series C Convertible Preferred Stock.
("Preferred Stock"). The Preferred Stock, sold to twenty-four accredited
investors, has a stated value of $1,000 per share. The Preferred Stock is
convertible into common stock at the lower of: (i) $3.50 per common share (based
on 125% of the average of the five day's closing bid prices immediately
preceding the transaction, and (ii) 100% of the average of the closing prices
during the three trading days immediately preceding the conversion notice). If
conversion is based on the $3.50 conversion price, conversion may take place
after the underlying common stock is registered. If conversion is based on the
alternative calculation, conversion cannot take place for fifteen months. The
Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day
of the quarter.
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1998 VERSUS
DECEMBER 31, 1997 VERSUS DECEMBER 31, 1996
Net sales decreased by 39% in 1998 to $10.0 million as compared to
$16.5 million in 1997. Sales of Crinone which were $11.2 million in 1997 fell to
$2.5 million in 1998. American Home Products Corporation, our licensee for
Crinone, had purchased large initial quantities of Crinone from the Company in
1997 and used this inventory to fulfill most of their 1998 Crinone requirements.
Sales of Replens increased from $1.6 million in 1997 to $4.2 million in 1998.
The increase reflects the reacquisition of the product by the Company from the
Warner-Lambert Company in April 1998. As a result of the reacquisition, the
Company sells Replens directly to chain drugstores, food stores and mass
merchandisers at wholesale prices instead of to Warner-Lambert at contract
manufacturing prices which are much lower than wholesale prices. Sales increased
by 193% to $16.5 million in 1997 as compared to $5.6 million in 1996 because of
the initial sales of Crinone which amounted to $11.2 million in 1997.
Gross profit as a percentage of sales fell to 43% in 1998 as compared
to 60% in 1997. The reduction in Crinone sales, with its 80% gross profit,
accounts for almost all of the reduction. Gross profit as a percentage of sales
12
<PAGE>
was 60% in 1997 as compared to 38% in 1996 primarily as the result of the sales
of Crinone which had a higher gross profit than the existing group of products.
Selling and distribution expenses increased by 41% to $4.1 million in
1998 from $2.9 million in 1997. Contributing to the $1.2 million increase were
additional expenses related to the reacquisition of Replens and the marketing of
the product such as: amortization of the Replens trademark $230,000; media
advertising $464,000; advertising billbacks $209,000; and broker commissions
$133,000. Selling and distribution expenses in 1997 were $2.9 million versus
$3.0 million in 1996.
General and administrative expenses increased by 46% to $5.8 million
in 1998 from $4.0 million in 1997. The principal reasons for the $1.8 million
increase were an increase in legal expense from $707,000 in 1997 to $1,793,000
in 1998 and an increase in investor/public relations expenses from $543,000 in
1997 to $966,000 in 1998. The increase in legal fees reflected additional
attorney charges related to litigation and dissident shareholder activities. The
increase in investor/public relation expenses reflected work done in 1998 on
Crinone media promotion and investor relations work performed in Europe. The
European investor relations expense included $264,000 which represented the
value of warrants granted to non-employees. Other increases in 1998 general and
administrative expenses included $135,000 for salaries and benefits and $84,000
for insurance. General and administrative expenses increased by 14% to $4.0
million in 1997 from $3.5 million in 1996. The principal reasons for the
$478,000 increase was a $153,000 increase in salary expense, a $45,000 increase
in insurance expense, a $73,000 increase in travel and entertainment and a
$57,000 increase in investor relations expense.
Research and development expenditures decreased in 1998 to $7.8
million as compared to $9.1 million in 1997 as the number of Crinone studies
continued to decline. Research and development expenditures in 1997 were $9.1
million as compared to $10.9 million in 1996, when costs were incurred on the
pivotal studies required for filing the New Drug Applications in the United
States associated with Crinone.
License fees in 1998 were $73,088. License fees in 1997 and 1996 were
$7.0 million and $2.0 million, respectively, and primarily represented milestone
payments received in connection with the licensing agreement with AHP.
Interest income in 1998 was $141,564 as compared to $70,664 in 1997.
The increase resulted from interest earned on the money received from the
issuance of a $10 million note issued to SBC Warburg Dillon Read in March 1998,
after paying $4.6 million to reacquire the rights to the product Replens in
April 1998.
As a result, the net loss for 1998 was $13,859,734 or $0.48 per share
as compared to net income of $762,906 or $0.03 per share in 1997 and to the net
loss of $13,078,984 or $0.47 per share in 1996.
IMPACT OF THE YEAR 2000
The Company and each of its operating subsidiaries are in the process
of implementing a Year 2000 ("Y2K") readiness program with the objective of
having all significant business systems function properly with respect to Y2K
before January 1, 2000.
The first component of the Y2K readiness program was to identify all
internal information technology ("IT") and non-IT systems, business systems of
the Company and its operating subsidiaries that are susceptible to system
failures or processing errors as a result of Y2K problems. This step has been
completed and all systems have been upgraded to avoid the Y2K problem,
principally through the replacement or modification of computer software of
affected systems. The cost incurred by the Company and its operating
subsidiaries approximated $5,000.
13
<PAGE>
The second component of the Y2K readiness program is to identify
significant service providers, vendors and customers that are believed to be
critical to the Company's business operations after January 1, 2000. Steps are
being undertaken in an attempt to reasonably ascertain their stage of Y2K
readiness through questionnaires, interviews and other available means.
Estimated costs of assessing readiness of significant service providers, vendors
and customers should not exceed $1,000. The possible consequences of the
Company's service providers, vendors and customers not being fully Y2K compliant
by January 1, 2000 include, among other things delays in delivery of products,
delays in the receipt of supplies, invoice and collections errors, and inventory
obsolescence. There can be no assurance that systems of third parties on which
the Company relies will be converted in a timely manner, or that a failure to
properly convert by another company would not have a material adverse impact on
the Company's financial condition or results of operations. However, based on
surveys of vendors, the Company believes that all vendors will be Y2K compliant
by January 1, 2000.
The Company believes it has developed an effective program to address
the Y2K problem and, based upon current plans and assumptions, the Company does
not expect that the Y2K problem will have a material adverse impact on the
Company's financial condition or results of operations. Due to the general
uncertainty with respect to Y2K, however, there can be no assurance that all Y2K
issues will be foreseen and corrected on a timely basis, or that no material
disruption of the Company's business operations will occur. Further, the
Company's expectations are based on the assumption that there will be no general
failure of external local, national or international systems (including power,
communications, postal or transportation systems) necessary for the ordinary
conduct of business. The Company will, however, continue to assess the risks
presented by the Y2K problem and will develop contingency plans if and when such
plans become necessary.
THE ESTIMATES AND CONCLUSIONS HEREIN WITH RESPECT TO Y2K ISSUES ARE
FORWARD-LOOKING STATEMENTS UNDER THE REFORM ACT AND ARE BASED ON MANAGEMENT'S
BEST ESTIMATES OF FUTURE EVENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
COMPANY'S ESTIMATES AND CONCLUSIONS AS A RESULT OF A NUMBER OF FACTORS INCLUDING
THE AVAILABILITY OF RESOURCES, THE ABILITY TO DISCOVER AND CORRECT THE POTENTIAL
Y2K SENSITIVE ISSUES WHICH COULD HAVE A SERIOUS IMPACT ON CERTAIN OPERATIONS AND
THE ABILITY OF THE COMPANY'S VENDORS, SUPPLIERS, PROVIDERS OF GOODS AND SERVICES
AND CUSTOMERS TO BRING THEIR SYSTEMS INTO Y2K ISSUES COMPLIANCE.
EURO
On January 1, 1999, eleven of the fifteen member countries of the
European Union established fixed conversion rates between their existing
currencies ("legacy currencies") and one common currency (the "Euro"). The Euro
trades on currency exchanges and may be used in business transactions. Under the
regulations governing the transition to a single currency, there is a "no
compulsion, no prohibition" rule which states that no one is obliged to use the
Euro until the notes and coinage have been introduced on January 1, 2002.
Beginning in January 2002, new euro-denominated bills and coins will be issued
and legacy currencies will be withdrawn from circulation. The Company's
operating subsidiaries affected by the Euro conversion have established plans to
address the systems and business issues raised by the Euro currency conversion.
These issues include: (1) the need to adapt computer and other business systems
and equipment to accommodate Euro-denominated transactions, and (2) the
competitive impact of cross-border price transparency, which may make it more
difficult for business to charge different prices for the same products on a
country-by-country basis particularly once the Euro currency is issued in 2002.
Based upon current plans and assumptions, the Company does not expect that the
Euro conversion will have a material adverse impact on its financial condition
or results of operations.
IMPACT OF INFLATION
Sales revenues, manufacturing costs, selling and distribution
expenses, general and administrative expenses and research and development costs
tend to reflect the general inflationary trends.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company are annexed to this report on
pages F-1 through F-20. An index to the financial statements appears on page
F-1. The financial statement schedules are also annexed to this report on pages
S-1 through S-4. An index to the financial statement schedules appears on page
S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On January 7, 1999, the Board of Directors of Columbia Laboratories,
Inc. (the "Registrant") approved the engagement of Goldstein Golub Kessler LLP
as the Registrant's independent certified public accountants to audit the
Registrant's consolidated financial statements. During the last two fiscal years
and each subsequent interim period, the Registrant has not consulted with
Goldstein Golub Kessler LLP regarding the application of accounting principles
to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Registrant's financial statements or on
any matter that was the subject of a disagreement or a reportable event.
Simultaneously with the approval of the Registrant's new accountants,
the Board of Directors dismissed Arthur Andersen LLP as the Registraint's
independent certified public accountants. During the two most recent fiscal
years or any subsequent interim period, there have been no adverse opinions,
disclaimers of opinion or qualifications or modifications as to uncertainty,
audit scope or accounting principles regarding the reports of Arthur Andersen
LLP, on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure of a nature which if not resolved to
the satisfaction of Arthur Andersen LLP would have caused it to make reference
to the subject matter of such disagreement in connection with its report.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and directors of the Company as of February 28,
1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William J. Bologna 56 Chairman of the Board
James J. Apostolakis 56 Vice Chairman of the Board
Norman M. Meier 59 President, Chief Executive Officer
and Director
David L. Weinberg 53 Vice President--Finance and
Administration, Chief Financial
Officer, Secretary and Treasurer
Dominique de Ziegler, M.D. 51 Vice President--Pharmaceutical
Development and Director
Howard L. Levine, Pharm. D. 44 Vice President--Research and
Development
Annick Blondeau, Ph.D. 53 Vice President--Regulatory Affairs
Jean Carvais, Ph.D. 71 Director
Denis M. O'Donnell, M.D. 45 Director
Selwyn P. Oskowitz, M.D. 52 Director
Robert C. Strauss 57 Director
</TABLE>
16
<PAGE>
WILLIAM J. BOLOGNA has been a director of the Company since inception
and was elected Chairman of the Company's Board of Directors in January 1992.
From December 1988 to January 1992, Mr. Bologna served as Vice Chairman of the
Company's Board of Directors. In addition, from 1980 to 1991, he was Chairman of
Bologna & Hackett ("B&H"), an advertising agency specializing in pharmaceutical
products which has in the past performed services for various international
pharmaceutical companies. B&H ceased operations in May 1991. Prior to 1980, Mr.
Bologna was employed by William Douglas McAdams, Inc., a company engaged in the
marketing of pharmaceuticals, in a variety of positions, including Senior Vice
President. In 1965, Mr. Bologna received his B.S. in Pharmacy from Fordham
University. He received an MBA in Finance from Fordham University in 1971.
JAMES J. APOSTOLAKIS has been a director and Vice Chairman of the
Company's Board of Directors since January 1999. Mr. Apostolakis has been a
Managing Director at Poseidon Capital Corporation, an investment banking firm,
since February of 1998. Mr. Apostolakis has also served as President of
Lexington Shipping & Trading Corporation, a company engaged in shipping
operations, since 1973. From 1989 until 1992, Mr. Apostolakis served as a
director on the Board of Directors of Grow Group, a paint and specialty
chemicals company. From 1982 to 1988, he served as a director for Macmillan,
Inc., a publishing and information services company.
NORMAN M. MEIER has been President, Chief Executive Officer and a
director of the Company since inception. From 1971 to 1977, Mr. Meier was Vice
President of Sales and Marketing for Key Pharmaceuticals, Inc., a company which
had been engaged in the marketing and sales of pharmaceuticals until its sale to
Schering-Plough Corporation in June 1986. From 1977 until June 1986, Mr. Meier
served as a consultant to Key Pharmaceuticals, Inc. In 1960, Mr. Meier received
his B.S. in Pharmacy from Columbia University. He received his M.S. in Pharmacy
Administration from Long Island University in 1964. Mr. Meier is also a director
of Universal Heights, Inc.
DAVID L. WEINBERG has been Vice President--Finance and Administration,
Chief Financial Officer, Treasurer and Secretary of the Company from September
1997 to the present and previously from the inception of the Company to June
1991. From October 1991 until September 1997, Mr. Weinberg was employed by
Transmedia Network Inc., a company specializing in consumer savings programs,
where he served in various capacities including Vice President and Chief
Financial Officer. From February 1981 until August 1986, Mr. Weinberg worked for
Key Pharmaceuticals, Inc., a company engaged in the development, manufacturing,
marketing and sales of pharmaceuticals until its sale to Schering-Plough
Corporation. Mr. Weinberg served in various capacities including Vice President
- - Finance, Treasurer and Secretary. Mr. Weinberg received a B.B.A. in Accounting
from Hofstra University in 1968.
DOMINIQUE DE ZIEGLER, M.D. has been Vice President--Pharmaceutical
Development of the Company since January 1996 and a director since January 1998.
Dr. de Ziegler has been employed by the Company since 1992 as Director of
Research Development. In addition, from 1988 through 1991, Dr. de Ziegler was an
Associate Professor at the Department of Obstetrics and Gynecology, Hospital A.
Beclere in Clamart, France. In 1990, Dr. de Ziegler became a Diplomat of the
American Board of Obstetrics and Gynecology, Reproductive Endocrinology and
Infertility. Dr. de Ziegler is a member of the American Fertility Society, the
American Society for Reproductive Endocrinogolists, The American Endocrine
Society, the Society of Gynecologic Investigation and the Association Francaise
pour l'Etude de la Menopause. Dr. de Zeigler has also been a journal editor and
an "ad hoc" reviewer for Fertility Sterility, Human Reproduction, The Journal of
In Vitro Fertilization and Embryo Transfer, Contraception Fertilite Sexualite
and Reproduction Humaine et Hormone.
HOWARD L. LEVINE, Pharm.D. has been Vice President-Research and
Development since September, 1997. Dr. Levine has been employed by the Company
since 1990. Prior to joining the Company, Dr. Levine was with the Medical
Department of Pfizer Labs. Dr. Levine has held faculty and clinical practice
positions at the University of Southern California, Long Island University and
Duquesne University. He has instructed both pharmacy and medical students in
clinical pharmacology, as well as providing numerous lectures for the continuing
education of practitioners. Dr. Levine received his B.S. in Pharmacy from Oregon
State University and Doctor of Pharmacy degree from the State University of New
York at Buffalo in 1980.
17
<PAGE>
ANNICK BLONDEAU, PH. D. has been Vice President--Regulatory Affairs
since June 1996. Dr. Blondeau has been employed by the Company since 1993 as
Director of Regulatory Affairs. From 1984 through 1993, Dr. Blondeau was
responsible for all of the international filings for Debat Centre R&D Garches, a
large French pharmaceutical company. Dr. Blondeau also worked at Pfizer as Head
of the Pharmacology Department. Dr. Blondeau received her doctorate in
pharmacology and physiology from the Faculte des Sciences de Potiers France in
1971.
JEAN CARVAIS, PH.D. has been a director of the Company since October
1996. Since 1984, Dr. Carvais has been an independent consultant in the
pharmaceutical industry. Prior to that time, Dr. Carvais was President of The
Research Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc Rorer.
As such, he was involved in the development of a line of anti-cancer drugs,
including Bleomycin and Adriamycin, as well as a new line of antibiotics and
quinolones. Following the acquisition of Roger Bellon, S.A., Dr. Carvais became
a member of Rhone-Poulenc's central research committee which directs the
company's worldwide research and development activities. Dr. Carvais is also a
director of Imclone Systems Incorporated.
DENIS M. O'DONNELL, M.D. has been a director of the Company since
January 1999. Dr. O'Donnell has been a Managing Director at Seaside Advisors
LLC, a small cap investment fund, since 1997. From 1995 to 1997, Dr. O'Donnell
served as President of Novavax, Inc., a pharmaceutical and drug delivery
company. From 1991 to 1995, he was Vice President of IGI, Inc., a company
engaged in the marketing of human and animal pharmaceuticals. Currently, Dr.
O'Donnell served on the Board of Directors and the audit committees of both
Novavax, Inc. and ELXSI, Inc., a restaurant and water inspection services
company, and also serves on the Board of Directors of Bell National Corporation,
a medical diagnostics company.
SELWYN P. OSKOWITZ, M.D. has been a director of the Company since
January 1999. Dr. Oskowitz has been a clinical professor of obstetrics,
gynecology and reproductive biology at Harvard Medical School since 1993. He is
a reproductive endocrinologist at, and the Director of, Boston IVF, a fertility
clinic with which he has been associated since 1986. Dr. Oskowitz is also a
former President of the Boston Fertility Society.
ROBERT C. STRAUSS has been a director of the Company since January
1997. Since December 1997, Mr. Strauss has been the President & Chief Executive
Officer of Noven Pharmaceuticals, Inc. Prior to joining Noven, Strauss was
President, Chief Executive Officer and Chairman of the Board of Cordis
Corporation. In the past he has held senior positions at Ivax Corporation,
Touche-Ross & Company and Food Fair, Inc. Mr. Strauss received undergraduate and
graduate degrees in physics and serves on the Board of Trustees for the
University of Miami. Mr. Strauss holds a position on the Board of Directors of
several companies including CardioGenesis Corporation, American Bankers
Insurance Group and the Florida High Tech and Industry Council. Mr. Strauss also
devotes his time to many civic duties, namely, the United Way of Miami-Dade
County.
During 1998, two Form 4 filings were filed late, however, all remaining
filings of Forms 3, 4 and 5 were made on a timely basis.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Directors receive no
compensation for serving on the Board, except for the receipt of stock options
and the reimbursement of reasonable expenses incurred in attending meetings.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board. The Board of Directors has three standing committees,
the Audit Committee, the Compensation/Stock Option Committee, and the Finance
Committee.
18
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The tables, graph and descriptive information set forth below are
intended to comply with the Securities and Exchange Commission compensation
disclosure requirements applicable to, among other reports and filings, annual
reports on Form 10-Ks. This information is being furnished with respect to the
Company's Chief Executive officer ("CEO") and its four other executive officers,
other than the CEO, whose salary and bonus exceeded $100,000 for the most recent
fiscal year (collectively, the "Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY OPTIONS
- ------------------ ---- ------ ----------
<S> <C> <C> <C>
Norman M. Meier 1998 $400,000 250,000
President and Chief 1997 301,000 250,000
Executive Officer 1996 250,000 150,000
William J. Bologna 1998 400,000 250,000
Chairman of the Board 1997 294,000 250,000
1996 250,000 150,000
Nicholas A. Buoniconti (1) 1998 231,250 -
Vice Chairman and 1997 237,000 400,000
Chief Operating Officer 1996 200,000 -
Dominique de Ziegler 1998 221,800 25,000
Vice President- 1997 221,800 25,000
Pharmaceutical 1996 203,500 15,000
Development
Howard L. Levine (2) 1998 279,198 50,000
Vice President- 1997 82,500 -
Research and Development 1996 - -
</TABLE>
- ------------
(1) Nicholas A. Buoniconti resigned from his positions as Vice Chairman and
Chief Operating Officer, effective October 8, 1998.
(2) Howard L. Levine was elected as Vice President - Research and Development
on September 29, 1997.
19
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS DURING 1998
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES PRICE EXERCISE PRESENT
NAME GRANTED IN 1998 ($/SH) DATE VALUE(1)
- ---- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Norman M. Meier 250,000 33% $11.63 3/2/08 $1,227,025
William J. Bologna 250,000 33% 11.63 3/2/08 1,227,025
Nicholas A. Buoniconti - - - - -
Dominique de Ziegler 25,000 3% 11.63 3/2/08 122,703
Howard L. Levine 50,000 7% 11.63 3/2/08 245,405
</TABLE>
- ------------
(1) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: (i) an
exercise price equal to the fair market value of the underlying stock on the
date of grant, (ii) an option term of three years, (iii) an interest rate of
6% that represents the interest rate on a U.S. Treasury security with a
maturity date corresponding to that of the expected option term, (iv)
volatility of 55% calculated using daily stock prices for the two-year
period ending on December 31, 1997 and (v) no annualized dividends paid with
respect to a share of Common Stock at the date of grant. The ultimate values
of the options will depend on the future price of the Company's Common
Stock, which cannot be forecast with reasonable accuracy. The actual value,
if any, an optionee will realize upon exercise of an option will depend on
the excess of the market value of the Company's Common Stock over the
exercise price on the date the option is exercised.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES DURING 1998 AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE DECEMBER 31, 1998 DECEMBER 31, 1998
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman M. Meier - $ - 830,000 340,000 $ - $ -
William J. Bologna - - 830,000 340,000 - -
Nicholas A. Buoniconti - - 1,247,500 - - -
Dominique de Ziegler - - 120,000 25,000 - -
Howard L. Levine - - 200,000 50,000 - -
</TABLE>
20
<PAGE>
EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into five-year employment
agreements with each of William J. Bologna and Norman M. Meier, to serve as
Chairman and President of the Company, respectively. Pursuant to their
respective employment agreements, each such employee is entitled to a base
salary of $250,000. In addition, each such employee was granted options to
purchase 150,000 shares of the Company's Common Stock at an exercise price of
$7.25. Pursuant to the terms of such agreements, each employee has agreed to
dedicate his services on a substantially full-time basis and has agreed for the
term of his agreement and for two years thereafter not to compete with the
Company. The employment agreements were amended effective September 15, 1997 to
increase the base salary to $400,000. Messrs. Bologna and Meier agreed to a
voluntary 25% reduction in base salary for the six month period ending June 30,
1999.
In April 1997, the Company entered into a four-year employment
agreement with Nicholas A. Buoniconti, to serve as Vice Chairman and Chief
Operating Officer of the Company. Pursuant to this agreement, Mr. Buoniconti was
paid an annual salary of $200,000. As additional compensation, Mr. Buoniconti
was granted an option to purchase 150,000 shares of the Company's Common Stock
at an exercise price of $11.88 per share, which option vests over four years.
Pursuant to the terms of such agreement, Mr. Buoniconti had agreed to dedicate
his services on a substantially full-time basis and has agreed for the term of
his agreement and for two years thereafter not to compete with the Company. The
employment agreement was amended effective September 15, 1997 to increase the
base salary to $300,000. In October 1998, the Company and Mr. Buoniconti entered
into a further amendment to Mr. Buoniconti's employment agreement. Under the
terms of this amendment, in order to permit him to devote more time to interests
outside of the Company, Mr. Buoniconti resigned from his position as Chief
Operating Officer and Vice-Chairman of the Board of Directors and agreed not to
seek re-election as a director of the Company at the Company's 1998 Annual
Meeting of Stockholders. By the terms of the October 1998 Agreement, Mr.
Buoniconti agreed to serve the Company in a part-time capacity, devoting
approximately five hours per month to such duties as will be determined by the
Board of Directors. By the terms of the October 1998 Agreement, Mr. Buoniconti
received his base salary and his automobile allowance pursuant to the terms of
his employment agreement, as amended to date, through December 31, 1998. From
January 1, 1999 through April 15, 2001 (the date of expiration of his original
employment agreement), Mr. Buoniconti's compensation will be decreased to the
rate of $500 per month and he will no longer be entitled to an automobile
allowance. By the terms of the October 1998 Agreement, in addition, options to
purchase shares of the Company's Common Stock granted to Mr. Buoniconti under
the Company's 1988 Stock Option Plan will continue to remain exercisable in
accordance with the terms of the 1988 Stock Option Plan. Options granted to Mr.
Buoniconti under the Company's 1996 Long-Term Performance Plan which did not
vest by October 18, 1998 have been cancelled. If, prior to such date, Mr.
Buoniconti exercised any options which already vested under the 1996 Long-Term
Performance Plan, an equal number of unvested options immediately vested on a
one-for-one basis in the order such options would otherwise have vested.
Pursuant to the terms of the 1996 Long-Term Performance Plan, any vested options
will remain exercisable by Mr. Buoniconti until the tenth anniversary of their
respective dates of grant.
In July 1995, the Company entered into a three-year employment
agreement with Dominique de Ziegler, to serve as Director of Research
Development. Pursuant to this agreement, Dr. de Ziegler was paid an annual
salary of $203,500. As additional compensation, Dr. de Ziegler was granted
options to purchase 25,000 shares of the Company's Common Stock at an exercise
prices of $7.25 per share. Pursuant to the terms of such agreement, Dr. de
Ziegler agreed to dedicate his services on a substantially full-time basis and
has agreed for the term of his agreement and for two years thereafter not to
compete with the Company. Dr. de Ziegler's contract expired in July 1998. For
the calendar years 1997 and 1998, Dr. de Ziegler's salary was increased to
$221,800.
The exercise price of all of the options granted pursuant to the
aforementioned employment agreements are based on the closing price of the
Company's Common Stock on the American Stock Exchange on the day of grant.
21
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1999, directors and named executive officers,
individually and as a group, beneficially owned Common Stock as follows:
<TABLE>
<CAPTION>
NAME OF SHARES, NATURE OF INTEREST
BENEFICIAL OWNER AND PERCENTAGE OF EQUITY SECURITIES(1)
---------------- --------------------------------------
<S> <C> <C>
Norman M. Meier (2) 1,848,150 6.3%
William J. Bologna (3) 2,985,310 10.0%
James J. Apostolakis (4) 1,114,078 3.9%
David L. Weinberg (5) 77,600 *
Dominique de Ziegler (5) 145,000 *
Annick Blondeau (5) 120,000 *
Howard L. Levine (5) 250,000 *
Jean Carvais (5) 22,000 *
Denis M. O'Donnell - *
Selwyn P. Oskowitz - *
Robert C. Strauss (5) 25,000 *
The James J. Apostolakis Group (6) 1,524,900 5.3%
c/o Lexington Shipping and Trading Corp.
950 Third Avenue, 27th Floor
New York, New York 10022
The David M. Knott Group (7) 1,397,828 4.8%
485 Underhill Boulevard, Ste. 205
Syosset, New York 11791-3419
Anthony R. Campbell (8) 1,412,600 4.9%
c/o TC Management
237 Park Avenue, Suite 800
New York, New York
Officers and directors as a group (11 people) 6,587,138 20.7%
</TABLE>
- ------------
* Represents less than 1 percent.
(1) Includes shares issuable upon exercise of both options and warrants which
are currently exercisable or which may be acquired within 60 days and shares
issuable upon conversion of the Series A, Series B and Series C Preferred
Stock (12.36 for the Series A Preferred Stock, 20.57 for the Series B
Preferred Stock and 285.71 for the Series C Preferred Stock).
(2) Includes 100,000 shares issuable upon conversion of 350 shares of Series C
Preferred Stock. Includes 1,161,950 shares issuable upon exercise of options
and warrants, which are currently exercisable or which may be acquired
within 60 days.
(3) Includes 20,570 shares issuable upon conversion of 1,000 shares of Series B
Preferred Stock and 71,428 shares issuable upon conversion of 250 shares of
Series C Preferred Stock. Includes 1,118,750 shares issuable upon exercise
of options and warrants, which are currently exercisable or which may be
acquired within 60 days. Includes 198,062 shares beneficially owned by Mr.
Bologna's spouse.
(4) Includes 71,428 shares issuable upon conversion of 250 shares of Series C
Preferred Stock. Includes 108,750 shares issuable upon exercise of warrants
which are currently exercisable or which may be acquired within 60 days.
Additionally, Mr. Apostolakis has filed a schedule 13D as he may be deemed
to have acted as a member of a group with other shareholders (see footnote 6
herein).
22
<PAGE>
(5) Includes shares issuable upon exercise of options, which are currently
exercisable or which may be acquired within 60 days, to purchase 75,000
shares with respect to Mr. Weinberg, 145,000 shares with respect to Dr. de
Ziegler, 120,000 shares with respect to Dr. Blondeau, 250,000 shares with
respect to Dr. Levine, 22,000 shares with respect to Dr. Carvais and 25,000
shares with respect to Mr. Strauss.
(6) Based on a Schedule 13D dated July 6, 1998, as amended by an Amendment No. 1
to Schedule 13D dated July 16, 1998, an Amendment No. 2 dated October 2,
1998, an Amendment No. 3 dated November 4, 1998 and an Amendment No. 4 dated
December 14, 1998, Messrs. James J. Apostolakis, David Ray and Bernard
Marden and, by reference to a Schedule 13D separately filed by David M.
Knott, Mr. Knott and certain affiliated entities and, by reference to a
Schedule 13D dated separately filed by Mr. Campbell, Mr. Campbell may be
deemed to have acted together as a group for certain purposes. The
information contained in the Schedule 13D reflects that Messrs. Apostolakis,
Ray and Marden beneficially own 935,900, 214,000 and 375,700 shares of the
Company's Common Stock, respectively. And each has sole voting and
dispositive power with respect to all shares beneficially owned by such
person. Such persons have indicated that their filings do not constitute an
admission that they are members of a "group" for any purpose.
(7) Base on a Schedule 13D dated July 6, 1998, as amended by an Amendment No. 1
to Schedule 13D dated October 2, 1998, an Amendment No. 2 dated November 23,
1998 and an Amendment No. 3 dated December 14, 1998, an Amendment No. 4
dated January 19, 1999 and an Amendment No. 5 dated January 27, 1999, Mr.
Knott, Knott Partners, L.P., Dorset Management Corporation and Matterhorn
Offshore Fund Limited, along with Messrs. Apostolakis, Ray, Marden and
Campbell, may be deemed to have acted together as a group for certain
purposes. Such persons have indicated, however, that their filings do not
constitute an admission that they are members of a "group" for any purpose.
The information contained in the Schedule 13D reflects that Mr. Knott
beneficially owns 1,397,828 shares of the Company's Common Stock and (a)
individually (i) has the sole power to vote and to dispose of (1) 52,120
shares of the Company's Common Stock held in his and his IRA's accounts and
(2) 801,008 shares held in the account of Knott Partners, L.P., and (ii)
shares with the respective account owners the power to dispose of (but not
to vote) 600 shares held by the accounts of Mrs. Knott and her IRA, and (b)
as President of Dorset Management Corporation (i) has the sole power to vote
and dispose of 448,100 shares of the Company's Common Stock and (ii) shares
with the respective account owner the power to vote and dispose of 96,100
shares held in the account of Matterhorn Offshore Fund Limited.
(8) Based on a Schedule 13D dated November 4, 1998, as amended by an Amendment
No. 1 dated December 14, 1998, and an Amendment No. 2 dated December 18,
1998, Mr. Campbell, and Messrs. Apostolakis, Ray, Marden and Knott and
certain affiliated entities may be deemed to have acted together as a group
for certain purposes. The information contained in the Schedule 13D reflects
that Mr. Campbell beneficially owns 1,412,600 shares of the Company's Common
Stock and has sole voting and dispositive power with respect to all shares
beneficially owned by such person. Additionally, Mr. Campbell individually
owns 42,500 shares of Common Stock and a trust estate for the benefit of Mr.
Campbell's children owns 30,000 shares of Common Stock (as to which Mr.
Campbell disclaims beneficial ownership). Mr. Campbell expressly disclaims
beneficial ownership of any Common Stock beneficially owned by Messrs.
Apostolakis, Ray, Marden or any other person. Such persons have also
indicated that their filings do not constitute an admission that they are
members of a "group" for any purpose. TC Management, as the general partner
of Windsor LP and manager of the TC Managed Account, may be deemed to
beneficially own the shares directly owned by Windsor LP and the TC Managed
Account. TC Management, Windsor LP and TC Managed Account own 1,382,600,
1,238,800 and 101,300 shares of the Company's Common Stock, respectively.
As of February 28, 1999, the Company knows of no persons other than shown above
who beneficially own or exercise voting or dispositive control over 5% or more
of the Company's outstanding Common Stock.
23
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1993, the Company loaned Messrs. Meier and Bologna, $80,000 and
$110,350, respectively. The notes, which bear interest at 10% per annum and are
unsecured but with full recourse, were due on or before December 7, 1996. The
due dates of these notes have subsequently been extended through December 7,
1999. At December 31, 1998, the balances including interest are $121,806 and
$166,833, respectively.
In connection with the issuance of the Series C Convertible Preferred
Stock in January 1999, the Company received two notes receivable from Messrs.
Meier and Bologna for $350,000 and $250,000, respectively. The notes bear
interest at 5% per annum and are due on July 28, 1999.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Indexes to financial statements and financial statement schedules
appear on F-1 and S-1, respectively.
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation of the Company, as amended(1)
3.2 -- Amended and Restated By-laws of Company
4.1 -- Certificate of Designations, Preferences and Rights of Series C Convertible
Preferred Stock of the Company, dated as of January 7, 1999
4.2 -- Securities Purchase Agreement, dated as of January 7, 1999, between the
Company and each of the purchasers named on the signature pages thereto
4.3 -- Securities Purchase Agreement, dated as of January 19, 1999, among the
Company, David M. Knott and Knott Partners, L.P.
4.4 -- Securities Purchase Agreement, dated as of February 1, 1999, between the
Company and Windsor Partners, L.P.
4.5 -- Registration Rights Agreement, dated as of January 7, 1999,
between the Company and each of the purchasers named on the
signature pages thereto
4.6 -- Form of Warrant to Purchase Common Stock
10.1 -- Employment Agreement dated as of January 1, 1996, between the Company and
Norman M. Meier(6)
10.2 -- Employment Agreement dated as of January 1, 1996, between the Company and
William J. Bologna(6)
10.3 -- 1988 Stock Option Plan, as amended, of the Company(4)
10.4 -- 1996 Long-term Performance Plan(7)
10.5 -- License and Supply Agreement between Warner-Lambert Company and the Company
dated December 5, 1991(3)
10.6 -- Asset Purchase, License and Option Agreement, dated November 22, 1989(1)
10.7 -- Employment Agreement dated as of April 15, 1997, between the Company and
Nicholas A. Buoniconti(8)
10.8 -- License and Supply Agreement for Crinone between Columbia Laboratories, Inc.
(Bermuda) Ltd. and American Home Products dated as of May 21, 1995(5)
10.9 -- Addendum to Employment Agreement dated as of September 1, 1997, between the
Company and Norman M. Meier(8)
10.10 -- Addendum to Employment Agreement dated as of September 1, 1997, between the
Company and William J. Bologna(8)
10.11 -- Addendum to Employment Agreement dated as of September 1, 1997, between the
Company and Nicholas A. Buoniconti(8)
10.12 -- Convertible Note Purchase Agreement, 7 1/8% Convertible Subordinated Note due
March 15, 2005 and Registration Rights Agreement all dated as of March 16,
1998 between the Company and SBC Warburg Dillon Read Inc.(9)
10.13 -- Termination Agreement dated as of April 1, 1998 between the Company and the
Warner-Lambert Company(9)
10.14 -- Addendum to Employment Agreement dated as of October 8, 1998, between the
Company and Nicholas A. Buoniconti.
10.15 -- Agreement dated as of December 14, 1998, by and among Columbia Laboratories,
Inc., William J. Bologna, Norman M. Meier, James J. Apostolakis, David Ray,
Bernard Marden, Anthony R. Campbell, David M. Knott and Knott Partners, L.P.
21 -- Subsidiaries of the Company
27 -- Financial Data Schedule
</TABLE>
25
<PAGE>
- ------------
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (File No. 33-31962) declared effective on May 14, 1990.
(2) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990.
(3) Incorporated by reference to the Registrant's Current Report on Form 8-K,
filed on January 2, 1992.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.
(5) Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (File No. 33-60123) declared effective August 28, 1995.
(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995.
(7) Incorporated by reference to the Registrant's Proxy Statement dated August
26, 1996.
(8) Incorporated by reference to the Registrants Annual Report on Form 10-K for
the year ended December 31, 1997.
(9) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.
REPORTS ON FORM 8-K
On January 7, 1999, the Company filed a Form 8-K stating that it had
engaged Goldstein Golub Kessler LLP as its independent certified public
accountants to audit the Company's consolidated financial statements.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COLUMBIA LABORATORIES, INC.
Date: MARCH 24, 1999 By: /S/ DAVID L. WEINBERG
-----------------------------------
David L. Weinberg, VicePresident
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/S/ NORMAN M. MEIER President, Chief Executive March 24, 1999
- ------------------------- Officer, Director
Norman M. Meier (Principal Executive Officer)
/S/ WILLIAM J. BOLOGNA Chairman of the Board of Directors March 24, 1999
- -------------------------
William J. Bologna
/S/ JAMES J. APOSTOLAKIS Vice Chairman of the Board March 24,1999
- ------------------------- of Directors
James J. Apostolakis
/S/ DAVID L. WEINBERG Vice President-Finance and March 24, 1999
- ------------------------- Administration, Chief Financial
David L. Weinberg Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer)
/S/ DOMINIQUE DE ZIEGLER Vice President - Pharmaceutical March 24, 1999
- ------------------------- Development and Director
Dominique de Ziegler
/S/ JEAN CARVAIS Director March 24, 1999
- -------------------------
Jean Carvais
/S/ DENIS M. O'DONNELL Director March 24, 1999
- -------------------------
Denis M. O'Donnell
/S/ SELWYN P. OSKOWITZ Director March 24, 1999
- -------------------------
Selwyn P. Oskowitz
/S/ ROBERT C. STRAUSS Director March 24, 1999
- -------------------------
Robert C. Strauss
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants F-2
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheets
As of December 31, 1998 and 1997 F-4
Consolidated Statements of Operations
for the Three Years Ended December 31, 1998 F-6
Consolidated Statements of Comprehensive Operations
for the Three Years Ended December 31, 1998 F-7
Consolidated Statements of Stockholders' Equity (Deficiency)
for the Three Years Ended December 31, 1998 F-8
Consolidated Statements of Cash Flows
for the Three Years Ended December 31, 1998 F-10
Notes to Consolidated Financial Statements F-12
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:
We have audited the accompanying consolidated balance sheet of Columbia
Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1998, and the related consolidated statements of operations, comprehensive
operations, stockholders' equity (deficiency) and cash flows for the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Columbia Laboratories, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year ended December 31, 1998 in conformity with
generally accepted accounting principles.
Goldstein Golub Kessler LLP
New York, New York
February 26, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:
We have audited the accompanying consolidated balance sheet of Columbia
Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1997, and the related consolidated statements of operations, comprehensive
operations, stockholders' equity (deficiency) and cash flows for each of the two
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Columbia Laboratories, Inc. and
Subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for each of the two years in the period ended December 31, 1997
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 13, 1998.
F-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, of which $85,795 is
interest bearing as of December 31, 1998 $ 315,288 $ 2,256,590
Accounts receivable, net of allowance
for doubtful accounts of $229,829
and $132,276 in 1998 and 1997, respectively 1,323,271 6,223,842
Inventories 2,411,434 2,252,675
Prepaid expenses 472,538 477,857
Other current assets 288,639 --
------------ ------------
Total current assets 4,811,170 11,210,964
------------ ------------
PROPERTY AND EQUIPMENT:
Leasehold improvements 186,905 155,939
Machinery and equipment 2,159,970 3,075,075
Furniture and fixtures 193,092 156,251
------------ ------------
2,539,967 3,387,265
Less-accumulated depreciation
and amortization 1,166,516 1,686,129
------------ ------------
1,373,451 1,701,136
------------ ------------
INTANGIBLE ASSETS, net 5,283,277 1,119,697
OTHER ASSETS 411,648 969,955
------------ ------------
TOTAL ASSETS $ 11,879,546 $ 15,001,752
============ ============
</TABLE>
(Continued)
F-4
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,153,151 $ 3,709,368
Accrued expenses 1,480,839 1,319,400
Deferred revenue 578,150 1,042,638
------------ ------------
Total current liabilities 6,212,140 6,071,406
------------ ------------
CONVERTIBLE SUBORDINATED NOTE PAYABLE 10,000,000 --
OTHER LONG-TERM LIABILITIES -- 116,781
------------ ------------
TOTAL LIABILITIES 16,212,140 6,188,187
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value; 1,000,000 shares authorized
Series A Convertible Preferred Stock,
923 shares issued and
outstanding in 1998 and 1997
(liquidation preference of $92,300 at December 31, 1998) 9 9
Series B Convertible Preferred Stock,
1,630 shares issued and
outstanding in 1998 and 1997, respectively
(liquidation preference of $163,000 at December 31, 1998) 16 16
Common stock, $.01 par value; 40,000,000
shares authorized; 28,684,687 and 28,623,187
shares issued and outstanding in 1998 and 1997, respectively 286,846 286,231
Capital in excess of par value 93,221,998 92,588,038
Accumulated deficit (97,988,640) (84,128,906)
Accumulated other comprehensive income 147,177 68,177
------------ ------------
Total stockholders' equity (deficiency) (4,332,594) 8,813,565
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 11,879,546 $ 15,001,752
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $ 10,017,644 $ 16,547,411 $ 5,646,031
COST OF GOODS SOLD 5,707,814 6,630,820 3,517,163
------------ ------------ ------------
Gross profit 4,309,830 9,916,591 2,128,868
------------ ------------ ------------
OPERATING EXPENSES:
Selling and distribution 4,099,446 2,908,504 3,012,089
General and administrative 5,785,895 3,972,077 3,493,621
Research and development 7,821,642 9,135,573 10,942,065
------------ ------------ ------------
Total operating expenses 17,706,983 16,016,154 17,447,775
------------ ------------ ------------
Loss from operations (13,397,153) (6,099,563) (15,318,907)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
License fees 73,088 7,038,853 2,018,205
Interest income 141,564 70,664 359,224
Interest expense (599,773) (24,186) (22,041)
Other, net (77,460) (137,862) (115,465)
------------ ------------ ------------
(462,581) 6,947,469 2,239,923
------------ ------------ ------------
Income (loss) before income taxes (13,859,734) 847,906 (13,078,984)
Provision for income taxes -- 85,000 --
------------ ------------ ------------
Net income (loss) $(13,859,734) $ 762,906 $(13,078,984)
============ ============ ============
INCOME (LOSS) PER COMMON
SHARE - BASIC AND DILUTED $ (0.48) $ 0.03 $ (0.47)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 28,679,000 28,350,000 27,615,000
============ ============ ============
DILUTED 28,679,000 29,982,000 27,615,000
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
1998 1997 1996
------------ --------- ------------
<S> <C> <C> <C>
NET INCOME (LOSS) $(13,859,734) $ 762,906 $(13,078,984)
Other Comprehensive income (loss):
Foreign currency translation, net of tax (79,000) (38,557) 12,772
------------ --------- ------------
Comprehensive income (loss) $(13,938,734) $ 724,349 $(13,066,212)
============ ========= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
SERIES A SERIES B
CONVERTIBLE PREFERRED STOCK CONVERTIBLE PREFERRED STOCK COMMON STOCK
--------------------------- --------------------------- ------------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996 1,323 $13 1,750 $18 25,982,373 $259,824
Issuance of common stock -- -- -- -- 1,358,000 13,580
Options exercised -- -- -- -- 253,374 2,534
Warrants exercised -- -- -- -- 475,382 4,754
Conversion of preferred stock -- -- (120) (2) 2,467 24
Dividends on preferred stock -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- --
----- --- ----- --- ---------- --------
BALANCE, December 31, 1996 1,323 13 1,630 16 28,071,596 280,716
Options exercised -- -- -- -- 366,500 3,665
Warrants exercised -- -- -- -- 180,147 1,801
Conversion of preferred stock (400) (4) -- -- 4,944 49
Dividends on preferred stock -- -- -- -- -- --
Fair market value of warrants
granted to non-employees -- -- -- -- -- --
Fair market value of options
granted to non-employees -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
Net income -- -- -- -- -- --
----- --- ----- --- ---------- --------
BALANCE, December 31,1997 923 $ 9 1,630 $16 28,623,187 $286,231
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL IN OTHER
EXCESS OF ACCUMULATED COMPREHENSIVE
PAR VALUE DEFICIT INCOME (LOSS) TOTAL
----------- ----------- -------------- -----
<S> <C> <C> <C> <C>
BALANCE, January 1, 1996 $73,067,014 $(71,812,828) $ 42,392 $ 1,556,433
Issuance of common stock 12,220,519 -- -- 12,234,099
Options exercised 1,651,872 -- -- 1,654,406
Warrants exercised 2,326,116 -- -- 2,330,870
Conversion of preferred stock (22) -- -- --
Dividends on preferred stock (10,614) -- -- (10,614)
Translation adjustment -- -- (12,772) (12,772)
Net loss -- (13,078,984) -- (13,078,984)
----------- ------------ -------- ------------
BALANCE, December 31, 1996 89,254,885 (84,891,812) 29,620 4,673,438
Options exercised 2,161,804 -- -- 2,165,469
Warrants exercised 860,095 -- -- 861,896
Conversion of preferred stock (45) -- -- --
Dividends on preferred stock (8,088) -- -- (8,088)
Fair market value of warrants
granted to non-employees 269,264 -- -- 269,264
Fair market value of options
granted to non-employees 50,123 -- -- 50,123
Translation adjustment -- -- 38,557 38,557
Net income -- 762,906 -- 762,906
----------- ------------ -------- ------------
BALANCE, December 31,1997 $92,588,038 $(84,128,906) $ 68,177 $ 8,813,565
</TABLE>
(Continued)
F-8
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(Continued)
SERIES A SERIES B
CONVERTIBLE PREFERRED STOCK CONVERTIBLE PREFERRED STOCK COMMON STOCK
--------------------------- --------------------------- ------------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 923 $ 9 1,630 $16 28,623,187 $286,231
Options exercised -- -- -- -- 31,500 315
Warrants exercised -- -- -- -- 30,000 300
Dividends on preferred stock -- -- -- -- -- --
Fair market value of warrants
granted to non-employees -- -- -- -- -- --
Fair market value of options
granted to non-employees -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- --
----- --- ----- --- ---------- --------
BALANCE, December 31, 1998 923 $ 9 1,630 $16 28,684,687 $286,846
===== === ===== === ========== ========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL IN OTHER
EXCESS OF ACCUMULATED COMPREHENSIVE
PAR VALUE DEFICIT INCOME (LOSS) TOTAL
----------- ----------- -------------- -----
<S> <C> <C> <C> <C>
BALANCE, January 1, 1998 $92,588,038 $(84,128,906) $ 68,177 $ 8,813,565
Options exercised 209,938 -- -- 209,938
31,500
Warrants exercised 145,950 -- -- 146,250
Dividends on preferred stock (6,714) -- -- (6,714)
Fair market value of warrants
granted to non-employees 39,696 -- -- 39,696
Fair market value of options
granted to non-employees 245,405 -- -- 245,405
Translation adjustment -- -- 79,000 79,000
Net loss -- (13,859,734) -- (13,859,734)
----------- ------------ -------- ------------
BALANCE, December 31, 1998 $93,221,998 $(97,988,640) $147,177 $ (4,332,594)
=========== ============ ======== ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(13,859,734) $ 762,906 $(13,078,984)
Adjustments to reconcile net income (loss) to net
cash used in operating activities-
Depreciation and amortization 992,358 913,945 848,469
Provision for (recovery of) doubtful accounts 97,553 35,001 (8,162)
Provision for (recovery of) returns and allowances 61,020 -- (82,718)
Write-down of inventories 1,176,200 -- 77,380
Issuance of warrants and options for consulting services 285,101 94,998 --
Write-off of property and equipment 52,111 3,411 --
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable 4,741,998 (4,818,322) (228,558)
Inventories (1,334,959) (1,309,531) (66,610)
Prepaid expenses 5,319 (72,065) (38,383)
Other assets 269,668 59,080 (304,561)
Increase (decrease) in:
Accounts payable 320,288 905,117 (491,797)
Accrued expenses 161,439 130,322 46,953
Deferred revenue (464,488) (15,336) (8,902)
------------ ----------- ------------
Net cash used in operating activities (7,496,126) (3,310,474) (13,335,873)
------------ ----------- ------------
</TABLE>
(Continued)
F-10
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(Continued)
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of product rights $ (4,615,644) -- --
Purchase of property and equipment (264,720) $(1,011,987) $ (750,763)
------------ ----------- ------------
Cash used in investing activities (4,880,364) (1,011,987) (750,763)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of note payable 10,000,000 -- --
Repayments of notes payable and long-term debt -- -- (156,749)
Proceeds from issuance of common stock -- -- 12,234,099
Proceeds from exercise of options and warrants 356,188 3,027,365 3,985,276
------------ ----------- ------------
Net cash provided by financing activities 10,356,188 3,027,365 16,062,626
------------ ----------- ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 79,000 (10,108) (43,148)
------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,941,302) (1,305,204) 1,932,842
CASH AND CASH EQUIVALENTS,
Beginning of year 2,256,590 3,561,794 1,628,952
------------ ----------- ------------
CASH AND CASH EQUIVALENTS,
End of year $ 315,288 $ 2,256,590 $ 3,561,794
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 367,357 $ 20,825 $ 24,124
============ =========== ============
Taxes paid $ 110,255 $ 54,076 --
============ =========== ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements
F-11
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION-
Columbia Laboratories, Inc. (the "Company") was incorporated as a
Delaware corporation in December 1986. The Company's objective is to develop
unique pharmaceutical products that treat female specific diseases and
conditions including infertility, dysmenorrhea, endometriosis, hormonal
deficiencies and the prevention of sexually transmitted diseases. Columbia's
research in endocrinology has also led to the development of a product to treat
"Andropause" in men. Columbia's products primarily utilize the Company's
patented bioadhesive delivery technology.
PRINCIPLES OF CONSOLIDATION-
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
ACCOUNTING ESTIMATES-
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY-
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at current exchange rates and revenue and expense
items are translated at average rates of exchange prevailing during the period.
Resulting translation adjustments are accumulated as a separate component of
stockholders' equity.
INVENTORIES-
Inventories are stated at the lower of cost (first-in, first-out) or
market. Components of inventory cost include materials, labor and manufacturing
overhead. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Finished goods $1,550,917 $1,399,835
Raw materials 860,517 852,840
---------- ----------
$2,411,434 $2,252,675
========== ==========
</TABLE>
PROPERTY AND EQUIPMENT-
Property and equipment are stated at cost less accumulated
depreciation. Leasehold improvements are amortized over the life of the
respective leases. Depreciation is computed on the straight-line basis over the
estimated useful lives of the respective assets, as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Machinery and equipment 5 - 10
Furniture and fixtures 5
</TABLE>
F-12
<PAGE>
Costs of major additions and improvements are capitalized and
expenditures for maintenance and repairs which do not extend the life of the
assets are expensed. Upon sale or disposition of property and equipment, the
cost and related accumulated depreciation are eliminated from the accounts and
any resultant gain or loss is credited or charged to operations.
A deposit on manufacturing equipment totaling approximately $600,000 as
of December 31, 1997, is included in other assets in the accompanying
consolidated balance sheets.
INTANGIBLE ASSETS-
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Patents $ 2,600,000 $ 2,600,000
Trademarks 4,956,644 341,000
------------ ------------
7,556,644 2,941,000
Less accumulated amortization (2,273,367) (1,821,303)
------------ ------------
$ 5,283,277 $ 1,119,697
============ ============
</TABLE>
Patents are being amortized on a straight-line basis over their
remaining lives (through 2003). Trademarks are being amortized on a
straight-line basis over ten years to fifteen years.
In April 1998, the Company and the Warner-Lambert Company signed an
agreement terminating their December 1991 license and supply agreement under
which the Warner-Lambert Company had distributed Replens, a vaginal moisturizer
which had been developed by the Company. Under the terms of the termination
agreement, the Company agreed to pay $4.6 million for the right to reacquire the
product Replens, effective on April 9, 1998. The $4.6 million cost has been
capitalized and is being amortized over a 15 year period, which represents the
remaining term on the terminated December 1991 license and the patent underlying
the product.
LONG-LIVED ASSETS-
Following the acquisition of any long-lived assets, the Company
continually evaluates whether later events and circumstances have occurred that
indicate the remaining estimated useful life of the long-lived asset may warrant
revision or that the remaining balance of the long-lived asset may not be
recoverable. When factors indicate that a long-lived asset may be impaired, the
Company uses an estimate of the underlying product's future cash flows,
including amounts to be received over the remaining life of the long-lived asset
from license fees, royalty income, and related deferred revenue, in measuring
whether the long-lived asset is recoverable. Unrecoverable amounts are charged
to operations.
INCOME TAXES-
As of December 31, 1998, the Company has U.S. tax net operating loss
carryforwards of approximately $49 million which expire through 2013. The
Company also has unused tax credits of approximately $949,000 which expire at
various dates through 2012. Utilization of net operating loss carryforwards may
be limited in any year due to limitations in the Internal Revenue Code.
Accordingly, the Company recorded an $85,000 alternative minimum tax provision
for U.S. Federal taxes in 1997.
As of December 31, 1998 and 1997, other assets in the accompanying
consolidated balance sheets include deferred tax assets of approximately $18
million and $16 million, respectively, (comprised primarily of a net operating
loss carryforward) for which a valuation allowance has been recorded since the
realizability of the deferred tax assets are not determinable.
F-13
<PAGE>
REVENUE RECOGNITION-
Sales are recorded as products are shipped and services are rendered.
Royalties and additional monies owed to the Company based on the strategic
alliance partners sales are recorded as revenue as sales are made by the
strategic alliance partners.
LICENSE FEES-
License fees are recognized as other income when the Company has no
further obligations with respect to the payments and thus the earnings process
is complete.
ADVERTISING EXPENSE-
All costs associated with advertising and promoting products are
expensed in the year incurred. Advertising and promotion expense was
approximately $758,000 in 1998, $460,000 in 1997 and $540,000 in 1996.
RESEARCH AND DEVELOPMENT COSTS-
Company sponsored research and development costs related to future
products are expensed as incurred. Costs related to research and development
contracts are charged to cost of sales upon recognition of the related revenue.
INCOME/LOSS PER SHARE-
Basic income per share is computed by dividing net income less
preferred dividends by the weighted average number of common stock outstanding
during the period. Diluted income per share is computed by dividing net income
by the weighted average number of shares of common stock outstanding during the
period assuming the exercise or conversion of all securities that are
exercisable or convertible into common stock. Basic loss per share is computed
by dividing the net loss plus preferred dividends by the weighted average number
of shares of common stock outstanding during the period. Shares to be issued
upon the exercise of the outstanding options and warrants or the conversion of
the preferred stock are not included in the computation of loss per share as
their effect is antidilutive.
STATEMENTS OF CASH FLOWS-
For purposes of the statements of cash flows, the Company considers all
investments purchased with an original maturity of three months or less to be
cash equivalents.
STOCK-BASED COMPENSATION-
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting
for Stock-Based Compensation". Under the provisions of SFAS No. 123, companies
can either measure the compensation cost of equity instruments issued under
employee compensation plans using a fair value based method, or can continue to
recognize compensation cost using the intrinsic value method under the
provisions of Accounting Principles Board Opinion ("APB") No. 25. However, if
the provisions of APB No. 25 are continued, pro forma disclosure of net income
or loss and earnings or loss per share must be presented in the financial
statements as if the fair value method had been applied. For the three years
ended December 31, 1998, the Company recognized compensation costs under the
provisions of APB No. 25, and for the three years ended December 31, 1998, the
Company has provided the expanded disclosure required by SFAS No. 123 (see Note
4).
RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". The Company adopted SFAS 130 on January 1, 1998. The SFAS
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of financial statements. Comprehensive income is
defined as the change in equity during the financial reporting period of a
business enterprise resulting from non-owned sources. Accordingly, the Company
has included "Consolidated Statements of Comprehensive Operations" as part of
its financial statements.
F-14
<PAGE>
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", was also issued by the FASB in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company has adopted SFAS 131 effective
December 31, 1998 (See note 7).
The Company does not believe that any recently issued, but not yet
effective accounting standards will have a material effect on the Company's
consolidated financial position, results of operations or cash flows.
(2) STRATEGIC ALLIANCE AGREEMENTS:
In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP will market
Crinone. Under the terms of the agreement, the Company earned $7 million and $2
million in milestone payments in 1997 and 1996 and expects to receive additional
milestone payments in the future. The Company also supplies Crinone to AHP at a
price equal to 30% of AHP's net selling price.
The Company has also entered into strategic alliance agreements for the
marketing and distribution of Replens and Advantage-S with various
pharmaceutical companies. Pursuant to these agreements, the Company has received
advance payments, of which $578,150 and $1,042,638, respectively, are reflected
as deferred revenue in the accompanying December 31, 1998 and 1997 consolidated
balance sheets. These advance payments will be recognized as products are
shipped to the applicable strategic alliance partners or as sales are made by
the strategic alliance partners.
(3) CONVERTIBLE SUBORDINATED NOTE PAYABLE:
On March 16, 1998, the Company issued to an institutional investor a
$10 million convertible subordinated note due March 15, 2005. The note is
subordinate to other senior securities of the Company and bears interest at 7
1/8% which is payable semi-annually on March 15 and September 15. The note is
convertible into 662,032 shares of common stock at a price equal to $15.105 per
share. The Company also granted certain registration rights to the investor,
under which the earliest the shares underlying the note could be registered
would be March 19,1999. The carrying amount of the Company's convertible
subordinated note payable approximates fair value using the Company's estimated
incremental borrowing rate.
(4) STOCKHOLDERS' EQUITY (DEFICIENCY):
PREFERRED STOCK-
In November 1989, the Company completed a private placement of 151,000
shares of Series A Convertible Preferred Stock ("Series A Preferred Stock"). The
Series A Preferred Stock pays cumulative dividends at a rate of 8% per annum
payable quarterly and each share is convertible into 12.36 shares of Common
Stock. As of December 31, 1997 dividends of $116,781 were earned but were not
declared and were included in other long-term liabilities in the accompanying
consolidated balance sheet. As of December 31, 1998, there were no dividends
earned, but not declared.
In August 1991, the Company completed a private placement of 150,000
shares of Series B Convertible Preferred Stock ("Series B Preferred Stock").
Each share of Series B Preferred Stock is convertible into 20.57 shares of
Common Stock.
Upon liquidation of the Company, the holders of the Series A and Series
B Preferred Stock are entitled to $100 per share. In addition, the holders of
Series A Preferred Stock are entitled to accumulated unpaid dividends. The
Series A Preferred Stock shares are redeemable for cash, at the option of the
Company, at specified redemption prices. The Series B Preferred Stock will be
automatically converted into Common Stock upon the occurrence of certain events.
F-15
<PAGE>
Holders of the Series A and Series B Preferred Stock are entitled to one vote
for each share of Common Stock into which the preferred stock is convertible.
WARRANTS-
As of December 31, 1998, the Company had warrants outstanding for the
purchase of 240,253 shares of Common Stock. Information on outstanding warrants
is as follows:
<TABLE>
<CAPTION>
EXERCISE
PRICE
--------
<S> <C>
$ 5.00 120,000
10.78 60,253
16.00 20,000
18.00 20,000
20.00 20,000
-------
240,253
=======
</TABLE>
The 120,000 of $5.00 warrants and the 60,253 of $10.78 warrants were exercisable
on December 31, 1998.
STOCK OPTION PLAN-
All employees, officers, directors and consultants of the Company or
any subsidiary were eligible to participate in the Columbia Laboratories, Inc.
1988 Stock Option Plan, as amended (the "Plan"). Under the Plan, a total of
5,000,000 shares of Common Stock were authorized for issuance upon exercise of
the options. As of October 1996, no further options will be granted pursuant to
this Plan.
In October 1996, the Company adopted the 1996 Long-term Performance
Plan ("Performance Plan") which provides for the grant of stock options, stock
appreciation rights and restricted stock to certain designated employees of the
Company, non-employee directors of the Company and certain other persons
performing significant services for the Company as designated by the
Compensation/Stock Option Committee of the Board of Directors. Pursuant to the
Performance Plan, an aggregate of 3,000,000 shares of Common Stock have been
reserved for issuance.
A summary of the status of the Company's two stock option plans as of
December 31, 1998, 1997 and 1996 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- -------------------------- ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,557,274 $ 8.92 3,591,272 $ 6.25 3,176,646 $ 5.37
Granted 904,000 11.52 1,332,500 14.72 699,000 10.41
Exercised (31,500) 6.66 (366,498) 5.92 (253,374) 6.53
Forfeited (244,836) 11.29 -- -- (31,000) 6.80
--------- --------- ---------
Outstanding at end of year 5,184,938 9.13 4,557,274 8.92 3,591,272 6.25
========= ========= =========
Options exercisable at year end 4,210,938 2,984,774 2,808,772
========= ========= =========
</TABLE>
F-16
<PAGE>
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------- -----------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES AT DECEMBER 31, 1998 LIFE (YEARS) PRICE AT DECEMBER 31, 1998 PRICE
- ---------------------- ---------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
$4.00 10,000 9.69 $4.00 -- $ --
$ 4.38-$ 7.25 2,344,750 5.71 4.81 2,344,750 4.81
$ 8.00-$ 12.13 1,591,000 8.02 10.93 627,000 10.44
$ 12.25-$16.03 1,112,188 7.76 14.76 1,112,188 7.76
$16.63-$18.63 127,000 8.71 17.64 127,000 8.71
--------- ---------
$ 4.00-$18.63 5,184,938 6.94 9.13 4,210,938 8.66
========= =========
</TABLE>
The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for the stock option plans. Had compensation cost been determined based on the
fair value at the grant dates for those awards consistent with the method of
FASB Statement 123, the Company's net income or loss per share would have been
decreased or increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ---------- ------------
<S> <C> <C> <C> <C>
Net income (loss) As reported ($13,859,734) $762,906 ($13,078,984)
Proforma (17,479,167) (7,013,855) ($16,648,154)
=============================================
Income (loss) per share As reported ($0.48) $0.03 ($0.47)
Proforma ($0.61) ($0.25) ($0.60)
---------------------------------------------
</TABLE>
The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value of
the options reflected in the above table include the following: (i) an exercise
price equal to the fair market value of the underlying stock on the dates of
grant, (ii) an option term of three years, (iii) a risk free rate of 6% that
represents the interest rate on a U.S. Treasury security with a maturity date
corresponding to that of the option term, (iv) volatility of 55% for 1998 and
1997 and 60% for 1996 and (v) no annualized dividends paid with respect to a
share of Common Stock at the date of grant. The ultimate values of the options
will depend on the future price of the Company's Common Stock, which cannot be
forecast with reasonable accuracy. The actual value, if any, an optionee will
realize upon exercise of an option will depend on the excess of the market value
of the Company's Common Stock over the exercise price on the date the option is
exercised.
F-17
<PAGE>
(5) COMMITMENTS AND CONTINGENCIES:
CASH AND CASH EQUIVALENTS-
The Company maintains its cash in bank deposit accounts which at times
may exceed federally insured limits. The Company believes that there is no
credit risk with respect to these accounts.
LEASES-
The Company leases office space, apartments and office equipment under
noncancelable operating leases. Lease expense for each of the three years ended
December 31, 1998, 1997 and 1996 totaled $813,167, $679,791 and $736,372
respectively. Future minimum lease payments as of December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999 $ 679,169
2000 593,019
2001 421,344
2002 154,606
2003 66,394
Thereafter 13,325
----------
$1,927,857
==========
</TABLE>
ROYALTIES-
In 1989, the Company purchased the assets of Bio-Mimetics, Inc. which
consisted of the patents underlying the Company's Bioadhesive Delivery System,
other patent applications and related technology, for $2,600,000, in the form of
9% convertible debentures which were converted into 500,000 shares of Common
Stock during 1991, and $100,000 in cash. In addition, Bio-Mimetics, Inc.
receives a royalty equal to two percent of the net sales of products based on
the Bioadhesive Delivery System to an aggregate amount of $7,500,000. In
addition, beginning in March 1995, the Company agreed to prepay a portion of the
remaining royalty obligation if certain conditions are met. The Company may not
assign the patents underlying the Bioadhesive Delivery System without the prior
written consent of Bio-Mimetics, Inc. until the aggregate royalties have been
paid.
In May 1989, the Company signed an exclusive agreement to license the
U.S. and Canadian marketing rights for Diasorb/registered trademark/, a unique
pediatric antidiarrheal product formerly marketed by Schering-Plough
Corporation. Under the terms of the agreement, the Company is obligated to pay a
royalty equal to 5% of the net sales of Diasorb.
EMPLOYMENT AGREEMENTS-
The Company has employment agreements with certain employees, some of
whom are also stockholders of the Company. The remaining terms of the employment
agreements range from one to four years. Future base compensation to be paid
under these agreements as of December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 706,000
2000 806,000
2001 1,750
----------
$1,513,750
==========
</TABLE>
During 1993, the Company's stockholders approved an Incentive
Compensation Plan covering all employees pursuant to which an aggregate of 5% of
pretax earnings of the Company for any year will be awarded to designated
employees of the Company. As a result of the Company's income in 1997, a
provision for 5% of pretax income was included in general and administrative
expenses. No provision has been made in 1998.
F-18
<PAGE>
LEGAL PROCEEDINGS-
The Company filed an action in the United States District Court for the
Southern District of Florida in November 1997 seeking a declaratory judgement on
certain issues related to its relationship with Lake Pharmaceuticals, Inc.
("Lake") as governed in the contract between the Company and Lake. Lake filed an
action against the Company in the United States District Court, Northern
District of Illinois, for damages alleged by Lake to have been suffered by it as
a result of the FDA's allegations in July 1997 that the Company's nonoxynol-9
product, then marketed by Lake under the tradename Advantage 24/registered
trademark/, was not permitted to be sold under the monograph. This action was
dismissed by the Illinois Court and transferred to the Florida Court for
consolidation as a counterclaim in the Florida action. The Company is vigorously
defending the Lake claims and believes that Lake's action will be dismissed
without any damage award to Lake and that the Company will prevail in its claims
against Lake for damages.
Other claims and lawsuits have been filed against the Company. In the
opinion of management and counsel, none of these lawsuits are material and they
are all adequately reserved for or covered by insurance or, if not so covered,
are without any or have little merit or involve such amounts that if disposed of
unfavorably would not have a material adverse effect on the Company.
(6) OTHER RELATED-PARTY TRANSACTION:
During 1993, the Company loaned two individuals who are officers,
directors and stockholders of the Company an aggregate of $190,350. These notes,
which bear interest at 10% per annum and which were due on or before December 7,
1997 have subsequently been extended through December 7, 1999. Accordingly, as
of December 31, 1998, the aggregate balance of $288,639 is included in other
current assets in the accompanying 1998 consolidated balance sheet.
(7) SEGMENT INFORMATION:
The Company and its subsidiaries are engaged in one line of business,
the development and sale of pharmaceutical products and cosmetics. One customer
accounted for approximately 25% and 68% of 1998 and 1997 consolidated net sales,
respectively. Another customer accounted for approximately 4% and 5% of 1998 and
1997 consolidated net sales, respectively. A third customer accounted for
approximately 15%, 5% and 18% of 1998, 1997 and 1996 consolidated net sales,
respectively. A fourth customer accounted for approximately 3% and 13% of 1997
and 1996 consolidated net sales, respectively. The following table shows
selected information by geographic area:
<TABLE>
<CAPTION>
INCOME
NET (LOSS) FROM IDENTIFIABLE
SALES OPERATIONS ASSETS
------------ ------------ -----------
<S> <C> <C> <C>
As of and for the year
ended December 31, 1998-
United States $ 7,515,436 $ (4,114,779) $ 7,965,715
Europe 2,502,208 (9,282,374) 3,913,831
------------ ------------ -----------
$ 10,017,644 $(13,397,153) $11,879,546
============ ============ ===========
As of and for the year
ended December 31, 1997-
United States $ 15,623,341 $ 4,984,325 $ 7,804,944
Europe 924,070 (11,083,888) 7,196,808
------------ ------------ -----------
$ 16,547,411 $ (6,099,563) $15,001,752
============ ============ ===========
As of and for the year
ended December 31, 1996-
United States $ 4,434,410 $ (5,560,059) $ 5,370,215
Europe 1,211,621 (9,758,848) 4,609,882
------------ ------------ -----------
$ 5,646,031 $(15,318,907) $ 9,980,097
============ ============ ===========
</TABLE>
F-19
<PAGE>
(8) SUBSEQUENT EVENT:
In January 1999, the Company raised approximately $6.4 million, net of
expenses from the issuance and sale of Series C Convertible Preferred Stock
("Preferred Stock"). The Preferred Stock, sold to twenty-four accredited
investors, has a stated value of $1,000 per share. The Preferred Stock is
convertible into common stock at the lower of: (i)$3.50 per common share (based
on 125% of the average of the five day's closing bid prices immediately
preceding the transaction and (ii) 100% of the average of the closing prices
during the three trading days immediately preceding the conversion notice). If
conversion is based on the $3.50 conversion price, conversion may take place
after the underlying common stock is registered. If conversion is based on the
alternative calculation, conversion cannot take place for fifteen months. The
Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day
of the quarter.
In connection with the issuance of the Series C Convertible Preferred
Stock in January 1999, the Company received two notes receivable from Messrs.
Meier and Bologna for $350,000 and $250,000, respectively. The notes bear
interest at 5% per annum and are due on July 28, 1999.
F-20
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants S-2
Report of Independent Certified Public Accountants S-3
Schedule II-Valuation and Qualifying Accounts and Reserves S-4
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Columbia Laboratories, Inc. and subsidiaries included in
this Form 10-K and have issued our report thereon dated February 26, 1999. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Goldstein Golub Kessler LLP
New York, New York
February 26, 1999
S-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:
We have audited in accordance with generally accepted auditing standards, the
1997 and 1996 financial statements of Columbia Laboratories, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 13, 1998. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The year ended December 31, 1997 and 1996
portions of this schedule have been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 13, 1998.
S-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
CHARGED TO
BALANCE AT (CREDITED TO) BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
----------- ----------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful accounts $132,276 $ 105,000 $ 7,447 $229,829
======== ========= ======= ========
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts $ 97,275 $ 35,001 $ -- $132,276
======== ========= ======= ========
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts $105,437 $ (8,162) $ -- $ 97,275
======== ========= ======= ========
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBERS
- -------
<S> <C> <C>
3.2 -- Amended and Restated By-laws of Company
4.1 -- Certificate of Designations, Preferences and Rights of Series
C Convertible Preferred Stock of the Company, dated as of
January 7, 1999
4.2 -- Securities Purchase Agreement, dated as of January 7, 1999,
between the Company and each of the purchasers named on the
signature pages thereto
4.3 -- Securities Purchase Agreement, dated as of January 19, 1999,
among the Company, David M. Knott and Knott Partners, L.P.
4.4 -- Securities Purchase Agreement, dated as of February 1, 1999,
between the Company and Windsor Partners, L.P.
4.5 -- Registration Rights Agreement, dated as of January 7, 1999,
between the Company and each of the purchasers named on the
signature pages thereto
4.6 -- Form of Warrant to Purchase Common Stock
10.14 -- Addendum to Employment Agreement dated as of October 8, 1998,
between the Company and Nicholas A. Buoniconti
10.15 -- Agreement dated as of December 14, 1998, by and among Columbia
Laboratories, Inc., William J. Bologna, Norman M. Meier, James
J. Apostolakis, David Ray, Bernard Marden, Anthony R.
Campbell, David M. Knott and Knott Partners, L.P.
21 -- Subsidiaries of the Company
27 -- Financial Data Schedule
</TABLE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
COLUMBIA LABORATORIES, INC.
ARTICLE I.
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. A meeting of stockholders shall be
held annually for the election of directors and the transaction of such other
business as is related to the purpose or purposes set forth in the notice of
meeting on such date as may be fixed by the Board of Directors, or if no date is
so fixed on the second Tuesday in April in each and every year, unless such day
shall fall on a legal holiday, in which case such meeting shall be held on the
next succeeding business day, at such time and at such place as may be fixed by
the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
stockholders for any purpose may be called by the Board of Directors, the
Chairman of the Board, the President or the Secretary, and shall be called by
the Chairman of the Board, the President or the Secretary at the written request
of the holders of record of a majority of the outstanding shares of the
Corporation entitled to vote at such meeting. Special meetings shall be held at
such time as may be fixed in the call and stated in the notices of meeting or
waiver thereof. At any special meeting only such business may be
<PAGE>
transacted as is related to the purpose or purposes for which the meeting is
convened.
SECTION 3. PLACE OF MEETINGS. Meetings of stockholders shall
be held at such place, within or without the State of Delaware or the United
States of America, as may be fixed in the call and stated in the notice of
meeting or waiver thereof.
SECTION 4. NOTICE OF MEETINGS; ADJOURNED MEETINGS. Notice of
each meeting of stockholders shall be given in writing and shall state the
place, date and hour of the meeting. The purpose or purposes for which the
meeting is called shall be stated in the notices of each special meeting and of
each annual meeting at which any business other than the election of directors
is to be transacted.
A copy of the notice of any meeting shall be given, personally
or by mail, not less then ten (10) nor more than sixty (60) days before the date
of the meeting, to each stockholder entitled to vote at such meeting. If mailed,
such notice shall be deemed given when deposited in the United States mail, with
postage thereon prepaid, directed to the stockholder at his address as it
appears on the record of stockholders.
When a meeting is adjourned for less than thirty (30) days in
any one adjournment, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the
2
<PAGE>
meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. When a meeting is adjourned for thirty (30) days or more, notice
of the adjourned meeting shall be given as in the case of an original meeting.
SECTION 5. WAIVER OF NOTICE. The transactions of any meeting
of stockholders, however called and with whatever notice, if any, are as valid
as though had at a meeting duly held after regular call and notice, if: (a) all
the stockholders entitled to vote are present in person or by proxy and no
objection to holding the meeting is made by anyone so present, and if, either
before or after the meeting, each of the persons entitled to vote, not present
in person or by proxy, signed a written waiver of notice, or a consent to the
holding of the meeting, or an approval of the action taken as shown by the
minutes thereof.
Whenever notice is required to be given to any stockholder, a
written waiver thereof signed by such stockholder, whether before or after the
time thereon stated, shall be deemed equivalent to such notice. Attendance of a
person at a meeting of stockholders shall constitute a waiver of notice of such
meeting, except when such stockholder attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not
3
<PAGE>
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of any meeting of stockholders need be specified in any written waiver
of notice thereof.
SECTION 6. QUALIFICATION OF VOTERS. Except as may be otherwise
provided in the Certificate of Incorporation, every stockholder of record shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders for every share standing in his name on the record of stockholders.
SECTION 7. QUORUM. At any meeting of the stockholders the
presence, in person or by proxy, of the holders of a majority of the shares
entitled to vote thereat shall constitute a quorum for the transaction of any
business.
When a quorum is once present to organize a meeting, it is not
broken by the subsequent withdrawal of any stockholders.
The stockholders present may adjourn the meeting despite the
absence of a quorum.
SECTION 8. PROXIES. Every stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy.
Every proxy must be executed by the stockholder or his
attorney-in-fact. No proxy shall be valid after the
4
<PAGE>
expiration of three (3) years from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except as otherwise provided therein and as permitted by law.
Except as otherwise provided in the proxy, any proxy holder may appoint in
writing a substitute to act in his place.
SECTION 9. VOTING. Except as otherwise required by law,
directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the holders of shares entitled to vote in the election.
5
<PAGE>
Whenever any corporate action, other than the election of
directors, is to be taken by vote of the stockholders at a meeting, it shall,
except as otherwise required by law or the Certificate of Incorporation, be
authorized by a majority of the votes cast thereat, in person or by proxy.
SECTION 10. ACTION WITHOUT A MEETING. Whenever stockholders
are required or permitted to take any action at a meeting or by vote, such
action may be taken without a meeting, without prior notice and without a vote,
by consent in writing setting forth the action so taken, signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
SECTION 11. RECORD DATE. The Board of Directors is authorized
to fix a day not more than sixty (60) days nor less than ten (10) days prior to
the day of holding any meeting of stockholders as the day as of which
stockholders entitled to notice of and to vote at such meeting shall be
determined; and only stockholders of record on such day shall be entitled to
notice or to vote at such meeting.
6
<PAGE>
SECTION 12. INSPECTORS OF ELECTION. The Chairman of any
meeting of the stockholders may appoint one or more Inspectors of Election. Any
Inspector so appointed to act at any meeting of the stockholders, before
entering upon the discharge of his or her duties, shall be sworn faithfully to
execute the duties of an Inspector at such meeting with strict impartiality, and
according to the best of his or her ability.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS. The
business and affairs of the Corporation shall be managed by the Board of
Directors.
SECTION 2. NUMBER OF DIRECTORS. The number of directors
constituting the entire Board of Directors shall be such number not less than
one (1) nor more than fifteen (15) as may be fixed from time to time by
resolution adopted by the stockholders or by the Board. The number of directors
constituting the initial Board of Directors shall be three.
SECTION 3. ELECTION AND TERM OF DIRECTORS. At each annual
meeting of stockholders, directors shall be elected to serve until the next
annual meeting.
SECTION 4. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice
7
<PAGE>
to the Board of Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5. REMOVAL OF DIRECTORS. Any or all of the directors
nay be removed with or without cause by vote of the stockholders.
SECTION 6. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly
created directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by stockholders without cause may be filled by vote of a majority
of the directors then in office although less than a quorum exists, or may be
filled by the stockholders. Vacancies occurring as a result of the removal of
directors by stockholders, without cause, shall be filled by the stockholders. A
director elected to fill a vacancy or a newly created directorship shall be
elected to hold office until the next annual meeting of stockholders.
SECTION 7. COMMITTEES OF DIRECTORS. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may designate
from among its members committees, each consisting of one or more directors, and
to which, to the extent provided in the resolution, the Board
8
<PAGE>
of Directors may delegate authority with respect to certain specific matters
from time to time; provided, however, that with the exception of the Audit
Committee and the Compensation Committee, the Board of Directors may not
designate any committee which shall have all or any substantial portion of the
authority of the Board of Directors, including without limitation the power and
authority to declare a dividend or to authorize the issuance of stock.
The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent member or
members at any meeting of such committee.
SECTION 8. COMPENSATION OF DIRECTORS. The Board of Directors
shall have authority to fix the compensation of directors for services in any
capacity, or to allow a fixed sum plus expenses, if any, for attendance at
meetings of the Board or of committees designated thereby.
SECTION 9. INTEREST OF DIRECTOR IN A TRANSACTION.
(a) No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the
9
<PAGE>
director or officer is present at or participates in the meeting of the Board or
committee thereof which authorized the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee, in
good faith, authorizes the contract or transaction by the affirmative
vote of a majority of the disinterested directors, even though the
disinterested directors be less than as quorum; or
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved, in good faith, by vote of the stockholders;
or
(3) The contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted
10
<PAGE>
indetermining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorized the contract or transaction.
ARTICLE III.
MEETINGS OF THE BOARD
SECTION 1. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be called by the Chairman of the Board or the President, without
notice, at such time and place, within or without the State of Delaware, or the
United States of America, as may from time to time be fixed by the Chairman of
the Board or the President, but not less than [six (6)] times annually.
SECTION 2. SPECIAL MEETINGS; NOTICE; WAIVER. Special meetings
of the Board of Directors may be held at any time, place, within or without the
State of Delaware or the United States of America, upon the call of the Chairman
of the Board or the President, by oral, telegraphic or written notice, duly
given to or sent or mailed to each director not less than two (2) days before
such meeting. Special meetings shall be called by the Chairman of the Board or
the President upon the written request of any five (5) directors.
Notice of a special meeting need not be given to any director
who submits a signed waiver or notice, whether before or after the meeting, or
who attends the meeting
11
<PAGE>
without protesting, prior thereto or at its commencement, the lack of notice to
him.
A notice, or waiver of notice, need not specify the purpose of
any special meeting of the Board of Directors.
SECTION 3. QUORUM; ACTION BY THE BOARD; ADJOURNMENT. At all
meetings of the Board of Directors, a majority of the whole Board shall
constitute a quorum for the transaction of business, except that when the number
of directors constituting the whole Board shall be an even number, one-half of
that number shall constitute a quorum.
The vote of a majority of the directors present at the time of
the vote, if a quorum is present at such time, shall be the act of the Board,
except as may be otherwise specifically provided by law or by the Certificate of
Incorporation or by these By-Laws.
A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place.
SECTION 4. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board, or any committee thereof, may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes or proceedings of the Board or committee, whether done before or
after the action
12
<PAGE>
so taken.
SECTION 5. ACTION TAKEN BY CONFERENCE TELEPHONE. Members of
the Board of Directors, or any committee thereof, may participate in a meeting
by means of conference telephone or similar communications equipment, by means
of which all persons participating in the meeting can hear each other. If one or
more of the members of the Board of Directors participating in the meeting is
involuntarily disconnected from such meeting or can no longer hear or be heard
by all other participating members, then such meeting shall be adjourned by
either the Chairman of the Board or the President until such time as all members
of the Board of Directors participating in the meeting are reconnected or
restored to such meeting so that all persons can participate fully.
ARTICLE IV.
OFFICERS
SECTION 1. OFFICERS. The Board of Directors shall elect a
President, one or more Vice Presidents, a Secretary and a Treasurer of the
Corporation, and from time to time, may elect or appoint such other officers as
it may determine. Any two or more offices may be held by the same person.
Notwithstanding Section 3 of Article III of these By-Laws,
until after the annual meeting of stockholders to
13
<PAGE>
be held in 2000, a vote of 75% of the members constituting the whole Board shall
be required in order to elect anyone other than William J. Bologna to the
position of Chairman of the Board and anyone other than Norman M. Meier to the
positions of President and Chief Executive Officer.
Securities of other corporations held by the corporation may
be voted by any officer designated by the Board, and, in the absence of any such
designation, by the President, any Vice President, the Secretary, or the
Treasurer.
The Board may require any officer to give security for the
faithful performance of his duties.
SECTION 2. PRESIDENT. The President shall be the chief
executive and chief operating officer of the Corporation with all the rights and
powers incident to that position.
SECTION 3. VICE PRESIDENT. The Vice Presidents shall perform
such duties as may be prescribed or assigned to them by the Board of Directors,
the Chairman of the Board or President. In the absence of the President the
first-elected Vice President shall perform the duties of the President. In the
event of the refusal or incapacity of the President to function as such, the
first-elected Vice President shall perform the duties of the President until
such time as the Board of Directors elects a new President. In the event of the
absence, refusal or incapacity of the
14
<PAGE>
first-elected Vice President, the other Vice Presidents, in order of their rank,
shall so perform the duties of the President; and the order of rank of such
other Vice Presidents shall be determined by the designated rank of their
offices or, in the absence of such designation, by seniority in the office of
Vice President; provided that said order or rank may be established otherwise by
action of the Board of Directors.
SECTION 4. TREASURER. The Treasurer shall perform all the
duties customary to that office, and shall have the care and custody of the
funds and securities of the Corporation. He shall at all reasonable times
exhibit his books and accounts to any director upon application, and shall give
such bond or bonds for the faithful performance of his duties with such surety
or sureties as the Board of Directors from time to time may determine.
SECTION 5. SECRETARY. The Secretary shall act as secretary of
and shall keep the minutes of the Board of Directors and of the stockholders,
have the custody of the seal of the Corporation and perform all of the other
duties usual to that office.
SECTION 6. ASSISTANT TREASURER AND ASSISTANT SECRETARY. Any
Assistant Treasurer or Assistant Secretary shall perform such duties as may be
prescribed or assigned to him by the Board of Directors, the Chairman of the
Board, or the President. An Assistant Treasurer shall give such
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bond or bonds for the faithful performance of his duties with such surety or
sureties as the Board of Directors from time to time may determine.
SECTION 7. TERM OF OFFICE; REMOVAL. Each officer shall hold
office for such term as may be prescribed by the Board. Notwithstanding Section
3 of Article III, removal of the Chairman of the Board or the President for
cause shall require the vote of 75% of the members constituting the whole Board,
and removal of the Chairman of the Board or the President without cause shall
require the vote of 66.67% of the members constituting the whole Board. All
other officers may be removed at any time by the Board, with or without cause,
by the vote of the majority of the Board. The removal of any officer without
cause shall be without prejudice to his contract rights, if any. The election or
appointment of an officer, shall not, of itself, create contract rights.
SECTION 8. COMPENSATION. The compensation of all officers of
the Corporation shall be fixed by the Board of Directors.
ARTICLE V.
SHARE CERTIFICATES
SECTION 1. FORM OF SHARE CERTIFICATES. The shares of the
Corporation shall be represented by certificates, in such form as the Board of
Directors may
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from tine to time prescribe, signed by the Chairman of the Board, the President,
or a Vice President, and by the Secretary, an Assistant Secretary, the Treasurer
or an Assistant Treasurer, and shall be sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation or its employees. In case any such
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of issue.
SECTION 2. LOST CERTIFICATES. In case of the loss, theft,
mutilation or destruction of a stock certificate, a duplicate certificate will
be issued by the Corporation upon notification thereof and receipt of such
proper indemnity or assurances as the Board of Directors may require.
SECTION 3. TRANSFER OF SHARES. Transfers of shares of stock
shall be made upon the books of the Corporation by the registered holder in
person or by duly authorized attorney, upon surrender of the certificate or
certificates for such shares properly endorsed.
SECTION 4. REGISTERED STOCKHOLDERS. Except as otherwise
provided by law, the Corporation shall be entitled
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to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends or other distributions and to vote as such
owner, and to hold such person liable for calls and assessments, and shall not
be bound to recognize any equitable or legal claim to or interest in such shares
on the part of any other person.
ARTICLE VI.
INDEMNIFICATION
SECTION 1. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Any
person made a party to an action by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he, his testator or
intestate, is or was a Director or officer of the Corporation shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred by him in connection with the
defense of such action or in connection with an appeal therein, to the fullest
extent permitted by the General Corporation Law or any successor thereto.
SECTION 2. ACTION OR PROCEEDING OTHER THAN BY OR IN THE RIGHT
OF THE CORPORATION. Any person made or threatened to be made a party to an
action or proceeding other than one by or in the right of the Corporation to
procure a judgment in its favor, whether civil or criminal, including an action
by or in the right of any other
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corporation of any type or kind, domestic or foreign, which any Director or
officer of the Corporation served in any capacity at the request of the
Corporation, by reason of the fact that he, his testator or intestate, was a
Director or officer of the Corporation, or served such other corporation in any
capacity, shall be indemnified by the Corporation against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, if such Director or officer acted in good faith for a
purpose which he reasonably believed to be in the best interests of the
Corporation and, in criminal actions or proceedings, in which he had no
reasonable cause to believe that his conduct was unlawful. The termination of
any such civil or criminal action or proceeding by judgment, settlement,
conviction or upon a plea of NOLO CONTENDERE, or its equivalent shall not in
itself create a presumption that any such Director or officer did not act in
good faith for a purpose which he reasonably believed to be in the best
interests of the Corporation or that he had reasonable cause to believe that his
conduct was unlawful.
SECTION 3. OPINION OF THE COUNSEL. In taking any action or
making any determination pursuant to this Article, the Board of Directors and
each Director, officer or employee, whether or not interested in any such action
or
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determination, may rely upon an opinion of counsel selected by the Board.
SECTION 4. OTHER INDEMNIFICATION; LIMITATION. The
Corporation's obligations under this Article shall not be exclusive or in
limitation of but shall be in addition to any other rights to which any such
person may be entitled under any other provision of these By-Laws, or by
contract, or as a matter of law, or otherwise. All of the provisions of this
Article VI of the By-Laws shall be valid only to the extent permitted by the
Certificate of Incorporation and the laws of the State of Delaware.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
SECTION 1. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation and shall be in such form as the
Board of Directors may from time to time determine.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation
shall be the twelve month period ending December 31.
SECTION 3. CHECKS AND NOTES. All checks and demands for money
and notes or other instrument evidencing indebtedness or obligations of the
Corporation shall be signed by such officer or officers or other person or
persons as shall be authorized from time to time by the
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Board of Directors.
ARTICLE VIII.
AMENDMENTS
SECTION 1. POWER TO AMEND. By-Laws of the Corporation may be
adopted, amended or repealed by the Board of Directors, subject to amendment or
repeal by the stockholders entitled to vote thereon. Notwithstanding the
foregoing provisions, any amendment to or repeal of Sections 1 or 2 of Article
III, Sections 1 or 7 of Article IV, or Section 1 of Article VIII of these
By-Laws by the Board of Directors shall require the vote of 75% of the members
constituting the whole Board.
21
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
COLUMBIA LABORATORIES, INC.
---------------
Pursuant to Section 151 of
the General Corporation Law of the State of Delaware
---------------
Columbia Laboratories, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation on January 7, 1999 pursuant to
authority of the Board of Directors as required by Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority expressly granted to
and vested in the Board of Directors of the Corporation (the "Board" or the
"Board of Directors") by the provisions of the Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation"), there hereby is created,
out of the 1,000,000 shares of preferred stock of the Corporation authorized in
Article FOURTH of the Certificate of Incorporation (the "Preferred Stock"), a
series of Preferred Stock consisting of 6,660 shares, which series shall have
the following powers, designations, preferences and relative, participating,
optional or other rights, and the following qualifications, limitations and
restrictions (in addition to the powers, designations, rights, and the
qualifications, limitations and restrictions, set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock).
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ARTICLE 1
DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Series C
Convertible Preferred Stock" (the "Series C Preferred Stock") and the authorized
number of shares constituting such series shall be 6,660 shares. The par value
of the Series C Preferred Stock shall be $.01 per share. The stated value of the
Series C Preferred Stock shall be One Thousand Dollars ($1,000) per share (the
"Stated Value").
ARTICLE 2
DEFINITIONS
SECTION 2.1 DEFINITIONS. The terms defined in this Article whenever
used in this Certificate of Designations have the following respective meanings:
(a) "AFFILIATE" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
(b) "BUSINESS DAY" means a day other than Saturday, Sunday or
any day on which banks located in the State of New York are authorized or
obligated to close.
(c) "CLOSING DATE" means the date of issuance of the first
share of Series C Preferred Stock.
(d) "COMMON SHARES" or "COMMON STOCK" means shares of common
stock, $.01 par value, of the Corporation.
(e) "CONVERSION DATE" means any day on which all or any
portion of shares of the Series C Preferred Stock is converted in accordance
with the provisions hereof.
(f) "CONVERSION NOTICE" has the meaning set forth in Section
6.2.
(g) "CONVERSION PRICE" means on any date of determination the
applicable price for the conversion of shares of Series C Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
(h) "CONVERSION SHARES" mean shares of Common Stock issuable
upon conversion of the Series C Preferred Stock or any accrued and unpaid
dividends thereon.
(i) "CORPORATION" means Columbia Laboratories, Inc., a
Delaware corporation, and any successor or resulting
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corporation by way of merger, consolidation, sale or exchange of all or
substantially all of the Corporation's assets, or otherwise.
(j) "CURRENT MARKET PRICE" on any date of determination means
the closing price of a Common Share on such day as reported on the American
Stock Exchange ("AMEX"), or if the Common Stock is not listed or admitted to
trading on the AMEX, on such other principal national securities exchange or
quotation system on which the common stock is then listed or quoted, or, if not
listed or quoted or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any Nasdaq member firm of the National
Association of Securities Dealers, Inc. selected from time to time by the Board
of Directors of the Corporation for that purpose, or, if not so available, a
price determined in good faith by the Board of Directors of the Corporation as
being equal to the fair market value thereof.
(k) "ISSUE DATE" means the date of original issuance of the
applicable share of Series C Preferred Stock.
(l) "MARKET DISRUPTION EVENT" means any event that results in
a material suspension or limitation of trading of Common Shares on the AMEX or
such other principal national securities exchange on which the common stock is
then listed.
(m) "PERSON" means an individual, a corporation, a
partnership, an association, a limited liability company, a unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.
(n) "REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement, dated as of the Issue Date, between the Corporation and
certain holders of the Series C Preferred Stock.
(o) "REGISTRATION STATEMENT" means a registration statement
that the meets the requirements of the Registration Rights Agreement and
registers the resale of the Conversion Shares by the recipient thereof.
(p) "SEC" means the United States Securities and Exchange
Commission.
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(q) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
(r) "SERIES C PREFERRED STOCK" means the Series C Convertible
Preferred Stock of the Corporation created by this Certificate of Designations
or such other convertible Preferred Stock exchanged therefor as provided in
Section 6.4.
(s) "STATED VALUE" has the meaning set forth in Article 1.
(t) "SUBSIDIARY" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(u) "TRADING DAY" means any day on which purchases and sales
of securities authorized for quotation on the AMEX are reported thereon and on
which no Market Disruption Event has occurred or, if the Common Stock is not
listed or admitted to trading on the AMEX, a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business, or, if the Common Stock is not so
listed or admitted to trading on any national securities exchange, a day on
which the Nasdaq National Market (or any successor thereto) or such other system
then in use is open for the transaction of business, or, if the Common Stock is
not quoted by any such organization, any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE 3
RANK
The Series C Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the
Corporation hereafter created other than "Pari Passu Securities" (collectively,
with the Common Stock, "Junior Securities"); (iii) pari passu with the
Corporation's Series A Convertible Preferred Stock (the "Series A Preferred
Stock") and the Corporation's Series B Convertible Preferred Stock (the "Series
B Preferred
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Stock"); and (iv) pari passu with any class or series of capital stock of the
Corporation hereafter created specifically ranking on parity with the Series C
Preferred Stock (collectively, with the Series A Preferred Stock and the Series
B Preferred Stock, "Pari Passu Securities").
ARTICLE 4
DIVIDENDS
SECTION 4.1
(a) (i) Subject to Article 6 hereof, a holder of Series C
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the payment of dividends,
dividends (subject to Section 4(a)(ii) hereof) at the rate of 5% per annum
(computed on the basis of a 360-day year) on the Stated Value of each share of
Series C Preferred Stock on and as of the most recent Dividend Payment Date (as
defined below) with respect to each Dividend Period (as defined below).
Dividends on the Series C Preferred Stock shall be cumulative from the date of
issue, whether or not declared for any reason, including if such declaration is
prohibited under any outstanding indebtedness or borrowings of the Corporation
or any of its Subsidiaries, or any other contractual provision binding on the
Corporation or any of its Subsidiaries, and whether or not there shall be funds
legally available for the payment thereof.
(ii) Each dividend shall be payable in equal
quarterly amounts on each March 31, June 30, September 30 and December 31 of
each year (each, a "Dividend Payment Date"), commencing March 31, 1999, to the
holders of record of shares of the Series C Preferred Stock, as they appear on
the stock records of the Corporation at the close of business 10 days preceding
each payment date thereof. For the purposes hereof, "Dividend Period," in
respect of any share of Series C Preferred Stock, shall mean (i) the period
commencing on and including the Issue Date of such share and ending on and
including March 31, 1999 and, thereafter, the quarterly period commencing on and
including the day after the immediately preceding Dividend Payment Date and
ending on and including the immediately subsequent Dividend Payment Date.
Accrued and unpaid dividends for any past Dividend Period may be declared and
paid at any time, without reference to any Dividend Payment Date, to holders of
record on such date, not more than 15 days preceding the payment date thereof,
as may be fixed by the Board of Directors.
(iii) At the option of the Corporation, the dividend
shall be paid in cash or through the issuance of
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duly and validly authorized and issued, fully paid and non-assessable shares of
the Common Stock valued at the Current Market Price.
(b) A holder of Series C Preferred Stock shall not be entitled
to any dividends in excess of the cumulative dividends, as herein provided, on
the Series C Preferred Stock. Except as provided in this Article 4, no interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the Series C Preferred Stock that may be in arrears.
(c) So long as any shares of the Series C Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any Subsidiary for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any shares
of any such stock) by the Corporation, directly or indirectly, unless in each
case (i) the full cumulative dividends required to be paid on all outstanding
shares of the Series C Preferred Stock and any other Pari Passu Securities shall
have been paid or set apart for payment for all past Dividend Periods with
respect to the Series C Preferred Stock and all past dividend periods with
respect to such Pari Passu Securities, and (ii) sufficient funds shall have been
paid or set apart for the payment of the dividend for the current Dividend
Period with respect to the Series C Preferred Stock and the current dividend
period with respect to such Pari Passu Securities.
(d) So long as any shares of the Series C Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities for
any period unless full dividends required to be paid in cash have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Series C Preferred Stock for
all Dividend Periods terminating on or prior to the date of payment of the
dividend on such class or series of Pari Passu Securities. When dividends are
not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the Series C Preferred Stock
and all dividends declared upon any other class or series of Pari Passu
Securities shall be declared ratably in proportion to the respective amounts of
dividends
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accumulated and unpaid on the Series C Preferred Stock and accumulated
and unpaid on such Pari Passu Securities.
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<PAGE>
ARTICLE 5
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any Junior
Securities of the Corporation upon such Liquidation Event unless prior thereto,
the holders of shares of Series C Preferred Stock shall have received an amount,
in cash, equal to the sum of (i) the Stated Value of the shares of Series C
Preferred Stock plus (ii) the aggregate of all accrued and unpaid dividends on
such shares of Series C Preferred Stock until the most recent Dividend Payment
Date (the "Liquidation Preference"). If upon the occurrence of a Liquidation
Event, the assets and funds available for distribution among the holders of the
Series C Preferred Stock and holders of Pari Passu Securities shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series C Preferred Stock and the Pari Passu
Securities shall be distributed ratably among such shares in proportion to the
ratio that the Liquidation Preference payable on each such share bears to the
aggregate liquidation Preference payable on all such shares. The sale,
conveyance, exchange or transfer of all or substantially all of the property and
assets of the Corporation or the merger or consolidation of the Corporation into
or with any other corporation, or the merger of any other corporation into it,
shall not be deemed a dissolution, liquidation or winding up of the affairs of
the Corporation for purposes of this Article 5.
ARTICLE 6
CONVERSION AND REDEMPTION OF PREFERRED STOCK
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SECTION 6.1 CONVERSION; CONVERSION PRICE. At the option of a holder of
Series C Preferred Stock, the shares of Series C Preferred Stock then held by
such holder may be converted, either in whole or in part, into Common Shares
(calculated as to each such conversion to the nearest 1/100th of a share), at
any time following the dates specified herein at a Conversion Price equal to the
lesser of (a) $3.50 (representing 125% of the average of the closing prices of
the Common Shares as reported on the AMEX for the five Trading Days immediately
preceding January 7, 1999) (the "Initial Conversion Price") and (b) 100% of the
average of the closing prices of the Common Shares as reported on the AMEX for
the three Trading Days immediately preceding the Conversion Date (the
"Subsequent Conversion Price"); PROVIDED HOWEVER, that a holder of Series C
Preferred Stock shall not have the right to convert any portion of the Series C
Preferred Stock at (a) the Initial Conversion Price until after the date the
Registration Statement has been declared effective by SEC, or (b) at the
Subsequent Conversion Price until the date which is fifteen (15) months
following the Issue Date. The amount of accrued and unpaid dividends as of the
Conversion Date shall also be subject to conversion at the Conversion Price at
the holder's option. Notwithstanding the foregoing, in no event shall a holder
of Series C Preferred Stock have the right to convert that portion of the Series
C Preferred Stock to the extent that the issuance of Common Shares upon the
conversion of such Series C Preferred Stock, when combined with shares of Common
Stock received upon other conversions of Series C Preferred Stock and exercise
of the Warrants by such holder of Series C Preferred Stock and any other holders
of Series C Preferred Stock and the Warrants, would exceed 19.99% of the Common
Stock outstanding on the Closing Date. Within ten (10) Business Days after the
receipt of the Conversion Notice which upon conversion would, when combined with
shares of Common Stock received upon other conversions of Series C Preferred
Stock and exercise of the Warrants by such holder of Series C Preferred Stock
and any other holders of Series C Preferred Stock and Warrants, exceed 19.99% of
the Common Stock outstanding on the Closing Date, the Corporation shall redeem
all remaining outstanding shares of Series C Preferred Stock at the Stated Value
thereof, together with all accrued and unpaid dividends thereon, in cash, to the
date of such redemption.
The number of shares of Common Stock due upon conversion of
Series C Preferred Stock in respect of any Conversion Date shall be (i) the
number of shares of Series C Preferred Stock to be converted, multiplied by (ii)
the Stated Value and divided by (iii) the applicable Conversion Price as of such
Conversion Date.
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SECTION 6.2 EXERCISE OF CONVERSION PRIVILEGE. (a) Conversion of the
Series C Preferred Stock may be exercised, in whole or in part, by a holder of
Series C Preferred Stock by telecopying an executed and completed notice of
conversion in the form annexed hereto as Annex I (the "Conversion Notice") to
the Corporation and delivering a copy of the Conversion Notice to the
Corporation by nationally recognized overnight courier not later than three (3)
Business Days next following the date on which the telecopied Conversion Notice
has been transmitted to the Corporation. Each date on which a Conversion Notice
is telecopied to and received by the Corporation in accordance with the
provisions of this Section 6.2 shall be deemed a Conversion Date. The Conversion
Notice also shall state the name or names (with addresses) of the persons who
are to become the holders of the Common Stock issued at conversion in connection
with such conversion. The applicable holder of Series C Preferred Stock shall
deliver the stock certificate representing the shares of Series C Preferred
Stock so converted to the Corporation by nationally recognized overnight courier
service within ten (10) days following the date on which the telecopied
Conversion Notice has been transmitted to the Corporation. Upon surrender for
conversion, the Series C Preferred Stock shall be accompanied by a proper
assignment hereof to the Corporation or be endorsed in blank. As promptly as
practicable after the delivery to the Corporation of the applicable Conversion
Notice as aforesaid, the Corporation shall (i) issue the Common Stock issued at
conversion in accordance with the provisions of this Article 6, and (ii) cause
to be mailed for delivery by overnight courier to the holder of Series C
Preferred Stock (X) a certificate or certificate(s) representing the number of
Common Shares to which the holder of Series C Preferred Stock is entitled by
virtue of such conversion, (Y) cash, as provided in Section 6.3, in respect of
any fraction of a Share issuable upon such conversion and (Z) cash or Common
Stock, as applicable, representing the amount of accrued and unpaid dividends as
of the Conversion Date which the holder of Series C Preferred Stock has elected
not to convert. Such conversion shall be deemed to have been effected on the
Conversion Date so long as the Corporation shall have been delivered the
applicable Conversion Notice in accordance with this Section 6.2, and at such
time the rights of the holder of Series C Preferred Stock, as such, shall cease
and the Person and Persons in whose name or names the Common Stock issued at
conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby for all purposes. If
the Series C Preferred Stock shall have been converted in part, the Corporation
shall, at the time of delivery of the Common Stock issued at conversion, deliver
to the holder a new certificate for the
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unconverted shares of Series C Preferred Stock. The Conversion Notice shall
constitute a contract between the holder of Series C Preferred Stock and the
Corporation, whereby the holder of Series C Preferred Stock shall be deemed to
subscribe for the number of Common Shares which it will be entitled to receive
upon such conversion and, in consideration of such conversion, to surrender the
Preferred Stock and to release the Corporation from all liability thereon.
(b) From and after the Conversion Date in respect of any
conversion of shares of Series C Preferred Stock, all shares of Series C
Preferred Stock to which the Conversion Notice relates shall be deemed to have
been converted into shares of Common Stock as of such Conversion Date at the
applicable Conversion Price, all dividends on such shares of the Series C
Preferred Stock shall cease to accrue, and all rights of the holder thereof as
holder of Series C Preferred Stock, except the right to receive all unconverted
accrued and unpaid dividends to such Conversion Date at the applicable rate for
such shares of Series C Preferred Stock and the right to receive certificates
representing shares of Common Stock issuable upon such conversion (including,
without limitation, with respect to such converted dividends, as applicable),
shall cease and terminate, such shares of Series C Preferred Stock shall not
thereafter be transferred (except with the consent of the corporation) and such
shares shall not be deemed to be outstanding for any purpose whatsoever.
(c) In the event a dispute arises over whether a Conversion
Notice was delivered to the Corporation by a holder of Series C Preferred Stock
pursuant to Section 6.2, the holder of Series C Preferred Stock purporting to
have telecopied such notice shall have the burden of proving that such notice
was telecopied to the Corporation.
SECTION 6.3 FRACTIONAL SHARES. No fractional Common Shares or scrip
representing fractional Common Shares shall be issued upon conversion of the
Series C Preferred Stock or any accrued and unpaid dividends thereon. Instead of
any fractional Common Shares which otherwise would be issuable upon conversion
of the Series C Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction. No cash
payment of less than $1.50 shall be required to be given unless specifically
requested by the holder of Series C Preferred Stock.
SECTION 6.4 ADJUSTMENTS. The Conversion Price and the number of shares
issuable upon conversion of the Series C Preferred Stock are subject to
adjustment from time to time
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as follows.
(a) MERGER, SALE OF ASSETS, ETC. If at any time while the
Series C Preferred Stock, or any portion thereof, is outstanding there shall be
(i) a merger or consolidation of the Corporation with or into another
corporation in which the Corporation is the surviving entity but the shares of
the Corporation's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise or (ii) a sale or transfer of the Corporation's
properties and assets as, or substantially as, an entirety to any other person,
then as a part of such merger, consolidation, sale or transfer lawful provision
shall be made so that the holders of Series C Preferred Stock shall thereafter
be entitled to receive upon conversion of the Series C Preferred Stock, during
the period specified herein, the number of shares of stock or other securities
or property of the successor corporation resulting from such merger,
consolidation, sale or transfer that the holder of Series C Preferred Stock
would have been entitled to receive in such consolidation, merger, sale or
transfer if the Series C Preferred Stock had been converted immediately before
such reorganization, merger, consolidation, sale or transfer, all subject to
further adjustment as provided in this Section 6.4. The foregoing provisions of
this Section 6.4 shall similarly apply to successive reclassification, changes,
consolidations, mergers, mandatory share exchanges and sales and transfers. If
the per share consideration payable to the holder hereof for shares in
connection with any such transaction is in a form other than cash or marketable
securities, then the value of such consideration shall be determined in good
faith by the Board of Directors.
(b) RECLASSIFICATION, ETC. If the Corporation, at any time
while the Series C Preferred Stock, or any portion thereof, remains outstanding,
shall change any of the securities as to which conversion rights under this
Certificate of Designations exist into the same or a different number of
securities of any other class or classes, the Series C Preferred Stock shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under this Certificate of
Designations immediately prior to such reclassification or other change and the
Conversion Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Certificate of Designations.
(c) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Corporation at any time while the Series C Preferred
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Stock, or any portion thereof, remains outstanding shall split, subdivide or
combine the securities as to which conversion rights under this Certificate of
Designations exist into a different number of securities of the same class, the
Conversion Price shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a combination.
(d) ISSUANCE OF BELOW THE MARKET SECURITIES. If the
Corporation at any time while the Series C Preferred Stock, or any portion
thereof, remains outstanding shall issue rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase Common Stock at a price
per share less than the Current Market Price at the record date mentioned below,
then, the Initial Conversion Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights or warrants, plus the number of
shares that the aggregate offering price of the total number of shares of Common
Stock so offered would purchase at the Current Market Price, and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such rights or warrants, plus the number of additional
shares of Common Stock offered for subscription or purchase. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon
expiration of any right or warrant to purchase shares of Common Stock the
issuance of which resulted in an adjustment of the Conversion Price pursuant to
this Section 6.4(d), if any such right or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section 6.4 upon the
issuance of other rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the basis of
offering for subscription only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants.
(e) DISTRIBUTIONS OF OTHER PROPERTY. If the Corporation at any
time while shares of Series C Preferred Stock are outstanding shall distribute
to all holders of its Common Stock evidences of indebtedness of the Corporation
or assets of the Corporation (excluding cash dividends or distributions out of
earned surplus) or rights or warrants to subscribe for securities of the
Corporation (excluding those referred to in the foregoing provisions of this
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Section 6.4), then in each case the Initial Conversion Price shall be adjusted
to a price determined by multiplying (1) the Initial Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by (2) a fraction, the numerator of which
shall be the difference of (A) the Current Market Price on such record date,
less (B) the then fair value at such record date (as reasonably determined by
the Board of Directors of the Corporation) of the portion of the assets or
evidence of indebtedness so distributed or of such subscription rights or
warrants which are applicable to one share of Common Stock, and the denominator
of which shall be the Current Market Price as of the record date mentioned
above.
SECTION 6.5 MANDATORY REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Upon the
occurrence of a Triggering Event (as defined below), each holder of Series C
Preferred Stock shall have the right, exercisable at the option of such holder,
to require the Corporation to redeem all or a portion of the Preferred Stock
then held by such holder of Series C Preferred Stock for a redemption price, in
cash, equal to the sum of (x) the product of (A) the number of shares of Series
C Preferred Stock then held by such holder and (B) the Stated Value thereof plus
(y) the aggregate of all accrued and unpaid dividends on such shares of Series C
Preferred Stock on the date such redemption is demanded (the "Mandatory
Redemption Price"). The Mandatory Redemption Price shall be due and payable
within ten (10) days of the date on which the notice for the payment therefor is
provided by a holder of Series C Preferred Stock; PROVIDED, HOWEVER, that if
there are insufficient legally available funds for redemption under this Section
6.5 at the date of such redemption, the Corporation shall redeem all or part of
the remainder of the shares of the Series C Preferred Stock subject to
redemption as soon as the Corporation has sufficient funds which are legally
available therefor until all such shares of the Series C Preferred Stock have
been redeemed and all accrued dividends thereon have been paid or until such
time as all such shares of the Series C Preferred Stock are converted in
accordance with Section 6.1.
A "Triggering Event" means any one or more of the following
events:
(i) the failure of a Registration Statement to be
declared effective by the SEC on or prior to the 180th day after the Closing
Date;
(ii) the failure of the Common Stock to be listed for
trading on the AMEX or on such other principal national securities exchange on
which the Common Stock is
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then listed for more than thirty (30) Trading Days;
(iii) the Corporation shall fail to deliver
certificates representing Common Stock issued upon conversion that comply with
the provisions hereof prior to the 30th day after any Conversion Date;
(iv) the occurrence of any of (A) an acquisition
after the date hereof by an individual or legal entity of effective control
(whether through legal or beneficial ownership of capital stock of the
Corporation, by contract or otherwise) of in excess of 50% of the voting
securities of the Corporation, (B) a merger of the Corporation with or into
another entity or (C) the sale of all or substantially all of the Corporation's
assets; or
(v) the failure of the Corporation to have cured an
Event (as defined in the Registration Rights Agreement) within thirty (30) days
after the Event Date (as defined in the Registration Rights Agreement) relating
thereto.
(vi) the default by the Corporation in payment with
respect to any indebtedness for borrowed money having a principal amount in
excess of $1,000,000 (other than with respect to accrued dividends and accrued
expenses) if the effect of such default is to cause or permit the acceleration
of such indebtedness prior to its expressed maturity, following the expiration
of any cure period provided in the instrument or agreement under which such
indebtedness was created; PROVIDED, if any such default has been cured or waived
or any acceleration with respect thereto rescinded, or if such other
indebtedness has been repaid or otherwise discharged, the default referred to
herein shall be deemed not to have occurred and such event shall not be deemed a
Triggering Event for purposes of this Section 6.5.
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SECTION 6.6 OPTIONAL REDEMPTION UNDER CERTAIN CIRCUMSTANCES. At any
time after the fifteenth (15th) monthly anniversary date of the date of issuance
of the Series C Preferred Stock, the Corporation, upon notice delivered to the
holder of Series C Preferred Stock as provided in this Section 6.6, may redeem
all or any portion of the shares of the Series C Preferred Stock (but only with
respect to such shares as to which the holder of Series C Preferred Stock has
not theretofore furnished a Conversion Notice in compliance with Section 6.2),
for a redemption price, in cash, equal to the product of (A) the number of
shares of Series C Preferred Stock to be redeemed and (B) the product of (1) the
Current Market Price on the date immediately preceding the date of the Optional
Redemption Notice (as defined below) and (2) a fraction the numerator of which
is the Stated Value (plus all accrued and unpaid dividends) and the denominator
of which is the Conversion Price at such time. Notice of redemption (the
Optional Redemption Notice") pursuant to this Section 6.6 shall be provided by
the Corporation to the holder of Series C Preferred Stock in writing (by
registered mail or overnight courier at such holder's last address appearing in
the Corporation's security registry) not less than twenty (20) days prior to the
proposed Redemption Date, which notice shall specify the proposed Redemption
Date and the Optional Redemption Price. A holder of Series C Preferred Stock may
convert (and the Corporation shall honor such conversions in accordance with the
terms hereof) any shares of Series C Preferred Stock, including shares subject
to an Optional Redemption Notice up through and until the Redemption Date.
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SECTION 6.7 SURRENDER OF PREFERRED STOCK. Upon any redemption of the
Series C Preferred Stock pursuant to Sections 6.5 or 6.6, the holder of Series C
Preferred Stock shall, on the date fixed for any such redemption, surrender the
Series C Preferred Stock to the Corporation at its principal executive offices
or at such other address as may be designated by the Corporation and the holder
of Series C Preferred Stock shall thereupon be entitled to receive payment. Upon
any such redemption and surrender, shares of Series C Preferred Stock shall be
immediately retired and cancelled. Payment of the Mandatory Redemption Price or
the Optional Redemption Price specified in Section 6.5 or 6.6, as the case may
be, shall be made by the Corporation to the holder of Series C Preferred Stock
by wire transfer of immediately available funds to such account as the holder of
Series C Preferred Stock shall specify to the Corporation.
ARTICLE 7
VOTING
Holders of Series C Preferred Stock have no voting power,
except as otherwise provided by the General Corporation Law of the State of
Delaware ("DGCL"). In any vote by the holders of Series C Preferred Stock as may
be required by DGCL, each such holder shall be entitled to one (1) vote for each
share of such holder's Series C Preferred Stock. No consent of holders of Series
C Preferred Stock shall be required for (i) the creation of any indebtedness of
any kind of the Corporation, (ii) the creation of any class of stock of the
Corporation subordinate to the Series C Preferred Stock as to the payment of
dividends and upon liquidation of the Corporation, or (iii) any increase or
decrease in the amount of authorized Common Stock or any decrease or change in
the par value thereof.
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ARTICLE 8
MISCELLANEOUS
SECTION 8.1 LOSS, THEFT, DESTRUCTION. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
any certificate(s) representing shares of Series C Preferred Stock and, in the
case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation (it being understood that
the written agreement of the holder of Series C Preferred Stock shall be
sufficient indemnity), or, in the case of any such mutilation, upon surrender
and cancellation of the Series C Preferred Stock certificate, the Corporation
shall make, issue and deliver, in lieu of such lost, stolen, destroyed or
mutilated certificate(s) of Series C Preferred Stock, new certificate(s)
representing shares of Series C Preferred Stock of like date and tenor.
SECTION 8.2 WHO DEEMED ABSOLUTE OWNER. The Corporation may deem the
Person in whose name the Series C Preferred Stock shall be registered upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series C Preferred Stock for the purpose of receiving payment of
dividends on the Series C Preferred Stock, for the conversion of the Series C
Preferred Stock and for all other purposes, and the Corporation shall not be
affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Series C Preferred Stock to the extent of the sum or sums so paid or the
conversion so made.
SECTION 8.3 REGISTER. The Corporation shall direct its transfer agent
to keep a register of the Series C Preferred Stock and, upon any transfer of the
Series C Preferred Stock in accordance with the provisions hereof, such transfer
agent shall promptly register such transfer on the Series C Preferred Stock
register.
SECTION 8.4 WITHHOLDING. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
C Preferred Stock.
SECTION 8.5 HEADINGS. The headings of the Sections of this Certificate
of Designations are inserted for convenience only and do not constitute a part
of this Certificate of Designations.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Preferences and Rights to be signed by Norman M. Meier, its
President and Chief Executive Officer, and attested by David L. Weinberg, its
Secretary, on this 26th day of January, 1999.
COLUMBIA LABORATORIES, INC.
By:
---------------------------------------
Norman M. Meier
President & Chief Executive Officer
Attested:
By:
------------------------------------
David L. Weinberg
Secretary
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ANNEX I
TO CERTIFICATE
OF DESIGNATIONS
FORM OF CONVERSION NOTICE
TO: Columbia Laboratories, Inc.
Attention: Chief Financial Officer
The undersigned owner of shares of Series C Cumulative
Convertible Redeemable Preferred Stock (the "Series C Preferred Stock") issued
by Columbia Laboratories, Inc. (the "Corporation") hereby irrevocably exercises
its option to convert __________ shares of the Series C Preferred Stock into
shares of the common stock, $.01 par value, of the Corporation ("Common Stock"),
in accordance with the terms of the Certificate of Designations of the Series C
Preferred Stock. The undersigned hereby instructs the Corporation to convert the
number of shares of the Series C Preferred Stock specified above into shares of
Common Stock in accordance with the provisions of Article 6 of such Certificate
of Designations. The undersigned directs that the Common Stock issuable and
certificates therefor deliverable upon conversion, the Series C Preferred Stock
recertificated, if any, not being surrendered for conversion hereby, together
with any check in payment for fractional Common Stock, be issued in the name of
and delivered to the undersigned unless a different name has been indicated
below. All capitalized terms used and not defined herein have the respective
meanings assigned to them in such Certificate of Designations.
Dated:_______________________________
_____________________________________
Signature
Fill in for registration of Series C Preferred Stock:
Please print name and address
(including zip code number) :
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"),
dated as of January 7, 1999, between Columbia Laboratories, Inc., a
Delaware corporation with principal executive offices located at 2875
Northeast 191 Street, Suite 400, Aventura, Florida 33180 (the
"Company"), and each of the purchasers named on the signature pages
hereto (herein referred to individually as a "Purchaser" and
collectively as the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Purchasers desire to purchase from
Company, and the Company desires to issue and sell to the Purchasers,
upon the terms and subject to the conditions of this Agreement, (i)
shares of Series C Convertible Preferred Stock, $.01 par value (the
"Series C Preferred Stock"), having the rights, preferences and
privileges set forth in the Certificate of Designations, Preferences
and Rights hereto as EXHIBIT A (the "Certificate of Designations") and
(ii) Warrants to purchase up to an aggregate of 173,600 shares of
Common Stock (as defined below), having the terms and conditions and
being in the form attached hereto as EXHIBIT B (the "Warrants"); and
WHEREAS, upon the terms and subject to the conditions
set forth in the Certificate of Designations, the Series C Preferred
Stock is convertible into shares of the Company's common stock, $.01
par value ("Common Stock").
WHEREAS, contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement substantially in the form
attached hereto as EXHIBIT C (the "Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933 and the rules and
regulations promulgated thereunder, and applicable state securities
laws.
NOW THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereto, intending to
be legally bound, hereby agree as follows:
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ARTICLE I.
PURCHASE AND SALE OF SERIES C PREFERRED STOCK
I.1. TRANSACTION. The Purchasers hereby agree to
purchase from the Company, and the Company has offered and hereby
agrees to issue and sell to the Purchasers, the number of shares of
Series C Preferred Stock and the number of Warrants set forth opposite
the names of each Purchaser on the signature pages hereto.
I.2. PURCHASE PRICE; FORM OF PAYMENT. The aggregate
purchase price for the Series C Preferred Stock and Warrants to be
purchased by the Purchasers hereunder shall be U.S. $4,960,000. At the
Closing referred to in Section 1.3 below, each Purchaser (other than
William J. Bologna and Norman M. Meier) (the "Cash Purchasers") shall
pay in cash the purchase price set forth next to the name of such
Purchaser on the signature pages hereto (the "Cash Purchase Price").
The Cash Purchase Price shall be paid by wire transfer of immediately
available funds to the Company in accordance with the Company's wire
instructions set forth below. At the Closing, William J. Bologna and
Norman M. Meier (the "Note Purchasers"), in lieu of paying the Cash
Purchase Price, shall each deliver to the Company a duly executed
promissory note (the "Promissory Note") in the aggregate principal
amount set forth next to the name of such Note Purchaser on the
signature pages hereto. Simultaneously against receipt by the Company
of the Cash Purchase Price by the Cash Purchasers and the Promissory
Note by the Note Purchasers, the Company shall deliver to each
Purchaser (i) the stock certificates evidencing the number of shares of
Series C Preferred Stock purchased by each Purchaser as set forth next
to the name of such Purchaser on the signature pages hereto, and (ii)
the number of Warrants purchased by each Purchaser as set forth next to
the name of such Purchaser on the signature pages hereto, in each case
duly executed on behalf of the Company and registered in the name of
each Purchaser.
I.3. CLOSING. The closing (the "Closing") of the
issuance and sale of the Series C Preferred Stock shall be January 27,
1999 or such other date as shall be mutually agreed upon in writing
(the "Closing Date") and shall occur at the offices of Weil, Gotshal &
Manges LLP, or at such other place mutually agreeable to the parties
hereto.
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I.4. METHOD OF PAYMENT. Payment of the Cash Purchase
Price shall be made by wire transfer of immediately available funds to:
First Union National Bank
18545 Biscayne Blvd.
Aventura, FL 33180
Bank ABA Number: 063000021
Account Number: 2090001613844
Account Holder: Columbia Laboratories, Inc.
I.5. DELIVERY INSTRUCTIONS. The Series C Preferred
Stock and the Warrants shall be delivered by the Company to the
Purchasers pursuant to Section 1.2. hereof on a
"delivery-against-payment basis" at the Closing.
ARTICLE II.
PURCHASERS' REPRESENTATIONS, WARRANTIES; ACCESS
TO INFORMATION; INDEPENDENT INVESTIGATION.
Each Purchaser represents and warrants to and
covenants and agrees with the Company as follows:
II.1. Each Purchaser is purchasing the Series C
Preferred Stock, the Warrants, the Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares") and the Shares of Common Stock
issuable upon conversion of the Series C Preferred Stock (the
"Conversion Shares" and, collectively with the Series C Preferred
Stock, the Warrants and the Warrant Shares, the "Securities") for its
own account, for investment purposes only and not with a view towards
or in connection with the public sale or distribution thereof in
violation of the provisions of the Securities Act of 1933, as amended
(the "Securities Act").
II.2. Each Purchaser is (i) an "accredited investor"
within the meaning of Rule 501 of Regulation D under the Securities
Act, (ii) experienced in making investments of the kind contemplated by
this Agreement, (iii) capable, by reason of its business and financial
experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iv) able to afford the loss of its
investment in the Securities.
II.3. Each Purchaser understands that the Securities
are being offered and sold by the Company in reliance on an exemption
from the registration requirements
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of the Securities Act and equivalent state securities and "blue sky"
laws, and that the Company is relying upon the accuracy of, and each
Purchasers' compliance with, the Purchasers' representations,
warranties and covenants set forth in this Agreement to determine the
availability of such exemption and the eligibility of each Purchaser to
purchase the Securities. Each Purchaser further understands that the
Series C Preferred Stock and Conversion Shares may not be transferred
or resold without (a) registration under the Securities Act and any
applicable state securities laws, or (b) an exemption from the
requirements of the Securities Act and applicable state securities
laws.
II.4. Each Purchaser understands that an exemption
from such registration is not presently available pursuant to Rule 144
promulgated under the Securities Act by the Commission and that in any
event no Purchaser may sell any securities pursuant to Rule 144 prior
to the expiration of a one-year period after such Purchaser has
acquired the securities. Each Purchaser understands that any sales
pursuant to Rule 144 may only be made in full compliance with the
provisions of Rule 144.
II.5. Each Purchaser has been furnished with or
provided access to all materials relating to the business, financial
position and results of operations of the Company, including the risk
factors relating to the Company and its business set forth in EXHIBIT D
hereto (the "Risk Factors") and all other materials requested by the
Purchasers to enable them to make an informed investment decision with
respect to the Securities.
II.6. Each Purchaser acknowledges that the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997 and all other reports and documents heretofore filed by the
Company with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act and the Securities Exchange Act of 1934,
as amended (the "Exchange Act") since December 31, 1997 (collectively
the "Commission Filings") have been made available to such Purchaser
for such Purchaser's review.
II.7. Each Purchaser acknowledges that in making its
decision to purchase the Securities it has relied on its own
investigation of the Company and been given an opportunity to ask
questions of and to receive answers from the Company's executive
officers, directors and management personnel concerning the terms and
conditions of the private placement of the Securities by the Company.
II.8. Each Purchaser understands that the
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Securities have not been approved or disapproved by the Commission or
any state securities commission and that the foregoing authorities have
not reviewed any documents or instruments in connection with the offer
and sale to it of the Securities and have not confirmed or determined
the adequacy or accuracy of any such documents or instruments.
II.9. Each Purchaser has the requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly authorized, executed and delivered by each Purchaser and is a
valid and binding agreement of each Purchaser enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally.
II.10. Neither the Purchasers nor any of their
affiliates nor any person acting on its or their behalf has the
intention of entering, or will enter into, any put option, short
position or other similar instrument or position with respect to the
Common Stock and neither the Purchasers nor any of their affiliates nor
any person acting on its or their behalf will use at any time shares of
Common Stock acquired pursuant to this Agreement or the Certificate of
Designations to settle any put option, short position or other similar
instrument or position that may have been entered into prior to the
execution of this Agreement.
ARTICLE III.
COMPANY'S REPRESENTATIONS
The Company represents and warrants to the Purchasers
that:
III.1. CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company is as set forth on SCHEDULE
3.1. All of the issued and outstanding shares of capital stock set
forth on SCHEDULE 3.1 have been validly issued and are fully paid and
non-assessable. The Series C Preferred Stock has been duly and validly
authorized for issuance by the Company pursuant to this Agreement, and
when issued by the Company pursuant hereto, will be duly and validly
issued, fully paid and non-assessable and will be free of any
preemptive or similar rights. The Conversion Shares and Warrant Shares
have been duly and validly authorized and reserved for issuance by the
Company and, when issued by the Company upon conversion of, or in lieu
of
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accrued dividends on, the Series C Preferred Stock, or on exercise
of the Warrants, will be duly and validly issued, fully paid and
non-assessable. Except as set forth on SCHEDULE 3.1 or in the
Commission Filings there are no options, warrants, subscription, "call"
or other similar rights to acquire the Common Stock that have been
issued or granted to any person.
III.2. ORGANIZATION. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation
or organization and each is duly qualified as a foreign corporation in
all jurisdictions in which the failure to so qualify would have a
material adverse effect on the business, properties, condition
(financial or otherwise) or results of operations of the Company and
its subsidiaries taken as a whole or on the consummation of any of the
transactions contemplated by this Agreement (a "Material Adverse
Effect").
III.3. AUTHORIZED SHARES. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock
sufficient in number for the conversion, of the shares of Series C
Preferred Stock issued to the Purchasers hereunder (assuming for
purposes of this Section 3.3 a Conversion Price (as defined in the
Certificate of Designations) of $2.80) and the exercise of 173,600
Warrants. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the Conversion
Shares and Warrant Shares upon conversion of the Series C Preferred
Stock and exercise of the Warrants. The Company further acknowledges
that its obligation to issue Conversion Stock upon conversion of the
Series C Preferred Stock and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Certificate of
Designations and the Warrants is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
III.4. AUTHORITY; VALIDITY AND ENFORCEABILITY. The
Company has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby (including without limitation the filing of the
Certificate of Designations, the issuance of the Series C Preferred
Stock, the Warrants and the issuance and reservation for issuance of
the Conversion Shares and Warrant Shares), has been duly authorized by
all requisite
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corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery by the other parties hereto)
constitutes a valid and binding obligation of the Company enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
III.5. NON-CONTRAVENTION. The execution and delivery
by the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby do not and will not conflict with
or result in a breach by the Company of any of the terms or provisions
of, or constitute a default (or an event which, with notice, lapse of
time or both, would constitute a default), and there is not currently
outstanding any uncured breach or default under (i) the certificate of
incorporation or by-laws of the Company, or (ii) any indenture,
mortgage, deed of trust or other material agreement or instrument to
which the Company is a party or by which its properties or assets are
bound, or any law, rule, regulation, decree, judgment or order of any
court or public or governmental authority having jurisdiction over the
Company or any of the Company's properties or assets, except as to (ii)
above such conflict, breach or default which would not have a Material
Adverse Effect.
III.6. ABSENCE OF CERTAIN CHANGES. Since December 31,
1997, except as disclosed in the Commission Filings there has not
occurred any change, event or development in the business, financial
condition, prospects or results of operations of the Company, and there
has not existed any condition having or reasonably likely to have, a
Material Adverse Effect.
III.7. ABSENCE OF LITIGATION. Except as disclosed in
the Commission Filings, there is no action, suit, claim, proceeding,
inquiry or investigation pending or, to the Company's knowledge,
threatened, by or before any court or public or governmental authority,
nor does the Company have knowledge of any facts or circumstances which
would reasonably be likely to give rise to any such action, suit,
claim, inquiry, proceeding or investigation, which, if determined
adversely to the Company or any of its subsidiaries, would have a
Material Adverse Effect.
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III.8. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. Each
of the financial statements included in the Commission Filings complied
in all material respects with the rules and regulations of the
Commission with respect thereto as in effect at the time of filing,
have been prepared in accordance with United States General Accepted
Accounting Principles ("GAAP") (subject, in the case of the interim
financial statements, to normal year end adjustments and the absence of
footnotes) and in conformity with the practices consistently applied by
the Company without modification of the accounting principles used in
the preparation thereof, and fairly presents in all material respects
the financial position, results of operations and cash flows of the
Company as at the dates and for the periods indicated.
III.9. SECURITIES LAW MATTERS. Assuming the accuracy
of the representations and warranties of the Purchasers set forth in
Article II hereof, the offer and sale by the Company of the Securities
is exempt from the registration and prospectus delivery requirements of
the Securities Act and the rules and regulations of the Commission
thereunder. No form of general solicitation or advertising has been
used or authorized by the Company or any of its officers, directors or
Affiliates in connection with the offer or sale of the Series C
Preferred Stock (and the Conversion Shares) as contemplated by this
Agreement or any other agreement to which the Company is a party.
III.10. INTERNAL CONTROLS AND PROCEDURES. The Company
maintains accurate books and records and internal accounting controls
which provide reasonable assurance that (i) all transactions to which
the Company is a party or by which its properties are bound are
executed with management's authorization; (ii) the reported
accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted
only in accordance with management's authorization; and (iv) all
transactions to which the Company is a party or by which its properties
are bound are recorded as necessary to permit preparation of the
financial statements of the Company in accordance with U.S. generally
accepted accounting principles.
III.11. COMMISSION FILINGS. None of the Commission
Filings contained at the time they were filed any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
8
<PAGE>
III.12. ABSENCE OF CERTAIN CHANGES. Except as
disclosed in the Commission Filings, since December 31, 1997 there has
not occurred any change, event or development in the business,
financial condition, prospects or results of operations of the Company
or its subsidiaries, and there has not existed any condition having or
reasonably likely to have, a Material Adverse Effect.
III.13. FILINGS, CONSENTS AND APPROVALS. The Company
is not required to obtain any consent, authorization, or make any
filing with, Federal, state, local or other governmental authority in
connection with the issuance and sale of the Series C Preferred Stock
and the Warrants, other than (i) the filing of the Certificate of
Designations with the Secretary of State of Delaware, (ii) the filings
required pursuant to Section 4.2, (iii) the filing of the Registration
Statement with the Securities and Exchange Commission meeting the
requirements set forth in the Registration Rights Agreement, (iv) the
application(s) to the American Stock Exchange for the listing of the
Conversion Shares and Warrant Shares for trading on the American Stock
Exchange (and with any other national securities exchange or market on
which the Common Stock is then listed), and (v) in all other cases
where the failure to obtain such consent, waiver, authorization or
order, or to give such notice or make such filing or registration could
not have or result in, individually or in the aggregate, a Material
Adverse Effect.
III.14. COMPLIANCE WITH LAWS; PERMITS. The Company is
in compliance with all laws, rules, regulations, codes, ordinances and
statutes applicable to them or to the conduct of their respective
businesses, except for such non-compliance which would not have a
Material Adverse Effect. The Company possesses all permits, approvals,
authorizations, licenses, certificates and consents from all public and
governmental authorities which are necessary to conduct its business,
except for those the absence of which would not have a Material Adverse
Effect.
III.15. PATENTS AND TRADEMARKS. The Company has, or
has the rights to use, all patents, patent applications, trademarks,
trademark applications, licenses and rights which are necessary or
material for use in connection with its business, except where the
failure to have any such rights would not have a Material Adverse
Effect.
ARTICLE IV.
9
<PAGE>
CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
IV.1. RESTRICTIVE LEGEND. The Purchasers acknowledge
and agree that, upon issuance pursuant to this Agreement, the
Securities (and any shares of Common Stock issued in conversion of the
Series C Preferred Stock, in lieu of dividends on the Series C
Preferred Stock and on exercise of the Warrants) shall have endorsed
thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Series C
Preferred Stock and the Conversion Shares):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF
ANY STATE, AND ARE BEING OFFERED, SOLD OR
OTHERWISE TRANSFERRED PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR SUCH OTHER LAWS IN RESPECT OF WHICH
THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY TO SUCH
EFFECT."
IV.2. FILINGS. The Company shall make all necessary
SEC and "blue sky" filings required to be made by the Company in
connection with the sale and issuance of the Securities to the
Purchasers and, upon request, shall promptly provide a copy thereof to
the Purchasers after such filing.
IV.3. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Securities (excluding amounts paid by the
Company for legal fees in connection with such sale) for general
corporate and working capital purposes.
IV.4. LISTING. The Company shall use its best
10
<PAGE>
efforts to maintain its listing of the Common Stock on the American
Stock Exchange or such other principal national securities exchange on
which the Common Stock may be then listed.
IV.5. RESERVED CONVERSION SHARES. The Company at all
times from and after the date hereof shall have a sufficient number of
shares of Common Stock duly and validly authorized and reserved for
issuance to satisfy the conversion (pursuant to the Certificate of
Designations), in full, of 4,960 Shares of Series C Preferred Stock
issued to the Purchasers hereunder (assuming for purposes of this
Section 4.5, a Conversion Price (as defined in the Certificate of
Designations) of $2.80) and the exercise in full of all of the Warrants
issued to the Purchasers hereunder.
IV.6. RIGHT OF FIRST REFUSAL. If, during the period
ending 120 days after the Closing Date (the "Right of First Refusal
Period"), the Company should propose (the "Proposal") to issue Common
Stock or securities convertible into Common Stock (the "Right of First
Refusal Securities") at a price less than the Current Market Price (as
defined in the Certificate of Designations), the Company shall be
obligated to offer the Purchasers an opportunity to purchase all, but
not less than all, of the shares of Common Stock included in the
Proposal on the terms set forth in the Proposal (the "Offer"), and the
Purchasers shall have the right, but not the obligation, to accept such
Offer on such terms. The Purchasers shall have ten (10) business days
to accept or reject any such Offer following written notice to the
Purchasers that the Company proposes to issue any Right of First
Refusal Securities on the terms set forth in the Proposal, which shall
accompany the notice. If the Purchaser shall fail to notify the Company
in writing of its intention to exercise its Right of First Refusal
within such time period, the Company may effect the sale of securities
on substantially the terms set forth in the Proposal. Notwithstanding
the foregoing, the Purchasers shall have no rights under this paragraph
4.6. in respect of Common Stock or any other securities of the Company
issuable (i) upon the exercise or conversion of options, warrants or
other rights to purchase securities of the Company outstanding as of
the date hereof, (ii) to officers, directors or employees of the
Company or any of its subsidiaries under any stock option or similar
plan heretofore or hereafter adopted by the Company and approved by its
stockholders.
IV.7. NO ISSUANCE OF SERIES C PREFERRED STOCK. As
long as any shares of Series C Preferred Stock are outstanding the
Company shall not issue any shares of Series
11
<PAGE>
C Preferred Stock to any person or entity other than the Purchasers, or
to David M. Knott, Knott Partners, L.P. and Windsor Partners, L.P.,
without the prior written consent of the Purchasers, which consent
shall not be unreasonably withheld.
ARTICLE V.
TRANSFER AGENT INSTRUCTIONS.
V.1. The Company agrees that it will provide its
transfer agent with customary stop transfer instructions to enable it
to issue certificates, registered in the name of each of the Purchasers
or its respective nominee(s), for the Conversion Shares or the Warrant
Shares in such amounts as may be specified from time to time by such
Purchaser to the Company upon conversion of the Series C Preferred
Stock and the exercise of the Warrants, in all cases in accordance with
the terms of the Certificate of Designations or the Warrants, as the
case may be. Nothing contained in this Section 5.1. shall affect in any
way any of the Purchasers' obligations to comply with all applicable
securities laws upon resale of such Common Stock. If, at any time, any
of the Purchasers provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of the resale
by such Purchaser of such Common Stock is not required under the
Securities Act and that the removal of restrictive legends is permitted
under applicable law, the Company shall permit the transfer of such
Common Stock and, promptly instruct the Company's transfer agent to
issue one or more certificates for Common Stock without any restrictive
legends endorsed thereon.
V.2. Each of the Purchasers is permitted to (i)
exercise its right to convert the Series C Preferred Stock in
accordance with the terms of conversion set forth in the Certificate of
Designations and (ii) exercise its right to purchase shares of Common
Stock pursuant to exercise of the Warrants in accordance with the
applicable terms of the Warrants.
ARTICLE VI.
CONDITIONS
VI.1.CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Series C
Preferred Stock and the Warrants to each Purchaser at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of
the
12
<PAGE>
following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Purchaser with prior written
notice thereof:
(i) Each Purchaser shall have executed each of this
Agreement and the Registration Rights Agreement and delivered the same
to the Company.
(ii) The Certificate of Designations shall have been
filed with the Secretary of State of the State of Delaware.
(iii) Each Cash Purchaser shall have delivered to the
Company the Cash Purchase Price for the Preferred Shares being
purchased by such Purchaser at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided
by the Company and each Note Purchaser shall have delivered to the
Company the Promissory Note in accordance with Section 1.2 hereof.
(iv) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights
Agreement.
(v) The accuracy in all material respects on the
Closing Date of the representations and warranties of the Purchasers
contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as
of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date).
VI.2.CONDITIONS TO THE PURCHASERS' OBLIGATION TO
PURCHASE. The obligations of each Purchaser to purchase the Series C
Preferred Stock and the Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Purchasers' sole
benefit and may be waived by the Purchasers at any time in its sole
discretion by providing the Company with prior written notice thereof:
(i) The Company shall have executed each of this
Agreement and the Registration Rights Agreement, and delivered the same
to each Purchaser.
13
<PAGE>
(ii) The Certificate of Designations shall have been
filed with the Secretary of State of the State of Delaware, and a copy
of the Certificate of Designations that has been certified by such
Secretary of State shall have been delivered to each of the Purchasers.
(iii) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights
Agreement.
(iv) The Purchasers shall have received the opinion
of Weil, Gotshal & Manges LLP dated as of the Closing Date in
substantially the form of EXHIBIT E attached hereto (the "Company
Opinion").
(v) The Company shall have executed and delivered to
the Purchasers the Warrants and the stock certificates for the Series C
Preferred Stock being purchased by each of the Purchasers at the
Closing.
(vi) The accuracy in all material respects on the
Closing Date of the representations and warranties of the Company
contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as
of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date).
ARTICLE VII.
SURVIVAL; INDEMNIFICATION.
VII.1. The representations, warranties and covenants
made by each of the Company and the Purchasers in this Agreement shall
survive for two (2) years following the Closing. In the event of a
breach or violation of any of such representations, warranties or
covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such
breach or violation available to it under the provisions of this
Agreement or otherwise, whether at law or in equity, irrespective of
any investigation made by or on behalf of such party on or prior to the
Closing Date.
VII.2. The Company hereby agrees to indemnify and
hold harmless the Purchasers, their Affiliates and their respective
officers, directors, partners and members
14
<PAGE>
(collectively, the "Purchaser Indemnitees"), from and against any and
all losses, claims, damages, judgments, penalties, liabilities and
deficiencies (collectively, "Losses"), and agrees to reimburse the
Purchaser Indemnitees for all out-of-pocket expenses (including the
reasonable and documented fees and expenses of legal counsel), in each
case promptly as incurred by the Purchaser Indemnitees and to the
extent arising out of or in connection with:
(a) any misrepresentation, omission of fact or
breach of any of the Company's
representations or warranties contained in
this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement
or certificate entered into or delivered by
the Company pursuant to or in connection
with this Agreement; or
(b) any failure by the Company to perform in any
material respect any of its covenants,
agreements, undertakings or obligations set
forth in this Agreement, or any instrument,
agreement or certificate entered into or
delivered by the Company pursuant to or in
connection with this Agreement.
The Company shall be liable to a Purchaser Indemnitee
under this Section 7.2 only to the extent of, in the aggregate, the
lesser of (i) the amount of any such loss, claim, damage or liability
or (ii) the portion of the Purchase Price received by the Company from
such Purchaser in connection with the purchase of the Series C
Preferred Stock hereunder.
VII.3. Each Purchaser hereby agrees to indemnify and
hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Losses, and agrees to
reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees, to the extent arising
out of or in connection with:
(a) any misrepresentation, omission of fact, or
breach of any of such Purchaser's
representations or warranties contained in
this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement
or certificate entered into or delivered by
such Purchaser pursuant to this Agreement;
or
15
<PAGE>
(b) any failure by such Purchaser to perform in
any material respect any of its covenants,
agreements, undertakings or obligations set
forth in this Agreement or any instrument,
certificate or agreement entered into or
delivered by such Purchaser pursuant to this
Agreement.
A Purchaser shall be liable to the Company
Indemnitees under this Section 7.3 only to the extent of, in the
aggregate, the lesser of (i) the amount of any such loss, claim, damage
or liability or (ii) the portion of the Purchase Price received by the
Company from such Purchaser in connection with the purchase of the
Series C Preferred Stock hereunder.
VII.4. Promptly after receipt by either party hereto
seeking indemnification pursuant to this Article VII (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or
other action in respect of which indemnification is being sought (each,
a "Claim"), the Indemnified Party promptly shall notify the party
against whom indemnification pursuant to this Article VI is being
sought (the "Indemnifying Party") of the commencement thereof; but the
omission to so notify the Indemnifying Party shall not relieve it from
any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially
prejudiced and forfeits substantive rights and defenses by reason of
such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the
Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to
employ one separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of one such separate legal counsel to
the Indemnified Party if (and only if): (x) the Indemnifying Party
shall have agreed to pay such fees, out-of-pocket costs and expenses,
(y) representation of the Indemnified Party and the Indemnifying Party
by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of
the defense of such Claim, or if there may be legal defenses available
to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying
Party shall have failed to employ
16
<PAGE>
legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such
Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above,
the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. In no event shall the
Indemnifying Party be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party. The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
17
<PAGE>
VII.5. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall deliver
notice of such claim to the Indemnifying Party. If the Indemnified
Party disputes the claim, such dispute shall be resolved by mutual
agreement of the Indemnified Party and the Indemnifying Party or by
binding arbitration conducted in accordance with the procedures and
rules of the American Arbitration Association. Judgment upon any award
rendered by any arbitrators may be entered in any court having
competent jurisdiction thereof.
ARTICLE VIII.
GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York, without regard to
the conflicts of law principles of such state. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with
any dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any objection
based on FORUM NON conveniens, to the bringing of any such proceeding
in such jurisdictions. A facsimile transmission to the Company of a
Purchaser's signature on this Agreement, upon execution hereof by the
Company and delivery to such Purchaser by facsimile transmission or
otherwise, shall be legal and binding on the Company and such
Purchaser. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This
Agreement may be amended only by an instrument in writing signed by the
party to be charged with enforcement. Any provision of this Agreement
may be waived only by an instrument in writing signed by the party
against whom enforcement of the waiver is sought. This Agreement
supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
18
<PAGE>
ARTICLE IX.
NOTICES.
Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or sent
by certified mail, postage prepaid, or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally or by overnight courier service, or, if mailed, three (3)
days after the date of deposit in the United States mails, as follows:
(1) if to the Company, to:
COLUMBIA LABORATORIES, INC.
2875 Northeast 191 Street, Suite 400
Aventura, Florida 33180
Attention: David L. Weinberg
With a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq. or
Michael Nissan, Esq.
(2) if to any Purchaser, at the most current
address as provided by such Purchaser to the
Company in accordance with the provisions of
this Article IX, which address shall
initially be the address set forth next to
such Purchaser's name on the signature pages
hereto.
The Company or any Purchaser may change its address for notice by
providing notice pursuant to this Article IX.
19
<PAGE>
ARTICLE X.
CONFIDENTIALITY.
The Company and each of the Purchasers agree to keep
confidential and not to disclose to or use for the benefit of any third
party the terms of this Agreement or any other information which at any
time is communicated by the other party as being confidential without
the prior written approval of the other party; provided, however, that
this provision shall not apply to information which, at the time of
disclosure, is already part of the public domain (except by breach of
this Agreement) and information which is required to be disclosed by
law (including, without limitation, pursuant to Item 10 of Rule 601 of
Regulation S-K under the Securities Act and the Exchange Act) or by
subpoena or order of any court or governmental agency.
ARTICLE XI.
ASSIGNMENT.
This Agreement shall not be assignable by either of
the parties hereto prior to the Closing without the prior written
consent of the other party, and any attempted assignment contrary to
the provisions hereby shall be null and void.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
COLUMBIA LABORATORIES, INC.
By:
--------------------------------
Name: David L. Weinberg
Title: Vice President -
Chief Financial Officer
<PAGE>
ACHIEVE FUND, L.P.
By:
--------------------------------
Name:
Title:
Number of Shares of Series C
Preferred Stock to be purchased by
you - 250; Number of Warrants -
8,750; Aggregate Purchase Price -
$250,000.
c/o Richard Morrison
3658 Mt. Diablo Blvd.
Suite 215
Lafayette, CA 94549
Attention: Richard Morrison
(925) 283-1501
<PAGE>
VMR LUXEMBURG SA
By:
--------------------------------
Name:
Title:
Number of Shares of Series C
Preferred Stock to be purchased by
you - 600; Number of Warrants -
21,000; Aggregate Purchase Price -
$600,000.
c/o Value Management Research
Am Kronberger
Hang Five
65824 Schwalbach
Germany
011-49-61-968800-0
Fax: 011-49-61-968800-58
<PAGE>
ARIES TRADING LTD
By:
--------------------------------
Name:
Title:
Number of Shares of Series C
Preferred Stock to be purchased by
you - 200; Number of Warrants -
7,000; Aggregate Purchase Price -
$200,000.
c/o Lexington Shipping &
Trading Corp.
950 Third Avenue
Suite 2700
New York, NY 10022
Attention: James Apostolakis
(212) 588-1900
<PAGE>
NARRAGANSETT CAPITAL
PARTNERS, LP
By:
--------------------------------
Name:
Title:
Number of Shares of Series C
Preferred Stock to be purchased by
you - 100; Number of Warrants -
3,500; Aggregate Purchase Price -
$100,000.
375 Park Avenue
14th Floor
New York, NY 10152
Attention: Anthony Chaves
(212) 521-5042
<PAGE>
DERWENT LIMITED
By:
--------------------------------
Name:
Title:
Number of Shares of
Series C Preferred Stock
to be purchased by you -
1,000; Number of Warrants -
35,000; Aggregate Purchase
Price - $1,000,000.
10 Coleherne Mews
London SW10 9EA
Attention: David J. Rowland
011-44-171-730-3403
Fax: 011-44-171-823-5129
<PAGE>
----------------------------------
James J. Apostolakis
Number of Shares of Series C
Preferred Stock to be purchased by
you - 250; Number of Warrants -
8,750; Aggregate Purchase Price -
$250,000.
c/o Lexington Shipping & Trading
Corp.
950 Third Avenue
Suite 2700
New York, NY 10022
(212) 588-1900
<PAGE>
--------------------------------
David Ray
Number of Shares of Series C
Preferred Stock to be purchased by
you - 250; Number of Warrants -
8,750; Aggregate Purchase Price -
$250,000.
One Barrister's Wharf
Newport, RI 02840
(401) 847-4685
<PAGE>
--------------------------------
Bernard Marden
Number of Shares of Series C
Preferred Stock to be purchased by
you - 500; Number of Warrants -
17,500; Aggregate Purchase Price -
$500,000.
1290 South Ocean Blvd.
Palm Beach, FL 33480
(561) 833-2001
<PAGE>
--------------------------------
Christopher Castroviejo
Number of Shares of Series C
Preferred Stock to be purchased by
you - 50; Number of Warrants -
1,750; Aggregate Purchase Price -
$50,000.
c/o Reynders Gray
530 Fifth Avenue
2nd Floor
New York, NY 10036
(212) 944-7153
<PAGE>
--------------------------------
John Fenlin
Number of Shares of Series C
Preferred Stock to be purchased by
you - 60; Number of Warrants -
2,100; Aggregate Purchase Price -
$60,000.
c/o Lazard Freres
30 Rockefeller Plaza
60th Floor
New York, NY 10020
(212) 632-6768
<PAGE>
--------------------------------
Terry Van Der Tuuk
Number of Shares of Series C
Preferred Stock to be purchased by
you - 100; Number of Warrants -
3,500; Aggregate Purchase Price -
$100,000.
c/o MidAmerica Merchandising
204 West 3rd Street
Kansas City, MO 64105
(816) 471-5600
<PAGE>
--------------------------------
Mallory Factor
Number of Shares of Series C
Preferred Stock to be purchased by
you - 100; Number of Warrants -
3,500; Aggregate Purchase Price -
$100,000.
c/o TC Management
237 Park Avenue
Suite 800
New York, NY 10017
Attention: Tony Campbell
(212) 808-3435
<PAGE>
--------------------------------
John Gildea
Number of Shares of Series C
Preferred Stock to be purchased by
you - 100; Number of Warrants -
3,500; Aggregate Purchase Price -
$100,000.
Gildea Management Company
115 East Putnam Ave.
3rd Floor
Greenwich, CT 06830
(203) 629-0861
<PAGE>
--------------------------------
William J. Bologna
Number of Shares of Series C
Preferred Stock to be purchased by
you - 250; Number of Warrants -
8,750; Aggregate Purchase Price -
$250,000.
c/o Columbia Laboratories, Inc.
2875 NE 191 Street
Aventura, FL 33180
(305) 933-6089
<PAGE>
--------------------------------
Norman M. Meier
Number of Shares of Series C
Preferred Stock to be purchased by
you - 350; Number of Warrants -
12,250; Aggregate Purchase Price -
$350,000.
c/o Columbia Laboratories, Inc.
2875 NE 191st Street
Aventura, FL 33180
(305) 933-6089
<PAGE>
--------------------------------
Morrison Family Trust
Number of Shares of Series C
Preferred Stock to be purchased by
you - 350; Number of Warrants -
12,250; Aggregate Purchase Price -
$350,000.
c/o Richard Morrison
3658 Mt. Diablo Blvd.
Suite 215
Lafayette, CA 94549
(925) 283-1501
<PAGE>
--------------------------------
David Landau
Number of Shares of Series C
Preferred Stock to be purchased by
you - 50; Number of Warrants -
1,750; Aggregate Purchase Price -
$50,000.
c/o Continental Kraft Corporation
100 Jericho Quadrangle
Jericho, NY 11753
(516) 681-9090
<PAGE>
--------------------------------
JUPITER PARTNERS
By:
-----------------------------
Name:
Title:
Number of Shares of Series C
Preferred Stock to be purchased by
you - 150; Number of Warrants -
5,250; Aggregate Purchase Price -
$150,000.
c/o Bryan & Edwards
600 Montgomery Street
35th Floor
San Francisco, CA 94111
(415) 421-9990
<PAGE>
--------------------------------
Robert W. Ledeux
Number of Shares of Series C
Preferred Stock to be purchased by
you - 50; Number of Warrants -
1,750; Aggregate Purchase Price -
$50,000.
Venture Growth Associates
2479 East Bayshore Road
Suite 710
Palo Alto, CA 94303
<PAGE>
--------------------------------
James R. Berdell
Number of Shares of Series C
Preferred Stock to be purchased by
you - 100; Number of Warrants -
3,500; Aggregate Purchase Price -
$100,000.
Venture Growth Associates
2479 East Bayshore Road
Suite 710
Palo Alto, CA 94303
<PAGE>
--------------------------------
George Voelker
Number of Shares of Series C
Preferred Stock to be purchased by
you - 100; Number of Warrants -
3,500; Aggregate Purchase Price -
$100,000.
c/o Frantzen/Voelker
Investments LLC
1100 Poydras Street
New Orleans, LA 70163
(504) 582-2244
EXHIBIT 4.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
January 19, 1999, among Columbia Laboratories, Inc., a Delaware corporation with
principal executive offices located at 2875 Northeast 191 Street, Suite 400,
Aventura, Florida 33180 (the "Company"), David M. Knott ("Knott") and Knott
Partners, L.P. ("Knott LP") (Knott and Knott LP are herein referred to
individually as a "Purchaser" and collectively as the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Purchasers desire to purchase from Company, and
the Company desires to issue and sell to the Purchasers, upon the terms and
subject to the conditions of this Agreement, (i) shares of Series C Convertible
Preferred Stock, $.01 par value (the "Series C Preferred Stock"), having the
rights, preferences and privileges set forth in the Certificate of Designations,
Preferences and Rights hereto as EXHIBIT A (the "Certificate of Designations")
and (ii) Warrants to purchase up to an aggregate of 45,500 shares of Common
Stock (as defined below), having the terms and conditions and being in the form
attached hereto as EXHIBIT B (the "Warrants"); and
WHEREAS, upon the terms and subject to the conditions set
forth in the Certificate of Designations, the Series C Preferred Stock is
convertible into shares of the Company's common stock, $.01 par value ("Common
Stock").
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as EXHIBIT C (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act of 1933 and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
<PAGE>
ARTICLE I.
PURCHASE AND SALE OF SERIES C PREFERRED STOCK
I.1. TRANSACTION. The Purchasers hereby agree to purchase from
the Company, and the Company has offered and hereby agrees to issue and sell to
the Purchasers, the number of shares of Series C Preferred Stock and the number
of Warrants set forth opposite the names of each Purchaser on the signature
pages hereto.
I.2. PURCHASE PRICE; FORM OF PAYMENT. The aggregate purchase
price for the Series C Preferred Stock and Warrants to be purchased by the
Purchasers hereunder shall be U.S. $1,300,000. At the Closing referred to in
Section 1.3 below, each Purchaser shall pay in cash the purchase price set forth
next to the name of such Purchaser on the signature pages hereto (the "Purchase
Price"). The Purchase Price shall be paid by wire transfer of immediately
available funds to the Company in accordance with the Company's wire
instructions set forth below. Simultaneously against receipt by the Company of
the Purchase Price by the Purchasers, the Company shall deliver to each
Purchaser (i) the stock certificates evidencing the number of shares of Series C
Preferred Stock purchased by each Purchaser as set forth next to the name of
such Purchaser on the signature pages hereto, and (ii) the number of Warrants
purchased by each Purchaser as set forth next to the name of such Purchaser on
the signature pages hereto, in each case duly executed on behalf of the Company
and registered in the name of each Purchaser.
I.3. CLOSING. The closing (the "Closing") of the issuance and
sale of the Series C Preferred Stock shall be January 27, 1999 or such other
date as shall be mutually agreed upon in writing (the "Closing Date") and shall
occur at the offices of Weil, Gotshal & Manges LLP, or at such other place
mutually agreeable to the parties hereto.
I.4. METHOD OF PAYMENT. Payment of the Purchase Price shall be
made by wire transfer of immediately available funds to:
First Union National Bank
18545 Biscayne Blvd.
Aventura, FL 33180
Bank ABA Number: 063000021
Account Number: 2090001613844
Account Holder: Columbia Laboratories, Inc.
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<PAGE>
I.5. DELIVERY INSTRUCTIONS. The Series C Preferred Stock and
the Warrants shall be delivered by the Company to the Purchasers pursuant to
Section 1.2. hereof on a "delivery-against-payment basis" at the Closing.
ARTICLE II.
PURCHASERS' REPRESENTATIONS, WARRANTIES; ACCESS
TO INFORMATION; INDEPENDENT INVESTIGATION.
Each Purchaser represents and warrants to and covenants and
agrees with the Company as follows:
II.1. Each Purchaser is purchasing the Series C Preferred
Stock, the Warrants, the Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Shares of Common Stock issuable upon conversion
of the Series C Preferred Stock (the "Conversion Shares" and, collectively with
the Series C Preferred Stock, the Warrants and the Warrant Shares, the
"Securities") for its own account, for investment purposes only and not with a
view towards or in connection with the public sale or distribution thereof in
violation of the provisions of the Securities Act of 1933, as amended (the
"Securities Act").
II.2. Each Purchaser is (i) an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act, (ii)
experienced in making investments of the kind contemplated by this Agreement,
(iii) capable, by reason of its business and financial experience, of evaluating
the relative merits and risks of an investment in the Securities, and (iv) able
to afford the loss of its investment in the Securities.
II.3. Each Purchaser understands that the Securities are being
offered and sold by the Company in reliance on an exemption from the
registration requirements of the Securities Act and equivalent state securities
and "blue sky" laws, and that the Company is relying upon the accuracy of, and
each Purchasers' compliance with, the Purchasers' representations, warranties
and covenants set forth in this Agreement to determine the availability of such
exemption and the eligibility of each Purchaser to purchase the Securities. Each
Purchaser further understands that the Series C Preferred Stock and Conversion
Shares may not be transferred or resold without (a) registration under the
Securities Act and any applicable state securities laws, or (b) an exemption
from the requirements of the Securities Act and applicable state securities
laws.
II.4. Each Purchaser understands that an
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<PAGE>
exemption from such registration is not presently available pursuant to Rule 144
promulgated under the Securities Act by the Commission and that in any event no
Purchaser may sell any securities pursuant to Rule 144 prior to the expiration
of a one-year period after such Purchaser has acquired the securities. Each
Purchaser understands that any sales pursuant to Rule 144 may only be made in
full compliance with the provisions of Rule 144.
II.5. Each Purchaser has been furnished with or provided
access to all materials relating to the business, financial position and results
of operations of the Company, including the risk factors relating to the Company
and its business set forth in EXHIBIT D hereto (the "Risk Factors") and all
other materials requested by the Purchasers to enable them to make an informed
investment decision with respect to the Securities.
II.6. Each Purchaser acknowledges that the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1997 and all other
reports and documents heretofore filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since December
31, 1997 (collectively the "Commission Filings") have been made available to
such Purchaser for such Purchaser's review.
II.7. Each Purchaser acknowledges that in making its decision
to purchase the Securities it has relied on its own investigation of the Company
and been given an opportunity to ask questions of and to receive answers from
the Company's executive officers, directors and management personnel concerning
the terms and conditions of the private placement of the Securities by the
Company.
II.8. Each Purchaser understands that the Securities have not
been approved or disapproved by the Commission or any state securities
commission and that the foregoing authorities have not reviewed any documents or
instruments in connection with the offer and sale to it of the Securities and
have not confirmed or determined the adequacy or accuracy of any such documents
or instruments.
II.9. Each Purchaser has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by each Purchaser and is a valid and binding agreement of
each Purchaser enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
4
<PAGE>
moratorium and similar laws affecting creditors' rights and remedies generally.
II.10. Neither the Purchasers nor any of their affiliates nor
any person acting on its or their behalf has the intention of entering, or will
enter into, any put option, short position or other similar instrument or
position with respect to the Common Stock and neither the Purchasers nor any of
their affiliates nor any person acting on its or their behalf will use at any
time shares of Common Stock acquired pursuant to this Agreement or the
Certificate of Designations to settle any put option, short position or other
similar instrument or position that may have been entered into prior to the
execution of this Agreement.
ARTICLE III.
COMPANY'S REPRESENTATIONS
The Company represents and warrants to the Purchasers that:
III.1. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company is as set forth on SCHEDULE 3.1. All of the issued
and outstanding shares of capital stock set forth on SCHEDULE 3.1 have been
validly issued and are fully paid and non-assessable. The Series C Preferred
Stock has been duly and validly authorized for issuance by the Company pursuant
to this Agreement, and when issued by the Company pursuant hereto, will be duly
and validly issued, fully paid and non-assessable and will be free of any
preemptive or similar rights. The Conversion Shares and Warrant Shares have been
duly and validly authorized and reserved for issuance by the Company and, when
issued by the Company upon conversion of, or in lieu of accrued dividends on,
the Series C Preferred Stock, or on exercise of the Warrants, will be duly and
validly issued, fully paid and non-assessable. Except as set forth on SCHEDULE
3.1 or in the Commission Filings there are no options, warrants, subscription,
"call" or other similar rights to acquire the Common Stock that have been issued
or granted to any person.
III.2. ORGANIZATION. Each of the Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and each is duly
qualified as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the business, properties,
condition (financial or otherwise) or results of operations
5
<PAGE>
of the Company and its subsidiaries taken as a whole or on the consummation of
any of the transactions contemplated by this Agreement (a "Material Adverse
Effect").
III.3. AUTHORIZED SHARES. The Company has duly and validly
authorized and reserved for issuance shares of Common Stock sufficient in number
for the conversion, of the shares of Series C Preferred Stock issued to the
Purchasers hereunder (assuming for purposes of this Section 3.3 a Conversion
Price (as defined in the Certificate of Designations) of $2.80) and the exercise
of 45,500 Warrants. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the Conversion Shares and
Warrant Shares upon conversion of the Series C Preferred Stock and exercise of
the Warrants. The Company further acknowledges that its obligation to issue
Conversion Stock upon conversion of the Series C Preferred Stock and Warrant
Shares upon exercise of the Warrants in accordance with this Agreement, the
Certificate of Designations and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
III.4. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby (including without
limitation the filing of the Certificate of Designations, the issuance of the
Series C Preferred Stock, the Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares), has been duly authorized
by all requisite corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery by the other parties hereto) constitutes a
valid and binding obligation of the Company enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
III.5. NON-CONTRAVENTION. The execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated
6
<PAGE>
hereby do not and will not conflict with or result in a breach by the Company of
any of the terms or provisions of, or constitute a default (or an event which,
with notice, lapse of time or both, would constitute a default), and there is
not currently outstanding any uncured breach or default under (i) the
certificate of incorporation or by-laws of the Company, or (ii) any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which its properties or assets are bound, or any law,
rule, regulation, decree, judgment or order of any court or public or
governmental authority having jurisdiction over the Company or any of the
Company's properties or assets, except as to (ii) above such conflict, breach or
default which would not have a Material Adverse Effect.
III.6. ABSENCE OF CERTAIN CHANGES. Since December 31, 1997,
except as disclosed in the Commission Filings there has not occurred any change,
event or development in the business, financial condition, prospects or results
of operations of the Company, and there has not existed any condition having or
reasonably likely to have, a Material Adverse Effect.
III.7. ABSENCE OF LITIGATION. Except as disclosed in the
Commission Filings, there is no action, suit, claim, proceeding, inquiry or
investigation pending or, to the Company's knowledge, threatened, by or before
any court or public or governmental authority, nor does the Company have
knowledge of any facts or circumstances which would reasonably be likely to give
rise to any such action, suit, claim, inquiry, proceeding or investigation,
which, if determined adversely to the Company or any of its subsidiaries, would
have a Material Adverse Effect.
III.8. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. Each
of the financial statements included in the Commission Filings complied in all
material respects with the rules and regulations of the Commission with respect
thereto as in effect at the time of filing, have been prepared in accordance
with United States General Accepted Accounting Principles ("GAAP") (subject, in
the case of the interim financial statements, to normal year end adjustments and
the absence of footnotes) and in conformity with the practices consistently
applied by the Company without modification of the accounting principles used in
the preparation thereof, and fairly presents in all material respects the
financial position, results of operations and cash flows of the Company as at
the dates and for the periods indicated.
III.9. SECURITIES LAW MATTERS. Assuming the
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<PAGE>
accuracy of the representations and warranties of the Purchasers set forth in
Article II hereof, the offer and sale by the Company of the Securities is exempt
from the registration and prospectus delivery requirements of the Securities Act
and the rules and regulations of the Commission thereunder. No form of general
solicitation or advertising has been used or authorized by the Company or any of
its officers, directors or Affiliates in connection with the offer or sale of
the Series C Preferred Stock (and the Conversion Shares) as contemplated by this
Agreement or any other agreement to which the Company is a party.
III.10. INTERNAL CONTROLS AND PROCEDURES. The Company
maintains accurate books and records and internal accounting controls which
provide reasonable assurance that (i) all transactions to which the Company is a
party or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's assets is
compared with existing assets at regular intervals; (iii) access to the
Company's assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company is a party or by
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with U.S. generally
accepted accounting principles.
III.11. COMMISSION FILINGS. None of the Commission Filings
contained at the time they were filed any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
III.12. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Commission Filings, since December 31, 1997 there has not occurred any change,
event or development in the business, financial condition, prospects or results
of operations of the Company or its subsidiaries, and there has not existed any
condition having or reasonably likely to have, a Material Adverse Effect.
III.13. FILINGS, CONSENTS AND APPROVALS. The Company is not
required to obtain any consent, authorization, or make any filing with, Federal,
state, local or other governmental authority in connection with the issuance and
sale of the Series C Preferred Stock and the Warrants, other than (i) the filing
of the Certificate of Designations with the Secretary of State of Delaware, (ii)
the filings required pursuant to Section 4.2, (iii) the filing of the
Registration Statement with the Securities and Exchange Commission meeting the
requirements set forth in
8
<PAGE>
the Registration Rights Agreement, (iv) the application(s) to the American Stock
Exchange for the listing of the Conversion Shares and Warrant Shares for trading
on the American Stock Exchange (and with any other national securities exchange
or market on which the Common Stock is then listed), and (v) in all other cases
where the failure to obtain such consent, waiver, authorization or order, or to
give such notice or make such filing or registration could not have or result
in, individually or in the aggregate, a Material Adverse Effect.
III.14. COMPLIANCE WITH LAWS; PERMITS. The Company is in
compliance with all laws, rules, regulations, codes, ordinances and statutes
applicable to them or to the conduct of their respective businesses, except for
such non-compliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
III.15. PATENTS AND TRADEMARKS. The Company has, or has the
rights to use, all patents, patent applications, trademarks, trademark
applications, licenses and rights which are necessary or material for use in
connection with its business, except where the failure to have any such rights
would not have a Material Adverse Effect.
ARTICLE IV.
CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
IV.1. RESTRICTIVE LEGEND. The Purchasers acknowledge and agree
that, upon issuance pursuant to this Agreement, the Securities (and any shares
of Common Stock issued in conversion of the Series C Preferred Stock, in lieu of
dividends on the Series C Preferred Stock and on exercise of the Warrants) shall
have endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Series C Preferred
Stock and the Conversion Shares):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED, SOLD OR OTHERWISE TRANSFERRED PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE
9
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS IN RESPECT OF WHICH THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO SUCH
EFFECT."
IV.2. FILINGS. The Company shall make all necessary SEC and
"blue sky" filings required to be made by the Company in connection with the
sale and issuance of the Securities to the Purchasers and, upon request, shall
promptly provide a copy thereof to the Purchasers after such filing.
IV.3. USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Securities (excluding amounts paid by the Company for legal fees
in connection with such sale) for general corporate and working capital
purposes.
IV.4. LISTING. The Company shall use its best efforts to
maintain its listing of the Common Stock on the American Stock Exchange or such
other principal national securities exchange on which the Common Stock may be
then listed.
10
<PAGE>
IV.5. RESERVED CONVERSION SHARES. The Company at all times
from and after the date hereof shall have a sufficient number of shares of
Common Stock duly and validly authorized and reserved for issuance to satisfy
the conversion (pursuant to the Certificate of Designations), in full, of 1,300
Shares of Series C Preferred Stock issued to the Purchasers hereunder (assuming
for purposes of this Section 4.5, a Conversion Price (as defined in the
Certificate of Designations) of $2.80) and the exercise in full of all of the
Warrants issued to the Purchasers hereunder.
IV.6. RIGHT OF FIRST REFUSAL. If, during the period ending 120
days after the Closing Date (the "Right of First Refusal Period"), the Company
should propose (the "Proposal") to issue Common Stock or securities convertible
into Common Stock (the "Right of First Refusal Securities") at a price less than
the Current Market Price (as defined in the Certificate of Designations), the
Company shall be obligated to offer the Purchasers an opportunity to purchase
all, but not less than all, of the shares of Common Stock included in the
Proposal on the terms set forth in the Proposal (the "Offer"), and the
Purchasers shall have the right, but not the obligation, to accept such Offer on
such terms. The Purchasers shall have ten (10) business days to accept or reject
any such Offer following written notice to the Purchasers that the Company
proposes to issue any Right of First Refusal Securities on the terms set forth
in the Proposal, which shall accompany the notice. If the Purchaser shall fail
to notify the Company in writing of its intention to exercise its Right of First
Refusal within such time period, the Company may effect the sale of securities
on substantially the terms set forth in the Proposal. Notwithstanding the
foregoing, the Purchasers shall have no rights under this paragraph 4.6. in
respect of Common Stock or any other securities of the Company issuable (i) upon
the exercise or conversion of options, warrants or other rights to purchase
securities of the Company outstanding as of the date hereof, (ii) to officers,
directors or employees of the Company or any of its subsidiaries under any stock
option or similar plan heretofore or hereafter adopted by the Company and
approved by its stockholders.
IV.7. NO ISSUANCE OF SERIES C PREFERRED STOCK. As long as any
shares of Series C Preferred Stock are outstanding the Company shall not issue
any shares of Series C Preferred Stock to any person or entity other than (i)
the Purchasers, (ii) the purchasers party to a Securities Purchase Agreement
dated as of January 7, 1999 with the Company with respect to the issuance of the
Series C Preferred Stock or (iii) Windsor Partners, L.P., without the
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prior written consent of the Purchasers, which consent shall not be unreasonably
withheld.
ARTICLE V.
TRANSFER AGENT INSTRUCTIONS.
V.1. The Company agrees that it will provide its transfer
agent with customary stop transfer instructions to enable it to issue
certificates, registered in the name of each of the Purchasers or its respective
nominee(s), for the Conversion Shares or the Warrant Shares in such amounts as
may be specified from time to time by such Purchaser to the Company upon
conversion of the Series C Preferred Stock and the exercise of the Warrants, in
all cases in accordance with the terms of the Certificate of Designations or the
Warrants, as the case may be. Nothing contained in this Section 5.1. shall
affect in any way any of the Purchasers' obligations to comply with all
applicable securities laws upon resale of such Common Stock. If, at any time,
any of the Purchasers provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by such Purchaser of
such Common Stock is not required under the Securities Act and that the removal
of restrictive legends is permitted under applicable law, the Company shall
permit the transfer of such Common Stock and, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without any
restrictive legends endorsed thereon.
V.2. Each of the Purchasers is permitted to (i) exercise its
right to convert the Series C Preferred Stock in accordance with the terms of
conversion set forth in the Certificate of Designations and (ii) exercise its
right to purchase shares of Common Stock pursuant to exercise of the Warrants in
accordance with the applicable terms of the Warrants.
ARTICLE VI.
CONDITIONS
VI.1. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Series C Preferred
Stock and the Warrants to each Purchaser at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Purchaser
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with prior written notice thereof:
(i) Each Purchaser shall have executed each of this Agreement
and the Registration Rights Agreement and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware.
(iii) Each Purchaser shall have delivered to the Company the
Purchase Price for the shares of Series C Preferred Stock being purchased by
such Purchaser at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement.
(v) The accuracy in all material respects on the Closing Date
of the representations and warranties of the Purchasers contained in this
Agreement as if made on the Closing Date (except for representations and
warranties which, by their express terms, speak as of and relate to a specified
date, in which case such accuracy shall be measured as of such specified date).
VI.2. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE. The
obligations of each Purchaser to purchase the Series C Preferred Stock and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Purchasers' sole benefit and may be waived by the Purchasers at any time
in its sole discretion by providing the Company with prior written notice
thereof:
(i) The Company shall have executed each of this Agreement and
the Registration Rights Agreement, and delivered the same to each Purchaser.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware, and a copy of the
Certificate of Designations that has been certified by such Secretary of State
shall have been delivered to each of the Purchasers.
(iii) No statute, rule, regulation, executive
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<PAGE>
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement.
(iv) The Purchasers shall have received the opinion of Weil,
Gotshal & Manges LLP dated as of the Closing Date in substantially the form of
EXHIBIT E attached hereto (the "Company Opinion").
(v) The Company shall have executed and delivered to the
Purchasers the Warrants and the stock certificates for the Series C Preferred
Stock being purchased by each of the Purchasers at the Closing.
(vi) The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date (except for representations and warranties which,
by their express terms, speak as of and relate to a specified date, in which
case such accuracy shall be measured as of such specified date).
ARTICLE VII.
SURVIVAL; INDEMNIFICATION.
VII.1. The representations, warranties and covenants made by
each of the Company and the Purchasers in this Agreement shall survive for two
(2) years following the Closing. In the event of a breach or violation of any of
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
VII.2. The Company hereby agrees to indemnify and hold
harmless the Purchasers, their Affiliates and their respective officers,
directors, partners and members (collectively, the "Purchaser Indemnitees"),
from and against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses"), and agrees to reimburse
the Purchaser Indemnitees for all out-of-pocket expenses (including the
reasonable and documented fees and expenses of legal counsel), in each case
promptly as incurred by the Purchaser Indemnitees and to the extent arising out
of or in connection with:
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(a) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to or in connection with this Agreement; or
(b) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to or in
connection with this Agreement.
The Company shall be liable to a Purchaser Indemnitee under
this Section 7.2 only to the extent of, in the aggregate, the lesser of (i) the
amount of any such loss, claim, damage or liability or (ii) the portion of the
Purchase Price received by the Company from such Purchaser in connection with
the purchase of the Series C Preferred Stock hereunder.
VII.3. Each Purchaser hereby agrees to indemnify and hold
harmless the Company, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all Losses, and agrees to reimburse the Company Indemnitees for all
out-of-pocket expenses (including the fees and expenses of legal counsel), in
each case promptly as incurred by the Company Indemnitees, to the extent arising
out of or in connection with:
(a) any misrepresentation, omission of fact, or breach of any
of such Purchaser's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by such Purchaser
pursuant to this Agreement; or
(b) any failure by such Purchaser to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or any instrument, certificate or agreement
entered into or delivered by such Purchaser pursuant to this Agreement.
A Purchaser shall be liable to the Company Indemnitees under
this Section 7.3 only to the extent of, in the aggregate, the lesser of (i) the
amount of any such loss, claim, damage or liability or (ii) the portion of the
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Purchase Price received by the Company from such Purchaser in connection with
the purchase of the Series C Preferred Stock hereunder.
VII.4. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article VII (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Article VI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ one separate legal counsel and to participate in the defense of such
Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket
costs and expenses of one such separate legal counsel to the Indemnified Party
if (and only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) representation of the Indemnified Party
and the Indemnifying Party by the same legal counsel would not be appropriate
due to actual or, as reasonably determined by legal counsel to the Indemnified
Party, potentially differing interests between such parties in the conduct of
the defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. In no event
shall the Indemnifying Party be liable for the fees and expenses of more than
one firm of legal counsel for the Indemnified Party. The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party (which
consent shall not unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include an unconditional
release of the Indemnified
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Party from all liabilities with respect to such Claim or judgment.
17
<PAGE>
VII.5. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
ARTICLE VIII.
GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON CONVENIENS, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission to the Company of a
Purchaser's signature on this Agreement, upon execution hereof by the Company
and delivery to such Purchaser by facsimile transmission or otherwise, shall be
legal and binding on the Company and such Purchaser. This Agreement may be
signed in one or more counterparts, each of which shall be deemed an original.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement. Any
provision of this Agreement may be waived only by an instrument in writing
signed by the party against whom enforcement of the waiver is sought. This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
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ARTICLE IX.
NOTICES.
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(1) if to the Company, to:
COLUMBIA LABORATORIES, INC.
2875 Northeast 191 Street, Suite 400
Aventura, Florida 33180
Attention: David L. Weinberg
With a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq. or
Michael Nissan, Esq.
(2) if to any Purchaser, at the most current address as
provided by such Purchaser to the Company in
accordance with the provisions of this Article IX,
which address shall initially be the address set
forth next to such Purchaser's name on the signature
pages hereto.
The Company or any Purchaser may change its address for notice by providing
notice pursuant to this Article IX.
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ARTICLE X.
CONFIDENTIALITY.
The Company and each of the Purchasers agree to keep
confidential and not to disclose to or use for the benefit of any third party
the terms of this Agreement or any other information which at any time is
communicated by the other party as being confidential without the prior written
approval of the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already part of the
public domain (except by breach of this Agreement) and information which is
required to be disclosed by law (including, without limitation, pursuant to Item
10 of Rule 601 of Regulation S-K under the Securities Act and the Exchange Act)
or by subpoena or order of any court or governmental agency.
ARTICLE XI.
ASSIGNMENT.
This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
COLUMBIA LABORATORIES, INC.
By:
--------------------------------------
Name:
Title:
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KNOTT PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
Number of Shares of
Series C Preferred Stock
to be purchased by you -
1,188; Number of Warrants -
41,580; Aggregate Purchase
Price - $1,188,000.
Knott Partners, L.P.
485 Underhill Blvd.
Suite 205
Syosset, NY 11791
(516) 364-0303
22
<PAGE>
-----------------------------------------
David M. Knott
Number of Shares of
Series C Preferred Stock
to be purchased by you -
112; Number of Warrants -
3,920; Aggregate Purchase
Price - $112,000.
c/o Dorset Management Corporation
485 Underhill Blvd.
Suite 205
Syosset, NY 11791
(516) 364-0303
23
EXHIBIT 4.4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
February 1, 1999, between Columbia Laboratories, Inc., a Delaware corporation
with principal executive offices located at 2875 Northeast 191 Street, Suite
400, Aventura, Florida 33180 (the "Company"), and Windsor Partners, L.P., a
Delaware limited partnership with its principal office at 237 Park Avenue, Suite
800, New York, N.Y. 10017 (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser desires to purchase from Company, and
the Company desires to issue and sell to the Purchaser, upon the terms and
subject to the conditions of this Agreement, (i) shares of Series C Convertible
Preferred Stock, $.01 par value (the "Series C Preferred Stock"), having the
rights, preferences and privileges set forth in the Certificate of Designations,
Preferences and Rights hereto as EXHIBIT A (the "Certificate of Designations")
and (ii) Warrants to purchase up to an aggregate of 45,500 shares of Common
Stock (as defined below), having the terms and conditions and being in the form
attached hereto as EXHIBIT B (the "Warrants"); and
WHEREAS, upon the terms and subject to the conditions set
forth in the Certificate of Designations, the Series C Preferred Stock is
convertible into shares of the Company's common stock, $.01 par value ("Common
Stock"); and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as EXHIBIT C (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act of 1933 and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
<PAGE>
ARTICLE I.
PURCHASE AND SALE OF SERIES C PREFERRED STOCK
I.1. TRANSACTION. The Purchaser hereby agrees to purchase from
the Company, and the Company has offered and hereby agrees to issue and sell to
the Purchaser, the number of shares of Series C Preferred Stock and the number
of Warrants set forth opposite the names of the Purchaser on the signature pages
hereto.
I.2. PURCHASE PRICE; FORM OF PAYMENT. The aggregate purchase
price for the Series C Preferred Stock and Warrants to be purchased by the
Purchaser hereunder shall be U.S. $400,000. At the Closing referred to in
Section 1.3 below, the Purchaser shall pay in cash the purchase price set forth
next to the name of the Purchaser on the signature pages hereto (the "Purchase
Price"). The Purchase Price shall be paid by wire transfer of immediately
available funds to the Company in accordance with the Company's wire
instructions set forth below. Simultaneously against receipt by the Company of
the Purchase Price by the Purchaser, the Company shall deliver to the Purchaser
(i) the stock certificates evidencing the number of shares of Series C Preferred
Stock purchased by the Purchaser as set forth next to the name of the Purchaser
on the signature pages hereto, and (ii) the number of Warrants purchased by the
Purchaser as set forth next to the name of the Purchaser on the signature pages
hereto, in each case duly executed on behalf of the Company and registered in
the name of the Purchaser.
I.3. CLOSING. The closing (the "Closing") of the issuance and
sale of the Series C Preferred Stock shall be the date hereof or such other date
as shall be mutually agreed upon in writing (the "Closing Date") and shall occur
at the offices of Weil, Gotshal & Manges LLP, or at such other place mutually
agreeable to the parties hereto.
I.4. METHOD OF PAYMENT. Payment of the Purchase Price shall be
made by wire transfer of immediately available funds to:
First Union National Bank
18545 Biscayne Blvd.
Aventura, FL 33180
Bank ABA Number: 063000021
Account Number: 2090001613844
Account Holder: Columbia Laboratories, Inc.
2
<PAGE>
I.5. DELIVERY INSTRUCTIONS. The Series C Preferred Stock and
the Warrants shall be delivered by the Company to the Purchaser pursuant to
Section 1.2. hereof on a "delivery-against-payment basis" at the Closing.
ARTICLE II.
PURCHASER REPRESENTATIONS, WARRANTIES; ACCESS
TO INFORMATION; INDEPENDENT INVESTIGATION.
The Purchaser represents and warrants to and covenants and
agrees with the Company as follows:
II.1. The Purchaser is purchasing the Series C Preferred
Stock, the Warrants, the Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Shares of Common Stock issuable upon conversion
of the Series C Preferred Stock (the "Conversion Shares" and, collectively with
the Series C Preferred Stock, the Warrants and the Warrant Shares, the
"Securities") for its own account, for investment purposes only and not with a
view towards or in connection with the public sale or distribution thereof in
violation of the provisions of the Securities Act of 1933, as amended (the
"Securities Act").
II.2. The Purchaser is (i) an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act, (ii) experienced
in making investments of the kind contemplated by this Agreement, (iii) capable,
by reason of its business and financial experience, of evaluating the relative
merits and risks of an investment in the Securities, and (iv) able to afford the
loss of its investment in the Securities.
II.3. The Purchaser understands that the Securities are being
offered and sold by the Company in reliance on an exemption from the
registration requirements of the Securities Act and equivalent state securities
and "blue sky" laws, and that the Company is relying upon the accuracy of, and
the Purchaser's compliance with, the Purchaser's representations, warranties and
covenants set forth in this Agreement to determine the availability of such
exemption and the eligibility of the Purchaser to purchase the Securities. The
Purchaser further understands that the Series C Preferred Stock and Conversion
Shares may not be transferred or resold without (a) registration under the
Securities Act and any applicable state securities laws, or (b) an exemption
from the requirements of the Securities Act and applicable state securities
laws.
II.4. The Purchaser understands that an exemption
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<PAGE>
from such registration is not presently available pursuant to Rule 144
promulgated under the Securities Act by the Commission and that in any event the
Purchaser may not sell any securities pursuant to Rule 144 prior to the
expiration of a one-year period after the Purchaser has acquired the securities.
The Purchaser understands that any sales pursuant to Rule 144 may only be made
in full compliance with the provisions of Rule 144.
II.5. The Purchaser has been furnished with or provided access
to all materials relating to the business, financial position and results of
operations of the Company, including the risk factors relating to the Company
and its business set forth in EXHIBIT D hereto (the "Risk Factors") and all
other materials requested by the Purchaser to enable them to make an informed
investment decision with respect to the Securities.
II.6. The Purchaser acknowledges that the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1997 and all other
reports and documents heretofore filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since December
31, 1997 (collectively the "Commission Filings") have been made available to the
Purchaser for the Purchaser's review.
II.7. The Purchaser acknowledges that in making its decision
to purchase the Securities it has relied on its own investigation of the Company
and been given an opportunity to ask questions of and to receive answers from
the Company's executive officers, directors and management personnel concerning
the terms and conditions of the private placement of the Securities by the
Company.
II.8. The Purchaser understands that the Securities have not
been approved or disapproved by the Commission or any state securities
commission and that the foregoing authorities have not reviewed any documents or
instruments in connection with the offer and sale to it of the Securities and
have not confirmed or determined the adequacy or accuracy of any such documents
or instruments.
II.9. The Purchaser has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Purchaser and is a valid and binding agreement of
the Purchaser enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
4
<PAGE>
moratorium and similar laws affecting creditors' rights and remedies generally.
II.10. Neither the Purchaser nor any of its affiliates nor any
person acting on its or their behalf has the intention of entering, or will
enter into, any put option, short position or other similar instrument or
position with respect to the Common Stock and neither the Purchaser nor any of
its affiliates nor any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement or the Certificate of
Designations to settle any put option, short position or other similar
instrument or position that may have been entered into prior to the execution of
this Agreement.
ARTICLE III.
COMPANY'S REPRESENTATIONS
The Company represents and warrants to the Purchaser that:
III.1. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company is as set forth on SCHEDULE 3.1. All of the issued
and outstanding shares of capital stock set forth on SCHEDULE 3.1 have been
validly issued and are fully paid and non-assessable. The Series C Preferred
Stock has been duly and validly authorized for issuance by the Company pursuant
to this Agreement, and when issued by the Company pursuant hereto, will be duly
and validly issued, fully paid and non-assessable and will be free of any
preemptive or similar rights. The Conversion Shares and Warrant Shares have been
duly and validly authorized and reserved for issuance by the Company and, when
issued by the Company upon conversion of, or in lieu of accrued dividends on,
the Series C Preferred Stock, or on exercise of the Warrants, will be duly and
validly issued, fully paid and non-assessable. Except as set forth on SCHEDULE
3.1 or in the Commission Filings there are no options, warrants, subscription,
"call" or other similar rights to acquire the Common Stock that have been issued
or granted to any person.
III.2. ORGANIZATION. Each of the Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and each is duly
qualified as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the business, properties,
condition (financial or otherwise) or results of operations
5
<PAGE>
of the Company and its subsidiaries taken as a whole or on the consummation of
any of the transactions contemplated by this Agreement (a "Material Adverse
Effect").
III.3. AUTHORIZED SHARES. The Company has duly and validly
authorized and reserved for issuance shares of Common Stock sufficient in number
for the conversion, of the shares of Series C Preferred Stock issued to the
Purchaser hereunder (assuming for purposes of this Section 3.3 a Conversion
Price (as defined in the Certificate of Designations) of $2.80) and the exercise
of 45,500 Warrants. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the Conversion Shares and
Warrant Shares upon conversion of the Series C Preferred Stock and exercise of
the Warrants. The Company further acknowledges that its obligation to issue
Conversion Stock upon conversion of the Series C Preferred Stock and Warrant
Shares upon exercise of the Warrants in accordance with this Agreement, the
Certificate of Designations and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
III.4. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby (including without
limitation the filing of the Certificate of Designations, the issuance of the
Series C Preferred Stock, the Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares), has been duly authorized
by all requisite corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery by the other parties hereto) constitutes a
valid and binding obligation of the Company enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
III.5. NON-CONTRAVENTION. The execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated
6
<PAGE>
hereby do not and will not conflict with or result in a breach by the Company of
any of the terms or provisions of, or constitute a default (or an event which,
with notice, lapse of time or both, would constitute a default), and there is
not currently outstanding any uncured breach or default under (i) the
certificate of incorporation or by-laws of the Company, or (ii) any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which its properties or assets are bound, or any law,
rule, regulation, decree, judgment or order of any court or public or
governmental authority having jurisdiction over the Company or any of the
Company's properties or assets, except as to (ii) above such conflict, breach or
default which would not have a Material Adverse Effect.
III.6. ABSENCE OF CERTAIN CHANGES. Since December 31, 1997,
except as disclosed in the Commission Filings there has not occurred any change,
event or development in the business, financial condition, prospects or results
of operations of the Company, and there has not existed any condition having or
reasonably likely to have, a Material Adverse Effect.
III.7. ABSENCE OF LITIGATION. Except as disclosed in the
Commission Filings, there is no action, suit, claim, proceeding, inquiry or
investigation pending or, to the Company's knowledge, threatened, by or before
any court or public or governmental authority, nor does the Company have
knowledge of any facts or circumstances which would reasonably be likely to give
rise to any such action, suit, claim, inquiry, proceeding or investigation,
which, if determined adversely to the Company or any of its subsidiaries, would
have a Material Adverse Effect.
III.8. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. Each of the
financial statements included in the Commission Filings complied in all material
respects with the rules and regulations of the Commission with respect thereto
as in effect at the time of filing, have been prepared in accordance with United
States General Accepted Accounting Principles ("GAAP") (subject, in the case of
the interim financial statements, to normal year end adjustments and the absence
of footnotes) and in conformity with the practices consistently applied by the
Company without modification of the accounting principles used in the
preparation thereof, and fairly presents in all material respects the financial
position, results of operations and cash flows of the Company as at the dates
and for the periods indicated.
III.9. SECURITIES LAW MATTERS. Assuming the
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<PAGE>
accuracy of the representations and warranties of the Purchaser set forth in
Article II hereof, the offer and sale by the Company of the Securities is exempt
from the registration and prospectus delivery requirements of the Securities Act
and the rules and regulations of the Commission thereunder. No form of general
solicitation or advertising has been used or authorized by the Company or any of
its officers, directors or Affiliates in connection with the offer or sale of
the Series C Preferred Stock (and the Conversion Shares) as contemplated by this
Agreement or any other agreement to which the Company is a party.
III.10. INTERNAL CONTROLS AND PROCEDURES. The Company
maintains accurate books and records and internal accounting controls which
provide reasonable assurance that (i) all transactions to which the Company is a
party or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's assets is
compared with existing assets at regular intervals; (iii) access to the
Company's assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company is a party or by
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with U.S. generally
accepted accounting principles.
III.11. COMMISSION FILINGS. None of the Commission Filings
contained at the time they were filed any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
III.12. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Commission Filings, since December 31, 1997 there has not occurred any change,
event or development in the business, financial condition, prospects or results
of operations of the Company or its subsidiaries, and there has not existed any
condition having or reasonably likely to have, a Material Adverse Effect.
III.13. FILINGS, CONSENTS AND APPROVALS. The Company is not
required to obtain any consent, authorization, or make any filing with, Federal,
state, local or other governmental authority in connection with the issuance and
sale of the Series C Preferred Stock and the Warrants, other than (i) the filing
of the Certificate of Designations with the Secretary of State of Delaware, (ii)
the filings required pursuant to Section 4.2, (iii) the filing of the
Registration Statement with the Securities and Exchange Commission meeting the
requirements set forth in
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the Registration Rights Agreement, (iv) the application(s) to the American Stock
Exchange for the listing of the Conversion Shares and Warrant Shares for trading
on the American Stock Exchange (and with any other national securities exchange
or market on which the Common Stock is then listed), and (v) in all other cases
where the failure to obtain such consent, waiver, authorization or order, or to
give such notice or make such filing or registration could not have or result
in, individually or in the aggregate, a Material Adverse Effect.
III.14. COMPLIANCE WITH LAWS; PERMITS. The Company is in
compliance with all laws, rules, regulations, codes, ordinances and statutes
applicable to it or to the conduct of its respective businesses, except for such
non-compliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
III.15. PATENTS AND TRADEMARKS. The Company has, or has the
rights to use, all patents, patent applications, trademarks, trademark
applications, licenses and rights which are necessary or material for use in
connection with its business, except where the failure to have any such rights
would not have a Material Adverse Effect.
ARTICLE IV.
CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
IV.1. RESTRICTIVE LEGEND. The Purchaser acknowledges and
agrees that, upon issuance pursuant to this Agreement, the Securities (and any
shares of Common Stock issued in conversion of the Series C Preferred Stock, in
lieu of dividends on the Series C Preferred Stock and on exercise of the
Warrants) shall have endorsed thereon a legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the Series C
Preferred Stock and the Conversion Shares):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED, SOLD OR OTHERWISE TRANSFERRED PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS IN RESPECT OF WHICH THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO SUCH
EFFECT."
IV.2. FILINGS. The Company shall make all necessary SEC and
"blue sky" filings required to be made by the Company in connection with the
sale and issuance of the Securities to the Purchaser and, upon request, shall
promptly provide a copy thereof to the Purchaser after such filing.
IV.3. USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Securities (excluding amounts paid by the Company for legal fees
in connection with such sale) for general corporate and working capital
purposes.
IV.4. LISTING. The Company shall use its best efforts to
maintain its listing of the Common Stock on the American Stock Exchange or such
other principal national securities exchange on which the Common Stock may be
then listed.
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IV.5. RESERVED CONVERSION SHARES. The Company at all times
from and after the date hereof shall have a sufficient number of shares of
Common Stock duly and validly authorized and reserved for issuance to satisfy
the conversion (pursuant to the Certificate of Designations), in full, of 1,300
Shares of Series C Preferred Stock issued to the Purchaser hereunder (assuming
for purposes of this Section 4.5, a Conversion Price (as defined in the
Certificate of Designations) of $2.80) and the exercise in full of all of the
Warrants issued to the Purchaser hereunder.
IV.6. RIGHT OF FIRST REFUSAL. If, during the period ending 120
days after the Closing Date (the "Right of First Refusal Period"), the Company
should propose (the "Proposal") to issue Common Stock or securities convertible
into Common Stock (the "Right of First Refusal Securities") at a price less than
the Current Market Price (as defined in the Certificate of Designations), the
Company shall be obligated to offer the Purchaser an opportunity to purchase
all, but not less than all, of the shares of Common Stock included in the
Proposal on the terms set forth in the Proposal (the "Offer"), and the Purchaser
shall have the right, but not the obligation, to accept such Offer on such
terms. The Purchaser shall have ten (10) business days to accept or reject any
such Offer following written notice to the Purchaser that the Company proposes
to issue any Right of First Refusal Securities on the terms set forth in the
Proposal, which shall accompany the notice. If the Purchaser shall fail to
notify the Company in writing of its intention to exercise its Right of First
Refusal within such time period, the Company may effect the sale of securities
on substantially the terms set forth in the Proposal. Notwithstanding the
foregoing, the Purchaser shall have no rights under this paragraph 4.6. in
respect of Common Stock or any other securities of the Company issuable (i) upon
the exercise or conversion of options, warrants or other rights to purchase
securities of the Company outstanding as of the date hereof, (ii) to officers,
directors or employees of the Company or any of its subsidiaries under any stock
option or similar plan heretofore or hereafter adopted by the Company and
approved by its stockholders.
IV.7. NO ISSUANCE OF SERIES C PREFERRED STOCK. As long as any
shares of Series C Preferred Stock are outstanding the Company shall not issue
any shares of Series C Preferred Stock to any person or entity other than (i)
the Purchaser, (ii) David Knott or Knott Partners, L.P., or (iii) the purchasers
party to the Securities Purchase Agreement dated as of January 7, 1999 entered
into in connection with the issuance of the Series C Preferred
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Stock, without the prior written consent of the Purchaser, which consent shall
not be unreasonably withheld.
ARTICLE V.
TRANSFER AGENT INSTRUCTIONS.
V.1. The Company agrees that it will provide its transfer
agent with customary stop transfer instructions to enable it to issue
certificates, registered in the name of the Purchaser or its respective
nominee(s), for the Conversion Shares or the Warrant Shares in such amounts as
may be specified from time to time by the Purchaser to the Company upon
conversion of the Series C Preferred Stock and the exercise of the Warrants, in
all cases in accordance with the terms of the Certificate of Designations or the
Warrants, as the case may be. Nothing contained in this Section 5.1. shall
affect in any way any of the Purchaser's obligations to comply with all
applicable securities laws upon resale of such Common Stock. If, at any time,
the Purchaser provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by the Purchaser of
such Common Stock is not required under the Securities Act and that the removal
of restrictive legends is permitted under applicable law, the Company shall
permit the transfer of such Common Stock and, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without any
restrictive legends endorsed thereon.
V.2. The Purchaser is permitted to (i) exercise its right to
convert the Series C Preferred Stock in accordance with the terms of conversion
set forth in the Certificate of Designations and (ii) exercise its right to
purchase shares of Common Stock pursuant to exercise of the Warrants in
accordance with the applicable terms of the Warrants.
ARTICLE VI.
CONDITIONS
VI.1. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Series C Preferred
Stock and the Warrants to the Purchaser at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Purchaser
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with prior written notice thereof:
(i) The Purchaser shall have executed each of this Agreement
and the Registration Rights Agreement and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware.
(iii) The Purchaser shall have delivered to the Company the
Purchase Price for the shares of Series C Preferred Stock being purchased by the
Purchaser at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement.
(v) The accuracy in all material respects on the Closing Date
of the representations and warranties of the Purchaser contained in this
Agreement as if made on the Closing Date (except for representations and
warranties which, by their express terms, speak as of and relate to a specified
date, in which case such accuracy shall be measured as of such specified date).
VI.2. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE. The
obligations of the Purchaser to purchase the Series C Preferred Stock and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Purchaser's sole benefit and may be waived by the Purchaser at any time
in its sole discretion by providing the Company with prior written notice
thereof:
(i) The Company shall have executed each of this Agreement and
the Registration Rights Agreement, and delivered the same to the Purchaser.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware, and a copy of the
Certificate of Designations that has been certified by such Secretary of State
shall have been delivered to the Purchaser.
(iii) No statute, rule, regulation, executive
13
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order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement.
(v) The Company shall have executed and delivered to the
Purchaser the Warrants and the stock certificates for the Series C Preferred
Stock being purchased by the Purchaser at the Closing.
(vi) The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date (except for representations and warranties which,
by their express terms, speak as of and relate to a specified date, in which
case such accuracy shall be measured as of such specified date).
ARTICLE VII.
SURVIVAL; INDEMNIFICATION.
VII.1. The representations, warranties and covenants made by
each of the Company and the Purchaser in this Agreement shall survive for two
(2) years following the Closing. In the event of a breach or violation of any of
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
VII.2. The Company hereby agrees to indemnify and hold
harmless the Purchaser, its Affiliates and its or their respective officers,
directors, partners and members (collectively, the "Purchaser Indemnitees"),
from and against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses"), and agrees to reimburse
the Purchaser Indemnitees for all out-of-pocket expenses (including the
reasonable and documented fees and expenses of legal counsel), in each case
promptly as incurred by the Purchaser Indemnitees and to the extent arising out
of or in connection with:
(a) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
14
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agreement or certificate entered into or delivered by the Company
pursuant to or in connection with this Agreement; or
(b) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to or in
connection with this Agreement.
The Company shall be liable to the Purchaser Indemnitee under
this Section 7.2 only to the extent of, in the aggregate, the lesser of (i) the
amount of any such loss, claim, damage or liability or (ii) the portion of the
Purchase Price received by the Company from the Purchaser in connection with the
purchase of the Series C Preferred Stock hereunder.
VII.3. The Purchaser hereby agrees to indemnify and hold
harmless the Company, its Affiliates and its or their respective officers,
directors, partners and members (collectively, the "Company Indemnitees"), from
and against any and all Losses, and agrees to reimburse the Company Indemnitees
for all out-of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees, to the
extent arising out of or in connection with:
(a) any misrepresentation, omission of fact, or breach of any
of the Purchaser's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Purchaser
pursuant to this Agreement; or
(b) any failure by the Purchaser to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or any instrument, certificate or agreement
entered into or delivered by the Purchaser pursuant to this Agreement.
The Purchaser shall be liable to the Company Indemnitees under
this Section 7.3 only to the extent of, in the aggregate, the lesser of (i) the
amount of any such loss, claim, damage or liability or (ii) the portion of the
Purchase Price received by the Company from the Purchaser in connection with the
purchase of the Series C Preferred Stock hereunder.
VII.4. Promptly after receipt by either party
15
<PAGE>
hereto seeking indemnification pursuant to this Article VII (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a "Claim"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Article VI is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise may
have to the Indemnified Party, except to the extent that the Indemnifying Party
is materially prejudiced and forfeits substantive rights and defenses by reason
of such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ one separate legal counsel and to participate in the defense
of such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of one such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) representation of the
Indemnified Party and the Indemnifying Party by the same legal counsel would not
be appropriate due to actual or, as reasonably determined by legal counsel to
the Indemnified Party, potentially differing interests between such parties in
the conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. In no event shall the Indemnifying Party be liable for the
fees and expenses of more than one firm of legal counsel for the Indemnified
Party. The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
16
<PAGE>
VII.5. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
ARTICLE VIII.
GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON CONVENIENS, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission to the Company of the
Purchaser's signature on this Agreement, upon execution hereof by the Company
and delivery to the Purchaser by facsimile transmission or otherwise, shall be
legal and binding on the Company and the Purchaser. This Agreement may be signed
in one or more counterparts, each of which shall be deemed an original. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement. Any
provision of this Agreement may be waived only by an instrument in writing
signed by the party against whom enforcement of the waiver is sought. This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
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<PAGE>
ARTICLE IX.
NOTICES.
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(1) if to the Company, to:
COLUMBIA LABORATORIES, INC.
2875 Northeast 191 Street, Suite 400
Aventura, Florida 33180
Attention: David L. Weinberg
With a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq. or
Michael Nissan, Esq.
(2) if to the Purchaser, at the most current address as
provided by the Purchaser to the Company in
accordance with the provisions of this Article IX,
which address shall initially be the address set
forth next to the Purchaser's name on the signature
pages hereto.
The Company or the Purchaser may change its address for notice by providing
notice pursuant to this Article IX.
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ARTICLE X.
CONFIDENTIALITY.
The Company and the Purchaser agree to keep confidential and
not to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 10 of Rule
601 of Regulation S-K under the Securities Act and the Exchange Act) or by
subpoena or order of any court or governmental agency.
ARTICLE XI.
ASSIGNMENT.
This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
COLUMBIA LABORATORIES, INC.
By:
--------------------------------------
Name:
Title:
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<PAGE>
WINDSOR PARTNERS, L.P.
By:
-------------------------------------
Name:
Title:
Number of Shares of
Series C Preferred Stock
to be purchased by you -
400; Number of Warrants -
14,000; Aggregate Purchase
Price - $400,000.
Windsor Partners, L.P.
c/o TC Management
237 Park Avenue
Suite 800
New York, N.Y. 10017
Attn: Tony Campbell
(212) 808-3435
21
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 7th day of
January, 1999 (the "Agreement"), by and among Columbia Laboratories, Inc., a
Delaware Corporation, with principal executive offices located at 2875 Northeast
191 Street, Suite 400, Aventura, Florida 33180 (the "Company"), each of the
holders named on the signature pages hereto (herein referred to individually as
a "Holder" and collectively as the "Holders").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of the date hereof between the Company
and each of the Holders (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Holders (i) shares of Series C Convertible
Preferred Stock (the "Series C Preferred Stock") which, upon the terms and
subject to the conditions thereof, are convertible into shares of the common
stock, $.01 par value, of the Company (the "Common Stock"), and (ii) warrants
(the "Warrants") to purchase shares of Common Stock; and
WHEREAS, to induce the Holders to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Series C Preferred Stock, upon conversion of the Series C Preferred Stock and
exercise of the Warrants certain registration rights with respect to the
Securities Act.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the meanings:
(i) "CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations, Preferences and Rights of the Series C Convertible Preferred
Stock.
(ii) "COMMISSION" means the Securities and Exchange
Commission.
<PAGE>
(iii) "EVENT" AND "EVENT DATE" have the meanings ascribed to
such terms in Section 2(b) hereof.
(iv) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(v) "PERSON" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(vi) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
(vii) "REGISTRABLE SECURITIES" means the Common Stock and
other securities issued or issuable (i) in lieu of cash dividend
payments on the Series C Preferred Stock, (ii) upon conversion of the
Series C Preferred Stock or (iii) upon exercise of the Warrants;
PROVIDED, HOWEVER, a share of Common Stock shall cease to be a
Registrable Security for purposes of this Agreement when it no longer
is a Restricted Security.
(viii) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities
pursuant to Rule 415 under the Securities Act, including the Prospectus
contained therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all
exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(ix) "RESTRICTED SECURITY" means any share of
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Common Stock or other security issued or issuable in lieu of cash
dividend payments on the Series C Preferred Stock upon conversion of
the Series C Preferred Stock or exercise of the Warrants except any
such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the Prospectus included in the Registration Statement,
(ii) has been transferred in compliance with the resale provisions of
Rule 144 under the Securities Act (or any successor provision thereto)
or is transferable by the holder thereof pursuant to paragraph (k) of
Rule 144 under the Securities Act (or any successor provision thereto),
or (iii) otherwise has been transferred and a new share of Common Stock
not subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company.
(x) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION.
(A) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company shall prepare and file with the Commission, not later than March 31,
1999, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate Form in accordance herewith)
relating to the offer and sale of the Registrable Securities and shall use its
reasonable best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable, but not
later than May 31, 1999, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act until the
date which is five years after the date that such Registration Statement is
declared effective by the Commission (subject to the suspension periods
described in Section 3(a) hereof) or such shorter period that will terminate
when all the Registrable Securities covered by the Registration Statement have
been sold pursuant thereto in accordance with the plan of distribution provided
in the Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the "Registration
Period"). Notwithstanding the foregoing, the Company shall have no obligation to
prepare and file a Registration Statement pursuant to this Agreement if the
Series C Preferred Stock has
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<PAGE>
been redeemed in full pursuant to Section 6.5 or 6.6 of the Certificate of
Designations.
(B) REGISTRATION DEFAULT. If (i) the Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not filed with the Commission by the March 31, 1999, or
(ii) the Registration Statement is not declared effective by the Commission by
May 31, 1999, or (iii) the Company fails to file with the Commission a request
for acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, or Rule 461 promulgated under the Securities
Act, as amended, within five (5) days of the date that the Company is notified
in writing by the Commission that the Registration Statement will not be
"reviewed," or not subject to further review or comment, or (iv) such
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Registration Period (as defined in Section
3(a) below), without being succeeded within thirty (30) days by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(v) trading in the Common Stock shall be suspended from the AMEX or the
principal national securities exchange on which the Common Stock is then listed
for more than three (3) consecutive Business Days, or (vi) the conversion rights
of the Holders are suspended for any reason or (vii) an amendment to the
Registration Statement is not filed by the Company with the Commission within
ten (10) days of the Commission's notifying the Company that such amendment is
required in order for the Registration Statement to be declared effective (any
such failure or breach being referred to as an "EVENT," and for purposes of
clauses (i), (ii), (vi) the date on which such Event occurs, or for purposes of
clause (iii) the date on which such five (5) day period is exceeded, or for
purposes of clause (iv) the date which such 30 day-period is exceeded, for
purposes of clause (v) the date on which such three (3) Business Day-period is
exceeded or for purposes of clause (vii) the date which such 10 day-period is
exceeded being referred to as "EVENT DATE"), then the Company shall pay to the
Holders an amount equal to 2% of the purchase price per share of Series C
Preferred Stock (as defined in the Securities Purchase Agreement) on the first
of each monthly anniversary of the Event Date until such time as the applicable
Event is cured or the Company has redeemed the Series C Preferred Stock in
accordance with Section 6.5 of the Certificate of Designations.
3. OBLIGATIONS OF THE COMPANY. If and when the Company is
required by the provisions of this Agreement to use its reasonable best efforts
to effect the registration of the Registrable Securities, the Company shall:
(a) Prepare and file with the Commission such
4
<PAGE>
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement effective and in compliance with the provisions of the Securities Act
applicable thereto so as to permit the Prospectus forming part thereof to be
current and useable by the Holders for resales of the Registrable Securities
during the Registration Period. Notwithstanding the foregoing provisions of this
Section 3(a), the Company may, during the Registration Period, suspend the sale
by the Holders of their Registrable Securities pursuant to the Registration
Statement for a reasonable period not to exceed ninety (90) days upon (1) the
receipt by the Company 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, in which case suspension shall be limited to sales
in such jurisdiction, (2) the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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 light of the circumstances under which they were
made, not misleading, or (3) the good faith determination of the Board of
Directors of the Company that because of valid business reasons, including
pending mergers or other business combination transactions, the planned
acquisition or divestiture of assets, pending material corporate developments
and similar events which the Company has a bona fide business purpose for
preserving as confidential, it is in the best interests of the Company to
suspend such use, and prior to or contemporaneously with suspending such use,
the Company provides the Holders with written notice of such suspension, which
notice need not specify the nature of the event giving rise to such suspension.
At the end of any such suspension period, the Company shall provide the Holders
with written notice of the termination of such suspension. Each Holder agrees
that it will not sell Registrable Securities pursuant to the Registration
Statement during any suspension period and the Company agrees to cause each such
suspension period to end as soon as reasonably practicable.
(b) Furnish to each Holder whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company such number of copies of the Prospectus (including any preliminary
Prospectus), and all amendments and supplements thereto as such Holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Holder.
5
<PAGE>
(c) Use its reasonable best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under such
securities or "blue sky" laws of such jurisdictions as Holders who hold a
majority-in-interest of the Registrable Securities being offered reasonably
request in order to facilitate the disposition of the Registrable Securities by
the Holders; PROVIDED, HOWEVER, that the Company shall not be required in
connection therewith or as a condition thereto to (1) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(c), (z) subject itself to general taxation in any such
jurisdiction or (3) file a general consent to service of process in any such
jurisdiction.
(d) Use its reasonable best efforts to cause all the
Registrable Securities covered by the Registration Statement to be listed on the
principal national securities exchange, and included in an inter-dealer
quotation system of a registered national securities association, on or in which
securities of the same class or series issued by the Company are then listed or
included.
(e) Maintain a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement.
(f) Take all reasonable actions as the Holders may reasonably
request necessary to expedite or facilitate the disposition by the Holders of
their Registrable Securities.
(g) (i) Make reasonably available for inspection by the
Holders participating in any disposition pursuant to the Registration Statement,
and any attorney or accountant retained by such Holders, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries, and (ii) cause the Company's officers, directors and
employees to supply all information reasonably requested by such Holders or any
such attorney or accountant in connection with the Registration Statement, in
each case, as is customary for similar due diligence examinations; PROVIDED,
HOWEVER, that all records, information and documents that are designated in
writing by the Company, in good faith, as confidential, proprietary or
containing any material non-public information shall be kept confidential by
such Holders and any such attorney or accountant (pursuant to an appropriate
confidentiality agreement in the case of any such holder), unless such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available to
the public generally or
6
<PAGE>
through a third party not in violation of an accompanying obligation of
confidentiality; and PROVIDED FURTHER that, if the foregoing inspection and
information gathering would otherwise disrupt the Company's conduct of its
business, such inspection and information gathering shall, to the maximum extent
possible, be coordinated on behalf of the Holders and the other parties entitled
thereto by one firm of counsel designed by and on behalf of the majority in
interest of Holders and other parties.
(h) Promptly notify the Holders (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration Statement
and Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the issuance by any
state securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky" laws or the
initiation of any proceedings for that purpose, (v) if, between the effective
date of a Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the Company
contained in any securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
and (vi) of the happening of any event which makes any statement made in a
Registration Statement or related Prospectus untrue or which requires the making
of any changes in such Registration Statement or Prospectus so that they 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 light of the circumstances under which they were made, not
misleading. As promptly as possible following expiration of any suspension
period, the Company shall prepare and file with the Commission and furnish a
supplement or amendment to such Prospectus so that, as thereafter deliverable to
the purchasers of such Registerable Securities, such Prospectus will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(i) Make generally available to the Holders an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act no
later than 45 days after the end of the 12-month period beginning with the first
day of the
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Company's first fiscal quarter commencing after the effective date of
a Registration Statement, which earnings statement shall cover said 12-month
period, and which requirement will be deemed to be satisfied if the Company
timely files complete and accurate information on forms 10-Q, 10-K and 8-K under
the Exchange Act and otherwise complies with Rule 158 under the Securities Act.
(j) Promptly use its reasonable best efforts to prevent the
issuance of or, if issued, obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement, and if one is issued use commercially
reasonable efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement at the earliest possible moment.
(k) Permit counsel for the Holders to review the Registration
Statement and all amendments and supplements thereto for a reasonable period of
time prior to their filing with the Commission, and shall not file any document
in a form to which such counsel reasonably objects.
(l) Cooperate with the Holders in a reasonable manner to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be sold pursuant to
the registration statement and enable such certificates to be in such
denominations or amounts, as the case may be, and registered in such names as
the Holders may reasonably request.
4. OBLIGATIONS OF THE HOLDERS. In connection with the
registration of the Registrable Securities, the Holders shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request in order to assure
compliance with the Securities Act and the Exchange Act. At least ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Holder of the information the Company
requires from each such Holder (the "Requested Information") if such Holder
elects to have any of its Registrable Securities included in the Registration
Statement. If at least three (3) business days prior to the anticipated filing
date the Company has not
8
<PAGE>
received the Requested Information from an Holder (a "Non-Responsive Holder"),
then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Holder and have no further
obligations to the Non-Responsive Holder.
(b) Each Holder by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Holder has notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement.
(c) Each Holder agrees that, to the extent limited thereby, it
will not effect sales of the Registrable Securities during any suspension period
as described in Section 3(a) hereof until such Holder receives notice from the
Company that the suspension period has ended and, if so directed by the Company,
such Holder shall deliver to the Company or destroy (and deliver to the Company
a certificate of destruction) all copies in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of notice of such suspension.
(d) The failure of any Holder to comply with the provisions of
this Section 4 shall not relieve the Company of its obligations to the other
Holders under this Agreement with respect to the registration of such other
Holders' Registrable Securities in accordance with the terms hereof, except
where the failure of any Holder to so comply will materially interfere with the
ability of the Company to timely perform its obligations hereunder to the other
Holders.
5. EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions, if any, incurred in connection with
registrations, filings or qualifications pursuant to Section 3 shall be borne by
the Company; PROVIDED, that the Holders shall bear their own attorney's fees and
expenses and all underwriting accounts and commissions applicable to their
Registrable Securities.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. If the Registrable
Securities are registered under the Securities Act pursuant to Section 3 hereof,
the Company shall indemnify and hold harmless each Holder who sold Registrable
Securities pursuant to such registration its officers, directors, partners and
trustees, and each person who controls a Holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (each, a "Holder
Indemnitee") from and against any losses, claims, damages or
9
<PAGE>
liabilities to which such Holder Indemnitee may become subject under the
Securities Act, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or any amendment thereto or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, not misleading, or arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (as the same may have been amended or supplemented) or an omission or
alleged omission to state therein a 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 the Company hereby agrees to
reimburse such Holder Indemnitee for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; PROVIDED, HOWEVER, that the
Company shall not be liable to any such Holder Indemnitee in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Holder Indemnitee expressly for use therein or (ii) the use by
the Indemnified Holder of an outdated or defective Prospectus after the Company
has provided to such Holder Indemnitee an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) INDEMNIFICATION BY THE HOLDERS. If any Registrable
Securities are registered under the Securities Act pursuant to Section 3 hereof
each Holder agrees to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
an omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
10
<PAGE>
circumstances under which they were made, not misleading in each case to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such holder expressly for use therein,
and (ii) reimburse the Company for any legal or other expenses incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred; PROVIDED, HOWEVER, that a Holder shall be liable
to the Company under this Section 6(b) only to the extent of, in the aggregate,
the lesser of (i) the amount of any such loss, claim, damage or liability or
(ii) the net proceeds actually received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim; PROVIDED, HOWEVER, in no
event shall the Indemnifying Party be required to pay the fees and expenses of
more than one separate firm for all Indemnified Parties. If the Indemnified
Party employs
11
<PAGE>
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. The Indemnifying Party shall not,
without the prior written consent of the Indemnifying Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnifying Party from all liabilities with respect to such Claim or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein
because such indemnification is held by a court of competent jurisdiction to be
unenforceable, then each Indemnifying Party shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations, subject, however, to the
limitations on the liability of the Holders contained in subsection (b) above.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such Indemnifying Party or by
such Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in this Section 6(d). The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
7. RULE 144. The Company covenants to file all reports
required to make publicly available, and available to the Holders, at all times
during the Registration Period such
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<PAGE>
information as is necessary to enable the Holders to make sales of Registrable
Securities pursuant to Rule 144 of the Commission under the Securities Act, or
any successor to such rule. Upon request of a Holder, the Company will deliver
to such Holder a written statement as to whether it has complied with such
requirements.
8. ADDITIONAL HOLDERS. If any of David M. Knott, Knott
Partners, L.P. or Windsor Partners, L.P. shall within thirty (30) days after the
date hereof enter into a Securities Purchase Agreement with the Company to
purchase shares of Series C Preferred Stock, such entity shall, upon execution
of a counterpart of this Agreement and without the consent of any other Holder,
be entitled to all rights and privileges under this Agreement (including rights
to have the Company register Registrable Securities pursuant to this Agreement),
as if such entity was a Holder originally named on the signature pages thereof.
9. ASSIGNMENT. The rights to have the Company register
Registrable Securities pursuant to this Agreement may be assigned by the Holders
to any permitted transferee of all or any portion of the Registrable Securities
(or all or any portion of any Series C Preferred Stock of the Company or any
Warrant to purchase the Registrable Securities) of Registrable Securities only
if: (a) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
10. AMENDMENT AND WAIVER. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Holders who hold a majority-in-interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Holder and the Company; PROVIDED,
HOWEVER, that no amendment or waiver shall be effective as to any Holder whose
rights hereunder may be adversely affected thereby without such Holder's express
written consent.
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<PAGE>
11. MISCELLANEOUS.
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(1) if to the Company, to:
COLUMBIA LABORATORIES, INC.
2875 Northeast 191 Street, Suite 400
Aventura, Florida 33180
Attention: David L. Weinberg
With a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq. or
Michael Nissan, Esq.
(2) if to any Holder, at the most current address as such
Holder shall have provided in writing to the Company
in accordance with the provisions of this Section 10,
which address shall initially be the address set
forth next to such Holder's name on the signature
page to the Securities Purchase Agreement signed by
such Holder.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based ON FORUM NON CONVENIENS, to the bringing of any such
proceeding in such jurisdictions.
14
<PAGE>
(d) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provision, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(e) This Agreement, the Securities Purchase Agreement, the
Certificate of Designations and the Warrants constitute the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Certificate of Designations and the Warrants supersede all prior agreements and
undertakings among the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
COLUMBIA LABORATORIES, INC.
By:
------------------------
Name: David L. Weinberg
Title: Vice President -
Chief Financial
Officer
<PAGE>
ACHIEVE FUND, L.P.
By:
------------------------
Name:
Title:
<PAGE>
VMR LUXEMBURG SA
By:
------------------------
Name:
Title:
<PAGE>
ARIES TRADING LTD
By:
------------------------
Name:
Title:
<PAGE>
NARRAGANSETT CAPITAL
PARTNERS, LP
By:
------------------------
Name:
Title:
<PAGE>
DERWENT LIMITED
By:
------------------------
Name:
Title:
<PAGE>
JUPITER PARTNERS
By:
------------------------
Name:
Title:
<PAGE>
---------------------------
James J. Apostolakis
<PAGE>
---------------------------
David Ray
<PAGE>
---------------------------
Bernard Marden
<PAGE>
---------------------------
Christopher Castroviejo
<PAGE>
---------------------------
John Fenlin
<PAGE>
---------------------------
Mallory Factor
<PAGE>
---------------------------
John Gildea
<PAGE>
---------------------------
William J. Bologna
<PAGE>
---------------------------
Norman M. Meier
<PAGE>
---------------------------
David Landau
<PAGE>
---------------------------
Morrison Family Trust
<PAGE>
---------------------------
Robert W. Ledeux
<PAGE>
---------------------------
James R. Berdell
<PAGE>
---------------------------
George Voelker
<PAGE>
---------------------------
Terry Van Der Tuuk
<PAGE>
KNOTT PARTNERS, L.P.
By:
-----------------------
Name:
Title:
<PAGE>
---------------------------
David M. Knott
<PAGE>
WINDSOR PARTNERS, L.P.
By:
-----------------------
Name:
Title:
EXHIBIT 4.6
[FORM OF WARRANT]
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH
ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS
OF THIS WARRANT.
No. of Shares of Common Stock: ________
Warrant No. __
WARRANT
To Purchase Common Stock of
Columbia Laboratories, Inc.
THIS IS TO CERTIFY THAT _________________________________, or
registered assigns, is entitled, at any time from the Closing Date (as
hereinafter defined) to the Expiration Date (as hereinafter defined), to
purchase from Columbia Laboratories, Inc., a Delaware corporation (the
"Company"), _____________ shares of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a purchase price equal to $3.50 per share, all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" means January 27, 1999.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then
<PAGE>
administering the Securities Act and other federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.3.
"Current Market Price" on any date of determination means the
closing price of a share of Common Stock on such day as reported on the American
Stock Exchange, or if the Common Stock is not listed or admitted to trading on
the American Stock Exchange, on such other principal national securities
exchange or quotation system on which the Common Stock is then listed or quoted,
or, if not listed or quoted or admitted to trading on any national securities
exchange or quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished by any Nasdaq
member firm of the National Association of Securities Dealers, Inc. selected
from time to time by the Board of Directors of the Company for that purpose, or,
if not so available, a price determined in good faith by the Board of Directors
of the Company as being equal to the fair market value thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Price" shall mean $3.50 per share of Common Stock.
"Expiration Date" shall mean January 27, 2004.
"Holder" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on
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the books of the Company maintained for such purpose.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of January 7, 1999, by and between the Company and
the holders named on the signature pages thereto, as it may be amended from time
to time.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 7.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in
Section 7.2.
"Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date; unless and until
adjusted pursuant to Section 4, the Warrant Price shall equal the Exercise
Price.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
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"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Closing Date and
until 5:00 P.M., New York time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 2875 Northeast 191
Street, Suite 400, Aventura, Florida 33180 (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased, (ii) payment of the Warrant Price in
cash or by wire transfer or cashier's check drawn on a United States bank and
(iii) this Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt of the items referred
to in clauses (i), (ii) and (iii) above, the Company shall, as promptly as
practicable, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise, together with
cash in lieu of any fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as Holder shall request in the notice and
shall be registered in the name of Holder or, subject to Section 7 hereof, such
other name as shall be designated in the notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other Person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with the cash or check or checks
and this Warrant, is received by the Company as described above and all taxes
required to be paid by Holder, if any, pursuant to Section 2.2 prior to the
issuance of such shares have been paid. If this Warrant shall have been
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exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be
required to register shares in the name of any Person who acquired this Warrant
(or part hereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
At any time prior to the Expiration Date, Holder may, at its
option, exchange this Warrant, in whole or in part (a "Cashless Exchange"), into
the number of shares of Warrant Stock determined in accordance with this Section
2.1, by surrendering this Warrant at the principal office of the Company or at
the office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of shares of Warrant Stock
to be exchanged and the date on which a Holder requests that such Cashless
Exchange occur (the "Notice of Exchange"). The Cashless Exchange shall take
place on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company or its stock transfer agent (the
"Exchange Date"). Upon any such exchange, the amount paid for this Warrant shall
be deemed to constitute payment of the par value of the Warrant Shares so issued
in exchange. Certificates for the shares of Common Stock issuable upon such
Cashless Exchange and, if applicable, a new warrant of like tenor evidencing the
balance of the shares of Common Stock remaining subject to this Warrant, shall
be issued as of the Exchange Date and delivered to the Holder as promptly as
practicable following the Exchange Date. In connection with any Cashless
Exchange, this Warrant shall represent the right to subscribe for and acquire
the number of shares of Warrant Stock (rounded to the next highest integer)
equal to (i) the number of shares of Warrant Stock specified by Holder in its
Notice of Exchange (the "Total Number") less (ii) the number of shares of
Warrant Stock equal to the quotient obtained by dividing (A) the product of the
Total Number and the existing Exercise Price by (B) the Current Market Price on
the Exchange Date.
2.2. PAYMENT OF TAXES AND CHARGES. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued, fully
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paid and nonassessable, freely tradeable and without any preemptive rights. The
Company shall pay all documentary stamp taxes and other governmental charges
attributable to the issuance of the Warrant Stock, unless such tax or charge is
imposed by law upon Holder, in which case such taxes or charges shall be paid by
Holder. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of Common Stock issuable upon exercise of this Warrant in
any name other than that of Holder, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the satisfaction of the
Company that no such tax or other charge is due. The Holder shall be responsible
for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Stock upon exercise hereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the Closing Date.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject in all respects to compliance with
Section 7, transfer of this Warrant and all rights hereunder, in whole or in
part, shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 10.1, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall, subject to Section 7, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance
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<PAGE>
with Section 7, may be exercised by a new Holder for the purchase of shares of
Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 7, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 7, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) declare a dividend payable in, or make a distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
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<PAGE>
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Warrant Price shall be
adjusted to equal the price determined by multiplying the Warrant Price by a
fraction the denomination of which shall be the number of shares of Common Stock
outstanding immediately after giving effect to such action, and numerator of
which shall be the number of shares outstanding immediately prior to such
action. Any adjustment made pursuant to the Section 4.1 shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.
4.2. PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price provided for in this Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
4.3. RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF
ASSETS. In case of any reclassification of the Common Stock, any consolidation
or merger of the Company
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<PAGE>
with or into another person, the sale or transfer of all or substantially all of
the assets of the Company or any compulsory share exchange pursuant to which the
Common Stock is converted into other securities, case or property, then the
Holder shall have the right thereafter to exercise this Warrant only into the
shares of stock and other securities and property receivable upon or deemed to
be held by holders of Common Stock following such reclassification,
consolidation, merger, sales, transfer or share exchange, and the Holder shall
be entitled upon such event to receive such amount of securities or property
equal to the amount of Warrant Stock such Holder would have been entitled to had
such Holder exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sales, transfer or share exchange.
4.4. OTHER ACTION AFFECTING COMMON STOCK. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Section 4, which would have a
materially adverse effect upon the rights of the Holder, the number of shares of
Common Stock and/or the purchase price thereof shall be adjusted in such manner
as may be equitable in the circumstances, as determined in good faith by the
Board of Directors of the Company.
5. NOTICES TO HOLDER
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall give notice
to the Holder of the adjusted Warrant Price and adjusted number of shares of
Warrant Stock and, if requested, information describing the transactions giving
rise to such adjustments. Each such written notice shall be sufficiently given
if addressed to Holder at the last address of Holder appearing on the books of
the Company and delivered in accordance with Section 10.1.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall pay a dividend or make any distribution
of its Common Stock, or
(b) there shall be any capital, any reclassification or
recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or
other
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disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up, and (ii) in the
case of any such reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
deliverable upon such reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up. Each such written notice
shall be sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
10.1.
5.3. NOTICE OF OTHER ACTIONS. If at any time the Company shall
(a) issue rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price at the record date mentioned below of (b) distribute to all
holders of its Common Stock evidences of indebtedness of the Company or assets
of the Company (excluding cash dividends or distributions out of earned
surplus), then the Company shall give to Holder at least 30 days' prior written
notice of the date on which a record date shall be selected for the
determination of stockholders entitled to receive such rights or warrants,
evidences of indebtedness or assets of the Company.
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6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
7. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 7, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 7.
7.1. RESTRICTIVE LEGEND. (a) The Holder by accepting this
Warrant and any Warrant Stock agrees that this Warrant and the Warrant Stock
issuable upon exercise hereof may not be assigned or otherwise transferred
unless and until (i) the Company has received an opinion of counsel for the
Holder that such securities may be sold pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "Securities Act")
or (ii) a registration statement relating to such securities has been filed by
the Company and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows unless such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act").
The securities may not be offered for sale, sold or otherwise
transferred except (i) pursuant to an effective registration statement
under the Act or (ii) pursuant to an exemption from registration under
the Act in respect of which the Company has
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received an opinion of counsel satisfactory to the Company to such
effect. Copies of the agreement covering both the purchase of the
securities and restricting their transfer may be obtained at no cost by
written request made by the holder of record of this certificate to the
Secretary of the Company at the principal executive offices of the
Company."
(b) Except as otherwise provided in this Section 7, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended, and may
not be transferred in violation of such Act, the rules and regulations
thereunder or the provisions of this Warrant."
7.2. NOTICE OF PROPOSED TRANSFERS. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Restricted Common Stock, the
Holder shall give ten days' prior written notice (a "Transfer Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to Holder who
shall be reasonably satisfactory to the Company, an opinion that the proposed
Transfer of such Warrants or such Restricted Common Stock may be effected
without registration under the Securities Act. After receipt of the Transfer
Notice and opinion, the Company shall, within five days thereof, notify the
Holder as to whether such opinion is reasonably satisfactory and, if so, such
holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer shall bear the restrictive legend set forth in Section
7.1(a), and the Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 7.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
The Holder shall not be entitled to Transfer such Warrants or such Restricted
Common Stock until receipt of notice from the Company under this Section 7.2
that such opinion is reasonably satisfactory.
7.3. REQUIRED REGISTRATION. Pursuant to the terms and
conditions set forth in the Registration Rights Agreement, the Company shall
prepare and file with the
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Commission not later than March 31, 1999, a Registration Statement relating to
the offer and sale of the Common Stock issuable upon exercise of the Warrants
and shall use its reasonable best efforts to cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly as
practicable but no later than May 31, 1999.
7.4. TERMINATION OF RESTRICTIONS. Notwithstanding the
foregoing provisions of Section 7, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 7.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act. Whenever the restrictions
imposed by Section 7 shall terminate as to this Warrant, as hereinabove
provided, the Holder hereof shall be entitled to receive from the Company upon
written request of the Holder, at the expense of the Company, a new Warrant
bearing the following legend in place of the restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 7 HEREOF TERMINATED ON
________, ____, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 7.1(a).
8. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary
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<PAGE>
for Holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant or Restricted
Common Stock.
9. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; PROVIDED, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
10. MISCELLANEOUS
10.1. NOTICE GENERALLY. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified mail, postage prepaid, or by a nationally recognized overnight courier
service, and shall be deemed given when so delivered personally or by overnight
courier service, or, if mailed, three (3) days after the date of deposit in the
United States mails, as follows:
(1) If to the Company, to:
COLUMBIA LABORATORIES, INC.
2875 Northeast 191 Street, Suite 400
Aventura, Florida 33180
Attention: David L. Weinberg
With a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq. or
Michael Nissan, Esq.
(2) If to any Holder, at such Holder's last known address
appearing on the books of the Company maintained for
such purpose.
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10.2. SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 3.1 and 7, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder.
10.3. AMENDMENT. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Holder.
10.4. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
10.5. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
10.6. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and attested by its duly authorized officer on this 27th day of
January, 1999.
COLUMBIA LABORATORIES INC.
By:
---------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Shares of Common Stock of
Columbia Laboratories, Inc. and, if such Holder is not utilizing the cashless
exercise provisions set forth in Section 2.1 of this Warrant, encloses herewith
cash payment therefor, all at the price and on the terms and conditions
specified in this Warrant and requests that certificates for the shares of
Common Stock hereby purchased (and any securities issuable upon such exercise)
be issued in the name of and delivered to _____________ whose address is
_________________ and, if such shares of Common Stock shall not include all of
the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF
COMMON STOCK
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of Columbia
Laboratories, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:__________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
EXHIBIT 10.14
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment dated as of October 8, 1998 (the "EFFECTIVE DATE"),
between COLUMBIA LABORATORIES, INC., a Delaware corporation and any successor
thereof (the "COMPANY"), and NICHOLAS A. BUONICONTI ("EMPLOYEE"). Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the employment agreement between Employee and the Company dated as of April 15,
1997, as amended by the addendum dated as of September 1, 1997 (the "EMPLOYMENT
AGREEMENT").
W I T N E S S E T H :
WHEREAS, the Company is and will be engaged in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products;
WHEREAS, Employee and the Company are parties to the Employment
Agreement relating to the terms and conditions of Employee's services as an
employee and officer of the Company;
WHEREAS, the Company and Employee desire to enter into this amendment
(the "AMENDMENT") to the Employment Agreement; and
WHEREAS, the terms of the Employment Agreement shall be modified only by
the specific terms and conditions set forth herein, which shall either add
additional terms to the Employment Agreement or modify and supercede the
provisions in the Employment Agreement that address the subject matter hereof
and, in the event of any inconsistency between this Amendment and the Employment
Agreement, the provisions of this Amendment shall govern;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT; DUTIES. The Company shall employ Employee and
Employee hereby agrees to be employed by the Company for the
remainder of the Term; provided, however, that as of the
Executive Date, Employee hereby resigns from his positions as
Chief Operating Officer and Vice Chairman. His duties shall be
as directed by the Board of Directors or its designee.
Employee shall not be required to provide his services to the
Company on a substantially full-time basis, as set forth in
Section 5(b) of the Employment Agreement; instead, Employee
shall devote approximately five hours per month to his duties
to the Company, as requested by the Company.
<PAGE>
2. COMPENSATION. The Company shall continue to pay Employee his
base salary at the annual rate of $300,000 per year during the
period commencing on the day following the Effective Date and
ending on December 31, 1998. Such salary payments shall be
paid in accordance with the Company's payroll practices
commencing on the next payroll date following the Effective
Date, in an amount equal to the amount paid to Employee by the
Company for the payroll period immediately prior to the
Effective Date. For the remainder of the Term after December
31, 1998, the Company shall pay Employee a salary of $500 per
month.
3. FRINGE BENEFITS. Through December 31, 1998 Employee shall
continue to be given an automobile allowance or automobile
lease plan to the extent provided him immediately before the
Effective Date.
4. STOCK OPTIONS. The Company and Employee are parties to option
agreements (the "OPTION AGREEMENTS") in connection with the
Company's 1988 Stock Option Plan, as amended (the "1988
PLAN"), and the Company's 1996 Long-Term Performance Plan (the
"1996 PLAN" and, together with the 1988 Plan, the "PLANS").
Pursuant to the Option Agreements, the Company has granted
Employee stock options (the "STOCK OPTIONS") to purchase up to
a maximum of 1,360,000 shares of common stock of the Company
in accordance with the terms and provisions of the Option
Agreements and the Plans.
(A) 1988 PLAN. The Company and Employee acknowledge that,
as of the Effective Date, all of the 960,000 Stock
Options granted pursuant to the 1988 Plan are vested.
All Stock Options granted thereunder shall remain
exercisable for a period of two and one-half years
after the end of the Term.
(B) 1996 PLAN. The Company and Employee acknowledge that of
the 400,000 Stock Options granted pursuant to the
1996 Plan, 287,500 are vested as of the Effective
Date. To the extent that on or prior to the tenth day
following the Effective Date (the "OPTION
CANCELLATION DATE") Employee exercises any Stock
Options under the Plans, an equal number of Stock
Options that are unvested on the date of such
exercise shall immediately vest on a one-for-one
basis in the order such options would otherwise vest.
Any options under the 1996 Plan which have not vested
on or prior to the Option Cancellation Date shall be
canceled on such date and be of no further force or
effect. The Company and Employee acknowledge that as
set forth in the respective Option Agreements issued
to Employee pursuant to the 1996 Plan, already vested
Stock Options granted under the 1996 Plan shall
remain exercisable by Employee until they expire on
the tenth anniversary of their respective dates of grant.
5. TERMINATION OF EMPLOYMENT WITHOUT CAUSE. During the Term, the
Company may not terminate the employment of Employee other
than for Cause.
<PAGE>
6. INDEMNIFICATION. The Company acknowledges that Employee is
entitled to and shall be afforded indemnification in
connection with, relating to, or arising about of his service
as an officer or director of the Company or any other aspect
of his employment with or services for the Company to the
fullest extent that such indemnification is provided to
officers or directors of the Company.
7. COMMENT.
(A) BY THE COMPANY. The Company shall refrain from making now
or at any time in the future any false or defamatory
comment, statement or other communication concerning
Employee or Employee's employment relationship with
the Company to any third party, including, without
limitation, the press, any employee of the Company
and any individual or entity with whom Employee or
the Company has a current or prospective business
relationship.
(B) BY THE EMPLOYEE. Employee shall refrain from making now
or at any time in the future any false or defamatory
comment, statement or other communication concerning
the Company, its products, its services or any
current or former directors, officers or employees of
the Company to any third party, including, without
limitation, the press, any employee of the Company
and any individual or entity with whom Employee or
the Company has a current or prospective business
relationship.
8. PRESS RELEASE. On or immediately following the Effective Date
the Company shall issue a press release regarding the
modification of Employee's positions with and duties to the
Company in the form attached hereto as Exhibit A.
9. ATTORNEY'S FEES AND COSTS. The Company shall promptly pay
Employee's attorneys' fees and related costs in the amount of
$20,000 incurred in connection with the negotiation, drafting
and execution of this Amendment.
10. BINDING AGREEMENT; SUCCESSORS. This Amendment and the
Employment Agreement shall be binding upon, and inure to the
benefit of, the parties hereto, any successors to or assigns
of the Company and Employee's heirs and the personal
representatives of Employee's estate.
11. COUNTERPARTS. This Amendment may be executed by the parties
hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute
one and the same instrument.
12. HEADINGS. The headings of sections herein are included solely
for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Amendment.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment to be
signed by its officer pursuant to the authority of its Board of
Directors, and Employee has executed this Amendment as of the day and
year first written above.
COLUMBIA LABORATORIES, INC.
By:
---------------------------
William J. Bologna
Chairman of the Board
AGREED AND ACCEPTED:
- --------------------------
Nicholas A. Buoniconti
EXHIBIT 10.15
AGREEMENT
AGREEMENT (the "Agreement"), dated as of December 14, 1998, by
and among Columbia Laboratories, Inc., a Delaware corporation (the "Company"),
William J. Bologna and Norman M. Meier (the "Management Group"), and James J.
Apostolakis, David Ray, Bernard Marden, Anthony R. Campbell, David M. Knott and
Knott Partners, L.P. (Messrs. Apostolakis, Ray, Marden, Campbell and Knott,
together with Knott Partners, L.P., being referred to herein, collectively, as
the "Signing Stockholders").
WHEREAS, the Company and certain of the Signing Stockholders have
been engaged in discussions regarding the management and operation of the
Company in anticipation of the Company's 1998 Annual Meeting of Stockholders
(the "1998 Meeting"); and
WHEREAS, the Company and the Signing Stockholders desire to enter
into this Agreement to express their understandings and agreements with respect
to the nomination of persons to serve on the Board of Directors of the Company
during the period commencing on the date hereof and ending immediately prior to
the Company's 2000 Annual Meeting of Stockholders or December 31, 2000, if
sooner (the "Term").
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. 1998 ANNUAL MEETING. As soon as reasonably practicable after
the date hereof, the Company shall establish a record date of December 28, 1998
for purposes of determining eligibility to vote at the 1998 Meeting. The Company
shall call the 1998 Meeting to be held at 10:00 A.M., E.D.T., on January 28,
1999, at such location as the Company may determine within the City of New York.
The 1998 Meeting shall not be cancelled or adjourned without the consent of the
Signing Stockholders.
2. INCREASE IN DIRECTORSHIPS. The Company agrees that during the
Term it will not change the size of the Company's Board of Directors without the
consent of a majority of the New Designees (as defined below). Notwithstanding
the foregoing, the Company (i) may increase the number of members of the Board
of Directors by one member to include as a director the person separately
disclosed to James J. Apostolakis in writing by a letter dated the date hereof
(the "Approved Designee") and (ii) shall increase the number of members of the
Board of Directors by one additional member to include as a director, if
designated and approved in accordance with Section 3(a) hereof, the Additional
New Designee (as defined below).
3. BOARD OF DIRECTORS.
(a) For the duration of the Term, the Company agrees that it will
take all actions reasonably within its power, including those actions specified
in Section 3(c), to provide that the Board of Directors of the Company will
include five (5) persons designated
<PAGE>
by the Management Group (the "Incumbent Designees"), which shall initially
consist of Messrs. William J. Bologna, Norman M. Meier, Dominique de Ziegler,
Jean Carvais and Robert C. Strauss, and three (3) persons designated by the
Signing Stockholders, which shall initially consist of Messrs. James J.
Apostolakis, Dennis M. O'Donnell and Selwyn P. Oskowitz (together with any
Additional New Designee, the "New Designees"). Within ninety (90) days after the
date hereof, the Signing Stockholders may designate a fourth person to serve on
the Board of Directors (the "Additional New Designee"), which person shall be
subject to the approval of a majority of the Incumbent Designees, such approval
not to be unreasonably withheld. The individuals separately disclosed to the
Incumbent Designees by a letter dated the date hereof are deemed to have been
approved for this purpose, and no further approval shall be required if any one
of those persons is designated by the Signing Stockholders as the Additional New
Designee. If the Additional New Designee is designated and approved by such
date, the Board of Directors of the Company shall promptly take all necessary
corporate action to increase the number of members of the Board of Directors of
the Company by one member to include as a director the Additional New Designee.
If the Additional New Designee is designated but not approved, the Signing
Stockholders shall have the right to designate a substitute Additional New
Designee within thirty (30) days after the date of such disapproval, which
person shall be subject to the same approval process as described above. If the
Additional New Designee (or any substitute Additional New Designee) is not so
designated and approved, the Signing Stockholders shall have the right to
designate only three members to serve on the Board of Directors for the duration
of the Term, which number may be further reduced in accordance with Section 3(b)
below. The Board of Directors by approval of this Agreement hereby nominates
Messrs. Bologna, Meier, de Ziegler, Carvais, Strauss, Apostolakis, O'Donnell and
Oskowitz as candidates for election to the Board of Directors at the 1998
Meeting.
(b) For the duration of the Term, the Signing Stockholders agree
that, notwithstanding Sections 3(a) and 3(c) of this Agreement, if the aggregate
number of shares of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK"), beneficially owned by Signing Stockholders who at such time
have filed Schedule 13D's acknowledging cooperation with respect to matters
relating to the Company or referring to the possibility of being deemed members
of a group (whether or not disclaimed) (i) falls below 9% of the outstanding
shares of Common Stock, the Signing Stockholders will have the right to
designate only two (2) persons for nomination to the Board of Directors at the
next annual meeting of stockholders, (ii) falls below 6% of the outstanding
shares of Common Stock, the Signing Stockholders will have the right to
designate only one (1) person for nomination to the Board of Directors at the
next annual meeting of stockholders, and (iii) falls below 5% of the outstanding
shares of Common Stock, the Signing Stockholders will not have the right to
designate any persons for nomination to the Board of Directors at the next
annual meeting of stockholders. Upon the designation and approval of the
Additional New Designee pursuant to Section 3(a) hereof, the number of persons
which the Signing Stockholders have the right to designate pursuant to clause
(i) and clause (ii) above shall be increased by one (1) person. Notwithstanding
the foregoing, if the Signing Stockholders' share ownership falls below 5% of
the outstanding shares of Common Stock,
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<PAGE>
but James J. Apostolakis (including any entities as to which he has claimed
beneficial ownership in his current Schedule 13D) beneficially owns at least 80%
of the number of outstanding shares of Common Stock reported as beneficially
owned by him in Amendment No. 3 to his Schedule 13D (totalling 926,000 shares)
at all times during the Term, the Company shall then use its best efforts to
nominate, recommend and effectuate the election of Mr. Apostolakis to the Board
of Directors at the 1998 Meeting and the 1999 Annual Meeting of Stockholders
(the "1999 Meeting"). For purposes of this Section 3(b), the term "outstanding
shares" shall mean all issued and outstanding shares of the Company's Common
Stock as of December 10, 1998 (totalling 28,684,687 shares), without regard to
any issuance of shares of Common Stock after such date.
(c) Subject to Section 3(b) of this Agreement, at the 1999
Meeting, the Company agrees to use its best efforts to nominate each of the
Incumbent Designees and the New Designees for election to the Board of
Directors. At the 1999 Meeting, the Company shall recommend to its stockholders
that the Incumbent Designees and the New Designees be elected to the Board of
Directors and use its best efforts to effectuate the election of the Incumbent
Designees and the New Designees to the Board of Directors.
(d) If during the period commencing with the succession to office
of the Board of Directors following the 1998 Meeting and ending immediately
prior to the Company's 2000 Annual Meeting of Stockholders (the "2000 MEETING")
at which directors are elected, a vacancy is created on the Board of Directors
by reason of the death, removal or resignation of any director, the parties
hereto agree to take such action to approve and elect a person to fill such
vacancy, which person shall be designated for election as a director (i) by the
remaining Incumbent Designees, if the person who has ceased to be a director was
an Incumbent Designee, and (ii) by the remaining New Designees, subject to the
approval of a majority of the Incumbent Designees, not to be unreasonably
withheld, if the person who has ceased to be a director was a New Designee;
PROVIDED, HOWEVER, if Robert C. Strauss shall resign from the Board of Directors
at any time when the Approved Designee is a member of the Board of Directors or
the Additional New Designee is not on the Board of Directors, no action shall be
taken to replace Mr. Strauss as a member of the Board of Directors, and the
number of members of the Board of Directors shall be reduced by one member;
PROVIDED FURTHER, HOWEVER, if Robert C. Strauss shall resign from the Board of
Directors at any time when the Approved Designee is not a member of the Board of
Directors (and the Additional New Designee is on the Board of Directors), a vote
of the majority of the entire Board of Directors shall be required to approve
and elect a person to replace Mr. Strauss as a member of the Board of Directors,
and thereafter the same vote shall be required to approve and elect any
successor to the person so elected to replace Mr. Strauss, or any of such
person's immediate or subsequent successors. Notwithstanding the foregoing, if
during the period commencing with the succession to office of the Board of
Directors following the 1998 Meeting and ending immediately prior to the
Company's 2000 Meeting at which directors are elected, a vacancy, or vacancies,
is or are created on the Board of Directors by reason of a New Designee's
resignation from the Board of Directors and, at such time, the Signing
Stockholders shall have lost their right to designate one or
3
<PAGE>
more persons for nomination to the Board of Directors at the next annual meeting
of stockholders pursuant to Section 3(b) hereof, the Incumbent Designees shall
approve and elect a person to fill the vacancy or vacancies caused by each such
resignation.
4. AMENDMENT OF BY-LAWS. Effective at the 1998 Meeting, the
By-Laws of the Company shall have been amended and restated in the form attached
as EXHIBIT A hereto.
5. COMMITTEE PARTICIPATION. The Company agrees that during the
period commencing with the succession to office of the Board of Directors
following the 1998 Annual Meeting and until the end of the Term, the Audit
Committee and the Compensation Committee shall each consist of one Incumbent
Designee, one New Designee (which shall be James J. Apostolakis) and Robert C.
Strauss (or his successor), in each case to the extent such person shall
otherwise be eligible to participate on such committee. During the Term there
shall be no executive committee of the Board of Directors or other committee to
which the Board of Directors may otherwise delegate all or any substantial
portion of its authority.
6. NO PROXY CONTESTS OR OTHER STOCKHOLDER ACTIONS. During the
Term, each of the Signing Stockholders agrees that he or it:
(a) shall cause all shares of capital stock of the Company
which have the right to vote generally in the election of directors or
otherwise, including, without limitation, shares of Common Stock
(collectively, "Voting Stock"), that are beneficially owned (within the
meaning of Regulation 13D and Rules 13d-3 and 13d-5 under the Exchange
Act) by such party (i) to be present, in person or by proxy, at all
meetings of stockholders of the Company so that all such shares may be
counted for the purpose of determining if a quorum is present at such
meetings, (ii) to be voted as provided in Section 3 and in favor of the
election of the Incumbent Designees and the New Designees to the Board
of Directors at the 1998 Meeting and the 1999 Meeting, (iii) to be voted
in favor of persons nominated and recommended by the Board of Directors
of the Company in any other election of directors and (iv) to be voted
in a manner consistent with the recommendation of the Board of Directors
with respect to any other matter brought before stockholders of the
Company (whether at a meeting or by written consent) other than a vote
with respect to a business combination, sale, lease or exchange of
property and assets, recapitalization, authorization or issuance of
securities or dissolution involving the Company;
(b) shall not directly or indirectly (except through the
Company pursuant to due authorization) solicit any proxies or consents
with respect to Voting Stock or in any way participate in any
"solicitation" of any "proxy" with respect to shares of Voting Stock (as
such terms are defined in Rule 14a-1 under the Exchange Act) or become a
"participant" in any election contest with respect to the Company
4
<PAGE>
(as such term is used in Rule 14a-11 under the Exchange Act) or request
or induce or attempt to induce any other person to take any such
actions or attempt to advise, counsel or otherwise influence in any way
any person with respect to the voting of Voting Stock;
(c) except to the extent previously disclosed on a
Schedule 13D or amendment thereto filed with the Securities and Exchange
Commission prior to November 23, 1998 or to the extent appropriate to
reflect this Agreement, shall not (i) form, join or otherwise
participate in any "group" (within the meaning of Section 13(d)(3) of
the Exchange Act or Rule 13d-5 thereunder) with respect to any Voting
Stock (a "13D Group"), (ii) otherwise act in concert with any other
person for the purpose of holding or voting Voting Stock, or (iii) file
any amendment to any Schedule 13D that relates to a plan or proposal
referred to in paragraph (d) of Item 4 of Schedule 13D or that contains
any statement that is in any way inconsistent with the provisions of the
Agreement;
(d) shall not deposit any Voting Stock in a voting trust
or subject any Voting Stock to any arrangement or agreement with respect
to the voting of such Voting Stock or other agreement having similar
effect, except that this clause (d) shall not apply to any arrangements
that are reflected in the Company's 1998 Proxy Statement;
(e) except as expressly contemplated hereby, shall not
make any proposal (including any proposal pursuant to Rule 14a-8 under
the Exchange Act) or bring any business before any meeting of
Stockholders and, other than actions proposed or taken at any meeting of
the Board of Directors, shall not take or seek to take any action in the
name or on behalf of the Company except pursuant to the performance of
any responsibilities attendant to any office in the Company held by such
party or pursuant to a resolution adopted by the Board of Directors;
(f) shall not call, request the call, or seek to call, any
special meeting of stockholders of the Company;
(g) for a period of twelve (12) months following the
succession to office of the New Designees, shall not take any action to
remove, or otherwise seek the removal of, William J. Bologna as Chairman
of the Board of Directors or Norman M. Meier as President and Chief
Executive Officer of the Company; and
(h) shall not enter into any discussions, negotiations,
arrangements or understandings with any other person with respect to any
of the foregoing matters referred to in this Section 6 or take any
action that would otherwise be in contravention of any provision of this
Agreement.
7. CONFIDENTIALITY OBLIGATIONS OF THE DIRECTORS. Each of the
Signing
5
<PAGE>
Stockholders who serves as a director on the Board of Directors acknowledges
that as a director such person will receive and have access to certain
non-public information concerning the Company and that he is aware that the
United States securities laws prohibit any person who has material, non-public
information concerning the matters of the Company from purchasing or selling
securities of the Company or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. Each of the Signing
Stockholders who serves as a director on the Board of Directors also
acknowledges that he is aware that he will be subject to Sections 16(a) and (b)
of the Exchange Act and the rules and regulations promulgated thereunder.
8. REPRESENTATIONS AND WARRANTIES OF THE SIGNING STOCKHOLDERS.
The Company hereby represents and warrants to the Signing Stockholders as
follows:
(a) AUTHORIZATION OF AGREEMENT. The Company has the
requisite power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement have been duly
authorized by all necessary corporate action on behalf of the Company.
This Agreement has been duly executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other
parties hereto) constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) CONFLICTS; CONSENTS OF THIRD PARTIES. Neither the
execution and delivery by the Company of this Agreement nor the
compliance by the Company with any of the provisions hereof will (i)
conflict with, or result in the breach of, any provision of the
certificate of incorporation or by-laws of the Company, (ii) conflict
with, violate, result in the breach of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other
obligation to which the Company is a party or by which the Company or
its properties or assets are bound, or (iii) violate any statute, rule,
regulation, order or decree of any governmental body or authority by
which the Company is bound.
9. REPRESENTATIONS AND WARRANTIES OF THE SIGNING STOCKHOLDERS.
Each of the Signing Stockholders hereby represents and warrants to the Company
as follows:
(a) AUTHORIZATION OF AGREEMENT. Each of the Signing
Stockholders has the requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The
6
<PAGE>
execution, delivery and performance by each partnership or
corporation which is a Signing Stockholder of this Agreement has been
duly authorized by all necessary partnership or corporate action on
behalf of such Signing Stockholder. This Agreement has been duly
executed and delivered by each of the Signing Stockholders and (assuming
the due authorization, execution and delivery by the other parties
hereto) constitutes the legal, valid and binding obligations of such
Signing Stockholder, enforceable against such Signing Stockholder in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(b) CONFLICTS; CONSENTS OF THIRD PARTIES. Neither the
execution and delivery by the Signing Stockholders of this Agreement nor
the compliance by the Signing Stockholders with any of the provisions
hereof will (i) conflict with, or result in the breach of, any provision
of the certificate of incorporation or by-laws or similar constitutive
documents of any partnership or corporation which is a Signing
Stockholder, (ii) conflict with, violate, result in the breach of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other obligation to which any of the Signing Stockholders
is a party or by which any such Signing Stockholder or its properties or
assets are bound, or (iii) violate any statute, rule, regulation, order
or decree of any governmental body or authority by which any of the
Signing Stockholders is bound.
(c) OWNERSHIP OF SHARES. Each Signing Stockholder is the
beneficial owner (within the meaning of Regulation 13D and Rules 13d-3
and 13d-5 under the Exchange Act) of the shares of Common Stock
indicated as being beneficially owned by such Signing Stockholder on
EXHIBIT B hereto. Upon the request of the Board of Directors in
connection with the nomination of persons for election to the Board of
Directors at the 1999 Meeting, each of the Selling Stockholders shall
deliver to the Board of Directors, not less than twenty (20) days prior
to the date established as the record date for the 1999 Meeting, a
statement in writing that sets forth the number of shares of Common
Stock then beneficially owned by such Signing Stockholder as of such
date, which statement shall be certified in writing by the record owner
or broker-dealer, if any, holding such shares.
(d) INFORMATION. The Signing Stockholders have furnished
the Company with the information required under Item 401 of Regulation
S-K with respect to each of the New Designees, and will furnish the
Company any other information regarding the New Designees it shall
reasonably request in connection with the preparation of the Company's
1998 Proxy Statement for the 1998 Meeting.
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<PAGE>
10. MISCELLANEOUS.
(a) AMENDMENT. No change or modification of this Agreement shall
be valid, binding or enforceable unless the same shall be in writing and signed
by the Company, William J. Bologna, Norman M. Meier and the holders of a
majority of outstanding shares of Common Stock then beneficially owned by the
Signing Stockholders.
(b) NO WAIVER. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(c) NOTICES. All notices, requests or instruction hereunder shall
be in writing and delivered personally or sent by registered or certified mail,
postage prepaid or by telecopy (or like transmission), as follows:
(1) if to the Company:
2875 Northeast 191 Street
Aventura, Florida 33180
Attention: President
Fax: (305) 933-6090
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen M. Besen, Esq. or
Greg A. Danilow, Esq.
Fax: (212) 310-8007
(2) if to any other party hereto, at his or its
address set forth in the records of the
Company or such other address as may be
specified by such party by written notice as
provided herein.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(e) GOVERNING LAW. This Agreement, and all amendments hereto,
shall
8
<PAGE>
be governed by and construed in accordance with the laws of the State of
Delaware.
(f) SUBMISSION TO JURISDICTION. The parties hereto hereby
irrevocably submit to the exclusive jurisdiction of any federal or state court
located within the State of New York, Borough of Manhattan, over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims in
respect of such dispute or any suit, action proceeding related thereto may be
heard and determined in such courts. The parties hereby irrevocably waive, to
the fullest extent permitted by applicable law, any objection which they may now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(g) COMPLETE AGREEMENT. This Agreement constitutes the complete
understanding among the parties with respect to its subject matter and no
alteration or modification of any of its provisions shall be valid unless made
in writing and signed by all of the parties hereto.
(h) SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(i) BINDING EFFECT; SUCCESSORS AND ASSIGNS. All of the terms of
this Agreement shall be binding upon and shall inure to the benefit of and shall
be binding upon the heirs, executors, administrators, personal representatives,
successors and permitted assigns of the parties hereto, but neither this
Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties and any such attempted assignment without consent shall be void.
(j) EXPENSES. Not later than five (5) months after the date
hereof, the Company shall reimburse the Signing Shareholders up to $60,000 for
the reasonable and documented legal fees and expenses incurred by the Signing
Shareholders in connection with the negotiation, execution and delivery of this
Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date first set forth above.
COLUMBIA LABORATORIES, INC.
By:
--------------------------------------------
Name:
Title:
--------------------------------------------
William J. Bologna
--------------------------------------------
Norman M. Meier
--------------------------------------------
James J. Apostolakis
--------------------------------------------
David Ray
--------------------------------------------
Bernard Marden
--------------------------------------------
Anthony R. Campbell
--------------------------------------------
David M. Knott
KNOTT PARTNERS, L.P.
10
<PAGE>
By:
---------------------------------------
Name:
Title:
11
<PAGE>
EXHIBIT A
AMENDED AND RESTATED BY-LAWS
COLUMBIA LABORATORIES, INC.
ARTICLE I.
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. A meeting of stockholders shall be
held annually for the election of directors and the transaction of such other
business as is related to the purpose or purposes set forth in the notice of
meeting on such date as may be fixed by the Board of Directors, or if no date is
so fixed on the second Tuesday in April in each and every year, unless such day
shall fall on a legal holiday, in which case such meeting shall be held on the
next succeeding business day, at such time and at such place as may be fixed by
the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose may be called by the Board of Directors, the Chairman of the
Board, the President or the Secretary, and shall be called by the Chairman of
the Board, the President or the Secretary at the written request of the holders
of record of a majority of the outstanding shares of the Corporation entitled to
vote at such meeting. Special meetings shall be held at such time as may be
fixed in the call and stated in the notices of meeting or waiver thereof. At any
special meeting only such business may be transacted as is related to the
purpose or purposes for which the meeting is convened.
SECTION 3. PLACE OF MEETINGS. Meetings of stockholders shall be
held
<PAGE>
at such place, within or without the State of Delaware or the United States
of America, as may be fixed in the call and stated in the notice of meeting or
waiver thereof.
SECTION 4. NOTICE OF MEETINGS; ADJOURNED MEETINGS. Notice of each
meeting of stockholders shall be given in writing and shall state the place,
date and hour of the meeting. The purpose or purposes for which the meeting is
called shall be stated in the notices of each special meeting and of each annual
meeting at which any business other than the election of directors is to be
transacted.
A copy of the notice of any meeting shall be given, personally or
by mail, not less then ten (10) nor more than sixty (60) days before the date of
the meeting, to each stockholder entitled to vote at such meeting. If mailed,
such notice shall be deemed given when deposited in the United States mail, with
postage thereon prepaid, directed to the stockholder at his address as it
appears on the record of stockholders.
When a meeting is adjourned for less than thirty (30) days in any
one adjournment, it shall not be necessary to give any notice of the adjourned
meeting if the time and place to which the meeting is adjourned are announced at
the meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. When a meeting is adjourned for thirty (30) days or more, notice
of the adjourned meeting shall be given as in the case of an original meeting.
SECTION 5. WAIVER OF NOTICE. The transactions of any meeting of
stockholders, however called and with whatever notice, if any, are as valid as
though
2
<PAGE>
had at a meeting duly held after regular call and notice, if: (a) all the
stockholders entitled to vote are present in person or by proxy and no objection
to holding the meeting is made by anyone so present, and if, either before or
after the meeting, each of the persons entitled to vote, not present in person
or by proxy, signed a written waiver of notice, or a consent to the holding of
the meeting, or an approval of the action taken as shown by the minutes thereof.
Whenever notice is required to be given to any stockholder, a
written waiver thereof signed by such stockholder, whether before or after the
time thereon stated, shall be deemed equivalent to such notice. Attendance of a
person at a meeting of stockholders shall constitute a waiver of notice of such
meeting, except when such stockholder attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of any meeting of stockholders need be
specified in any written waiver of notice thereof.
SECTION 6. QUALIFICATION OF VOTERS. Except as may be otherwise
provided in the Certificate of Incorporation, every stockholder of record shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders for every share standing in his name on the record of stockholders.
SECTION 7. QUORUM. At any meeting of the stockholders the
presence, in person or by proxy, of the holders of a majority of the shares
entitled to vote thereat shall constitute a quorum for the transaction of any
business.
When a quorum is once present to organize a meeting, it is not
broken
3
<PAGE>
by the subsequent withdrawal of any stockholders.
The stockholders present may adjourn the meeting despite the
absence of a quorum.
SECTION 8. PROXIES. Every stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy.
Every proxy must be executed by the stockholder or his
attorney-in-fact. No proxy shall be valid after the expiration of three (3)
years from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the stockholder executing it, except as
otherwise provided therein and as permitted by law. Except as otherwise provided
in the proxy, any proxy holder may appoint in writing a substitute to act in his
place.
SECTION 9. VOTING. Except as otherwise required by law,
directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the holders of shares entitled to vote in the election.
4
<PAGE>
Whenever any corporate action, other than the election of
directors, is to be taken by vote of the stockholders at a meeting, it shall,
except as otherwise required by law or the Certificate of Incorporation, be
authorized by a majority of the votes cast thereat, in person or by proxy.
SECTION 10. ACTION WITHOUT A MEETING. Whenever stockholders are
required or permitted to take any action at a meeting or by vote, such action
may be taken without a meeting, without prior notice and without a vote, by
consent in writing setting forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
SECTION 11. RECORD DATE. The Board of Directors is authorized to
fix a day not more than sixty (60) days nor less than ten (10) days prior to the
day of holding any meeting of stockholders as the day as of which stockholders
entitled to notice of and to vote at such meeting shall be determined; and only
stockholders of record on such day shall be entitled to notice or to vote at
such meeting.
SECTION 12. INSPECTORS OF ELECTION. The Chairman of any meeting
of the stockholders may appoint one or more Inspectors of Election. Any
Inspector so appointed to act at any meeting of the stockholders, before
entering upon the discharge of his or her duties, shall be sworn faithfully to
execute the duties of an Inspector at
5
<PAGE>
such meeting with strict impartiality, and according to the best of his or her
ability.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS. The
business and affairs of the Corporation shall be managed by the Board of
Directors.
SECTION 2. NUMBER OF DIRECTORS. The number of directors
constituting the entire Board of Directors shall be such number not less than
one (1) nor more than fifteen (15) as may be fixed from time to time by
resolution adopted by the stockholders or by the Board. The number of directors
constituting the initial Board of Directors shall be three.
SECTION 3. ELECTION AND TERM OF DIRECTORS. At each annual meeting
of stockholders, directors shall be elected to serve until the next annual
meeting.
SECTION 4. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5. REMOVAL OF DIRECTORS. Any or all of the directors nay
be removed with or without cause by vote of the stockholders.
SECTION 6. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly
created directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of
6
<PAGE>
directors by stockholders without cause may be filled by vote of a majority
of the directors then in office although less than a quorum exists, or may be
filled by the stockholders. Vacancies occurring as a result of the removal of
directors by stockholders, without cause, shall be filled by the stockholders. A
director elected to fill a vacancy or a newly created directorship shall be
elected to hold office until the next annual meeting of stockholders.
SECTION 7. COMMITTEES OF DIRECTORS. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may designate
from among its members committees, each consisting of one or more directors, and
to which, to the extent provided in the resolution, the Board of Directors may
delegate authority with respect to certain specific matters from time to time;
provided, however, that with the exception of the Audit Committee and the
Compensation Committee, the Board of Directors may not designate any committee
which shall have all or any substantial portion of the authority of the Board of
Directors, including without limitation the power and authority to declare a
dividend or to authorize the issuance of stock.
The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent member or
members at any meeting of such committee.
SECTION 8. COMPENSATION OF DIRECTORS. The Board of Directors
shall have authority to fix the compensation of directors for services in any
capacity, or to allow a fixed sum plus expenses, if any, for attendance at
meetings of the Board or of
7
<PAGE>
committees designated thereby.
SECTION 9. INTEREST OF DIRECTOR IN A TRANSACTION.
(a) No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee thereof which authorized the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee, in good
faith, authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested directors, even though the disinterested
directors be less than as quorum; or
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved, in good faith, by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
8
<PAGE>
Directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorized the contract or transaction.
ARTICLE III.
MEETINGS OF THE BOARD
SECTION 1. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be called by the Chairman of the Board or the President, without
notice, at such time and place, within or without the State of Delaware, or the
United States of America, as may from time to time be fixed by the Chairman of
the Board or the President, but not less than six (6) times annually.
SECTION 2. SPECIAL MEETINGS; NOTICE; WAIVER. Special meetings of
the Board of Directors may be held at any time, place, within or without the
State of Delaware or the United States of America, upon the call of the Chairman
of the Board or the President, by oral, telegraphic or written notice, duly
given to or sent or mailed to each director not less than two (2) days before
such meeting. Special meetings shall be called by the Chairman of the Board or
the President upon the written request of any five (5) directors.
Notice of a special meeting need not be given to any director who
submits a signed waiver or notice, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to him.
9
<PAGE>
A notice, or waiver of notice, need not specify the purpose of
any special meeting of the Board of Directors.
SECTION 3. QUORUM; ACTION BY THE BOARD; ADJOURNMENT. At all
meetings of the Board of Directors, a majority of the whole Board shall
constitute a quorum for the transaction of business, except that when the number
of directors constituting the whole Board shall be an even number, one-half of
that number shall constitute a quorum.
The vote of a majority of the directors present at the time of
the vote, if a quorum is present at such time, shall be the act of the Board,
except as may be otherwise specifically provided by law or by the Certificate of
Incorporation or by these By-Laws.
A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place.
SECTION 4. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board, or any committee thereof, may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes or proceedings of the Board or committee, whether done before or
after the action so taken.
SECTION 5. ACTION TAKEN BY CONFERENCE TELEPHONE. Members of the
Board of Directors, or any committee thereof, may participate in a meeting by
means of conference telephone or similar communications equipment, by means of
which all
10
<PAGE>
persons participating in the meeting can hear each other. If one or more of the
members of the Board of Directors participating in the meeting is involuntarily
disconnected from such meeting or can no longer hear or be heard by all other
participating members, then such meeting shall be adjourned by either the
Chairman of the Board or the President until such time as all members of the
Board of Directors participating in the meeting are reconnected or restored to
such meeting so that all persons can participate fully.
ARTICLE IV.
OFFICERS
SECTION 1. OFFICERS. The Board of Directors shall elect a
President, one or more Vice Presidents, a Secretary and a Treasurer of the
Corporation, and from time to time, may elect or appoint such other officers as
it may determine. Any two or more offices may be held by the same person.
Notwithstanding Section 3 of Article III of these By-Laws, until
after the annual meeting of stockholders to be held in 2000, a vote of 75% of
the members constituting the whole Board shall be required in order to elect
anyone other than William J. Bologna to the position of Chairman of the Board
and anyone other than Norman M. Meier to the positions of President and Chief
Executive Officer.
Securities of other corporations held by the corporation may be
voted by any officer designated by the Board, and, in the absence of any such
designation, by the President, any Vice President, the Secretary, or the
Treasurer.
The Board may require any officer to give security for the
faithful
11
<PAGE>
performance of his duties.
SECTION 2. PRESIDENT. The President shall be the chief executive
and chief operating officer of the Corporation with all the rights and powers
incident to that position.
SECTION 3. VICE PRESIDENT. The Vice Presidents shall perform such
duties as may be prescribed or assigned to them by the Board of Directors, the
Chairman of the Board or President. In the absence of the President the
first-elected Vice President shall perform the duties of the President. In the
event of the refusal or incapacity of the President to function as such, the
first-elected Vice President shall perform the duties of the President until
such time as the Board of Directors elects a new President. In the event of the
absence, refusal or incapacity of the first-elected Vice President, the other
Vice Presidents, in order of their rank, shall so perform the duties of the
President; and the order of rank of such other Vice Presidents shall be
determined by the designated rank of their offices or, in the absence of such
designation, by seniority in the office of Vice President; provided that said
order or rank may be established otherwise by action of the Board of Directors.
SECTION 4. TREASURER. The Treasurer shall perform all the duties
customary to that office, and shall have the care and custody of the funds and
securities of the Corporation. He shall at all reasonable times exhibit his
books and accounts to any director upon application, and shall give such bond or
bonds for the faithful performance of his duties with such surety or sureties as
the Board of Directors from time to time may determine.
12
<PAGE>
SECTION 5. SECRETARY. The Secretary shall act as secretary of and
shall keep the minutes of the Board of Directors and of the stockholders, have
the custody of the seal of the Corporation and perform all of the other duties
usual to that office.
SECTION 6. ASSISTANT TREASURER AND ASSISTANT SECRETARY. Any
Assistant Treasurer or Assistant Secretary shall perform such duties as may be
prescribed or assigned to him by the Board of Directors, the Chairman of the
Board, or the President. An Assistant Treasurer shall give such bond or bonds
for the faithful performance of his duties with such surety or sureties as the
Board of Directors from time to time may determine.
SECTION 7. TERM OF OFFICE; REMOVAL. Each officer shall hold
office for such term as may be prescribed by the Board. Notwithstanding Section
3 of Article III, removal of the Chairman of the Board or the President for
cause shall require the vote of 75% of the members constituting the whole Board,
and removal of the Chairman of the Board or the President without cause shall
require the vote of 66.67% of the members constituting the whole Board. All
other officers may be removed at any time by the Board, with or without cause,
by the vote of the majority of the Board. The removal of any officer without
cause shall be without prejudice to his contract rights, if any. The election or
appointment of an officer, shall not, of itself, create contract rights.
SECTION 8. COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
13
<PAGE>
ARTICLE V.
SHARE CERTIFICATES
SECTION 1. FORM OF SHARE CERTIFICATES. The shares of the
Corporation shall be represented by certificates, in such form as the Board of
Directors may from tine to time prescribe, signed by the Chairman of the Board,
the President, or a Vice President, and by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer, and shall be sealed with the
seal of the Corporation or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation or its
employees. In case any such officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of issue.
SECTION 2. LOST CERTIFICATES. In case of the loss, theft,
mutilation or destruction of a stock certificate, a duplicate certificate will
be issued by the Corporation upon notification thereof and receipt of such
proper indemnity or assurances as the Board of Directors may require.
SECTION 3. TRANSFER OF SHARES. Transfers of shares of stock shall
be made upon the books of the Corporation by the registered holder in person or
by duly authorized attorney, upon surrender of the certificate or certificates
for such shares properly endorsed.
SECTION 4. REGISTERED STOCKHOLDERS. Except as otherwise provided
14
<PAGE>
by law, the Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends or
other distributions and to vote as such owner, and to hold such person liable
for calls and assessments, and shall not be bound to recognize any equitable or
legal claim to or interest in such shares on the part of any other person.
ARTICLE VI.
INDEMNIFICATION
SECTION 1. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Any
person made a party to an action by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he, his testator or
intestate, is or was a Director or officer of the Corporation shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred by him in connection with the
defense of such action or in connection with an appeal therein, to the fullest
extent permitted by the General Corporation Law or any successor thereto.
SECTION 2. ACTION OR PROCEEDING OTHER THAN BY OR IN THE RIGHT OF
THE CORPORATION. Any person made or threatened to be made a party to an action
or proceeding other than one by or in the right of the Corporation to procure a
judgment in its favor, whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign,
which any Director or officer of the Corporation served in any capacity at the
request of the Corporation, by reason of the fact that he, his testator or
intestate, was a Director or officer of the
15
<PAGE>
Corporation, or served such other corporation in any capacity, shall be
indemnified by the Corporation against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such Director or officer acted in good faith for a purpose which he
reasonably believed to be in the best interests of the Corporation and, in
criminal actions or proceedings, in which he had no reasonable cause to believe
that his conduct was unlawful. The termination of any such civil or criminal
action or proceeding by judgment, settlement, conviction or upon a plea of NOLO
CONTENDERE, or its equivalent shall not in itself create a presumption that any
such Director or officer did not act in good faith for a purpose which he
reasonably believed to be in the best interests of the Corporation or that he
had reasonable cause to believe that his conduct was unlawful.
SECTION 3. OPINION OF THE COUNSEL. In taking any action or making
any determination pursuant to this Article, the Board of Directors and each
Director, officer or employee, whether or not interested in any such action or
determination, may rely upon an opinion of counsel selected by the Board.
SECTION 4. OTHER INDEMNIFICATION; LIMITATION. The Corporation's
obligations under this Article shall not be exclusive or in limitation of but
shall be in addition to any other rights to which any such person may be
entitled under any other provision of these By-Laws, or by contract, or as a
matter of law, or otherwise. All of the provisions of this Article VI of the
By-Laws shall be valid only to the extent permitted by the Certificate of
Incorporation and the laws of the State of Delaware.
16
<PAGE>
ARTICLE VII.
MISCELLANEOUS PROVISIONS
SECTION 1. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation and shall be in such form as the
Board of Directors may from time to time determine.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall
be the twelve month period ending December 31.
SECTION 3. CHECKS AND NOTES. All checks and demands for money and
notes or other instrument evidencing indebtedness or obligations of the
Corporation shall be signed by such officer or officers or other person or
persons as shall be authorized from time to time by the Board of Directors.
ARTICLE VIII.
AMENDMENTS
SECTION 1. POWER TO AMEND. By-Laws of the Corporation may be
adopted, amended or repealed by the Board of Directors, subject to amendment or
repeal by the stockholders entitled to vote thereon. Notwithstanding the
foregoing provisions, any amendment to or repeal of Sections 1 or 2 of Article
III, Sections 1 or 7 of Article IV, or Section 1 of Article VIII of these
By-Laws by the Board of Directors shall require the vote of 75% of the members
constituting the whole Board.
17
<PAGE>
EXHIBIT B
SIGNING STOCKHOLDERS'
BENEFICIAL OWNERSHIP INTEREST
IN COMMON STOCK
SIGNING STOCKHOLDER OWNERSHIP INTEREST
- ------------------- ------------------
James J. Apostolakis 935,900
David Ray 214,000
Bernard Marden 375,000
Anthony R. Campbell 1,352,600
David M. Knott 968,100
Knott Partners, L.P. 460,000
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Columbia Laboratories (Bermuda) Ltd.
Columbia Laboratories (France) SA
Columbia Laboratories (UK) Limited
Columbia Research Laboratories, Inc.
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 315,288
<SECURITIES> 0
<RECEIVABLES> 1,553,100
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