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, 1999
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 29, 2000: $326,071,266.
Number of shares of Common Stock of Columbia Laboratories, Inc. issued
and outstanding as of February 29, 2000: 29,314,489.
<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(R). 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"(C). 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
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Company received U.S. marketing approval for Crinone from the FDA for the
treatment of secondary amenorrhea (loss of menstrual period).
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 market
Crinone. Under the terms of the agreement, the Company earned $17 million in
milestone payments to date and will continue to receive additional milestone
payments. The Company also supplied Crinone at a price equal to 30% of AHP's net
selling price. On July 2, 1999, AHP assigned the license and supply agreement to
Ares-Serono ("Serono"), a Swiss pharmaceutical company. Serono paid $68 million
to AHP for the rights to Crinone and assumed AHP's financial obligations to the
Company.
ADVANTAGE-S(TM). 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(R) 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(R). 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" in 1999, the Chinese Health Authorities issued 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(R). 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. In October 1999, the
Company engaged an investment banking firm to act as its exclusive advisor in a
planned divesture of certain of the Company's over-the-counter products which
includes Replens.
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OTHER PRODUCTS. The Company also markets Advanced Formula Legatrin
PM(R), for the relief of occasional pain and sleeplessness associated with minor
muscle aches such as night leg cramps; Legatrin(R) GCM Formula(TM), which
nutritionally supports healthy joint function; Vaporizer in a bottle(R), a
portable cough suppressant for the temporary relief of a cough due to the common
cold; and Diasorb(R), a pediatric antidiarrheal product. These products do not
utilize the Bioadhesive Delivery System. In October 1999, the Company engaged an
investment banking firm to act as its exclusive advisor in a planned divestiture
of certain of the Company's over-the-counter products which include Advanced
Formula Legatrin PM, Legatrin GCM Formula, Vaporizer in a Bottle and Diasorb.
In March 1999, the Company entered into a license and supply agreement
with Mipharm SpA under which Mipharm SpA will be the exclusive marketer of the
Company's previously unlicensed women's healthcare products in Italy, Portugal,
Greece and Ireland with a right of first refusal for Spain. Under the terms of
the agreement, the Company received $462,500, net of expenses, and expects to
receive future milestone payments as products are made available by the Company.
RESEARCH AND DEVELOPMENT
The Company expended $6.7 million in 1999, $7.8 million in 1998 and
$9.1 million in 1997 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(R). 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. It has been
shown that women with endometriosis have an abnormality of uterine contractility
which prevents sperm from reaching the fallopian tubes, thereby causing
infertility. The Company believes that Chronodyne can normalize uterine
contractility and restore fertility.
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
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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.
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 1999, there were two United States patents granted to the
Company. The first patent was for a method of treating or reducing ischemia or
incidence of cardiovascular events by administering progesterone. The second
patent was for the composition and method of moisturizing mammalian membranous
tissue.
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
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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 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 six 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; Legatrin GCM
Formula, which nutritionally supports healthy joint function; Diasorb, a
pediatric antidiarrheal product; 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 non
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 5% or more of
consolidated net sales in any of the three years ended December 31, 1999.
1999 1998 1997
---------- ---------- -----------
Crinone 56% 25% 68%
Replens 24 40 10
Advantage-S 3 4 3*
Legatrin PM/Legatrin GCM 12 26 15
Other Products 5 5 4
---------- ---------- -----------
100% 100% 100%
========== ========== ===========
* 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 and Ares-Serono accounted
for approximately 56% of 1999 consolidated net sales. AHP accounted for
approximately 25% and 68% of
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1998 and 1997 consolidated net sales, respectively. A retail customer accounted
for approximately 9%, 15% and 5% of 1999, 1998 and 1997 consolidated net sales,
respectively. Another customer accounted for approximately 5%, of 1999,
consolidated net sales.
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. 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(R)
and Gyne-Moisturin(R), 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(R)
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.
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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 29, 2000, the Company had 37 employees, 3 in
management, 14 in research and development administration, 5 in manufacturing, 2
in marketing, and 13 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."
ITEM 2. PROPERTIES
As of February 29, 2000, 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 2,000 October 2004 53,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company filed an action in the United States District Court for the
Southern District of Florida ("Florida Action") in November 1997 seeking a
declaratory judgement on certain issues related to its relationship with Lake
Consumer Products, 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 ("Illinois Action") , 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. The
IllinoisAction was dismissed by the Illinois Court and transferred to the
Florida Court for consolidation as a counterclaim in the Florida Action. On
March 16, 2000, the Company and Lake settled all outstanding issues in the
consolidated Florida Action by the Company having bought out the contract for
the sum of $1,200,000 ($600,000 in cash and $600,000 in the form of Company
common stock). As a result, the Company reacquired the U.S. rights to the
Advantage product and both parties agreed to have their legal actions dismissed.
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
None.
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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.
FISCAL YEAR ENDED DECEMBER 31, 1998 HIGH LOW
- ------------------------------------ ------ -------
First Quarter $15.18 $11.25
Second Quarter 14.13 5.63
Third Quarter 8.94 2.50
Fourth Quarter 4.88 2.38
FISCAL YEAR ENDED DECEMBER 31, 1999
- -----------------------------------
First Quarter $6.81 $2.88
Second Quarter 9.06 5.88
Third Quarter 8.69 5.69
Fourth Quarter 8.31 5.50
At February 29, 2000, there were 396 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 22 shareholders of record of the Company's
Series C Convertible Preferred Stock ("Series C Preferred Stock").
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 Shephard Lane and Anthony
Campbell, in exchange for services performed, warrants to purchase up to an
aggregate of 125,000 shares of Common Stock at an exercise price of $4.8125 per
share.
On January 28, 1999 and September 23, 1999, the Company granted to
James Apostolakis, warrants to purchase up to an aggregate of 100,000 and 75,000
shares, respectively, of common stock at an exercise price of $4.8125 and $7.50,
respectively, per share.
On October 25, 1999, the Company granted to Ryan Beck & Co., Inc., as
part of a services agreement, warrants to purchase up to an aggregate of 12,500
shares of common stock at an exercise price of $7.0625 per share.
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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.
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, 1999, dividends of $1,860 were payable on January 3, 2000.
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, 1999 (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>
<S> <C>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997 1996 1995
-----------------------------------------------------------
Statement of Operations Data: (000's)
NET SALES 18,921 $10,018 $16,547 $5,646 $9,905
NET INCOME ( LOSS) (1) (2,210) (13,860) 763 (13,079) (959)
INCOME (LOSS) PER COMMON SHARE (0.09) (0.48) 0.03 (0.47) (0.04)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING-DILUTED 28,853 28,679 29,982 27,615 25,487
BALANCE SHEET DATA: (000'S)
WORKING CAPITAL (DEFICIENCY) $3,441 ($1,401) $5,140 $720 ($1,968)
TOTAL ASSETS 12,988 11,880 15,002 9,980 7,687
LONG-TERM DEBT 10,000 10,000 -- -- --
STOCKHOLDERS' EQUITY (DEFICIENCY) (274) (4,333) 8,814 4,673 1,556
</TABLE>
(1) 1999, 1998, 1997, 1996 and 1995 net income (loss) includes approximately
$463,000, $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 timely
completion of studies and approvals by the FDA and other regulatory
agencies. 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 increased from approximately $315,000 at
December 31, 1998 to approximately $1,982,000 at December 31, 1999. The Company
received approximately $6.4 million, net of expenses from the issuance and sale
of Series C Convertible Preferred Stock. Offsetting this was the approximately
$4.1 million of cash used in 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 market
Crinone. On July 2, 1999 AHP assigned this license and supply agreement to
Ares-Serono ("Serono"), a swiss pharmaceutical company. Under the terms of the
agreement, as of February 28, 2000, the Company has earned $17 million in
milestone payments and will continue to receive additional milestone payments.
The Company also supplied Crinone at a price equal to 30% of AHP's net selling
price. Serono paid $68 million to AHP for the rights to Crinone and assumed
AHP's financial obligations to the Company.
11
<PAGE>
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, 1999, the Company has paid approximately $1.6
million in royalty payments.
As of December 31, 1999, the Company has outstanding exercisable
options and warrants that, if exercised, would result in approximately $50.9
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 $8.2 million on research and
development in 2000 and an additional $200,000 on property and equipment.
As of December 31, 1999, the Company had available net operating loss
carryforwards of approximately $45 million to offset its future U.S. taxable
income.
In accordance with Statement of Financial Accounting Standards No.
109, as of December 31, 1999 and 1998, other assets in the accompanying
consolidated balance sheet include deferred tax assets of approximately $17
million and $18 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 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.
Subsequent to year-end, the Company has received approximately $4.7
million from the exercise of outstanding options and warrants. The Company
anticipates that cash generated from operations, together with the proceeds
from the exercise of options and warrants will be sufficient to meet its working
capital requirements for 2000.
In October 1999, the Company engaged an investment banking firm to act
as its exclusive advisor in a planned divestiture of certain of the Company's
over-the-counter products. Subsequent to year-end, the Company has received a
letter of intent from a prospective party who is in the process of completing
due diligence procedures. The terms of the agreement are being negotiated.
12
<PAGE>
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1999 VERSUS DECEMBER 31, 1998
VERSUS DECEMBER 31, 1997
Net sales increased by approximately 89% in 1999 to approximately
$18.9 million as compared to $10.0 million in 1998 and $16.5 million in 1997.
Sales of Crinone accounted for approximately $10.6 million of net sales in 1999
as compared to approximately $2.5 million and $11.2 million in 1998 and 1997,
respectively. AHP, the Company's former 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. The approximately
$8.9 million increase in 1999 over 1998 was attributable to the replenishment of
inventory utilized in 1998 and increased usage by consumers. Sales of Replens
were approximately $4.5 million, $4.2 million and $1.6 million in 1999, 1998 and
1997, respectively. The increase in 1998 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.
Gross profit as a percentage of sales increased in 1999 to
approximately 70% as compared to approximately 43% in 1998 and approximately 60%
in 1997. The increase in Crinone sales, with its approximately 80% gross profit,
accounts for almost all of the increase in 1999
Selling and distribution expenses were approximately $3.9 million,
$4.1 million and $2.9 million in 1999, 1998 and 1997, respectively. Selling and
distribution expenses increased by approximately 41% in 1998 compared to 1997.
Contributing to the approximately $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.
General and administrative expenses decreased approximately $1.2
million or 21% to approximately $4.6 million in 1999 from approximately $5.8
million in 1998. The decrease was principally the result of an approximately
$249,000 reduction in salaries, an approximately $490,000 reduction in
professional services, including investor relations, and an approximately
$227,000 reduction in legal expenses related to dissident shareholder
activities. 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
Research and development decreased in 1999 to approximately $6.7
million as compared to approximately $7.8 million in 1998. The $1.1 million
decrease was primarily the result of a $125,000 reimbursement of expenses
incurred in 1998 negotiated and received in 1999 and an approximately $742,000
reduction in Crinone studies and other research and development costs. 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.
License fees in 1999 of $462,500, net of expenses totaling $137,500,
represent payments received in connection with the licensing agreement with
Mipharm SpA entered into in March 1999. License fees in 1998 were $73,088.
License fees in 1997 were $7.0 million representing milestone payments received
in connection with the licensing agreement with AHP.
Interest income in 1999 was $134,795. 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.
13
<PAGE>
Interest expense amounted to $755,352, $599,773 and $24,186 in 1999,
1998 and 1997, respectively. Interest expense is primarily from interest on the
$10 million note issued in March 1998 which bears an interest rate of 7.125%.
As a result, the net loss for 1999 was $2,210,208 or $.09 per share as
compared to a net loss of $13,859,734 or $0.48 per share in 1998 and net income
of $762,906 or $0.03 per share in 1997.
IMPACT OF THE YEAR 2000
Since January 1, 2000, the Company has not had any Year 2000-related
problems associated with its internal systems or software, and is not aware of
any Year 2000-related problems associated with the systems or software of its
vendors, distributors or suppliers. Although the Company expects most material
Year 2000 compliance problems to have arisen or occurred on or after January 1,
2000, there can be no assurance, however, that the Year 2000 problem will not
adversely affect the Company's business, financial condition, results of
operations or cash flows. It is possible that future Year 2000-related problems
will arise after January 1, 2000.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company are annexed to this report on
pages F-1 through F-21. 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
14
<PAGE>
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 29, 2000 are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C>
William J. Bologna 57 Chairman of the Board and Chief Executive Officer
James J. Apostolakis 57 Vice Chairman of the Board and President
David L. Weinberg 54 Vice President--Finance and Administration, Chief
Financial Officer, Secretary and Treasurer
Dominique de Ziegler, M.D. 52 Vice President--Pharmaceutical Development and
Director
Howard L. Levine, Pharm. D. 45 Vice President--Research and Development
Annick Blondeau, Ph.D. 54 Vice President--Regulatory Affairs
Jean Carvais, M.D. 72 Director
Norman M. Meier 60 Director
Denis M. O'Donnell, M.D. 46 Director
Selwyn P. Oskowitz, M.D. 53 Director
Robert C. Strauss 58 Director
</TABLE>
16
<PAGE>
WILLIAM J. BOLOGNA has been a director of the Company since inception,
Chairman of the Company's Board of Directors since January 1992 and Chief
Executive Officer since January 2000. 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 and President since January
2000. 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. Mr.
Apostolakis received an A.B. in Economics from the University of Pennsylvania in
1962 and an LL.B from Harvard University Law School in 1965.
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.
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.
17
<PAGE>
JEAN CARVAIS, M.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.
NORMAN M. MEIER has been a director of the Company since inception and
served as President and Chief Executive Officer from inception until January
2000. Beginning in January 2000, Mr. Meier will serve in a non-executive
position as Chairman Emeritus. 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.
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 Ampersand Medical
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 Procarda Corporation and Eclipse Surgical
Corporation. Mr. Strauss also devotes his time to many civic duties, namely, the
United Way of Miami-Dade County.
During 1999, all 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 four standing committees,
the Audit Committee, the Compensation/Stock Option Committee, the Finance
Committee and Scientific Advisory 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").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS
- --------------------------- ---- ------ -------
<S> <C> <C> <C>
Norman M. Meier (1) 1999 $350,000 20,000
President and Chief 1998 400,000 250,000
Executive Officer 1997 301,000 250,000
William J. Bologna 1999 350,000 20,000
Chairman of the Board 1998 400,000 250,000
1997 294,000 250,000
Dominique de Ziegler 1999 221,800 25,000
Vice President- 1998 221,800 25,000
Pharmaceutical 1997 221,800 25,000
Development
Howard L. Levine (2) 1999 250,000 60,000
Vice President- 1998 279,198 50,000
Research and Development 1997 82,500 -
David L. Weinberg 1999 189,000 25,000
Vice President-Finance 1998 182,000 50,000
and Administration, 1997 51,000 25,000
Chief Financial Officer,
Secretary and Tresurer
</TABLE>
(1) Norman M. Meier served as President and Chief Executive Officer until
January 2000.
(2) Howard L. Levine was elected Vice President - Research and Development on
September 29, 1997.
(3) David L. Weinberg was elected Vice President-Finance and Administration,
Chief Financial Officer, Secretary and Treasurer on September 29, 1997.
19
<PAGE>
OPTION GRANTS DURING 1999
<TABLE>
<CAPTION>
Number of % of total
Securities Options Grant
Underlying Granted to Exercise Date
Options Employees Price Expiration Present
Name Granted in 1999 ($/Share) Date Value (1)
- ---- ------- ------- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Norman M. Meier 10,000 2.4% $5.75 3/24/09 $33,716
10,000 2.4% 8.25 6/2/09 48,375
William J. Bologna 10,000 2.4% 5.75 3/24/09 33,716
10,000 2.4% 8.25 6/2/09 48,375
Dominique de Ziegler 15,000 3.6% 5.75 3/24/09 50,574
10,000 2.4% 8.25 6/2/09 48,375
Howard L. Levine 50,000 12.0% 5.75 3/24/09 168,580
10,000 2.4% 8.25 6/2/09 48,375
David L. Weinberg 15,000 3.6% 5.75 3/24/09 50,574
10,000 2.4% 8.25 6/2/09 48,375
</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 86.7% calculated using daily stock prices for the
one-year period ending on December 31, 1999 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.
AGGREGATED OPTION EXERCISES DURING 1999 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares Acquired Value December 31, 1999 December 31, 1999
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Norman M. Meier -- $- 1,122,250 80,000 $1,527,900 $ 17,500
William J. Bologna -- -- 1,118,750 80,000 1,513,900 17,500
Dominique de Ziegler -- -- 145,000 25,000 119,250 26,250
Howard L. Levine -- -- 250,000 60,000 -- 87,500
David L. Weinberg -- -- 75,000 25,000 -- 26,250
</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. Effective January 1, 2000, Mr. Bologna's employment agreement was amended.
Under the terms of the amendment, the term of Mr. Bologna's agreement was
extended by one year. In January 2000, Mr. Meier's employment agreement was
amended. Under the terms of the amendment, Mr. Meier will be employed by the
Company for two years beginning January 1, 2000 in a non-executive position with
the title, Chairman Emeritus, at a salary of $200,000 per year.
In January 2000, the Company entered into a two-year employment
agreement with James J. Apostolakis to serve as Vice Chairman and President of
the Company. Pursuant to his employment agreement, Mr. Apostolakis is entitled
to a base salary of $200,000 per year.
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
21
<PAGE>
1997, 1998 and 1999, Dr. de Ziegler's salary was increased to
$221,800. On December 30, 1999, the Company entered into a one-year employment
agreement with Dr. de Ziegler to serve as Director of Research and Development.
Pursuant to this agreement, Dr. de Ziegler will receive an annual salary of
$210,000 plus a housing allowance of approximately $36,000.
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.
22
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 29, 2000, directors and named executive officers,
individually and as a group, beneficially owned Common Stock as follows:
Name of Shares, Nature of Interest
Beneficial Owner and Percentage of Equity Securities(1)
----------------- -------------------------------------
Norman M. Meier (2) 1,927,850 6.3%
William J. Bologna (3) 3,025,290 9.9%
James J. Apostolakis (4) 1,307,078 4.4%
David L. Weinberg (5) 94,000 *
Dominique de Ziegler (5) 160,000 *
Annick Blondeau (5) 135,000 * %
Howard L. Levine (5) 300,000 1.0%
Jean Carvais (5) 34,000 *
Denis M. O'Donnell 11,000 *
Selwyn P. Oskowitz 10,000 *
Robert C. Strauss (5) 38,000 *
The James J. Apostolakis Group (6) 1,524,900 5.2%
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 4.8%
c/o TC Management
237 Park Avenue, Suite 800
New York, New York
Officers and directors as a group (11 people) 7,042,218 21.4%
* 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 1,162,250 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 1,158,750 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 293,750 shares issuable upon exercise of
warrants which are currently exercisable or which may be acquired
within 60 days.
(5) Includes shares issuable upon exercise of options, which are currently
exercisable or which may be acquired within 60 days, to purchase 90,000
shares with respect to Mr. Weinberg, 160,000 shares with respect to Dr.
de
23
<PAGE>
Ziegler, 135,000 shares with respect to Dr. Blondeau, 300,000 shares
with respect to Dr. Levine, 34,000 shares with respect to Dr. Carvais,
11,000 shares with respect to Dr. O'Donnell, 10,000 shares with respect
to Dr. Oskowitz and 37,000 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 29, 2000, 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.
24
<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, 1999, the balances including interest remain outstanding
and total $128,667 and $178,017, respectively. At March 29, 2000 the above
notes remain outstanding.
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 were due on July 28, 1999. Mr. Meier's note was
paid in December 1999 with interest through the date of payment and Mr.
Bologna's note was paid in January 2000 with interest through the date of
payment.
On January 28, 1999 and September 23, 1999, the Company granted to
James Apostolakis, warrants to purchase up to an aggregate of 100,000 and 75,000
shares, respectively, of common stock at an exercise price of $4.8125 and $7.50,
respectively, per share.
25
<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.
EXHIBITS
3.1 -- Restated Certificate of Incorporation of the Company, as
amended (1/)
3.2 -- Amended and Restated By-laws of Company (10/)
4.1 -- Certificate of Designations, Preferences and Rights of Series
C Convertible Preferred Stock of the Company, dated as of
January 7, 1999 (10/)
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 (10/)
4.3 -- Securities Purchase Agreement, dated as of January 19, 1999,
among the Company, David M. Knott and Knott Partners, L.P.
(10/)
4.4 -- Securities Purchase Agreement, dated as of February 1, 1999,
between the Company and Windsor Partners, L.P. (10/)
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 (10/)
4.6 -- Form of Warrant to Purchase Common Stock (10/)
4.7 -- Warrant to Purchase Common Stock granted to James J.
Apostolakis on September 23, 1999
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/)
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. (10/)
26
<PAGE>
10.16 -- License and Supply Agreement for Crinone between Columbia
Laboratories (Bermuda) Limited and Ares Trading S.A. dated as
of May 20, 1999
10.17 -- Addendum to Employment Agreement dated as of January 1, 2000
between the Company and Norman M. Meier
10.18 -- Addendum to Employment Agreement dated as of January 1, 2000
between the Company and William J. Bologna
10.19 -- Employment Agreement dated as of January 1, 2000 between the
Company and James J. Apostolakis
10.20 -- Employment Agreement dated December 30, 1999 between the
Company and Dominique de Ziegler
10.21 -- Settlement Agreement and Release dated as of March 16, 2000
between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer
Products, Inc.
21 -- Subsidiaries of the Company
27 -- Financial Data Schedule
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.
10/ Incorporated by referenced to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998.
REPORTS ON FORM 8-K
On November 3, 1999, the Company filed a Form 8-K in which it exhibited
its bi-monthly stockholders newsletter.
27
<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 29, 2000 By: /s/ David L. Weinberg
---------------------------- ------------------------------
David L. Weinberg, Vice President
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>
<S> <C> <C>
/s/ William J. Bologna Chairman of the Board of Directors March 29, 2000
- -------------------------- and Chief Executive Officer
William J. Bologna
/s/ James J. Apostolakis Vice Chairman of the Board of Directors March 29, 2000
- -------------------------- and President
James J. Apostolakis
/s/ David L. Weinberg Vice President-Finance and March 29, 2000
- -------------------------- Administration, Chief Financial
David L. Weinberg Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer)
/s/ Dominique de Ziegler Vice President - Pharmaceutical March 29, 2000
- -------------------------- Development and Director
Dominique de Ziegler
/s/ Jean Carvais Director March 29, 2000
- --------------------------
Jean Carvais
/s/ Norman M. Meier Director March 29, 2000
- --------------------------
Norman M. Meier
/s/ Denis M. O'Donnell Director March 29, 2000
- --------------------------
Denis M. O'Donnell
/s/ Selwyn P. Oskowitz Director March 29, 2000
- --------------------------
Selwyn P. Oskowitz
/s/ Robert C. Strauss Director March 29, 2000
- --------------------------
Robert C. Strauss
</TABLE>
28
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheets
As of December 31, 1999 and 1998 F-4
Consolidated Statements of Operations
for the Three Years Ended December 31, 1999 F-6
Consolidated Statements of Comprehensive Operations
for the Three Years Ended December 31, 1999 F-7
Consolidated Statements of Stockholders' Equity (Deficiency)
for the Three Years Ended December 31, 1999 F-8
Consolidated Statements of Cash Flows
for the Three Years Ended December 31, 1999 F-10
Notes to Consolidated Financial Statements F-12
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 sheets of Columbia
Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of operations,
comprehensive operations, stockholders' equity (deficiency) and cash flows for
the years then ended. 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, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
February 18, 2000, except for the first
paragraph under the caption "Legal
Proceedings" in Note 6 as to which
the date is March 16, 2000
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 statements of operations,
comprehensive operations, stockholders' equity (deficiency) and cash flows of
Columbia Laboratories, Inc. (a Delaware corporation) and Subsidiaries for the
year 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 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 results of operations and cash flows of Columbia
Laboratories, Inc. and Subsidiaries for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 13, 1998.
F-3
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
---------------- ---------------
CURRENT ASSETS:
Cash and cash equivalents, of which $135,399 is
interest-bearing as of December 31, 1999 $ 1,982,085 $ 315,288
Accounts receivable, net of allowance
for doubtful accounts of $119,829
and $229,829 in 1999 and 1998, respectively 1,835,086 1,323,271
Inventories 1,848,816 2,411,434
Prepaid expenses 468,948 472,538
Other current assets 568,259 288,639
---------------- ---------------
Total current assets 6,703,194 4,811,170
---------------- ---------------
PROPERTY AND EQUIPMENT:
Leasehold improvements 164,766 186,905
Machinery and equipment 2,160,288 2,159,970
Furniture and fixtures 178,297 193,092
---------------- ---------------
2,503,351 2,539,967
Less-accumulated depreciation and amortization (1,494,798) (1,166,516)
---------------- ---------------
1,008,553 1,373,451
---------------- ---------------
INTANGIBLE ASSETS, net 4,860,212 5,283,277
OTHER ASSETS 415,654 411,648
---------------- ---------------
TOTAL ASSETS $ 12,987,613 $11,879,546
================ ===============
</TABLE>
(Continued)
F-4
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------------- -------------
CURRENT LIABILITIES:
Accounts payable $ 2,089,260 $ 4,153,151
Accrued expenses 1,072,567 1,480,839
Deferred revenue 100,000 578,150
------------- -------------
Total current liabilities 3,261,827 6,212,140
------------- -------------
CONVERTIBLE SUBORDINATED NOTE PAYABLE 10,000,000 10,000,000
------------- -------------
TOTAL LIABILITIES 13,261,827 16,212,140
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value; 1,000,000 shares authorized:
Series A Convertible Preferred Stock,
923 shares issued and outstanding in 1999 and 1998
(liquidation preference of $92,300 at December 31, 1999) 9 9
Series B Convertible Preferred Stock,
1,630 shares issued and outstanding in 1999 and 1998
(liquidation preference of $163,000 at December 31, 1999) 16 16
Series C Convertible Preferred Stock,
5,260 shares issued and outstanding in 1999
(liquidation preference of $5,610,000 at December 31, 1999) 53 --
Common stock, $.01 par value; 40,000,000
shares authorized; 29,124,686 and 28,684,687
shares issued and outstanding in 1999 and 1998, respectively 291,246 286,846
Capital in excess of par value 99,575,803 93,221,998
Accumulated deficit (100,198,848) (97,988,640)
Accumulated other comprehensive income 57,507 147,177
------------- -------------
Total stockholders' equity (deficiency) (274,214) (4,332,594)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 12,987,613 $ 11,879,546
============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
------------ ------------ ------------
NET SALES $ 18,921,074 $ 10,017,644 $ 16,547,411
COST OF GOODS SOLD 5,655,350 5,707,814 6,630,820
------------ ------------ ------------
Gross profit 13,265,724 4,309,830 9,916,591
------------ ------------ ------------
OPERATING EXPENSES:
Selling and distribution 3,938,756 4,099,446 2,908,504
General and administrative 4,575,702 5,785,895 3,972,077
Research and development 6,652,096 7,821,642 9,135,573
------------ ------------ ------------
Total operating expenses 15,166,554 17,706,983 16,016,154
------------ ------------ ------------
Loss from operations (1,900,830) (13,397,153) (6,099,563)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
License fees, net of expenses 462,500 73,088 7,038,853
Interest income 134,795 141,564 70,664
Interest expense (755,352) (599,773) (24,186)
Other, net (82,321) (77,460) (137,862)
------------ ------------ ------------
(240,378) (462,581) 6,947,469
------------ ------------ ------------
Income (loss) before income taxes (2,141,208) (13,859,734) 847,906
Provision for income taxes 69,000 -- 85,000
------------ ------------ ------------
Net income (loss) $ (2,210,208) $(13,859,734) $ 762,906
============ ============ ============
INCOME (LOSS) PER COMMON
SHARE - BASIC AND DILUTED $ (0.09) $ (0.48) $ 0.03
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND POTENTIAL COMMON SHARES OUTSTANDING:
BASIC 28,853,000 28,679,000 28,350,000
============ ============ ============
DILUTED 28,853,000 28,679,000 29,982,000
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
------------ ------------ ------------
NET INCOME (LOSS) $ (2,210,208) $(13,859,734) $ 762,906
Other comprehensive income (loss):
Foreign currency translation, net of tax 89,670 (79,000) (38,557)
------------ ------------ ------------
Comprehensive income (loss) $ (2,120,538) $(13,938,734) $ 724,349
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Series A Convertible Series B Convertible Series C Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
-------------------- --------------------- --------------------- -----------------------
Number of Number of Number of Number of
Shares Amount Shares Amount Shares Amount Shares Amount
----------- --------- ---------- ---------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 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
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
Capital in Accumulated Other
Excess of Accumulated Comprehensive
Par Value Deficit Income (Loss) Total
------------- ------------------ ----------------- ----------
Balance, January 1, 1997 $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
Options exercised 209,623 - - 209,938
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>
(Continued)
F-8
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Series A Convertible Series B Convertible Series C Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
-------------------- --------------------- --------------------- ------------------------
Number of Number of Number of Number of
Shares Amount Shares Amount Shares Amount Shares Amount
----------- --------- ----------- ---------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 923 $9 1,630 $16 - - 28,684,687 $286,846
Issuance of preferred stock - - - - 6,660 $67 - -
Options exercised - - - - - - 5,000 50
Warrants exercised - - - - - - 35,000 350
Dividends on preferred stock - - - - - - - -
Fair market value of warrants
granted to non-employees - - - - - - - -
Fair market value of options
granted to non-employees - - - - - - - -
Translation adjustment - - - - - - - -
Conversion of preferred stock - - - - (1,400) (14) 399,999 4,000
Net loss - - - - - - - -
----------- --------- ----------- ---------- ----------- --------- ----------- ------------
Balance, December 31, 1999 923 $9 1,630 $16 5,260 $53 29,124,686 $291,246
=========== ========= =========== ========== =========== ========= =========== ============
Capital in Accumulated Other
Excess of Accumulated Comprehensive
Par Value Deficit Income (Loss) Total
------------ ------------- ---------------- ------------
Balance, December 31, 1998 $93,221,998 ($97,988,640) $147,177 ($4,332,594)
Issuance of preferred stock 6,373,277 - - 6,373,344
Options exercised 26,825 - - 26,875
Warrants exercised 122,150 - - 122,500
Dividends on preferred stock (287,994) - - (287,994)
Fair market value of warrants
granted to non-employees 112,172 - - 112,172
Fair market value of options
granted to non-employees 11,361 - - 11,361
Translation adjustment - - (89,670) (89,670)
Conversion of preferred stock (3,986) - - -
Net loss - (2,210,208) - (2,210,208)
------------ ------------- ---------------- ------------
Balance, December 31, 1999 $99,575,803 ($100,198,848) $ 57,507 ($274,214)
============ ============= ================ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-9
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ------------------ ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,210,208) $(13,859,734) $762,906
Adjustments to reconcile net income (loss) to net
cash used in operating activities-
Depreciation and amortization 968,845 992,358 913,945
Provision for (recovery of) doubtful accounts (110,000) 97,553 35,001
Provision for (recovery of) returns and allowances (4,335) 61,020 -
Write-down of inventories - 1,176,200 -
Issuance of warrants and options for consulting services 123,533 285,101 94,998
Write-off of property and equipment 27,766 52,111 3,411
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable (397,480) 4,741,998 (4,818,322)
Inventories 562,618 (1,334,959) (1,309,531)
Prepaid expenses 3,590 5,319 (72,065)
Other assets (283,626) 269,668 59,080
Increase (decrease) in:
Accounts payable (1,942,234) 320,288 905,117
Accrued expenses (408,272) 161,439 130,322
Deferred revenue (478,150) (464,488) (15,336)
---------------- ------------------ ----------------
Net cash used in operating activities (4,147,953) (7,496,126) (3,310,474)
---------------- ------------------ ----------------
</TABLE>
(Continued)
F-10
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
---------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of product rights - $ (4,615,644) -
Purchase of property and equipment $ (108,648) (264,720) $(1,011,987)
Acquisition of licensing rights (100,000) - -
---------------- -------------- ---------------
Net cash used in investing activities (208,648) (4,880,364) (1,011,987)
---------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of preferred stock 6,373,344 - -
Issuance of note payable - 10,000,000 -
Dividends paid (409,651) - -
Proceeds from exercise of options and warrants 149,375 356,188 3,027,365
---------------- -------------- ---------------
Net cash provided by financing activities 6,113,068 10,356,188 3,027,365
---------------- -------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (89,670) 79,000 (10,108)
---------------- -------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,666,797 (1,941,302) (1,305,204)
CASH AND CASH EQUIVALENTS,
Beginning of year 315,288 2,256,590 3,561,794
---------------- -------------- ---------------
CASH AND CASH EQUIVALENTS,
End of year $ 1,982,085 $ 315,288 $ 2,256,590
================ ============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 712,500 $ 367,357 $ 20,825
================ ============== ===============
Taxes paid $ 134,000 $ 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:
December 31,
-------------------------------------------
1999 1998
--------------- ---------------
Finished goods $1,029,574 $1,550,917
Raw materials 819,242 860,517
--------------- ---------------
$1,848,816 $2,411,434
=============== ===============
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:
Years
-------
Machinery and equipment 5 - 10
Furniture and fixtures 5
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.
INTANGIBLE ASSETS-
Intangible assets consist of the following:
December 31,
-----------------------------------
1999 1998
--------------- ---------------
Patents $2,600,000 $2,600,000
Trademarks 4,956,644 4,956,644
Licensing rights 100,000 -
--------------- ---------------
7,656,644 7,556,644
Less accumulated amortization (2,796,432) (2,273,367)
--------------- ---------------
$4,860,212 $5,283,277
=============== ===============
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. Licensing rights are being amortized over a period of
five 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-
------------
The reconciliation of the effective income tax rate to the Federal statutory
rate is as follows:
1999 1998 1997
----------- ------------ ------------
Federal income tax rate (34.0)% (34.0)% 34.0%
Increase in valuation allowance 34.0 34.0 --
Utilization of net operating
loss carryover -- -- (34.0)
U.S. Alternative Minimum Tax 3.2 -- 10.0
----------- ------------ ------------
Effective income tax rate 3.2% 0.0% 10.0%
=========== ============ ============
As of December 31, 1999, the Company has U.S. tax net operating loss
carryforwards of approximately $45 million which expire through 2013. The
Company also has unused tax credits of approximately $949,000 which expire at
F-13
<PAGE>
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 a $69,000 and an $85,000 alternative minimum
tax provision for U.S. Federal taxes in 1999 and 1997, respectively.
As of December 31, 1999 and 1998, other assets in the accompanying consolidated
balance sheets include deferred tax assets of approximately $17 million and $18
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.
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 $858,000 in
1999, $758,000 in 1998 and $460,000 in 1997.
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-
------------------------
Under the provisions of Statement of Financial Accounting Standard ("SFAS") No.
123, "Accounting for Stock-Based Compensation", 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
F-14
<PAGE>
December 31, 1999, the Company has recognized compensation costs under the
provisions of APB No. 25, and has provided the expanded disclosure required by
SFAS No. 123 (see Note 4).
Recent Accounting Pronouncements:
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 marketed Crinone.
Under the terms of the agreement, the Company earned $7 million in milestone
payments in 1997 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. On July 2, 1999, AHP assigned the license and supply
agreement to Ares-Serono, a Swiss pharmaceutical company. The Company will
supply Crinone to Ares-Serono under the same terms as in the agreement with AHP.
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 $100,000 and $578,150, respectively, are reflected as
deferred revenue in the accompanying December 31, 1999 and 1998 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.
In March 1999, the Company entered into a license and supply agreement with
Mipharm SpA under which Mipharm SpA will be the exclusive marketer of the
Company's previously unlicensed women's healthcare products in Italy, Portugal,
Greece and Ireland with a right of first refusal for Spain. Under the terms of
the agreement, the Company has received $462,500, net of expenses, and expects
to receive future milestone payments as products are made available by the
Company.
(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.
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
F-15
<PAGE>
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. 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.
In January 1999, the Company raised approximately $6.4 million, net of expenses
from the issuance and sale of Series C Convertible Preferred Stock ("Series C
Preferred Stock"). The Series C Preferred Stock, sold to twenty-four accredited
investors, has a stated value of $1,000 per share. The Series C Preferred Stock
is convertible into common stock at the lower of: (i) $3.50 per common share 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 Series C Preferred Stock pays a 5%
dividend, payable quarterly in arrears on the last day of the quarter.
Warrants-
--------
As of December 31, 1999, the Company had warrants outstanding for the purchase
of 750,853 shares of Common Stock. Information on outstanding warrants is as
follows:
Exercise
Price
-----
$ 3.50 198,100
4.81 225,000
5.00 120,000
7.06 12,500
7.50 75,000
10.78 60,253
16.00 20,000
18.00 20,000
20.00 20,000
----------
750,853
==========
All the warrants are exercisable as of December 31, 1999.
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, 1999, 1998 and 1997 and changes during the years ending on those dates is
presented below:
F-16
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- -------------------------
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 5,184,938 $9.13 4,557,274 $8.92 3,591,272 $6.25
Granted 512,500 5.97 904,000 11.52 1,332,500 14.72
Exercised (5,000) 5.38 (31,500) 6.66 (366,498) 5.92
Forfeited (21,000) 15.59 (244,836) 11.29 - -
--------------- --------------- -------------
Outstanding at end of year 5,671,438 8.83 5,184,938 9.13 4,557,274 8.92
=============== =============== =============
Options exercisable at year end 5,038,938 4,210,938 2,984,774
=============== =============== =============
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<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, 1999 Life (Years) Price at December 31, 1999 Price
- ---------------------------- --------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
$3.19 - $4.00 110,000 8.99 $3.26 10,000 $4.00
$4.38 - $7.75 2,645,250 5.26 4.95 2,338,750 4.81
$8.00 - $12.13 1,697,000 7.17 10.76 1,471,000 11.04
$12.25 - $18.63 1,219,188 6.97 15.04 1,219,188 15.04
------------------- ---------------------
$3.19 - $18.63 5,671,438 6.27 8.83 5,038,938 9.10
=================== =====================
</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>
<S> <C> <C> <C>
Net income (loss) As reported ($2,210,208) ($13,859,734) $762,906
====================================================
Proforma ($4,311,608) ($17,479,167) ($7,013,855)
====================================================
Income (loss) per share As reported ($0.09) ($0.48) $0.03
====================================================
Proforma ($0.15) ($0.61) ($0.25)
====================================================
</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 86.7% for 1999 and
55% for 1998 and 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
F-17
<PAGE>
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.
(5) INCOME (LOSS) PER COMMON AND POTENTIAL COMMON SHARE:
The calculation of basic and diluted income (loss) per common and potential
common share is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
------------ ------------ ------------
Net income (loss) $ (2,210,208) $(13,859,734) $ 762,906
Less: Preferred stock dividends (287,994) (6,714) (8,088)
Deduction related to Series C
Convertible Preferred Stock (133,320) -- --
------------ ------------ ------------
Net income (loss) applicable to
common stock $ (2,631,522) $(13,866,448) $ 754,818
============ ============ ============
Basic:
Weighted average number of
common shares outstanding 28,853,000 28,679,000 28,350,000
============ ============ ============
Basic net income (loss) per common
and potential common share $ (0.09) $ (0.48) $ 0.03
============ ============ ============
Diluted:
Weighted average number of
common shares outstanding 28,853,000 28,679,000 28,350,000
Weighted average number of
potential common shares -- -- 1,632,000
------------ ------------ ------------
Weighted average number of
common and potential
common shares outstanding 28,853,000 28,679,000 29,982,000
============ ============ ============
Diluted net income (loss) per
common and potential
common share $ (0.09) $ (0.48) $ 0.03
============ ============ ============
</TABLE>
(6) 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.
F-18
<PAGE>
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, 1999, 1998 and 1997 totaled $641,569, $813,167 and $679,791
respectively. Future minimum lease payments as of December 31, 1999 are as
follows:
2000 $ 612,774
2001 423,409
2002 209,158
2003 132,131
2004 60,684
Thereafter 9,425
----------
$1,447,581
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 up 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(R), 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 two years. Future base compensation to be paid
under these agreements as of December 31, 1999 are as follows:
2000 $1,016,000
2001 801,750
----------
$1,817,750
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
was required in 1999 and 1998.
Legal Proceedings-
-----------------
The Company filed an action in the United States District Court for the
Southern District of Florida ("Florida Action") in November 1997 seeking a
declaratory judgement on certain issues related to its relationship with Lake
Consumer Products, 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 ("Illinois Action") , 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. The
Illinois Action was dismissed by the Illinois Court and transferred to the
Florida Court for consolidation as a counterclaim in the Florida Action. On
March 16, 2000, the Company and Lake settled all outstanding issues in the
consolidated Florida Action by the Company having bought out the contract for
the sum of
F-19
<PAGE>
$1,200,000 ($600,000 in cash and $600,000 in the form of Company common stock).
As a result, the Company reacquired the U.S. rights to the Advantage product and
both parties agreed to have their legal actions dismissed.
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.
(7) 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 were
subsequently extended through December 7, 1999. At December 31, 1999, the
aggregate balance of $306,684 remains outstanding and is included in other
current assets in the accompanying 1999 consolidated balance sheet.
In connection with the issuance of the Series C Convertible Preferred Stock in
January 1999, the Company received two notes receivable from Norman M. Meier,
the President and Chief Executive Officer, and from William J. Bologna, the
Chairman of the Board, for $350,000 and $250,000, respectively. The notes bear
interest at 5% per annum and were due on July 28, 1999. Mr. Meier's note was
paid in December 1999 with interest through the date of payment and Mr.
Bologna's note was paid in January 2000 with interest through the date of
payment.
The above notes are reflected in the accompanying balance sheets at their face
value plus interest which approximates fair value.
(8) SEGMENT INFORMATION:
- -----------------------
The Company and its subsidiaries are engaged in one line of business, the
development and sale of pharmaceutical products. Two customers (under the same
contract) accounted for approximately 56% of 1999 consolidated net sales. One
customer accounted for approximately 25% and 68% of 1998 and 1997 consolidated
net sales, respectively. Another customer accounted for approximately 9%, 15%
and 5% of 1999, 1998 and 1997 consolidated net sales, respectively. A third
customer accounted for approximately 5%, of 1999, consolidated net sales. The
following table shows selected information by geographic area:
F-20
<PAGE>
<TABLE>
<CAPTION>
Income
Net (loss) from Identifiable
Sales Operations Assets
----------------- ------------------ -----------------
As of and for the year
ended December 31, 1999-
<S> <C> <C> <C>
United States $16,376,205 $3,860,850 $9,047,230
Europe 2,544,869 (5,761,680) 3,940,383
----------------- ------------------ -----------------
$18,921,074 ($1,900,830) $12,987,613
================= ================== =================
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
================= ================== =================
</TABLE>
(9) SUBSEQUENT EVENT:
In October 1999, the Company engaged an investment banking firm to act as its
exclusive advisor in a planned divestiture of certain of the Company's
over-the-counter products. Subsequent to year-end, the Company has received a
letter of intent from a prospective party who is in the process of completing
due diligence procedures. The terms of the agreement are being negotiated.
F-21
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page
----
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
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
1999 and 1998 financial statements of Columbia Laboratories, Inc. and
Subsidiaries included in this Form 10-K and have issued our report thereon dated
February 18, 2000, except for the first paragraph under the caption "Legal
Proceedings" in Note 6 as to which the date is March 16, 2000. 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 years
ended December 31, 1999 and 1998 portions of this schedule have been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly state 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 18, 2000, except for the first
paragraph under the caption "Legal
Proceedings" in Note 6 as to which
the date is March 16, 2000
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 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 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. The year ended December 31, 1997 portion 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>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
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, 1999:
Allowance for doubtful accounts $229,829 $10,000 $120,000 $119,829
============== ================ ============== =============
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
============== ================ ============== =============
</TABLE>
S-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBERS
4.7 -- Warrant to Purchase Common Stock granted to James J.
Apostolakis on September 23, 1999
10.16 -- License and Supply Agreement for Crinone between Columbia
Laboratories (Bermuda) Limited and Ares Trading S.A. dated as
of May 20, 1999
10.17 -- Addendum to Employment Agreement dated as of January 1, 2000
between the Company and Norman M. Meier
10.18 -- Addendum to Employment Agreement dated as of January 1, 2000
between the Company and William J. Bologna
10.19 -- Employment Agreement dated as of January 1, 2000, between the
Company and James J. Apostolakis
10.20 -- Employment Agreement dated December 30, 1999 between the
Company and Dominique de Ziegler
10.21 -- Settlement Agreement and Release dated as of March 16, 2000
between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer
Products, Inc.
21 -- Subsidiaries of the Company
27 -- Financial Data Schedule
EXHIBIT 4.7
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT
BE RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR
SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE
SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION
REQUIREMENTS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE
FOR THIS WARRANT.
Void after 5:00 p.m. New York Time, on September 23, 2004.
Warrant to Purchase 75,000 Shares of Common Stock.
WARRANT TO PURCHASE 75,000 SHARES OF COMMON STOCK
WARRANT TO PURCHASE COMMON STOCK
OF
COLUMBIA LABORATORIES, INC.
This is to certify that, FOR VALUE RECEIVED, James Apostolakis
or registered assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from COLUMBIA LABORATORIES, INC., a Delaware
corporation ("Company"), 75,000 fully paid, validly issued and nonassessable
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") exercisable at $7.50 per share. The number of shares of Common Stock to
be received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares," and the exercise price of a share of Common Stock as adjusted from time
to time is hereinafter sometimes referred to as the "Exercise Price."
<PAGE>
(a) EXERCISE OF WARRANT. This Warrant may be exercised as to a
minimum of 5,000 Warrant Shares at any time or from time to time until 5:00 P.M.
New York time on September 23, 2004, provided, however, that if such day is a
day on which banking institutions in the State of New York are authorized by law
to close, then on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, if any, with
the Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such form. As soon
as practicable after each such exercise of the Warrants, but not later than
seven (7) business days from the date of such exercise, the Company shall issue
and deliver to the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder or the
Holder's designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the rights of the Holder thereof to purchase the balance
of the Warrant Shares purchasable thereunder. Upon receipt by the Company of
this Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, together with the exercise price thereof in
cash or certified or bank check and the investment letter described below, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the Holder. It shall
be a condition of the exercise of this Warrant that the Holder shall deliver to
the Company an investment letter in the form as customarily used by the Company
from time to time in connection with the exercise of non-registered options and
warrants which are issued by the Company. It is further understood that
certificates for the Warrant Shares to be issued upon exercise of this Warrant
shall contain a restrictive legend to the effect that such Warrant Shares are
restricted securities as such term is defined in Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act") and cannot be sold except in
compliance with the Act and the rules and regulations promulgated thereunder.
(b) RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance and delivery
upon exercise of the Warrants. If the Common Stock is listed on any national
securities exchange, the Company shall also list such shares on such exchange
subject to notice of issuance.
(c) FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of a share, determined as
follows:
<PAGE>
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on
the NASDAQ system, the current market value shall be
the last reported sale price of the Common Stock on
such exchange or system on the last business day
prior to the date of exercise of this Warrant or if
no such sale is made on such day, the average closing
bid and asked prices for such day on such exchange or
system; or
(2) If the Common Stock is not so listed or admitted
to unlisted trading privileges, the current market
value shall be the mean of the last reported bid and
asked prices reported by the National Quotation
Bureau, Inc., on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and asked
prices are not so reported, the current market value
shall be an amount, not less than the book value
thereof as at the end of the most recent fiscal year
of the Company ending prior to the date of the
exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board
of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other Warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company at its principal office or at the office of its stock transfer agent, if
any, with the Assignment Form annexed hereto duly executed and funds sufficient
to pay any transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and in the case of loss, theft or destruction of reasonable
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the
<PAGE>
part of the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at
any time and the number and kind of securities purchasable upon the exercise of
the Warrants shall be subject to adjustment from time to time upon the happening
of certain events as follows:
(1) In case the Company shall (i) declare a dividend
or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii)
subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record
date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be proportionately adjusted as
of the effective date of such event by multiplying
such Exercise Price by a fraction, the denominator of
which shall be the number of shares of Common Stock
outstanding immediately following such event and the
numerator of which shall be the number of shares of
Common Stock outstanding immediately prior thereto.
For example, if the Company declares a 2 for 1 stock
distribution and the Exercise Price immediately prior
to such event was $1.00 per share, the adjusted
Exercise Price immediately after such event would be
$.50 per share. Such adjustment shall be made
successively whenever any event listed above shall
occur.
(2) Whenever the Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection
(1) above, the number of Shares purchasable upon
exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Shares
initially issuable upon exercise of this Warrant by
the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise
Price, as adjusted.
(3) No adjustment in the Exercise Price shall be
required unless such adjustment would require an
increase or decrease of at least twenty-five cents
($.25) in such price; provided, however,
<PAGE>
that any adjustments which by reason of this
Subsection (3) are not required to be made shall be
carried forward and taken into account in any
subsequent adjustment required to be made hereunder.
All calculations under this Section (f) shall be made
to the nearest cent or to the nearest one-hundredth
of a Share, as the case may be.
(4) Whenever the Exercise Price is adjusted, as
herein provided, the Company shall promptly cause a
notice setting forth the adjusted Exercise Price and
adjusted number of Shares issuable upon exercise of
each Warrant to be mailed to the Holders, at their
last addresses appearing in the Warrant Register, and
shall cause a certified copy thereof to be mailed to
its transfer agent, if any. The Company may retain a
firm of independent certified public accountants
selected by its Board of Directors (who may be the
regular accountants employed by the Company) to make
any computation required by this Section (f), and a
certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(5) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the
Holder of this Warrant thereafter shall become
entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (3),
inclusive above.
(6) Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable
upon exercise of this Warrant, Warrants theretofore
or thereafter issued may continue to express the same
price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to
this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise
Price shall be adjusted as required by the provisions of the foregoing Section,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
<PAGE>
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder or
any holder of a Warrant executed and delivered pursuant to Section (a), and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this
Warrant shall be outstanding, (i) if the Company shall pay any dividend or make
any distribution upon the Common Stock, or (ii) if the Company shall offer to
the holders of Common Stock for subscription or purchase by them any share of
any class or any other rights, or (iii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale, lease or transfer
of all or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least 15 days prior the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In
case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, capital reorganization and other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment,
<PAGE>
in whole or in part, for a security of the Company other than Common Stock, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933
(1) No later than two (2) years from the date hereof,
the Company shall, if permitted by applicable
regulation or any contractual provisions include in
the filing of any new registration statement (other
than a registration statement on Forms S-8, S-14,
S-15 or any other Form not generally available for
sale of securities to the public) ("Registration
Statement") under the Act covering securities of the
Company such information as may be required to permit
a public offering of the Warrant Shares. The Company
shall supply prospectuses and other documents in
order to facilitate the public sale or other
disposition of the Warrant Shares. The Company shall
file any necessary post-effective amendments to such
Registration Statement and use its best efforts to
maintain the effectiveness thereof for a period of 36
months from the date of issuance of the Warrant
Shares. The Company shall bear the entire cost and
expense of a registration of securities initiated by
it, under this Paragraph (1). The Holder shall,
however, bear the fees of his own counsel and any
transfer taxes or underwriting discounts or
commissions applicable to the Warrant Shares sold by
him. The Company may include other securities in any
such registration statement. The Company shall do any
and all other acts and things which may be necessary
or desirable to enable the Holder to consummate the
public sale or other disposition of the Warrant
Shares, and furnish indemnification in the manner as
set forth in Paragraph (2) (a) of this Section (j).
The Holder shall furnish information and
indemnification as set forth in Paragraph (2) (b) of
this Section (j).
Notwithstanding the foregoing, in
the event that there is an underwritten offering of
the Company's securities offered pursuant to said
registration statement pursuant to the immediately
preceding paragraph j(1), the underwriter shall have
the right to refuse to permit any Warrant Shares, or
to limit the amount of Warrant Shares, to be sold by
the Holder to such underwriter(s) as such
underwriter(s) may determine in its discretion, and
the Holder shall refrain from selling such remainder
of its Warrant Shares covered by such registration
<PAGE>
statement for the period of forty five (45) days
following the effective date.
(2) (a) Whenever pursuant to this Section (j) a
registration statement relating to the Warrant Shares
is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder
of the securities covered by such registration
statement, amendment or supplement (such holder being
hereinafter called the "Distributing Holder"), and
each person, if any who controls (within the meaning
of the Act) the Distributing Holder, against any
losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder or any such
controlling person may become subject, under the Act
or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or
alleged untrue statement of any material fact
contained in any such registration statement or any
preliminary prospectus or final prospectus
constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon
the omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading; and will
reimburse the Distributing Holder and each such
controlling person for any legal or other expenses
reasonable incurred by the Distributing Holder and
each controlling person for any legal or other
expenses reasonable incurred by the Distributing
Holder or such controlling person or underwriter in
connection with investigating or defending any such
loss, claim damage, liability or action; provided,
however, that the Company will not be liable in any
such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or
omission or alleged omission made in said
registration statement, said preliminary prospectus,
said final prospectus or said amendment or supplement
in reliance upon and in conformity with written
information furnished by such Distributing Holder for
use in the preparation thereof.
(b) The Distributing Holder will indemnify
and hold harmless the Company, each of its directors,
each of its officers who have signed said
registration statement and such amendments and
supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act)
against any losses, claims, damages or liabilities to
which the Company or any such director, officer or
controlling person may become subject, under
<PAGE>
the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon
any untrue or alleged untrue statement of any
material fact contained in said registration
statement, said preliminary prospectus, said final
prospectus, or said amendment or supplement, or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein no misleading, in each case to the extent,
but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged
omission was made in said registration statement,
said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in
conformity with written information furnished by such
distributing Holder for use in the preparation
thereof; and will reimburse the Company or any such
director, officer or controlling person for any legal
or other expenses reasonably incurred by them in
connection with investigating or defending any such
loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified
party under this Paragraph 2 of notice of the
commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made
against any indemnifying party, give the indemnifying
party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not
relieve it from any liability which it may have to
any indemnified party otherwise than under this
Paragraph 2.
(d) In case any such action is brought
against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate
in, and, the extent that it may wish, jointly with
any other indemnifying party similarly notified to
assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after
notice from the indemnifying party to such
indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be
liable to such indemnified party under this Paragraph
2 for any legal or other expenses subsequently
incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of
investigation.
<PAGE>
(e) The Company's agreements with respect to
Warrant Shares in this Section (j) shall continue in
effect regardless of the exercise or surrender of
this Warrant.
Issued as of September 23, 1999
COLUMBIA LABORATORIES, INC.
By: /s/ David L. Weinberg
----------------------------
David L. Weinberg
Vice President - Finance and
Administration
<PAGE>
PURCHASE FORM
Dated , 19
------------
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing ____________ shares of Common Stock
of Columbia Laboratories, Inc., and hereby makes payment of ___________ in
payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _________________________________________ (Please typewrite or print in
block letters)
Address
Signature
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________hereby sells, assigns and
transfers unto
Name ______________________________ (Please typewrite or print in block letters)
Address
the right to purchase Common Stock of Columbia Laboratories, Inc., represented
by this Warrant to the extent of shares as to which such right is exercisable
and does hereby irrevocably constitute and appoint Attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.
Date , 19
--------------
Signature
EXHIBIT 10.16
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement (the "Agreement") made and entered
into as of this 20th day of May 1999 by and between Columbia Laboratories
(Bermuda) Limited, a Bermuda corporation having its principal place of business
at Rosebank Center, 14 Bermudiana Road, Pembroke, HM08 Bermuda ("Licensor"), and
Ares Trading S.A., a Swiss company with its principal place of business at
Chateau de Vaumarcus, 2028 Vaumarcus, Switzerland ("Licensee");
WITNESSETH:
WHEREAS, Licensor and American Home Products Corporation of Five
Giralda Farms, Madison, New Jersey 07940-0874, a Delaware corporation,
represented by its Wyeth-Ayerst Laboratories Division ("AHPC") entered into a
License and Supply Agreement dated as of May 21, 1995, as amended;
WHEREAS, pursuant to an Assignment and Royalty Agreement (the
"Assignment Agreement") AHPC will assign its right, title and interest in, to
and under such License and Supply Agreement to Licensee;
WHEREAS, this Agreement is an amended and restated version of such
License and Supply Agreement;
WHEREAS, this Agreement will become effective upon the completion of
Closing under the Assignment Agreement (as such term is defined therein);
WHEREAS, Licensor is the owner or exclusive licensee of, and has the
right to grant licenses with respect to, certain Technology, Patents and the
Trademarks (as hereinafter defined); and
WHEREAS, Licensor wishes to grant to Licensee an exclusive license
(subject only to Licensor's retained use and manufacturing rights) to the
Technology, Patents and the Trademarks for use and sale of the Product (as
hereinafter defined) in the Territory (as hereinafter defined), and Licensee
wishes to receive such a license, on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants herein contained, the parties hereto agree as follows.
1. Definitions. As used in this Agreement, the following terms (except
as otherwise expressly provided or unless the context otherwise requires) shall
have the respective meanings set forth below ( it being understood that the
terms defined in this Agreement shall include the singular number in the plural,
and the plural number in the singular):
(a) "Affiliate" shall mean any corporation or other business entity
that either directly or indirectly controls a party to this Agreement, is
controlled by such party, or is under common control
<PAGE>
of such party. As used herein, the term "control" means possession of the power
to direct or cause the direction of the management and policies of a corporation
or other entity whether through the ownership of voting securities, by contract
or otherwise.
(b) "Assignment Agreement" shall mean the Assignment and Royalty
Agreement by and between AHPC and Licensee.
(c) "Base Price" shall mean Direct Cost plus 20%. On a country by
country basis, Licensor shall notify Licensee of the Base Price if the Base
Price becomes relevant in calculating the Purchase Price.
(d) "Confidential Information" shall mean all information and/or
technical data which is disclosed by one party hereto to the other party hereto
pursuant to this Agreement which the disclosing party treats as confidential and
identifies as such, other than (i) information known to the receiving party or
its Affiliates prior to the disclosure of such information to such party,
provided said prior knowledge is supportable by documentary evidence, (ii)
information which at the time of the disclosure is, or thereafter becomes,
generally known to the public, provided that such public knowledge does not
result from any act or disclosure by the receiving party or one of its
Affiliates in violation of the terms of this Agreement, (iii) information which
can be shown to be independently discovered, after the date hereof, by a party,
or one of its Affiliates, without the aid, application or use of the disclosed
information, or (iv) information obtained by the receiving party from a third
party which is determined to be in lawful possession of such information,
provided such third party is not in violation of any contractual or legal
obligation to the disclosing party or one of its Affiliates with respect to such
information.
(e) "Direct Cost" shall mean the following direct costs of
manufacturing the Product: raw material/ingredient costs, packaging costs,
direct labor and direct overhead.
(f) "Effective Date" shall mean the date of the completion of Closing
under the Assignment Agreement (as such term is defined therein).
(g) "FDA" shall mean the U.S. Food and Drug Administration.
(h) "Field" shall mean the vaginal delivery of progesterone or
progestational agents alone or in combination or co-administered with other
active substances directed toward use in hormone replacement therapy as well as
in the indications of secondary amenorrhea, in vitro fertilization, and
prevention of endometrial hyperplasia and other indications where progesterone
or progestational agents are commonly used except in a locally acting -
non-systemic - contraceptive where progesterone or a progestational agent may be
useful.
(i) "Finished Package Form" shall mean applicators wrapped in aluminum
foil with required leaflet printed in two colors and inserted into an
appropriate box with customary trade dress printed in up to four colors. The
boxes will be placed into appropriate outer cartons which will be printed in one
color with required labeling and UPC codes.
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<PAGE>
(j) "Forecast" shall mean the official Licensee forecast as required by
paragraphs 4 (i) and 4 (j).
(k) "GMP" shall mean current good manufacturing practice regulations
promulgated by the FDA and other regulatory agencies.
(l) "Intellectual Property Rights" shall mean trade secrets,
trademarks, tradenames, logos, trade dress, graphics, designs, patents,
copyrights or other proprietary rights.
(m) "NDA" shall mean a New Drug Application as defined by the FDA.
(n) "Net Sales" shall mean the aggregate equivalent of gross revenue
received by Licensee, its Affiliates or sublicensees from or on account of the
sale of the Product to non affiliated third parties on which payments are due
under this Agreement, less (i) reasonable credits or allowances, if any,
actually granted on account of cash or trade discounts, recalls, rebates,
rejection or return of the Product previously sold, (ii) excises, sales taxes,
value added taxes, consumption taxes, duties or other taxes imposed upon and
paid with respect to such sales (excluding income or franchise taxes of any
kind) and (iii) separately itemized insurance and transportation costs incurred
in shipping the Product to such third parties. No deduction shall be made for
any item of cost incurred by Licensee or its Affiliates in preparing,
manufacturing, shipping or selling the Product except as permitted pursuant to
clauses (i), (ii) or (iii) of the foregoing sentence. Net Sales shall not
include any transfer between Licensee and any of its Affiliates or sublicensees
for resale. No transfer of the Product for test or development purposes or as
free samples shall be considered a sale hereunder for accounting and payment
purposes,
(o) "Patents" shall mean the patents and/or patent applications filed
in the Territory owned by the Licensor or its Affiliates or with respect to
which Licensor or its Affiliates may now or hereafter have the right to grant
licenses in the Territory, the claims of which may be infringed, absent a
license, by the manufacture, use or sale of the Product within the Territory,
including, without limitation, the patents and applications set forth in
Schedule A hereto and any and all patents issued pursuant thereto, as well as
any patents to be applied for or issued to Licensor or its Affiliates in the
future during the term of this Agreement, which future patents and patent
applications shall be added to Schedule A by written notice of Licensor to
Licensee within thirty (30) days of such application and/or issuance.
(p) "Product" shall mean progesterone/COL-1620 vaginal gel.
(q) "Purchase Price" shall have the meaning set forth in Section 5 of
this Agreement.
(r) "Technology" shall mean all pharmacological, toxicological,
preclinical, clinical, technical and other information, data and analysis and
know-how relating to the registration, manufacture, packaging, use, marketing
and sale of the Product (including, without limitation, all works copyrighted by
Licensor) and all proprietary rights relating thereto owned by Licensor or its
Affiliates or to which Licensor or its Affiliates has rights so as to be able to
license, whether prior to or after the Effective Date, and relating or
pertaining to the Product.
3
<PAGE>
(s) "Territory" shall mean all countries and territories of the world
except for sub-Saharan Africa, which is comprised of the following countries:
The Republic of South Africa, Lesotho, Botswana, Zimbabwe, Namibia, Mozambique,
Zaire, Kenya, Malawi, Mauritius, Seychelles, Madagascar, Zambia and Swaziland.
(t) "Trademarks" shall mean the trademark "Crinone" or the trademark
"Perlence" for use on cosmetic and pharmaceutical products used primarily for
progesterone supplementation as set forth in Schedule B.
(u) "Unit" shall mean a single applicator.
(v) "Valid Claim" shall mean a claim which is contained in an
unexpired, issued Patent which has not been held invalid or unenforceable by a
decision of a court or patent office of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not been admitted
to be invalid by the owner through reissue or disclaimer.
2. Grant of License.
----------------
(a) Licensor grants to Licensee, and Licensee accepts from Licensor, on
the terms and conditions stated herein, an exclusive (even as to Licensor and
Licensor's Affiliates) right and license, with the right to sublicense, under
the Patents and Technology to market, use and sell the Product in the Territory;
provided, however that Licensee will only sublicense Product containing
progesterone in a concentration of eight percent (8%) after prior consultation
with Licensor. Licensor grants to Licensee, and Licensee accepts from Licensor,
on terms and conditions stated herein, a nonexclusive right and license with the
right to sublicense its Affiliates under the Patents and Technology to make
and/or have made the Product anywhere in the world, but only for use or sale in
the Territory.
(b) Licensor grants to the Licensee, and Licensee accepts from
Licensor, on the terms and conditions contained herein (i) an exclusive right
and license, with the right to sublicense, to use the Trademarks in the
distribution, advertising, marketing, use and sale of the Product (and any line
extension to the Product as to which Licensee has obtained Licensor's prior
written consent, not to be unreasonably withheld) in the Territory, and (ii) a
nonexclusive right and license with the right to sublicense its Affiliates to
use the Trademarks in the manufacture, labeling and packaging of the Product
(and any line extensions to the Product as to which Licensee has obtained
Licensor's prior written consent, not to be unreasonably withheld) anywhere in
the world. Licensor shall not use, nor permit any of its Affiliates or other
licensees to use, the Trademarks on any other product marketed, used or sold in
the Territory.
(c) Licensor's retained rights in the Territory in connection with the
Product shall include only those rights under the Patents, the Trademarks and
Technology to make, have made and use the Product as necessary for Licensor to
fulfill its commitments now or in the future with respect to this Agreement and
with respect to its licensees who market the Product outside the Territory, to
otherwise operate its business (it being understood that Licensor, its
Affiliates and other licensees shall not sell, use or market the Product within
the Territory), and to make, have made, use, market and sell the Product, itself
or through its Affiliates or licensees, outside the Territory.
4
<PAGE>
(d) Licensor will use its best efforts to convince its licensee outside
the Territory not to use the Trademarks.
(e) Licensee may, at any time, request from Licensor, and Licensor
agrees to grant directly to any party in any country of the Territory exclusive
license rights consistent with those granted to Licensee herein. Accordingly,
upon receipt of Licensee's request, Licensor shall enter into and sign a
separate direct license agreement or agreements with the companies designated by
Licensee in the request. All direct agreements shall be prepared by Licensee. In
the absence or upon the expiration of laws and regulations to the contrary, the
terms and conditions thereof shall not be less favorable by Licensor than those
contained in this Agreement and shall be similar to the terms and conditions
contained in this Agreement. Such agreements must be approved by Licensor, which
approval shall not be unreasonably withheld. In those countries in which the
validity of such a direct license agreement requires prior governmental approval
or registration, such direct license agreement shall not be binding or have any
force or effect until the required governmental approval or registration has
been granted. Incidental out of pocket costs incurred by Licensor in the
renegotiation of this Agreement, the execution of direct license agreements and
matters pertaining thereto shall be for the account of Licensee, when prior
approved by Licensee.
(f) In the event that any local government would request or local
regulations would require that the regulatory approval for the Product be held
in the name of Licensee or should it reasonably appear that ownership of the
registration for the Product by Licensee would facilitate regulatory approval,
then Licensor, upon the request of Licensee, shall transfer to Licensee
ownership of the regulatory approval for the Product for such country or
countries.
(g) Licensor shall make reasonable efforts to obtain from its licensee
outside the Territory any right such licensee may have to market, use, sell,
make and have made the Product and to use the Trademarks. Upon Licensor
obtaining such rights, "Territory" under this Agreement shall be automatically
redefined to mean "the world." Any incidental out of pocket costs incurred by
Licensor in obtaining such rights shall be for the account of Licensee, when
prior approved by Licensee.
3. License Fees.
------------
In consideration of the services by Licensor to research and develop
the Product and to obtain respective local approvals for the Product, all to the
benefit of Licensee pursuant to the license and other rights granted to Licensee
hereunder, Licensee shall pay to Licensor the following (all dollars mean U.S.
dollars):
(a) Five hundred thousand dollars ($500,000) upon Licensee, its
Affiliates or sublicensees filing a NDA for the Product for the treatment of
hyperplasia.
(b) Five million dollars ($5 million) upon FDA approval of the
promotable claim made via NDA or other FDA procedure that the Product can be
used concomitantly with estrogen in Hormone Replacement Therapy (HRT).
5
<PAGE>
(c) Five million dollars ($5 million) when Net Sales of the Product in
the United States reach sixty million dollars ($60 million) during two
consecutive calendar years, provided that this level of Net Sales is achieved
within seven (7) years of the Product launch in the United States.
6
<PAGE>
4. Supply.
------
(a) During the term of the Agreement, Licensor shall supply, unless
otherwise agreed, Licensee, its Affiliates and sublicensees with the Product on
an exclusive basis in the Territory. All such Product shall be delivered in
Finished Package Form. Also, during the term of the Agreement, Licensor shall
not develop, license, manufacture nor sell to another party in the Territory any
product in the Field. Licensor is not restricted from developing, licensing
manufacturing or selling other hormones or drugs. Licensor represents that as of
the Effective Date it has not entered into any arrangement which would
contravene the intentions of this paragraph.
(b) Although Licensor is responsible for production and quality
control, Licensee has the right of inspection to ensure Licensor meets all
appropriate standards set by the FDA or other appropriate regulatory
authorities.
(c) Licensor shall be obliged to maintain the registration of the
manufacturing facilities with the appropriate regulatory authorities and to
allow inspection of such facilities by regulatory authorities insofar as
necessary or advisable in order to facilitate the supply to Licensee, its
Affiliates or sublicensees of the Product, and promptly to notify Licensee of
any inspection of its own or its contract supplier's manufacturing facilities by
the regulatory authorities and promptly to provide Licensee with copies of any
correspondence received from the regulatory authorities setting forth the
results of any such inspection insofar as the Product is concerned. Furthermore,
as may be required for regulatory purposes, Licensor grants Licensee the right
to refer to, and shall cause its contract supplier to grant to Licensee access
to, contract supplier's master file relating to the Product and undertakes to
notify Licensee and provide Licensee with specific details of any changes to
said master file or other filings by the contract supplier with the regulatory
authorities relative to the Product. Licensor shall consult with Licensee before
it or its contract supplier makes any material change in any manufacturing
process for the Product. Licensor shall be kept duly informed without any delay
by copy letter of any correspondence between Licensee and the contract supplier,
in the event that any such communication should occur.
(d) Upon reasonable prior notice given by Licensee to Licensor in
writing, Licensor shall permit and shall cause its contract supplier to permit
representatives of Licensee or designees of Licensee acceptable to Licensor
and/or contract supplier to inspect any manufacturing, quality control or
testing facilities used by or in connection with the manufacture or testing of
the Product and annual GMP audits provided that such representatives or
designees of Licensee shall conduct such inspections in a manner which shall
cause the least possible interruption to Licensor's or the contract supplier's
operations under the particular circumstances. Such inspection shall take place
in a timely manner and shall be permitted to take place during any or all phases
of manufacturing, quality control and testing, and shall provide for Licensor
and/or the contract supplier's granting to Licensee access to information in its
possession relevant to determining whether GMP are likely to be met with respect
to manufacture of the Product.
(e) Personnel of Licensee or Licensee's designee shall be entitled to
witness the manufacturing of test batches, scale-up batches and full-size
production batches which in each case will be used as NDA support batches filed
by Licensee or in regulatory authority presentations. These batches would be
prepared by the intended commercial process for the Product or prepared to
7
<PAGE>
demonstrate the quality of the entire process (validation) or any single aspect
of a critical manufacturing parameter. Licensee may witness and/or review the
analytical laboratory testing of any of the above cited batches or of the
methodology which will be used to support a regulatory authority presentation.
Licensee may prospectively review, to the extent necessary for compliance with
applicable GMP and for scheduling purposes, the protocols and actual study data
and results (process, cleaning, sterilization, validation) as related to such
batches.
(f) Licensee shall keep all information disclosed to or obtained by
Licensee under paragraphs 4 (c) (d) and (e) strictly confidential and not
disclose the same to any other person, except to the extent reasonably necessary
or appropriate under applicable regulations for Licensee to register the Product
with the regulatory authorities or otherwise comply with applicable law.
(g) The information disclosed shall be used only to check the
compliance of the contract supplier with GMP or any other applicable regulation
or any other purpose agreed by Licensor and the contract supplier. In no case,
shall Licensee use such information to manufacture the Product, except in the
case where such rights have been acquired from Licensor or transferred to
Licensee.
(h) Product in Finished Packaged Form shall be delivered by Licensor so
as to comply with the packaging and labeling requirements set forth by the FDA
or other appropriate regulatory agencies.
(i) Licensee will supply Licensor with a sales Forecast between the
time of submission of a registration file in any country of the Territory and
the approval of such file by the appropriate regulatory authority in such
country, so that Licensor can plan production. If Licensee or one of its
Affiliates or sublicensees does not market the Product in a country within the
later of (i) six (6) months after the Effective Date or (ii) six (6) months
after approval for both marketing and price, where applicable (e.g. France,
Spain and Italy), Licensee will pay to Licensor twenty percent (20%) of the
first year Forecast for the Product in such country for each year of delay in
marketing the Product in such country. It is additionally provided that such
payment will be reduced in the event Licensee or one of its Affiliates or
sublicensees introduces the Product in such country within the twelve (12) month
period from the date of regulatory approval therein (including price approval)
to the extent of thirty (30%) of Net Sales for such country during said twelve
(12) month period.
(j) Licensee will give Licensor, on the first business day of each
calendar quarter, a Forecast of Licensee's, its Affiliates' and sublicensees'
requirements of Product for each country in which the Product is marketed for
the six (6) month period that begins three (3) months later. The first three (3)
months of each six (6) month Forecast will be a firm order, and the Product
described in the order will be delivered to Licensee, its Affiliates and
sublicensees in accordance with the terms of the order, but not less than three
(3) months from the date of the order. Licensor is obliged to supply the amount
of Product requested in the firm order except to the extent that such amount is
more than fifteen percent (15%) higher than the amount that had been forecasted
for that period in the last Forecast received by Licensor. With respect to any
amount ordered in excess of the fifteen percent (15%) limit, Licensor is
obligated to use commercially reasonable efforts to supply the requested amount
to Licensee, its Affiliates and sublicensees.
(k) Licensor shall use reasonable commercial efforts to notify Licensee
within thirty (30) days after the Effective Date and thereafter thirty (30) days
prior to the end of each calendar year, of
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<PAGE>
factory vacation schedules for the coming year, and if Licensee receives notice
of such vacation schedules, they will be incorporated into Licensee's Forecasts.
(l) Licensor bears the expense and responsibility for transportation
and insurance for the Product to the Licensee's choice of airport or seaport
(FOB port) nearest to the manufacturing site where the Product is manufactured;
thereafter, transportation, insurance and duties for the Product are the
responsibility of Licensee. Each shipment of the Product shall be accompanied by
a Certificate of Analysis for each lot within each shipment signed by authorized
quality control/quality assurance personnel of Licensor or its contract
manufacturer.
(m) All Product manufactured and supplied hereunder shall meet the
quality control specifications and the specifications in the applicable
regulatory filing through the expiration date stated on that Product package.
Such Product when delivered to Licensee, its Affiliates and sublicensees shall
also not be adulterated or misbranded within the meaning of the U.S. Food, Drug
and Cosmetic Act, as amended. In accordance with GMPs and other applicable laws
and regulations, Licensor or its contract manufacturer will test each shipment
of the Product to be supplied to Licensee, its Affiliates and sublicensees
pursuant to this Agreement before delivery of such shipment to Licensee, its
Affiliates and sublicensees to ensure that the Product meets these standards.
Licensor or its contract manufacturer shall retain sufficient quantities of each
shipment of the Product to verify on an on-going basis that such Product meets
quality control specifications and the specifications in the applicable
regulatory filing through its stated expiration date. Such Product shall be
retained through its stated expiration date plus one year, or such longer period
of time as may be required by GMPs and other applicable laws and regulations.
(n) Licensee, its Affiliates and sublicensees shall have the right to
reject any delivered Product that does not meet quality control specifications
and the specifications in the applicable regulatory filing. Licensee must notify
Licensor in writing of any such rejection within thirty (30) days (except as to
latent defects), and Licensor has thirty (30) days to replace the rejected
shipment with Product that meets the agreed upon specifications in the
regulatory filings. The expense of return, manufacture of replacement Product
and shipment of replacement Product are Licensor's.
(o) Licensor will use its best efforts to provide Licensee, its
Affiliates and sublicensees with its ordered amounts (up to fifteen percent
(15%) over Licensee's Forecast) and with respect to any amount ordered in excess
of the fifteen percent (15%) above Forecast, Licensor will use commercially
reasonable efforts to supply the requested amounts.
(p) In the event Licensor is unable, due to reasons beyond its control,
to provide Licensee, its Affiliates and sublicensees the amount of Product set
forth in any firm order, Licensor shall be obligated to provide such amount of
Product to Licensee, its Affiliates and sublicensees through third parties with
which Licensor contracts, and Licensor shall be responsible for any additional
costs, including without limitation additional costs of manufacturing the
Product, caused thereby, provided that the provisions of this sentence shall not
apply to the extent that the amount of Product set forth in such firm order
exceeds the Forecast by more than fifteen percent (15%).
(q) In countries (e.g. in some countries in South America or in India)
where the Purchase Price of thirty percent (30%) of Net Sales for Finished
Package Form of the Product is below the Base
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<PAGE>
Price, Licensor will provide Licensee finished Product in tubes with reusable
applicators or other appropriate presentation, at a negotiated second base
price. In countries where import duties make it impractical to import Product in
Finished Package Form (e.g. Argentina), Licensor will grant Licensee the right
to manufacture the Product locally if requested by Licensee for such country and
will be paid a royalty on Net Sales for such country, provided such royalty can
be legally expatriated from any such country, equal to the difference between
thirty percent (30%) of Net Sales in such country and Licensee's cost of
manufacturing the Product for such country.
This royalty shall be payable for such country until the expiration of
any Valid Claims in such country or until a third-party vaginally-administered
progesterone product captures fifteen percent (15%) or more of the sales of the
Product in such country. Subsequent to either event taking place in any such
country, the royalty payable to Licensor on Net Sales in such country shall be
reduced to seven percent (7%) in consideration of rights to the Trademarks and
Technology until May 21, 2015, and thereafter the royalty payable on Net Sales
in such country shall be two percent (2%) in consideration of rights to the
Trademarks until May 21, 2020. Thereafter Licensee shall have an irrevocable
fully paid up license to the Product under the Technology and shall own the
Trademarks and related goodwill (subject to the condition set forth in Section
13 hereto).
(r) If after the ten (10) year period defined in Section 13, the
parties cannot agree upon mutually acceptable terms for supply, Licensee has the
option of converting this Agreement into a license agreement and Licensee will
be free to manufacture, or have manufactured, the Product, provided that
Licensee pays to Licensor on a quarterly basis a royalty for the license of the
Patents, Technology and Trademarks of fifteen (15%) of Net Sales.
The royalty pursuant to this paragraph (r) shall remain at fifteen
(15%) of Net Sales for any country until the expiration of any Valid Claims in
such country or until a third-party vaginally-administered progesterone product
captures fifteen percent (15%) or more of the sales of the Product in such
country. Subsequent to either event taking place in any country of the
Territory, the royalty payable to Licensor on Net Sales in such country shall be
reduced to seven percent (7%) in consideration of rights to the Trademarks and
Technology until May 21, 2015, and thereafter the royalty payable on Net Sales
in such country shall be two percent (2%) in consideration of right to the
Trademarks until May 21, 2020. Thereafter Licensee shall have an irrevocable
fully paid up license to the Product under the Technology and shall own the
Trademarks and related goodwill (subject to the condition set forth in Section
13 hereto).
(s) The procedure for communication and processing of customer
complaints with respect to the Product shall be as set forth on Schedule D.
During the term of this Agreement, each party shall make available to the other
party information about the Product as may be necessary to carry out the
provisions and purposes of this Agreement, including without limitation general
medical information relating to the Product's storage, use and safety. Licensor
shall provide prompt written notice to Licensee, including relevant references,
of any information which Licensor believes in its reasonable judgment is
material for medical information services. Material information shall include,
but not be limited to, published or unpublished reports or other clinical or
laboratory data received by Licensor about Product safety, contraindications,
treatment programs in the indications specified by the approved Product insert,
stability, storage and shipping, pharmacology, and other information Licensor
believes in its reasonable judgment is relevant to safe and effective Product
use. Licensor shall
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provide reasonable follow-up information and prompt written replies to verbal or
written questions from Licensee pertinent to medical information services about
the Product. On a periodic basis as agreed by both parties, but no less than
annually, Licensor shall provide a written summary of information about the
Product, which Licensor believes in its reasonable judgment is material for the
medical information services provided by Licensee.
(t) In the event any regulatory authority having jurisdiction shall so
request or order, or if either party has reason to believe that any corrective
action should be taken with respect to the Product supplied hereunder, including
without limitation any Product recall, customer notice, restriction, change, or
market action, then such party shall immediately inform the other in writing. If
the party owning the relevant registration file for such Product, after
consultation with the other party, deems it necessary to effect a Product
corrective action then such party shall effect such corrective action in
accordance with procedures agreed upon by the parties.
If the Product defect causing the corrective action shall be found to
result solely from the manufacture and supply of the Product hereunder, then
Licensor shall either supply a quantity of the Product without charge sufficient
to enable Licensee and/or its Affiliates or sublicensees to replace all Product
subject to the corrective action, or render a credit to Licensee, its Affiliates
or sublicensees for such Product, at Licensee's option. Such replacement Product
shall be delivered at Licensor's expense within thirty (30) days of the date on
which the corrective action was effected, as Licensee may direct. In such event
Licensor also agrees to reimburse Licensee, its Affiliates or sublicensees for
other costs and expenses incurred with respect to such corrective action. If the
Product defect causing the corrective action shall be found to result solely
from Licensee's, its Affiliates' or sublicensees' marketing, use or sale of the
Product hereunder, then the costs and expenses of such corrective action shall
be paid by Licensee. If the Product defect causing the corrective action shall
be found to result from a joint act or omission of the parties, then the parties
shall negotiate in good faith an appropriate allocation of the costs and
expenses of the corrective action.
5. Price and Payment Terms.
-----------------------
(a) The Purchase Price to be paid by Licensee for the Product in
Finished Package Form shall be the Base Price or thirty percent (30%) of Net
Sales, whichever is greater, unless otherwise agreed as contemplated in
paragraph 4(q). If the Base Price were to exceed thirty percent (30%) of Net
Sales, the parties shall meet to discuss how to resolve the high cost of goods.
The parties hereby acknowledge that the Base Price for the Product is
contemplated for six (6) Units - twelve (12) days therapy in Finished Package
Form. If Licensee orders the Product in Finished Package Form containing fewer
than six (6) Units the Base Price shall be reduced. This reduction will reflect
a pro rata reduction in the cost of the Product based on the number of Units
specified as well as any reduction in the cost of packaging. If Licensee wishes
to order the Product in Finished Package Form that contains more than six (6)
Units the Base Price will be adjusted accordingly.
(b) The following quantity discounts will be applied to annual
purchases of the Product by Licensee, its Affiliates, or sublicensees:
(i) Over ten (10) million Units - 3.33% - which would reduce
the Purchase Price to twenty-nine percent (29 %) of Net Sales or the Base Price,
whichever is greater.
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(ii) Over twenty (20) million Units - 6.66% - which would
reduce the Purchase Price to twenty-eight percent (28%) of Net Sales or the Base
Price, whichever is greater.
(iii) Over thirty (30) million Units - 10% - which would
reduce the Purchase Price to twenty-seven percent (27%) of Net Sales or the Base
Price, whichever is greater.
(c) At Licensee's request, Licensor will supply promotional samples of
the Product in Finished Package Form at a Purchase Price equal to Licensor's
Direct Cost.
(d) Licensee's invoice price for the Product purchased from Licensor
shall be paid in U.S. dollars thirty (30) days after the later of (A) receipt by
Licensee of an invoice for such Product, or (B) the shipment by Licensor of the
corresponding Product.
(i) Licensor's invoice price to Licensee and Licensee's
payment to Licensor shall both be in U.S. dollars and shall be established for
each Product pack for each country of the Territory at the commencement of each
calendar year. For each country, the basis for the invoice price shall be the
in-market local currency price from Licensee, its Affiliates or sublicensees to
third parties converted into U.S. dollars at the exchange rate published in the
Wall Street Journal prevailing at the close of business on the first working day
of the applicable calendar year.
(ii) Any necessary adjustments to such payments to reflect the
actual Purchase Price for the Product shall be made forty-five (45) days after
the end of each calendar quarter in the report described in paragraph 16 (a), by
converting local currency Net Sales into U.S. dollars based on the local
currency - U.S. dollar exchange rate published in the Wall Street Journal on the
last working day of the applicable calendar quarter and calculating the Purchase
Price on this basis.
(iii) Underpayments or overpayments shall be calculated based
on the Net Sales value of Units of the Product sold by Licensee, its Affiliates
or sublicensees during the calendar quarter. Purchases by Licensee in excess of
actual Unit sales by Licensee, its Affiliates or sublicensees during a given
calendar quarter shall be carried over to the next calendar quarter for
reconciliation. Volume discounts, as defined by paragraph 5(b), shall be taken
into account in the last reconciliation of each calendar year. A credit for
Licensee's out-of-pocket costs and expenses of conducting clinical trials and
registering the Product in Japan, as defined by paragraph 7(c), shall also be
taken into account in the last reconciliation of each calendar year, by each
year offsetting the amount of such costs and expenses against the total annual
amount due for purchases of the Product until all such costs and expenses have
been offset.
(e) If a vaginally administered progesterone-containing product is
approved in any country of the Territory subsequent to the Effective Date which
product captures fifteen percent (15%) or more of the sales of the Product in
such country the parties shall renegotiate price based on the economic impact
upon the Licensee for any such country or countries.
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6. Marketing.
---------
(a) Licensee will be responsible for marketing and sales of the Product
in the Territory. Licensee will use its diligent efforts to make the Product a
commercial success by making a commitment throughout the term of the Agreement,
financial and otherwise, to the Product that is no less than its commitment to
those of its own brands and products in similar circumstances that it actively
and aggressively promotes, in accordance with the life cycle of such products,
provided, however, that Licensee shall have no such obligations with respect to
the Product containing progesterone in a concentration of four percent (4%).
Licensee will ensure that any sublicense it makes under the Patents and
Technology to market, use and sell the Product in the Territory will contain
appropriate obligations of commercial diligence.
(b) Licensee will provide quarterly sales and other marketing
information useful to the Licensor in monitoring sales progress.
(c) Licensor hereby authorizes Licensee to communicate directly with
regulatory authorities with respect to regulatory files for the Product owned by
Licensor to the extent necessary to fulfill Licensee's responsibilities for
marketing and sales of the Product in the Territory. Licensor agrees, at
Licensee's request, to execute any documents or take any other actions as may be
necessary or desirable to obtain authorization for Licensee so to communicate
directly with such regulatory authorities.
7. Clinical Trials and Registration
(a) Licensor will be responsible for clinical trials and registration
filings related to the Product throughout the world. All clinical trials
contemplated and completed are attached in Schedule C together with their
completion or estimated completion dates. These studies are designed to register
the Product for the following indications:
In-Vitro Fertilization (IVF)
Secondary Amenorrhea
Treatment of Hyperplasia
Hormone Replacement Therapy
The parties shall consult from time to time regarding the scope,
details and timing of the clinical trials and registration filings. The parties
may agree to allocate resources currently allocated to clinical trials and
registration filings for the Product for the treatment of hyperplasia and for
hormone replacement therapy (prevention of hyperplasia) to other indications.
Licensor will use diligent efforts to conduct and complete the clinical trials
and to prepare and submit the registration filings.
In some countries additional approvals may be obtained based on the
clinical trials enumerated in Schedule C for indications that are not at the
moment approvable in the United States, specifically, benign mastopathies and
premenstrual syndrome.
(b) Licensee shall have the right to monitor and audit the clinical
trials and/or other tests required by the protocols described in Schedule C for
the Product.
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(c) To the extent Licensee seeks to amend the labeling or support
additional advertising claims for the Product beyond that which is contemplated
in paragraph 7(a), at its sole discretion and expense it may design, conduct and
control such additional clinical trials necessary to obtain FDA or other
regulatory approval, provided, that Licensee shall give Licensor prior written
notice of its intention to do so. In addition to the Phase I clinical trial for
the Product in Japan described in Schedule C, Licensee shall also conduct
clinical trials and register the Product in Japan. Licensor shall reimburse
Licensee for all out-of-pocket costs and expenses incurred in conducting such
clinical trials and registering the Product by providing Licensee a credit for
this amount against the Purchase Price for the Product in accordance with the
terms and conditions of paragraph 5(d). It is anticipated that the out-of-pocket
costs and expenses for such clinical trials may include, without limitation,
costs and expenses associated with clinical investigators, contract
laboratories, and data analysis, but shall not include any incremental costs and
expenses associated with retaining a contract research organization. Product and
placebo necessary for the conduct of such clinical trials shall be supplied by
Licensor free of charge, appropriately packaged and labeled and in accordance
with the terms of paragraphs 4 (j), (l)-(p) and (t) hereof.
Licensee shall own and have unrestricted rights to the clinical data generated
as a result of clinical trials conducted by Licensee; provided that the results
of such clinical trials shall be made available to Licensor free of charge to be
filed in connection with Licensor's regulatory submissions outside the
Territory.
(d) Each party will immediately notify the other of any adverse or
unexpected reaction or results or any actual or potential government action
relevant to clinical trials of the Product and the parties will discuss with
each other measures to be undertaken to resolve any such problem.
8. Maintenance of Patents and Trademarks.
-------------------------------------
(a) Licensor shall keep Licensee currently advised of all steps taken
or to be taken in the prosecution of all applications for Patents. Licensor
shall have full and complete control over any reissue or reexamination or other
proceedings relating to the Patents, the Trademarks and/or Technology and of any
disclaimers thereof. Licensor shall bear all costs for the maintenance and
enforcement of the Patents and Trademarks, as well as all costs for the filing,
maintenance and enforcement of all additional Patents which may be filed by the
Licensor during the term hereof. If Licensor fails to carry out such obligations
set forth in this Section 8, Licensee may carry out such obligations on
Licensor's behalf at Licensor's cost and may set off such cost against amounts
due to Licensor hereunder provided that such action is commercially reasonable.
(b) Trademark Use and Quality Control
(i) Licensee agrees to list the Trademarks in accordance with
good customary trademark practice, and to avoid taking any action that would in
any manner impair or detract from the value of the Trademarks, or the goodwill
and reputation of Licensor. Licensee acknowledges Licensor's ownership of the
Trademarks and related goodwill, both in the Territory and outside the
Territory.
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<PAGE>
(ii) Licensee agrees to use the Trademarks only in the form
and manner and with appropriate legends as approved from time to time by
Licensor, and not to use any other trademark or service mark in combination with
the Trademarks without the prior written approval of Licensor, provided that
such approval shall be granted unless Licensor reasonably objects on the basis
that the proposed use would impair the value of the Trademarks.
9 Infringement of Patents, Technology and/or Trademarks.
-----------------------------------------------------
(a) Licensee and Licensor shall each promptly notify the other
following the discovery of any alleged infringement or unauthorized use of the
Patents, Technology and/or Trademarks which may come to their attention.
Licensor shall promptly undertake, at Licensor's expense, reasonable efforts to
obtain a discontinuance of the infringement or unauthorized use and, if not
successful, Licensor may, at its sole option, bring suit against such infringer.
(b) If Licensor fails to obtain a discontinuance of such infringement
and/or elects not to bring an infringement suit, then Licensor shall give notice
in writing to Licensee within thirty (30) days of such failure or election and
Licensee may, but is not required to, obtain a discontinuance of the alleged
infringement or unauthorized use or bring an infringement suit; provided, that
without the prior written consent of Licensor, Licensee shall not agree to any
settlement with respect to such infringement or unauthorized use that
compromises the value of the license granted hereunder. Any infringement suit by
Licensee shall be in the name of Licensee, or in the name of Licensor, or
jointly by both Licensee or Licensor, as may be required by the law of the
forum. Licensor shall execute such documentation as may be reasonably required
by Licensee with respect to such suit.
(c) It is understood and agreed that the party to this Agreement that
institutes suit shall bear solely all costs and expenses in connection therewith
and shall be entitled to recover all costs first and then share 50/50 with the
other party the balance of any sums received, obtained, collected or recovered
whether by judgement, settlement or otherwise as a result of such suit;
provided, however, that if a settlement by Licensee (with the prior written
consent of Licensor to the extent required above) includes the granting by
Licensee of rights hereunder to a third party, amounts received by Licensee from
such settlement shall not be shared with Licensor and sales of Product by such
third party pursuant to such rights shall not be included in Net Sales. In
addition, with respect to any suit for infringement or unauthorized use of the
Patents, Technology and/or Trademarks, the party that did not institute suit
shall render all reasonable assistance to the party that did institute suit at
the latter's expense, including, but not limited to, executing all documents as
may be reasonably requested by the party that did institute the suit. The party
that did institute suit shall keep the other party informed of, and shall from
time to time consult with the other party regarding, the status of any such suit
and shall provide the other party with copies of all pleadings filed in such
suit.
10. Infringement of Third-Party Intellectual Property Rights.
--------------------------------------------------------
(a) Each party hereto shall notify the other promptly of the receipt of
notice of any action, suit or claim alleging infringement by the Patents, the
Technology, the Trademarks or the Product of any Intellectual Property Rights of
a third party.
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<PAGE>
(b) In no event shall Licensee settle any such allegation of
infringement without the prior written consent of Licensor, which consent shall
not be unreasonably withheld or delayed. In the event that the Licensor agrees
in writing or Licensee in good faith determines that is necessary for Licensee
to make royalty or other payments to a third party in order for Licensee to
make, have made, use or sell or to continue making, having made, using or
selling the Product, Licensee shall be entitled to offset such amounts so paid
to any third party against any amounts which may become due to Licensor under
this Agreement.
11. Confidentiality.
---------------
Each party hereto shall hold all Confidential Information in
confidence, use it only in connection with the performance of its obligations
pursuant to this Agreement and use its diligent efforts (consistent with those
which it uses to safeguard its own confidential information) to safeguard
Confidential Information and to prevent the unauthorized use or disclosure of
any Confidential Information. Each party hereto shall ensure that its Affiliates
or employees who have access to any Confidential Information shall be made aware
of and subject to these obligations. The receiving party may disclose
Confidential Information to regulatory authorities for the purpose of seeking
marketing approval of the Product pursuant to this Agreement and may also
disclose Confidential Information to individuals who have a need to know to
effectuate the development and commercialization of the Product pursuant to this
Agreement, provided each such individual is bound by a confidentiality
obligation comparable to the obligation set forth in this Section 11. The
obligations of the parties hereto under this Section 11 shall survive for five
(5) years after the expiration or termination of this Agreement.
12. Representations, Warranties and Covenants and Indemnification.
-------------------------------------------------------------
(a) Licensor hereby represents, warrants and covenants the following:
(i) Licensor is a corporation duly organized, existing and in
good standing under the laws of Bermuda, with full right, power and authority to
enter into and perform this Agreement and to grant all of the rights, powers and
authorities herein granted.
(ii) The execution, delivery and performance of this Agreement
do not conflict with, violate or breach any agreement to which Licensor is a
party, or Licensor's articles of incorporation or bylaws.
(iii) This Agreement has been duly executed and delivered by
Licensor and is a legal, valid and binding obligation enforceable against
Licensor in accordance with its terms.
(iv) Licensor shall comply with all applicable laws, consent
decrees and regulations of any federal, state or other governmental authority in
performing this Agreement.
(v) To the best of Licensor's knowledge and belief as of the
Effective Date, there are no issued or pending patents, trademarks or patent or
trademark applications relating to the Product that would prevent Licensee from
using or selling the Product in the Territory.
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<PAGE>
(vi) To the best of Licensor's knowledge and belief as of the
Effective Date, there are no outstanding, pending or threatened product
liability or breach of warranty or other similar claims, actions, suits,
demands, investigations, arbitrations, administrative or other proceedings, or
orders, injunctions, judgments or decrees of any court or government agency in
connection with the Product in the Territory.
(vii) To the best of Licensor's knowledge and belief as of the
Effective Date, there are no outstanding, pending or threatened violations,
notices of noncompliance, warning letters, orders, injunctions, judgements or
decrees of any court or government agency, investigations, claims, actions,
suits, demands, administrative or other proceedings that have resulted or might
result in the revocation, suspension or modification of any regulatory approval
for the Product in the Territory.
(b) Licensee hereby represents, warrants and covenants the following:
(i) Licensee is a corporation duly organized, existing and in
good standing under the laws of Switzerland, with full right, power and
authority to enter into and perform this Agreement.
(ii) The execution, delivery and performance of this Agreement
do not conflict with, violate or breach any agreement to which Licensee is a
party, or Licensee's articles of organization or bylaws.
(iii) This Agreement has been duly executed and delivered by
Licensee and is a legal, valid and binding obligation enforceable against
Licensee in accordance with its terms.
(iv) Licensee shall comply with all applicable laws, consent
decrees and regulations of any federal, state or other governmental authority in
performing this Agreement.
(c) Indemnification
(i) Licensor agrees to indemnify and hold harmless Licensee,
its Affiliates and sublicensees and their respective employees, agents, officers
and directors from and against any claims, losses, liabilities, damages, costs
and expenses (including reasonable attorneys' fees) incurred by Licensee, its
Affiliates or sublicensees arising out of or in connection with any (A) breach
by Licensor of any representation, warranty, covenant or obligation hereunder,
(B) claim or demand of any kind for injury to a person or property arising from
Licensor's or its contract manufacturer's manufacturing, packaging, or labeling
of the Product; provided, that this indemnification shall not apply to the
extent such claim or demand has resulted from manufacturing, packaging, or
labeling conducted by or at the direction of Licensee, its Affiliates or
sublicensees or from any negligent act or omission with respect to such Product
by Licensee, its Affiliates, or sublicensees or their employees or agents, (C)
act or omission on the part of Licensor or any of its employees, agents or
contract manufacturers in the performance of this Agreement, and (D) payments,
commissions or fees of any kind due to consultants or brokers retained by
Licensor relating to the Product.
(ii) Licensee agrees to indemnify and hold harmless Licensor
and its Affiliates and their respective employees, agents, officers and
directors from and against any claims, losses, liabilities, damages, costs and
expenses (including reasonable attorneys' fees) incurred by Licensor or
17
<PAGE>
its Affiliates arising out of or in connection with any (A) breach by Licensee
of any representation, warranty, covenant or obligation hereunder, (B) claim or
demand of any kind for injury to person or property arising from Licensee's, its
Affiliates' or sublicensees' marketing, distribution and sale of the Product;
provided, that this indemnification shall not apply to the extent such claim or
demand has resulted from any negligent act or omission with respect to such
Product by Licensor, its Affiliates, their employees, agents or contract
manufacturers, (C) act or omission on the part of Licensee or any of its
employees or agents in the performance of this Agreement, (D) third party claims
alleging infringement of such third parties' Intellectual Property Rights as a
result of the advertisement, promotion or marketing materials created by or at
the direction of Licensee, its Affiliates or sublicensees and used in connection
with the sale of the Product hereunder, and (E) payments, commissions or fees of
any kind due to consultants or brokers retained by Licensee relating to the
Product.
(iii) A party seeking indemnification under this paragraph 12
(c) (the "Indemnified Party") must give prompt written notice thereof to the
other party (the "Indemnifying Party"). The Indemnifying Party shall have the
right to defend any such claim or demand subject to the right of the Indemnified
Party to participate with counsel of its choice in such defense, but the fees
and expenses of such additional counsel shall be at the expense of the
Indemnified Party. The Indemnified Party shall cooperate fully in all respects
with the Indemnifying Party in any such compromise, settlement or defense,
including, without limitation, by making available all pertinent information and
personnel under its control to the Indemnifying Party. The Indemnifying Party
will not compromise or settle any claim or demand (other than, after
consultation with Indemnified Party, a claim or demand to be settled by the
payment of money damages and/or the granting of releases) without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(iv) Each party shall maintain and keep in force for the term
of this Agreement comprehensive general liability insurance including
Products/Completed Operations, Contractual and Broad Form Property Damage
covering its indemnification obligations hereunder with a minimum limit of
Fifteen Million United States Dollars(U.S. $15,000,000) per annum combined
single limit for Bodily Injury and Property Damage, to be increased as
appropriate, consistent with prudent business practices prevailing in the
pharmaceutical business. Such insurance shall be placed with a first class
insurance carrier with at least a BBB rating by Standard & Poors. Promptly after
execution and delivery of this Agreement, each party shall furnish a certificate
of insurance to the other party evidencing the foregoing endorsements, coverage
and limits, and providing that such insurance shall not expire or be canceled or
modified without at least thirty (30) days prior notice to the other party.
13. Term of License.
---------------
Except as otherwise provided for herein, and subject to the provisions
of paragraph 4 (r), the duration of the Agreement shall be for ten (10) years
from the Effective Date, renewable upon mutual agreement of the parties for five
(5) year periods at commercial terms to be agreed upon. It is understood that if
after the ten-year period or any subsequent five-year period the parties cannot
agree upon mutually acceptable terms, Licensee will have the option of
converting this Agreement into a license agreement and Licensee will be free to
manufacture, or have manufactured, the Product. Under such circumstances,
Licensor shall continue to supply the Product in Finished Package Form under the
then current terms and conditions of this Agreement for as long as is necessary
and will assist Licensee
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<PAGE>
as necessary, including without limitation by transferring to Licensee all
Technology necessary or useful to give Licensee the capability of manufacturing
the Product in such a way as to communicate such Technology to Licensee
promptly, effectively and economically, so that Licensee can undertake
manufacture of the Product and continue the sale of the Product without
interruption. In the event that Licensee shall continue to market the Product
under the terms of this Agreement for twenty-five (25) years from the Effective
Date in each of the European Economic Community, Canada and the United States,
Licensee shall thereafter own the Trademarks and related goodwill.
14. Termination.
-----------
(a) This Agreement may be terminated upon the mutual written agreement
of the parties.
(b) Either party may terminate this Agreement forthwith by written
notice to the other, if the other party commits a material breach of any part of
this Agreement and such breach has not been remedied by the breaching party
within sixty (60) days after written notice of such breach has been given by the
other party. If the breach cannot be remedied within sixty (60) days, the
breaching party may submit a plan within this sixty (60) day period, reasonably
acceptable to the other party, outlining the steps that it intends taking to
cure the breach and then must cure the breach in accordance with the terms of
such plan or be subject to an action by the other party for termination of this
Agreement pursuant to this paragraph 14 (b) for breach of such plan.
(c) This Agreement may also be terminated by written notice of one
party, if the other party shall be involved in financial difficulties as
evidenced:
(i) by its commencement of a voluntary case under any
applicable bankruptcy code or statute, or by its authorizing, by appropriate
proceedings, the commencement of such voluntary case; or
(ii) by its failing to receive dismissal of any involuntary
case under any applicable bankruptcy code or statute within sixty (60) days
after initiation of such action or petition; or
(iii) by its seeking relief as a debtor under any applicable
law of any jurisdiction relating to the liquidation or reorganization of debtors
or to the modification or alteration of the rights of creditors, or by
consenting to or acquiescing in such relief, or
(iv) by the entry of an order by a court of competent
jurisdiction finding it to be bankrupt or insolvent, or ordering or approving
its liquidation, reorganization or any modification or alteration of the rights
of its creditors or assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property or assets; or
(v) by its making an assignment for the benefit of, or
entering into a composition with its creditors, or appointing or consenting to
the appointment of a receiver or other custodian for all or a substantial part
of its property.
(d) Licensee may terminate this Agreement at any time after three (3)
years with one (1) year's written notice if the Product is not a commercial
success, as determined by Licensee in its sole
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discretion, and on ninety (90) days' notice at any time during the Agreement for
reasons of safety or efficacy of the Product.
(e) The failure by a party to exercise its rights to terminate this
Agreement pursuant to this Section (14) in the event of any occurrence giving
rise thereto shall not constitute a waiver of such rights in the event of any
subsequent occurrence.
(f) Termination of this Agreement shall not release either party from
its obligations accrued prior to the effective date of termination nor deprive
either party from any rights that this Agreement provides shall survive
termination. The provisions of paragraphs 4 (q), (r), (s) and (t), Sections 11,
13, 16, 17, 24 and 29, and paragraph 12 (c) shall remain in full force and
effect and shall survive the termination of this Agreement to the extent
necessary to effect the express purposes of such paragraphs and Sections.
15. Publicity.
---------
The parties hereto shall coordinate the preparation and issuance of any
public announcement of this Agreement. Any such announcement shall comply with
relevant Securities and Exchange Commission requirements and shall take into
account any reasonable concern regarding the trade. The wording of such
announcement shall be agreed upon by the parties before release.
16. Audits.
------
(a) Licensee shall keep accurate records of all Product sales and other
relevant data concerning the Product for a period of two (2) years following the
year in which such records were created and Licensee shall provide Licensor
quarterly reports thereof forty-five (45) days after the end of the applicable
calendar quarter. Such reports shall state the number of Units of Product
manufactured by Licensee, its Affiliates or sublicensees and the number of Units
of Product sold by Licensee, its Affiliates or sublicensees during the
applicable quarter as well as the number of free samples of Product distributed
and any Product returns made during such calendar quarter together with an
accounting of any other applicable components of the amounts paid or to be paid
hereunder with respect to such calendar quarter. Simultaneous with the delivery
such report, Licensee shall make, or cause to be made, any additional payment
due with respect to the Purchase Price for Product sold during such calendar
quarter. Once a year, upon reasonable notice, at times mutually agreed upon and
during business hours, Licensor at Licensor's cost may have the accounts of
Licensee, its Affiliates or sublicensees for the preceding two (2) calendar
years relating to the Product reviewed by independent certified public
accountants appointed by Licensor and reasonably approved by Licensee, solely in
order to verify amounts due under this Agreement. Licensor and Licensee shall
mutually determine a general strategy for such audit in advance of its conduct.
Said accountant shall not disclose to Licensor any information except that which
should properly be contained in a quarterly report required under this
Agreement. Licensee shall promptly pay any underpayment evidenced by such audit,
and Licensor shall promptly refund any overpayment evidenced by such audit. In
the event such an audit evidences an underpayment of more than five percent (5%)
with respect to the amounts actually paid, Licensee shall promptly pay such
underpayment to Licensor with interest at the prime rate as set by Citibank,
from the time when such underpayment accrued, and shall reimburse Licensor for
the reasonable costs and expenses (including fees) of such audit.
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<PAGE>
(b) Licensor shall keep accurate records of its Direct Costs of
manufacturing the Product for a period of two (2) years following the year in
which such records were created. Once a year, upon reasonable notice, at times
mutually agreed upon and during business hours, Licensee at Licensee's cost may
have the accounts of Licensor for the preceding two (2) calendar years relating
to the Direct Costs of manufacturing the Product reviewed by independent
certified public accountants appointed by Licensee and reasonably approved by
Licensor, solely in order to verify amounts due under this Agreement. Licensor
and Licensee shall mutually determine a general strategy for such audit in
advance of its conduct. Said accountant shall not disclose to Licensee any
information except that relating to the Direct Costs of manufacturing the
Product. Licensor shall promptly refund any overpayment evidenced by such audit,
and Licensee shall promptly pay any underpayment evidenced by such audit. In the
event such audit evidences an overpayment of more than five percent (5%) with
respect to the amounts actually paid, Licensor shall promptly refund such
overpayment to Licensee with interest at the prime rate as set by Citibank, from
the time when such overpayments accrued, and shall reimburse Licensee for the
reasonable costs and expenses (including fees) of such audit.
17. Notices.
-------
All notices required hereunder shall be in writing and shall be deemed
to be properly given if sent by air courier to the party to be notified at the
address set forth on page 1 hereof, or at such other latest address as either
party may hereafter designate in writing to the other; provided that a copy of
each notice to be sent to Licensor hereunder shall also be sent by the same
means to William J. Bologna, Chairman of the Board, Columbia Laboratories Inc.,
2875 N.E. 191st Street, Suite 400, Aventura, Florida 33180, U.S.A.; and further
provided that a copy of each notice sent to Licensee hereunder shall also be
sent by the same means to General Counsel, Ares-Serono International S.A., 15
bis chemin des Mines, 1202, Geneva, Switzerland. The date of service of any
notice so sent by air courier shall be the date of receipt.
18. Ownership Change: Assignment; Successors.
----------------------------------------
This Agreement shall be binding on and inure to the benefit of the
successors and assigns of the parties, including any Affiliate, subsidiary,
division or any entity controlled by either party. Except as provided herein,
Licensee may not sublicense or assign this Agreement, in whole or in part,
without the consent in writing of Licensor, and any purported assignment without
such consent (which may be withheld without reason) shall be void; provided,
that Licensee may upon notice to Licensor assign all or any portion of this
Agreement to any of its Affiliates, but may not then sell such Affiliate without
Licensor's prior written consent unless this Agreement is first assigned back
from such Affiliate to Licensee. Licensor may not assign its rights under this
Agreement, in whole or in part, without consent in writing of Licensee; and any
purported assignment without such consent (which may be withheld without reason)
shall be void; provided, that Licensor may upon notice to Licensee assign all or
any portion of this Agreement to any of its Affiliates, but may not then sell
such Affiliate without Licensee's prior written consent unless this Agreement is
first assigned back from such Affiliate to Licensor.
If any person, individually, or in concert with others, shall acquire
directly or indirectly, through one or more intermediaries, the beneficial
ownership of fifty percent or more of the equity or
21
<PAGE>
assets of Licensor or Licensee during the term of this Agreement, the party not
being acquired may require from the new owners of the acquired party a written
affirmation of its intent and capability to comply with all the terms of this
Agreement. Under no circumstances shall such action by Licensor interfere with
or compromise the continued supply of the Product to Licensee, provided however,
that should such interference or compromise occur, Licensee in such event shall
have the option of terminating this Agreement.
Nothing in this Agreement, express or implied, is intended to confer on
any person other than the parties hereto, or their respective permitted
successors and assigns, any benefits, rights or remedies.
22
<PAGE>
19. Tax.
---
All taxes levied on account of any payments accruing under this
Agreement which constitute income to Licensor, shall be the obligation of
Licensor, and if provision is made in law or regulation for withholding, such
tax shall be deducted from any payment then due, paid to the proper taxing
authority, and receipt for payment of the tax secured and promptly sent to
Licensor.
20. Independent Contractors.
-----------------------
The relationship of the parties under this Agreement is that of
independent contractors. Neither party shall be deemed to be the agent of the
other and neither is authorized to take any action binding upon the other.
21. Entire Agreement; Modification.
------------------------------
This Agreement, including the Schedules hereto, contains the entire
understanding between the parties hereto relating to the subject matter hereof,
there being no terms and conditions other than those set forth herein, and it
supersedes all prior agreements, written or oral, between the parties hereto
with respect to the matters covered hereunder. This Agreement may not be
modified, altered or otherwise changed other than by an instrument in writing,
duly executed by each of the parties hereto.
22. Severability.
------------
If any provision of this Agreement should be or becomes fully or partly
invalid or unenforceable for any reason whatsoever or should be adjudged to
violate any applicable law, this Agreement is to be considered divisible as to
such provision and such provision is deemed to be deleted from this Agreement,
and the remainder of this Agreement shall be valid and binding as if such
provision were not included herein; provided, however, that this Agreement is
not rendered fundamentally different in its content or effect.
23. Effect of Headings.
------------------
The headings for the sections and paragraphs of this Agreement are to
facilitate reference only, do not form a part of this Agreement, and shall not
in any way affect the interpretation hereof.
24. Choice of Law.
-------------
This Agreement and performance hereof shall be construed and governed
by the laws of the Commonwealth of Massachusetts and the United States. Any
dispute, controversy, claim or difference arising between the parties out of,
relating to, or in connection with this Agreement shall be submitted to the
jurisdiction of the courts sitting in the Commonwealth of Massachusetts.
25. No Waiver.
---------
No delay or omission or failure to exercise any right or remedy
provided for herein shall be deemed to be a waiver thereof or acquiescence in
the event giving rise to such right or remedy.
23
<PAGE>
26. Counterparts.
------------
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed shall be deemed an original, but all such counterparts shall constitute
but one and the same instrument.
27. Further Assurances.
------------------
Licensor and Licensee each agree to produce or execute such other
documents or agreements as may be necessary or desirable for the execution and
implementation of this Agreement and the consummation of the transactions
contemplated hereby.
28. Schedules.
---------
The terms and provisions of the Schedules attached to this Agreement
are hereby incorporated herein as if fully set forth herein.
29. Bankruptcy.
----------
All Trademark, Patent and Technology rights and licenses granted to the
Product under or pursuant to this Agreement by Licensor to Licensee are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of the United
States Bankruptcy Code, as amended from time to time (the "Bankruptcy Code"),
licenses of rights to "intellectual property" as defined under Section 101 (35A)
of the Bankruptcy Code. The parties hereto agree that so long as Licensee, as a
licensee of such rights under this Agreement, makes all payments to Licensor
required under this Agreement, Licensee shall retain and may fully exercise all
of its rights and elections under the Bankruptcy Code. The parties further agree
that, in the event that any proceeding shall be instituted by or against
Licensor seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking an entry of an
order for relief or the appointment of a receiver, trustee or other similar
official for it or any substantial part of its property or it shall take an
action to authorize any of the foregoing actions, Licensee, as a licensee of
such rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code. The parties further agree that,
in the event of the commencement of a bankruptcy proceeding by or against
Licensor under the Bankruptcy Code, Licensee shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiment of such intellectual property, and the same, if not
already in its possession, shall be promptly delivered to Licensee (i) upon any
such commencement of a bankruptcy proceeding upon written request therefor by
Licensee, unless Licensor elects to continue to perform all of its obligations
under this Agreement, or (ii) if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of Licensor, upon written request
therefor by Licensee. In addition the parties agree that in such event the
intellectual property delivered to Licensee shall include all Technology
necessary or useful to give Licensee the capability of manufacturing the Product
and such Technology shall be delivered to Licensee in such a way as to
communicate it to Licensee promptly, effectively and economically
24
<PAGE>
30. Force Majeure.
-------------
No failure or omission by a party hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement nor
shall it create any liability if the same shall arise from any cause or causes
beyond the control of the party, including, but not limited to, the following,
which, for the purposes of this Agreement, shall be regarded as beyond the
control of the party in question: acts of God, acts or omissions of any
government, any rules, regulations, or orders issued by any governmental
authority or any officer, department, agency, or instrumentality thereof, fire,
storm, flood, earthquake, accident, war, rebellion, insurrection, riot,
invasion, strikes, lockouts; provided however, that the party so affected shall
promptly advise the other party of the existence of such causes of
nonperformance, shall use its best efforts to avoid or remove such causes of
nonperformance and shall continue performance hereunder with the utmost dispatch
whenever such causes are removed.
31. Performance by Affiliates.
-------------------------
The parties agree that certain of their rights and obligations under
this Agreement may be carried out by one or more of their Affiliates; provided,
however, that each party shall remain responsible for the acts and omission of
its Affiliates. The parties further understand and agree that no such Affiliate
is a party to this Agreement, and, except as contemplated by this Agreement, is
not the agent of such party for purposes hereof, is not authorized to bind such
party and cannot enter into amendments to this Agreement, which can only be made
in accordance with the terms of Section 21 hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first above written,
Columbia Laboratories (Bermuda) Ltd.
By: /s/ William J. Bologna
----------------------------
(Title) Chairman of the Board
Ares Trading S.A.
By: /s/ Ernesto Bertarelli
----------------------------
(Title) Authorized Representative
25
EXHIBIT 10.17
ADDENDUM NO. 2 TO MEIER EMPLOYMENT AGREEMENT
This second addendum ("Second Addendum") dated as of the 1st
day of January 2000, by and between Columbia Laboratories Inc. ("Columbia") a
corporation organized and existing under and by virtue of the laws of the State
of Delaware, having its principal place of business at 2875 SE 191st Street,
Aventura, Florida 33180 (hereinafter referred to as the "Company"), and Norman
M. Meier, who resides at 934 S. South Lake Drive, Hollywood, Florida 33019
(hereinafter referred to as "Employee").
W I T N E 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; and
WHEREAS, the employee, by reason of his knowledge, skill and
ability has been uniquely qualified to aid the Company in the development,
testing, registration, manufacturing, licensing, marketing, and selling of
pharmaceutical products; and
WHEREAS, the Employee and the Company are desirous of
continuing the employment relationship of the Employee, in a changed capacity,
whereafter the Employee will provide ad hoc assistance to the Company in the
development, testing, registration, manufacturing, licensing, marketing, and
selling of pharmaceutical products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this
Second Addendum to the Employee's employment agreement dated January 1, 1996,
which agreement was previously modified by an addendum effective September 1,
1997, (the January 1, 1996 employment agreement and September 1, 1997 addendum
are hereinafter collectively referred to as the "Agreement") so that the rights,
duties, benefits and obligations of each to the other, in respect of the changed
employment of the Employee for and by the Company, will be fully set forth under
the terms and conditions set forth both in the Agreement, and herein, upon the
execution hereof; and
WHEREAS, the Compensation and Stock Option Committee of the
Board of Directors of the Company have approved the continued employment of the
Employee upon the terms and conditions set forth in the Agreement and herein, by
a resolution issued by it, and have authorized the execution and delivery of
this Second Addendum; and
WHEREAS, the terms of the Employee's Agreement will only be
modified by the specific terms and conditions set forth herein, which will
modify and supersede any and all similar provisions in the Employee's Agreement,
and any inconsistency between this Second Addendum and the Employee's Agreement
will be resolved by the provisions hereinafter set forth. To the extent this
Second Addendum does not change any provision of the Employment Agreement, those
provisions will remain and continue to be effective.
NOW, therefore, in consideration of the mutual promises
contained herein, the payment of Ten ($10.00) dollars by each party to the
other, the receipt of which is hereby duly acknowledged, and for other good and
valuable consideration, the Company and Employee further agree as follows:
EMPLOYMENT
2
<PAGE>
The Company will continue to employ the Employee in
an executive capacity, specifically as "Second Vice-Chairman." The Employee
hereby accepts such employment and agrees to perform the services and duties
specified herein.
TERM
The term of employment ("Term") shall be for a period
of Two (2) years from the date hereof, unless sooner terminated in accordance
with the terms and conditions set forth herein.
DISABILITY
If, during the Term, the Employee will become unable
to perform his duties as provided for herein by reason of illness or injury, for
a consecutive period of Three Hundred sixty-five (365) days, the Company may, on
Ninety (90) days written notice to the Employee, terminate his office of Second
Vice-Chairman. In the event of such termination, then Employee will remain an
employee of the Company and receive the balance of his compensation and all of
his fringe benefits as is set forth below in this Second Addendum, through to
the Termination date set forth above in this Second Addendum.
TERMINATION FOR CAUSE
This Agreement may be immediately terminated by the
Company for "cause" at any time, upon written notice to the Employee, after
which all obligations of the Company to the Employee will thereupon cease. For
the purposes of this Agreement, the term "cause" when used with reference to the
termination of this Agreement, shall mean only the following:
Willful misconduct, gross negligence or indictable criminal
conduct against the Company, by the Employee in connection with the performance
of his duties.
DUTIES
(a) The Employee shall perform the following duties
in connection with his employment, all of which will be subject to the paramount
directions of the Board of Directors:
(i) To serve as Second Vice-Chairman of the
Company; and
(ii) To assist the Company (the
"Assistance") in its business affairs and scientific dealings relating to the
development, testing, registration, manufacturing, licensing, marketing, and
selling of pharmaceutical products, as well as in the Company's dealings with
other
3
<PAGE>
companies, its regulatory affairs, banking and other financial institutions and
other groups and institutions; and
(iii) To provide such Assistance in the form
of ad hoc services for the Company without specific assignment, as determined
necessary by the Employee, and to report from time to time to the Board of
Directors; and
(iv) To continue to serve as a director of
the Company, and then as, if and when so re-elected to continue to serve as a
director of the Company, and also if so elected, to serve as a director of any
subsidiary or affiliate of the Company.
(b) Employee will, in the discharge of his duties,
use his best efforts and skills for the affairs of the Company, and for the
performance of the duties set forth herein. The Company acknowledges that the
Employee will be the sole and exclusive party to determine where and when the
Employee will provide his services (apart from board of directors meetings), and
the Company explicitly acknowledges that the Employee is not required to
maintain an office or regularly attend at office's of the Company, or regularly
perform any Company services. The Employee is expressly permitted to participate
in any outside business activity that he so desires to involve himself in,
except those which will create a conflict of interest with the Company.
COMPENSATION
(a) Base Salary
The Employee retroactive to and effective as
of January 1, 2000, will receive for the discharge of his duties and activities
on behalf of the Company as provided for herein, an annual salary ("Base
Salary") of Two Hundred Thousand and No/00 ($200,000.00) dollars, which will be
paid by the Company to the Employee in equal and regular installments not less
frequently than monthly, in accordance with the Company's policy for payment of
executive salaries.
(b) Compensation Options
The Employee may receive compensation
options to purchase $.01 par value per share common stock of the Company
("Common"), if it is determined to be warranted in the sole discretion of the
Board of Directors.
4
<PAGE>
OPTIONS
The Employee from time to time, may in the sole
discretion of the Board of Directors, grant as additional compensation stock
options ("Options's") to purchase shares of the Company's Common ("Grant"). If
there is such a Grant then the Options's will be made pursuant to the Company's
Stock Option Plan, as may be amended from time to time ("Plan"). The Company
shall then enter into an Option agreement for the issuance of the Options's,
which Option agreement will be subject to the terms and conditions contained in
the Plan.
FRINGE BENEFITS
In addition to the Base Compensation set forth
herein, the Employee will be entitled to receive the following benefits:
(a) Any benefits under group hospitalization, health,
dental care or sick leave plan, life or other insurance or death benefit plan,
travel or accident insurance, for which any executives are or will become
eligible. In the event the Employee is not eligible for health benefits as
described above, by reason of age, location or otherwise the Employee will be
provided equivalent benefits determined at the election of the Company. The
Employee will be eligible to receive the foregoing benefits during the Eighteen
(18) month period following the termination of his employment under this
Agreement; and
(b) No annual vacation will be given to Employee by
reason of Employee's ad hoc status without regular assignment duties; and
(c) The Employee may incur and will be reimbursed for
reasonable expenses which are related to the Company's business, including
expenses for entertainment, travel and similar items ("Approved Reimbursable
Expenses"). All such reimbursement of Approved Reimbursable Expenses will be
made within Thirty (30) days of receipt by the Company from the Employee of an
itemized account and if necessary proper substantiation of Approved Reimbursable
Expenses. In order to facilitate the payment of the Approved Reimbursable
Expenses, the Company may furnish the Employee with Company acquired credit
cards as may be available to other executive officers of the Company; and
5
<PAGE>
(d) The Employee will be given access to a Company
office, at any Company facility, with secretarial help and any and all
reasonable facilities and services, where such an office and help is necessary
to Employee to fulfill any ad hoc assignment.
(e) The Employee will be given an automobile
allowance or automobile lease plan to the extent of $7,500.00 per annum, paid in
Twelve equal monthly installments, to be used to defray acquisition expense for
a luxury automobile, and insurance and maintenance expenses for the automobile.
6
<PAGE>
NOTICES
Any notice required or permitted to be given under
this Second Addendum and the Employee's employment Agreement will be sufficient
if in writing and actually delivered, or if sent either by Federal Express, or
postage prepaid, by certified mail, return receipt requested, with a copy by
ordinary mail, to the addresses below:
As to Company: 2875 SE 191st Street
Aventura, Florida 33180
As to Employee: 934 S. South Lake Drive
Hollywood, Florida 33019
Or to such other address as either party shall designate by written notice to
the other.
1. ENTIRE ADDENDUM
This Addendum contains the entire agreement and
understanding of the Company and the Employee with respect to the subject matter
contained herein, and shall incorporate, merge and supersede all prior
agreements and understandings had between the Company and the Employee with
respect to the subject matter contained herein, either oral or written, if any.
No modification, change or amendment to this Second addendum, with respect to
the subject matter contained herein, shall be binding upon the Company or the
Employee unless the same is in writing, and signed by the party against whom
enforcement of the modification, change or amendment is sought to be enforced.
1. MISCELLANEOUS
(a) This Addendum and the implementation of it shall
be subject to and governed by the laws of the State of Florida, and any legal
proceedings relating to (i) the interpretation or, enforcement of any of the
provisions of this Second Addendum or (ii) any dispute relating to the
7
<PAGE>
employment relationship created by this Second Addendum, shall only be brought
in the Circuit Court of the State of Florida, in and for the County of Dade.
(b) The Article headings contained herein are for
reference purposes only and shall not in any way affect the meaning or the
interpretation of this Second Addendum.
(c) The failure of any provision of this Second
Addendum shall in no manner affect the right to enforce the remainder of this
Second Addendum, and the waiver by either The Company or the Employee of any
breach of any provision of this Second addendum shall not be construed to be a
waiver by the Company or the Employee of any succeeding breach of such provision
or a waiver by such party of any breach of any other provision of this Second
Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this
Addendum on January 1, 2000.
BALANCE OF PAGE INTENTIONALLY BLANK - CONTINUED ON EXECUTION PAGE
8
<PAGE>
EMPLOYEE:
Witness:
- -------------------
/s/ Norman Meier
-------------------------
NORMAN MEIER
COMPANY:
COLUMBIA LABORATORIES, INC.
Witness:
- -------------------
/S/ William J. Bologna
--------------------------
By: WILLIAM J. BOLOGNA
CHAIRMAN OF THE BOARD
9
EXHIBIT 10.18
ADDENDUM TO EMPLOYMENT AGREEMENT
This addendum ("Addendum") dated as of the 1st day of January,
2000, between Columbia Laboratories Inc. ("Columbia") a corporation organized
and existing under and by virtue of the laws of the State of Delaware, having
its principal place of business at 2785 NE 191st Street, Aventura, Florida 33180
(hereinafter referred to as the "Company"), and William J. Bologna, who
maintains a residence at 22 Place du General Catroux, Paris, 75017 (hereinafter
referred to as "Employee").
W I T N E 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; and
WHEREAS, the employee, by reason of his knowledge, skill and
ability is uniquely qualified to aid the Company in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products; and
WHEREAS, the Company is desirous of continuing the employment
of the Employee to provide assistance to the Company in the development,
testing, registration, manufacturing, licensing, marketing, and selling of
pharmaceutical products and the Employee is desirous of continuing his
employment with the Company to assist it in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this
Addendum to the Employee's employment agreement (the "Agreement") so that the
rights, duties, benefits and obligations of each in respect of the employment of
the Employee for and by the Company will be fully set forth under the terms and
conditions stated both in the Agreement and herein upon the execution hereof;
and
WHEREAS, the terms of the Employee's Agreement shall only be
modified by the specific terms and conditions set forth herein, which shall
modify and supersede any similar provisions in the Employee's employment
agreement, if any, and any inconsistency between this Addendum and the
Employee's Agreement shall be resolved by the provisions hereinafter set forth.
NOW, therefore, in consideration of the mutual promises
contained herein, the payment of Ten ($10.00) dollars by each party to the
other, the receipt of which is hereby duly acknowledged, and for other good and
valuable consideration, the Company and Employee further agree as follows:
1. TERM
The Employee's term of his employment is extended for
a period of one (1) year, and shall terminate on December 31, 2001.
2. DUTIES
The Employee shall perform the duties of and serve as
the "Chairman of the Board" of the Company, and as its "Chief Executive
Officer."
3. NOTICES
Any notice required or permitted to be given under
this addendum and the Employee's employment agreement shall be sufficient if in
writing and actually delivered, or if sent either
2
<PAGE>
by Federal Express, or postage prepaid, by certified mail, return receipt
requested, with a copy by ordinary mail, to the addresses below:
As to Company: 2785 NE 191st Street
Aventura, Florida 33180
As to Employee: 22 Place du General Catroux
Paris, 75017 France
or to such other address as either party shall designate by written notice to
the other.
4. ENTIRE ADDENDUM
This Addendum contains the entire agreement and
understanding of the Company and the Employee with respect to the subject matter
hereof, and shall incorporate, merge and supersede all prior agreements and
understandings had between the Company and the Employee, either oral or written,
if any. No modification, change or amendment to this Addendum, shall be binding
upon the Company or the Employee unless the same is in writing, and signed by
the party against whom enforcement of the modification, change or amendment is
sought to be enforced.
5. MISCELLANEOUS
(a) This Addendum and the implementation of it shall
be subject to and governed by the laws of the State of Florida, and any legal
proceedings relating to (i) the interpretation or enforcement of any of the
provisions of this Addendum, or (ii) any dispute relating to the employment
relationship created by the addendum, shall only be brought in the Circuit Court
of the State of Florida, in and for the County of Dade.
(b) The Article headings contained herein are for
reference purposes only and shall not in any way affect the meaning or the
interpretation of this Addendum.
3
<PAGE>
(c) The failure of any provision of this Addendum
shall in no manner affect the right to enforce the remainder of this Addendum,
and the waiver by either The Company or the Employee of any breach of any
provision of this Addendum shall not be construed to be a waiver by the Company
or the Employee of any succeeding breach of such provision or a waiver by such
party of any breach of any other provision of this Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum on
March 8, 2000.
EMPLOYEE:
Witness:
- ------------------------
/s/ William J. Bologna
------------------------
WILLIAM J. BOLOGNA
COMPANY:
COLUMBIA LABORATORIES, INC.
Witness:
- ------------------------
/s/ James J. Apostolakis
------------------------
By: JAMES A. APOSTOLAKIS
PRESIDENT
4
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
This agreement ("Agreement") dated as of the 1st day of
January, 2000, between Columbia Laboratories Inc. ("Columbia") a corporation
organized and existing under and by virtue of the laws of the State of Delaware,
having its principal place of business at 2875 NE 191st Street, Aventura,
Florida 33180 (hereinafter referred to as the "Company"), and James A.
Apostolakis, who resides at 150 East 69th Street, New York, New York 10021
(hereinafter referred to as "Employee").
W I T N E 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; and
WHEREAS, the employee, by reason of his knowledge, skill and
ability is uniquely qualified to aid the Company in the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products; and
WHEREAS, the Company is desirous of employing the Employee to
provide assistance to the Company in the development, testing, registration,
manufacturing, licensing, marketing, and selling of pharmaceutical products and
the Employee is desirous of being employed by the Company to assist it in the
development, testing, registration, manufacturing, licensing, marketing, and
selling of pharmaceutical products; and
<PAGE>
WHEREAS, the Company and Employee desire to enter into this
Agreement so that the rights, duties, benefits and obligations of each in
respect of the employment of the Employee for and by the Company will be fully
set forth under the terms and conditions stated herein upon the execution
hereof; and
WHEREAS, the Compensation and Stock Option Committee of the
Board of Directors of the Company have approved the employment of the Employee
upon the terms and conditions set forth herein by a resolution issued by it, and
have authorized the execution and delivery of this Agreement.
NOW, therefore, in consideration of the mutual promises
contained herein, the payment of Ten ($10.00) dollars by each party to the
other, the receipt of which is hereby duly acknowledged, and for other good and
valuable consideration, the Company and Employee agree as follows:
1. EMPLOYMENT
The Company hereby employs the Employee in an
executive capacity, specifically as "President." The Employee hereby accepts
such employment and agrees to perform the services and duties specified herein.
2. TERM
(a) The term of this Agreement ("Term") shall be for
a period of Two (2) years from the date hereof, unless sooner terminated in
accordance with the terms and conditions set forth herein.
(b) Upon the mutual agreement of the Employee and the
Company, the Term may be extended for an additional period of years, either upon
the terms and conditions set forth herein, or upon any other terms and
conditions as may be mutually agreed in writing between the Employee and the
Company. The foregoing
2
<PAGE>
notwithstanding, this Agreement shall terminate as provided for in Article 2(a),
and there shall not be any automatic renewal or other similar extension of the
Term.
3. DISABILITY
If, during the Term, the Employee shall become unable
to perform his duties as provided for herein by reason of illness or injury, for
a consecutive period of One Hundred and Eighty (180) days, the Company may, on
Thirty (30) days written notice to the Employee, terminate the officership held
by Employee. In the event of such termination, then Employee shall remain an
employee of the Company and receive Seventy (70%) percent of his compensation
and all of his fringe benefits as is set forth below in this Agreement at
paragraphs "6" and "8" respectively.
4. TERMINATION FOR CAUSE
This Agreement may be immediately terminated by the
Company for "cause" at any time, upon written notice to the Employee, after
which all obligations of the Company to the Employee shall thereupon cease. For
the purposes of this Agreement, the term "cause" when used with reference to the
termination of this Agreement, shall mean only any or all of the following:
(a) Employee's absence from, or his failure to
perform the duties of his employment, for any reason other than sickness or
injury, at substantially all times during a period of Ninety (90) consecutive
days;
(b) Failure on the part of the Employee to (i) follow
material instructions or policy of the Board of Directors given or adopted in
good faith, or (ii) carry out an agreed policy or course of action as determined
by (a) the Board of Directors or (b) a committee of the Board of Directors, any
or all of which is or may be to the detriment of the Company; or
(c) Willful misconduct, gross negligence or
indictable criminal conduct against the Company, by the Employee in connection
with the performance of the duties of his employment.
3
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5. DUTIES
(a) The Employee shall perform the following duties
in connection with his employment, all of which shall be subject to the
paramount directions of the Board of Directors:
(i) To serve as "President" of the Company;
and
(ii) To assist the Company in its business
affairs and scientific dealings relating to the development, testing,
registration, manufacturing, licensing, marketing, and selling of pharmaceutical
products, as well as in the Company's dealings with other companies, its
regulatory affairs, banking and other financial institutions and other groups
and institutions; and
(iii) To undertake such specific
assignments, consistent with his office and position, as may be given to him
from time to time by the Board of Directors; and
(iv) To continue to serve as a director of
the Company, and then as, if and when so re-elected to continue to serve as a
director of the Company, and also if so elected, to serve as a director of any
subsidiary or affiliate of the Company.
(b) Employee shall devote his best efforts and skills
to the affairs of the Company, and to the performance of the duties set forth in
this Article 5, on a substantially full-time basis. The Employee shall not
participate in any outside business activity that will either (i) interfere
with, or (ii) be a conflict of interest with the performance of the Employee's
duties, activities and employment pursuant to this Agreement. The foregoing
notwithstanding, the Employee has disclosed to the Company his other outside
business interests ("Outside Business Interests") which are listed on Schedule
"1" hereto and the Company with this full knowledge has consented to the
Employee's continuance thereof. Moreover, the Company agrees to permit the
Employee to involve himself in other similar Outside Business Interests, on
condition that they similarly be disclosed and are added to Schedule "1" prior
4
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to their being commenced. The Employee may also invest his assets and devote
such reasonable time as is necessary to do so, so as to manage, protect and
support the profitability of those invested assets.
6. COMPENSATION
(a) Base Salary
The Employee shall receive for the discharge
of his duties and activities on behalf of the Company as provided for herein, an
annual salary ("Base Salary") of Two Hundred Thousand ($200,000.00) dollars,
which shall be paid by the Company to the Employee in equal and regular
installments not less frequently than monthly, in accordance with the Company's
policy for payment of executive salaries.
(b) Bonus
The Employee shall receive those benefits
accorded to executive employees pursuant to the Company's Incentive Compensation
Plan now in effect, or from any subsequent similar plan as shall be made
available to senior executives of the Company.
(c) Compensation Options
The Employee may receive compensation
options to purchase $.01 par value per share common stock of the Company
("Common"), together with those compensation options granted to other senior
management, if it is determined to be warranted by the Board of Directors.
7. OPTIONS AND WARRANTS
The Employee from time to time shall be granted as
additional compensation stock options ("Options's") and/or warrants ("Warrants")
to purchase shares of the Company's Common ("Grant"). The Grant of the Options's
shall be made pursuant to the Company's 1988 Stock Option Plan, as may be
amended from time to time ("Plan"). The Company shall enter into an Option
agreement for the issuance of the Options's, which Option agreement shall be
subject to the terms and conditions contained in the Plan. All Options's and/or
Warrants
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received by Employee will be exercisable at a price equal to the fair market
value of the Company's Common on the date of the Grant.
8. FRINGE BENEFITS
In addition to the Base Compensation set forth in
Article 6 above, the Employee shall be entitled to receive the following
benefits:
(a) Any benefits under group hospitalization, health,
dental care or sick leave plan, life or other insurance or death benefit plan,
travel or accident insurance, or contingent compensation plan, or any other
present or future plan, including any qualified retirement plan, for which any
executives are or shall become eligible. In the event the Employee is not
eligible for health benefits as described above, by reason of age, location or
otherwise the Employee shall be provided equivalent benefits determined at the
election of the Company. The Employee shall be eligible to receive the foregoing
benefits during the five (5) years period following the termination of his
employment under this Agreement; and
(b) An annual vacation of either or a combination of
(i) up to Four (4) consecutive weeks or (ii) up to any Thirty (30) days
("Vacation Period"), at such time or times as shall be approved by the Company,
and which approval shall not be unreasonably refused. Full compensation shall be
paid during any Vacation Period. Any portion of any Vacation Period not used
within any year shall be accrued and will accumulate, and may be used by the
Employee at any time during his employment in accordance with the provisions of
this Article 8. In the event that the Employee has not used all of his accrued
and accumulated vacation time at the termination of his employment, then the
employee may then elect to have his accrued and accumulated Vacation Period time
converted to annual Base Salary, pro rata at the then prevailing Base Salary,
regardless of when the unused vacation time accrued; and
(c) The Employee may incur and shall be reimbursed
for reasonable expenses which are related to the Company's business, including
expenses for entertainment, travel and similar items ("Approved Reimbursable
Expenses"). All such reimbursement of Approved Reimbursable Expenses shall be
made within Thirty (30) days of receipt by the Company from the Employee of an
itemized account and if necessary proper substantiation of Approved Reimbursable
Expenses. In order to facilitate the payment of the Approved
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<PAGE>
Reimbursable Expenses, the Company shall furnish the Employee with Company
acquired credit cards as may be available to all other executive officers of the
Company; and
(d) The Employee shall be given a private office with
secretarial help and any and all reasonable facilities and services, at a
location where the Company maintains offices, so as to be suitable with his
position as President, and so as to assist in the performance of his duties and
activities.
(e) The Employee shall be given an automobile
allowance or automobile lease plan to the extent of $7,500.00 per annum, paid in
Twelve equal monthly installments, to be used to defray acquisition expense for
a luxury automobile, and insurance and maintenance expenses for the automobile.
9. DISCLOSURE OF INFORMATION AND NON-COMPETITION
(a) The Employee recognizes and acknowledges that
during the course of his employment he will have access to certain confidential
information of the Company and that such information constitutes valuable,
special and unique property of the Company. During the term of this Agreement
and following termination of his employment hereunder, the Employee will not
disclose information, including any trade secrets or confidential information of
the Company obtained during the course of his employment with the Company,
except such information as may have become part of the public domain through no
fault of the Employee, which public domain determination shall only be made by
the Company in a written acknowledgment made at the request of the Employee,
before the Employee may be free to disclose any such claimed public domain
information.
(b) During the term of this Agreement, and for Two
(2) years thereafter, the Employee will not, directly or indirectly, engage in
any business enterprise or activity, which is competitive with the business of
the Company either as an employee, consultant, partner, shareholder, or in any
other capacity. For the purposes of this covenant not to compete, a competing
business enterprise will be deemed competitive only if such business enterprise
(i) conducts research, develops and/or tests products (the "Development")
similar to the products the Company then has under Development, or (ii) offers
for sale in any market in which the Company has significant sales, one or more
products for which the major claimed usage or usages overlap materially with the
product or products of the Company in existence at the time of termination of
Employee's employment. Further, the Employee
7
<PAGE>
agrees that he will not either during or within Two (2) years subsequent to the
termination of his employment, disturb, entice, hire or in any other manner
attempt to persuade any employee, dealer, supplier or customer of the Company to
discontinue its business relationship with the Company.
(c) The Employee and the Company acknowledge that it
would be very difficult or impossible to measure the damages resulting from a
breach of this Article 9, and that any such breach would cause immediate and
irreparable harm. Therefore, in consequence of the foregoing, the Employee
hereby agrees that any breach or threatened breach by him of any provision of
this Article 9 shall entitle the Company, in addition to any other legal
remedies available to it, to obtain from any Court of competent jurisdiction a
temporary and permanent injunction in order to enjoin such breach or threatened
breach, without the necessity on the part of the Company, in any application for
such injunctive relief to show immediate and irreparable harm, which would be a
requirement of such an application absent this covenant waiving those
requirements. The Employee also covenants that the service of any papers to
commence any legal proceedings including proceedings to obtain injunctive
relief, may be done by utilizing Federal Express in lieu of any other form of
personal delivery of the process or orders of the Court and upon doing so the
service and notice provisions for the commencement of legal proceedings shall be
satisfied.
10. DEATH DURING EMPLOYMENT
If the Employee dies during the term of his
employment, the Company shall pay to his estate compensation which would
otherwise be payable to the Employee for the shorter of (i) Two (2) years from
the date of his death, or (ii) through to the termination date of this
Agreement. Said sums shall be paid in accordance with written directions given
by the Employee to the Company, or lacking any such directions then to the
surviving spouse of the Employee, or if there is no surviving
8
<PAGE>
spouse, then to his surviving children in equal shares, or if there are none,
then to his estate.
11. PATENTS AND PROPRIETARY RIGHTS
During the Term of employment all work product
emanating directly and/or indirectly from the Employees duties and activities
effected on behalf of the Company ("Work Product"), shall be exclusively owned
by the Company. In the event that any such Work Product is the subject of an
application for patent, copyright, trade mark or similar proprietary protection
("Application"), then regardless of the name of the person or entity submitting
the Application, the Employee hereby acknowledges the Company's exclusive rights
in and to the Application for proprietary protection. In the event that the
Application results in the issuance of the requested proprietary protection,
e.g. a patent, then the Employee hereby acknowledges the Company's exclusive
ownership therein, and the employee will execute any documents necessary to give
effect and implement this ownership, including but not limited to an assignment
of the Application and/or the issued proprietary protection.
12. NOTICES
Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and actually delivered, or if
sent either by Federal Express, or postage prepaid, by certified mail, return
receipt requested, with a copy by ordinary mail, to the addresses below:
As to Company: 2785 NE 191st Street
Aventura, Florida 33180
As to Employee: 150 East 69th Street
New York, New York 10021
or to such other address as either party shall designate by written notice to
the other.
9
<PAGE>
13. ASSIGNMENT
The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. The Employee acknowledges that the services to be
rendered by him are unique and personal, and accordingly, he may not assign any
of his rights, duties, obligations or benefits under this Agreement.
14. ENTIRE AGREEMENT
This Agreement contains the entire agreement and
understanding of the Company and the Employee with respect to the subject matter
hereof, and shall incorporate, merge and supersede all prior agreements and
understandings had between the Company and the Employee, either oral or written,
if any. No modification, change or amendment to this Agreement, shall be binding
upon the Company or the Employee unless the same is in writing, and signed by
the party against whom enforcement of the modification, change or amendment is
sought to be enforced.
15. MISCELLANEOUS
(a) This Agreement and the implementation of it shall
be subject to and governed by the laws of the State of Florida, and any legal
proceedings relating to (i) the interpretation or enforcement of any of the
provisions of this Agreement, or (ii) any dispute relating to the employment
relationship created by the Agreement, shall only be brought in the Circuit
Court of the State of Florida, in and for the County of Dade.
(b) The Article headings contained herein are for
reference purposes only and shall not in any way affect the meaning or the
interpretation of this Agreement.
(c) The failure of any provision of this Agreement
shall in no manner affect the right to enforce the remainder of this Agreement,
and the waiver by either The Company or the Employee of any breach of
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<PAGE>
any provision of this Agreement shall not be construed to be a waiver by the
Company or the Employee of any succeeding breach of such provision or a waiver
by such party of any breach of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on March 8, 2000.
EMPLOYEE:
Witness:
- --------------------
/s/ James J. Apostolakis
------------------------
James A. Apostolakis
COMPANY:
COLUMBIA LABORATORIES, INC.
Witness:
- -------------------
/s/ William J. Bologna
------------------------
By:
11
EXHIBIT 10.20
AGREEMENT
This Agreement dated as of the 30 day of December, 1999, between
COLUMBIA LABORATORIES INC., a corporation organized
And existing under and by virtue of the laws of the State of
Delaware, having an office at 2875 NE 191st Street, Suite 400,
Aventura, FL 33180, USA (hereinafter referred to as the "Company")
and
DOMINIQUE DE ZIEGLER, with offices at Hopital deNyon, Nyon
1261, Switzerland (hereinafter referred to as "de Ziegler")
W I T N E S S E T H:
WHEREAS, the Company is and will be engaged in the development,
testing, registration, manufacture, licensing and sale of pharmaceutical
products; and
WHEREAS, de Ziegler is a physician with Board certification in
obstetrics, gynecology and reproductive endocrinology and, by reason of this and
his other knowledge, skill and ability, is uniquely qualified to aid the Company
in the development, testing, registration, manufacture, licensing and sale of
pharmaceutical products; and
WHEREAS, the Company is desirous of establishing a business
relationship with de Ziegler to provide assistance to the Company in the
development, testing, registration, manufacture, licensing and sale of
pharmaceutical products and de Ziegler is desirous of assisting the Company in
the development, testing, registration, manufacture, licensing and sale of
pharmaceutical products; and
WHEREAS, the Company and de Ziegler desire to enter into this Agreement
so the rights, duties, benefits and obligations of each will be fully set forth
herein; and
NOW, THEREFORE, in consideration of the mutual promises
contained by each party to the other, and for other good and valuable
consideration, the Company and de Ziegler agree as follows:
<PAGE>
1. NATURE OF ENGAGEMENT
The Company and de Ziegler agree to establish the following
professional and business relationship:
a. de Ziegler shall be employed by the Company to provide
services at its Paris, France offices; and
b. de Ziegler shall be employed by the Company to perform
medical research at his Nyon, Switzerland medical practice; and
c. de Ziegler's workweek shall be divided between Paris,
France and Nyon, Switzerland as follows: twenty (20%) percent France and eighty
(80%) percent Switzerland.
2. TERM
a. The term of this Agreement shall be for a period of one (1)
year from the date hereof ("Initial Period"), unless sooner terminated in
accordance with the terms and conditions set forth herein.
b. At the end of the Initial Period, upon the mutual agreement
of de Ziegler and the Company, the term of this Agreement may be extended for an
additional period of years ("Renewal Period(s)"), either upon the terms and
conditions set forth herein, or upon any other terms and conditions as may be
mutually agreed in writing between de Ziegler and the Company. The foregoing
provisions of this Subparagraph 2(b) notwithstanding, this Agreement shall
terminate at the end of the Initial Period or Renewal Period(s), as the case may
be, as provided for in this Paragraph 2, and there shall not be any automatic
renewal or other similar extension of the term of employment.
3. DISABILITY
If, during the effective term of this Agreement, de Ziegler
shall become unable to perform his duties as provided for herein by reason of
illness or injury, for a consecutive period of ninety (90) days ("Disability
Period"), the Company may, on thirty (30) days' written notice to de Ziegler,
immediately terminate this Agreement, with no further obligation to de Ziegler.
4. TERMINATION
a. Company Termination for Cause
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<PAGE>
This Agreement may be immediately terminated by the
Company for cause at any time, upon written notice to de Ziegler, after which
all obligations of the Company to de Ziegler shall thereupon cease. For purposes
of this Agreement, the term "Cause" when used in reference to the termination of
this Agreement, shall mean only any or all of the following:
i. Failure on the part of de Ziegler to follow
material instructions or policy of the Board of Directors given or adopted in
good faith, or carry out an agreed policy or course of action as determined by
the Board of Directors or a committee of the Board of Directors, any or all of
which may be to the detriment of the Company, provided the Company shall serve
written notice to de Ziegler of his breach of this Subparagraph 4(a)(i) setting
forth particularly de Ziegler's conduct creating the breach, and that de Ziegler
shall cure such breach within thirty (30) days of such written notice and the
failure to do so will then permit the Company to implement the provisions of
this Paragraph 4; or
ii. Willful misconduct or gross negligence of de
Ziegler in connection with the performance of his duties and services; or
iii. The termination of this Agreement shall
automatically result in the cancellation of the Company's business relationship
with de Ziegler and his medical practice.
b. Termination by de Ziegler
de Ziegler may terminate this Agreement without
penalty of any kind upon ninety (90) days prior written notice to the Company.
5. DUTIES
a. de Ziegler shall perform the following duties in connection
with his engagement, all of which shall be subject to the paramount direction of
the Board of Directors:
i. To serve as a Member of the Board of Directors of
the Company;
i. To serve as Director of Research and
Development;
ii. To assist the Company in its business affairs and
scientific dealings relating to the development, testing, registration,
manufacture, licensing and sale
3
<PAGE>
of pharmaceutical products, as well as in the Company's dealings with other
companies; and
iii. To undertake and conduct research for the Company within his
private medical practice in Nyon, Switzerland, as may be given to him from time
to time by the Board of Directors.
b. de Ziegler shall devote his best efforts and skills to the
affairs of the Company, and to the performance of the duties set forth in
Subparagraph 5(a). de Ziegler shall not participate in any outside business
activity that will either interfere with or be a conflict of interest with the
performance of his duties pursuant to this Agreement. Notwithstanding the
foregoing, de Ziegler will be permitted to maintain a private practice in Nyon,
Switzerland.
6. COMPENSATION
a. de Ziegler shall receive for the performance of his duties
and services on behalf of the Company, as provided for herein, annual
compensation of approximately Two Hundred Ten Thousand (US$210,000.00) United
States Dollars, which shall be paid by the Company to de Ziegler in monthly
installments.
b. The aforesaid compensation shall be allocated twenty (20%)
percent to de Ziegler's employment in France and eighty (80%) percent to his
employment contract services in Nyon, Switzerland. The compensation paid to de
Ziegler in Switzerland shall include a lodging allowance of approximately
Thirty-Six Thousand (US$36,000.00) United States Dollars. Payment for the Nyon,
Switzerland services shall be made to his medical practice.
c. de Ziegler may receive a bonus if it is determined to be
warranted by the Board of Directors in their sole discretion.
7. FRINGE BENEFITS
In addition to the compensation set forth in Paragraph 6
above, de Ziegler shall be entitled to receive the following benefits virtue of
his employment by the Company in France;
a. Any benefits under group hospitalization, health, dental
care or sick leave plan, life or other insurance or death benefit plan, travel
or accident insurance, or contingent compensation plan, or any other present or
future plan, including any
4
<PAGE>
qualified retirement plan, for which any executive of the Company is or shall
become eligible; and
b. A vacation of up to four (4) weeks in each year, at such
time or times as shall be approved by the Company, and which approval shall not
be unreasonably refused. Full compensation shall be paid to de Ziegler and his
medical practice during any such vacation period; and
c. de Ziegler may incur and shall be reimbursed for reasonable
expenses which are related to the Company's business, including expenses for
entertainment, travel and similar items ("Approved Reimbursable Expenses"). All
such reimbursement of Approved Reimbursable Expenses shall be made within sixty
(60) days of receipt by the Company from de Ziegler of an itemized account and
proper substantiation of such Approved Reimbursable Expenses. In order to
facilitate the payment of Approved Reimbursable Expenses, the Company may
furnish de Ziegler with Company acquired credit cards; and
d. de Ziegler shall be given an office with secretarial help
and any and all reasonable facilities and services as to be suitable with his
position as Director of Research and Development so as to assist him in the
performance of his duties and activities; and
e. The Company shall provide de Ziegler with an apartment in
Paris, France, which shall have a maximum rent per month of Eighteen Thousand
(18,000) French francs. Notwithstanding the foregoing, de Ziegler may lease any
apartment in Paris, France and the Company will pay monthly rental stipend to de
Ziegler of no more than Eighteen Thousand (18,000) French francs.
f. If de Ziegler's employment shall be terminated by the
Company whatsoever the reason or cause, in addition to any benefits required to
be paid by French law, de Ziegler's medical practice shall continue to receive
monthly payments due it for a period of twelve (12) months.
8. DISCLOSURE OR INFORMATION
De Ziegler recognizes and acknowledges that during the course
of his professional relationship with the Company he will have access to certain
confidential information and that such information constitutes valuable, special
and unique property
5
<PAGE>
of the Company. During the term of this Agreement and following termination
thereof, de Ziegler will not disclose such information, including any trade
secrets or confidential information of the Company obtained during the course of
his relationship with the Company, except any information as may have become
part of the public domain through no fault of de Ziegler.
De Ziegler and the Company acknowledge it would be very
difficult or impossible to measure the damages resulting from a breach of this
Paragraph 8, and that any such breach would cause immediate and irreparable
harm. Therefore, in consequent of the foregoing, de Ziegler hereby agrees that
any breach or threatened breach by him of any provision of this Paragraph 8
shall entitle the Company, in addition to any other legal remedies available to
it, to obtain from any court of competent jurisdiction a temporary and permanent
injunction in order to enjoin such breach or threatened breach without the
necessity on the part of the Company, in any application for such injunctive
relief, to show immediate and irreparable harm, which would be a requirement of
such an application absent this covenant waiving those requirements. de Ziegler
also covenants the service of any papers to commence any legal proceedings
including proceedings to obtain injunctive relief, may be done by utilizing
Federal Express in lieu of any other form of personal delivery of the process of
orders of the Court and upon doing so the service and notice provisions for the
commencement of legal proceedings shall be satisfied.
9. DEATH DURING EMPLOYMENT
If de Ziegler dies during the term of this Agreement, the
Company shall pay compensation which would otherwise be payable to de Ziegler
and to his medical practice for a period of six (6) months from the date of his
death under this Agreement. Said sum shall be paid to the surviving spouse of de
Ziegler, or if there is no surviving spouse, then to his surviving children in
equal shares, or if there are none, then to his estate.
10. NOTICES
Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and actually delivered, or if sent
either by Federal Express, or
6
<PAGE>
postage prepaid, by certified mail, return receipt requested, with a copy by
ordinary mail to the addresses below:
As to the Company: 2875 NE 191st Street, Suite 400
Aventura, FL 33180, USA
As to de Ziegler: Hopital deNyon
Nyon 1261, Switzerland
Or such other address as either party shall designate by written notice to the
other.
11. ASSIGNMENT
The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company. de Ziegler acknowledges the services to be rendered by
him are unique and personal and, accordingly, he may not assign any of his
rights, duties, obligations or benefits under this Agreement.
12. ENTIRE AGREEMENT
This Agreement contains the entire agreement and understanding
of the Company and de Ziegler with respect to the subject matter hereof, and
shall incorporate, merge and supercede all prior agreements and understandings
had between the Company and de Ziegler, either oral or written, if any. No
modification, change or amendment to this Agreement shall be binding upon the
Company or de Ziegler unless the same is in writing, and signed by both parties.
13. MISCELLANEOUS
a. This Agreement and the implementation of it shall be
subject to and governed by the laws of the State of New Jersey and any legal
proceedings relating to (i) the interpretation or enforcement of any of the
provisions of this Agreement, or (ii) any dispute relating to the employment
relationship created by this Agreement shall, with the exception of a dispute
under Paragraph 8 of this Agreement, be resolved by arbitration before the
American Arbitration Association in their New Jersey offices, in accordance with
their rules then in effect. Disputes under Paragraph 8 of this Agreement shall
only be brought in the Courts of the State of New Jersey.
7
<PAGE>
b. The paragraph headings contained herein are for references
purposes only and shall not in any way affect the meaning or the interpretation
of this Agreement.
c. The failure of any provision of this Agreement shall in no
matter affect the right to enforce the remainder of this Agreement, and the
waiver by either the Company or de Ziegler of any breach of any provision of
this Agreement shall not be construed to be a waiver by the Company or de
Ziegler of any succeeding breach of such provision or a waiver by such party of
any breach of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties here to have executed this Agreement as
of the date first above written.
COLUMBIA LABORATORIES, INC.
By: /s/ William Bologna
----------------------------
William Bologna, Chairman
/s/ Dominique de Ziegler
----------------------------
Dominique de Ziegler
8
EXHIBIT 10.21
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is made by and
between Columbia Laboratories, Inc., Columbia Laboratories (Bermuda) Ltd.
("Columbia"), on the one hand, and Lake Consumer Products, Inc., f/k/a Lake
Pharmaceutical, Inc. ("Lake"), on the other. (The aforementioned parties may
hereinafter be collectively referred to as the "Settling Parties").
WITNESSETH:
WHEREAS, Columbia and Lake had a business relationship ("Relationship")
regarding a spermicidal gel product of Columbia ("Product").
WHEREAS, Columbia and Lake entered into a License and Distribution
Agreement effective as of July 1, 1994 regarding Columbia's spermicidal gel
product ("Columbia/Lake Agreement").
WHEREAS, a dispute arose between Columbia and Lake with respect to the
Columbia/Lake Agreement and Relationship, ("Dispute") leading to claims by
Columbia and Lake in actions captioned COLUMBIA LABORATORIES, INC. AND COLUMBIA
LABORATORIES (BERMUDA) LTD V. LAKE PHARMACEUTICAL, INC., United States District
Court for the Southern District of Florida Case No. 97-3378-CIV-Gold ("Florida
Action") and LAKE CONSUMER PRODUCTS, INC. V. COLUMBIA LABORATORIES, INC., United
States District Court for the Northern District of Illinois Case No. 97 C 7951,
transferred to the United States District Court for the Southern District of
Florida under case no. 98-1091-CIV-Graham ("Illinois Action") (the Florida
Action and the Illinois Action may collectively be referred to as the
"Actions").
WHEREAS, the Settling Parties desire to settle and resolve all issues
related to the Product, the Relationship, the Columbia/Lake Agreement, the
Dispute and the Actions, as set forth below;
NOW THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the Settling Parties hereby agree as follows:
I. LAKE RELEASE AND UNDERTAKINGS
1. In consideration of Columbia's promises, covenants, payments,
representations, and warranties under this Agreement, Lake, its officers,
directors and employees and its assigns and all persons claiming by, through,
for or under it or on its behalf, and each of them, jointly and severally hereby
fully, unconditionally, and forever release Columbia, and its respective present
and past subsidiaries, parents, and other affiliated or related entities, and
their respective predecessors, successors, assigns, officers, directors, agents,
shareholders, employees, insurers, counsel and representatives, and each of
them, of, from and against any and all claims, debts, demands, liabilities,
fees, costs, expenses, damages and/or causes of action whatsoever, whether known
or unknown, whether past, present, or future, accrued or unaccrued, that arise
from or relate to the Relationship, including but not limited to (a) claims that
arise from or relate to the Product, the Columbia/Lake Agreement, or the
Dispute, and (b) claims that were or could have been raised in the Actions. This
specifically includes, but is not limited to, a release as to all issues
relating to the Product, its current uses and claims and any of the Product's
actual or potential future uses and claims, including without limitation
STD-related uses or claims, as well as any and all causes of action, debts,
demands, liabilities, fees, costs, expenses, damages and/or defenses whatsoever
sounding in fraud.
2. In further consideration of Columbia's promises, covenants,
payments, representations, and warranties under this Agreement, Lake shall, upon
(a) the Columbia Stock Issuance, and (b) payment of the first installment of the
Columbia Payment, agree to the entry of a stipulation dismissing with prejudice
its claims against Columbia in any of the Actions that are pending.
<PAGE>
3. In further consideration of Columbia's promises, covenants,
payments, representations, and warranties under this Agreement, Lake shall, upon
(a) the Columbia Stock Issuance, and (b) payment of the first installment of the
Columbia Payment, agree to the termination and buy-out of the Columbia/Lake
Agreement as set forth in Article III of this Agreement.
II. COLUMBIA PAYMENT, STOCK ISSUANCE, RELEASE, AND UNDERTAKINGS
1. In consideration of Lake's promises, covenants, representations, and
warranties under this Agreement, Columbia will pay to Lake the sum of One
Million Two Hundred Thousand Dollars ($1,200,000) as follows: (i) Six Hundred
Thousand Dollars ( $600,000 ) in cash in five (5) consecutive monthly
installments, the first installment to be paid by check in the sum of Two
Hundred Thousand Dollars ($200,000) within three (3) business days of the
execution of this Agreement and then One Hundred Thousand Dollars ($100,000) per
month by check on the monthly anniversary of the first payment for the following
four (4) consecutive months ("Columbia Payment"); and (ii) Six Hundred Thousand
Dollars in the form of the common capital stock of Columbia Laboratories, Inc.,
valued at $11 1/8th, the February 25,2000 closing price as published in the
February 26, 2000 New York Times, to be delivered to Lake within three (3)
business days of the execution of this Agreement ("Columbia Stock Issuance").
After the Columbia Stock Issuance, Columbia will, at Columbia's cost, within
ninety (90) days of the execution date of this Agreement, be required to file a
registration statement with the Securities and Exchange Commission on a form
suitable for resale of the common capital stock to be issued to Lake, and
Columbia shall use its commercially reasonable best efforts to cause such
registration statement to become effective, and to maintain the effectiveness of
the registration statement for not less than 180 days, and shall supply Lake
with sufficient copies of the related prospectus so as to permit Lake to satisfy
its prospectus delivery requirements in connection with resale of the stock.
2. In further consideration of Lake's promises, covenants,
representations, and warranties under this Agreement, Columbia, its officers,
directors and employees and its assigns and all persons claiming by, through,
for or under it or on its behalf, and each of them, jointly and severally hereby
fully, unconditionally, and forever release Lake, and its respective present and
past subsidiaries, parents, and other affiliated or related entities, and their
respective predecessors, successors, assigns, officers, directors, agents,
shareholders, employees, insurers, counsel and representatives, and each of
them, of, from and against any and all claims, debts, demands, liabilities,
fees, costs, expenses, damages and/or causes of action whatsoever, whether known
or unknown, whether past, present, or future, accrued or unaccrued, that arise
from or relate to the Relationship, including but not limited to (a) claims that
arise from or relate to the Product, the Columbia/Lake Agreement, or the
Dispute, and (b) claims that were or could have been raised in the Actions. This
specifically includes, but is not limited to, a release as to all issues
relating to the Product, its current uses and claims and any of the Product's
actual or potential future uses and claims, including without limitation
STD-related uses or claims, as well as any and all causes of action, debts,
demands, liabilities, fees, costs, expenses, damages and/or defenses whatsoever
sounding in fraud.
3. In further consideration of Lake's promises, covenants,
representations, and warranties under this Agreement, Columbia shall agree to
the entry of a stipulation dismissing with prejudice its claims against Lake in
any of the Actions that are pending.
4. In further consideration of Lake's promises, covenants,
representations, and warranties under this Agreement, Columbia shall agree to
the termination and buy-out of the Columbia/Lake Agreement as set forth in
Article III of this Agreement.
III. AGREEMENT BUY-OUT AND TERMINATION
The Settling Parties agree that the Columbia/Lake Agreement is hereby
bought out and thereby terminated, with full legal force and effect, and
accordingly neither of the Settling Parties has any future rights or
responsibilities under the Columbia/Lake Agreement.
IV. WARRANTIES AND REPRESENTATIONS
1. Each of the Settling Parties represents and warrants to the another
that it has never assigned to anyone any (or any portion) of the claims, debts,
demands, liabilities, expenses, damages, fees, costs and causes of action
2
<PAGE>
which are the subject of this Agreement, and shall indemnify the other for any
claim made by reason of such assignment.
2. Each of the Settling Parties represents and warrants to the other
that it has sought and received the advice of its respective attorneys prior to
entering into this Agreement and hereby acknowledges that it has read in full
this Agreement, agrees to each and every term and condition set forth herein,
and voluntarily agrees to be bound by same. Each of the Settling Parties also
represents and warrants that it has not relied upon any representation or lack
thereof by the other Party in reaching its decision to enter into this Agreement
except for those representations and warranties listed in Section IV herein. In
addition, Lake expressly acknowledges the possibility that the Product may, at
some point in the future, immediate or otherwise, acquire additional claims,
including but not limited to STD-related claims, and expressly acknowledges that
it is not relying on any representations, or lack thereof, by Columbia in that
regard in entering into this Agreement. Lake also expressly acknowledges that it
is not relying upon any representations by Columbia, or lack thereof, as to the
value or future value of the stock that it is receiving pursuant to Section II.
Lake also expressly acknowledges that it is not relying upon any disclosure by
Columbia or lack thereof in discovery in the Actions.
3. Each of the Settling Parties represents that the terms and
conditions of this Agreement shall be kept confidential and will not be revealed
to any other person or entity, except upon order of Court or upon required
disclosure by the Settling Parties as provided by law or regulation, and except
as may be required in the ordinary course of business. Should Columbia choose to
seek an order sealing the files which relate in whole or in part to this
Agreement, Lake will not object.
V. PRODUCT LIABILITY CLAIMS
The parties to this Settlement Agreement and Release are not releasing
each other for indemnification or contribution claims arising out of third party
consumer product liability or third party consumer tort claims concerning the
Product.
VI. MISCELLANEOUS
It is understood and acknowledged by the Settling Parties that:
1. The terms herein do not constitute an admission of liability on the
part of the Settling Parties;
2. if any provision of this Agreement shall be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective, provided that such remaining provisions do not increase the
obligations or liabilities of the Settling Parties;
3. the Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, and such counterparts
together shall constitute and be one and the same instrument;
4. the Agreement is the entire agreement among the Settling Parties,
supersedes and replaces any prior oral or written communications,
representations, or understandings concerning the terms of this Agreement, may
be modified only by an instrument in writing executed by the parties hereto, and
is effective as of the date of execution set forth below;
5. the Agreement shall be binding upon and inure to the benefit of the
respective successors, assigns, and predecessors of the Settling Parties;
6. except as otherwise provided herein, the representations,
warranties, covenants and agreements set forth in the Agreement will survive the
execution, delivery, and performance hereof;
7. the headings contained in the Agreement are inserted for convenience
only and shall not affect the meaning or construction of any of the terms in the
Agreement;
8. in any action brought to enforce the terms of this Agreement, the
prevailing party in such action shall be entitled to recover from the other
party all reasonable costs thereof, including reasonable attorneys' fees and
costs;
3
<PAGE>
9. the parties agree that the United States District Court for the
Southern District of Florida shall retain exclusive jurisdiction of the parties
for purposes of interpretation and enforcement of this Agreement; and
10. this Agreement shall be construed and enforced in accordance with,
and governed by, the laws of the State of Florida, without regard to principles
governing choice of law.
IN WITNESS WHEREOF, the Settling Parties have caused this Agreement to be
duly executed by its authorized officer on the date set forth below.
Lake Consumer Products, Inc.
_________________ By: /s/ Gary J. Burns
-----------------
Its: President
STATE OF ILLINOIS
SS:
COUNTY OF LAKE
I HEREBY CERTIFY that on this date before an officer duly
authorized in this State and County to take acknowledgments, personally appeared
Gary J. Burns, as (Title) President, on behalf of Lake Consumer Products, Inc.
f/k/a Lake Pharmaceutical, Inc. who acknowledged executing this Settlement
Agreement and Release freely and voluntarily, and is personally known to me or
produced the following as identification:
WITNESS my hand and official seal in the County and State
referenced above this 16th day of March, 2000.
/s/ Susan M. Kellogg
--------------------
Notary Public
Notary Stamp:
4
<PAGE>
Columbia Laboratories (Bermuda) Ltd.
_________________ By: /s/James J. Apostolakis
---------------------------------------
Its: President
STATE OF NEW YORK
SS:
COUNTY OF NEW YORK
I HEREBY CERTIFY that on this date before an officer duly
authorized in this State and County to take acknowledgments, personally appeared
James J. Apostolakis, as (Title) President, on behalf of Columbia Laboratories
(Bermuda), Ltd. who acknowledged executing this Settlement Agreement and Release
freely and voluntarily, and is personally known to me or produced the following
as identification:
WITNESS my hand and official seal in the County and State
referenced above this 16th day of March, 2000.
/s/Kenneth M. Swisstack
-----------------------
Notary Public
Notary Stamp:
5
<PAGE>
Columbia Laboratories, Inc.
_________________ By: /s/James J. Apostolakis
-----------------------
Its: President
STATE OF NEW YORK
SS:
COUNTY OF NEW YORK
I HEREBY CERTIFY that on this date before an officer duly
authorized in this State and County to take acknowledgments, personally appeared
James J. Apostolakis, as (Title) President, on behalf of Columbia Laboratories,
Inc. who acknowledged executing this Settlement Agreement and Release freely and
voluntarily, and is personally known to me or produced the following as
identification:
WITNESS my hand and official seal in the County and State
referenced above this 16th day of March, 2000.
/s/Kenneth M. Swisstack
-----------------------
Notary Public
Notary Stamp:
6
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Columbia Laboratories (Bermuda) Ltd.
Columbia Laboratories (France) SA
Columbia Laboratories (UK) Limited
Columbia Research Laboratories, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,982,085
<SECURITIES> 0
<RECEIVABLES> 1,954,915
<ALLOWANCES> 119,829
<INVENTORY> 1,848,816
<CURRENT-ASSETS> 6,703,194
<PP&E> 2,503,351
<DEPRECIATION> 1,494,798
<TOTAL-ASSETS> 12,987,613
<CURRENT-LIABILITIES> 3,261,827
<BONDS> 0
0
78
<COMMON> 291,246
<OTHER-SE> (565,538)
<TOTAL-LIABILITY-AND-EQUITY> 12,987,613
<SALES> 18,921,074
<TOTAL-REVENUES> 18,921,074
<CGS> 5,655,350
<TOTAL-COSTS> 5,655,350
<OTHER-EXPENSES> 15,166,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 755,352
<INCOME-PRETAX> (2,141,208)
<INCOME-TAX> 69,000
<INCOME-CONTINUING> (2,210,208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,210,208)
<EPS-BASIC> (0.09)
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