SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 N.E. 191ST STREET, SUITE 400
AVENTURA, FLORIDA 33180
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 933-6089
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
Number of shares of the Common Stock of Columbia Laboratories, Inc.
issued and outstanding as of May 1, 2000: 30,433,926
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited, condensed consolidated financial statements of
the Company have been prepared in accordance with the instructions to Form 10-Q
and, therefore, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial information for the interim periods reported have been made.
Results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results for the year ending December 31, 2000.
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.
2
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets-
Cash and cash equivalents $ 5,501,774 $ 1,982,085
Accounts receivable, net 2,438,558 1,835,086
Inventories 1,428,843 1,848,816
Prepaid expenses 407,254 468,948
Other current assets 311,442 568,259
------------- -------------
Total current assets 10,087,871 6,703,194
Property and equipment, net 902,709 1,008,553
Intangible assets, net 5,955,088 4,860,212
Other assets 408,588 415,654
------------- -------------
TOTAL ASSETS $ 17,354,256 $ 12,987,613
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities-
Accounts payable $ 1,492,949 $ 2,089,260
Accrued expenses 1,072,250 1,072,567
Deferred revenue 100,000 100,000
------------- -------------
Total current liabilities 2,665,199 3,261,827
Convertible subordinated note payable 10,000,000 10,000,000
------------- -------------
TOTAL LIABILITIES 12,665,199 13,261,827
Stockholders' equity (deficiency)-
Preferred stock, $.01 par value; 1,000,000 shares authorized:
Series A Convertible Preferred Stock, 33 and 923
shares issued and outstanding in 2000 and 1999, respectively -- 9
Series B Convertible Preferred Stock, 1,630
shares issued and outstanding in 2000 and 1999 16 16
Series C Convertible Preferred Stock, 4,310 and
5,260 shares issued and outstanding in 2000 and 1999, respectively 43 53
Common stock, $.01 par value; 40,000,000 shares
authorized; 30,412,641 shares and 29,124,686
issued and outstanding in 2000 and 1999, respectively 304,126 291,246
Capital in excess of par value 105,939,456 99,575,803
Accumulated deficit (101,560,544) (100,198,848)
Accumulated other comprehensive income 5,960 57,507
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 4,689,057 (274,214)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 17,354,256 $ 12,987,613
============= =============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2000 1999
------------ ------------
NET SALES $ 2,989,930 $ 5,466,461
COST OF GOODS SOLD 1,219,848 1,776,841
------------ ------------
Gross profit 1,770,082 3,689,620
------------ ------------
OPERATING EXPENSES:
Selling and distribution 812,870 857,827
General and administrative 788,128 1,484,598
Research and development 1,363,412 1,390,076
------------ ------------
Total operating expenses 2,964,410 3,732,501
------------ ------------
Loss from operations (1,194,328) (42,881)
------------ ------------
OTHER INCOME (EXPENSE):
License fees, net of expenses -- 387,500
Interest income 28,304 30,496
Interest expense (188,838) (188,838)
Other, net (6,834) (21,167)
------------ ------------
(167,368) 207,991
------------ ------------
Income (loss) before income taxes (1,361,696) 165,110
Provision for income taxes -- 25,000
------------ ------------
Net income (loss) (1,361,696) $ 140,110
============ ============
NET INCOME (LOSS) PER COMMON SHARE:
Basic $ (.05) $ .00
============ ============
Diluted $ (.05) $ .00
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
POTENTIAL COMMON SHARES OUTSTANDING:
Basic 29,527,163 28,685,000
============ ============
Diluted 29,527,163 28,985,000
============ ============
See notes to condensed consolidated financial statements
4
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
2000 1999
----------- -----------
NET INCOME (LOSS) $(1,361,696) $ 140,110
Other comprehensive income (loss):
Foreign currency translation, net of tax 51,547 38,290
----------- -----------
Comprehensive income (loss) $(1,310,149) $ 178,400
=========== ===========
See notes to condensed consolidated financial statements.
5
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,361,696) $ 140,110
Adjustments to reconcile net income (loss) to net
cash used in operating activities-
Depreciation and amortization 241,322 259,725
Issuance of warrants for consulting services 5,681 12,699
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable (603,472) (2,482,146)
Inventories 419,973 628,971
Prepaid expenses 61,694 (253,825)
Other assets 263,883 6,062
Increase (decrease) in:
Accounts payable (596,311) (976,448)
Accrued expenses (425,317) (337,395)
----------- -----------
Net cash used in operating activities (1,994,243) (3,002,247)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,354) (4,406)
Acquisition of licensing rights (200,000) (100,000)
----------- -----------
Net cash used in investing activities (205,354) (104,406)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock -- 5,939,534
Dividends paid (62,404) (181,625)
Proceeds from exercise of options and warrants 5,833,237 --
----------- -----------
Net cash provided by financing activities 5,770,833 5,757,909
----------- -----------
</TABLE>
(Continued)
6
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Three Months Ended March 31,
2000 1999
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (51,547) (45,047)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,519,689 2,606,209
CASH AND CASH EQUIVALENTS,
Beginning of period 1,982,085 315,288
----------- -----------
CASH AND CASH EQUIVALENTS,
End of period $ 5,501,774 $ 2,921,497
=========== ===========
See notes to condensed consolidated financial statements
7
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies followed for quarterly financial reporting are
the same as those disclosed in Note (1) of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.
(2) INVENTORIES:
March 31, December 31,
2000 1999
---------- ------------
Finished goods $ 688,190 $1,029,574
Raw materials 740,653 819,242
---------- ----------
$1,428,843 $1,848,816
========== ==========
(3) SEGMENT INFORMATION:
The Company and its subsidiaries are engaged in one line of business, the
development and sale of pharmaceutical products and cosmetics. The following
table shows selected information by geographic area:
NET LOSS FROM IDENTIFIABLE
SALES OPERATIONS ASSETS
------------ ------------ ------------
As of and for the three months
ended March 31, 2000-
United States $ 2,412,784 $ (144,827) $ 13,127,361
Europe 577,146 (1,049,501) 4,226,895
------------ ------------ ------------
$ 2,989,930 $ (1,194,328) $ 17,354,256
============ ============ ============
As of and for the three months
ended March 31, 1999-
United States $ 4,498,887 $ 1,228,563 $ 11,391,018
Europe 967,574 (1,271,444) 5,040,357
------------ ------------ ------------
$ 5,466,461 $ (42,881) $ 16,431,375
============ ============ ============
8
<PAGE>
(4) 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>
Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net income (loss) $ (1,361,696) $ 140,110
Less: preferred stock dividends (62,404) (59,968)
------------ ------------
Net income (loss) applicable to common stock (1,424,100) 80,142
============ ============
Basic:
Weighted average number of common shares outstanding 29,527,163 28,685,000
============ ============
Basic net income (loss) per common share $ (.05) $ .00
============ ============
Diluted:
Weighted average number of common shares outstanding 29,527,163 28,685,000
Weighted average number of potential common shares -- 300,000
------------ ------------
Weighted average number of common and potential common
shares outstanding 29,527,163 28,985,000
============ ============
Diluted net income (loss) per common share $ (.05) $ .00
============ ============
</TABLE>
(5) LAWSUIT SETTLEMENT:
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
judgment 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 $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.
The total amount of the settlement plus certain attorney's fees, related solely
to the reacquisition of the product rights, have been capitalized as part of
intangible assets in the accompanying balance sheets.
9
<PAGE>
(6) SUBSEQUENT EVENT:
Effective May 5, 2000, the Company sold various tangible and intangible assets
related to the U.S. rights for Replens for a total of $4.5 million cash.
Additionally, the purchaser agreed to buy up to $500,000 of Replens inventory
from the Company and to pay future royalties of up to $2 million equal to 10% of
future U.S. sales of Replens based.
Additionally, effective May 5, 2000, the Company licensed its Legatrin PM,
Legatrin GCM, Vaporizer in a Bottle and Diasorb brands to the same purchaser
mentioned above. Under the terms of these agreements, the Company will receive
license fees equal to 20% of the licensee's net sales of these brands. These
agreements each have five-year terms with provisions for renewal and contain
options that allow the licensee to acquire the brands from the Company.
10
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company and its representatives from time to time make written or
verbal forward looking statements, including statements contained in this and
other filings with the Securities and Exchange Commission and in the Company's
reports to stockholders, which are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such statements
include, without limitation, the Company's expectations regarding sales,
earnings or other future financial performance and liquidity, product
introductions, entry into new geographic regions and general optimism about
future operations or operating results. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include, without limitation:
(i) increased competitive activity from companies in the pharmaceutical
industry, some of which have greater resources than the Company; (ii) social,
political and economic risks to the Company's foreign operations, including
changes in foreign investment and trade policies and regulations of the host
countries and of the United States; (iii) changes in the laws, regulations and
policies, including changes in accounting standards, that affect, or will
affect, the Company in the United States and abroad; (iv) foreign currency
fluctuations affecting the relative prices at which the Company and foreign
competitors sell their products in the same market; and (v) the ability of the
Company and third parties, including customers or suppliers, to adequately
address Year 2000 issues. Additional information on factors that may affect the
business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission. All forward-looking
statements should be considered in light of these risks and uncertainties. The
Company assumes no responsibility to update forward-looking statements made
herein or otherwise.
Cash and cash equivalents increased from $1,982,285 at December 31,
1999 to $5,501,774 at March 31, 2000. The Company received approximately $5.8
million from the exercise of outstanding options and warrants.
The Company has a worldwide, except for South Africa, license and
supply agreement with Ares-Serono ("Serono") a Swiss pharmaceutical company.
Under the terms of the agreement, as of March 31, 2000, the Company has earned
$17 million in milestone payments and will continue to receive additional
milestone payments. The Company supplies Crinone to Serono at a price equal to
30% of Serono's net selling price.
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 March 31, 2000, the Company has paid approximately $1.7 million
in royalty payments.
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
11
<PAGE>
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 a $462,500 in 1999, net of expenses, upfront payment and
expects to receive future milestone payments, as additional products are made
available by the Company.
The Company believes that sales and liquidity will increase as Crinone
is fully marketed by Ares-Serono.
As of March 31, 2000, the Company has outstanding exercisable options
and warrants that, if exercised, would result in approximately $46.2 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 $100,000 on property and equipment.
As of March 31, 2000, the Company had available net operating loss
carryforwards of approximately $51.2 million to offset its future U.S. taxable
income.
In accordance with Statement of Financial Accounting Standards No.
109, as of March 31, 2000 and December 31, 1999, other assets in the
accompanying consolidated balance sheets include deferred tax assets of
approximately $18.6 million and $17 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.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS
ENDED MARCH 31, 1999
Net sales decreased by approximately $2.5 million to approximately $2,990,000 in
2000 as compared to approximately $5,466,000 in 1999. The decrease is primarily
the result of decreased Crinone sales of approximately $1.9 million in 2000 from
approximately $3,192,000 in 1999 to approximately $1,274,000 in 2000 as a result
of Ares-Serono's transition to marketing Crinone in the U.S. and abroad.
Gross profit as a percentage of net sales decreased in 2000 to 59% as compared
to 67% in 1999. The lower gross profit in 2000 is the result of the decrease in
Crinone sales in which has a higher gross profit.
Selling and distribution expenses decreased by approximately $45,000 in 2000.
Selling and distribution expenses decreased from approximately $858,000 in 1999
to approximately $813,000 in 2000 resulting from an approximately $400,000
decrease in U.S. over-the-counter product sales.
General and administrative expenses decreased by approximately $697,000 from
approximately $1,485,000 in 1999 to approximately $788,000 in 2000. The majority
of the decrease is the result of a decrease in legal expenses of approximately
$518,000 related litigation settled in March 2000.
12
<PAGE>
Research and development decreased in 2000 by approximately $27,000 from
approximately $1,390,000 in 1999 to approximately $1,363,000 in 2000.
Net license fees of $387,500 in 1999 represent an upfront payment received in
connection with a licensing agreement entered into in March 1999. No such fees
were received in 2000.
Interest expense related to the convertible subordinated note payable totaled
approximately $189,000 in 2000 and 1999.
In 1999, the Company recorded a $25,000 alternative minimum tax provision for
U.S. federal taxes. No provision is required in 2000.
As a result, the net loss for the three months ended March 31, 2000 was
$1,361,696 or $(.05) per common share as compared to a net income for the three
months ended March 31, 1999 of $140,110 or $.00 per common share.
13
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. 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 judgment 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
$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 lawsuits have been filed against the Company.
In the opinion of management and counsel, none of these lawsuits are
material and they are all adequately reserved for or covered by
insurance or, if not so covered, are without any or have little merit
or involve such amounts that if disposed of unfavorably would not have
a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
ACQUISITION OR DISPOSITION OF ASSETS
Effective May 5, 2000, the Company sold various tangible and intangible
assets related to the U.S. rights for Replens for a total of $4.5
million cash. Additionally, the purchaser agreed to buy up to $500,000
of Replens inventory from the Company and to pay future royalties of up
to $2 million equal to 10% of future U.S. sales of Replens.
14
<PAGE>
Additionally, effective May 5, 2000, the Company licensed its Legatrin
PM, Legatrin GCM, Vaporizer in a Bottle and Diasorb brands to the same
purchaser mentioned above. Under the terms of these agreements, the
Company will receive license fees equal to 20% of the licensee's net
sales of these brands. These agreements each have five-year terms with
provisions for renewal and contain options that allow the licensee to
acquire the brands from the Company.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Not Applicable
PRO FORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Condensed Consolidated Financial Information of
Columbia Laboratories, Inc. and Subsidiaries
The following unaudited pro forma condensed consolidated financial
information is being filed herewith:
Unaudited Pro Forma Condensed Consolidated Balance Sheet at
March 31, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the three months ended March 31, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the year ended December 31, 1999
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Information
15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000
-------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma (a)
-------------- ------------ --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets-
Cash and cash equivalents $ 5,501,774 $ 4,165,000 (b) $ 9,666,774
Accounts receivable, net 2,438,558 412,235 (c) 2,850,793
Inventories 1,428,843 (412,235)(c) 1,016,608
Prepaid expenses 407,254 -- 407,254
Other current assets 311,442 (66,624)(d) 244,818
-------------- ------------ --------------
Total current assets 10,087,871 4,098,376 14,186,247
Property and equipment, net 902,709 -- 902,709
Intangible assets, net 5,955,088 (3,986,658)(e) 1,968,430
Other assets 408,588 -- 408,588
-------------- ------------ --------------
TOTAL ASSETS $ 17,354,256 $ 111,718 $ 17,465,974
============== ============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities-
Accounts payable $ 1,492,949 -- $ 1,492,949
Accrued expenses 1,072,250 -- 1,072,250
Deferred revenue 100,000 -- 100,000
-------------- ------------ --------------
Total current liabilities 2,665,199 -- 2,665,199
Convertible subordinated note payable 10,000,000 -- 10,000,000
-------------- ------------ --------------
TOTAL LIABILITIES 12,665,199 -- 12,665,199
-------------- ------------ --------------
Stockholders' equity (deficiency)-
Preferred stock, $.01 par value; 1,000,000 shares authorized:
Series A Convertible Preferred Stock, 33
shares issued and outstanding in 2000 -- -- --
Series B Convertible Preferred Stock, 1,630
shares issued and outstanding in 2000 16 -- 16
Series C Convertible Preferred Stock, 4,310
shares issued and outstanding in 2000 43 -- 43
Common stock, $.01 par value; 40,000,000 shares
authorized; 30,412,641 shares
issued and outstanding in 2000 304,126 -- 304,126
Capital in excess of par value 105,939,456 60,009 (f) 105,999,465
Accumulated deficit (101,560,544) 51,709 (101,508,835)
Accumulated other comprehensive income 5,960 -- 5,960
-------------- ------------ --------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 4,689,057 111,718 4,800,775
-------------- ------------ --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 17,354,256 $ 111,718 $ 17,465,974
============== ============ ==============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial information.
16
<PAGE>
COLUMBIA LABORATORIES, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 QUARTER ENDED MARCH 31, 2000
------------------------------------------ ------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $18,921,074 ($5,547,259)(g) $13,373,815 $2,989,930 ($1,266,245)(g) $1,723,685
COST OF GOODS SOLD 5,655,350 (2,072,637)(h) 3,582,713 1,219,848 (555,005)(h) 664,843
------------ ------------ ------------ ------------ ------------ ------------
Gross Profit 13,265,724 (3,474,622) 9,791,102 1,770,082 (711,240) 1,058,842
------------ ------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling and distribution 3,938,756 (2,507,342)(i) 1,431,414 812,870 (439,005)(i) 373,865
General and administrative 4,575,702 (588,151)(j) 3,987,551 788,128 (26,836)(j) 761,292
Research and development 6,652,096 (109,607)(k) 6,542,489 1,363,412 (48,175)(k) 1,315,237
------------ ------------ ------------ ------------ ------------ ------------
Total operating expenses 15,166,554 (3,205,100) 11,961,454 2,964,410 (514,016) 2,450,394
------------ ------------ ------------ ------------ ------------ ------------
Loss from operations (1,900,830) (269,522) (2,170,352) (1,194,328) (197,224) (1,391,552)
------------ ------------ ------------ ------------ ------------ ------------
Other Income (Expense):
License fees, net of expenses 462,500 -- 462,500 -- --
Interest income 134,795 -- 134,795 28,304 -- 28,304
Interest expense (755,352) -- (755,352) (188,838) -- (188,838)
Other, Net (82,321) -- (82,321) (6,834) -- (6,834)
------------ ------------ ------------ ------------ ------------ ------------
(240,378) -- (240,378) (167,368) -- (167,368)
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes (2,141,208) (269,522) (2,410,730) (1,361,696) (197,224) (1,558,920)
Provision for income taxes 69,000 -- 69,000 -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Income/(Loss) ($2,210,208) ($269,522) ($2,479,730) ($1,361,696) ($197,224) ($1,558,920)
============ ============ ============ ============ ============ ============
NET LOSS PER COMMON SHARE:
Basic and Diluted ($0.09) ($0.01) ($0.10) ($0.05) -- ($0.05)
============ ============ ============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON AND POTENTIAL
COMMON SHARES OUTSTANDING:
Basic and Diluted 28,853,000 -- 28,853,000 29,527,163 -- 29,527,163
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial information.
17
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(a) The unaudited pro forma condensed consolidated balance sheet gives
retroactive effect to the sale and license of certain assets related to
Columbia's over-the-counter products to Lil' Drug Store Products, Inc.
("Lil' Drug") as if the sale and license had occurred as of March 31,
2000. The unaudited pro forma condensed consolidated statements of
income give retroactive effect as if the sale had occurred as of the
beginning of the periods represented.
(b) Reflects the initial cash proceeds received by Columbia, net of
expenses related to the transaction.
(c) Reflects inventory to be purchased by Lil' Drug.
(d) Reflects expenses of the transaction previously deferred.
(e) Reflects Replens trademark, net of accumulated amortization.
(f) Reflects stock warrants issued to Columbia's advisor on the
transaction.
(g) Reflects revenues related to the over-the-counter products to be
assumed by Lil' Drug, offset by royalty revenue from Lil' Drug as a
result of the sale and license.
(h) Reflects cost of sales related to the over-the-counter products to be
assumed by Lil' Drug.
(i) Reflects selling and distribution expenses related to the
over-the-counter products to be assumed by Lil' Drug.
(j) Reflects general and administrative expenses related to the
over-the-counter products to be assumed by Lil' Drug.
(k) Reflects research and development expenses related to the
over-the-counter products to be assumed by Lil' Drug.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
10.22 - Replens Purchase and License Agreement dated April 18, 2000,
between the Company and Lil' Drug Store Products, Inc.
10.23 - License Agreement dated April 18, 2000, between the Company and
Lil' Drug Store Products, Inc.
10.24 - Distribution Agreement dated April 18, 2000, between the
Company and Lil' Drug Store Products, Inc.
27.1 - Financial Data Schedule (for SEC use only)
Reports on Form 8-K
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBIA LABORATORIES, INC.
/S/ DAVID L. WEINBERG
----------------------------------
DAVID L. WEINBERG, Vice President-
Finance and Administration,
Chief Financial Officer
DATE: MAY 15, 2000
20
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBERS
10.22 - Replens Purchase and License Agreement dated April 18, 2000,
between the Company and Lil' Drug Store Products, Inc.
10.23 - License Agreement dated April 18, 2000, between the Company and
Lil' Drug Store Products, Inc.
10.24 - Distribution Agreement dated April 18, 2000, between the
Company and Lil' Drug Store Products, Inc.
27.1 - Financial Data Schedule (for SEC use only)
EXHIBIT 10.22
REPLENS PURCHASE AND LICENSE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of April, 2000,
by and between COLUMBIA LABORATORIES, INC., a Delaware corporation having its
principal place of business at 2875 N.E. 191 St., Suite 400, Aventura, Florida
33180 ("Seller"), and LIL' DRUG STORE PRODUCTS, INC., an Iowa corporation with
its principal place of business at 1201 Continental Place NE, Cedar Rapids, Iowa
("Buyer").
RECITALS
WHEREAS, Seller is the owner of certain Technology, Patents and
Trademarks (as hereinafter defined); and
WHEREAS, Seller desires to sell and license to Buyer, and Buyer desires
to purchase and license from Seller, certain Technology, Patents and Trademarks
for the Product (as hereinafter defined) in the Territory (as hereinafter
defined) on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties 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" means any corporation or the business entity that
either directly or indirectly controls a party to this
Agreement, is controlled by such party, or is under common
control of such party. As used herein, the term "controlling"
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) "Buyer Transaction Documents" means this Agreement and all
other agreements or documents to be executed and delivered by
Buyer pursuant to the requirements of this Agreement.
(c) "cGMP" means current good manufacturing practice regulations
promulgated by the Federal Drug Administration ("FDA") and
other regulatory agencies.
(d) "Columbia Patents" means the bioadhesive composition and
method of treatment patent, U.S. Patent
<PAGE>
No. 4,615,697 and the vaginal tissue moisturizing composition
and method patent, U.S. Patent No. 5,474,768, and any and all
patents issued pursuant thereto that are now used in
connection with the Product.
(e) "Deferred Revenue" means the aggregate amount, as of the
Closing Date (defined below), billed or received by Seller for
the sale of the Product, the delivery of which will occur on
or after the Closing Date.
(f) "Design Patents" means U.S. Design Patent Nos. 345,211 and
375,352, and any and all patents issued pursuant thereto that
are now used in connection with the Product.
(g) "Encumbrance" means any encumbrance, security interest,
mortgage, lien, pledge, claim, lease, right of first refusal,
option, restrictive covenant, charge or other restriction or
third party rights.
(h) "Field" means products that are promoted or marketed primarily
as a vaginal moisturizer or vaginal lubricant. The Field does
not include other products containing polycarbophil that are
promoted or marketed primarily for a purpose outside the
Field, but that may claim a side benefit of also being a
vaginal moisturizer or lubricant.
(i) "Governmental Body" means any United States or other national,
state, municipal or local government, domestic or foreign, any
subdivision, agency, entity, commission or authority thereof,
or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or
quasi-governmental authority.
(j) "Intellectual Property Rights" means trade secrets,
trademarks, trade names, logos, trade dress, graphics, designs
and copyrights.
(k) "Net Sales" means the aggregate equivalent of gross sales
received by Buyer, 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) credits or allowances, if any, actually granted on account
of cash or trade discounts,
2
<PAGE>
recalls, rebates, rejection or return of the Product
previously sold, and (ii) excises, sales taxes, value added
taxes, consumptions taxes, duties or other taxes imposed upon
and paid with respect to such sales (excluding income or
franchise taxes of any kind). Net Sales shall not include any
transfer between Buyer 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. Net
Sales shall be determined in accordance with generally
accepted accounting principles ("GAAP").
(l) "Product" means the current formulation of Replens(R) brand
vaginal moisturizer or lubricant and any and all improvements,
reformulations or advances to such formulation in the Field.
(m) "Replens Patent" means the tissue moisturizing composition and
method patent, U.S. Patent No. 5,968,500, and any and all
patents issued pursuant thereto that are now used in
connection with the Product.
(n) "Seller Transaction Documents" means this Agreement and all
other agreements or documents to be executed by Seller
pursuant to the requirements of this Agreement.
(o) "Transaction Documents" means the Buyer Transaction Documents
and the Seller Transaction Documents, collectively.
(p) "Technology" means all pharmacological, toxicological,
preclinical, clinical, technical and other information, data
and analysis and know-how relating exclusively to the
registration, manufacture, packaging, use, marketing and sale
of the Product (including, without limitation, all words
copyrighted by Seller) and all proprietary rights relating
thereto owned by Seller or its Affiliates or to which Seller
or its Affiliates has rights so as to be able to license,
whether prior to or after the Closing Date, and relating or
pertaining exclusively to the Product. Technology shall also
include all improvements thereto from time to time developed
or otherwise acquired by Seller as to which Seller has rights
so as to be able to license such improvements.
3
<PAGE>
(q) "Territory" means the United States of America and its
territories.
(r) "Trademark" means the trademark "Replens" (Reg. No.
1,591,663).
(s) "Unit" means a single package of the Product, whether a three
count, eight count, tube or other configuration.
2. TRANSFERRED ASSETS. On the Closing Date (as hereinafter defined), Buyer
agrees to acquire from Seller and Seller agrees to convey, transfer and
deliver to Buyer, free and clear of all Encumbrances, the Technology
and Trademarks (the "Transferred Assets"), and fully paid, royalty
free, transferable, perpetual, non-exclusive licenses of the Columbia
Patents and the Design Patents in the Territory, with such licenses to
be exclusive as to the Field (the "CP License" and the "Design
License," respectively) to manufacture, produce, market, modify, sell,
license or otherwise distribute the Product. The Transferred Assets
include, but are not limited to:
(a) All tangible and intangible assets used by Seller exclusively
in
(i) research and development pertaining to the Product;
(ii) the design of the Product and of different versions
and packaging of the Product;
(iii) manufacture and reproduction of the Product and
packaging;
(iv) modification of the Product; and
(v) marketing and distribution of the Product,
including all customer lists, manufacturing and sales contracts and
quotations (including any open customer purchase orders), advertising
and marketing material, including all sales collateral, sampling list,
art work, web-sites, existing and under development, Product samples,
manufacturing molds, trade names, clinical studies, customer
support/inquiry material, historical production records, stability
records, formulation information, records and all other relevant
property.
(b) Ongoing support by Seller of Buyer's activities as discussed
further herein, including without limitation regarding the
following:
(i) assistance during transition after closing, pursuant
to Section 6(a) of this Agreement;
(ii) coordination and sourcing of production of the
Product, pursuant to Section 6(b) of this Agreement;
4
<PAGE>
(iii) potential cross-branding of the Product with Seller's
other products, pursuant to Section 6(d);
(iv) future Product line extensions, pursuant to Section
6(e);
(v) research and development for the Product line,
pursuant to Section 6(e); and
(vi) handling and advice regarding regulatory matters,
pursuant to Section 6(e).
This transaction also includes a transferable, non-exclusive license of
the Replens Patent, with such license to be exclusive as to the Field (the "RP
License") in the Territory to manufacture, produce, market, modify, sell,
license or otherwise distribute the Product, for which Buyer shall pay Seller
the License Fees described in Section 3 below.
It is agreed that except as set out expressly herein, Buyer is not
assuming and shall not be liable for any debt, liability or obligation of Seller
whatsoever, whether existing or contingent, direct or indirect, known or
unknown. Without in any way limiting the generality of the foregoing, Buyer
shall have no obligations with respect to any of the following liabilities:
(vii) Any liabilities of Seller occurring prior to the
Closing Date under contracts, permits or licenses;
(viii) Any liabilities and/or obligations of Seller with
respect to wages and salaries, bonuses, vacation pay,
commissions, overtime, benefits, entitlement to
severance whenever arising or occurring, with respect
to any employees of Seller;
(ix) Any liabilities with respect to injury to or death of
persons or damage to or destruction of property not
constituting part of the Transferred Assets,
including product liability claims and workers
compensation claims arising out of the conduct of
Seller prior to Closing, regardless of when said
liability is asserted, including any liability for
consequential or punitive damages in connection with
the foregoing;
(x) Any liabilities for taxes payable by Seller;
(xi) Any trade or accounts payable, notes payable, loans,
or other indebtedness or
5
<PAGE>
obligations to make payments relating to the
Transferred Assets.
3. CONSIDERATION. In consideration for the Transferred Assets and the
Design License, Seller's express obligations hereunder, including but
not limited to, Seller's obligations set out in Section 6 below, and
any other rights granted to Buyer hereunder, Buyer shall pay to Seller
the sum of $4,400,000 in cash at the Closing (as defined below), less
any Deferred Revenue. In addition, in consideration for the CP License,
Buyer shall pay to Seller the sum of $100,000 in cash at the Closing,
and shall pay Seller, as consideration for the RP License, 10% of the
Net Sales of the Product ("License Fees") from the Closing Date forward
until such time as Buyer has paid Seller a total amount (the cash
consideration paid at Closing and the License Fees paid) of $6,500,000
(calculated on a net present value basis assuming a 10% annual discount
rate). Buyer may, in its sole discretion, pay all or any portion of the
balance of the consideration described above at any time. Buyer shall
pay Seller the License Fees for the first two (2) months within thirty
(30) days after the end of the second month following the Closing, and
thereafter on a monthly basis within thirty (30) days after the close
of each month. Each payment of the percent of Net Sales shall be
accompanied by documentation evidencing the Net Sales for the previous
period. At such time as Buyer shall have paid Seller the full amount of
the consideration described above, Seller shall grant Buyer a
perpetual, fully paid, royalty free, transferrable, non-exclusive
license of the Replens Patents, with such license to be exclusive as to
the Field.
4. CLOSING.
(a) CLOSING DATE. The transaction which is the subject of this Agreement
shall be closed on or before May 5, 2000 ("Closing" and/or "Closing Date"), at
the offices of Bradley & Riley PC, 2007 1st Avenue SE, Cedar Rapids, Iowa 52402,
or at such time and place as the parties shall agree.
(b) DELIVERIES BY SELLER. At the Closing, Seller shall deliver the
Transferred Assets and the CP License to Buyer by a Bill of Sale in the form
acceptable to Seller and Buyer, appropriate assignment(s) of the Trademark, and
any other documents reasonably necessary to complete this transaction.
(c) DELIVERIES BY BUYER. At Closing, Buyer shall deliver to Seller the
cash consideration described in Section 3 above.
5. INVENTORY. In addition to the consideration set out in Section 3 above,
Buyer agrees to purchase from Seller up to $500,000 worth of usable
Product inventory (samples and Product prepared for sale, but excluding
Replens 3) on an as needed basis during the six (6) month period
beginning after the Closing Date. Buyer agrees to purchase from Seller
inventory of the Replens 3 Product on an as needed basis. The Product
inventory to be purchased by Buyer shall be selected by Buyer in its
sole discretion. Initially, Buyer intends to use Seller's current
outsource distribution partner, Redford Distributing, in Redford,
Michigan. Buyer shall be responsible for the distribution/shipping fees
for inventory shipped out of the Redford facility; provided,
6
<PAGE>
however, if, within ninety (90) days after the Closing Date, Buyer
elects to move the Product inventory to a Buyer designated warehouse
for fulfillment, Seller and Buyer each shall bear one-half (1/2) of the
costs of transportation of such Product inventory to such warehouse.
The parties agree to work together in connection with the distribution
and sale of such Inventory because the Inventory lists Seller as the
manufacturer and provides Seller's 800 number for customer support.
Buyer shall pay Seller for the Product inventory purchased within the
first two (2) months after the Closing within thirty (30) days after
the end of such second month following the Closing and thereafter on a
monthly basis within thirty (30) days after the close of each month in
which Buyer purchases Product inventory from Seller.
6. CONDUCT AFTER CLOSING.
(a) From and after the Closing Date, Seller will reasonably make
available to Buyer all staff necessary to support the
transition of the Product and the manufacturing and
distribution of same, with such staff to include, but not be
limited to, the Director of Sales, the Vice President of
Research and Development, the Corporate Controller, and the
Chairman and CEO. The parties anticipate the transition period
will last at least ninety (90) days, and both Buyer and Seller
agree to use their best efforts in the transition.
(b) Seller will continue to coordinate the production of the
Product and act as a centralized sourcing point for same to
insure Buyer does not face capacity restrictions in the
manufacturing of the Product. Seller will designate an
individual with Seller to work with Buyer on all supply
matters. Buyer shall reimburse Seller for its costs of the
Product (bill of materials multiplied by the amount of the
Product, plus necessary freight/transportation charges) in
U.S. dollars promptly upon Buyer's receipt and reasonable
inspection of the Product. Seller will promptly notify Buyer
of any increase in the cost of the Product or the
freight/transportation charges. Seller and Buyer agree to work
together to secure all necessary contracts to protect the
supply of the Product and will work together to explore and
qualify more cost effective methods of manufacture for
producing the Product. Seller will, at Buyer's request,
promote the manufacture of the Product in all facilities that
Seller qualifies for production of its other current and
future gel based products (Advantage S, Crinone, etc.). Seller
will reasonably conduct its remaining business in such a way
as not to interfere with the production of the Product by
Buyer.
7
<PAGE>
(c) Seller shall not sell or license for sale in the Territory any
product in the Field, nor invest in, consult with, or in any
manner assist any other person or entity to do same. Seller
represents that as of the date hereof, it has not entered into
any arrangement that would contravene the intentions of this
paragraph.
(d) As of the Closing, Seller will not use the Trademark in the
Territory on any exterior packaging or tubes or in any other
manner that cross-brands the Product with any other products;
provided, however, Seller may continue to market and sell the
March production run of 100,000 Advantage S boxes and tubes
that contain the Product name and the April production run of
Advantage S with the Product name on the tube only.
Notwithstanding the provisions hereof, at the expiration of
six (6) months from the Closing, Seller shall stop selling all
of its products that contain the Product name, whether on
exterior packaging or on the product itself. At Buyer's
request, Seller shall consider whether to cross-brand the
Product with Seller's other products, on terms reasonably
acceptable to both Buyer and Seller.
(e) Seller intends to work with Buyer on any future Product line
extension and all research and development efforts for the
Product line, at Buyer's request and at Buyer's cost, on terms
and conditions to be agreed upon prior to such efforts. Seller
shall also furnish such additional assistance as Buyer may
reasonably request in connection with any regulatory
compliance regarding the manufacture, marketing or sale of the
Product in the Territory. Seller shall, at Buyer's request and
at Buyer's cost, with respect to such regulatory matters, (i)
act as liaison with the FDA or other governmental authority;
(ii) prepare and make all submissions regarding the regulatory
matter; (iii) monitor all studies pertinent to the regulatory
matter; and (iv) obtain regulatory approvals as reasonably
deemed necessary by Seller and Buyer.
(f) Seller shall be responsible for any returns of the Product
sold and shipped by Seller prior to the Closing Date
("Returns"). Buyer shall be entitled to a credit against the
amount owed for License Fees pursuant to Section 3 above equal
to the gross margin (net wholesale price less cost of goods
sold) on such Returns, or equal to the amount of any refund
paid by Buyer for any returns of
8
<PAGE>
damaged Product. Damaged Product shall include, but is not
limited to, Product with a retailer's inventory or pricing
marking affixed. Notwithstanding the above, if Buyer sells any
damaged Product after receiving a credit for such damaged
Product, Buyer shall pay Seller of the Net Sales of such
damaged Product, less any out-of-pocket expenses incurred by
Buyer in such sale.
(g) To the extent Buyer, in its reasonable judgment, is required
to honor any documented customer commitment, Seller will
promptly reimburse Buyer for such commitment. Buyer shall
provide Seller with all necessary financial records to verify
such commitment. A documented customer commitment shall mean
any written documentation related to financial or
non-financial customer or broker commitments made by Seller
related to the Products. Commitments may include customer or
broker rebates, deductions, credits, allowances, promotional
guarantees, bill backs and SPIFFS. Such documented customer
commitments must clearly indicate that Seller and/or its
representatives agreed to such commitment. If a customer or
broker commitment is undocumented, Buyer and Seller agree to
review such alleged commitment and, subject to Seller's
approval, which approval shall not be unreasonably withheld,
Seller will promptly reimburse Buyer for any commitment Buyer
makes to honor such undocumented customer or broker
commitment.
7. SELLER REPRESENTATIONS AND WARRANTIES. Seller represents and warrants
to Buyer as follows:
(a) Seller 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.
(b) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which
Seller is a party, or Seller's articles of incorporation or
bylaws.
(c) All manufacturing, production, marketing and sales agreements
that are assigned hereby related to the Product are assignable
to Buyer.
9
<PAGE>
(d) This Agreement has been duly executed and delivered by Seller
and is a legal, valid and binding obligation enforceable
against Seller in accordance with its terms.
(e) Seller shall comply with all applicable laws, consent decrees
and regulations of any federal, state or other governmental
authority in performing this Agreement.
(f) Seller knows of no issued or pending patents, trademarks or
patent or trademark applications relating to the Product that
would prevent Buyer from using or selling the Product in the
Territory.
(g) As of the Effective Date, there are no outstanding, pending or
threatened violations, notice of noncompliance, warning
letters, orders, injunctions, judgments 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.
(h) Seller ceased, as of March 13, 2000, all further sales of the
Products to Quality King.
(i) Seller has conducted the sales of the Product consistent with
its past practices and in the ordinary course of business from
January 1, 2000 through the Closing Date.
(j) Seller is the sole and exclusive legal and equitable owner of
the Transferred Assets, the Columbia Patents and the Replens
Patent (and has good title to the tangible Transferred Assets)
free and clear of any Encumbrances, other than certain royalty
or other payments due from Seller to third parties in
connection with the Columbia Patents and/or the Replens
Patent. At Closing, Buyer shall acquire all of Seller's right,
title and interest in the Transferred Assets, free and clear
of all Encumbrances. Except for ordinary wear and tear, the
Transferred Assets are in good operating condition and repair,
free of known defects affecting operation, and are adequate
and fit for the uses for which they are presently intended or
being used. Seller has the right to transfer or license the
Replens Patents, the Bioadhesive Patents and the Intellectual
Property and no consent on the part of any other person
10
<PAGE>
or entity is necessary to validate the transfer to Buyer of
the Transferred Assets or the license to Buyer of the CP
License or the RP License.
(k) All customer lists and all other information, reports and data
made available or provided to Buyer by Seller are, in all
material respects, true, correct and accurate as of the date
provided or made available, as of the date of this Agreement,
and as of the date of Closing. Seller has no knowledge of any
intent of any such customer to modify or terminate its account
or any of its outstanding orders.
(l) There is no action, suit, investigation, claim, arbitration or
litigation pending or, to Seller's knowledge, threatened,
against or involving the Transferred Assets or the propriety
of this Agreement or any of the transactions contemplated
hereby, at law or in equity, or before or by any court,
arbitrator or governmental authority, and Seller is not
operating under or subject to any order, judgment, decree,
license or injunction of any court, arbitrator or governmental
authority. No governmental agency or authority has at any time
challenged, questioned, or commenced or given notice of
intention to commence any investigation relating to, the legal
right of Seller to conduct the operations of its business as
it relates to the Product. Seller, and to Seller's knowledge
each of its contract manufacturers in connection with the
Product, has complied, and is in compliance, in all material
respects with all laws, ordinances, regulations, awards,
orders, judgments, decrees and injunctions applicable to the
Transferred Assets, including all federal, state and local
laws, ordinances, regulations and orders pertaining to
employment or labor, safety, health, environmental protection,
zoning and other matters. Seller has obtained and holds all
permits, licenses and approvals (none of which has been
modified or rescinded and all of which are in full force and
effect) from all governmental authorities as they relate to
the Product necessary in order to conduct its business and
operations as presently conducted as it relates to the Product
and to own, use and maintain the Transferred Assets, and has
paid all regulatory fees and assessments attributable to
Seller's business operations involving the Transferred Assets
that are due or accrue prior to the Closing Date.
(m) All historical sales, costs of goods sold and operating
expenses are substantially accurate and properly
11
<PAGE>
classified on Seller's financial statements and on any other
written information provided to Buyer by Seller in connection
with this transaction.
(n) Seller's inventory of the Product at its outsource
distribution partner's location in Redford, Michigan (other
than its supply of Replens tubes) is sufficient to handle
normal and customary sales of the Product after the Closing
and represents at least a normal and customary three (3) month
supply of the Product.
8. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to Seller as follows:
(a) Buyer is a corporation duly organized, existing and in good
standing under the laws of the State of Iowa, U.S.A., with
full right, power and authority to enter into and perform this
Agreement.
(b) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which
Buyer is a party, or Buyer's articles of organization or
bylaws.
(c) This Agreement has been duly executed and delivered by Buyer
and is a legal, valid and binding obligation enforceable
against Buyer in accordance with its terms.
(d) Buyer shall comply with all applicable laws, consent decrees
and regulations of any federal, state or other governmental
authority in performing this Agreement.
(e) Buyer will actively market and sell the Product in the
Territory, which may include use of samples, national media
marketing plans, co-op advertising, trade shows, etc. Buyer
will also timely provide quarterly sales and other marketing
information usable to Seller in monitoring sales progress.
Buyer will also maintain a qualified national force to
sell/promote the Product.
(f) Buyer has or shall take all corporate action to effectuate the
transactions contemplated by this Agreement and any other
agreement or document executed in connection with this
Agreement.
12
<PAGE>
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All obligations of Buyer
to proceed with the Closing are subject to the fulfillment or waiver of
each of the following conditions at or prior to Closing:
(a) Each and every representation and warranty of Seller shall be
true and correct in all material respects when made and at the
Closing.
(b) Seller shall have performed and complied in all material
respects with all covenants and conditions required by this
Agreement to be performed or complied with by it prior to or
at the Closing.
(c) Any and all Encumbrances against the Transferred Assets shall
have been released and any and all required consents shall
have been obtained.
(d) All items to be delivered by Seller pursuant to Section 4 have
been delivered.
If any of the conditions set forth in this Section 9 have not been fulfilled as
of the Closing, Buyer may, at its option, by written notice to Seller, render
its obligations hereunder null and void. By proceeding with the Closing, and
unless otherwise agreed in writing, Buyer shall be conclusively deemed to have
accepted or waived fulfillment of all of said conditions, but shall not be
deemed to have waived the requirement that the representations and warranties of
Seller shall survive the Closing.
10. COVENANTS AND AGREEMENTS OF SELLER.
(a) NEGATIVE COVENANTS. Seller further represents, covenants and
agrees that it will not do or agree to do any of the following
between the date of this Agreement and the Closing:
(i) Sell, assign, lease or otherwise transfer or dispose
of any of the Transferred Assets.
(ii) Create, incur or permit any Encumbrance of any kind
on the Transferred Assets now owned or hereafter
acquired.
(iii) Enter into, engage in, or become a party to, directly
or indirectly, any transaction with respect to the
Transferred Assets other than in the ordinary course
of business consistent with past practice.
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(iv) Perform or omit to perform any act, which act or
omission would cause Seller's warranties and
representations in this Agreement to be untrue.
(b) AFFIRMATIVE COVENANTS. Seller further represents, covenants
and agrees that between the date of this Agreement and the
Closing it will:
(i) Provide Buyer and its representatives with full
access during normal business hours to all of the
properties, contracts, records, books, and accounts
relating to the Transferred Assets and furnish Buyer
and its representatives with such information
relative to the Transferred Assets as Buyer or its
representatives shall at any time, or from time to
time, reasonably request.
(ii) Maintain its existing franchises and licenses
relating to the Product, use its best efforts to
preserve for Buyer relationships with suppliers,
customers and others having business relations with
Seller relating to the Product, and keep all
Transferred Assets in their present condition,
ordinary wear and tear excepted.
(iii) Maintain its books and records in the usual, regular
and ordinary manner on a basis consistent with prior
years, as they relate to the Product.
(iv) Subject to the terms and conditions of this
Agreement, carry on the businesses and activities as
they relate to the Product in the usual and ordinary
course of business consistent with the past business
practices.
(v) Maintain the validity of all permits and approvals
relating to the Product and comply in all respects
with all laws, rules, regulations and orders of any
Governmental Body relating to the Product.
(vi) Take all corporate action necessary to effectuate the
transactions contemplated by this Agreement and any
other agreement or document executed in connection
with this Agreement.
(vii) Upon receiving notice or otherwise
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becoming aware of any violation under any statutes,
rules, regulations or laws relating to the Product,
promptly notify Buyer and, at Seller's discretion and
expense, cure all such violations prior to the
Closing Date.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of Seller
to proceed with the Closing is subject to the fulfillment or waiver of
each of the following conditions at or prior to Closing:
(a) Each and every representation and warranty of Buyer contained
in the Buyer Transaction Documents shall be true and correct
in all respects when made and at the Closing.
(b) Buyer shall have performed and complied in all material
respects with all covenants and conditions required by this
Agreement to be performed or complied with by it prior to or
at Closing.
(c) No suit or action by any party or any investigation, inquiry
or proceeding by any governmental authority or any legal or
administrative proceeding that would have or be likely to have
a material adverse effect on any of the Transferred Assets or
on the business to be conducted by Buyer with the Transferred
Assets following the Closing shall have been instituted or
threatened on or before the Closing that:
(i) questions the validity or legality of this Agreement
or any transaction contemplated hereby; or
(ii) seeks to enjoin any transaction contemplated hereby;
or
(iii) seeks damages on account of the consummation of any
transaction contemplated hereby.
(d) All items to be delivered by Buyer pursuant to Section 4 have
been delivered.
If any of the conditions set forth in this Section 11 have not been
fulfilled as of the Closing, Seller may, at its option, by written notice to
Buyer, render its obligations hereunder null and void. By proceeding with the
Closing, and unless otherwise agreed in writing, Seller shall be conclusively
deemed to have accepted or waived fulfillment of all of said conditions.
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<PAGE>
12. INDEMNIFICATION.
(a) Seller agrees to indemnify and hold harmless Buyer, its
Affiliates and sublicensees and their respective employees,
agents, officers and directors, successors and assigns, from
and against any claims, losses, liabilities, damages, costs
and expenses (including reasonable attorney fees) incurred by
Buyer, its Affiliates or sublicensees arising out of or in
connection with any (i) breach by Seller of any
representation, warranty, covenant or obligation hereunder,
(ii) act or omission on the part of Seller or any of its
employees or agents in the performance of this Agreement,
(iii) payments, commissions or fees of any kind due to
consultants or brokers retained by Seller relating to the
Product, and (iv) claim or demand of any kind for injury to a
person or property arising from Seller'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 changes
in such manufacturing, packaging or labeling conducted by or
at the direction of Buyer after Closing.
(b) Buyer agrees to indemnify and hold harmless Seller and its
Affiliates and their respective employees, agents, officers
and directors from and against any claims, losses,
liabilities, damages, costs and expenses (including reasonable
attorney fees) incurred by Seller or its Affiliates arising
out of or in connection with any (A) breach by Buyer of any
representation, warranty, covenant or obligation hereunder,
(B) claim or demand of any kind for injury to person or
property arising from Buyer's, its Affiliates' or
sublicensee's manufacture, 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
Seller, its Affiliates, their employees, agents or contract
manufacturers, (C) act or omission on the part of Buyer 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 Buyer, its Affiliates or
sublicensees and used in connection with the sale of the
Product hereunder, and (E) payments, commissions or fees
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<PAGE>
of any kind due to consultants or brokers retained by Buyer
relating to the Product.
(c) A party seeking indemnification under this Section 12 (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.
(d) 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 Ten Million Dollars
($10,000,000) per annum combined single limit for Bodily
Injury and Property Damage, to be increased as appropriate,
consistent with prudent business practices prevailing in the
business. 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.
(e) The representations and warranties of Seller and Buyer
hereunder and their indemnification obligations shall survive
the Closing.
13. RISK OF LOSS. The risk of loss or damage by fire or other casualty or
cause to the Product inventory and any tangible assets included as part
of the Transferred Assets until the Closing Date shall be upon Seller.
In the event of such loss or damage prior to the Closing Date, Seller
shall promptly restore, replace or repair the damaged Product inventory
and/or tangible assets included as part of the Transferred Assets to
their previous condition at Seller's sole cost and expense. If such
loss or damage shall not be restored, replaced or repaired as of the
Closing Date, Buyer shall, at its option, either:
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<PAGE>
(a) Proceed with the Closing and receive all insurance proceeds to
which Seller would be entitled as a result of such loss or
damage; provided, however, that if such proceeds do not equal
the loss, Seller shall pay the deficiency to Buyer; or
(b) Defer the Closing Date until such restorations, replacements
or repairs are made (provided that no such deferral shall
affect the rights of the parties hereto to terminate this
Agreement pursuant to the provisions of Section 14).
14. TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of the parties hereto; or
(b) any party hereto:
(i) upon a material breach of this Agreement by the other
party hereto;
(ii) if a court of competent jurisdiction or governmental
authority shall have issued an order, decree or
ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best
efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have
become final and nonappealable; or
(iii) if the Closing shall not have occurred on or before
May 15, 2000; provided, however, that the right to
terminate this Agreement shall not be available to
any party whose breach of this Agreement has been the
cause of, or resulted in, the failure of the
transactions contemplated herein to occur on or
before such date.
15. REMEDIES.
(a) DEFAULT BY BUYER. If Buyer shall default in the performance of
its obligations under this Agreement in any material respect
or if, as a result of Buyer's action or failure to act, the
conditions precedent to Seller's
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<PAGE>
obligation to close specified in Section 11 are not satisfied,
and for such reason or reasons this Agreement is not
consummated, and provided that Seller shall not then be in
default in any material respect in the performance of Seller's
obligations hereunder, Seller shall be entitled, by written
notice to Buyer, to terminate this Agreement, and to pursue
any other remedies Seller has at law or in equity or
otherwise.
(b) DEFAULT BY SELLER. If Seller shall default in the performance
of its obligations under this Agreement in any material
respect, or if, as a result of Seller's action or failure to
act, the conditions precedent to Buyer's obligation to close
specified in Section 9 are not satisfied, and for such reason
or reasons this Agreement is not consummated, and provided
that Buyer shall not then be in default in any material
respect in the performance of Buyer's obligations hereunder,
Buyer shall be entitled by written notice to Seller, to
terminate this Agreement, and to pursue any other remedies
Buyer has at law or in equity or otherwise.
16. SPECIFIC PERFORMANCE. The parties acknowledge that the Transferred
Assets to be delivered pursuant to this Agreement are unique and that
no party hereto has an adequate remedy at law if the other party shall
fail to perform any of its obligations hereunder, and all parties
hereto therefore confirm and agree that the right of specific
performance is essential to protect the rights and interests.
Accordingly, in addition to any other remedies that any party hereto
may have hereunder or at law or in equity or otherwise, the parties
hereto hereby agree that Seller and Buyer shall each have the right to
have all obligations, undertakings, agreements and other provisions of
this Agreement specifically performed by the other and that each of
them shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States or of any state
or other political subdivision thereof.
17. BROKERS. Seller shall be solely responsible for any brokerage fees,
finders' fees, commissions or otherwise payable to any broker, finder
or agent engaged by Seller in connection with the transactions
contemplated by this Agreement. Buyer shall be solely responsible for
any brokerage fees, finders' fees, commissions or otherwise payable to,
any broker, finder or agent engaged by Buyer in connection with the
transactions contemplated by this Agreement. Seller agrees to indemnify
Buyer, and Buyer agrees to indemnify Seller, against any claims
asserted against the other party for any fees or commissions due such
person. Notwithstanding any other provision of this Agreement, this
provision shall survive the Closing without limitation.
18. ARBITRATION.
(a) ARBITRATION. With the exception of any action for
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specific performance pursuant to Section 16, in the event of
any dispute (a "Dispute") between the parties hereto
subsequent to Closing with respect to the breach,
interpretation or enforcement of this Agreement, such dispute
shall be resolved by binding arbitration in accordance with
the commercial arbitration rules of the American Arbitration
Association ("AAA"). Notwithstanding the foregoing, the
parties intend to depart from the AAA commercial arbitration
rules to the extent any of the following provisions conflict
with such rules.
(b) PANEL. Any arbitration shall take place before a panel of
three (3) arbitrators (the "Panel"). The Panel shall be
selected in accordance with the AAA's procedures for selecting
an arbitration Panel, provided, that the Panel shall include
one certified public accountant and one transactional lawyer,
each of whom shall have had at least ten (10) years experience
in his or her respective field, and at least three (3) years
of arbitration experience. If any arbitrator on the Panel
neglects or refuses to act or is or becomes incapable of
acting, or dies before the Panel shall have made its award,
and the parties fail to agree or concur in the appointment of
another arbitrator, either party may serve on the other a
notice in writing requiring him to agree and concur in the
appointment of another arbitrator, and if such appointment is
not made within twenty (20) days from the service of said
notice, then the remaining arbitrators shall have power on the
request in writing of either party to appoint another
arbitrator who shall have the like authority to act in the
arbitration and make an award and the like powers in all
respects as if he had been appointed by the parties.
(c) BINDING EFFECT. Each of the parties agrees that the decision
of the Panel shall be final and binding on the parties hereto
and, provided diversity or other federal jurisdiction exists,
the parties hereby consent to the entry of final judgment
thereon in the United States District Court for the Southern
District of New York, and to the issuance of execution on the
judgment. The award may be appealed only to the court in which
judgment on the award is required to be entered and only to
the extent the award contains material errors of applicable
law, is arbitrary or capricious, or was fraudulently obtained.
If the parties cannot meet the applicable requirements for
federal jurisdiction, the parties agree to the entry of
judgment in the State Court of New York, and to the issuance
of
20
<PAGE>
execution on such judgment. The parties hereto hereby consent
to the jurisdiction of such court (i.e., such federal court,
or, in the event federal jurisdiction does not exist, such
state court) in reference to any matter arising out of the
arbitration or this Agreement including but not limited to
confirmation of any arbitration award and enforcement thereof
by entry of judgment thereon or by any other legal remedy. As
to any Dispute which under the terms hereof is made subject to
arbitration, no suit at law or in equity based on such Dispute
shall be instituted by either party hereto other than to
enforce the award of the Panel. If any controversy shall arise
after the award as to whether the award or any part thereof
has been complied with, such controversy shall be determined
by the same Panel.
(d) EVIDENCE. The Panel shall not be bound by strict rules of
evidence and may give such right to evidence as may seem right
and proper to it. The Panel shall schedule a pre-hearing
conference to resolve procedural matters, arrange for the
exchange of information, obtain stipulations, and narrow the
issues. The parties will submit proposed discovery schedules
to the Panel at the pre- hearing conference. The scope and
duration of discovery will be within the sole discretion of
the Panel. Unresolved discovery disputes may be brought to the
attention of the chair of the arbitration panel and may be
disposed of by the chair of the panel. The Panel shall have
the discretion to order a pre-hearing exchange of information
by the parties, including, without limitation, production of
requested documents, exchange of summaries of testimony of
proposed witnesses, and examination by deposition of parties
and third-party witnesses. This discretion shall be exercised
in favor of discovery reasonable under the circumstances. The
arbitration shall be conducted in New York, New York. Any
party may be represented by counsel or other authorized
representative. In rendering a decision(s), the Panel shall
determine the rights and obligations of the parties according
to the substantive and procedural laws of New York and the
terms and provisions of this Agreement. The Panel's decision
shall be based on the evidence introduced at the hearing,
including all logical and reasonable inferences therefrom. The
Arbitrator may make any determination, and/or grant any remedy
or relief that is just and equitable, subject to the express
provisions of this Agreement. The Panel shall have power to
award and direct that the parties or any of them shall execute
such releases, conveyances,
21
<PAGE>
assurances, and do things as the Panel shall think fit and
such releases, conveyances, assurances and things shall be
executed and done accordingly. The Panel shall have the
authority to proceed ex parte in case of the nonattendance of
either of the parties or of their witnesses after thirty (30)
days prior notice in writing by the Panel given to the parties
respectively or their respective attorneys or agents notifying
the time and place of meeting to proceed with the reference.
Any provisional remedy that would be available from a court of
law shall be available from the arbitrator to the parties to
this Agreement pending arbitration.
(e) WAIVER OF CONSEQUENTIAL DAMAGES. The Panel shall have no
authority to award consequential damages, punitive damages,
and all other damages not measured by the prevailing party's
actual damages, and each party hereby waives all claims to
same. The Panel may not in any event make any ruling, finding
or award that does not conform to the terms and conditions of
the Agreement. Liabilities for Taxes are direct damages.
(f) DISCLOSURE. Except to the extent disclosure, filing, reporting
or announcement thereof is required by law, including by any
rules or regulations of any applicable governmental,
regulatory or stock exchange agency or authority, neither a
party nor an arbitrator may disclose the existence, content or
results of any arbitration hereunder without the prior written
consent of both parties, except to the extent that the
recordation of a final judgment causes such matters to become
public.
19. AUDITS. Until the full amount of the consideration set out in Section 3
above is paid to Seller, Buyer shall keep accurate records of all
Product sales and other relevant data concerning the Product, and Buyer
shall provide Seller reports thereof within thirty (30) days after the
end of each quarter. Such reports shall state the number of Units of
Product sold by Buyer, its Affiliates or sublicensees, if any, during
the applicable period, as well as the number of free samples of the
Product distributed and any Product returns made during such calendar
quarter, together with an accounting of Net Sales with respect to such
calendar quarter. Once a year, upon reasonable notice, at times
mutually agreed upon and during business hours, Seller, at Seller's
cost, may have the accounts of Buyer, its Affiliates or sublicensees
for the preceding two (2) calendar years relating to the Product
reviewed by an independent certified public accountant appointed by
Seller and reasonably approved by Buyer, solely in order to verify
amounts due under this Agreement. Seller and Buyer shall mutually
determine a general strategy for such auditing in advance of its
conduct. Such accountant shall not disclose to Seller any
22
<PAGE>
information except that which should properly be contained in a report
required under this Agreement. Buyer shall promptly pay any
underpayment evidenced by such audit, and Seller shall promptly refund
any overpayment evidenced by such audit. If an audit evidences an
underpayment of more than five percent (5%) with respect to the amounts
actually paid, Buyer shall promptly pay such underpayment to Seller
with interest at the prime rate as set by Citibank, from the time when
such underpayment occurred, and shall reimburse Seller for the
reasonable costs and expenses (including fees) of such audit.
20. RIGHT OF FIRST REFUSAL. Seller hereby grants Buyer a right of first
refusal to purchase or license the Product for sale in other
territories as such territories become available if such purchase or
license requires only one total payment at the closing of such purchase
or license. In all other cases, Seller hereby grants Buyer a right of
first refusal to purchase or license the Product for sale in
territories within NAFTA subject to Buyer providing evidence reasonably
acceptable to Seller that Buyer can adequately market and sell the
Product in the applicable territory or territories.
21. MISCELLANEOUS.
(a) NOTICES FROM BUYER. Any notices from Buyer to Seller hereunder
shall be deemed sufficiently given upon delivery (with the
return receipt, the delivery receipt, or the affidavit of
messenger), refusal by addressee or notice to Buyer from the
Post Office that such notice is undeliverable, if such notice
has been mailed by United States registered or certified mail,
postage prepaid, delivered by overnight courier or transmitted
by facsimile transmission addressed to:
Columbia Laboratories, Inc.
William J. Bologna, Chairman
2875 N.E. 191 St., Suite 400
Aventura, Florida 33180
with a copy (which shall not be deemed notice) to:
Lyon & Lyon, LLP
Scott H. Blackman
1701 Pennsylvania Avenue NW, Suite 1040
Washington, DC 20006
or at such other address or addresses as Seller may from time to time specify by
notice in writing to Buyer, given in the manner provided in this Section.
(b) NOTICES FROM SELLER. Any notice from Seller to Buyer under
this Agreement shall be deemed sufficiently given upon
delivery (with the return receipt, the delivery receipt, or
the affidavit of messenger), refusal by addressee or notice to
Seller from the Post Office that such notice is
23
<PAGE>
undeliverable, if such notice has been mailed by United States
registered or certified mail, postage prepaid, delivered by
overnight courier or transmitted by facsimile transmission
addressed to:
Lil' Drug Store Products, Inc.
Chris DeWolf
1201 Continental Place NE
Cedar Rapids, IA 52402
with a copy (which shall not be deemed notice) to:
Bradley & Riley PC
Bradley G. Hart
2007 1st Avenue SE
PO Box 2804
Cedar Rapids, IA 52406-2804
or at such other address or addresses as Buyer may from time to time specify by
notice in writing to Seller, giving in the manner provided in this Section.
(c) WAIVER; SEVERABILITY. No delay or failure on the part of any
party hereto in exercising any right, power or privilege under
any of the Transaction Documents or under any other instrument
or document given in connection with or pursuant thereto shall
impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single
or partial exercise of any such right, power or privilege
shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto
unless made in writing and signed by the party against whom
enforcement of such waiver is sought and then only to the
extent expressly specified therein. The unenforceability or
invalidity of any provision of any of the Transfer Documents
shall not affect the enforceability or validity of any other
provision.
(d) BENEFIT AND ASSIGNMENT. No party hereto shall assign this
Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of the other
party hereto, and any purported assignment contrary to the
terms hereof shall be null, void and of no force and effect.
(e) CONFIDENTIALITY. Except to the extent disclosure, filing,
reporting or announcement of this Agreement is
24
<PAGE>
required by law, including by any rules or regulations of any
applicable governmental, regulatory or stock exchange agency
or authority, the existence and substance of this Agreement
shall remain confidential for a period of ten (10) days
following the date hereof. If the transaction that is the
subject of this Agreement is not consummated, Buyer agrees
that it will return to Seller, and Seller agrees that it will
return to Buyer, all records and other documents of the other
then in that party's possession and will not itself use, or
disclose, directly or indirectly, to any person any
Confidential information with respect to the other party or
the business learned by that party during the period between
the date hereof and termination of this Agreement. The term
"Confidential Information" as used herein means all
information of a business or technical nature, including, but
not limited to, all patents and technology, relevant to each
party's business that is not publically known. The foregoing
provisions shall survive the Closing or any termination of
this Agreement without limitation.
(f) ENTIRE AGREEMENT. Any schedules and exhibits attached to this
Agreement are incorporated herein by reference. This Agreement
sets forth the entire understanding of the parties with
respect to the subject matter hereto, supersedes all prior
oral or written agreements, instruments and understandings
with respect to such matters, and may be modified only by
instruments signed by Seller and Buyer.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and
the same instrument.
(h) EXPENSES. Seller and Buyer shall each pay its own legal and
accounting costs and other expenses incurred in negotiating
and preparing this Agreement and in closing and carrying out
the transactions contemplated by this Agreement.
(i) GOVERNING LAW. This Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating
hereto, shall be construed and governed in accordance with the
laws of the State of New York, excluding the choice of law
rules thereof.
(j) HEADINGS. The subject headings of Sections of this
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Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of
its provisions.
(k) FURTHER ASSURANCES. Each party hereto shall cooperate, shall
take such further action and shall execute and deliver such
further documents at any time prior to at or after the Closing
as may be reasonably requested by any other party in order to
carry out the provisions and purposes of this Agreement,
including but not limited to the endorsement of checks
received after Closing in payment of the receivables being
purchased by Buyer.
(l) RELEASE OF INFORMATION. Neither party shall disclose any of
the terms of the transactions contemplated by this Agreement,
except as may be required by law, and the contents of any
press releases concerning the transactions contemplated by
this Agreement shall be determined by mutual agreement of the
parties. The foregoing provisions shall survive the Closing or
any termination of this Agreement without limitation.
(m) FACSIMILE SIGNATURES. For purposes of executing this
Agreement, a facsimile signature shall be deemed as effective
as an actual signature.
(n) REMEDIES CUMULATIVE. Except as specifically provided herein,
the remedies provided herein shall be cumulative and shall not
preclude the assertion by Seller or by Buyer of any other
rights or the seeking of any other remedies against the other
parties, or their successors or assigns.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement effective as of the date first above written.
COLUMBIA LABORATORIES, INC.
By:/S/ WILLIAM J. BOLOGNA
-------------------------------
William J. Bologna, Chairman of the Board
LIL' DRUG STORE PRODUCTS, INC.
By:/S/ DENNIS L. OLDORF
-------------------------------
Dennis L. Oldorf, Chairman of the Board
26
LICENSE AGREEMENT
This License Agreement (the "Agreement") is made and entered into as of
this 18th day of April, 2000 by and between Columbia Laboratories, Inc., a
Delaware corporation having its principal place of business at 2875 N.E. 191
St., Suite 400, Aventura, Florida 33180 ("Licensor"), and Lil' Drug Store
Products, Inc., an Iowa corporation with its principal place of business at 1201
Continental Place NE, Cedar Rapids, Iowa 52402 ("Licensee");
WITNESSETH:
WHEREAS, Licensor is the owner 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 to
the Technology, Patents and the Trademarks for the manufacture, use and sale of
the Products (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 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) "cGMP" shall mean current good manufacturing practice
regulations promulgated by the FDA and other regulatory
agencies.
(c) "Confidential Information" shall mean all information and/or
technical data that is disclosed by one party hereto to the
other party hereto pursuant to this
<PAGE>
Agreement, whether written or oral, that the disclosing party
treats as confidential and identifies as such (by marking
written information "Confidential" and if oral, by promptly
reducing it to writing and marking it "Confidential"), 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 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 or of any other
confidentiality obligation owed to the disclosing party, (iii)
information that 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 that 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.
(d) "Effective Date" shall mean the date May 5, 2000.
(e) "Field" shall mean the present formulations of Vaporizer in a
Bottle(R) brand cough and cold product, Advanced Formula
Legatrin P.M.(R) brand sleep-aid analgesic and Legatrin GCM(R)
brand nutritional, and their generic equivalents.
(f) "Intellectual Property Rights" shall mean trade secrets,
trademarks, trade names, logos, trade dress, graphics,
designs, patents, copyrights or other proprietary rights used
by Licensor in connection with the Products.
(g) "Net Sales" shall mean the aggregate equivalent of gross sales
received by Licensee, its Affiliates or sublicensees from or
on account of the sale of the Products to non-affiliated third
parties on which payments are due under this Agreement, less
(i) credits or allowances, if any, actually granted on account
of cash or trade discounts, recalls, rebates, rejection or
return of the Products previously sold, and (ii) excises,
sales taxes, value added taxes, consumptions taxes, duties or
other taxes imposed upon and paid with respect to such sales
(excluding income or franchise taxes of any kind). Net Sales
shall not include any transfer between Licensee and any of its
Affiliates or sublicensees for resale. No transfer of the
Products for test or development purposes or as free samples
shall be considered a sale
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<PAGE>
hereunder for accounting and payment purposes. Net Sales shall
be determined in accordance with generally accepted accounting
principles ("GAAP").
(h) "Patents" shall mean the patents filed in the Territory owned
by the Licensor or its Affiliates or with respect to which
Licensor or its Affiliates 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 Products
within the Territory, i.e. U.S. Patent No. 4,742,960.
(i) "Products" shall mean the current formulations of Advanced
Formula Legatrin P.M./Registered trademark/ brand sleep-aid
analgesic, Legatrin GCM/Registered trademark/ brand
nutritional, and Vaporizer in a Bottle/Registered trademark/
brand cough and cold product, and any and all improvements,
reformulations or advances to the existing formulations.
(j) "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
Products (including, without limitation, all words 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 Products.
(k) "Territory" shall mean the United States of America and its
territories.
(l) "Trademarks" shall mean the United States trademarks "Advanced
Formula Legatrin P.M." (Reg. No. 1,973,493), "Legatrin GCM"
(Serial No. 75/793300), "Vaporizer in a Bottle" (Reg. No.
1,000,400), and any variations thereof.
(m) "Unit" shall mean a single item package of any of the
Products.
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, only to manufacture, produce, market,
distribute, use and sell the Products in the Territory;
provided, however that Licensee will only
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sublicense the Products with Licensor's prior written
approval, which approval shall not be unreasonably withheld.
(b) Licensor grants to Licensee, and Licensee accepts from
Licensor, on the terms and conditions contained herein an
exclusive right and license, with the right to sublicense, to
use the Trademarks in the manufacture, distribution,
advertising, marketing, use and sale of the Products (and any
line extension to the Products as to which Licensee has
obtained Licensor's prior written consent, not to be
unreasonably withheld) only in the Territory. Neither Licensor
or Licensee shall use, nor permit any of its Affiliates or
other licensees to use, the Trademarks or any similar marks on
any other product marketed, used or sold in the Territory
without the prior written consent of the other party hereto.
Licensee shall not use, nor permit any of its Affiliates or
any other licensees to use, the Trademarks or any similar
marks outside the Territory.
(c) Licensee may at any time request from Licensor, and Licensor
agrees to grant directly to any party in 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 to Licensor than those
contained in this Agreement and shall be similar to the terms
and conditions contained in this Agreement. Such licenses and
agreements, and the party to whom they are granted, must be
approved by Licensor, which approval shall not be unreasonably
withheld.
(d) To the extent reasonable and necessary for Licensee to fulfill
its obligations hereunder, Licensor shall transfer or grant
Licensee the rights to use Licensor's art work, customer
lists, records, web-sites, contracts, advertising/media
schedules in connection with the manufacturing, production,
use or sale of the Products in the Territory.
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<PAGE>
3. LICENSE FEES. In consideration of the license and other rights granted
to Licensee hereunder, Licensee shall pay to Licensor twenty percent
(20%) of the Net Sales of the Products during the term hereof, with
such fees to be paid to Licensor within (thirty) 30 days after the end
of the second month following the Effective Date, and thereafter on a
monthly basis within thirty (30) days after the close of each month.
Each payment of license fee shall be accompanied by documentation
evidencing the Net Sales for the previous period.
4. MANUFACTURE AND DISTRIBUTION.
(a) Licensor shall assign all contracts or agreements with
suppliers, wholesalers, manufacturers, distributors and
retailers in connection with the manufacture, production, sale
and distribution exclusively of the Products during the term
hereof (including any open customer purchase orders), and
Licensee shall assume responsibility for the same. In
addition, Licensor shall transfer, assign or license to
Licensee all necessary rights to the Products, Intellectual
Property and Technology reasonably necessary for Licensee to
assume such responsibility; provided, however, in no event
shall Licensee be responsible for any royalty, license or
other similar fees or payments to third parties required in
connection with the rights to the Products, Intellectual
Property or Technology. Licensor shall reasonably make
available to Licensee all staff necessary to facilitate the
transition of the manufacturing and production of the
Products, with such staff to include, but not be limited to,
the Director of Sales, the Vice President of Research and
Development, the Corporate Controller, and the Chairman and
CEO. The transition period is anticipated to last sixty (60)
days. Licensee and Licensor each agree to use their
commercially reasonable best efforts to facilitate the
transition.
(b) During the term of the Agreement, Licensor shall not sell or
license for sale in the Territory any product in the Field.
Licensor represents that as of the Effective Date it has not
entered into any arrangement that would contravene the
intentions of this paragraph.
(c) As may be required for regulatory purposes, Licensee grants
Licensor the right to refer to, and shall cause its contract
supplier to grant to Licensor access to,
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<PAGE>
contract supplier's master file relating to the Products and
undertakes to notify Licensor and provide Licensor with
details of any changes to said master file or other filings by
the contract supplier with the regulatory authorities relative
to the Products. Licensee shall obtain Licensor's consent
before it or its contract supplier makes any material change
in any manufacturing process for the Products, which consent
shall not be unreasonably withheld.
(d) Upon reasonable prior written notice given by Licensor to
Licensee, Licensee shall permit and shall cause its contract
supplier to permit representatives of Licensor or designees of
Licensor acceptable to Licensee 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 Products and annual cGMP audits provided that
such representatives or designees of Licensor shall conduct
such inspections in a manner that shall reasonably cause the
least possible interruption to Licensee'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 Licensee and/or the contract supplier's granting to
Licensor access to information in its possession relevant to
determining whether cGMP and Licensor's quality standards in
effect as of the Effective Date are being met and are likely
to be met with respect to manufacture of the Products.
(e) Personnel of Licensor or Licensor's designee shall be entitled
to witness the manufacturing of test batches, scale-up batches
and full-size production batches.
(f) All Products 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, as reasonably determined by
Licensor. Such Products shall also not be adulterated or
misbranded within the meaning of the U.S. Food, Drug and
Cosmetic Act, as amended.
(g) Licensor agrees that the manufacturers and manufacturing
processes currently used by Licensor in the manufacture of the
Products, if continued by Licensee, shall meet all of the
requirements set out in this Section 4.
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<PAGE>
(h) Licensee shall have the right to purchase from Licensor the
Product inventory (samples and Product prepared for sale) on
an as needed basis for a six month period beginning after the
Effective Date. The Product inventory to be purchased by
Licensee shall be selected by Licensee in its sole discretion.
Initially, Licensee intends to use Licensor's current
outsource distribution partner, Redford Distributing in
Redford, Michigan. Licensee shall be responsible for the
distribution/shipping fees for inventory shipped out of the
Redford facility; provided, however, if, within ninety (90)
days after the Effective Date, Licensee elects to move the
Product inventory to a Licensee designated warehouse for
fulfillment, Licensor and Licensee shall each bear one-half
(1/2) the costs of transportation of such Product inventory to
such warehouse. The parties agree to work together in
connection with the distribution and sale of such inventory
because the inventory lists Licensor as the manufacturer.
Licensee shall pay Licensor for the Product inventory
purchased within the first two months after the Effective Date
within thirty (30) days after the end of such second month
following the Effective Date and thereafter on a monthly basis
within thirty (30) days after the close of each month in which
Licensee purchases Product inventory from Licensor.
5. RETURNS AND CUSTOMER COMMITMENTS. Licensor shall be responsible for any
returns of Products sold and shipped by Licensor prior to the Effective
Date ("Returns"). Licensee shall be entitled to a credit against the
next license fees due hereunder for Returns as follows: (i) a credit
equal to the gross margin (net wholesale price less cost of goods sold)
on such Returns; or (ii) a credit equal to the amount of any refund
paid by Licensee for any Returns of expired or damaged Products.
Expired Products shall mean Units of (i) Legatrin P.M. that have twelve
(12) months or less before their expiration date; (ii) Legatrin GCM
that have eighteen (18) months or less before their expiration date;
and (iii) Vaporizer in a Bottle that have less than twenty-four (24)
months or less before their expiration date. Damaged Products shall
include, but are not limited to, those Products with a retailer's
inventory or pricing marking affixed. Notwithstanding the above, if
Licensee sells any expired Product after receiving a credit for such
returned Product, Licensee shall pay Licensor the Net Sales of such
returned Product, less any out-of-pocket expenses incurred by Licensee
in such sale.
To the extent Licensee, in its reasonable judgment, is required to
honor any documented customer commitment, Licensor will promptly reimburse
Licensee for such commitment. Licensee shall provide Licensor with all necessary
financial records to verify such commitment. A documented customer commitment
shall mean any written documentation related to financial or non-financial
customer or broker commitments made by Licensor related to the Products.
Commitments may include customer or broker rebates, deductions, credits,
allowances, promotional guarantees, bill backs and SPIFFS. Such documented
customer commitments must clearly indicate that Licensor and/or its
representatives agreed to such commitment. If a customer or broker commitment is
undocumented, Licensee and Licensor agree to review such alleged commitment and,
subject to Licensor's approval, which approval shall not be unreasonably
withheld, Licensor will promptly reimburse Licensee for any commitment Licensee
makes to honor such undocumented customer or broker commitment.
-7-
<PAGE>
6. MARKETING.
(a) Licensee will be responsible for actively marketing and
selling the Products (Vaporizer in a Bottle/Registered
trademark/ brand cough and cold product and Advanced Formula
Legatrin P.M./Registered trademark/ brand sleep-aid analgesic
only) in the Territory, which may include use of samples,
national media marketing plans, coop advertising, trade shows,
etc., and Licensor may, at its option, participate in or
support such marketing efforts. Licensee will use reasonable
efforts to market and sell Legatrin GCM/Registered trademark/
brand nutritional.
(b) Licensee will timely provide quarterly sales and other
marketing information useful to Licensor in monitoring sales
progress.
(c) Licensor shall notify Licensee prior to Licensor communicating
with any regulatory authorities with respect to the Products.
Licensee shall promptly disclose and refer to Licensor any
regulatory action or inquiry concerning the Products.
(d) Licensee will maintain a qualified, national sales force to
sell/promote the Product.
7. MAINTENANCE OF PATENTS AND TRADEMARKS.
(a) Licensor and Licensee expressly acknowledge that Licensor does
not intend to further develop the Patents, Trademarks or
Technology for the Products. However, Licensor shall keep
Licensee currently advised of the status of the Patents, the
Trademarks and/or Technology. Licensor shall bear all costs
for the maintenance of the Patents and Trademarks. If Licensor
fails to carry out such obligations set forth in this Section
7, Licensee may, in its sole discretion, carry out such
maintenance on Licensor's behalf and may set off such cost
against amounts due to Licensor hereunder, provided that such
action by Licensee is commercially reasonable.
(b) Trademark Use and Quality Control
(i) Licensee agrees to use the Trademarks in accordance
with good customary trademark practice, and to avoid
taking any action that would
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<PAGE>
in any manner impair or detract from the value of the
Trademarks, or the goodwill and reputation of
Licensor; provided, however, Licensee may modify
and/or redesign the labels and other packaging of the
Products with Licensor's prior written approval,
which approval shall not be unreasonably withheld.
Licensee acknowledges Licensor's ownership of the
Trademarks and related goodwill.
(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 or allow use of 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.
8. 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
that may come to their attention. Licensor shall promptly
undertake, at Licensor's expense, commercially 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 or as may be reasonably requested by Licensor to protect
its interests.
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<PAGE>
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 the balance of any sums received,
obtained, collected or recovered, whether by judgment,
settlement or otherwise as a result of such suit, shall be
paid to Licensor and/or Licensee to cover their respective
damages, with any balance to be divided 50% to Licensee and
50% to Licensor; 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 the Products 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 promptly
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.
9. 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 Products of any intellectual property rights of a third
party.
(b) In no event shall either party settle any such allegation of
infringement without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed.
If any such settlement requires Licensee to make royalty or
other payments to a third party in order for Licensee to make,
have made, use
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<PAGE>
or sell or to continue making, having made, using or selling
the Products in the Territory, Licensee shall be entitled to
offset such amounts so paid to any third party against any
amounts that may thereafter become due to Licensor under this
Agreement.
10. 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 effects (consistent with those 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 Products 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 Products pursuant to this Agreement, provided
such individual is bound by a confidentiality obligation comparable to
the obligation set forth in this Section 10. The obligations of the
parties hereto under this Section 10 shall survive the expiration or
termination of this Agreement.
11. 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 Delaware, 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) All manufacturing, production, marketing and sales
agreements that are assigned hereby related to the
Products, are assignable to Licensee.
(iv) This Agreement has been duly executed and delivered
by Licensor and is a legal, valid and
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binding obligation enforceable against Licensor in
accordance with its terms.
(v) Licensor shall comply with all applicable laws,
consent decrees and regulations of any federal, state
or other governmental authority in performing this
Agreement.
(vi) As of the Effective Date, Licensor knows of no issued
or pending patents, trademarks or patent or trademark
applications relating to the Products that would
prevent Licensee from using or selling the Products
in the Territory.
(vii) 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 Products in the
Territory.
(viii) As of the Effective Date, there are no outstanding,
pending or threatened violations, notice of
noncompliance, warning letters, orders, injunctions,
judgments 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 Products in the Territory.
(ix) Licensor ceased, as of March 13, 2000, all further
sales of the Products to Quality King.
(x) Licensor has conducted the sales of the Products
consistent with its past practices and in the
ordinary course of business from January 1, 2000
through the Effective Date.
(xi) All contracts relating to the Products, the
Intellectual Property Rights and the Technology, as
they relate exclusively to the Products, including
all manufacturing, production, marketing and sales
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agreements related thereto, are assignable to
Licensee.
(xii) All historical sales, costs of goods sold and
operating expenses in connection with the Products
are substantially accurate and properly classified on
Licensor's financial statements and on any other
written information provided by Licensor to Licensee
in connection with this Agreement.
(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 the State of
Iowa, U.S.A., 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
attorney 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) act
or omission on the part of
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Licensor or any of its employees or agents in the
performance of this Agreement, (C) claim or demand of
any kind or injury to a person or property arising
from Licensor's or its contractor manufacturer's
manufacturing, packaging or labeling of the Products;
provided, that this indemnification shall not apply
to the extent that such claim or demand has resulted
from changes in such manufacturing, packaging or
labeling conducted by or at the direction of Licensee
after Closing, and (D) payments, commissions or fees
of any kind due to consultants or brokers retained by
Licensor relating to the Products.
(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 attorney
fees) incurred by Licensor or 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 sublicensee's
manufacture, marketing, distribution and sale of the
Products, 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 Products 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 Products
hereunder, and (E) payments, commissions or fees of
any kind due to consultants or brokers retained by
Licensee relating to the Products.
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(iii) A party seeking indemnification under this paragraph
11(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 Ten Million Dollars
($10,000,000) per annum combined single limit for
Bodily Injury and Property Damage, to be increased as
appropriate, consistent with prudent business
practices prevailing in the business. 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.
12. TERM OF LICENSE. Except as otherwise provided for herein, the term of
the Agreement shall be for five (5) years from the Effective Date, and
shall automatically renew for additional five (5) year periods unless
either party provides the other with
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written notice of its intent not to renew this Agreement at least
ninety (90) days prior to the expiration of the then current term.
13. 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 13(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 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
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(iv) by the entry of an order by a court of competent
jurisdiction finding it to be bankrupt or insolvent,
or during 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 with ninety
(90) days written notice to Licensor if the Products are not a
commercial success, as determined by Licensee in its sole
discretion, or for reasons of safety or efficacy of the
Products.
(e) Licensor may terminate this Agreement at any time with ninety
(90) days written notice to Licensee if Licensee fails to meet
its marketing obligations set out in Section 6 above.
(f) The failure by a party to exercise its rights to terminate
this Agreement pursuant to this Section 13 in the event of any
occurrence giving rise thereto shall not constitute a waiver
of such rights in the event of any subsequent occurrence.
(g) 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.
14. OPTION. Licensor hereby grants Licensee an option to purchase any or
all of the applicable Intellectual Property Rights and Technology
related exclusively to the Products at any time during the term hereof
upon ninety (90) days written notice to Licensor. The purchase price
for such Intellectual Property Rights and Technology shall be an amount
equal to one times the average annual Net Sales of such Products from
1999 until the date Licensor exercises the option; provided, however,
such purchase price shall not be less than the average annual Net Sales
of such Products in 1999. The
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purchase of such Intellectual Property Rights and Technology shall
include, at no additional cost or expense, any necessary license of the
Technology or Patents or Intellectual Property Rights from third
parties. The closing, which closing shall be established by Licensor
and Licensee, shall be no later than one hundred twenty (120) days
after Licensor receives Licensee's written notice of its election to
exercise the option to purchase such Intellectual Property Rights and
Technology.
In addition, Licensor hereby grants Licensee a right of first refusal
to purchase or license the Products in other territories as such purchases or
licenses may become available.
15. PUBLICITY. The parties hereto shall coordinate the preparation and
issuance of any public announcement of 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. Licensee shall keep accurate records of all Product sales and
other relevant data concerning the Products for a period of two (2)
years following the year in which such records were created, and
Licensee shall provide Licensor quarterly reports thereof thirty (30)
days after the end of the applicable calendar quarter. Such reports
shall state the number of Units of Product sold by Licensee, its
Affiliates or sublicensees, if any, during the applicable quarter, as
well as the number of free samples of the Products distributed, any
Product returns made during such calendar quarter, together with an
accounting of Net Sales with respect to 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 Products 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. If 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.
17. ARBITRATION.
(a) ARBITRATION. In the event of any dispute (a "Dispute") between
the parties hereto subsequent to the Effective Date with
respect to the breach, interpretation or
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enforcement of this Agreement, such dispute shall be resolved
by binding arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association
("AAA"). Notwithstanding the foregoing, the parties intend to
depart from the AAA commercial arbitration rules to the extent
any of the following provisions conflict with such rules.
(b) PANEL. Any arbitration shall take place before a panel of
three (3) arbitrators (the "Panel"). The Panel shall be
selected in accordance with the AAA's procedures for selecting
an arbitration Panel, provided, that the Panel shall include
one certified public accountant and one transactional lawyer,
each of whom shall have had at least ten (10) years experience
in his or her respective field, and at least three (3) years
of arbitration experience. If any arbitrator on the Panel
neglects or refuses to act or is or becomes incapable of
acting, or dies before the Panel shall have made its award,
and the parties fail to agree or concur in the appointment of
another arbitrator, either party may serve on the other a
notice in writing requiring him to agree and concur in the
appointment of another arbitrator, and if such appointment is
not made within twenty (20) days from the service of said
notice, then the remaining arbitrators shall have power on the
request in writing of either party to appoint another
arbitrator who shall have the like authority to act in the
arbitration and make an award and the like powers in all
respects as if he had been appointed by the parties.
(c) BINDING EFFECT. Each of the parties agrees that the decision
of the Panel shall be final and binding on the parties hereto
and, provided diversity or other federal jurisdiction exists,
the parties hereby consent to the entry of final judgment
thereon in the United States District Court for the Southern
District of New York, and to the issuance of execution on the
judgment. The award may be appealed only to the court in which
judgment on the award is required to be entered and only to
the extent the award contains material errors of applicable
law, is arbitrary or capricious, or was fraudulently obtained.
If the parties cannot meet the applicable requirements for
federal jurisdiction, the parties agree to the entry of
judgment in the State Court of New York, and to the issuance
of execution on such judgment. The parties hereto hereby
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consent to the jurisdiction of such court (i.e., such federal
court, or, in the event federal jurisdiction does not exist,
such state court) in reference to any matter arising out of
the arbitration or this Agreement including but not limited to
confirmation of any arbitration award and enforcement thereof
by entry of judgment thereon or by any other legal remedy. As
to any Dispute which under the terms hereof is made subject to
arbitration, no suit at law or in equity based on such Dispute
shall be instituted by either party hereto other than to
enforce the award of the Panel. If any controversy shall arise
after the award as to whether the award or any part thereof
has been complied with, such controversy shall be determined
by the same Panel.
(d) EVIDENCE. The Panel shall not be bound by strict rules of
evidence and may give such right to evidence as may seem right
and proper to it. The Panel shall schedule a pre-hearing
conference to resolve procedural matters, arrange for the
exchange of information, obtain stipulations, and narrow the
issues. The parties will submit proposed discovery schedules
to the Panel at the pre- hearing conference. The scope and
duration of discovery will be within the sole discretion of
the Panel. Unresolved discovery disputes may be brought to the
attention of the chair of the arbitration panel and may be
disposed of by the chair of the panel. The Panel shall have
the discretion to order a pre-hearing exchange of information
by the parties, including, without limitation, production of
requested documents, exchange of summaries of testimony of
proposed witnesses, and examination by deposition of parties
and third-party witnesses. This discretion shall be exercised
in favor of discovery reasonable under the circumstances. The
arbitration shall be conducted in New York, New York. Any
party may be represented by counsel or other authorized
representative. In rendering a decision(s), the Panel shall
determine the rights and obligations of the parties according
to the substantive and procedural laws of New York and the
terms and provisions of this Agreement. The Panel's decision
shall be based on the evidence introduced at the hearing,
including all logical and reasonable inferences therefrom. The
Arbitrator may make any determination, and/or grant any remedy
or relief that is just and equitable, subject to the express
provisions of this Agreement. The Panel shall have power to
award and direct that the parties
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or any of them shall execute such releases, conveyances,
assurances, and do things as the Panel shall think fit and
such releases, conveyances, assurances and things shall be
executed and done accordingly. The Panel shall have the
authority to proceed ex parte in case of the nonattendance of
either of the parties or of their witnesses after thirty (30)
days prior notice in writing by the Panel given to the parties
respectively or their respective attorneys or agents notifying
the time and place of meeting to proceed with the reference.
Any provisional remedy that would be available from a court of
law shall be available from the arbitrator to the parties to
this Agreement pending arbitration.
(e) WAIVER OF CONSEQUENTIAL DAMAGES. The Panel shall have no
authority to award consequential damages, punitive damages,
and all other damages not measured by the prevailing party's
actual damages, and each party hereby waives all claims to
same. The Panel may not in any event make any ruling, finding
or award that does not conform to the terms and conditions of
the Agreement. Liabilities for taxes are direct damages.
(f) DISCLOSURE. Except to the extent disclosure, filing, reporting
or announcement thereof is required by law, including by any
rules or regulations of any applicable governmental,
regulatory or stock exchange agency or authority, neither a
party nor an arbitrator may disclose the existence, content or
results of any arbitration hereunder without the prior written
consent of both parties, except to the extent that the
recordation of a final judgment causes such matters to become
public.
18. RIGHT OF FIRST OFFER AND REFUSAL. If at any time during the term of
this Agreement, Licensor desires to market, sell or distribute in the
Territory any over-the- counter product closely related to the Field,
then Licensor shall provide Licensee the right of first offer and
refusal to present a proposal to Licensor to market and distribute any
such product on an exclusive basis within the Territory.
19. 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. 191 St.,
Suite 400,
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<PAGE>
Aventura, Florida 33180; and further provided that a copy of each
notice set to Licensee hereunder shall also be sent by the same means
to Chris DeWolf, 1201 Continental Place NE, Cedar Rapids, Iowa 52402.
The date of service of any notice to sent by air courier shall be the
date of receipt.
20. TAX. All taxes levied on account of any payments accruing under this
Agreement that 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.
21. 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.
22. 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.
23. 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.
24. 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.
25. CHOICE OF LAW. This Agreement and performance hereof shall be construed
and governed by the laws of the State of New York and of 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
State of Iowa or the State of New York, at the option of the party
filing such action.
26. 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.
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<PAGE>
27. 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.
28. 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.
29. BANKRUPTCY. All Trademark, Patent and Technology rights and licenses
granted to the Products 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, if 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 its or any substantial part of its property or 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 requires 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 Products and such Technology shall be
delivered to Licensee in such a way as to communicate it to Licensee
promptly, effectively and economically.
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
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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 hereunder wit 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 not 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 22
hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first above written.
COLUMBIA LABORATORIES, INC. LIL' DRUG STORE PRODUCTS, INC.
By:/S/ WILLIAM J. BOLOGNA By:/S/ DENNIS L. OLDORF
---------------------- --------------------
William J. Bologna, Chairman of Dennis L. Oldorf, Chairman of
the Board the Board
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EXHIBIT 10.24
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made and entered into
as of this 18th day of April, 2000 by and between Columbia Laboratories, Inc., a
Delaware corporation having its principal place of business at 2875 N.E. 191st
St., Suite 400, Aventura, Florida ("Columbia"), and Lil' Drug Store Products,
Inc., an Iowa corporation with its principal place of business at 1201
Continental Place NE, Cedar Rapids, Iowa ("Lil' Drug Store Products");
WITNESSETH:
WHEREAS, Columbia has the right to sell certain Product (as hereinafter
defined); and
WHEREAS, Columbia wishes to obtain the services of Lil' Drug Store
Products to establish distribution channels for sale of the Product in the
Territory (as hereinafter defined), and Lil' Drug Store Products wishes to
engage in distribution of the Product in the Territory, 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 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) "Confidential Information" shall mean all information and/or
technical data that is disclosed by one party hereto to the other party hereto
pursuant to this Agreement, whether written or oral, that the disclosing party
treats as confidential and identifies as such (by marking written information
"Confidential" and if oral, by promptly reducing it to writing and marking it
"Confidential"), 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 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 or of any other confidentiality obligation owed to the disclosing
party, (iii) information that 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 that 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.
(c) "Effective Date" shall mean the date May 5, 2000.
<PAGE>
(d) "Net Sales" shall mean the aggregate equivalent of gross sales
received by Lil' Drug Store Products or its Affiliates 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) credits or allowances, if any, actually granted
on account of cash or trade discounts, recalls, rebates, rejection or return of
the Product previously sold, and (ii) excises, sales taxes, value added taxes,
consumptions taxes, duties or other taxes imposed upon and paid with respect to
such sales (excluding income or franchise taxes of any kind). Net Sales shall
not include any transfer between Lil' Drug Store Products and any of its
Affiliates 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. Net Sales shall be determined in accordance with generally
accepted accounting principles ("GAAP").
(e) "Product" shall mean the current formulation of DIASORB(R) brand
aluminum magnesium silicate products for use as a drug for human health
purposes, and any and all improvements, reformulations, or advances to such
formulation.
(f) "Territory" shall mean the United States of America and its
territories.
(g) "Trademark" shall mean the United States trademark DIASORB (Reg.
No. 1,211,235), and any variations thereof.
(h) "Unit" shall mean a single item package of the Product.
2. RIGHTS GRANTED
(a) Columbia grants to Lil' Drug Store Products, and Lil' Drug Store
Products accepts from Columbia, on the terms and conditions stated herein, an
exclusive (even as to Columbia and Columbia's Affiliates) right to use the
Trademark only in connection with marketing and sale of the Product in the
Territory, and a nonexclusive right (but exclusive as to Columbia and Columbia's
Affiliates) to market, distribute, and sell the Product, only in connection with
the Trademark and only in the Territory.
(b) Columbia shall not use, nor permit any party to use, the Trademark
or any similar mark on any other product marketed, used or sold in the Territory
without the prior written consent of Lil' Drug Store Products. Lil' Drug Store
Products shall not (1) use nor permit any party to use, the Trademark with any
other product marketed, used, or sold in the Territory, (2) sell the Product or
permit the Product to be sold outside the Territory, or (3) use the Trademark in
any manner outside the Territory.
(c) To the extent reasonable and necessary for Lil' Drug Store Products
to fulfill its obligations hereunder, Columbia shall transfer or grant Lil' Drug
Store Products the rights to use Columbia's art work, customer lists, records,
web-sites, contracts, advertising/media schedules in connection with the
manufacturing, production, use or sale of the Product in the Territory.
(d) From and after the Effective Date, Columbia will reasonably make
available to Lil' Drug Store Products all staff necessary to support the
transition of the Product and the distribution of same, with such staff to
include, but not be limited to, the Director of Sales, the Vice President of
Research and Development, the Corporate Controller, and the Chairman and CEO.
The parties anticipate the transition period will last at least ninety (90)
days, and both parties agree to use their respective best efforts in the
transition.
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<PAGE>
(e) Columbia will coordinate all supply of the Product, and will use
its best efforts to insure Lil' Drug Store Products does not face capacity
restrictions for its supply of the Product. Columbia will designate an
individual with Columbia to work with Lil' Drug Store Products on all supply
matters. Lil' Drug Store Products shall reimburse Columbia for its costs of the
Product (bill of materials multiplied by the amount of the Product, plus
necessary freight/transportation charges) in U.S. dollars promptly upon receipt
and reasonable inspection of the Product. Seller will promptly notify Buyer of
any increase in the cost of the Product or the freight/transportation charges.
Columbia and Lil' Drug Store Products agree to work together to secure all
necessary contracts to protect the supply of the Product and will work together
to explore and qualify more cost effective methods of manufacture for producing
the Product.
3. PRODUCT FEES, RIGHTS, AND PAYMENTS.
(a) In consideration of the services to be provided by Lil' Drug Store
Products hereunder, Lil' Drug Store Products shall pay to Columbia (aside from
the cost of the Product) twenty percent (20%) of the Net Sales of the Product
during the term hereof, retaining all other moneys from the Net Sales. Such
payments are to be paid to Columbia within (thirty) 30 days after the end of the
second month following the Effective Date, and thereafter on a monthly basis
within thirty (30) days after the close of each month. Each payment shall be
accompanied by documentation evidencing the Net Sales for the previous period.
(b) During the term of the Agreement, Columbia shall not sell, or
license for sale, to any other distributor or licensee the Product for sale or
marketing in the Territory. Columbia represents that as of the Effective Date it
has not entered into any arrangement that would contravene the intentions of
this paragraph.
(c) 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 shall also not be adulterated or misbranded within the meaning of
the U.S. Food, Drug and Cosmetic Act, as amended.
(d) Lil' Drug Store Products shall from time to time notify Columbia of
the quantity of Product it wishes to order. Lil' Drug Store Products shall pay
Columbia for the Product purchased within the first two months after the
Effective Date within thirty (30) days after the end of such second month
following the Effective Date and thereafter on a monthly basis within thirty
(30) days after the close of each month in which Lil' Drug Store Products
purchases Product.
4. RETURNS AND COMMITMENTS.
Columbia shall be responsible for any returns of Product sold and
shipped by Columbia prior to the Effective Date ("Returns"). Lil' Drug Store
Products shall be entitled to a credit against the next payment due to Columbia
hereunder for Returns as follows: (i) a credit equal to the gross margin (net
wholesale price less cost of goods sold) on such Returns; or (ii) a credit equal
to the amount of any refund paid by Lil' Drug Store Products for any Returns of
expired or damaged Product. Expired Product shall mean Units of Product that
have eighteen (18) months or less before their expiration date. Damaged Product
shall include, but are not limited to, those Product with a retailer's inventory
or pricing marking affixed, if they are not resellable. Notwithstanding the
above, if Lil' Drug Store Products sells any returned Product after receiving a
credit for such returned Product, Lil' Drug Store Products shall pay Columbia
the Net Sales of
<PAGE>
such returned Product, less any out of pocket expenses incurred by Lil' Drug
Store Products in such sale.
To the extent Lil' Drug Store Products, in its reasonable judgment, is
required to honor any documented customer commitment, Columbia will promptly
reimburse Lil' Drug Store Products for such commitment. Lil' Drug Store Products
shall provide Columbia with all necessary financial records to verify such
commitment. A documented customer commitment shall mean any written
documentation related to financial or non-financial customer or broker
commitments made by Columbia related to the Product. Commitments may include
customer or broker rebates, deductions, credits, allowances, promotional
guarantees, bill backs and SPIFFS. Such documented customer commitments must
clearly indicate that Columbia and/or its representatives agreed to such
commitment. If a customer or broker commitment is undocumented, Lil' Drug Store
Products and Columbia agree to review such alleged commitment and, subject to
Columbia's approval, which approval shall not be unreasonably withheld, Columbia
will promptly reimburse Lil' Drug Store Products for any commitment Lil' Drug
Store Products makes to honor such undocumented customer or broker commitment.
5. MARKETING.
(a) Lil' Drug Store Products will use reasonable efforts to market and
sell the Product in the Territory, which may include use of samples, national
media marketing plans, coop advertising, trade shows, etc., and Columbia may, at
its option, participate in or support such marketing efforts.
(b) Lil' Drug Store Products will timely provide quarterly sales and
other marketing information useful to Columbia in monitoring sales progress.
(c) Lil' Drug Store Products and Columbia shall each promptly disclose
to the other party to this Agreement any regulatory action or inquiry concerning
the Product. Columbia shall promptly notify Lil' Drug Store Products of all
communications and responses regarding such regulatory action or inquiry.
(d) Lil' Drug Store Products will maintain a qualified national sales
force to sell/promote the Product.
6. THE TRADEMARK.
(a) Maintenance
Columbia promptly shall keep Lil' Drug Store Products currently advised
of the status of the Trademark. Columbia shall bear all costs for the
maintenance of the Trademark.
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(b) Trademark Use and Quality Control
(i) Lil' Drug Store Products agrees to use the Trademark 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
Trademark, or the goodwill and reputation of Columbia; provided, however, Lil'
Drug Store Products may modify and/or redesign the labels and other packaging of
the Product with Columbia's prior written approval, which approval shall not be
unreasonably withheld. Lil' Drug Store Products acknowledges Columbia's
ownership of rights to the Trademark and of all related goodwill.
(ii) Lil' Drug Store Products agrees to use the Trademark only
in the form and manner and with appropriate legends as approved from time to
time by Columbia, and not to use or allow use of any other trademark or service
mark in combination with the Trademark without the prior written approval of
Columbia, provided that such approval shall not be unreasonably withheld.
7. INFRINGEMENT OF TRADEMARK.
Lil' Drug Store Products and Columbia shall each promptly notify the
other following the discovery of any alleged infringement or unauthorized use of
the Trademark that may come to their attention. Columbia shall promptly
undertake, at Columbia's expense, commercially reasonable efforts to obtain a
discontinuance of the infringement or unauthorized use and, if not successful,
Columbia may, at its sole option, bring suit against such infringement.
8. 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 of any third party's
intellectual property rights on the grounds of any activities by either party
hereto involving the Product or the Trademark.
(b) In no event shall either party settle any such allegation of
infringement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
9. 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 effects (consistent with those
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 such individual is bound by a confidentiality obligation comparable to
the obligation set forth in this Section 9. The obligations of the parties
hereto under this Section 9 shall survive the expiration or termination of this
Agreement.
5
<PAGE>
10. REPRESENTATIONS, WARRANTIES AND COVENANTS AND INDEMNIFICATION.
(a) Columbia hereby represents, warrants and covenants the following:
(i) Columbia is a corporation duly organized, existing and in
good standing under the laws of Delaware, 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 Columbia is a
party, or Columbia's articles of incorporation or bylaws.
(iii) This Agreement has been duly executed and delivered by
Columbia and is a legal, valid and binding obligation enforceable against
Columbia in accordance with its terms.
(iv) Columbia shall comply with all applicable laws, consent
decrees and regulations of any federal, state or other governmental authority in
performing this Agreement.
(v) As of the Effective Date, Columbia knows of no issued or
pending patents, trademarks or patent or trademark applications relating to the
Product that would prevent Lil' Drug Store Products from marketing or selling
the Product in the Territory.
(vi) 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) As of the Effective Date, there are no outstanding,
pending or threatened violations, notice of noncompliance, warning letters,
orders, injunctions, judgments 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.
(viii) Columbia has conducted the sales of the Product
consistent with its past practices and in the ordinary course of business.
(ix) Columbia ceased, as of March 13, 2000, all further sales
of the Product to Quality King.
(x) All historical sales, costs of goods sold and operating
expenses are substantially accurate and properly classified on Columbia's
financial statements and on any other written information provided to Lil' Drug
Store Products by Columbia in connection with this transaction.
6
<PAGE>
(b) Lil' Drug Store Products hereby represents, warrants and covenants
the following:
(i) Lil' Drug Store Products is a corporation duly organized,
existing and in good standing under the laws of the State of Iowa, 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 Lil' Drug Store
Products is a party, or Lil' Drug Store Products' articles of organization or
bylaws.
(iii) This Agreement has been duly executed and delivered by
Lil' Drug Store Products and is a legal, valid and binding obligation
enforceable against Lil' Drug Store Products in accordance with its terms.
(iv) Lil' Drug Store Products 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) Columbia agrees to indemnify and hold harmless Lil' Drug
Store Products, its Affiliates and ad their respective employees, agents,
officers and directors from and against any claims, losses, liabilities,
damages, costs and expenses (including reasonable attorney fees) incurred by
Lil' Drug Store Products or its Affiliates arising out of or in connection with
any (A) breach by Columbia of any representation, warranty, covenant or
obligation hereunder, (B) act or omission on the part of Columbia or any of its
employees or agents in the performance of this Agreement, (C) payments,
commissions or fees of any kind due to consultants or brokers retained by
Columbia relating to the Product, and (D) claim or demand of any kind for injury
to a person or property arising from Columbia'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 changes in such manufacturing, packaging or labeling conducted at the
direction of Lil' Drug Store Products after the Effective Date.
(ii) Lil' Drug Store Products agrees to indemnify and hold
harmless Columbia and its Affiliates and their respective employees, agents,
officers and directors from and against any claims, losses, liabilities,
damages, costs and expenses (including reasonable attorney fees) incurred by
Columbia or its Affiliates arising out of or in connection with any (A) breach
by Lil' Drug Store Products of any representation, warranty, covenant or
obligation hereunder, (B) claim or demand of any kind for injury to person or
property arising from Lil' Drug Store Products' or its Affiliates' 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 Columbia, its Affiliates, their
employees, agents or contract manufacturers, (C) act or omission on the part of
Lil' Drug Store Products 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 Lil' Drug
Store Products, or its Affiliates and used in connection with the sale of the
Product hereunder, and (E)
7
<PAGE>
payments, commissions or fees of any kind due to consultants or brokers retained
by Lil' Drug Store Products relating to the Product.
(iii) A party seeking indemnification under this paragraph
10(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
Product/Completed Operations, Contractual and Broad Form Property Damage
covering its indemnification obligations hereunder with a minimum limit of Ten
Million Dollars ($10,000,000) per annum combined single limit for Bodily Injury
and Property Damage, to be increased as appropriate, consistent with prudent
business practices prevailing in the business. 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.
11. TERM. Except as otherwise provided for herein, the term of the Agreement
shall be for five (5) years from the Effective Date, and shall automatically
renew for additional five (5) year periods unless either party provides the
other with written notice of its intent not to renew this Agreement at least
ninety (90) days prior to the expiration of the then current term.
12. 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 12(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:
8
<PAGE>
(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 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
(iv) by the entry of an order by a court of competent
jurisdiction finding it to be bankrupt or insolvent, or during 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) Lil' Drug Store Products may terminate this Agreement at any time
with ninety (90) days written notice to Columbia if the Product are not a
commercial success, as determined by Lil' Drug Store Products in its sole
discretion, or for reasons of safety or efficacy of the Product.
(e) Columbia may terminate this Agreement at any time with ninety (90)
days written notice to Lil' Drug Store Products if the marketing standards set
forth in this Agreement are not being met by Lil' Drug Store Products.
(f) The failure by a party to exercise its rights to terminate this
Agreement pursuant to this Section 12 in the event of any occurrence giving rise
thereto shall not constitute a waiver of such rights in the event of any
subsequent occurrence.
(g) 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.
13. 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.
14. AUDITS. Lil' Drug Store Products 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 Lil' Drug Store
Products shall provide Columbia quarterly reports thereof thirty (30) days after
the end of the applicable calendar quarter. Such reports shall state the number
of Units of Product sold by Lil' Drug Store Products and its Affiliates
9
<PAGE>
during the applicable quarter, as well as the number of free samples of the
Product distributed, any Product returns made during such calendar quarter,
together with an accounting of Net Sales with respect to such calendar quarter.
Once a year, upon reasonable notice, at times mutually agreed upon and during
business hours, Columbia, at Columbia's cost, may have the accounts of Lil' Drug
Store Products or its Affiliates for the preceding two (2) calendar years
relating to the Product reviewed by independent certified public accountants
appointed by Columbia and reasonably approved by Lil' Drug Store Products,
solely in order to verify amounts due under this Agreement. Columbia and Lil'
Drug Store Products shall mutually determine a general strategy for such audit
in advance of its conduct. Said accountant shall not disclose to Columbia any
information except that which should properly be contained in a quarterly report
required under this Agreement. Lil' Drug Store Products shall promptly pay any
underpayment evidenced by such audit, and Columbia shall promptly refund any
overpayment evidenced by such audit. If such an audit evidences an underpayment
of more than five percent (5%) with respect to the amounts actually paid, Lil'
Drug Store Products shall promptly pay such underpayment to Columbia with
interest at the prime rate as set by Citibank, from the time when such
underpayment accrued, and shall reimburse Columbia for the reasonable costs and
expenses (including fees) of such audit.
15. OPTION. Columbia hereby grants Lil' Drug Store Products an option as
follows: at any time during the term hereof upon ninety (90) days written notice
to Columbia, Lil' Drug Store Products may purchase from Columbia Columbia's best
efforts to facilitate procurement for Lil' Drug Store Products, directly from
Columbia's Licensor, of (a) a permanent, fully-paid sub-license to sell Product
in the Territory, and (b) ownership of the Trademark in the Territory. The
purchase price for such option, if successfully executed, shall be an amount
equal to one times the average annual Net Sales of such Product from 1999 until
the date Lil' Drug Store Products exercises the option; provided, however, such
purchase price shall not be less than the average annual Net Sales of such
Product in 1999.
16. ARBITRATION.
(a) ARBITRATION. In the event of any dispute (a "Dispute") between the
parties hereto subsequent to the Effective Date with respect to the breach,
interpretation or enforcement of this Agreement, such dispute shall be resolved
by binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association ("AAA"). Notwithstanding the foregoing, the
parties intend to depart from the AAA commercial arbitration rules to the extent
any of the following provisions conflict with such rules.
(b) PANEL. Any arbitration shall take place before a panel of three (3)
arbitrators (the "Panel"). The Panel shall be selected in accordance with the
AAA's procedures for selecting an arbitration Panel, provided, that the Panel
shall include one certified public accountant and one transactional lawyer, each
of whom shall have had at least ten (10) years experience in his or her
respective field, and at least three (3) years of arbitration experience. If any
arbitrator on the Panel neglects or refuses to act or is or becomes incapable of
acting, or dies before the Panel shall have made its award, and the parties fail
to agree or concur in the appointment of another arbitrator, either party may
serve on the other a notice in writing requiring him to agree and concur in the
appointment of another arbitrator, and if such appointment is not made within
twenty (20) days from the service of said notice, then the remaining arbitrators
shall have power on the request in writing of either party to appoint another
arbitrator who shall have the like authority to act in the arbitration and make
an award and the like powers in all respects as if he had been appointed by the
parties.
10
<PAGE>
(c) BINDING EFFECT. Each of the parties agrees that the decision of the
Panel shall be final and binding on the parties hereto and, provided diversity
or other federal jurisdiction exists, the parties hereby consent to the entry of
final judgment thereon in the United States District Court for the Southern
District of New York, and to the issuance of execution on the judgment. The
award may be appealed only to the court in which judgment on the award is
required to be entered and only to the extent the award contains material errors
of applicable law, is arbitrary or capricious, or was fraudulently obtained. If
the parties cannot meet the applicable requirements for federal jurisdiction,
the parties agree to the entry of judgment in the New York Supreme Court located
in New York City, New York, and to the issuance of execution on such judgment.
The parties hereto hereby consent to the jurisdiction of such court (i.e., such
federal court, or, in the event federal jurisdiction does not exist, such state
court) in reference to any matter arising out of the arbitration or this
Agreement including but not limited to confirmation of any arbitration award and
enforcement thereof by entry of judgment thereon or by any other legal remedy.
As to any Dispute which under the terms hereof is made subject to arbitration,
no suit at law or in equity based on such Dispute shall be instituted by either
party hereto other than to enforce the award of the Panel. If any controversy
shall arise after the award as to whether the award or any part thereof has been
complied with, such controversy shall be determined by the same Panel.
(d) EVIDENCE. The Panel shall not be bound by strict rules of evidence
and may give such right to evidence as may seem right and proper to it. The
Panel shall schedule a pre-hearing conference to resolve procedural matters,
arrange for the exchange of information, obtain stipulations, and narrow the
issues. The parties will submit proposed discovery schedules to the Panel at the
pre-hearing conference. The scope and duration of discovery will be within the
sole discretion of the Panel. Unresolved discovery disputes may be brought to
the attention of the chair of the arbitration panel and may be disposed of by
the chair of the panel. The Panel shall have the discretion to order a
pre-hearing exchange of information by the parties, including, without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties and
third-party witnesses. This discretion shall be exercised in favor of discovery
reasonable under the circumstances. The arbitration shall be conducted in New
York, New York. Any party may be represented by counsel or other authorized
representative. In rendering a decision(s), the Panel shall determine the rights
and obligations of the parties according to the substantive and procedural laws
of New York and the terms and provisions of this Agreement. The Panel's decision
shall be based on the evidence introduced at the hearing, including all logical
and reasonable inferences therefrom. The Arbitrator may make any determination,
and/or grant any remedy or relief that is just and equitable, subject to the
express provisions of this Agreement. The Panel shall have power to award and
direct that the parties or any of them shall execute such releases, conveyances,
assurances, and do things as the Panel shall think fit and such releases,
conveyances, assurances and things shall be executed and done accordingly. The
Panel shall have the authority to proceed ex parte in case of the nonattendance
of either of the parties or of their witnesses after thirty (30) days prior
notice in writing by the Panel given to the parties respectively or their
respective attorneys or agents notifying the time and place of meeting to
proceed with the reference. Any provisional remedy that would be available from
a court of law shall be available from the arbitrator to the parties to this
Agreement pending arbitration.
(e) WAIVER OF CONSEQUENTIAL DAMAGES. The Panel shall have no authority
to award consequential damages, punitive damages, and all other damages not
measured by the prevailing party's actual damages, and each party hereby waives
all claims to same. The Panel
11
<PAGE>
may not in any event make any ruling, finding or award that does not conform to
the terms and conditions of the Agreement. Liabilities for taxes are direct
damages.
(f) DISCLOSURE. Except to the extent disclosure, filing, reporting or
announcement thereof is required by law, including by any rules or regulations
of any applicable governmental, regulatory or stock exchange agency or
authority, neither a party nor an arbitrator may disclose the existence, content
or results of any arbitration hereunder without the prior written consent of
both parties, except to the extent that the recordation of a final judgment
causes such matters to become public.
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 Columbia hereunder shall also be sent by the
same means to William J. Bologna, Chairman of the Board, Columbia Laboratories,
Inc., 2875 N.E. 191st St., Suite 400, Aventura, Florida 33180; and further
provided that a copy of each notice set to Lil' Drug Store Products hereunder
shall also be sent by the same means to Chris DeWolf, 1201 Continental Place NE,
Cedar Rapids, Iowa 52402. The date of service of any notice to sent by air
courier shall be the date of receipt.
18. TAX. All taxes levied on account of any payments accruing under this
Agreement that constitute income to Columbia, shall be the obligation of
Columbia, 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
Columbia.
19. 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.
20. 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.
21. 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.
22. 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.
23. CHOICE OF LAW. This Agreement and performance hereof shall be construed and
governed by the laws of the State of New York and of the United States. Any
dispute, controversy, claim or difference arising between the parties out of,
relating to, or in connection
<PAGE>
with this Agreement shall be submitted to the jurisdiction of the courts sitting
in the State of Iowa or the State of New York, at the option of the party filing
such action.
24. 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.
25. 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.
26. FURTHER ASSURANCES. Columbia and Lil' Drug Store Products 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.
27. 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 hereunder wit the utmost dispatch whenever
such causes are removed.
28. PERFORMANCE BY AFFILIATES. The parties agree that certain of their rights
and obligations under this Agreement may not 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
20 hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first above written.
COLUMBIA LABORATORIES, INC. LIL' DRUG STORE PRODUCTS, INC.
By:/S/ WILLIAM J. BOLOGNA By:/S/ DENNIS OLDORF
----------------------- -----------------
William J. Bologna Dennis Oldorf
Chairman of the Board Chairman of the Board
13
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,501,774
<SECURITIES> 0
<RECEIVABLES> 2,558,387
<ALLOWANCES> 119,829
<INVENTORY> 1,428,843
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0
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<OTHER-SE> 4,689,057
<TOTAL-LIABILITY-AND-EQUITY> 17,354,256
<SALES> 2,989,930
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<CGS> 1,219,848
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