8-K

COLUMBIA LABORATORIES, INC.

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BN18ALkgGM6OOzoUZZPB5mXvyuAN9T8MZrjxFhe25PR97rFXn3ZkD/3x7XQ5Tmqc zdfmhTLeFWVTgyQTJ9yNtw== 0000950123-06-015579.txt : 20061226 0000950123-06-015579.hdr.sgml : 20061225 20061226153953 ACCESSION NUMBER: 0000950123-06-015579 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20061221 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061226 DATE AS OF CHANGE: 20061226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA LABORATORIES INC CENTRAL INDEX KEY: 0000821995 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 592758596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10352 FILM NUMBER: 061298953 BUSINESS ADDRESS: STREET 1: 354 EISENHOWER PARKWAY CITY: LIVINGSTON STATE: NJ ZIP: 07039 BUSINESS PHONE: 9739943999 MAIL ADDRESS: STREET 1: 354 EISENHOWER PARKWAY CITY: LIVINGSTON STATE: NJ ZIP: 07039 8-K 1 y28284e8vk.htm 8-K 8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

DATE OF REPORT — December 21, 2006
(Date of Earliest Event Reported)

COLUMBIA LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

Commission File No. 1-10352


Delaware		59-2758596

(State of Incorporation)		(I.R.S. Employer Identification No.)

354 Eisenhower Parkway
Livingston, New Jersey		07039

(Address of principal executive offices)		Zip Code

Registrant’s telephone number, including area code: (973) 994-3999

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):


o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS


Item 1.01		Entry into a Material Definitive Agreement.
Item 1.02		Termination of a Material Definitive Agreement.
Item 2.03		Creation of a Direct Financial Obligation.
Item 3.02		Unregistered Sales of Equity Securities.
Item 9.01.		Exhibits.
SIGNATURE
Exhibit Index
EX-4.1: FORM OF CONVERTIBLE SUBORDINATED NOTE
EX-4.2: FORM OF WARRANT TO PURCHASE COMMON STOCK
EX-10.68: AGREEMENT DATED 12-21-2006*
EX-10.69: AMENDMENT NO. 1 TO THE AMENDED AND RESTATED SUPPLY AGREEMENT
EX-10.70: SECURITIES PURCHASE AGREEMENT


* Confidential treatment requested. Confidential portions of this document have been redacted and filed separately with the Securities & Exchange Commission.

Item 1.01 Entry into a Material Definitive Agreement.

Crinone Agreement

On December 21, 2006, Columbia Laboratories, Inc. (the “Company”) entered into an Agreement (the “Crinone Agreement”) by and among Ares Trading S.A. (“Ares”), Serono Inc., (“Serono”), the Company and its wholly-owned subsidiary, Columbia Laboratories (Bermuda), Ltd. (“Columbia Bermuda”), pursuant to which (i) Ares and Columbia Bermuda agreed to amend the Amended and Restated License and Supply Agreement dated as of June 4, 2002 between Ares and Columbia Bermuda (the “Amended and Restated License and Supply Agreement”) to terminate Ares’s rights thereunder to market, use and sell Crinone in the United States (such amendment, “Amendment No. 1”), (ii) the parties agreed to terminate the Marketing License Agreement dated as of June 4, 2002 among Ares, Serono, Columbia and Columbia Bermuda (the “Marketing License Agreement”), (iii) Columbia agreed to pay to Ares a termination payment of $33 million, and (iv) Columbia agreed to purchase Ares’s existing inventory of Crinone in the United States. The Company will have a reduction in revenues for the fourth quarter of 2006 of approximately $580,000 due to the repurchase of saleable inventory.

Crinone is the brand name of progesterone gel sold by Ares worldwide pursuant to the Amended and Restated License and Supply Agreement. Prochieve is the brand name of the same progesterone gel sold by the Company in the United States under the Marketing License Agreement. The Company’s revenues from Crinone in the United States in recent years were approximately $3.1 million annually in the form of a “transfer price,” which was 30% of Crinone net sales in the United States, plus approximately $1.4 million in the form of a royalty, which was 40% of Crinone net sales in the United States on prescriptions by non-fertility specialists (all pursuant to the Amended and Restated License and Supply Agreement). The Company’s annual revenues from Prochieve were approximately $4.0 million in calendar year 2006, for which the Company paid Serono 30% of such revenues as a royalty (pursuant to the Marketing License Agreement). Upon consummation of the transactions under the Crinone Agreement, Columbia will have the sole right to market both Crinone and Prochieve in the United States.

The transactions under the Crinone Agreement closed on December 22, 2006.

The foregoing is a summary of the terms of the Crinone Agreement and Amendment No. 1 and does not purport to be complete and is qualified in its entirety by reference to the full text of the Crinone Agreement and Amendment No. 1 which are filed as Exhibits 10.68 and 10.69, respectively, hereto and are incorporated herein by reference .

Securities Purchase Agreement

On December 21, 2006, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors (as such term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)) set forth on Exhibit A thereto (the “Purchasers”). Pursuant to the Securities Purchase Agreement, on December 22, 2006 the Company issued, for aggregate consideration of approximately $40 million (i) subordinated convertible notes in aggregate principal amount of $39,999,997.75 million (the “Notes”), which Notes are convertible into shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), and (ii) warrants to purchase 2,285,714 shares of Common Stock (“Warrants”) with an exercise price of $5.50 per share (the “Private Placement”).

A portion of the proceeds from the Private Placement were used to make the required payments under the Crinone Agreement; the balance will be used to pay related expenses and for working capital.

The Notes will bear interest at the initial rate of 8% per annum, payable quarterly in arrears commencing April 1, 2007. If the Company receives the approval of the United States Food and Drug Administration to a new drug application, amendment or supplement permitting the marketing of progesterone gel 8% for the prevention of recurrent preterm birth, the interest rate on the Notes reduces to 5% per annum.

The principal amount of the Notes, together with any accrued and unpaid interest thereon (collectively, the “Conversion Amount”), is convertible by the holders of the Notes at any time following their issuance into shares of Common Stock at an initial conversion price of $5.25 per share. The conversion price is subject to adjustment if the Company subdivides or combines the outstanding Common Stock and under certain other circumstances, as set forth in the Notes.

The maturity date of the Notes is December 31, 2011. If, at any time after December 22, 2009, the dollar-volume weighted average price of the Common Stock exceeds, for any twenty consecutive trading days, 200% of the conversion price of the Notes, then the Company will have the right to require the holders of the Notes to convert up to 100% of the outstanding principal amount at the Conversion Amount into shares of Common Stock at the then applicable conversion price. The holders of the Notes will have the right to require the Company to redeem all or any portion of their Notes for cash upon a Change of Control (as defined in the Notes), and, under certain circumstances, to pay a Make-Whole Premium (as defined in the Notes).

The Notes contain customary events of default. After an event of default (other than a bankruptcy event, in which case the Notes become immediately due and payable), the holders representing at least 25% of the aggregate principal amount of the Notes may declare all or any portion of the Notes to be immediately due and payable and may demand immediate payment of all or any portion of the outstanding principal amount of the Notes.

The Notes are subordinated in right of payment to the Company’s obligations to PharmaBio Development Inc. (“PharmaBio”) under the Investment and Royalty Agreements dated July 31, 2002 and March 5, 2005 between PharmaBio and the Company.

The Warrants are exercisable during the period commencing 180 days after the issue date and ending on December 22, 2011, unless earlier exercised or terminated as provided in the Warrant. The Warrants are exercisable for an aggregate of 2,285,714 shares of Common Stock at an exercise price of $5.50 per share, subject to adjustment in certain circumstances.

Under the terms of the Securities Purchase Agreement, the Company has agreed to file, within 30 days after the closing of the Private Placement, a registration statement with the Securities and Exchange Commission (“SEC”) to register for resale the shares of Common Stock issuable upon the conversion of the Notes and exercise of the Warrants. The registration statement is required under the Securities Purchase Agreement to become effective on the earlier of (i) the date which is 120 days following the closing, and (ii) the date which is five business days following the date the Company receives written notice from the SEC that no review of the

registration statement will be made by the staff of the SEC or that the staff has no further comments to the registration statement. The Company will be required to make certain cash payments to the holders of the Notes and Warrants if it does not meet its registration obligations under the Securities Purchase Agreement as set forth therein.

The Notes and the Warrants are being offered and sold in reliance on exemptions from registration pursuant to Section 4(2) under the Securities Act and Rule 506 promulgated thereunder, based on the nature of the Purchasers and certain representations made by them to the Company.

The following Purchasers were, individually or with their respective affiliates, holders of more than 5.0% of the Company’s outstanding capital stock immediately prior to execution of the Securities Purchase Agreement: Perry Corp., David M. Knott and John P. Curran.

The aggregate placement agent commissions are expected to be approximately $1,250,000. Rodman & Renshaw LLP acted as the Company’s placement agent for the Private Placement.

The transactions under the Securities Purchase Agreement closed, and the Notes and Warrants were issued, on December 22, 2006.

The foregoing is a summary of the terms of the Securities Purchase Agreement, the Notes and the Warrants and does not purport to be complete and is qualified in its entirety by reference to the full text of the Securities Purchase Agreement, and the forms of Notes and Warrants which are filed as Exhibits 10.70, 4.1 and 4.2, respectively, hereto and are incorporated herein by reference.

Item 1.02 Termination of a Material Definitive Agreement.

Pursuant to the Crinone Agreement, the parties thereto have terminated the Marketing License Agreement. A description of the Crinone Agreement is set forth under Item 1.01 of this Current Report on Form 8-K and is incorporated by reference herein.

Item 2.03 Creation of a Direct Financial Obligation.

A description of the Securities Purchase Agreement, the Notes and the Warrants set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference herein.

Item 3.02 Unregistered Sales of Equity Securities.

A description of the Securities Purchase Agreement, the Notes and the Warrants set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference herein.

Item 9.01. Exhibits.


(d)		Exhibits

4.1		Form of Convertible Subordinated Note

4.2		Form of Warrant to Purchase Common Stock

10.68		Agreement, dated December 21, 2006, by and among Ares Trading S.A., Serono, Inc., the Company and its wholly-owned subsidiary, Columbia Laboratories (Bermuda), Ltd.^*

10.69		Amendment No. 1 to the Amended and Restated License and Supply Agreement, entered into December 21, 2006, by and between Ares Trading S.A and Columbia Laboratories (Bermuda), Ltd.

10.70		Securities Purchase Agreement, dated December 21, 2006, by and between Columbia Laboratories, Inc. and the Purchasers listed on Exhibit A thereto.


		^* Confidential treatment requested. Confidential portions of this document have been redacted and filed separately with the Securities and Exchange Commission.

SIGNATURE

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 hereunto duly authorized.

Date: December 26, 2006


	COLUMBIA LABORATORIES, INC.
	By:	/S/ James Meer
		James Meer
		Senior Vice President, Chief Financial Officer, and Treasurer

Exhibit Index


Exhibit No.		Description

4.1		Form of Convertible Subordinated Note

4.2		Form of Warrant to Purchase Common Stock

10.68		Agreement, dated December 21, 2006, by and among Ares Trading S.A., Serono, Inc., the Company and its wholly-owned subsidiary, Columbia Laboratories (Bermuda), Ltd.^*

10.69		Amendment No. 1 to the Amended and Restated License and Supply Agreement, entered into December 21, 2006, by and between Ares Trading S.A. and Columbia Laboratories (Bermuda), Ltd.

10.70		Securities Purchase Agreement, dated December 21, 2006, by and between Columbia Laboratories, Inc. and the Purchasers listed on Exhibit A thereto.


		^* Confidential treatment requested. Confidential portions of this document have been redacted and filed separately with the Securities and Exchange Commission.

EX-4.1 2 y28284exv4w1.htm EX-4.1: FORM OF CONVERTIBLE SUBORDINATED NOTE EX-4.1

Exhibit 4.1

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. THE COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THE NOTE WAS ISSUED.

THE RIGHT OF THE HOLDER OF THIS CONVERTIBLE SUBORDINATED NOTE TO RECEIVE PAYMENT HEREUNDER IS SUBJECT AND SUBORDINATED IN PAYMENT TO THE SENIOR DEBT TO THE EXTENT AND IN THE MANNER SET FORTH IN PARAGRAPH 3 OF THIS NOTE.

Columbia Laboratories, Inc.

CONVERTIBLE SUBORDINATED
NOTE


Issuance Date: December 22, 2006		$

For value received, Columbia Laboratories, Inc., a Delaware corporation (the “Company”), hereby promises to pay to , or its registered assigns (“Holder”), the principal amount of $ together with interest thereon from the date set out above as the Issuance Date (the “Issuance Date”) until the date such amount becomes due and payable in accordance with the provisions of this Note.

This Note was issued pursuant to a Securities Purchase Agreement, dated as of December 21, 2006 (as amended and modified from time to time, the “Purchase Agreement”), between the Company and certain investors, This Convertible Subordinated Note (including all Convertible Subordinated Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Convertible Subordinated Notes issued pursuant to the Purchase Agreement on the Issuance Date (collectively, the “Notes” and such other Convertible Subordinated Notes, the “Other Notes”). The Purchase Agreement contains terms governing the rights of the Holder, and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Except as defined in paragraph 9 or unless otherwise indicated herein, capitalized terms used in this Note have the same meanings set forth in the Purchase Agreement.

1. Payment of Interest. Except as otherwise expressly provided in paragraph 4(b), interest shall accrue at the Interest Rate computed on the basis of a 360 day year of twelve thirty day months on the unpaid principal amount of this Note, outstanding from time to time and to the extent permitted by applicable law, on any interest which has not been paid on the date on which it is due and payable, or (if less) at the highest rate then permitted under applicable law. Subject to paragraph 3, the Company shall pay to the Holder in cash all accrued and unpaid interest in arrears for each calendar quarter on the first day of each April, July, October and January, beginning April 1, 2007. Any accrued interest which for any reason has not theretofore been paid shall be paid in full on the date on which the final principal payment on this Note is made.

2. Payment of Principal on Note.

Maturity. The Company shall pay the principal amount then outstanding of this Note to the Holder on December 31, 2011, together with all accrued and unpaid interest. This Note shall not be prepaid except with the express written consent of the holders of the Senior Debt; provided that nothing herein shall affect the right of the Holders to convert at any time in accordance with paragraph 5.

3. Subordination.

(a) Extent of Subordination. All amounts (including all principal, interest, premiums and other payments) payable by the Company under the Notes (the “Subordinated Debt”) are and shall be subordinate and junior in right of payment to the prior payment in full of the Senior Debt (as defined below) to the extent and in the manner set forth in this paragraph 3. Each holder of the Senior Debt, whether now outstanding or hereafter incurred, shall be deemed to have acquired the Senior Debt in reliance upon the provisions contained in this paragraph 3. This paragraph 3 shall constitute a continuing offer to all persons who become holders of, or continue to hold, the Senior Debt, and the provisions herein are made for the benefit of the holders of the Senior Debt, and such holders are made obligees hereunder and any one or more of them may enforce such provisions.

(b) Payment Suspension.

(i) The Holder shall, at all times, be entitled to receive payments on account of the Subordinated Debt in accordance with the terms of this Note; provided, however, that, if and so long as a Senior Default (as defined below) has occurred and is continuing, and written notice thereof (the “Senior Default Notice”) has been delivered by the holders of the Senior Debt to the holders of the Subordinated Debt and the Company referencing the provisions of this paragraph 3 and demanding a suspension of payments during the period of such continuance in accordance with this subparagraph (b) (such period of time being referred to as the “Payment Suspension Period”), then, except as otherwise set forth below, the Company shall not make, and the holders of the Subordinated Debt shall not accept or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner (including, without limitation, from or by way of any collateral or redemption or sale), payment of all or any part of the Subordinated Debt unless and until the earlier of (A) the Senior Debt has been paid in full or (B) the Senior Default has been cured by the Company or waived by the holders of the Senior Debt or the holders of the outstanding principal amount of the Senior Debt have terminated the Payment Suspension Period, in each case in accordance with the terms of the relevant agreements governing such Senior Debt.

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(ii) “Senior Default” means (i) the occurrence and continuance (after any applicable grace period) of a default in payment of all or any part of the Senior Debt, or (ii) the breach or default by the Company of any term of this Note if the effect of such breach or default it to cause an amount exceeding $500,000 to become due prior to its stated maturity or to permit the Holder of this Note to cause an amount exceeding $500,000 to become due prior to its stated maturity, or (iii) the occurrence of any event that provides the Holder of this Note with cash redemption rights prior to its stated maturity.

(c) Liquidation, Winding Up, etc. Upon any distribution of assets of the Company or upon any dissolution, winding up, liquidation or reorganization of the Company, whether in any bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company:

(i) the holders of all Senior Debt shall be entitled to receive payment in full of the principal thereof, the interest due thereon and any premium or other payment obligation with respect thereto before the holders of the Subordinated Debt are entitled to receive any payment upon the Subordinated Debt; and

(ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the holders of the Subordinated Debt would be entitled but for the provisions of this paragraph 3 shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Debt or their agents or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Debt may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, interest on and any premium or other amounts payable with respect to the Senior Debt held or represented by each such holder, to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of the Senior Debt.

The consolidation of the Company with, or the merger of the Company into, another entity shall not be deemed a dissolution, winding up, liquidation or reorganization of the Company for the purposes of this paragraph 3(c) if such other entity is organized in the United States and such entity, as a part of such consolidation or merger, succeeds to the Company’s property and business and assumes the Company’s obligations (including the Senior Debt and the Subordinated Debt).

(d) Payment Held in Trust. All payments or distributions by the Company upon or with respect to the Subordinated Debt which are received by the holders thereof in violation of or contrary to the provisions of subparagraph (b) or (c) above shall be received in trust for the benefit of the holders of the Senior Debt and shall be paid over upon demand to such holders in the same form as so received (with all necessary endorsements) to be applied to the payment of the Senior Debt.

(e) Subrogation. Upon receipt by the holders of the Senior Debt of amounts sufficient to pay all Senior Debt in full, to the extent any amounts which are otherwise payable with respect to the Subordinated Debt but for the provisions of this paragraph 3 have been paid over to the holders of the Senior Debt, the holders of the Subordinated Debt shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property

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or securities of the Company applicable to Senior Debt until the Subordinated Debt is paid in full, and no such payments or distributions to the holders of the Senior Debt of cash, property or securities otherwise distributable to the holders of Subordinated Debt shall, as between the Company, its creditors (other than the holders of Senior Debt) and the holders of the Subordinated Debt, be deemed to be payment by the Company to the holders of the Senior Debt. Upon any payment or distribution of assets of the Company referred to in this paragraph 3, the holders of the Subordinated Debt shall be entitled to rely upon a certificate of the liquidating trustee or agent or other Person making any distribution to the holders of the Subordinated Debt for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this paragraph 3. The provisions of this paragraph 3 shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by the holders of the Senior Debt for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Company) all as though such payment had not been made. Subject to the foregoing, the subordination provisions in this paragraph 3 shall terminate when all the Senior Debt has been indefeasibly and irrevocably paid in full.

(f) Rights Not Subordinated. The provisions of this paragraph 3 are for the purpose of defining the relative rights of the holders of Senior Debt on the one hand and the holders of Subordinated Debt on the other hand, and nothing herein shall impair (as between the Company, the holders of the Subordinated Debt) the Company’s obligation to the holders of the Subordinated Debt to pay to such holders the full amount of the Subordinated Debt in accordance with the terms of the Purchase Agreement and the Notes. No provision of this paragraph 3 shall be construed to prevent the holders of the Subordinated Debt from exercising all rights and remedies available under the Notes, the Purchase Agreement or under applicable law upon the occurrence of an Event of Default or otherwise, subject to the rights of the holders of the Senior Debt as set forth above to receive payments otherwise payable to the holders of the Subordinated Debt, and no provision of this paragraph 3 shall be deemed to subordinate, to any extent, any claim or right of any holder of the Subordinated Debt to any claim against the Company by any creditor or any other Person except to the extent expressly provided herein.

(g) Continuing Conversion Rights. Nothing in this paragraph 3 shall affect the right of the Holder to convert at any time, in accordance with paragraph 5, including, without limitation, during a Senior Default or the insolvency, bankruptcy or reorganization of the Company.

(h) Amendment. The provisions of this paragraph 3 may not be amended or modified without the written consent of the holders of all the Senior Debt.

4. Events of Default.

(a) Definition. For purposes of this Note, an Event of Default shall be deemed to have occurred if:

(i) the Company fails to pay when due and payable (whether at maturity or otherwise) any principal, interest or other payment on the Note, and such failure to pay any such amount, other than the principal, is not cured within 30 days after the occurrence thereof;

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(ii) the Company breaches any covenant or other term or condition in any Transaction Document (excluding Article 6 of the Purchase Agreement and the Events of Default set forth in this paragraph 4), and such breach is not cured within 30 days from the Company’s knowledge thereof;

(iii) the representations and warranties contained in the Purchase Agreement were not true and correct at the Issuance Date (except to the extent expressly made as of an earlier date, in which case, as of such earlier date) and such failure, individually or in the aggregate, results in a material adverse effect on the business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole;

(iv) the Company or any Subsidiary makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company or any Subsidiary bankrupt or insolvent; or any order for relief with respect to the Company or any Subsidiary is entered under the Federal Bankruptcy Code; or the Company or any Subsidiary petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or any Subsidiary, or of any substantial part of the assets of the Company or any Subsidiary, or commences any proceeding (other than a proceeding for the voluntary liquidation and dissolution of any Subsidiary) relating to the Company or any Subsidiary under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Company or any Subsidiary and either (A) the Company or any such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein or (B) such petition, application or proceeding is not dismissed within 60 days;

(v) a judgment, to the extent not covered under an insurance policy, in excess of $1,000,000 is rendered against the Company or any Subsidiary and, within 60 days after entry thereof, such judgment is not discharged in full or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged in full; or

(vi) the Company or any Subsidiary defaults in the performance of any obligation if the effect of such default is to cause an amount exceeding $500,000 to become due prior to its stated maturity or to permit the holder or holders of such obligation to cause an amount exceeding $500,000 to become due prior to its stated maturity.

The foregoing shall constitute Events of Default whatever the reason or cause for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body and regardless of the effects of any subordination provisions.

(b) Consequences of Events of Default.

(i) Upon the occurrence of an Event of Default the Interest Rate on the Notes shall increase immediately by an increment of four percentage point(s) per annum to the extent permitted by law. Any increase of the Interest Rate resulting from the operation of this subparagraph shall terminate as of the close of business on the date on which no Events of Default exist (subject to subsequent increases pursuant to this subparagraph).

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(ii) If an Event of Default of the type described in subparagraph 4(a)(iv) has occurred, the aggregate principal amount of the Notes (together with all accrued interest thereon and all other amounts due and payable with respect thereto) shall become immediately due and payable without any action on the part of any Holder, and the Company shall immediately pay to the holders of the Notes all amounts due and payable with respect to the Notes.

(iii) If any Event of Default (other than under subparagraph 4(a)(iv)) has occurred and is continuing, the holder or holders of Notes representing at least 25% of the aggregate principal amount of Notes then outstanding may declare all or any portion of the outstanding principal amount of the Notes (together with all accrued interest thereon and all other amounts due and payable with respect thereto) to be immediately due and payable and may demand immediate payment of all or any portion of the outstanding principal amount of the Notes (together with all such other amounts then due and payable) owned by such holder or holders. The Company shall give prompt written notice of any such demand to the other holders of Notes, each of which may demand immediate payment of all or any portion of such holder’s Note. If any holder or holders of the Notes demand immediate payment of all or any portion of the Notes, the Company shall immediately pay to such holder or holders all amounts due and payable with respect to such Notes.

(iv) Each Holder shall also have any other rights which such Holder may have pursuant to applicable law.

(v) The Company hereby waives diligence, presentment, protest and demand and notice of protest and demand, dishonor and nonpayment of this Note and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of the Company hereunder.

5. Conversion.

This Note shall be convertible into shares of Common Stock on the terms and conditions set forth in this paragraph 5.

(a) Conversion Procedure.

(i) The Holder may convert all or any portion of the outstanding principal amount of this Note into a number of shares of the Conversion Stock (excluding any fractional share) determined by dividing the principal amount designated by such Holder to be converted by the Conversion Price then in effect.

(ii) To convert any principal amount into shares of Conversion Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Annex A (the “Conversion Notice”) to the Company and (B) if required by paragraph 5(a)(iv), surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third

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Business Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (1) (X) if legends are not required to be placed on certificates of Conversion Stock pursuant to the Purchase Agreement and provided that the Transfer Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Conversion Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Conversion Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant to Section 3.6 of the Purchase Agreement. The Person or Persons entitled to receive the shares of Conversion Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Conversion Stock on the Conversion Date. On the date that the Conversion Stock is delivered to the Holder, the Company shall also deliver to the Holder a payment in an amount equal to the sum of all accrued interest with respect to the principal amount converted, which has not been paid prior thereto.

(iii) If within three Trading Days after the Company’s receipt of the facsimile copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Conversion Stock to which the Holder is entitled upon such holder’s conversion of any principal amount (a “Conversion Failure”), and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Conversion Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Conversion Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Bid Price on the Conversion Date.

(iv) The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to paragraph 13. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full principal amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice

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(which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the principal converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

(v) If any fractional share of Conversion Stock would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional share, shall pay an amount equal to the Market Price of such fractional share as of the date of such conversion.

(vi) All certificates evidencing the Conversion Shares to be issued to the Holder may bear a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. THE COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.

(vii) The issuance of certificates for shares of Conversion Stock upon conversion of this Note shall be made without charge to the Holder for any issuance tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of shares of Conversion Stock. Upon conversion of this Note, the Company shall take all such actions as are necessary in order to ensure that the Conversion Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.

(viii) The Company shall not close its books against the transfer of Conversion Stock issued or issuable upon conversion of this Note in any manner which interferes with the timely conversion of this Note. The Company shall assist and cooperate with any Holder required to make any governmental filings or obtain any governmental approval prior to or in connection with the conversion of this Note (including, without limitation, making any filings required to be made by the Company).

(b) Conversion Price. The initial Conversion Price shall be $5.25, subject to adjustment as set forth in this Note.

(i) Beneficial Ownership. The Company shall not effect any conversion of this Note or otherwise issue shares of Common Stock pursuant to paragraphs

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5(e) and 5(h) hereof, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to paragraph 5(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, non-converted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this paragraph 5(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this paragraph 5(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written request of the Holder, the Company shall within one Business Day confirm in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock upon conversion of this Note, and the Holder of this Note shall not have the right to receive upon conversion of this Note any shares of Common Stock, if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion or exercise, as applicable, of the Notes and Warrants without breaching the Company’s obligations under the rules or regulations of the applicable Principal Market (the number of shares which may be issued without violating such rules and regulations, the "Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of such Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holders. Unless and until such approval or written opinion is obtained, no purchaser of the Notes pursuant to the Purchase Agreement (the “Purchasers”) shall be issued in the aggregate, upon conversion or exercise or otherwise, as applicable, of Notes or Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of Notes issued to such Purchasers pursuant to the Purchase Agreement on the Closing Date and the denominator of which is the aggregate principal amount of all Notes issued to the Purchasers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such

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transferee. In the event that any holder of Notes shall convert all of such holder’s Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes then held by each such holder.

(d) Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Company at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

(e) Rights Upon Fundamental Transaction and Change of Control.

(i) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this paragraph 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holders and approved by the Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes then outstanding held by such holder, having similar conversion rights and having similar ranking to the Notes, and reasonably satisfactory to the Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market (a “Public Successor Entity”). Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the conversion of the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity), as adjusted in accordance with the provisions of this Note. The provisions of this paragraph shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.

(ii) Redemption Right. No sooner than 20 Trading Days nor later than ten Trading Days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”). At any time during the period beginning after the Holder’s receipt of a Change of Control Notice and ending on 20 Trading Days after the effective date of the Change of Control (the “Effective

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Date”, and such period between the date of the Holder’s receipt of a Change of Control Notice and the date ending on 20 Trading Days after the Effective Date, “Change of Control Redemption/Conversion Period”), the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the principal amount of the Note being redeemed plus all accrued interest thereon and all other amounts due and payable with respect thereto (the “Conversion Amount”) the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this paragraph 5(e) shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the “Change of Control Redemption Price”). Redemptions required by this paragraph 5(e) shall be made in accordance with the provisions of this paragraph 5(e) and shall have priority to payments to stockholders in connection with a Change of Control. To the extent redemptions required by this paragraph 5(e) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this paragraph 5(e), but subject to paragraph 5(c), until the Change of Control Redemption Price (together with any interest thereon) is paid in full, the principal amount submitted for redemption under this paragraph 5(e) (together with any interest thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to paragraph 5.

(iii) Make-Whole Premium.

(A) Upon the occurrence of a Change of Control, the Holder shall be entitled to receive from the Company, on the applicable Change of Control Purchase Date, a Make-Whole Premium, if any, if the Holder converts, in whole or in part, this Note pursuant to paragraph 5 hereof at any time during the Change of Control Redemption/Conversion Period. The Make-Whole Premium shall be equal to an additional number of shares of Common Stock calculated in accordance with paragraph 5(e)(iii)(B) hereof. The Make-Whole Premium will be in addition to, and not in substitution for, any cash, securities or other assets otherwise due to Holder upon conversion as described in this Note. For purposes of paragraph 5 hereof, the “Change of Control Purchase Date” shall mean the Effective Date; provided that with respect to any conversion for which a Conversion Notice is delivered after the Effective Date and during the Change of Control Redemption/Conversion Period, the Change of Control Purchase Date shall mean the date that is three Business Days following the applicable Conversion Date.

(B) The “Make-Whole Premium” shall be equal to the principal amount of the portion of the note being converted divided by $1,000 and multiplied by the applicable number of shares of Common Stock determined by reference to the table below (the “Make-Whole Premium Table”) and is based on the Effective Date and the Stock Price.

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Make-Whole Premium Table

(Number of Additional Shares of Common Stock)


Stock Price/
Effective Date	$3.50		$3.85		$4.20		$4.55		$4.90		$5.25		$5.60		$5.95		$6.30		$6.65		$7.00		$7.35		$7.70		$8.05		$8.40		$8.75	$9.10	$9.45	$9.80	$10.15	$10.50

12/31/2006		119.133		104.543		92.711		82.959		74.809		67.917		62.027		56.948		52.532		48.666		45.257		42.236		39.543		37.130		34.960	32.999	31.221	29.602	28.215	26.771	25.528
12/31/2007		114.372		99.254		87.056		77.054		68.739		61.745		55.801		50.705		46.300		42.466		39.106		36.146		33.525		31.191		29.106	27.234	25.548	24.023	22.641	21.383	20.236
12/31/2008		108.820		92.885		80.084		69.633		60.984		53.743		47.621		42.400		37.917		34.042		30.674		27.733		25.153		22.882		20.876	19.098	17.518	16.110	14.853	13.727	12.717
12/31/2009		103.252		86.470		73.153		62.402		53.583		46.243		40.046		34.746		30.155		26.131		22.564		19.371		16.488		13.866		11.468	9.266	7.237	5.364	3.654	2.042	0.382
12/31/2010		95.392		76.648		62.150		50.824		41.895		34.790		29.081		24.444		20.635		17.467		14.795		12.510		10.530		8.790		7.245	5.857	4.601	3.456	2.408	1.463	0.445
12/31/2011		95.238		69.264		47.619		29.304		13.703		0.000		0.000		0.000		0.000		0.000		0.000		0.000		0.000		0.000		0.000	0.000	0.000	0.000	0.000	0.000	0.000

(iv) The exact Stock Price and Effective Date may not be set forth on the Make-Whole Premium Table, in which case, if the Stock Price is between two Stock Prices on the Make-Whole Premium Table or the Effective Date is between two Effective Dates on the Make-Whole Premium Table, the Make-Whole Premium shall be determined by straight-line interpolation between Make-Whole Premium amounts set forth for the higher and lower Stock Prices and the two Effective Dates, as applicable, based on a 365-day year (or a 366-day year if the Effective Date occurs in a leap year). The Stock Prices set forth in the column headers are subject to adjustment pursuant to paragraph 5(d).

(A) If the Stock Price is less than or equal to $3.50 (subject to adjustment pursuant to paragraph 5(d), the “Stock Price Threshold”), the Make-Whole Premium shall be equal to zero shares of Common Stock.

(B) If the Stock Price is equal to or greater than $10.50 (subject to adjustment pursuant to paragraph 5(d), the “Stock Price Cap”), the Make-Whole Premium shall be equal to zero shares of Common Stock.

(C) “Stock Price” means the price paid per share of Common Stock in the transaction constituting the Change of Control, determined as follows: (i) if holders of Common Stock receive only cash in the transaction constituting the Change of Control, the Stock Price shall equal the cash amount paid per share of Common Stock; and (ii) in all other cases, the Stock Price shall equal the arithmetic average of the Closing Sale Prices of a share of Common Stock over the five (5) Trading Day period ending on the fifth (5^th) Trading Day immediately preceding the Effective Date.

(v) The Company shall pay the Make-Whole Premium solely in shares of Common Stock (other than cash paid in lieu of fractional shares) or in the same form of consideration into which all or substantially all of the shares of Common Stock have been converted or exchanged in connection with the Change of Control. If holders of the Common Stock receive or have the right to receive more than one form of consideration in connection with such Change of Control, then, for purposes of the foregoing, the forms of consideration in which the Make-Whole Premium shall be paid shall be in proportion to the different forms of consideration paid to holders of Common Stock in connection with such Change of Control.

(vi) The Company shall, from time to time, appoint an independent nationally recognized investment bank to serve as calculation agent with respect to calculation of the Make-Whole Premium (the “Calculation Agent”). The Calculation Agent shall, on behalf of and on request by the Company, calculate (1) the Stock Price and (2) the Make-Whole Premium in respect of such Stock Price, based on the Effective Date specified by the Company, and shall deliver its calculation of the Stock Price and Make-Whole Premium to the Company and the Holder within three Business Days of the request by the Company or the Required Holders. The Company, (A) shall notify the Holder of the Stock Price and the estimated Make-Whole Premium per $1,000 of Conversion Amount in respect of a Change of Control as part of the Change of Control Notice and (B) shall notify the holder of the Notes, promptly upon the opening of business on the Effective Date, of the number of shares of Common Stock (or such other securities, assets or property (including cash) into which all or

substantially all of the shares of Common Stock have been converted as of the Effective Date as described above) to be paid in respect of the Make-Whole Premium in connection with such Change of Control, in the manner provided in this Note. The Company shall verify, in writing, all calculations made by the Calculation Agent pursuant to this paragraph 5(e)(vi).

(vii) Adjustment to the Make-Whole Premium. Whenever the Conversion Price shall be adjusted from time to time by the Company pursuant to paragraph 5, the Stock Price Threshold, the Stock Price Cap and each of the Stock Prices set forth in the Make-Whole Premium Table shall be adjusted. The adjusted Stock Price Threshold, Stock Price Cap, and Stock Prices set forth in the Make-Whole Premium Table shall equal such Stock Prices immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Price as so adjusted and the denominator of which is the Conversion Price immediately prior to the adjustment giving rise to such adjustment. Each of the share amounts set forth in the body of the Make-Whole Premium Table shall also be adjusted in the same manner and at the same time.

(viii) If the Holder has submitted a Change of Control Redemption Notice in accordance with paragraph 5(e), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company’s receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note representing the outstanding principal which has not been redeemed. In the event that the Company does not pay the applicable Change of Control Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Change of Control Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Change of Control Redemption Price that has not been paid. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note to the Holder representing the sum of such Conversion Amount to be redeemed together with accrued and unpaid Interest with respect to such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the applicable Change of Control Redemption Notice is voided and (B) the lowest Closing Bid Price of the Common Stock during the period beginning on and including the date on which the applicable Change of Control Redemption Notice is delivered to the Company and ending on and including the date on which the applicable Change of Control Redemption Notice is voided.

(f) Certain Events. If any event occurs of the type contemplated by the provisions of this paragraph 5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of each Holder; provided, that no such adjustment shall increase the Conversion Price as otherwise determined pursuant to this paragraph 5 or decrease the number of shares of Conversion Stock issuable upon conversion of the Notes then outstanding.

(g) Notices.

(i) Immediately upon any adjustment of the Conversion Price, the Company shall send written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment.

(ii) The Company shall send written notice to the Holder at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Change, dissolution or liquidation.

(iii) The Company shall also give at least 20 days prior written notice of the date on which any Fundamental Change, dissolution or liquidation shall take place.

(h) Mandatory Conversion.

(i) Subject to paragraph 5(c), if at any time from and after December 22, 2009, the Weighted Average Price of the Common Stock for each of 20 consecutive Trading Days (the “Mandatory Conversion Measuring Period”) equals or exceeds 200% of the Conversion Price and there is not then an Equity Conditions Failure, the Company shall have the right to require the Holder to convert up to 100% of the outstanding principal amount then remaining under this Note, in each case as designated in the Mandatory Conversion Notice (as defined below) into fully paid, validly issued and nonassessable shares of Common Stock in accordance with paragraph 5(a) hereof at the Conversion Rate as of the Mandatory Conversion Date (as defined below) (a “Mandatory Conversion”).

(ii) The Company may exercise its right to require conversion under this paragraph 5(h) by delivering within not more than three Trading Days following the end of such Mandatory Conversion Measuring Period a written notice thereof to all, but not less than all, of the holders of Notes (the “Mandatory Conversion Notice” and the date all of the holders received such notice is referred to as the “Mandatory Conversion Notice Date”). The Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall state (w) the Trading Day selected for the Mandatory Conversion in accordance with paragraph 5(h)(i), which Trading Day shall be no later than five Business Days following the Mandatory Conversion Notice Date (the “Mandatory Conversion Date”), (x) the aggregate principal amount of the Notes subject to mandatory conversion from the Holder and all of the other holders of the Notes pursuant to this paragraph 5(i) (and analogous provisions under such other Notes), (y) the number of shares of Common Stock to be issued to such Holder on the Mandatory Conversion Date, and (z) certify that there is not then an Equity Conditions Failure.

(iii) If the Company elects to cause a conversion of any principal amount of this Note pursuant to this paragraph 5(h), then it must simultaneously take the same action in the same proportion with respect to the other Notes. If the Company elects a Mandatory Conversion of this Note pursuant to this paragraph 5(h) (or similar provisions under the other Notes) with respect to less than all of the principal amount of the Notes then outstanding, then the Company shall require conversion of a principal amount from each of the holders of the Notes equal to the product of (x) the aggregate principal amount of Notes which the Company has elected to cause to be converted pursuant to this paragraph 5(h), multiplied by (y) a fraction, the numerator of which is the principal amount of the Notes held by such holder and the denominator of which is the aggregate principal amount of the Notes then outstanding.

6. Dividends. If the Company declares a cash dividend upon the Common Stock (a “Dividend”), then the Company shall pay to the holders of the Notes at the time of payment thereof the Dividend which would have been paid to the Holder on the Conversion Stock had this Note been fully converted immediately prior to the date on which a record is taken for such Dividend (without regard to any limitations on conversion contained herein), or, if no record is taken, the date as of which the record holders of Common Stock entitled to such Dividends are to be determined.

7. Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then each holder of the Notes shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Conversion Stock acquirable upon conversion of such holder’s Note immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights (without regard to any limitations on conversion herein or elsewhere), or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

8. Amendment and Waiver. Except as otherwise expressly provided herein, the provisions of the Notes may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of at least a majority of the outstanding principal amount of the Notes; provided that no such action shall change (i) the rate at which or the manner in which interest accrues on the Notes or the times at which such interest becomes payable, (ii) any provision relating to the scheduled payments or prepayments of principal on the Notes, (iii) the Conversion Price of the Notes or the number of shares or the class of stock into which the Notes are convertible or (iv) any provision of this paragraph 8, without the written consent of the holders of at least 75% of the outstanding principal amount of the Notes.

9. Definitions. For purposes of the Notes, the following terms have the respective meaning set forth in this paragraph 9.

“2002 Investment and Royalty Agreement” means that Investment and Royalty Agreement dated July 31, 2002, by and among the Company and PharmaBio, as amended by the Letter Agreement dated January 26, 2004.

“2003 Investment and Royalty Agreement” means that Investment and Royalty Agreement dated March 5, 2003, by and between the Company and PharmaBio, as amended by the Letter Agreement dated January 26, 2004 and the Letter Agreement dated April 14, 2006.

“Bloomberg” means Bloomberg Financial Markets.

"Capital Stock” means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, in respect of partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.

“Change of Control” means any Fundamental Transaction other than (i) any reorganization, recapitalization or reclassification of the Common Stock or business combination in which the Company is the publicly traded surviving entity in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification or business combination continue after such reorganization, recapitalization or reclassification or business combination to hold publicly traded securities, or (ii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company. Notwithstanding anything in this Note to the contrary, a merger or consolidation shall not be deemed to constitute a “Change of Control” if at least 90% of the consideration (excluding cash payments for fractional shares and cash payments pursuant to dissenters’ appraisal rights) in the merger or consolidation consists of shares of Capital Stock that are listed on, or immediately after the transaction will be listed on, any Eligible Market and as a result of such transaction the obligations of the Company under the Notes are expressly assumed by the Person issuing such consideration in such merger or consolidation and any Notes surrendered for conversion would become convertible into such publicly traded securities.

“Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to paragraph 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

“Common Stock” means the Company’s Common Stock, par value $0.01 per share.

“Convertible Securities” means any stock or securities (directly or indirectly) convertible into or exchangeable for Common Stock.

“Conversion Stock” means shares of the Company’s authorized but unissued Common Stock; provided, that if there is a change such that the securities issuable upon conversion of the Notes are issued by an entity other than the Company or there is a change in the class of securities so issuable, then the term “Conversion Stock” shall mean one share of the security issuable upon conversion of this Note if such security is issuable in shares, or shall

mean the smallest unit in which such security is issuable if such security is not issuable in shares.

“Eligible Market” means The NASDAQ Global Market, The New York Stock Exchange, Inc., the American Stock Exchange, The NASDAQ Capital Market or The NASDAQ Global Select Market.

“Equity Conditions” means that either (a) the Registration Statement filed pursuant to the Purchase Agreement shall be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the Purchase Agreement or (b) all shares of Common Stock issuable upon conversion of the Notes shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws.

“Equity Conditions Failure” means that on any day during the period commencing ten Trading Days prior to the applicable Mandatory Conversion Notice Date through the applicable Mandatory Conversion Date, the Equity Conditions have not been satisfied (or waived in writing by the Holder).

“Fundamental Transaction” means that (A) the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person or Persons, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common Stock, or (B) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate Voting Stock of the Company.

“Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered

thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (viii) all contingent obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.

“Interest Rate” means (i) initially 8% per annum and (ii) following the Company’s receipt of Preterm Approval, 5% per annum.

“Lien” means any mortgage, lien, pledge, charge, security interest or other encumbrance.

“Market Price” means on any particular date:

(a) if the Common Stock is traded on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market (or their successors) the average of the closing prices of the Common Stock on such market over the five trading days ending immediately prior to the applicable date of valuation;

(b) if the Common Stock is traded on any registered national stock exchange but is not traded on the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (or their successors), the average of the closing prices of the Common Stock on such exchange over the five trading days ending immediately prior to the applicable date of valuation;

(c) if the Common Stock is traded over-the-counter, but not on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or a registered national stock exchange, the average of the closing bid prices over the 30-day period ending immediately prior to the applicable date of valuation; and

(d) if there is no active public market for the Common Stock, the value thereof, as determined in good faith by the Board of Directors of the Company upon due consideration of the proposed determination thereof by the Holder.

“Options” means any rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

“Permitted Indebtedness” of any Person means (i) all Indebtedness of a type set forth in clause (ii) of the definition of Indebtedness, (ii) all Indebtedness of a type set forth in clause (iii) of the definition of Indebtedness and incurred in the ordinary course of business, (iii) unsecured Indebtedness between the Company and any of its Subsidiaries or between

Subsidiaries, and (iv) any other Indebtedness in an aggregate original principal amount not to exceed $4,000,000 at any one time outstanding.

“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent or that is being contested in good faith by appropriate proceedings, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment or other fixed asset (together “equipment”) acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, and (viii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under paragraph 4(a)(iv), (ix) rights of setoff or bankers’ Liens upon deposits of cash, (x) Liens consisting of deposits made in the ordinary course of business, (xi) Liens arising by operation of law under Article 4 of the Uniform Commercial Code, (xii) Liens on property not securing Indebtedness for borrowed money, which do not interfere in any material respect with the Company’s or any Subsidiary’s use thereof in the ordinary course of business, and (xiii) Liens securing the Senior Debt.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“PharmaBio” means PharmaBio Development Inc., a corporation organized under the laws of the State of North Carolina, and its successors and assigns.

“Preterm Approval” means approval by the United States Food and Drug Administration to the new drug application, amendment or supplement for permitting the marketing of progesterone gel 8% for the prevention of recurrent preterm birth.

“Principal Market” means the principal securities exchange or securities market on which the Common Stock is then traded.

“Senior Debt” means (i) the total royalties payable by the Company to PharmaBio pursuant to Section 2.3 of the 2003 Investment and Royalty Agreement up to an aggregate amount of $30,000,000, (ii) the Repayment Amount (as defined in the 2003 Investment and Royalty Agreement), if any, owing by the Company to PharmaBio pursuant to Section 2.2 of the 2003 Investment and Royalty Agreement, and (iii) the total royalties payable

by the Company to PharmaBio pursuant to Section 2.2 of the 2002 Investment and Royalty Agreement up to an aggregate amount of $8,000,000.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.

“Successor Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, Successor Entity shall mean such Person’s Parent Entity.

“Trading Day” means any day on which the Common Stock is traded on the Principal Market, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time) and, for purposes of the definition of “Weighted Average Price”, includes the period from the official open of trading to the official close of trading on the relevant market.

“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

“Weighted Average Price” means, for the Common Stock as of any date, the dollar volume-weighted average price for the Common Stock on the Principal Market during such Trading Day, as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock during such Trading Day as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for the Common Stock by Bloomberg for such Trading Day, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for the Common Stock as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

10. Reservation of Authorized Shares.

(a) The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 100% of the Conversion Rate with respect to the principal amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the principal amount of the Notes held by each holder at the Closing (as defined in the Purchase Agreement) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.

(b) If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 90 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in (the “Authorized Share Failure Deadline”), the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. During all or part of any thirty-day period (the “Authorized Share Failure Payment Period”) during which the Authorized Share Failure remains uncured, the Company shall pay to each holder 1% of such holder’s principal amount of his or her Notes for each Authorized Share Failure Payment Period during which the Authorized Share Failure remains uncured.

11. Covenants.

(a) All payments due under this Note shall rank pari passu with all Other Notes and shall be senior to all other Indebtedness of the Company and its Subsidiaries, other than the Senior Debt and Permitted Indebtedness.

(b) So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness that would rank senior or pari passu to the Notes,

other than (i) the Indebtedness evidenced by this Note and the Other Notes, (ii) the Senior Debt and (iii) Permitted Indebtedness.

(c) So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any Lien, other than Permitted Liens.

12. Notice by the Company. The Company shall send Notice to the Holder of the Company’s receipt of the Preterm Approval within ten business days of its receipt thereof.

13. Transfers. The Company shall maintain a register for recording the ownership and the transfer of the Notes. Upon surrender of this Note for registration of transfer or for exchange to the Company at its principal office, the Company at its sole expense shall execute and deliver in exchange therefor a new Note or Notes, as the case may be, as requested by the holder or transferee, which aggregate the unpaid principal amount of such Note, registered as such holder or transferee may request, dated so that there will be no loss of interest on such surrendered Note and otherwise of like tenor. The issuance of new Note(s) shall be made without charge to the holder(s) of the surrendered Note for any issuance tax in respect thereof or other cost incurred by the Company in connection with such issuance; provided that the Holder shall pay any transfer taxes associated therewith. The Company shall be entitled to regard the registered holder of this Note as the owner and holder of the Notes so registered for all purposes until the Company is required to record a transfer of this Note on its register.

14. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction of this Note, upon receipt of an indemnity reasonably satisfactory to the Company (provided that, if the holder of this Note is a financial institution, its own unsecured agreement shall be satisfactory) or, in the case of any such mutilation, upon the surrender and cancellation of this Note, the Company, at its expense, shall execute and deliver, in lieu thereof, a new Note of like tenor and dated the date of such lost, stolen, destroyed or mutilated Note. Any Note in lieu of which any such new Note has been so executed and delivered by the Company shall not be deemed to be an outstanding Note.

15. Waivers. The Company hereby waives presentation for payment, demand, notice of nonpayment and notice of protest with respect to this Note.

16. Cancellation. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued.

17. Form of Payments. All payments to be made to the holders of the Notes shall be made in the lawful money of the United States of America in immediately available funds, with no offsets against or withholding from any payments due hereunder.

18. Place of Payment. Payments of principal and interest shall be delivered to at the following address:

or to such other address or to the attention of such other person as specified by prior written notice to the Company.

19. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Note shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Holder and to the Company at the respective addresses indicated below:

If to the Company:

Columbia Laboratories, Inc.
354 Eisenhower Parkway
Livingston, New Jersey 07039
Telecopier No.: (973) 994-3001
Telephone No.: (973) 994-3999
Attention: General Counsel

With a copy to:

Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Telecopier No.: (212) 836-8689
Telephone No.: (212) 836-8673
Attention: Adam H. Golden, Esq.

If to the Holder:

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

20. Business Days. If any payment is due, or any time period for giving notice or taking action expires, on a day which is a Saturday, Sunday or legal holiday in the State of New York, the payment shall be due and payable on, and the time period shall automatically be extended to, the next business day immediately following such Saturday, Sunday or legal holiday, and interest shall continue to accrue at the required rate hereunder until any such payment is made.

21. Governing Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of

New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

22. Usury Laws. It is the intention of the Company and the Holder to conform strictly to all applicable usury laws now or hereafter in force, and any interest payable under this Note shall be subject to reduction to the amount not in excess of the maximum legal amount allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. If the maturity of this Note is accelerated by reason of an election by the Holder resulting from an Event of Default, voluntary prepayment by the Company or otherwise, then earned interest may never include more than the maximum amount permitted by law, computed from the Issuance Date until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the option of the Holder either be rebated to the Company or credited on the principal amount of this Note, or if this Note has been paid, then the excess shall be rebated to the Company. The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the maximum legal rate upon the unpaid principal balance of this Note remaining unpaid from time to time. If such interest does exceed the maximum legal rate, it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to the Company or credited on the principal amount of this Note, or if this Note has been repaid, then such excess shall be rebated to the Company.

23. Dispute Resolution. In the case of a dispute as to the determination of a Market Price, the Closing Bid Price, the Closing Sale Price, Change of Control Redemption Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two Business Days of receipt, or deemed receipt, of the applicable notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within two Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two Business Days submit via facsimile (a) the disputed determination of a Market Price, the Closing Bid Price, the Closing Sale Price, Change of Control Redemption Price or the Weighted Average Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate to the Company’s independent, outside accountant. The Company, at the Company’s expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

* * *

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has executed and delivered this Note on December 22, 2006.

Convertible Subordinate Note Signature Page

ANNEX A

COLUMBIA LABORATORIES, INC.
CONVERSION NOTICE

Reference is made to the Convertible Subordinated Note (the “Note”) issued to the undersigned by Columbia Laboratories, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the principal amount of the Note indicated below into shares of Common Stock par value $0.01 per share (the “Common Stock”) of the Company, as of the date specified below.


		Date of Conversion:


		Aggregate Principal Amount to be converted:


Please confirm the following information:

		Conversion Price:


		Number of shares of Common Stock to be issued:


Please issue the Common Stock into which the Note is being converted in the following name and to the following address:


		Issue to:


		Facsimile Number:


		Authorization:


				By:


				Title:


Dated:


		Account Number:

		(if electronic book entry transfer)

		Transaction Code Number:

		(if electronic book entry transfer)

A-1

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs American Stock Transfer & Trust Company to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated December 21, 2006 from the Company and acknowledged and agreed to by American Stock Transfer & Trust Company.


	COLUMBIA LABORATORIES, INC.
	By:
		Name:
		Title:

A-2

EX-4.2 3 y28284exv4w2.htm EX-4.2: FORM OF WARRANT TO PURCHASE COMMON STOCK EX-4.2

Exhibit 4.2

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. THE COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.

COLUMBIA LABORATORIES, INC.

WARRANT TO PURCHASE COMMON STOCK



No. W-		December 22, 2006

Void After December 22, 2011

This Certifies That, for value received, , with its principal office at , or its permitted assigns (the “Holder”), is entitled to subscribe for and purchase at the Exercise Price (defined below) from Columbia Laboratories, Inc., a Delaware corporation, with its principal office at 354 Eisenhower Parkway, Livingston, New Jersey 07039 (the “Company”), up to shares of common stock of the Company, par value $0.01 per share (the “Common Stock”), subject to adjustment as provided herein. This Warrant is one of a series of Warrants being issued pursuant to the terms of the Securities Purchase Agreement (the “SPA Warrants”), as of December 22, 2006, by and among the Company and the original Holder of this Warrant and the other parties named therein (the “Purchase Agreement”). Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to such terms in the Purchase Agreement.

1. Definitions. As used herein, the following terms shall have the following respective meanings:

(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(b) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade

price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

(c) “Exercise Period” shall mean the period commencing 180 days after the date hereof and ending at 5:00 p.m., New York time, on December 22, 2011, unless sooner exercised or terminated as provided below.

(d) “Exercise Price” shall mean $5.50 per share, subject to adjustment pursuant to Section 5 below.

(e) “Exercise Shares” shall mean the shares of the Common Stock issued upon exercise of this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to adjustment pursuant to Section 5 below.

(f) “Principal Market” means the principal securities exchange or securities market on which the Common Stock is then traded.

(g) “SPA Securities” means the Notes issued pursuant to the Purchase Agreement.

(h) “Trading Day” means any day on which the Common Stock is traded on the Principal Market; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

2. Exercise of Warrant.

2.1 Method of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 2.5), this Warrant may be exercised by the Holder at any time during the Exercise Period, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant to the Company and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of shares of Common Stock as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of immediately available funds or (B) by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 2.3). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Common Stock shall have the same effect as cancellation of the original Warrant and

issuance of a new Warrant evidencing the right to purchase the remaining number of Exercise Shares. On or before the first Business Day following the date on which the Company has received each of the Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the “Exercise Delivery Documents”), the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business Day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of Exercise Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Exercise Shares to which the Holder is entitled pursuant to such exercise which certificates shall not bear any restrictive legends unless required pursuant to Section 3.6 of the Purchase Agreement. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Exercise Shares with respect to which this Warrant has been exercised, irrespective of the date such Exercise Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Exercise Shares as the case may be. If this Warrant is submitted in connection with any exercise pursuant to this Section 2.1 and the number of Exercise Shares represented by this Warrant submitted for exercise is greater than the number of Exercise Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 2.4) representing the right to purchase the number of Exercise Shares purchasable immediately prior to such exercise under this Warrant, less the number of Exercise Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant. Fractional shares shall be treated as provided in Section 6. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Exercise Shares upon exercise of this Warrant.

2.2 Company’s Failure to Timely Deliver Securities. If within three Trading Days after the Company’s receipt of the facsimile copy of a Exercise Notice the Company shall fail to issue and deliver a certificate to the Holder and register such Exercise Shares on the Company’s share register or credit the Holder’s balance account with DTC for the number of Exercise Shares to which the Holder is entitled upon such holder’s exercise hereunder or if the Company fails to deliver to the Holder the certificate or certificates representing the applicable Exercise Shares (or credit the Holder’s balance account at DTC with the applicable Exercise Shares) within three Trading Days after its obligation to do so under clause (ii) below and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Exercise Shares issuable upon such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Exercise Shares) or credit such Holder’s balance account with DTC shall terminate, or (ii) promptly honor its obligation to deliver to the

Holder a certificate or certificates representing such Exercise Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Exercise Shares, times (B) the Closing Bid Price on the date of exercise.

2.3 Cashless Exercise. Notwithstanding any provisions herein to the contrary, if, at any time during the Exercise Period, the Current Market Price (as defined below) of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise and the Company shall issue to the Holder a number of Exercise Shares computed using the following formula:


	X =	Y (B-A)
		B

Where:	X =	the number of Exercise Shares to be issued to the Holder.

	Y =	the number of Exercise Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.

A = the Exercise Price.

B = the Current Market Price of one share of Common Stock.

“Current Market Price” means on any particular date:

(a) if the Common Stock is traded on the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (or their successors), the average of the closing prices of the Common Stock of the Company on such market over the five trading days ending immediately prior to the applicable date of valuation;

(b) if the Common Stock is traded on any registered national stock exchange but is not traded on the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (or their successors), the average of the closing prices of the Common Stock of the Company on such exchange over the five trading days ending immediately prior to the applicable date of valuation;

(c) if the Common Stock is traded over-the-counter, but not on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or a registered national stock exchange, the average of the closing bid prices over the 30-day period ending immediately prior to the applicable date of valuation; and

(d) if there is no active public market for the Common Stock, the value thereof, as determined in good faith by the Board of Directors of the Company upon due consideration of the proposed determination thereof by the Holder.

2.4 Partial Exercise. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant, execute and deliver, within 10 days of the date of exercise, a new Warrant evidencing the rights of the Holder, or, subject to Section 8, such other

person as shall be designated in the Notice of Exercise, to purchase the balance of the Exercise Shares purchasable hereunder. In no event shall this Warrant be exercised for a fractional Exercise Share, and the Company shall not distribute a Warrant exercisable for a fractional Exercise Share. Fractional shares shall be treated as provided in Section 6.

2.5 Limitations on Exercise.

(a) The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of 9.99% of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written request of the Holder, the Company shall within one Business Day confirm in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the SPA Securities and the SPA Warrants, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

(b) The Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant, if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue upon exercise, redemption or conversion, as applicable, of the SPA Warrants and SPA Securities or otherwise without breaching the Company’s obligations under the rules or regulations of the applicable Principal Market (the number of shares which may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the applicable Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders. Unless and until such approval or written opinion is obtained, no Holder shall be issued in the aggregate, upon exercise or conversion, as applicable, of any SPA Warrants or SPA Securities, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the total number of shares of Common Stock underlying

the SPA Warrants issued to such Holder pursuant to the Purchase Agreement on the Issuance Date and the denominator of which is the aggregate number of shares of Common Stock underlying the SPA Warrants issued to the Purchasers pursuant to the Purchase Agreement on the Issuance Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event that any Holder shall sell or otherwise transfer any of such Holder’s SPA Warrants, the transferee shall be allocated a pro rata portion of such Holder’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any Holder of SPA Warrants shall exercise all of such Holder’s SPA Warrants into a number of shares of Common Stock which, in the aggregate, is less than such Holder’s Exchange Cap Allocation, then the difference between such Holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such Holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of SPA Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the SPA Warrants then held by each such holder. In the event that the Company is prohibited from issuing any Warrant Shares for which an Exercise Notice has been received as a result of the operation of this Section 2.5(b), the Company shall pay cash in exchange for cancellation of such Warrant Shares, at a price per Warrant Share equal to the difference between the Closing Sale Price and the Exercise Price as of the date of the attempted exercise.

2.6 Insufficient Authorized Shares. If at any time while any of the Warrants remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of the Warrants at least a number of shares of Common Stock equal to 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Warrants then outstanding (the “Required Reserve Amount”) (such event an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 90 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

3. Covenants of the Company.

3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its

authorized but unissued shares of Common Stock (or other securities as provided herein) to such number of shares as shall be sufficient for such purposes.

3.2 Notices of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least ten days prior to the date specified herein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution.

4. Representations of Holder.

4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a present view toward the public sale or distribution of said Warrant or Exercise Shares or any part thereof and has no intention of selling or distributing said Warrant or Exercise Shares or any arrangement or understanding with any other persons regarding the sale or distribution of said Warrant or, except in accordance with the provisions of Article 6 of the Purchase Agreement, the Exercise Shares, and except as would not result in a violation of the Securities Act. The Holder will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) the Warrant except in accordance with the Securities Act and will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) the Exercise Shares except in accordance with the provisions of Article 6 of the Purchase Agreement or pursuant to and in accordance with the Securities Act.

4.2 Securities Are Not Registered.

(a) The Holder understands that the offer and sale of the Warrant or the Exercise Shares have not been registered under the Securities Act on the basis that no distribution or public offering of the Securities of the Company is to be effected and/or pursuant to specific exemptions from the registration provisions of the Securities Act, which exemptions depend upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. The Holder realizes that the basis for such exemptions may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder represents and warrants that it has no such present intention.

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or, except as provided in the Purchase Agreement, the Exercise Shares of the Company, or to comply with any exemption from such registration.

4.3 Disposition of Warrant and Exercise Shares.

(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until:

(i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or

(ii) If reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Securities Act or any applicable state securities laws; provided, that no opinion shall be required for any disposition made or to be made in accordance with the provisions of Rule 144.

(b) The Holder understands and agrees that all certificates evidencing the Exercise Shares to be issued to the Holder may bear a legend in substantially the following form:

5. Adjustments. In the event of changes in the outstanding Common Stock of the Company by reason of any stock split, stock dividend, recapitalization, reclassification, combination or exchange of shares, reorganization, liquidation, dissolution, consolidation or merger effected by the Company, the number and class of shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class and kind of shares or other property, including cash, as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. The form of this Warrant need not be changed because of any adjustment in the Exercise Price and/or number, class and kind of shares subject to this Warrant. The Company shall promptly provide a certificate from its Chief Financial Officer notifying the Holder in writing of any adjustment in the Exercise Price and/or the total number, class and kind of shares issuable upon exercise of this Warrant, which certificate shall specify the Exercise Price and number, class and kind of shares under this Warrant after giving effect to such adjustment. For the avoidance of doubt, if necessary to effectuate the provisions of this paragraph 5, any successor to the Company or surviving entity in a reorganization, consolidation or merger effected by the Company shall deliver to the Holder confirmation (or a new warrant to the effect) that such successor or surviving entity shall have all of the obligations of the Company under this Warrant with the same effect as if such successor or surviving entity had been named as the Company herein, and that there shall be

issued upon exercise of this Warrant (or a new warrant) at any time after the consummation of such reorganization, consolidation or merger, in lieu of the shares of Common Stock issuable upon the exercise of this Warrant prior to such transaction, the total number, class and kind of shares or other property, including cash, as the Holder would have owned had the Warrant been exercised prior to such transaction and had the Holder continued to hold such shares until after such transaction.

6. Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the fair market value of the Common Stock on the date of exercise of this Warrant by such fraction.

7. No Stockholder Rights. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

8. Transfer of Warrant. Subject to applicable laws and compliance with Section 4.3, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by Holder.

8.1 Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of shares of Common Stock without having a new Warrant issued.

8.2 If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.

9. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual

obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.

10. Modifications and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and (i) Purchasers holding Warrants representing at least a majority of the number of Exercise Shares then issuable upon exercise of any then unexercised Warrants sold in the Offering, provided, however, that such modification, amendment or waiver is made with respect to all unexercised Warrants issued in the Offering and does not adversely affect the Holder without adversely affecting all holders of Warrants in a similar manner; or (ii) the Holder.

11. Notices, etc. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed email, telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holders at the addresses on the Company records, or at such other address as the Company or Holder may designate by ten days’ advance written notice to the other party hereto.

12. Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

13. Governing Law. This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of New York without regard to the principles of conflict of laws.

14. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.

15. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

16. Entire Agreement. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

17. Remedies, Other Obligations, Breaches And Injunctive Relief. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder right to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such

10.

breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

[Signature Page Follows]

11.

In Witness Whereof, the Company has caused this Warrant to be executed by its duly authorized officer as of December 22, 2006.


		COLUMBIA LABORATORIES, INC.

		By:

		Name: Robert S. Mills
		Title: President and Chief Executive Officer
		Address:				354 Eisenhower Parkway
						Livingston, New Jersey 07039
						Attention: General Counsel
						Facsimile: (973) 994-3001

12.

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

COLUMBIA LABORATORIES, INC.

The undersigned holder hereby exercises the right to purchase of the shares of Common Stock (“Exercise Shares”) of Columbia Laboratories, Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:

a “Cash Exercise” with respect to Exercise Shares; and/or

a “Cashless Exercise” with respect to Exercise Shares.

2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Exercise Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant.

3. Delivery of Exercise Shares. The Company shall deliver to the holder Exercise Shares in accordance with the terms of the Warrant.

Date: ,



Name of Registered Holder

By:

		Name:
		Title:

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and, if applicable, hereby directs American Stock Transfer & Trust Company to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated December 21, 2006 from the Company and acknowledged and agreed to by American Stock Transfer & Trust Company.


	COLUMBIA LABORATORIES, INC.
	By:
		Name:
		Title:

ASSIGNMENT FORM

(To assign the foregoing Warrant, subject to
compliance with Section 4.3, execute this form and
supply required information. Do not use this form
to purchase shares.)

For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby assigned to


Name:

(Please Print)


Address:

(Please Print)

Dated: , 20__


Holder’s
Signature:


Holder’s
Address:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-10.68 4 y28284exv10w68.htm EX-10.68: AGREEMENT DATED 12-21-2006* EX-10.68

CONFIDENTIAL TREATMENT REQUESTED

CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND NOTED WITH “***.” AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION.

Exhibit 10.68

AGREEMENT

THIS AGREEMENT (this “Agreement”) is entered into as of December 21, 2006, by and among Ares Trading S.A., a company constituted and existing under the laws of Switzerland (“Ares”), Serono, Inc., a corporation organized and existing under the laws of the State of Delaware (“Serono”), Columbia Laboratories, Inc., a corporation organized and existing under the laws of the State of Delaware (“Columbia”), and Columbia Laboratories (Bermuda), Ltd., a corporation organized and existing under the laws of Bermuda (“Columbia Bermuda”). Each of Ares, Serono, Columbia and Columbia Bermuda shall be a “Party” and are collectively referred to herein as the “Parties.”

RECITALS

WHEREAS, Ares and Columbia Bermuda are parties to that certain Amended and Restated License and Supply Agreement (as defined herein);

WHEREAS, Ares, Serono, Columbia and Columbia Bermuda are parties to that certain Marketing License Agreement (as defined herein);

WHEREAS, pursuant to the Amended and Restated License and Supply Agreement, Columbia Bermuda has granted to Ares an exclusive license to market, use and sell the Product (as defined herein) in the Territory, and has agreed to supply the Product to Ares in the Territory;

WHEREAS, pursuant to the Marketing License Agreement, Serono has granted to Columbia an exclusive license to promote the Product in the United States to the Non-Fertility Specialist Market (as defined in the Marketing License Agreement) and sell the Product in the United States; and

WHEREAS, the Parties wish to (1) amend the Amended and Restated License and Supply Agreement to terminate Ares’s U.S. rights under the Amended and Restated License and Supply Agreement and (2) terminate the Marketing License Agreement, on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

DEFINITIONS

(a)		In addition to the terms defined above and elsewhere in this Agreement, when used in this Agreement, the following capitalized terms have the meanings set forth in this Article 1.

1.1		“Adverse Event” means any serious untoward medical occurrence in a patient or subject who is administered the Product, but only if and to the extent that such

		serious untoward medical occurrence is required under applicable laws, rules and regulations to be reported to any Governmental Authority.

1.2		“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. For the purposes of this definition, control shall mean the direct or indirect ownership of (a) in the case of corporate entities, securities authorized to cast more than fifty percent (50%) of the votes in any election for directors, or (b) in the case of non-corporate entities, more than fifty percent (50%) ownership interest with the power to direct the management and policies of such non-corporate entity.

1.3		“Agreement” means this Agreement and all exhibits and schedules attached hereto.

1.4		“Amended and Restated License and Supply Agreement” means the Amended and Restated License and Supply Agreement dated as of June 4, 2002 by and between Columbia Bermuda and Ares, amending and restating that License and Supply Agreement dated as of May 20, 1999.

1.5		“Assigned Assets” shall mean all Inventory.

1.6		“Assignment and Royalty Agreement” means Section 4.2 of that Assignment and Royalty Agreement dated as of May 27, 1999 by and between American Home Products Corporation, represented by its Wyeth-Ayerst Laboratories Division (“AHPC”) and Ares.

1.7		“Business Day” means any day except a Saturday, Sunday or a day on which a commercial bank in Geneva, Switzerland or New York City is authorized to close.

1.8		“BWH” means Brigham and Women’s Hospital.

1.9		“BWH Study” means the infertility study sponsored by Serono at the BWH.

1.10		“BWH Study Data” means all technical, scientific, biological, pharmacological and toxicological data related to the Product that was or is generated by or derived from the BWH Study, which is owned by Serono or its Affiliates.

1.11		“BWH Study Protocol” means the scientific protocol for the BWH Study approved by Serono or its Affiliates.

1.12		“Chargebacks” shall mean credits, chargebacks, reimbursements, administrative fees and other payments to wholesalers and other distributors, group purchasing organizations, insurers and other institutions.

1.13		“Control” or “Controlled” means, with respect to any Intellectual Property or other intangible property, the possession (whether by license or ownership, or by control over an Affiliate having possession by license or ownership) by a Party of

		the ability to grant to the other Party access and/or a license or sublicense as provided herein.

1.14		“Crinone” means the Product sold under the brand name Crinone^®.

1.15		“Crinone NDA” means new drug application #20-701 for Crinone/Prochieve owned by Columbia and approved by the FDA, and all amendments and supplements thereto.

1.16		“FDA” means the U.S. Food and Drug Administration, and any successor agency thereto.

1.17		“Finished Goods” means Product purchased by Ares under the License and Supply Agreement.

1.18		“Governmental Authority” means any federal, regional, state, provincial, local or other government, any national, regional, state, provincial, local or other court of competent jurisdiction, legislature, governmental, administrative or regulatory agency, department, body, bureau, council or commission or any other national, regional, state, provincial, local or other governmental authority or instrumentality, including the FDA Division of Drug Marketing, Advertising and Communications (DDMAC), other FDA offices, or their foreign equivalents.

1.19		“Intellectual Property” means all (a) Patents; (b) copyrights in works of authorship of any type, including computer software and industrial designs, registrations and applications for registration thereof; (c) trademarks (both registered and common law) and trademark registrations, applications and renewals and domain names and all goodwill associated therewith; and (d) trade secrets, know-how, ideas, concepts, formulas, methods, procedures, designs, compositions, plans, documents, data, inventions, discoveries, works of authorship, compounds and biological materials and other confidential or proprietary technical, business and other information, and all rights in any jurisdiction to limit the use or disclosure thereof.

1.20		“Inventory” or “Inventories” mean all inventories of Finished Goods held by Ares or its Affiliates bearing lot number C06107 as of the Closing Date for sale in the U.S., whether then in the possession of Ares or an Affiliate thereof or in the possession of, or in transit to, any distribution center of Ares or an Affiliate thereof as of such date.

1.21		“Inventory Unit” shall mean a set of eighteen (18) applicators of the Product in Inventory.

1.22		“Law” means any applicable declaration, decree, directive, legislative enactment, order, ordinance, law, regulation, rule, guidance or other binding restriction of or by any Governmental Authority, as amended from time to time.

1.23		“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable, including those arising under any Laws, action or governmental order and those arising under any contract, agreement, arrangement, commitment or undertaking, or otherwise.

1.24		“Liens” means any liens, hypothecations, mortgages, charges, security interests, pledges, defects of title and other similar encumbrances, in each case whether absolute, contingent, accrued or otherwise.

1.25		“Losses” means any and all Liabilities, damages, fines, penalties, deficiencies, losses and expenses (including interest, court costs, amounts paid in settlement, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment); provided, however, that the term “Losses” shall not include any special, consequential, indirect, punitive, provisional or similar damages, except to the extent actually paid by a Party pursuant to any Third Party Claim.

1.26		“Marketing License Agreement” means the Marketing License Agreement dated as of June 4, 2002 by and among Columbia Bermuda, Columbia, Ares and Serono.

1.27		“Patents” means all patents, patent applications, additions, reissues, renewals, registrations, divisions, continuations, continuations-in-part, continued prosecution applications, substitutions, extensions and reexaminations thereof.

1.28		“Person” means any individual, firm, corporation, partnership, limited liability company, trust, unincorporated organization or other entity or a government agency or political subdivision thereto, and shall include any successor (by merger or otherwise) of such Person.

1.29		“Product” means and collectively refers to progesterone/COL-1620 vaginal gel containing progesterone in a concentration of four percent (4%) or eight percent (8%).

1.30		“Product B” shall have the meaning attributed to it in the Amended and Restated License and Supply Agreement.

1.31		“Product Marketing Materials” means all marketing, advertising and promotional materials of Ares, Serono or their respective Affiliates that are used, or held for use, solely in connection with the Product in the U.S. and that are in existence as of the Closing Date.

1.32		“Regulatory Approval” means the technical, medical, scientific and other applicable licenses, registrations, authorizations, approvals and other requirements of any Governmental Authority necessary for the development, manufacture, distribution, marketing, promotion, offer for sale, use, import, export or sale of the Product solely and exclusively for the U.S.

1.33		“Serono Intellectual Property” means any Intellectual Property Controlled by Ares, Serono and/or their respective Affiliates, in each case related to the Product.

1.34		“Serono Product Tradedress” means the current trade dress of Crinone^® in the U.S., to the extent owned, controlled or licensed by Ares and/or Serono, including, but not limited to, product packaging associated with the sale of Crinone^® in the U.S. and the lettering of Crinone^®’s trade name or brand name in the U.S.

1.35		“Serono Product Trademarks” means, to the extent owned, controlled or licensed by Ares and/or Serono, the trademarks, proprietary names or designations currently used by Serono in the U.S. for Crinone^®, including registrations and applications for registration therefor (and all renewals, modifications, and extensions thereof).

1.36		“Taxes” (and with correlative meaning, “Tax,” “Taxes,” and “Taxable”) shall mean all taxes of any kind imposed by a federal, state, provincial, local or foreign Governmental Authority, including those on, or measured by or referred to as, income, gross receipts, financial operation, sales, use, ad valorem, value added, franchise, profits, license, excise, stamp, premium, property, transfer (including transfer of goodwill) or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by such Governmental Authority with respect to such amounts.

1.37		“Technology” shall have the meaning attributed to it in the Amended and Restated License and Supply Agreement.

1.38		“Territory” shall have the meaning attributed to it in the Amended and Restated License and Supply Agreement.

1.39		“Third Party” means any Person who is not a Party to this Agreement (or an Affiliate thereof).

1.40		“Transaction Documents” means this Agreement, Amendment No. 1, and all other instruments, agreements, certificates or other documents executed or delivered in connection with the consummation of the transactions contemplated by this Agreement.

1.41		“United States” or “U.S.” means the several United States, the District of Columbia and Puerto Rico.

1.42		“U.S. Patent” means United States patent 5,543,150, assigned to Columbia.

1.43		“U.S. Trademark” means United States trademark 2,086,161, for Crinone and owned by Columbia.

(b)

Additional Definitions. Each of the following definitions is set forth in the Section of this Agreement indicated below:


Definition		Section
Agreement		Preamble
AHPC Assumed Liabilities		2.3(b)
Amendment No. 1		2.1
Ares		Preamble
Assignment and Assumption		2.6(c)
Assumed Liabilities		2.3(a)
Closing		2.7(a)
Closing Date		2.7(a)
Columbia		Preamble
Columbia Bermuda		Preamble
Confidential Information		10.4(a)
Indemnitee		6.3(a)
Indemnitor		6.3(a)
Inventory Distribution Period		3.4(a)
Inventory Purchase Amount		2.5
Licenses		2.2
Proceeding		4.1(f)
Product Acquisition Transactions		2.1
Product Registration Transfer Date		3.1
Proposed Transaction		5.7
Proceeding		4.1(e) and 4.2(e)
Retained Liabilities		2.3(c)
Returns		5.4
Serono		Preamble
Termination Payment		2.4
Third Party Claim		6.3(a)

(c)

Interpretive Provisions.

(i) The words “hereof”, “herein”, and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “including” means “including without limitation.”

(ii) The terms “dollars” and “$” shall mean United States dollars.

ARTICLE 2

SALE OF ASSETS, LICENSES, CLOSING AND ASSIGNMENT AND ASSUMPTION

2.1

Product Acquisition Transactions.

The Parties have agreed to terminate Ares’s right under the License and Supply Agreement to market, use and sell the Product in the U.S., including the termination of Ares’s rights to Crinone NDA, the Technology in the U.S., the U.S. Patent, and the U.S. Trademark, in exchange for the payment to Ares of the Termination Payment in accordance with the terms and conditions herein. In connection with the foregoing, the Parties have agreed to certain actions, including but not limited to the following actions (the “Product Acquisition Transactions”), in accordance with the terms and conditions contained herein:

(a)		On the Closing Date, Ares and Columbia Bermuda shall execute Amendment No. 1 to the Amended and Restated License and Supply Agreement in the form attached hereto as Exhibit A (“Amendment No. 1”).

(b)		Effective as of the Closing Date, the Marketing License Agreement shall be terminated.

(c)		On the Closing Date, Columbia shall purchase from Ares and Ares shall sell to Columbia the entire Inventory for consideration consisting of the Inventory Purchase Amount, and promptly following the Closing, Ares shall transfer, or cause to be transferred, to Columbia, the Inventory.

(d)		On the Closing Date, Columbia shall pay to Ares the Termination Payment.

2.2		Licenses.

Effective as of the Closing Date, subject to the terms and conditions of this Agreement, Ares hereby grants, and agrees to cause its Affiliates to grant to Columbia the following licenses (the “Licenses”):

(a)		An irrevocable, non-exclusive, royalty-free right and license to use the Serono Product Trademarks and Serono Product Tradedress in the U.S. during the Inventory Distribution Period, and an irrevocable non-exclusive, royalty-free license to use the Serono Product Tradedress in the U.S. during the period subsequent to the Inventory Distribution Period, for so long as Columbia is selling the Product in the U.S.

(b)		A non-exclusive, royalty-free right and license to reference, file with the FDA and otherwise use the Serono Intellectual Property, if any, solely for the purposes of (1) maintaining Regulatory Approvals for the Products for sale in the U.S. and (2) subject to this Section 2.2, making product labeling changes for Products for sale in the U.S.

(c)		So long as the Amended and Restated License and Supply Agreement is in effect, Columbia shall obtain the prior written approval of Ares prior to implementing any change affecting the infertility branding, infertility product labeling and infertility product positioning of the Crinone brand, such consent not to be unreasonably withheld or delayed.

CONFIDENTIAL TREATMENT REQUESTED

2.3		Assumed Liabilities.

(a)		As of the Closing Date, Columbia shall assume, be responsible for and pay, perform and discharge when due the following (collectively, the “Assumed Liabilities”): any Liabilities arising from (i) the use, manufacture, supply, packaging, labeling, marketing or sale of the Product in the U.S. by or on behalf of Columbia arising out of acts, omissions or events first occurring on or after the Closing Date, (ii) Returns, Chargebacks and Rebates and (iii) the AHPC Assumed Liabilities. In addition, for the sake of clarity, the Parties agree that notwithstanding anything to the contrary herein, the obligations of the Parties under the Amended and Restated License and Supply Agreement, as amended by Amendment No.1 (including but not limited to the respective indemnification obligations of the Parties thereunder) shall remain in effect, other than the obligation of Columbia to supply Serono with Product for sale in U.S. after the Closing Date. Furthermore, for the sake of clarity, the Parties agree that notwithstanding anything to the contrary herein, the provisions of the Marketing License Agreement that under the terms of the Marketing License Agreement continue after termination of the Marketing License Agreement shall remain in effect as provided in the Marketing License Agreement.

(b)		From the Closing Date through December 31, 2009, Columbia shall report to Ares within thirty (30) days of the end of each calendar quarter on the number of units of Product B sold by Columbia and its Affiliates and its sublicensees during such period. In the event that, for any calendar year or other period, Ares is required to pay to AHPC royalties under the Assignment and Royalty Agreement on sales of Product B in excess of $*** then (i) Ares shall provide to Columbia a copy of the written report with regard to such calendar year or other period furnished by Ares to AHPC under the Assignment and Royalty Agreement, which report shall include the description and number of all units of Product B sold by Ares and its Affiliates (including Serono) and its sublicensees and the number of all units of Product B sold by Columbia and its Affiliates and its sublicensees during such calendar year or other period and the royalties payable thereon by Ares to AHPC; and (ii) Columbia shall, within thirty (30) days following receipt of such report, pay to Ares an amount calculated by multiplying the royalties payable by Ares to AHPC for such calendar year or other period by the fraction X/Y where X is Columbia’s Net Sales (as defined in the Amended and Restated License and Supply Agreement) of Product B in the United States during such calendar year or other period and Y is Columbia’s Net Sales of Product B in the United States plus Ares’s Net Sales of Product B throughout the world during such calendar year or other period. Such payment shall be made in immediately available funds by wire transfer to an account designated by Ares. Columbia’s obligation to make the


*		Portions of this page have been omitted pursuant to a request for Confidential Treatment filed separately with the Commission.

CONFIDENTIAL TREATMENT REQUESTED


		payments described in this Section 2.3(b) are referred to herein as the “AHPC Assumed Liabilities”.

(c)		Except (i) for the Assumed Liabilities and (ii) as otherwise provided in Section 2.3(a), Columbia will not assume, nor will it become responsible for, nor will it be deemed to have assumed or become responsible for, any Liability or obligation of Ares, Serono or their respective Affiliates relating to the marketing, use or sale of Crinone prior to the Closing Date (each, a “Retained Liability” and collectively, the “Retained Liabilities”).

2.4		Termination Payment. Subject to the terms and conditions set forth herein, in consideration for (a) the amendment of the Amended and Restated License and Supply Agreement, as provided in Amendment No. 1 and (b) the sale, transfer, assignment, conveyance, license and delivery of the Assigned Assets (other than the Inventory) and the Licenses, at the Closing, Columbia will pay to Ares, a non-refundable cash payment of Thirty-Three Million Dollars ($33,000,000) (the “Termination Payment”).

2.5		Inventory Purchase and Transfer.

(a)		In addition to the Termination Payment under Section 2.4 above, at the Closing, Columbia shall pay to Ares the non-refundable amount equal to (a) the product of (x) $* and (y) the number of Inventory Units as of the Closing Date less (b) $* (such amount, the “Inventory Purchase Amount”). The Parties agree that the Inventory Purchase Amount includes payment to account, in full, for any and all Returns, Chargebacks and Rebates, whether attributable to sale of Product prior or subsequent to the Closing Date.

(b)		The Inventory will be transferred to Columbia or its designees in accordance with the terms of this Section 2.5(b). Promptly following the Closing Date, Ares shall ship the Inventory to Columbia. Upon the transfer of the Inventory to Columbia, the number of Inventory Units shipped to Columbia will be counted and noted by Ares, and the amount received by Columbia will be counted by Columbia. Within thirty (30) days of the Closing, the Parties will jointly prepare a reconciliation report, accompanied by reasonable supporting documents and calculations, which reconciles among other things: (i) the number of Inventory Units specified in Section 2.5(a) for which payment was made at the Closing and (ii) the actual quantities received by Columbia. Within ten (10) days after such reconciliation report is prepared and exchanged by the Parties the net amount shown as being due either Columbia or Ares will be paid by the Party owing such amount.


*		Portions of this page have been omitted pursuant to a request for Confidential Treatment filed separately with the Commission.

(c)		Title to the Inventory and risk of loss shall pass to Columbia on the Closing Date, regardless of the date Columbia receives delivery of the Inventory.

(d)		All right, title and interest in and to accounts receivable of Serono on account of Products existing as of the Closing Date shall continue to be the property of Serono, and such accounts receivable shall not be transferred to Columbia.

2.6		Method of Payment. All payments to be made by Columbia or Ares hereunder shall be made in United States dollars by way of wire transfer to the other Party on the date each such payment is due and payable.

2.7		Closing.

(a)		The closing of the transactions contemplated hereby (the “Closing”) will take place at the offices of Ares in Geneva, Switzerland on the first (1^st) Business Day following the satisfaction or waiver of the conditions to Closing set forth in Articles 7 and 8 hereof. The actual date of the Closing is referred to as the “Closing Date.” The Closing, and the consummation of the Product Acquisition Transactions shall be deemed to be effective at 12:01 A.M. on the Closing Date.

(b)		At the Closing, Columbia will (i) pay to Ares the Termination Payment and (ii) pay to Ares the Inventory Purchase Amount, in full in cash without any deductions or offsets, by wire transfer of immediately available funds to a bank account or accounts to be designated in writing by Ares and Serono prior to Closing.

(c)		At the Closing, Ares and Serono will sell, assign, convey, transfer and deliver to Columbia all of Ares’s, Serono’s and their respective Affiliates’ right, title and interest in, to and under the Assigned Assets, as provided in Section 2.8 hereof.

(d)		At the Closing, Columbia will assume from Ares the due payment, performance and discharge of the Assumed Liabilities, as provided in Section 2.8 hereof.

2.8		Assignment and Assumption.

(a)		Effective as of the Closing, Ares hereby grants, sells, assigns, transfers, conveys and delivers to Columbia, its successors and assigns, all of Ares’s rights, title and interest under, in and to the Assigned Assets.

(b)		Effective as of the Closing, Columbia hereby expressly assumes and agrees to pay, perform and/or discharge the Assumed Liabilities.

ARTICLE 3

RESALE OF INVENTORY

AND PRODUCT CLINICAL DATA

3.1		Adverse Event Reporting.

(a)		Columbia shall continue to be responsible for the adverse experience and safety reporting for Products in the U.S. in compliance with the requirements of the FDCA, including 21 U.S.C. § 321 et seq. and the regulations promulgated thereunder.

(b)		Each Party shall promptly provide the other Party with Adverse Event reports related to Products that are filed by such Party with Governmental Authorities.

(c)		Serono shall, as soon as practicable following the Closing Date, but no later than thirty (30) Business Days thereafter, provide Columbia with copies of the information in its possession relating to all investigation and reporting in the twelve (12) month period prior to the Closing Date to Governmental Authorities of Adverse Events. The Parties agree to cooperate following the Closing Date in Adverse Event and safety reporting for the Product in the U.S.

(d)		Each Party shall promptly provide the other Party with Adverse Event reports related to the Product that are filed by such Party with Governmental Authorities.

3.2		Medical and Other Inquiries. From and after the Closing Date, Columbia shall assume all responsibility for all correspondence and communication with physicians and other health care professionals and customers with respect to the Product in the U.S. The Parties shall cooperate in the prompt transition of handling such communications for the Product in the U.S. After the Closing Date, Ares shall refer all questions relating to the Product in the U.S. raised by health care professionals and customers to Columbia for its response and handling.

3.3		Resale of Inventory.

(a)		Columbia shall have the right to resell or otherwise distribute the Inventory for a period of up to six (6) months subsequent to the Closing Date (the “Inventory Distribution Period”). Following such date, all remaining Inventory shall be destroyed by Columbia.

(b)		Upon Ares’s request, Columbia shall provide to Ares a resell exemption certificate relating to the resale of the Inventory.

(c)		Columbia shall have the right to use the distribution services of Freedom Pharmacy, Serono’s distributor of Product in the U.S. until the end of the Inventory Distribution Period, and the Parties shall take such action, at Columbia’s cost and expense, as may be reasonably required in connection thereof.

(d)		Within fifteen (15) Business Days of the Closing Date, Serono shall send a letter of introduction, prepared by Serono (with review by Columbia), to ten (10) physicians selected by Columbia in the U.S.

3.4		Product Marketing Materials. On the Closing Date, Serono shall provide Columbia with one sample of the Product Marketing Materials offered or used by Serono as of the Closing Date, for Columbia’s information only. Columbia shall not be permitted to disseminate such Product Marketing Materials to any Third Party, and shall have no rights in such Product Marketing Materials.

3.5		BWH Study. Serono shall provide to Columbia a copy of each of the BWH Protocol and BWH Clinical Data, promptly after each becomes available. Columbia shall have the right to use the BWH Clinical Data for promotional and regulatory purposes only, to the extent permitted by Law. All costs and expenses for Product after the Closing for the BWH Study shall be the responsibility of Columbia.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1		Representations and Warranties of Ares and Serono. Each of Ares and Serono represents and warrants, jointly and severally, to Columbia and Columbia Bermuda, as follows:

(a)		Organization and Standing. Such Party is a legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of Switzerland (in the case of Ares) or Delaware (in the case of Serono).

(b)		Power and Authority; Binding Effect. Such Party has all requisite power and authority, and has taken all other actions necessary, to execute and deliver and to perform all of its obligations of under this Agreement and the other Transaction Documents to which it is a party or by which it is bound and to consummate the transactions contemplated herein and therein. Such Party has duly and properly taken all actions required by Law, its organizational documents or otherwise to authorize the execution, delivery and performance by it of its obligations under this Agreement and the other Transaction Documents to be executed and delivered by it and the consummation of transactions contemplated hereby and thereby. This Agreement has been duly and validly executed and delivered by it and constitutes the legal, valid and binding obligation of it, enforceable against it in accordance with its terms, except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity. The other Transaction Documents to be executed by it, when so executed and delivered, will be duly and validly executed and delivered by it and will constitute the legal, valid, and binding obligations of it, enforceable against it in accordance with their respective terms, except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity.

(c)		No Conflict. The execution, delivery, and performance of this Agreement and the other Transaction Documents by such Party to which such Party is a party or by which such Party is bound, including the granting of the Licenses, and the consummation of the transactions contemplated hereby or thereby (i) is not prohibited by, and will not result in the breach of, or a material default under (1) any provisions of such Party’s organizational documents, (2) any Law applicable to such Party or its Affiliates, (3) any contract to which such Party or its Affiliates is a party, or (4) any order, writ, injunction, judgment or decree to which such Party or its Affiliates is bound or subject, and (ii) will not result in the creation or imposition of any Lien upon any of the Assigned Assets.

(d)		Ownership of Assets. Ares and Serono have good and valid title in and to all of the Assigned Assets and the assets, properties or rights subject to the Licenses and, at the Closing, Columbia will receive beneficial and legal title to the Assigned Assets, free and clear of all Liens.

(e)		Litigation or Disputes. There is no material claim, action, suit, proceeding, investigation, hearing, arbitration, judgment, decree, injunction, rule or order with any Person, including any Governmental Authority (each, a “Proceeding”), pending or, to the knowledge of such Party and its Affiliates, threatened, with respect to the Assigned Assets, the Product in the U.S., or against any of or its Affiliates relating to the Assigned Assets, the Product in the U.S. or the assets, properties or rights subject to the Licenses, or that would otherwise delay or impair the ability of such Party and its Affiliates to consummate the transactions contemplated by this Agreement or the other Transaction Documents or to perform such Party’s obligations hereunder or thereunder.

4.2		Representations and Warranties of Columbia and Columbia Bermuda. Each of Columbia and Columbia Bermuda represents and warrants, jointly and severally, to Ares and Serono, as follows:

(a)		Organization and Standing. Such Party is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware (in the case of Columbia) or Bermuda (in the case of Columbia Bermuda).

(b)		Power and Authority; Binding Effect. Such Party has all requisite corporate power and authority, and has taken all other actions necessary, to execute and deliver and to perform all of its obligations under this Agreement and the other Transaction Documents to which it is a party or by which it is bound and to consummate the transactions contemplated herein and therein. Such Party has duly and properly taken all actions required by Law, its organizational documents or otherwise to authorize the execution, delivery and performance by it of its obligations under this Agreement and the other Transaction Documents to be executed and delivered by it and the consummation of the transactions contemplated hereby and thereby. This Agreement has been duly and validly executed and delivered by such Party and constitutes the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms,

		except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity. The other Transaction Documents to be executed by such Party, when so executed and delivered, will be duly and validly executed and delivered and will constitute the legal, valid, and binding obligations of such Party, enforceable against it in accordance with their respective terms, except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity.

(c)		No Conflict. The execution, delivery, and performance of this Agreement and the other Transaction Documents to which such Party is a party or by which such Party is bound and the consummation of the transactions contemplated hereby or thereby by such Party is not prohibited or limited by, and will not result in the breach of, or a default under (1) any provisions of such Party’s organizational documents, (2) any Law applicable to such Party, (3) any contract to which such Party is a party, or (4) any order, writ, injunction, judgment or decree to which such Party is bound or subject.

(d)		Litigation. There is no material Proceeding pending or, to the knowledge of such Party, threatened, against such Party and, to such Buyer’s knowledge, such Party is not in violation of or in default with any applicable Law, the result of any of which, either individually or cumulatively, would prevent or materially delay or impair the ability of such Party to consummate the transactions contemplated by this Agreement or the other Transaction Documents to which such Party is to be a party or to perform such Party’s obligations hereunder or thereunder.

4.3		Survival of Representations/Warranties. The representations and warranties contained in this Article 4 shall survive the Closing Date for a period of twelve (12) months.

4.4		Brokers. Each Party represents that no agent, broker, investment banker, financial advisor or other Person, is or will be entitled to any brokers’ or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement.

ARTICLE 5

COVENANTS AND ACKNOWLEDGMENT

5.1

Post-Closing Orders and Payments. At the Closing, Serono will deliver to Columbia all purchase orders for Product in the U.S. in its possession. From and after the Closing Date, Serono shall promptly deliver to Columbia any purchase orders for Product in the U.S. received after the Closing and any payments received from Third Parties for Products purchased from Columbia after the Closing, and refer all inquiries it shall receive with respect to the Product in the U.S. to Columbia or its designee.

5.2		Chargebacks. Following the Closing Date, Columbia shall be responsible for all Chargebacks for Product sold in the U.S., on account of Products sold, whether sold prior to, on or subsequent to the Closing Date.

5.3		Medicare, Medicaid and State Rebates. Following the Closing Date, Columbia shall be responsible for the processing, payment and handling of all government (federal or state) rebate programs related to the sale of Product.

5.4		Returns.

(a)		Following the Closing Date, Columbia shall be responsible for all refunds to customers on account of any Product in the U.S. which is returned (“Returns”), whether sold prior to, on or, subsequent to the Closing Date.

(b)		In the event that any Products are returned to Serono or its Third Party processor of Returns rather than to Columbia, Serono shall, and shall cause its Third Party processor to, forward such returned Products to Columbia. In such event, Columbia shall reimburse Serono for all of its costs and expenses related to Serono’s or its Third Party processor’s receipt of such returned Product and subsequent forwarding to Columbia.

(c)		Columbia shall notify all parties purchasing Inventory from Columbia following the Closing Date that all Returns should be sent to Columbia’s designated return vendor for Products.

5.5		Acknowledgment and Release. Columbia and Columbia Bermuda acknowledge and agree that Ares and Serono have satisfied any and all of their respective obligations under the Amended and Restated License and Supply Agreement, or otherwise, to market, promote and sell Product in the United States. Further, Columbia and Columbia Bermuda hereby forever release and discharge Ares, Serono, their predecessors, successors, Affiliates, and their respective stockholders, officers, directors, agents, attorneys, employees, and any and all others in any way acting or claiming on its behalf, from any and all claims, demands, liabilities, actions, causes of action, suits, damages and complaints arising out of any breach prior to the Closing Date by Ares or Serono of its obligations under the Amended and Restated License and Supply Agreement, or otherwise, to market, promote and sell Product in the United States. The foregoing shall not limit the retention by Ares and Serono of the Retained Liabilities.

ARTICLE 6

INDEMNIFICATION

6.1

Indemnification by Ares and Serono. From and after the Closing Date, Ares and Serono, jointly and severally, shall reimburse and indemnify Columbia, Columbia Bermuda, the Affiliates of Columbia and Columbia Bermuda, and their respective officers, directors, employees, legal representatives and agents in respect of, and hold each of them harmless from and against, any and all Losses

		suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to:

(a)		the Retained Liabilities;

(b)		any misrepresentation or breach of warranty by Ares or Serono made or contained in this Agreement; and

(c)		any failure of Ares or Serono to perform or observe any covenant or agreement to be performed or observed by Ares or Serono pursuant to this Agreement.

6.2		Indemnification by Columbia and Columbia Bermuda. From and after the Closing Date, Columbia and Columbia Bermuda, jointly and severally, shall reimburse and indemnify Ares, Serono, Affiliates of Ares and Serono, and their respective officers, directors, employees and agents in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to:

(a)		the Assumed Liabilities;

(b)		any misrepresentation or breach of warranty by Columbia or Columbia Bermuda made or contained in this Agreement; and

(c)		any failure by Columbia or Columbia Bermuda to duly perform or observe any covenant or agreement to be performed or observed by Columbia or Columbia Bermuda pursuant to this Agreement.

6.3		Procedures for Indemnification for Third Party Claims.

(a)		In the event of any claim or demand made by any Person who is not a Party to this Agreement (or an Affiliate thereof) (“Third Party Claim”) which relates to circumstances under which, in accordance with Section 6.1 or 6.2, a Party (the “Indemnitor”) may be obligated to provide indemnification pursuant to this Agreement, such Party seeking indemnification hereunder (“Indemnitee”) will notify the Indemnitor in writing of the Third Party Claim (and specifying in reasonable detail the factual basis for the Third Party Claim and to the extent known, the amount of the Third Party Claim) reasonably promptly after becoming aware of such Third Party Claim; provided, however, that failure to give such notification will not affect the indemnification provided hereunder except to the extent the Indemnitor shall have been actually prejudiced as a result of such failure.

(b)		If a Third Party Claim is made against an Indemnitee, the Indemnitor will be entitled, within sixty (60) days after receipt of written notice from the Indemnitee, under Section 6.3(a), of the commencement or assertion of any such Third Party Claim, to assume the defense thereof (at the expense of the Indemnitor) with counsel selected by the Indemnitor and reasonably satisfactory to the Indemnitee,

for so long as the Indemnitor is conducting a good faith and diligent defense. Should the Indemnitor so elect to assume the defense of a Third Party Claim:

	(i)		the Indemnitor will not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that if under applicable standards of professional conduct a conflict of interest exists between the Indemnitor and the Indemnitee in respect of such claim, such Indemnitee shall have the right to employ separate counsel (which shall be reasonably satisfactory to the Indemnitor) to represent such Indemnitee with respect to the matters as to which a conflict of interest exists and in that event the reasonable fees and expenses of such separate counsel shall be paid by such Indemnitor; provided, further, that the Indemnitor shall only be responsible for the reasonable fees and expenses of one separate counsel for such Indemnitee;

	(ii)		the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnitor;

	(iii)		the Indemnitor and Indemnitee will promptly supply to the other copies of all correspondence and documents relating to or in connection with such Third Party Claim and keep the other informed of developments relating to or in connection with such Third Party Claim, as may be reasonably requested by the Indemnitee or Indemnitor, as applicable (including providing to the Indemnitee or Indemnitor, as applicable, on reasonable request updates and summaries as to the status thereof); and

	(iv)		all Indemnitees shall reasonably cooperate with the Indemnitor in the defense, and in the conduct of discussions for settlement, compromise or discharge, thereof (such cooperation to be at the expense, including reasonable legal fees and expenses, of the Indemnitor).

(c)		If the Indemnitor does not elect to assume control of the defense thereof within the sixty (60) day period set forth above, or if such good faith and diligent defense is not being or ceases to be conducted by the Indemnitor, the Indemnitee shall have the right, at the expense of the Indemnitor, after three (3) Business Days notice to the Indemnitor of its intent to do so, to undertake the defense of the Third Party Claim (with counsel selected by the Indemnitee), and to compromise or settle such Third Party Claim, exercising reasonable business judgment.

(d)		If the Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of such Third Party Claim that the Indemnitor may recommend that by its terms obligates the Indemnitor to pay the full amount of Losses (whether through settlement, compromise or discharge) in connection with such Third Party Claim and unconditionally and irrevocably releases the

Indemnitee completely from all Liability in connection with such Third Party Claim; provided, however, that, without the Indemnitee’s prior written consent, the Indemnitor shall not consent to any settlement, compromise or discharge (including the consent to entry of any judgment), and the Indemnitee may refuse to agree to any such settlement, compromise or discharge, that provides for injunctive or other equitable or other non-monetary relief affecting the Indemnitee, the Product in the U.S. or the Assigned Assets. If the Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim, the Indemnitee shall not (unless required by applicable Law) admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnitor’s prior written consent (which consent shall not be unreasonably withheld or delayed).

6.4

Losses That Are Not Third Party Claims. Any claim on account of Losses which does not involve a Third Party Claim shall be asserted by reasonably prompt written notice (stating in reasonable detail, the basis of such claim and a reasonable estimate of the amount thereof) given by the Indemnitee to the Indemnitor from whom such indemnification is sought. For a period of sixty (60) days from and after receipt of the written notice, the Parties shall attempt in good faith to resolve such claim for indemnification. If the Parties are unable to resolve such claim, the Party seeking indemnification may thereafter pursue any and all remedies at its disposal to enforce said indemnification claim.

6.5		Termination of Indemnification Obligations. The obligations of each Party to indemnify, defend and hold harmless the other Party and other Indemnitees pursuant to Sections 6.1(b) and 6.2(b) shall terminate when the applicable representation or warranty expires pursuant to Section 4.3; provided, however, that such obligations to indemnify, defend and hold the Indemnitee harmless shall not terminate with respect to any individual item as to which the Indemnitee shall have before the expiration of the survival period, made a claim by delivering a written notice (stating in reasonable detail the basis of such claim and a reasonable estimate of the amount thereof) to the Indemnitor.

6.6		Other Matters. In the event of payment in full by an Indemnitor to any Indemnitee in connection with any Third Party Claim, such Indemnitor will be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee will cooperate with such Indemnitor in a reasonable manner, and at the cost and expense of such Indemnitor, in prosecuting any subrogated right or claim.

ARTICLE 7

CONDITIONS TO PERFORMANCE BY ARES AND SERONO

The obligations of Ares and Serono to consummate at the Closing the transactions contemplated by this Agreement shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

7.1		Compliance by Columbia and Columbia Bermuda. Each of Columbia and Columbia Bermuda shall have complied with and performed in all material respects all of their respective agreements and obligations under the terms, covenants and conditions of this Agreement to be complied with or performed by each of them on or prior to the Closing Date.

7.2		Representations and Warranties of Columbia and Columbia Bermuda. The representations and warranties of each of Columbia and Columbia Bermuda contained in this Agreement shall be true and correct in all material respects as of the Closing Date, with the same force and effect as if made as of the Closing Date.

7.3		No Litigation or Governmental Proceeding. Since the date of this Agreement, no action or proceeding shall have been instituted or threatened before any court or Governmental Authority or by any third party (a) involving any challenge to or seeking damages or other relief in connection with, any of the transactions contemplated hereby or (b) that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated hereby.

7.4		Closing Deliveries; Payment.

(a)		Columbia and Columbia Bermuda shall have executed and delivered to Ares and Serono, at or prior to the Closing, this Agreement and any other documents to be delivered by them at the Closing.

(b)		Columbia Bermuda shall have executed and delivered to Ares, at or prior to the Closing, Amendment No. 1.

(c)		Ares shall have received the Termination Payment and the Inventory Purchase Amount.

ARTICLE 8

CONDITIONS TO PERFORMANCE

BY COLUMBIA AND COLUMBIA BERMUDA

The obligations of Columbia and Columbia Bermuda to consummate at the Closing the transactions contemplated by this Agreement shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

8.1		Financing. Columbia shall have obtained financing necessary to pay the Termination Payment and the Inventory Purchase Amount at the Closing.

8.2		Compliance by Ares and Serono. Each of Ares and Serono shall have complied with and performed in all material respects all of their respective agreements and obligations under the terms, covenants and conditions of this Agreement to be complied with or performed by each of them on or prior to the Closing Date.

8.3		Representations and Warranties of Ares and Serono. The representations and warranties of Ares and Serono contained in this Agreement shall be true and correct in all material respects as of the Closing Date with the same force and effect as if made as of the Closing Date.

8.4		No Litigation or Governmental Proceeding. Since the date of this Agreement, no action or proceeding shall have been instituted or threatened before any court or Governmental Authority or by any third party (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereby or (b) that may have the effect of preventing, delaying making illegal or otherwise interfering with any of the transactions contemplated hereby.

8.5		Closing Deliveries.

(a)		Ares and Serono shall have executed and delivered to Columbia and Columbia Bermuda, at or prior to the Closing, this Agreement and any other documents to be delivered by them at the Closing.

(b)		Ares shall have executed and delivered to Columbia Bermuda, Amendment No. 1.

ARTICLE 9

TERMINATION

In the event that the Closing shall not have occurred on or before five (5) Business Days from the date hereof, either Party shall have the right to terminate this Agreement at the close of business on such date without liability of any Party to any other Party; provided, however, that in the event that Closing shall not have occurred due to a breach of any provision hereof by a Party, such breaching Party shall not have the right to terminate this Agreement. Any termination of this Agreement shall not relieve any Party of liability for breach hereof occurring prior to such termination.

ARTICLE 10

GENERAL PROVISIONS

10.1

Payment of Transaction Expenses. All legal fees and other expenses incurred by Ares or Serono in connection with the negotiation of this Agreement and the consummation of the transactions contemplated herein will be borne by Ares or Serono, as the case may be, whether or not the Closing shall have occurred. All legal fees and other expenses incurred by Columbia or Columbia Bermuda in

		connection with the negotiation of this Agreement and the consummation of the transactions contemplated herein will be borne by Columbia or Columbia Bermuda, as the case may be, whether or not the Closing shall have occurred.

10.2		Notices. Except as otherwise specifically provided herein, any notice or other documents to be delivered by a Party under this Agreement shall be in writing and shall be deemed to have been duly given if sent by registered mail, nationally recognized overnight courier or facsimile transmission (with confirmation of receipt) to a Party or delivered in person to a Party at the address or facsimile number set out below for such Party or such other address as the Party may from time to time designate by written notice to the other:

		If to Columbia, to:

		Columbia Laboratories, Inc. 354 Eisenhower Parkway Plaza 1 Second Floor Livingston, NJ 07039 Attn: General Counsel Fax: 973-994-3001

		with a copy to:

		Kaye Scholer LLP 425 Park Avenue New York, NY 10022 Attn: Adam H. Golden, Esq. Fax: 212-836-8689

		If to Columbia Bermuda, to:

		Columbia Laboratories (Bermuda) Ltd. 22 Victoria Street P.O. Box HM 1179 Hamilton HM EX Bermuda Attn: Secretary Fax: 441-295-9216

		with a copy to:

		Columbia Laboratories, Inc. 354 Eisenhower Parkway Plaza 1 Second Floor Livingston, NJ 07039 Attn: General Counsel Fax: 973-994-3001

		If to Ares, to:

		Ares Trading S.A. Zone Industrielle de l’Ouriettaz 1170 Aubonne Switzerland Attn: General Manager Fax: Facsimile: 41 22 345 5081

		With a copy to:

		Serono International, SA 9 chemin des mines 1211 Geneva Switzerland Attn: General Counsel Fax: 41 22 414 3070

		If to Serono, to:

		Serono, Inc. One Technology Place Rockland, Massachusetts 02370 U.S.A. Fax: 781 681 2933

		With a copy to :

		Serono Inc. One Technology Place Rockland, Massachusetts 02370 U.S.A. Attn: General Counsel Fax: 781 681 2934

		Any such notice or other document shall be deemed to have been received by the addressee five (5) Business Days following the date of dispatch of the notice or other document by post or, where the notice or other document is sent by overnight courier, by hand or is given by facsimile, simultaneously with the transmission or delivery. Notwithstanding the foregoing, any notice given by facsimile shall also be sent by another means of delivery pursuant to this Section 10.2.

10.3		Entire Agreement. This Agreement and the other Transaction Documents embody and set forth the entire agreement and understanding of the Parties with respect to the subject matter herein and there are no promises, terms, conditions or obligations, oral or written, expressed or implied, other than those contained in

		this Agreement or the other Transaction Documents. The terms of the Transaction Documents shall supersede all previous oral or written agreements which may exist or have existed between the parties relating to the subject matter hereof and thereof.

10.4		Confidentiality; Public Disclosures.

(a)		For the purposes of this Agreement, “Confidential Information” shall mean any information relating to the Assigned Assets, this Agreement, the other Transaction Documents and the transactions contemplated hereby or thereby; provided, however, that the Confidential Information shall not include any information which is in the public domain or becomes generally known through no wrongful act of the part of a Party. Following the Closing, each Party shall keep confidential and not disclose to any Person or use any Confidential Information of the other Party. This Section 10.4(a) shall not be violated by disclosure pursuant to (i) court order or as otherwise required by Law, on condition that notice of the requirement for such disclosure is given to the other Party prior to making any disclosure and the Party subject to such requirement cooperates as the other may reasonably request in resisting it or limiting the scope of disclosure, or (ii) Section 10.4(b).

(b)		Each party hereto agrees not to issue any press release or other public statement, whether oral or written, disclosing the existence of this Agreement, the terms hereof or any information relating to this Agreement without the prior written consent of the other party; provided however, that neither party hereto will be prevented from complying with any duty of disclosure it may have pursuant to law or governmental regulation or pursuant to the rules of any recognized stock exchange or quotation system. A party hereto who desires to issue a press release or make any other public disclosure relating to this Agreement shall notify the other in writing at least four (4) Business Days (or such shorter period where legally required) before the time of the proposed release. Such party shall provide a draft of any of the proposed documents containing any such reference (including without limitation, a copy of this Agreement or any excerpt hereof, proposed to be filed with any securities regulatory authority or any securities exchange) to the other party and its counsel in sufficient time for review of such documents. In the event such other party objects to any such reference, the applicable document will be modified to such party’s reasonable satisfaction.

10.5		Modifications and Amendments. This Agreement shall not be amended, modified, varied or supplemented except in writing signed a duly authorized representative of each of the Parties.

10.6		Assignment. Neither this Agreement nor any of the rights or obligations of the Parties hereunder may be assigned by any Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that either Party shall be entitled, without the prior written consent of the other to assign its rights and obligations hereunder in

		connection with a merger or similar reorganization or the sale of all or substantially all of its assets. Any attempted assignment or delegation in contravention hereof shall be null and void. Subject to the foregoing, this Agreement and all rights and powers granted and obligations created hereby will bind and inure to the benefit of the Parties hereto and their respective successors and assigns.

10.7		Headings, Interpretation. The headings used in this Agreement are for convenience only and are not a part of this Agreement nor affect the interpretation of any of its provisions.

10.8		Independent Parties. This Agreement shall not be deemed to create any partnership, joint venture, amalgamation or agency relationship between the Parties. Each Party shall act hereunder as an independent contractor. Neither Party shall at any time enter into, incur, or hold itself out to Third Parties as having authority to enter into or incur, on behalf of the other party, any commitment, expense, or liability whatsoever.

10.9		Governing Law. This Agreement shall be governed by and construed under the substantive laws of New York, without giving effect to the choice of law provisions thereof.

10.10		Jurisdiction; Waiver of Jury Trial. 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 New York. EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10.11		Waiver. Neither the failure nor delay on the part of a Party to require the strict performance of any term, covenant or condition of this Agreement or to exercise any right or remedy available on a breach thereof shall constitute a waiver of any such breach or of any such term or condition. The consent to, or the waiver of, any breach, or the failure to require on any single occasion, the performance or timely performance of any term, covenant, or condition of this Agreement shall not be construed as authorizing any subsequent or additional breach and shall not prevent a subsequent enforcement of such term, covenant, or condition.

10.12		Severability. In the event that any provision of this Agreement or the application thereof to any Party or circumstance shall be finally determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, then (i) a suitable and equitable provision shall be substituted therefore in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid and unenforceable provision and (ii) the remainder of this Agreement and the

		application of such provision to the Parties or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby.

10.13		Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute a single agreement. This Agreement may be executed by facsimile signatures, which signatures shall have the same force and effect as original signatures.

10.14		No Third Party Beneficiaries. No Person other than the Parties and permitted assignees hereunder shall be deemed an intended beneficiary hereunder or have any right to enforce any term of this Agreement.

10.15		Further Assurances. Each Party shall execute and deliver (and Ares shall cause its Affiliates to execute and deliver) such additional instruments and other documents and use (and Ares shall cause its Affiliates to use) all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under applicable Law or reasonably requested by the other Party to consummate the transactions contemplated hereby or by the other Transaction Documents and to confirm and assure the transfer of the Assigned Assets to Columbia or the grant of the Licenses granted in Section 2.2.

10.16		No Strict Construction. This Agreement has been prepared jointly and shall not be strictly construed against either Party.

IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be duly executed as of the date first above written.


ARES TRADING S.A.
By:	/S/ Francois Naef
	Name:	Francois Naef
	Title:	Senior Executive Vice President


By:	/S/ Franck Latrille
	Name:	Franck Latrille
	Title:	Senior Executive Vice President

SERONO, INC.
By:	/S/ Fereydoun Firouz
	Name:	Fereydoun Firouz
	Title:	President

COLUMBIA LABORATORIES, INC.
By:	/S/ Robert S Mills
	Name:	Robert S Mills
	Title:	President & CEO

COLUMBIA LABORATORIES (Bermuda), Ltd.
By:	/S/ Robert S Mills
	Name:	Robert S Mills
	Title:	President

SIGNATURE PAGE TO AGREEMENT

Exhibit A

Amendment No. 1

EX-10.69 5 y28284exv10w69.htm EX-10.69: AMENDMENT NO. 1 TO THE AMENDED AND RESTATED SUPPLY AGREEMENT EX-10.69

Exhibit 10.69

AMENDMENT N° 1 TO THE AMENDED AND RESTATED LICENSE AND
SUPPLY AGREEMENT

THIS AMENDMENT N° 1 TO THE AMENDED AND RESTATED LICENSE AND SUPPLY AGREEMENT (the “Amendment”) effective as of the Closing Date, is made and entered into by and between Columbia Laboratories (Bermuda) Limited, a corporation organized and existing under the laws of Bermuda (“Licensor”) and Ares Trading S.A., a corporation organized and existing under the laws of Switzerland (“Licensee”). Licensor and Licensee may be referred to herein as a “Party” or, collectively, as “Parties.”

RECITALS:

WHEREAS, the Parties entered into an Amended and Restated License and Supply Agreement on June 4, 2002 (the “License and Supply Agreement”), amending and restating the License and Supply Agreement entered into between the Parties on May 20, 1999;

WHEREAS, the Parties wish to enter into this Amendment as a result of the Parties, Serono Inc. (which is an Affiliate of Licensee), and Columbia Laboratories, Inc. entering into an agreement pursuant to which Licensee’s U.S. rights under the License and Supply Agreement are terminated (the “U.S. Agreement”);

WHEREAS the Parties shall enter into this Amendment simultaneously with the execution of the U.S. Agreement;

WHEREAS, capitalized terms used and not otherwise defined in this Amendment are used as defined in the License and Supply Agreement and/or the U.S. Agreement. If a capitalized term is defined in both the License and Supply Agreement and the U.S. Agreement, then for the purposes of this Amendment, the definition in the License and Supply Agreement shall apply.

NOW, THEREFORE, in consideration of the various promises and undertakings set forth herein, the Parties agree to amend the License and Supply Agreement as follows:

	1.		Section 1 (f) is deleted and not replaced.

	2.		The following phrase of Section 1 (h) is deleted and not replaced:

			“(i) the United States or (ii)”

	3.		The following wording is inserted to the first sentence of Section 1 (s), between the phrases “or sublicensees” and “from or on account of”:

			“(for the sake of clarity, the definition of Net Sales hereunder shall not include any sales of Product by the Licensor)”

	4.		The last two sentences of Section 1 (s) are deleted and not replaced.

	5.		Section 1 (z) (bb) is amended to read as follows:

“Territory” shall mean all countries and territories of the world except for the United States and for Sub-Saharan Africa. “Sub-Saharan Africa” shall mean the following countries: the Republic of South Africa, Lesotho, Botswana, Zimbabwe, Namibia,

Mozambique, Zaire, Kenya, Malawi, Mauritius, Seychelles, Madagascar, Zambia and Swaziland.”

Section 2 (g) is amended to read as follows:

“Licensor shall make reasonable efforts to obtain from its licensee in Sub-Saharan Africa any right such licensee may have to market, use, sell, make or have made the Product and to use the Trademarks. Upon Licensor obtaining such rights, “Territory” under this Agreement shall be automatically redefined to mean “all the countries in the world, excluding the United States”. Any incidental out-of-pocket costs incurred by Licensor in obtaining such rights shall be for the account of Licensee, when prior approved by Licensee.”

	7.		Section 2 (h) is deleted and not replaced.

	8.		Sections 3 (a), (b) and (c ) are deleted and not replaced.

	9.		The last sentence of the first paragraph of Section 4 (m) (which, for the avoidance of doubt, begins with “Licensor may manufacture..” and ends with “..shearing cycles.” is deleted and not replaced.

	10.		The last paragraph Section 4 (m) (which is the last sentence of Section 4 (m)) is amended by deleting the phrase “under the Marketing Agreement”.

	11.		Section 4 (s) is amended in its entirety to read as follows:

“Each Party shall be responsible for receiving and responding to complaints and requests for information from patients and others regarding the Product sold by it and each Party shall provide reasonable assistance to the other Party in responding to such complaints and requests for information and shall be responsible for investigating and resolving any complaints. Within thirty (30) days following the end of each calendar month during the term of the Agreement, each Party shall provide the other Party with a written report detailing complaints regarding the Product received during such month, provided that each Party shall notify the other Party of any serious adverse events within two (2) days following notice to either Party of such serious adverse event. During the term of this Agreement, each Party shall make available to the other Party information about the Product as may be necessary to carry out the provisions and purposes of this Agreement and the U.S. Agreement, including without limitation general medical information relating to the Product’s storage, use and safety. Each Party shall provide prompt written notice to the other Party, including relevant references, of any information which the Party giving notice believes in its reasonable judgment is material for medical information services. Material information shall include, but not be limited to, published or unpublished reports or other clinical or laboratory data received by either Party about Product safety, contraindications, treatment programs in the indications specified by the approved Product insert, stability, storage and shipping, pharmacology, and other information that either Party believes in its reasonable judgment is relevant to safe and effective Product use. The Party giving notice shall provide reasonable follow-up information and prompt written replies to verbal or written questions from the other Party pertinent to medical information services about the Product. On a periodic basis as agreed by both Parties, but no less than annually, each Party shall provide the other Party a written summary of information about the Product, which in the reasonable judgment of the Party providing the information, is material for the medical services information of the other Party.”

12.

The penultimate sentence of Section 4 (t) is amended to read as follows:

“If the Product defect causing the corrective action shall be found to result solely from one of the Party’s , its Affiliates’ or sublicensees’ marketing, use or sale of the Product, then the costs and expenses of such corrective action shall be paid by such Party.”

13.

A new sentence is added following the end of the Section 4 (t) to read as follows:

“The Licensor shall be responsible for the costs of any corrective action (i) outside of the Territory and (b) within the Territory, if found to result solely from the manufacture and supply of the Product hereunder.”

14.

The first paragraph of Section 5 (a) is amended to read as follows:

“The Purchase Price to be paid by the Licensee for the Product in Finished Packaged Form shall be the Base Price of thirty percent (30%) of Net Sales, whichever is greater, unless otherwise agreed as contemplated in paragraph 4 (q).”

	15.		The second paragraph of Section 5 (a) (which, for the avoidance of doubt, begins with “Whether the Net Sales were made..” and ends with “..from the reference of the dispute or difference.”) is deleted in its entirety and not replaced.

	16.		Section 5 (f) is deleted and not replaced.

	17.		The last sentence of Section 13 is amended to read as follows:

“In the event that the Licensee shall continue to market the Product under the terms of this Agreement for twenty-five (25) years from the Effective Date in the European Union and Canada, Licensee shall thereafter own the Trademarks and related goodwill in the Territory.”

	18.		The address of Ares Trading S.A. referred to in Section 17 is Ares Trading SA, c/o Zone Industrielle de l’Ouriettaz, 1267 Coinsins, Switzerland. A copy of each notice to Licensee shall be sent to General Counsel, Serono International SA, 9 chemin des Mines, 1202 Geneva, Switzerland. The address of Columbia Laboratories (Bermuda) Ltd., referred to in Section 17 is Canon’s Court, 22 Victoria Street, PO Box HM 1179, Hamilton HM 12, Bermuda. A copy of each notice to Licensor shall be sent to General Counsel, Columbia Laboratories, Inc., 354 Eisenhower Parkway, Livingston, New Jersey 07039, USA.

	19.		Effectiveness. This Amendment shall enter into effect as of the Closing Date (as such term is defined in the U.S. Agreement).

	20.		Counterparts; Fax; Signatures. This Amendment may be executed in any two (2) counterparts, including by facsimile, each of which, when executed, shall be deemed to be an original and both of which together shall constitute the one and same document.

	21.		Full Force and Effect. Except as set forth in this Amendment and in the U.S. Agreement, the License and Supply Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed and delivered by their respective duly authorized officers.

ARES TRADING S.A.


By:		/S/ Francois Naef
		Name: Francois Naef
		Title: Senior Executive Vice President

By:		/S/ Franck Latrille

		Name: Franck Latrille
		Title: Senior Executive Vice President

COLUMBIA LABORATORIES (Bermuda), Ltd.


By:		/S/ Robert S Mills
Name:		Robert S Mills
Title:		President

SIGNATURE PAGE TO AMENDMENT NO. 1

EX-10.70 6 y28284exv10w70.htm EX-10.70: SECURITIES PURCHASE AGREEMENT EX-10.70

EXHIBIT 10.70

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”), dated as of December 21, 2006, is made by and among Columbia Laboratories, Inc., a Delaware corporation (the “Company”), and the Purchasers listed on Exhibit A hereto, together with their permitted transferees (each, a “Purchaser” and collectively, the “Purchasers”).

Recitals:

A. The Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act and/or Regulation D under the Securities Act.

B. The Purchasers, severally but not jointly, desire to purchase, and the Company desires to sell, upon the terms and conditions stated in this Agreement, up to a maximum amount of up to $40,000,000.00 principal amount of subordinated notes convertible into shares of Common Stock (as defined herein) and warrants to purchase shares of Common Stock.

C. The capitalized terms used herein and not otherwise defined have the meanings given them in Article 7.

AGREEMENT

In consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchasers (severally and not jointly) hereby agree as follows:

ARTICLE 1

PURCHASE AND SALE OF SECURITIES

1.1 Purchase and Sale of Securities. At the Closing, the Company will issue and sell to each Purchaser, and each Purchaser will, severally and not jointly, purchase from the Company (i) subordinated notes convertible into shares of Common Stock in accordance with the terms of the notes (the “Notes”), and (ii) warrants (the “Warrants”) to purchase shares of Common Stock, in the amounts set forth opposite such Purchaser’s name on Exhibit A hereto (the Notes, the Warrants, the Conversion Shares and the Warrant Shares are referred to collectively as the “Securities”). The aggregate purchase price for the Notes and the Warrants to be purchased by such Purchaser at the Closing (the “Purchase Price”) shall be the amount set forth opposite such Purchaser’s name on Exhibit A hereto, such Purchase Price being (i) a price of $1.00 for each $1.00 of principal amount of Notes and (ii) a price for related Warrant equal to $0.01 for each share of Common Stock subject to the Warrant to be purchased by such Purchaser at the Closing.

1.2 Payment. At the Closing, each Purchaser will pay the aggregate Purchase Price set forth opposite its name on Exhibit A hereto by wire transfer of immediately available funds in accordance with wire instructions provided by the Company to the Purchasers prior to the Closing. The Company will deliver to each Purchaser at the Closing (i) a Note, substantially in the form attached hereto as Exhibit B, in the amount set forth opposite such Purchaser’s name on Exhibit A and (ii) a Warrant, substantially in the form attached hereto as Exhibit C, to purchase the number of shares of Common Stock set forth opposite such Purchaser’s name on Exhibit A.

1.3 Closing Date. The closing of the transaction contemplated by this Agreement will take place on December 22, 2006 (the “Closing Date”) and the closing (the “Closing”) will be held at the offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York, or at such other time and place as shall be agreed upon by the Company and the Purchasers hereunder of a majority in interest of the Securities.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as specifically contemplated by this Agreement, the Company hereby represents and warrants to the Purchasers that:

2.1 Organization and Qualification. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to conduct its business as currently conducted as disclosed in the SEC Documents. The Company is duly qualified to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to have a Material Adverse Effect.

2.2 Authorization; Enforcement. The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement, the Notes, the Irrevocable Transfer Agent Instructions (as defined in Section 4.10(b)), and the Warrants, (collectively, the “Transaction Documents”) to consummate the transactions contemplated hereby and thereby and to issue the Securities in accordance with the terms hereof. The execution, delivery and performance of this Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby (including the issuance of the Securities) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its stockholders is required. This Agreement has been and other Transaction Documents, at the Closing, will be duly executed by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or moratorium or similar laws affecting creditors’ and contracting parties’ rights generally, and except as enforceability may be subject to general principles of equity and except as rights to indemnity and contribution may be limited by state or federal securities laws or public policy underlying such laws.

2.3 Capitalization. The authorized capital stock of the Company, as of December 20, 2006, consisted of (i) 100,000,000 shares of Common Stock, of which 49,694,213 shares were issued and outstanding, (ii) 151,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share, none of which were issued or outstanding, (iii) 150,000 shares of Series B Convertible Preferred Stock, par value $0.01 per share, of which 130 shares were issued and outstanding, (iv) 6,660 shares of Series C Convertible Preferred Stock, par value $0.01 per share, of which 3,250 shares were issued and outstanding, (v) 100,000 shares of Series D Junior Participating Preferred Stock, none of which were issued or outstanding and (vi) 100,000 shares of Series E Convertible Preferred Stock, par value $0.01 per share, of which 69,000 shares were issued and outstanding (clauses (ii) through (vi), collectively, the “Preferred

Stock”). All of the issued and outstanding shares of Common Stock and Preferred Stock have been duly authorized, validly issued and are fully paid and nonassessable. Options to purchase an aggregate of 4,771,802 shares of Common Stock were outstanding as of December 20, 2006. Except as disclosed in or contemplated by the SEC Documents, the Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or exercisable or exchangeable for, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations other than (i) options granted under the Company’s stock option plans, (ii) pursuant to the Preferred Stock, (iii) pursuant to warrants exercisable for 2,582,041 shares of Common Stock as of December 20, 2006 and (iv) pursuant to the Investment and Royalty Agreement, dated as of March 5, 2003, between the Company and PharmaBio Development Inc. (“PharmaBio”), a corporation organized under the laws of the State of North Carolina. The Company’s Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”), as in effect on the date hereof, and the Company’s Bylaws (the “Bylaws”) as in effect on the date hereof, are each filed as exhibits to the SEC Documents.

2.4 Issuance of Securities. The Notes and Warrants are duly authorized and are free from all taxes, liens and charges with respect to the issue thereof. The shares of Common Stock issuable upon conversion of the Notes (“Conversion Shares”) and the shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares” and, collectively with the Conversion Shares, the “Shares”) are duly authorized and, upon issuance in accordance with the terms of the Notes and the Warrants, as applicable, the Shares will be validly issued, fully paid and non-assessable and will not be subject to preemptive rights or other similar rights of stockholders of the Company.

2.5 No Conflicts; Government Consents and Permits.

(a) The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including the issuance of the Securities) will not (i) conflict with or result in a violation of any provision of its Certificate of Incorporation or Bylaws or require the approval of the Company’s stockholders, (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default under, any agreement, indenture or instrument to which the Company is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company, except in the case of clauses (ii) and (iii) only, for such conflicts, breaches, defaults and violations as would not reasonably be expected to have a Material Adverse Effect.

(b) The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self regulatory agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents in accordance with the terms hereof, or to issue and sell the Securities in accordance with the terms hereof other than such as have been made or obtained, and except for the registration of the Shares under the Securities Act pursuant to Section 6 hereof, any filings required to be made under federal or state securities laws, and any required filings or notifications regarding the issuance or listing of additional shares with Nasdaq.

(c) The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, except for such

franchise, permit, license or similar authority, the lack of which would not reasonably be expected to have a Material Adverse Effect. The Company has not received any written notice of any proceeding relating to revocation or modification of any such franchise, permit, license or similar authority except where such revocation or modification would not reasonably be expected to have a Material Adverse Effect.

2.6 SEC Documents, Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC since January 1, 2005, pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and included, to the extent required, detailed descriptions of material indebtedness for borrowed money, and, except as otherwise disclosed therein, none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Financial Statements and the related notes have been prepared in accordance with accounting principles generally accepted in the United States, consistently applied, during the periods involved (except (i) as may be otherwise indicated in the Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, may be condensed or summary statements or may otherwise conform to the SEC’s rules and instructions for Reports on Form 10-Q) and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments). All material agreements that were required to be filed as exhibits to the SEC Documents under Item 601 of Regulation S-K (collectively, the “Material Agreements”) to which the Company or any Subsidiary of the Company is a party, or the property or assets of the Company or any Subsidiary of the Company are subject, have been filed as exhibits to the SEC Documents. To the Company’s knowledge, all Material Agreements are valid and enforceable against the Company in accordance with their respective terms, except (i) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or moratorium or similar laws affecting creditors’ and contracting parties’ rights generally, and (ii) as enforceability may be subject to general principles of equity and except as rights to indemnity and contribution may be limited by state or federal securities laws or public policy underlying such laws. The Company is not in breach of or in default under any of the Material Agreements and, to the Company’s knowledge, no other party to a Material Agreement is in breach of or default under such Material Agreement, except in each case, for such breaches or defaults as would not reasonably be expected to have a Material Adverse Effect. The Company has not received a notice of termination of any of the Material Agreements.

2.7 Disclosure Controls and Procedures. Except as disclosed in the SEC Documents, the Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material information relating to the Company, including any consolidated Subsidiaries, that is required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, including, without limitation, controls and

procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the period covered by the most recently filed quarterly or annual periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed quarterly or annual periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal control over financial reporting identified in connection with such evaluation that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

2.8 Accounting Controls. Except as disclosed in the SEC Documents, the Company maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

2.9 Absence of Litigation. As of the date hereof, there is no action, suit, proceeding or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the Company’s knowledge, threatened against the Company that if determined adversely to the Company would reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, there has not been and there is not pending any investigation by the SEC involving the Company or any current or former director or officer of the Company. The Company has not received any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act and, to the Company’s knowledge, the SEC has not issued any such order.

2.10 Intellectual Property Rights. To the Company’s knowledge, the Company owns or possesses licenses or sufficient rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights necessary to enable it to conduct its business in all material respects as conducted as of the date hereof (the “Intellectual Property”), except for such Intellectual Property, the inability to use would not have a Material Adverse Effect. To the Company’s knowledge, the Company has not infringed the intellectual property rights of third parties and no third party, to the Company’s knowledge, is infringing the Intellectual Property, in each case, which could reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the SEC Documents, there are no material options, licenses or agreements relating to the Intellectual Property, nor is the Company bound by or a party to any material options, licenses or agreements relating to the patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names or copyrights of any other person or entity. As of the date hereof, there is no material claim or action or proceeding pending or, to the Company’s knowledge, threatened that challenges the right of the Company with respect to any Intellectual Property.

2.11 Placement Agent. The Company has taken no action that would give rise to any claim by any person for brokerage commissions, placement agent’s fees or similar payments relating to the Transaction Documents or the transactions contemplated thereby, except for dealings with the Placement Agent, whose commissions and fees will be paid by the Company.

2.12 Investment Company. The Company is not and, after giving effect to the offering and sale of the Securities, will not be an “investment company” as such term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

2.13 No Material Adverse Change. Since December 31, 2005, except as described or referred to in the SEC Documents, there has not been any Material Adverse Effect. Since December 31, 2005, (i) there has not been any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock (except for the regular quarterly dividend payable on the Company’s Series C Convertible Preferred Stock), (ii) the Company has not sustained any material loss or interference with the Company’s business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, and (iii) the Company has not incurred any material liabilities except in the ordinary course of business and except for liabilities arising from or in connection with the Transaction Documents. The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent.

2.14 Nasdaq Global Market. The issued and outstanding shares of Common Stock are listed on Nasdaq, and, to the Company’s knowledge, there are no proceedings to revoke or suspend such listing. The Company is in compliance in all material respects with the requirements of Nasdaq for continued listing of the Common Stock thereon and any other Nasdaq listing and maintenance requirements.

2.15 Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity with respect to the Company) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents to the Company in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to such Purchaser’s purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into the Transaction Documents has been based on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

2.16 Accountants. Goldstein Golub Kessler LLP, who will express their opinion with respect to the audited financial statements and schedules to be included as a part of the

Registration Statement prior to the filing of the Registration Statement, are independent accountants as required by the Securities Act.

2.17 Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary for a company (i) in the businesses and location in which the Company is engaged, (ii) with the resources of the Company and (iii) at a similar stage of development as the Company. The Company has not received any written notice that the Company will not be able to renew its existing insurance coverage as and when such coverage expires. The Company believes it will be able to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

2.18 Foreign Corrupt Practices. Since January 1, 2005, neither the Company, nor to the Company’s knowledge, any director, officer, agent, employee or other person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of in any material respect any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

2.19 Private Placement. Neither the Company nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under any circumstances that would require registration of the Securities under the Securities Act.

2.20 No Registration Rights. No person has the right to (i) prohibit the Company from filing the Registration Statement or (ii) other than as disclosed in the SEC Documents, require the Company to register any securities for sale under the Securities Act by reason of the filing of the Registration Statement. The granting and performance of the registration rights under this Agreement will not violate or conflict with, or result in a breach of any provision of, or constitute a default under, any agreement, indenture or instrument to which the Company is a party.

2.21 Taxes. The Company has filed (or has obtained an extension of time within which to file) all necessary federal, state and foreign income and franchise tax returns and has paid all taxes shown as due on such tax returns, except where the failure to so file or the failure to so pay would not reasonably be expected to have a Material Adverse Effect.

2.22 Real and Personal Property. The Company has good and marketable title to, or has valid rights to lease or otherwise use, all items of real and personal property that are material to the business of the Company free and clear of all liens, encumbrances, claims and defects and imperfections of title except those that (i) do not materially interfere with the use of such property by the Company or (ii) would not reasonably be expected to have a Material Adverse Effect.

2.23 No Manipulation of Stock. The Company has not taken, nor will it take, directly or indirectly any action designed to stabilize or manipulate the price of the Common Stock or any security of the Company to facilitate the sale or resale of any of the Shares.

2.24 Related Party Transactions. Since September 30, 2006, except with respect to the transactions (i) that are not required to be disclosed and (ii) contemplated hereby to the extent an affiliate of any director purchases Securities hereunder, all transactions that have occurred between or among the Company, on the one hand, and any of its officers or directors, or any affiliate or affiliates of any such officer or director, on the other hand, prior to the date hereof have been disclosed in the SEC Documents.

2.25 No Integrated Offering. None of the Company, its Subsidiaries, any of their Affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the Securities Act or cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. None of the Company, its Subsidiaries, their Affiliates nor any Person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the Securities Act or cause the offering of the Securities to be integrated with other offerings.

2.26 Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the jurisdiction of its formation which is or could become applicable to any Purchaser as a result of the transactions contemplated by the Transaction Documents, including, without limitation, the Company’s issuance of the Securities and any Purchaser’s ownership of the Securities.

2.27 Sarbanes-Oxley Act. The Company is in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

2.28 Form S-3 Eligibility. The Company is eligible to register the Conversion Shares and the Warrant Shares for resale by the Purchasers using Form S-3 promulgated under the Securities Act.

ARTICLE 3

PURCHASER’S REPRESENTATIONS AND WARRANTIES

Each Purchaser represents and warrants to the Company, severally and not jointly, with respect to itself and its purchase hereunder, that:

3.1 Investment Purpose; Status. The Purchaser is an “accredited investor” as such term is defined in Rule 501(a) of the Securities Act. The Purchaser is purchasing the Securities for its own account and not with a present view toward the public sale or distribution thereof and has no intention of selling or distributing any of such Securities or any arrangement or understanding with any other persons regarding the sale or distribution of such Securities, except as would not result in a violation of the Securities Act; provided, however, that by making the representations herein, such Purchaser does not agree to hold any of the Securities for any

minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Securities except pursuant to and in accordance with the Securities Act. The Purchaser acknowledges that no Securities were offered or sold to it by means of any form of general solicitation or general advertising.

3.2 Questionnaire. The Investor Questionnaire (the “Investor Questionnaire”) submitted by Purchaser to the Company in connection with its purchase of the Securities was accurate and correct when delivered and is accurate and correct as of the date hereof.

3.3 Reliance on Exemptions. The Purchaser understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Securities.

3.4 Acknowledgement of Risk.

(a) The Purchaser acknowledges and understands that its investment in the Securities involves a significant degree of risk, including, without limitation, (i) the Company remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds from the sale of the Securities; (ii) an investment in the Company is speculative, and only Purchasers who can afford the loss of their entire investment should consider investing in the Company and the Securities; (iii) the Purchaser may not be able to liquidate its investment; (iv) transferability of the Securities is extremely limited; (v) in the event of a disposition of the Securities, the Purchaser could sustain the loss of its entire investment; and (vi) the Company has not paid any dividends on its Common Stock since January 1, 2001, and does not anticipate the payment of dividends in the foreseeable future. Such risks are more fully set forth in the SEC Documents;

(b) The Purchaser is able to bear the economic risk of holding the Securities for an indefinite period, and has knowledge and experience in financial and business matters such that it is capable of evaluating the risks of the investment in the Securities; and

(c) The Purchaser has, in connection with the Purchaser’s decision to purchase Securities, not relied upon any representations or other information (whether oral or written) other than as set forth in the representations and warranties of the Company contained herein, and the Purchaser has, with respect to all matters relating to this Agreement and the offer and sale of the Securities, relied solely upon the advice of such Purchaser’s own counsel and has not relied upon or consulted any counsel to the Placement Agent or counsel to the Company.

3.5 Governmental Review. The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or an investment therein.

3.6 Transfer or Resale.

(a) The Purchaser understands that the Securities have not been and are not being registered under the Securities Act or any applicable state securities laws and, consequently, the Purchaser may have to bear the risk of owning the Securities for an indefinite period of time because the Securities may not be transferred unless (i) the resale thereof is registered pursuant to an effective registration statement under the Securities Act; or (ii) the Purchaser has delivered to the Company an opinion of counsel (in form, substance and scope reasonably acceptable to the Company) to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; and

(b) Neither the Company nor any other person is under any obligation to register the resale of the Securities or under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder; provided it is acknowledged that the Company is obligated to register the Shares for resale pursuant to Article 6 hereof.

3.7 Legends. The Purchaser understands the certificates representing the Securities will bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. THE COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT SUCH OPINION IS REQUIRED PURSUANT TO THAT CERTAIN SECURITIES PURCHASE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.

and, the Notes will additionally bear the following restrictive legend:

3.8 Authorization; Enforcement. The Purchaser is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and has the requisite power and authority to enter into the Transaction Documents and to consummate the transactions contemplated thereby. The Purchaser has taken all necessary action to authorize the execution, delivery and performance of the Transaction Documents. Upon the execution and delivery of the Transaction Documents, the Transaction Documents shall constitute a valid and binding obligation of the Purchaser enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity and except as rights to indemnity and contribution may be limited by state or federal securities laws or public policy underlying such laws

3.9 Residency. The Purchaser is a resident of the jurisdiction set forth immediately below such Purchaser’s name on the signature pages hereto.

3.10 No Short Sales. Between the time the Purchaser learned about the Offering and the public announcement of the Offering, the Purchaser has not engaged in any short sales or similar transactions with respect to the Common Stock, nor has the Purchaser, directly or indirectly, knowingly caused any Person to engage in any short sales or similar transactions with respect to the Common Stock.

3.11 Status. The Purchaser is not an “interested stockholder” (as such term is defined in Section 203 of the Delaware General Corporation Law) of the Company.

3.12 Rights Agreement. The Purchaser (other than Affiliates of Perry Corp.), its Affiliates and Associates collectively Beneficially Own (as defined in the Rights Agreement, dated as of March 13, 2002, between the Company and First Union National Bank, as rights agent, as amended), and, immediately after the Closing will Beneficially Own, less than 15% of the outstanding shares of Common Stock.

ARTICLE 4

COVENANTS

4.1 Reporting Status. The Common Stock is registered under Section 12 of the Exchange Act. During the Registration Period, the Company agrees to use commercially reasonable efforts to timely file with the SEC all reports required to be filed by the Company under the Exchange Act, and the Company will not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.

4.2 Expenses. The Company and each Purchaser is liable for, and each will pay, its own expenses incurred in connection with the negotiation, preparation, execution and delivery of the Transaction Documents; provided, that the Company will pay the reasonable attorneys’ fees and expenses incurred in connection with the negotiation, execution and delivery of the Transaction Documents by the Purchaser identified as the lead investor on Exhibit A hereto.

4.3 Financial Information. The Company will use commercially reasonable efforts to cause the financial statements of the Company included in any documents filed with the SEC (i) to be prepared in accordance with accounting principles generally accepted in the United States, consistently applied (except (x) as may be otherwise indicated in such financial statements or the notes thereto, or (y) in the case of unaudited interim statements, to the extent they may not include footnotes, may be condensed or summary statements or may otherwise conform to the SEC’s rules and instructions for Reports on Form 10-Q), and (ii) to fairly present in all material respects the consolidated financial position of the Company and consolidated results of its operations and cash flows as of, and for the periods covered by, such financial statements (subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments).

4.4 Securities Laws Disclosure; Publicity. On or before 9:30 a.m., New York local time, on the first Business Day following the date of this Agreement, the Company shall issue a press release and, on or before Tuesday, December 26, 2007, shall file a Current Report on Form 8-K with the SEC, in each case announcing the signing of this Agreement and describing the terms of the transactions contemplated by this Agreement and including as an exhibit to such Current Report on Form 8-K the material Transaction Documents, in the form required by the Exchange Act (the “8-K Filing”). At the time of the filing of the 8-K Filing with the SEC, no Purchaser shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The Company shall not otherwise publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the SEC (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency, without the prior written consent of such Purchaser, except to the extent such disclosure is required by law, regulations or the rules of any securities exchange, in which case the Company shall provide the Purchasers with prior notice of such disclosure.

4.5 Sales by Purchasers. Each Purchaser will sell any Securities and Shares held by it in compliance with applicable prospectus delivery requirements, if any, or otherwise in compliance with the requirements for an exemption from registration under the Securities Act and the rules and regulations promulgated thereunder. No Purchaser will make any sale, transfer or other disposition of the Securities or Shares in violation of federal or state securities laws.

4.6 Use of Proceeds. The Company will use the proceeds from the sale of the Securities (i) to make the payments required pursuant to the Serono Agreement in order to terminate the rights of Ares Trading SA. (“Ares”) to market, use and sell Crinone in the United States and to repurchase inventory of Crinone held by Ares, and (ii) otherwise, for working capital and not for the prepayment (at any time within six months of the Closing) of any other outstanding indebtedness of the Company or any of its Subsidiaries.

4.7 Furnishing of Information. As long as any Purchaser owns Securities, the Company covenants to use reasonable commercial efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, the Company will use reasonable commercial efforts to prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will use reasonable commercial efforts to take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

4.8 Reservation of Shares. So long as any Purchaser owns any Securities, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 100% of the number of shares of Common Stock issuable (i) as Conversion Shares upon conversion of the Notes then outstanding and (ii) as Warrant Shares upon exercise of the Warrants then outstanding (without taking into account any limitations on the conversion of the Notes or exercise of the Warrants set forth in the Notes and Warrants, respectively).

4.9 Pledge of Securities. The Company will not object if the Securities are pledged by a Holder in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Holder effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 3.6 hereof; provided that a Holder and its pledgee shall be required to comply with the provisions of Section 3.6 hereof in order to effect a sale, transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with an acknowledgement of a pledge of the Securities to such pledgee by a Holder.

4.10 Register; Transfer Agent Instructions.

(a) Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Notes and the Warrants in which the Company shall record the name and address of the Person in whose name the Notes and the Warrants have been issued (including the name and address of each transferee), the principal amount of Notes held by such Person and the number of Conversion Shares issuable upon conversion of the Notes and Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company shall keep the register open and available at all times during business hours for inspection of any Purchaser or its legal representatives.

(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each Purchaser or its respective nominee(s), for the Conversion Shares and the Warrant Shares issued at the Closing or upon conversion of the Notes or exercise of the Warrants in such amounts as specified from time to time by each Purchaser to the Company upon conversion of the Notes or exercise of the Warrants in the form of Exhibit E attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 4.10(b), and stop transfer instructions to give effect to Section 3.6(a) hereof, will be given by the Company to its transfer agent, and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the other Transaction Documents. If a Purchaser effects a sale, assignment or transfer of the Securities in accordance with Section 3.6(a), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Purchaser to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the Purchaser, assignee or transferee, as the case may be, without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Purchaser. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 4.10(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 4.10(b), that a Purchaser shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

4.11 Certain Approvals with Respect to Perry Purchaser. If the Purchaser is a Perry Purchaser, the provisions of this Section 4.11(d) shall apply.

(a) Reference is made to that certain Rights Agreement, dated as of March 13, 2002, between the Company and First Union National Bank, as rights agent (the “Rights Agreement”). Capitalized terms used but not defined in this Section 4.11 shall have the meanings given to them in the Rights Agreement.

(b) Perry Corp., a New York corporation (the “Perry Purchaser”), hereby represents and warrants to the Company that, immediately prior to the Closing, it, its Affiliates and Associates do not Beneficially Own more than 19.9% of the outstanding shares of Common Stock.

(c) The Company hereby waives, for purposes of the transactions contemplated by this Agreement only, any restriction imposed on the Perry Purchaser under the Standstill Agreement that would prohibit the Perry Purchaser from acquiring the Shares hereunder.

(d) The Company hereby represents and warrants and the Perry Purchaser acknowledges that (i) the board of directors of the Company has approved for purposes of clause (ii) (A) of the first proviso of the definition of “Acquiring Person” in the Rights Agreement, the Perry Purchaser, together with its Affiliates and Associates, becoming the Beneficial Owner, in the aggregate, of up to, but no more than, an aggregate of 27% of the outstanding Voting Stock, subject to the Perry Purchaser and its Affiliates and Associates, as of the date hereof, being eligible to report Beneficial Ownership of all such stock on Schedule 13G under the Exchange Act and not, as of the date hereof, being required to report such ownership on Schedule 13D under the Exchange Act and (ii) the board of directors of the Company has approved the transaction for purposes of Section 203 of the Delaware General Corporation Law.

ARTICLE 5

CONDITIONS TO CLOSING

5.1 Conditions to Obligations of the Company. The Company’s obligation to complete the purchase and sale of the Securities and deliver such Notes and Warrants to each Purchaser is subject to the fulfillment or waiver as of the Closing Date of the following conditions:

(a) Receipt of Funds. The Company shall have received immediately available funds in the full amount of the purchase price for the Securities being purchased hereunder as set forth opposite such Purchaser’s name on Exhibit A hereto.

(b) Representations and Warranties. The representations and warranties made by each Purchaser in Article 3 which are qualified as to materiality must be true and correct as written and the representations and warranties of each Purchaser contained in this Agreement which are not qualified as to materiality must be true and correct in all material respects as of the Closing Date except to the extent that the representations and warranties relate to an earlier date in which case the representations and warranties must be true and correct as written or true and correct in all material respects, as the case may be, as of the earlier date.

(c) Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Purchasers on or prior to the Closing Date shall have been performed or complied with in all material respects.

(d) Blue Sky. The Company shall have obtained all necessary blue sky law permits and qualifications, or secured exemptions therefrom, required by any state for the offer and sale of the Securities.

(e) Nasdaq Qualification. The Shares to be issued shall be duly authorized for listing by Nasdaq, subject to official notice of issuance, to the extent required by the rules of Nasdaq.

(f) Absence of Litigation. No proceeding challenging this Agreement or the transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted or be pending before any court, arbitrator, governmental body, agency or official.

(g) No Governmental Prohibition. The sale of the Securities by the Company shall not be prohibited by any law or governmental order or regulation.

(h) Minimum Aggregate Investment. The Company shall have received at the Closing at least $40 million of aggregate proceeds from the sale of Securities hereunder.

(i) Acquisition of Crinone. The transactions contemplated by the Serono Agreement shall have been consummated at or prior to the Closing.

(j) PharmaBio Consent. PharmaBio shall have consented to the issuance of the Securities on the terms set forth herein at or prior to the Closing.

5.2 Conditions to Purchasers’ Obligations at the Closing. Each Purchaser’s obligation to complete the purchase and sale of the Securities is subject to the fulfillment or waiver as of the Closing Date of the following conditions:

(a) Representations and Warranties. The representations and warranties made by the Company in Article 2 which are qualified as to materiality must be true and correct as written and the representations and warranties of the Company contained in this Agreement which are not qualified as to materiality must be true and correct in all material respects as of the Closing Date except to the extent that the representations and warranties relate to an earlier date in which case the representations and warranties must be true and correct as written or true and correct in all material respects, as the case may be, as of the earlier date.

(b) Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects.

(c) Blue Sky. The Company shall have obtained all necessary blue sky law permits and qualifications, or secured exemptions therefrom, required by any state or foreign or other jurisdiction for the offer and sale of the Securities.

(d) Legal Opinion. The Company shall have delivered to such Purchaser an opinion, dated as of the Closing Date, from Kaye Scholer LLP, counsel to the Company, in substantially the form attached hereto as Exhibit D hereto.

(e) Transfer Agent Instructions. The Company shall have delivered to such Purchaser a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit E hereto, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

(f) Nasdaq Qualification. The Shares shall be duly authorized for listing by Nasdaq, subject to official notice of issuance, to the extent required by the rules of Nasdaq.

(g) Absence of Litigation. No proceeding challenging this Agreement or the transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted or be pending before any court, arbitrator, governmental body, agency or official.

(h) Acquisition of Crinone. The transactions contemplated by the Serono Agreement shall have been consummated at or prior to the Closing.

(i) PharmaBio Consent. PharmaBio shall have consented to the issuance of the Securities on the terms set forth herein at or prior to the Closing.

(j) No Governmental Prohibition. The sale of the Securities by the Company shall not be prohibited by any law or governmental order or regulation.

ARTICLE 6

REGISTRATION RIGHTS

6.1 The Company shall use commercially reasonable efforts to file, as soon as reasonably practicable, but in no event later than 30 days after the Closing Date (the “Filing Date”), a registration statement (the “Registration Statement”) with the SEC covering the resale of the Registrable Securities, and effect the registration, qualifications or compliances (including, without limitation, the execution of any required undertaking to file post-effective amendments, appropriate qualifications or exemptions under applicable blue sky or other state securities laws and appropriate compliance with applicable securities laws, requirements or regulations) of the Shares as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Deadline. The Registration Statement will be on Form S-3; provided, that if Form S-3 is not available for use by the Company on the Filing Date, then the Registration Statement will be on such form as is then available.

6.2 All Registration Expenses incurred in connection with any registration, qualification, exemption or compliance pursuant to Section 6.1 shall be borne by the Company. All Selling Expenses relating to the sale of securities registered by or on behalf of Holders shall be borne by such Holders pro rata on the basis of the number of securities so registered.

6.3 In the event the number of shares available under a Registration Statement filed pursuant to Section 6.1 is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement, the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if

applicable), or both, so as to cover at least the Required Registration Amount as of the trading day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen days after the necessity therefor arises. The Company shall use commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under the Registration Statement is less than the product determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on the conversion of the Notes or the exercise of the Warrants and such calculation shall assume that the Notes are then convertible for shares of Common Stock at the then prevailing Conversion Price (as defined in the Notes) and that the Warrants are then exercisable for shares of Common Stock at the then prevailing Exercise Price (as defined in the Warrants).

6.4 The Company further agrees that, in the event that the Registration Statement (i) has not been filed with the SEC on or before the Filing Date, (ii) has not been declared effective by the SEC on or before the Effectiveness Deadline, or (iii) after the Registration Statement is declared effective by the SEC, is suspended by the Company or ceases to remain continuously effective during the Registration Period as to all Registrable Securities for which it is required to be effective, other than, in each case, within the time period(s) permitted by Section 6.8(b) (each such event referred to in clauses (i), (ii) and (iii), (a “Registration Default”)), for all or part of any thirty-day period (a “Non-Liquidity Payment Period”) during which the Registration Default remains uncured (which initial thirty-day period shall commence on the fifth Business Day after the date of such Registration Default if such Registration Default has not been cured by such date), the Company shall pay to each Purchaser 1% of such Purchaser’s aggregate Purchase Price of his or her Securities for each Non-Liquidity Payment Period during which the Registration Default remains uncured; provided, however, that if a Purchaser fails to provide the Company with any information that is required to be provided in the Registration Statement with respect to such Purchaser as set forth herein, then the commencement of the Non-Liquidity Payment Period described above shall be extended until two Business Days following the date of receipt by the Company of such required information; and provided, further, that in no event shall the Company be required hereunder to pay to any Purchaser pursuant to this Agreement an aggregate amount that exceeds 8% of the aggregate Purchase Price paid by such Purchaser for such Purchaser’s Securities. The Company shall deliver said cash payment to the Purchaser by the fifth Business Day after the end of such Non-Liquidity Payment Period. If the Company fails to pay said cash payment to the Purchasers in full by the fifth Business Day after the end of such Non-Liquidity Payment Period, the Company will pay interest thereon at a rate of 10.0% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Purchasers, accruing daily from the date such liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The provisions of this Section 6.4 are the Purchasers’ exclusive remedy for any Registration Default.

6.5 In the case of the registration, qualification, exemption or compliance effected by the Company pursuant to this Agreement, the Company shall, upon reasonable request, inform each Holder as to the status of such registration, qualification, exemption and compliance. At its expense, during the Registration Period, the Company shall:

(a) except for such times as the Company is permitted hereunder to suspend the use of the prospectus forming part of the Registration Statement, use commercially reasonable

efforts to keep such registration, and any qualification, exemption or compliance under state securities laws which the Company determines to obtain, continuously effective with respect to a Holder, and to keep such Registration Statement free of any material misstatements or omissions, until the earlier of the following: (i) the fifth anniversary of the Closing Date or (ii) the date all Shares held by such Holder may be sold under Rule 144 during any 90 day period. The period of time during which the Company is required hereunder to keep the Registration Statement effective is referred to herein as the “Registration Period.”

(b) advise the Holders within three Business Days:

(i) when the Registration Statement or any amendment thereto has been filed with the SEC and when the Registration Statement or any post-effective amendment thereto has become effective;

(ii) of any request by the SEC for amendments or supplements to the Registration Statement or the prospectus included therein;

(iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose;

(iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(v) of the occurrence of any event that requires the making of any changes in the Registration Statement or the prospectus so that, as of such date, the Registration Statement and the prospectus, as applicable, do not contain an untrue statement of material fact, and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in the light of the circumstances under which they were made) not misleading;

(c) The Company shall notify each Holder in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten copies of such supplement or amendment to each Holder (or such other number of copies as such Holder may reasonably request). The Company shall also promptly notify each Holder in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to each Holder by facsimile or e-mail on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

(d) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;

(e) if a Holder so requests in writing, promptly furnish to each such Holder, without charge, at least one copy of such Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if explicitly requested, all exhibits in the form filed with the SEC (other than those exhibits available via EDGAR);

(f) during the Registration Period, promptly deliver to each such Holder, without charge, as many copies of the prospectus included in such Registration Statement and any amendment or supplement thereto as such Holder may reasonably request in writing; and the Company consents to the use, consistent with the provisions hereof, of the prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto;

(g) during the Registration Period, if a Holder so requests in writing, deliver to each Holder, without charge, (i) one copy of the following documents, other than those documents available via EDGAR: (A) its annual report to its stockholders, if any (which annual report shall contain financial statements audited in accordance with generally accepted accounting principles in the United States of America by an independent registered public accounting firm of recognized standing), (B) if not included in substance in its annual report to stockholders, its annual report on Form 10-K (or similar form), (C) its definitive proxy statement with respect to its annual meeting of stockholders, (D) each of its quarterly report(s) on Form 10-Q (or similar form), and (E) a copy of the full Registration Statement (the foregoing, in each case, excluding exhibits); and (ii) if explicitly requested, all exhibits excluded by the parenthetical to the immediately preceding clause (E);

(h) prior to any public offering of Registrable Securities pursuant to any Registration Statement, promptly take such actions as may be necessary to register or qualify or obtain an exemption for offer and sale under the securities or blue sky laws of such United States jurisdictions as any such Holders reasonably request in writing, provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction, and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Registration Statement;

(i) upon the occurrence of any event contemplated by Section 6.5(b)(v) or 6.5(c) above, except for such times as the Company is permitted hereunder to suspend the use of the prospectus forming part of the Registration Statement, the Company shall use commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(j) otherwise use commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the SEC which could affect the sale of the Registrable Securities;

(k) use commercially reasonable efforts to cause all Registrable Securities to be listed on each securities exchange or market, if any, on which equity securities issued by the Company have been listed;

(l) use commercially reasonable efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby and to enable the Holders to sell Registrable Securities under Rule 144; and

(m) if requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request; and

(n) if a Holder so requests in writing, permit a single counsel for the Purchasers designated by Holders of a majority of the Registrable Securities to review the Registration Statement and all amendments and supplements thereto, within two Business Days prior to the filing thereof with the SEC;

provided that, in the case of clause (n) above, the Company shall not be required (A) to delay the filing of the Registration Statement or any amendment or supplement thereto to incorporate any comments to the Registration Statement or any amendment or supplement thereto by or on behalf of a Holder if such comments would require or result in a delay in the filing of such Registration Statement, amendment or supplement, as the case may be, or (B) to provide, and shall not provide, any Purchaser or its representatives with material, non-public information unless such Purchaser agrees to receive such information and enters into a written confidentiality agreement with the Company in a form reasonably acceptable to the Company.

6.6 The Holders shall have no right to take any action to restrain, enjoin or otherwise delay any registration pursuant to Section 6.1 hereof as a result of any controversy that may arise with respect to the interpretation or implementation of this Agreement.

6.7 (a) To the extent permitted by law, the Company shall indemnify each Holder and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which any registration that has been effected pursuant to this Agreement, against all claims, losses, damages and liabilities (or action in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 6.7(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, prospectus or any amendment or supplement thereof, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in case of any prospectus, in light of the circumstances in which they were made), or any violation by the Company of any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, and will reimburse each Holder and each person controlling such Holder, for reasonable legal and other out-of-pocket expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred; provided that the Company will not be liable in any such case to the extent that any untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder specifically for use in preparation of such Registration Statement, prospectus,

amendment or supplement; provided further that the Company will not be liable in any such case where the claim, loss, damage or liability arises out of or is related to the failure of such Holder to comply with the covenants and agreements contained in this Agreement respecting sales of Registrable Securities, and except that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement or alleged untrue statement or omission or alleged omission made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the Registration Statement becomes effective or in the amended prospectus filed with the SEC pursuant to Rule 424(b) or in the prospectus subject to completion under Rule 424 of the Securities Act, which together meet the requirements of Section 10(a) of the Securities Act (the “Final Prospectus”), such indemnity shall not inure to the benefit of any such Holder or any such controlling person, if a copy of the Final Prospectus furnished by the Company to the Holder for delivery was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act and the Final Prospectus would have cured the defect giving rise to such loss, liability, claim or damage.

(b) Each Holder will severally, and not jointly, indemnify the Company, each of its directors and officers, and each person who controls the Company within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 6.8(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, prospectus, or any amendment or supplement thereof, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in case of any prospectus, in light of the circumstances in which they were made), and will reimburse the Company, such directors and officers, and each person controlling the Company for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the extent, that such untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder specifically for use in preparation of the Registration Statement, prospectus, amendment or supplement. Notwithstanding the foregoing, a Holder’s aggregate liability pursuant to this subsection (b) and subsection (d) shall be limited to the net amount received by the Holder from the sale of the Registrable Securities pursuant to the Registration Statement.

(c) Each party entitled to indemnification under this Section 6.8 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent such failure is materially prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying Party shall not be liable for any settlement of an action or claim effected without its written consent (which consent will not be unreasonably withheld). No Indemnifying Party, in its defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any

settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

(d) If the indemnification provided for in this Section 6.8 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

6.8 (a) Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event requiring the preparation of a supplement or amendment to a prospectus relating to Registrable Securities so that, as thereafter delivered to the Holders, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, each Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement and prospectus contemplated by Section 6.1 until its receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by the Company, each Holder shall deliver to the Company all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

(b) Notwithstanding anything in this Agreement to the contrary, if the Company shall notify the Holders participating in a registration that the Board of Directors of the Company has made the good faith determination (i) that continued use by such Holders of the Registration Statement for purposes of effecting offers or sales of Shares pursuant thereto would require, under the Securities Act, premature disclosure in the Registration Statement (or the prospectus relating thereto) of material, nonpublic information concerning the Company, its business or prospects or any proposed material transaction involving the Company, (ii) that such premature disclosure would be materially adverse to the Company, its business or prospects or any such proposed material transaction or would make the successful consummation by the Company of any such material transaction significantly less likely and (iii) that it is therefore desirable to suspend the use by such Holders of such Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Shares pursuant thereto, then the right of such Holders to use the Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Shares pursuant thereto shall be suspended. Notwithstanding the foregoing, the Company shall not under any circumstances be entitled to exercise its right to suspend the use of the Registration Statement on more than three occasions during any 12-month period or for more than 20 days per such occasion. Each Holder hereby covenants and agrees that it will not sell any Shares pursuant to the Registration Statement during the periods the Registration Statement is withdrawn or the ability to sell thereunder is suspended as set forth in this Section 6.9(b).

(c) As a condition to the inclusion of its Registrable Securities, each Holder shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing, including completing an Investor Questionnaire in the form provided by the Company, or as shall be required in connection with any registration referred to in this Article 6.

(d) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the Registration Statement are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Registrable Securities is accompanied by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable Securities have been sold in accordance with such Registration Statement and (ii) the requirement of delivering a current prospectus has been satisfied.

(e) Each Holder agrees not to take any action with respect to any distribution deemed to be made pursuant to such Registration Statement which would constitute a violation of Regulation M under the Exchange Act or any other applicable rule, regulation or law.

(f) At the end of the Registration Period the Holders shall discontinue sales of shares pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such Registration Statement which remain unsold, and such Holders shall notify the Company of the number of shares registered which remain unsold immediately upon receipt of such notice from the Company.

6.9 With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which at any time permit the sale of the Registrable Securities to the public without registration, so long as the Holders still own Registrable Securities, the Company shall use commercially reasonable efforts to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act; and

(c) so long as a Holder owns any Registrable Securities, furnish to such Holder, upon any reasonable request, a written statement by the Company as to its compliance with Rule 144 under the Securities Act, and of the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as such Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such securities without registration.

6.10 The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under Section 6.1 may be assigned by a Holder in connection with a transfer by such Holder of all or a portion of its Registrable Securities, provided, however, that such transfer must be made at least three Business Days prior to the Filing Date and that (i) such transfer must otherwise be effected in accordance with applicable securities laws; (ii) such Holder gives prior written notice to the Company at least three Business Days prior to the Filing Date; and (iii) such transferee agrees in writing to comply with the terms and provisions of this Agreement, has provided the Company with a completed Investor Questionnaire in such form as is reasonably requested by the Company, and such transfer is otherwise in compliance with this Agreement.

6.11 The rights of the Holders under any provision of this Article 6 may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) or amended by an instrument in writing signed by Holders of at least a majority of the number of Registrable Securities; provided, that any rights of the Holders relating to payment obligations of the Company may only be waived or amended by an instrument in writing signed by all Holders.

ARTICLE 7

DEFINITIONS

As used herein, the following capitalized terms have the following meanings:

“Affiliate” means, with respect to any Person (as defined below), any other Person controlling, controlled by or under direct or indirect common control with such Person (for the purposes of this definition “control,” when used with respect to any specified Person, shall mean the power to direct the management and policies of such person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing).

“Business Day” means a day Monday through Friday on which banks are generally open for business in New York City.

“Bylaws” has the meaning set forth in Section 2.3.

“Certificate of Incorporation” has the meaning set forth in Section 2.3.

“Closing” has the meaning set forth in Section 1.3.

“Closing Date” has the meaning set forth in Section 1.3.

“Common Stock” means the common stock, par value $0.01 per share, of the Company.

“Company” means Columbia Laboratories, Inc.

“Effectiveness Deadline” means the earlier of (i) the date which is 120 calendar days after the Closing Date and (ii) the date which is five Business Days from the date the Company receives written notice from the SEC that no review of the Registration Statement will be made by the staff of the SEC or that the staff has no further comments to the Registration Statement, as the case may be.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Filing Date” has the meaning set forth in Section 6.1.

“Final Prospectus” has the meaning set forth in Section 6.7(a).

“Financial Statements” means the financial statements of the Company included in the SEC Documents.

“Holder” means any Purchaser for so long as such Purchaser holds Registrable Securities, or any person to whom the rights under Article 6 have been transferred in accordance with Section 6.9 hereof.

“Indemnified Party” has the meaning set forth in Section 6.7(c).

“Indemnifying Party” has the meaning set forth in Section 6.7(c).

“Insolvent” means, with respect to any Person, (a) the present fair saleable value of such Person’s assets is less than the amount required to pay such Person’s total Indebtedness, (b) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (c) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (d) such Person has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

“Intellectual Property” has the meaning set forth in Section 2.10.

“Material Adverse Effect” means a material adverse effect on the business, properties, assets, operations, results of operations, condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby and the other Transaction Documents or by the agreements and instruments to be entered into in connection herewith or therewith or on the authority or ability of the Company to perform its obligations under the Transaction Documents.

“Nasdaq” means The Nasdaq Global Market or any successor thereto.

“Non-Liquidity Payment Period” has the meaning set forth in Section 6.4.

“Notes” has the meaning set forth in Section 1.1.

“Offering” means the private placement of the Company’s Securities contemplated by this Agreement.

“Person” means any person, individual, corporation, limited liability company, partnership, trust or other nongovernmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise).

“PharmaBio” has the meaning set forth in Section 2.3.

“Placement Agent” means Rodman & Renshaw LLC.

“Purchasers” mean the Purchasers whose names are set forth on the signature pages of this Agreement, and their permitted transferees.

“Purchase Price” has the meaning set forth in Section 1.1.

The terms “register,” “registered” and “registration” refer to the registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

“Registrable Securities” means the Shares and any capital stock of the Company issued or issuable with respect to the Notes, the Shares or the Warrants as a result of any split, dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on conversion of the Notes or exercise of the Warrants; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (A) have not been disposed of pursuant to a registration statement declared effective by the SEC, (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale or (C) are held by a Holder or a permitted transferee pursuant to Section 6.10.

“Registration Default” has the meaning set forth in Section 6.4.

“Registration Expenses” means all expenses incurred by the Company in complying with Section 6.1 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but, for the avoidance of doubt, excluding the fees of legal counsel for any Holder).

“Registration Statement” has the meaning set forth in Section 6.1.

“Registration Period” has the meaning set forth in Section 6.5(a).

“Required Registration Amount” means 100% of the sum of (i) the maximum number of Conversion Shares issued or issuable upon conversion of the Notes as of the trading day immediately preceding the applicable date of determination and (ii) the maximum number of Warrant Shares issued and issuable pursuant to the Warrants as of the trading day immediately preceding the applicable date of determination, (without regard to any limitation on conversion of the Notes or exercise of the Warrants).

“Rule 144” means Rule 144 promulgated under the Securities Act, or any successor rule.

“SEC” means the United States Securities and Exchange Commission.

“SEC Documents” has the meaning set forth in Section 2.6.

“Securities” has the meaning set forth in Section 1.1.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute.

“Selling Expenses” means all selling commissions applicable to the sale of Registrable Securities and all fees and expenses of legal counsel for any Holder.

“Serono Agreement” means the Agreement, dated the date hereof, by and among Ares Trading S.A., Serono, Inc., the Company and Columbia Laboratories (Bermuda), Ltd.

“Shares” has the meaning set forth in Section 2.4.

“Subsidiary” of any person shall mean any corporation, partnership, limited liability company, joint venture or other legal entity of which such Person (either above or through or together with any other subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“Warrants” has the meaning set forth in Section 1.1.

ARTICLE 8

GOVERNING LAW; MISCELLANEOUS

8.1 Governing Law; Jurisdiction; Jury Trial. This Agreement will be governed by and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

8.2 Counterparts; Signatures by Facsimile. This Agreement may be executed in two or more counterparts, all of which are considered one and the same agreement and will become effective when counterparts have been signed by each party and delivered to the other parties. This Agreement, once executed by a party, may be delivered to the other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

8.3 Headings. The headings of this Agreement are for convenience of reference only, are not part of this Agreement and do not affect its interpretation.

8.4 Severability. If any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision will be deemed modified in order to conform with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under any law will not affect the validity or enforceability of any other provision hereof.

8.5 Entire Agreement; Amendments. This Agreement (including all schedules and exhibits hereto) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement supersedes all prior

agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and Purchasers holding a majority of the Registrable Securities. Any amendment or waiver effected in accordance with this Section 8.5 shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding (including securities into which such Securities are convertible and for which such Securities are exercisable), each future holder of all such securities, and the Company.

8.6 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed email, telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. The addresses for such communications are:


		If to the Company:		Columbia Laboratories, Inc.
				354 Eisenhower Parkway
				Livingston, New Jersey 07039
				Telecopier No.: (973) 994-3001
				Telephone No.: (973) 994-3999
				Attention: General Counsel

		With a copy to:		Kaye Scholer LLP
				425 Park Avenue
				New York, New York 10022
				Telecopier No.: (212) 836-8689
				Telephone No.: (212) 836-8673
				Attention: Adam H. Golden, Esq.

If to a Purchaser: To the address set forth immediately below such Purchaser’s name on the signature pages hereto. Each party will provide ten days’ advance written notice to the other parties of any change in its address.

8.7 Successors and Assigns. This Agreement is binding upon and inures to the benefit of the parties and their successors and permitted assigns. The Company will not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers, and no Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company, except as permitted in accordance with Section 6.9 hereof.

8.8 Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto, their respective permitted successors and assigns and the Placement Agent, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

8.9 Further Assurances. Each party will do and perform, or cause to be done and performed, all such further acts and things, and will execute and deliver all other agreements, certificates, instruments and documents, as another party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

8.10 No Strict Construction. The language used in this Agreement is deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

8.11 Equitable Relief. The Company recognizes that, if it fails to perform or discharge any of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the Purchasers. The Company therefore agrees that the Purchasers are entitled to seek temporary and permanent injunctive relief in any such case. Each Purchaser also recognizes that, if it fails to perform or discharge any of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the Company. Each Purchaser therefore agrees that the Company is entitled to seek temporary and permanent injunctive relief in any such case

8.12 Survival of Representations and Warranties. Notwithstanding any investigation made by any party to this Agreement, all representations and warranties made by the Company and the Purchasers herein shall survive for a period of three years following the date hereof, except for Sections 2.1, 2.2, 2.11 and 2.19 which representations and warranties shall survive the Closing until the lapse of the statute of limitations.

8.13 Independent Nature of Purchasers’ Obligations and Rights. The obligations of the Purchaser under this Agreement and the other Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement or any other Transaction Document. Nothing contained herein and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group, or are deemed affiliates (as such term is defined under the Exchange Act) with respect to such obligations or the transactions contemplated by this Agreement or the other Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement and the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

In Witness Whereof, the undersigned Purchasers and the Company have caused this Agreement to be duly executed as of the date first above written.



		COLUMBIA LABORATORIES, INC.

		By:		/s/ Robert S. Mills

		Name:		Robert S. Mills
		Title:		President and Chief Executive Officer