-----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,
IPXYc0L6OtIf6gTwGXayS0DluUdZEsHm3DBYS1z8qYeIqgGD/6ez9yBL7FUMjr8a
mftrR1lFcq5bldZO0SxW3w==
0000950123-10-040491.txt : 20100730
0000950123-10-040491.hdr.sgml : 20100730
20100429150043
ACCESSION NUMBER: 0000950123-10-040491
CONFORMED SUBMISSION TYPE: PRER14A
PUBLIC DOCUMENT COUNT: 7
FILED AS OF DATE: 20100429
DATE AS OF CHANGE: 20100519
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: PRER14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10352
FILM NUMBER: 10781123
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
PRER14A
1
y83374a2prer14a.htm
SCHEDULE PRER14A
prer14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 2)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
|
|
|
|
þ |
|
Preliminary Proxy Statement |
|
o |
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
|
o |
|
Definitive Proxy Statement |
|
o |
|
Definitive Additional Materials |
o |
|
Soliciting Material Pursuant to § 240.14a-12 |
COLUMBIA LABORATORIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the Appropriate Box):
|
|
|
o |
|
No fee required. |
|
o |
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Title of each class of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Aggregate number of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
Total fee paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
þ |
|
Fee paid previously with preliminary materials. |
|
|
|
|
o |
|
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing. |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Amount Previously Paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Form, Schedule or Registration Statement No.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
Filing Party: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
Date Filed: |
|
|
|
|
|
|
|
|
|
|
Preliminary Proxy StatementSubject to Completion
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
(973) 994-3999
[], 2010
To our Stockholders:
You are cordially invited to attend a special meeting of the stockholders of Columbia
Laboratories, Inc. (Columbia), which will be held at [], on [day], [month], 2010 at [] local
time. At the special meeting or any postponement, adjournment or delay thereof (the Special
Meeting), you will be asked to consider and vote upon the following proposals:
1. to approve the sale of substantially all of our assets primarily relating to the research,
development, regulatory approval, manufacture, distribution, marketing, sale and promotion of
pharmaceutical products containing progesterone as an active ingredient, and the transfer of
certain related liabilities (the Asset Sale), pursuant to the Purchase and Collaboration
Agreement, dated as of March 3, 2010 (the Purchase and Collaboration Agreement), by and among
Columbia, Coventry Acquisition, Inc. (Buyer), a Delaware corporation and wholly owned subsidiary
of Watson Pharmaceuticals, Inc., a Nevada corporation (Watson), and Watson, as a guarantor of
Buyers obligations under the Purchase and Collaboration Agreement;
2. to approve a proposed amendment (the Charter Amendment) to our Restated Certificate of
Incorporation, as amended, to increase the number of our authorized shares of common stock, $0.01
par value per share (the Common Stock), from 100,000,000 to 150,000,000;
3. to adjourn the Special Meeting to a later date (the Adjournment), if necessary or
appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to
approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the
Asset Sale and/or the Charter Amendment, as applicable; and
4. to transact such other business as may properly come before the Special Meeting.
The approval of the Asset Sale proposal is conditioned upon the approval of the Charter
Amendment proposal, but not upon the approval of the Adjournment proposal. Neither the approval of
the Charter Amendment proposal nor the Adjournment proposal are conditioned upon the approval of
any other proposal.
After careful consideration, our board of directors has unanimously determined that (i) the
Asset Sale on the terms and conditions set forth in the Purchase and Collaboration Agreement is
expedient and in the best interests of Columbia and (ii) the approval of the Charter Amendment is
advisable and in the best interests of our stockholders. Our board of directors has approved the
Purchase and Collaboration Agreement, and the transactions contemplated thereby, and the Charter
Amendment, and recommends that you vote FOR the proposal to approve the Asset Sale, FOR the
proposal to approve the Charter Amendment and FOR adjourning the Special Meeting to a later date,
if necessary or appropriate, to allow for the solicitation of additional proxies in favor of the
proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are insufficient votes
to approve the Asset Sale and/or the Charter Amendment, as applicable.
Our board of directors considered a number of factors in evaluating the Asset Sale and also
consulted with its financial and legal advisors. The attached proxy statement contains a detailed
discussion of the background of, and reasons for, the Asset Sale, and the reasons for the Charter
Amendment. A copy of the Purchase and Collaboration Agreement (and certain related agreements) is
attached as Annex A to the proxy statement. A copy of the Charter Amendment is attached as Annex B
to the proxy statement. We encourage you to read the proxy statement and its annexes carefully and
in its entirety. You may also obtain more information about us from other documents that we have
filed with the Securities and Exchange Commission.
We hope that you can join us at the Special Meeting. As a stockholder, your participation in
our affairs is important, regardless of the number of shares you hold. Therefore, whether or not
you are able to personally attend the Special Meeting, please vote your shares as soon as possible
by completing and returning the enclosed proxy card. If you attend the Special Meeting and vote in
person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold
your shares in street name, you should instruct your bank, broker or other nominee how to vote in
accordance with the voting instruction card you will receive from your bank, broker or other
nominee.
Your vote is very important, regardless of the number of shares that you own. We cannot
consummate the Asset Sale unless the proposal to approve the Asset Sale is adopted by the
affirmative vote of a majority of the votes entitled to be cast by the holders of the outstanding
shares of our Common Stock, shares of our Series B Convertible Preferred Stock, $0.01 par value per
share (the Series B Preferred Stock), and shares of our Series E Convertible Preferred Stock,
$0.01 par value per share (the Series E Preferred Stock), voting together as a single class (with
the holders of shares of Common Stock entitled to one vote per share, the holders of shares of
Series B Preferred Stock entitled to 20 votes per share and the holders of shares of Series E
Preferred Stock entitled to 50 votes per share, collectively, the Voting Power). We cannot
consummate the Charter Amendment unless the proposal to approve the Charter Amendment is adopted by
the affirmative vote of (i) the holders of a majority of our outstanding shares of Common Stock
and (ii) the holders of a majority of the Voting Power of
2
our outstanding shares of Common Stock, Series B Preferred Stock and Series E Preferred Stock,
voting together as a single class. The stockholders present may adjourn the Special Meeting
despite the absence of a quorum to a later date, if necessary or appropriate, to allow for the
solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the
Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter
Amendment, as applicable. Approval of the Adjournment proposal requires the affirmative vote of a
majority of the votes cast by holders of our Common Stock, Series B Preferred Stock and Series E
Preferred Stock present in person or by proxy at the Special Meeting, whether or not a quorum is
present. Our shares of Contingently Redeemable Series C Convertible Preferred Stock, $0.01 par
value per share, have no voting rights. The failure of any stockholder to vote in person by ballot
at the Special Meeting or submit a signed proxy card will have the same effect as a vote AGAINST
the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will
not have an effect on the proposal to adjourn the Special Meeting to a later date, if necessary or
appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to
approve the Asset Sale and/or the Charter Amendment. If you hold your shares in street name, the
failure to instruct your bank, broker or other nominee how to vote your shares will have the same
effect as a vote AGAINST the proposal to approve the Asset Sale and the proposal to approve the
Charter Amendment but will not have an effect on the Adjournment proposal.
On behalf of our board of directors, thank you for your continued support.
Sincerely yours,
Frank C. Condella, Jr.
Frank C. Condella, Jr.
Interim Chief Executive Officer
Stephen G. Kasnet
Stephen G. Kasnet
Chairman of the Board of Directors
The proxy statement is dated [], 2010, and is first being mailed to stockholders on or about
[], 2010.
3
Preliminary Proxy StatementSubject to Completion
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
(973) 994-3999
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held On [], 2010
[], 2010
To our Stockholders:
You are cordially invited to attend a special meeting of the stockholders of Columbia
Laboratories, Inc. (Columbia), which will be held at [], on [day], [month], 2010 at [] local
time. At the special meeting or any postponement, adjournment or delay thereof (the Special
Meeting), you will be asked to consider and vote upon the following proposals:
1. to approve the sale of substantially all of our assets primarily relating to the research,
development, regulatory approval, manufacture, distribution, marketing, sale and promotion of
pharmaceutical products containing progesterone as an active ingredient, and the transfer of
certain related liabilities (the Asset Sale), pursuant to the Purchase and Collaboration
Agreement, dated as of March 3, 2010 (the Purchase and Collaboration Agreement), by and among
Columbia, Coventry Acquisition, Inc. (Buyer), a Delaware corporation and wholly owned subsidiary
of Watson Pharmaceuticals, Inc., a Nevada corporation (Watson), and Watson, as a guarantor of
Buyers obligations under the Purchase and Collaboration Agreement;
2. to approve a proposed amendment (the Charter Amendment) to our Restated Certificate of
Incorporation, as amended, to increase the number of our authorized shares of common stock, $0.01
par value per share (the Common Stock), from 100,000,000 to 150,000,000;
3. to adjourn the Special Meeting to a later date (the Adjournment), if necessary or
appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to
approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the
Asset Sale and/or the Charter Amendment, as applicable; and
4. to transact such other business as may properly come before the Special Meeting.
Our board of directors has specified
April 27, 2010 as the record date (the Record Date) for the
purpose of determining our stockholders who are entitled to receive notice of, and to vote at, the
Special Meeting. Only stockholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the Special Meeting.
A complete list of stockholders of record entitled to vote at the Special Meeting will be
available for ten days prior to the Special Meeting at our executive offices and principal place of
business for inspection by our stockholders during ordinary business hours for any purpose germane
to the Special Meeting and will also be available at the Special Meeting.
Even if you plan to attend the Special Meeting in person, we request that you sign, date and
return the enclosed proxy card in the accompanying reply envelope prior to the Special Meeting to
ensure that your shares will be represented at the Special Meeting if you are unable to attend.
If you are a stockholder of record, voting in person by ballot at the Special Meeting will revoke
any proxy that you previously submitted. If you hold your shares through a bank, broker or other
nominee, you must obtain from such bank, broker or other nominee a legal proxy issued in your name in order to
vote in person at the Special Meeting.
The affirmative vote of a majority of the votes entitled to be cast by the holders of the
outstanding shares of our Common Stock, shares of our Series B Convertible Preferred Stock, $0.01
par value per share (the Series B Preferred Stock), and shares of our Series E Convertible
Preferred Stock, $0.01 par value per share (the Series E Preferred Stock), voting together as a
single class (with the holders of shares of Common Stock entitled to one vote per share, the
holders of shares of Series B Preferred Stock entitled to 20 votes per share and the holders of
shares of Series E Preferred Stock entitled to 50 votes per share, collectively, the Voting
Power) is required to approve the Asset Sale. The affirmative vote of (i) the holders of a
majority of our outstanding shares of Common Stock and (ii) the holders of a majority of the
Voting Power of our outstanding shares of Common Stock, shares of Series B Preferred Stock and
shares of Series E Preferred Stock, voting together as a single class, is required to approve the
Charter Amendment. The stockholders present may adjourn the Special Meeting despite the absence of
a quorum to a later date, if necessary or appropriate, to allow for the solicitation of additional
proxies in favor of the proposal(s) to approve the Asset Sale and/or the Charter Amendment, as
applicable. Approval of the Adjournment proposal requires the affirmative vote of a majority of the
votes cast by holders of our Common Stock, Series B Preferred Stock and Series E Preferred Stock
present in person or by proxy at the Special Meeting, whether or not a quorum is present.
Columbias shares of Contingently Redeemable Series C Convertible Preferred Stock, $0.01 par value
per share, have no voting rights.
2
The failure of any stockholder to submit a signed proxy card or to vote in person by ballot at
the Special Meeting will have the same effect as a vote AGAINST the proposal to approve the Asset
Sale and the proposal to approve the Charter Amendment but will not have an effect on the
Adjournment proposal.
If you hold your shares in street name, the failure to instruct your bank, broker or other
nominee how to vote your shares will have the same effect as a vote AGAINST the proposal to
approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an
effect on the Adjournment proposal.
After careful consideration, our board of directors has unanimously determined that (i) the
Asset Sale on the terms and conditions set forth in the Purchase and Collaboration Agreement is
expedient and in the best interests of Columbia and (ii) the approval of the Charter Amendment is
advisable and in the best interests of our stockholders.
OUR BOARD OF DIRECTORS HAS APPROVED THE PURCHASE AND COLLABORATION AGREEMENT, AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND THE CHARTER AMENDMENT, AND RECOMMENDS THAT YOU VOTE FOR
THE PROPOSAL TO APPROVE THE ASSET SALE, FOR THE PROPOSAL TO APPROVE THE CHARTER AMENDMENT AND
FOR ADJOURNING THE SPECIAL MEETING TO A LATER DATE, IF NECESSARY OR APPROPRIATE, TO ALLOW FOR THE
SOLICITATION OF ADDITIONAL PROXIES IN FAVOR OF THE PROPOSAL(S) TO APPROVE THE ASSET SALE AND/OR THE
CHARTER AMENDMENT IF THERE ARE INSUFFICIENT VOTES TO APPROVE THE ASSET SALE AND/OR THE CHARTER
AMENDMENT, AS APPLICABLE.
Your vote is important. Properly executed proxy cards with no instructions indicated on the
proxy card will be voted FOR the proposal to approve the Asset Sale, FOR the proposal to
approve the Charter Amendment and FOR adjourning the Special Meeting to a later date, if
necessary or appropriate, to allow for the solicitation of additional proxies in favor of the
proposal(s) to approve the Asset Sale and/or the Charter Amendment, as applicable. Whether or not
you plan to attend the Special Meeting, please date, sign and complete the enclosed proxy card and
return it in the enclosed envelope, which requires no postage if mailed in the United States. If
you attend the Special Meeting, you may revoke your proxy and vote in person by ballot if you wish,
even if you have previously returned your proxy card. If you hold your shares in street name,
you should instruct your bank, broker or other nominee how to vote in accordance with the voting
instruction card you will receive from your bank, broker or other nominee. Your prompt cooperation
is greatly appreciated.
By Order of the Board of Directors,
Michael McGrane
Corporate Secretary
Livingston, New Jersey
[], 2010
3
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
1 |
|
|
|
|
2 |
|
|
|
|
2 |
|
|
|
|
2 |
|
|
|
|
4 |
|
|
|
|
5 |
|
|
|
|
6 |
|
|
|
|
6 |
|
|
|
|
7 |
|
|
|
|
9 |
|
|
|
|
9 |
|
|
|
|
10 |
|
|
|
|
10 |
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
12 |
|
|
|
|
13 |
|
|
|
|
13 |
|
|
|
|
13 |
|
|
|
|
14 |
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
28 |
|
|
|
|
28 |
|
|
|
|
28 |
|
|
|
|
28 |
|
|
|
|
29 |
|
|
|
|
29 |
|
|
|
|
29 |
|
|
|
|
30 |
|
|
|
|
31 |
|
|
|
|
31 |
|
i
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
32 |
|
|
|
|
32 |
|
|
|
|
32 |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
33 |
|
|
|
|
33 |
|
|
|
|
45 |
|
|
|
|
53 |
|
|
|
|
58 |
|
|
|
|
59 |
|
|
|
|
59 |
|
|
|
|
60 |
|
|
|
|
60 |
|
|
|
|
61 |
|
|
|
|
62 |
|
|
|
|
64 |
|
|
|
|
64 |
|
|
|
|
64 |
|
|
|
|
64 |
|
|
|
|
64 |
|
|
|
|
65 |
|
|
|
|
66 |
|
|
|
|
66 |
|
|
|
|
67 |
|
|
|
|
73 |
|
|
|
|
|
|
|
|
|
74 |
|
|
|
|
|
|
|
|
|
79 |
|
|
|
|
80 |
|
|
|
|
80 |
|
|
|
|
81 |
|
|
|
|
81 |
|
|
|
|
83 |
|
|
|
|
83 |
|
|
|
|
84 |
|
|
|
|
84 |
|
|
|
|
85 |
|
|
|
|
89 |
|
|
|
|
91 |
|
|
|
|
93 |
|
|
|
|
93 |
|
|
|
|
95 |
|
|
ii
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
95 |
|
|
|
|
96 |
|
|
|
|
97 |
|
|
|
|
99 |
|
|
|
|
100 |
|
|
|
|
102 |
|
|
|
|
102 |
|
|
|
|
109 |
|
|
|
|
111 |
|
|
|
|
112 |
|
|
|
|
116 |
|
|
|
|
117 |
|
|
|
|
118 |
|
|
|
|
119 |
|
|
|
|
121 |
|
|
|
|
122 |
|
|
|
|
122 |
|
|
|
|
122 |
|
|
|
|
122 |
|
|
|
|
122 |
|
|
|
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
126 |
|
|
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
|
|
|
129 |
|
|
|
|
|
|
|
|
|
134 |
|
|
|
|
|
|
|
|
|
137 |
|
|
|
|
|
|
|
|
|
138 |
|
|
|
|
|
140 |
|
|
|
|
140 |
|
|
|
|
140 |
|
|
|
|
141 |
|
|
|
|
141 |
|
|
|
|
|
|
|
|
|
142 |
|
|
|
|
142 |
|
|
|
|
142 |
|
|
|
|
|
|
|
|
|
144 |
|
|
|
|
144 |
|
|
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
|
149 |
|
|
iii
|
|
|
Annex A |
|
Purchase and Collaboration Agreement |
Annex B |
|
Charter Amendment |
Annex C |
|
Opinion of RBC Capital Markets Corporation |
Annex D |
|
Note Purchase Agreement(s) |
REGISTERED TRADEMARKS
CRINONE®, PROCHIEVE® and STRIANT® are registered trademarks
of Columbia Laboratories, Inc.
iv
SUMMARY TERM SHEET
This summary term sheet highlights selected information contained in this proxy statement and
may not contain all the information that may be important to you. Accordingly, we encourage you to
carefully read this proxy statement, its annexes and the documents referred to or incorporated by
reference in this proxy statement in their entirety. Each item in
this summary term sheet includes a page
reference directing you to a more complete description of that topic. See Where You Can Find More
Information, beginning on page 148. In this proxy statement, references to (i) Columbia, we,
our or us refer to Columbia Laboratories, Inc. and its subsidiaries, (ii) the board, our
board, our board of directors or the board of directors refer to the board of directors of
Columbia Laboratories, Inc., (iii) Watson refers to Watson Pharmaceuticals, Inc. and its
subsidiaries and (iv) Buyer refers to Coventry Acquisition, Inc., a wholly owned subsidiary of
Watson.
The
Parties to the Asset Sale (Page 33)
Columbia Laboratories, Inc.
Columbia is a Delaware corporation in the business of developing, manufacturing and selling
pharmaceutical products that utilize Columbias proprietary bioadhesive drug delivery technologies.
Columbia is focused predominantly on the womens reproductive healthcare market, but Columbias
product development projects address the broader womens healthcare market. Columbias bioadhesive
vaginal gel products provide patient-friendly solutions for infertility, pregnancy support,
amenorrhea, and other obstetric, gynecologic and medical conditions. Our common stock, $0.01 par
value per share (the Common Stock), is listed on the NASDAQ Global Market under the symbol
CBRX. Our corporate headquarters is located at 354 Eisenhower Parkway, Plaza 1, Second Floor,
Livingston, NJ 07039 and our telephone number is (973) 994-3999.
Watson Pharmaceuticals, Inc.
Watson is a Nevada corporation and leading specialty pharmaceutical company in the business of
developing, manufacturing, marketing, selling and distributing generic (off-patent) and brand
pharmaceutical products. Watson operates in approximately 20 countries, with its key commercial
market being the United States. As of December 31, 2009, Watson marketed approximately 170 generic
pharmaceutical product families and 30 branded pharmaceutical product families through its Generic
and Brand Divisions, respectively, and distributed approximately 8,000 stock-keeping units through
its Distribution Division. Watsons corporate headquarters is located at 311 Bonnie Circle,
Corona, CA 92880-2882 and Watsons telephone number is (951) 493-5300.
Coventry Acquisition, Inc.
Buyer is a Delaware corporation, formed by Watson solely for the purpose of effectuating the
transactions contemplated by the Purchase and Collaboration Agreement, dated as of March 3, 2010,
by and among Columbia, Buyer and Watson, as guarantor of Buyers obligations under the Purchase and
Collaboration Agreement (the Purchase and Collaboration Agreement) and the documents related
thereto described in this proxy statement. As of the date of this proxy
statement, Buyer has not conducted any business activities other than those incidental to the
transactions contemplated by the Purchase and Collaboration Agreement (the Watson Transactions).
Buyers corporate headquarters is located at 311 Bonnie Circle, Corona, CA 92880-2882 and Buyers
telephone number is (951) 493-5300.
1
The
Asset Sale (Page 81)
Pursuant to the terms and conditions of the Purchase and Collaboration Agreement, Buyer will
acquire substantially all of our assets primarily related to the research, development, regulatory
approval, manufacture, distribution, marketing, sale and promotion of pharmaceutical products
containing progesterone as an active pharmaceutical ingredient, including CRINONE 8% progesterone
gel marketed and sold by us in the United States, and PROCHIEVE 8% progesterone gel and PROCHIEVE
4% progesterone gel, each sold by us in the United States, and certain related liabilities (the
Asset Sale), and 11.2 million shares of our Common Stock (the Acquisition Shares). Columbia
will continue as a public company after the Closing of the Watson Transactions. Prior to the
Closing, Buyer shall assign to a wholly-owned subsidiary of Watson the rights and obligations of
Buyer to purchase certain non-U.S. intellectual property rights that constitute part of the Assets
(as defined herein). These non-U.S. Assets include the rights to Develop (as defined herein) or
Commercialize (as defined herein) the Assets outside of the United
States and the income, royalties, damages
and payments made, due or payable with respect to such rights.
A copy of the Purchase and Collaboration Agreement (and certain related agreements) is
attached as Annex A to this proxy statement. We encourage you to carefully read the Purchase and
Collaboration Agreement and related agreements in their entirety
because they are the legal documents
that govern the Watson Transactions, including the Asset Sale.
Initial
Consideration to be Received by Columbia (Page 83)
If the Watson Transactions are completed, Columbia will receive an initial $47 million payment
in cash (the Upfront Payment) and Buyer will assume certain of our liabilities. See The
Purchase and Collaboration AgreementLiabilities to be
Assumed, beginning
on page 83, and The Purchase and Collaboration
AgreementPurchase Price, beginning
on page 84.
Milestone
and Royalty Payments (Page 84)
Under the Purchase and Collaboration Agreement, Buyer agreed to pay us up to $45.5 million in
cash upon the achievement of several contingent milestones as follows:
|
|
|
upon the completion of the statistical analysis and delivery of results
from our Phase III PREGNANT study designed to evaluate the ability of PROCHIEVE
8% to reduce the risk of preterm birth in women with a short cervix of between
1.0 and 2.0 centimeters (the PTB Indication) as measured by transvaginal
ultrasound at mid-pregnancy (the PREGNANT Study) and (A) if the
results of the PREGNANT Study reflect the achievement of a primary endpoint,
reduction in preterm birth, p-value that is less than or equal to 0.05 and
greater than 0.01, $6 million, or (B) if the results of the PREGNANT Study
reflect the achievement of a primary endpoint, reduction |
2
|
|
|
in preterm birth, p-value that is less than or equal to 0.01, $8 million; provided,
however, in each case, the results reflect the achievement of a secondary
endpoint, infant outcomes composite score, p-value that is less than or equal to
0.05; |
|
|
|
|
upon acceptance by the United States Food and Drug Administration (the
FDA) of a new drug application (or a supplemental new drug application) to
market PROCHIEVE 8% for the PTB Indication, $5 million; |
|
|
|
|
upon the first commercial sale of PROCHIEVE 8% in the United States for
the PTB Indication, $30 million; |
|
|
|
|
upon filing with and acceptance by a Regulatory Authority (as defined
herein) of an application for the authorization to market a pharmaceutical
product containing Progesterone as an active pharmaceutical ingredient
(Progesterone Products) for the PTB Indication in a country or jurisdiction
outside the United States, $0.5 million; and |
|
|
|
|
upon a grant by any Regulatory Authority of an approval to market a
Progesterone Product for the PTB Indication in a country or jurisdiction
outside of the United States, $2 million. |
Pursuant to the Purchase and Collaboration Agreement, after the Closing, Buyer also agreed to
make certain royalty payments, on a country-by-country basis, to us in each year during the
relevant royalty period (as described herein) based on the Net Sales (as defined herein) of:
|
|
|
any pharmaceutical product containing Natural Progesterone (as defined
herein) or 17-alpha-hydroxyprogesterone caproate that is delivered
transvaginally, except Generic Equivalents (as defined herein) of Progesterone
Products that are not (and never were) Commercialized pursuant to the Purchase
and Collaboration Agreement (each a Royalty Product); and |
|
|
|
|
|
any pharmaceutical product that contains Progesterone as an active
pharmaceutical ingredient covered by a Regulatory Approval (as defined herein)
indicated for preterm birth, except Generic Equivalents of Progesterone
Products that are not (and never were) Commercialized pursuant to the Purchase
and Collaboration Agreement (each, a PTB Royalty
Product) (the Purchase and Collaboration Agreement contains
limitations on Buyers and Buyers affiliates ability to introduce Generic
Equivalents of Progesterone Products, see The Purchase and
Collaboration AgreementPurchase PriceAdjustments to
Royalty PaymentsGeneric Entry, beginning on page 87). |
|
|
|
|
|
Royalty rates
are: |
|
|
|
10% of the portion of annual U.S. Net Sales which are less than
or equal to $150,000,000; |
|
|
|
|
15% of the portion of annual U.S. Net Sales which are greater
than $150,000,000 and less than or equal to $250,000,000;
|
3
|
|
|
20% of the portion of annual U.S. Net Sales which are greater
than $250,000,000; and |
|
|
|
|
10% of annual Net Sales outside of the United States in a
country where Buyer or its affiliates are Commercializing any Royalty
Product or PTB Royalty Product; provided, however, that: |
|
|
|
if Generic Entry by a third party with respect to any Royalty Product or
PTB Royalty Product occurs in any country such that quarterly Net Sales of such
Royalty Product or PTB Royalty Product in such country are reduced by 50% from
the average quarterly Net Sales for such Product in such country over the
preceding four quarters and such reduction is directly attributable to the
marketing or sale in such country of such Generic Equivalent, the royalty rate
shall be reduced by 50% in such country (a Generic Entry); |
|
|
|
|
if Buyer or any of its affiliates grants any licenses, sublicenses,
distribution or marketing rights or otherwise collaborates with a third party
to Commercialize any Royalty Product or PTB Royalty Product in a country
outside of the United States, in lieu of royalties payable in respect of Net
Sales, we will be entitled to 20% of Gross Profits (as defined herein)
associated with such Commercialization in such country; and |
|
|
|
|
in the event that a Generic Entry by Buyer or its affiliates with
respect to any Royalty Product or PTB Royalty Product in a country occurs in
the circumstances permitted by the Purchase and Collaboration Agreement, in
lieu of royalties payable in respect of Net Sales for such generic product, we
will be entitled to 20% of Gross Profits associated with the Commercialization
of such generic product in such country. |
Closing(s)
(Page 80)
The Purchase and Collaboration Agreement contemplates that the closing (the Closing) will
take place at the offices of Kaye Scholer LLP, 425 Park Ave., New York, NY 10022 at 10:00 a.m., New
York City time, or at such other place or time as we and the Buyer may mutually agree, three
business days after our stockholders approve the Asset Sale and Charter Amendment, provided all of
the other conditions to the Closing have been satisfied or waived. At the Closing, we will receive
the Upfront Payment and issue to the Buyer, the Acquisition Shares as well as the assets and
liabilities to be transferred pursuant to the Purchase and Collaboration Agreement other than those
regulatory filings and approvals necessary for Commercializing the PTB Indication, which will be
subsequently transferred upon receipt of the PTB US Approval (as defined herein) or the mutual
agreement between us and Buyer to cease the Development of the PTB Indication, provided all of the
other conditions have been satisfied or waived, or in the absence of the foregoing, on December 31,
2012.
4
Use of
the Upfront Payment from the Watson Transactions (Page 59)
We
intend to use a portion of the Upfront Payment to pay approximately $16 million in satisfaction of
certain amounts owed to PharmaBio Development, Inc. (PharmaBio) pursuant to the Investment and
Royalty Agreement, dated March 5, 2003, between us and PharmaBio, as amended and supplemented from
time to time (the PharmaBio Agreement). On March 3, 2010, we and PharmaBio amended the PharmaBio
Agreement (the PharmaBio Amendment) to provide for the early termination of the PharmaBio
Agreement and permit us to make certain payments thereunder on an accelerated and discounted basis
under certain circumstances. See The Asset Sale (Proposal No. 1)Senior Debt, beginning on page
66.
In
addition, we will use approximately $26.8 million of the Upfront
Payment toward the repurchase of all $40 million in outstanding
principal amount of our convertible subordinated notes due December 31,
2011 (the Notes)(and to pay accrued and unpaid interest
thereon) pursuant to agreements that we have entered into with the holders of the Notes
(the Note Purchase Agreements), attached as Annex D to
this proxy statement. The Note Purchase Agreements provide for us, at the time of the
Closing, to repurchase the Notes for an aggregate purchase price of $26 million in cash, plus
accrued and unpaid interest through (but excluding) the date of Closing, warrants to purchase 7.75
million shares of Common Stock and 7,407,407 shares of our Common Stock. Pursuant to the Note
Purchase Agreements, the Notes were amended so that the Watson Transactions would not trigger the
rights of the Note holders to compel us to redeem the Notes. The
closings of the transactions contemplated by the Note Purchase Agreements are subject to various
conditions, including the Closing of the Watson Transactions, the
filing of the Charter Amendment with the Secretary of State of the
State of Delaware, and the satisfaction of certain of our obligations
owing to PharmaBio under the PharmaBio Agreement. See The Asset Sale (Proposal No. 1)Purchase of our Convertible Subordinated Notes,
beginning on page 67.
We may use up to $600,000 of the Upfront Payment to redeem the outstanding shares of our
Contingently Redeemable Series C Convertible Preferred Stock, $0.01 par value per share (Series C
Preferred Stock). Upon a triggering event (the Watson Transactions would be a triggering event),
the holders of our shares of Series C Preferred Stock have the right to require us to redeem their
shares of Series C Preferred Stock in cash for the value of the shares of Series C Preferred Stock
plus all accrued and unpaid dividends thereon on the date such redemption is demanded. As of the date
hereof, 600 shares of our Series C Preferred Stock are outstanding, each with a value of $1,000.
See The Asset Sale (Proposal No. 1)Preferred
Stock, beginning on page 73.
Additionally, we expect to use a portion of the Upfront Payment (not to exceed $7 million
incurred after January 1, 2010) to pay for completion of the PREGNANT Study and the preparation,
filing and approval process of the related new drug application (or supplemental new drug
application). Pursuant to the Purchase and Collaboration Agreement, we are required to maintain a
separate account for the purpose of paying those costs. See The Purchase and Collaboration
AgreementDevelopment and the Joint Development CommitteeDevelopment of PROCHIEVE for the PTB Indication,
beginning on page 103.
We will also use a portion of the Upfront Payment to pay fees and expenses incurred in
connection with the transactions described herein.
To the extent the payments set forth above exceed the Upfront Payment, we will make such
payments from our existing cash.
5
No proceeds from the Watson Transactions will be distributed to our stockholders.
Development
and Commercialization (Pages 102 and 109)
Pursuant to the Purchase and Collaboration Agreement, we and Buyer have agreed to collaborate
with respect to the Development of Progesterone Products. In connection therewith, the parties
agreed to establish a joint development committee to oversee and supervise all Development
activities. We will be responsible for completion of the PREGNANT Study and such other activities
as determined by the joint development committee. We will be responsible for the Development Costs
(as defined herein) associated with conducting the PREGNANT Study and the preparation, filing and
approval process of the related new drug application (or supplemental new drug application) up to a
maximum amount of $7 million incurred after January 1, 2010. All other Development Costs incurred
in connection with the Development collaboration will be paid by Buyer. Pursuant to the Purchase
and Collaboration Agreement, we and Buyer have also agreed that with limited exception, Buyer will
be solely responsible to Commercialize the Progesterone Products from and after the Closing and
that Buyer will use commercially reasonable efforts to maximize Net Sales of the Progesterone
Products until the end of the royalty term of any Royalty Product or PTB Royalty Product, as
applicable. However, the Parties will establish a joint commercialization committee for the
purposes of providing a means for the exchange of information with respect to Commercialization
activities and opportunities.
Nature of Columbias Business Following the Asset Sale (Page 61)
After the Closing, we will continue the PREGNANT Study and the preparation of a new drug
application or supplemental new drug application to market PROCHIEVE 8% for the PTB Indication. In
addition, if the PREGNANT Study is successful, we expect to receive (at least a portion of) the
milestone payments described herein. We also expect to receive the royalty payments contemplated
by the Purchase and Collaboration Agreement and perform our obligations and receive payments under
the Supply Agreement.
After the Closing, we will also retain certain assets and rights relating to our Progesterone
business, including all rights necessary to perform our obligations under our license and supply
agreement (the Merck Serono Agreement) with Ares Trading S.A., an affiliate of Merck Serono S.A.
(Merck Serono). The Merck Serono Agreement expires on May 19, 2010, and is renewable upon mutual
agreement of the parties for five year periods at commercial terms to be agreed upon. While Merck
Serono has informed us that they wish to renew the Merck Serono Agreement, there can be no
assurance that we will reach a renewal agreement or that any renewal agreement will not
differ materially from the current Merck Serono Agreement.
If the PREGNANT Study is successful and we achieve milestones set forth in the Purchase and
Collaboration Agreement, we intend to become a focused development company, with research and
development centered on products to address womens health needs, subject to the covenant not to
compete in the Purchase and Collaboration Agreement (discussed herein). Our aim would be to take
new product candidates through proof-of-concept and then to enter into new partnership arrangements
with respect to them. In addition, we would expect to enter
6
into partnership discussions for STRIANT, and through a partner, attempt to build revenue from
STRIANT and explore the potential to expand its labeling. We also would expect to continue to
leverage our proprietary drug delivery systems to expand our product portfolio.
If the PREGNANT Study is not successful, our resources will be limited and our board of
directors will have to reassess our strategy.
The
Special Meeting (Page 28)
Date, Time and Place. The special meeting will be held at [], on [day], [month], 2010 at []
local time (the Special Meeting).
Purpose. You will be asked to consider and vote upon the following proposals:
1. to approve the Asset Sale pursuant to the Purchase and Collaboration Agreement;
2. to approve a proposed amendment (the Charter Amendment) to our Restated Certificate of
Incorporation, as amended, to increase the number of shares of our authorized Common Stock from
100,000,000 to 150,000,000;
3. to adjourn the Special Meeting to a later date (the Adjournment), if necessary or
appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to
approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the
Asset Sale and/or the Charter Amendment, as applicable; and
4. to transact such other business as may properly come before the Special Meeting.
The approval of the Asset Sale proposal is conditioned upon the approval of the Charter
Amendment proposal, but not upon the approval of the Adjournment proposal. Neither the approval of
the Charter Amendment proposal nor the Adjournment proposal are conditioned upon the approval of
any other proposal.
Record Date and Quorum. Our board
of directors has specified April 27, 2010 as the record date
(the Record Date) for the purpose of determining our stockholders who are entitled to receive
notice of, and to vote at, the Special Meeting. Only stockholders of record at the close of
business on the Record Date are entitled to notice of and to vote at the Special Meeting. You are
entitled to vote all shares of Common Stock, shares of our Series B Convertible Preferred Stock,
$0.01 par value per share (Series B Preferred Stock), and shares of our Series E Convertible
Preferred Stock, $0.01 par value per share (Series E Preferred Stock and, together with the
Series B Preferred Stock, the Preferred Stock), that you owned as of the close of business on the
Record Date. Each share of Common Stock is entitled to one vote. Each share of Series B Preferred
Stock is entitled to 20 votes (which is the number of shares of Common Stock into which each share
of Series B Preferred Stock is convertible). Each share of Series E Preferred Stock is entitled to
50 votes (which is the number of shares of Common Stock into which each share of Series E Preferred
Stock is convertible). Our shares of Series C Preferred Stock have no voting rights. As of the
close of business on the Record Date, there were approximately
65,605,886 shares of Common Stock issued
and outstanding (each of which is entitled to one vote per share), 130 shares of Series B Preferred
Stock issued and outstanding having aggregate voting power
7
equal to 2,600 shares of Common Stock, and 59,000 shares of Series E Preferred Stock issued
and outstanding having aggregate voting power equal to 2,950,000
shares of Common Stock. The shares of Common Stock, shares of
Series B Preferred Stock and shares of Series E Preferred Stock are
collectively herein referred to as, the Shares. The quorum requirement for holding the Special
Meeting and transacting business is the presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote at the Special Meeting. The Shares may be present in
person or represented by proxy at the Special Meeting. Votes withheld, abstentions and broker
non-votes are counted as present and entitled to vote for purposes of determining a quorum.
Vote Required. The affirmative vote of a majority of the votes entitled to be cast by the
holders of our outstanding shares of our Common Stock, shares of our Series B Preferred Stock and
shares of our Series E Preferred Stock, voting together as a single class (with the holders of
shares of our Common Stock entitled to one vote per share, the holders of shares of our Series B
Preferred Stock entitled to 20 votes per share and the holders of shares of our Series E Preferred
Stock entitled to 50 votes per share, collectively, the Voting Power), is required to approve the
Asset Sale. The affirmative vote of (i) the holders of a majority of the outstanding shares of our
Common Stock and (ii) the holders of a majority of the Voting Power of the outstanding shares of
our Common Stock, shares of our Series B Preferred Stock and shares of our Series E Preferred
Stock, voting together as a single class, is required to approve the Charter Amendment. The
stockholders present may adjourn the Special Meeting despite the absence of a quorum to a later
date, if necessary or appropriate, to allow for the solicitation of additional proxies in favor of
the proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are insufficient
votes to approve the Asset Sale and/or the Charter Amendment, as applicable. Approval of the
Adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of
our Common Stock, Series B Preferred Stock and Series E Preferred Stock present in person or by
proxy at the Special Meeting, whether or not a quorum is present.
A complete list of stockholders of record entitled to vote at the Special Meeting will be
available for ten days prior to the Special Meeting at our executive offices and principal place of
business for inspection by our stockholders during ordinary business hours for any purpose germane
to the Special Meeting and will also be available at the Special Meeting.
Common Stock Ownership of Directors and Executive Officers. As of April 27, 2010, the
directors and executive officers of Columbia had, or were deemed to have had, beneficial ownership
of, in the aggregate, approximately 4.1% of our Common Stock (including approximately 2.7% which
represents shares of Common Stock that are purchasable under options held by such directors and
executive officers but excluding approximately 8.9% which are held by affiliates of one of our
directors). Columbia believes that its directors and executive officers will vote all of the
Shares for which they have, or are deemed to have, beneficial ownership in favor of all of the
proposals that stockholders are being asked to approve.
Voting and Proxies. Any stockholder of record entitled to vote at the Special Meeting may
submit a proxy by returning the enclosed proxy card by mail or by voting by ballot by appearing in
person at the Special Meeting. If you hold your Shares in street name, you should instruct your
bank, broker or other nominee how to vote in accordance with the voting instruction card you will
receive from your bank, broker or other nominee. The failure of any
8
stockholder to submit a signed proxy card, or to vote in person by ballot at the Special
Meeting, will have the same effect as a vote AGAINST the proposal to approve the Asset Sale and
the proposal to approve the Charter Amendment but will not have an effect on the proposal to
adjourn the Special Meeting, if necessary or appropriate, to allow for the solicitation of
additional proxies in favor of the
proposal(s) to approve the Asset Sale and/or the Charter
Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter Amendment,
as applicable. If you hold your Shares in street name, the failure to instruct your bank, broker
or other nominee how to vote your Shares will have the same effect as a vote AGAINST the proposal
to approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an
effect on the Adjournment proposal. Your prompt cooperation is greatly appreciated.
Revocability of Proxy. Any stockholder of record who executes and returns a proxy card may
revoke the proxy at any time before it is voted at the Special Meeting in any of the following
ways:
|
|
|
if you hold your Shares in your name as a stockholder of record, by
written notice of revocation to our Corporate Secretary at 354
Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039; |
|
|
|
|
timely delivery of a valid, later-dated proxy; or |
|
|
|
|
|
by attending the Special Meeting and voting by ballot in person (your
attendance at the Special Meeting will not, by itself, revoke your previously
granted proxy, unless you give written notice of revocation to our
Corporate Secretary (as described above) before the vote at the
Special Meeting, or you vote by written ballot at the Special Meeting). |
|
If you hold your Shares in street name through a bank, broker or other nominee, you have the
right to change or revoke your proxy at any time before it is voted at the Special Meeting by
following the directions received from your bank, broker or other nominee to change or revoke those
instructions.
Treatment
of Stock Options and Stock-Based Awards (Page 60)
Any unvested restricted stock and unvested and unexercised stock options granted and
outstanding under either of our 1996 Long-Term Performance Plan (our 1996 Plan) or our 2008
Long-Term Incentive Plan (our 2008 Plan) will become immediately and fully vested and exercisable
upon a change in control of Columbia. Consummation of the Asset Sale will constitute a change in
control for this purpose.
Interests
of Columbias Directors and Executive Officers in the Asset Sale (Page 60)
Our directors and executive officers have interests in the Asset Sale and the other
transactions described herein that are different from, or in addition to, your interests as a
stockholder and that may create potential conflicts of interest. Our board of directors was aware
that these interests existed when it approved the Purchase and Collaboration Agreement, the
9
Asset Sale, the Charter Amendment and the other transactions described herein. See The Asset
Sale (Proposal No. 1)Interests of Columbias Directors and Executive Officers in the Asset Sale
and The Asset Sale (Proposal No. 1)Treatment of Stock Options and Stock-Based Awards, beginning
on page 60.
Reasons for the Asset Sale and Charter Amendment; Recommendation of Our Board of Directors (Page 45)
After careful consideration, our board of directors has unanimously determined that (i) the
Asset Sale on the terms and conditions of the Purchase and Collaboration Agreement is expedient and
in the best interests of Columbia and (ii) the approval of the Charter Amendment is advisable and
in the best interests of our stockholders. Our board of directors has approved the Purchase and
Collaboration Agreement, and the transactions contemplated by the Purchase and Collaboration
Agreement, and the Charter Amendment. For a discussion of the material factors considered by our
board in reaching its conclusions, see The Asset Sale (Proposal No. 1)Reasons for the Asset
Sale; Recommendation of Our Board of Directors, beginning on
page 45. For a discussion of the
material factors considered by our board in reaching its conclusions, see Approval of the
Amendment to the Restated Certificate of Incorporation (Proposal No. 2)Reasons for the Charter
Amendment, beginning on page 140. Our board recommends that you vote FOR the proposal to
approve the Asset Sale, FOR the proposal to approve the Charter Amendment and FOR adjourning
the Special Meeting to a later date, if necessary or appropriate, to allow for the solicitation of
additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the Charter
Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter Amendment,
as applicable.
Opinion
of Columbias Financial Advisor (Page 53)
On March 3, 2010, RBC Capital Markets Corporation (RBC) delivered its oral opinion,
subsequently confirmed in writing, to our board of directors to the effect that, as of such date,
based upon and subject to the factors and assumptions made, matters considered and limits of the
review undertaken by RBC set forth therein, the Upfront Payment and the subsequent milestone
payments and royalty payments, if any (such payments the Contingent Payments, and together with
the Upfront Payment, the Consideration), to be received by Columbia pursuant to the terms of the
Purchase and Collaboration Agreement, in exchange for Columbias (i) transfer of the Assets (as
defined herein) and (ii) issuance of the Acquisition Shares to Buyer, was fair from a financial
point of view to Columbia.
The full text of RBCs written opinion, dated March 3, 2010, which, among other things, sets
forth the assumptions made, procedures followed, matters considered, and limitations on the review
undertaken by RBC in connection with the opinion, is attached as Annex C. RBC provided its opinion
for the information and assistance of Columbias board of directors in connection with its
consideration of the Watson Transactions. The RBC opinion was not a recommendation to any member
of Columbias board of directors as to how any such member should vote with respect to the Watson
Transactions or how any stockholder should vote with respect to the Asset Sale. Columbias
stockholders are urged to read the RBC opinion in its entirety.
10
Agreements Related to the Purchase and Collaboration Agreement (Page 62)
In connection with the Asset Sale, we and Watson have agreed to enter into a License
Agreement, a Supply Agreement and an Investors Rights Agreement
(respectively, the License Agreement, the Supply
Agreement and the Investors Rights
Agreement, and collectively, the Other Agreements).
|
|
|
Pursuant to the License Agreement, the parties granted each other
certain licenses to use certain intellectual property. |
|
|
|
|
Pursuant to the Supply Agreement, we will be the exclusive supplier of
PROCHIEVE 4%, PROCHIEVE 8% and CRINONE 8% to Buyer for sale in the United
States at a price equal to 110% of the cost of goods sold. |
|
|
|
|
|
Pursuant to the Investors Rights Agreement we will grant to Buyer
certain rights with respect to the registration of the Acquisition Shares under
the Securities Act of 1933, as amended (the Securities Act), and the right to
appoint a designee to our board of directors until such time as Buyer ceases to
hold at least 10% of our outstanding shares of Common Stock. In connection
with these rights, Buyer will become subject to certain restrictions on
transfer relating to the Acquisition Shares, subject to certain exceptions. |
|
Financing
of the Asset Sale (Page 64)
Buyer has represented that it has sufficient immediately available funds to enable it to
consummate the Watson Transactions.
Non-Compete
(Page 111)
As part of the Purchase and Collaboration Agreement, from the date of the Closing until the
second anniversary of the date on which we and Buyer terminate our relationship with respect to the
joint development of the Progesterone Products, we have agreed not to manufacture, Develop or
Commercialize products containing Progesterone or any other products which are approved or being
Developed for the PTB Indication, subject to certain exceptions.
Conditions
to the Closing (Page 97)
The Closing is subject to customary conditions, including Columbia stockholder approval of
both the Asset Sale proposal and the Charter Amendment proposal.
No
Solicitation of Other Offers (Page 112)
We agreed to various covenants in the Purchase and Collaboration Agreement, including, among
other things, not to solicit any Acquisition Proposal (as defined herein).
Under the Purchase and Collaboration Agreement, our board may withdraw, modify or qualify, or
propose publicly to withdraw, modify or qualify, in a manner adverse to Buyer, its recommendation
to our stockholders to approve the Asset Sale proposal and the Charter Amendment proposal and/or
endorse or recommend to our stockholders a Superior Proposal (as described herein) (a Change of
Board Recommendation), in the circumstances and subject to
11
certain limitations described herein. However, our obligation to call, give notice of,
convene and hold the Special Meeting, and to hold a vote of our stockholders on the Asset Sale
proposal and the Charter Amendment proposal shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission to us of any Acquisition Proposal (whether or
not a Superior Proposal), or by any Change of Board Recommendation, and we will not be entitled to
terminate the Purchase and Collaboration Agreement if a Change of Board Recommendation occurs. In
addition, we agreed not to submit to the vote of our stockholders any Acquisition Proposal whether
or not a Superior Proposal or propose to do so until after the termination of the Purchase and
Collaboration Agreement.
Termination
of the Purchase and Collaboration Agreement (Page 116)
The Purchase and Collaboration Agreement may be terminated prior to the Closing by either us
or Buyer in certain circumstances, including:
|
|
|
by mutual agreement of each of Columbia and Buyer (the Parties); |
|
|
|
|
if the Closing has not occurred on or before August 30,
2010 (the Outside Date), provided,
that the failure to close is not due to a failure of the party seeking to
terminate the Purchase and Collaboration Agreement to comply in all material
respects with its obligations under the Purchase and Collaboration Agreement
(the Outside Date Clause); |
|
|
|
|
if the Special Meeting is held and our stockholders do not approve the
Asset Sale proposal and the Charter Amendment proposal (the No Vote Clause);
or |
|
|
|
|
the transactions contemplated by the Purchase and Collaboration
Agreement are permanently prohibited to be consummated by an order of a
governmental authority. |
We may terminate the Purchase and Collaboration Agreement prior to the Closing in the event of
certain material breaches of the Purchase and Collaboration Agreement by Buyer that would cause
certain conditions to Closing under the Purchase and Collaboration Agreement to be incapable of
being fulfilled.
Moreover, Buyer may terminate the Purchase and Collaboration Agreement prior to the Closing:
|
|
|
in the event of certain material breaches of the Purchase and
Collaboration Agreement by us that would cause certain conditions to Closing
under the Purchase and Collaboration Agreement to be incapable of being
fulfilled; or |
|
|
|
|
if, prior to our stockholders approving the Asset Sale proposal and the
Charter Amendment proposal, a Change of Board Recommendation (as defined
herein) shall have occurred (provided, that Buyer must terminate the Purchase
and Collaboration Agreement within five business days following the Change |
12
|
|
|
of Board Recommendation) (the Change of Board Recommendation Clause). |
Termination
Fees (Page 117)
In the event that Buyer terminates the Purchase and Collaboration Agreement under the Change
of Board Recommendation Clause, we have agreed to pay Buyer a $2 million termination fee within two
business days after such termination.
In addition, we have agreed to pay to Buyer $2 million:
|
|
|
if an Acquisition Proposal (as described herein) has been publicly
announced; and |
|
|
|
|
|
thereafter, the Purchase and Collaboration Agreement is terminated by
either party under the Outside Date Clause or the No Vote Clause; and |
|
|
|
|
within 12 months after the termination of the Purchase and Collaboration
Agreement, we shall have entered into an agreement regarding or consummate a
transaction which would have constituted an Acquisition Proposal (excluding an
Equity Financing (as defined herein) and/or any agreement relating thereto). |
|
Indemnification
(Page 120)
We, on one hand, and Buyer, on the other hand, have agreed to indemnify each other under
certain circumstances after the Closing as more fully described in this proxy statement and the
Purchase and Collaboration Agreement.
Accounting
Treatment of the Asset Sale (Page 65)
We will allocate the $47 million Upfront Payment, net of transaction expenses to:
|
|
|
the then fair value of the Acquisition Shares; and |
|
|
|
|
the elimination of the remaining book value of the CRINONE intangible
assets (which was $18.8 million as of December 31, 2009). |
The excess, if any, will be recorded as revenue over the remaining research and development
period for the PREGNANT Study through the date of the PTB US Approval which, if it occurs, is
currently expected to occur by mid-2011. The value of unvested options ($900,525 at December 31,
2009) and the value of unvested shares of restricted stock ($311,817 at December 31, 2009) will be
expensed on the date of the Closing.
The accounting treatment for the retirement of the obligations owing to PharmaBio under the
PharmaBio Agreement and the Notes (collectively, the Debt Retirement) will be
subsequently evaluated, subject to the timing of the Watson Transactions and the price of our
Common Stock on the date of the Closing.
13
Certain
United States Federal Income Tax Consequences of the Watson
Transactions (Page 66)
The following is a brief summary of the United States federal income tax consequences
resulting from the Watson Transactions. This summary does not address all of the consequences that
may arise for United States federal income tax purposes and does not address any state, local,
non-U.S. or non-income tax considerations.
The Watson Transactions will not result in any U.S. federal income tax consequences to our
stockholders.
The sale of assets in connection with the Asset Sale will be a taxable transaction for us for
United States federal income tax purposes. However, we do not anticipate that we will incur
significant United States federal income tax liability as a result of such sale due to the tax
basis we have in the Assets and the availability of net operating loss carryforwards. We
anticipate that we will incur an insignificant amount of United States federal alternative minimum
tax in connection with the Asset Sale.
The issuance of the Acquisition Shares to Buyer will not be a taxable transaction for United
States federal income tax purposes.
Potential future receipt of milestone and/or royalty payments will be taxable events. The
United States federal income tax consequences of the receipt of these payments cannot be determined
at this time.
Appraisal
Rights in Respect of the Asset Sale (Page 64)
Delaware law does not provide for stockholder appraisal rights in connection with the sale of
a companys assets.
14
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING;
THE ASSET SALE AND THE AMENDMENT
The following questions and answers are intended to address briefly some commonly asked
questions regarding the Asset Sale, the Purchase and Collaboration Agreement, the Charter Amendment
and the Special Meeting. These questions and answers may not address all questions that may be
important to you as a stockholder of Columbia. Please refer to the Summary Term Sheet and the
more detailed information contained elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by reference in this proxy statement. See
Where You Can Find More Information, beginning on page 148.
Q: |
|
Why am I receiving this proxy statement and proxy card? |
|
|
A: |
|
You are receiving this proxy statement and proxy card
because, as of April 27, 2010, the record date for the Special Meeting,
you owned Shares of Columbia. We have entered into a Purchase and Collaboration Agreement with Buyer and Watson. A copy
of the Purchase and Collaboration Agreement (and certain related agreements) is attached to this proxy statement as Annex
A. |
|
|
|
|
In order to consummate the Asset Sale, our stockholders must vote to approve the Asset Sale and Charter Amendment. Our
board of directors is providing this proxy statement to give you information for use in determining how to vote on the
proposals submitted to our stockholders at the Special Meeting. Your vote is very important. We encourage you to vote as
soon as possible. |
|
Q: |
|
What do I need to do now? |
|
A: |
|
We urge you to carefully read this proxy statement, including its annexes, and to consider how the Asset Sale and Charter
Amendment will affect you. Even if you plan to attend the Special Meeting, if you hold your Shares in your own name as the
stockholder of record, please vote your Shares by signing, dating and returning the enclosed proxy card. You can also
attend the Special Meeting and vote by ballot in person. If you hold your Shares in street name, follow the procedures
provided by your bank, broker or other nominee. |
|
Q: |
|
When and where is the Special Meeting? |
|
A: |
|
The Special Meeting will be held at [], on [day], [month], 2010 at [] local time. |
|
Q: |
|
Who is entitled to vote at the Special Meeting? |
|
|
A: |
|
Only stockholders of Columbia as of the close of business on the Record Date are entitled to receive notice of the Special
Meeting and to vote the Shares that they held at that time at the Special Meeting. If you hold your Shares through a bank,
broker or other nominee, you must obtain from such bank, broker or
other nominee a legal proxy issued in your name in order to vote in
person at the Special Meeting. |
|
15
Q: |
|
What am I being asked to vote on at the Special Meeting? |
|
A: |
|
You will be asked to consider and vote upon the following proposals: |
|
1. |
|
to approve the Asset Sale pursuant to the Purchase and Collaboration Agreement; |
|
|
2. |
|
to approve the Charter Amendment to increase the number of our authorized
shares of Common Stock from 100,000,000 to 150,000,000; |
|
|
3. |
|
to adjourn the Special Meeting to a later date, if necessary or appropriate, to
allow for the solicitation of additional proxies in favor of the proposal(s) to approve
the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve
the Asset Sale and/or the Charter Amendment, as applicable; and |
|
|
4. |
|
to transact such other business as may properly come before the Special
Meeting. |
|
|
The approval of the Asset Sale proposal is conditioned upon the approval of the Charter
Amendment proposal, but not upon the approval of the Adjournment proposal. Neither the
approval of the Charter Amendment proposal nor the Adjournment proposal are conditioned upon
the approval of any other proposal. |
|
Q: |
|
How does the board of directors recommend that I vote? |
|
A: |
|
After careful consideration of a variety of factors described in this
proxy statement, our board of directors unanimously recommends that
you vote FOR the proposal to approve the Asset Sale, FOR the
proposal to approve the Charter Amendment and FOR adjourning the
Special Meeting to a later date, if necessary or appropriate. You
should read The Asset Sale (Proposal No. 1)Reasons for the Asset
Sale; Recommendation of Our Board of Directors beginning on
page 45 for a discussion of
the factors that our board considered in deciding to recommend
approval of the Asset Sale. |
|
Q: |
|
Will we be required to submit the Asset Sale proposal and the Charter
Amendment proposal for approval by our stockholders even if our board
of directors has withdrawn, modified or qualified its recommendation? |
|
A: |
|
Yes. Unless the Purchase and Collaboration Agreement is terminated,
we are required to submit the Asset Sale proposal and the Charter
Amendment proposal to our stockholders, even if our board of directors
has withdrawn, modified or qualified its recommendation with respect
to the Watson Transactions. |
|
Q: |
|
Who will buy the Assets and for what price? |
|
A: |
|
If the Asset Sale proposal and the Charter Amendment proposal are
approved by our stockholders, Buyer, a wholly owned subsidiary of
Watson, will acquire the Assets in connection with the Asset Sale and
the Acquisition Shares for the Upfront Payment of $47 million pursuant
to the terms of the Purchase and Collaboration Agreement, and assume
certain of our liabilities. Prior to the Closing, Buyer shall assign
to a wholly-owned subsidiary of Watson the rights and obligations of
Buyer to purchase certain non- |
16
|
|
U.S. intellectual property rights that constitute part of the Assets. These non-U.S. Assets include the rights to Develop or
Commercialize the Assets outside of the United States and the income,
royalties, damages and payments made, due or payable with respect to
such rights. Under the Purchase and Collaboration Agreement, Buyer
also agreed to make up to $45.5 million in payments to us upon the achievement
of certain contingent milestones under the circumstances and on the
terms set forth in the Purchase and Collaboration Agreement as well as certain royalty payments
on the terms set forth in the Purchase and Collaboration Agreement. See The Purchase and Collaboration
AgreementPurchase Price, beginning on page 84. |
|
Q: |
|
What assets are being sold and what liabilities will be assumed by Buyer? |
|
A: |
|
The assets we propose to sell consist of substantially all of our assets primarily relating to the
research, development, regulatory approval, manufacture, distribution, marketing, sale and promotion of
the Progesterone Products, including certain intellectual property, promotional materials, contracts,
product data and regulatory approvals and regulatory filings. In addition, Buyer will assume certain
liabilities related to the Progesterone Products and certain liabilities arising under any assigned
contracts. |
|
Q: |
|
What will the Upfront Payment from the Watson Transactions be used for? Will any of the proceeds from the
Watson Transactions be distributed to me as a stockholder? |
|
A: |
|
We intend to use a portion of the Upfront Payment to pay approximately $16 million in satisfaction of certain amounts
owed to PharmaBio pursuant to the PharmaBio Agreement. On March 3, 2010, we entered into the PharmaBio
Amendment with PharmaBio to provide for the early termination of the PharmaBio Agreement and permit us to
make certain payments thereunder on an accelerated and discounted basis under certain circumstances. See
The Asset Sale (Proposal No. 1)Senior Debt,
beginning on page 66. |
|
|
|
|
In addition, we will use approximately $26.8 million of
the Upfront Payment toward the repurchase of all $40 million in
outstanding principal amount of our
Notes (and to pay accrued and unpaid interest thereon) pursuant to the Note Purchase Agreements, attached as Annex D
to this proxy statement. The Note Purchase Agreements provide for us, at the time of the Closing, to
repurchase the Notes for an aggregate purchase price of $26 million in cash, plus accrued
and unpaid interest through (but excluding) the date of Closing, warrants to purchase 7.75
million shares of Common Stock and 7,407,407 shares of our Common Stock. Pursuant to the
Note Purchase Agreements, the Notes were amended so that the Watson Transactions would not
trigger the rights of the Note holders to compel us to redeem the
Notes. The closings of the transactions contemplated by the Note
Purchase Agreements are subject to various conditions including the
Closing of the Watson Transactions, the filing of the Charter
Amendment with the Secretary of State of the State of Delaware and
the satisfaction of certain of our obligations owing to PharmaBio under the
PharmaBio Agreement. See The Asset
Sale (Proposal No. 1)Purchase of our Convertible Subordinated Notes, beginning on
page 67. |
|
|
|
|
We may use up to $600,000 of the Upfront Payment to redeem the outstanding shares of our
Series C Preferred Stock. Upon a triggering event (the Watson Transactions would be a
triggering event), the holders of our shares of Series C Preferred Stock have the right to
require us to redeem their shares of Series C Preferred Stock in cash for the value of the
shares of Series C Preferred Stock plus all accrued and unpaid dividends thereon on the date
such redemption is demanded. As of the date hereof, 600 shares of our Series C Preferred
Stock are outstanding, each with a value of $1,000. See The Asset Sale (Proposal No.
1)Preferred Stock, beginning on page 73. |
17
|
|
|
Additionally, we expect to use a portion of the Upfront Payment (not to exceed $7 million
incurred after January 1, 2010) to pay for completion of the PREGNANT Study and the
preparation, filing and approval process of the related new drug application (or
supplemental new drug application). Pursuant to the Purchase and Collaboration Agreement,
we are required to maintain a separate bank account for the purpose of paying those costs.
See The Purchase and Collaboration AgreementDevelopment
and the Joint Development CommitteeDevelopment of PROCHIEVE for the PTB
Indication, beginning on page 103. |
|
|
|
|
We will also use a portion of the Upfront Payment to pay fees and expenses incurred in
connection with the transactions described herein. |
|
|
|
To the extent the payments set forth above exceed the amount of the Upfront Payment, we will
make such payments from our existing cash. |
|
|
|
No proceeds from the Watson Transactions will be distributed to our stockholders. |
|
Q: |
|
What will happen if the Asset Sale or Charter Amendment proposal is not approved by Columbias stockholders or the Watson
Transactions are not completed for any other reason? |
|
A: |
|
If the Asset Sale or the Charter Amendment proposal is not approved by Columbias stockholders, or if the Watson
Transactions are not completed for any other reason, then: |
|
|
|
in certain circumstances, we may be required to pay a termination fee of
$2 million to Buyer; |
|
|
|
|
we may have difficulty recouping the costs incurred in connection with
negotiating the Watson Transactions and the other transactions described in
this proxy statement; |
|
|
|
|
we would have limited liquidity and may have difficulties continuing the
PREGNANT Study as well as other business operations; |
|
|
|
|
our relationships with our customers, suppliers and employees may be
damaged and our business may be harmed; and |
|
|
|
|
the market price for the shares of our Common Stock may decline. |
|
|
If the Asset Sale is not completed, we may explore other potential transactions with other
parties on such terms as our board of directors may approve. The terms of an alternative
transaction may be less favorable to us than the terms of the Watson Transactions and there
can be no assurance that we will be able to reach agreement with or complete an alternative
transaction with another party. |
|
|
|
Approval of the Charter Amendment proposal is not conditioned on approval of any other
proposal. Accordingly, if the Charter Amendment proposal is approved but the Asset Sale
proposal is not, we will increase the number of our authorized shares of Common |
18
|
|
|
Stock but not effectuate the Asset Sale. These additional shares of Common Stock would be
available to use for future issuances or capital raising activities or acquisitions, and for
conversions or exercises of outstanding convertible securities. See Approval of the
Amendment to the Restated Certificate of Incorporation (Proposal
No. 2), beginning on page 140. |
|
|
Q: |
|
When are the Watson Transactions expected to be completed? |
|
|
A: |
|
If the Asset Sale and the Charter Amendment proposals are approved by
our stockholders, we expect to complete the Asset Sale as soon as
reasonably practicable after all of the conditions in the Purchase and
Collaboration Agreement have been satisfied or waived. We currently
anticipate that the Watson Transactions will be completed during the
second quarter of 2010. The exact timing of the completion of the
Asset Sale, however, cannot be predicted. See The Purchase and
Collaboration AgreementClosing(s), beginning on page 80, and The Purchase and Collaboration
AgreementConditions to the Closing(s), beginning on page
97. |
|
|
Q: |
|
How will Columbias stock options and restricted stock be treated in
the Asset Sale? |
|
|
A: |
|
Any unvested restricted stock and unvested and unexercised stock options granted and
outstanding under either of our 1996 Plan or our 2008 Plan will become immediately and fully
vested and exercisable upon a change in control of Columbia. Consummation of the Asset Sale
will constitute a change in control for this purpose. |
|
|
Q: |
|
Will Columbia continue to be publicly traded following the Watson
Transactions? Will it change its name? Will its ticker symbol change? |
|
A: |
|
We will continue to be a publicly traded company whether or not the
Asset Sale closes and we will continue to be subject to the rules and
regulations of the Securities and Exchange Commission (the SEC) and
the NASDAQ Global Market. Whether or not the Asset Sale is
consummated, our name will remain Columbia Laboratories, Inc. and
our NASDAQ Global Market ticker symbol will remain CBRX. |
|
Q: |
|
What will be the nature of Columbias business following completion of
the Asset Sale? |
|
A: |
|
After the Closing, we will continue the PREGNANT Study and the
preparation of a new drug application or supplemental new drug
application to market PROCHIEVE 8% for the PTB Indication. In
addition, if the PREGNANT Study is successful, we expect to receive
(at least a portion of) the milestone payments described herein. We
also expect to receive the royalty payments contemplated by the
Purchase and Collaboration Agreement and perform our obligations and
receive payments under the Supply Agreement. |
|
|
|
Additionally, we will retain certain assets and rights relating to our Progesterone
business, including all rights necessary to perform our obligations under the Merck Serono
Agreement. The Merck Serono Agreement expires on May 19, 2010, and is renewable upon mutual
agreement of the parties for five year periods at commercial |
19
|
|
terms to be agreed upon. While Merck Serono has informed us that they wish to renew the
Merck Serono Agreement, there can be no assurance that we will reach a renewal
agreement or that any renewal agreement will not differ materially from the current Merck
Serono Agreement. |
|
|
|
If the PREGNANT Study is successful and we achieve milestones set forth in the Purchase and
Collaboration Agreement, we intend to become a focused development company, with research
and development centered on products to address womens health needs, subject to the
covenant not to compete in the Purchase and Collaboration Agreement (discussed herein). Our
aim would be to take new product candidates through proof-of-concept and then to enter into
new partnership arrangements with respect to them. In addition, we would expect to enter
into partnership discussions for STRIANT, and through a partner, attempt to build revenue
from STRIANT and explore the potential to expand its labeling. We also would expect to
continue to leverage our proprietary drug delivery systems to expand our product portfolio. |
|
|
|
If the PREGNANT Study is not successful, our resources will be limited and our board of
directors will have to reassess our strategy. |
|
Q: |
|
Am I entitled to appraisal rights in connection with the Asset Sale? |
|
A: |
|
No. Delaware law does not provide for stockholder appraisal rights in connection with the sale of a companys assets. |
|
Q: |
|
What vote is required for Columbias stockholders to approve the Asset Sale? |
|
A: |
|
The affirmative vote of the holders of a majority of the Voting Power of the outstanding shares of our Common Stock, Series
B Preferred Stock and Series E Preferred Stock is required to approve the Asset Sale. |
|
Q: |
|
What vote is required for Columbias stockholders to approve the Charter Amendment? |
|
A: |
|
The affirmative vote of (i) the holders of a majority of the outstanding shares of our Common Stock, and (ii) the holders
of a majority of the Voting Power of the outstanding shares of our Common Stock, shares of our Series B Preferred Stock and
shares of our Series E Preferred Stock, voting together as a single class, is required to approve the Charter Amendment. |
|
Q: |
|
What vote is required for Columbias stockholders to approve the Adjournment proposal? |
|
A: |
|
Approval of the Adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of our Common
Stock, Series B Preferred Stock and Series E Preferred Stock present in person or by proxy at the Special Meeting, whether
or not a quorum is present. |
20
Q: |
|
What shares may I vote? |
|
A: |
|
You may vote all shares of Common Stock, Series B Preferred Stock, and Series E Preferred Stock that you owned as of the
close of business on the Record Date. These Shares include (i) those held directly in your name as the stockholder of
record and (ii) those held for you as the beneficial owner through a bank, broker or other nominee at the close of business
on the Record Date. |
|
|
|
Each share of Common Stock is entitled to one vote. Each share of Series B Preferred Stock
is entitled to 20 votes (which is the number of shares of Common Stock into which each share
of Series B Preferred Stock is convertible). Each share of Series E Preferred Stock is
entitled to 50 votes (which is the number of shares of Common Stock into which each share of
Series E Preferred Stock is convertible). Columbias shares of Series C Preferred Stock
have no voting rights. |
|
|
|
|
As of the close of business on the Record Date, there were approximately 65,605,886 shares of
Common Stock issued and outstanding (each of which is entitled to one vote per share), 130
shares of Series B Preferred Stock issued and outstanding having aggregate voting power
equal to 2,600 shares of Common Stock, and 59,000 shares of Series E Preferred Stock issued
and outstanding having aggregate voting power equal to 2,950,000 shares of Common Stock. |
|
|
Q: |
|
What is a quorum? |
|
A: |
|
A quorum must be present for the Special Meeting to be held. The
quorum requirement for holding the Special Meeting and transacting
business is the presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote at the Special Meeting. The
Shares may be present in person or represented by proxy at the Special
Meeting. Votes withheld, abstentions and broker non-votes are
counted as present and entitled to vote for purposes of determining a
quorum. |
|
Q: |
|
What happens if I abstain from voting? |
|
A: |
|
If an executed proxy card is returned and the stockholder has
explicitly abstained from voting on any proposal, the Shares
represented by the proxy will be considered present at the Special
Meeting for the purpose of determining a quorum. In addition, while
they will not count as votes cast in favor of the Asset Sale proposal,
the Charter Amendment proposal or the Adjournment proposal, they will
count as votes cast on the Asset Sale proposal, the Charter Amendment
proposal and the Adjournment proposal. As a result, an abstention on
a proposal will have the same effect as a vote AGAINST the proposal
to approve the Asset Sale and the proposal to approve the Charter
Amendment but will not have an effect on the Adjournment proposal. |
|
Q: |
|
What is a broker non-vote? |
|
A: |
|
A broker non-vote occurs when a broker submits a proxy that does not
indicate a vote for one or more of the proposals because the broker
has not received instructions from the beneficial owner on how to vote
on such proposals and does not have discretionary |
21
|
|
|
authority to vote in the absence of instructions. While broker non-votes will
be counted for the purposes of determining whether a quorum exists at the
Special Meeting, they will not be considered to have voted on any of the
proposals on which such instructions have been withheld. As a result, a broker
non-vote will have the same effect as a vote AGAINST the proposal to approve
the Asset Sale and the proposal to
approve the Charter Amendment but will not have an effect on the Adjournment
proposal. |
|
|
Q: |
|
What is the difference between holding shares as a
stockholder of record and as a beneficial owner? |
|
A: |
|
Most Columbia stockholders hold their Shares through
a bank, broker or other nominee rather than directly
in their own name. As summarized below, there are
some distinctions between shares held of record and
those owned beneficially. |
|
|
|
Stockholder of Record |
|
|
|
If your Shares are registered directly in your name with Columbias transfer agent, American
Stock Transfer & Trust Company (the Transfer Agent), you are considered, with respect to
those Shares, the stockholder of record and we are sending these proxy materials directly to
you. As the stockholder of record, you have the right to grant your proxy directly to
Columbia or to vote in person at the Special Meeting. Columbia has enclosed a proxy card
for you to use. |
|
|
|
Beneficial Owner |
|
|
|
If you hold Shares in a stock brokerage account or through a bank, broker or other nominee,
you are considered the beneficial owner of Shares held in street name and your bank,
broker or other nominee is forwarding these proxy materials to you. Your bank, broker or
other nominee is considered, with respect to those Shares, the stockholder of record. As
the beneficial owner, you have the right to direct your bank, broker or other nominee on how
to vote, but because you are not the stockholder of record, you may not vote these Shares in
person at the Special Meeting unless you obtain a signed proxy from the record holder giving
you the right to vote the Shares. As a beneficial owner, you are, however, welcome to
attend the Special Meeting. Your bank, broker or other nominee has enclosed a voting
instruction card for you to use. |
|
Q: |
|
How do I vote? |
|
A: |
|
You may vote: |
|
|
|
by signing and dating each proxy card you receive and returning it in
the enclosed prepaid envelope; |
|
|
|
|
by attending the Special Meeting and voting by ballot in person (your
attendance at the Special Meeting will not, by itself, revoke your proxy; you
must vote by ballot at the Special Meeting); or |
22
|
|
|
if you hold your shares in street name, by following the procedures on
the voting instruction card provided by your bank, broker or other nominee.
See How can I vote without attending the Special
Meeting, beginning on page 23. |
|
|
If you return your signed and dated proxy card but do not mark the boxes showing how you
wish to vote, your Shares will be voted FOR the proposal to approve the Asset Sale, FOR
the proposal to approve the Charter Amendment and FOR the Adjournment proposal. The
failure of any stockholder to submit a signed proxy card or to vote in person by ballot at
the Special Meeting will have the same effect as a vote AGAINST the proposal to approve
the Asset Sale and the Charter Amendment proposal but will not have an effect on the
Adjournment proposal. If you hold your Shares in street name, the failure to instruct
your bank, broker or other nominee how to vote your Shares will have the same effect as a
vote AGAINST the proposal to approve the Asset Sale and the Charter Amendment proposal but
will not have an effect on the Adjournment proposal. |
|
Q: |
|
If my Shares are held in street name by my bank, broker or other
nominee, will my bank, broker or other nominee vote my Shares for me? |
|
A: |
|
Your bank, broker or other nominee will only be permitted to vote your
Shares if you instruct your bank, broker or other nominee how to vote.
You should follow the procedures on the voting instruction card
provided by your bank, broker or other nominee regarding the voting of
your Shares. |
|
Q: |
|
How can I vote my Shares without attending the Special Meeting? |
|
A: |
|
Whether you hold Shares directly as the stockholder of record or
beneficially in street name, you may direct your vote without
attending the Special Meeting. If you hold your Shares directly, you
may vote by granting a proxy. If you hold your Shares in street
name, you may submit voting instructions to your bank, broker or
other nominee. Please refer to the summary instructions below and
those included on your proxy card or, for Shares held in street
name, the voting instruction card included by your bank, broker or
other nominee. |
|
|
|
|
By Mail You may vote by mail by signing your
proxy card and mailing it in the enclosed, postage prepaid and
addressed envelope or, for Shares held in street
name, by following the instructions on the voting instruction card included by your bank, broker or other nominee and
mailing it in the enclosed, postage prepaid and addressed envelope. If you provide specific
voting instructions, your Shares will be voted as you instruct. If you sign but do not
provide instructions, your Shares will be voted as described below in How are votes
counted? |
|
|
|
On the Internet If you hold your Shares in street name and the bank, broker or other
nominee that holds your Shares offers Internet voting, your voting instruction card will
contain instructions on how to vote online. If you vote online, you do not need to mail in
your proxy card. If you hold your Shares directly in your name as the stockholder of record,
you may not vote online. |
|
23
|
|
|
By Telephone If you hold your Shares in street name and the bank, broker or other
nominee that holds your Shares offers voting by telephone, your voting instruction card will
contain instructions on how to vote by telephone. If you hold your Shares directly in your name as the
stockholder of record, you may not vote by telephone. |
|
|
Q: |
|
How do I access proxy materials on the Internet? |
|
A: |
|
Stockholders can access our Notice of Special Meeting and proxy
statement and a form of a proxy card on the Internet at: |
|
|
|
http://amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=25479 |
|
|
|
|
Our public filings can also be accessed at the SECs web site at www.sec.gov. See Where
You Can Find More Information, beginning on page 148. |
|
|
Q: |
|
How are votes counted? |
|
A: |
|
If you return your signed and dated proxy card but do not mark the
boxes showing how you wish to vote, your Shares will be voted FOR
the proposal to approve the Asset Sale, FOR the proposal to approve
the Charter Amendment and FOR adjourning the Special Meeting to a
later date, if necessary or appropriate, to allow for the solicitation
of additional proxies in favor of the proposal(s) to approve the Asset
Sale and/or the Charter Amendment if there are insufficient votes to
approve the Asset Sale and/or the Charter Amendment, as applicable.
The failure of any stockholder to submit a signed proxy card or to
vote in person by ballot at the Special Meeting will have the same
effect as a vote AGAINST the proposal to approve the Asset Sale and
the proposal to approve the Charter Amendment but will not have an
effect on the proposal to adjourn the Special Meeting to a later date.
If you hold your Shares in street name, the failure to instruct
your bank, broker or other nominee how to vote your Shares will have
the same effect as a vote AGAINST the proposal to approve the Asset
Sale and the proposal to approve the Charter Amendment but will not
have an effect on the Adjournment proposal. |
|
Q: |
|
May I change or revoke my vote? |
|
A: |
|
Yes, you may change or revoke your proxy instructions at any time
prior to the vote at the Special Meeting. |
|
|
|
If you hold your Shares directly and returned your proxy by
mail, you must (a) mail a written notice of revocation to our
Corporate Secretary at 354 Eisenhower Parkway, Plaza 1, Second Floor,
Livingston, NJ 07039 or (b) timely deliver a valid, later-dated
proxy. Your attendance at the Special Meeting will not by itself revoke your previously
granted proxy unless you give written notice of revocation to our
Corporate Secretary (as described above) before the
vote at the Special Meeting or you vote by written ballot at the Special Meeting. Any proxy
submitted by a stockholder of record may be revoked at any time prior to its exercise at the
Special Meeting. |
|
|
|
For Shares you own beneficially in street name, through a bank, broker or other nominee,
you have the right to change or revoke your proxy at any time before it is voted |
24
|
|
at the Special Meeting by following the directions received from your bank, broker or other
nominee to change or revoke those instructions. |
|
Q: |
|
What does it mean if I receive more than one proxy or voting instruction card? |
|
A: |
|
It means your Shares are registered differently or are held in more than one account. Please provide voting instructions
for all proxy and voting instruction cards you receive. |
|
Q: |
|
Who will bear the cost of this solicitation? |
|
A: |
|
We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In
addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone
or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation
for such solicitation activities. We have retained the services of Georgeson Shareholder Communications, Inc.
(Georgeson) to aid in the solicitation of proxies. We estimate that we will pay Georgeson a fee of $7,500 for its
services plus per-call fees for any individual solicitations and reimbursement of reasonable out-of-pocket expenses. We
will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to stockholders. |
|
Q: |
|
Will a proxy solicitor be used? |
|
A: |
|
Yes. We have engaged Georgeson to assist in the solicitation of proxies for the Special Meeting and we estimate that we
will pay Georgeson a fee of approximately $12,500 for such assistance. We have also agreed to reimburse Georgeson for
reasonable out-of-pocket expenses incurred in connection with the proxy solicitation and to indemnify Georgeson against
certain losses, costs and expenses. |
|
Q: |
|
Who can help answer any other questions that I have? |
|
A: |
|
If you have additional questions about the Asset Sale or the Charter Amendment, need assistance in submitting your proxy or
voting your Shares, or need additional copies of this proxy statement or the enclosed proxy card, please contact Georgeson,
our proxy solicitor: |
Georgeson Inc.
Call Toll Free: (866) 482-5136
Banks and Brokerage Firms Call Collect: (212) 440-9800
25
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This proxy statement and the documents incorporated by reference herein contain
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995 with respect to the financial condition, results of operations, business strategies, operating
efficiencies or synergies, competitive positions, growth opportunities for existing products, plans
and objectives of management, markets for our stock and other matters. Statements in this proxy
statement that are not historical facts are forward-looking statements for the purpose of the
safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act), and Section 27A of the Securities Act. These forward-looking statements are only
predictions and reflect our current expectations or forecasts of future events. Forward-looking
statements generally can be identified by the use of forward-looking terminology such as may,
will, expect, anticipate, intend, estimate, believe, project, continue, plan,
forecast, or other similar words. Such forward-looking statements, including, without
limitation, those relating to our future business prospects, revenues and income, wherever they
occur, are necessarily estimates reflecting the best judgment of our senior management on the date
on which they were made, or if no date is stated, as of the date of this proxy statement. These
forward-looking statements are subject to risks, uncertainties and assumptions, including those
described below under the caption Risk Factors Relating to the Proposal to Approve the Asset
Sale, that may affect the operations, performance, development and results of our business.
Because these factors could cause our actual results or outcomes to differ materially from those
expressed in any forward-looking statements made by us or on our behalf, you should not place undue
reliance on any such forward-looking statements. New factors emerge from time to time, and it is
not possible for us to predict which factors will arise. In addition, we cannot assess the impact
of each factor on our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements.
You should understand that, in addition to those factors discussed below under the caption
Risk Factors Relating to the Proposal to Approve the Asset Sale, factors that could affect our
future results and could cause our actual results to differ materially from those expressed in such
forward-looking statements, as well as factors that could affect our ability to consummate the
Asset Sale, include, but are not limited to:
|
|
|
the occurrence of any event, change or other circumstances that could
give rise to the termination of the Purchase and Collaboration Agreement; |
|
|
|
|
the effect of the announcement of the Asset Sale on our business
relationships (including with employees, customers and suppliers), operating
results and business generally; |
|
|
|
|
the failure of our stockholders to approve the Asset Sale and/or the
Charter Amendment; |
|
|
|
|
the failure of the Asset Sale to close for any reason; |
26
|
|
|
the outcome of pending or future litigation and governmental proceedings
that may have the effect of delaying or preventing the consummation of the
Asset Sale; |
|
|
|
|
the amount of the costs, fees, expenses and charges related to the Asset
Sale and the Charter Amendment; |
|
|
|
|
adverse developments in general business, economic and political
conditions or any outbreak or escalation of hostilities on a national, regional
or international basis; |
|
|
|
|
our failure to comply with regulations and any changes in regulations; |
|
|
|
|
the loss of any of our senior management; and |
|
|
|
|
increased competitive pressures that may reduce revenues or increase
costs. |
27
THE SPECIAL MEETING
Date, Time, and Place
The Special Meeting will be held at [], on [day], [month], 2010 at [] local time.
Purpose
The purpose of the Special Meeting is for our stockholders to consider and vote upon the
following proposals:
|
1. |
|
to approve the Asset Sale pursuant to the Purchase and Collaboration Agreement; |
|
|
2. |
|
to approve the Charter Amendment to increase the number of our authorized
shares of Common Stock from 100,000,000 to 150,000,000; |
|
|
3. |
|
to adjourn the Special Meeting to a later date, if necessary or appropriate, to
allow for the solicitation of additional proxies in favor of the proposal(s) to approve
the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve
the Asset Sale and/or the Charter Amendment, as applicable; and |
|
|
4. |
|
to transact such other business as may properly come before the Special
Meeting. |
A copy of the Purchase and Collaboration Agreement (and certain related agreements) is
attached to this proxy statement as Annex A and a copy of the Charter Amendment is attached to this
proxy statement as Annex B.
Record Date; Stockholders Entitled to Vote
You are entitled to vote at the Special Meeting if
you owned Shares at the close of business on April 27, 2010, which is the Record Date. You are entitled to vote all shares of Common Stock, shares of our Series B
Preferred Stock and shares of our Series E Preferred Stock that you owned as of the close of
business on the Record Date. As of the close of business on the Record Date, there were
approximately 65,605,886 shares of Common Stock issued and outstanding (each of which is entitled to one
vote per share), 130 shares of Series B Preferred Stock issued and outstanding having aggregate
voting power equal to 2,600 shares of Common Stock, and 59,000 shares of Series E Preferred Stock
issued and outstanding having aggregate voting power equal to 2,950,000 shares of Common Stock.
Each share of Common Stock entitles its holder to one vote on all matters properly coming before
the Special Meeting. Each share of Series B Preferred Stock entitles its holder to 20 votes (which
is the number of shares of Common Stock into which each share of Series B Preferred Stock is
convertible) on all matters properly coming before the Special Meeting. Each share of Series E
Preferred Stock entitles its holder to 50 votes (which is the number of shares of Common Stock into
which each share of Series E Preferred Stock is convertible) on all matters properly coming before
the Special Meeting. Shares of Columbias Series C Preferred Stock have no voting rights.
A complete list of stockholders of record entitled to vote at the Special Meeting will be
available for ten days prior to the Special Meeting at our executive offices and principal place of
28
business for inspection by our stockholders during ordinary business hours for any purpose
germane to the Special Meeting and will also be available at the Special Meeting.
Quorum
A quorum must be present for the Special Meeting to be held. The quorum requirement for
holding the Special Meeting and transacting business is the presence, in person or by proxy, of the
holders of a majority of the shares entitled to vote at the Special Meeting. The Shares may be
present in person or represented by proxy at the Special Meeting. Abstentions and broker non-votes
are counted as present for the purpose of determining whether a quorum is present. A broker
non-vote occurs on an item when a broker is not permitted to vote on that item without instructions
from the beneficial owner of the Shares and no instructions from such beneficial owner are given.
In the event that a quorum is not present at the Special Meeting, it is expected that the Special
Meeting will be adjourned or postponed to allow for the solicitation of additional proxies.
Vote Required for Approval
The affirmative vote of the holders of a majority of the Voting Power of the outstanding
shares of our Common Stock, Series B Preferred Stock and Series E Preferred Stock is required to
approve the Asset Sale. The affirmative vote of (i) the holders of a majority of our outstanding
shares of Common Stock and (ii) the holders of a majority of the Voting Power of the outstanding
shares of our Common Stock, Series B Preferred Stock and Series E Preferred Stock, voting together
as a single class, is required to approve the Charter Amendment. The stockholders present may
adjourn the Special Meeting despite the absence of a quorum to a later date, if necessary or
appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to
approve the Asset Sale and/or the proposal to approve the Charter Amendment.
Approval of the Adjournment proposal requires the affirmative vote of a majority of the votes
cast by holders of our Common Stock, Series B Preferred Stock and Series E Preferred Stock present
in person or by proxy at the Special Meeting, whether or not a quorum is present.
The failure of any stockholder to submit a signed proxy card or to vote in person by ballot at
the Special Meeting will have the same effect as a vote AGAINST the proposal to approve the Asset
Sale and the proposal to approve the Charter Amendment but will not have an effect on the proposal
to adjourn the Special Meeting to a later date, if necessary or appropriate, to allow for the
solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the
Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter
Amendment, as applicable. If you hold your Shares in street name, the failure to instruct your
bank, broker or other nominee how to vote your Shares will have the same effect as a vote AGAINST
the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will
not have an effect on the Adjournment proposal.
Effects of Abstentions and Broker Non-Votes
For each of the proposals to be considered and voted upon at the Special Meeting, you may vote
FOR, AGAINST or ABSTAIN. Shares voted as abstentions will be counted for
29
purposes of determining the presence of a quorum at the Special Meeting but will be treated as
unvoted, although present and entitled to vote, for purposes of determining whether a proposal is
approved. As a result, votes of ABSTAIN will have the same effect as a vote AGAINST the
proposal to approve the Asset Sale and the proposal to approve the Charter Amendment, but votes of
ABSTAIN will not have an effect on the Adjournment proposal.
Brokers who hold shares in street name for customers have the authority to vote on routine
proposals when they have not received instructions from beneficial owners. However, brokers are
precluded from exercising their voting discretion with respect to approving non-routine matters
such as the proposal to approve the Asset Sale, the proposal to approve the Charter Amendment and
the proposal to adjourn the Special Meeting to a later date, if necessary or appropriate, to allow
for the solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale
and/or the Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the
Charter Amendment, as applicable. As a result, absent specific instructions from the beneficial
owner of such Shares, brokers are not empowered to vote those Shares, which are referred to
generally as broker non-votes. These broker non-votes will be counted for purposes of
determining a quorum and will have the same effect as a vote AGAINST the proposal to approve the
Asset Sale and the proposal to approve the Charter Amendment but will not have an effect on the
Adjournment proposal.
Proxies and Revocation
If you submit a proxy by returning a signed proxy card by mail, your Shares will be voted at
the Special Meeting as you indicate. If you sign your proxy card without indicating your vote,
your Shares will be voted FOR the proposal to approve the Asset Sale, FOR the proposal to
approve the Charter Amendment and FOR adjourning the Special Meeting, if necessary or
appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to
approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the
Asset Sale and/or the Charter Amendment, as applicable, and in accordance with the discretion of
the persons named on the enclosed proxy card on any other matters properly brought before the
Special Meeting for a vote.
If your shares of Common Stock are held in street name, you will receive instructions from
your bank, broker or other nominee that you must follow in order to have your Shares voted. If you
do not instruct your bank, broker or other nominee to vote your Shares, it has the same effect as a
vote AGAINST the Asset Sale proposal and the Charter Amendment proposal but will not have an
effect on the Adjournment proposal.
Proxies received at any time before the Special Meeting and not revoked or superseded before
being voted will be voted at the Special Meeting. Any stockholder of record who executes and
returns a proxy card may revoke the proxy at any time before it is voted at the Special Meeting in
any of the following ways:
|
|
|
if you hold your Shares in your name as a stockholder of record, by
written notice of revocation to our Corporate Secretary at 354
Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039; |
30
|
|
|
timely delivery of a valid, later-dated proxy; or |
|
|
|
|
|
by attending the Special Meeting and voting by ballot in person (your
attendance at the Special Meeting will not, by itself, revoke your previously
granted proxy, unless you give written notice of revocation to our
Corporate Secretary (as described above) before the vote at the
Special Meeting or you vote by written ballot at the Special Meeting). |
|
If you hold your Shares in street name through a bank, broker or other nominee, you have the
right to change or revoke your proxy at any time before it is voted at the Special Meeting by
following the directions received from your bank, broker or other nominee to change or revoke those
instructions.
Adjournments
Although it is not currently expected, the Special Meeting may be adjourned for the purpose of
soliciting additional proxies. Any adjournment may be made without notice, other than by an
announcement made at the Special Meeting of the time, date and place of the adjourned Special
Meeting. The stockholders present may adjourn the Special Meeting despite the absence of a quorum
to a later date. Approval of the Adjournment proposal requires the affirmative vote of a majority
of the votes cast by holders of our Common Stock, Series B Preferred Stock and Series E Preferred
Stock present in person or by proxy at the Special Meeting, whether or not a quorum is present.
Any signed proxies received by us in which no voting instructions are provided on the matter will
be voted FOR adjourning the Special Meeting, if necessary or appropriate, to allow for the
solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the
Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter
Amendment, as applicable. Any adjournment or postponement of the Special Meeting for the purpose
of soliciting additional proxies will allow our stockholders who have already sent in their proxies
to revoke them at any time prior to their use at the Special Meeting as adjourned or postponed.
Common Stock Ownership of Directors and Executive Officers
As
of April 27, 2010, the directors and executive officers of Columbia had, or were deemed to
have had, beneficial ownership of, in the aggregate, approximately 4.1% of our Common Stock
(including approximately 2.7% which represents shares of Common Stock that are purchasable under
options held by such directors and executive officers but excluding
approximately 8.9% which are
held by affiliates of one of our directors). Columbia believes that its directors and executive
officers will vote all of the Shares for which they have, or are deemed to have, beneficial
ownership FOR the proposal to approve the Asset Sale, FOR the proposal to approve the Charter
Amendment and FOR adjourning the Special Meeting, if necessary or appropriate, to allow for the
solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the
Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter
Amendment, as applicable.
31
Solicitation of Proxies
This proxy solicitation is being made and paid for by Columbia on behalf of its board of
directors. In addition, we have retained Georgeson to assist in the solicitation. We will pay
Georgeson a fee of approximately $12,500 for such assistance. The initial solicitation of proxies
by mail may be supplemented by telephone, fax, e-mail, Internet and personal solicitation by our
directors, officers or other regular employees. No additional compensation for soliciting proxies
will be paid to our directors, officers or other regular employees for their proxy solicitation
efforts. These persons will not be paid additional remuneration for their efforts. We will also
request banks, brokers and other nominees to forward proxy solicitation material to the beneficial
owners of shares of our Common Stock and Preferred Stock that the banks, brokers and other nominees
hold of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses.
In addition, we will indemnify Georgeson against certain losses, costs and expenses.
Attendance of Accountants
A
representative of BDO Seidman, LLP, our current principal accountants
and our accountants for the year ended December 31, 2009 is expected
to be present at the Special Meeting. Such representative will have
the opportunity to make a statement if BDO Seidman, LLP desires to do
so and will be available to respond to questions, as appropriate.
Other Matters
We do not know of any other business that will be presented at the Special Meeting. If any
other proposal properly comes up for a vote at the Special Meeting in which your proxy has provided
discretionary authority, the persons named on the enclosed proxy card will vote your Shares in
their discretion accordance with their best judgment.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be
Held on [], 2010
The proxy statement is available at:
http://amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=25479
Questions and Additional Information
If you have additional questions about the Asset Sale or the Charter Amendment, need
assistance in submitting your proxy or voting your shares of our Common Stock and Preferred Stock,
or need additional copies of this proxy statement or the enclosed proxy card, please call
Georgeson, our proxy solicitor:
Georgeson Inc.
Call Toll Free: (866) 482-5136
Banks and Brokerage Firms Call Collect: (212) 440-9800
32
THE ASSET SALE (PROPOSAL NO. 1)
The Parties to the Asset Sale
Columbia Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
(973) 994-3999
Columbia is a Delaware corporation in the business of developing, manufacturing and selling
pharmaceutical products that utilize Columbias proprietary bioadhesive drug delivery technologies.
Columbia is focused predominantly on the womens reproductive healthcare market, but Columbias
product development projects address the broader womens healthcare market. Columbias bioadhesive
vaginal gel products provide patient-friendly solutions for infertility, pregnancy support,
amenorrhea, and other obstetric, gynecologic and medical conditions. Our Common Stock is listed on
the NASDAQ Global Market under the symbol CBRX.
Watson Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 92880 2882
(951) 493-5300
Watson is a Nevada corporation and leading specialty pharmaceutical company in the business of
developing, manufacturing, marketing, selling and distributing generic (off-patent) and brand
pharmaceutical products. Watson operates in approximately 20 countries, with its key commercial
market being the United States. As of December 31, 2009, Watson marketed approximately 170 generic
pharmaceutical product families and 30 branded pharmaceutical product families through its Generic
and Brand Divisions, respectively, and distributed approximately 8,000 stock-keeping units through
its Distribution Division.
Coventry Acquisition, Inc.
311 Bonnie Circle
Corona, CA 92880 2882
(951) 493-5300
Buyer is a Delaware corporation, formed by Watson solely for the purpose of effectuating the
transactions contemplated by the Purchase and Collaboration Agreement and the documents related
thereto described in this proxy statement. As of the date of this proxy statement, Buyer has not
conducted any business activities other than those incidental to the Watson Transactions.
Background
of the Asset Sale and Joint Development Transaction
Our board of directors regularly and on an on-going basis evaluates and assesses our business,
financial condition, results of operations, cash flows, products, intellectual property, markets
and marketing capability, management and competitive position, financial performance,
33
outlook and prospects, as well as current industry, stock and credit market conditions and our
strategic direction and alternatives, and business plan.
In February 2007, we reported the results of our Phase III clinical study designed to assess
the efficacy, safety and tolerability of PROCHIEVE 8% in preventing preterm birth in pregnant women
with a previous preterm birth before 35 weeks of gestation. This study did not achieve a
statistically significant reduction in the incidence of preterm birth at week 32, the primary
endpoint in the study population. However, in April 2007, we reported that an evaluation of the
data from that study revealed a possible effect of PROCHIEVE 8% in delaying cervical shortening,
and suggested a correlation between the cervical length data, PROCHIEVE 8% administration, and both
a reduction in the likelihood of preterm birth and an improvement in infant outcomes. As a result
of this, as well as further analyses, investigations and discussions with the FDA, we designed the
PREGNANT Study, initially for 300 patients.
In early 2008, we recruited 19 study sites, prepared the protocol, and began enrollment in the
PREGNANT Study. However, we faced various challenges in recruiting patients and while our plan had
been to recruit all 300 patients in one year, we found that this time frame was not feasible. In
response, we implemented various initiatives to enhance patient enrollment, including the addition
of incremental study sites.
In October 2008, we announced a collaboration with the Perinatology Research Branch (PRB) of
the Eunice Kennedy Shriver National Institutes of Child Health and Human Development, part of the
National Institutes of Health (NIH) under which we amended the PREGNANT Study protocol to reflect
the addition of nine NIH sponsored sites and an increase in the number of patients from 300 to 450.
This amendment required incremental time and we recognized that completion of recruitment for the
PREGNANT Study would be further delayed. We also were of the view that, if the PREGNANT Study was
successful, the application for approval of the PTB Indication by the FDA would be filed in late
2010 or 2011. As a result, FDA approval of the PTB Indication, if granted, could not be received
until the second or third quarter of 2011, at the earliest.
At that time, our board asked our management to prepare and present an updated business plan.
In addition, our board commenced the process to interview and retain financial advisors to assist
us in seeking potential partners to either launch or assist in the launch of PROCHIEVE 8% for its
potential use in the reduction of preterm birth in women with a short cervix (the PTB
Opportunity).
At the December 16-17, 2008 meeting of our board, our management presented to our board an
updated business plan. In preparation of the business plan, we considered the impact of the
downturn in global economic conditions and the increased challenges that companies like ours would
face in raising capital in such an environment. At that meeting, management reviewed with the
board our existing debt obligations of:
|
|
|
approximately $16.5 million payable to PharmaBio by the end of November
2010 (subject to extension); and |
|
|
|
|
$40 million owed under the Notes payable on December 31, 2011. |
34
Management also reviewed the timeline of the PREGNANT Study and reported that if positive
PREGNANT Study results were not available until mid-2010 with FDA approval of the PTB Indication
not likely to follow until 2011, at the earliest, it would be extremely difficult to refinance our
debt and unlikely that the holders of the Notes would convert them to Common Stock, leaving us in a
situation where we would likely have to pay our debt at maturity. Management also reviewed with
the board, the estimated costs associated with launching a Progesterone Product for the PTB
Opportunity, including the related marketing and sales costs, costs relating to educating the
physician community and costs associated with hiring and training a sales force to launch the
product for the PTB Indication. Management estimated that such costs would be very significant and
we would need to raise significant capital to fund such costs over an 18 to 24 month period
beginning six to 12 months prior to approval by the FDA of the PTB Indication. Our board then
considered the challenges that a company such as ours would face in raising such capital over that
time period. Our board also considered the fact that the PREGNANT Study might not be successful
and that FDA approval of the PTB Indication might not be obtained. On this basis, our board
decided that Columbia should explore partnership opportunities for PROCHIEVE 8% for the PTB
Opportunity.
At its December 16-17, 2008 meeting, our board of directors invited two investment banking
firms to present proposals to assist us in evaluating and implementing this strategic opportunity.
Following the presentations, our board selected Torreya Partners LLC (Torreya Partners) as
Columbias strategic advisor in connection with a possible partnering transaction related to
PROCHIEVE 8% and the PTB Opportunity. On January 7, 2009, we entered into an engagement letter
with Torreya Partners. At this juncture, our board was of the view that we should retain CRINONE
8% progesterone gel for the infertility indication and contemplate a transaction to partner
PROCHIEVE 8% for the PTB Opportunity. Our board considered that both products include the same
active ingredient in the same formulation and are differentiated only by their respective
trademarks.
During January and February 2009, Torreya Partners and Columbias management prepared
presentation materials for the potential partners for PROCHIEVE 8% for the PTB Opportunity and
organized an electronic due diligence data room. Torreya Partners also began contacting
potential partners and commenced scheduling management presentations. In advance of sharing access
to our due diligence materials, Torreya Partners required potential partners to sign a
confidentiality agreement.
At the boards January 26, 2009 meeting, our management reported on a January 20, 2009 meeting
with a European company (Party A) regarding a possible strategic relationship. Party A, a
successful marketer of womens health products outside the United States, was evaluating the
potential of establishing a United States based business. Management reported, however, that Party
A was only interested in Columbias vaginal progesterone products for treatment of infertility and
was not interested in the PTB Opportunity.
On February 19, 2009, we made a management presentation to a privately held specialty
pharmaceutical company (Party B) with a focus in womens health.
At our boards March 10, 2009 meeting, Torreya Partners and management provided an update to
the board on the partnering effort for PROCHIEVE 8% for the PTB Opportunity.
35
Torreya Partners reported that over 22 potential partners had been contacted, a management
presentation was made to Party B and that management presentations were scheduled for March 19,
2009 with a United States based affiliate of an international pharmaceutical company (Party C)
focused on sales, marketing and development of branded prescription products, including womens
health products, and on March 24, 2009 with another potential partner, a United States based
pharmaceutical company, interested in PROCHIEVE 8% for the PTB Opportunity, which did not
ultimately result in an offer. Torreya Partners reported to the board that on March 10, 2009,
Party A provided us with a non-binding term sheet pursuant to which Party A would acquire the right
to co-market PROCHIEVE 8% in infertility and an unspecified amount of stock in exchange for $10
million plus a 5% royalty. That term sheet also provided for a milestone payment of $10 million
upon FDA approval of the PTB Indication and a royalty of 10% on sales that would decrease with
sales over $50 million.
At our boards April 3, 2009 meeting, Columbias management reported that Party B provided a
preliminary indication of interest regarding PROCHIEVE 8% for the PTB Opportunity. Torreya
Partners reported that Party B and another party had raised the concern about limiting the scope of
the potential partnership to PROCHIEVE 8% for the PTB Opportunity as these parties were concerned
about the potential for off label use of CRINONE for the PTB Indication and the resulting
negative impact on PROCHIEVE 8% sales. Torreya Partners reported that Party Bs preliminary
indication of interest proposed a partnership covering both brands and all indications for an
upfront payment of $10 million, royalties of 20% (which would decline to 5% if a generic product
entered the market), milestone payments of up to $25 million upon FDA filing and approval for the
PTB Indication, $20 million upon issuance of a patent covering the PTB Indication, and additional
milestone payments of up to $22.5 million upon achievement of certain annual sales goals. Our
board discussed in detail the proposals for each transaction received to date, including pricing,
timing and likelihood of receiving contingent payments, whether specific assets were or should be
included or excluded from such transactions and the Development and Commercialization capabilities
of each potential partner. Our board then instructed Columbias management to work with Torreya
Partners to continue discussions regarding potential partnerships for PROCHIEVE 8% for the PTB
Opportunity, while considering offers for both brands (PROCHIEVE and CRINONE), as well.
On May 1, 2009, we presented the PTB Opportunity to Watson. Watson indicated to us that
womens health was one of its areas of focus, it had late stage products in its development
pipeline, and it was re-organizing its branded sales efforts to reach Obstetrics and Gynecology
prescribers.
On June 22, 2009, Party A visited our New Jersey headquarters for a presentation on the PTB
Opportunity and, on June 24, 2009, Party A presented a revised non-binding term sheet to purchase
CRINONE for all then approved indications. A partnership for PROCHIEVE 8% for the PTB Opportunity
was not covered by Party As offer, but Party A stated that it would consider another agreement
that would possibly cover the PTB Opportunity. Party As proposal included a $50 million payment
at closing for the purchase of product rights and an equity position of not less than 10% in
Columbia. Party A also proposed to pay royalties of 5% to 10% for the term of our existing
Progesterone delivery patent (which expires during September 2013), and would pay
36
increased royalties if sales accelerated at a certain rate after the FDA filing for the PTB
Indication.
On June 25, 2009, management made a presentation to another party (Party D) on the
infertility business and the PTB Opportunity. Party D is a large international pharmaceutical
company with U.S. operations.
On June 26, 2009, a management team backed by a financial sponsor (Party E) visited our New
Jersey headquarters for a management presentation on both the infertility indication for our
Progesterone Products and the PTB Opportunity. Party E was interested in establishing a new
pharmaceutical company focused on womens health.
Also on June 26, 2009, Watson submitted its initial indication of interest for United States
and international rights, where available, to acquire CRINONE and PROCHIEVE 8% for the PTB
Opportunity and the infertility indication after completion of the PREGNANT Study and submission of
an application to FDA for the PTB Indication. This proposal provided for an equity investment by
Watson of $8 million in Columbia. The other terms of the proposal remained subject to modification
and quantification. After reviewing the offer with Columbias management, Torreya Partners advised
Watson that it was unable to evaluate the offer because of the lack of quantification of the
milestone payments and royalty rates. Watson responded on July 1, 2009, by offering success based
milestones of up to $80 million and royalties of 12% to 15%.
On July 9, 2009, management presented the PTB Opportunity in more detail to the financial
sponsor of Party E. Also on July 9, 2009, Party A (after further due diligence and negotiations)
submitted a revised non-binding proposal to us to acquire CRINONE and PROCHIEVE 8% for all
indications within the United States and to take an equity position in Columbia. Pursuant to this
proposal, Party A would pay up to $50 million at closing for the Progesterone Products and stock,
make development milestone payments of up to $30 million, sales related milestone payments of up to
$50 million, and royalties of 5% to 10% during the remaining life of our Progesterone delivery
patent (which expires during September 2013). Under this proposal, the royalties would continue at
these rates if new patents were issued and a new dosage form of a Progesterone Product were
marketed. Under this proposal, Columbia would continue to be responsible for managing and funding
the patent applications and development of a new dosage form.
On July 9, 2009, Torreya Partners reviewed with our board the proposals that had been received
as of that date. Our board discussed in detail the proposals, including pricing, timing and
likelihood of receiving contingent payments, whether specific assets were or should be included or
excluded from such transactions and the Development and Commercialization capabilities of each
potential partner. Torreya Partners reported to us that many of the potential partners focused on:
|
|
|
the necessity to package the infertility indication and the PTB
Opportunity together; |
|
|
|
|
the fact that our Progesterone delivery patent for our currently
marketed product expires in 2013; and |
37
|
|
|
the costs and timing for development and approval of a second generation
product for lifecycle management. |
As a result, Torreya Partners was instructed to contact the potential partners and request
them to conduct further due diligence and investigations regarding our products and the PTB
Opportunity. Subsequently, our board determined that in order to find an adequate partnership
opportunity, we should explore partnership opportunities that included the infertility indication
and the PTB Opportunity for both CRINONE and PROCHIEVE 8%.
On July 15, 2009, Columbias management made a presentation to a privately held specialty
pharmaceutical company on the infertility business and the PTB Opportunity, which did not result in
an offer from such company.
At the July 18, 2009 meeting of our board of directors, the board reviewed the efforts of
Torreya Partners with regard to the partnering process as well as the proposals that we had
received through that date. Torreya Partners reported that it had contacted over 50 companies
regarding partnering transactions and as to the status of each of the potential partners. Our
board, at that meeting, also asked board member Frank Condella to work closely on a going-forward
basis with members of Columbias management and Torreya Partners on the partnering process.
On July 21, 2009, Columbias management made a presentation to a large U.S. based
international pharmaceutical company on the infertility business and the PTB Opportunity, which did
not result in an offer from such company.
On July 23, 2009, representatives of Columbias management met with representatives of Party E
to present the CRINONE infertility opportunity. On July 25, 2009, the financial sponsor for Party
E presented a non-binding indication of interest that contemplated equity investments in Columbia
over time in the range of $70 to $80 million, a change in Columbias executive management, and
representation on our board. We also held additional meetings with Party E during the week of
August 3, 2009 to negotiate its proposal.
At our boards meeting on July 27, 2009, Torreya Partners again reviewed the partnering
process. Torreya Partners reported that at this time we had received several expressions of
interest and then reviewed the different structures and valuations of those proposals with our
board. Our board discussed in detail the various proposals, including pricing, timing and
likelihood of receiving contingent payments, whether specific assets were or should be included or
excluded from such transactions and the Development and Commercialization capabilities of each
potential partner. At the conclusion of the meeting, our board requested that Torreya Partners and
management continue their efforts with respect to the partnering process.
On July 29, 2009, Mr. Condella and a representative of Torreya Partners met in Europe with
Party A to discuss Party As marketing capabilities in the United States for infertility and the
PTB Opportunity. On July 30, 2009, Mr. Condella and a representative of Torreya Partners met with
management of another European company with whom Columbia had held prior partnering discussions to
see if their interest could be advanced to an offer. However, that company did not convey a
proposal to us.
38
On August 5, 2009, representatives of Watson, Columbia and Torreya Partners met to review and
discuss Watsons proposal.
At our boards August 6, 2009 meeting, Mr. Condella and Torreya Partners reported to the board
on the European meetings as well as the status of discussions with Watson and Party E. The board
reviewed the status of the partnering process and requested management and Torreya Partners to
continue with the process.
On August 13, 2009, Party C submitted a non-binding offer to acquire CRINONE and PROCHIEVE 8%
for all indications that contemplated an upfront payment of $25 million, milestone payments of $15
million upon FDA approval of the PTB Indication, of $5 million upon approval of a second generation
product, which Columbia would continue to be responsible for managing and funding development; and
annual sales related milestone payments ranging from $5 million to $20 million, depending on the
sales level, and royalties of 10% to 14%.
On August 14, 2009, Party D submitted a non-binding offer to acquire CRINONE and PROCHIEVE 8%
for all indications that contemplated an upfront payment of $10 million, milestone payments of $15
million on filing and FDA approval of the PTB Indication, and annual sales related milestone
payments ranging from $10 million to $35 million, depending on sales levels.
On September 2, 2009, a start-up company (Party F) and its financial sponsor visited our New
Jersey headquarters for a management presentation on the PTB Opportunity.
On September 4, 2009, Party E withdrew from the partnering process because its investment
committee did not support its equity investment for the deal structure that it had previously
proposed.
On September 5, 2009, Party A submitted a revised non-binding offer. In this offer, Party A
increased its contemplated upfront payment to $45 million plus an equity investment in Columbia of
20% of our Common Stock at a purchase price to be negotiated. Party A also proposed that it would
make development and patent related success based milestone payments of up to $40 million and sales
related milestone payments of up to $75 million. In addition, Party A proposed that the royalties
it would pay would be at the rate of 10% and increase to 15% if the PTB Indication was approved by
the FDA.
At the September 9, 2009 board meeting, Torreya Partners reviewed its efforts, the status of
the partnering proposals received to date (and the negotiations relating thereto) and the
withdrawal by Party E from the partnering process. Our board then discussed the partnering process
and conducted an in-depth review of the offer by Party A, including the pricing, timing and
likelihood of receiving contingent payments and its Development and Commercialization capabilities
in the United States, as well as the status and terms of the other proposals received to date.
On September 11, 2009, Party F presented to us a non-binding offer to acquire CRINONE and
PROCHIEVE 8% for all indications that contemplated a $40-$50 million upfront payment, potential
milestone payments for successful development of a second generation product totaling $20 million
and escalating royalties on net sales over $50 million from 5% to
39
15%. Party F also indicated it would reimburse Columbia for 50% of development costs for a
second generation product, which Columbia would develop.
On September 16, 2009, Watson submitted a revised offer for our Progesterone related assets
and Common Stock. This revised offer included a $40 million upfront payment and Watson taking over
the CRINONE infertility business at the closing of the transaction. It also contemplated that
Columbia would continue to be responsible for the PREGNANT Study and submission to the FDA of an
application for the PTB Indication. This offer also contemplated contingent development milestone
payments of up to $50 million and escalating royalties to be paid on net sales ranging from 12% to
20%. Watson also proposed that it would pay the development costs for a second generation product
after FDA approval of the PTB Indication. Torreya Partners reviewed the offer in detail with
Columbias management and continued to negotiate with Watson.
On September 17, 2009, Party A met with representatives of Columbias management and Torreya
Partners in New York City to discuss Party As U.S. Commercialization plan and to negotiate the
terms of its most recent non-binding offer.
On September 29, 2009, Party F revised its offer. The revised offer contemplated an upfront
payment of $55 million. Party F did not modify the terms that it had previously proposed related
to the contingent development milestones and payment of the PTB Opportunity development costs.
However, Party F added to its proposal contingent sales related milestones of up to $40 million and
improved its proposal regarding royalty sales ranges slightly, but stayed at 5% to 15%. At this
point, Party F requested exclusivity as a condition to its committing further resources to
conduct additional due diligence.
On October 1, 2009, Watson modified its proposal by increasing its contemplated upfront
payment by $2 million to $42 million and reduced its proposed clinical results milestone payment by
the same amount.
On October 7, 2009, Party A provided a revised non-binding term sheet for United States rights
to CRINONE and PROCHIEVE 8% for both the infertility indication and the PTB Opportunity. Party A
offered an upfront payment of $45 million as well as an equity investment of up to 20% of our
Common Stock. This modified proposal also provided for up to $40 million of development milestone
payments, up to $75 million in sales related milestone payments, and a royalty of 10% that would
escalate to 15% if the PTB Indication was approved by the FDA. It also provided for termination of
royalty payments in the event a generic entry was launched, and a product supply agreement that
limited us to a 5% markup on cost of goods sold.
After conducting its due diligence review of Columbia, including an October 8, 2009 meeting
with management, Party F submitted a revised offer on October 13, 2009. Pursuant to that offer,
Party F reduced its contemplated upfront payment to $45 million, increased the second generation
product development milestone payments by $10 million, but withdrew the reimbursement of 50% of
development costs and reduced the launch milestone payment by $10 million.
40
At our boards October 13, 2009 meeting, our board reviewed, evaluated and discussed the
offers from Party A, Party F, and Watson under a range of assumptions regarding clinical and
commercial success. Our board considered the economic terms of each of the offers, the nature and
capabilities of each of the potential partners and our likelihood of receiving the contingent
payments contemplated by each of these offers. In particular, our board considered that Party A
did not have any existing United States operations, that Watsons offer included an agreement to
pay for future development costs for the second generation product and offered the most attractive
royalty package as well as Watsons established United States presence, and that Party F had
recently made negative modifications to its offer. Our board also considered that Party F was a
start-up company without a commercial infrastructure.
On October 19, 2009, board chairman, Mr. Stephen G. Kasnet, and Mr. Condella met with
representatives of Party As management in Europe to discuss Party As most recent offer, our
future business strategy, and the operational and financial aspects of the proposed partnership.
On October 21, 2009, Party A indicated to us that it was prepared to proceed with its offer
for the assets related to the Progesterone Products, but that its equity investment would not be
approved by its parent company. As a result, Party A reduced its offer by approximately $15
million. We, however, continued to negotiate with Party A regarding its proposal.
On October 22, 2009, we entered into certain agreements with investors pursuant to which we
issued 10,900,000 units, each consisting of one share of Common Stock and one warrant to purchase
0.5 shares of our Common Stock (with an exercise price of $1.52 per share) and in doing so, on
October 28, 2009, raised approximately $10.7 million in net proceeds in order to continue to fund
our business operations, including the funding of the PREGNANT Study and development of the second
generation product.
On October 25, 2009, Watson submitted a revised non-binding offer for global rights, where
available, for the PTB Opportunity and infertility indication with respect to both CRINONE and
PROCHIEVE 8% and a combination of assets and equity, for a $47 million upfront payment. Watsons
revised offer also included an opportunity for us to earn development milestone payments of up to
$45.5 million, escalating royalties on net sales in the United States of 8% to 20% and royalties of
10% outside the United States. Watson also proposed to pay the life cycle management costs for
developing a second generation product for both the infertility and preterm birth indications and
to pay us royalty payments on the second generation product. Under this revised proposal, we would
remain responsible for completion of the PREGNANT Study and filing for approval by the FDA of the
PTB Indication.
At a board meeting on October 30, 2009, Mr. Condella and Torreya Partners reported to the
board on the partnering discussions with Party A, Party F, and Watson, including that Party A had
removed the equity component of its offer. Mr. Condella and Torreya Partners also explained that
Party A was in the process of reconsidering its offer and indicated that it would respond to us
regarding the offer in early November 2009. Torreya Partners also reported that it had held
discussions with Party F and that Party F had not revised its offer.
On November 4, 2009, Party A indicated to us that it had completed its further review of its
proposal and that it would not modify it.
41
During November 2009, we engaged in detailed discussions with Watson regarding its non-binding
proposal and negotiated the terms thereof, including with respect to the range of royalty payments,
resulting in an increase to the bottom of the range.
At its November 17, 2009 meeting, Mr. Condella and Torreya Partners reported to our board on
discussions with Party A and Watson, the two parties with which Columbia remained in active
negotiations, and on the status of two other parties who remained interested in a potential
partnership opportunity. Financial and other terms of the offers from Party A and Watson were
reviewed and evaluated by the board in detail, including pricing, timing and likelihood of
receiving contingent payments, likelihood of closing, whether specific assets were or should be
included or excluded from such transactions and the Development and Commercialization capabilities
of each potential partner. Following discussion and review, our board decided that we should
proceed with Watson and prepare definitive agreements in parallel with due diligence on Watson. At
that meeting, our management also reviewed with the board the proposed structure and a preliminary
plan for our post-transaction business strategies. Our board requested Torreya Partners to contact
Watson to invite it to make a presentation to our board so that our board could conduct due
diligence regarding Watsons overall business and womens health strategic plans, especially for
the CRINONE product, and in particular, for our board to investigate our future opportunity to
realize the milestone payments and royalties and to gain assurances as to Watsons commitment to
fund the development of second generation products.
At its November 17, 2009 meeting our board considered and discussed prepaying approximately
$18 million in principal amount of Notes held by a holder of the Notes owning approximately 45% of
the outstanding Notes (the Principal Holder), as well as prepaying the obligations owing to
PharmaBio under the PharmaBio Agreement.
On December 1, 2009, Lawrence Gyenes, our Chief Financial Officer, and Robert Mills, our Chief
Operating Officer, discussed with PharmaBio the possibility of prepaying the obligations under the
PharmaBio Agreement.
On
December 14, 2009, we engaged RBC for the purpose of our board receiving an opinion from RBC
with respect to the fairness, from a financial point of view, of the consideration to be received
by us in connection with the potential sale of assets.
On December 15, 2009, Paul M. Bisaro, President and Chief Executive Officer of Watson, and G.
Frederick Wilkinson, Executive Vice President of Global Brands of Watson, made a presentation to
our board. During that presentation, Messrs. Bisaro and Wilkinson described Watson and its
business. They also discussed Watsons recent acquisition, its plans, including its plans for
marketing CRINONE for the infertility indication, its commitment to fund the development of a
second generation product in concert with Columbia and its plan to launch and support the PTB
Opportunity should it receive FDA approval.
On December 17, 2009, Mr. Gyenes discussed with the Principal Holder the possibility of
Columbia acquiring its Notes.
During January and February of 2010, Columbias management, Columbias outside counsel, Kaye
Scholer LLP (Kaye Scholer), Watsons management along with its outside
42
counsel, Latham & Watkins LLP, exchanged drafts of the proposed definitive agreements for a
potential transaction and engaged, in person and telephonically, in negotiations
regarding the documentation for the Watson Transactions. During the course of these negotiations,
we agreed to include PROCHIEVE 4% among the assets being sold to Watson.
At the January 8, 2010 meeting of the board, Mr. Condella, Torreya Partners and Kaye Scholer
reported to our board on the status of contract negotiations with Watson and the proposed
transaction. Kaye Scholer made a presentation as to the fiduciary duties of our board and reviewed
the terms of the Purchase and Collaboration Agreement, the Supply Agreement, the License Agreement,
the Investors Rights Agreement and the Charter Amendment which had been provided to the board in
advance of the meeting.
Also at the January 8, 2010 meeting of the board, Mr. Gyenes presented to the board a proposal
for us to satisfy the obligations owing to PharmaBio as well as a significant portion of our
obligations with respect to the Notes. Mr. Gyenes also made a presentation regarding the terms of
a proposed amendment to the Notes to remove the put right contained therein (which required the
approval of the holders of at least 75% of the principal amount of the Notes). He discussed that
in the absence of this amendment, upon a sale of substantially all of our assets (the Watson
Transactions would qualify as such) the holders of the Notes would have the right to compel us to
redeem the Notes for a cash price equal to the principal amount of the outstanding Notes, plus
accrued and unpaid interest. At the meeting the board decided that, before entering into the
Purchase and Collaboration Agreement with Watson, the Notes needed to be amended so that the
holders of the Notes would not have the right to put the Notes to us upon a sale of all or
substantially all of our assets. Otherwise, we would not have sufficient liquidity to satisfy our
debt obligations.
During January 2010, we engaged in negotiations with the holders of the Notes regarding the
financial terms of a transaction pursuant to which the holders of at least 75% of the principal
amount of the Notes would agree to amend the Notes to delete their put rights and agree to sell
their Notes to us at a discount. Initially, we proposed that we would repurchase the Notes for an
aggregate value of up to $26 million in cash and warrants to acquire up to approximately 15.5
million shares of Common Stock (with an exercise price of $1.50 per share) and amend the Notes to
remove the put right.
It was also during this time that we commenced negotiations of an agreement with PharmaBio
allowing us to pre-pay our obligations owing to them, conditional upon the closing of a transaction
on specified terms.
At the February 5, 2010 meeting of the board, representatives of Torreya Partners and Kaye
Scholer were present and discussed the status of the Watson Transactions. At that time, our board
also considered the results of our preliminary research concerning the market flexibility for
increasing the price of CRINONE and PROCHIEVE 8% for the PTB Opportunity. Our research suggested
that the market might accept higher pricing for CRINONE and PROCHIEVE 8% for the PTB Opportunity
and the board considered the advantage this would present, as Watsons offer included escalating
royalty rates on increasing net sales. At that meeting, the board reviewed drafts of the Purchase
and Collaboration Agreement, the Supply Agreement, the License Agreement, the Investors Rights
Agreement, the Charter Amendment, drafts of
43
agreements with the holders of the Notes to prepay and amend the Notes and a draft of the
agreement to prepay the obligations owing to PharmaBio, each of which was provided to the board in
advance of the meeting. During the meeting, a Kaye Scholer representative discussed the boards
fiduciary duties in connection with the proposed transactions and a Torreya Partners representative
reviewed the key aspects of the process in which it was engaged to evaluate the advisability of
selling the Assets. A representative of RBC rendered its preliminary financial analysis of the
consideration contemplated in the proposed sale of assets and its views on whether such
consideration would be fair from a financial point of view to Columbia.
During the next two weeks, we and Kaye Scholer negotiated the terms of the repurchase of, and
amendment to, the Notes with the holders of the Notes.
A board meeting was called on February 17, 2010 to approve the Watson Transactions, the
Charter Amendment, the Note Purchase Agreements, the amendment to the Notes and PharmaBio
Amendment. However, prior to the meeting, two holders of the Notes with a combined ownership of
approximately 30% of the outstanding Notes, informed us that they would not go forward with the
Note purchase and amendment transaction unless the economic terms of that transaction were
modified. At the board meeting, the board was informed of the position of these holders of the
Notes. The board decided that it should not approve the transaction with Watson until it obtained
an agreement with the holders of at least 75% in principal amount of the Notes to amend the Notes
so that the Watson Transactions would not trigger the put right. The board authorized Columbias
management to continue negotiations with the holders of the Notes.
Columbias management, along with Kaye Scholer, over the next few days, negotiated with the
holders of the Notes. On the evening of February 21, 2010, we concluded negotiations with the
holders of the Notes having reached an agreement in principle under which the holders of the Notes
would receive an aggregate of up to $26 million in cash, warrants to acquire up to approximately
15.5 million shares of Common Stock (the exercise price to be determined using a formula at the
closing of the transactions contemplated under the Note Purchase Agreements, with a floor price of
$0.80 and a cap price of $1.50 per share) and $6 million of Common Stock (the number of shares to
be determined using a formula at the closing of the transactions contemplated under the Note
Purchase Agreements, with a per share floor price of $0.80 and a per share cap price of $1.50 per
share) in exchange for their Notes. The holders would also consent to an amendment to the Notes so
that the Watson Transactions would not trigger the put right.
On February 22, 2010, Columbia informed Watson of the revised terms for the acquisition and
amendment of the Notes. At this point, Watson informed us that it would not enter into a
transaction with us if we engaged in a transaction with the holders of the Notes on those terms. A
board meeting was then convened and the board was apprised of the current status of negotiations
with Watson and the holders of the Notes. The board instructed Columbias management to continue
to negotiate with Watson and the holders of the Notes.
Over the ensuing days, we analyzed the terms for the repurchase and amendment of our Notes and
engaged in negotiations with the holders of the Notes and Watson.
44
On March 3, 2010, we concluded negotiations with the holders of the Notes and Watson.
Ultimately, we agreed to pay the holders of the Notes an aggregate
amount of $26 million in cash (plus accrued and unpaid
interest on our Notes through (but excluding) the Closing date),
issue them warrants to acquire up to 7.75 million shares of Common Stock at an exercise price of
$1.35 and issue them 7,407,407 shares of Common Stock and also agreed to the terms of an amendment
to the Notes. On that date, we also finalized the PharmaBio Agreement pursuant to which we agreed
to pay PharmaBio approximately $16 million in satisfaction of our obligations under the PharmaBio
Agreement, upon the satisfaction of certain conditions.
A meeting of the board was then held on the evening of March 3, 2010 for the purpose of
approving the Watson Transactions, the Charter Amendment, the Note Purchase Agreements, the
amendment to the Notes, the PharmaBio Amendment and certain other matters. Prior to the meeting,
the board was provided with the latest drafts of the Purchase and Collaboration Agreement, the
Supply Agreement, the License Agreement, the Investors Rights Agreement, the Charter Amendment,
the PharmaBio Amendment, the Note Purchase and Amendment Agreements and the latest draft of RBCs
preliminary financial analysis of the proposed transaction. During the meeting, representatives of
Kaye Scholer again discussed the boards fiduciary duties in connection with the Watson
Transactions and reviewed key aspects of the process that we had engaged in to evaluate the
advisability of entering into the Watson Transactions and certain other transactions. Also at this
meeting, RBC rendered its oral fairness opinion to our board that, as of that date and based upon
and subject to the factors and assumptions set forth in its written
fairness opinion, the Upfront Payment and the
Contingent Payments to be received by Columbia pursuant to the terms of the Purchase and
Collaboration Agreement was fair from a financial point of view to Columbia, which opinion was
subsequently confirmed in writing. Following these presentations, our board considered, among
other things the merits of the Watson Transactions when compared to Columbias prospects if it
would not enter in the Watson Transactions and the risks and uncertainties associated therewith.
Following the discussion, the board unanimously determined that the Asset Sale on the terms and
conditions set forth in the Purchase and Collaboration Agreement is expedient and in the best
interests of Columbia and that the approval of the Charter Amendment is advisable and in the best
interests of our stockholders. Thereafter, the board adopted and approved the Purchase and
Collaboration Agreement, the issuance of the Acquisition Shares, the PharmaBio Amendment, the Note
Purchase Agreements and the issuance of the securities thereunder, and the amendment to the Notes
and certain other matters.
Later in the evening of March 3, 2010, the Purchase and Collaboration Agreement, the PharmaBio
Amendment, the Note Purchase Agreements and the related schedules and exhibits were finalized and,
to the extent necessary, executed by the parties thereto. The Watson Transactions, the PharmaBio
Amendment, the Note Purchase Agreements and the Note Amendment were announced by press release on
the morning of March 4, 2010 prior to the opening of trading of our Common Stock on the NASDAQ
Global Market.
Reasons for the Asset Sale; Recommendation of Our Board of Directors
Our board of directors, acting with the advice and assistance of its legal advisors, evaluated
the Purchase and Collaboration Agreement and, acting with the advice and assistance of its legal
and financial advisors, evaluated the consideration negotiated with Watson, Buyer and their
representatives. After careful consideration, our board determined that the Asset Sale is
45
expedient and in the best interests of Columbia. At a special meeting of our board held on
March 3, 2010, the board resolved to adopt and approve the Purchase and Collaboration Agreement and
the transactions contemplated thereby, and to recommend to our stockholders that they vote for the
approval of the Asset Sale.
In the course of reaching its recommendation, our board of directors consulted with our
management and Columbias financial and legal advisors and considered a number of substantive
factors, both positive and negative, and potential benefits and detriments of the Asset Sale. The
board believed that, taken as a whole, the following factors supported its decision to approve the
Purchase and Collaboration Agreement and the Asset Sale:
|
|
|
Strategic Review Process. Our board of directors considered the
rigorous process (which began approximately 15 months earlier) through which we
had explored various strategic alternatives. Our board considered that this
process involved our announcing that we were exploring strategic alternatives
for the sale or license of the PTB Indication and during 2009, Torreya Partners
contacting more than 50 parties, our conducting management presentations for 11
parties and receiving indications of interest to acquire or enter into
strategic partnering arrangements from seven parties. |
|
|
|
|
Uncertainties With Respect to Other Proposals. Our board of directors
considered the uncertainties in connection with pursuing a transaction with any
of Parties A through F as opposed to Watson. With respect to Party A, our
board was concerned that it had not previously conducted significant business
in the United States, the inferiority of its offer with respect to royalty
streams and its lack of commitment to funding for the Development of the
Progesterone Products. With respect to Parties B, C and D, our board
considered that the consideration offered was not competitive with the other
offers received. Our board also considered that Party E withdrew from the
partnering process due to a lack of internal support for the offer it had
previously made and the possibility of Party E re-engaging in the partnering
process. With respect to Party F, a start-up company sponsored by a financial
institution, our board was concerned with its capabilities to Develop and
Commercialize the Progesterone Products. In the judgment of the board,
continuing the partnering process by continuing negotiations with any
other parties, including Party A or Party F, was likely to place in jeopardy
the proposal received from Watson. Our board also, in contrast, considered
Watsons capabilities to Develop and Commercialize the Progesterone Products
with its sales and marketing force, Watsons recognized name and financial
capabilities as well as Watsons plans to expand the Commercialization of the
Progesterone Products outside of the United States and Watsons willingness to
fund the Development of a second generation Progesterone Product. |
|
|
|
|
|
Consideration. Our board of directors considered a variety of valuation
methodologies relating to our Progesterone Products and the likelihood of
receiving (all or a portion of) an amount of the contingent parts of the |
|
46
|
|
|
consideration contemplated by the various proposals. Our board also noted the
fact that the Upfront Payment payable at the Closing was all cash, which
provides certainty of value to Columbia. In addition, our board considered the
contingent milestone and royalty payments by Watson and the likelihood of
obtaining such payments, which provided Columbia with an opportunity to share in
a significant portion of the future upside and performance of the Progesterone
Products. Our board concluded, based upon all of the factors described in this
proxy statement, that the Watson Transactions were the best reasonably
attainable alternative for Columbia. |
|
|
|
|
|
Risks Related to Alternatives to Sale. Our board of directors
considered our business, financial condition, results of operations, cash
flows, products, intellectual property, markets and marketing capability,
management and competitive position, financial performance, outlook and
prospects, as well as current industry, economic, stock and credit market
conditions and our strategic direction and alternatives, and business plan.
Our board also considered certain strategic alternatives to the Watson
Transactions, as well as the possibility of not engaging in a transaction at
all. In that regard, our board considered our long- and short-term strategic
plan and initiatives, including the risks associated with a negative outcome to
the PREGNANT Study. Our board considered that significant resources would be
needed in order to successfully Develop, Launch and Commercialize PROCHIEVE 8%
for the PTB Indication (assuming that the PREGNANT Study was successful). Our
board also considered that our Progesterone delivery patent for the current
formulation of CRINONE/PROCHIEVE expires in September 2013 and a Second
Generation Delivery System (as defined herein) with a longer patent life would need to be
Developed, approved by FDA, and Launched, requiring significant additional |
|
47
|
|
|
capital. Moreover, our board considered that we have
approximately $57 million
in debt obligations that will mature on or prior to December 31, 2011 and our
need for resources to satisfy such obligations. Our board considered the risks
of not being able to raise sufficient capital to Develop, Launch and
Commercialize PROCHIEVE 8% for the PTB Indications and satisfy our debt
obligations. Our board also considered the benefits and potential risks,
including execution risks, of pursuing other strategic alternatives available to
Columbia. Our board considered that the
Upfront Payment from the Watson Transactions, together with our available cash,
would provide us with the necessary resources to continue the PREGNANT Study,
and satisfy our debt obligations. Our board also considered that, in
connection with the Watson Transactions, the
Development Costs we would be responsible for would be capped at $7 million
and that Watson would be responsible for funding most of the future Development
Costs and costs to Launch and Commercialize PROCHIEVE 8% for the PTB Indication
as well as for the Second Generation Delivery System (if the decision
is made to Launch and Commercialize the same). |
|
|
|
|
|
Ability to Change Recommendation to Stockholders. Our board of
directors considered its ability to make a Change of Board Recommendation, in
the circumstances and subject to certain limitations described herein,
including but not limited to its endorsement of a Superior Proposal. |
|
|
|
|
Other Terms of the Purchase and Collaboration Agreement. Our board of
directors considered the other terms and conditions of the Purchase and
Collaboration Agreement (in addition to the consideration), including the
number and nature of the conditions to the Buyers obligation to consummate the
Watson Transactions and the likelihood that those conditions would be
satisfied. |
|
|
|
|
Likelihood of Consummation. Our board of directors considered the
likelihood that the Watson Transactions would be completed, including its
belief that there would not be any antitrust or other regulatory impediments to
the Watson Transactions as well as the fact that Buyers receipt of financing
is not a condition to the completion of the Watson Transactions. Our board
noted that the receipt of third party consents was not a condition to the
completion of the Watson Transactions. The board also considered the fact that
Buyer did not need to obtain stockholder approval for the Watson Transactions. |
|
|
|
|
Identity of Watson. Our board of directors considered the fact that
Watson is a leading United States pharmaceutical company that invests in the
research, development and marketing of innovative and effective treatments to
improve patient well-being and quality of life. Our board noted that Watson
had done an extensive due diligence review of Columbia and accordingly was very
familiar with our business. |
|
|
|
|
Reduction of Debt. Our board considered the fact that, at the Closing,
we would pay our obligations owing to PharmaBio under the PharmaBio Agreement
and to the holders of our Notes. As a result, we would be free of debt and
debt service obligations. |
|
|
|
|
Transformation of Columbia. Our board of directors noted that upon
consummation of the Watson Transactions we would initially continue our
focus on conducting the PREGNANT Study and performing our obligations |
48
|
|
|
under the
Merck Serono Agreement. If the PREGNANT Study is successful however and we
achieve the milestones set forth in the Purchase and Collaboration Agreement,
our board considered that by selling the Progesterone Products, Columbia
management would be able to focus on our other product candidates and drug
development program and pipeline. However, our board did consider that if the
PREGNANT Study is not successful, our resources would be limited and our board
of directors would have to reassess our strategy. |
|
|
|
|
Opinion of Columbias Financial Advisor. Our board of directors
considered the financial analysis presented by RBC and RBCs fairness opinion
that was presented to the board that, as of the date given and based upon and
subject to the factors and assumptions set forth therein, the Upfront Payment
and the Contingent Payments to be received pursuant to the terms of the
Purchase and Collaboration Agreement, was fair from a financial point of view
to Columbia, which opinion was confirmed in writing. See Opinion of
Columbias Financial Advisor, beginning on page 53. The full text of RBCs
opinion, which set forth the assumptions made, matters considered and
limitations of the review undertaken by RBC, is attached as Annex C to this
proxy statement and is incorporated herein by reference. You are urged to, and
should, read the opinion of RBC carefully. |
Our board of directors also considered a variety of risks and other potentially negative
factors relating to the Watson Transactions, including the following:
|
|
|
Future Growth and Risk Profile. Our board of directors considered the
fact that if the Watson Transactions are consummated, except with respect to
the contingent milestone and royalty payments by Buyer, Columbia and its
stockholders will no longer participate in the future growth of the
Progesterone Products, including any growth as a result of the marketing of
PROCHIEVE 8% for the PTB Indication (assuming positive results for the PREGNANT
Study) (except in connection with certain retained assets and rights relating
to our Progesterone business, including all rights necessary to perform our
obligations under the Merck Serono Agreement). Our board believed that the
Asset Sale provided certain value for Columbia and that the contingent right to
receive milestone and royalty payments allowed Columbia to participate in a
significant portion of the growth of Progesterone Products in the coming years.
Our board recognized that the Asset Sale would largely eliminate the more
predictable cash flows that we had traditionally received from the sale of
Progesterone Products and, as a result, the risk/reward profile of Columbia
following the transaction would be changed accordingly. |
|
|
|
|
Risk of Non-Completion. Our board of directors considered the risk that
the Watson Transactions might not be completed and the effect of the resulting
public announcement of termination of the Purchase and Collaboration Agreement
on: |
49
|
|
|
The market price of our Common Stock. In that regard, the
market price could be affected by many factors, including the reason or
reasons why the Purchase and Collaboration Agreement was terminated and
whether such termination resulted from factors adversely affecting
Columbia or the Progesterone Products and the possibility that, as a
result of the termination of the Purchase and Collaboration Agreement,
the marketplace would consider Columbia and its assets to be an
unattractive acquisition candidate; |
|
|
|
|
Our ability to effectively implement our current business
strategies, including the continuation of the PREGNANT Study. It is
evident that significant resources would be necessary, in order to
successfully Develop, Launch and Commercialize the PROCHIEVE 8% for the
PTB Indication (assuming that the PREGNANT Study is successful) and
there can be no assurances that we will have the capital to meet these
needs. Moreover, our board considered that if the Watson Transactions
are not consummated, our stockholders will bear the entire risk that
the PREGNANT Study may not be successful; |
|
|
|
|
|
Our available liquidity. We have approximately $57 million in
debt obligations that would be satisfied upon the completion of the
Watson Transactions, or in the alternative, would mature on or prior to
December 31, 2011 and there can be no assurances that we would have the
means to satisfy such obligations or raise additional capital in the
absence of the consummation of the Watson Transactions; |
|
|
|
|
|
The value of our patents. The value of our delivery patent for
the current formulation of CRINONE/PROCHIEVE, which expires in
September 2013 may decrease in value as such date nears; |
|
|
|
|
Possible Payment of Termination Fee. Our board of directors
considered the termination fee that would be payable by us to Buyer if
the Purchase and Collaboration Agreement was to be terminated in
certain circumstances. Our board believed that the termination fee was
customary and reasonable and would not unduly preclude a third party
from making a Superior Proposal; |
|
|
|
|
Personnel. Our ability to attract and retain key personnel; and |
|
|
|
|
Contracts/Customers. Our ability to enter into agreements
relating to Progesterone Products or obtain new customers. |
|
|
|
Inability to Solicit Competing Proposals or to Terminate the Purchase
and Collaboration Agreement or Vote on a Superior Proposal in the Event of a
Change of Board Recommendation. Our board of directors considered that the
Purchase and Collaboration Agreement contains provisions that make it |
50
|
|
|
|
more
difficult for us to engage in a material strategic transaction with any party
other than Buyer. These provisions could discourage a third party that might
have an interest in Columbia or the Progesterone Products, even if that party
were prepared to pay consideration with a higher value than that to be paid by
Watson. Our board of directors also recognized our obligation to call, give
notice of, convene and hold the Special Meeting, and to hold a vote of our
stockholders on the Asset Sale proposal and the Charter Amendment proposal
regardless of the commencement, disclosure, announcement or submission to us of
any Acquisition Proposal (whether or not a Superior Proposal), and that we will
not be entitled to terminate the Purchase and Collaboration Agreement if a
Change of Board Recommendation occurs. Our board was mindful that the Purchase
and Collaboration Agreement significantly limits our ability to pursue
alternatives to the Watson Transactions. See The Purchase and Collaboration
AgreementTermination of the Purchase and Collaboration
Agreement, beginning on page 116 The
Purchase and Collaboration AgreementProcedure and Effect of
Termination, beginning on page 117 and The Purchase and
Collaboration AgreementNo Solicitation of Other Offers, beginning on
page 112. |
|
|
|
|
|
|
Possible Disruption of our Business. Our board considered the possible
disruption to our business that might result from the announcement of the
Watson Transactions and the resulting distraction of the attention of Columbia
management and employees. Our board also considered the fact that the Purchase
and Collaboration Agreement contains certain limitations regarding our
operations during the period between the signing of the Purchase and
Collaboration Agreement and the Closing. See The Purchase and Collaboration
AgreementConduct of Business Prior to Closing,
beginning on page 93.
Our board believed that such limitations were customary for transactions
similar to the Watson Transactions and appropriately tailored to the specific
requirements of the assets being sold. |
|
|
|
|
|
|
Non-Competition Restrictions. Our board of directors considered the
non-competition obligation that would be imposed on us as a result of the
Watson Transactions. See The Purchase and Collaboration
AgreementNon-Compete, beginning on page 112. Based on the status of our
development pipeline and the fact that the obligations were only minimally
restrictive of our activities with respect to womens healthcare, taken as a
whole, our board did not believe that these obligations would materially
interfere with the growth and development of our business. |
|
|
|
|
|
Indemnification Obligations. Our board of directors was aware that the
Purchase and Collaboration Agreement placed certain indemnification obligations
on us. Our board considered the customary nature of such indemnification
obligations in the Watson Transactions and the risk of liability to Buyer
following the Closing. |
51
|
|
|
Transaction Consideration Taxable. Our board of directors considered
that the gain we would recognize on the sale of the Assets in connection with
the Asset Sale would be taxable. In that regard, the board noted that we have
the opportunity to shield substantially all such gain through our existing net
operating loss carryforwards. |
|
|
|
|
|
Acceleration of the Notes. Our board of directors was aware that
consummation of the Asset Sale would trigger certain rights in the Notes, that
could force us to redeem the Notes for a cash price equal to the principal
amount of the outstanding Notes, plus accrued and unpaid interest. In
recognition of this risk, all of the Notes have been amended and will be
repurchased contemporaneously with the Closing. See Purchase of our
Convertible Subordinated Notes, beginning on page 67. In addition, our board
was aware that our obligations owing to PharmaBio under the PharmaBio Agreement
were senior to the Notes. Therefore, our obligations to PharmaBio under the PharmaBio Agreement would also needed to be prepaid at the Closing. |
|
|
|
|
|
|
Rights of Our Series C Preferred Stockholders. Our board of directors
was aware that the consummation of the Watson Transactions would result in a
triggering event for the holders of our Series C Preferred Stock, providing
such holders with the right to require us to redeem their shares of Series C
Preferred Stock for the cash value of the Series C Preferred Stock, plus all
accrued and unpaid dividends thereon on the date such redemption is demanded. See
Preferred Stock, beginning on page 73. |
|
In
addition, our board of directors was aware of, and considered the
interests that, certain of
our directors and executive officers may have with respect to the Asset Sale and the other
transactions described herein that differ from, or are in addition to, their interests as
stockholders of the Columbia, as described in Interests of the Columbias Directors and
Executive Officers in the Asset Sale.
The foregoing discussion summarizes the material factors considered by our board of directors
in its consideration of the Asset Sale. In view of the wide variety of factors considered by our
board, and the complexity of these matters, our board did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In addition, individual members of our
board may have assigned different weights to various factors. Our board approved the Purchase and
Collaboration Agreement and the transactions contemplated thereby and recommended the Asset Sale
based upon the totality of the information presented to and considered by it.
Our board of directors has approved the Purchase and Collaboration Agreement and the
transactions contemplated thereby and recommends that you vote FOR the proposal to approve the
Asset Sale and FOR adjourning the Special Meeting to a later date, if necessary or appropriate,
to allow for the solicitation of additional proxies in favor of the proposal to approve the Asset
Sale if there are insufficient votes to approve the Asset Sale.
52
Opinion of Columbias Financial Advisor
On March 3, 2010, RBC delivered its oral opinion, subsequently confirmed in writing, to our
board of directors to the effect that, as of such date, based upon and subject to the factors and
assumptions made, matters considered and limits of the review undertaken by RBC set forth therein,
the Upfront Payment and the Contingent Payments to be received by Columbia pursuant to the terms of
the Purchase and Collaboration Agreement, in exchange for Columbias (i) transfer of the Assets and
(ii) issuance of the Acquisition Shares to Buyer, was fair from a financial point of view to
Columbia.
The full text of RBCs written opinion, dated March 3, 2010, which, among other things, sets
forth the assumptions made, procedures followed, matters considered, and limitations on the review
undertaken by RBC in connection with the opinion, is attached as Annex C. RBC provided its opinion
for the information and assistance of Columbias board of directors in connection with its
consideration of the Asset Sale. The RBC opinion was not a recommendation to any member of our
board of directors as to how any such member should vote with respect to the Watson Transactions or
how any stockholder should vote with respect to the Asset Sale proposal. Columbias stockholders
are urged to read the RBC opinion in its entirety.
For the purpose of rendering its opinion, RBC undertook such review and inquiries as it deemed
necessary or appropriate under the circumstances, including the following:
|
|
|
reviewed the financial terms of a draft of the Purchase and
Collaboration Agreement provided to RBC on March 3, 2010; |
|
|
|
|
reviewed financial information and estimates related to the Progesterone
Products and to the operations associated therewith that were provided to RBC
by Columbias management, including estimates as to corporate overhead costs
attributable thereto and Columbias payment of the first $7,000,000 of
development costs associated with the PTB Indication and other mutually
agreed-upon product development (the Forecast); |
|
|
|
|
conducted discussions with members of our senior management with respect
to the prospects and financial outlook of the Assets; and |
|
|
|
|
performed such other studies and analyses as it deemed appropriate. |
In arriving at its opinion, RBC performed the following analyses in addition to the review,
inquiries and analyses referred to in the preceding paragraph:
|
|
|
reviewed selected market valuations of publicly-traded companies that it
deemed comparable to the Assets; and |
|
|
|
|
performed a discounted cash flow analysis using the Forecasts. |
53
RBC employed several analytical methodologies in rendering its opinion, and no one method of
analysis should be regarded as critical to the overall conclusion reached by RBC. Each methodology
has inherent strengths and weaknesses, and the nature of the available information may further
affect the usefulness of particular methodologies. RBCs overall conclusions were based on all the
analyses and factors presented, taken as a whole, and also on application of RBCs own experience
and judgment. Such conclusions may have involved significant elements of subjective judgment and
qualitative analysis. RBC therefore gave no opinion as to the standalone value or merit of any one
or more parts of those analyses.
In rendering its opinion, RBC assumed and relied upon the accuracy and completeness of all of
the financial, legal, tax, operating and other information provided to it by Columbia, and did not
assume any responsibility for independently verifying, and did not independently verify, such
information. For all forward-looking financial information with respect to the Assets, RBC relied
on the Forecasts. RBC assumed that all of the Forecasts represented the best currently available
estimates and good faith judgments of Columbias management as to the financial performance of
the Assets and expressed no opinion as to any aspect of the Forecasts or the assumptions on which
they are based.
In rendering its opinion, RBC did not assume any responsibility to perform, and did not
perform, an independent evaluation or appraisal of any of the assets or liabilities of Columbia,
including any Assets or our liabilities. RBC did not assume any obligation to conduct, and did not
conduct, a physical inspection of the property or facilities of Columbia, including any property or
facilities relating to the Assets. RBC did not investigate, and made no assumptions regarding, any
litigation or other claims affecting Columbia or the Assets. The RBC opinion relates to the Assets
as a part of an on-going concern and, accordingly, RBC expressed no opinion regarding the
liquidation value of the Assets. In addition, RBC did not perform any review or analysis regarding
the fairness of the Consideration on an after-tax basis.
RBC assumed, in all respects material to its analysis, that:
|
|
|
all conditions to the consummation of the Watson Transactions would be
satisfied without waiver thereof; |
|
|
|
|
the representations and warranties of each party contained in the
Purchase and Collaboration Agreement were true and correct; |
|
|
|
|
each party would perform all of the covenants and agreements required to
be performed by it under the Purchase and Collaboration Agreement; and |
|
|
|
|
the executed version of the Purchase and Collaboration Agreement would
not differ, in any respect material to the RBC opinion, from the latest draft
reviewed by RBC. |
The RBC opinion speaks only as of the date thereof, is based on the conditions as they existed
on, and information that RBC was supplied, as of the date thereof, and is without regard to any
market, economic, financial, legal, or other circumstances or event of any kind or nature that may
exist or occur after such date. RBC did not undertake to reaffirm or revise its opinion
54
or
otherwise comment upon events occurring after the date thereof and does not have an obligation to
update, revise or reaffirm its opinion. RBC did not express an opinion as to the fairness of the
amount or nature of any compensation to any officers, directors or employees of any party, or any
class of such persons, relative to the Consideration. RBC expressed no opinion as to what the
value of Common Stock or the Acquisition Shares will be when issued in connection with the Watson
Transactions or the price at which our Common Stock will trade at any time.
The RBC opinion was provided for the information and assistance of the board of directors of
Columbia in connection with the Asset Sale. The RBC opinion did not address the merits of the
underlying decision by Columbia to enter into the Purchase and Collaboration Agreement or the
relative merits of entering into such agreement compared to any alternative business strategy or
transaction in which Columbia might engage. The RBC opinion addresses solely the fairness to
Columbia, from a financial point of view, of the Consideration. It does not in any way address
other terms or conditions of the Purchase and Collaboration Agreement.
Set forth below is a summary of the material financial analyses performed by RBC in connection
with its opinion and reviewed with our board of directors at its meeting on March 3, 2010. The
following summary, however, does not purport to be a complete description of the financial analyses
performed by RBC. The order of analyses described does not represent relative importance or weight
given to those analyses by RBC. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read together with the full text of
each summary and are alone not a complete description of RBCs financial analyses. Except as
otherwise noted, the following quantitative information, to the extent that it is based on market
data, is based on market data as it existed on or before March 2, 2010, and is not necessarily
indicative of current market conditions. The Forecasts used by RBC in certain of its analyses were
based on projections prepared by the management of Columbia for the fiscal years beginning January
1, 2010 and ending December 31, 2020.
Risk-Adjusted Forecasts
In connection with the Forecast, RBC applied estimated risk-adjustments based on various
third-party research (the Risk Adjustments) to the Forecasts, to account for the probability
associated with the regulatory approvals necessary to Commercialize the PTB Indication. These
adjustments resulted in a discount to projected revenue for the Assets of approximately 33%. Based
on the foregoing, RBC calculated risk-adjusted projected revenue and EBITDA for the Assets on a
standalone basis for the fiscal years 2010 through 2020 (the Risk-Adjusted Projections).
Comparable Companies Analysis
RBC reviewed and compared certain financial and stock market information and management
projections for the Assets to corresponding information for a group of publicly traded companies
(the peer group). In selecting companies for the peer group, RBC selected companies that (i)
were generally considered to be part of the specialty pharmaceuticals sector, (ii) were focused on
developing and marketing products in a single therapeutic area and (iii) had annual revenues
between $10 million and $100 million.
55
The peer group to which the Assets, as a going concern, was compared consisted of the
following publicly traded specialty pharmaceutical companies:
|
|
|
Cornerstone Therapeutics, Inc. |
|
|
|
|
Inspire Pharmaceuticals, Inc. |
|
|
|
|
Cumberland Pharmaceuticals, Inc. |
|
|
|
|
Spectrum Pharmaceuticals, Inc. |
|
|
|
|
BioSante Pharmaceuticals, Inc. |
The historical financial data used were based on publicly available financial statements for
each of the selected companies, other than BioSante Pharmaceuticals, Inc., for which there was no
available meaningful data. Estimates for 2010 and 2011 revenues were based on consensus estimates
of securities and equity research analysts, or Wall Street consensus research estimates. None of
the companies used in the comparable companies analysis is identical to the Assets, as a going
concern. Accordingly, RBC believes the analysis is not simply mathematical. Rather, it involves
complex considerations and qualitative judgments, reflected in RBCs opinion, concerning
differences in financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies.
The following table sets forth the mean and median forward multiples of the peer group derived
by RBC, based on historical financial information and Wall Street consensus research estimates:
|
|
|
|
|
|
|
Peer Group Mean |
|
Peer Group Median |
Enterprise value as a multiple of
calendar year 2009 revenue |
|
3.5x |
|
3.9x |
Enterprise value as a multiple of
calendar year 2010 revenue |
|
2.5x |
|
2.5x |
Enterprise value as a multiple of
calendar year 2011 revenue |
|
1.9x |
|
1.6x |
Using the Risk-Adjusted Projections for 2012, RBC applied to the projected revenue forward
trading multiples ranging from 2.0x to 3.0x and discount rates ranging from 25% to 35%
(discounted to January 1, 2010). RBC selected the 2012 projected revenue based on estimates
by Columbias management that 2012 will be the first year in which revenues are materially affected
by the PTB Indication. The discount rate used in the analysis was based on RBCs estimate of the
weighted average cost of capital, or WACC, for the Assets after taking into account the estimated
cost of capital to fund the Assets on a stand-alone basis. Based on the foregoing multiples and
discount rates, RBC estimated a range of enterprise values for the Assets of $93.8 million to
$163.6 million.
56
Discounted Cash Flow Analysis
RBC performed a discounted cash flow analysis of the Assets to calculate the estimated present
value of the stand-alone, unlevered, after-tax free cash flows that the Assets could generate based
on (i) the Forecast for the remaining portion of the 2010 fiscal year through fiscal year 2020,
taking into account the Risk Adjustments, and (ii) a range of growth rates in perpetuity, based on
projected EBITDA for fiscal year 2020.
RBC performed a discounted cash flow analysis of the Assets based on perpetual growth rates
ranging from -1% to 1% and applied discount rates reflecting a weighted-average cost of capital
ranging from 25% to 35% (discounted to January 1, 2010). The discount rate used in this analysis
was based on RBCs estimate of the WACC for the Assets after taking into account the estimated cost
of capital to fund the Assets on a stand-alone basis. These calculations indicated implied
enterprise values for Columbia ranging from $92.1 million to $178.1 million.
RBC also performed a discounted cash flow analysis that analyzed the present value to existing
shareholders of Columbia of the unlevered, after-tax free pro forma cash flows for the Asset Sale,
taking into account the Risk-Adjusted Projections and the anticipated dilution from the issuance of
the Acquisition Shares to Buyer. RBC assumed that each clinical phase, regulatory approval,
product launch, or other milestone contemplated by the Purchase and Collaboration Agreement, will
be realized in such time periods indicated in the Forecasts. Furthermore, RBC assumed that the
Contingent Payment associated with the PTB Indication clinical trial results will equal $6,000,000,
and that there will be no third party collaboration or generic entry with respect to the
Progesterone Products. RBC applied (i) a range of discount rates of 13% to 17% based on estimated
WACC of selected comparable publicly-traded companies referred to above and inherent regulatory
risk (discounted to January 1, 2010) and (ii) terminal values based on perpetual growth rates
ranging from -1% to 1%. These calculations implied net present values ranging from $104.1 million
to $133.5 million.
General
The foregoing summary describes all the analyses and factors that RBC deemed material in its
presentation to our board of directors, but is not a comprehensive description of all analyses
performed or factors considered by RBC in connection with preparing its opinion. The preparation
of a fairness opinion is a complex process involving the application of subjective business
judgment in determining the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, is not readily
susceptible to summary description. RBC believes that its analyses must be considered as a whole
and that considering any portion of such analyses and of the factors considered without considering
all of such analyses and factors could create a misleading view of the process underlying the
opinion. In arriving at its fairness determination, RBC did not assign specific weights to any
particular analyses.
In conducting its analyses and arriving at its opinion RBC used a variety of generally
accepted valuation methods. The analyses were prepared for the purpose of enabling RBC to provide
its opinion to our board of directors as to the fairness, from a financial point of view, to us of
the Consideration and do not purport to be appraisals or necessarily reflect the prices at
57
which businesses or securities actually may be sold, which are inherently subject to
uncertainty. In connection with its analyses, RBC made, and was provided by our management with,
numerous assumptions with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of RBC or Columbia. Analyses based on
estimates or forecasts of future results are not necessarily indicative of actual past or future
values or results, which may be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of Columbia or its advisors, neither Columbia nor RBC nor any
other person assumes responsibility if future results or actual values are materially different
from these forecasts or assumptions.
The terms of the Purchase and Collaboration Agreement were determined through arms-length
negotiations between Watson and Columbia and were approved by our board of directors. The decision
to enter into the Purchase and Collaboration Agreement was solely that of our board of directors.
As described above, the opinion and presentation of RBC to our board of directors were only one of
a number of factors taken into consideration by our board of directors in making its determination
to approve the Purchase and Collaboration Agreement.
Columbia selected RBC to provide the opinion based on RBCs qualifications, expertise,
reputation and experience in mergers and acquisitions. We retained RBC pursuant to a letter
agreement, dated December 14, 2009, which is referred to below to as the engagement letter. RBC
has earned a fee of $250,000 for delivery of its opinion, regardless of whether the Asset Sale or
the Watson Transactions are consummated or whether such opinion is accepted. Regardless of whether
the Asset Sale or the Watson Transactions are completed, Columbia has agreed to reimburse RBC for
all reasonable travel, legal and other out-of-pocket expenses incurred by RBC in performing the
services described in the engagement letter, including reasonable fees and disbursements of RBCs
legal counsel. We also agreed to indemnify RBC and certain related persons against certain
liabilities, including certain liabilities under the United States federal securities laws arising
out of its engagement or any transaction contemplated under the engagement letter.
In the ordinary course of business, RBC may act as a market maker and broker in the publicly
traded securities of Columbia and Watson and receive customary compensation, and may also actively
trade securities of Columbia and Watson for its own account and the accounts of its customers.
Accordingly, RBC and its affiliates may hold a long or short position in such securities.
RBC is an internationally recognized investment banking firm experienced in providing advice
in connection with mergers and acquisitions and related transactions. RBC is an affiliate of Royal
Bank of Canada.
Torreya Partners
On January 7, 2009 our board engaged Torreya Partners to assist in finding a partner for
PROCHIEVE 8% for the PTB Opportunity. The engagement was subsequently expanded to include looking
for a commercial partner for CRINONE 8% and STRIANT®. The engagement agreement included a retainer
and monthly consultancy fee, the sum of which is deductible from
58
any success fee or fees payable under this engagement agreement. The success fee arrangement
includes percentages of dollars received by us payable upon receipt thereof of 6% for the first $10
million in proceeds, 5% for the next $10 million in proceeds, 2%
for amounts over $20 million and up to
$50 million and 1% for amounts in excess of $50 million in proceeds. Columbia has agreed to reimburse
Torreya Partners for its out-of-pocket expenses (including fees and expenses of its counsel)
reasonably incurred by it in connection with its services up to a specified amount, and to
indemnify Torreya Partners against certain liabilities that may arise out of its engagement.
Torreya Partners was not engaged by, did not perform any services for, nor receive any compensation
from Columbia (other than pursuant to the letter agreement referred to above) or Watson (or their
affiliates).
Net Proceeds from the Watson Transactions
The net proceeds from the Watson Transactions will vary based on transaction expenses, taxes
payable on any gain, and the amounts, if any, of milestone and royalty payments. Because the
Watson Transactions are, in part, a sale of assets, the amount by which the purchase price
allocable to the sale of assets in connection with the Asset Sale exceeds the tax basis of such
assets will be subject to United States federal and state income taxes. However, we do not
anticipate that we will incur significant United States federal and state income tax liability as a
result of such sale.
Use of the Upfront Payment from the Watson Transactions
We
intend to use a portion of the Upfront Payment to pay approximately $16 million in satisfaction of
certain amounts owed to PharmaBio pursuant to the PharmaBio Agreement. On March 3, 2010, we
entered into the PharmaBio Amendment to provide for the early termination of the PharmaBio
Agreement and permit us to make certain payments thereunder on an accelerated and discounted basis
under certain circumstances. See The Asset Sale (Proposal No. 1)Senior Debt, beginning on page
66.
In
addition, we will use approximately $26.8 million of the Upfront
Payment toward the repurchase of all $40 million in outstanding
principal amount of our Notes
pursuant to the Note Purchase Agreements (and to pay accrued and
unpaid interest thereon), attached as Annex D to this
proxy statement.
The Note Purchase Agreements provide for us, at the time of the Closing, to repurchase the Notes
for an aggregate purchase price of $26 million, plus accrued and unpaid interest through (but
excluding) the date of Closing, warrants to purchase 7.75 million shares of Common Stock and
7,407,407 shares of our Common Stock. Pursuant to the Note Purchase Agreements, the Notes were
amended so that the Watson Transactions would not trigger the rights of the Note holders to compel
us to redeem the Notes. The closings of the transactions contemplated by the Note
Purchase Agreements are subject to various conditions including the
Closing of the Watson Transactions, the filing of the Charter
Amendment with the Secretary of State of the State of Delaware and
the satisfaction of certain of our obligations owing to PharmaBio under the
PharmaBio Agreement. See The Asset Sale (Proposal No. 1)Purchase of our Convertible
Subordinated Notes, beginning on page 67.
We may use up to $600,000 of the Upfront Payment to redeem the outstanding shares of our
Series C Preferred Stock. Upon a triggering event (the Watson Transactions would be a triggering
event), the holders of our shares of Series C Preferred Stock have the right to require us to
redeem their shares of Series C Preferred Stock in cash for the value of the shares of Series C
Preferred Stock plus all accrued and unpaid dividends thereon on the date such redemption is demanded.
As of the date hereof, 600 shares of our Series C Preferred Stock are outstanding,
59
each with a value of $1,000. See The Asset Sale (Proposal No. 1)Preferred Stock,
beginning on page 73.
Additionally, we expect to use a portion of the Upfront Payment (not to exceed $7 million
incurred after January 1, 2010) to pay for completion of the PREGNANT Study and the preparation,
filing and approval process of the related new drug application (or supplemental new drug
application). Pursuant to the Purchase and Collaboration Agreement, we are required to maintain a
separate bank account for the purpose of paying those costs. See The Purchase and Collaboration
AgreementDevelopment and the Joint Development CommitteeDevelopment of PROCHIEVE for the PTB Indication,
beginning on page 103.
We will also use a portion of the Upfront Payment to pay fees and expenses incurred in
connection with the transactions described herein.
To the extent the payments set forth above exceed the Upfront Payment, we will make such
payments from our existing cash.
No proceeds from the Watson Transactions will be distributed to our stockholders.
Treatment of Stock Options and Stock-Based Awards
Any unvested restricted stock and unvested and unexercised stock options granted and
outstanding under either of our 1996 Plan or our 2008 Plan will become immediately and fully vested
and exercisable upon a change in control of Columbia. Consummation of the Asset Sale will
constitute a change in control for this purpose. See
Accounting Treatment of the Asset Sale, beginning
on page 65.
Interests of Columbias Directors and Executive Officers in the Asset Sale
As of April 27, 2010, the directors and executive officers of Columbia had, or were deemed to
have had, beneficial ownership of, in the aggregate, approximately 4.1% of our Common Stock
(including approximately 2.7% which represents shares of Common Stock that are purchasable under
options held by such directors and executive officers but excluding approximately 8.9% which are
held by affiliates of one of our directors). Additionally, Columbias directors and executive
officers have interests in the Asset Sale that are different from, or in addition to, those of our
stockholders generally. These interests may create potential conflicts of interest. Our board of
directors was aware that these interests existed when it approved the Purchase and Collaboration
Agreement, the Asset Sale, the Charter Amendment and the other transactions described herein. All
such interests are described below to the extent material, and except as described below, such
persons have, to the knowledge of Columbia, no material interest in the Asset Sale and the other
transactions described herein apart from those of stockholders generally.
Anthony R. Campbell, a member of our board of directors, is a senior analyst of Dorset
Management Corporation (DMC) and a member of Knott Partners Management LLC (KPM). DMC
beneficially owns, in the aggregate with David M. Knott, a manager of KPM and president of DMC, $5
million in outstanding principal amount of outstanding Notes (or 12.5% thereof), which are to be
repurchased by us in connection with the Note Purchase
60
Agreements. At the closings under the Note Purchase Agreements, DMC and David M. Knott would
receive in exchange for their Notes an aggregate cash purchase price of $3,250,000, 925,926 shares
of Common Stock and warrants to purchase 968,992 shares of our Common Stock. See Use of the
Upfront Payment from the Watson Transactions, beginning on page
59.
The Asset Sale constitutes a change of control under our 2008 Plan and our 1996 Plan.
Accordingly, unvested options exercisable for (or
covering) an aggregate of 558,500 shares of
Common Stock will vest and become exercisable upon consummation of the Asset Sale, at a weighted average exercise price of
$1.53 per share. The aggregate number of shares subject to unvested options held by each director
and/or executive officer that will vest and become exercisable (on an accelerated basis) at the Closing is as
follows: Frank C. Condella, Jr., 100,000 shares at a weighted average exercise price of $0.87 per
share; Lawrence A Gyenes, 125,000 shares at a weighted average exercise price of $1.17 per share;
Michael McGrane, 141,000 shares at a weighted average exercise price of $1.82 per share; and Robert
S. Mills, 192,500 shares at a weighted average exercise price of $1.89 per share.
In
addition, an aggregate of 195,485 shares of restricted Common Stock will vest upon consummation
of the Asset Sale. The aggregate number of shares of restricted stock held by each director and/or executive
officer that will vest (on an accelerated basis) at the Closing is as follows: Valerie L.
Andrews, 19,230 shares; Edward A. Blechschmidt, 19,230 shares; Anthony R. Campbell, 19,230 shares;
Frank C. Condella, Jr., 19,230 shares; James S. Crofton, 19,230 shares; Stephen G. Kasnet, 19,230
shares; Michael McGrane, 25,875 shares; Robert S. Mills, 35,000 shares; and Selwyn P. Oskowitz,
M.D., 19,230 shares. See Treatment of Stock Options and Stock-Based Awards, beginning on page
60, and Summary Term SheetInterests of Columbias Directors and Executive Officers in the Asset
Sale, beginning on page 9.
Nature of Columbias Business Following the Watson Transactions
After the Closing, we will continue the PREGNANT Study and the preparation of a new drug
application or supplemental new drug application to market PROCHIEVE 8% for the PTB Indication. In
addition, if the PREGNANT Study is successful, we expect to receive (at least a portion of) the
milestone payments described herein. We also expect to receive the royalty payments contemplated
by the Purchase and Collaboration Agreement and perform our obligations and receive payments under
the Supply Agreement.
After the Closing, we will also retain certain assets and rights relating to our Progesterone
business, including all rights necessary to perform our obligations under the Agreement. The Merck
Serono Agreement expires on May 19, 2010, and is renewable upon mutual agreement of the parties for
five year periods at commercial terms to be agreed upon. While Merck Serono has informed us that
they wish to renew the Merck Serono Agreement, there can be no assurance that we will
reach a renewal agreement or that any renewal agreement will not differ materially from the current
Merck Serono Agreement.
If the PREGNANT Study is successful and we achieve milestones set forth in the Purchase and
Collaboration Agreement, we intend to become a focused development company, with research and
development centered on products to address womens health needs, subject to the covenant not to
compete in the Purchase and Collaboration Agreement (discussed herein).
61
Our aim would be to take new product candidates through proof-of-concept and then to enter
into new partnership arrangements with respect to them. In addition, we would expect to enter into
partnership discussions for STRIANT, and through a partner, attempt to build revenue from STRIANT
and explore the potential to expand its labeling. We also would expect to continue to leverage our
proprietary drug delivery systems to expand our product portfolio.
If the PREGNANT Study is not successful, our resources will be limited and our board of
directors will have to reassess our strategy.
Agreements Related to the Purchase and Collaboration Agreement
In connection with the Asset Sale, we and Watson have agreed to enter into the License
Agreement, the Supply Agreement and the Investors Rights Agreement.
License Agreement
Pursuant
to the license agreement we will enter into with Buyer at the Closing (the License
Agreement) the parties will grant each other certain licenses to use certain intellectual
property.
We
will grant to Buyer, subject to the Purchase and Collaboration Agreement and agreements with
Dimera Incorporated and Merck Serono, an exclusive, irrevocable, perpetual, royalty-free and fully
paid-up license, with the right to grant sublicenses, under the Patents and know-how under our
control as of that time which relate primarily to Progesterone Products but that are not included
among the Assets and any inventions and know-how arising from the parties activities under the
Purchase and Collaboration Agreement that relate solely to the progressive hydration tablet
technology described in our US Patent No. 6,248,358 (Second Generation Delivery System), in each
case for the purposes of Developing, manufacturing, having manufactured, using, importing,
exporting, marketing, selling, offering to sell or otherwise Commercializing the Progesterone
Products in any and all fields.
Buyer will grant to us
|
|
|
a non-exclusive, non-transferable, royalty-free and fully paid-up
license to the Patents and know-how included among the Assets and the know-how
arising from the Development activities pursuant to the Purchase and
Collaboration Agreement for the purpose of supplying the Progesterone Products
to Buyer under the terms and conditions of the Supply Agreement; |
|
|
|
|
a non-exclusive, non-transferable, royalty-free and fully paid-up
license to the Patents and know-how included among the Assets, the know-how
arising from the Development activities and the Patents and know-how controlled
by Buyer but identified for our use in writing, for the purposes of conducting
our Development activities under the Purchase and Collaboration Agreement; |
|
|
|
|
an exclusive, irrevocable, perpetual, royalty-free and fully paid-up
license, with the right to grant sublicenses to the Patents and know-how
included among the Assets and certain know-how arising from the Development |
62
|
|
|
activities pursuant to the Purchase and Collaboration Agreement for the purposes
of our compliance with our agreements with Dimera Incorporated and Merck Serono;
and |
|
|
|
a non-exclusive, irrevocable, perpetual, royalty-free and fully paid-up
license, with the right to grant sublicenses to Develop, manufacture, have
manufactured, use, import, export, market, sell, offer to sell or otherwise
Commercialize the Second Generation Delivery System to the extent that it
incorporates or delivers any product other than the Progesterone Products in
any and all fields. |
The License Agreement may be terminated upon mutual written agreement of the parties. If one
party enters bankruptcy, the other party is entitled to a complete duplicate of, or access to, any
intellectual property licensed under the License Agreement.
Supply Agreement
Pursuant to the supply agreement we will enter with Buyer at the Closing (the Supply
Agreement), we will be the exclusive supplier of PROCHIEVE 4%, PROCHIEVE 8% and CRINONE 8% to
Buyer for sale in the United States at a price equal to 110% of the cost of goods sold. The
initial purchase order under the Supply Agreement, of finished goods inventory held on hand by us
at Closing, will be made by Buyer at the time of the execution of the Supply Agreement for a batch
price set forth in the Supply Agreement, calculated based on an agreed upon cost of goods formula,
which includes a monthly adjustment to reflect the then-current foreign currency exchange rates.
The initial purchase order will be delivered to Buyer within 30 days after the Closing and each
purchase order made pursuant to the Supply Agreement thereafter will be for a delivery date no
earlier than 90 days following our receipt of such purchase order. The Supply Agreement, unless
earlier terminated in accordance with its terms, shall remain in force through May 19, 2015, and
shall renew automatically for two-year terms thereafter, unless either party gives written notice
of its intention to not renew at least 180 days prior to expiration of the then applicable term.
The Supply Agreement is terminable by Buyer upon 180 days notice (after the termination of the
Joint Development Period) and by either party at any time pursuant to standard termination
provisions, including the insolvency or uncured default of the other party.
Investors Rights Agreement
Pursuant to an investors rights agreement we will enter with Buyer at the Closing (the
Investors Rights Agreement), Buyer will have the right to nominate one director to our board of
directors and we will use our commercially reasonable efforts to expand our board of directors and
appoint such designee as a director. We have agreed to use our commercially reasonable efforts to
facilitate the re-election of Buyers board designee until such time as Buyer ceases to hold at
least 10% of our outstanding shares of Common Stock. Buyer will become subject to a six month
lock-up commencing on the Closing (the Initial Lock-Up Period), during which it will not be
permitted to sell the Shares, subject to certain limited exceptions. Following the Initial Lock-Up
Period (and until 18 months after the Closing), subject to certain exceptions, Buyer will agree
that it will not, during any fiscal quarter, transfer more than 2 million shares of
63
Common Stock. The transfer restrictions will expire at the time that Buyer no longer holds
10% of our outstanding shares of Common Stock. In order to provide Buyer with liquidity with
respect to its holdings in Columbia following the Initial Lock-Up Period, we have agreed to use our
commercially reasonable efforts to file a shelf registration statement with the SEC not later than
90 days prior to the end of the Initial Lock-Up Period and to keep such shelf registration
statement effective until the earliest of the fourth anniversary of the Closing, the date on which
all of the Shares have been transferred by Buyer or the date upon which the Shares may be sold by
Buyer under Rule 144 (without limitation as to volume or compliance with certain specified
provisions of Rule 144). Pursuant to the Investors Rights
Agreement, we will also agree to certain indemnification and
contribution provisions, including with respect to liabilities
arising under the Securities Act.
Financing of the Asset Sale
Buyer has represented that it has sufficient immediately available funds to enable it to
consummate the Watson Transactions.
Stockholder Approval of the Asset Sale
We are organized under the corporate laws of the State of Delaware. Under Section 271 of the
Delaware General Corporation Law, any sale by us of all or substantially all our assets requires
affirmative vote of the holders of a majority of the Voting Power of our outstanding shares of
Common Stock, Series B Preferred Stock and Series E Preferred Stock, voting together as a single
class. We are selling a significant portion of our assets but retaining material on-going
businesses and assets after the Asset Sale. Because the Delaware statute does not define the
phrase all or substantially all, the meaning of the phrase is not entirely clear in this context.
In light of the specific facts and circumstances of the Asset Sale, we have determined that the
Asset Sale involves the sale by us of all or substantially all of our assets and, therefore,
requires us to seek stockholder approval of the Asset Sale. The Purchase and Collaboration
Agreement provides that if our stockholders fail to approve the Asset Sale, either Columbia or
Watson may terminate the Purchase and Collaboration Agreement. The Purchase and Collaboration
Agreement also provides that obtaining such approval is a condition to each of Columbia and Watson
being obligated to consummate the transactions contemplated by the Purchase and Collaboration
Agreement.
No Changes to the Rights of Stockholders
There will be no change in the rights of our stockholders as a result of the Asset Sale.
Appraisal Rights in Respect of the Asset Sale
Under Delaware law, our stockholders are not entitled to appraisal rights in connection with
the Asset Sale.
Regulatory Approvals
No filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the HSR Act), in connection with the Purchase and Collaboration Agreement and,
therefore, there is no applicable waiting period under the HSR Act for the Watson Transactions to
be consummated. At any time before or after consummation of the Watson Transactions,
64
notwithstanding that there is no requirement for a filing pursuant to the HSR Act, the
Antitrust Division of the Department of Justice or the Federal Trade Commission could take such
action under the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Asset Sale or seeking divestiture of
substantial assets of Buyer. At any time before or after the consummation of the Watson
Transactions, and notwithstanding the termination of the waiting period under the HSR Act, any
state could take such action under antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the consummation of the Asset Sale or
seeking divestiture of substantial assets of Buyer. Private parties may also seek to take legal
action under antitrust laws under certain circumstances.
In addition, we and Buyer do not believe that the Asset Sale is subject to or requires any
filing under any foreign antitrust laws.
Although there can be no assurance that the Watson Transactions will not be challenged by a
governmental authority or private party on antitrust grounds, we, based on a review of information
provided by Buyer relating to the businesses in which they and its affiliates are engaged, believe
that the Watson Transactions can be effected in compliance with federal, state and foreign
antitrust laws. The term antitrust laws means the Sherman
Antitrust Act of 1890, as amended, the
Clayton Antitrust Act of 1914, as amended, the HSR Act, the Federal Trade Commission Act of 1914,
as amended, and all other United States federal, state and non-U.S. statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization
or restraint of trade.
Other than applicable antitrust laws, neither we nor Buyer is aware of any other regulatory
requirements or governmental approvals or actions that may be required to consummate the Watson
Transactions, except for compliance with the applicable regulations of the SEC in connection with
this proxy statement.
Accounting Treatment of the Asset Sale
We will allocate the $47 million Upfront Payment, net of transaction expenses to:
|
|
|
the then fair value of the Acquisition Shares; and |
|
|
|
|
the elimination of the remaining book value of the CRINONE intangible
assets (which was $18.8 million as of December 31, 2009). |
The excess, if any, will be recorded as revenue over the remaining research and development
period for the PREGNANT Study through the date of the PTB US Approval which, if it occurs, is
currently expected to occur by mid-2011. The value of unvested options, ($900,525 at December 31,
2009) and the value of unvested shares of restricted stock ($311,817 at December 31, 2009) will be
expensed on the date of the Closing.
65
The accounting treatment for the Debt Retirement will be subsequently evaluated, subject to
the timing of the Watson Transactions and the price of our Common Stock on the date of the Closing.
Certain United States Federal Income Tax Consequences of the Watson Transactions
The following is a brief summary of the United States federal income tax consequences
resulting from the Watson Transactions. This summary does not address all of the consequences that
may arise for United States federal income tax purposes and does not address any state, local,
non-U.S. or non-income tax considerations.
The Watson Transactions will not result in any U.S. federal income tax consequences to our
stockholders.
The sale of assets in connection with the Asset Sale will be a taxable transaction for United
States federal income tax purposes. However, we do not anticipate that we will incur significant
United States federal income tax liability as a result of such sale due to the tax basis we have in
the Assets and the availability of net operating loss carryforwards. We anticipate that we will
incur an insignificant amount of United States federal alternative minimum tax in connection with
the Asset Sale.
The issuance of the Acquisition Shares to Buyer will not be a taxable transaction for United
States federal income tax purposes.
Potential future receipt of milestone and/or royalty payments will be taxable events. The
United States federal income tax consequences of the receipt of these payments cannot be determined
at this time.
Senior Debt
Pursuant to the PharmaBio Agreement, PharmaBio paid to us $15 million over a 15-month
period that commenced on March 5, 2003. In return, PharmaBio receives from us a 9% royalty on net
sales of STRIANT in the United States up to agreed annual sales levels, and a 4.5% royalty of net
sales above those levels. The royalty term under the PharmaBio Agreement was initially seven years
and the royalty payments thereunder commenced in the third quarter of 2003. As of December 31,
2009, we had paid $13.5 million in royalties to PharmaBio under the PharmaBio Agreement. The
balance of the minimum royalty payments, estimated to be approximately $16.5 million, is due in
November 2010.
On July 22, 2009, we and PharmaBio amended the PharmaBio Agreement pursuant to which we agreed
that, when the minimum royalty payment is due, we may, in our sole discretion, either pay the
balance due or issue to PharmaBio a secured promissory note for that balance. The note would bear
interest quarterly in arrears at the rate of 10% per annum and be due on November 30, 2011. In
consideration for the right to issue the secured promissory note, we have
|
|
|
agreed that during the period from July 22, 2009 through November 30,
2010, we will place in escrow any proceeds from sales of assets outside the
ordinary course of business in excess of $15.0 million but not exceeding the
difference |
66
|
|
|
between the amount of royalties actually received by PharmaBio under the
PharmaBio Agreement and $30.0 million; and |
|
|
|
granted PharmaBio a warrant to purchase 900,000 shares of Common Stock. |
In further consideration for the right to issue the secured promissory note, we have agreed
that if we issue the secured promissory note on November 30,
2010, then we will also on that date
grant PharmaBio a warrant to purchase 900,000 shares of our Common Stock.
On March 3, 2010, we entered into the PharmaBio Amendment. The PharmaBio Amendment provides
for the early termination of the PharmaBio Agreement by permitting us to repay our outstanding debt
thereunder on an accelerated and discounted basis on the date we consummate (and contingent upon us
consummating) a transfer of assets, sale of stock, licensing agreement and/or similar transaction
yielding gross cash proceeds to us of $40 million or more. The Watson Transactions would be such a
transaction.
Our obligations to PharmaBio under the PharmaBio Agreement are senior to the Notes.
Therefore, the repurchase of our Notes is contingent upon us pre-paying the amount owing to PharmaBio under the PharmaBio Agreement. We intend to use a portion of the Upfront Payment to
make such prepayment.
Purchase of our Convertible Subordinated Notes
The Notes
The following is
a summary of the
terms of our Notes and does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the full text of the
Securities Purchase Agreement (as defined herein) relating to the
Notes which includes the form of Note as an exhibit thereto which is filed as Exhibit 4.11 to our Annual Report on Form
10-K for the fiscal year ended December 31, 2009, filed with the SEC
on March 12, 2010, and is
incorporated herein by this
reference.
As of the date hereof, we had
$39,999,997.75 in outstanding principal amount of our Convertible
Subordinated Notes due December 31, 2011. Our Notes mature on December 31, 2011 unless
earlier redeemed, repurchased or converted.
Our Notes are not listed or registered on any national securities exchange.
Our Notes bear interest at the rate of 8% per annum until the approval by the FDA of the new
drug application, amendment or supplement permitting the marketing of progesterone gel 8% for the
prevention of recurrent preterm birth, at which point that rate will
reduce to 5% per annum.
Our Obligations with Respect to our Notes
There are no sinking fund or amortization
provisions with respect to our Notes. Our Notes are our unsecured
obligations and there are no liens securing performance of our obligations under our Notes. There are no existing defaults in
principal or interest with respect to our Notes.
All amounts payable by us under our Notes are and
will be subordinate and junior in right of payment to the prior
payment in full of certain of our obligations owing to PharmaBio under the PharmaBio Agreement (the Senior Debt), to the
extent and in the manner described in our Notes. As of the date hereof, there was approximately $16.5 million of Senior
Debt owed to PharmaBio under the PharmaBio Agreement. See Senior Debt, beginning on page 66. The holders of our
Notes will, at all times, be entitled to receive payments on account of our Notes in accordance with the
terms of our Notes;
provided, however, that, if and so long as a Senior Default (as defined below) has occurred and is continuing, and
written
notice thereof has been delivered by PharmaBio to the holders of our Notes and us, referencing
the subordination provisions of our Notes and demanding a suspension of payments during the period of such continuance in
accordance with our Notes (the Payment Suspension Period), then, except as otherwise set forth in our Notes, we will not
make, and the holders of our Notes will not accept or receive from us, payment in respect of our Notes unless and until the
earlier of:
|
|
|
the time we have paid in full our obligations owing to PharmaBio under the PharmaBio Agreement; |
|
|
|
the Senior Default has been cured by us or waived by PharmaBio; or |
|
|
|
PharmaBio has terminated the Payment Suspension Period. |
Senior Default means:
|
|
|
the occurrence and continuance (after any applicable grace period) of a default in payment of all or any part of
the Senior Debt; |
|
|
|
the breach or default by us of any term of any Notes if the effect of such breach or default is to cause an amount
exceeding $500,000 to become due prior to its stated maturity or to permit the holder of any Note to cause an
amount exceeding $500,000 to become due prior to the stated maturity of our Notes; or |
|
|
|
the occurrence of any event that provides the holder of any Note with cash redemption rights prior to the stated
maturity of our Notes. |
67
Upon any distribution of our assets or upon
any dissolution, winding up, liquidation or reorganization involving us,
whether in any bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of
creditors or any other marshalling of our assets and liabilities:
|
|
|
the holders of our Senior Debt will 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 our Notes are
entitled to receive any payment; and |
|
|
|
any payment or distribution of our assets of any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the holders of our Notes would be entitled but for the subordination provisions of
our Notes will 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, 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. |
Our consolidation with, or our merger into, another
entity will not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of the subordination provisions of our Notes if such other entity is organized in the United
States and such entity, as a part of such consolidation or merger, succeeds to our property and business and assumes our
obligations (including with respect to the Senior Debt and our Notes).
All payments or distributions by us upon or with
respect to our Notes which are received by the holders thereof in
violation of or contrary to the subordination provisions of our Notes will be received in trust for the benefit of the holders of
the Senior Debt and will 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.
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 our Notes but for the subordination provisions of our Notes have been
paid over to the holders of the Senior Debt, the holders of our Notes will be subrogated to the rights of the holders of Senior
Debt to receive payments or distributions of cash, property or securities applicable to Senior Debt until our Notes are 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 our Notes will, as between us, our creditors (other than the holders of Senior Debt) and the
holders of our Notes, be deemed to be payment by us to the holders of the Senior Debt. The subordination provisions of our
Notes will 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, our insolvency, bankruptcy or reorganization) all as though such payment had not been made. Subject to the
foregoing, the subordination provisions of our Notes will terminate when all the Senior Debt has been indefeasibly and
irrevocably paid in full.
The subordination provisions of our Notes are
for the purpose of defining the relative rights of the holders of Senior Debt
on the one hand and the holders of our Notes on the other hand, and those provisions will not impair (as between us and the
holders of our Notes) our obligation to the holders of our Notes to pay to such holders the full amount of our Notes. None of
the subordination provisions of our Notes will be construed to prevent the holders of our Notes from exercising all rights and
remedies available under our Notes, the Securities Purchase Agreement (as defined below) 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 described above to
receive payments otherwise payable to the holders of our Notes, and no provision of our Notes will be deemed to subordinate,
to any extent, any claim or right of any holder of our Notes to any claim against us by any creditor or any other person except
to the extent expressly provided in our Notes.
The subordination provisions of
our Notes may not be amended or modified without the written consent of the holders of
the Senior Debt.
All payments due under any Note rank
pari passu with the other Notes and are senior to all of our other indebtedness,
other than the Senior Debt and Permitted Indebtedness (as defined below). So long as our Notes are outstanding, we will not
incur or guarantee, assume or suffer to exist any indebtedness that would rank senior or pari passu to our Notes, other than:
|
|
|
the indebtedness evidenced by our Notes; |
|
|
|
Permitted Indebtedness. |
68
So long as our Notes are outstanding, we
will not allow or suffer to exist any lien, other than certain permitted liens (as specified in our Notes).
Permitted Indebtedness means:
|
|
|
all of our obligations issued, undertaken or assumed as the deferred purchase price of property or services, including
(without limitation) capital leases in accordance with GAAP; |
|
|
|
all of our reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar
instruments, incurred in the ordinary course of our business; |
|
|
|
unsecured indebtedness between us and any of our subsidiaries or between our subsidiaries; and |
|
|
|
any other indebtedness of ours in an aggregate original principal amount not to exceed $4,000,000 at any one time
outstanding. |
Except
as described above, our Notes do not limit the issuance of additional debt, senior indebtedness or securities.
For the
purposes of our Notes, an event of default is deemed to have occurred if:
|
|
|
we or one of our subsidiaries 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 us or any of
our subsidiaries bankrupt or insolvent; or any order for relief with respect to us or any of our subsidiaries is
entered under the Federal Bankruptcy Code; or we or any of our subsidiaries petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator in respect of us or any of our subsidiaries, or of
any substantial part of the assets of ours or of any of our subsidiaries, or we or any of our subsidiaries commence any proceeding (other than a
proceeding for the voluntary liquidation and dissolution of any of our subsidiaries) relating to us or any of our
subsidiaries 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 us or any of our subsidiaries and either (i) we or any of our subsidiaries by any act indicates
its approval thereof, consents thereto or acquiesces therein or (ii) such petition, application or proceeding is
not dismissed within 60 days (each an Insolvency Default); |
|
|
|
a judgment, to the extent not covered under an insurance policy, in excess of $1,000,000 is rendered against us or
any of our subsidiaries 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 |
|
|
|
we or any of our subsidiaries 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; |
|
|
|
we fail to pay when due and payable (whether at maturity or otherwise) any principal, interest or other payment
on any Note, and such failure to pay any such amount, other than principal, is not cured within 30 days after the
occurrence thereof; |
|
|
|
we breach any covenant or other term or condition in our Notes or in the Securities Purchase Agreement, dated
December 21, 2006 (the Securities Purchase Agreement), subject to certain limited exceptions, with such breach
not being cured within 30 days from our knowledge thereof; or |
|
|
|
the representations and warranties contained in the Securities Purchase Agreement should not be true and
correct on the date of the issuance of our Notes (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 our business, results of operations or financial condition, taken as a whole. |
Upon and during the
pendency of any event of default under our Notes, the interest rate on our Notes will increase by 4%
per annum, to the extent permitted by law.
If an event of default (other than
an Insolvency Default) has occurred, then the holders of at least 25% of the aggregate
principal amount of our Notes then outstanding may declare all or any portion of our Notes held by such holders to be due and
payable and demand immediate payment of the aggregate principal amount of such Notes, together with all accrued and
unpaid interest thereon, and we will then give prompt notice of any such demand to the other holders of Notes, each of whom
may also demand immediate payment of the aggregate principal amount of such Notes, together with all accrued and unpaid
interest thereon. If an Insolvency Default occurs, the principal amount of our Notes (together with all accrued and unpaid
interest thereon) shall become immediately due and payable without any action on the part of any holder of Notes.
Upon a change of control
(the Watson Transactions would have, absent the Note Amendment, been a change of control),
we are required to provide the holders of our Notes written notice thereof and such holders have the
right to cause us to redeem their Notes for a cash price equal to the principal amount of the outstanding Notes, plus accrued and
unpaid interest thereon. Should a holder, upon notice of a change of control, convert its Notes to Common Stock, such holder
may be entitled to a make-whole premium determined in accordance with a formula contained in our Notes.
69
Our Notes are convertible, at
the option of the holder, into shares of our Common Stock at a
conversion price of $5.25. Holders of our Notes may not
convert any portion of their Notes to Common Stock to the extent that the holder would
beneficially own in excess of 9.99% of our outstanding Common Stock immediately after giving effect to such conversion. In
the event that we subdivide the Common Stock, by means of stock split, stock dividend or otherwise, into a greater number of
shares, or if we combine, by means of reverse stock split or otherwise, one or more classes of Common Stock into a smaller
number of shares, the conversion price of our Notes will be adjusted accordingly.
If within three trading days after
we receive a conversion notice from a Note holder we fail to issue and deliver a
certificate representing shares of Common Stock to which such holder is entitled upon such holders conversion of Notes or
credit the holders balance account with The Depository Trust Company for the number of shares of Common Stock to which
such holder is entitled upon such holders conversion of Notes, and if on or after such trading day such holder purchases (in an
open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such holder of Common Stock
issuable upon such conversion that the holder anticipated receiving from us, then we will, within three business days after such
holders request and in such holders discretion, either:
|
|
|
pay cash to such holder in an amount equal to such holders 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 our obligation to deliver such certificate (and to issue such Common Stock) will terminate; or |
|
|
|
promptly honor our obligation to deliver to such holder a certificate or certificates representing such Common Stock
and pay cash to such holder in an amount equal to the excess (if any) of the Buy-In Price over the product of such
number of shares of Common Stock, times the closing bid price of our Common Stock on the conversion date. |
If at any time, the weighted average
of our Common Stock over a 20 trading day period equals or exceeds 200% of the
conversion price set forth in our Notes and certain events specified in our Notes did not occur, we will have the option to
require a holder of our Notes to convert all or a portion of its Notes into Common Stock.
If we declare a cash dividend on the Common
Stock then we are obligated under our Notes to pay to the holders of our
Notes the amount of the dividends that would have been paid to such holders had our Notes been fully converted into Common
Stock at the time of the record date for such dividend. If at any time we grant, issue or sell any options, convertible
securities or rights to purchase securities or other property pro
rata to the record holders of the Common Stock (the Purchase Rights),
then each holder of our 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 Common Stock acquirable upon conversion of such holders Notes 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 in the Notes or elsewhere) or, if no such record is taken, the date as of which record holders of Common Stock
are to be determined for the grant, issuance or sale of such Purchase Rights.
Under the terms of the Securities Purchase
Agreement, the holders of our Notes have certain registration rights with
respect to the resale of shares of Common Stock issuable upon the conversion of our Notes (as well as with respect to certain other
shares). Resale of such shares was registered under the Securities Act on a Form S-3 filed with the SEC, and we are required to keep such registration effective until
the fifth anniversary of the closing date of the transactions contemplated by the Securities Purchase Agreement or the date
upon which all shares held by the holders of our Notes may be sold under Rule 144 during any 90 day period or we could be
liable for certain agreed upon liquidated damages, subject to certain limited exceptions.
Under the Securities Purchase Agreement, we
also agreed to certain covenants regarding our financial information, our
SEC reports, our securities law disclosure, our furnishing of certain information, reservation of our shares for issuance upon
conversion of convertible securities and the registration and transfer of our securities. In addition, we agreed to certain
indemnification and contribution provisions, including with respect to liabilities arising under the Securities Act and the
Exchange Act.
Our Notes may be amended by us if we have
obtained the written consent of holders of a majority of the outstanding
principal amount of our Notes, provided, that no such amendment will change the rate or manner in which interest accrues on our
Notes, any provision related to scheduled payments or prepayments of principal on our Notes, the conversion price of our
Notes, the number of shares of Common Stock which our Notes are convertible into or the amendment and waiver provisions of
our Notes, without the written consent of the holders of at least 75% of the outstanding principal amount of our Notes.
Note Purchase Agreements
As
of March 3, 2010, we entered into the Note Purchase Agreements with the holders of 100% of
our Notes. Pursuant to the Note Purchase Agreements, the Note holders
agreed, as of March 3, 2010, to amend our Notes in a manner such that the Watson Transactions would not constitute a change of control and we would
not be required to offer to redeem any of the outstanding Notes (or
entitle the holders of our Notes to any rights) as a result of the Watson Transactions (the Note Amendment). In addition,
pursuant to the Note Purchase Agreements, at the time of the Closing, we and the Note holders
agreed that we will repurchase our Notes at an aggregate purchase price of $26 million in cash
(plus approximately $500,000 of estimated accrued and unpaid interest through the
70
date of
the closing of the Note purchases (assuming the closing occurs on June 1, 2010)), warrants to purchase 7,750,000 shares of Common
Stock (the Warrants) and 7,407,407 shares of Common Stock (the NPA Shares). The number of NPA
Shares is equal to 10 million divided by 110% of the average of the consolidated closing bid prices
of the Common Stock over the ten trading days ending on March 3, 2010 (i.e., the date the
Note Purchase Agreements were entered into) but not less than the consolidated closing bid price of
the Common Stock on March 3, 2010. See Use of the Upfront Payment from the Watson Transactions,
beginning on page 59.
The
closings of the transactions contemplated by the Note Purchase Agreements are subject
to various conditions, including the Closing of the Watson
Transactions, the filing of the Charter Amendment with the Secretary
of State of the State of Delaware, and the satisfaction of certain of
our obligations owing to PharmaBio under the PharmaBio Agreement.
In the Note Purchase Agreements, both we and the holders of the Notes made various
representations and warranties. In the Note Purchase Agreements, each holder of Notes made various
covenants to us and we made covenants to the Note holders with
respect to, among other things, our SEC reports and
reporting obligations, certain disclosures made by us, our furnishing certain information to the
Note holders, our reservation of certain shares and our obligations relating to the resale of
certain securities by the Note holders.
Each Note Purchase Agreement may be terminated in certain circumstances, including, among
others, by any party to such Note Purchase Agreement if the closing contemplated thereunder does
not occur on or prior to August 31, 2010. The Note Amendment will terminate and be of no further
force and effect on the earliest of:
|
|
|
|
August 31, 2010, only if the closings contemplated under the Note Purchase Agreements do not occur on or prior
to August 31, 2010; |
|
|
|
|
|
|
the date, if any, after the date of the Note Purchase Agreements and prior to the closings contemplated under the
Note Purchase Agreements, on which holders of at least 25% of the aggregate principal amount of our Notes have
not consented to the Note Amendment or have terminated Note Purchase Agreements to which they are a party
(in accordance with their terms); and |
|
|
|
|
|
|
the business day after the Closing (of the Watson Transactions) if the closings under the Note Purchase
Agreements do not occur on or prior to such business day. |
|
Under the Note Purchase Agreements, until
45 days after the our public announcement of the results of the
PREGNANT Study, if we issue any shares of Common Stock (or Common
Stock equivalents), subject to certain exceptions, for a price that is less than $2.00
per share, we must offer the parties to the Note Purchase Agreements the right to exchange their
Warrants for cash payments of up to an aggregate of $3,999,996.
Under the Note Purchase Agreements, we also agreed to reimburse the Note holders for certain
fees and expenses incurred by them.
The summary of the Note Purchase Agreements contained in this proxy statement does not purport
to be complete and is subject to, and qualified in its entirety by reference to, the full text of
the Note Purchase Agreements, which are included as Annex D to this proxy statement, and are
incorporated herein by this reference.
Reasons for the Note Purchase Agreement
The Watson Transactions would have constituted a
change of control under our Notes. This would have triggered
our obligation to redeem our Notes for their outstanding principal amount, plus accrued and unpaid interest thereon.
However, satisfaction of this obligation was prohibited by the PharmaBio Agreement, unless we first satisfied our Senior Debt owing to PharmaBio. As a result, in connection with the Watson Transactions, we would have been potentially
required to pay approximately $57 million in cash to satisfy our obligations in respect of the PharmaBio Agreement and our
Notes, but not had sufficient cash resources to do so.
We entered into the PharmaBio Amendment, the
Note Purchase Agreements and the Note Amendment so that we
would be able to, at the Closing, satisfy our obligations owing to PharmaBio under the PharmaBio Agreement and our
obligations under our Notes with the Upfront Payment and our existing cash at the time of the Closing (together with the
shares of Common Stock and Warrants issuable under the Note Purchase Agreements).
The Warrants
The Warrants to be issued
pursuant to the Note Purchase Agreements will be exercisable,
subject to certain limitations specified therein, during the period commencing 180 days after, and
ending on the fifth anniversary of, the date of the closings contemplated under the Note Purchase
Agreements, unless earlier exercised or terminated as provided in the Warrants. The Warrants will
be exercisable, subject to adjustment in certain circumstances, as described below, for an aggregate of 7,407,407 shares of Common Stock. The exercise price per share,
subject to adjustment in certain circumstances, as described below, is $1.35 (which is equal to 110% of the average of
the consolidated closing bid prices of the Common Stock over the ten trading days ending on March
3, 2010 (i.e., the date the Note Purchase Agreements were entered into)).
Holders of the Warrants may not exercise their Warrants to the extent that the holder would beneficially own in excess
of 9.99% of our outstanding Common Stock immediately after giving effect to such exercise.
The exercise price (and the number of securities issuable
upon exercise) of the Warrants may be adjusted in the event of certain
changes in the outstanding shares of Common Stock by reason of any stock split, stock dividend, recapitalization,
reclassification, combination or exchange of shares, reorganization, liquidation, dissolution, consolidation or merger effected
by Columbia.
The Warrants may not be modified and
no provision of a Warrant will be waived without our consent and the consent
of either the holders of a majority of the unexercised Warrants, provided that such modification does not adversely affect the
non-consenting holder of a Warrant without adversely affecting all other holders in a similar manner, or the holder of each Warrant that would
be modified.
71
Upon the closing of the transactions
contemplated under the Note Purchase Agreements, we intend to list the shares of
Common Stock issuable upon the exercise of the Warrants on the NASDAQ Global Market, or upon such other primary
exchange on which shares of our Common Stock are then listed.
The foregoing summary of the
Warrants does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full
text of the form of Warrant, which is included as an Exhibit to the Note Purchase Agreements included as Annex D to
this proxy statement, and is incorporated herein by this reference.
The NPA Shares
At the closing of the transactions contemplated
by the Note Purchase Agreements, we expect to issue the 7,407,407 NPA Shares pursuant to the Note Purchase Agreements.
As of the date of this proxy statement, we
are authorized to issue 100,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock, of which 151,000 shares have been designated Series A Convertible Preferred Stock (the Series A Preferred Stock),
150,000 shares have
been designated Series B Preferred Stock, 6,660 shares have been designated Series C Preferred
Stock, 100,000 shares have been designated Series D junior participating convertible Preferred
Stock and 100,000 shares have been designated Series E Preferred Stock.
The following is a summary of the terms of the Common Stock and does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the full text of our Restated Certificate of
Incorporation, as amended, and Amended and Restated By-laws, which are filed as Exhibits 3.1 and 3.2,
respectively, to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2009, filed with the SEC on March 12, 2010, and are incorporated herein
by this reference.
Holders of the shares of Common Stock,
subject to certain exceptions, and holders of the Series B Preferred Stock and
Series E Preferred Stock vote together as a single class on all matters upon which our stockholders are entitled to vote. The
holders of Common Stock are entitled to one vote for each share of such stock held of record by them. Our board of directors
is not classified, and the holders of our voting securities may not accumulate votes. This means that the holders of more than 50% of the shares voting for the election of directors can
elect all of our directors if they choose to do so; and, in such event, the holders of our
remaining shares will not be able to elect any person to our board. Holders of shares of Common Stock have
no conversion, preemptive or other subscription rights. There are no redemption or sinking fund provisions applicable to the
shares of Common Stock. The holders of Common Stock are entitled to receive dividends when, as and if declared by our
board of directors out of funds legally available therefor, subject to prior rights of the holders of our preferred stock. We have
never paid a cash dividend on our shares of Common Stock and do not anticipate paying cash dividends in the foreseeable
future. In the event of liquidation, dissolution or winding up of Columbia, holders of shares of the Common Stock will be
entitled to share ratably in all assets remaining after payment of liabilities and after payment of any preferential amounts to
which the holders of our preferred stock are entitled, if any.
We are currently subject to the provisions of Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. Section 203 prevents certain Delaware corporations from engaging,
under certain circumstances, in a business combination, which includes a merger or sale of more
than 10% of the corporations assets, with any interested stockholder for three years following the
date that the stockholder became an interested stockholder. An interested stockholder is a
stockholder who acquired 15% or more of a corporations outstanding voting stock without the prior
approval of such corporations board of directors.
On March 12, 2002, our board
declared a dividend distribution for each outstanding share of Common Stock of one right
to purchase one one-thousandth (1/1000) of a share of preferred stock of Columbia, designated as Series D Junior
Participating Preferred Stock, at a price of $30 per one one-thousandth (1/1000) of a share, subject to certain adjustments (the
Rights). The description and terms of the Rights are set forth in a Rights Agreement, dated as of March 12, 2002, by and between us and First Union
National Bank, as Rights Agent (the Rights Agreement). Upon certain triggering events (described in the Rights Agreement), the Rights become exercisable
to purchase shares of Common Stock (or, in the discretion of our board of directors, Series D
junior participating convertible preferred stock). The foregoing is a summary of the terms of the
Rights and the Rights Agreement and does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the full text of the Rights Agreement, which is filed as Exhibit 10.6 to
our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, filed with the SEC on March 12, 2010, and is incorporated herein by this reference.
The Common Stock is traded on the NASDAQ Global Market.
The transfer agent and registrar for the
Common Stock is American Stock Transfer & Trust Company.
Upon the closing of the
transactions contemplated under the Note Purchase Agreements, we intend to list the NPA Shares
on the NASDAQ Global Market, or upon such other primary exchange on which shares of our Common Stock are then listed.
Registration Rights
Under the terms of the Note Purchase Agreements, we have granted Holders who are Affiliates
(as such term is defined in Rule 405 of the Securities Act) of ours, certain registration rights
with respect to the resale of the NPA Shares and the shares of Common Stock issuable upon the
exercise of the Warrants. In certain circumstances, we could be liable for certain agreed upon
liquidated damages to such holders for our failure to file a registration statement with the SEC by
an agreed to date, cause that registration statement to be declared effective by the SEC by an
agreed to date or if such registration statement is not continuously effective, subject to certain
limited exceptions.
72
Preferred Stock
Our Series C Preferred Stock was issued in January 1999.
The Series C Preferred Stock has a
stated value of $1,000 per share, and is convertible into Common Stock at the lower of: (i) $3.50
per share of Common Stock and (ii) 100% of the average of the closing prices during the three
trading days immediately preceding the conversion notice. Upon a triggering event
(the Watson Transactions would be a triggering event), the holders of our shares of Series C
Preferred Stock have the right to require us to redeem their shares of Series C Preferred Stock in
cash for the value of the shares of Series C Preferred Stock
plus all accrued and unpaid dividends
thereon on the date such redemption is demanded. As of the date hereof, 600 shares of our Series C
Preferred Stock are outstanding, each with a value of $1,000.
Additionally, we have authorized and outstanding shares of Series B Preferred Stock and Series
E Preferred Stock. No rights under the Series B Preferred Stock or Series E Preferred Stock other
than those voting rights described herein are implicated by the Watson Transactions or any other
transaction described herein.
73
RISK FACTORS RELATING TO THE PROPOSAL TO APPROVE THE ASSET SALE
You should carefully consider the risk factors described below and those risk factors
generally associated with our business contained in our Annual Report on Form 10-K for the year
ended December 31, 2009, filed with the SEC on March 12, 2010, and our subsequent SEC filings, along with other information provided to
you in this proxy statement, in deciding how to vote on the proposal to approve the Asset Sale
pursuant to the terms of the Purchase and Collaboration Agreement. See Where You Can Find More
Information, beginning on page 148. The special risk considerations described below are not the
only ones facing Columbia. Additional considerations not presently known to us or that we
currently believe are immaterial may also impair our business operations. If any of the following
special risk considerations actually occur, our business, financial condition or results of
operations could be materially adversely affected, the market price of shares of our Common Stock
may decline, and you may lose all or part of your investment.
The Watson Transactions may not be completed or may be delayed if the conditions to Closing are not
satisfied or waived.
The Watson Transactions may not be completed or may be delayed because the conditions to
Closing, including approval of the Asset Sale proposal or Charter Amendment proposal by our
stockholders, may not be satisfied or waived. If the Watson Transactions are not completed, we may
have difficulty recouping the costs incurred in connection with negotiating the Watson
Transactions, our relationships with our customers, suppliers and employees may be damaged and our
business may be harmed.
Failure to complete the Watson Transactions may be detrimental to us.
If the Watson Transactions are not consummated, we may experience a significant liquidity
shortage that will negatively impact our current business strategies, including the continuation of
the PREGNANT Study. We have approximately $57 million in debt obligations that mature over the
next two years and there can be no assurances that we would have the means to satisfy such
obligations or raise additional capital in the absence of the consummation of the Watson
Transactions. Also, we estimate that the costs associated with concluding the PREGNANT Study, and
if it is successful, Developing, launching and Commercializing the PROCHIEVE 8% for the PTB
Indication, would be very significant. If the Watson Transactions are not consummated and the
PREGNANT Study were to be delayed or unsuccessful, such liquidity concerns could become especially
acute. If the Watson Transactions are not consummated, we may not have the resources to Develop,
launch and Commercialize the PROCHIEVE 8% for the PTB Indication.
Without consummation of the Watson Transactions, the risk of the failure of the PREGNANT Study
would be borne entirely by Columbia and its stockholders.
Already, as a result of our announcement of the Watson Transactions, third parties may be
unwilling to enter into material agreements with us relating to our Progesterone Products. New or
existing customers and business partners may prefer to enter into agreements with our competitors
who have not expressed an intention to sell their business because customers and business partners
may perceive that such new relationships are likely to be more stable.
74
Employees working with the Assets to be sold under the Purchase and Collaboration Agreement
may become concerned about the future of the business and lose focus or seek other employment. If
we fail to complete the Watson Transactions, the failure to maintain existing business
relationships or enter into new ones could adversely affect our business, results of operations and
financial condition. The resultant potential for loss or disaffection of employees or customers
could have a material, negative impact on the value of our business.
In addition, if the Watson Transactions are not consummated, our directors, executive officers
and other employees will have expended extensive time and effort and will have experienced
significant distractions from their work during the pendency of the Watson Transactions and we will
have incurred significant third party transaction costs, in each case, without any commensurate
benefit, which may have a material and adverse effect on our stock price and results of operations.
Failure to complete the Watson Transactions may cause the market price for shares of our Common
Stock to decline.
If our stockholders fail to approve the Watson Transactions, or if the Watson Transactions are
not completed for any other reason, the market price of shares of our Common Stock may decline due
to various potential consequences, including:
|
|
|
we may experience a significant liquidity shortage; |
|
|
|
|
the failure to complete the Watson Transactions may create substantial
doubt as to our ability to effectively implement our current business
strategies, including the continuation of the PREGNANT Study; |
|
|
|
|
our costs related to the Watson Transactions, such as legal, financial
advisor and accounting fees, must be paid even if the Watson Transactions are
not completed; and |
|
|
|
|
we may not be able to sell any of our assets to another party on terms
as favorable to us as the terms of the Purchase and Collaboration Agreement, if
at all. |
If the Watson Transactions are not completed, we may explore other potential transactions, but the
alternatives may be less favorable to us and there can be no assurance that we will be able to
complete an alternative transaction.
If the Watson Transactions are not consummated, we may explore other potential transactions,
including a sale of certain of our assets to another party on such terms as our board of directors
may approve. The terms of an alternative transaction may be less favorable to us than the terms of
the Watson Transactions and there can be no assurance that we will be able to reach agreement with
or complete an alternative transaction with another party.
75
The amount of net proceeds that we will receive from the Watson Transactions is subject to
uncertainties.
The milestone and royalty payments contemplated by the Purchase and Collaboration Agreement
are subject to uncertainties, many of which are beyond our control. It is possible that these
payments may be materially less than we expect or may not be owed to us at all.
Pursuant to the Purchase and Collaboration Agreement, the amount that we receive from Buyer is
subject to the possibility of reduction after the Closing if Buyer or its affiliates successfully
assert claims for indemnification pursuant to the indemnification provisions of the Purchase and
Collaboration Agreement. See The Purchase and Collaboration AgreementIndemnification,
beginning on page 119. Furthermore, we may have unforeseen liabilities and expenses that must be
satisfied from the net proceeds of the Asset Sale, leaving less to fund our remaining operations.
Management could spend or invest the milestone and royalty payments in ways with which our
stockholders may not agree.
Our management could spend or invest the milestone and royalty payments, if any, in ways with
which our stockholders may not agree. The investment of these proceeds may not yield a favorable
return.
By completing the Watson Transactions, our business will be modified.
Sales of CRINONE and PROCHIEVE accounted for a significant portion of our revenue for the
fiscal year ended December 31, 2009. After giving effect to the Watson Transactions, we will no
longer be directly involved in the Commercialization of Progesterone Products. We will be
primarily in the business of supplying Progesterone Products to Watson and, pursuant to the Merck
Serono Agreement, to Merck Serono. Therefore, we will be dependent upon our partners for the sale
and marketing of Progesterone Products. If the Asset Sale is consummated, the right to receive
royalties and milestone payments, the manufacturing revenues from CRINONE, PROCHIEVE and STRIANT
sales will be our principal operations and, accordingly, our profitability will be entirely
dependent thereon.
Following the Closing, we will continue to conduct the PREGNANT Study (and certain development
activities relating to the PTB Indication), and incur costs (up to $7 million incurred from January
1, 2010) associated therewith. If the PREGNANT Study is successful and we achieve milestones set
forth in the Purchase and Collaboration Agreement, we intend to become a focused development
company, with research and development centered on products to address womens health needs,
subject to the covenant not to compete in the Purchase and Collaboration Agreement (discussed
herein). Our aim would be to take new product candidates through proof-of-concept and then to
enter into new partnership arrangements with respect to them. In addition, we would expect to
enter into partnership discussions for STRIANT, and through a partner, attempt to build revenue
from STRIANT and explore the potential to expand its labeling. We also would expect to continue to
leverage our proprietary drug delivery systems to expand our product portfolio.
76
If the PREGNANT Study is not successful, the amount of milestone payments and royalties to be
received under the Purchase and Collaboration Agreement will be severely reduced and our resources
will be limited. If this occurs, our board of directors will have to reassess our business
strategy.
We will be unable to compete in certain areas of the womens healthcare business for a period after
the Closing.
As part of the Purchase and Collaboration Agreement, from the Closing until the second
anniversary of the date on which we and Buyer terminate our relationship with respect to the joint
development of the Progesterone Products, we have agreed not to manufacture, Develop or
Commercialize products containing Progesterone or any other products which are approved or being
Developed for the PTB Indication, subject to certain exceptions. Accordingly, the Purchase and
Collaboration Agreement will restrict our future business activities.
The Purchase and Collaboration Agreement will expose us to contingent liabilities that could have a
material adverse effect on our financial condition.
We have agreed to indemnify Buyer and its affiliates for breaches of any representation,
warranty or covenant made by us in the Purchase and Collaboration Agreement, as well as for losses
arising out of or in connection with excluded assets or excluded liabilities, and for certain other
matters. Significant indemnification claims by Buyer or its affiliates could have a material
adverse effect on our financial condition. We will not be obligated to indemnify Buyer or its
affiliates for any breach of the representations or warranties made by us under the Purchase and
Collaboration Agreement until the aggregate amount of claims for indemnification exceed $500,000
(the deductible). In the event that claims for indemnification for breach of most of the
representations and warranties made by us under the Purchase and Collaboration Agreement exceed
this threshold, we will be obligated to indemnify Buyer and its affiliates for any damages or loss
resulting from such breach in excess of the deductible up to $7.5 million (the aggregate liability
cap). Claims for indemnification for breaches of covenants or liabilities relating to any
excluded assets or excluded liabilities made by Buyer and its affiliates under the Purchase and
Collaboration Agreement will not be subject to the deductible or the aggregate liability cap
described above, and claims for breaches of representations and warranties classified as
fundamental representations and claims arising due to fraud or intentional misrepresentation will
not be subject to the aggregate liability cap.
Columbias directors and executive officers have interests in the Watson Transactions that may be
different from, or in addition to, the interests of our stockholders.
Our directors and executive officers have interests in the Watson Transactions (and the other
transactions described herein) that are different from, or in addition to, the interests of our
stockholders. These interests include the acceleration of the vesting of restricted stock awards
and stock options held by such persons upon consummation of the Watson Transactions. In addition,
affiliates of one of our directors owns Notes and will engage in transactions with us under the
Note Purchase Agreements. As a result of these interests, Columbias directors and executive
officers could be more likely to recommend a vote in favor of the Asset Sale than if they did not
hold these interests, and may have reasons for doing so that are not the same as the
77
interests of our other stockholders. See The Asset Sale (Proposal No. 1)Interests of
Columbias Executive Officers and Directors in the Asset Sale, beginning on page 60.
The Purchase and Collaboration Agreement limits our ability to pursue alternatives to the Watson
Transactions.
The Purchase and Collaboration Agreement contains provisions that make it more difficult for
us to engage in a material strategic transaction with any party other than Buyer. These provisions
include the prohibition on our ability to solicit competing Acquisition Proposals, the requirement
that we pay a termination fee of $2 million if the Purchase and Collaboration Agreement is
terminated in specified circumstances and force the vote provisions requiring that, even if our
board changes its recommendation regarding the Watson Transactions or endorses a superior
proposal, we are not entitled to terminate the Purchase and Collaboration Agreement and must
submit the Asset Sale to our stockholders for approval. In addition, we agreed not to submit to
the vote of our stockholders any Acquisition Proposal whether or not a Superior Proposal or propose
to do so until after the termination of the Purchase and Collaboration Agreement.
See The Purchase and Collaboration AgreementTermination of the Purchase and Collaboration Agreement,
beginning on page 116, The Purchase and Collaboration
AgreementNo Solicitation of Other Offers, beginning on page 112 and The Purchase and Collaboration
AgreementProcedure and Effect of Termination, beginning on page 117.
These provisions could discourage a third party that might have an interest in acquiring all
of or a significant part of Columbia or the Progesterone Products from considering or proposing an
alternative transaction, even if that party were prepared to pay consideration with a higher value
than that to be paid by Watson.
78
THE PURCHASE AND COLLABORATION AGREEMENT
The summary of the material
terms of the Purchase and Collaboration Agreement below and
elsewhere in this proxy statement is Subject to, and qualified in its entirety by reference to, the Purchase and
Collaboration Agreement (and the related agreements), a copy of which is attached as Annex A and
which we incorporate by reference into this document. This summary does not purport to be complete
and may not contain all of the information about the Purchase and Collaboration Agreement that is
important to you. We encourage you to carefully read the Purchase and Collaboration Agreement in
its entirety.
The Purchase and Collaboration Agreement has been included to provide you with information
regarding its terms. It is not intended to provide any other factual information about Columbia,
Buyer or Watson. Such information can be found elsewhere in this proxy statement and in the other
public filings Columbia makes with the SEC, which are available without charge at www.sec.gov. and
www.cbrxir.com.
The representations, warranties and covenants contained in the Purchase and Collaboration
Agreement were made only for purposes of the Purchase and Collaboration Agreement as of specific
dates and may be subject to more recent developments. Such representations, warranties and
covenants were made solely for the benefit of the parties to the Purchase and Collaboration
Agreement, may be subject to limitations agreed upon by the contracting parties, including being
qualified by confidential disclosures made for the purposes of allocating risk between parties to
the Purchase and Collaboration Agreement instead of establishing these matters as facts, and may
apply standards of materiality in a way that is different from what may be viewed as material by
you or by other investors. These representations, warranties and covenants contained in the
Purchase and Collaboration Agreement are qualified by confidential information contained in
confidential disclosure schedules that the parties exchanged and a confidential disclosure letter
from us to Buyer in connection with the execution of the Purchase and Collaboration Agreement. The
disclosure schedules and disclosure letter contain information that modifies, qualifies and creates
exceptions to the representations, warranties and covenants set forth in the Purchase and
Collaboration Agreement. Since some of the information contained in the disclosure schedules and
disclosure letter is non-public and some of such information is highly confidential, we do not
believe that this information is required to be publicly disclosed under United States federal or
state or non-U.S. securities laws or Delaware law (although any specific material facts that
qualify the representations and warranties in the Purchase and Collaboration Agreement have been
disclosed in this proxy statement or in to other documents described under the caption *).
Finally, information concerning the subject matter of these representations, warranties and
covenants may have changed since the date of the Purchase and Collaboration Agreement. For the
foregoing reasons, you should not rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of facts or condition of Columbia or
Watson or any of their respective subsidiaries or affiliates.
79
General
Under the terms of the Purchase and Collaboration Agreement, Buyer will acquire the Assets,
and certain of our liabilities, and the Acquisition Shares for the Upfront Payment. Buyer has also
agreed to make certain additional contingent milestone and royalty payments under the circumstances
and on the terms described below. Watson has guaranteed Buyers obligations under the Purchase and
Collaboration Agreement.
The Closing(s)
The Purchase and Collaboration Agreement contemplates that at the Closing we will receive the
Upfront Payment and transfer to Buyer the Acquisition Shares, each of the Assets, other than the
regulatory filings and approvals necessary for Commercializing Progesterone Products for the PTB
Indication (see Assets to be Sold, beginning on
page 81) and Buyer will assume certain
liabilities relating to the Assets transferred at the Closing. The Closing will take place at the
offices of Kaye Scholer LLP, 425 Park Ave., New York, NY 10022 at 10:00 a.m., New York City time,
or at such other place or time as we and the Buyer may mutually agree, three business days after
our stockholders approve the transactions contemplated by the Purchase and Collaboration Agreement,
provided all of the other conditions to the Closing have been satisfied or waived.
Subsequently, at a second closing, we will transfer to Buyer the PTB NDA or PTB Supplemental
NDA (the Second Closing Date Assets) and Buyer will assume certain liabilities arising out of the
Second Closing Date Assets. The second closing will take place at the offices of Kaye Scholer
LLP, 425 Park Ave., New York, NY 10022 at 10:00 a.m., New York City time, or at such other place or
time as we and Buyer may mutually agree, three business days after the Completion of PTB US
Development, provided all of the other conditions have been satisfied or waived.
Completion of PTB US Development means the earliest of (i) PTB US Approval, (ii) mutual agreement
of the Parties to cease the development of the PTB Indication or (iii) December 31, 2012.
PTB NDA means the Regulatory Filings and Regulatory Approval, to the extent made or obtained by
or on behalf of Seller, necessary for Commercializing the Progesterone Products for the PTB
Indication.
PTB Supplemental NDA means, with the approval of the Joint Development Committee, an Efficacy
Supplement to NDA No. 20,701, which is a modification to our existing NDA for Progesterone Products
to include the PTB Indication.
PTB US Approval means the approval by FDA of the PTB NDA or PTB Supplemental NDA, as applicable,
expanding the PROCHIEVE label to include the PTB Indication, which approval has been accepted by
the Joint Development Committee (as defined herein).
80
Progesterone Products
Progesterone is a hormone manufactured by a womans ovaries in the second half of the
menstrual cycle and by the placenta during pregnancy. Progesterone is responsible for preparing
the uterus for pregnancy and, if pregnancy occurs, maintaining it until birth, or, if pregnancy
does not occur, inducing menstruation. Progesterone means both (i) pregn-4-ene-3,20-dione and
17-alpha-hydroxypregn-4-ene-3,20-dione (Natural Progesterone), and (ii)
17-alpha-hydroxyprogesterone caproate, medroxyprogesterone acetate, norethindrone, norethindrone
acetate, norethindrone enanthate, desogestrel, levonorgestrel, lynestrenol, ethynodiol diacetate,
norgestrel, norgestimate, norethynodrel, gestodene, drospirenone, trimegestone, levodesogestrel,
gestodyne, nesterone, etonogestrel, and derivatives from 19-nor-testoterone (Synthetic
Progesterone). We market Progesterone Products under two brand names, CRINONE and PROCHIEVE,
available in two strengths, an 8% progesterone gel and a 4% progesterone gel.
Assets to be Sold
The Purchase and Collaboration Agreement provides that we will sell, convey, transfer, assign
and deliver or cause our subsidiaries to sell, convey, transfer, assign and deliver to Buyer and
Buyer will purchase, take delivery of and acquire from us all of our right, title, and interest in
and to the following assets (the Assets):
|
|
|
Certain of our United States and non-United States patents, patent
applications, and other similar enforceable rights relating to the protection
of inventions worldwide (and all rights related thereto, including all
reissues, reexaminations, divisions, continuations, continuations-in-part,
extensions or renewals of any of the foregoing) (Patents); |
|
|
|
|
Certain of our trademarks, service marks, certification marks, trade
dress, Internet domain names, trade names, identifying symbols, designs,
product names, company names, slogans, logos or insignia, whether registered or
unregistered, and all common law rights, applications and registrations
therefor, and all goodwill associated therewith (Trademarks); |
|
|
|
|
The advertising, promotional and media materials, sales training
materials, trade show materials and videos primarily used by us for the
importing, marketing, detailing, promoting, advertising, distributing and
selling (the Commercialization, or as applicable, Commercializing or
Commercialize) the Progesterone Products in our possession and control and
the copyrights and copyrightable works, including all rights of authorship,
use, publication, reproduction, distribution, performance, transformation,
moral rights and rights of ownership of copyrightable works, copyright
registrations, or any application therefore, in the United States or any
foreign country, and all rights to register and obtain renewals and extensions
of registrations, to the extent relating thereto; |
|
|
|
|
All submissions, primarily relating to the Progesterone Products, to
Regulatory Authorities of regulatory applications and any approval, |
81
|
|
|
registration, license, permit, certificate, exemption, consent, confirmation,
order, waiver, clearance or authorization from a Regulatory Authority in a
jurisdiction that is necessary to market and sell the Progesterone Products
(Regulatory Approval); |
|
|
|
All rights and interest of Columbia under its contracts primarily
related to the Progesterone Products; |
|
|
|
|
The books, files, documents, data, information, records and complete and
correct copies of all tax returns and other documents pertaining to taxes, if
any, primarily related to the Assets in our possession or the research,
development, regulatory approval, manufacture, distribution, marketing, sale
and promotion of the Progesterone Products (the Business), in our possession
or control; provided, that we shall be entitled to exclude or appropriately
redact such documents, information, materials and data from the applicable
books and records to the extent not related to Assets or the Business and
retain the original (in the case of such exclusion) or a copy (in the case of
such redaction) thereof; provided, further, that any such exclusion or
redaction may not degrade or impair Buyers ability to use any such books and
records; |
|
|
|
|
To the extent in our possession or control, all pre-clinical, clinical
and process development data and reports primarily relating to the research,
Commercialization or Development of the Progesterone Products, including all
raw data from clinical trials of our marketed 8% vaginal gel Progesterone
Product PROCHIEVE or other Progesterone Products, all case report forms
relating thereto and all statistical programs developed (or modified in a
manner material to the use or function thereof (other than through user
preferences)) to analyze data from such clinical trials; all market research
data, market intelligence reports, statistical programs (if any) used for
marketing and sales research primarily related to the marketing and sale of
Progesterone Products; data contained in laboratory notebooks primarily
relating to the Progesterone Products; all adverse experience reports and files
primarily related to the Progesterone Products (including source documentation)
and all periodic adverse experience reports and all data contained in
electronic data bases primarily relating to adverse experience reports and
periodic adverse experience reports for the Progesterone Products; all
analytical and quality control data for the Progesterone Products; and all
correspondence with the FDA primarily relating to the Progesterone Products;
and |
|
|
|
|
All refunds, credits and claims for refunds or credits relating to
property taxes allocable to any tax period beginning after the date of the
Closing, in our favor or any of our affiliates or any of their respective
employees to the extent relating to any Asset or any Assumed Liability (as
herein defined). |
82
|
|
|
Prior to the Closing, Buyer shall assign to a wholly-owned subsidiary of
Watson the rights and obligations of Buyer to purchase certain non-U.S.
intellectual property rights that constitute part of the Assets. These
non-U.S. Assets include the rights to Develop or Commercialize the Assets
outside of the United States and the income, royalties, damages and payments made, due
or payable with respect to such rights. |
Excluded Assets
All of our assets, properties, rights and interests not specifically identified as Assets
above (collectively, the Excluded Assets) are expressly excluded from the purchase and sale
contemplated by the Purchase and Collaboration Agreement and shall remain ours. The Excluded
Assets include, without limitation, certain assets listed on a schedule to the Purchase and
Collaboration Agreement. Notwithstanding anything set forth in the Purchase and Collaboration
Agreement or the Other Agreements to the contrary, Buyers rights with respect to the Assets and
the Business outside the United States (including the District of Columbia and Puerto Rico) shall
be subject to the Merck Serono Agreement, which we will not amend or modify in a manner adverse to
Buyer without its prior written consent.
To the extent rights or assets held by us or our subsidiaries are necessary for the operation
or conduct of the Business but such rights or assets are not included in the Assets and Buyer is
not otherwise provided with the use of such rights or assets pursuant to the License Agreement or
Supply Agreement, from and after the Closing, we will provide Buyer with access to and the right to
use such rights or assets so as to allow Buyer to use such rights or assets in substantially the
same manner as used by us in the operation or conduct of the Business immediately prior to the
Closing.
Furthermore, to the extent any Asset is necessary for the operation or conduct of our business
(not constituting the Business) or the use by us of the Excluded Assets and we are not otherwise
provided with the use of such rights or assets pursuant to the License Agreement or Supply
Agreement, from and after the Closing, Buyer will provide us with access to and the right to use
such Asset so as to allow us to continue to use such Asset in substantially the same manner as
used by us in the operation or conduct of our business (not constituting the Business) or the use
by us of the Assets immediately prior to the Closing.
Liabilities to be Assumed
The Purchase and Collaboration Agreement provides that Buyer shall assume and pay, perform or
otherwise discharge, when due, any and all of the following Liabilities, which includes
indebtedness, guaranties, endorsements, claims, liabilities, losses, damages, deficiencies, costs,
expenses, obligations, commitments or responsibilities, of whatever kind or nature, fixed or
unfixed, known or unknown, choate or inchoate, liquidated or unliquidated, secured or unsecured,
direct or indirect, matured or unmatured, or absolute, contingent or otherwise, including any
products liability (the Assumed Liabilities):
|
|
|
All Liabilities arising out of or relating to the Assets on and after
the Closing; and |
83
|
|
|
All Liabilities under the contracts assigned to Buyer to the extent such
Liabilities arise on or after the date of the Closing. |
Each of the foregoing shall be assumed by Buyer on the Closing with the exception of those
liabilities arising out of the Second Closing Date Assets, which will be assumed as of the second
closing date.
Excluded Liabilities
Notwithstanding the foregoing, all of our Liabilities not specifically identified as Assumed
Liabilities will be retained by us (Excluded Liabilities).
Purchase Price
In addition to assuming the Liabilities discussed above, at the Closing, Buyer will pay us the
Upfront Payment of $47 million in cash, as consideration for the Assets and the Acquisition Shares.
Milestone Payments
In addition, Buyer will make the following milestone payments to us:
Clinical Trial Results Milestone Payment
|
|
|
|
|
|
Milestone Payment |
Milestone |
|
(the Clinical Trial Results |
(the Clinical Trial Results Milestone) |
|
Milestone Payment) |
Upon completion of the statistical analysis,
and delivery to Buyer of a report from our
third party statistician for the PREGNANT
Study in accordance with the Purchase and
Collaboration Agreement, if the primary
endpoint, reduction in preterm birth (as
currently prespecified in the clinical trial
protocol), achieves a p value of ≤ 0.01 and
the secondary endpoint, infant outcomes
composite score (to be agreed to with the FDA
in the final statistical analysis plan),
achieves a p value of ≤ 0.05; OR
|
|
U.S. $8,000,000; OR |
|
|
|
Upon completion of the statistical analysis,
and delivery to Buyer of a report from our
third party statistician for the PREGNANT
Study in accordance with the Purchase and
Collaboration Agreement, if the primary
endpoint, reduction in preterm birth (as
currently prespecified in the clinical trial
protocol), achieves a p value of > 0.01
and ≤ 0.05 and the secondary endpoint, infant
outcomes composite score (to be agreed to
with the FDA in the final statistical
analysis plan), achieves a p value of ≤ 0.05.
|
|
U.S. $6,000,000 |
|
|
|
|
84
We will be entitled to a maximum of one Clinical Trial Results Milestone Payment.
Product Approval Milestone Payment
|
|
|
|
Milestone |
|
Milestone Payment |
Acceptance by the FDA of a PTB NDA
or a PTB Supplemental NDA filed by
or on behalf of Seller or Buyer with
the approval of the Joint
Development Committee (the PTB NDA
Acceptance Milestone)
|
|
U.S. $5,000,000 (PTB NDA Acceptance Milestone Payment) |
|
|
|
First commercial sale of a PTB
Product by or on behalf of Buyer in
the United States (the PTB Product
Launch Milestone)
|
|
U.S. $30,000,000 (PTB Product Launch Milestone Payment) |
|
|
|
|
We will be entitled to a maximum of one milestone payment in connection with each of the PTB
NDA Acceptance Milestone and the PTB Product Launch Milestone.
PTB Product means the Progesterone Product approved by the PTB US
Approval.
Ex-U.S. Filing and Approval Milestone Payments
|
|
|
|
Milestone |
|
|
(the Ex-U.S. Filing/Approval Milestone) |
|
Milestone Payment |
Filing and acceptance by the applicable Regulatory
Authority of an MAA in a country or jurisdiction outside
the United States seeking Regulatory Approval to market
a Progesterone Product for the PTB Indication (the
Ex-U.S. Filing Milestone)
|
|
U.S. $500,000 |
|
|
|
Grant by the applicable Regulatory Authority in a
country or jurisdiction outside the United States of
regulatory approval to market a Progesterone Product for
the PTB Indication (the Ex-U.S. Approval Milestone)
|
|
U.S. $2,000,000 |
|
|
|
|
We will be entitled to payment for a maximum of one Ex-U.S. Filing Milestone and one Ex-U.S.
Approval Milestone.
MAA means an application for the authorization to market a pharmaceutical product in any country
or group of countries outside the United States, as defined in the applicable laws and filed with
the Regulatory Authority of a given country or group of countries.
85
Royalty Payments
In addition, Buyer will make royalty payments to us on a country-by-country basis during the
applicable Royalty Product or PTB Royalty Product Term.
For sales in the United States, Buyer will make the following royalty payments to us on a
quarterly basis based on sales in the United States:
|
|
|
|
|
|
Total Net Sales in any Calendar Year |
|
Royalty Rate |
Portion of aggregate Net Sales (as defined below) of Royalty
Products and PTB Royalty Products which are less than or
equal to U.S. $150,000,000 |
|
|
10 |
% |
Portion of
aggregate Net Sales of Royalty Products and PTB
Royalty Products which are greater than U.S. $150,000,000 but
less than or equal to U.S. $250,000,000 |
|
|
15 |
% |
Portion of
aggregate Net Sales of Royalty Products and PTB
Royalty Products which are greater than U.S. $250,000,000 |
|
|
20 |
% |
|
|
|
|
Net Sales means, with respect to sales of a Progesterone Product by Buyer and its affiliates
and/or licensees, sublicensees, distributors or other agents, the amount of gross sales (in dollars
or other currencies) for such Progesterone Product, reduced by the sum of the following items
relating to such sales that are actually given to or taken by, as applicable, Buyer, and its
affiliates and/or licensees, sublicensees, distributors or other agents, to the extent such
deductions are accrued and recognized under and in accordance with United States generally accepted
accounting principles (or other internationally recognized accounting standard in use by Buyer):
|
|
|
trade, quantity and cash discounts; |
|
|
|
|
|
adjustments for price adjustments, billing errors, rejected goods,
returns, product recalls and damaged goods (excluding goods damaged while under
the control of Buyer or its affiliates or their respective licensees,
sub-licensees or distributors); |
|
|
|
|
|
credits, charge-backs, reimbursements, and similar payments provided to
wholesalers and other distributors, buying groups, health care insurance
carriers, pharmacy benefit management companies, health maintenance
organizations, other institutions or health care organizations or other
customers; |
|
|
|
|
rebates or other price reductions provided to any Regulatory Authority
with respect to any state or federal Medicare, Medicaid or similar programs; |
|
|
|
|
|
any invoiced charge for freight, insurance, handling or other
transportation costs directly related to delivery of the Progesterone Products; |
|
|
|
|
|
distributor fees per contract based solely as a percentage of gross
sales; and |
86
|
|
|
taxes that are in the nature of tariffs, duties, excise, sales, use or
value-added taxes; |
provided, however, that the foregoing deductions shall only be deducted once and only to the extent
not otherwise deducted from gross sales.
For
sales of Royalty Products or PTB Royalty Products outside the United States in a country
where Buyer or its affiliates is Commercializing Royalty Products or
PTB Royalty Products, the
royalty rate on annual Net Sales shall equal 10%.
Adjustments to Royalty Payments
If Buyer or any of its affiliates grants any licenses, sublicenses, distribution or marketing
rights, or otherwise collaborates or partners with a third party to Commercialize any Royalty
Product or PTB Royalty Product in any country outside the United States, in lieu of royalties on
Net Sales of Royalty Products or PTB Royalty Products which may become payable with respect to such
country, we and Buyer will share Gross Profits arising from the Commercialization of Royalty
Products or PTB Royalty Products in such country with Buyer entitled to 80% and we will be entitled
to 20% of such Gross Profits. Gross Profits means Net Sales less raw materials costs, conversion
costs (direct labor), laboratory testing, quality control, freight, packaging, manufacturing
variances, FDA annual user fees, depreciation and manufacturing management/overheads.
Generic Entry. In the event of Generic Entry with respect to a Royalty Product or a
PTB Royalty Product, then the royalty rates applicable to Net Sales of such Royalty Product or a
PTB Royalty Product in such country will be reduced by 50%. Unless there is Impending Generic
Entry with respect to a Royalty Product or a PTB Royalty Product in a country, neither Buyer nor
its affiliates may introduce its own Generic Equivalent of such Product in such country. In the
event of such Impending Generic Entry, in lieu of royalties on Net Sales of such Generic Equivalent
which may become payable with respect to such country, Buyer and Columbia will share Gross Profits
arising from the Commercialization of such Generic Equivalent in such country with Buyer entitled
to 80% and Columbia entitled to 20% of such Gross Profits.
Generic Equivalent means, with respect to any Progesterone Product in a given country, any
true AB rated generic product (i.e., a non-proprietary product) (1) with the same active
ingredient(s) and administration route as such Progesterone Product, and (2) that obtained
Regulatory Approval in such country solely by means of an abbreviated NDA filing (or a similar
procedure in a country other than the United States) for establishing bioequivalence of such
Progesterone Product that does not require any human clinical trials other than solely for
purposes of establishing bioequivalence to the Progesterone Product.
Impending Generic Entry means that
Launch of a Generic Equivalent for a Royalty Product or a PTB Royalty Product in a country is
likely to occur within three months, as mutually determined by both Buyer and us. In the event of
any dispute with respect thereto, the matter will be resolved by arbitration in accordance with the
Purchase and Collaboration Agreement.
Term of Royalties. Royalties and payments by Buyer to us with respect to sharing of
Gross Profits, with respect to a Royalty Product (other than a PTB Royalty Product) sold in any
country, will be payable on a country-by-country basis from the Closing until the latest of:
|
|
|
the expiration of the last to expire Valid Claim (as defined below) of
any Patent in the Assets or licensed by Buyer under the License Agreement, and
covering such Royalty Product in such country; |
|
|
|
|
the expiration of any period of any exclusive marketing rights or data
exclusivity rights conferred by any Regulatory Authority with respect to a |
87
|
|
|
Progesterone Product other than Patents, including rights conferred in the
United States under the Hatch-Waxman Act or the FDA Modernization Act of 1997 or
rights similar thereto outside the United States (Regulatory Exclusivity),
applicable to such Royalty Product in such country; and |
|
|
|
|
the tenth anniversary of the date of Launch by Buyer of such Royalty
Product in such country (or, if no such Launch of a Royalty Product occurs, the
tenth anniversary of the Closing) (the Royalty Product Term). |
|
|
Royalties and payments by Buyer to us with respect to sharing of Gross Profits with
respect to a PTB Royalty Product sold in any country will be payable on a country-by-country basis from the Closing until the latest of: |
|
|
|
|
|
|
the expiration of the last to expire Valid Claim of any Patent in the Assets or licensed by Buyer under the
License Agreement and covering such PTB Royalty Product in such country; |
|
|
|
|
|
|
the expiration of any period of Regulatory Exclusivity applicable to such PTB Royalty Product in such country;
and |
|
|
|
|
|
|
the tenth anniversary of the date of Launch by Buyer of such PTB Royalty Product in such country (or, if no
such Launch occurs, the tenth anniversary of the Closing) (the PTB Royalty Product Term). |
|
With respect to any Royalty Product which contains only Synthetic Progesterone (and,
for the avoidance of doubt, no Natural Progesterone) sales of such Royalty Product
shall only generate Net Sales for purposes of the Royalty payments if such Royalty
Product is approved in the applicable country for the PTB Royalty Indication or any
other indication for which PROCHIEVE is approved in the United States as of the date
of the Purchase and Collaboration Agreement.
Launch means the launch of a Progesterone Product in a country or jurisdiction in
such quantities as are customary for the general introduction of a pharmaceutical
product in such country or jurisdiction.
Valid Claim means, with respect to any country, a claim of an issued Patent or
Patent application (that has been pending for no more than seven years after the
date from which such Patent application claims priority) that has not expired or
been revoked, held invalid or unenforceable by a patent office, court or other
governmental agency of competent jurisdiction in a final and non-appealable judgment
(or judgment from which no appeal was taken within the allowable time period).
Payment. Buyer will make the royalty payments and payments by
Buyer to us with respect to sharing of Gross Profits described herein on a
quarterly basis not later than 45 days after the end of each calendar quarter
(with payments made in respect of each of the first three calendar quarters of
each applicable
88
|
|
|
calendar year constituting Buyers good faith estimate of the royalty (or share
of Gross Profits) owed for such quarter, and with the payment made in respect of
the fourth calendar quarter of such calendar year including a true up for the
first three calendar quarters payments, based on actual amounts owed by Buyer
in respect of such three calendar quarters relative to amounts paid by Buyer). |
Other Revenue; Pricing. Buyer agrees that it shall not, and
shall cause its affiliates not to, and, after the Closing, Buyer will cause all
licensees, sublicensees, distributors or other agents to with whom it or its
affiliates grant rights to Commercialize any Progesterone Product (to the
extent such rights include the right to promote and sell such Progesterone
Product) not to, distribute, bundle or otherwise sell such Progesterone Product
in any manner that would have the effect of reducing the Net Sales or Gross
Profits arising from the Commercialization of such Progesterone Product in
favor of other revenue not subject to the royalties or sharing of Gross Profits
set forth in the Purchase and Collaboration Agreement; provided, that, the
foregoing proviso will not apply to actions which have an unintended effect of
causing such reduction.
Set-Offs
The milestone payments and royalty payments (if any) payable pursuant to the Purchase and
Collaboration Agreement shall be subject to reduction for:
|
|
|
finally determined claims for indemnification made by Buyer and |
|
|
|
|
|
breach of our obligation to use the cash in the Development Bank Account
exclusively for Development Costs during the Seller Expense Period.
See Development and the Joint Development
Committee, beginning on page 102. |
|
Representations and Warranties
In the Purchase and Collaboration Agreement, we made representations and warranties to Buyer
relating to, among other things:
|
|
|
|
our organization, existence and power and authority to own our assets,
including the Assets; and operate our business as currently conducted;
qualification to do business and good standing; |
|
|
|
|
|
our corporate power and authority to enter into the Purchase and
Collaboration Agreement and Other Agreements to be executed by us pursuant to
the Purchase and Collaboration Agreement and to consummate the transactions
contemplated by the Purchase and Collaboration Agreement and the Other
Agreements;
|
89
|
|
|
|
the lack of a violation of our charter documents, certain contracts or
any law as a result of entering into the Purchase and Collaboration Agreement
and the consummation of the transactions contemplated by the Purchase and
Collaboration Agreement and the Other Agreements; |
|
|
|
|
|
the requirement of any required governmental approvals or consents; |
|
|
|
|
our and our subsidiaries title and sufficiency with respect to the
Assets; |
|
|
|
|
our capitalization; |
|
|
|
|
our intellectual property; |
|
|
|
|
the absence of litigation; |
|
|
|
|
our real and personal property; |
|
|
|
|
tax matters; |
|
|
|
|
environmental, safety and health matters; |
|
|
|
|
our compliance with all applicable laws and permits; |
|
|
|
|
regulatory matters; |
|
|
|
|
our suppliers; |
|
|
|
|
the filing of required company reports and other documents with the SEC,
compliance of such reports and documents and with applicable requirements of
federal securities laws, rules and regulations, the accuracy and completeness
of such reports and documents, including the content of our financial
statements included in such reports and documents; |
|
|
|
|
the absence of certain changes or events since December 31, 2008; |
|
|
|
|
our material contracts; |
|
|
|
|
the absence of brokers; |
|
|
|
|
certain insurance related matters; |
|
|
|
|
certain investment company related matters; |
|
|
|
|
the listing of our Common Stock on the NASDAQ Global Market; |
|
|
|
|
application of takeover protections; and |
90
|
|
|
the receipt of a fairness opinion from our financial advisor. |
In the Purchase and Collaboration Agreement, Buyer made representations and warranties to us
relating to, among other things:
|
|
|
its corporate organization, existence and power and authority to own,
lease and operate its properties and carry on its business; |
|
|
|
|
its corporate power and authority to enter into the Purchase and
Collaboration Agreement and Other Agreements to be executed by it pursuant to
the Purchase and Collaboration Agreement and to consummate the transactions
contemplated by the Purchase and Collaboration Agreement and the Other
Agreements; |
|
|
|
|
its investment purpose in the Acquisition Shares and its status as an
accredited investor; |
|
|
|
|
its acknowledgment regarding the securities laws; |
|
|
|
|
its ownership of our securities; |
|
|
|
|
its acknowledgment of risk in holding the Acquisition Shares; |
|
|
|
|
its capitalization; |
|
|
|
|
|
the lack of violation of its charter documents, certain contracts or any
law as a result of entering into the Purchase and Collaboration Agreement and
the consummation of the transactions contemplated by the Purchase and
Collaboration Agreement and the Other Agreements; |
|
|
|
|
|
the absence of litigation; |
|
|
|
|
the availability of financing; |
|
|
|
|
lack of short sales; |
|
|
|
|
absence of brokers; and |
|
|
|
|
its independent investigation of the Assets and other matters relating
to entering into the Purchase and Collaboration Agreement. |
Material Adverse Effect
Many of our representations and warranties are qualified by a Material Adverse Effect
standard. Material Adverse Effect means any state of facts, change, development, event,
occurrence, effect or condition that, individually or in the aggregate, is materially adverse to
the business, assets, liabilities, results of operations or financial condition of Columbia and
its
91
subsidiaries, taken as a whole. The definition of Material Adverse Effect excludes any
facts, change, development, event, occurrence, effect or condition resulting or arising from any
one or more of the following:
|
|
|
changes, effects or events that generally affect the industr(ies) in
which we operate (including the pharmaceutical industry and Progesterone
products industry) or the manufacture, Development or Commercialization of
Progesterone Products (including legal and regulatory changes) to the extent
that they do not disproportionately affect us relative to other industry
participants; |
|
|
|
|
general economic or political changes, effects or events affecting the
financing or securities markets generally to the extent that they do not
disproportionately affect us relative to other industry participants; |
|
|
|
|
|
changes, developments or events caused by an act of God or by acts of
terrorism or war (whether or not declared) occurring after the execution date
of the Purchase and Collaboration Agreement (including a material worsening of
current conditions); |
|
|
|
|
|
|
changes, effects or events arising from, or in connection with, the
consummation (or anticipated consummation) of the transactions contemplated by
the Purchase and Collaboration Agreement or any of them, or the announcement of
the execution of, the Purchase and Collaboration Agreement or the Other
Agreements related thereto and the pendency or public disclosure of the Purchase
and Collaboration Agreement or the Watson Transactions; |
|
|
|
|
|
any change in our accounting practices or policies required by United
States GAAP; |
|
|
|
|
any changes, effects or events that result from any action taken
pursuant to or in accordance with the Purchase and Collaboration Agreement, the
Other Agreements contemplated thereby or at the written request of Buyer; |
|
|
|
|
any failure of Columbia to meet estimates or expectations of our
revenues or earnings (it being understood that the facts or occurrences giving
rise or contributing to such failure may be deemed to constitute, or be taken
into account in determining, whether there has been or will be a Material
Adverse Effect); or |
|
|
|
|
any claim, action, suit, arbitration, inquiry, audit, proceeding or
investigation by or before any Regulatory Authority made or brought (whether
before or after the date of the Purchase and Collaboration Agreement) by any of
our
current or former stockholders, arising out of the Purchase and Collaboration
Agreement or the Watson Transactions. |
92
Investigation of Business
Until the Closing, except as otherwise prohibited by applicable law or the terms of any
contract entered into prior to the date of the Purchase and Collaboration Agreement or as would be
reasonably expected to violate our attorney-client privilege, we will afford Buyer and its
representatives reasonable access, during regular business hours and at agreed-upon times, at
Buyers sole cost and expense, to our personnel, properties pertaining to the Assets and the
Assumed Liabilities; provided, that such access shall not unreasonably interfere with our business
and operations.
Conduct of Business Prior to Closing
Until the Closing,
except as expressly permitted by the Purchase and Collaboration
Agreement,
we will conduct our business only in the ordinary course of business consistent with past practice
(including, with respect to Progesterone Products, research and development efforts, advertising,
manufacturing and inventory levels thereof) and use commercially reasonable efforts to keep intact
the Assets and the Business, and preserve the relationships of the Business with customers,
suppliers, licensors, licensees, distributors, sales personnel, regulatory authorities and other
persons, in each case, who are material to the Business. Without limiting the generality of the
foregoing, until the Closing, we will:
|
|
|
use commercially reasonable efforts to keep in full force and effect,
without amendment, all material rights relating to the Business, except those
that expire in accordance with their terms; |
|
|
|
|
use commercially reasonable efforts to comply in all material respects
with all requirements of law and contractual obligations, in each case
applicable to the operation of the Business; |
|
|
|
|
maintain all books and records related to the Business in accordance
with past practice; |
|
|
|
|
not fail to maintain our existing insurance coverage to the extent
relating to the Business in all material respects in effect as of the date of
the Purchase and Collaboration Agreement; and |
|
|
|
|
confer with Buyer prior to (A) effecting any material personnel changes
that would affect Development of the Progesterone Products, (B) amending the
PROCHIEVE PTB Development Plan or otherwise making any material decision with
respect to Development of the Progesterone Products, or (C) entering into any
discussions with, or making any commitments to, any Regulatory Authority with
respect to the Progesterone Products or the Business. |
Without limiting the generality of the covenant described above or as otherwise expressly
permitted by the terms of the Purchase and Collaboration Agreement, from the date of the
93
Purchase and Collaboration Agreement until the Closing, without the prior written consent of Buyer (which
shall not be unreasonably withheld), we will not:
|
|
|
|
declare, set aside or pay any dividend or distribution or other capital
return in respect of any shares of our capital stock, except with respect to
our preferred stock to the extent required by the terms thereof, or redeem,
purchase or acquire any shares of our capital stock other than preferred stock
to the extent required by the terms thereof, in connection with any of our
existing equity plans or in the ordinary course of business consistent with
past practice; |
|
|
|
|
|
subject any Assets to any material security interest, pledge,
hypothecation, mortgage, lien or encumbrance, other than any licenses of
intellectual property rights and encumbrances set forth on a schedule to the
Purchase and Collaboration Agreement; |
|
|
|
|
sell, transfer, lease, sublease, license or otherwise dispose of or
grant any option or rights in, to or under any Assets; |
|
|
|
|
enter into any Material Contract (as defined in the Purchase and
Collaboration Agreement) primarily relating to the Progesterone Products or
terminate (other than in accordance with its terms), extend or amend any such
Material Contract; |
|
|
|
|
abandon, terminate or materially alter the administration of any
Development activities relating to any Progesterone Product (other than for
safety concerns or in accordance with the terms of existing agreements with
respect to such clinical trials) or terminate or materially alter our support
of clinical trials sponsored by clinical investigators with respect to any
Progesterone Product; |
|
|
|
|
abandon, terminate or materially reduce our marketing activities
(including expenditures for promotional activities and sales force activity)
for any Progesterone Product or materially change the size of, or our business
relationship with, the sales force for PROCHIEVE; |
|
|
|
|
commence, sponsor or commit to participate in any clinical trials or
investigator sponsored trials with respect to any Progesterone Product or
provide any clinical grants with respect to any Progesterone Product; |
|
|
|
|
commit to comply with any obligations imposed by a Regulatory Authority
with respect to any Progesterone Product; |
|
|
|
|
abandon any Patents or any litigation seeking to enforce our interest in
any of our intellectual property that is an Asset or Excluded Asset that would
(if not
abandoned) be licensed to Buyer under the terms of the License Agreement other
than in the ordinary course of business consistent with past practice; |
94
|
|
|
to the extent that doing so would relate to the Assets or the Business
and would have a material effect on the Assets or the Business after the
Closing, make any election or change to any election with respect to taxes,
adopt or change any accounting method with respect to taxes, enter into any tax
allocation agreement, tax sharing agreement, tax indemnity agreement or Closing
agreement relating to any tax, settle or compromise on any claim, notice, audit
report or assessment in respect of taxes, consent to any extension or waiver of
the limitation period applicable to any claim or assessment with respect to
taxes, change any annual tax accounting period, file any amended tax return, or
surrender any right to claim a tax refund; or |
|
|
|
|
agree, whether in writing or otherwise, to do any of the foregoing. |
Until the Closing, except as expressly permitted by the Purchase and Collaboration Agreement,
neither Buyer or us will, without the prior written consent of the other party, take any action
that would, or that could reasonably be expected to, result in any of the conditions to the
purchase and sale of the Assets set forth in the Purchase and Collaboration Agreement not being
satisfied.
Trade Inventory
Until the Closing, we will use commercially reasonable efforts to distribute Progesterone
Products to our wholesalers and other customers in quantities such that the volume of Progesterone
Products in the marketplace (including such amounts held by distributors, wholesalers, retailers
and customers) remains at levels consistent with the levels established during the two years
preceding the execution of the Purchase and Collaboration Agreement.
Notifications; Updated Schedules
Prior to the Closing:
|
|
|
Columbia, on the one hand, and Buyer, on the other hand, shall promptly
notify the other party in writing of any fact, change, condition, matter,
circumstance, claim, event or occurrence or nonoccurrence of any event of which
it is aware that will or is reasonably likely to result in any of the
conditions to Closing set forth in the Purchase and Collaboration Agreement
becoming incapable of being satisfied. |
|
|
|
|
We shall give prompt notice to Buyer of (i) the existence, occurrence or
non-occurrence of any fact, change, condition, matter, circumstance, claim or
event the existence, occurrence or non-occurrence of which would cause our
representations or warranties contained in the Purchase and Collaboration
Agreement to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure by us to perform, comply with or satisfy
any covenant, condition or agreement to be performed, complied with or satisfied
by it thereunder. With respect to a notice contemplated by clause (i) above if
the notice expressly acknowledges that the facts, changes, |
95
|
|
|
conditions, matters,
circumstances claims and/or events (occurrence or nonoccurrence of which)
described therein occurred after the date of the Purchase and Collaboration
Agreement and would give rise to the failure of a condition in favor of Buyer
set forth in the Purchase and Collaboration Agreement (a MAE Notice) the
Schedules (the Schedules) included in the disclosure letter delivered to Buyer
in connection with the Purchase and Collaboration Agreement will be deemed to
include the information contained in any such MAE Notice (other than for
purposes of the conditions and termination provisions of the Purchase and
Collaboration Agreement) and no claim may be made by any Buyer Indemnitee for
losses under the Purchase and Collaboration Agreement with respect to any of the
facts, changes, conditions, matters, circumstances, claims or other events (or
the existence, occurrence or nonoccurrence thereof) described in any such MAE
Notice. A notice contemplated by clause (i) (other than a MAE Notice) or clause
(ii) of the first sentence of this paragraph will not be deemed to update the
Schedules or adversely affect Buyers rights with respect to the conditions to
Closing, termination or indemnification under the Purchase and Collaboration
Agreement, including Buyers rights under the Purchase and Collaboration
Agreement. |
|
|
|
We may, by delivery to Buyer, update the Schedules to correct
typographical or immaterial errors and, upon Buyers written approval, any such
updated Schedule shall replace the corresponding Schedule delivered by us in
connection with the execution of the Purchase and Collaboration Agreement. |
Efforts and Actions to Cause the Closing to Occur
Each of the Parties shall use its commercially reasonable efforts, in the most expeditious
manner practicable:
|
|
|
to satisfy or cause to be satisfied all the conditions precedent that
are set forth as conditions to Closing of the Purchase and Collaboration
Agreement, as applicable to each of them; |
|
|
|
|
to cause the Watson Transactions to be consummated; and |
|
|
|
|
without limiting the generality of the foregoing, to obtain all consents
and authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to consummate the Watson Transactions. |
The
Parties shall, and will cause their respective subsidiaries to, at the request of another
Party, take all actions such other Party may reasonably request to transfer the Assets and the
Assumed Liabilities on the terms and conditions of the Purchase and Collaboration Agreement in
connection with the consummation of the Watson Transactions.
96
The Parties will, and will cause their respective subsidiaries to, at the request of another
Party, execute and deliver to such other Party all such further instruments, assignments,
assurances and other documents as such other Party may reasonably request in connection with the
consummation of the Watson Transactions.
Listing
We have agreed to use commercially reasonable efforts to cause the Acquisition Shares to be
listed on the NASDAQ Global Market, or upon such other primary exchange on which shares of our
Common Stock are then listed, upon issuance of the Acquisition Shares, if shares of our Common
Stock are listed upon any such exchange as of the Closing.
Ownership Cap
From the date of the Purchase and Collaboration Agreement until the Closing and after giving
effect to the consummation of the Watson Transactions, neither Buyer nor Watson will (i)
beneficially own (as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the
shares of Common Stock and/or (ii) possess 19.9% or more of our voting power.
Conditions to the Closing(s)
The Closing of the Watson Transactions is subject to customary closing conditions described
below.
Conditions Precedent to Obligations of the Parties at the Closing.
The respective obligations of the Parties to consummate the transactions contemplated by the
Purchase and Collaboration Agreement to be consummated on the Closing are subject to the
satisfaction or waiver (jointly by both Buyer and us) at or prior to the Closing of each of the
following conditions:
|
|
|
No Regulatory Authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Watson Transactions to be consummated on
the Closing. |
|
|
|
|
Our stockholders shall have approved the Asset Sale and the Charter
Amendment. |
|
|
|
|
The Charter Amendment shall have been filed with the Secretary of State
of the State of Delaware. |
97
Conditions Precedent to Buyers Obligations at the Closing.
The obligation of Buyer to consummate the Watson Transactions contemplated to be consummated
on the Closing is subject to the satisfaction at or prior to the Closing of each of the following
additional conditions, any one or more of which may be waived by Buyer in its sole discretion in
writing:
|
|
|
Each of the representations and warranties made by us in the Purchase
and Collaboration Agreement, shall be true and correct as of the date thereof
and as of the Closing as though made on and as of the Closing (unless any such
representation or warranty expressly relates to a particular date, in which
case such representation or warranty shall be true and correct only as of such
date) except where the failure of such representations and warranties to be
true and correct would not, individually or in the aggregate, be expected to
have a Material Adverse Effect. |
|
|
|
|
We shall have performed and complied in all material respects with each
of the covenants, agreements and obligations we are required to perform, at or
prior to the Closing, under the Purchase and Collaboration Agreement. |
|
|
|
|
We shall have made or caused to be made certain deliveries required to
be made by us under the Purchase and Collaboration Agreement. |
|
|
|
|
No Material Adverse Effect shall have occurred since the date of the
Purchase and Collaboration Agreement. |
|
|
|
|
We shall have established the Development Bank Account (as defined
herein). |
Conditions Precedent to our Obligations at the Closing.
Our obligation to consummate the Watson Transactions contemplated by the Purchase and
Collaboration Agreement to be consummated on the Closing is subject to the satisfaction on or prior
to the Closing of each of the following additional conditions, any one or more of which may be
waived by us in our sole discretion in writing:
|
|
|
Each of the representations and warranties of Buyer contained in the
Purchase and Collaboration Agreement shall be true and correct in all material
respects, as of the date of the Purchase and Collaboration Agreement and as of
the Closing as though made on and as of the Closing (unless any such
representation or warranty expressly relates to a particular date, in which
case such representation or warranty shall be true and correct only as of such
date), except where the failure of any representation or warranty to be true
and correct would not prevent or materially delay the consummation of the
Watson Transactions. |
98
|
|
|
Buyer shall have performed and complied in all material respects with
each of the covenants, agreements and obligations Buyer is required to perform
at or prior to the Closing. |
|
|
|
|
Buyer shall have made or caused to be made certain deliveries required
under the Purchase and Collaboration Agreement. |
Conditions Precedent to Obligations of the Parties at the Second Closing.
The respective obligations of the Parties to consummate the transactions contemplated by the
Purchase and Collaboration Agreement to be consummated on the second closing date are subject to
the satisfaction or waiver (jointly by both Buyer and us) at or prior to the second closing date of
each of the following conditions:
|
|
|
Completion of PTB US Development shall have occurred; |
|
|
|
No Regulatory Authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions which are contemplated by
this Purchase and Collaboration Agreement to be consummated on the second
closing date; and |
|
|
|
The Closing shall have occurred. |
Additionally, the respective obligations of the Parties to consummate the transactions
contemplated by the Purchase and Collaboration Agreement to be consummated on the second closing
date are subject to both Parties making certain deliveries and taking certain actions specified in
the Purchase and Collaboration Agreement.
Product Returns, Rebate Charges and Wholesaler Charges
NDC Numbers. Following the Closing, Buyer shall register with FDA to obtain its own National
Drug Code (NDC) numbers with respect to Progesterone Products and shall use commercially
reasonable efforts to have in place as soon as reasonably practicable all resources such that sales
can be accomplished under the NDC numbers of Buyer. Thereafter, Buyer shall use, or cause to be
used, its new NDC numbers on all invoices, orders, drug labels and labeling and other
communications with all customers and regulatory authorities.
Products Returns. Buyer shall be responsible for processing, or causing to be processed, all
Progesterone Product returns requested on or after the Closing, including any returns of
Progesterone Products sold, prior to the Closing. We shall be responsible for refunds owed with
respect to Progesterone Products sold prior to the Closing; provided, however, if the Parties sell
Progesterone Products from the same lot, then we and Buyer shall be responsible for Progesterone
Products sold from such lot in proportion to their pro-rata sales of Progesterone Products from
such lot. (For example, if we sold 80% of a lot prior to the Closing and Buyer sells the remaining
20% of the lot after the Closing, then we shall be responsible for 80% of the
99
refunds owed with respect to such lot.) Buyer shall destroy, or cause to be destroyed, all
such returned Progesterone Products in a manner consistent with applicable law.
Rebate Charges. Buyer shall be responsible for processing, or causing to be processed, all
amounts claimed by or under, or in respect of, Medicaid, state rebate programs, pharmaceutical
benefit management organizations, managed care organizations, and other persons as rebates under
contracts between such parties and Columbia or Buyer, as the context requires (Rebate Charges)
requested on or after the Closing, including with respect to any Progesterone Products sold by us
prior to the Closing. We shall be responsible for Rebate Charges for Progesterone Products sold
prior to the Closing; provided, however, if we and Buyer sell Progesterone Products from the same
lot, then we and Buyer shall be responsible for Rebate Charges for Progesterone Products sold from
such lot in proportion to their pro-rata sales of Progesterone Products from such lot.
Wholesaler Charges. Buyer shall be responsible for processing, or causing to be processed,
all amounts claimed by wholesalers of the Progesterone Products as chargebacks or returns to the
wholesaler under contracts between group purchasing organizations (collectively, GPOs) and us and
amounts claimed by GPOs as administrative or marketing fees under contracts between GPOs and us
(Wholesaler Charges) requested on or after the Closing, including with respect to any
Progesterone Products sold by us prior to the Closing.
Notices. The Parties shall agree upon an appropriate notice with respect to the transfer of
Rebate Charge and Wholesaler Charge submissions to Buyer after the Closing.
Regulatory Matters and the Products
Until
the Closing, we shall be solely responsible for:
|
|
|
|
taking all actions, paying all fees and conducting all communication
with the appropriate Regulatory Authority required by law in respect of
Regulatory Approvals, including preparing and filing all reports (including
adverse drug experience reports, product deviation reports, annual
reports)
with the appropriate Regulatory Authority; |
|
|
|
|
submitting all applications for marketing authorizations of new drugs,
where such authorizations have not yet been granted, and variation of existing
authorizations; and |
|
|
|
investigating all complaints and adverse drug experiences with respect
to Progesterone Products sold pursuant to such regulatory approvals. |
Until the second closing date, we shall be solely responsible for
|
|
|
taking all actions, paying all fees and conducting all communication
with the appropriate Regulatory Authority required by law in respect of
regulatory approvals solely for the PTB Indication, including preparing and
filing all |
100
|
|
|
|
reports (including adverse drug experience reports, product deviation reports,
annual reports) with the appropriate Regulatory Authority; |
|
|
|
|
submitting all applications for marketing authorizations of new drugs
solely for the PTB Indication, where such authorizations have not yet been
granted, and variation of existing authorizations; and |
|
|
|
investigating all complaints and adverse drug experiences with respect
to Progesterone Products sold pursuant to such regulatory approvals. |
The costs incurred by us for activities pursuant to the foregoing shall constitute Development
Costs of Columbia subject to the Seller Development Costs Cap. See Development and the Joint
Development Committee, beginning on page 102.
From
and after the Closing, Buyer, at its cost, shall be solely responsible for taking all
actions and conducting all communication with third parties with respect to Progesterone Products
sold pursuant to such Regulatory Approvals (whether sold before or after transfer of such
regulatory approval), including responding to all complaints in respect thereof, including
complaints related to tampering, contamination or counterfeiting.
We shall provide Buyer with such data as is reasonably necessary to comply with Buyers
reporting obligations for Best Price (as defined at 42 U.S.C. § 1396r-8(c)(1)(C)), Average
Manufacturers Price (as defined at 42 U.S.C. § 1396r-8(k)(1)) and Average Sales Price (as defined
at 42 U.S.C. § 1395w-3(a)(c)) for such period as is reasonably necessary, not to exceed one year
after the Closing.
From and after the Closing, Buyer promptly (and in any event within the time periods required
by law) shall notify us within three business days if Buyer receives a complaint or a report of an
adverse drug experience with respect to Progesterone Products. In addition, Buyer shall cooperate
with our reasonable requests and assist us in connection with the investigation of and response to
any complaint or adverse drug experience related to Progesterone Products sold by Buyer.
From
and after the Closing, Buyer shall be responsible for:
|
|
|
conducting all voluntary and mandatory recalls of units of Progesterone
Products sold pursuant to such regulatory approvals (whether sold before or
after transfer of such regulatory approval), including recalls required by any
Regulatory Authority and recalls of units of Progesterone Products sold by us
deemed necessary by us in its reasonable discretion; |
|
|
|
conducting all communications and submitting all required reports to any
Regulatory Authority concerning the recalls; and |
|
|
|
notifying customers and consumers about the recalls. |
101
We promptly shall notify Buyer in the event that a recall of Progesterone Products sold by us
is necessary. We shall be responsible for all costs associated with recalls of Progesterone
Products sold prior to Closing; provided, however, if Buyer and us sell Progesterone Products from
the same lot, then Buyer and us shall be responsible for the cost of recalls of Progesterone
Products sold from such lot in proportion to their pro-rata sales of Progesterone Products from
such lot.
The Parties each agree to promptly prepare and file whatever filings, requests or applications
are required or deemed advisable to be filed with any Regulatory Authority in connection with the
Watson Transactions and transfer and assumption of the regulatory approvals and to cooperate with
one another as reasonably necessary to accomplish the foregoing.
Tax Matters
All transfer, documentary, sales, use, stamp, registration, value added, recording and other
similar taxes and fees (including any penalties and interest) incurred as a result of the
transactions contemplated by the Purchase and Collaboration Agreement will be paid equally by us,
on the one hand, and Buyer, on the other hand. The Party having responsibility for the payment of
such taxes will prepare and file all necessary tax returns and other documentation.
The Parties agree to reasonably cooperate on certain tax matters, including in connection with
the preparation and filing of tax returns and in connection with any tax audit or tax litigation.
The Parties agree to allocate, between pre- and post-Closing tax periods, certain property
taxes levied with respect to the Assets. In general, we will be responsible for such pre-Closing
property taxes and Buyer will be responsible for such post-Closing property taxes.
Development and the Joint Development Committee
Development Generally; Development Plan.
The Parties respective responsibilities for the Development (as defined below) of the
Progesterone Products shall be set forth in the Development Plan (as defined below), subject to the
Purchase and Collaboration Agreement. All Development activities will be overseen and supervised
by the Joint Development Committee, as described below.
The Parties will establish and, from and after the Closing, actively maintain and update a
Development plan for the Development of the Progesterone Products (the Development Plan),
including a Development budget therefor (the Development Budget). The Development Plan will
include a Development plan for the Development by us of PROCHIEVE for the PTB Indication (the
PROCHIEVE PTB Development Plan). In addition to the PROCHIEVE PTB Development Plan, the
Development Plan shall include detailed plans and timelines for the Development of Second
Generation Products after the Closing through the projected date of regulatory approval in each of
(1) United States, (2) at least one of France, Germany or the United Kingdom, (3) Japan, and (4)
at least one of Brazil, Russia, India, or China (the Major Territories) of a Second Generation
Product (as defined below) for the PTB Indication. Buyer shall prepare and the Joint Development
Committee shall approve a full Development Plan
102
within 60 days of the Closing. The Development Plan and Development Budget may be updated
from time to time after Closing by the Joint Development Committee as described below.
Second Generation Product means a Progesterone Product to
be administered utilizing the Second Generation Delivery System or another system
for delivering a drug or other biological or chemical product to a human or animal subject,
including any oral formulation, patch, gel, progressive hydration tablet or other drug delivery
technology approved by the Joint Development Committee.
Development of PROCHIEVE for the PTB Indication
From and after the Closing until the second closing date, we will be responsible for
Progesterone Product Development activities related to PROCHIEVE for the PTB Indication as set
forth in the PROCHIEVE PTB Development Plan, including the conducting of the PREGNANT Study. We shall
use commercially reasonable efforts to retain our employees who are responsible for, or tasked
with, achievement of the regulatory approval for a PTB Product (the PTB Product Team) until the
second closing date. If, due to the departure of one or more of our employees, the capabilities of
the PTB Product Team are materially adversely impacted prior to the second closing date, we shall
use commercially reasonable efforts promptly to replace any such employee(s). All Development
Costs (as defined below) in connection with such Product Development activities incurred by or on
behalf of us from and after the Closing will be borne by us;
provided, that, notwithstanding any
other provision of the Purchase and Collaboration Agreement or in the Other Agreements and
notwithstanding any amendments or updates to the Development Plan, we shall be required to bear no
more than $7,000,000 in such Development Costs (the Seller
Development Costs Cap); and provided,
further, that, if Buyer requests an increase in the size of the PREGNANT Study, any costs related to
such increase, in excess of what is contemplated in the Development Plan, shall be borne by Buyer.
All such Development Costs incurred by us and reasonably documented after January 1, 2010 shall
count towards the Seller Development Costs Cap. All Development Costs in excess of the Seller
Development Costs Cap will be borne by Buyer.
On the Closing, we will establish a separate bank account at a nationally recognized financial
institution (the Development Bank Account) for the purpose of paying Development Costs. The
initial balance of the Development Bank Account will be equal to the excess of (A) the Seller
Development Costs Cap minus (B) the amount of reasonably documented Development Costs incurred by
us after January 1, 2010 through the Closing. Until the earlier of the time that (x) we have
fulfilled our responsibilities set forth in the Development Plan and Development Budget and (y) we
have incurred an amount of Development Costs (including any reasonably documented Development Costs
incurred by us after January 1, 2010 and prior to the Closing) equal to the Seller Development
Costs Cap (the Seller Expense Period), the funds in the Development Bank Account shall be used
exclusively for the payment of Development Costs. We shall provide to Buyer full access to review
the balances in the Development Bank Account on a current basis during the Seller Expense Period.
103
Lifecycle Management
The
Parties Development activities include, and the Development
Plan will reflect, an
active and sustained program with respect to the lifecycle management of Progesterone Products
(including Development of a Second Generation Product under the supervision of the Joint
Development Committee). Buyer will be responsible for all Development activities and Development
costs associated therewith, provided, that any such activities may be allocated to us, at Buyers
cost, with the mutual agreement of the Parties.
Columbia Development Activities
We shall use commercially reasonable efforts to timely and diligently conduct all Development
activities with respect to the Progesterone Products that are designated as our responsibility in
the Purchase and Collaboration Agreement or the Development Plan (the Columbia Development
Activities). All Columbia Development Activities shall be conducted by us in accordance with the
Development Plan.
No less than five business days prior to each scheduled meeting of the Joint Development
Committee, we will provide the Buyer members of the Joint Development Committee with a written
report on the status and progress of the Columbia Development Activities, which reports shall
include information on progress versus plan, spend versus budget (quarterly), protocol deviations,
notable safety and efficacy findings (including serious adverse events and events of interest from
risk management perspective), inspection, audit findings, and summaries of all interactions, and
copies of all correspondence, with regulatory authorities since the previous report.
In addition, we shall make available to Buyer such information about the Columbia Development
Activities as may be reasonably requested by Buyer from time to time.
Buyer shall have the right to review any data generated by us during the conduct of the
Columbia Development Activities, as may be reasonably requested by Buyer from time to time.
We shall promptly inform Buyer in writing about any unforeseen and/or material results,
problems, difficulties or issues in connection with the Columbia Development Activities or of which
we are otherwise aware with respect to the Development of the Progesterone Products.
We shall
notify Buyer promptly upon scheduling, and provide Buyer with five
days notice, of
any Regulatory Authority meetings with FDA or the European Medicines Agency or any successor
European governmental agency thereto (the EMEA) held by us for a Progesterone Product, and Buyer,
at its option, may attend such meetings.
Buyer Development Activities
Buyer shall use commercially reasonable efforts to timely and diligently conduct all
Development activities with respect to the Progesterone Products that are designated as Buyers
responsibility in the Purchase and Collaboration Agreement or the Development Plan (Buyer
Development Activities). Without limiting the foregoing, Buyer shall use commercially reasonable
efforts to achieve each of the milestones set forth in the Purchase and Collaboration
104
Agreement
as soon as practicable, it being acknowledged that, prior to the second closing date,
conducting of the PREGNANT Study and Development efforts with respect to the achievement of the NDA
Acceptance Milestone shall be our responsibility. All Buyer Development Activities shall be
conducted by Buyer in accordance with the Development Plan.
No less than five business days prior to each scheduled meeting of the Joint Development
Committee, Buyer will provide the Columbia members of the Joint Development Committee with a
written report on the status and progress of Buyer Development Activities, which reports shall
include information on progress versus plan, spend versus budget (quarterly), protocol deviations,
notable safety and efficacy findings (including serious adverse events and events of interest from
risk management perspective), inspection, audit findings, and summaries of all interactions, and
copies of all correspondence, with regulatory authorities since the previous report.
In addition, Buyer shall make available to us such information about Buyer Development
Activities as may be reasonably requested by us from time to time.
We shall have the right to review any data generated by Buyer during the conduct of Buyer
Development Activities, as may be reasonably requested by us from time to time.
Buyer shall promptly inform us in writing about any unforeseen material results, problems,
difficulties or issues in connection with the Buyer Development Activities or of which Buyer is
otherwise aware with respect to the Development of the Progesterone Products.
Buyer shall notify us promptly upon scheduling, and provide us with five days notice, of any
Regulatory Authority meetings with FDA or EMEA held by Buyer or its affiliate for a Progesterone
Product and we, at our option, may attend such meeting.
Development Costs Reporting and Payment
Each Party shall prepare and deliver to the other Party quarterly written reports in a form
approved by the Joint Development Committee setting forth all Development Costs incurred in the
performance of all Development activities, as set forth in the Purchase and Collaboration Agreement
and the Development Plan in the applicable calendar quarter by such Party on an
activity-by-activity basis. Such quarterly reports shall be submitted within 30 days after the end
of the relevant calendar quarter for review by the Joint Development Committee and we will include
in each such report an original invoice for Development Costs incurred by us or our subsidiaries
payable under the Purchase and Collaboration Agreement, and Buyer shall pay us all such amounts within 30 days from the date of receipt
by Buyer of the applicable invoice.
Compliance
Each Party agrees that in performing its Development obligations under the Purchase and
Collaboration Agreement (a) it shall comply with all applicable current international regulatory
standards, including cGMP, cGLP, cGCP and other rules, regulations and requirements and (b) it will
not employ or use any person that has been debarred under Section 306(a) or 306(b) of the United
States Federal Food, Drug and Cosmetic Act.
105
Regulatory
The Joint Development Committee shall determine plans and strategies for seeking regulatory
approvals for Progesterone Products.
The Party responsible for Development of a Progesterone Product shall also be responsible for
making all regulatory filings and seeking regulatory approval for such Progesterone Product in the
applicable jurisdiction(s) and be responsible for conducting all meetings with regulatory
authorities in connection therewith.
Buyer shall fully cooperate with and provide assistance to us in connection with filings to
any Regulatory Authority relating to the Progesterone Products, including by executing any required
documents, providing access to personnel and providing such Party with copies of all reasonably
required documentation.
To the extent required, each Party shall grant or cause to be granted to the other and its
affiliates or sublicensees cross-reference rights to any relevant drug master files and other
filings submitted by such Party or its affiliates with any Regulatory Authority relevant to the
Progesterone Products. In countries where cross-reference rights are deemed insufficient, each
Party shall assist the other in preparing and providing the relevant regulatory authorities with
equivalent Regulatory Filings which will include, with respect to any Progesterone Product, any
submission to a federal, state or local Regulatory Authority, regulatory agency or other
governmental body, including the FDA and EMEA (Regulatory Authority) of any appropriate
regulatory application and shall include, without limitation, any submission to a regulatory
advisory board, marketing authorization application, and any supplement or amendment thereto,
including any Investigational New Drug Application, New Drug Application, MAA or the corresponding
application in any other country or group of countries, in order to enable such other Party to
comply with its regulatory obligations and obtain the relevant regulatory approvals.
Joint Development Period
With limited exception, our role in the Development of Progesterone Products as contemplated
by the Purchase and Collaboration Agreement, including our participation in the Joint Development
Committee and our rights and obligations in relation thereto, shall terminate upon termination of
the period beginning on the Closing and ending on such date as the Parties mutually decide to cease
joint activities with respect to Development of Progesterone Products (the Joint Development
Period); provided, that either Party may terminate the Joint Development Period by written notice
to the other Party at any time after the fifth anniversary of the Closing; provided, that such
termination shall not limit or restrict any of either Partys rights or obligations accrued prior
to such termination.
The Parties will establish a Joint Development Committee, composed of three senior
executives of Columbia and three senior executives of Buyer, two of which will have responsibility
for Development activities within the appointing Partys organization. Prior to the Closing, each
Party will designate its initial members to serve on the Joint Development Committee and notify the
other Party of the dates of availability for the first meeting of the Joint
106
Development Committee. Each Party may replace its representatives on the Joint Development
Committee on written notice to the other Party.
The Joint Development Committee will oversee and supervise all Development activities for
Progesterone Products by the Parties pursuant to the Purchase and
Collaboration Agreement. Without limiting the foregoing,
the Joint Development Committee shall: (A) review the Development Plan and Development Budget no
less frequently than once per calendar year and consider and approve any proposed amendments or
updates thereto; (B) be responsible for monitoring and reviewing the activities of the Parties in
connection with Development of Progesterone Products under the Development Plan and assessing
overall performance and compliance by the Parties with the Development Plan; (C) determine any
matter within the Joint Development Committees responsibility delegated to any sub-committees
established pursuant to the Purchase and Collaboration Agreement with respect to which such
sub-committees have been unable to reach agreement; (D) perform any other activities related to the
Development Plan as jointly requested by both Parties from time to time; (E) be solely responsible
for approving any submission to the FDA of the PTB NDA or PTB Supplemental NDA; (F) be solely
responsible for approving any amendments, modifications, supplements or updates to the PTB NDA or
PTB Supplemental NDA; (G) be solely responsible for negotiating
and accepting the PTB US Approval;
and (H) consider and act upon such other matters as specified in the Purchase and Collaboration
Agreement.
Meetings of the Joint Development Committee
The Joint Development
Committee shall meet on a quarterly basis and at such other times as the
Parties may agree, with at least 30 days advance written notice to each Party. The first meeting
of the Joint Development Committee shall be held as soon as reasonably practicable, but in no event
later than 30 days following the Closing. Meetings shall be held face to face at such dates and
places as are mutually agreed or by teleconference or videoconference should the members of the
Joint Development Committee mutually decide. Unless otherwise agreed by the Parties, all in-person
meetings of the Joint Development Committee shall be held on an alternating basis between our
facilities and Buyers facilities.
Each Party may from time to time invite a reasonable number of participants, in addition to
its representatives, to attend Joint Development Committee meetings, with the consent of the other
Party (which shall not be unreasonably withheld); provided, that, if either Party intends to have
any third party (including any consultant) attend such a meeting, such third party will be subject
to the prior approval of the other Party and must be bound by a confidentiality agreement
acceptable to both Parties.
Buyer shall appoint one of its representatives on the Joint Development Committee to act as
chairperson of the Joint Development Committee. The chairperson shall set agendas for Joint
Development Committee meetings; provided that the agendas will include any reasonable matter
requested by either Party. The chairperson shall be responsible for recording, preparing and,
within a reasonable time, issuing minutes of each Joint Development Committee meeting, which draft
minutes shall be subject to review and comment by the Parties.
107
In order to have a quorum for the conduct of business at any Joint Development Committee
meeting, at least one representative of each Party must be present.
Decision Making
Decisions of the Joint Development Committee shall be made by unanimous vote, with each
Partys representatives to the Joint Development Committee collectively having one vote. In the
event of a disagreement among the Joint Development Committee with respect to a matter to be
decided by the Joint Development Committee as specified herein, the matter shall be referred to
Senior Officers (Columbias Chief Executive Officer and Watsons Chief Executive Officer) who
shall attempt in good faith to resolve such disagreement. If they cannot resolve such issue within
30 days of the matter being referred to them, then, subject to the paragraph below, the resolution
and/or course of conduct shall (x) in the case of decisions made in respect of matters described in
clauses (E) and (G) of the last sentence of the final paragraph in subsection Joint
Development Period, be determined by Buyer in its sole discretion and (y) in all other cases, be
determined by Buyer in its reasonable discretion.
Notwithstanding the foregoing, in no event shall Buyer in exercising its final decision-making
authority described above have the right:
|
|
|
to modify or amend the terms and conditions of the Purchase and
Collaboration Agreement or to determine any such issue in a manner that would
conflict with the express terms and conditions of the Purchase and
Collaboration Agreement; or |
|
|
|
|
to approve or adopt any amendment, modification or update to the
Development Plan or Development Budget or take any other action that would (A)
unilaterally impose an obligation (financial or otherwise) on Columbia beyond
those expressly provided in the Purchase and Collaboration Agreement, (B)
excuse Buyer from any of its obligations specifically enumerated under the
Purchase and Collaboration Agreement, or (C) reduce the rights of Columbia
specifically enumerated under the Purchase and Collaboration Agreement. |
Sub-Committees
The Joint Development Committee may, at any time it deems necessary or appropriate, establish
additional joint committees and delegate such of its responsibilities as it determines appropriate
to such joint committees.
In the event of a disagreement among the members of any such joint committee, the matter shall
be referred to the Joint Development Committee for resolution pursuant to the Purchase and
Collaboration Agreement.
Develop or Development means activities directly and specifically relating to the pre-clinical
and clinical drug development of a Progesterone Product or the updating or review of the
Progesterone Product labeling, including test method development and stability testing, assay
108
development, toxicology, formulation, quality assurance/quality control development, statistical
analysis, pharmacokinetic studies, clinical trials (including, without limitation, research to
design clinical trials) and any other research and development activities with respect to a
Progesterone Product.
Development Costs include expenses and other costs, including regulatory expenses, incurred by or
on behalf of a Party or its affiliates in connection with the Development of the Progesterone
Products in accordance with the applicable approved Development Plan (including the Development
Budget) in accordance with GAAP (or other internationally recognized accounting standard used by
such Party), including, without limitation, the costs of clinical trials, the preparation of
medical writing and publishing on the data and results obtained from such clinical trials. Without
limiting the generality of the foregoing, Development Costs include, to the extent included in the
scope described above:
|
|
|
all out-of-pocket costs incurred by the Parties or their affiliates,
including payments made to third parties with respect to any of the foregoing; |
|
|
|
|
|
the cost of clinical supply, including without limitation (i) costs of
manufacturing or procuring clinical supplies, including reasonable costs
incurred in connection with the development of the manufacturing process for
such clinical supplies, but excluding any capital expenditures or qualification
or validation expenses relating to any manufacturing facility and (ii) expenses
incurred to purchase and/or package placebos and comparator drugs, and costs
and expenses of disposal of clinical samples; and |
|
|
|
|
|
|
the costs of Regulatory Filings. |
|
Commercialization and the Joint Commercialization Committee
Commercialization Generally
With limited exception, Buyer shall be solely responsible to Commercialize the Progesterone
Products from and after the Closing. All Commercialization activities shall be conducted in
accordance with the terms of the Purchase and Collaboration Agreement. Buyer shall use
commercially reasonable efforts to Commercialize Progesterone Products in order to maximize Net
Sales during the period starting on the Closing and ending, on a country-by-country basis, upon
expiration of the later to expire of the Royalty Product Term or the PTB Royalty Product Term, as
applicable, in such country.
Compliance with Laws
In connection with all Commercialization activities under the Purchase and Collaboration
Agreement, Buyer and all of its sales representatives shall comply with all applicable rules,
regulations and requirements, including the Office of Inspector General Compliance Program Guidance
for Pharmaceutical Manufacturers, April 2003, PDMA, state laws and regulations governing the
storage and distribution of pharmaceutical samples and aggregate spending on physician gifts,
entertainment and expenses, the PhRMA Code, Sec. 1128B(b) of the Social
109
Security Act, the AMA Guidelines on Gifts to Physicians from Industry, the Office of Inspector
General Compliance Program Guidance for Pharmaceutical Manufacturers, HIPAA and all other
applicable laws.
Promotional Materials
Buyer shall be responsible for developing and disseminating all promotional, advertising,
communication and educational materials relating to the Commercialization of the Progesterone
Products.
Launch
Buyer shall or shall cause its affiliates, agents, licensees, sublicensees or distributors to
Launch the PTB Product in the United States within six months after receipt of the PTB US Approval.
Potential Partners Ex-U.S.
To the extent Buyer or any affiliate thereof is not seeking Regulatory Approval or
Commercializing any Royalty Products or PTB Royalty Products in a country outside the United States
and has no current plans to do so, we will be entitled to seek proposals from third parties to
Develop and/or Commercialize Royalty Products and/or PTB Royalty Products in such country. Prior
to initiating efforts to identify or solicit proposals from third parties, we shall notify the
Buyer of our intent to do so. In such event Buyer shall cooperate with us in such efforts,
including providing us or any third party such information and data regarding the Progesterone
Product as may be reasonably requested by us or such third party, subject to such third party
entering into a confidentiality agreement on terms approved in writing by Buyer (such approval not
to be unreasonably withheld). Any proposals submitted by any such third party shall be reviewed
and discussed by the Joint Commercialization Committee, provided that any decision whether or not
to pursue any such proposals shall be subject to the approval of Buyer. For the avoidance of
doubt, any activities of ours contemplated by the foregoing shall not constitute a breach of our
covenant not to compete under the Purchase and Collaboration Agreement.
Joint Commercialization Committee
The Parties will establish a Joint Commercialization Committee composed of one of our
representatives and such number of representatives of Buyer as it shall determine, in its
discretion. Prior to the Closing, each Party will designate its initial members to serve on the
Joint Commercialization Committee and notify the other Party of the dates of availability for the
first meeting of the Joint Commercialization Committee. Each Party may replace its representatives
on the Joint Commercialization Committee on written notice to the other Party.
The Joint Commercialization Committee will provide a means for the exchange of information
between the Parties regarding Commercialization activities for Progesterone Products. Without
limiting the foregoing, at each annual meeting of the Joint Commercialization Committee, the
Committee shall review and discuss Buyers Commercialization activities with respect to
Progesterone Products during the prior year and review and discuss Buyers planned
110
Commercialization activities for the next year. In furtherance thereof, at least 14 days
prior to each annual meeting of the Joint Commercialization Committee, Buyer shall provide us a
Commercialization presentation covering sales forecasts and the annual marketing plan, including
sales force allocations and activities. The Joint Commercialization Committee shall also review
and discuss opportunities or proposals to grant any license, sublicense, distribution or marketing
rights to any third party to Commercialize any Royalty Products or PTB Royalty Products in any
country outside the United States from time to time.
Meetings of the Joint Commercialization Committee
The Joint Commercialization Committee shall meet on an annual basis, from time to time at our
request for the purposes contemplated above under Potential Partners Ex-U.S., and at such other
times as the Parties may agree, with at least 30 days advance written notice to each Party. The
first meeting of the Joint Commercialization Committee shall be held as soon as reasonably
practicable, but in no event later than 90 days following the Closing. Meetings shall be held face
to face at such dates and places as are mutually agreed or by teleconference or videoconference
should the members of the Joint Commercialization Committee mutually decide. Unless otherwise
agreed by the Parties, all in-person meetings of the Joint Commercialization Committee shall be
held at an alternating basis between our facility and Buyers facilities.
Each Party may from time to time invite a reasonable number of participants, in addition to
its representatives, to attend Joint Commercialization Committee meetings in a non-voting capacity,
with the consent of the other Party (which shall not be unreasonably
withheld); provided, that, if
either Party intends to have any third party (including any consultant) attend such a meeting, such
third party will be subject to the prior approval of the other Party and must be bound by a
confidentiality agreement acceptable to both Parties.
Decision Making
The Joint Commercialization Committee shall have no decision-making authority and the
Commercialization of the Progesterone Products from and after the Closing shall be in accordance
with the Purchase and Collaboration Agreement.
Non-Compete
During the Joint Development Period and for a period of two years thereafter (the Non-Compete
Period), we and our subsidiaries and any successor to all or substantially all of our assets,
taken as a whole, shall not, directly or indirectly: (1) engage in the manufacture, Development or
Commercialization anywhere in the world (A) of products containing Progesterone, or (B) any other
products which are approved or being Developed for any pre-term birth indication ((i) and (ii),
collectively, Competing Activities); or (2) engage in, own, manage, operate, advise, control or
in any way participate in the ownership, management, operation, financing or control of any
business engaged in Competing Activities (a Competing Business). The restrictions described
above shall not be construed to preclude, prohibit or restrict:
111
|
|
|
us, from performing our obligations under the Purchase and Collaboration
Agreement or the Other Agreements; |
|
|
|
|
any investment by us or our subsidiaries in any class of publicly traded
debt or equity securities of any Competing Business so long as we do not hold
at any time during such period more than 5% of such class of issued and
outstanding voting securities of such publicly traded company, and so long as
we do not otherwise exercise any management or control with respect to such
Competing Business; or |
|
|
|
|
certain other agreed upon activities. |
No Solicitation of Other Offers
From the execution date of the Purchase and Collaboration Agreement until the Closing or, if
earlier, the termination of the Purchase and Collaboration Agreement, we shall not, and cause our
subsidiaries not to, and will use commercially reasonable efforts to cause our representatives not
to, directly or indirectly:
|
|
|
solicit, initiate or knowingly or intentionally facilitate any inquiry
with respect to, or the making, submission or announcement of, any Acquisition
Proposal (as defined below) or any proposal that would reasonably be expected
to lead to any Acquisition Proposal; |
|
|
|
|
furnish to any person any non-public information relating to us or any
of our subsidiaries in connection with an Acquisition Proposal, except as
permitted below; |
|
|
|
|
participate or engage in discussions or negotiations with any person
with respect to any Acquisition Proposal, except to notify such person as to
the existence of the provisions of the Purchase and Collaboration Agreement or
to the extent specifically permitted below; |
|
|
|
|
approve, endorse or recommend any Acquisition Proposal, except as
permitted below; or |
|
|
|
|
enter into any letter of intent or similar document or any agreement,
commitment or understanding contemplating or otherwise relating to any
Acquisition Proposal or a transaction contemplated thereby, except as permitted
below. |
Without limiting the foregoing, we agreed that any violation of the restrictions described in
the preceding sentence by any of our representatives or subsidiaries shall be a breach of the
Purchase and Collaboration Agreement by us. Pursuant to the Purchase
and Collaboration Agreement, on the date of the Purchase and
Collaboration Agreement, we agreed to, and agreed to cause
each of our subsidiaries to, immediately
cease, and use commercially reasonable efforts to cause our representatives to terminate any
solicitation, discussion or negotiation with any persons conducted by us or our subsidiaries or
112
any of our representatives prior to the date of the Purchase and Collaboration Agreement with
respect to any Acquisition Proposal.
Notwithstanding anything to the contrary described above, if at any time following the date of
the Purchase and Collaboration Agreement and prior to the earlier of obtaining the (i) adoption of
a resolution by the holders of our outstanding capital stock having a majority of the Voting Power
associated with all shares of our outstanding capital stock approving the sale and transfer of the
Assets and the Assumed Liabilities pursuant to the Purchase and Collaboration Agreement, and
approval of the Charter Amendment by the (x) holders of a majority of the outstanding shares of the
Common Stock and (y) holders of our capital stock having a majority of the Voting Power associated
with all shares of our outstanding capital stock (the Required Seller Stockholder Vote) and (ii)
the termination of the Purchase and Collaboration Agreement (1) we have fully complied with our
obligations described in the paragraph above and have received an Acquisition Proposal from any
person or group (as determined under Section 13(d)(3) of the Exchange Act) that our board of
directors believes in good faith to be bona fide, and (2) our board of directors determines in good
faith, after consultation with its financial advisors and outside counsel, that such Acquisition
Proposal constitutes or may reasonably be expected to result in a Superior Proposal (as defined
below), then we may:
|
|
|
furnish information (including non-public information) with respect to
us and our subsidiaries to the person or group making such
Acquisition Proposal; |
|
|
|
|
participate in discussions or negotiations with the person or group
making such Acquisition Proposal regarding such Acquisition Proposal; provided, that we: |
|
|
|
will not, and will not allow our subsidiaries to (and will use
commercially reasonable efforts to cause our representatives not to), disclose
any non-public information to such person or group without first entering or
having entered into a confidentiality agreement with such person or group that
is at least as restrictive on such person or group as that certain Mutual
Non-Disclosure Agreement, dated as of April 15, 2009, between us and Watson
(including any amendments or supplements thereto) is on Buyer; and |
|
|
|
|
will promptly provide to Buyer any material non-public information
concerning us or our subsidiaries provided by us to such other person or group
which was not previously made available to Buyer, except to the extent
restricted by applicable laws. |
We will promptly (within 48 hours of, or the next business day immediately following, if
later) notify Buyer in the event that any of us, our subsidiaries or our representatives receives
any Acquisition Proposal or written indication by any person or group that it is considering making
an Acquisition Proposal and shall disclose to Buyer the identity of the other person making such
Acquisition Proposal. We will keep Buyer informed (orally and in writing) on a current basis of
the occurrence of any material changes or developments of the status of any such Acquisition
Proposal or written indication (including the material terms and conditions thereof and of any
material modification thereto), and any material developments related thereto.
113
Notwithstanding the foregoing paragraphs, our board of directors may, at any time prior to
obtaining the Required Seller Stockholder Vote, withdraw, modify or qualify, or propose publicly to
withdraw, modify or qualify, in a manner adverse to Buyer, the Seller Board Recommendation its
unanimous:
|
|
|
determination that the sale of the Assets and the transfer of the
Assumed Liabilities on the terms and subject to the conditions of the Purchase
and Collaboration Agreement are expedient and in the best interests of
Columbia; |
|
|
|
|
approval of the sale and issuance of the Acquisition Shares on the terms
and subject to the conditions of the Purchase and Collaboration
Agreement; |
|
|
|
|
determination that the approval of the Charter Amendment is advisable
and in the best interests of our stockholders; |
|
|
|
|
approval of the Purchase and Collaboration Agreement and the Watson
Transactions; and/or |
|
|
|
|
its resolution to recommend the approval of the asset sale contemplated
by the Purchase and Collaboration Agreement, the Charter Amendment (the Seller
Board Recommendation) and/or endorse or recommend to our stockholders any
Superior Proposal (a Change of Board Recommendation) if, but only if: |
|
|
|
our board of directors concludes in good faith, after consultation with
outside counsel, that failure to take such action would be inconsistent with
its fiduciary obligations under applicable law; and |
|
|
|
|
|
in the case of any Superior Proposal, we have given Buyer five business
days prior written notice that the board of directors intends to make a Change
of Board Recommendation (the Superior Proposal Notice) and for a period of
not less than five business days after Buyers receipt of such Superior
Proposal Notice, we will, if requested by Buyer, negotiate in good faith with
Buyer to revise the Purchase and Collaboration Agreement so that the
Acquisition Proposal that constituted a Superior Proposal no longer constitutes
a Superior Proposal (a Former Superior Proposal). |
|
The terms and conditions described herein will again apply to any inquiry or proposal made by
any person who withdraws a Superior Proposal or who made a Former Superior Proposal (after
withdrawal or after such time as their proposal is a Former Superior Proposal). We may, if we
receive an Acquisition Proposal, delay the mailing of this proxy statement and/or the holding of
the Special Meeting of our stockholders to provide a reasonable opportunity for our board of
directors to consider such Acquisition Proposal and to determine the effect of the same, if any, on
the Seller Board Recommendation, which is included herein.
114
Nothing contained in the Purchase and Collaboration Agreement will prohibit our board of
directors from disclosing the fact that our board of directors has received an Acquisition Proposal
and the terms of such Acquisition Proposal, if our board of directors determines, after
consultation with its outside legal counsel, that:
|
|
|
failure to make such disclosure would be inconsistent with its fiduciary
duties under applicable law or |
|
|
|
|
we are otherwise required to make such disclosure. |
Acquisition Proposal means any inquiry, offer or proposal, or any
indication of interest in making an offer or proposal, made by a person or
group at any time which is structured to permit such person or group to acquire
beneficial ownership of any Assets or at least 25% of the assets of, or equity
interest in, us and our subsidiaries, taken as a whole, pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer or exchange offer or similar transaction, in each
case other than the Watson Transactions, and |
|
Superior Proposal means any bona fide Acquisition Proposal made by a
person or group (except that references in the definition thereof to at least
25% of the assets of, or equity interest in, us and our subsidiaries, taken as
a whole, shall be replaced by more than 50% of the assets of, or equity
interests in, us and our subsidiaries, taken as a whole,) in each case other
than the Watson Transactions, made in writing that our board of directors has
determined in its good faith judgment (after consultation with its financial
advisors and outside counsel and after taking into account all legal,
financial, regulatory and other aspects of the proposal, including the
financing terms thereof) is more favorable to us and/or our stockholders than
the Watson Transactions. |
Notwithstanding anything to the contrary contained herein, in no event shall any acquisition
by any person or group from us at any time after the termination of this Agreement of any equity
securities (as defined in Section 2(a)(1) of the Securities Act) of us constitute an Acquisition
Proposal or a Superior Proposal if our board of directors shall in good faith determine that such
acquisition is made in connection with a bona fide financing or capital raising arrangement (an
Equity Financing), nor shall any agreement entered into by any person or group with us after the
termination of the Purchase and Collaboration Agreement in connection with or relating to an Equity
Financing constitute an Acquisition Proposal or a Superior Proposal.
Notwithstanding anything to the contrary contained in the Purchase and Collaboration
Agreement, our obligation to call, give notice of, convene and hold the Special Meeting of our
stockholders and to hold a vote of our stockholders on the asset sale contemplated by the Purchase
and Collaboration Agreement and the Charter Amendment will not be limited or
115
otherwise affected by the commencement, disclosure, announcement or submission to it of any
Acquisition Proposal (whether or not a Superior Proposal), or by any Change of Board
Recommendation. We have agreed that we will not submit to the vote of our stockholders any
Acquisition Proposal (whether or not a Superior Proposal) or propose to do so.
Termination of the Purchase and Collaboration Agreement
The Purchase and Collaboration Agreement may be terminated prior to the Closing:
|
|
|
at any time before the Closing by mutual written consent of the Parties; or |
|
|
|
|
by either Party, by delivery of written notice of termination to the
other, if the Closing has not occurred on or before the Outside Date; provided, that such failure is not due to the failure of the
Party seeking to terminate the Purchase and Collaboration Agreement to comply
in all material respects with its obligations under the Purchase and
Collaboration Agreement; or |
|
|
|
|
by either Party, by delivery of written notice of termination to the
other, if our Special Meeting of the stockholders is held and the Required
Seller Stockholders Vote is not obtained at the Seller Stockholders Meeting
(or at any adjournment thereof); or |
|
|
|
|
|
by either Party, by delivery of written notice of termination to the
other, if any Regulatory Authority of competent jurisdiction shall have issued
an order, decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Watson Transactions and such order,
decree, ruling or other action shall have become final and non-appealable;
provided, that, in order for either party to seek to terminate the Purchase and
Collaboration Agreement pursuant to this reason, it must have used its
commercially reasonable efforts to lift and rescind such order, decree, ruling
or other action. |
|
The Purchase and Collaboration Agreement may be terminated by us prior to the Closing by
delivery of a written notice of termination to Buyer, if:
|
|
|
|
(A) any representation or warranty of Buyer set forth in the Purchase and
Collaboration Agreement shall have become untrue, (B) such misrepresentation is
not capable of being cured prior to the Outside Date and (C) as a result of the
preceding clauses (A) and (B), the closing conditions with respect to the
accuracy of Buyers representation and warranties are not capable of being met;
or |
|
|
|
|
|
|
(A) a material breach of any covenant or obligation in the Purchase and
Collaboration Agreement has been committed by Buyer, (B) such breach has not
been waived by us and such breach is not cured by Buyer within 10 days after
written notice thereof is delivered by us to Buyer or is incapable of being
|
|
116
|
|
|
cured by Buyer and (C) as a result of the preceding clauses (A) and (B), the
closing conditions with respect to Buyers performance are not capable of being
met. |
The Purchase and Collaboration Agreement may be terminated by Buyer prior to the Closing by
delivery of a written notice of termination to us, if:
|
|
|
|
(A) any representation or warranty of ours set forth in the Purchase and
Collaboration Agreement shall have become untrue, (B) such misrepresentation is
not capable of being cured prior to the Outside Date and (C) as a result of the
preceding clauses (A) and (B), the closing condition with respect to the
accuracy of our representation and warranties is not capable of being met; |
|
|
|
|
|
|
(A) a material breach of any covenant or obligation in the Purchase and
Collaboration Agreement has been committed by us, (B) such breach has not been
waived by Buyer and such breach is not cured by us within 10 days after written
notice thereof is delivered by Buyer to us or is incapable of being cured by us
and (C) as a result of the preceding clauses (A) and (B), the closing condition
with respect to our performance is not capable of being met; or |
|
|
|
|
|
if, prior to obtaining the Required Seller Stockholders Vote a Change of
Board Recommendation shall have occurred; provided, that any such termination
must occur within five business days following the occurrence of any Change of
Board Recommendation (the Change of Board Recommendation Clause). |
Procedure and Effect of Termination
Upon termination of the Purchase and Collaboration Agreement by either Party, the Purchase and
Collaboration Agreement will terminate forthwith and become void and there shall be no Liability or
obligation on the part of the Parties or their respective representatives, except as provided
below. Termination of the Purchase and Collaboration Agreement shall terminate all outstanding
obligations and liabilities between the Parties arising from the Purchase and Collaboration
Agreement except those set forth in certain provisions relating to confidentiality and any other
provisions of the Purchase and Collaboration Agreement that specifically state that they shall
survive termination of the Purchase and Collaboration Agreement,
including those described under the caption Procedure and
Effect of Termination.
In the event that the Purchase and Collaboration Agreement is terminated by Buyer under the
Change of Board Recommendation Clause in the manner described above
(see No Solicitation of Other Offers, beginning on
page 112), then we will pay to Buyer a fee of
$2 million (the Termination Fee) within 2 business days after such termination.
In the
event that:
|
|
|
an Acquisition Proposal has been publicly announced;
|
117
|
|
|
thereafter, the Purchase and Collaboration Agreement is terminated by
either Party following the Outside Date or if Required Seller Stockholders Vote
is not obtained; and |
|
|
|
|
|
within 12 months after the termination of the Purchase and Collaboration
Agreement, we have entered into an agreement regarding or consummated a transaction which would have
constituted an Acquisition Proposal (excluding an Equity Financing and/or any agreement relating
thereto), then we will pay to Buyer the Termination Fee upon the
earlier of: |
|
|
|
|
|
two business days following entering into any such agreement; and |
|
|
|
|
|
|
immediately upon the consummation of any such transaction. |
|
The Termination Fee will be the sole and exclusive remedy of Buyer under circumstances where
the Termination Fee is payable by us and upon payment of the Termination Fee in accordance with the
Purchase and Collaboration Agreement, we shall not have any further Liability or obligation
relating to or arising out of the Purchase and Collaboration Agreement; provided, however, that
nothing in the Purchase and Collaboration Agreement will limit the ability of either Party to
obtain specific performance of the Purchase and Collaboration Agreement or to recover damages
(including damages in excess of the Termination Fee) in the event of fraud or a willful breach of
the Purchase and Collaboration Agreement by the other Party.
Survival of Representations, Warranties and Covenants
The representations, warranties and the covenants, agreements and obligations to be performed
on or prior to the Closing (the Pre-Closing Covenants) contained in the Purchase and
Collaboration Agreement shall survive the Closing solely for purposes of the indemnification
provisions of the Purchase and Collaboration Agreement and:
|
|
|
shall terminate and no longer survive at the close of business on the
18th month anniversary of the Closing (the Basic Survival Period); |
|
|
|
|
|
provided, however, that our representations and warranties pertaining to
power, authorization, board action to enter into the Purchase and Collaboration
Agreement, and title and sufficiency of assets and capitalization
(collectively, the Fundamental Representations) and the tax representations
and warranties shall survive the Closing until the expiration of the applicable
statute of limitations (with extensions) with respect to the matters addressed
in such sections. The period of time a representation, warranty or Pre-Closing
Covenant survives the Closing pursuant to the preceding sentence shall be the
Survival Period with respect to such representation, warranty or Pre-Closing
Covenant; |
|
118
|
|
|
|
subject to certain procedures set forth in the Purchase and
Collaboration Agreement, so long as a Party gives written notice of an
indemnification claim notice, including a description of the claim and the
amount of claimed Losses (as defined below) for such claim on or before the
expiration of the applicable Survival Period, such Indemnified Party shall be
entitled to pursue its rights to indemnification under the Purchase and
Collaboration Agreement, as applicable; |
|
|
|
|
|
|
subject to certain procedures set forth in the Purchase and
Collaboration Agreement, in the event notice of any claim(s) for
indemnification shall have been given within the applicable Survival Period and
such claim(s) have not been finally resolved by the expiration of such Survival
Period, the representations, warranties or Pre-Closing Covenants, as
applicable, that are the subject of such claim(s) shall survive the end of the
Survival Period of such representations, warranties or Pre-Closing Covenants
until such claim(s) are finally resolved, but such representations, warranties
and Pre-Closing Covenants shall only survive with respect to such asserted
claim(s); and |
|
|
|
|
|
|
the covenants and agreements contained in the Purchase and Collaboration
Agreement that require by their terms performance or compliance on and after
the Closing shall continue in force thereafter in accordance with their terms
or if no term is specified, indefinitely. |
|
Indemnification
Indemnification by Columbia
Subject to the limitations and terms discussed in this section and those discussed under the
heading Notifications; Updated Schedules, on and after the Closing, we shall indemnify,
reimburse, defend and hold harmless Buyer and its affiliates and each of their respective
representatives, successors and assigns (Buyer Indemnitees) from and against, and hold them
harmless from, with respect to any claim or matter, all losses, obligations and other Liabilities
or other damages, diminution in value, fines, fees, taxes, penalties, interest obligations,
deficiencies, losses and reasonable expenses (Losses) incurred (payable promptly upon written
request), without duplication, to the extent arising from, in connection with, or otherwise with
respect to:
|
|
|
subject to the applicable Survival Period, any breach of any
representation or warranty made by us contained in the Purchase and
Collaboration Agreement (Seller Representation Indemnification); |
|
|
|
|
any breach of any representation and warranty made by us under any Other
Agreement or any covenant, agreement or obligation of ours contained in the
Purchase and Collaboration Agreement or in any Other Agreement; |
|
|
|
|
any Excluded Liability; and |
119
|
|
|
any fees, expenses or other payments incurred or owed by us to any
brokers, financial advisors or other comparable Persons retained or employed by
us in connection with the Watson Transactions. |
Indemnification by Buyer
Subject to the limitations and terms of the indemnification section of the Purchase and
Collaboration Agreement, on and after the Closing, Buyer shall indemnify and defend us, our
affiliates and each of our respective representatives, successor and assigns (Seller Indemnitees)
from and against, and agrees to hold them harmless from, any Losses, as incurred (payable promptly
upon written request), without duplication, to the extent arising from, in connection with, or
otherwise with respect to:
|
|
|
subject to the limitations set forth in the Purchase and Collaboration
Agreement, any breach of any representation or warranty of Buyer contained in
the Purchase and Collaboration Agreement (Buyer Representation
Indemnification); |
|
|
|
|
any breach of any representation or warranty of Buyer under any Other
Agreement or any covenant, agreement or obligation of Buyer contained in the
Purchase and Collaboration Agreement or in any Other Agreement; |
|
|
|
|
any Assumed Liability; |
|
|
|
|
any fees, expenses or other payments incurred or owed by Buyer to any
brokers, financial advisors or other comparable persons retained or employed by
Buyer in connection with the Watson Transactions; and |
|
|
|
|
Certain of our Losses arising out of or resulting from certain agreed
upon circumstances. |
Limitation on Losses; Calculation of Losses; Treatment of Indemnification Payments
The Parties shall have no indemnification obligations pursuant to a breach of such Partys
representation or warranty contained in the Purchase and Collaboration Agreement, as applicable,
except to the extent that the aggregate amount of Losses incurred or suffered by Buyer or us that
the other Party is otherwise responsible for, exceeds $500,000 (the Deductible), at which time
the party (the Indemnified Party) entitled to any indemnification provided for under the Purchase
and Collaboration Agreement in respect of, arising out of or involving a claim made by any person
against the such party, shall be entitled to assert claims against the other Party for all Losses
in excess of, but excluding the Deductible; provided, that, subject to the immediately following
proviso, the maximum liability of either Party pursuant to its obligations with respect to Seller
Representation Indemnification or Buyer Representation Indemnification, as applicable, shall not in
any case exceed $7,500,000 (the Liability Cap); provided further, that for purposes of claims
made by us or Buyer pursuant to the Seller Representation Indemnification or the Buyer
Representation Indemnification, respectively,
120
arising from the other Partys breach of a Fundamental Representation or the other Partys
fraud or intentional misrepresentation, the Liability Cap shall be inapplicable.
The amount of any Loss for which indemnification is provided under the obligations discussed
in this section shall be reduced to take account of certain tax benefits actually realized by the
Indemnified Party and with respect to certain insurance payments.
Notwithstanding anything to the contrary herein, we shall not in any event be liable to the
Buyer Indemnitees and Buyer shall not in any event be liable to the Seller Indemnitees on account
of any indemnity obligation, respectively, for any indirect, consequential or punitive damages
(including, but not limited to, lost profits, loss of use, damage to goodwill or loss of business).
Sole Remedy
Each of the Parties acknowledges and agrees that its sole and exclusive remedy after the
Closing with respect to any and all claims and causes of action relating to the Purchase and
Collaboration Agreement (including the Schedules), the Other Agreements and the Watson
Transactions, the Assets, the Assumed Liabilities and the Acquisition Shares (other than claims of,
or causes of action arising from fraud) shall be pursuant to the indemnification provisions set
forth in the indemnification section of the Purchase and Collaboration Agreement or as provided in
the Specific Performance section of the Purchase and Collaboration Agreement described below.
Assignment; Binding Effect
The Purchase and Collaboration Agreement shall be binding upon and inure to the benefit of the
Parties thereto and their respective successors and assigns. Prior to the Closing, Buyer shall
assign its rights and obligations to Develop or Commercialize the Assets outside of the United
States and the income, royalties, damages and payments made, due or payable with respect to such rights and
obligations to a wholly-owned subsidiary of Watson. In addition, from and after the Closing,
either Party may: (a) assign its rights and obligations under the Purchase and Collaboration
Agreement or any part thereof to one or more of its affiliates without the consent of the other
Party; and (b) assign the Purchase and Collaboration Agreement in its entirety without the other
Partys consent to an entity that acquires all or substantially all of the assets of the assigning
party to which the Purchase and Collaboration Agreement relates, whether by merger, acquisition or
otherwise; provided, however, that in the event we assign the Purchase and Collaboration Agreement
pursuant to subsection (b) above, Buyer shall have the right, at
any time during the six-month
period after such assignment and upon 30 days prior written notice to us, to (i) terminate the
Parties relationship with respect to our joint Development of the Development of the Progesterone
Products and ours or our successors and assigns role in such Development, including participation
in the Joint Development Committee, and (ii) disband the Joint Commercialization Committee. Other
than as described above, neither Party may sell, transfer, assign, license, sublicense, delegate,
pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or
otherwise, the Purchase and Collaboration Agreement or any of its rights or obligations under the
Purchase and Collaboration Agreement
121
without the prior written consent of the other Party hereto and any attempted assignment or
transfer of the Purchase and Collaboration Agreement shall be null and void.
Watson Guarantee of Obligations
Watson has unconditionally and irrevocably guaranteed the prompt performance, payment and
discharge when due, of each and every obligation of Buyer and each and every successor or assignee
of Buyer under the Purchase and Collaboration Agreement and the Other Agreements and of the Non-US
Asset Purchaser (as defined in the License Agreement) under the License Agreement, including the
payment obligations. We are obligated to unconditionally and irrevocably guaranteed
the prompt performance, payment and discharge when due, of each and every obligation of each and
every successor or assignee of ours under the Purchase and Collaboration Agreement and the Other
Agreements, including the payment obligations.
Specific Performance
The Parties agreed that, except with respect to the payment of any Termination Fee, the
Parties are entitled to an injunction or injunctions to prevent breaches of the Purchase and
Collaboration Agreement and to enforce specifically the terms and provisions of the Purchase and
Collaboration Agreement in addition to any other remedy to which they are entitled at law or in
equity.
Fees and Expenses
Except as otherwise provided in the Purchase and Collaboration Agreement, Columbia, on the one
hand, and Buyer, on the other hand, shall each pay their respective expenses (including legal,
investment banking, finders, brokers and accounting fees) incurred in connection with the
Purchase and Collaboration Agreement.
Arbitration
Except as otherwise provided in the Purchase and Collaboration Agreement, all disputes,
differences, controversies and claims arising out of or related to the Purchase and Collaboration
Agreement shall be resolved by final and binding arbitration administered by the American
Arbitration Association.
Governing Law
The Purchase and Collaboration Agreement is governed by the laws of the State of Delaware.
122
PROJECTED FINANCIAL INFORMATION
In connection with RBCs preparation of its fairness opinion, we provided RBC with certain
projections regarding the Assets and Columbia as a whole for fiscal years 2010 through 2020 (the
Projections). In addition, we provided RBC with certain internal financial analyses and
forecasts for the Assets, which were derived from the Projections, and certain probabilities
assigned to the likelihood that the forecasts will be achieved and the milestone payments
contemplated by the Purchase and Collaboration Agreement will be made, in each case prepared by our
management, for use by RBC in connection with their financial analyses. We also provided the
Projections and the other material described above to our board in connection with their
consideration of the Watson Transactions.
We do not, as a matter of course, publicly disclose projections or forecasts as to future
financial performance for any of our businesses, including with respect to the Assets. We are
especially guarded about making projections for extended periods due to the inherent unpredictability of
the underlying assumptions and estimates. The Projections were not prepared with a view to public
disclosure and are included in this proxy statement in summary form only because such information
was made available to RBC and our board. The Projections were prepared using our best preliminary
interpretation of the accounting rules in effect at the time to reflect the application of United
States generally accepted accounting principles but were not prepared with a view to compliance
with published guidelines of the SEC regarding projections or the guidelines established by the
American Institute of Certified Public Accountants for preparation and presentation of prospective
financial information. Furthermore, our independent auditors have not examined, compiled or
otherwise applied procedures to the Projections and accordingly assume no responsibility for them.
The Projections included in this proxy statement have been prepared by and are the sole
responsibility of our management. The Projections were prepared solely for internal use in support
of our own long-range planning and are subjective in many respects and thus susceptible to various
interpretations based on actual experience and business developments.
In compiling the projections, our management took into account our historical performance,
combined with estimates regarding revenues, operating income, net income, cash flows and other
factors. Although the Projections are presented with numerical specificity, they reflect numerous
assumptions and estimates as to future events made by our management that we believed were
reasonable at the time the Projections were prepared. However, the Projections are not fact and
should not be relied upon as being necessarily indicative of actual future results. In addition,
factors such as industry performance, the market for our existing and new Progesterone Products,
and general business, economic, regulatory, market and financial conditions, all of which are
difficult to predict and beyond the control of our management, may cause the Projections or the
underlying assumptions not to be reflective of actual future results. In addition, the Projections
do not take into account any circumstances or events occurring after the date that they were
prepared and, accordingly, do not reflect any changes to our operations or strategy that may be
implemented after the Asset Sale is completed. Accordingly, there can be no assurance that the
Projections will be realized, and actual results may be materially greater or less than those
contained in the Projections. The inclusion of the Projections should not be regarded as an
indication that we, our board, RBC or any other recipient of the Projections considered the
Projections, or now considers the Projections, to be predictive of actual future
123
results. The Projections are considered forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and are subject to the risks and uncertainties
described above under the caption Cautionary Statements Concerning Forward Looking Statements and the risks
referred to therein.
Readers of this proxy statement are cautioned not to place undue reliance on the Projections
set forth below. No one has made or makes any representation to any stockholder or anyone else
regarding the information included in the Projections or our ultimate performance compared to the
information included in the Projections. For the foregoing reasons, as well as the bases and
assumptions on which the Projections were compiled, the inclusion of the Projections in this proxy
statement should not be regarded as an indication that such Projections will be an accurate
prediction of future results, and they should not be relied on as such. Columbia does not intend
to update or otherwise revise the Projections to reflect circumstances existing after the date when
the Projections were made or to reflect the occurrence of future events even in the event that any
of the assumptions underlying the Projections are shown to be in error.
The Stand-Alone Product Revenue Projections for the fiscal years 2010 through 2020 were as
follows:
Stand-Alone Product Revenue Projections
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Infertility Sales |
|
$ |
18.8 |
|
|
$ |
27.5 |
|
|
$ |
25.6 |
|
|
$ |
27.7 |
|
|
$ |
29.6 |
|
|
$ |
32.3 |
|
|
$ |
34.9 |
|
|
$ |
37.7 |
|
|
$ |
40.8 |
|
|
$ |
44.1 |
|
|
$ |
47.6 |
|
United States Pre-term Birth Sales |
|
|
0.0 |
|
|
|
20.3 |
|
|
|
82.0 |
|
|
|
134.4 |
|
|
|
180.4 |
|
|
|
193.8 |
|
|
|
205.7 |
|
|
|
216.0 |
|
|
|
226.8 |
|
|
|
238.1 |
|
|
|
250.0 |
|
Ex-United States Infertility Royalties |
|
|
8.7 |
|
|
|
10.0 |
|
|
|
12.7 |
|
|
|
12.9 |
|
|
|
12.2 |
|
|
|
11.8 |
|
|
|
11.3 |
|
|
|
10.8 |
|
|
|
10.2 |
|
|
|
9.6 |
|
|
|
9.0 |
|
Ex-United States Pre-term Birth Sales |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
6.7 |
|
|
|
27.0 |
|
|
|
44.4 |
|
|
|
59.5 |
|
|
|
63.9 |
|
|
|
67.9 |
|
|
|
71.3 |
|
|
|
69.1 |
|
|
|
66.5 |
|
Other Continuing Revenues |
|
|
2.0 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
2.0 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
29.5 |
|
|
$ |
59.5 |
|
|
$ |
128.7 |
|
|
$ |
203.8 |
|
|
$ |
268.6 |
|
|
$ |
299.1 |
|
|
$ |
317.5 |
|
|
$ |
334.1 |
|
|
$ |
350.8 |
|
|
$ |
362.6 |
|
|
$ |
374.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The key assumptions underlying the Stand-Alone Product Revenue Projections included:
|
(1) |
|
The data set forth under Stand-Alone Product Revenue Projections represents
our revenues that would be derived from sales of our products on a stand-alone basis,
without giving effect to the Watson Transactions. |
|
|
(2) |
|
We would have sufficient funds to effect the transactions
contemplated by the Note Purchase Agreements at the closing
thereunder and the satisfaction of our payment obligations owing to
PharmaBio under the PharmaBio Agreement (as amended by the PharmaBio
Amendment)(collectively, the "Debt Retirement"),
pay for the completion of the PREGNANT Study, fund the Launch and
Commercialization of PROCHIEVE 8% for the PTB Indication, and to pay
for the Development, Launch and Commercialization of a Second
Generation Product. |
|
|
(3) |
|
Continued growth in our United States infertility business through life cycle
management. |
|
|
(4) |
|
The PREGNANT Study is successful and the Launch and Commercialization of PROCHIEVE 8% in the United States for the PTB
Indication occurs during the third quarter of 2011. |
|
|
(5) |
|
Launch and Commercialization of PROCHIEVE 8% outside the United States for
the PTB Indication commences in 2012. |
|
|
(6) |
|
Ex-United States Infertility Royalties represents royalties for CRINONE. |
|
|
(7) |
|
Infertility royalties of Progesterone Products outside the United States
decline as a result of the loss of patent protection in 2014. |
124
|
(8) |
|
Other Continuing Revenues include primarily revenues relating to STRIANT. |
The Company Projections for the fiscal years 2010 through 2020 were as follows:
Company Projections
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
|
Revenues |
|
$ |
54.6 |
|
|
$ |
27.1 |
|
|
$ |
45.4 |
|
|
$ |
52.3 |
|
|
$ |
44.3 |
|
|
$ |
37.3 |
|
|
$ |
40.0 |
|
|
$ |
42.6 |
|
|
$ |
45.8 |
|
|
$ |
48.6 |
|
|
$ |
51.4 |
|
Operating Income |
|
$ |
3.8 |
|
|
$ |
6.0 |
|
|
$ |
30.6 |
|
|
$ |
37.1 |
|
|
$ |
29.1 |
|
|
$ |
28.2 |
|
|
$ |
30.6 |
|
|
$ |
32.8 |
|
|
$ |
35.7 |
|
|
$ |
38.1 |
|
|
$ |
40.6 |
|
Net Income |
|
$ |
0.4 |
|
|
$ |
6.8 |
|
|
$ |
31.9 |
|
|
$ |
38.8 |
|
|
$ |
31.4 |
|
|
$ |
31.2 |
|
|
$ |
33.2 |
|
|
$ |
23.5 |
|
|
$ |
25.6 |
|
|
$ |
27.5 |
|
|
$ |
29.5 |
|
Cash Flows from Operations |
|
|
($8.0 |
) |
|
|
($0.2 |
) |
|
$ |
16.9 |
|
|
$ |
25.7 |
|
|
$ |
35.0 |
|
|
$ |
34.8 |
|
|
$ |
36.8 |
|
|
$ |
27.1 |
|
|
$ |
29.2 |
|
|
$ |
31.1 |
|
|
$ |
33.1 |
|
Cash Flows from Upfront Payment/Milestones |
|
$ |
41.6 |
|
|
$ |
35.5 |
|
|
$ |
2.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
The key assumptions underlying the Company Projections included:
|
(1) |
|
The assumptions in notes (3), (4), (5) and (7) set forth under Stand-Alone
Product Revenue Projections. |
|
|
(2) |
|
Data presented gives effect to the Watson Transactions and the Debt Retirement as
if they were consummated during the second quarter of 2010. |
|
|
(3) |
|
Revenues include royalty streams from Watson and Merck Serono, receipt of the
Upfront Payment (to the extent described in note (4) below), receipt of the milestone
payments (as described in note (4) below, some portion of which is deferred for revenue
recognition purposes) and receipt of payments under the Supply Agreement. |
|
|
(4) |
|
Cash flow from Upfront Payment/Milestones reflects receipt by us of the
following under the Purchase and Collaboration Agreement: |
|
|
|
$33.6 million in initial Upfront Payment, after allocating
$13.4 million to the purchase of the Acquisition Shares (determined by using a share price of $1.20 per share, which was the share
price on the date the Projections were made). |
|
|
|
|
$8.0 million in respect of the Clinical Trial Results Milestone
Payment. |
|
|
|
|
$5.0 million in respect of the PTB NDA Acceptance Milestone
Payment. |
|
|
|
|
$30 million in respect of the PTB Product Launch Milestone
Payment. |
|
|
|
|
|
$0.5 million in respect of the Ex-U.S. Filing Milestone. |
|
|
|
|
|
|
$2.0 million in respect of the Ex-U.S. Approval Milestone. |
|
|
(5) |
|
Our sales, marketing and certain administrative support costs are eliminated
following consummation of the Watson Transactions. |
|
|
(6) |
|
Our research and development activities are limited to completion of the
PREGNANT Study and the preparation, filing and approval process of the related new drug
application (or supplemental new drug application). |
|
|
(7) |
|
We do not engage in new product Development or in-licensing activities other
than in respect of the Commercialization of Progesterone Products for the PTB
Indication. |
|
|
(8) |
|
Our tax net operating loss carryforwards are fully utilized by 2016 and we
become a taxpayer thereafter. |
125
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth below is our selected financial data as of the dates and for the periods indicated.
The consolidated financial and operating data as of and for the fiscal periods ended December 31,
2009, 2008, 2007, 2006 and 2005 were derived from the audited consolidated financial statements
included in our filings on Form 10-K for each of the respective periods. The data should be read
in conjunction with our financial statements and notes thereto, as well as Managements Discussion
and Analysis of Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2009, filed
with the SEC on March 12, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(000s except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
32,196 |
|
|
$ |
36,229 |
|
|
$ |
29,627 |
|
|
$ |
17,393 |
|
|
$ |
22,041 |
|
Gross profit |
|
|
23,002 |
|
|
|
25,294 |
|
|
|
20,613 |
|
|
|
9,573 |
|
|
|
13,929 |
|
Operating expenses |
|
|
36,165 |
|
|
|
32,552 |
|
|
|
28,721 |
|
|
|
20,733 |
|
|
|
21,160 |
|
Interest expense |
|
|
8,851 |
|
|
|
7,882 |
|
|
|
7,946 |
|
|
|
2,670 |
|
|
|
3,491 |
|
Net loss |
|
|
(21,870 |
) |
|
|
(14,077 |
) |
|
|
(14,292 |
) |
|
|
(12,485 |
) |
|
|
(10,104 |
) |
Loss per common share |
|
|
(0.39 |
) |
|
|
(0.27 |
) |
|
|
(0.28 |
) |
|
|
(0.26 |
) |
|
|
(0.25 |
) |
Weighted average number of common shares
outstanding-basic and diluted |
|
|
56,359 |
|
|
|
52,439 |
|
|
|
51,124 |
|
|
|
48,089 |
|
|
|
41,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (deficiency) |
|
$ |
14,256 |
|
|
$ |
12,305 |
|
|
$ |
14,461 |
|
|
$ |
23,410 |
|
|
$ |
(3,471 |
) |
Total assets |
|
|
43,757 |
|
|
|
45,622 |
|
|
|
56,589 |
|
|
|
65,839 |
|
|
|
14,732 |
|
Notes payable |
|
|
32,966 |
|
|
|
30,075 |
|
|
|
27,536 |
|
|
|
25,299 |
|
|
|
|
|
Long-term portion of financing agreements |
|
|
15,234 |
|
|
|
13,126 |
|
|
|
11,426 |
|
|
|
13,277 |
|
|
|
10,921 |
|
Redeemable preferred series C stock |
|
|
600 |
|
|
|
775 |
|
|
|
1,125 |
|
|
|
3,200 |
|
|
|
3,250 |
|
Shareholders equity (deficiency) |
|
|
(13,766 |
) |
|
|
(5,893 |
) |
|
|
2,015 |
|
|
|
12,616 |
|
|
|
(20,573 |
) |
126
UNAUDITED STATEMENTS OF NET REVENUES AND DIRECT COSTS
FOR U.S. PROGESTERONE PRODUCTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
The Unaudited Statements of Net Revenues and Direct Costs for U.S. Progesterone Products
represent certain financial information regarding the Assets to be sold under the Purchase and
Collaboration Agreement. The Unaudited Statements of Net Revenues and Direct Costs for U.S.
Progesterone Products should be read in conjunction with the notes related thereto and our Selected
Historical Consolidated Financial Data included in this proxy statement beginning on page 126 as
well as our audited financial statements and the related notes which are incorporated by reference
into this proxy statement from our Annual Report on Form 10-K for the fiscal year ended December
31, 2009.
The Unaudited Statements of Net Revenues and Direct Costs for U.S. Progesterone Products does
not purport to represent, and is not necessarily indicative, of what financial results would have
been, had we operated the Assets as a separate stand-alone entity, subsidiary or division for the
periods presented.
The Unaudited Statements of Net Revenues and Direct Costs for U.S. Progesterone Products has
been prepared from our books and records in accordance with U.S. generally accepted accounting
principles (GAAP). The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions about reported amounts of revenues and expenses during the respective
reporting periods. These estimates and assumptions are based on our managements best estimates and
judgment. Management evaluates its estimates and assumptions on an on-going basis, considering
historical experience, the current economic environment and other factors that management believes
to be reasonable under the circumstances. Management adjusts such estimates and assumptions when
facts and circumstances dictate. In the opinion of our
management, all adjustments (consisting of only normal and recurring adjustments) considered
necessary for a fair presentation have been included in the Unaudited Statements of Net Revenues
and Direct Costs for U.S. Progesterone Products.
127
UNAUDITED STATEMENTS OF NET REVENUES AND DIRECT COSTS
FOR U.S. PROGESTERONE PRODUCTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
NET REVENUES1, 4 |
|
$ |
12,471,894 |
|
|
$ |
15,833,265 |
|
|
$ |
15,182,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES1 |
|
|
1,226,311 |
|
|
|
1,491,390 |
|
|
|
1,116,754 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
11,245,583 |
|
|
|
14,341,875 |
|
|
|
14,066,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution2 |
|
|
10,111,796 |
|
|
|
12,685,618 |
|
|
|
11,982,229 |
|
Amortization of licensing right3 |
|
|
5,044,728 |
|
|
|
5,044,728 |
|
|
|
5,044,728 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
15,156,524 |
|
|
|
17,730,346 |
|
|
|
17,026,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses in excess
of net revenues |
|
$ |
(3,910,941 |
) |
|
$ |
(3,388,471 |
) |
|
$ |
(2,960,883 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. |
|
Represents the unaudited revenues and direct cost of revenues for the U.S. Progesterone
Products. |
|
|
|
2. |
|
Represents direct sales, marketing and distribution costs in support of U.S. Progesterone
Products revenues. |
|
|
|
3. |
|
Amortization of acquired intangible assets for the U.S. Progesterone Products. |
|
|
|
4. |
|
Net revenues are derived from gross sales of Progesterone Products, net of returns, allowances,
distributor fees and discounts. |
|
Revenues from the sale of Progesterone Products are recorded at the time goods are shipped to
customers. We believe that we have not made any shipments in excess of our customers ordinary
course of business inventory levels. Our return policy allows Progesterone Products to be returned
for a period beginning three months prior to the expiration date of the Progesterone Products and
ending twelve months after the expiration date. Provisions for returns on sales to wholesalers,
distributors and retail chain stores are estimated based on a percentage of sales, using such
factors as historical sales information, distributor inventory levels and Progesterone Products
prescription data, and are recorded as a reduction to sales in the same period as the related sales
are recognized. We assume that our customers are using the first-in, first-out method in filling
orders so that the oldest saleable Progesterone Products are used first. We record a provision for
returns on a quarterly basis using an estimated rate and adjust the provision if our analysis
indicates that the potential for Progesterone Products non-saleability exists.
We estimate fees we pay to our distributors and specialty pharmacies for customer services that
include supplemental sales calling, providing information about their customers and the processing
of sales returns.
128
UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Financial Statements give effect to the Watson
Transactions and the Debt Retirement (as defined below) and are based upon the Unaudited Statements
of Net Revenues and Direct Costs for U.S. Progesterone Products for the fiscal year ended December
31, 2009 and the related notes beginning on page 127 of this proxy statement, our audited financial
statements for the fiscal year ended December 31, 2009 and the related notes and certain estimates,
adjustments and assumptions that our management believes to be reasonable. The unaudited pro forma
statement of operations for the fiscal year ended December 31, 2009 is presented as if the Watson
Transactions and the Debt Retirement were completed as of January 1, 2009 and the unaudited pro
forma balance sheet at December 31, 2009 is presented as if the Watson Transactions and the Debt
Retirement were consummated at December 31, 2009.
The Unaudited Pro Forma Financial Statements include adjustments to reflect the effects of the
Watson Transactions. After the Closing, we will no longer be directly involved in the
Commercialization of Progesterone Products and we will primarily be involved in the supplying of
Progesterone Products to Buyer and Merck Serono. The Unaudited Pro Forma Financial Statements also
include adjustments in respect of the effects of the (a) satisfaction of our payment obligations
owing to PharmaBio under the PharmaBio Agreement (as amended by the PharmaBio Amendment) and (b)
transactions contemplated to occur at the closings under the Note Purchase Agreements, and the
resulting elimination of substantially all of our debt (collectively, the Debt Retirement). See
The Asset Sale (Proposal No. 1)Nature of Columbias Business Following the Watson Transactions,
beginning on page 61, The Asset Sale (Proposal
No. 1)Senior Debt, beginning on page 66, and
The Asset Sale (Proposal No. 1)Purchase of our Convertible Subordinated Notes, beginning on
page 67. The Unaudited Pro Forma Financial Statements should be read in conjunction with our
Selected Historical Financial Data beginning on page 126 of this proxy statement, the Unaudited
Statements of Net Revenues and Direct Costs for U.S. Progesterone Products for the fiscal years
ended December 31, 2007, 2008 and 2009 beginning on page 127 of this proxy statement as well as our
audited financial statements for the fiscal year ended December 31, 2009 and the related notes
which are incorporated by reference into this proxy statement from our Annual Report on Form 10-K
for the fiscal year ended December 31, 2009.
The Unaudited Pro Forma Financial Statements are based on the transactions that are
contemplated to occur at the closings under the Purchase and Collaboration Agreement, the Note
Purchase Agreements and the PharmaBio Agreement (as amended by the PharmaBio Amendment), including
our sale of the Assets, our receipt of the $47,000,000 cash Upfront Payment from Buyer, the
issuance by us of the 11,200,000 Acquisition Shares to Buyer, the payment by us to PharmaBio of
$15,845,277 in cash (which represents the net present value of our payment obligations under the
PharmaBio Agreement (as amended by the PharmaBio Amendment) of $16,500,000 due in November 2010,
discounted at a rate of 4.6% to December 31, 2009), and the payment by us of approximately
$26,800,000 in cash (including accrued and unpaid interest), and the issuance by us of Warrants to
purchase 7,750,000 shares of Common Stock and the 7,407,407 NPA Shares under the Note Purchase
Agreements. The Unaudited Pro Forma Financial Statements do not give effect to our receipt of any
portion of the up to $45,500,000 in contingent milestone payments that may be payable to us
pursuant to the terms of the Purchase and Collaboration Agreement. In
addition, the Unaudited Pro Forma Financial Statements do not give
effect to any adjustments in respect of potential reductions in
Research and Development or General and Administrative expenses that
may occur following the consummation of the Watson Transactions.
129
Pro forma information is intended to provide investors with information about the continuing
impact of a transaction by showing how a specific transaction might have affected historical
financial statements, illustrating the scope of the change in the historical financial position and
results of operations. The adjustments made to historical financial information give effect to
events that are directly attributable to the Asset Sale and the Debt Retirement, factually
supportable, and expected to have a continuing impact. The Unaudited Pro Forma Financial Statements
are prepared in accordance with Article 11 of Regulation S-X.
The Unaudited Pro Forma Financial Statements set forth below are not fact and there can be no
assurance that our actual results will not differ significantly from those set forth below or that
the impact of the Watson Transactions and the Debt Retirement will not differ significantly from
those presented below. Accordingly, the Unaudited Pro Forma Financial Statements are presented for
illustrative purposes only and do not purport to represent, and are not necessarily indicative of,
what our actual financial position and results of operations would have been had the Watson
Transactions and the Debt Retirement occurred on the dates indicated, nor are they
indicative of our future financial position or results of operations. Readers of this proxy
statement are cautioned not to place undue reliance on such information and no one makes any
representation regarding the information set forth below or our ultimate performance compared to
it.
130
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2009A |
|
|
|
Historical |
|
|
Pro Forma Adjustments |
|
|
|
|
|
|
Columbia |
|
|
Sale of U.S |
|
|
Pro Forma |
|
|
|
|
|
|
Laboratories, |
|
|
Progesterone |
|
|
Adjustments |
|
|
|
|
|
|
Inc |
|
|
Products (-) B |
|
|
(+) |
|
|
Pro Forma |
|
NET REVENUES |
|
$ |
32,196,381 |
|
|
$ |
15,182,828 |
|
|
$ |
2,746,712 |
C |
|
$ |
19,760,265 |
|
|
COST OF REVENUES |
|
|
9,194,538 |
|
|
|
1,116,754 |
|
|
|
1,116,754 |
D |
|
|
9,194,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
23,001,843 |
|
|
|
14,066,074 |
|
|
|
1,629,958 |
|
|
|
10,565,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution |
|
|
11,982,229 |
|
|
|
11,982,229 |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
10,559,298 |
|
|
|
|
|
|
|
|
|
|
|
10,559,298 |
|
Research and development |
|
|
8,579,035 |
|
|
|
|
|
|
|
|
|
|
|
8,579,035 |
|
Amortization of licensing right |
|
|
5,044,728 |
|
|
|
5,044,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
36,165,290 |
|
|
|
17,026,957 |
|
|
|
|
|
|
|
19,138,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(13,163,447 |
) |
|
|
(2,960,883 |
) |
|
|
1,629,958 |
|
|
|
(8,572,606 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
33,830 |
|
|
|
|
|
|
|
|
|
|
|
33,830 |
|
Interest expense |
|
|
(8,851,253 |
) |
|
|
|
|
|
|
8,848,828 |
E |
|
|
(2,425 |
) |
Other, net |
|
|
(243,720 |
) |
|
|
|
|
|
|
|
|
|
|
(243,720 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,061,143 |
) |
|
|
|
|
|
|
8,848,828 |
|
|
|
(212,315 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before income tax |
|
|
(22,224,590 |
) |
|
|
(2,960,883 |
) |
|
|
10,478,786 |
|
|
|
8,784,921 |
|
State income tax benefits |
|
|
355,032 |
|
|
|
|
|
|
|
|
|
|
|
355,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(21,869,558 |
) |
|
$ |
(2,960,883 |
) |
|
|
10,478,786 |
|
|
|
8,429,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED |
|
$ |
(0.39 |
) |
|
|
|
|
|
|
|
|
|
|
(0.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED |
|
|
56,358,843 |
|
|
|
|
|
|
|
18,607,407 |
U, V |
|
|
74,966,250 |
U, V |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
Historical |
|
|
|
|
|
|
|
|
|
Columbia |
|
|
|
|
|
|
|
|
|
Laboratories, |
|
|
Pro Forma |
|
|
|
|
|
|
Inc |
|
|
Adjustments |
|
|
Pro Forma |
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents of which $12,225,732
is interest bearing |
|
$ |
14,757,615 |
|
|
$ |
|
|
|
$ |
|
|
Upfront Payment from Watson |
|
|
|
|
|
|
47,000,000 |
F |
|
|
|
|
Payment for Notes |
|
|
|
|
|
|
(25,999,999 |
) G |
|
|
|
|
Payment for Notes accrued interest |
|
|
|
|
|
|
(800,000 |
) H |
|
|
|
|
Payment for PharmaBio |
|
|
|
|
|
|
(15,845,277 |
) I |
|
|
|
|
Payment for Series C preferred stock |
|
|
|
|
|
|
(600,000 |
) J |
|
|
|
|
Transaction costs |
|
|
|
|
|
|
(4,000,000 |
) K |
|
|
|
|
Sale of finished goods inventory to Watson |
|
|
|
|
|
|
432,617 |
L |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
14,757,615 |
|
|
|
187,341 |
|
|
|
14,944,956 |
|
Accounts receivable, net of allowances for doubtful accounts of $100,000 |
|
|
4,262,851 |
|
|
|
|
|
|
|
4,262,851 |
|
Inventories |
|
|
2,532,722 |
|
|
|
(432,617 |
) L |
|
|
2,100,105 |
|
Prepaid expenses and other current assets |
|
|
1,097,525 |
|
|
|
|
|
|
|
1,097,525 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
22,650,713 |
|
|
|
(245,276 |
) |
|
|
22,405,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT |
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
|
2,547,460 |
|
|
|
|
|
|
|
2,547,460 |
|
Computer software |
|
|
545,616 |
|
|
|
|
|
|
|
545,616 |
|
Office equipment and furniture and fixtures |
|
|
669,599 |
|
|
|
|
|
|
|
669,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,762,675 |
|
|
|
|
|
|
|
3,762,675 |
|
Less-accumulated depreciation and
amortization |
|
|
(3,071,196 |
) |
|
|
|
|
|
|
(3,071,196 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
691,479 |
|
|
|
|
|
|
|
691,479 |
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS NET |
|
|
18,770,332 |
|
|
|
(18,770,332 |
) M |
|
|
|
|
Deposits/long term investments |
|
|
483,146 |
|
|
|
|
|
|
|
483,146 |
|
Deferred charges |
|
|
1,161,549 |
|
|
|
(1,161,549 |
) N |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
1,644,695 |
|
|
|
(1,161,549 |
) |
|
|
483,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
43,757,219 |
|
|
$ |
(20,177,157 |
) |
|
$ |
23,580,062 |
|
|
|
|
|
|
|
|
|
|
|
132
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
Historical |
|
|
|
|
|
|
|
|
|
Columbia |
|
|
|
|
|
|
|
|
|
Laboratories, |
|
|
Pro Forma |
|
|
|
|
|
|
Inc |
|
|
Adjustments |
|
|
Pro Forma |
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of financing agreements |
|
$ |
144,897 |
|
|
$ |
(144,897 |
) O |
|
$ |
|
|
Accounts payable |
|
|
3,662,091 |
|
|
|
|
|
|
|
3,662,091 |
|
Accrued expenses |
|
|
4,588,088 |
|
|
|
(800,000 |
) H |
|
|
3,788,088 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
8,395,076 |
|
|
|
(944,897 |
) |
|
|
7,450,179 |
|
NOTES PAYABLE |
|
|
32,965,863 |
|
|
|
(32,965,863 |
) P |
|
|
|
|
DEFERRED REVENUE |
|
|
328,367 |
|
|
|
12,133,668 |
Q |
|
|
12,462,035 |
|
LONG-TERM PORTION OF
FINANCING AGREEMENTS |
|
|
15,234,406 |
|
|
|
(15,234,406 |
) R |
|
|
|
|
REDEEMABLE WARRANTS |
|
|
|
|
|
|
2,456,797 |
S |
|
|
2,456,797 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
56,923,712 |
|
|
|
(34,554,701 |
) |
|
|
22,369,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
Contingently redeemable series C preferred
stock, 600 shares issued and outstanding in
2009 (liquidation preference of $600,000) |
|
|
600,000 |
|
|
|
(600,000 |
) J |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY (DEFICIENCY): |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; 1,000,000 shares
authorized |
|
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, 130 shares
issued and outstanding (liquidation preference
of $13,000) |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Series E convertible preferred stock 59,000
shares issued and outstanding (liquidation
preference of $5,900,000) |
|
|
590 |
|
|
|
|
|
|
|
590 |
|
Common Stock, $.01 par value; 100,000,000 shares
authorized; 65,761,986 shares issued
(footnotes T, U and V) |
|
|
657,619 |
|
|
|
186,074 |
U,V |
|
|
843,693 |
|
Capital in excess of par value |
|
|
242,637,646 |
|
|
|
19,909,926 |
U,V |
|
|
264,974,730 |
|
|
|
|
|
|
|
|
2,427,158 |
W |
|
|
|
|
Less cost of 131,935 treasury shares |
|
|
(280,813 |
) |
|
|
|
|
|
|
(280,813 |
) |
Accumulated deficit |
|
|
(256,979,263 |
) |
|
|
(5,118,456 |
) X |
|
|
(264,524,877 |
) |
|
|
|
|
|
|
|
(2,427,158 |
) W |
|
|
|
|
Accumulated other comprehensive income |
|
|
197,727 |
|
|
|
|
|
|
|
197,727 |
|
Shareholders equity (deficiency) |
|
|
(13,766,493 |
) |
|
|
14,977,544 |
|
|
|
1,211,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY (DEFICIENCY) |
|
$ |
43,757,219 |
|
|
$ |
(20,177,157 |
) |
|
$ |
23,580,062 |
|
|
|
|
|
|
|
|
|
|
|
133
NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
Description of Transaction and Basis of Presentation
The historical information in the Unaudited Pro Forma Financial Statements is derived from our
Unaudited Statements of Net Revenues and Direct Costs for U.S. Progesterone Products for the fiscal
year ended December 31, 2009 and the related notes and our audited financial statements for the
fiscal year ended December 31, 2009 and the related notes which are incorporated by reference in this proxy
statement from our Annual Report on Form 10-K for the fiscal year ended as of December
31, 2009. The Unaudited Pro Forma Financial Statements as of and for the year ended at December 31,
2009 are presented to illustrate the estimated effects of the Watson Transactions and the Debt
Retirement on Columbia had those transactions occurred on January 1, 2009 for purposes of the
unaudited pro forma consolidated statement of operations and
at December 31, 2009 for purposes of the unaudited pro forma consolidated balance sheet including but not limited to the following:
|
|
|
|
We will no longer be directly involved in the Commercialization of Progesterone Products and will
primarily be in the business of supplying Progesterone Products to Buyer and Merck Serono. See The
Asset Sale (Proposal No. 1)Nature of Columbias Business Following the Watson Transactions,
beginning on page
61; |
|
|
|
|
|
|
The (a) satisfaction of our payment obligations owing to PharmaBio under the PharmaBio Agreement
(as amended by the PharmaBio Amendment) and (b) transactions contemplated to occur at the closings
under the Note Purchase Agreements, and the resulting elimination of substantially all of our debt,
including the payment by us to PharmaBio of $15,845,277 in cash (which represents the net present
value of our payment obligations under the PharmaBio Agreement (as amended by the PharmaBio
Amendment) of $16,500,000 due in November 2010, discounted at a rate of 4.6% to December 31, 2009),
and payment by us of approximately $26,800,000 in cash (including accrued and unpaid interest), and
the issuance by us of Warrants to purchase 7,750,000 shares of Common Stock and the 7,407,407 NPA
Shares under the Note Purchase Agreements. See The Asset Sale (Proposal No. 1)Senior Debt,
beginning on page 66 and The Asset Sale (Proposal No. 1)Purchase of our Convertible
Subordinated Notes, beginning on page 67; |
|
|
|
|
|
|
The sale by us of the Assets, our receipt of the $47,000,000 cash Upfront Payment from Buyer and
the issuance of the 11,200,000 Acquisition Shares to Buyer; and |
|
|
|
|
|
|
Each of the other Pro Forma Adjustments described in the notes below. |
|
The Unaudited Pro Forma Financial Statements do not give effect to our receipt of any portion of
the up to $45,500,000 in contingent milestone payments that may be payable to us pursuant to the
terms of the Purchase and Collaboration Agreement. In addition, the Unaudited Pro Forma Financial Statements do not give effect to any adjustments in respect of potential reductions in Research and Development or General and Administrative expenses that may occur following the consummation of the Watson Transaction.
Allocation of $47,000,000 Upfront Payment
|
|
|
|
|
Upfront Payment from Buyer |
|
$ |
47,000,000 |
|
Transaction costs |
|
|
(4,000,000 |
) |
Acquisition Shares |
|
|
(12,096,000 |
) |
Write-off of Net Book Value of Intangible Assets to be
sold by us pursuant to the Purchase and Collaboration
Agreement |
|
|
(18,770,332 |
) |
|
|
|
|
Net Proceeds (Deferred Revenue) |
|
$ |
12,133,668 |
|
Pro Forma Adjustments
Pro forma information is intended to reflect the impact of the Watson Transactions and the
Debt Retirement on our historical financial position and results of operations through adjustments
that are directly attributable to the Watson Transactions and the Debt Retirement, factually
supportable and expected to have a continuing impact. These
Unaudited Pro Forma Financial Statements reflect the adjustments that, in the opinion of our
management, are necessary to present fairly the pro forma results of operations and financial
position set forth above.
134
|
A. |
|
The pro forma information is presented on the basis that the Watson Transactions and the Debt
Retirement had occurred (x) as of January 1, 2009 for the pro forma consolidated statement of operations and for
the year ended as of December 31, 2009, and (y) at December 31, 2009 for the pro forma consolidated balance
sheet as of December 31, 2009, including that as of such dates we transferred the Assets to Buyer, received the $47,000,000
cash Upfront Payment from Buyer, we issued the 11,200,000 Acquisition Shares to Buyer, we paid to
PharmaBio $15,845,277 in cash (which represents the net present value of our payment obligations
under the PharmaBio Agreement (as amended by the PharmaBio Amendment) of $16,500,000 due in
November 2010, discounted at a rate of 4.6% to December 31, 2009), we paid approximately
$26,800,000 in cash (including accrued and unpaid interest) and issued the Warrants to purchase
7,750,000 shares of Common Stock and the 7,407,407 NPA Shares under the Note Purchase Agreements,
and that, after the Closing, we are no longer directly involved in the Commercialization of the
Progesterone Products and we will primarily be involved in the supplying of Progesterone Products
to Buyer and Merck Serono. The unaudited pro forma information does not give effect to our receipt
of any portion of the up to $45,500,000 in contingent milestone payments that may be payable to us
pursuant to the Purchase and Collaboration Agreement. In addition, the Unaudited Pro Forma Financial Statements do not give effect to any adjustments in respect of potential reductions in Research and Development or General and Administrative expenses that may occur following the consummation of the Watson Transaction. These Unaudited Pro Forma Financial
Statements reflect all adjustments that, in the opinion of our management, are necessary to present
fairly the pro forma results of operations and financial position presented herein. |
|
|
|
B. |
|
Represents the unaudited net revenues and direct expenses for the U.S. Progesterone Products for
the year ended
December 31, 2009. |
|
|
|
C. |
|
Represents the sales that we would have made to Buyer under the Supply Agreement and royalties
that we would have received under the Purchase and Collaboration Agreement had all Progesterone
Products sold by us in the U.S. during the fiscal year ended December 31, 2009 been manufactured by
us and sold to Buyer under the Supply Agreement during 2009 (at the pricing set forth in that
Agreement) and then sold during 2009 by Buyer to its customers at the prices that we sold
Progesterone Products to our customers during 2009. |
|
|
|
D. |
|
Represents cost of revenues that we would have incurred had all Progesterone Products sold by us
in the U.S. during the fiscal year ended December 31, 2009 been manufactured by us and sold to
Buyer under the Supply Agreement during 2009. |
|
|
|
E. |
|
Represents interest expense on the Notes and obligations owing to PharmaBio under the PharmaBio
Agreement (as amended by the PharmaBio Amendment) as if the Debt Retirement had occurred on January
1, 2009. |
|
|
|
F. |
|
Represents the $47,000,000 Upfront Payment in cash that would be received by us from Buyer under the
Purchase and Collaboration Agreement. |
|
|
|
G. |
|
Represents the approximately $26,000,000 cash payment that would be made by us to the Note
holders at the closings under the Note Purchase Agreements |
|
|
|
H. |
|
Represents the approximately $800,000 of accrued and unpaid interest on our Notes that would be paid by us at the closings under the
Note Purchase Agreements. |
|
|
|
I. |
|
Represents the $15,845,277 in cash (which represents the net present value of our payment
obligations under the PharmaBio Agreement (as amended by the PharmaBio Amendment) of $16,500,000
due in November 2010, discounted at a rate of 4.6% to December 31, 2009). |
|
|
|
J. |
|
Assumes that all holders of our Series C Preferred Stock had exercised their rights, resulting
from the Asset Sale, to have their shares of Series C Preferred Stock redeemed by us as of December
31, 2009 and that we had redeemed such shares on such date. |
|
|
|
K. |
|
Reflects estimated transaction related costs and expenses, which include fees and expenses
relating to legal services, accounting services, investment advisory fees, fairness opinion fees
and proxy statement printing and distribution. |
|
|
|
L. |
|
Represents the finished goods inventory of Progesterone Products sold by us to Buyer at the Closing pursuant to the Supply Agreement. |
|
|
|
M. |
|
Reflects the write-off of net book value of intangible Assets that would be sold by us pursuant
to the Purchase and Collaboration Agreement. |
|
|
|
N. |
|
Reflects the write-off of deferred charges related to financing costs for the Notes and
obligations owing to PharmaBio under the PharmaBio Agreement. |
|
|
|
O. |
|
Represents payment of the current portion of our obligations owing to PharmaBio under the
PharmaBio Agreement. |
|
|
|
P. |
|
Represents the settlement of our Notes which is $39,999,998, less the unamortized discount related to the relative fair market value of the warrants
issued by us in connection with the sale of the Notes and the beneficial conversion feature. |
|
135
|
Q. |
|
Reflects deferred revenue from the $47,000,000 Upfront Payment that would be received by us from
Buyer under the Purchase and Collaboration Agreement, less transactions costs described in Note K,
the value of the 11,200,000 Acquisition Shares as determined by the closing price of the Companys
share on December 31, 2009, and the write off of the intangible assets described in Note M. |
|
|
|
R. |
|
Represents the payment of the unpaid portion of the $30 million minimum royalty obligation payable under the
PharmaBio Agreement (without giving effect to the PharmaBio Amendment), net of unamortized imputed
interest and the value of certain warrants issued to PharmaBio. |
|
|
|
S. |
|
Represents the fair market of our contingent obligation under the Note Purchase Agreements to
purchase the Warrants for an aggregate purchase price of $3,999,996 in the circumstances described
under the The Asset Sale (Proposal No. 1)Repurchase Offer of our Convertible Subordinated
Notes, beginning on page 67. |
|
|
|
T. |
|
Assumes that, as of December 31, 2009, (a) the Charter Amendment proposal had been approved by
our stockholders and (b) we had amended our Restated Certificate of Incorporation, as amended, to
increase the number of our authorized shares of Common Stock from 100,000,000 to 150,000,000. |
|
|
|
U. |
|
Assumes that we had issued the 11,200,000 Acquisition Shares to Buyer as of January 1, 2009 at a
price of $1.08 per share (which was the closing price of our Common Stock on December 31, 2009). |
|
|
|
V. |
|
Assumes that we had issued the 7,407,407 NPA Shares under the Note Purchase Agreements as of
January 1, 2009 at a price of $1.08 (which was the closing price of our Common Stock on December 31, 2009). |
|
|
|
W. |
|
Represents unamortized expense for options and restricted shares issued under our 2008 Plan or
our 1996 Plan that would vest and/or become exercisable upon consummation and as a result of the
Asset Sale. |
|
|
|
X. |
|
Represents net loss on extinguishment of debt as of December 31, 2009. |
|
136
MARKET PRICE OF COMMON STOCK
Shares of our Common Stock are listed for trading on the NASDAQ Global Market under the symbol
CBRX. The following table sets forth, for the fiscal quarters indicated, the high and low sales
prices per share as reported on the NASDAQ Global Market.
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
High |
|
Low |
|
|
|
|
|
|
|
|
|
YEAR ENDED DECEMBER 31, 2008 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
2.51 |
|
|
$ |
1.89 |
|
Second Quarter |
|
$ |
4.29 |
|
|
$ |
2.13 |
|
Third Quarter |
|
$ |
4.47 |
|
|
$ |
2.15 |
|
Fourth Quarter |
|
$ |
2.76 |
|
|
$ |
0.92 |
|
YEAR ENDED DECEMBER 31, 2009 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
1.74 |
|
|
$ |
1.09 |
|
Second Quarter |
|
$ |
1.70 |
|
|
$ |
1.06 |
|
Third Quarter |
|
$ |
1.59 |
|
|
$ |
1.08 |
|
Fourth Quarter |
|
$ |
1.51 |
|
|
$ |
0.65 |
|
YEAR ENDING
DECEMBER 31, 2010 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
1.43 |
|
|
$ |
1.03 |
|
The closing sale price of shares of our Common Stock on the NASDAQ Global Market on March
3, 2010, the last trading day before the announcement of the Asset Sale, was $1.35. On [], 2010,
the most recent practicable date before this proxy statement was printed, the closing price for
shares of our Common Stock on the NASDAQ Global Market was $[]. You are encouraged to obtain
current market quotations for shares of our Common Stock in connection with voting your shares.
We have never declared or paid dividends on shares of our Common Stock.
137
COMPARATIVE SHARE DATA
The following table sets forth our selected per share and unaudited pro forma per share
information after giving effect to the Watson Transactions and the Debt Retirement. This data is
derived from, and should be read together with, the Unaudited Pro Forma Financial Statements (and
the notes thereto) commencing on page 129 of the proxy statement
The pro forma data includes adjustments to reflect the effects of the Watson Transactions. After
the Closing, we will no longer be directly involved in the Commercialization of Progesterone
Products and we will primarily be involved in the supplying of Progesterone Products to Buyer and
Merck Serono. The pro forma data set forth below also includes adjustments in respect of the
effects of the (a) satisfaction of our payment obligations owing to PharmaBio under the PharmaBio
Agreement (as amended by the PharmaBio Amendment) and (b) transactions contemplated to occur at the
closings under the Note Purchase Agreements, and the elimination of substantially all of our debt
(collectively, the Debt Retirement). See The Asset Sale (Proposal No. 1)Nature of Columbias
Business Following the Watson Transactions, beginning on page 61, The Asset Sale (Proposal No.
1)Senior Debt, beginning on page 66, and The Asset Sale (Proposal No. 1)Purchase of our
Convertible Subordinated Notes, beginning on page 67. The pro forma data should be read in
conjunction with the Unaudited Pro Forma Financial Statements (and the notes thereto) beginning on
page 129 of this proxy statement, our Selected Historical Financial Data beginning on page 126 of
this proxy statement and Unaudited Statements of Net Revenues and Direct Costs for U.S.
Progesterone Products for the Fiscal Years Ended December 31, 2008 and 2009 beginning on page 127
of this proxy statement as well as our audited financial statements for the fiscal year ended
December 31, 2009 and the related notes which are incorporated by reference into this proxy
statement from our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
The pro forma data set forth below is based on the transactions that are contemplated to occur at
the closings under the Purchase and Collaboration Agreement, the Note Purchase Agreements and the
PharmaBio Agreement (as amended by the PharmaBio Amendment), including our sale of the Assets, our
receipt at the Closing of the $47,000,000 cash Upfront Payment from Buyer, the issuance of the
11,200,000 Acquisition Shares to Buyer, the payment by us to PharmaBio of $15,845,277 in cash
(which represents the net present value of our payment obligations under the PharmaBio Agreement
(as amended by the PharmaBio Amendment) of $16,500,000 due in November 2010, discounted at a rate
of 4.6% to December 31, 2009), and the payment by us of approximately $26,800,000 in cash
(including accrued and unpaid interest), and the issuance by us of Warrants to purchase 7,750,000
shares of Common Stock and the 7,407,407 NPA Shares under the Note Purchase Agreements. The pro
forma data set forth below does not give effect to our receipt of any portion of the up to
$45,500,000 in contingent milestone payments that may be payable to us pursuant to the Purchase and
Collaboration Agreement.
Pro forma information is intended to provide investors with information about the continuing impact
of a transaction but showing how a specific transaction might have affected historical financial
statements, illustrating the scope of the change in the historical financial position and results
of operations. The adjustments made to historical financial information give effect to events that
are directly attributable to the Asset Sale and the Debt Retirement, factually supportable, and
expected to have a continuing impact. The pro forma data is prepared in accordance with Article 11
of Regulation S-X.
The pro forma data set forth below is not fact and there can be no assurance that our actual
results will not differ significantly from those set forth below or that the impact of the Watson
Transactions and the Debt Retirement will not differ significantly from those presented below.
Accordingly, the pro forma data set forth below is presented for illustrative purposes only and
does not purport to represent, and is not necessarily indicative of, what our actual financial
position and results of operations would have been had the Watson Transactions and the Debt
Retirement occurred on the dates indicated in the Unaudited Pro Forma Financial Statements, nor are
they indicative of our future financial position or results of operations. We do not intend to
update or otherwise revise the pro forma data set forth below to reflect the occurrence of future
events even in the event that any of the estimates, adjustments and assumptions underlying the pro
forma data presented below are shown to be in error. The information set forth below is a
forward-looking statement within the meaning of the Private Securities Litigation Reform Act of
1995 and is subject to the risks and uncertainties described under the caption Cautionary
Statements Concerning Forward
Looking Statements and the risks referred to therein. Readers of this proxy statement are
cautioned not to place
138
undue reliance on such information and no one makes any representation
regarding the information set forth below or our ultimate performance compared to it.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009 |
|
|
Historical Columbia |
|
Condensed |
|
|
Laboratories, Inc |
|
Pro Forma |
|
|
|
|
|
|
|
Loss per common share |
|
|
|
|
|
|
|
|
-basic and diluted |
|
$ |
(0,39 |
) |
|
$ |
(0.11 |
) |
Weighted Average Number of shares used in calculating loss per common share |
|
|
|
|
|
|
|
|
-basic and diluted |
|
|
56,358,843 |
|
|
|
74,966,250 |
|
Book value per share |
|
$ |
(0.21 |
) |
|
$ |
0.01 |
|
Outstanding shares used in calculating book value per share |
|
|
65,761,986 |
|
|
|
84,369,393 |
|
Shareholders equity (deficiency) |
|
|
(13,766,493 |
) |
|
|
1,211,051 |
|
139
APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION (PROPOSAL NO. 2)
The Charter Amendment Proposal
Columbia stockholders are also being asked to approve the Charter Amendment to increase the
number of Columbias authorized shares of Common Stock from 100,000,000 to 150,000,000. The text
of the Charter Amendment is included in this proxy statement as Annex B.
Reasons for the Charter Amendment
Columbia has the authority to issue 100,000,000 shares of Common Stock. As of the close of
business on the Record Date, there were 65,605,886 shares of Common Stock issued and outstanding. In
addition, as of the Record Date, 28,004,254 additional shares of Common Stock were issuable or purchasable
upon the conversion or exercise of outstanding shares of Preferred
Stock, warrants, options and other convertible securities.
Pursuant to the terms of the Purchase and Collaboration Agreement, we, at the Closing, will
sell to Buyer the 11,200,000 Acquisition Shares. In addition, on March 3, 2010, we entered into
the Note Purchase Agreements with the holders of all of our outstanding $40 million in principal
amount of Notes. Pursuant to the Note Purchase Agreements, at the
Closing, we will repurchase our
Notes for an aggregate purchase price of $26 million, plus accrued and unpaid interest through (but
excluding) the date of Closing, in cash, warrants to purchase 7.75 million shares of Common Stock
and 7,407,407 shares of our Common Stock. See The Asset Sale (Proposal No. 1)Purchase of our Convertible Subordinated Notes, beginning on page 67 and The Asset Sale
(Proposal No. 1)The Purchase and Collaboration AgreementThe Closings, beginning on page 80.
In order to be able to:
|
|
|
effectuate the terms of the Purchase Collaboration Agreement, including
the issuance of the Acquisition Shares; |
|
|
|
|
effectuate the terms of the Note Purchase Agreement, including the
issuance of the shares of Common Stock to be issued pursuant to the Note
Purchase Agreements as well as in connection with the exercise of the warrants
issued thereunder; and |
|
|
|
|
|
have additional shares available for future issuances for capital
raising activities or acquisitions, for conversions or exercises of
outstanding convertible securities (including our preferred stock) and for compensation of our directors,
officers, employees and consultants, |
|
additional shares of Common Stock need to be authorized.
We are seeking stockholder approval of the Charter Amendment even if the Asset Sale is not
approved by our stockholders and the Watson Transactions are not consummated. If the Watson
Transactions are not consummated, in order to have additional shares available for future issuances
for capital raising activities or acquisitions, for conversions or exercises of outstanding
convertible securities (including our preferred stock) and for compensation of our directors, officers, employees and consultants, additional shares of Common Stock need to be authorized.
We have no current plans
or commitments to issue any of the shares of Common Stock that would be authorized by
Proposal No. 2 other than the Acquisition Shares, the shares of Common Stock to be issued pursuant to the Note Purchase
Agreements and in connection with the warrants issued thereunder, any shares of Common Stock issued with respect to the
conversion or exercise of any of our outstanding options, warrants or
convertible securities (including our preferred stock) or in connection with the compensation of our directors,
officers, employees and consultants.
140
Required Vote
The affirmative vote of (i) the holders of a majority of our outstanding shares of Common
Stock, and (ii) the holders of a majority of the Voting Power of our outstanding shares of Common
Stock, Series B Preferred Stock and Series E Preferred Stock, voting together as a single class, is
required to approve the Charter Amendment. Our shares of Series C Preferred Stock have no voting
rights. Broker non-votes, abstentions or the failure to vote on the Charter Amendment proposal
will have the same effect as a vote against the Charter Amendment proposal.
The approval of the Charter Amendment proposal is a condition to the approval of the Asset
Sale proposal. However, approval of the Asset Sale proposal is not a condition to the approval of
the Charter Amendment Proposal.
Recommendation
After careful consideration, Columbias board of directors has unanimously determined that the
approval of the Charter Amendment is advisable and in the best interests of the stockholders of
Columbia, unanimously approved Charter Amendment, and recommends that Columbias stockholders vote
or instruct their vote to be cast FOR the Charter Amendment proposal.
141
ADJOURNMENT OF THE SPECIAL MEETING (PROPOSAL NO. 3)
The Adjournment Proposal
If
the number of Shares present in person or
represented by proxy at the Special Meeting voting in favor of the proposal to approve the Asset
Sale and in favor of the proposal to approve the Charter Amendment, as applicable, is insufficient
to approve the Asset Sale and/or the Charter Amendment at the time of the Special Meeting, as
applicable, we intend to move to adjourn the Special Meeting to a later date in order to enable our
board of directors to solicit additional proxies in respect of the proposal to approve the Asset
Sale and/or the proposal to approve the Charter Amendment, as applicable.
In this proposal regarding the adjournment of the Special Meeting, we are asking you to
authorize the holder of any proxy solicited by our board of directors to vote in favor of granting
discretionary authority to the proxy or attorney-in-fact to adjourn the Special Meeting for the
purpose of soliciting additional proxies in favor of the proposal(s) to approve the Asset Sale
and/or the proposal to approve the Charter Amendment. If our stockholders approve the Adjournment
proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and
use the additional time to solicit additional proxies, including the solicitation of proxies from
stockholders that have previously returned properly executed proxies voting against the Asset Sale
and/or the Charter Amendment. Among other things, approval of the Adjournment proposal could mean
that, even if we had received proxies representing a sufficient number of votes against the Asset
Sale and/or the Charter Amendment such that either or both proposals would be defeated, we could
adjourn the Special Meeting without a vote on the approval of the Asset Sale and/or the Charter
Amendment and seek to convince the holders of Shares that voted
against the Asset Sale proposal and/or the Charter Amendment proposal to change their votes to votes in favor
of the Asset Sale and the Charter Amendment. Additionally, we may seek to adjourn the Special
Meeting if a quorum is not present at the Special Meeting.
Vote Required and Board Recommendation
Our
stockholders present may adjourn the Special Meeting, despite the absence of a quorum to a
later date if necessary or appropriate, to allow for the solicitation of additional proxies in
favor of the proposal to approve the Asset Sale and/or the proposal to approve the Charter
Amendment. Approval of the Adjournment proposal requires the affirmative vote of a majority of the
votes cast by holders of our Common Stock, Series B Preferred Stock and Series E Preferred Stock
present in person or by proxy at the Special Meeting, whether or not a quorum is present.
Abstentions and broker non-votes are not counted as votes for or against the Adjournment
proposal and are not counted in determining the number of votes cast on the Adjournment proposal.
No proxy that is
specifically marked AGAINST the proposal to approve the Asset Sale or the Charter Amendment will
be voted in favor of the Adjournment proposal, unless it is specifically marked FOR the proposal
to adjourn the Special Meeting.
142
Our board of directors believes that if the Shares present in person or represented
by proxy at the Special Meeting voting in favor of the proposal(s) to approve the Asset Sale and/or
the Charter Amendment are not sufficient to approve the Asset Sale and/or the
Charter Amendment, it is in the best interests of Columbia and its stockholders to enable our board
to continue to seek to obtain a sufficient number of additional votes in favor of the proposal(s)
to approve the Asset Sale and/or the Charter Amendment, as applicable.
Approval of the Adjournment proposal is not conditioned upon the approval of the Asset Sale
proposal or the Charter Amendment proposal.
Our board of directors recommends that you vote FOR adjournment of the Special Meeting to a
later date, if necessary or appropriate, to allow for the solicitation of additional proxies in
favor of the proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are
insufficient votes to do so.
143
OWNERSHIP OF COLUMBIA
Security Ownership of Certain Beneficial Owners and Management
Common
Stock. The following table sets forth, as of April 27, 2010, information with respect
to the beneficial ownership of shares of Columbias Common Stock by:
|
|
|
each person known to us to be the beneficial owner of more than 5% of
the shares of Columbias Common Stock; |
|
|
|
|
each of Columbias directors and director nominees; |
|
|
|
|
each of Columbias executive officers who were serving as executive
officers at the end of the last fiscal year (collectively, the named executive
officers); and |
|
|
|
|
all of Columbias current directors and named executive officers as a
group. |
The number of shares beneficially owned by each person, director, director nominee, or named
executive officer is determined under rules of the SEC; the information is not necessarily
indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership
includes any shares for which the individual has sole or shared voting power or investment power
and also any shares with respect to which the person has the right to acquire sole or shared voting
or investment power on or before June 26, 2010 (60 days
after April 27, 2010) through the conversion
of shares of convertible preferred stock or convertible debt or the exercise of any stock option,
warrant or other right. Unless we indicate otherwise, each person has sole investment and/or
voting power (or shares such powers with his or her spouse) with respect to the class of shares set
forth in the following tables.
Common Stock
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
Beneficially |
|
Percentage |
Name and Address of Beneficial Owner |
|
Owned (1) |
|
of Total (2) |
David M.
Knott/Dorset Management
Corporation (3) |
|
|
6,107,803 |
|
|
|
8.9 |
% |
485 Underhill Boulevard, Suite 205
Syosset, New York 11791 |
|
|
|
|
|
|
|
|
John P. Curran (4) |
|
|
6,600,272 |
|
|
|
9.99 |
% |
230 Park Avenue
New York, New York 10017 |
|
|
|
|
|
|
|
|
Goldman Capital Management, Inc. (5) |
|
|
4,585,350 |
|
|
|
7.0 |
% |
320 Park Avenue
New York, New York 10022 |
|
|
|
|
|
|
|
|
Perry Corp. and Richard C. Perry (6) |
|
|
4,457,142 |
|
|
|
6.8 |
% |
767 Fifth Avenue, 19th Floor
New York, NY 10153 |
|
|
|
|
|
|
|
|
144
Common Stock
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
Beneficially |
|
Percentage |
Name and Address of Beneficial Owner |
|
Owned (1) |
|
of Total (2) |
Directors and Named Executive Officers: |
|
|
|
|
|
|
|
|
Valerie L.
Andrews (7)(8)(9) |
|
|
48,981 |
|
|
|
* |
|
Edward A.
Blechschmidt (7)(8)(9) |
|
|
84,731 |
|
|
|
* |
|
Anthony R.
Campbell (7)(8)(9)(10) |
|
|
6,381,642 |
|
|
|
9.3 |
% |
Frank C.
Condella, Jr. (9) |
|
|
162,764 |
|
|
|
* |
|
James S.
Crofton (7)(8)(9) |
|
|
48,981 |
|
|
|
* |
|
Lawrence A.
Gyenes (9) |
|
|
50,000 |
|
|
|
* |
|
Stephen G.
Kasnet (7)(8)(9) |
|
|
136,981 |
|
|
|
* |
|
Michael
McGrane (7)(8)(9) |
|
|
754,259 |
|
|
|
1.1 |
% |
Robert S.
Mills (7)(8)(9) |
|
|
1,079,474 |
|
|
|
1.6 |
% |
Selwyn P.
Oskowitz, M.D. (7)(8)(9) |
|
|
123,681 |
|
|
|
* |
|
All Directors and Executive Officers as
a Group (10 persons) (7) (8) (9) (10) |
|
|
8,871,494 |
|
|
|
13.2 |
% |
|
|
|
* |
|
Signifies less than 1% |
|
|
(1) |
|
Includes shares that may be acquired through the conversion of shares of convertible
preferred stock or convertible debt or the exercise of warrants, stock options, or other
rights, in each case, that are convertible or exercisable on or before June 26, 2010. |
|
|
|
(2) |
|
Based on 65,605,886 shares outstanding at April 27, 2010. In calculating the percentage of
ownership, all shares of Common Stock of which the identified person or group has the right to
acquire beneficial ownership on or before June 26, 2010 are deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by that person or
group. These shares are not, however, deemed to be outstanding for the purpose of computing
the percentage of the shares of Common Stock owned by any other person or group. |
|
|
|
(3) |
|
Based on Schedule 13D/A, filed on March 18, 2010 with the SEC by Dorset Management
Corporation and David M. Knott in which (a) Dorset Management Corporation reported beneficial
ownership of 6,012,473 shares of Common Stock, which includes 2,152,381 shares of Common Stock
issuable upon the conversion of the Notes and the conversion of shares of Series E Preferred
Stock, and 657,002 shares of Common Stock that are issuable upon the exercise of warrants or
options to purchase shares of Common Stock, and (b) David M. Knott reported beneficial
ownership of the shares reported as beneficially owned by Dorset Management Corporation plus
95,330 additional shares of Common Stock. |
|
|
|
(4) |
|
Based on Schedule 13G/A filed on April 27, 2010 with the SEC by John P. Curran, which
reported beneficial ownership of 6,600,272 shares of Common Stock.
The Schedule 13G/A reported
that Mr. Curran does not have sole voting and dispositive power over any shares of Columbias
Common Stock and has shared voting and dispositive power over 6,600,272 of Columbias Common
Stock. Mr. Curran disclaimed beneficial ownership in the securities reported in the Schedule
13G/A except to the extent of his pecuniary interest therein. |
|
|
|
(5) |
|
Based on a telephone conversation on March 17, 2010, between
Frank C. Condella, Jr., interim Chief Executive Officer of the
Company, and Neil Goldman, President of Goldman Capital Management, Inc., in which Mr.
Goldman reported beneficial ownership of 4,585,350 shares of Common
Stock. |
|
145
|
|
|
(6) |
|
Based on a Schedule 13D filed on March 12, 2010 with the SEC by Perry Corp. and Richard C.
Perry, which reported beneficial ownership of 4,457,142 shares of Common Stock issuable upon
conversion of Notes or exercise of warrants to purchase Common Stock. |
|
|
(7) |
|
Includes shares which may be acquired upon the exercise of options exercisable within 60 days
after April 27, 2010, as follows: Ms. Andrews, 12,000 shares; Mr. Blechschmidt, 15,000
shares; Mr. Campbell, 25,000 shares; Mr. Crofton, 12,000 shares; Mr. Kasnet, 12,000 shares;
Mr. McGrane, 663,810 shares; Mr. Mills, 977,674 shares; and, Dr. Oskowitz, 83,000 shares. |
|
|
|
(8) |
|
Includes restricted shares that were unvested on April 27, 2010, as follows: Ms. Andrews,
19,230 shares; Mr. Blechschmidt, 19,230 shares; Mr. Campbell, 19,230 shares; Mr. Condella,
19,230 shares; Mr. Crofton, 19,230 shares; Mr. Kasnet, 19,230 shares; Mr. McGrane, 25,875
shares; Mr. Mills, 35,000 shares; and, Dr. Oskowitz, 19,230 shares. |
|
|
|
(9) |
|
Excludes (a) restricted stock that would not vest within 60 days after April 27, 2010 and
(b) shares that may be acquired through the exercise of options that would not vest or become
exercisable within 60 days after April 27, 2010, in each case, other than because vesting,
exercisability or conversion will be accelerated in connection with the Asset Sale (because the
Asset Sale constitutes a change of control under our 2008 Plan and our 1996 Plan). The number of
shares subject to unvested options held by each director and/or executive officer that are excluded
from the number of shares presented in the table above and that would vest and become exercisable
(on an accelerated basis) at the Closing is as follows: Frank C. Condella, Jr., 100,000 shares;
Lawrence A Gyenes, 125,000 shares; Michael McGrane, 141,000 shares; and Robert S. Mills, 192,500
shares. The number of shares of restricted stock held by each director and/or executive officer
that are excluded from the number of shares presented in the table above and that would vest (on an
accelerated basis) at the Closing is as follows: Valerie L. Andrews, 19,230 shares; Edward A.
Blechschmidt, 19,230 shares; Anthony R. Campbell, 19,230 shares; Frank C. Condella, Jr., 19,230
shares; James S. Crofton, 19,230 shares; Stephen G. Kasnet, 19,230 shares; Michael McGrane, 25,875
shares; Robert S. Mills, 35,000 shares; and Selwyn P. Oskowitz, M.D., 19,230 shares. |
|
|
(10) |
|
Includes direct ownership of 122,265 shares of Common Stock and indirect ownership of 126,574
shares of Common Stock (including 100,000 shares that have been pledged as security). Also
includes beneficial ownership of the shares described in footnote 3 above reported as
beneficially owned by Dorset Management Corporation and David M. Knott. |
Series B Preferred Stock. Michael Nissan and Marla S. Nissan of 876 Park Avenue, New
York, New York 10021, hold all 130 outstanding shares of the
Series B Preferred Stock as of April 27, 2010.
Series E
Preferred Stock. The following table sets forth, as of April 27, 2010, information
with respect to each person known to us to be the beneficial owner of more than 5% of Columbias
Series E Preferred Stock. No director, director nominee, or named executive officer owns any
shares of Series E Preferred Stock.
Series E Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Percentage |
Name and Address of Beneficial Owner |
|
Beneficially Owned |
|
of Total (1) |
Perry Corp. and Richard C. Perry (2) |
|
|
35,000 |
|
|
|
59.3 |
% |
767 Fifth Avenue, 19th Floor
New York, NY 10153 |
|
|
|
|
|
|
|
|
Knott Partners Offshore Master Fund, L.P. |
|
|
9,580 |
|
|
|
16.2 |
% |
485 Underhill Boulevard, Suite 205
Syosset, New York 11791 |
|
|
|
|
|
|
|
|
Knott Partners, L.P. |
|
|
7,980 |
|
|
|
13.5 |
% |
485 Underhill Boulevard, Suite 205
Syosset, New York 11791 |
|
|
|
|
|
|
|
|
Shoshone Partners, L.P. |
|
|
5,180 |
|
|
|
8.8 |
% |
485 Underhill Boulevard, Suite 205
Syosset, New York 11791 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on 59,000 shares of Series E Preferred Stock
outstanding at April 27,
2010. |
|
|
(2) |
|
Based on a Schedule 13D filed on March 12, 2010 with the SEC by Perry Corp. and
Richard C. Perry, which reported beneficial ownership of 1,750,000 shares of Common
Stock issuable upon conversion of Preferred Stock. |
146
As of April 27, 2010, we know of no persons, other than those listed above, who
beneficially own, as determined under rules of the SEC, more than 5% of our outstanding shares of
Common Stock, Series B Preferred Stock or Series E Preferred Stock.
147
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals intended for inclusion in the proxy statement for the 2010 Annual
Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must be directed to the
Corporate Secretary, Columbia Laboratories, Inc., at 354 Eisenhower Parkway, Plaza 1, Second Floor,
Livingston, NJ 07039. Any such proposal concerning Columbias 2010 Annual Meeting of Stockholders
was required to be submitted by a stockholder prior to December 20, 2009. In order for proposals
of stockholders made outside of Rule 14a-8 under the Exchange Act to be considered timely within
the meaning of Rule 14a-4(c) under the Exchange Act, such proposals must have been received by the
Corporate Secretary at the above address by March 8, 2010. The proxy to be solicited on behalf of
our board for the 2010 Annual Meeting of Stockholders may confer discretionary authority to vote on
any such proposal considered to have been received on a non-timely basis that nonetheless properly
comes before the 2010 Annual Meeting of Stockholders.
OTHER MATTERS
At this time, we know of no other matters to be submitted to our stockholders at the Special
Meeting. If any other matters properly come before the Special Meeting in which your proxy has
provided discretionary authority, your shares of common stock will be voted in accordance with the
discretion of the persons named on the enclosed proxy card in accordance with their best judgment.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy any document we file at the SECs public reference room located at 100
F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings are also available to the public
at the SECs website at http://www.sec.gov. You also may obtain free copies of the documents we
file with the SEC by going to the SEC Filings section of our Investor Relations website at
http://www.cbrxir.com. The information provided on our website is not part of this proxy
statement, and therefore is not incorporated by reference.
Any person, including any beneficial owner, to whom this proxy statement is delivered may
request copies of proxy statements and any of the documents incorporated by reference in this
document or other information concerning us, without charge, by written or telephonic request
directed to our Corporate Secretary at Columbia Laboratories, Inc., 354 Eisenhower Parkway, Plaza
1, Second Floor, Livingston, NJ 07039, telephone (973) 994-3999, on our website at
http://www.cbrxir.com, or from the SEC through the SECs website at http://www.sec.gov. Documents
incorporated by reference are available without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference into those documents.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
148
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT.
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference certain information into this proxy statement.
This means that we can disclose important information to you by referring you to another document
filed separately with the SEC. To the extent permitted, information that we file later with the
SEC, prior to the closing of the Asset Sale, will automatically update and supersede the previously
filed information and be incorporated by reference into this proxy statement.
We may incorporate by reference any documents that are filed with the SEC between the date of
this proxy statement and prior to the date of the Special Meeting. These include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as proxy statements (except for information furnished to the SEC that is not deemed to
be filed for purposes of the Exchange Act).
The information incorporated by reference is considered to be a part of this proxy statement,
and later information that we file with the SEC will update and supersede that information. We
incorporate by reference the documents listed below and any documents filed by us pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and
prior to the date of the Special Meeting:
|
|
|
Filings |
|
Period/Date |
|
Current Report on Form 8-K
|
|
July 7, 2008 |
Annual Report on Form 10-K
|
|
Fiscal year ended December 31, 2009 |
Current Report on Form 8-K
|
|
January 21, 2010 |
Current Report on Form 8-K
|
|
March 3, 2010 |
Current Report on Form 8-K
|
|
March 4, 2010 |
Current Report on Form 8-K
|
|
March 11, 2010 |
Current Report on Form 8-K
|
|
March 11, 2010 |
Current Report on Form 8-K/A
|
|
March 11, 2010 |
Current Report on Form 8-K |
|
April 12, 2010 |
Current Report on Form 8-K |
|
April 19, 2010 |
Current Report on Form 8-K |
|
April 23, 2010 |
Any person, including any beneficial owner, to whom this proxy statement is delivered may
request copies of reports, proxy statements or other information concerning us, without charge, as
described above under Where You Can Find More Information.
You should only rely on information provided or incorporated in this proxy statement. No
person has been authorized to give any information or to make any representations other than those
contained in this proxy statement and, if given or made, such information or representations must
not be relied upon as having been authorized by us or any other person.
THIS PROXY STATEMENT IS DATED [], 2010. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT IS ACCURATE
149
AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS
DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
150
Annex A
PURCHASE AND COLLABORATION AGREEMENT
by and among
COLUMBIA
LABORATORIES, INC.,
COVENTRY
ACQUISITION, INC.
and
WATSON PHARMACEUTICALS, INC.
Dated as of March 3, 2010
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
ARTICLE I. DEFINITIONS |
|
|
1 |
|
|
|
1.1 |
|
Definitions |
|
|
1 |
|
|
|
1.2 |
|
Other Definitional Provisions |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
ARTICLE II. PURCHASE AND SALE |
|
|
2 |
|
|
|
2.1 |
|
Purchase and Sale of Assets |
|
|
2 |
|
|
|
2.2 |
|
Shares |
|
|
3 |
|
|
|
2.3 |
|
Excluded and Other Assets |
|
|
3 |
|
|
|
2.4 |
|
Assumed Liabilities |
|
|
4 |
|
|
|
2.5 |
|
Excluded Liabilities |
|
|
4 |
|
|
|
2.6 |
|
Nonassignable Assets |
|
|
5 |
|
|
|
2.7 |
|
Purchase Price |
|
|
5 |
|
|
|
2.8 |
|
Milestone and Royalty Payments |
|
|
6 |
|
|
|
2.9 |
|
Purchase Price Allocation |
|
|
13 |
|
|
|
2.10 |
|
Withholding |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
ARTICLE III. CLOSING |
|
|
14 |
|
|
|
3.1 |
|
Closing |
|
|
14 |
|
|
|
3.2 |
|
Transactions at First Closing |
|
|
15 |
|
|
|
3.3 |
|
Transactions at Second Closing |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER |
|
|
17 |
|
|
|
4.1 |
|
Organization |
|
|
17 |
|
|
|
4.2 |
|
Authority; Board Action |
|
|
18 |
|
|
|
4.3 |
|
No Conflicts; Enforceability |
|
|
19 |
|
|
|
4.4 |
|
Title; Sufficiency of Assets |
|
|
19 |
|
|
|
4.5 |
|
Capitalization |
|
|
20 |
|
|
|
4.6 |
|
Intellectual Property |
|
|
21 |
|
|
|
4.7 |
|
Absence of Litigation |
|
|
22 |
|
|
|
4.8 |
|
Real and Personal Property |
|
|
22 |
|
|
|
4.9 |
|
Taxes |
|
|
22 |
|
|
|
4.10 |
|
Environmental, Safety and Health |
|
|
23 |
|
|
|
4.11 |
|
Compliance with Laws |
|
|
24 |
|
|
|
4.12 |
|
Permits |
|
|
24 |
|
|
|
4.13 |
|
Regulatory Matters |
|
|
24 |
|
|
|
4.14 |
|
Suppliers |
|
|
26 |
|
|
|
4.15 |
|
SEC Documents, Financial Statements |
|
|
26 |
|
|
|
4.16 |
|
Absence of Certain Changes or Events |
|
|
27 |
|
|
|
4.17 |
|
Contracts |
|
|
27 |
|
|
|
4.18 |
|
Brokers, Etc. |
|
|
27 |
|
i
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
|
|
4.19 |
|
Insurance |
|
|
27 |
|
|
|
4.20 |
|
Investment Company |
|
|
28 |
|
|
|
4.21 |
|
Exchange |
|
|
28 |
|
|
|
4.22 |
|
Application of Takeover Protections |
|
|
28 |
|
|
|
4.23 |
|
Fairness Opinion |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER |
|
|
28 |
|
|
|
5.1 |
|
Organization |
|
|
28 |
|
|
|
5.2 |
|
Authority |
|
|
28 |
|
|
|
5.3 |
|
Investment Purpose; Status |
|
|
29 |
|
|
|
5.4 |
|
Securities Laws |
|
|
29 |
|
|
|
5.5 |
|
Ownership Cap |
|
|
30 |
|
|
|
5.6 |
|
Acknowledgement of Risk |
|
|
30 |
|
|
|
5.7 |
|
No Conflicts; Enforceability |
|
|
30 |
|
|
|
5.8 |
|
Litigation |
|
|
31 |
|
|
|
5.9 |
|
Financing |
|
|
31 |
|
|
|
5.10 |
|
No Short Sales |
|
|
31 |
|
|
|
5.11 |
|
Brokers, Etc. |
|
|
31 |
|
|
|
5.12 |
|
Independent Investigation |
|
|
31 |
|
|
|
|
|
|
|
|
|
|
ARTICLE VI. COVENANTS PRIOR TO CLOSING |
|
|
31 |
|
|
|
6.1 |
|
Access to Information |
|
|
31 |
|
|
|
6.2 |
|
Conduct of the Business |
|
|
32 |
|
|
|
6.3 |
|
[Omitted.] |
|
|
34 |
|
|
|
6.4 |
|
Proxy Statement; Seller Stockholders Meeting |
|
|
34 |
|
|
|
6.5 |
|
No Solicitation; Acquisition Proposals |
|
|
35 |
|
|
|
6.6 |
|
Transition Activities |
|
|
37 |
|
|
|
6.7 |
|
Trade Inventory |
|
|
38 |
|
|
|
6.8 |
|
Cooperation Regarding Financial Statements; etc. |
|
|
38 |
|
|
|
6.9 |
|
Notifications; Updated Schedules |
|
|
38 |
|
|
|
6.10 |
|
Further Assurances; Further Documents |
|
|
38 |
|
|
|
6.11 |
|
Listing |
|
|
39 |
|
|
|
6.12 |
|
Ownership Cap |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
ARTICLE VII. CONDITIONS TO CLOSING |
|
|
40 |
|
|
|
7.1 |
|
Conditions Precedent to Obligations of Buyer and Seller at the First Closing |
|
|
40 |
|
|
|
7.2 |
|
Conditions Precedent to Buyers Obligations at the First Closing |
|
|
40 |
|
|
|
7.3 |
|
Conditions Precedent to Sellers Obligations at the First Closing |
|
|
41 |
|
|
|
7.4 |
|
Conditions Precedent to Obligations of Buyer and Seller at the Second Closing |
|
|
41 |
|
|
|
7.5 |
|
Conditions Precedent to Buyers Obligations to the Second Closing |
|
|
41 |
|
|
|
7.6 |
|
Conditions Precedent to Sellers Obligations to the Second Closing |
|
|
42 |
|
|
|
|
|
|
|
|
|
|
ARTICLE VIII. ADDITIONAL COVENANTS |
|
|
42 |
|
|
|
8.1 |
|
Confidentiality; Publicity |
|
|
42 |
|
ii
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
|
|
8.2 |
|
Use of Trade or Service Marks; Name Change |
|
|
42 |
|
|
|
8.3 |
|
Notification of Customers |
|
|
42 |
|
|
|
8.4 |
|
Products Returns, Rebate Charges and Wholesaler Charges |
|
|
42 |
|
|
|
8.5 |
|
Regulatory Matters |
|
|
43 |
|
|
|
8.6 |
|
Tax Matters |
|
|
44 |
|
|
|
8.7 |
|
Development |
|
|
46 |
|
|
|
8.8 |
|
Commercialization |
|
|
50 |
|
|
|
8.9 |
|
Joint Development Committee |
|
|
51 |
|
|
|
8.10 |
|
Joint Commercialization Committee |
|
|
53 |
|
|
|
8.11 |
|
Covenant Not to Compete |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
ARTICLE IX. TERMINATION AND SURVIVAL |
|
|
55 |
|
|
|
9.1 |
|
Termination |
|
|
55 |
|
|
|
9.2 |
|
Procedure and Effect of Termination |
|
|
56 |
|
|
|
|
|
|
|
|
|
|
ARTICLE X. INDEMNIFICATION |
|
|
57 |
|
|
|
10.1 |
|
Survival of Representations |
|
|
57 |
|
|
|
10.2 |
|
Indemnification by Seller |
|
|
58 |
|
|
|
10.3 |
|
Indemnification by Buyer |
|
|
59 |
|
|
|
10.4 |
|
Limitation on Losses; Calculation of Losses; Treatment of Indemnification Payments |
|
|
59 |
|
|
|
10.5 |
|
No Termination of Indemnification |
|
|
60 |
|
|
|
10.6 |
|
Procedures |
|
|
60 |
|
|
|
10.7 |
|
Sole Remedy |
|
|
62 |
|
|
|
10.8 |
|
Effect of Investigation or Knowledge |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
ARTICLE XI. MISCELLANEOUS |
|
|
62 |
|
|
|
11.1 |
|
Assignment; Binding Effect |
|
|
62 |
|
|
|
11.2 |
|
Guarantee of Obligations |
|
|
62 |
|
|
|
11.3 |
|
Expenses |
|
|
63 |
|
|
|
11.4 |
|
Notices |
|
|
63 |
|
|
|
11.5 |
|
Severability |
|
|
64 |
|
|
|
11.6 |
|
Amendments; Entire Agreement |
|
|
64 |
|
|
|
11.7 |
|
No Third-Party Beneficiaries |
|
|
64 |
|
|
|
11.8 |
|
Waiver |
|
|
64 |
|
|
|
11.9 |
|
Governing Law |
|
|
65 |
|
|
|
11.10 |
|
Arbitration |
|
|
65 |
|
|
|
11.11 |
|
Injunctive Relief |
|
|
66 |
|
|
|
11.12 |
|
Headings |
|
|
66 |
|
|
|
11.13 |
|
Counterparts |
|
|
66 |
|
|
|
11.14 |
|
Schedules |
|
|
66 |
|
|
|
11.15 |
|
Construction |
|
|
67 |
|
iii
SCHEDULES AND EXHIBITS
|
|
|
|
|
|
Annex 1.1
|
|
Definitions |
|
|
|
Exhibit A
|
|
Asset Transfer Documentation |
Exhibit B
|
|
Form of Investors Rights Agreement |
Exhibit C
|
|
Form of Supply Agreement |
Exhibit D
|
|
Form of License Agreement |
Exhibit E
|
|
Form of Charter Amendment |
iv
PURCHASE AND COLLABORATION AGREEMENT
THIS
PURCHASE AND COLLABORATION AGREEMENT (this
Agreement), dated as of March 3, 2010 (the
Execution Date), is entered into by and among
Columbia Laboratories, Inc., a Delaware corporation
(Seller), Watson Pharmaceuticals, Inc., a Nevada
corporation (Parent) (solely for purposes of
Section 11.2 herein) and Coventry Acquisition, Inc., a Delaware
corporation and wholly-owned Subsidiary of Parent (Buyer). Each of Seller and Buyer is sometimes
referred to herein, individually, as a Party and, collectively, as the Parties.
RECITALS
WHEREAS, subject to the terms and conditions of this Agreement, Seller wishes to sell the
Purchased Assets and eleven million two hundred thousand (11,200,000) shares (the Shares) of
common stock, $.01 par value per share, of Seller (the Common Stock), and transfer the Assumed
Liabilities to Buyer, and Buyer wishes to purchase the Purchased Assets, the Shares and assume the
Assumed Liabilities from Seller.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties,
covenants, agreements and provisions set forth herein and in the Other Agreements, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. Unless the context requires otherwise, all capitalized terms used herein shall have the meanings
specified in Annex 1.1 or elsewhere in this Agreement, as applicable.
1.2 Other Definitional Provisions.
(a) When a reference is made in this Agreement to an Article, Section, Exhibit, Schedule,
Recital or Preamble, such reference is to an Article, Section, Exhibit, Schedule, Recital or
Preamble of or to this Agreement unless otherwise indicated.
(b) The words hereof, herein, hereto 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.
(c) A term defined in the singular has a comparable meaning when used in the plural, and vice
versa.
(d) Words of one gender include the other gender.
(e) The term dollars and $ means United States dollars.
(f) The word including means including without limitation and the words include and
includes have corresponding meanings.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase and Sale of Assets. On the terms and subject to the conditions hereof and in consideration of the Purchase Price
paid or payable to Seller by Buyer, Seller will sell, convey, transfer, assign and deliver or cause
its Subsidiaries to sell, convey, transfer, assign and deliver to Buyer, and Buyer will purchase,
take delivery of and acquire from Seller or its Subsidiaries, all of Sellers and its Subsidiaries
right, title and interest in and to the following assets, properties, rights and interests, free
and clear of any Encumbrances (collectively, the Purchased Assets):
(a) the Patents listed on Schedule 2.1(a);
(b) the Trademarks listed on Schedule 2.1(b);
(c) all Promotional Materials in Sellers possession and control and all Copyrights thereto;
(d) all Regulatory Filings and Regulatory Approvals primarily related to the Products, other
than the PTB NDA and the PTB Supplemental NDA, including the Regulatory Approvals listed on
Schedule 2.1(d) and all files related thereto;
(e) the Contracts listed on Schedule 2.1(e) (the Assigned Contracts);
(f) all Books and Records and complete and correct copies of all Tax Returns and other
documents pertaining to Taxes, if any, primarily related to the Purchased Assets or the Business in
Sellers possession or control; provided, that Seller shall be entitled to exclude or appropriately
redact such documents, information, materials and data from the applicable Books and Records to the
extent not related to Purchased Assets or the Business and retain the original (in the case of such
exclusion) or a copy (in the case of such redaction) thereof; provided, further, that any such
exclusion or redaction may not degrade or impair Buyers ability to use any such Books and Records;
(g) to the extent in Sellers possession or control, all pre-clinical, clinical and process
development data and reports primarily relating to the research, Commercialization or Development
of the Products, including all raw data from clinical trials of Prochieve or other Products, all
case report forms relating thereto and all statistical programs developed (or modified in a manner
material to the use or function thereof (other than through user preferences)) to analyze data from
such clinical trials; all market research data, market intelligence reports, statistical programs
(if any) used for marketing and sales research primarily related to the marketing and sale of
Products; data contained in laboratory notebooks primarily relating to the Products; all adverse
experience reports and files primarily related to the Products (including source documentation) and
all periodic adverse experience reports and all data contained in electronic data bases primarily
relating to adverse experience reports and periodic adverse experience reports for the Products;
all analytical and quality control data for the Products; and all correspondence with the FDA
primarily relating to the Products (all of the foregoing referenced in this paragraph (g),
collectively, Product Data);
2
(h) all refunds, credits and claims for refunds or credits relating to Property Taxes
allocable to any Post-Closing Tax Period, in favor of Seller or any of its Affiliates or any of
their respective employees to the extent relating to any Purchased Asset or any Assumed Liability;
and
(i) the Regulatory Filings and Regulatory Approval, to the extent made or obtained by or on
behalf of Seller, necessary for Commercializing the PTB Indication, which Regulatory Filings and
Regulatory Approval will consist of an Original NDA (the PTB NDA) or, with the approval of the
Joint Development Committee, an Efficacy Supplement to NDA No. 20,701 (the PTB Supplemental NDA).
For the purposes hereof, the First Closing Date Purchased Assets shall consist of the Purchased
Assets listed in Section 2.1(a)-(h) above and the Second Closing Date Purchased Assets
shall consist of the Purchased Assets listed in Section 2.1(i).
2.2 Shares. On the terms and subject to the conditions hereof and in consideration of the Purchase Price
paid or payable to Seller by Buyer, Seller will issue and sell the Shares to Buyer, and Buyer will
purchase, take delivery and receive from Seller the Shares.
2.3 Excluded and Other Assets.
(a) Notwithstanding anything to the contrary contained in this Agreement, all assets,
properties, rights and interests of Seller or its Affiliates not specifically identified as
Purchased Assets in Section 2.1 (collectively, the Excluded Assets) are expressly
excluded from the purchase and sale contemplated hereby and as such are not included in the
Purchased Assets and shall remain the assets, property rights and interests of Seller or its
Affiliates, as applicable. The Excluded Assets include, without limitation, the assets listed on
Schedule 2.3.
(b) Notwithstanding paragraphs (f) and (g) of Section 2.1, Seller shall be entitled to
retain copies of and shall have the right to use any Books and Records, Tax Returns and other
documents pertaining to Taxes and Product Data in connection with its use of the Excluded Assets
and its businesses not constituting the Business.
(c) (i) To the extent rights or assets held by Seller or any of its Subsidiaries are necessary
for the operation or conduct of the Business but such rights or assets are not included in the
Purchased Assets and Buyer is not otherwise provided with the use of such rights or assets pursuant
to the Other Agreements, from and after the First Closing, Seller or one of its Subsidiaries shall
provide Purchaser with access to and the right to use such rights or assets so as to allow Buyer to
use such rights or assets in substantially the same manner as used by Seller or its Subsidiaries in
the operation or conduct of the Business immediately prior to the First Closing.
(ii) To the extent any Purchased Asset is necessary for the operation or conduct of
Sellers or one of its Subsidiaries business not constituting the Business or the use by
Seller or its Affiliates of the Excluded Assets and Seller is not otherwise provided with
the use of such rights or assets pursuant to the Other Agreements, from and after the First
Closing, Buyer or one of its Subsidiaries shall provide Seller with access to and the right
to use such Purchased Asset so as to allow Seller and its Subsidiaries to
3
continue to use such Purchased Asset in substantially the same manner as used by Seller
or its Subsidiaries in the operation or conduct of Sellers or one of its Subsidiaries
business not constituting the Business or the use by Seller or its Affiliates of the
Excluded Assets immediately prior to the First Closing.
(iii) In the event of a conflict between this Section 2.3(c) and the License
Agreement, the provisions of the License Agreement shall control.
(d) Notwithstanding any other provision of this Agreement or the Other Agreements to the
contrary, Buyers rights with respect to the Purchased Assets and Business outside the United
States shall be subject to the Merck-Serono Agreement. Seller shall not and shall cause its
Subsidiaries not to amend or modify the Merck-Serono Agreement in a manner adverse to Buyer without
Buyers prior written consent. For purposes of this Section 2.3(d), United States means
the several United States, the District of Columbia and Puerto Rico.
2.4 Assumed Liabilities. On the terms and subject to the conditions hereof, Buyer shall assume and pay, perform or
otherwise discharge, when due, any and all of the following Liabilities (collectively, the Assumed
Liabilities):
(a) all Liabilities arising out of or relating to the use of the First Closing Date Purchased
Assets on and after the First Closing Date;
(b) all Liabilities under the Assigned Contracts, to the extent such Liabilities arise on or
after the First Closing Date; and
(c) all Liabilities arising out of or relating to the use of the Second Closing Date Purchased
Assets after the Second Closing Date.
For purposes hereof, (i) the First Closing Date Assumed Liabilities shall consist of the Assumed
Liabilities listed in Section 2.4(a)-(b) above and Buyer shall assume and pay, perform or
otherwise discharge when due the First Closing Date Assumed Liabilities on and following the First
Closing Date and (ii) the Second Closing Date Assumed Liabilities shall consist of the Assumed
Liabilities listed in Section 2.4(c) and Buyer shall assume and pay, perform or otherwise
discharge when due the Second Closing Date Assumed Liabilities on and following the Second Closing
Date. Notwithstanding anything in this Agreement to the contrary, the Assumed Liabilities with
respect to Taxes shall consist of (i) any Liability for Property Taxes imposed (x) on the First
Closing Date Purchased Assets attributable to the Post-Closing Tax Period or (y) on the Second
Closing Date Purchased Assets attributable to the Second Post-Closing Tax Period, in each case to
the extent and in the manner in which Buyer is liable for Property Taxes as set forth in
Section 8.6(c), and (ii) any Liability for Transfer Taxes for which Buyer is liable
pursuant to Section 8.6(a).
2.5 Excluded Liabilities. Seller shall retain and shall be responsible for, and Buyer shall not assume or have any
responsibility for, any of the Liabilities of Seller not specifically included in the Assumed
Liabilities pursuant to Section 2.4 (the Excluded Liabilities). Notwithstanding anything
in this Agreement to the contrary, the Excluded Liabilities with respect to Taxes shall consist of
(i) any Liability of Seller for Taxes (including any Liability of Seller for the Taxes of any other
Person under Treasury Regulations
4
Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor,
by Contract, or otherwise) other than Property Taxes imposed on the Purchased Assets and Transfer
Taxes, (ii) any Liability for Property Taxes otherwise imposed (x) on the First Closing Date
Purchased Assets attributable to the Pre-Closing Tax Period or (y) on the Second Closing Date
Purchased Assets attributable to the Second Pre-Closing Tax Period, in each case to the extent and
in the manner in which Seller is liable for Property Taxes as set forth in Section 8.6(c),
and (iii) any Liability for Transfer Taxes for which Seller is liable pursuant to Section
8.6(a).
2.6 Nonassignable Assets. In the event that Seller is unable to sell, assign, transfer or convey any Purchased Asset
(including any Contracts, Regulatory Filings or Regulatory Approvals) to Buyer due to a failure to
obtain a required consent of a Third Party (such asset, a Nonassignable Asset), such
Nonassignable Asset shall be held, as of and from the applicable Closing, by Seller for the benefit
and burden of Buyer, and the covenants and obligations thereunder shall be fully performed by Buyer
on Sellers behalf (to the extent such covenants and obligations are Assumed Liabilities) at
Buyers sole cost, and all rights and benefits (to the extent such rights and benefits are
Purchased Assets) existing thereunder shall be for Buyers account. To the extent permitted by
applicable Law and by the terms of the applicable Nonassignable Asset, each of Seller and Buyer
shall take or cause to be taken such actions as the other Party may reasonably request which are
required to be taken or appropriate in order to provide Buyer with, and relieve Seller of, the
benefits and burdens of the Nonassignable Asset, including, if appropriate, entry into subcontracts
for the performance thereof. Seller shall promptly pay over to Buyer the net amount (after
expenses and Taxes) of all payments received by it in respect of all Nonassignable Assets with
respect to periods from and after the applicable Closing. Buyer shall promptly pay over to Seller
any payments, and perform and discharge any obligations (including any and all Taxes, but only to
the extent not deducted in computing a payment made by Seller pursuant to the preceding sentence),
owed by Seller with respect to such Nonassignable Assets during the period when Buyer enjoys the
full benefit of such Nonassignable Asset.
2.7 Purchase Price. In addition to any other amounts due hereunder, in consideration of the sale, assignment,
conveyance, license and delivery of the Purchased Assets and the Shares pursuant to this Agreement,
Buyer shall: (a) at the First Closing pay to Seller, by wire transfer of immediately available
funds directly to the Seller Account, an amount equal to Forty-Seven Million Dollars ($47,000,000)
(the Upfront Payment), (b) pay to Seller the amounts required pursuant to and in accordance with
Section 2.8 (the Post-Closing Payments) by wire transfer of immediately available funds
directly to the Seller Account and (c) assume the Assumed Liabilities (the items set forth in
clauses (a) through (c) collectively, the Purchase Price).
5
2.8 Milestone and Royalty Payments.
(a) Clinical Trial Milestone Payment.
(i) Milestone Payment.
|
|
|
|
Milestone (the Clinical Trial Results Milestone)
|
|
|
Milestone Payment (the Clinical Trial Results Milestone Payment)
|
Upon completion of the statistical analysis,
and delivery to Buyer of a report from
Sellers Third Party statistician for the
PREGNANT Study in accordance with Section
2.8(a)(ii), if the primary endpoint,
reduction in preterm birth (as currently
prespecified in the clinical trial protocol),
achieves a p value of ≤ 0.01 and the
secondary endpoint, infant outcomes composite
score (to be agreed to with the FDA in the
final statistical analysis plan), achieves a
p value of ≤ 0.05; OR
|
|
|
U.S. $8,000,000; OR |
|
|
|
|
Upon completion of the statistical analysis,
and delivery to Buyer of a report from
Sellers Third Party statistician for the
PREGNANT Study in accordance with Section
2.8(a)(ii), if the primary endpoint,
reduction in preterm birth (as currently
prespecified in the clinical trial protocol),
achieves a p value of > 0.01 and ≤ 0.05
and the secondary endpoint, infant outcomes
composite score (to be agreed to by the FDA
in the final statistical analysis plan),
achieves a p value of ≤ 0.05.
|
|
|
U.S. $6,000,000 |
For avoidance of doubt, Seller shall be entitled to a maximum of one (1) Clinical Trial Results
Milestone Payment.
(ii) Notice and Payment.
Seller shall provide to Buyer written notice of achievement of a Clinical Trial Results
Milestone, together with a report from Sellers Third Party statistician with completed tables from
the PREGNANT Study Statistical Analysis Plan. Upon receipt of such notice, Buyer will have a
period of thirty (30) days to review such notice and data. If Buyer reasonably believes that the
Clinical Trial Results Milestone was not achieved, it shall notify Seller within such thirty (30)
day period and the Parties shall discuss and attempt to resolve the dispute. If the Parties are
unable to resolve the dispute within fifteen (15) days of Sellers receipt of Buyers
6
notice, the matter shall be submitted for resolution pursuant to Section 11.10. Buyer
shall pay to Seller the Clinical Trial Results Milestone Payment within two (2) Business Days
following expiration of such thirty (30) day period or resolution of any dispute in accordance with
this Section 2.8(a)(ii), as applicable.
(b) Other Milestone Payments.
(i) Milestone Payment.
|
|
|
|
Milestone
|
|
|
Milestone Payment
|
Acceptance by the FDA of a PTB NDA
or a PTB Supplemental NDA filed by
or on behalf of Seller or Buyer with
the approval of the Joint
Development Committee (the PTB NDA
Acceptance Milestone)
|
|
|
U.S. $5,000,000 (PTB NDA Acceptance
Milestone Payment) |
|
|
|
|
First commercial sale of a PTB
Product by or on behalf of Buyer in
the U.S. (the PTB Product Launch
Milestone)
|
|
|
U.S. $30,000,000 (PTB Product
Launch Milestone Payment)
|
For purposes hereof: PTB Product means the Product approved by the PTB US Approval.
For avoidance of doubt, Seller shall be entitled to a maximum of one (1) PTB NDA Acceptance
Milestone Payment and one (1) PTB Product Launch Milestone Payment.
(ii) Notice and Payment.
(A) If Seller achieves the PTB NDA Acceptance Milestone, Seller shall
provide to Buyer written notice of achievement of such PTB NDA Acceptance
Milestone. Upon receipt of such notice, Buyer will have a period of ten (10)
days to review such notice (the Review Period). If Buyer reasonably
believes that the PTB NDA Acceptance Milestone was not achieved, it shall
notify Seller within such ten (10) day period and the Parties shall discuss
and attempt to resolve the dispute. If the Parties are unable to resolve
the dispute within ten (10) days of Sellers receipt of Buyers notice, the
matter shall be submitted for resolution pursuant to Section 11.10.
Buyer shall pay to Seller the PTB NDA Acceptance Milestone Payment within
two (2) Business Days following expiration of the Review Period or
resolution of any dispute in accordance with this Section
2.8(b)(ii)(A), as applicable. If Buyer achieves the PTB NDA Acceptance
Milestone, Buyer shall provide to Seller written notice of achievement of
the PTB NDA Acceptance Milestone promptly but in no event later than ten
(10) days after such achievement, which notice shall be accompanied by
payment to Seller of the PTB NDA Acceptance Milestone Payment.
7
(B) If Buyer achieves the PTB Product Launch Milestone, Buyer shall
provide to Seller written notice of achievement of the PTB Product Launch
Milestone promptly but in no event later than ten (10) days after such
achievement, which notice shall be accompanied by payment to Seller of the
PTB Product Launch Milestone Payment.
(c) Ex-U.S. Filing and Approval Milestone Payments.
(i) Milestone Payments.
|
|
|
Milestone |
|
Milestone
Payment |
(the Ex-U.S. Filing/Approval Milestone) |
|
|
Filing and acceptance by the applicable Regulatory
Authority of an MAA in a country or jurisdiction outside
the United States seeking Regulatory Approval to market
a Product for the PTB Indication (the Ex-U.S. Filing
Milestone)
|
|
U.S. $500,000 |
|
|
|
Grant by the applicable Regulatory Authority in a
country or jurisdiction outside the United States of
Regulatory Approval to market a Product for the PTB
Indication (the Ex-U.S. Approval Milestone)
|
|
U.S. $2,000,000 |
|
|
|
For avoidance of doubt, Seller shall be entitled to payment for a maximum of one (1) Ex-U.S. Filing
Milestone (i.e., a maximum payment of U.S. $500,000) and one (1) Ex-U.S. Approval Milestone (i.e.,
a maximum payment of U.S. $2,000,000).
(ii) Notice and Payment.
Buyer
shall provide to Seller written notice of achievement of an Ex-U.S.
Filing Milestone or Ex-U.S. Approval Milestone promptly but in no event later than ten (10) days after such achievement, which notice
shall be accompanied by payment to Seller of the applicable milestone
payment.
(d) Royalty Payments; Gross Profit Share.
(i) Royalty Rates. Buyer shall make the following royalty payments to Seller
on a country-by-country basis during the applicable Royalty Product Term or PTB Royalty
Product Term, based on annual aggregate Net Sales of Royalty Products and PTB Royalty
Products in the Territory, at the applicable rates set forth below.
8
(A) For sales of Royalty Products and PTB Royalty Products in the U.S.:
|
|
|
Total Net Sales in any Calendar Year |
|
Royalty Rate |
|
|
|
Portion of aggregate Net Sales of Royalty Products
and PTB Royalty Products which are less than or
equal to U.S. $150,000,000
|
|
Ten percent (10%) |
|
|
|
Portion of aggregate Net Sales of Royalty Products
and PTB Royalty Products which are greater than U.S.
$150,000,000 but less than or equal to U.S.
$250,000,000
|
|
Fifteen percent (15%) |
|
|
|
Portion of aggregate Net Sales of Royalty Products
and PTB Royalty Products which are greater than U.S.
$250,000,000
|
|
Twenty percent (20%) |
|
|
|
(B) For sales of Royalty Products and PTB Royalty Products outside the
U.S. in a country where Buyer or its Affiliates is Commercializing Royalty
Products and/or PTB Royalty Products, the royalty rate on annual Net Sales
shall equal ten percent (10%).
(C) Notwithstanding Section 2.8(d)(i)(B),
if Buyer or any of its Affiliates grants any licenses, sublicenses,
distribution or marketing rights, or otherwise collaborates or partners with
a Third Party to Commercialize any Royalty Products or PTB Royalty Products
in any country outside the U.S., in lieu of royalties on Net Sales of
Royalty Products or PTB Royalty Products under Section 2.8(d)(i)(B),
as applicable, which may become payable with respect to such country, Buyer
and Seller shall share Gross Profits arising from the Commercialization of
such Royalty Products or PTB Royalty Products, as applicable, in such
country with Buyer entitled to eighty percent (80%) and Seller entitled to
twenty percent (20%) of such Gross Profits.
(D) Royalties under Section 2.8(d)(i)(A) or
2.8(d)(i)(B), and payments by Buyer to Seller with respect to
sharing of Gross Profits under Section 2.8(d)(i)(C), with respect to
a Royalty Product (other than a PTB Royalty Product) sold in any country in
the Territory, will be payable on a country-by-country basis from the First
Closing Date until the latest of (i) the expiration of the last to expire
Valid Claim of any Patent in the Purchased Assets or licensed by Buyer under
the License Agreement, and covering such Royalty Product in such country,
(ii) the expiration of any period of Regulatory Exclusivity applicable to
such Royalty Product in such country and (iii) the tenth
(10th) anniversary
of the date of Launch by Buyer of such Royalty Product in such country (or,
if no such Launch occurs, the tenth
(10th) anniversary of the First Closing
Date) (the Royalty Product Term).
9
(E) Royalties under Section 2.8(d)(i)(A) or
2.8(d)(i)(B), and payments by Buyer to Seller with respect to
sharing of Gross Profits under Section 2.8(d)(i)(C), with respect to
a PTB Royalty Product sold in any country in the Territory, will be payable
on a country-by-country basis from the First Closing Date until the latest
of (i) the expiration of the last to expire Valid Claim of any Patent in the
Purchased Assets or licensed by Buyer under the License Agreement and
covering such PTB Royalty Product in such country, (ii) the expiration of
any period of Regulatory Exclusivity applicable to such PTB Royalty Product
in such country and (iii) the tenth (10th) anniversary of the date of Launch
by Buyer of such PTB Royalty Product in such country (or, if no such Launch
occurs, the tenth (10th) anniversary of the First Closing Date
(the PTB Royalty Product Term).
With respect to any Royalty Product which contains only Synthetic Progesterone (and, for the
avoidance of doubt, no Natural Progesterone) sales of such Royalty Product shall only generate Net
Sales for purposes of this Section 2.8(d) if such Royalty Product is approved in the
applicable country for the PTB Indication or any other indication for which Prochieve is approved
in the U.S. as of the Execution Date.
(ii) Generic Entry. In the event of Generic Entry with respect to a Royalty
Product or a PTB Royalty Product in any country in the Territory, then the royalty rates
applicable to Net Sales of such Royalty Product or PTB Royalty Product in such country in
accordance with Section 2.8(d)(i)(A) or (B), as applicable, shall be reduced
by fifty percent (50%). Unless there is Impending Generic Entry with respect to a Royalty
Product or PTB Royalty Product in a country, neither Buyer nor its Affiliates may introduce
its own Generic Equivalent of such Product in such country. In the event of such Impending
Generic Entry, in lieu of royalties on Net Sales of such Generic Equivalent which may become
payable with respect to such country, Buyer and Seller shall share Gross Profits arising
from the Commercialization of such Generic Equivalent in such country, with Buyer entitled
to eighty percent (80%) and Seller entitled to twenty percent (20%) of such Gross Profits.
For purposes hereof, Impending Generic Entry means that Launch of a Generic Equivalent for
a Royalty Product or PTB Royalty Product in a country is likely to occur within three (3)
months, as mutually determined by the Parties. In the event of any dispute with respect
thereto, the matter will be resolved in accordance with Section 11.10.
(iii) Payment. Buyer shall make the royalty payments to Seller and payments by
Buyer to Seller with respect to sharing of Gross Profits described in Sections
2.8(d)(i)(A), (B) and (C) above on a quarterly basis not later than
forty-five (45) days after the end of each calendar quarter (with payments made in respect
of each of the first three (3) calendar quarters of each applicable calendar year
constituting Buyers good faith estimate of the royalty (or share of Gross Profits) owed for
such quarter, and with the payment made in respect of the fourth calendar quarter of such
calendar year including a true up for the first three (3) calendar quarters payments,
based on actual amounts owed by Buyer in respect of such three (3) calendar quarters
relative to amounts paid by Buyer).
10
(iv) Other Revenue; Pricing. Buyer agrees that it shall not, and shall cause
its Affiliates not to, and, after the First Closing Date, Buyer shall cause all licensees,
sublicensees, distributors or other agents to whom it or its Affiliates grant rights to
Commercialize any Product (to the extent such rights include the right to promote and sell
such Product) not to, distribute, bundle or otherwise sell such Product in any manner that
would have the effect of reducing the Net Sales or Gross Profits arising from the
Commercialization of such Product in favor of other revenue not subject to the royalties or
sharing of Gross Profits set forth in Sections 2.8(d)(i)(A), (B) and
(C); provided, that this clause (iv) will not apply to actions which have an
unintended effect of causing such reduction.
(v) Reports. In connection with any payments made pursuant to Sections
2.8(d)(i)(A), (B) and (C), Buyer shall simultaneously deliver to Seller
a schedule setting forth in reasonable detail the calculation of Net Sales and Gross Profits
and the amounts payable by it pursuant to each of the clauses of Sections
2.8(d)(i)(A), (B) and (C), in each case, on a Product-by-Product and
country-by-country basis, and including deductions from gross sales to arrive at Net Sales.
(vi) Books and Records; Audit Rights.
(A) Each Party shall keep, and shall require its Affiliates to keep,
complete, true and accurate books and records in accordance with GAAP (or
other internationally recognized accounting standard in use by such Party)
in relation to this Agreement, including Development Costs under Section
8.7 and, with respect to Buyer, in relation to Net Sales, Gross Profits
and royalties. Each Party will keep such books and records at its principal
place of business (or the place of business of its Subsidiaries) for at
least three (3) years following the calendar quarter to which they pertain.
After the First Closing Date, Buyer shall ensure that any licensees,
sublicensees, distributors or other agents to whom it or its Affiliates
grant rights to Commercialize any Product (to the extent such rights include
the right to promote and sell such Product) to be bound by similar record
keeping obligations in relation to Net Sales, Gross Profits and royalties.
(B) Each Party (the Audit Rights Holder) may, upon written request
and at its expense (except as provided for in Section
2.8(d)(vi)(F)), cause an internationally-recognized independent
accounting firm selected by it (except one that serves as such Partys
independent auditors or to whom the auditee otherwise has a reasonable
objection) (the Audit Team) to audit during ordinary business hours the
books and records of the other Party (Auditee) and its Affiliates (and
with respect to Buyer, its licensees, sublicensees, distributors or other
agents) for a given calendar year and the correctness of any payments made
or required to be made to or by such Party during such calendar year, and
any report, data or calculation underlying such payment (or lack thereof),
pursuant to the terms of this Agreement.
11
(C) In respect of each audit of the Auditees books and records: (i)
the Auditee shall be audited not more frequently than once per year; and
(ii) the Audit Rights Holder shall only be entitled to audit books and
records of an Auditee from the three (3) calendar years prior to the
calendar year in which the audit request is made.
(D) In order to initiate an audit for a particular calendar year, the
Audit Rights Holder must provide written notice to the Auditee, which notice
shall include one or more proposed dates for the audit and which notice
shall be given not less than forty-five (45) days prior to the first
proposed audit date. The Auditee will reasonably accommodate the scheduling
of such audit. The Auditee shall provide the Audit Team(s) with full and
complete access to the applicable books and records relating to the Products
and otherwise reasonably cooperate with such audit.
(E) The audit report and basis for any determination by an Audit Team
shall be made available for review and comment by the Auditee, and the
Auditee shall have the right, at its expense, to request a further
determination by such Audit Team as to matters which the Auditee disputes
(to be completed no more than thirty (30) days after the applicable audit
report is provided to such Auditee and to be limited to the disputed
matters). If the Parties disagree as to such further determination, the
Audit Rights Holder and the Auditee shall mutually select an
internationally-recognized independent accounting firm that shall make a
final determination as to the remaining matters in dispute, which
determination shall be binding upon the Parties.
(F) If any audit finds any under-reporting or underpayment, or
overcharging by any Party, the underpaying or overcharging Party shall remit
such underpayment or reimburse such overcharge to the other Party within
fifteen (15) days of receiving the final audit report establishing such
obligation. Further, if the audit for any one or more calendar years shows
an under-reporting or underpayment or an overcharge by the Auditee for that
period in excess of five percent (5%) of the amounts properly determined,
the Auditee shall reimburse the Audit Rights Holder for its out-of-pocket
expenses, including the fees and expenses paid by it to the Audit Team(s),
in connection with said audit, which reimbursement shall be made within
thirty (30) days of receiving appropriate invoices and other support for
such audit-related costs.
(G) After the First Closing Date, Buyer shall ensure that any
licensees, sublicensees, distributors or other agents to whom it or its
Affiliates grant rights to Commercialize any Product (to the extent such
rights include the right to promote and sell such Product), to be bound by
similar audit provisions.
12
(vii) Foreign Exchange. The royalties and payments by Buyer with respect to
sharing of Gross Profits received by this Section 2.8 will be payable in U.S.
dollars. For the purpose of computing the Net Sales of or Gross Profits arising from the
Commercialization of Products sold in a currency other than U.S. dollars, such currency
shall be converted from the local currency to U.S. dollars by Buyer using the relevant
exchange rate, as reported by the Wall Street Journal, in effect on the last Business Day of
the relevant calendar quarter in which such sales were made (or such Gross Profits were
realized).
(e) License or Assignment of Rights. Notwithstanding anything to the contrary in this Agreement, Buyer shall not sell, assign,
transfer, dispose of or convey any of the Purchased Assets or rights in any Products to any other
Person unless such Person has agreed to be bound by the terms and conditions of this Section
2.8; provided, however, that Buyer shall and hereby does guarantee the payment by such Person
of amounts payable to Seller pursuant to this Section 2.8.
(f) Interest. If a Party fails to pay in full on or before the date due any payment that is required to be
paid under this Agreement, such Party will also pay to the other Party, on demand, interest on any
such amount beginning on such due date at an annual rate (calculated on the basis of a 360-day
year) equal to the base rate as announced by JPMorgan N.A., or any successor thereto, in New
York, New York in effect on such due date, plus two percent (2%) to be assessed from the date
payment of the amount in question first became due.
(g) Set Off. The Post-Closing Payments (if any) payable pursuant to this Section 2.8 shall be subject
to reduction for (i) claims for indemnification made by Buyer pursuant to Article X,
which are finally determined pursuant to Section 10.6 to
be due and owing to Buyer and
(ii) breach of Sellers obligation to use the cash in the Development Bank Account exclusively for
Development Costs during the Seller Expense Period as required by Section 8.7(c).
2.9 Purchase Price Allocation. Seller and Buyer agree that the Purchase Price shall be allocated among the Purchased Assets and
the Shares, and the portion of the Purchase Price allocated to the Purchased Assets shall be
allocated among the Purchased Assets in accordance with Section 1060 of the Code, pursuant to an
allocation schedule (the Allocation Schedule) as agreed by Buyer and Seller in accordance with
this Section 2.9. Buyer shall provide to Seller the Allocation Schedule within ninety (90)
days after the First Closing Date. Thereafter, Seller shall have thirty (30) days either to (a)
agree with and accept the Allocation Schedule or (b) in good faith suggest changes to the
Allocation Schedule and attempt to agree with Buyer as to the contents of the Allocation Schedule.
Seller and Buyer shall provide each other promptly with any other information required to complete
the Allocation Schedule. If Seller and Buyer agree on the Allocation Schedule within one hundred
and thirty-five (135) days following the First Closing Date, Seller and Buyer shall file IRS Form
8594 and any required attachments thereto (Form 8594), together with all federal, state and local
Tax Returns, in a manner consistent with and in accordance with the Allocation Schedule. In
addition, Seller and Buyer hereby undertake and agree to timely file any information that may be
required to be filed pursuant to the U.S. Treasury Regulations promulgated under Section 1060(b) of
the Code in a manner consistent with and in accordance with the Allocation Schedule. In any
proceeding
13
related to the determination of any Tax, neither Buyer nor Seller shall contend or represent that
the Allocation Schedule is not a correct allocation of the Purchase Price. If Seller and Buyer are
unable to reach an agreement within one hundred and thirty-five (135) days following the First
Closing Date, Seller and Buyer shall, within fifteen (15) days after the expiration of such one
hundred and thirty-five (135) day period, at their joint expense, engage the Independent Accounting
Firm to determine the appropriate Allocation Schedule, and they shall use their commercially
reasonable efforts to cause the Independent Accounting Firm to determine the Allocation Schedule in
a manner that is reasonable and in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder, within thirty (30) days after it is retained for such purpose.
The determination of the Allocation Schedule by the Independent Accounting Firm shall be binding on
Seller and Buyer. Not later than thirty (30) days prior to filing its respective Form 8594
relating to this transaction, Seller and Buyer shall each deliver to the other party a copy of its
Form 8594, and within ten (10) days after filing its Form 8594 with the IRS pursuant to this
Section 2.9, each Party shall provide the other with a copy of such form as filed. To the
extent required by applicable Law, the Allocation will be revised to reflect any adjustment of the
Purchase Price pursuant to this Agreement.
2.10 Withholding. Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to Seller such amounts as Buyer is required to deduct and withhold under the
Code, or any Tax law, with respect to the making of such payment. To the extent that amounts are
so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Person in respect of whom such deduction and withholding was made.
ARTICLE III.
CLOSING
3.1 Closing. Upon the terms and subject to the conditions of this Agreement:
(a) the closing of the purchase and sale of the Shares and the First Closing Date Purchased
Assets and the assumption of the First Closing Date Assumed Liabilities (the First Closing) shall
be held on a date to be specified by the Parties (the First Closing Date) no later than the third
(3rd) Business Day after satisfaction or waiver of each of the conditions set forth in
Sections 7.1, 7.2 and 7.3 at the offices of Kaye Scholer LLP, 425 Park
Ave., New York, NY 10022 unless the Parties agree otherwise. The Parties will exchange (or cause
to be exchanged) at the First Closing the funds, agreements, instruments, certificates and other
documents, and do, or cause to be done, all of the things respectively required of each Party as
specified in Section 3.2; and
(b) the closing of the purchase and sale of the Second Closing Date Purchased Assets and the
assumption of the Second Closing Date Assumed Liabilities (the Second Closing and together with
the First Closing, the Closing), shall be held on a date to be specified by the Parties (the
Second Closing Date and each of the First Closing Date and Second Closing Date, a Closing Date)
no later than the third (3rd) Business Day after satisfaction or waiver of the conditions set forth
in Sections 7.4, 7.5 and 7.6 at the offices of Kaye Scholer LLP, 425 Park
Ave., New York, NY 10022, unless the Parties agree otherwise. The Parties will exchange (or cause
to be exchanged) at the Second Closing the agreements,
14
instruments, certificates and other documents, and do, or cause to be done, all of the things
respectively required of each Party as specified in Section 3.3.
3.2 Transactions at First Closing. At the First Closing, subject to the terms and conditions hereof:
(a) Sellers Actions and Deliveries. Seller shall deliver or cause to be delivered to
Buyer:
(i) executed counterparts of each of the following:
(A) Asset Transfer Documentation providing for the transfer to Buyer of
the First Closing Date Purchased Assets;
(B) all such filings and submissions of Seller to the FDA, duly
executed by Seller, as are necessary to transfer Sellers rights with
respect to Regulatory Approvals and Regulatory Filings included in the First
Closing Date Purchased Assets, including in accordance with 21 CFR 314.72
from Seller to Buyer;
(C) the Supply Agreement;
(D) the License Agreement; and
(E) the Investors Rights Agreement;
(ii) the Shares in accordance with Section 3.2(c) below;
(iii) complete and accurate copies of the following documents:
(A) a certificate of good standing of Seller from the Secretary of
State of the State of Delaware, as of a date reasonably close to (and in no
event more than five (5) days prior to) the First Closing Date;
(B) resolutions of the board of directors of Seller authorizing the
execution and delivery by Seller of this Agreement, the Other Agreements to
which Seller will be a party and all other instruments and documents to be
delivered by Seller in connection herewith and the consummation by Seller of
the Transactions, certified by the Secretary of Seller; and
(C) a certificate from the Secretary of Seller as to the incumbency and
signatures of its officers who will execute documents at the First Closing
or who have executed this Agreement; and
(iv) a duly executed certificate (in the form provided for in section 1.1445-2 of the
U.S. Treasury Regulations) from Seller providing that Seller is not a foreign person for
U.S. federal income tax purposes.
15
(b) Buyers Actions and Deliveries. Buyer shall deliver or cause to be delivered to
Seller:
(i) the Upfront Payment in full by wire transfer of immediately available funds
directly to the Seller Account;
(ii) executed counterparts of each of the following:
(A) Asset Transfer Documentation providing for the transfer to Buyer of
the First Closing Date Purchased Assets and the assumption by Buyer of the
First Closing Date Assumed Liabilities;
(B) all such filings and submissions of Buyer to the FDA, duly executed
by Buyer, as are necessary to transfer Sellers rights with respect to
Regulatory Approvals and Regulatory Filings included in the First Closing
Date Purchased Assets, including in accordance with 21 CFR 314.72 from
Seller to Buyer;
(C) the Supply Agreement;
(D) the License Agreement; and
(E) the Investors Rights Agreement; and
(iii) complete and accurate copies of the following documents:
(A) certificates of good standing of each of Buyer and Parent from the
Secretary of State of Delaware and Nevada, respectively, as of a date
reasonably close to (and in no event more than five (5) days prior to) the
First Closing Date;
(B) resolutions of the board of directors of each of Buyer and Parent
authorizing the execution and delivery by Buyer and Parent of this
Agreement, the Other Agreements to which Buyer will be a party and all other
instruments and documents to be delivered by Buyer in connection herewith
and the consummation by Buyer of the Transactions, as applicable, certified
by the Secretary of Buyer; and
(C) certificates from the Secretary of each of Buyer and Parent as to
the incumbency and signatures of its officers who will execute documents at
the First Closing or who have executed this Agreement.
(c) Shares. Seller will instruct the Transfer Agent to deliver to Buyer at the First
Closing a certificate representing the Shares in the name of Buyer, bearing the legends set forth
in Section 5.4 and described in Section 4.1(e) of the Investors Rights Agreement.
16
(d) Charter Amendment. Seller shall, subject to obtaining the Required Seller
Stockholders Vote, take all actions necessary to cause the Charter Amendment to be filed with the
Secretary of State of the State of Delaware at or prior to the First Closing Date.
(e) Certain Adjustments. In the event Seller changes the number of outstanding shares
of Common Stock issued and outstanding prior to the First Closing Date as a result of a
reclassification, stock split (including a reverse split), dividend (including any dividend or
distribution with a record date prior to the First Closing Date), recapitalization, merger,
subdivision, issuer tender or exchange offer, or other similar transaction, the number of shares of
Common Stock issued to Buyer at the First Closing shall be equitably adjusted so as to preserve the
economic benefits that Buyer reasonably expected on the Execution Date to receive as a result of
the consummation transactions contemplated by this Agreement.
3.3 Transactions at Second Closing. At the Second Closing, subject to the terms and conditions hereof:
(a) Sellers Actions and Deliveries. Seller shall deliver or cause to be delivered to
Buyer all such filings and submissions of Seller to the FDA, duly executed by Seller, as are
necessary to transfer Sellers rights with respect to the PTB NDA or the PTB Supplemental NDA, as
applicable, in accordance with 21 CFR 314.72 from Seller to Buyer.
(b) Buyers Actions and Deliveries. Buyer shall deliver or cause to be delivered to
Seller all such filings and submissions of Buyer to the FDA, duly executed by Buyer, as are
necessary to transfer Sellers rights with respect to the PTB NDA or the PTB Supplemental NDA, as
applicable, in accordance with 21 CFR 314.72 from Seller to Buyer.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the disclosure letter supplied by Seller to Buyer and dated as of the
Execution Date (the Seller Disclosure Letter), which letter identifies the section (or, if
applicable, subsection) to which such exception relates (provided, however, that such disclosure
shall also apply to particular matters represented or warranted in other sections and subsections
to the extent that it is readily apparent from the text of such disclosure), Seller represents and
warrants to Buyer as follows:
4.1 Organization.
(a) Seller is duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own its assets, including the
Purchased Assets, and carry on its business as currently conducted as disclosed in the SEC
Documents. Seller 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.
(b) Schedule 4.1(b) of the Seller Disclosure Letter sets forth a list of each of
Sellers Subsidiaries, including each such Subsidiarys jurisdiction of incorporation or
17
organization and Sellers direct or indirect beneficial ownership interest in such Subsidiary,
as of the Execution Date. Each such Subsidiary is a corporation or other legal entity duly
organized, validly existing and in good standing, if applicable, under the Laws of the jurisdiction
of its organization and has all requisite corporate or other organizational power and authority to
carry on its businesses as now being conducted and is qualified to do business and is in good
standing, if applicable, as a foreign corporation in each jurisdiction where the conduct of its
business requires such qualification, except where the failure to be so qualified or in good
standing or to have such power or authority, would not reasonably be expected to have a Material
Adverse Effect.
(c) Seller has delivered or made available to Buyer a copy of the certificate or articles of
incorporation and bylaws (or like organizational documents) of Seller and each of its Subsidiaries,
and each such copy is true, correct and complete in all material respects. Seller is not in
violation of any of the provisions of its Certificate of Incorporation or Bylaws. Each Subsidiary
of Seller is not in violation of any of the provisions of its respective certificate or articles of
incorporation or bylaws (or like organizational documents).
4.2 Authority; Board Action.
(a) Seller has all requisite corporate power and authority and has taken all corporate actions
necessary to execute and deliver this Agreement and the Other Agreements to which Seller will
become a party and, subject to receipt of the Required Seller Stockholders Vote, the filing of the
Charter Amendment with the Secretary of State of the State of Delaware at or prior to the First
Closing and the satisfaction of the conditions set forth in Article VII, to consummate the
Transactions. The execution and delivery of this Agreement and the Other Agreements by Seller and
the consummation by Seller of the Transactions have been duly and validly authorized by the board
of directors of Seller and no other corporate proceedings on the part of Seller are necessary to
authorize this Agreement or the Other Agreements or to consummate the Transactions, other than
obtaining the Required Seller Stockholders Vote and the filing of the Charter Amendment with the
Secretary of State of the State of Delaware at or prior to the First Closing. This Agreement has
been (and, when executed and delivered by Seller, the Other Agreements will have been) duly and
validly executed and delivered by Seller and, assuming the due authorization, execution and
delivery by Buyer (Parent and the other parties hereto or thereto), constitutes (and, when executed
and delivered by Seller, each Other Agreement will constitute) a legal, valid and binding agreement
of Seller, enforceable against Seller in accordance with its terms, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other Laws
of general application relating to or affecting creditors rights generally (the Equitable
Exceptions).
(b) Sellers board of directors has unanimously (i) determined that the sale of the Purchased
Assets and the transfer of the Assumed Liabilities on the terms and subject to the conditions of
this Agreement are expedient and in the best interests of Seller, (ii) approved the sale and
issuance of the Shares on the terms and subject to the conditions of this Agreement, (iii)
determined that the approval of the Charter Amendment is advisable and in the best interests of the
stockholders of Seller, (iv) approved this Agreement and the Transactions and (v) subject to
Section 6.5, resolved to recommend the approval of the asset sale contemplated by this
Agreement and the Charter Amendment by the stockholders of Seller (the
Seller Board Recommendation) at the Seller Stockholders
Meeting.
18
4.3 No Conflicts; Enforceability.
(a) Subject to obtaining the Required Seller Stockholders Vote and the filing of the Charter
Amendment with the Secretary of State of the State of Delaware at or prior to the First Closing,
the execution, delivery and performance of this Agreement by Seller and the Other Agreements to
which Seller is a party by Seller (i) except as set forth on Schedule 4.3(a) of the Seller
Disclosure Letter, are not prohibited or limited by, and will not result in the breach of or a
default under, any provision of the Certificate of Incorporation or Bylaws of Seller, (ii) assuming
all of the consents, approvals, authorizations and permits described in Section 4.3(b)
and/or Schedule 4.3(b) of the Seller Disclosure Letter have been obtained and all the
filings and notifications described in Section 4.3(b) and/or Schedule 4.3(b) of the
Seller Disclosure Letter have been made and any waiting periods thereunder have terminated or
expired, conflict with any Law applicable to Seller, and (iii) except as set forth on Schedule
4.3(a) of the Seller Disclosure Letter, does not conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default under, or require the
consent of any Third Party pursuant to any Material Contract binding on Seller or any applicable
order, writ, injunction or decree of any Regulatory Authority to which Seller is a party or by
which Seller is bound or to which any of its assets is subject, except in the case of clauses (ii)
and (iii) only for such conflicts, breaches and defaults that would not reasonably be expected to
have either (A) a Material Adverse Effect or (B) an adverse effect on the Purchased Assets or the
Business.
(b) The execution, delivery and performance of this Agreement and the Other Agreements by
Seller and the consummation of the Transactions by Seller do not and will not require any consent,
approval, authorization or permit of, or filing with or notification to, any Regulatory Authority,
except (i) the filing of the Charter Amendment with the Secretary of State of the State of
Delaware, (ii) compliance with any applicable federal, foreign or state securities or blue sky
Laws, including, without limitation, filings required under the Exchange Act and the Securities
Act, (iii) any such consent, approval, authorization, permit, filing, or notification set forth on
Schedule 4.3(b) of the Seller Disclosure Letter (including, without limitation, the filings
contemplated by Sections 3.2(a)(i)(B) and 3.3(a) and (iv) any such consent,
approval, authorization, permit, filing, or notification the failure of which to make or obtain
would not reasonably be expected to have, individually or in the aggregate, an adverse effect on
the Purchased Assets or a Material Adverse Effect or to materially delay or impair or prevent,
consummation of the Transactions.
4.4 Title; Sufficiency of Assets.
(a) Except as set forth on Schedule 4.4(a) of the Seller Disclosure Letter, Seller or
one of its Subsidiaries owns, leases, licenses or has the right to use the Purchased Assets, free
and clear of all Encumbrances other than Permitted Encumbrances, and has the right to sell and
transfer to Buyer the Purchased Assets and Assumed Liabilities, free and clear of all Encumbrances.
19
(b) The Purchased Assets and the assets set forth on Schedule 2.3 of the Seller
Disclosure Letter constitute all of the assets of Seller and its Subsidiaries primarily relating to
the research, development, regulatory approval, manufacture, distribution, marketing, sale and
promotion of the Products (the Business).
4.5 Capitalization.
(a) The authorized capital stock of Seller, as of March 1, 2010, consisted of (i)
100,000,000 shares of Common Stock, of which 65,626,451 shares were issued and outstanding, (ii)
120,000 shares of Series A Convertible Preferred Stock, $0.01 par value per share, none of which
were issued or outstanding, (iii) 150,000 shares of Series B Convertible Preferred Stock, $0.01 par
value per share, of which 130 shares were issued and outstanding, (iv) 6,660 shares of Series C
Convertible Preferred Stock, $0.01 par value per share, of which 600 shares were issued and
outstanding, (v) 100,000 shares of Series D Junior Participating Preferred Stock, $0.01 par value
per share, none of which were issued or outstanding and (vi) 100,000 shares of Series E Convertible
Preferred Stock, $0.01 par value per share, of which 59,000 shares were issued and outstanding (the
preferred stock referred to in clauses (ii) through (vi), collectively, the Preferred Stock). As
of March 1, 2010, all of the issued and outstanding shares of Common Stock and shares of
Preferred Stock have been duly authorized, validly issued and are fully paid and nonassessable and
free of preemptive rights of any stockholder of Seller. As of March 1, 2010, options and
warrants and convertible notes to purchase an aggregate of 24,522,106 shares of Common Stock were
outstanding and the shares of the Sellers Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series E Convertible Preferred Stock were convertible into 2,600,
504,201 and 2,950,000 shares of Common Stock, respectively. Sellers Restated Certificate of
Incorporation (as amended, the Certificate of Incorporation), as in effect on the Execution Date,
and Sellers Amended and Restated By-Laws (the Bylaws) as in effect on the Execution Date, are
each filed as exhibits to the SEC Documents. Subject to obtaining the Required Seller Stockholders
Vote and the filing of the Charter Amendment with the Secretary of State of the State of Delaware
on or prior to the First Closing Date, the Shares will be duly authorized and, upon issuance in
accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable
and will not be subject to preemptive rights of any stockholder of Seller.
(b) Except for the options, warrants, convertible notes and the Preferred Stock described in
Section 4.5(a) or as otherwise set forth on Schedule 4.5(a) of the Seller
Disclosure Letter, as of March 1, 2010, there were no outstanding (i) securities of Seller
convertible into or exchangeable for shares of capital stock of Seller, (ii) options, warrants,
rights or other agreements or commitments to acquire from Seller, or obligations of Seller to
issue, any capital stock, (iii) obligations of Seller to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other similar agreement or
commitment relating to the issuance of any capital stock, or (iv) obligations of Seller or any of
its Subsidiaries to make any payments directly or indirectly based (in whole or in part) on the
price or value of the shares of Sellers capital stock.
20
4.6 Intellectual Property.
(a) Except as set forth on Schedule 4.6(a) of the Seller Disclosure Letter, Seller or
one of its Subsidiaries owns and possesses all right, title and interest in and to its Intellectual
Property that is part of the Purchased Assets and has the right to assign such Intellectual
Property that is part of the Purchased Assets free and clear of any Encumbrances, subject to
Section 2.3(d). None of the Encumbrances identified in Schedule 4.6(a) of the
Seller Disclosure Letter will interfere with Sellers ability to perform its obligations under this
Agreement and the Other Agreements. All Intellectual Property that is part of the Purchased Assets
is fully transferable to Buyer in accordance with the terms of this Agreement without restriction
and without payment of any kind to any Person, subject to Section 2.3(d).
(b) Schedule 4.6(b) of the Seller Disclosure Letter sets forth a complete and accurate
list of all Intellectual Property that is part of the Purchased Assets for which Seller has made a
filing or registered with a Regulatory Authority in the United States or a foreign country. Each
item of Intellectual Property listed in Schedule 4.6(b) of the Seller Disclosure Letter (i)
is in a form required by Applicable Law, (ii) has not been disclaimed, (iii) has been duly
maintained in accordance with applicable Law, including the submission of all filings required by
applicable Law, and (iv) there are no material actions that must be taken by Seller within one
hundred twenty (120) days after the First Closing Date for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Intellectual Property that is part of the Purchased
Assets.
(c) To Sellers Knowledge, all Patents, Trademarks and registered Copyrights, if any, that are
part of the Purchased Assets, other than pending applications, are valid and enforceable.
(d) Except as set forth on Schedule 4.6(d) of the Seller Disclosure Letter, (i) none
of the Intellectual Property that is part of the Purchased Assets is the subject of (A) any pending
adverse judgment, injunction, order, decree or agreement restricting (x) Sellers use thereof or
(y) assignment or license thereof by Seller, or (B) any threatened litigation or claim of
infringement made in writing or any pending litigation to which Seller is a party and (ii) to
Sellers Knowledge, there is no unauthorized use, infringement or misappropriation of any of
Sellers Intellectual Property that is part of the Purchased Assets by any Third Party and Seller
has not sent any Person any written claim, demand/or notice asserting infringement of the
Intellectual Property that is part of the Purchased Assets.
(e) To Sellers Knowledge, the Intellectual Property that is part of the Purchased Assets and
the Excluded Assets that would (if not abandoned) be licensed to Buyer under the terms of the
License Agreement, is all that is necessary for the Development, manufacture, and Commercialization
of Products currently under Development or being Commercialized by Seller, in accordance with
Sellers past practice.
(f) Except as set forth on Schedule 4.6(f) of the Seller Disclosure Letter, (i) Seller
has not granted any licenses to the Intellectual Property that is part of the Purchased Assets to
Third Parties, (ii) Seller is not party to any agreements with Third Parties that materially limit
or restrict Sellers use of the Intellectual Property that is part of the Purchased
21
Assets and (iii) no royalties are paid or payable by Seller or Buyer on or with respect to any of the Intellectual
Property that is part of the Purchased Assets except as provided in this Agreement in Section
2.7 and Section 2.8.
(g) All material issuance, renewal, maintenance and other payments that are or have become due
with respect to the Intellectual Property that is part of the Purchased Assets have been timely
paid by or on behalf of Seller.
(h) To Sellers Knowledge, the Development, manufacture, and Commercialization of Products in
accordance with Sellers past practice or as currently contemplated by Seller does not and would
not infringe or misappropriate any Intellectual Property of any Third Party anywhere in the world.
4.7 Absence of Litigation. As of the Execution Date, except as set forth on Schedule 4.7 of the Seller Disclosure
Letter, there is no material claim, action, suit, proceeding or investigation pending or, to the
Knowledge of Seller, threatened in writing, against Seller or any of its Subsidiaries. Except as
set forth on Schedule 4.7 of the Seller Disclosure Letter, there are no suits, claims,
actions, proceedings or investigations that would reasonably be expected to have (i) an adverse
effect on the Purchased Assets or the Business, and (ii) with respect to Seller and its
Subsidiaries, individually or in the aggregate, a Material Adverse Effect. To the Knowledge of
Seller, except as set forth on Schedule 4.7 of the Seller Disclosure Letter, neither Seller
nor any of its Subsidiaries is a party or subject to or in default under any order, decree, or
injunction, and there are no outstanding orders, decrees, or injunctions of any Regulatory
Authority that apply to the Purchased Assets or Seller that restricts the ownership, disposition or
use of the Purchased Assets by Seller, or the conduct of the Business of Seller as being conducted
by it on the Execution Date. To the Knowledge of Seller, there is not pending any investigation by
the SEC involving Seller or any current or former director or officer of Seller.
4.8 Real and Personal Property. Seller 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 Seller free and clear of all Encumbrances
and imperfections of title except those that (i) do not materially interfere with the use of such
property by Seller or (ii) would not reasonably be expected to have a Material Adverse Effect.
4.9 Taxes.
(a) Each of Seller and its Subsidiaries has timely filed (taking into account all properly and
timely requested extensions of time within which to file) all required U.S. federal, state and
non-U.S. income and franchise Tax Returns and has paid all required Taxes whether or not shown as
due on such Tax Returns. Neither Seller nor any of its Subsidiaries is currently the beneficiary
of any extension of time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction in which Seller or any of its Subsidiaries does not file Tax Returns
that such entity is or may be subject to taxation by that jurisdiction.
(b) There are no Encumbrances on any of the Purchased Assets for Taxes (other than for current
Taxes not yet due and payable). None of the Purchased Assets are property that is required to be
treated for any Tax purposes as being owned by any other Person.
22
(c) No deficiencies for material Taxes with respect to Seller or any if its Subsidiaries have
been claimed, proposed or assessed in writing by any Tax authority. There are no audits,
investigations, disputes, notices of deficiency, claims or other Actions, pending or threatened in
writing, for or relating to any material Liability for Taxes of Seller or any if its Subsidiaries.
(d) The unpaid Taxes of Seller and its Subsidiaries did not, as of the date of the Financial
Statements, exceed the reserve for Liability for Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth on the face of the
balance sheets contained in the Financial Statements (rather than in any notes thereto). Since the
date of the most recent Financial Statements, neither Seller nor any of its Subsidiaries has
incurred any material Liability for Taxes outside the ordinary course of business or otherwise
inconsistent with past custom and practice.
(e) Seller has delivered or made available to Buyer complete and accurate copies of all
material federal, state and local income Tax Returns of Seller and any predecessor for the 2008 Tax
year.
(f) Each of Seller and its Subsidiaries has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholders of Seller or other Person.
(g) Neither Seller nor any of its Subsidiaries has ever been a member of an affiliated group
filing a consolidated U.S. federal income Tax Return (other than a group the common parent of which
is Seller) or any similar group for U.S. federal, state, local or non-U.S. Tax purposes. Neither
Seller nor any of its Subsidiaries has any Liability for the Taxes of any Person (other than Taxes
of Seller or any of its Subsidiaries) (i) under U.S. Treasury Regulation Section 1.1502-6 (or any
similar provision of U.S. state, local or non-U.S. law), (ii) as a transferee or successor, (iii)
by Contract or (iv) otherwise.
(h) None of Seller and any of its Subsidiaries or predecessors has been a party to any
transaction intended to qualify under Section 355 of the Code.
(i) Neither Seller nor any of its Subsidiaries is or has ever been a party to or bound by any
Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar Contract.
(j) Neither Seller nor any of its Subsidiaries is or was a surrogate foreign corporation
within the meaning of Section 7874(a)(2)(B) of the Code or is treated as a U.S. corporation under
Section 7874(b) of the Code.
4.10 Environmental, Safety and Health.
(a) Except as set forth on Schedule 4.10 of the Seller Disclosure Letter, (i) the
Purchased Assets and Sellers operations as described in the SEC Documents are now and for the
previous three (3) years immediately prior to the Execution Date have been in material compliance
with all applicable Environmental, Safety and Health Laws, (ii) Seller has obtained all the
material permits required under Environmental, Safety and Health Laws that are necessary
23
to operate the Business as currently operated as described in the SEC Documents, and all such
permits are in good standing or Seller has timely applied for their issuance, amendment or renewal,
(iii) there are no Environmental Claims pending or, to Sellers Knowledge, threatened in writing
against Seller, and, (iv) to Sellers Knowledge, there are no facts or circumstances that would
reasonably be expected to form the basis of any material Environmental Claim against Seller that
would reasonably be expected to have a Material Adverse Effect.
(b) Seller is not in possession of any material audits, studies, analyses, tests or monitoring
pertaining to Hazardous Substances in, on or under any Site or pertaining to Sellers compliance
with Environmental, Safety and Health Laws and, to Sellers Knowledge, no such audits, studies,
analyses, tests or monitoring have been conducted in the previous three years preceding the
Execution Date.
(c) To Sellers Knowledge, neither the execution and delivery of this Agreement nor the
consummation of the Transactions triggers any requirement under the New Jersey Industrial Site
Recovery Act, or other Law of similar effect, that is reasonably likely to result in Buyer or
Seller incurring any material liability or obligation.
4.11 Compliance with Laws. Seller has, since January 1, 2008, complied in all material respects and is, as of the Execution
Date, in compliance in all material respects with all Laws and/orders of all Regulatory Authorities
with respect to its business, and no notice, charge, claim, action or assertion has been received
by Seller or has been filed, commenced or, to the Knowledge of Seller, threatened in writing
against Seller alleging any violation of any of the foregoing. The subject matter of Section
4.6, Section 4.9, Section 4.10, Section 4.12, Section 4.13 and
Section 4.15 is excluded from the provisions of this Section 4.11 and the
representations and warranties of Seller with respect to those subject matters are exclusively set
forth in those referenced sections.
4.12 Permits. Seller has all material franchises, permits, licenses, authorizations, registrations,
certificates, approvals, exemptions, consents, confirmations, orders, waivers and clearances and
any similar authority necessary for the conduct of the Business as being conducted by it on the
Execution Date. Seller has all franchises, permits, licenses and any similar authority necessary
for the conduct of all other business, other than the Business, as being conducted by it on the
Execution Date, except for such franchise, permit, license or similar authority, the lack of which
would not reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 4.12 of the Seller Disclosure Letter, Seller has not received any written notice
of any Action relating to revocation or modification of any such franchise, permit, license or
similar authority.
4.13 Regulatory Matters.
(a) Seller is the sole and exclusive owner of the Product Regulatory Approvals and all Product
Regulatory Approvals are in full force and effect.
(b) Seller is conducting the Business in material compliance with the Product Regulatory
Approvals and all applicable Laws.
24
(c) Seller has filed with the FDA all material applications, exemptions, requests, notices,
information, supplemental applications and annual or other reports, including adverse experience
reports, product deviation reports and annual reports with respect to each NDA and IND, related to
Sellers Development, manufacture, testing, study, distribution or sale of Products. To the
Knowledge of Seller, all applications, exemptions, requests, notices, submissions, information,
claims, reports and statistics, and other data and conclusions derived therefrom, utilized as the
basis for or submitted in connection with any and all requests for a Regulatory Approval of the FDA
or other Regulatory Authorities relating to the Products, when submitted to the FDA or other
Regulatory Authorities were true, complete and correct in all material respects as of the date of
submission and any necessary or required material updates, changes, corrections or modifications to
such applications, exemptions, requests, notices, submissions, information, claims, reports or
statistics have been submitted to FDA and other Regulatory Authorities.
(d) All pre-clinical and clinical trials conducted by or on behalf of the Seller with regard
to the Products were and are being conducted in material compliance with experimental protocols,
procedures and controls pursuant to accepted professional scientific standards and all applicable
Laws promulgated by the FDA relating thereto, including without limitation the FDCA and its
applicable implementing regulations. No IND filed by or on behalf of Seller with the FDA regarding
the Products has been terminated or suspended by the FDA, and neither the FDA nor any applicable
foreign Regulatory Authority has commenced, or, to the Knowledge of Seller, threatened to initiate,
any action to place a clinical hold order on, or otherwise terminate or suspend, any ongoing
clinical investigation conducted by or on behalf of Seller involving the Products.
(e) Seller has made available to Buyer all material information in its possession or control
concerning the safety, efficacy, side effects or toxicity of the Products (in animals or humans),
associated with or derived from any pre-clinical or clinical use, studies, investigations or tests
of the Product. Since January 1, 2005, no Product has been recalled, suspended, discontinued, or
withdrawn from the market, and no Product is currently involved in any ongoing, and to the
Knowledge of Seller, threatened or potential recall, discontinuance, withdrawal, or suspension from
the market within the Territory. Seller has no Knowledge of any serious adverse events from the
use of the Products that are not disclosed in the package inserts, adverse experience reports or
periodic safety update for the Products.
(f) As of the Execution Date, Seller has not received notice that Seller, its Products or any
of the Purchased Assets or the ownership, manufacturing, operation, storage, Development,
Commercialization, warehousing, packaging, labeling, handling, testing, and/or marketing thereof is
in material violation of any Regulatory Approval or applicable Law and such violation has not been
remedied, except for such violations that would not reasonably be expected to have a Material
Adverse Effect. To the Knowledge of Seller, there are no facts or circumstances existing which
would lead to any suspension, loss of or material modification to any Regulatory Approval or
refusal by a Regulatory Authority to renew or accept for filing any Regulatory Approval on terms
not substantially less advantageous, in the aggregate, to Seller than the terms of those Regulatory
Approvals currently in force. There are no outstanding orders, injunctions or decrees of any
Regulatory Authority that apply to Seller that restrict the ownership, disposition or use of
Products by Seller.
25
(g) To the Knowledge of Seller, (i) there are no investigations, audits, actions or other
proceedings pending with respect to a violation by the Seller of the FDCA or other applicable Law
that would reasonably be expected to result in material administrative, criminal or material civil
liability and (ii) there are no facts or circumstances existing that would reasonably be expected
to serve as a basis for such an investigation, audit, action or other proceeding.
4.14 Suppliers. Seller has used reasonable business efforts to maintain, and, to the Knowledge of the Seller,
currently maintains, good working relationships with all of the material suppliers to the Business.
Schedule 4.14 of the Seller Disclosure Letter also specifies for the period beginning on
January 1, 2009 and ending on the Execution Date the names of the material suppliers to the
Business. None of such suppliers has given Seller or any of its Subsidiaries written notice
terminating, canceling or threatening to terminate or cancel any Contract or relationship with the
Seller or any of its Subsidiaries relating to the Business. To the Knowledge of Seller, such
suppliers are manufacturing and otherwise operating in material compliance with applicable FDA
requirements with respect to the products and materials supplied to Seller.
4.15 SEC Documents, Financial Statements. Seller has timely filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC since January 1, 2007 pursuant to the reporting requirements of the
Exchange Act (all of the foregoing filed prior to the Execution Date 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 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 GAAP 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 conform to
the SECs rules and instructions for Reports on Form 10-Q) and fairly present in all material
respects the consolidated financial position of Seller 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
prior to the Execution Date to which Seller or any Subsidiary of Seller is a party, or the property
or assets of Seller or any Subsidiary of Seller are subject, have been filed as exhibits to the SEC
Documents.
26
4.16 Absence of Certain Changes or Events. Except as set forth on Schedule 4.16 of the Seller Disclosure Letter or as otherwise
expressly contemplated by this Agreement or the Other Agreements, from December 31, 2008 to the
Execution Date, Seller has conducted its business, including the Business, in the ordinary course
of business, consistent with past practice and Seller has not, with respect to the Business or any
of the Purchased Assets:
(a) sold, transferred, leased, subleased, licensed or otherwise disposed of any assets that
would constitute Purchased Assets or any other material assets necessary for the conduct of the
Business.
(b) surrendered, revoked or otherwise terminated any material permits relating to the
Business, except in connection with any renewal or reissuance thereof;
(c) waived, released or assigned any rights, which rights, but for such waiver, release or
assignment, would have been classified as Purchased Assets, other than in the ordinary course of
business consistent with past practice;
(d) made any election or change to any election in respect to Taxes, adopted or changed any
accounting method in respect to Taxes, entered into any Tax allocation agreement, Tax sharing
agreement, Tax indemnity agreement or closing agreement relating to any Tax, settled or compromised
on any claim, notice, audit report or assessment in respect of Taxes, changed any annual Tax
accounting period, filed any material amended Tax Return, or surrendered any right to claim a Tax
refund; or
(e) agreed, whether in writing or otherwise, to do any of the foregoing, except as expressly
contemplated by this Agreement.
4.17 Contracts. All Material Contracts (other than those Contracts that constitute Material Contracts solely by
reason of clause (i) of the definition thereof) are listed on Schedule 4.17 of the Seller
Disclosure Letter. To the Knowledge of Seller, all Material Contracts are valid and enforceable
against the other parties thereto in accordance with their respective terms, (i) subject to the
Equitable Exceptions and (ii) except as rights to indemnity and contribution may be limited by
state or federal securities Laws or public policy underlying such Laws. Seller is not in material
breach of or default under any of the Material Contracts, and to the Knowledge of Seller, no other
party to a Material Contract is in material breach of or default under any Material Contract. As
of the Execution Date, Seller has not received written notice of termination of any of the Material
Contracts. Complete and correct copies of all Material Contracts and amendments thereto have been
made available to Buyer.
4.18 Brokers,
Etc.
No broker, investment banker, agent, finder or other intermediary acting on behalf of Seller
or under the authority of Seller, except for Torreya Partners LLC (whose fees shall be borne solely
by Seller), is or will be entitled to any brokers or finders fee or any other commission or
similar fee directly or indirectly in connection with any of the Transactions.
4.19 Insurance. Seller is insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as Seller believes are prudent and customary for a company (i) in the
businesses and location in which Seller is engaged, and
27
(ii) with the resources of Seller. As of the Execution Date, Seller has not received any written
notice that Seller will not be able to renew its existing insurance coverage as and when such
coverage expires.
4.20 Investment Company. Seller is not an investment company as such term is defined in the Investment Company Act of
1940, as amended (the Investment Company Act). Seller shall conduct its business in a manner so
that it will not become subject to the Investment Company Act.
4.21 Exchange. As of the Execution Date, except as set forth on Schedule 4.21 of the Seller Disclosure
Letter, the issued and outstanding shares of Common Stock are listed on the Exchange, and, to
Sellers Knowledge, there are no proceedings to revoke or suspend such listing. Except as set
forth on Schedule 4.21 of the Seller Disclosure Letter, Seller is in compliance in all
material respects with the requirements of the Exchange for continued listing of the Common Stock
thereon.
4.22 Application of Takeover Protections. The execution and
delivery of this Agreement and the consummation of the Transactions will not impose any restriction
on Buyer, under any share acquisition, business combination, poison pill (including any
distribution under a rights agreement), or other similar anti-takeover provisions under the
Certificate of Incorporation or the Laws of the State of Delaware.
4.23 Fairness Opinion. Prior to the execution of this Agreement, RBC Capital Markets Corporation has delivered to
Sellers board of directors its written opinion to the effect that, as of the date thereof and
based upon and subject to the limitations, assumptions and other matters set forth therein, the
Upfront Payment and the Post-Closing Payments to be received by Seller are fair, from a financial
point of view, to Seller.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is duly incorporated, and validly existing and in good standing under the laws of
Delaware. Buyer has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
5.2 Authority. Buyer has all requisite corporate power and authority and has taken all actions necessary to
execute and deliver this Agreement and the Other Agreements to which Buyer will become a party and,
subject to the satisfaction of the conditions set forth in Article VII, to consummate the
Transactions. The execution and delivery of this Agreement and the Other Agreements by Buyer and
the consummation by Buyer of the Transactions have been duly and validly authorized by the board of
directors of Buyer and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or the Other Agreements or to consummate the Transactions. This Agreement
has been (and, when executed and delivered by Buyer, the Other Agreements will have been) duly and
validly executed and delivered by Buyer and, assuming the due authorization, execution and delivery
by Seller,
28
constitutes (and, when executed and delivered by Buyer, each Other Agreement will constitute) a
legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as enforceability may be limited by Equitable Exceptions.
5.3 Investment Purpose; Status. Buyer is an accredited investor as such term is defined in Rule 501(a) under the Securities
Act. Buyer is purchasing the Shares for its own account and not with a view toward the sale or
distribution thereof and has no intention of selling or distributing any of the Shares or any
arrangement or understanding with any other Persons regarding the sale or distribution of the
Shares. Buyer 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
Shares except in accordance with the Securities Act and the Investors Rights Agreement.
5.4 Securities Laws.
(a) Buyer understands that the Shares 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 Seller is relying upon the truth and accuracy of, and Buyers compliance
with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set
forth herein in order to determine the availability of such exemptions and the eligibility of Buyer
to acquire the Shares.
(b) The Investors Rights Agreement will contain provisions restricting the transfer of the
Shares.
(c) In addition to the legends described in the Investors Rights Agreement, the certificates
representing the Shares 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 Shares):
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. COLUMBIA LABORATORIES, INC. (THE COMPANY) SHALL BE ENTITLED TO
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
5.5 Ownership Cap.
Assuming compliance by Seller with
Section 6.2(b)(i), neither Buyer nor Parent will, after giving effect to the consummation of the Transactions, (i) beneficially own (as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the shares of Common Stock and/or (ii) possess 19.9% or more of the voting power of Seller.
5.6 Acknowledgement of Risk.
(a) Buyer acknowledges and understands that its investment in the Shares involves a
significant degree of risk, including, without limitation, (i) the Purchased Assets represent a
significant portion of Sellers business operations and the Transactions will alter Sellers
business operations following their consummation; (ii) an investment in Seller is
29
speculative, and only buyers who can afford the loss of their entire investment should
consider investing in Seller and the Shares; (iii) Buyer may not be able to liquidate its
investment; (iv) transferability of the Shares is limited and restricted; (v) in the event of a
disposition of the Shares, Buyer could sustain the loss of its entire investment; and (vi) Seller
has not paid any dividends on the 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) Buyer is able to bear the economic risk of holding the Shares 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 Shares.
(c) Buyer has, in connection with Buyers decision to purchase the Shares, not relied upon any
representations or other information (whether oral or written) other than as set forth in the
representations and warranties of Seller contained herein, and Buyer has, with respect to all
matters relating to this Agreement and the offer and sale of the Shares, relied solely upon the
advice of Buyers own counsel and has not relied upon or consulted any counsel to Seller.
5.7 No Conflicts; Enforceability.
(a) The execution, delivery and performance of this Agreement by Buyer and Parent and the
Other Agreements to which Buyer or Parent is a party by Buyer or Parent (i) are not prohibited or
limited by, and will not result in the breach of or a default under, any provision of the
certificate or articles of incorporation or bylaws of Buyer or Parent, (ii) conflict with any Law
applicable to Buyer or Parent, and (iii) does not conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, any material agreement
binding on Buyer or Parent or any applicable order, writ, injunction or decree of any Regulatory
Authority to which Buyer or Parent is a party or by which Buyer or Parent is bound.
(b) The execution, delivery and performance of this Agreement and the Other Agreements by
Buyer or Parent and the consummation of the Transactions by Buyer do not and will not require any
consent, approval, authorization or permit of, or filing with or notification to, any Regulatory
Authority, except (i) the filing of the Charter Amendment with the Secretary of State of the State
of Delaware, (ii) compliance with any applicable federal, foreign or state securities or blue sky
Laws, including, without limitation, filings received under the Exchange Act or Securities Act and
(iii) any material consent, approval, authorization, permit, filing, or notification the failure of
which to make or obtain would not reasonably be expected to materially delay or impair or prevent,
consummation of the Transactions.
5.8 Litigation. There is no Action pending or, to Buyers knowledge, threatened in writing, directly or
indirectly involving Buyer or Parent (or to Buyers knowledge, any Third Party) that would
prohibit, hinder, materially delay or otherwise impair Buyers ability to perform its obligations
hereunder or under the Other Agreements, including the assumption of the Assumed Liabilities, would
affect the legality, validity or enforceability of this Agreement or the Other Agreements, or
prevent or materially delay the consummation of the Transactions.
5.9 Financing. Buyer has, or has available to it, and at the Closing will have, sufficient immediately
available funds, marketable securities, other investments or capital
30
commitments to enable Buyer to consummate the Transactions on the terms and conditions set forth
herein.
5.10 No Short Sales. Neither Buyer nor Parent has ever engaged in any short sales or similar transactions with
respect to the Common Stock or other securities of Seller, nor has Buyer or Parent ever, directly
or indirectly, knowingly caused any Person to engage in any short sales or similar transactions
with respect to the Common Stock or other securities of Seller.
5.11 Brokers, Etc. No broker, investment banker, agent, finder or other intermediary acting on behalf of Buyer or
Parent or under the authority of Buyer or Parent is or will be entitled to any brokers or finders
fee or any other commission or similar fee directly or indirectly in connection with any of the
Transactions.
5.12 Independent Investigation. In making the decision to enter into this Agreement and the Other Agreements and to consummate
the Transactions, Buyer and Parent have conducted their own independent investigation, review and
analysis of the Purchased Assets, the Assumed Liabilities, the Products, the Shares and Seller,
which investigation, review and analysis was done by Buyer, Parent and their respective Affiliates
and Representatives. Buyer acknowledges that it and its Representatives have been provided
adequate access to the personnel, properties, premises and records of Seller for such purpose. In
entering into this Agreement and the Other Agreements, Buyer acknowledges that Buyer and Parent and
their respective Affiliates have relied solely upon the aforementioned investigation, review and
analysis and not on any factual representations or opinions of Seller or its Representatives
(except the specific representations and warranties of Seller set forth in Article IV).
ARTICLE VI.
COVENANTS PRIOR TO CLOSING
6.1 Access to Information. From the Execution Date until the First Closing Date, except as otherwise prohibited by
applicable Law or the terms of any Contract entered into prior to the Execution Date or as would be
reasonably expected to violate the attorney-client privilege of Seller, Seller shall afford Buyer
and its Representatives reasonable access, during regular business hours and at agreed-upon times,
at Buyers sole cost and expense, to Sellers personnel, properties pertaining to Purchased Assets
and the Assumed Liabilities; provided, that such access shall not unreasonably interfere with
Sellers business and operations.
6.2 Conduct of the Business.
(a) From the Execution Date through the First Closing Date, except as expressly permitted by
this Agreement or as set forth on Schedule 6.2(a) of the Seller Disclosure Letter, Seller
shall conduct its business only in the ordinary course of business consistent with past practice
(including, with respect to Products, research and development efforts, advertising, manufacturing
and inventory levels thereof) and use commercially reasonable efforts to keep intact the Purchased
Assets and the Business, and preserve the relationships of the Business with customers, suppliers,
licensors, licensees, distributors, sales personnel, regulatory authorities and other Persons, in
each case, who are material to the Business. Without limiting the generality of the foregoing, from
the Execution Date to the First Closing Date, Seller shall:
31
(i) use Commercially Reasonable Efforts to keep in full force and effect, without
amendment, all material rights relating to the Business, except those that expire in
accordance with their terms;
(ii) use commercially reasonable efforts to comply in all material respects with all
requirements of Law and contractual obligations, in each case applicable to the operation of
the Business;
(iii) maintain all Books and Records related to the Business in accordance with past
practice;
(iv) not fail to maintain its existing insurance coverage to the extent relating to the
Business in all material respects in effect as of the Execution Date; and
(v) confer with Buyer prior to (A) effecting any material personnel changes that would
affect Development of the Products, (B) amending the Prochieve PTB Development Plan or
otherwise making any material decision with respect to Development of the Products, or (C)
entering into any discussions with, or making any commitments to, any Regulatory Authority
with respect to the Products or the Business.
(b) Without limiting the generality of the lead-in paragraph of Section 6.2(a), and
except as set forth in Schedule 6.2(b) of the Seller Disclosure Letter or as otherwise
expressly permitted by the terms of this Agreement, from the Execution Date to the First Closing
Date, without the prior written consent of Buyer (which shall not be unreasonably withheld or
delayed), Seller shall not:
(i) declare, set aside or pay any dividend or distribution or other capital return in
respect of any shares of capital stock of Seller, except with respect to Preferred Stock to
the extent required by the terms thereof, or redeem, purchase or acquire any shares of
capital stock of Seller other than Preferred Stock to the extent required by the terms
thereof, in connection with any existing Seller equity plans or in the ordinary course of
business consistent with past practice;
(ii) subject any Purchased Assets to any material Encumbrances, other than Encumbrances
set forth on Schedule 4.4(a) of the Seller Disclosure Letter;
(iii) sell, transfer, lease, sublease, license or otherwise dispose of or grant any
option or rights in, to or under any Purchased Assets;
(iv) enter into any Material Contract primarily relating to the Products or terminate
(other than in accordance with its terms), extend or amend any such Material Contract;
(v) abandon, terminate or materially alter the administration of any Development
activities relating to any Product (other than for safety concerns or in accordance with the
terms of existing agreements with respect to such clinical trials) or terminate or
materially alter Sellers support of clinical trials sponsored by clinical investigators
with respect to any Product;
32
(vi) abandon, terminate or materially reduce its marketing activities (including
expenditures for promotional activities and sales force activity) for any Product or
materially change the size of, or its business relationship with, the sales force for
Prochieve;
(vii) commence, sponsor or commit to participate in any clinical trials or investigator
sponsored trials with respect to any Product or provide any clinical grants with respect to
any Product;
(viii) commit to comply with any obligations imposed by a Regulatory Authority with
respect to any Product;
(ix) abandon any patents or patent filings or any litigation seeking to enforce
Sellers interest in any Intellectual Property of Seller that is a Purchased Asset or
Excluded Asset that would (if not abandoned) be licensed to Buyer under the terms of the
License Agreement, other than in the ordinary course of business consistent with past
practice;
(x) to the extent that doing so would relate to the Purchased Assets or the Business
and would have a material effect on the Purchased Assets or the Business after the
applicable Closing Date, make any election or change to any election with respect to Taxes,
adopt or change any accounting method with respect to Taxes, enter into any Tax allocation
agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to
any Tax, settle or compromise on any claim, notice, audit report or assessment in respect of
Taxes, consent to any extension or waiver of the limitation period applicable to any claim
or assessment with respect to Taxes, change any annual Tax accounting period, file any
amended Tax Return, or surrender any right to claim a Tax refund; or
(xi) agree, whether in writing or otherwise, to do any of the foregoing set forth in
clauses (ii) through (x) above.
(c) From the Execution Date to the First Closing Date, except as expressly permitted by this
Agreement, each Party shall not, without the prior written consent of the other Party, take any
action that would, or that could reasonably be expected to, result in any of the conditions to the
purchase and sale of the Purchased Assets set forth in Article VII not being satisfied.
6.3 [Omitted.]
6.4 Proxy Statement; Seller Stockholders Meeting.
(a) Proxy Statement. As promptly as practicable after the Execution Date, unless this Agreement is terminated pursuant to Article
IX, Seller shall prepare and file with the SEC a proxy statement relating to the Seller
Stockholders Meeting (together with any amendments thereof or supplements thereto, the Proxy
Statement);
provided, that Seller shall not file the Proxy Statement with the SEC
later than March 19, 2010 without the consent of Buyer, such consent not to be unreasonably withheld. Seller, after consultation with Buyer, will use commercially reasonable efforts to
respond to any comments made by the SEC with respect to the Proxy Statement as
33
promptly as practicable following receipt of the same. Buyer shall furnish all information as
Seller may reasonably request in connection with such actions and the preparation of the Proxy
Statement. Subject to Section 6.5, as promptly as practicable after the clearance of the
Proxy Statement by the SEC, Seller shall mail the Proxy Statement to its stockholders. Subject to
Section 6.5, the Proxy Statement shall include the Seller Board Recommendation. Seller
will advise Buyer, promptly after it receives notice thereof, of any request by the SEC for
amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC
for additional information. If at any time prior to the Seller Stockholders Meeting, any event or
circumstance relating to Buyer, or its officers or directors, should be discovered by Buyer which
should be set forth in an amendment or a supplement to the Proxy Statement, Buyer shall promptly
inform Seller. If at any time prior to the Seller Stockholders Meeting, any event or circumstance
relating to Seller or any Subsidiary of Seller, or their respective officers or directors, should
be discovered by Seller which should be set forth in an amendment or a supplement to the Proxy
Statement, Seller shall promptly inform Buyer. All documents that Seller is responsible for filing
with the SEC in connection with the Transactions will comply as to form and substance in all
material respects with the applicable requirements of the Exchange Act and other applicable Laws
and will not contain any untrue statement of a material fact, or omit to state any material fact
required to be stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Information Supplied. None of the written information supplied or to be supplied
by Buyer or any of its Affiliates, directors, officers, employees, agents or Representatives
expressly for inclusion or incorporation by reference in the Proxy Statement or any other documents
filed or to be filed with the SEC in connection with the Transactions, will, as of the time such
documents (or any amendment thereof or supplement thereto) are mailed to Sellers stockholders and
at the time of Seller Stockholders Meeting, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. All documents
that Buyer is responsible for filing with the SEC in connection with the Transactions will comply
as to form in all material respects with the applicable requirements of the Exchange Act and will
not contain any untrue statement of a material fact, or omit to state any material fact required to
be stated therein in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the written information supplied or to be supplied
by Seller or any of its Subsidiaries or Representatives expressly for inclusion or incorporation by
reference in any document to be filed by Buyer with the SEC in connection with the Transactions,
will, as of the time such documents (or any amendment thereof or supplement thereto) are filed,
contain any untrue statement of a material fact, or omit to state any material fact required to be
stated therein in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) Seller Stockholders Meeting. Seller shall call and hold a meeting of its
stockholders (the Seller Stockholders Meeting) as promptly as practicable following the date on
which the Proxy Statement is cleared by the SEC for the purpose of obtaining the Required Seller
Stockholders Vote. Except as permitted by Section 6.5, the Proxy Statement shall include
the Seller Board Recommendation.
34
(d) No Restriction. Nothing in this Section 6.4 shall be deemed to
prevent Seller or the board of directors of Seller from taking any action they are permitted or
required to take under, and in compliance with, Section 6.5 or are required to take under
applicable Law.
6.5 No Solicitation; Acquisition Proposals.
(a) From the Execution Date until the First Closing Date or, if earlier, the termination of
this Agreement pursuant to Article IX, Seller shall not, and shall cause its Subsidiaries
not to, and shall use commercially reasonable efforts to cause its Representatives not to, directly
or indirectly: (i) solicit, initiate or knowingly or intentionally facilitate any inquiry with
respect to, or the making, submission or announcement of, any Acquisition Proposal or any proposal
that would reasonably be expected to lead to any Acquisition Proposal, (ii) furnish to any Person
any non-public information relating to Seller or any of its Subsidiaries in connection with an
Acquisition Proposal (except to the extent specifically permitted pursuant to Section
6.5(b)), (iii) participate or engage in discussions or negotiations with any Person with
respect to any Acquisition Proposal, except to notify such Person as to the existence of the
provisions of this Agreement or to the extent specifically permitted pursuant to Section
6.5(b), (iv) approve, endorse or recommend any Acquisition Proposal (except to the extent
specifically permitted pursuant to Section 6.5(d)), or (v) enter into any letter of intent
or similar document or any agreement, commitment or understanding contemplating or otherwise
relating to any Acquisition Proposal or a transaction contemplated thereby (except for
confidentiality agreements specifically permitted pursuant to Section 6.5(b)). Without
limiting the foregoing, it is agreed that any violation of the restrictions set forth in the
preceding sentence by any Representative of Seller or any Subsidiary of Seller shall be a breach of
this Section 6.5(a) by Seller. On the Execution Date, subject to Section 6.5(b)
Seller shall, and shall cause each of its Subsidiaries to, immediately cease and use commercially
reasonable efforts to cause its Representatives to terminate any solicitation, discussion or
negotiation with any Persons conducted by Seller or its Subsidiaries or any of their
Representatives prior to the Execution Date with respect to any Acquisition Proposal.
(b) Notwithstanding anything to the contrary contained in Section 6.5(a), if at any
time following the Execution Date and prior to the earlier of obtaining the Required Seller
Stockholder Vote and the termination of this Agreement pursuant to Article IX (i) Seller
has fully complied with its obligations in Section 6.5(a) and has received an Acquisition
Proposal from any Person or group (as determined under Section 13(d)(3) of the Exchange Act) that
the board of directors of Seller believes in good faith to be bona fide, and (ii) the board of
directors of Seller determines in good faith, after consultation with its financial advisors and
outside counsel, that such Acquisition Proposal constitutes or may reasonably be expected to result
in a Superior Proposal, then Seller may (A) furnish information (including non-public information)
with respect to Seller and its Subsidiaries to the Person or group making such Acquisition Proposal
and (B) participate in discussions or negotiations with the Person or group making such Acquisition
Proposal regarding such Acquisition Proposal; provided, that Seller (x) will not, and will not
allow its Subsidiaries to (and will use commercially reasonable efforts to cause its
Representatives not to), disclose any non-public information to such Person or group without first
entering or having entered into a confidentiality agreement with such Person or group that is at
least as restrictive on such Person or group as the Confidentiality Agreement is on Buyer and (y)
will promptly provide to Buyer any material non-public information concerning Seller or its
35
Subsidiaries provided by Seller to such other Person or group which was not previously made
available to Buyer, except to the extent restricted by applicable Laws.
(c) From and after the Execution Date, Seller shall promptly (within 48 hours of, or the next
Business Day immediately following, if later) notify Buyer in the event that any of Seller, its
Subsidiaries or its Representatives receives any Acquisition Proposal or written indication by any
Person or group that it is considering making an Acquisition Proposal and shall disclose to Buyer
the identity of the other Person making such Acquisition Proposal. Seller shall keep Buyer
informed (orally and in writing) on a current basis of the occurrence of any material changes or
developments of the status of any such Acquisition Proposal or written indication (including the
material terms and conditions thereof and of any material modification thereto), and any material
developments related thereto.
(d) Notwithstanding anything to the contrary contained in Section 6.5(a), the board of
directors of Seller may, at any time prior to obtaining the Required Seller Stockholder Vote,
withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner
adverse to Buyer, the Seller Board Recommendation and/or endorse or recommend to Sellers
stockholders any Superior Proposal (a Change of Board Recommendation) if, but only if, (A) the
board of directors of Seller concludes in good faith, after consultation with outside counsel, that
failure to take such action would be inconsistent with its fiduciary obligations under applicable
Law and (B) in the case of any Superior Proposal, Seller has given Buyer five (5) Business Days
prior written notice that the board of directors intends to make a Change of Board Recommendation
(the Superior Proposal Notice) and for a period of not less than five (5) Business Days after
Buyers receipt of such Superior Proposal Notice, Seller shall, if requested by Buyer, negotiate in
good faith with Buyer to revise this Agreement so that the Acquisition Proposal that constituted a
Superior Proposal no longer constitutes a Superior Proposal (a Former Superior Proposal). The
terms and conditions of this Section 6.5 shall again apply to any inquiry or proposal made
by any Person who withdraws a Superior Proposal or who made a Former Superior Proposal (after
withdrawal or after such time as their proposal is a Former Superior Proposal). Seller may, if it
receives an Acquisition Proposal, delay the mailing of the Proxy Statement and/or the holding of
the Seller Stockholders Meeting, in each case to provide a reasonable opportunity for the board of
directors of Seller to consider such Acquisition Proposal and to determine the effect of the same,
if any, on the Seller Board Recommendation. Except as permitted by this Section 6.5, the
Proxy Statement shall include the Seller Board Recommendation.
(e) Nothing contained in this Agreement shall prohibit the board of directors of Seller from
disclosing the fact that the board of directors of Seller has received an Acquisition Proposal and
the terms of such Acquisition Proposal, if the board of directors of Seller determines, after
consultation with its outside legal counsel, that (i) failure to make such disclosure would be
inconsistent with its fiduciary duties under applicable Law or (ii) Seller is otherwise required to
make such disclosure.
(f) For purposes of this Agreement, (i) Acquisition Proposal means any inquiry, offer or
proposal, or any indication of interest in making an offer or proposal, made by a Person or group
at any time which is structured to permit such Person or group to acquire beneficial ownership of
any Purchased Assets or at least twenty-five percent (25%) of the assets
36
of, or equity interest in, Seller and its Subsidiaries, taken as a whole, pursuant to a
merger, consolidation or other business combination, sale of shares of capital stock, sale of
assets, tender offer or exchange offer or similar transaction, in each case other than the
Transactions, and (ii) Superior Proposal means any bona fide Acquisition Proposal made by a
Person or group (except that references in the definition thereof to at least twenty-five percent
(25%) of the assets of, or equity interest in, Seller and its Subsidiaries, taken as a whole,
shall be replaced by more than fifty percent (50%) of the assets of, or equity interests in,
Seller and its Subsidiaries, taken as a whole), in each case other than the Transactions, made in
writing that the board of directors of Seller has determined in its good faith judgment (after
consultation with its financial advisors and outside counsel and after taking into account all
legal, financial, regulatory and other aspects of the proposal, including the financing terms
thereof) is more favorable to Seller and/or Sellers stockholders than the Transactions.
Notwithstanding anything to the contrary contained herein, in no event shall any acquisition by any
Person or group from Seller at any time after the termination of this Agreement of any equity
securities (as defined in Section 2(a)(1) of the Securities Act) of Seller constitute an
Acquisition Proposal or a Superior Proposal if the board of directors of Seller shall in good faith
determine that such acquisition is made in connection with a bona fide financing or capital raising
arrangement (an Equity Financing), nor shall any agreement entered into by any Person or group
with Seller after the termination of this Agreement in connection with or relating to an Equity
Financing constitute an Acquisition Proposal or a Superior Proposal.
(g) Notwithstanding anything to the contrary contained in this Agreement, the obligation of
Seller to call, give notice of, convene and hold the Seller Stockholders Meeting and to hold a
vote of Sellers stockholders on the asset sale contemplated by this Agreement and the Charter
Amendment shall not be limited or otherwise affected by the commencement, disclosure, announcement
or submission to it of any Acquisition Proposal (whether or not a Superior Proposal), or by any
Change of Board Recommendation. Seller agrees that it shall not submit to the vote of its
stockholders any Acquisition Proposal (whether or not a Superior Proposal) or propose to do so.
6.6 Transition Activities. Between the Execution Date and the First Closing Date, Seller shall
promptly furnish Buyer with such reasonable sample quantities of any Promotional Materials that
Seller may have utilized in connection with Products during the three (3) month period prior to the
Execution Date, for use by Buyer in preparing its own Promotional Materials. All costs and
expenses incurred by Buyer with respect to creating any Promotional Materials shall be borne by
Buyer.
6.7 Trade Inventory. Between the Execution Date and the First Closing, Seller shall use
Commercially Reasonable Efforts to distribute Products to its wholesalers and other customers in
quantities such that the volume of Products in the marketplace (including such amounts held by
distributors, wholesalers, retailers and customers) remains at levels consistent with the levels
established during the two (2) years preceding the Execution Date.
6.8 Cooperation Regarding Financial Statements; etc. In the event that Buyer is required to
include any audited financial statements with respect to the Business in any filing to be made by
Buyer under the Securities Act or Exchange Act, with respect to or as a result of the transactions
contemplated by this Agreement, Seller shall (i) use commercially reasonable
37
efforts to provide Buyer with the financial statements and other information and documents
pertaining to the Business that Buyer will be required by applicable rules and regulations of the
SEC to include in its filings and (ii) use commercially reasonable efforts to cause the independent
auditors for Seller to promptly deliver such information and provide access to files and work
papers in connection therewith as Buyer may reasonably request. Buyer shall reimburse Seller for
any reasonable out of pocket costs incurred by Seller in connection therewith.
6.9 Notifications; Updated Schedules. Between the Execution Date and the First Closing Date:
(a) Seller, on the one hand, and Buyer, on the other hand, shall promptly notify the other
Party in writing of any fact, change, condition, matter, circumstance, claim, event or occurrence
or nonoccurrence of any event of which it is aware that will or is reasonably likely to result in
any of the conditions set forth in Article VII becoming incapable of being satisfied;
(b) Seller shall give prompt notice to Buyer of (i) the existence, occurrence or
non-occurrence of any fact, change, condition, matter, circumstance, claim or event the existence,
occurrence or non-occurrence of which would cause the representations or warranties of Seller
contained in Article IV to be untrue or inaccurate in any material respect at or prior to
the First Closing Date and (ii) any material failure of Seller to perform, comply with or satisfy
any covenant, condition or agreement to be performed, complied with or satisfied by it hereunder.
With respect to a notice contemplated by clause (i) of the first sentence of this paragraph (b) if
the notice expressly acknowledges that the facts, changes, conditions, matters, circumstances
claims and/or events (occurrence or nonoccurrence of which) described therein occurred after the
Execution Date and would give rise to the failure of a condition in favor of Buyer set forth in
Article VII (a MAE Notice) the Schedules included in the Seller Disclosure Letter hereto
shall be deemed to include the information contained in any such MAE Notice (other than for
purposes of Articles VII and IX) and no claim may be made by any Buyer Indemnitee
(including under Article X hereof) for Losses hereunder with respect to any of the facts,
changes, conditions, matters, circumstances, claims or other events (or the existence, occurrence
or nonoccurrence thereof) described in any such MAE Notice. A notice contemplated by clause (i)
(other than a MAE Notice) or clause (ii) of the first sentence of this paragraph (b) shall not be
deemed to update the Schedules included in the Seller Disclosure Letter or adversely affect Buyers
rights under this Agreement, including for the purposes of Buyers rights under Articles
VII, IX and X of this Agreement.
(c) Seller may, by delivery to Buyer, update the Schedules to correct typographical or
immaterial errors and, upon Buyers written approval, any such updated Schedule shall replace the
corresponding Schedule delivered by Seller in connection with the execution of this Agreement.
6.10 Further Assurances; Further Documents.
(a) Each of the Parties shall use its commercially reasonable efforts, in the most expeditious
manner practicable, (i) to satisfy or cause to be satisfied all the conditions
38
precedent that are set forth in Article VII, as applicable to each of them, (ii) to
cause the Transactions to be consummated and (iii) without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably required on its part in
order to consummate the Transactions.
(b) Each of Buyer and Seller shall, and shall cause its respective Subsidiaries to, at the
request of another Party, take all actions such other Party may reasonably request to transfer the
Purchased Assets and the Assumed Liabilities on the terms and conditions of this Agreement in
connection with the consummation of the Transactions.
(c) Each of Buyer and Seller shall, and shall cause its respective Subsidiaries to, at the
request of another Party, execute and deliver to such other Party all such further instruments,
assignments, assurances and other documents as such other Party may reasonably request in
connection with the consummation of the Transactions.
6.11 Listing. Seller shall use commercially reasonable efforts to cause the Shares to be listed
on the Exchange, or upon such other primary exchange on which the Common Stock is then listed, upon
their issuance if the Common Stock is listed upon any such exchange as of the First Closing Date.
6.12 Ownership Cap.
From the Execution Date until the First Closing Date and after giving effect to the consummation of the Transactions, subject to Sellers
compliance with Section 6.2(b)(i), Buyer shall not and shall cause parent not to
(i) beneficially own (as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the shares of Common Stock and/or
(ii) possess 19.9% or more of the voting power of Seller.
ARTICLE VII.
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Buyer and Seller at the First Closing. The
respective obligations of Buyer and Seller to consummate the transactions contemplated by this
Agreement to be consummated on the First Closing Date are subject to the satisfaction or waiver
(jointly by Buyer and Seller) at or prior to the First Closing Date of each of the following
conditions:
(a) Order. No Regulatory Authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions which are contemplated by this Agreement to be consummated on the
First Closing Date.
(b) Stockholder Approval. The Required Seller Stockholders Vote shall have been
obtained.
(c) Charter Amendment. The Charter Amendment shall have been filed with the Secretary
of State of the State of Delaware.
39
7.2 Conditions Precedent to Buyers Obligations at the First Closing. The obligation of Buyer
to consummate the transactions contemplated by this Agreement to be consummated on the First
Closing Date is subject to the satisfaction at or prior to the First Closing Date of each of the
following additional conditions, any one or more of which may be waived by Buyer in its sole
discretion in writing:
(a) Representations and Warranties. Each of the representations and warranties of
Seller contained in Article IV, shall be true and correct as of the Execution Date and as
of the First Closing Date as though made on and as of the First Closing Date (unless any such
representation or warranty expressly relates to a particular date, in which case such
representation or warranty shall be true and correct only as of such date) except where the failure
of such representations and warranties to be true and correct would not, individually or in the
aggregate, be expected to have a Material Adverse Effect. Buyer shall have received a certificate
as to satisfaction of the conditions set forth in this Section 7.2(a) dated as of the First
Closing Date and executed by a duly authorized officer of Seller.
(b) Performance. Seller shall have performed and complied in all material respects
with each of the covenants, agreements and obligations Seller is required to perform, at or prior
to the First Closing Date, under this Agreement.
(c) Deliveries/Actions. Seller shall have made or caused to be made each of the
deliveries required to be made, and take each the actions required to be taken, by Seller under
Section 3.2(a).
(d) No Material Adverse Effect. No Material Adverse Effect shall have occurred since
the Execution Date.
(e) Establishment of Development Bank Account. Seller shall have established the
Development Bank Account in accordance with Section 8.7(c).
7.3 Conditions Precedent to Sellers Obligations at the First Closing. The obligation of
Seller to consummate the transactions contemplated by this Agreement to be consummated on the First
Closing Date is subject to the satisfaction on or prior to the First Closing Date of each of the
following additional conditions, any one or more of which may be waived by Seller in its sole
discretion in writing:
(a) Representations and Warranties. Each of the representations and warranties of
Buyer contained in Article V shall be true and correct in all material respects, as of the
Execution Date and as of the First Closing Date as though made on and as of the First Closing Date
(unless any such representation or warranty expressly relates to a particular date, in which case
such representation or warranty shall be true and correct only as of such date), except where the
failure of any representation or warranty to be true and correct would not prevent or materially
delay the consummation of the Transactions. Seller shall have received a certificate as to
satisfaction of the conditions set forth in this Section 7.3(a) dated as of the First
Closing Date and executed by a duly authorized officer of Buyer.
40
(b) Performance. Buyer shall have performed and complied in all material respects
with each of the covenants, agreements and obligations Buyer is required to perform at or prior to
the First Closing Date under this Agreement.
(c) Deliveries/Actions. Buyer shall have made or caused to be made each of the
deliveries required to be made, and take each the actions required to be taken, by Buyer under
Section 3.2(b).
7.4 Conditions Precedent to Obligations of Buyer and Seller at the Second Closing. The
respective obligations of Buyer and Seller to consummate the transactions contemplated by this
Agreement to be consummated on the Second Closing Date are subject to the satisfaction or waiver
(jointly by Buyer and Seller) at or prior to the Second Closing Date of each of the following
conditions:
(a) PTB US Development. Completion of PTB US Development shall have occurred.
(b) Order. No Regulatory Authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions which are contemplated by this Agreement to be consummated on the
Second Closing Date.
(c) First Closing. The First Closing shall have occurred.
7.5 Conditions Precedent to Buyers Obligations to the Second Closing. The obligation of Buyer
to consummate the transactions contemplated by this Agreement to be consummated on the Second
Closing Date are subject to the Seller making each of the deliveries required to be made, and take
each the actions required to be taken, by Seller under Section 3.3(a) each of which may be
waived in Buyers sole discretion in writing.
7.6 Conditions Precedent to Sellers Obligations to the Second Closing. The obligation of
Seller to consummate the transactions contemplated by this Agreement to be consummated on the
Second Closing Date are subject to Buyer making each of the deliveries required to be made, and
take each the actions required to be taken, by Buyer under Section 3.3(b) each of which may
be waived in Sellers sole discretion in writing.
ARTICLE VIII.
ADDITIONAL COVENANTS
8.1 Confidentiality; Publicity.
(a) The terms of the Confidentiality Agreement shall apply to any information provided by
Seller to Buyer pursuant to this Agreement.
(b) The Parties jointly agree that no public release or announcement concerning the
Transactions shall be issued by either of them without the prior written consent of the other
(which consent shall not be unreasonably withheld or delayed), except as such release or
announcement may be required by Law or the rules or regulations of any applicable United
41
States securities exchange or Regulatory Authority to which the relevant Party is subject or
submits, wherever situated, in which case the Party required to make the release or announcement
shall use its reasonable commercial efforts to allow, if reasonably practical, the other Party
reasonable time to comment on such release or announcement in advance of such issuance, it being
understood that the final form and content of any such release or announcement, to the extent so
required, shall be at the final discretion of the Party required to make such disclosure.
8.2 Use of Trade or Service Marks; Name Change. Other than as expressly provided in this
Agreement and/or the Other Agreements, Buyer shall not use or permit any of its Affiliates or
distributors to use any of Sellers corporate marks, trademarks or service marks or names now or
hereafter owned or used by Seller.
8.3 Notification of Customers. Promptly after the First Closing Date, Buyer and Seller shall
jointly notify all customers set forth on Schedule 8.3 of the Seller Disclosure Letter of
the transfer to Buyer of the Purchased Assets and Assumed Liabilities (in each case, to the extent
transferred on the First Closing Date), and that all purchase orders for Products submitted after
the First Closing Date should be sent to Buyer at the address of Buyer set forth in Section
11.4.
8.4 Products Returns, Rebate Charges and Wholesaler Charges.
(a) NDC Numbers. Following the First Closing Date, Buyer shall register with FDA to
obtain its own NDC numbers with respect to Products and shall use commercially reasonable efforts
to have in place as soon as reasonably practicable all resources such that sales can be
accomplished under the NDC numbers of Buyer. Thereafter, Buyer shall use, or cause to be used, its
new NDC numbers on all invoices, orders, drug labels and labeling and other communications with all
customers and Regulatory Authorities.
(b) Products Returns. Buyer shall be responsible for processing, or causing to be
processed, all Product returns requested on or after the First Closing Date, including any returns
of Products sold by Seller prior to the First Closing Date. Seller shall be responsible for
refunds owed with respect to Products sold prior to the First Closing Date; provided, however, if
Buyer and Seller sell Product from the same lot, then Buyer and Seller shall be responsible for
Products sold from such lot in proportion to their pro-rata sales of Products from such lot. (For
example, if Seller sold 80% of a lot prior to the First Closing Date and Buyer sells the remaining
20% of the lot after the First Closing Date, then Seller shall be responsible for 80% of the
refunds owed with respect to Products sold from such lot.) Buyer shall destroy, or cause to be
destroyed, all such returned Products in a manner consistent with applicable Law.
(c) Rebate Charges. Buyer shall be responsible for processing, or causing to be
processed, all Rebate Charges requested on or after the First Closing Date, including with respect
to any Products sold by Seller prior to the First Closing Date. Seller shall be responsible for
Rebate Charges for Products sold prior to the First Closing Date; provided, however, if Buyer and
Seller sell Product from the same lot, then Buyer and Seller shall be Rebate Charges for Products
sold from such lot in proportion to their pro-rata sales of Products from such lot.
42
(d) Wholesaler Charges. Buyer shall be responsible for processing, or causing to be
processed, all Wholesaler Charges requested on or after the First Closing Date, including with
respect to any Products sold by Seller prior to the First Closing Date.
(e) Notices. Buyer and Seller shall agree upon an appropriate notice with respect to
the transfer of Rebate Charge and Wholesaler Charge submissions to Buyer after the First Closing
Date.
8.5 Regulatory Matters.
(a) Until the First Closing Date, Seller shall be solely responsible for (i) taking all
actions, paying all fees and conducting all communication with the appropriate Regulatory Authority
required by Law in respect of Regulatory Approvals, including preparing and filing all reports
(including adverse drug experience reports, product deviation reports, annual reports, with the
appropriate Regulatory Authority), (ii) submitting all applications for marketing authorizations of
new drugs, where such authorizations have not yet been granted, and variation of existing
authorizations, and (iii) investigating all complaints and adverse drug experiences with respect to
Products sold pursuant to such Regulatory Approvals.
(b) Until the Second Closing Date, Seller shall be solely responsible for (i) taking all
actions, paying all fees and conducting all communication with the appropriate Regulatory Authority
required by Law in respect of Regulatory Approvals solely for the PTB Indication, including
preparing and filing all reports (including adverse drug experience reports, product deviation
reports, annual reports, with the appropriate Regulatory Authority), (ii) submitting all
applications for marketing authorizations of new drugs solely for the PTB Indication, where such
authorizations have not yet been granted, and variation of existing authorizations, and (iii)
investigating all complaints and adverse drug experiences with respect to Products sold pursuant to
such Regulatory Approvals. The costs incurred by Seller for activities pursuant to this
Section 8.5(b) shall constitute Development Costs of Seller subject to the Seller
Development Costs Cap.
(c) From and after the First Closing, Buyer, at its cost shall be solely responsible for
taking all actions and conducting all communication with third parties with respect to Products
sold pursuant to such Regulatory Approvals (whether sold before or after transfer of such
Regulatory Approval), including responding to all complaints in respect thereof, including
complaints related to tampering, contamination, or counterfeiting.
(d) Seller shall provide Buyer with such data as is reasonably necessary to comply with
Buyers reporting obligations for Best Price (as defined at 42 U.S.C. § 1396r-8(c)(1)(C)), Average
Manufacturers Price (as defined at 42 U.S.C. § 1396r-8(k)(1)) and Average Sales Price (as defined
at 42 U.S.C. § 1395w-3(a)(c)) for such period as is reasonably necessary, not to exceed one (1)
year after the First Closing Date.
(e) From and after the First Closing Date, Buyer promptly (and in any event within the time
periods required by Law) shall notify Seller within three (3) Business Days if Buyer receives a
complaint or a report of an adverse drug experience with respect to Products. In addition, Buyer
shall cooperate with Sellers reasonable requests and use Commercially
43
Reasonable Efforts to assist Seller in connection with the investigation of and response to
any complaint or adverse drug experience related to Products sold by Buyer.
(f) From and after the First Closing Date, Buyer shall be responsible for (i) conducting all
voluntary and mandatory recalls of units of Products sold pursuant to such Regulatory Approvals
(whether sold before or after transfer of such Regulatory Approval), including recalls required by
any Regulatory Authority and recalls of units of Products sold by Seller deemed necessary by Seller
in its reasonable discretion, (ii) conducting all communications and submitting all required
reports to any Regulatory Authority concerning the recalls and (iii) notifying customers and
consumers about the recalls. Seller promptly shall notify Buyer in the event that a recall of
Products sold by Seller is necessary. Seller shall be responsible for all costs associated with
recalls of Products sold prior to First Closing Date; provided, however, if Buyer and Seller sell
Product from the same lot, then Buyer and Seller shall be responsible for the cost of recalls of
Products sold from such lot in proportion to their pro-rata sales of Products from such lot.
(g) Seller and Buyer each agree to promptly prepare and file whatever filings, requests or
applications are required or deemed advisable to be filed with any Regulatory Authority in
connection with the Transactions and transfer and assumption of the Regulatory Approvals and to
cooperate with one another as reasonably necessary to accomplish the foregoing.
8.6 Tax Matters.
(a) All Transfer Taxes shall be paid fifty percent (50%) by Seller and fifty percent (50%) by
Buyer. Any Tax Return that must be filed in connection with Transfer Taxes shall be duly prepared
and timely filed by the Party primarily or customarily responsible under applicable local Law for
filing such Tax Return (the Filing Party), and such Filing Party will use commercially reasonable
efforts to provide such Tax Return to the other Party at least ten (10) Business Days prior to the
date such Tax Return is due to be filed. The Parties agree to use their commercially reasonable
efforts to resolve any disagreements over such Tax Return as promptly as possible. The non-Filing
Party shall furnish its fifty percent (50%) share of such Transfer Taxes to the Filing Party no
later than the later of (x) five (5) Business Days after such Tax Returns have been provided by the
Filing Party or (y) two (2) Business Days prior to such filing. The Filing Party shall provide the
non-Filing Party with evidence reasonably satisfactory to the non-Filing Party that such Transfer
Taxes have been paid by the Filing Party.
(b) Buyer and Seller agree to furnish or cause to be furnished to the other, upon request, as
promptly as practicable, such information and assistance relating to the Purchased Assets,
including, without limitation, access to books and records, as is reasonably necessary for the
filing of all Tax Returns by Buyer or Seller, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority and the prosecution or defense of any claim, suit
or proceeding relating to any Tax. Each of Buyer and Seller shall retain all books and records
with respect to Taxes pertaining to the Purchased Assets for a period of at least seven (7) years
following the applicable Closing Date.
44
(c) Seller shall be responsible for and shall promptly pay when due (x) all Property Taxes
levied with respect to the First Closing Date Purchased Assets attributable to the Pre-Closing Tax
Period and (y) all Property Taxes levied with respect to the Second Closing Date Purchased Assets
attributable to the Second Pre-Closing Tax Period, and Buyer shall be responsible for and shall
promptly pay when due (x) all Property Taxes levied with respect to the First Closing Date
Purchased Assets attributable to the Post-Closing Tax Period and (y) all Property Taxes levied with
respect to the Second Closing Date Purchased Assets attributable to the Second Post-Closing Tax
Period. All Property Taxes levied with respect to the Purchased Assets for the First Closing
Straddle Period or the Second Closing Straddle Period (as the case may be) shall be apportioned
between Buyer and Seller based on the number of days of such Straddle Period included in the
Pre-Closing Tax Period or the Second Pre-Closing Tax Period (as the case may be) and the number of
days of such Straddle Period included in the Post-Closing Tax Period or the Second Pre-Closing Tax
Period (as the case may be). Seller shall be liable for the proportionate amount of such Property
Taxes that is attributable to the relevant Pre-Closing Tax Period, and Buyer shall be liable for
the proportionate amount of such Property Taxes that is attributable to the relevant Post-Closing
Tax Period. Upon receipt of any bill for such Property Taxes, Buyer or Seller, as applicable,
shall present a statement to the other setting forth the amount of reimbursement to which each is
entitled under this Section 8.6(c) together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration amount shall be paid by the party owing
it to the other within ten (10) days after delivery of such statement. In the event that Buyer or
Seller makes any payment for which it is entitled to reimbursement under this Section
8.6(c), the applicable party shall make such reimbursement promptly but in no event later than
ten (10) days after the presentation of a statement setting forth the amount of reimbursement to
which the presenting party is entitled along with such supporting evidence as is reasonably
necessary to calculate the amount of reimbursement.
(d) Seller shall promptly notify Buyer in writing upon receipt by Seller of notice of any
pending or threatened Tax audits or assessments relating to the income, properties or operations of
Seller that reasonably may be expected to relate to or give rise to an Encumbrance on the Purchased
Assets. Each of Buyer and Seller shall promptly notify the other in writing upon receipt of notice
of any pending or threatened Tax audit or assessment challenging the Allocation Schedule.
(e) Buyer and Seller shall cooperate fully with each other in the conduct of any audit,
litigation or other proceeding relating to Taxes involving the Purchased Assets or the Allocation
Schedule. To the extent there arise any inquiries, claims, assessments, audits or similar events
with respect to Taxes relating to the Purchased Assets for a Pre-Closing Tax Period (any such
inquiry, claim, assessment, audit or similar event, a Tax Matter) and Seller acknowledges in
writing to Buyer that Seller shall be obligated to pay in full any Liability that results from a
Tax Matter under the terms of its indemnity under this Agreement (a Complete Indemnity
Obligation), then Seller shall be entitled, if it so elects at its own cost, risk and expense, by
written notice to Buyer within ten (10) Business Days of the institution thereof, to take sole
control of the conduct of such Tax Matter, including any settlement or compromise thereof,
provided, however, that Seller shall keep Buyer reasonably informed of the progress of any such Tax
Matter and shall not effect any such settlement or compromise of such Tax Matter which would result
in a material adverse Tax consequence to Buyer without obtaining Buyers prior written consent
thereto, which shall not be unreasonably withheld or delayed; and,
45
provided, further, that to the extent Seller would not have a Complete Indemnity Obligation to
Buyer hereunder in respect of any Tax Matter, Seller and Buyer shall each be entitled to exercise
joint control of the conduct of such Tax Matter with the other Party, with each bearing its own
costs and expenses. In the event of any conflict or overlap between the provisions of this
Section 8.6(e) and Section 10.6 (relating to indemnification procedures), the
provisions of this Section 8.6(e) shall control.
(f) Seller and Buyer hereby waive compliance with any bulk sales Laws (including Laws
relating to obtaining Tax clearance certificates and any requirement to withhold any amount from
payment of the Purchase Price or Post-Closing Payments) applicable to the sale to Buyer of the
Purchased Assets by Seller.
8.7 Development.
(a) Development Generally; Development Plan.
(i) The Parties respective responsibilities for the Development of the Products shall
be set forth in the Development Plan, subject to this Section 8.7 and the other
provisions of this Agreement. All Development activities after the First Closing Date will
be overseen and supervised by the Joint Development Committee.
(ii) The Parties will establish and, from and after the First Closing Date, actively
maintain and update a Development plan for the Development of Products (the Development
Plan), including a Development budget therefor (the Development Budget). The Development
Plan will include a Development plan for the Development by Seller of Prochieve for the PTB
Indication (the Prochieve PTB Development Plan). The initial Prochieve PTB Development
Plan is attached hereto as Schedule 8.7 of the Seller Disclosure Letter. In
addition to the Prochieve PTB Development Plan, the Development Plan shall include detailed
plans and timelines for the Development of Next Generation Products after the First Closing
Date through to the projected date of Regulatory Approval in each Major Territory of a Next
Generation Product for the PTB Indication. Buyer shall prepare and the Joint Development
Committee shall approve a full Development Plan, as described in this Section
8.7(a)(ii) within sixty (60) days of the First Closing Date. The Development Plan and
Development Budget may be updated from time to time after First Closing Date by the Joint
Development Committee in accordance with Section 8.9.
(b) Development of Prochieve for the PTB Indication.
(i) From and after the First Closing Date until the Second Closing Date, Seller will be
responsible for Product Development activities related to Prochieve for the PTB Indication
as set forth in the Prochieve PTB Development Plan, including the conduct of the PREGNANT
Study. Seller shall use Commercially Reasonable Efforts to retain its employees who are
responsible for, or tasked with, achievement of Regulatory Approval for a PTB Product (the
PTB Product Team) until the Second Closing Date. If, due to the departure of one or more
employees of Seller, the capabilities of the PTB Product Team are materially adversely
impacted prior to the Second Closing Date, Seller
46
shall use Commercially Reasonable Efforts promptly to replace any such employee(s). All
Development Costs in connection with such Product Development activities incurred by or on
behalf of Seller from and after the First Closing Date will be borne by Seller; provided,
that notwithstanding any other provision hereof or in the Other Agreements and
notwithstanding any amendments or updates to the Development Plan, Seller shall be required
to bear no more than seven million Dollars ($7,000,000) in such Development Costs (the
Seller Development Costs Cap) and provided, further, that, if Buyer requests an increase
in the patient enrollment in the PREGNANT Study in excess of five hundred (500) patients,
any costs related to such increase, in excess of what is contemplated in the Development
Plan, shall be borne by Buyer. All Development Costs incurred by Seller and reasonably
documented after January 1, 2010 shall count towards the Seller Development Costs Cap. All
Development Costs in excess of the Seller Development Costs Cap will be borne by Buyer.
(c) On the First Closing Date, Seller shall establish a separate bank account at a
nationally recognized financial institution (the Development Bank Account) for the purpose
of paying Development Costs. The initial balance of the Development Bank Account shall be
equal to the excess of (A) the Seller Development Costs Cap minus (B) the amount of
reasonably documented Development Costs incurred by Seller after January 1, 2010 through the
First Closing Date. Seller shall provide to Buyer full access to review the balances in the
Development Bank Account on a current basis during the Seller Expense Period. Until the
earlier of the time that (x) Seller has fulfilled its responsibilities set forth in the
Development Plan and Development Budget and (y) Seller has incurred an amount of Development
Costs (including any reasonably documented Development Costs incurred by Seller after
January 1, 2010 and prior to the First Closing Date) equal to the Seller Development Costs
Cap (the Seller Expense Period), the funds in the Development Bank Account shall be used
exclusively for the payment of Development Costs.
(d) Lifecycle Management. The Parties Development activities hereunder
include and the Development Plan will reflect an active and sustained program with respect
to the lifecycle management of Products (including Development of a Next Generation Product
as contemplated by Section 8.7(a)(ii)) under the supervision of the Joint
Development Committee. Buyer will be responsible for all Development activities and
Development costs associated therewith, provided, that any such activities may be allocated
to Seller, at Buyers cost, with the mutual agreement of the Parties.
(e) Seller Development Activities.
(i) Seller shall use Commercially Reasonable Efforts to timely and diligently conduct
all Seller Development Activities. All Seller Development Activities shall be conducted by
Seller in accordance with the Development Plan.
(ii) No less than five (5) Business Days prior to each scheduled meeting of the Joint
Development Committee, Seller will provide the Buyer members of the Joint Development
Committee with a written report on the status and progress of Seller Development Activities,
which reports shall include information on progress
47
versus plan, spend versus budget (quarterly), protocol deviations, notable safety and
efficacy findings (including serious adverse events and events of interest from risk
management perspective), inspection, audit findings, and summaries of all interactions, and
copies of all correspondence, with Regulatory Authorities since the previous report.
(iii) In addition, Seller shall make available to Buyer such information about Seller
Development Activities as may be reasonably requested by Buyer from time to time.
(iv) Buyer shall have the right to review any data generated by Seller during the
conduct of Seller Development Activities, as may be reasonably requested by Buyer from time
to time.
(v) Seller shall promptly inform Buyer in writing about any unforeseen and/or material
results, problems, difficulties or issues in connection with the Seller Development
Activities or of which Seller is otherwise aware with respect to the Development of
Products.
(vi) Seller shall notify Buyer promptly upon scheduling, and provide Buyer with five
(5) days notice, of any Regulatory Authority meetings with FDA or EMEA held by Seller or its
Subsidiary for a Product, and Buyer, at its option, may attend such meetings.
(f) Buyer Development Activities.
(i) Buyer shall use Commercially Reasonable Efforts to timely and diligently conduct
all Buyer Development Activities. Without limiting the foregoing, Buyer shall use
Commercially Reasonable Efforts to achieve each of the Milestones set forth in Section
2.8(a) and (b) as soon as practicable, it being acknowledged that prior to the
Second Closing Date, conduct of the PREGNANT Study and Development efforts with respect to
the achievement of the PTB NDA Acceptance Milestone shall be Sellers responsibility. All
Buyer Development Activities shall be conducted by Buyer in accordance with the Development
Plan.
(ii) No less than five (5) Business Days prior to each scheduled meeting of the Joint
Development Committee, Buyer will provide the Seller members of the Joint Development
Committee with a written report on the status and progress of Buyer Development Activities,
which reports shall include information on progress versus plan, spend versus budget
(quarterly), protocol deviations, notable safety and efficacy findings (including serious
adverse events and events of interest from risk management perspective), inspection, audit
findings, and summaries of all interactions, and copies of all correspondence, with
Regulatory Authorities since the previous report.
(iii) In addition, Buyer shall make available to Seller such information about Buyer
Development Activities as may be reasonably requested by Seller from time to time.
48
(iv) Seller shall have the right to review any data generated by Buyer during the
conduct of Buyer Development Activities, as may be reasonably requested by Seller from time
to time.
(v) Buyer shall promptly inform Seller in writing about any unforeseen material
results, problems, difficulties or issues in connection with the Buyer Development
Activities or of which Buyer is otherwise aware with respect to the Development of the
Products.
(vi) Buyer shall notify Seller promptly upon scheduling, and provide Seller with five
(5) days notice, of any Regulatory Authority meetings with FDA or EMEA held by Buyer or its
Affiliate for a Product, and Seller, at its option, may attend such meetings.
(g) Development Costs Reporting and Payment. Each Party shall prepare and deliver to
the other Party quarterly written reports in a form approved by the Joint Development Committee
setting forth all Development Costs incurred in the performance of all Development activities, as
set forth in this Agreement and the Development Plan in the applicable calendar quarter by such
Party on an activity-by-activity basis. Such quarterly reports shall be submitted within thirty
(30) days after the end of the relevant calendar quarter for review by the Joint Development
Committee and Seller shall include in each such report an original invoice for Development Costs
incurred by Seller or its Subsidiaries payable hereunder, and Buyer shall pay Seller all such
amounts within thirty (30) days from the date of receipt by Buyer of the applicable invoice.
(h) Compliance. Each Party agrees that in performing its Development obligations
under this Agreement (a) it shall comply with all applicable current international regulatory
standards, including cGMP, cGLP, cGCP and other rules, regulations and requirements and (b) it will
not employ or use any person that has been debarred under Section 306(a) or 306(b) of the U.S.
Federal Food, Drug and Cosmetic Act.
(i) Regulatory.
(i) The Joint Development Committee shall determine plans and strategies for seeking
Regulatory Approvals for Products.
(ii) The Party responsible for Development of a Product shall also be responsible for
making all Regulatory Filings and seeking Regulatory Approval for such Product in the
applicable jurisdiction(s) and be responsible for conducting all meetings with Regulatory
Authorities in connection therewith (subject to Sections 8.7(e)(vi) and
8.7(f)(vi)).
(iii) Buyer shall fully cooperate with and provide assistance to Seller in connection
with filings to any Regulatory Authority relating to the Products, including by executing
any required documents, providing access to personnel and providing such Party with copies
of all reasonably required documentation.
49
(iv) To the extent required, each Party shall grant or cause to be granted to the other
and its Affiliates or sublicensees cross-reference rights to any relevant drug master files
and other filings submitted by such Party or its Affiliates with any Regulatory Authority
relevant to the Products. In countries where cross-reference rights are deemed
insufficient, each Party shall assist the other in preparing and providing the relevant
Regulatory Authorities with equivalent Regulatory Filings in order to enable such other
Party to comply with its regulatory obligations and obtain the relevant Regulatory
Approvals.
(j) Joint Development Period. Notwithstanding the other provisions of this
Section 8.7, Sellers role in the Development of Products as contemplated by this
Agreement, including its participation in the Joint Development Committee and its rights and
obligations set forth in this Section 8.7 in relation thereto, shall terminate upon
termination of the Joint Development Period; provided, that such termination shall not limit or
restrict any rights or obligations of Buyer or Seller accrued prior to such termination.
8.8 Commercialization.
(a) Commercialization Generally. Subject to the other provisions of this Agreement,
including the other provisions of this Section 8.8, Buyer shall be solely responsible to
Commercialize the Products in the Territory from and after the First Closing Date. All
Commercialization activities shall be conducted in accordance with the terms of this Agreement.
Buyer shall use Commercially Reasonable Efforts to Commercialize Products in order to maximize Net
Sales in the Territory during the Marketing Term.
(b) Compliance with Laws. In connection with all Commercialization activities under
this Agreement, Buyer and all of its sales representatives shall comply with all applicable rules,
regulations and requirements, including the Office of Inspector General Compliance Program Guidance
for Pharmaceutical Manufacturers, April 2003, PDMA, state Laws and regulations governing the
storage and distribution of pharmaceutical samples and aggregate spending on physician gifts,
entertainment and expenses, the PhRMA Code, Section 1128B(b) of the Social Security Act, the AMA
Guidelines on Gifts to Physicians from Industry, the Office of Inspector General Compliance Program
Guidance for Pharmaceutical Manufacturers, HIPAA and all other applicable Laws.
(c) Promotional Materials. Buyer shall be responsible for developing and
disseminating all promotional, advertising, communication and educational materials relating to the
Commercialization of the Products hereunder.
(d) Launch. Buyer shall or shall cause its Affiliates, agents, licensees,
sublicensees or distributors to Launch the PTB Product in the United States within six (6) months
after receipt of the PTB US Approval.
(e) Potential Partners Ex-U.S. To the extent Buyer or any Affiliate thereof is not
seeking Regulatory Approval or Commercializing any Royalty Products or PTB Royalty Products in a
country outside the U.S. and has no current plans to do so, Seller shall be entitled to seek
proposals from Third Parties to Develop and/or Commercialize Royalty Products and/or
50
PTB Royalty Products in such country. Prior to initiating efforts to identify or solicit
proposals from Third Parties, Seller shall notify the Buyer of its intent to do so. In such event
Buyer shall cooperate with Seller in such efforts, including providing Seller or any Third Party
such information and data regarding the Product as may be reasonably requested by Seller or such
Third Party, subject to such Third Party entering into a confidentiality agreement on terms
approved in writing by Buyer (such approval not to be unreasonably withheld). Any proposals
submitted by any such Third Party shall be reviewed and discussed by the Joint Commercialization
Committee, provided that any decision whether or not to pursue any such proposals shall be subject
to the approval of Buyer. For the avoidance of doubt, any activities of Seller contemplated by
this Section 8.8(e) shall not constitute a breach of Section 8.11.
8.9 Joint Development Committee.
(a) Generally.
(i) The Parties will establish a Joint Development Committee, composed of three (3)
senior executives of Seller and three (3) senior executives of Buyer, two (2) of which will
have responsibility for Development activities within the appointing Partys organization.
Prior to the First Closing Date, each Party will designate its initial members to serve on
the Joint Development Committee and notify the other Party of the dates of availability for
the first meeting of the Joint Development Committee. Each Party may replace its
representatives on the Joint Development Committee on written notice to the other Party.
(ii) The Joint Development Committee will oversee and supervise all Development
activities for Products by the Parties pursuant to this Agreement. Without limiting the
foregoing, the Joint Development Committee shall: (A) review the Development Plan and
Development Budget no less frequently than once per calendar year and consider and approve
any proposed amendments or updates thereto; (B) be responsible for monitoring and reviewing
the activities of the Parties in connection with Development of Products under the
Development Plan and assessing overall performance and compliance by the Parties with the
Development Plan; (C) determine any matter within the Joint Development Committees
responsibility delegated to any sub-committees established pursuant to Section
8.9(d) with respect to which such sub-committees have been unable to reach agreement;
(D) perform any other activities related to the Development Plan as jointly requested by
both Parties from time to time; (E) be solely responsible for approving any submission to
the FDA of the PTB NDA or PTB Supplemental NDA; (F) be solely responsible for approving any
amendments, modifications, supplements or updates to the PTB NDA or PTB Supplemental NDA;
(G) be solely responsible for negotiating and accepting the PTB US Approval and (H) consider
and act upon such other matters as specified in this Agreement.
(b) Meetings of the Joint Development Committee.
(i) The Joint Development Committee shall meet on a quarterly basis and at such other
times as the Parties may agree, with at least thirty (30) days advance written notice to
each Party. The first meeting of the Joint Development Committee shall
51
be held as soon as reasonably practicable, but in no event later than thirty (30) days
following the First Closing Date. Meetings shall be held face to face at such dates and
places as are mutually agreed or by teleconference or videoconference should the members of
the Joint Development Committee mutually decide. Unless otherwise agreed by the Parties,
all in-person meetings of the Joint Development Committee shall be held on an alternating
basis between Sellers facility and Buyers facilities.
(ii) Each Party may from time to time invite a reasonable number of participants, in
addition to its representatives, to attend Joint Development Committee meetings, with the
consent of the other Party (which shall not be unreasonably withheld); provided, that if
either Party intends to have any Third Party (including any consultant) attend such a
meeting, such Third Party will be subject to the prior approval of the other Party and must
be bound by a confidentiality agreement acceptable to both Parties.
(iii) Buyer shall appoint one (1) of its representatives on the Joint Development
Committee to act as chairperson of the Joint Development Committee. The chairperson shall
set agendas for Joint Development Committee meetings; provided that the agendas will include
any reasonable matter requested by either Party. The chairperson shall be responsible for
recording, preparing and, within a reasonable time, issuing minutes of each Joint
Development Committee meeting, which draft minutes shall be subject to review and comment by
the Parties.
(iv) In order to have a quorum for the conduct of business at any Joint Development
Committee meeting, at least one (1) representative of each Party must be present.
(c) Decision Making.
(i) Decisions of the Joint Development Committee shall be made by unanimous vote, with
each Partys representatives to the Joint Development Committee collectively having one
vote. In the event of a disagreement among the Joint Development Committee with respect to
a matter to be decided by the Joint Development Committee as specified herein, the matter
shall be referred to the Senior Officers who shall attempt in good faith to resolve such
disagreement. If they cannot resolve such issue within thirty (30) days of the matter being
referred to them, then, subject to Section 8.9(c)(ii) below, the resolution and/or
course of conduct shall (x) in the case of decisions made in respect of matters described in
clauses (E) and (G) of the last sentence of Section 8.9(a)(ii), be determined by
Buyer in its sole discretion and (y) in all other cases, be determined by Buyer in its
reasonable discretion.
(ii) Notwithstanding the foregoing, in no event shall Buyer in exercising its final
decision-making authority described in Sections 8.9(c)(i) have the right:
(A) to modify or amend the terms and conditions of this Agreement or to
determine any such issue in a manner that would conflict with the express
terms and conditions of this Agreement; or
52
(B) to approve or adopt any amendment, modification or update to the
Development Plan or Development Budget or take any other action that would
(A) unilaterally impose an obligation (financial or otherwise) on Seller
beyond those expressly provided in this Agreement, (B) excuse Buyer from any
of its obligations specifically enumerated under this Agreement, or (C)
reduce the rights of Seller specifically enumerated under this Agreement.
(d) Sub-Committees.
(i) The Joint Development Committee may, at any time it deems necessary or appropriate,
establish additional joint committees and delegate such of its responsibilities as it
determines appropriate to such joint committees.
(ii) In the event of a disagreement among the members of any such joint committee, the
matter shall be referred to the Joint Development Committee for resolution pursuant to
Section 8.9(c) above.
8.10 Joint Commercialization Committee.
(a) Generally.
(i) The Parties will establish a Joint Commercialization Committee composed of one (1)
representative of Seller and such number of representatives of Buyer as it shall determine,
in its discretion. Prior to the First Closing Date, each Party will designate its initial
members to serve on the Joint Commercialization Committee and notify the other Party of the
dates of availability for the first meeting of the Joint Commercialization Committee. Each
Party may replace its representatives on the Joint Commercialization Committee on written
notice to the other Party.
(ii) The Joint Commercialization Committee will provide a means for the exchange of
information between the Parties regarding Commercialization activities for Products.
Without limiting the foregoing, at each annual meeting of the Joint Commercialization
Committee, the Committee shall review and discuss Buyers Commercialization activities with
respect to Products during the prior year and review and discuss Buyers planned
Commercialization activities for the next year. In furtherance thereof, at each annual
meeting of the Joint Commercialization Committee, Buyer shall provide to Seller a
Commercialization presentation covering sales forecasts and the annual marketing plan,
including sales force allocations and activities. The Joint Commercialization Committee
shall also review and discuss opportunities or proposals to grant any license, sublicense,
distribution or marketing rights to any Third Party to Commercialize any Royalty Products or
PTB Royalty Products in any country outside the U.S. from time to time, including as
contemplated by Section 8.8(e).
(b) Meetings of the Joint Commercialization Committee.
(i) The Joint Commercialization Committee shall meet on an annual basis, from time to
time at the request of Seller for the purpose contemplated by
53
Section 8.8(e), and at such other times as the Parties may agree, in each case, with at
least thirty (30) days advance written notice to each Party. The first meeting of the Joint
Commercialization Committee shall be held as soon as reasonably practicable, but in no event
later than ninety (90) days following the First Closing Date. Meetings shall be held face
to face at such dates and places as are mutually agreed or by teleconference or
videoconference should the members of the Joint Commercialization Committee mutually decide.
Unless otherwise agreed by the Parties, all in-person meetings of the Joint
Commercialization Committee shall be held at an alternating basis between Sellers facility
and Buyer facilities.
(ii) Each Party may from time to time invite a reasonable number of participants, in
addition to its representatives, to attend Joint Commercialization Committee meetings in a
non-voting capacity, with the consent of the other Party (which shall not be unreasonably
withheld); provided, that if either Party intends to have any Third Party (including any
consultant) attend such a meeting, such Third Party will be subject to the prior approval of
the other Party and must be bound by a confidentiality agreement acceptable to both Parties.
(c) Decision Making. The Joint Commercialization Committee shall have no
decision-making authority and the Commercialization of the Products in the Territory from and after
the First Closing Date shall be in accordance with Section 8.8 hereof.
8.11 Covenant Not to Compete.
(a) Seller understands that Buyer shall be entitled to protect and preserve the value of the
Business following the First Closing Date to the extent permitted by Law and that Buyer would not
have entered into this Agreement absent the provisions of this Section 8.11. During the
Joint Development Period and for a period of two (2) years thereafter (the Non-Compete Period),
Seller and its Subsidiaries, and any successor to all or substantially all of their assets, taken
as a whole, shall not, directly or indirectly (1) engage in the manufacture, Development or
Commercialization in the Territory (A) of Products containing Progesterone, or (B) any other
products which are approved or being Developed for any pre-term birth indication ((i) and (ii),
collectively, Competing Activities); or (2) engage in, own, manage, operate, advise, control or
in any way participate in the ownership, management, operation, financing or control of any
business engaged in Competing Activities (a Competing Business). The restrictions set forth in
this Section 8.11 shall not be construed to preclude, prohibit or restrict (i) Seller, from
performing its obligations under this Agreement or the Other Agreements; (ii) any investment by
Seller or its Subsidiaries in any class of publicly traded debt or equity securities of any
Competing Business so long as Seller does not hold at any time during such period more than five
percent (5%) of such class of issued and outstanding voting securities of such publicly traded
company, and so long as Seller does not otherwise exercise any management or control with respect
to such Competing Business; or (iii) any activity set forth on Schedule 8.11.
(b) If a court determines that the foregoing restrictions are too broad or otherwise
unreasonable under applicable Law, including with respect to time or scope, the court is hereby
requested and authorized by the Parties to revise the foregoing restriction to include the
54
maximum
restrictions allowable under applicable Law. Each of the Parties acknowledges, however, that this Section 8.11 has been negotiated by the Parties and that the
Territory and Non-Compete Period are reasonable in light of the circumstances pertaining to the
Parties.
(c) Notwithstanding any other provision of this Agreement, it is understood and agreed that
the remedy of indemnity payments pursuant to Article X and other remedies at law, if any,
would be inadequate in the case of any breach of the covenants contained in this Section
8.11, and, accordingly, Buyer shall be entitled to equitable relief, including the remedy of
specific performance, with respect to any breach or attempted breach of such covenants.
ARTICLE IX.
TERMINATION AND SURVIVAL
9.1 Termination.
(a) This Agreement may be terminated prior to the First Closing Date:
(i) at any time before the First Closing Date by mutual written consent of Buyer and
Seller;
(ii) by either Party, by delivery of written notice of termination to the other, if the
First Closing Date has not occurred on or before August 30, 2010 (the Outside Date);
provided, that such failure is not due to the failure of the Party seeking to terminate this
Agreement to comply in all material respects with its obligations under this Agreement;
(iii) by either Party, by delivery of written notice of termination to the other, if
the Seller Stockholders Meeting is held and the Required Seller Stockholders Vote is not
obtained at the Seller Stockholders Meeting (or at any adjournment thereof); or
(iv) by either Party, by delivery of written notice of termination to the other, if any
Regulatory Authority of competent jurisdiction shall have issued an order, decree or ruling,
or taken any other action permanently restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have become final and
non-appealable; provided that in order for either party to seek to terminate this Agreement
pursuant to this Section 9.1(a)(iv), it must have used its commercially reasonable
efforts to lift and rescind such order, decree, ruling or other action.
(b) This Agreement may be terminated by Seller prior to the First Closing Date by delivery of
a written notice of termination to Buyer, if:
(i) (A) any representation or warranty of Buyer set forth in this Agreement shall have
become untrue, (B) such misrepresentation is not capable of being cured prior to the Outside
Date and (C) as a result of the preceding clauses (A) and (B), the condition set forth in
Section 7.3(a) is not capable of being met; or
55
(ii) (A) a material breach of any covenant or obligation in this Agreement has been
committed by Buyer, (B) such breach has not been waived by Seller and such breach is not
cured by Buyer within ten (10) days after written notice thereof is delivered by Seller to
Buyer or is incapable of being cured by Buyer and (C) as a result of the preceding clauses
(A) and (B), the condition set forth in Section 7.3(b) is not capable of being met.
(c) This Agreement may be terminated by Buyer prior to the First Closing Date by delivery of a
written notice of termination to Seller, if:
(i) (A) any representation or warranty of Seller set forth in this Agreement shall have
become untrue, (B) such misrepresentation is not capable of being cured prior to the Outside
Date and (C) as a result of the preceding clauses (A) and (B), the condition set forth in
Section 7.2(a) is not capable of being met;
(ii) (A) a material breach of any covenant or obligation in this Agreement has been
committed by Seller, (B) such breach has not been waived by Buyer and such breach is not
cured by Seller within ten (10) days after written notice thereof is delivered by Buyer to
Seller or is incapable of being cured by Seller and (C) as a result of the preceding clauses
(A) and (B), the condition set forth in Section 7.2(b) is not capable of being met;
or
(iii) if, prior to obtaining the Required Seller Stockholders Vote a Change of Board
Recommendation shall have occurred; provided, that any such termination must occur within
five (5) Business Days following the occurrence of any Change of Board Recommendation.
9.2 Procedure and Effect of Termination.
(a) Upon termination of this Agreement by Seller or Buyer pursuant to Section 9.1,
this Agreement shall terminate forthwith and become void and there shall be no Liability or
obligation on the part of the Parties or their respective Representatives, except as provided in
this Section 9.2. Termination of this Agreement shall terminate all outstanding
obligations and liabilities between the Parties arising from this Agreement except those set forth
in: (i) Section 8.1(a), this Article IX and Article XI; (ii) the
Confidentiality Agreement; and (iii) any other provisions of this Agreement that specifically state
that they shall survive termination of this Agreement.
(b) In the event that this Agreement is terminated pursuant to Section 9.1(c)(iii),
then Seller shall pay to Buyer a fee of two million dollars ($2,000,000) (the Termination Fee)
within two (2) Business Days after such termination.
(c) In the event that an Acquisition Proposal has been publicly announced and, thereafter, (x)
this Agreement is terminated pursuant to Section 9.1(a)(ii) or Section 9.1(a)(iii)
and (y) within twelve (12) months after the termination of this Agreement, Seller shall have
entered into an agreement regarding or consummated a transaction which would have constituted an
Acquisition Proposal (excluding an Equity Financing and/or any agreement relating thereto), then
Seller shall pay to Buyer, the Termination Fee upon the earlier of (i) two
56
(2) days following entering into any such agreement or (ii) immediately upon the consummation
of any such transaction.
(d) The Termination Fee shall be
the sole and exclusive remedy of Buyer under circumstances where the Termination Fee is payable by
Seller and upon payment of the Termination Fee in accordance with this Section 9.2, Seller
shall not have any further Liability or obligation relating to or arising out of this Agreement;
provided, however, that nothing in this Agreement shall limit the ability of either Party to obtain
specific performance of this Agreement or to recover damages (including damages in excess of the
Termination Fee) in the event of fraud or a willful breach of this Agreement by the other Party.
(e) Each of the Parties acknowledges that the agreements contained in this Section 9.2
are an integral part of the Transactions contemplated by this Agreement and that without these
agreements, Buyer would not enter into this Agreement. Accordingly, if Seller fails promptly to pay
an amount due pursuant to this Section 9.2, and, in order to obtain such payment, Buyer
commences a suit that results in a judgment against Seller, Seller shall pay to Buyer its
reasonable costs and expenses (including attorneys fees and expenses) in connection with such
suit, together with interest on the amount due from the date such payment was required to be made
until the date of payment at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.
ARTICLE X.
INDEMNIFICATION
10.1 Survival of Representations.
(a) The representations and warranties and the covenants, agreements and obligations to be
performed on or prior to the First Closing Date (the Pre-Closing Covenants) contained in this
Agreement shall survive the First Closing Date solely for purposes of this Article X and
shall terminate and no longer survive at the close of business on the eighteenth (18th) month
anniversary of the First Closing Date (the Basic Survival Period); provided, however, that the
representations and warranties of Seller in Sections 4.2, 4.4 and 4.5 and
of the Buyer in Sections 5.2 and 5.3 (collectively, the Fundamental
Representations) and the representations and warranties of Seller in Section 4.9 shall
survive the First Closing Date until the expiration of the applicable statute of limitations (with
extensions) with respect to the matters addressed in such sections. The period of time a
representation, warranty or the Pre-Closing Covenants survives the First Closing Date pursuant to
the preceding sentence shall be the Survival Period with respect to such representation, warranty
or the Pre-Closing Covenants. Subject to Section 10.6, so long as a Party gives written
notice of an indemnification claim notice, including a description of the claim and the amount of
claimed Losses for such claim on or before the expiration of the applicable Survival Period, such
Indemnified Party shall be entitled to pursue its rights to indemnification under Section
10.2 or 10.3, as applicable. Subject to Section 10.6, in the event notice of
any claim(s) for indemnification under Section 10.2 or 10.3 shall have been given
within the applicable Survival Period and such claim(s) have not been finally resolved by the
expiration of such Survival Period, the representations, warranties or Pre-Closing Covenants, as
applicable, that are the subject of such claim(s) shall survive the end of
57
the Survival Period of such representations, warranties or Pre-Closing Covenants until such
claim(s) are finally resolved, but such representations, warranties and Pre-Closing Covenants shall
only survive with respect to such asserted claim(s).
(b) The covenants and agreements contained in this Agreement that require by their terms
performance or compliance on and after the First Closing Date shall continue in force thereafter in
accordance with their terms or if no term is specified, indefinitely.
10.2 Indemnification by Seller. Subject to the limitations and terms of this Article X
and Section 6.9(b), on and after the First Closing Date, Seller shall indemnify, reimburse
and defend Buyer and its Affiliates and each of their respective Representatives, successors and
assigns (Buyer Indemnitees) from and against, and hold them harmless from, any Losses incurred
(payable promptly upon written request), without duplication, to the extent arising from, in
connection with, or otherwise with respect to:
(a) subject to Section 10.1, any breach of any representation or warranty of Seller
contained in this Agreement;
(b) any breach of any representation and warranty of Seller under any Other Agreement or any
covenant, agreement or obligation of Seller contained in this Agreement or in any Other Agreement;
(c) any Excluded Liability; and
(d) any fees, expenses or other payments incurred or owed by Seller to any brokers, financial
advisors or other comparable Persons retained or employed by Seller in connection with the
Transactions.
10.3 Indemnification by Buyer. Subject to the limitations and terms of this Article X,
on and after the First Closing Date, Buyer shall indemnify and defend Seller, its Affiliates and
each of their respective Representatives, successor and assigns (Seller Indemnitees) from and
against, and agrees to hold them harmless from, any Losses, as incurred (payable promptly upon
written request), without duplication, to the extent arising from, in connection with, or otherwise
with respect to:
(a) subject to Section 10.1, any breach of any representation or warranty of Buyer
contained in this Agreement;
(b) any breach of any representation or warranty of Buyer under any Other Agreement or any
covenant, agreement or obligation of Buyer contained in this Agreement or in any Other Agreement;
(c) any Assumed Liability;
(d) any fees, expenses or other payments incurred or owed by Buyer to any brokers, financial
advisors or other comparable Persons retained or employed by Buyer in connection with the
Transactions; and
58
(e) any Losses of Seller arising out of or resulting from the circumstances described in
Schedule 10.3(e).
10.4 Limitation on Losses; Calculation of Losses; Treatment of Indemnification Payments.
(a) Seller and Buyer shall have no indemnification obligations pursuant to Section
10.2(a) and Section 10.3(a) as applicable, except to the extent that the aggregate
amount of Losses incurred or suffered by Indemnified Parties, that Buyer or Seller, as applicable, is otherwise
responsible for under Section 10.2(a) or Section 10.3(a) as applicable, exceeds
five hundred thousand dollars ($500,000) (the Deductible), at which time an Indemnified Party
shall be entitled to assert claims against Buyer or Seller, as applicable, for all Losses in excess of, but
excluding the Deductible; provided, that, subject to the immediately following proviso, the maximum
liability of Buyer and Seller for all claims by Indemnified Parties under Section 10.2(a) or
Section 10.3(a) as applicable, shall not in any case exceed seven million five hundred
thousand dollars ($7,500,000) (the Liability Cap); provided further, that for purposes of claims
made by Buyer Indemnitees pursuant to Sections 10.2(a) or Seller Indemnitees pursuant to Section 10.3(a)
arising from the breach of a Fundamental Representation or fraud or
intentional misrepresentation by Buyer or Seller, as applicable, the Liability Cap shall be inapplicable.
(b) The amount of any Loss for which indemnification is provided under Section 10.2 or
Section 10.3 shall be reduced to take account of any Tax benefit actually realized by the
Indemnified Party arising from the incurrence or payment of any such Loss in the Tax year of such
incurrence or payment, or in the subsequent two (2) Tax years. In computing the amount of any such
Tax benefit, the Indemnified Party shall be deemed to recognize all other items of income, gain,
loss deduction or credit before recognizing any item arising from the receipt of any indemnity
payment under Section 10.2 or Section 10.3 or the incurrence or payment of any
indemnified Loss.
(c) The amount of Losses recoverable by an Indemnified Party under Section 10.2 or
Section 10.3 shall be reduced by the amount of any payment received under insurance
policies or from any third-party indemnitor by such Indemnified Party (or an Affiliate thereof)
with respect to the Losses to which such claim for indemnification relates, less the reasonable
cost incurred in obtaining such payment. If an Indemnified Party (or an Affiliate) receives any
insurance or other payment in connection with any claim for Losses for which it has already
received an indemnification payment from the Indemnifying Party, it shall pay to the Indemnifying
Party, within thirty (30) days of receiving such payment, the amount of such payment (less the
reasonable cost incurred in obtaining such payment) not to exceed the amount previously received by
the Indemnified Party under Section 10.2 or Section 10.3, as applicable, with
respect to such claim from the Indemnifying Party.
(d) Any indemnity payment under Section 10.2 or Section 10.3 shall be treated
as an adjustment to the Purchase Price, including for Tax purposes, to the maximum extent allowable
under applicable Law.
(e) Notwithstanding anything to the contrary herein, Seller shall not in any event be liable
to the Buyer Indemnitees and Buyer shall not in any event be liable to the Seller
59
Indemnitees on account of any indemnity obligation set forth in Section 10.2 or
Section 10.3, respectively, for any indirect, consequential or punitive damages (including,
but not limited to, lost profits, loss of use, damage to goodwill or loss of business).
10.5 No Termination of Indemnification. Except with respect to the Pre-Closing Covenants, the
obligations to indemnify and hold harmless any Party pursuant to Sections 10.2(b)-(d) and
Section 10.3(b)-(e), shall not terminate.
10.6 Procedures.
(a) In order for a party (the Indemnified Party) to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a claim made by any
Person against the Indemnified Party (a Third-Party Claim), such Indemnified Party must notify
the indemnifying party (the Indemnifying Party) in writing (and in reasonable detail) of the
Third-Party Claim within fifteen (15) Business Days after receipt by such Indemnified Party of
notice of the Third-Party Claim; provided, however, that failure to give such notification shall
not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall
have been actually prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within five (5) Business Days after the Indemnified Partys
receipt thereof, copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third-Party Claim.
(b) If a Third-Party Claim is made against an Indemnified Party, the Indemnifying Party shall
be entitled to participate in the defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by the Indemnifying Party. Should the Indemnifying Party so elect to
assume the defense of a Third-Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof unless (i) a conflict of interest arises between the
Indemnifying Party and the Indemnified Party such that legal counsel cannot represent both the
Indemnifying Party and the Indemnified Party or (ii) the Indemnified Party is advised in writing by
counsel that one or more legal defenses is available to it that are different from those of the
Indemnifying Party. If the Indemnifying Party assumes such defense, the Indemnified Party shall
have the right to participate in the defense thereof and to employ counsel, at its own expense
(except under the conditions described in the prior sentence), separate from the counsel employed
by the Indemnifying Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by
the Indemnified Party for any period during which the Indemnifying Party has not assumed the
defense thereof (other than during any period in which the Indemnified Party shall have failed to
give notice of the Third-Party Claim as provided above). If the Indemnifying Party chooses to
defend or prosecute a Third-Party Claim, all the Indemnified Parties shall cooperate in the defense
or prosecution thereof. Such cooperation shall include the retention and (upon the Indemnifying
Partys request) the provision to the Indemnifying Party of records and information that are
reasonably relevant to such Third-Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any material provided
hereunder. Whether or not the Indemnifying Party assumes the defense of a Third-Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third-Party Claim
60
without the Indemnifying Partys prior written consent (which consent shall not be
unreasonably withheld). The Indemnifying Party may not settle, compromise or discharge any
Third-Party Claim without the Indemnified Partys prior written consent (which shall not be
unreasonably withheld), unless such settlement, compromise or discharge shall obligate the
Indemnifying Party to pay the full amount of the Liability in connection with such Third-Party
Claim, releases the Indemnified Party completely in connection with such Third-Party Claim and does
not materially adversely affect the Indemnified Party.
(c) In the event any Indemnified Party should have a claim against any Indemnifying Party
under Section 10.2 or Section 10.3 that does not involve a Third-Party Claim being
asserted against or sought to be collected from such Indemnified Party, the Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying Party and in any event
prior to the expiration of the underlying representations and warranties, if applicable. Except as
provided in Section 10.5, the failure by any Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party from any Liability that it may have to
such Indemnified Party under Section 10.2 or Section 10.3, except to the extent
that the Indemnifying Party shall have been actually prejudiced as a result of such failure. If
the Indemnifying Party disputes its Liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute
and, if not resolved through negotiations, such dispute shall be resolved in accordance with
Section 11.10.
(d) To the extent of any conflict between this Section 10.6 and Section
8.6(e), Section 8.6(e) shall control.
10.7 Sole Remedy. Each of Buyer and Seller acknowledges and agrees that its sole and exclusive
remedy after the First Closing Date with respect to any and all claims and causes of action
relating to this Agreement (including the Schedules), the Other Agreements and the Transactions,
the Purchased Assets, the Assumed Liabilities and the Shares (other than claims of, or causes of
action arising from fraud) shall be pursuant to the indemnification provisions set forth in this
Article X or as provided in Section 11.11.
10.8 Effect of Investigation or Knowledge. Any claim by Buyer or its Affiliates or any of their
Representatives for indemnification shall not be adversely affected by any investigation by or
opportunity to investigate afforded to Buyer, nor, subject to the limitations set forth in
Section 6.9(b), shall such a claim be adversely affected by Buyers knowledge on or before
any Closing Date of any breach of the type specified in Section 10.2 or of any state of
facts that may give rise to such a breach. Subject to the limitations set forth in Section
6.9(b), the waiver of any condition based on the accuracy of any representation or warranty, or
on the performance of or compliance with any covenant or obligation, will not adversely affect the
right to indemnification, payment of Losses or other remedy based on such representations,
warranties, covenants or obligations.
61
ARTICLE XI.
MISCELLANEOUS
11.1 Assignment; Binding Effect. This Agreement shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors and assigns. Prior to the First Closing,
Buyer shall assign its rights and obligations to purchase certain Non-United States Purchased
Assets to a wholly-owned Subsidiary of Parent. In addition, from and after the First Closing Date,
either Party may (a) assign its rights and obligations under this Agreement or any part hereof to
one or more of its Affiliates without the consent of the other Party; and (b) assign this Agreement
in its entirety without the other Partys consent to an entity that acquires all or substantially
all of the assets of the assigning party to which this Agreement relates, whether by merger,
acquisition or otherwise; provided, however, that in the event Seller assigns this Agreement
pursuant to clause (b) above, Buyer shall have the right, at any time during the six (6) month
period after such assignment and upon thirty (30) days prior written notice to Seller or Sellers
successors and assigns, as applicable, to (i) terminate the Joint Development Period and Sellers
or Sellers successors and assigns role in the Development of Products as contemplated by
Section 8.7 (subject to Section 8.7(j)), (ii) disband the Joint Development
Committee and the rights and obligations set forth in Section 8.9, and (iii) disband the
Joint Commercialization Committee and terminate the rights and obligations set forth in Section
8.10. Other than as provided in this Section 11.1, neither Party may sell, transfer,
assign, license, sublicense, delegate, pledge or otherwise dispose of, whether voluntarily,
involuntarily, by operation of Law or otherwise, this Agreement or any of its rights or obligations
under this Agreement without the prior written consent of the other Party hereto and any attempted
assignment or transfer of this Agreement shall be null and void.
11.2 Guarantee of Obligations.
(a) Parent will receive substantial benefits from the consummation of the Transactions, and
for other good and valuable consideration the sufficiency of which is clearly acknowledged as a
material inducement for Seller to enter into this Agreement, Parent hereby unconditionally and
irrevocably guarantees the prompt performance, payment and discharge when due, of each and every
obligation of Buyer and each and every successor or assignee of Buyer under this Agreement and the
Other Agreements and of the Non-US Asset Purchaser (as defined in the License Agreement) under the
License Agreement, including the payment obligations hereunder and thereunder. Seller will receive
substantial benefits from the consummation of the Transactions, and for other good and valuable
consideration the sufficiency of which is clearly acknowledged as a material inducement for Buyer
to enter into this Agreement, Seller hereby unconditionally and irrevocably guarantees the prompt
performance, payment and discharge when due, of each and every obligation of each and every
successor or assignee of Seller under this Agreement and the Other Agreements and of Columbia Laboratories (Bermuda) Ltd. under the License Agreement, including the payment obligations hereunder and
thereunder.
(b) This Agreement constitutes the legal, valid and binding obligation of the Parent,
enforceable against it in accordance with its terms. Parent has the unrestricted right, power and
authority to execute and deliver this Agreement and to perform its obligations under this
Agreement, and the execution, delivery and performance of this Agreement by Parent have
62
been duly authorized by all necessary action on behalf of Parent and this Agreement has been
duly executed and delivered by Parent.
11.3 Expenses. Except as otherwise specified herein, each Party shall bear its own expenses
with respect to the preparation of this Agreement and the Transactions.
11.4 Notices. All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given (a) when received if delivered
personally, (b) when transmitted if telecopied (which is confirmed), (c) upon receipt, if sent by
registered or certified mail (postage prepaid, return receipt requested) and (d) the day after it
is sent, if sent for next-day delivery to a domestic address by overnight mail or courier, to the
Parties at the following addresses:
If to Seller, to:
Columbia
Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
Attention: General Counsel
Facsimile: 973.994.3001
with copies (which shall not constitute notice) sent concurrently
to:
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
If to Buyer or Parent, to:
Watson
Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
with copies (which shall not constitute notice) sent concurrently
to:
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
provided, however, that if any Party shall have designated a different address by notice to the
others, then to the last address so designated.
11.5 Severability. If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction or other Regulatory Authority to be invalid, void, unenforceable
or against its regulatory policy such determination shall not affect the enforceability of any
others or of the remainder of this Agreement.
11.6 Amendments; Entire Agreement. This Agreement may not be amended, supplemented or otherwise
modified except by an instrument in writing signed by both Parties hereto. This Agreement (and all
Annexes, Exhibits and Schedules attached hereto), the Other
63
Agreements and the Confidentiality Agreement contain the entire agreement of the Parties hereto
with respect to the Transactions, superseding all negotiations, prior discussions and preliminary
agreements made prior to the Execution Date. In the event of any conflict between any specific
provision of this Agreement and a provision of any of the Asset Transfer Documentation, the
provisions of this Agreement shall govern.
11.7 No Third-Party Beneficiaries. This Agreement is solely for the benefit of the Parties
hereto and their respective Affiliates and no provision of this Agreement shall be deemed to confer
upon any third parties any remedy, claim, liability, reimbursement, claim of action or other right
in excess of those existing without reference to this Agreement; provided, however, the Buyer
Indemnitees and Seller Indemnitees that are not Parties are intended third-party beneficiaries of
this Agreement and shall be entitled to the benefits of Article X and enforce the same as
if they were Parties hereto (subject to the limitations contained therein).
11.8 Waiver. Any term or condition of this Agreement may be waived at any time by the Party
that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in
a written instrument duly executed by or on behalf of the party waiving such term or condition. The
failure of any Party to enforce any condition or part of this Agreement at any time shall not be
construed as a waiver of that condition or part, nor shall it forfeit any rights to future
enforcement thereof. Except as provided in Section 9.2, all remedies either under this
Agreement or by Law or otherwise afforded, will be cumulative and not in the alternative.
11.9 Governing Law. This Agreement (including any claim or controversy arising out of or
relating to this Agreement) shall be governed by and construed in accordance with the Laws of the
State of Delaware without regard to conflict of law principles that would result in the application
of any Law other than the Laws of the State of Delaware.
11.10 Arbitration.
(a) All disputes, differences, controversies and claims of the Parties arising out of or
relating to the Agreement (individually, a Dispute and, collectively, Disputes), except as
otherwise provided under this Agreement, shall be resolved by final and binding arbitration
administered by the American Arbitration Association (AAA) under its Commercial Arbitration
Rules, subject to the provisions of this Section 11.10.
(b) Following the delivery of a written demand for arbitration by either Party, each of Buyer
and Seller shall choose one (1) arbitrator within ten (10) Business Days after the date of such
written demand and the two chosen arbitrators shall mutually, within ten (10) Business Days after
selection select a third (3rd) arbitrator (each, an Arbitrator and together, the
Arbitrators), each of whom shall be a retired judge, subject to Section 11.10(i) below,
selected from a roster of arbitrators provided by the AAA. If the third (3rd)
Arbitrator is not selected within fifteen (15) Business Days after delivery of the written demand
for arbitration (or such other time period as the Parties may agree), the Parties shall promptly
request that the commercial panel of the AAA select an independent Arbitrator meeting such
criteria.
(c) The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association; provided, however, that notwithstanding any provisions of the
64
Commercial Arbitration Rules to the contrary, unless otherwise mutually agreed to by Buyer and
Seller, the sole discovery available to each Party shall be its right to conduct up to two (2)
non-expert depositions of no more than three (3) hours of testimony each.
(d) The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the Parties agree to extend such time. The award shall be final
and binding upon the Parties.
(e) Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the Parties, including without limitation any proceeding to enforce this section, to review or
confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery Court
sitting in the county of New Castle, Delaware (the Enforcing Court). By execution and delivery
of this Agreement, each Party accepts the jurisdiction of the Enforcing Court.
(f) Each Party shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section, including attorneys fees, unless determined otherwise by the Arbitrator.
(g) The Parties agree that the existence, conduct and content of any arbitration pursuant to
this section shall be kept confidential and no Party shall disclose to any Person any information
about such arbitration, except in connection with such arbitration or as may be required by Law or
by any Regulatory Authority (or any exchange on which such Partys securities are listed) or for
financial reporting purposes in such Partys financial statements.
(h) Notwithstanding the foregoing, none of the provisions of this Section 11.10 shall
restrict the right of any Party to seek injunctive relief or other equitable remedies, to enjoin
any breach or threatened breach of this Agreement or otherwise specifically enforce any provision
of this Agreement.
(i) For purposes of resolving any disputes pursuant to Section 2.8(a)(ii) or
Section 2.8(d)(ii), the Arbitrators shall consist of current or former executives with
knowledge of and experience in the pharmaceutical industry.
11.11 Injunctive Relief. Except as set forth in Section 9.2, the Parties hereto agree
that irreparable damage would occur in the event that any of the provisions of this Agreement,
including Section 8.11, were not performed in accordance with their specific terms or were
otherwise breached and that such damages would not be fully compensable by an award of money
damages. It is accordingly agreed that, except as set forth in Section 9.2, the Parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions of this Agreement without posting a bond or other
undertaking, this being in addition to any other remedy to which they are entitled at law or in
equity. The parties agree that notwithstanding Section 11.10, any Action brought for an
injunction or injunction, or for specific performance shall be heard and exclusively in the
Delaware Chancery Court sitting in New Castle County and each Party waives any objection which it
may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to
the jurisdiction of such courts in any such suit, action or proceeding.
65
11.12 Headings. The headings of the Sections and subsections of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
11.13 Counterparts. This Agreement may be executed in two or more counterparts (including by
facsimile or by an electronic scan delivered by electronic mail), each of which shall be deemed to
be an original, but all of which, taken together, shall constitute one and the same agreement and
shall become effective when counterparts have been signed by each of the Parties hereto delivered
to the other Parties, it being understood that all Parties need not sign the same counterpart.
11.14 Schedules. Buyer agrees that any disclosure by Seller of any item or matter under any
Section or subsection in the Schedules delivered by Seller in connection with this Agreement, or in
attachments thereto, and documents referred to therein, (a) shall be deemed disclosure for all
purposes of Article IV and (b) shall not establish any threshold of materiality or concede
the materiality of any matter or item disclosed therein.
11.15 Construction. The language in all parts of this Agreement shall be construed, in all
cases, according to its fair meaning. The Parties acknowledge that each Party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.
[Remainder of Page Intentionally Left Blank; Signature Pages to Follow.]
66
IN WITNESS WHEREOF, the Parties hereto have caused this Purchase and Collaboration Agreement
to be executed by their respective duly authorized officers as of the date first above written.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
/s/ Frank C. Condella, Jr. |
|
|
|
Name: |
Frank C. Condella, Jr. |
|
|
|
Title: |
Interim Chief Executive Officer |
|
|
|
COVENTRY ACQUISITION, INC.
|
|
|
By: |
/s/ Paul M. Bisaro |
|
|
|
Name: |
Paul M. Bisaro |
|
|
|
Title: |
Authorized Signatory |
|
|
|
WATSON PHARMACEUTICALS, INC.
(solely for purpose of Section 11.2)
|
|
|
By: |
/s/ Paul M. Bisaro |
|
|
|
Name: |
Paul M. Bisaro |
|
|
|
Title: |
President and Chief Executive Officer |
|
ANNEX 1.1
DEFINITIONS
AAA has the meaning set forth in Section 11.10(a).
Acquisition Proposal has the meaning set forth in Section 6.5(f).
Action means any claim, action, suit, arbitration, inquiry, audit, proceeding or
investigation by or before any Regulatory Authority.
Affiliate of a Party or Person means any Person, whether de jure or de facto, that directly
or indirectly, controls, is controlled by, or is under common control with such Party or Person, as
applicable. Solely as used in this definition, control means (i) direct or indirect ownership of
more than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed
to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or
direct the affairs of such Party or Person, or (ii) the possession of the power to direct or cause
the direction of the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. For purposes of this Agreement, Buyer and Seller shall be
deemed not to be Affiliates. For purposes of this Agreement and the Confidentiality Agreement, any
Wholesaler Affiliate shall be deemed not to be an Affiliate of Buyer.
Agreement has the meaning set forth in the Preamble.
Allocation Schedule has the meaning set forth in Section 2.9.
ANDA has the meaning set forth in the definition of Generic Equivalent.
Arbitrator has the meaning set forth in Section 11.10(b).
Asset Transfer Documentation means the Asset Transfer Documentation in substantially the
form attached hereto as Exhibit A.
Assigned Contracts has the meaning set forth in Section 2.1(e).
Assumed Liabilities has the meaning set forth in Section 2.4.
Audit Rights Holder has the meaning set forth in Section 2.8(d)(vi)(B).
Audit Team has the meaning set forth in Section 2.8(d)(vi)(B).
Auditee has the meaning set forth in Section 2.8(d)(vi)(B).
Basic Survival Period has the meaning set forth in Section 10.1(a).
Books and Records means all books, records, files, documents, data, information and
correspondence primarily related to the conduct of the Business and not constituting Product Data.
Business has the meaning set forth in Section 4.4(b).
Business Day means any day other than a Saturday, a Sunday or a day on which banks in New
York, New York, United States of America are authorized or obligated by Law to be closed.
Buyer has the meaning set forth in the Preamble.
Buyer Development Activities means all Development activities with respect to the Products
that are designated as Buyers responsibility in this Agreement or the Development Plan.
Buyer Indemnitees has the meaning set forth in Section 10.2.
Bylaws has the meaning set forth in Section 4.5(a).
Certificate of Incorporation has the meaning set forth in Section 4.5(a).
Change of Board Recommendation has the meaning set forth in Section 6.5(d).
Charter Amendment means the Amendment to the Certificate of Incorporation of Seller, in
substantially the form attached hereto as Exhibit E.
Clinical Trial Results Milestone has the meaning set forth in Section 2.8(a).
Clinical Trial Results Milestone Payment has the meaning set forth in Section
2.8(a).
Closing has the meaning set forth in Section 3.1(b).
Closing Date has the meaning set forth in Section 3.1(b).
Code means the United States Internal Revenue Code of 1986, as amended.
Commercialize means to import, market, detail, promote, advertise, distribute and sell; and
Commercialization or Commercializing will have the corresponding meaning.
Commercially Reasonable Efforts means the carrying out of obligations or tasks by a Party in
a sustained and diligent manner using good faith efforts and resources commonly used in the
pharmaceutical industry for a similar product (or activities designed to identify such product) of
similar commercial potential at a similar stage in its lifecycle, taking into consideration its
safety and efficacy, its cost to develop, the competitiveness of alternative products, its
proprietary position, the likelihood of Regulatory Approval, its profitability and all other
relevant factors, which efforts shall be consistent with the exercise of prudent scientific and
business judgment applied in the pharmaceutical industry by a party of similar size to products or
research, development, regulatory approval and marketing projects of similar scientific and
commercial potential. Without limiting the generality of the foregoing, Commercially
Reasonable Efforts requires that: (i) a Party promptly assign responsibility for such obligations
to specific employee(s) or consultant(s) who are held accountable for progress and monitor such
progress on an ongoing basis, (ii) such Party set and consistently seek to achieve specific and
meaningful objectives for carrying out such obligations and (iii) such Party consistently makes and
implements decisions and allocates resources designed to advance progress with respect to such
objectives.
Common Stock has the meaning set forth in the Recitals.
Competing Activities has the meaning set forth in Section 8.11(a).
Competing Business has the meaning set forth in Section 8.11(a).
Complete Indemnity Obligation has the meaning set forth in Section 8.6(e).
Completion of PTB US Development means the earliest of (i) PTB US Approval, (ii) mutual
agreement of the Parties to cease the development of the PTB Indication or (iii) December 31, 2012.
Confidentiality Agreement means that certain Mutual NonDisclosure Agreement, dated as of
April 15, 2009 between Seller and Parent (including any amendments or supplements thereto).
Contracts means any and all binding commitments, contracts, purchase orders, leases,
licenses or other agreements.
Control or Controlled means, with respect to any Intellectual Property, the legal
authority or right (whether by ownership, license or otherwise) of a Party or its Affiliates to
grant a license or a sublicense of or under such Intellectual Property to another Person, without
breaching the terms of any agreement with a Third Party.
Copyrights means any copyrights and copyrightable works, including all rights of authorship,
use, publication, reproduction, distribution, performance, transformation, moral rights and rights
of ownership of copyrightable works, copyright registrations, or any application therefore, in the
U.S. or any foreign country, and all rights to register and obtain renewals and extensions of
registrations.
Deductible has the meaning set forth in Section 10.4(a).
Delivery System means a system for delivering a drug or other biological or chemical product
to a human or animal subject, including any oral formulation, patch, gel, progressive hydration
tablet or other drug delivery technology.
Develop or Development means activities directly and specifically relating to the
pre-clinical and clinical drug development of a Product or the updating or review of the Product
labeling, including test method development and stability testing, assay development, toxicology,
formulation, quality assurance/quality control development, statistical analysis, pharmacokinetic
studies, clinical trials (including, without limitation, research to design clinical trials)
and any other research and development activities with respect to a Product.
Development
Bank Account has the meaning set forth in Section 8.7(c).
Development Budget has the meaning set forth in Section 8.7(a)(ii).
Development Costs means expenses and other costs, including regulatory expenses, incurred by
or on behalf of a Party or its Affiliates in connection with the Development of the Products in
accordance with the applicable approved Development Plan (including the Development Budget), in
accordance with GAAP (or other internationally recognized accounting standard used by such Party),
including, without limitation, the costs of clinical trials, the preparation, collection and/or
validation of data from such clinical trials and the preparation of medical writing and publishing
on the data and results obtained from such clinical trials. Without limiting the generality of the
foregoing, Development Costs shall include, to the extent included in the scope set forth above:
(a) all out-of-pocket costs incurred by the Parties or their Affiliates, including payments
made to Third Parties with respect to any of the foregoing;
(b) the cost of clinical supply, including without limitation (i) costs of manufacturing or
procuring clinical supplies, including reasonable costs incurred in connection with the development
of the manufacturing process for such clinical supplies, but excluding any capital expenditures or
qualification or validation expenses relating to any manufacturing facility, (ii) expenses incurred
to purchase and/or package placebos and comparator drugs, and (iii) costs and expenses of disposal
of clinical samples; and
(c) the costs of Regulatory Filings.
Development Plan has the meaning set forth in Section 8.7(a)(ii).
Dispute and, collectively, Disputes have the meanings set forth in Section
11.10(a).
Efficacy Supplement means an NDA submission to FDA requesting approval for a change to an
approved product, including a request for approval of a new indication for an approved product.
EMEA means the European Medicines Agency or any successor European governmental agency
thereto.
Encumbrance means any security interest, pledge, hypothecation, mortgage, lien or
encumbrance, other than any licenses of Intellectual Property.
Enforcing Court has the meaning set forth in Section 11.10(e).
Environmental Claim means any and all administrative or judicial actions, suits, orders,
written claims, Encumbrances, notices, notices of violations, complaints, requests for information,
proceedings, or other written communication (written or oral), whether criminal or
civil, pursuant to any applicable Environmental, Safety and Health Law by any Person
(including any Regulatory Authority) alleging, asserting, or claiming any actual or potential (i)
violation of or Liability under any Environmental, Safety and Health Law, (ii) violation of any
environmental permit, or (iii) Liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property damage, personal injury, fines,
or penalties arising out of, based on or resulting from the presence, Release, or threatened
Release into the environment, of any Hazardous Substances at any location.
Environmental, Safety and Health Laws means any and all applicable Laws that relate to
protection of the environment, or the imposition of Liability for, or standards of conduct
concerning, the manufacture, processing, generation, distribution, use, treatment, storage,
disposal, Release, cleanup, transport or handling of Hazardous Substances, including the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control Act, as amended,
any other so-called Superfund or Superlien Laws, and the Occupational Safety and Health Act of
1970, as amended, to the extent it relates to the handling of and exposure to hazardous or toxic
chemicals, and the state analogues thereto.
Equitable Exceptions has the meaning set forth in Section 4.2(a).
Equity Financing has the meaning set forth in Section 6.5(f).
Exchange means the NASDAQ Global Market.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Excluded Assets has the meaning set forth in Section 2.3(a).
Excluded Liabilities has the meaning set forth in Section 2.5.
Execution Date means the date set forth in the Preamble.
Ex-U.S. Approval Milestone has the meaning set forth in Section 2.8(c)(i).
Ex-U.S. Filing Milestone has the meaning set forth in Section 2.8(c)(i).
Ex-U.S. Filing/Approval Milestone Payment has the meaning set forth in Section
2.8(c)(ii).
FDCA means the United States Federal Food, Drug, and Cosmetic Act, as amended.
FDA means the United States Food and Drug Administration, or any successor agency thereto.
Federal Health Care Program means any plan or program that provides health benefits, whether
directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the
United States government (including the Medicare and Medicaid programs).
Filing Party has the meaning set forth in Section 8.6(a).
Financial Statements means the financial statements of Seller included in the SEC Documents.
First Closing has the meaning set forth in Section 3.1(a).
First Closing Date has the meaning set forth in Section 3.1(a).
First Closing Date Assumed Liabilities has the meaning set forth in Section 2.4.
First Closing Date Purchased Assets has the meaning set forth in Section 2.1.
First Closing Straddle Period means any Tax period beginning before or on and ending after
the First Closing Date.
Form 8594 has the meaning set forth in Section 2.9.
Former Superior Proposal has the meaning set forth in Section 6.5(d).
Fundamental Representations has the meaning set forth in Section 10.1(a).
GAAP means United States generally accepted accounting principles.
Generic Entry means, with respect to any Product in any country, that a Generic Equivalent
of such Product has been Launched by a Third Party and Net Sales of such Product in such country
for any calendar quarter thereafter have fallen by fifty percent (50%) from the average quarterly
Net Sales of such Product in such country over the last four (4) complete calendar quarters ending
prior to such Launch and such decline in Net Sales is directly attributable to the marketing or
sale in such country of such Generic Equivalent in such country.
Generic Equivalent means, with respect to any Product in a given country, any true AB rated
generic product (i.e., a non-proprietary product) (1) with the same active ingredient(s) and
administration route as such Product, and (2) that obtained Regulatory Approval in such country
solely by means of an abbreviated NDA (ANDA) filing (or a similar procedure in a country other
than the United States) for establishing bioequivalence of such Product that does not require any
human clinical trials other than solely for purposes of establishing bioequivalence to the Product.
Gross Profit means Net Sales less raw materials costs, conversion costs (direct labor),
laboratory testing, quality control, freight, packaging, manufacturing variances, FDA annual user
fees, depreciation and manufacturing management/overheads.
Hazardous Substance means any material, substance, waste, compound, pollutant or contaminant
listed, defined, designated or classified as hazardous, toxic, flammable, explosive, reactive,
corrosive, infectious, carcinogenic, mutagenic or radioactive or otherwise regulated by any
Regulatory Authority under any Environmental, Safety and Health Law, including petroleum or
petroleum products (including crude oil) and any derivative or by-product thereof, natural gas,
synthetic gas and any mixture thereof, or any substance that is or contains polychlorinated
biphenyls (PCBs), radon gas, urea formaldehyde, asbestos-containing materials (ACMs) or lead, and,
for the avoidance of doubt, excluding radio frequencies.
Impending Generic Entity has the meaning set forth in Section 2.8(d)(ii).
IND means an Investigational New Drug Application for a pharmaceutical product filed with
the FDA and all amendments and supplements thereto or equivalent applications in other countries.
Indemnified Party has the meaning set forth in Section 10.6(a).
Indemnifying Party has the meaning set forth in Section 10.6(a).
Independent Accounting Firm means a nationally recognized firm of independent public
accountants, mutually selected by the Parties.
Indication means the indication(s) for which a Product is being Developed or for which it is
approved, including assisted reproductive technology indications and the PTB Indication.
Intellectual Property means intellectual property rights, including Trademarks, Copyrights,
Patents and Know-How, whether registered or unregistered, and all applications and registrations
therefor.
Investment Company Act has the meaning set forth in Section 4.20.
Investors Rights Agreement means the Investors Rights Agreement, in substantially the form
attached hereto as Exhibit B.
IRS means the Internal Revenue Service of the United States.
Joint Development Period means the period beginning on the First Closing Date and ending on
such date as (i) the Parties mutually decide to cease joint activities with respect to Development
of Products; provided, that Seller or Buyer may terminate the Joint Development Period by written
notice to the other Party at any time after the fifth (5th) anniversary of the First
Closing Date or (ii) terminated by Buyer pursuant to Section 11.1.
Know-How means research and development data, information, reports, studies, validation
methods and procedures, unpatented inventions, knowledge, trade secrets, technical or other data,
or other materials, methods, procedures, processes, flow diagrams, materials, developments or
technology, including all biological, chemical, pharmacological, toxicological,
clinical, manufacturing, analytical, safety, quality assurance, quality control and other
data, information, reports or studies, other than any of the foregoing which is the subject of a
Patent.
Knowledge means, with respect to Seller, the actual knowledge of any executive officer of
Seller.
Launch means the launch of a Product in a country or jurisdiction within the Territory in
such quantities as are customary for the general introduction of a pharmaceutical product in such
country or jurisdiction.
Launch Quantities has the meaning set forth in Section 2.8(b).
Law means each provision of any currently existing federal, provincial, state, local or
foreign law, statute, ordinance, order, code, rule or regulation, promulgated or issued by any
Regulatory Authority.
Liability means, collectively, any indebtedness, guaranty, endorsement, claim, liability,
loss, damage, deficiency, cost, expense, obligation, commitment or responsibility, of whatever kind
or nature, fixed or unfixed, known or unknown, choate or inchoate, liquidated or unliquidated,
secured or unsecured, direct or indirect, matured or unmatured, or absolute, contingent or
otherwise, including any products liability.
Liability Cap has the meaning set forth in Section 10.4(a).
License Agreement means the License Agreement between Buyer and Seller, in substantially the
form attached hereto as Exhibit D.
Losses means, with respect to any claim or matter, all losses, obligations and other
Liabilities or other damages, diminution in value, fines, fees, Taxes, penalties, interest
obligations, deficiencies and reasonable expenses.
MAA means an application for the authorization to market a pharmaceutical product in any
country or group of countries outside the United States, as defined in the applicable Laws and
filed with the Regulatory Authority of a given country or group of countries.
MAE Notice has the meaning set forth in Section 6.9(b).
Major Territories means the (i) United States, (ii) at least one of France, Germany or the
United Kingdom, (iii) Japan, and (iv) at least one of Brazil, Russia, India, or China.
Marketing Term means the period starting on the First Closing Date and ending, on a
country-by-country basis, upon expiration of the later to expire of the Royalty Product Term or the
PTB Royalty Term, as applicable, in such country.
Material Adverse Effect means any state of facts, change, development, event, occurrence,
effect or condition that, individually or in the aggregate, is materially adverse to the business,
assets, liabilities, results of operations or financial condition of Seller and its Subsidiaries,
taken as a whole, but shall exclude any facts, change, development, event,
occurrence, effect or condition to the extent resulting or arising from any one or more of the
following: (a) changes, effects or events that generally affect the industr(ies) in which Seller
operates (including the pharmaceutical industry and Progesterone products industry) or the
manufacture, Development or Commercialization of Progesterone products (including legal and
regulatory changes) to the extent that they do not disproportionately affect Seller relative to
other industry participants, (b) general economic or political changes, effects or events affecting
the financing or securities markets generally to the extent that they do not disproportionately
affect Seller relative to other industry participants, (c) changes, developments or events caused
by an act of God or by acts of terrorism or war (whether or not declared) occurring after the
Execution Date (including, a material worsening of current conditions), (d) changes, effects or
events arising from, or in connection with, the consummation (or anticipated consummation) of the
Transactions or any of them, or the announcement of the execution of, this Agreement or the Other
Agreements, the pendency or public disclosure of this Agreement or the Transactions, (e) any change
in accounting practices or policies of Seller as required by GAAP, (f) any changes, effects or
events that result from any action taken pursuant to or in accordance with this Agreement, the
Other Agreements or at the written request of Buyer, (g) any failure of Seller to meet estimates or
expectations of Sellers revenues or earnings (it being understood that the facts or occurrences
giving rise or contributing to such failure may be deemed to constitute, or be taken into account
in determining, whether there has been or will be a Material Adverse Effect), or (h) any Action
made or brought (whether before or after the Execution Date) by any of the current or former
stockholders of Seller, arising out of this Agreement or the Transactions.
Material Contract shall mean each Contract to which Seller or any of its Subsidiaries is a
party, in each case, with a Third Party (excluding Contracts that are the subject of Section
4.6(f)),
(i) which has been included in the list of exhibits of any SEC Document filed by Seller
with the SEC, since January 1, 2009;
(ii) which relates primarily to the Products and involves or is reasonably expected to
involve payment by or to Seller or any of its Subsidiaries after the First Closing Date of
more than $500,000 per year, including any such Contract relating to the clinical trial,
supply, manufacture, marketing or co-promotion of, or collaboration with respect to, any
Product or Product candidate;
(iii) which relates to or evidences third-party indebtedness for borrowed money of
Seller or any of its Subsidiaries in excess of $1.0 million;
(iv) which relates to the Products and contains any covenant limiting, in any material
respect, the ability of Seller or any of its Subsidiaries to engage in any line of business
or compete with any Third Party;
(v) which is a material Contract of the type described in clauses (i) (iii) above and
contains any provisions contemplating or relating to a change in control or similar event
with respect to Seller or any one or more of its Subsidiaries and having the effect of
providing that the consummation of the transactions contemplated by this Agreement or the
execution, delivery or effectiveness of this Agreement will materially
conflict with, result in a material violation or material breach of, or constitute a
default (with or without notice or lapse of time or both) under, such Contract or give rise
under such Contract to any right of, or result in, a termination, right of first refusal,
material amendment, revocation, cancellation or material acceleration, or a loss of a
material benefit or the creation of any material Encumbrance upon any of the properties or
assets of Seller or any of its Subsidiaries, or to any increased, accelerated or additional
material rights or material entitlements of any Person;
(vi) which relates to the Products and which involves the grant of a most favored
nation pricing or terms that (i) apply to Seller or any of its Subsidiaries or (ii)
following the consummation of the transactions contemplated by this Agreement would apply to
Buyer or any of its Subsidiaries;
(vii) which relates primarily to the Products and involves the settlement or other
resolution of any suit, claim, action, proceeding or investigation that has any continuing
obligations, Liabilities or restrictions on Seller or any of its Subsidiaries and which was
entered into within two (2) years prior to the Execution Date; or
(viii) which relates to the disposition or acquisition by Seller or any of its
Subsidiaries, with obligations to Third Parties remaining to be performed or liabilities
continuing after the Execution Date, of any assets related to the Purchased Assets or the
Business, other than Contracts for the sale of Product inventory in the ordinary course.
Merck-Serono Agreement means the Amended and Restated License and Supply Agreement, dated
June 4, 2002, by and between Columbia Laboratories (Bermuda) Limited and Ares Trading S.A., as
amended by Amendment No. 1 thereto dated December 21, 2006, as amended, from time to time, subject
to Section 2.3(d).
Natural Progesterone has the meaning set forth in the definition of Progesterone.
NDA means a New Drug Application for any product, as appropriate, requesting permission to
place a drug on the market in accordance with 21 C.F.R. Part 314, and all amendments or supplements
filed pursuant to the requirements of the FDA.
NDC means the National Drug Code, which is the eleven digit code registered by a company
with the FDA with respect to a pharmaceutical product.
Net Sales means with respect to sales of a Product by Buyer, and its Affiliates and/or
licensees, sublicensees, distributors or other agents, the amount of gross sales (in dollars or
other currencies) for such Product, reduced by the sum of the following items relating to such
sales that are actually given to or taken by, as applicable, Buyer and its Affiliates, licensees,
sublicensees, distributors or other agents, to the extent such deductions are accrued and
recognized under and in accordance with GAAP (or other internationally recognized accounting
standard in use by Buyer):
(a) trade, quantity and cash discounts;
(b) adjustments for price adjustments, billing errors, rejected goods, returns, product
recalls and damaged goods (excluding goods damaged while under the control of Buyer or its
Affiliates or their respective licensees, sub-licensees, or distributors);
(c) credits, charge-backs, reimbursements, and similar payments provided to wholesalers and
other distributors, buying groups, health care insurance carriers, pharmacy benefit management
companies, health maintenance organizations, other institutions or health care organizations or
other customers;
(d) rebates or other price reductions provided to any Regulatory Authority with respect to any
state or federal Medicare, Medicaid or similar programs;
(e) any invoiced charge for freight, insurance, handling, or other transportation costs
directly related to delivery of the Products;
(f) distributor fees per Contract based solely as a percentage of gross sales and
(g) Taxes that are in the nature of tariffs, duties, excise, sales, use or value-added Taxes;
provided, however, that the foregoing deductions shall only be deducted once and only to the extent
not otherwise deducted from gross sales.
Next Generation Product means a Product to be administered utilizing the Seller Next
Generation Delivery System or another Delivery System approved by the Joint Development Committee.
Nonassignable Asset has the meaning set forth in Section 2.6.
Non-Compete Period has the meaning set forth in Section 8.11(a).
Non-United States Purchased Assets means the following, to the extent included in the
Purchased Assets: (i) Sellers rights to the Development or Commercialization outside of the
geographic territory of the United States of (A) the Products in existence at the time of the First
Closing, (B) the Products in Development at the time of the First Closing, and (C) in-process
research and development in existence at the time of the First Closing; (ii) all income, royalties,
damages, and payments made, due or payable with respect to the rights described in the preceding
clause (i); and (iii) all causes of action (in law or equity) and rights to sue, counterclaim,
and/or recover related to the rights set forth in clauses (i) and (ii).
Original NDA means a complete new NDA that has never before been submitted to the FDA.
Other Agreements means, collectively, the License Agreement, the Supply Agreement, the
Investors Rights Agreement and Asset Transfer Documentation.
Outside Date has the meaning set forth in Section 9.1(a)(ii).
Parent has the meaning set forth in the Preamble.
Party or Parties has the meaning set forth in the Preamble.
Patents means United States and non-United States patents, patent applications, and other
similar enforceable rights relating to the protection of inventions worldwide (and all rights
related thereto, including all reissues, reexaminations, divisions, continuations,
continuations-in-part, extensions or renewals of any of the foregoing).
Permitted Encumbrances means (a) statutory liens for current Taxes not yet due and payable
or Taxes being contested in good faith by appropriate proceedings and for which adequate reserves
have been established on the balance sheet contained in the Financial Statements, (b) mechanics,
carriers, workers, repairers and other similar liens arising or incurred in the ordinary course
of business consistent with past practice relating to obligations as to which there is no default
on the part of Seller or the validity or amount of which is being contested in good faith by
appropriate proceedings, or pledges, deposits or other liens securing the performance of bids,
trade contracts, leases or statutory obligations (including workers compensation, unemployment
insurance or other social security legislation), and (c) all other Encumbrances that would not,
individually or in the aggregate, have a Material Adverse Effect.
Person means any individual, corporation, partnership, joint venture, limited liability
company, trust or unincorporated organization or Regulatory Authority.
Post-Closing Payments has the meaning set forth in Section 2.7.
Post-Closing Tax Period means any Tax period beginning after the First Closing Date and that
portion of a First Closing Straddle Period beginning after the First Closing Date.
Pre-Closing Covenants has the meaning set forth in Section 10.1(a).
Pre-Closing Tax Period means any Tax period ending on or before the First Closing Date and
that portion of any First Closing Straddle Period ending on the First Closing Date.
Preferred Stock has the meaning set forth in Section 4.5(a).
PREGNANT Study means the Phase III clinical trial being conducted by Seller of Prochieve to
reduce the risk of preterm birth in women with a short cervix (the PTB Indication) as measured by
transvaginal ultrasound in mid-pregnancy.
Prochieve means Sellers currently marketed eight percent (8%) vaginal gel Product that is
the subject of the PREGNANT Study.
Prochieve PTB Development Plan has the meaning set forth in Section 8.7(a)(ii).
Product Data has the meaning set forth in Section 2.1(g).
Product Regulatory Approvals means Regulatory Approvals for Products sold by Seller or its
Subsidiaries.
Products means all pharmaceutical products containing Progesterone as an active
pharmaceutical ingredient, including all forms and formulations thereof and regardless of Delivery
System utilized to administer such product or Indication(s) for which such products are approved.
Progesterone means (i) pregn-4-ene-3,20-dione and 17-alpha-hydroxypregn-4-ene-3,20-dione
(Natural Progesterone), and (ii) 17-alpha-hydroxyprogesterone caproate, medroxyprogesterone
acetate, norethindrone, norethindrone acetate, norethindrone enanthate, desogestrel,
levonorgestrel, lynestrenol, ethynodiol diacetate, norgestrel, norgestimate, norethynodrel,
gestodene, drospirenone, trimegestone, levodesogestrel, gestodyne, nesterone, etonogestrel, and
derivatives from 19-nor-testoterone (Synthetic Progesterone).
Promotional Materials means the advertising, promotional and media materials, sales training
materials, trade show materials and videos used by Seller primarily for the Commercialization of
Products.
Property Taxes means real and personal ad valorem and specific property Taxes (other than
Transfer Taxes) imposed on a periodic basis and based on or with respect to (i) the assessed
valuations of assets or (ii) each article of a class of assets without regard to its value. For
the avoidance of doubt, Property Taxes shall not include any Taxes calculated based on income,
gross receipts, profits or sales.
Proxy Statement has the meaning set forth in Section 6.4(a).
PTB Indication has the meaning set forth in the definition of PREGNANT Study.
PTB NDA has the meaning set forth in Section 2.1(i).
PTB NDA Acceptance Milestone has the meaning set forth in Section 2.8(b)(i).
PTB NDA Acceptance Milestone Payment has the meaning set forth in Section 2.8(b)(i).
PTB Product has the meaning set forth in Section 2.8(b)(i).
PTB Product Launch Milestone has the meaning set forth in Section 2.8(b)(i).
PTB Product Launch Milestone Payment has the meaning set forth in Section 2.8(b)(i).
PTB Product Team has the meaning set forth in Section 8.7(b)(i).
PTB Royalty Product means any pharmaceutical product that contains Progesterone as an active
pharmaceutical ingredient covered by a Regulatory Approval indicated for pre-term birth, except any
and all Generic Equivalents of Products that are not (and never were) Commercialized pursuant to
this Agreement. For the avoidance of doubt, the foregoing exception shall not limit Section
2.8(d)(ii).
PTB Royalty Product Term has the meaning set forth in Section 2.8(d)(i)(E).
PTB Supplemental NDA has the meaning set forth in Section 2.1(i).
PTB US Approval means the approval by FDA of the PTB NDA or PTB Supplemental NDA, as
applicable, expanding the Prochieve label to include the PTB Indication, which approval has been
accepted by the Joint Development Committee.
PTO means the United States Patent and Trademark Office.
Purchase Price has the meaning set forth in Section 2.7.
Purchased Assets has the meaning set forth in Section 2.1.
Rebate Charges means amounts claimed by or under, or in respect of, Medicaid, state rebate
programs, pharmaceutical benefit management organizations, managed care organizations, and other
Persons as rebates under Contracts between such parties and Seller or Buyer, as the context
requires.
Regulatory Approval means, with respect to a Product in any country or jurisdiction, any
approval, registration, license, permit, certificate, exemption, consent, confirmation, order,
waiver, clearance or authorization from a Regulatory Authority in a country or other jurisdiction
that is necessary to market and sell such Product in such country or jurisdiction.
Regulatory Authority means any federal, state or local regulatory authority, regulatory
agency or other governmental body, including the FDA and EMEA.
Regulatory Exclusivity means any exclusive marketing rights or data exclusivity rights
conferred by any Regulatory Authority with respect to a Product other than Patents, including
rights conferred in the United States under the Hatch-Waxman Act or the FDA Modernization Act of
1997 or rights similar thereto outside the United States.
Regulatory Filings means, with respect to any Product, any submission to a Regulatory
Authority of any appropriate regulatory application and shall include, without limitation, any
submission to a regulatory advisory board, marketing authorization application, and any supplement
or amendment thereto. For the avoidance of doubt, Regulatory Filings shall include any IND, NDA,
MAA or the corresponding application in any other country or group of countries.
Release means any releasing, spilling, leaking, pumping, pouring, placing, emitting,
emptying, discharging, injecting, escaping, leaching, disposing, or dumping into the environment,
whether intentional or unintentional, negligent or non-negligent, sudden or non-sudden, accidental
or non-accidental.
Representatives means, with respect to any Person, the directors, officers, managers,
employees, independent contractors, agents, attorneys, advisors or consultants of such Person.
Required Seller Stockholders Vote means the (i) adoption of a resolution by the holders of
Sellers outstanding capital stock having a majority of the voting power associated with all shares
of Sellers outstanding capital stock approving the sale and transfer of the Purchased Assets and
the Assumed Liabilities pursuant to this Agreement and (ii) approval of the Charter Amendment by the
(x) holders of a majority of the outstanding shares of the Common Stock and (y) holders of Sellers
capital stock having a majority of the voting power associated with all shares of Sellers
outstanding capital stock.
Review Period has the meaning set forth in Section 2.8(b)(ii)
Royalty Product means any pharmaceutical product that contains Natural Progesterone or
17-alpha-hydroxyprogesterone caproate that is delivered transvaginally, except any and all Generic
Equivalents of Products that are not (and never were) Commercialized pursuant to this Agreement.
For the avoidance of doubt, the foregoing exception shall not limit Section 2.8(d)(ii).
Royalty Product Term has the meaning set forth in Section 2.8(d)(i)(D).
SEC means the United States Securities and Exchange Commission.
SEC Documents has the meaning set forth in Section 4.15.
Second Closing has the meaning set forth in Section 3.1(b).
Second Closing Date has the meaning set forth in Section 3.1(b).
Second Closing Date Purchased Assets has the meaning set forth in Section 2.1.
Second Closing Date Assumed Liabilities has the meaning set forth in Section 2.4.
Second Post-Closing Tax Period means any Tax period beginning after the Second Closing Date
and that portion of a Second Closing Straddle Period beginning after the Second Closing Date.
Second Pre-Closing Tax Period means any Tax period ending on or before the Second Closing
Date, and that portion of any Second Closing Straddle Period ending on the Second Closing Date.
Second Closing Straddle Period means any Tax period beginning before or on and ending after
the Second Closing Date.
Securities Act means the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
Seller has the meaning set forth in the Preamble.
Seller Account means a bank account in the United States to be designated by Seller in a
written notice to Buyer at least three (3) Business Days before the First Closing or, with respect
to any payments due thereafter, at least three (3) Business Days prior to the date that such
payment becomes due and payable.
Seller Board Recommendation has the meaning set forth in Section 4.2(b).
Seller Disclosure Letter has the meaning set forth in Article IV.
Seller Development Costs Cap has the meaning set forth in Section 8.7(b)(i)
Seller Development Activities means all Development activities with respect to the Products
that are designated as Sellers responsibility in this Agreement or the Development Plan.
Seller Expense Period has the meaning set forth in Section 8.7(c).
Seller Indemnitees has the meaning set forth in Section 10.3.
Seller Next Generation Delivery System means the progressive hydration tablet technology
described in Sellers US Patent No. 6,248,358.
Seller Stockholders Meeting has the meaning set forth in Section 6.4(c).
Sellers SEC Filings means all forms, reports and other documents filed with the SEC by
Seller under the Securities Act or Exchange Act, as the case may be since and including January 1,
2007.
Senior
Officers means, for Seller, the Chief Executive Officer,
and for Buyer, the Chief Executive Officer of Parent.
Shares has the meaning set forth in the Recitals.
Site means any of the real properties owned, leased or operated by Seller and used in
connection with its business, including all soil, subsoil, surface waters and groundwater thereat.
Subsidiary means, when used with reference to an entity, any other entity of which (a)
securities or other ownership interests having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions, or (b) a majority of the
outstanding securities of which, are owned directly or indirectly by such entity.
Superior Proposal has the meaning set forth in Section 6.5(f).
Superior Proposal Notice has the meaning set forth in Section 6.5(d).
Supply Agreement means the Supply Agreement between Buyer and Seller, in substantially the
form attached hereto as Exhibit C.
Survival Period has the meaning set forth in Section 10.1(a).
Synthetic Progesterone has the meaning set forth in the definition of Progesterone.
Tax or Taxes means any and all taxes, assessments, levies, tariffs, duties or other
charges or impositions in the nature of a tax (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including income, estimated income, gross receipts, profits, business, license,
occupation, franchise, capital stock, real or personal property, sales, use, transfer, value added,
employment or unemployment, social security, disability, alternative or add-on minimum, customs,
excise, stamp, environmental, commercial rent or withholding taxes, whether contested or not.
Tax Matter has the meaning set forth in Section 8.6(e).
Tax Return means any report, return (including any information return), claim for refund,
election, estimated Tax filing or payment, request for extension, document, declaration or other
information or filing required to be supplied to any taxing authority with respect to Taxes,
including attachments thereto and amendments thereof.
Termination Fee has the meaning set forth in Section 9.2(b).
Territory means the world.
Third Party means any Person other than a Party or its Affiliates.
Third-Party Claim has the meaning set forth in Section 10.6(a).
Trademarks means trademarks, service marks, certification marks, trade dress, Internet
domain names, trade names, identifying symbols, designs, product names, company names, slogans,
logos or insignia, whether registered or unregistered, and all common law rights, applications and
registrations therefor, and all goodwill associated therewith.
Transactions means the transactions contemplated by this Agreement and the Other Agreements.
Transfer Agent means American Stock Transfer and Trust Company, LLC.
Transfer Taxes means any and all transfer, documentary, sales, use, stamp, registration,
value added, recording and other similar Taxes and fees (including any penalties and interest)
incurred as a result of the transfer of the Purchased Assets, Shares and Assumed Liabilities
pursuant to the consummation of the transactions contemplated by this Agreement (including
recording fees and any real property or leasehold interest transfer tax and any similar Tax).
United States or U.S. means the United States of America and its territories and
possessions.
Upfront Payment has the meaning set forth in Section 2.7.
Valid Claim means, with respect to any country, a claim of an issued Patent or Patent
application (that has been pending for no more than seven (7) years after the date from which such
Patent application claims priority) that has not expired or been revoked, held invalid or
unenforceable by a patent office, court or other governmental agency of competent jurisdiction in a
final and non-appealable judgment (or judgment from which no appeal was taken within the allowable
time period).
Wholesaler Affiliate means an Affiliate of Buyer, substantially all of the business of which
consists of the wholesale distribution of pharmaceutical products.
Wholesaler Charges means amounts claimed by wholesalers of the Products as chargebacks or
returns to the wholesaler under contracts between group purchasing organizations (collectively,
GPOs) and Seller and amounts claimed by GPOs as administrative or marketing fees under contracts
between GPOs and Seller.
Exhibit
A
Asset Transfer Documentation
Exhibit B
INVESTORS RIGHTS AGREEMENT
Dated [], 2010
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
SECTION 1 DEFINITIONS |
|
|
1 |
|
1.1
|
|
Certain Definitions
|
|
|
1 |
|
|
|
|
|
|
|
|
SECTION 2 REGISTRATION RIGHTS |
|
|
4 |
|
2.1
|
|
Shelf-Registration
|
|
|
4 |
|
2.2
|
|
Expenses
|
|
|
5 |
|
2.3
|
|
Registration Procedures
|
|
|
5 |
|
2.4
|
|
Indemnification
|
|
|
7 |
|
2.5
|
|
Registration Covenants
|
|
|
9 |
|
2.6
|
|
Rule 144 Reporting
|
|
|
11 |
|
|
|
|
|
|
|
|
SECTION 3 BOARD OF DIRECTORS |
|
|
11 |
|
3.1
|
|
Investor Designee
|
|
|
11 |
|
3.2
|
|
Designation
|
|
|
12 |
|
3.3
|
|
Change in Designee
|
|
|
12 |
|
3.4
|
|
Information
|
|
|
12 |
|
3.5
|
|
Termination of Rights
|
|
|
12 |
|
3.6
|
|
No Compensation
|
|
|
12 |
|
3.7
|
|
Confidentiality Agreement
|
|
|
12 |
|
|
|
|
|
|
|
|
SECTION 4 LOCK-UP AGREEMENT |
|
|
13 |
|
4.1
|
|
Lock-Up Agreement
|
|
|
13 |
|
4.2
|
|
Stop-Transfer Instructions
|
|
|
14 |
|
4.3
|
|
Termination of Lock-Up Agreement
|
|
|
14 |
|
|
|
|
|
|
|
|
SECTION 5 MISCELLANEOUS |
|
|
14 |
|
5.1
|
|
Amendment
|
|
|
14 |
|
5.2
|
|
Notices
|
|
|
14 |
|
5.3
|
|
Information
|
|
|
15 |
|
5.4
|
|
Successors and Assigns
|
|
|
15 |
|
5.5
|
|
Entire Agreement
|
|
|
15 |
|
5.6
|
|
Delays or Omissions
|
|
|
15 |
|
5.7
|
|
Severability
|
|
|
15 |
|
5.8
|
|
Titles and Subtitles
|
|
|
16 |
|
5.9
|
|
Counterparts
|
|
|
16 |
|
5.10
|
|
Further Assurances
|
|
|
16 |
|
5.11
|
|
Injunctive Relief
|
|
|
16 |
|
5.12
|
|
Governing Law
|
|
|
16 |
|
5.13
|
|
Arbitration
|
|
|
16 |
|
5.14
|
|
Recapitalization, Exchanges, Etc.
|
|
|
17 |
|
5.15
|
|
Conflict
|
|
|
18 |
|
i
INVESTORS RIGHTS AGREEMENT
This Investors Rights Agreement (this Agreement) is dated as of [], 2010, and is between
Columbia Laboratories, Inc., a Delaware corporation (the Company),
and Coventry Acquisition, Inc., a Delaware corporation (the
Investor). All capitalized terms used and not defined herein shall have such meanings as set
forth in the Purchase and Collaboration Agreement, dated as of March 3, 2010, by and between the
Company and the Investor (the Purchase and Collaboration Agreement).
RECITALS
WHEREAS, the Investor and the Company are parties to the Purchase and Collaboration Agreement
pursuant to which Investor, among other things, acquired from the Company 11,200,000 shares of
Common Stock (the Shares); and
WHEREAS, the Company and the Investor are entering into this Agreement pursuant to the
Purchase and Collaboration Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the sufficiency of which is acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) AAA shall have the meaning set forth in Section 5.13(a).
(b) Affiliate shall mean, 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).
(c) Agreement shall have the meaning set forth in the Preamble.
(d) Arbitrator shall have the meaning set forth in Section 5.13(b).
(e) Board shall mean the Companys board of directors.
(f) Business Day shall mean a day Monday through Friday on which banks are generally open
for business in New York City.
(g) Bylaws shall mean the Companys Amended and Restated Bylaws, as amended from time to
time.
(h) Certificate shall mean the Companys Restated Certificate of Incorporation as filed with
the Secretary of State of the State of Delaware and as amended from time to time.
(i) Commission shall mean the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.
(j) Common Stock shall mean the Companys common stock, $0.01 par value per share.
(k) Company shall have the meaning set forth in the Preamble.
(l) DGCL shall mean the General Corporation Law of the State of Delaware.
(m) Dispute shall have the meaning set forth in Section 5.13(a).
(n) Enforcing Court shall have the meaning set forth in Section 5.13(e).
(o) Exchange Act shall mean the Securities Exchange Act of 1934, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(p) Filing Date shall have the meaning set forth in Section 2.1(a).
(q) Financial Statements shall mean the financial statements of the Company filed with the
Commission in connection with the registration contemplated under this Agreement.
(r) Indemnified Party shall have the meaning set forth in Section 2.4(c).
(s) Indemnifying Party shall have the meaning set forth in Section 2.4(c).
(t) Initial Lock-Up Period shall have the meaning set forth in Section 4.1(a).
(u) Investor shall have the meaning set forth in the Preamble.
(v) Investor Designee shall have the meaning set forth in Section 3.1.
(w) Nasdaq Stock Market shall have the meaning set forth in Section 2.3(i).
(x) Person shall mean 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).
(y) Purchase and Collaboration Agreement shall have the meaning set forth in the Preamble.
2
(z) 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
applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.
(aa) Registrable Securities shall mean (i) any Shares and (ii) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in replacement of the Shares
referenced in (i) above, in each case until Transferred by the Investor to the extent permitted by
this Agreement; provided, however, that Registrable Securities shall not include
any securities described in clause (i) or (ii) above which have previously been registered or which
have been sold to the public either pursuant to a Registration Statement or Rule 144, or which have
been sold in a private transaction.
(bb) Registration Expenses shall mean all expenses incurred by the Company in complying with
Section 2.1 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 the Investor).
(cc) Registration Statement shall mean any registration statement of the Company filed with
the Commission on the appropriate form pursuant to the Securities Act which covers any Registrable
Securities pursuant to the provisions of this Agreement and all amendments and supplements to any
such Registration Statement, including post-effective amendments, all exhibits thereto and all
materials incorporated by reference therein.
(dd) Registration Period shall have the meaning set forth in Section 2.1(b).
(ee) Rule 144 shall mean Rule 144 as promulgated by the Commission under the Securities Act,
as such Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the Commission.
(ff) Securities Act shall mean the Securities Act of 1933, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(gg) Selling Expenses shall mean all underwriting discounts and the selling commissions and
stock transfer taxes applicable to the sale of Registrable Securities and the fees and
disbursements of counsel for the Investor.
(hh) Shares shall have the meaning set forth in the Recitals.
(ii) Shelf Registration Statement shall have the meaning set forth in Section 2.1(a).
(jj) Subsidiary shall mean, when used with reference to an entity, any other entity of which
(i) securities or other ownership interests having ordinary voting power to elect a
3
majority of the board of directors or other Persons performing similar functions, or (ii) a
majority of the outstanding securities of which, are owned directly or indirectly by such entity.
(kk) Transaction Delay Notice shall have the meaning set forth in Section 2.5(b).
(ll) Transaction Delay Period shall have the meaning set forth in Section 2.5(b).
(mm) Transfer and Transferred shall mean to directly or indirectly sell, transfer,
exchange, assign, pledge, hypothecate, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of.
SECTION 2
REGISTRATION RIGHTS
2.1 Shelf-Registration.
(a) The Company shall use commercially reasonable efforts to file not later than ninety (90)
days before the end of the Initial Lock-Up Period (the Filing Date) a Registration Statement
pursuant to Rule 415 under the Securities Act with the Commission covering the resale of the
Registrable Securities on a delayed or continuous basis (the Shelf Registration Statement), 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 Registrable Securities as
promptly as possible after the filing thereof. The Shelf 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.
(b) Except for such times as the Company is permitted hereunder to suspend the use of the
prospectus forming part of the Shelf Registration Statement pursuant to Section 2.5, 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, and to keep such Shelf Registration Statement free of any untrue statement of a material
fact or omission to state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, in light of the circumstances in which they were made,
until the earliest of the following: (i) the date of the fourth (4th) anniversary of
the date on which the Shelf Registration Statement is initially declared effective by the
Commission, (ii) the date all of the Registrable Securities have been Transferred by the Investor
and (iii) the date all of the Registrable Securities then held by the Investor may be sold by the
Investor under Rule 144 during any ninety (90) day period without complying with the provisions of
clause (c) or (f) of Rule 144. The period of time during which the Company is required hereunder
to keep the Shelf Registration Statement effective is referred to herein as the
Registration Period. The rights of the Investor under this Section 2 shall terminate on the
last day of the Registration Period.
4
2.2 Expenses. All Registration Expenses incurred in connection with any registration, qualification, exemption
or compliance pursuant to Section 2, shall be borne by the Company. All Selling Expenses relating
to the sale of Registrable Securities registered hereunder by or on behalf of the Investor shall be
borne by the Investor.
2.3 Registration Procedures. In the case of the registration, qualification, exemption or compliance effected by the Company
pursuant to this Agreement, the Company shall:
(a) notify the Investor within three (3) Business Days:
(i) when the Shelf Registration Statement or any amendment thereto has been filed with the
Commission and when the Shelf Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or supplements to the Shelf Registration
Statement or the prospectus included therein, upon which the Company will use its commercially
reasonable efforts to file the same with the Commission;
(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the
Shelf 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, upon which the Company will use its
commercially reasonable efforts promptly to obtain the withdrawal of such suspension or address any
such proceedings, as applicable; and
(v) of the occurrence of any event that requires the making of any changes in the Shelf
Registration Statement or the prospectus forming a part thereof so that, as of such date, the Shelf
Registration Statement and the prospectus forming a part thereof, 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 (provided, that, in no event
shall such notice contain any material, non-public information);
(b) use commercially reasonable efforts to obtain the withdrawal of any order suspending the
effectiveness of the Shelf Registration Statement as soon as reasonably practicable;
(c) promptly furnish the Investor, without charge, at least one copy of the Shelf 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 Commission;
(d) during the Registration Period, promptly deliver to the Investor, without charge, as many
copies of the prospectus included in the Shelf Registration Statement and any
5
amendment or
supplement thereto as the Investor may reasonably request; and, subject to the limitations
contained herein, the Company consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by the Investor in connection with the offering
and sale of the Registrable Securities covered by the prospectus forming a part thereof or any
amendment or supplement thereto;
(e) during the Registration Period, if the Investor so requests, deliver to the Investor,
without charge, (i) one copy of the following documents: (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) 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 Shelf 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);
(f) prior to any public offering of Registrable Securities pursuant to the Shelf 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 the Investor reasonably requests 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 the Shelf Registration Statement;
(g) upon the occurrence of any event contemplated by Section 2.3(a)(v) above, except for such
times as the Company is permitted hereunder to suspend the use of the prospectus forming part of
the Shelf Registration Statement, pursuant to Section 2.5, the Company shall use commercially
reasonable efforts to as soon as reasonably practicable prepare a post effective amendment to the
Shelf Registration Statement or a supplement to the prospectus forming a part thereof, or file any
other required document so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, such 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;
(h) otherwise use commercially reasonable efforts to comply in all material respects with all
applicable rules and regulations of the Commission which could affect the sale of the Registrable
Securities;
(i) use commercially reasonable efforts to cause the Registrable Securities included in the
Shelf Registration Statement to be listed on the NASDAQ Global Market (NASDAQ Stock Market) or,
if the Common Stock is not then listed on the NASDAQ Stock Market, on the principal national
securities exchange on which the Common Stock is then listed,
6
or if the Common Stock is not then
listed on a national securities exchange, authorized for quotation on any automated quotation
system on which the Common Stock is then quoted;
(j) during the Registration Period, furnish to the Investor, without charge, copies of any
correspondence from the Commission or the staff of the Commission to the Company or its
representatives relating to the Shelf Registration Statement or any document incorporated by
reference therein within five (5) Business Days after the Companys receipt thereof;
(k) use commercially reasonable efforts to take all other steps necessary to effect the
registration of the Registrable Securities contemplated hereby and to enable the Investor to sell
Registrable Securities under Rule 144; and
(l) if the Investor so requests in writing, permit a single counsel, designated by the
Investor to review and provide reasonable comments to the Shelf Registration Statement and all
amendments and supplements thereto, within three (3) Business Days prior to the filing thereof with
the Commission;
provided, that, in the case of clause (l) above, the Company shall not be required (A) to
delay the filing of the Shelf Registration Statement or any amendment or supplement thereto to
incorporate any comments to the Shelf Registration Statement or any amendment or supplement thereto
by or on behalf of the Investor if such comments would require or result in a delay in the filing
of the Shelf Registration Statement, amendment or supplement, as the case may be, and the Company
reasonably believes (after consulting with legal counsel) that such comments are not necessary to
incorporate into the Shelf Registration Statement or any amendment or supplement thereto in order
to comply with the Securities Act or (B) to provide, and shall not provide, the Investor or its
representatives with material, non-public information unless the Investor agrees to receive such
information and enters into a written confidentiality agreement with the Company in a form
reasonably acceptable to the Company.
2.4 Indemnification.
(a) To the extent permitted by law, the Company shall (subject to Section 2.4(c) below)
indemnify the Investor, each of its directors and officers, and each person who controls the
Investor within the meaning of Section 15 of the Securities Act, with respect to 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 2.4(c) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact contained in
the Shelf 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 applicable to the Company and relating to any
action or inaction required of the Company in connection with any such registration, qualification
or compliance, and will reimburse the Investor and each person controlling the Investor, for
reasonable legal and other out-of-pocket expenses reasonably incurred in
7
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 is made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Investor specifically for use in preparation of the Shelf
Registration Statement, prospectus, amendment or supplement.
(b) The Investor will 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
2.4(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in the Shelf 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 Investor
specifically for use in preparation of the Shelf Registration Statement, prospectus, amendment or
supplement. Notwithstanding the foregoing, the Investors aggregate liability pursuant to this
Section 2.4(b) and Section 2.4(d) shall be limited to the net amount received by the Investor from
the sale of the Registrable Securities pursuant to the Shelf Registration Statement.
(c) Each party entitled to indemnification under this Section 2.4 (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, action or litigation as to
which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume
the defense of any such claim, action or litigation resulting therefrom; provided, that
counsel for the Indemnifying Party, who shall conduct the defense of such claim, action 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 Partys
expense (and after the assumption of the defense of any such claim, action or litigation by the
Indemnifying Party, the Indemnified Party shall not be entitled to reimbursement or indemnification
for its legal or other out-of-pocket expenses incurred in action with investigating or defending
any such claim, action or litigation except for out-of-
pocket costs (excluding legal or other professional fees or expenses) solely to the extent
incurred by the Indemnified Party for it to comply with any order or legally binding determination
of a court or other governmental authority or to provide assistance in the defense or investigation
of such claim at the request or direction of the Indemnifying Party), 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, action or
litigation. The Indemnified Party shall not settle, compromise, or consent to the entry of any
judgment with respect to any such claim, action or litigation without the prior written consent of
the
8
Indemnifying Party (which consent will not be unreasonably withheld) and the Indemnifying
Party shall not be liable for any compromise, settlement or consent to the entry of any judgment
with respect to any claim, action or litigation effected without its prior written consent. No
Indemnifying Party, in its defense of any such claim, action or litigation, shall, except with the
consent of each Indemnified Party, settle, compromise or consent to entry of any judgment 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, action or litigation.
(d) If the indemnification provided for in this Section 2.4 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.
(e) The amount paid or payable by an Indemnified Party as a result of the losses, claims,
damages, and liabilities referred to in this Section 2.4 shall include the reasonable legal or
other expenses reasonably incurred by such Indemnified Party in connection with investigating or
defending any such action or claim, subject to the provisions of Section 2.4(c). No Person guilty
of fraudulent misrepresentation (within the meaning of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent misrepresentation.
(f) The obligations of the Company and the Investor under this Section 2.4 shall survive the
completion of any offering of Registrable Securities under the Shelf Registration Statement.
2.5 Registration Covenants.
(a) The Investor agrees that, upon receipt of any notice from the Company of the happening of
any event:
(i) requiring the preparation of a supplement or amendment to a prospectus relating to
Registrable Securities so that, as thereafter delivered to the Investor, 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, the Investor will
forthwith discontinue offering or Transferring Registrable Securities pursuant to the Shelf
Registration Statement and prospectus forming a part thereof contemplated by Section 2.1 until its
receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by
the Company, the Investor shall deliver to the Company all copies, other than
9
permanent file copies
then in the Investors possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice;
(ii) contemplated by Section 2.3(a)(iii), the Investor shall forthwith discontinue offering or
Transferring Registrable Securities pursuant to the Shelf Registration Statement and the prospectus
forming a part thereof contemplated by Section 2.1 until its receipt of a notice from the Company
stating that the stop order of the type referred to in Section 2.3(a)(iii) is no longer applicable
or that the Commission will not issue any such stop order pursuant to the proceedings of the type
referred to in Section 2.3(a)(iii); or
(iii) contemplated by Section 2.3(a)(iv), the Investor shall forthwith discontinue offering or
Transferring Registrable Securities pursuant to the Shelf Registration Statement and the prospectus
forming a part thereof contemplated by Section 2.1 until its receipt of a notice from the Company
that any suspension of the type referred to in Section 2.3(a)(iv) is no longer applicable or that
no Person will issue any such suspension pursuant to any proceedings (threatened or initiated) of
the type referred to in Section 2.3(a)(iv).
(b) Notwithstanding anything in this Agreement to the contrary, if the Company delivers to the
Investor a certificate, signed by an officer of the Company (the Transaction Delay Notice),
stating that in the good faith judgment of the Board (i) continued use of the Shelf Registration
Statement for purposes of effecting offers or sales of the Registrable Securities pursuant thereto
would require, under the Securities Act or the Exchange Act, premature disclosure in the Shelf
Registration Statement (or the prospectus that is a part thereof or any document that is or would
be incorporated therein) of material, nonpublic information concerning the Company, its business or
prospects or any proposed material transaction involving the Company, (ii) 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) it is therefore desirable to suspend the
use by the Investor of the Shelf Registration Statement (and the prospectus that is a part thereof)
for purposes of effecting offers or sales of the Registrable Securities pursuant thereto, then the
right of the Investor to use the Shelf Registration Statement (and the prospectus that is a part
thereof) for purposes of effecting offers or sales of the Registrable Securities 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 Shelf Registration Statement on more than two (2)
occasions during any twelve (12) month period, and each such suspension shall not be for more than
thirty (30) days per such occasion (the Transaction Delay Period). The Investor hereby covenants
and agrees that it will not sell any Registrable Securities pursuant to the Shelf Registration
Statement during the periods the Shelf Registration Statement is withdrawn or the ability to sell
thereunder is suspended as set forth in this Section 2.5(b). During the period the ability of the
Investor to sell Registrable Securities under the Shelf Registration Statement is suspended
pursuant to this Section 2.5(b) the Company shall not file a Registration Statement during the
related Transaction Delay Period for the offer or sale of any securities for its own account or for
the offer or sale of any securities for the account of any stockholder of the Company.
10
(c) As a condition to the inclusion of its Registrable Securities, the Investor shall furnish
to the Company such information, including completing an investor questionnaire in the form
provided by the Company, as shall be required in connection with any registration referred to in
this Section 2.
(d) The Investor acknowledges and agrees that the Registrable Securities sold pursuant to the
Shelf 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 Transferred in accordance with the Shelf Registration Statement and (ii) the
requirement of delivering a current prospectus has been satisfied.
(e) At the end of the Registration Period the Investor shall discontinue sales of Registrable
Securities pursuant to the Shelf Registration Statement upon receipt of notice from the Company of
its intention to remove from registration the Registrable Securities covered by the Shelf
Registration Statement which remain unsold, and the Investor shall notify the Company of the number
of Registrable Securities registered which remain unsold immediately upon receipt of such notice
from the Company.
2.6 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission
that may permit the sale of the Registrable Securities to the public without registration, the
Company agrees to use its commercially reasonable efforts to:
(a) Make and keep adequate current public information with respect to the Company available in
accordance with Rule 144; and
(b) File with the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act.
SECTION 3
BOARD OF DIRECTORS
3.1 Investor Designee.
(a) Upon execution of this Agreement and in accordance with the terms of this Section 3, the
Investor shall have the right to designate one Person for election to the Board as its nominee in
its sole discretion (the Investor Designee). Within five (5) Business Days after the date
hereof, the Company shall take all commercially reasonable actions to expand the Board in
accordance with the Certificate, the Bylaws and the DGCL to create one vacancy on the Board and
appoint the Investor Designee to fill such vacancy.
(b) Subject to Section 3.5, following the appointment of the Investor Designee pursuant to
Section 3.1(a), for applicable subsequent elections of the members of the Board, the Company shall
take all such actions as are commercially reasonable to facilitate the Investor Designees
re-election to the Board.
(c) The Investor Designee must be eligible under applicable law and regulations of any
national securities exchange on which Company securities are traded to serve
11
on the Board;
provided, however, that the Investor Designee shall not be required to be
independent under the listing rules of any applicable national securities exchange, if any, on
which Company securities are traded.
3.2 Designation. The initial Investor Designee shall be [].
3.3 Change in Designee. From time to time, subject to Section 3.5, the Investor may, in its sole discretion, notify the
Company in writing of its intention to remove the Investor Designee that is serving on the Board
and/or to select a new Investor Designee for election to the Board (whether to replace a prior
Investor Designee or to fill a vacancy on the Board caused by the resignation or removal of a prior
Investor Designee). Subject to Section 3.5, in the event of such an initiation of a removal or
selection of an Investor Designee under this Section 3.3, the Company shall take such commercially
reasonable actions as are necessary to facilitate such removal or election. Notwithstanding the
foregoing sentence, the Company shall not be required to hold a special meeting of stockholders to
replace an Investor Designee and in no event shall there be more than one Investor Designee on the
Board.
3.4 Information. The Investor shall at the request of the Company provide, and shall cause the Investor Designee
to provide, all information regarding the Investor Designee that the Company may reasonably request
for inclusion in any proxy statement or other report that is required to contain such information
that the Company is required to file with the Commission or any national
securities exchange on which the Companys securities are listed. The Investor represents,
warrants and agrees that any such information supplied to the Company will not contain any untrue
statement of a material fact, or omit to state any material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading.
3.5 Termination of Rights. The rights provided to the Investor under this Section 3 shall terminate at the first time when
the Investor ceases to hold at least ten percent (10%) of the then outstanding Common Stock;
provided, however, that an Investor Designee who is appointed or elected prior to
the time when the Investor ceases to hold at least ten percent (10%) of the then outstanding Common
Stock may continue as a director of the Company until the Companys next meeting of stockholders
held after the time when the Investor ceases to hold at least ten percent (10%) of the then
outstanding Common Stock at which the stockholders are requested to take action with respect to the
election of directors of the Company. For purposes of this Section 3.5, in determining, at any
time, how many shares of Common Stock the Investor holds, only the Shares then held by the Investor
should be considered and no other shares of Common Stock held by the Investor shall be considered.
3.6 No Compensation. The Investor Designee shall not be entitled to receive compensation in any form from the Company
in connection with such designation or in respect of his or her position as a member of the Board.
3.7 Confidentiality Agreement. Notwithstanding anything contained herein to the contrary, no Investor Designee shall be
entitled to become a member of the Board unless and until he or she executes a confidentiality
agreement in a form agreed to by the Company, the Investor and the Investor Designee, each acting
reasonably.
12
SECTION 4
LOCK-UP AGREEMENT
4.1 Lock-Up Agreement.
(a) Except as otherwise permitted in this Section 4.1, the Investor agrees not to Transfer the
Shares or any legal or beneficial interest therein, without the prior written consent of the
Company, from the date hereof until the date which is six (6) months after the date of this
Agreement (the Initial Lock-Up Period); provided that the Investor shall have the right
to participate in any buy-back of Common Stock by the Company, any tender offer or exchange offer
for shares of Common Stock or in any extraordinary business combination or recapitalization
transaction involving the Company that is approved by the stockholders of the Company by a vote
required under applicable law.
(b) Notwithstanding Section 4.1(a), the Investor shall be permitted to Transfer any portion or
all of the Shares at any time to any Affiliate under common control with the Investor;
provided, that any transferee agrees in writing to be bound by the provisions of this
Section 4 to the reasonable satisfaction of the Company; provided, further that any such
Transfer shall not relieve the Investor from its obligations hereunder.
(c) Following the Initial Lock-Up Period, subject to Sections 4.3 and 5.3, the Investor agrees
that it will not, during any fiscal quarter of the Company, Transfer more than two million
(2,000,000) of the Shares; provided, however, the restrictions in this Section
4.1(c) shall terminate eighteen (18) months following the date of this Agreement.
(d) In addition to the foregoing Transfer restrictions, the Investor shall not be entitled to
transfer any Registrable Securities at any time if such Transfer would violate the Securities Act,
or any state (or other jurisdiction) securities or blue sky laws applicable to the Company or the
applicable Transfer of Registrable Securities.
(e) Each certificate representing the Registrable Securities shall bear the following legend:
THE SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE
SECURITIES EVIDENCED BY THIS CERTIFICATE IS RESTRICTED BY THE TERMS
OF AN INVESTORS RIGHTS AGREEMENT, DATED AS OF [], 2010,
COPIES OF WHICH ARE ON FILE WITH THE ISSUER OF THIS CERTIFICATE. NO
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION SHALL BE EFFECTIVE
UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH INVESTORS RIGHTS
AGREEMENT HAVE BEEN COMPLIED WITH IN FULL.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER
13
JURISDICTION AND
MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED
(OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.
(f) In the event that the restrictive legend set forth in Section 4.1(e) has ceased to be
applicable, the Company shall promptly provide the Investor or its permitted transferee, with new
certificates for such Registrable Securities not bearing the legend with respect to which the
restriction has ceased and terminated.
4.2 Stop-Transfer Instructions. In order to enforce Section 4.1, the Company may impose stop-transfer instructions with respect
to any Company securities owned by the Investor.
4.3 Termination of Lock-Up Agreement. This Section 4 shall terminate at the first time when the Investor, and its Affiliates (other
than the Company), in the aggregate, cease to hold at least ten percent (10%) of the then
outstanding Common Stock. For purposes of this Section 4.3, in determining, at any time, how many
shares of Common Stock the Investor and its Affiliates hold, only the Shares then held by the
Investor and its Affiliates shall be considered and no other shares of Common Stock held by the
Investor and/or its Affiliates shall be considered.
SECTION 5
MISCELLANEOUS
5.1 Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument referencing this Agreement and
signed by the Company and the Investor.
5.2 Notices. All notices and other communications required or permitted hereunder shall be in writing and
shall be mailed by registered or certified mail, postage prepaid, sent by electronic mail or
otherwise delivered by hand, messenger or courier service addressed:
(a) if to the Investor, to the address or electronic mail address of the Investor set forth
beneath its name on the signature pages hereto, as may be updated in accordance with the provisions
hereof, with a copy (which shall not constitute notice) to Latham & Watkins LLP, 650 Town Center
Drive, 20th Floor, Costa Mesa, CA 92626-1925, Attention: R. Scott Shean; and
(b) if to the Company, to the address or electronic mail address of the Company set forth
beneath its name on the signature pages hereto, as may be updated in accordance with the provisions
hereof, with a copy (which shall not constitute notice) to Kaye Scholer LLP, 425 Park Avenue, New
York, NY 10022, Attention: Adam H. Golden and Steven G. Canner.
Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given (i) if delivered by hand, messenger or courier service, when
delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid,
14
specifying next-business-day delivery, two (2) Business Days after deposit with the courier), (ii)
if sent via registered or certified mail, at the earlier of its receipt or five (5) days after the
same has been deposited in a regularly-maintained receptacle for the deposit of the United States
mail, addressed and mailed as aforesaid, or (iii) if sent via electronic mail, when directed to the
relevant electronic mail address, if sent during normal business hours of the recipient, or if not
sent during normal business hours of the recipient, then on the recipients next Business Day
in either case confirmed in writing.
5.3 Information. The Investor hereby acknowledges that it is aware (and the Investor agrees that any Person,
including the Investor Designee, who otherwise receives from the Investor confidential non-public
information relating to the Company has been and will be advised) that the United States securities
laws restrict any Person who possesses material, non-public information regarding the Company from
purchasing or selling securities of the Company and from communicating such information to any
other Person under circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
5.4 Successors and Assigns. Except as permitted by Section 4.1(b), this Agreement and the rights and obligations of the
parties hereunder shall not be assignable or otherwise transferred, in whole or in part, by the
Company or the Investor without the written consent of both parties hereto. Any attempted
assignment or transfer of this Agreement shall be null and void.
5.5 Entire Agreement. This Agreement and the exhibits hereto, the Purchase and Collaboration Agreement and the Other
Agreements (as defined in the Purchase and Collaboration Agreement) constitute the full and entire
understanding and agreement between the parties with regard to the subject hereof and thereof. No
party hereto shall be liable or bound to any other party in any manner with regard to the subjects
hereof or thereof by any warranties, representations or covenants except as specifically set forth
herein or therein.
5.6 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy
accruing to any party to this Agreement upon any breach or default of any other party under this
Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any party of any breach
or default under this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.
5.7 Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or void, portions of such provision, or such provision in its
entirety, to the extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the same economic,
15
business and other purposes of the
illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in
accordance with its terms.
5.8 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits attached hereto.
5.9 Counterparts. This Agreement may be executed and delivered by PDF signature and in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.
5.10 Further Assurances. Each party hereto agrees to execute and deliver, by the proper exercise of its corporate,
limited liability company, partnership or other powers, all such other and additional instruments
and documents and do all such other acts and things as may be necessary to more fully effectuate
this Agreement.
5.11 Injunctive Relief. The Parties hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached and that such damages would not be fully compensable by an award of money
damages. It is accordingly agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement without posting a bond or other undertaking, this being in addition to
any other remedy to which they are entitled at law or in equity.
5.12 Governing Law. This Agreement (including any claim or controversy arising out of or relating to this Agreement)
shall be governed by and construed in accordance with the laws of the State of Delaware without
regard to conflict of law principles that would result in the application of any law other than the
laws of the State of Delaware.
5.13 Arbitration.
(a) All disputes, differences, controversies and claims of the parties hereto arising out of
or relating to this Agreement (individually, a Dispute and, collectively,
Disputes), except as otherwise provided under this Agreement, shall be resolved by final and
binding arbitration administered by the American Arbitration Association (AAA) under its
Commercial Arbitration Rules, subject to the provisions of this Section 5.13.
(b) Following the delivery of a written demand for arbitration by either party hereto, each of
the Company and Investor shall choose one (1) arbitrator within ten (10) Business Days after the
date of such written demand and the two (2) chosen arbitrators shall mutually, within ten (10)
Business Days after selection, select a third (3rd) arbitrator (each, an Arbitrator
and together, the Arbitrators), each of whom shall be a retired judge selected from a roster of
arbitrators provided by the AAA. If the third (3rd) Arbitrator is not selected within
fifteen (15) Business Days after the delivery of the written demand for arbitration (or such other
time period as the parties hereto may agree), the parties hereto shall promptly request that the
commercial panel of the AAA select an independent Arbitrator meeting such criteria
16
(c) The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association; provided, however, that notwithstanding any provisions of the
Commercial Arbitration Rules to the contrary, unless otherwise mutually agreed to by the Company
and the Investor, the sole discovery available to each party hereto shall be its right to conduct
up to two (2) non-expert depositions of no more than three (3) hours of testimony each.
(d) The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the parties hereto agree to extend such time. The award shall be
final and binding upon the parties hereto.
(e) Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the parties hereto, including without limitation any proceeding to enforce this Section 5.13, to
review or confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery
Court sitting in the county of New Castle, Delaware (the Enforcing Court). By execution and
delivery of this Agreement, each party hereto accepts the jurisdiction of the Enforcing Court.
(f) Each party hereto shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section 5.13, including attorneys fees, unless determined otherwise by the
Arbitrator.
(g) The parties hereto agree that the existence, conduct and content of any arbitration
pursuant to this Section 5.13 shall be kept confidential and no party hereto shall disclose to any
Person any information about such arbitration, except in connection with such arbitration or as may
be required by law or by any court, regulatory or governmental authority (or any exchange on which
such partys securities are listed) or for financial reporting purposes in such partys financial
statements.
(h) Notwithstanding the foregoing, none of the provisions of this Agreement (including this
Section 5.13) shall restrict the right of any party hereto to seek injunctive relief or other
equitable remedies, to enjoin any breach or threatened breach of this Agreement or otherwise
specifically enforce any provision of this Agreement.
5.14 Recapitalization, Exchanges, Etc. The provisions of this Agreement shall apply to the full extent set forth herein with respect to
(i) the Registrable Securities, (ii) any and all securities into which the shares of Common Stock
are converted, exchanged or substituted in any recapitalization or other capital reorganization by
the Company and (iii) any and all equity securities of the Company or any successor or assign of
the Company (whether by merger, consolidation or otherwise) which may be issued in respect of, in
conversion of, in exchange for, or in substitution of, the shares of Common Stock and shall be
appropriately adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The Company shall cause any
successor or assign (whether by merger, consolidation or otherwise) to assume this Agreement or
enter into a new agreement with the Investor on terms substantially the same as this Agreement as a
condition of any such transaction.
17
5.15 Conflict. In the event of any conflict between the Companys books and records and this Agreement or any
notice delivered hereunder, the Companys books and records will control absent fraud or error.
(signature page follows)
18
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
Address: |
354 Eisenhower Parkway Plaza 1, Second Floor Livingston, New Jersey 07039 |
|
|
|
COVENTRY ACQUISITION, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
Address: |
311 Bonnie Circle
Corona, California 92880-2882 |
|
|
[Signature Page to the Investors Rights Agreement]
Exhibit C
SUPPLY AGREEMENT
THIS
SUPPLY AGREEMENT (this Agreement) is made
as of [], 2010 (the Effective Date), by
and between Columbia Laboratories, Inc., a corporation existing and organized under the laws of the State of Delaware,
having a place of business at 354 Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039
(Supplier), and Coventry Acquisition, Inc.,
a corporation existing and organized under the laws of the State of
Delaware,
having a place of business at 311 Bonnie Circle, Corona, California
92880 (hereinafter Buyer). Capitalized terms used herein but not
otherwise defined herein shall have the definitions ascribed to them in the Purchase and
Collaboration Agreement (as hereinafter defined).
WITNESSETH :
WHEREAS, Buyer and Supplier have entered into that certain Purchase and Collaboration
Agreement, dated as of March 3, 2010 (the Purchase and Collaboration Agreement), providing for the
purchase by Buyer from Supplier of certain assets related to, and a collaboration with respect to
the Development of, the Products (as hereinafter defined); and
WHEREAS, in connection with the Purchase and Collaboration Agreement, Buyer and Supplier have
agreed to enter into this Agreement pursuant to which Supplier will be the exclusive supplier of
the Products for Buyer.
NOW THEREFORE, in consideration of the premises, which are incorporated herein by reference,
and other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. SCOPE OF AGREEMENT
1.1 Appointment of Supplier. Subject to the terms and conditions hereof, Buyer hereby
appoints Supplier as its exclusive source and supplier of all of the requirements of Buyer, its
Affiliates and Partners for the products identified on Exhibit 1.1 hereto in the United
States in packaged, ready-for-sale form (the Products), and Supplier agrees to act as the
exclusive source and supplier of the requirements of Buyer, its Affiliates and Partners for the
Products. For purposes hereof Partner means any Third Party to whom Buyer or its Affiliates has
sold, assigned, transferred, disposed of, licensed or conveyed any of the Purchased Assets or
rights in any Products. Notwithstanding anything to the contrary, upon written notice from Buyer,
provided to Supplier in accordance with Section 19 at least thirty (30) days prior to the date of
any requested change, Buyer may designate any of Buyers Affiliates or Partners for the purpose of
furnishing purchase orders and for receipt of shipments of Products from Supplier; provided that,
at any time, there shall be only one such party and that any such designation shall not relieve
Supplier of its obligations hereunder.
1.2 Inventory on Hand. Buyer shall purchase the quantities of finished goods Products in
inventory of Supplier or its Affiliates (Inventory) on the First Closing Date for the Purchase Price
determined in accordance with Section 5.1, including any partial Batches (as defined in Section 2.3
below). Within thirty (30) days after the Effective Date, Supplier shall deliver the Inventory to
Buyer in accordance with Section 3.1, subject to acceptance by Buyer in
accordance with
Section 3.2. Except as otherwise provided in this Agreement, the other terms and conditions of
this Agreement shall apply to such Product to the same extent as if it were ordered pursuant to a
Purchase Order furnished pursuant to Section 2.3.
2. FORECASTS; PURCHASE ORDERS; MANUFACTURE
2.1 Supplier Forecasts. Suppliers forecasts for Product in place immediately prior to the
First Closing Date shall govern for the first four (4) months after the First Closing Date.
Supplier shall use Commercially Reasonable Efforts during such period to meet Buyer requirements
for Product in excess of said pre-closing forecasts, but inability to supply such excess amounts of
Product shall not constitute a breach of this Agreement by Supplier.
2.2 Buyer Forecasts. At the First Closing, and on or before the fifteenth
(15th) day of each calendar month during the Term (as hereinafter defined) Buyer shall
and agrees to submit to Supplier a written forecast of Buyers, its Affiliates and Partners
requirements, by calendar month, for the following twelve (12) calendar months for Product (the
Rolling Forecast). The first Rolling Forecast shall include Suppliers forecast for the first
four (4) months after the First Closing and any additional amount of Product required by Buyer, its
Affiliates and Partners in each of the first four (4) calendar months after the First Closing. The
first four (4) calendar months of each Rolling Forecast for Products will be firm orders (the
Binding Forecast). It is understood that such forecasts, updated monthly, that extend beyond the
Binding Forecast, are intended to be good faith estimates only, and shall not be binding upon Buyer
or Supplier. Buyer shall be bound to purchase from Supplier, and Supplier shall supply, one
hundred percent (100%) of those quantities of the Products set forth in each Binding Forecast.
Supplier shall comply with Purchase Orders for Products furnished pursuant to Section 2.3 and shall
use Commercially Reasonable Efforts to supply amounts in excess of one hundred percent (100%) of
the Binding Forecast amounts; provided, however, that inability to supply amounts in excess of one
hundred percent (100%) shall not constitute a breach of this Agreement by Supplier. Supplier shall
notify Buyer in writing of any prospective problems of which it is aware that might prevent it from
meeting Buyers forecasted order quantities or estimated delivery dates.
2.3 Binding Purchase Orders. At the First Closing and with each Binding Forecast
referenced in Section 2.2 hereof, Buyer shall furnish to Supplier a binding purchase order (each,
a Purchase Order) for the quantity of the Products which Buyer shall purchase and Supplier shall
deliver in accordance with the most recent Binding Forecast and this Agreement. Supplier shall
acknowledge receipt of such Purchase Order. Each such Purchase Order shall designate the quantity
of the Products ordered, taking into consideration the fact that all Purchase Orders must be for
one or more full batches (each a Batch). A Batch of 8% Product, as identified on Exhibit
1.1, is approximately 610,000 individual applicators, provided however, that production yields
may vary, and a yield of between 580,000 and 620,000 individual applicators will be considered an
8% Product Batch. A Batch of 4% Product, as identified on Exhibit 1.1, is approximately
150,000 individual applicators, provided however, that production yields may vary, and a yield of
between 140,000 and 160,000 individual applicators will be considered a 4% Product Batch. The
initial Purchase Order(s) shall first be filled by utilizing Suppliers inventory on hand (other
than Inventory), including finished goods and in-transit and in-process inventory of Supplier,
labeled with the name and NDC number of Supplier, until exhausted. Each
2
Purchase Order shall
specify a delivery date for the ordered Product no earlier than ninety (90) days following
Suppliers receipt of the Purchase Order.
2.4 Buyers Ability to Require Supplier to Subcontract the Manufacture of Product.
(a) In the event that (i) the parties reasonably determine that the demand for any Product is
projected to exceed (as evidenced by the Rolling Forecasts provided by Buyer to Supplier) or (ii)
the demand for any Product actually exceeds (as evidenced by Purchase Orders provided by Buyer to
Supplier) Suppliers capacity to supply Buyer with such Product, Buyer shall have the right to
require Supplier to employ a manufacturer selected by Buyer and reasonably acceptable to Supplier
(Subcontract Manufacturer), for the manufacture of such Product pursuant to the terms of this
Agreement. Buyer shall exercise this right by (A) specifying to Supplier the amount of any such
excess demand for such Product and the monthly period(s) in which such excess demand is expected to
occur or has occurred and (B) notifying Supplier of the amounts of such excess demand for such
Product which the Subcontract Manufacturer shall manufacture and supply to Supplier.
(b) If Supplier is unable to manufacture or supply substantially all of any Product required
to be supplied to Buyer under the terms of this Agreement for any reason whatsoever including, for
example, and without limitation, an injunction against such manufacture issued by a government
authority, Buyer shall have the right to require Supplier to employ a Subcontract Manufacturer,
selected by Buyer and reasonably acceptable to Supplier, for the manufacture of such Product for
the remaining Term pursuant to the terms of this Agreement. Buyers rights under this Section
2.4(b) shall be exercisable only if (i) Suppliers inability to manufacture or supply such Product
could reasonably be expected to result in the unavailability of such Product for commercial sale
for at least thirty (30) days, (ii) Buyer provides reasonable evidence of the Subcontract
Manufacturers ability to start manufacture of such Product more rapidly than Supplier could
restart manufacture of such Product, and (iii) Suppliers inability to manufacture or supply such
Product did not result, wholly or in part, from a breach by Buyer of its representations,
warranties or obligations under this Agreement.
(c) If, more than four (4) times in any two (2) year period, Supplier fails to supply, in
conforming form, all or substantially all of the amount of Products subject to an accepted Purchase
Order submitted in accordance with this Agreement (excluding amounts in excess of one hundred
percent (100%) of amounts covered by the applicable Binding Forecast) within thirty (30) days after
the delivery date specified for such Products in the respective Purchase Orders in accordance with
Section 2.3 (such failure, a Critical Supply Failure), such Critical Supply Failure shall
constitute a material breach under Section 10.2(c), and Buyer shall have the right, at Buyers sole
discretion, to (i) require Supplier to employ a Subcontract Manufacturer (selected by Buyer and
reasonably acceptable to Supplier), for the manufacture of such Product for the remaining Term
pursuant to the terms of this Agreement or (ii) terminate this Agreement pursuant to Section
10.2(c).
(d) Supplier agrees that, notwithstanding anything to the contrary in this Agreement, Buyer,
at any time after the Effective Date, may designate Buyer, or an Affiliate of Buyer or a Third
Party, for the manufacture and supply of Product, provided that (i) Buyer will bear the cost and
expense of establishing Buyer, or an Affiliate of Buyer or a Third Party, for the
3
manufacture and supply of any Product and (ii) Buyer, or an Affiliate of Buyer or a Third
Party, may only supply up to fifty percent (50%) of the amount of Product ordered in excess of
three (3) Batches per calendar year.
2.5 Provisions Applicable With Subcontract Manufacturer Supplier. If, at any time,
Supplier subcontracts with a Subcontract Manufacturer pursuant to Sections 2.4(a) (c), or
subcontracts with an Affiliate or a Third Party other than pursuant to Sections 2.4(a) (c), for
the manufacture and supply of any Product, such Subcontract Manufacturer or such Affiliate or a
Third Party shall be reasonably acceptable to Buyer. Supplier shall provide the Subcontract
Manufacturer, the Affiliate or Third Party, as applicable, or cause the Subcontract Manufacturer,
the Affiliate or Third Party to be provided, with all rights required for the manufacture of such
Product and with all assistance reasonably requested by the Subcontract Manufacturer in setting up
and overseeing its manufacturing facility, including know-how concerning the manufacture of such
Product, and copies of all written or other tangible forms of recorded know-how reasonably related
to the manufacture of such Product. Supplier shall obtain and enforce agreements from any such
Subcontract Manufacturer, Affiliate or Third Party requiring the Subcontract Manufacturer,
Affiliate or Third Party to keep all such information conveyed to such Subcontract Manufacturer,
Affiliate or Third Party confidential and not to use any such rights, materials or information to
manufacture Products other than for Products for sale to Supplier.
3. SHIPMENTS AND ACCEPTANCE
3.1 Delivery. Supplier shall deliver all Products DDP (as such term is defined and used in
Incoterms 2000, ICC Official Rules for Interpretation of Trade Terms) to Buyers warehouse in
Gurnee, Illinois, United States, or any other single destination within the United States
identified by Buyer at least thirty (30) days prior to the requested delivery date. Title and risk
of loss will transfer from Supplier to Buyer upon delivery of Product to Buyer.
3.2 Inspection; Rejection. Buyer may inspect the shipment of Product upon receipt to
verify such shipments conformity to the relevant Purchase Order as of the time the Product was
delivered to Buyer. If Buyer determines that any portion or all of any shipment of the Product did
not conform to the Purchase Order as of the time it was delivered to Buyer (each non-conforming
Product, a Defective Product), then Buyer shall be entitled to reject such portion or all of any
shipment of Product that includes Defective Product. Buyer shall notify Supplier in writing if the
shipment of Product includes Defective Product that existed at the time of the delivery of the
Products to Buyer. Such notification shall be made as soon as reasonably practicable after
discovery of the nonconformity, but not later than thirty (30) days after delivery of the Products.
Such notice shall specify the reasons for rejection. If Buyer does not so reject the Products
within thirty (30) days after delivery, Buyer shall be deemed to have accepted the Products. After
Buyer accepts a Product, or is deemed to have accepted a Product, except with respect to Latent
Defects (as defined herein below), Buyer shall have no recourse against Supplier except as set
forth in Section 6 hereof. After notice of rejection is received by Supplier, Buyer shall
cooperate with Supplier in determining whether such rejection is justified. Supplier shall notify
Buyer as soon as reasonably possible, but not later than thirty (30) days after receipt of the
notice from Buyer, whether it accepts Buyers basis for rejection. Notwithstanding anything to the
contrary, if a portion or all of any shipment of Product has a latent defect that renders such
Product a Defective Product prior to the expiry date of such Product and that
4
(a)
was not reasonably discoverable within the inspection period specified in this Section 3.2 and (b)
was attributable to Suppliers manufacture and/or supply and (iii) did not occur after receipt of
such Product by Buyer as described in Section 3.2 (each such defect, a Latent Defect), Buyer
shall promptly, and in no event more than twenty (20) days after the discovery or notification of
such Latent Defect, notify Supplier of such Latent Defect. If Supplier accepts Buyers
determination that the Product is a Defective Product or that the Product contains a Latent Defect,
then Buyer shall be entitled to the remedies set forth in Section 6.5 hereof. If Supplier does not
accept Buyers determination that the Product is a Defective Product or that the Product contains a
Latent Defect, and Buyer does not accept Suppliers conclusion, then Supplier and Buyer shall
jointly select an independent Third Party to determine whether it conforms to the Purchase Order.
The parties agree that such Third Partys determination shall be final. If the Third Party rules
that the Product conformed to the Purchase Order as of the time the Product was delivered to Buyer
or that the Product does not contain a Latent Defect, as applicable, then Buyer shall be deemed to
have accepted the Product at the agreed upon price and Buyer shall bear the cost of such
independent Third Party determination. If the Third Party rules that the Product does not conform
to the Purchase Order at the time the Product was delivered to Buyer or that the Product contains a
Latent Defect, then Buyer shall be entitled to the remedies set forth in Section 6.5 hereof and
Supplier shall bear the cost of such independent Third Party determination.
4. RECORDS AND AUDIT RIGHTS, PUBLIC STATEMENTS; RECALLS
4.1 Records; Audit Rights. Supplier shall maintain, and shall cause its Affiliates and
contract manufacturers and other agents to maintain, all records necessary to comply with all
applicable Laws relating to the manufacture, filling, packaging, testing, storage and shipment of
Products. All such records shall be maintained for such period as may be required by applicable
Laws; provided, however, that all records relating to the manufacture, stability and quality
control of Products shall be retained until the parties agree to dispose of such records. Buyer
and its authorized representatives shall have the right, at Buyers sole cost and expense, to
audit, inspect, and observe the manufacture, storage, disposal, and transportation of Products once
per contract year, during normal business hours upon thirty (30) days prior written notice;
provided that Buyer may conduct additional audits if required to address serious manufacturing
issues or complaints that necessitate reporting to a regulatory authority or for any for cause
audits.
4.2 Public Statements. Neither party shall use, or authorize others to use, the name,
symbols, or marks of the other in any advertising or publicity material or make any form of
representation or statement with regard to the services provided hereunder which would constitute
an express or implied endorsement by such other of any commercial product or service without the
others prior written approval.
4.3 Recalls. Buyer, in Buyers sole discretion, shall determine whether any Product must
be withdrawn or recalled from the market. To the extent legally required, Buyer shall notify all
regulatory authorities of any such withdrawal or recall. All costs of withdrawals or recalls
(including costs incurred by Supplier while assisting Buyer) shall be borne by Buyer, except in the
case of recalls or withdrawals caused solely by the negligence or willful malfeasance of Supplier,
its Affiliates or subcontractors or by the material breach by Supplier of its representations and
warranties in this Agreement, in which case Supplier shall credit Buyer
5
for the cost of the recalled or withdrawn Product and Buyers reasonable costs incurred with such
withdrawals or recalls. Buyer shall give Supplier prompt written notice of any withdrawals or
recalls that Buyer believes was caused or may have been caused by the negligence or willful
malfeasance of Supplier, its Affiliates or subcontractors or the material breach by Supplier of its
representations and warranties in this Agreement.
5. PRICE AND PAYMENT
5.1 Price.
(a) The purchase price for Products supplied hereunder (the Purchase Price) shall be one
hundred and ten percent (110%) of COGS calculated in accordance with this Section 5.1(a) and paid
in accordance with Section 5.1(d). For purposes hereof COGS means internal and external costs
incurred in manufacturing, acquiring, product testing activities for quality assurance and quality
control, packaging, transporting, storing and/or cGMP compliance determined in accordance with
United States generally accepted accounting principles, as consistently applied by Supplier in
accordance with Suppliers past practice and in the ordinary course of Suppliers business, in each
case to the extent related and allocable to the Product supplied to Buyer hereunder.
Notwithstanding the foregoing, COGS shall (i) include payroll taxes and customs charges
consistent in type and nature with those set forth on Exhibit 5.1(a), and (ii) exclude any
and all (A) costs attributable to general corporate activities, including, by way of example,
executive management, investor relations, business development, legal affairs and finance, (B)
Taxes other than as described in clause (i) above, and (C) the NDA maintenance fee and applicable
FDA establishment fees. Exhibit 5.1(a) to this Agreement sets forth further detail on the
calculation of COGS. For purposes hereof cGMP means current good manufacturing practices of the
FDA and other appropriate agencies, as set forth in 21 C.F.R. Parts 210 and 211 and all applicable
FDA rules, regulations, guides and guidances, as amended from time to time and in effect during the
term of this Agreement.
(b) Buyer shall reimburse Supplier the amount actually paid by Supplier in connection with
applicable FDA establishment fees to the extent related and allocable to the Product supplied to
Buyer hereunder; provided, that, with respect to the period from the Effective Date through
September 30, 2010, Buyers liability for such establishment fees shall be an amount equal to
$457,200 multiplied by a fraction, the numerator of which is (i) the number of days during such
period, and the denominator of which is (ii) 365. Supplier shall provide Buyer with a detailed
invoice of any amounts due and payable pursuant to this Section 5.1(b) and Buyer shall pay the
amount of such invoice within thirty (30) days following receipt.
(c) Supplier shall at all times use Commercially Reasonable Efforts to keep the cost of
acquiring any Product from a contract manufacturer or Subcontract Manufacturer, if applicable, as
low as possible.
(d) For each Batch of Product supplied hereunder, Buyer shall pay Supplier the Purchase Price
(the Batch Price) calculated as set forth in this Section 5.1(d). For the period from the
Effective Date through December 31, 2010, the Batch Price for 8% Product and the Batch Price for 4%
Product shall equal the amount for such Product set forth on Exhibit 5.1(d), subject to
adjustment in accordance with Section 5.1(e) below. For each calendar year
6
thereafter, Supplier shall notify Buyer of the Batch Price applicable to purchases of Product
during such calendar year no later than December 31st of the year immediately preceding
such calendar year. Such Batch Price shall be Suppliers good faith estimate of COGS for such
calendar year, determined based on Buyers Rolling Forecast, Suppliers projected costs for such
calendar year and foreign currency exchange rates in effect as of the last Business Day of November
immediately preceding Suppliers notice, subject to adjustment in accordance with Section 5.1(e);
provided, however, that, except for adjustment in accordance with Section 5.1(e), the Batch Price
in any calendar year shall not be greater than one hundred twenty percent (120%) of the Batch Price
in the prior, just-ended calendar year.
(e) The Batch Price shall be adjusted on a monthly basis to reflect foreign currency exchange
rates in effect as published in the Wall Street Journal on the last Business Day of the
month immediately preceding the applicable month.
(f) On or after each shipment of the Product, Supplier shall provide Buyer with an invoice
setting forth the Batch Price payable for such delivery pursuant to this Section 5. Each such
invoice shall, to the extent applicable, identify the Purchase Order number, quantities of the
Product, aggregate Batch Price of Product supplied pursuant to such Purchase Order and the total
amount to be remitted to Supplier.
(g) Buyer will pay amounts due pursuant to this Agreement within forty-five (45) days of the
date of invoice.
(h) Buyer will make all payments to Supplier, due pursuant to this Agreement, to Suppliers
accounts in the United States.
5.2 Intentionally Omitted.
5.3 Interest. If a party (or any successor thereto pursuant to the terms of this
Agreement) fails to pay in full on or before the date due any payment that is required to be paid
under this Agreement, such party (or any successor thereto pursuant to the terms of this Agreement)
will also pay to the other Party, on demand, interest on any such amount beginning on such due date
at an annual rate (calculated on the basis of a 360-day year) equal to the base rate as announced
by JPMorgan N.A., or any successor thereto, in New York, New York in effect on such due date, plus
three (3) percent to be assessed from the date payment of the amount in question first became due.
5.4 Taxes.
(a) Supplier and Buyer each shall cooperate with the other party, as reasonably requested by
the other party, to minimize or eliminate Taxes to the extent legally permissible, including by
making available to such other party any existing resale certificates, exemption certificates or
other existing information relevant for such purpose.
(b) If applicable Tax Law requires Buyer to withhold any Tax from a payment to Supplier, Buyer
shall withhold such Tax and shall pay the amount withheld to the relevant Tax authority.
7
(c) As soon as practicable after any payment of withheld Taxes by Buyer to a Tax authority,
Buyer shall deliver to Supplier the original or a certified copy of a receipt issued by such Tax
authority evidencing such payment, a copy of the return reporting that payment or other evidence of
such payment reasonably satisfactory to Supplier.
6. REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Supplier. Supplier represents and warrants to Buyer
that:
(a) the Products shall be manufactured and packaged in compliance with the provisions of the
Federal Food, Drug, and Cosmetic Act located at 21 U.S.C. §§ 301 to 397 (2000), as it may be
amended from time to time, and regulations promulgated thereunder (the Act), the laws or
regulations imposed by other involved health regulatory authorities within the Territory, and
cGMPs;
(b) as of the time of delivery to Buyer (i) Product (other than Inventory) with an FDA
approved shelf-life greater than or equal to thirty (30) months shall have minimum dating of not
less than twenty-four (24) months shelf-life prior to expiration, (ii) Product (other than
Inventory) with an FDA approved shelf-life less than thirty (30) months shall have minimum dating
of not less than eighteen (18) months shelf-life prior to expiration and (iii) Inventory shall have
minimum dating of not less than twelve (12) months shelf-life prior to expiration;
(c) as of the time any Product is delivered to Buyer and during the shelf life of such
Product, such Product shall conform to the specifications set forth in the NDA for such Product
(the Specifications); and
(d) upon transfer of the risk of loss of a Product, as provided in Section 3.1, good and valid
title to such Product sold hereunder will be conveyed by Supplier to Buyer free and clear of any
Encumbrances created by Supplier.
6.2 Representations and Warranties of Buyer. Buyer represents and warrants to Supplier
that Buyer will not make any false claims in any packaging, labeling, advertising or promotional
material regarding the Products.
6.3 EXCEPT AS OTHERWISE PROVIDED IN THE PURCHASE AND COLLABORATION AGREEMENT, THE WARRANTIES
SET FORTH IN SECTION 6.1 OF THIS AGREEMENT ARE THE EXCLUSIVE WARRANTIES GIVEN BY SUPPLIER TO BUYER
WITH RESPECT TO THE SUPPLY OF PRODUCTS HEREUNDER, AND ARE GIVEN AND ACCEPTED IN LIEU OF ANY AND ALL
OTHER WARRANTIES, GUARANTEES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.4 EXCEPT AS OTHERWISE PROVIDED IN THE PURCHASE AND COLLABORATION AGREEMENT, THE WARRANTIES
SET FORTH IN
8
SECTION 6.2 OF THIS AGREEMENT ARE THE EXCLUSIVE WARRANTIES GIVEN BY BUYER TO SUPPLIER WITH RESPECT TO
THE PURCHASE OF PRODUCT HEREUNDER, AND ARE GIVEN AND ACCEPTED IN LIEU OF ANY AND ALL OTHER
WARRANTIES, GUARANTEES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.5 Remedy. Any Product delivered to Buyer by Supplier which is finally determined to be a
Defective Product or contain a Latent Defect in accordance with Section 3.2, shall be replaced at
Suppliers expense, as Buyers sole and exclusive remedy.
7. INDEMNIFICATION
Each party agrees that it shall indemnify the other party for and hold such other party
harmless against any Losses incurred by such other party as a result of a breach of a
representation, warranty, covenant, agreement or obligation of such party contained in this
Agreement, in accordance with the terms and conditions contained in the Purchase and Collaboration
Agreement.
8. INSURANCE
8.1 Coverage. Each party shall maintain during the performance of this Agreement the
following insurance or self-insurance in amounts no less than that specified for each type:
(a) Commercial general liability insurance with combined limits of not less than $1,000,000
per occurrence, $1,000,000 per accident for bodily injury, including death, and property damage, a
general aggregate limit of not less than $1,000,000 and products/completed operations aggregate of
not less than $1,000,000 which coverage shall insure such party for product liability claims and
its obligations under this Agreement;
(b) Workers compensation insurance in the amounts required by the law of the state(s) in which
such partys workers are located and employers liability insurance with limits of not less than
$500,000 per occurrence;
(c) automobile liability insurance covering automobiles and trucks used by or on behalf of
such party either on or away from the other parties premises with combined single limit of not
less than $1,000,000 per occurrence and $1,000,000 per accident for bodily injury, including death,
and property damage, which policy shall include coverage for all hired, owned and no-owned
automobiles and trucks; and
(d) Product Liability Insurance with limits not less than $10,000,000.
8.2 Evidence. Each party shall provide the other with evidence of its insurance or self insurance.
Each party shall provide to the other thirty (30) days prior, written notice of any cancellation
or material change in its coverage. Each party agrees to deliver to the other concurrently with
the execution of this Agreement and thereafter annually, a certificate from the
9
insurance company(ies) evidencing that all the insurance required by this Agreement is in force,
including a broad form vendors endorsement naming the other party as an additional insured.
9. CONFIDENTIALITY
The terms of the Confidentiality Agreement shall apply to any information provided by Supplier
to Buyer.
10. TERM AND TERMINATION
10.1 Term. This Agreement shall come into effect on the Effective Date. Unless otherwise
terminated as provided in Section 10.2 or Section 12.2 hereof, this Agreement shall remain in force
through May 19, 2015 (for the purpose of this Section 10 the Initial Term). This Agreement shall
renew automatically in two (2) year increments after the Initial Term (each, a Renewal Term and,
collectively with the Initial Term, the Term) unless either party gives written notice to the
other of its intention to not renew at least one hundred and eighty (180) days prior to expiration
of the Initial Term or the then applicable Renewal Term.
10.2 Termination.
(a) Purchase and Collaboration Agreement. Buyer shall have a right to terminate this
Agreement, upon one hundred and eighty (180) days prior written notice to Supplier, upon the
expiration or termination of the Joint Development Period, as provided in the Purchase and
Collaboration Agreement.
(b) Insolvency. A party may immediately terminate this Agreement without written
notice to the other party, if (i) the other party is the subject of voluntary or involuntary
bankruptcy proceedings instituted on behalf of or against such it (except for involuntary
bankruptcy proceedings which are dismissed within sixty (60) days); (ii) an administrative
receiver, receiver and manager, interim receiver, custodian, sequestrator or similar officer is
appointed in respect of the other party (collectively, the Receiver) and that party has not
caused the underlying action or the Receiver to be dismissed within sixty (60) days after the
Receivers appointment; (iii) the Board of Directors of the other party shall have passed a
resolution to wind up that party, or such a resolution shall have been passed other than a
resolution for the solvent reconstruction or reorganization of that party; (iv) a resolution shall
have been passed by that party or that partys directors to make an application for an
administration order or to appoint an administrator; or (e) the other party makes a general
assignment, composition or arrangement with or for the benefit of all or the majority of that
partys creditors, or makes, suspends or threatens to suspend making payments to all or the
majority of that partys creditors.
(c) Default. In the event either party commits a material breach or defaults in the
performance or observance of any of the material provisions of this Agreement, and such breach or
default is not cured within one hundred and twenty (120) days (or within fifteen (15) days in the
case of any payment default or obligation to pay royalties hereunder) after the receipt of notice
thereof from the other party specifying such breach or default, the party not in breach or default
shall be entitled (without prejudice to any of its other rights) to terminate this Agreement,
without additional penalty, termination fee or cost, by giving notice to take effect immediately.
10
11. EFFECT OF EXPIRATION OR TERMINATION
11.1 Mutual Obligations. Upon expiration or termination of this Agreement pursuant to
Section 10 with effect as of the effective date of termination:
(a) the party terminating this Agreement shall be released from all obligations and duties
imposed or assumed hereunder except from those provided in Sections 4.1, 4.2, 6, 7, 8 and 9 and
this Section 11 and Section 21; and
(b) the other party shall lose the benefit of any rights granted in this Agreement, except for
those accrued prior to the effective date of termination and those set forth in Sections 4.1, 4.2,
6, 7, 8 and 9 and this Section 11 and Section 21.
11.2 Purchase Orders.
(a) Where this Agreement is terminated by Buyer pursuant to Section 10.2(a) or by Supplier
pursuant to Section 10.2(b) or 10.2(c), Supplier will be entitled, at its option, to fill or cancel
any Purchase Orders that were submitted by Buyer prior to such termination. If Supplier elects to
fill any such Purchase Orders, Supplier shall use commercially reasonable efforts to fill any such
Purchase Orders. If Supplier elects not to fill any such Purchase Orders, Buyer shall reimburse
Supplier for the costs (including, but not limited to, raw material costs) incurred in connection
with Purchase Orders that Supplier had started to supply prior to the termination of this Agreement
and that are canceled by Supplier pursuant to this Section 11.2(a).
(b) Where this Agreement is terminated by Buyer pursuant to Section 10.2(b) or 10.2(c),
Supplier will be entitled, at its option, to fill or cancel any Purchase Orders that were submitted
by Buyer, its Affiliates or sublicensees prior to such termination; provided that if Supplier
elects not to fill any such Purchase Orders, Supplier shall be liable for the costs (including, but
not limited to, raw material costs) incurred in connection with Purchase Orders that Supplier had
started to manufacture prior to the expiration or termination of this Agreement and that are
canceled by Supplier pursuant to this Section 11.2(b).
11.3 Financial Obligations. In the event that this Agreement is terminated pursuant to
Section 10.2 by either party, Buyer shall make all payments accruing prior to the effective date of
termination to Supplier in the manner specified herein. Supplier may proceed to enforce payment of
all outstanding payments. Each party may proceed to collect any other monies owed to such party
and to exercise any or all of the rights and remedies contained herein or otherwise available to
such party by law or in equity, successively or concurrently at the option of such party.
11.4 Transition upon Termination; HSR.
(a) Upon expiration or termination of this Agreement for any reason pursuant to Sections 10 or
12.2, Supplier and its Affiliates shall provide to Buyer, its Affiliates or Third Party designee(s)
such cooperation and assistance as may be reasonably required to facilitate Buyer, its Affiliates
or Third Party designee(s) to bring about a smooth and orderly transition to one or more new
manufacturers and suppliers of Product following such expiration or termination and continuing for
such period of time following such termination as is reasonably
11
necessary to fully effectuate such transition. Buyer shall pay the reasonable internal and
external costs incurred by Supplier in providing such cooperation and assistance.
(b) Upon the expiration or termination of this Agreement, Buyer and Supplier will determine
whether any transfer of rights under this Agreement to Buyer is subject to the premerger
notification requirements of the HSR Act. If HSR Act filings are required, Buyer and Supplier will
use commercially reasonable efforts to make such filings and cause the HSR Act waiting period to
expire or terminate.
11.5 No Release. Termination of this Agreement for any reason whatsoever shall neither be
deemed a release, nor shall it relieve either party from any obligation under this Agreement which
may have accrued prior thereto.
12. FORCE MAJEURE
12.1 Suspension of Obligations. If by reason of force majeure, which shall mean for the
purpose of this Agreement (a) acts of God, war, riots, civil unrest, acts of the public enemy,
fires, earthquakes, severe weather or storms, or (b) to the extent beyond the reasonable control of
the affected party, strikes, labor disputes, labor shortages, product transportation interruptions
or shortages, accidents, unavailability of raw materials or supplies, or any act in consequence of
compliance with any order of any government or governmental authority, and, in the case of either
(a) or (b), the affected party is delayed or prevented from complying with its obligations under
this Agreement, such affected party shall promptly give notice to the other party with an estimated
date by which the contingency will be removed.
12.2 Termination. To the extent that a party is or has been delayed or prevented by force
majeure from complying with its obligations under this Agreement, the other party may suspend the
performance of its obligations until the contingency is removed. If the party delayed or prevented
from complying with its obligations under this Agreement cannot permanently remove the contingency,
or if the contingency affecting such party results in a delay extending beyond three (3) months,
the other party (upon notice) shall have a right to terminate this Agreement and Section 11,
subject to Section 6.5(b), if applicable, shall apply, with the party delayed or prevented from
complying with its obligations under this Agreement deemed to be the non-terminating party.
13. NOTICES
All notices, requests, claims, demands and other communications hereunder shall be in writing
and shall be deemed to have been duly given (a) when received if delivered personally, (b) when
transmitted if telecopied (which is confirmed), (c) upon receipt, if sent by registered or
certified mail (postage prepaid, return receipt requested) and (d) the day after it is sent, if
sent for next-day delivery to a domestic address by overnight mail or courier, to the parties at
the following addresses:
If to Supplier, to:
Columbia
Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, New Jersey 07039
Attention: General Counsel
Facsimile: 973.994.3001
12
with copies (which shall not constitute notice) sent concurrently to:
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
If to Buyer, to:
Coventry Acquisition, Inc.
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
with copies (which shall not constitute notice) sent concurrently to:
Latham & Watkins LLP
650 Town Center Drive
20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
provided, however, that if any party shall have designated a different address by notice to the
others, then to the last address so designated.
14. ASSIGNMENT
Neither party may assign its rights and obligations under this Agreement without the other
partys prior written consent, except that: either party may (a) assign its rights and obligations
under this Agreement or any part hereof to one or more of its Affiliates without the consent of the
other party; and (b) assign this Agreement in its entirety without the other partys consent to an
entity that acquires all or substantially all of the business or assets of the assigning party to
which this Agreement relates, whether by merger, acquisition or otherwise; provided, however, that
in the event of Suppliers exercise of its right under clause (b), notwithstanding the Product
quantity and minimum order requirements set forth in Section 2.4(d), Buyer, or an Affiliate of
Buyer or a Third Party, may manufacture and supply any and all amounts of Product that Buyer, or an
Affiliate of Buyer or a Third Party, may require, without further obligation to Supplier under the
terms of this Agreement; provided, further, that to the extent an assignment of rights or
obligations by Supplier pursuant to this Section 14 increases the Taxes (including without
limitation any withholding Taxes) of, or the amounts owed under Section 5.1(a) subsection (i) by,
Buyer (or an Affiliate or Partner of Buyer that has been designated by Buyer pursuant to Section 1
as of the time of such assignment by Supplier), Supplier or the assignee shall indemnify Buyer (or
such Affiliate or Partner of Buyer) for and hold it harmless against such increase. In the case of
any permitted assignment, the assigning party shall remain responsible for the performance of this
Agreement by the assignee. The assigning party shall provide the other party with prompt written
notice of any such assignment. Any permitted assignee shall assume all obligations of its assignor
under this Agreement, and no permitted assignment shall relieve the assignor of liability
hereunder. Any attempted assignment in contravention of the foregoing shall be void. Subject to
the terms of this Agreement, this
13
Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
15. NO WAIVER
The failure of either party to enforce any condition or part of this Agreement at any time
shall not be construed as a waiver of that condition or part, nor shall it forfeit any rights to
future enforcement thereof.
16. RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement shall be deemed to constitute a partnership, joint
venture, or legal entity of any type between Supplier and Buyer, or to constitute one as the agent
of the other. Both parties shall act solely as independent contractors, and nothing in this
Agreement shall be construed to give either party the power or authority to act for, bind, or
commit the other party.
17. HEADINGS, INTERPRETATION
The headings of sections of this Agreement are for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement in any way. Words denoting the singular
shall include the plural and vice versa; words denoting any gender shall include all genders; and
words denoting persons shall include bodies corporate, and vice versa.
18. SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other Regulatory Authority to be invalid, void, unenforceable or against
its regulatory policy such determination shall not affect the enforceability of any others or of
the remainder of this Agreement.
19. ENTIRE AGREEMENT; AMENDMENT OR MODIFICATION
This Agreement may not be amended, supplemented or otherwise modified except by an instrument
in writing signed by both parties hereto. This Agreement, the Purchase and Collaboration
Agreement, the Confidentiality Agreement and the Other Agreements contain the entire agreement of
the parties hereto with respect to the subject matter hereof, superseding all negotiations, prior
discussions and preliminary agreements made prior to the date hereof. No provision of this
Agreement may be amended or modified other than by a written document signed by authorized
representatives of both parties.
20. FORMS
The parties recognize that, during the Term, a Purchase Order, acknowledgement form or similar
routine document (collectively Forms) may be used to implement or administer provisions of this
Agreement. Therefore, the parties agree that the terms of this Agreement will prevail in the event
of any conflict between this Agreement and the printed provision of such
14
Forms, or typed provisions of Forms that add to, vary, modify or are at conflict with the
provisions of this Agreement with respect to Product sold hereunder during the Term.
21. GOVERNING LAW
This Agreement (including any claim or controversy arising out of or relating to this
Agreement) shall be governed by and construed in accordance with the Laws of the State of Delaware
without regard to conflict of law principles that would result in the application of any Law other
than the Laws of the State of Delaware.
22. ARBITRATION
22.1 All disputes, differences, controversies and claims of the parties arising out of or
relating to this Agreement (individually, a Dispute and, collectively, Disputes), except as
otherwise provided under this Agreement, shall be resolved by final and binding arbitration
administered by the American Arbitration Association (AAA) under its Commercial Arbitration
Rules, subject to the provisions of this Section 22.
22.2 Following the delivery of a written demand for arbitration by either party, each of Buyer
and Supplier shall choose one (1) arbitrator within ten (10) Business Days after the date of such
written demand and the two chosen arbitrators shall mutually, within ten (10) Business Days after
their selection, select a third (3rd) arbitrator (each, an Arbitrator and together,
the Arbitrators), each of whom shall be a retired judge selected from a roster of arbitrators
provided by the AAA. If the third (3rd) Arbitrator is not selected within fifteen (15)
Business Days after delivery of the written demand for arbitration (or such other time period as
the Parties may agree), the parties shall promptly request that the commercial panel of the AAA
select an independent Arbitrator meeting such criteria.
22.3 The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association; provided, however, that notwithstanding any provisions of the Commercial Arbitration
Rules to the contrary, unless otherwise mutually agreed to by Buyer and Supplier, the sole
discovery available to each party shall be its right to conduct up to two (2) non-expert
depositions of no more than three (3) hours of testimony each.
22.4 The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the parties agree to extend such time. The award shall be final
and binding upon the parties.
22.5 Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the parties, including without limitation any proceeding to enforce this Section 22, to review
or confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery Court
sitting in the county of New Castle, Delaware (the Enforcing Court). By execution and delivery
of this Agreement, each party accepts the jurisdiction of the Enforcing Court.
22.6 Each party shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section 22, including attorneys fees, unless determined otherwise by the
Arbitrator.
15
22.7 The parties agree that the existence, conduct and content of any arbitration pursuant to
this Section 22 shall be kept confidential and no party shall disclose to any Person any
information about such arbitration, except as may be required by Law or by any Regulatory Authority
(or any exchange on which such Partys securities are listed) or for financial reporting purposes
in such partys financial statements.
22.8 Notwithstanding the forgoing, none of the provisions of this Agreement (including the
provision of this Section 22) shall restrict the right of any party to seek injunctive relief or
other equitable remedies, to enjoin any breach or threatened breach of this Agreement or otherwise
specifically enforce any provision of this Agreement.
16
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and
year first above mentioned.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
COVENTRY ACQUISITION, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
Exhibit D
LICENSE AGREEMENT
This LICENSE AGREEMENT (the Agreement), dated as of , 2010 (the Effective Date), is
entered into by and between Columbia Laboratories, Inc., a
Delaware corporation, and Columbia Laboratories (Bermuda) Ltd., a Bermuda corporation (together,
Seller), and Coventry Acquisition, Inc., a Delaware corporation (Buyer). Seller and Buyer are each referred to herein as a
Party, and collectively, as the Parties.
RECITALS
WHEREAS,
the Columbia Laboratories, Inc., Watson Pharmaceuticals, Inc., a Nevada
corporation and Buyer have entered into a Purchase and Collaboration Agreement, dated as
of March 3, 2010 (the PCA), for the sale by Seller, and the purchase by Buyer, of the First
Closing Date Purchased Assets on the First Closing Date and the Second Closing Date Purchased
Assets on the Second Closing Date (each as defined in the PCA);
WHEREAS, pursuant to the PCA, the Parties will collaborate with respect to certain Development
activities relating to the Products (as defined in the PCA); and
WHEREAS, as a condition to the First Closing (as defined in the PCA) under the PCA, Buyer will
grant to Seller certain licenses, and Seller will grant Buyer certain licenses, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the following meanings.
All other capitalized terms used herein and not defined in this Agreement shall be as defined in
the PCA.
Ascend Agreement means the License and Supply Agreement, dated as of September 27, 2007,
between Columbia Laboratories, Inc. and Ascend Therapeutics, Inc.
Buyer Introduced Technology means all Patents and Know-How Controlled by Buyer from time to
time during the Joint Development Period covering technology identified by Buyer in writing for use
by Seller in Seller Development Activities.
Buyer Technology means the Purchased Asset Technology and Collaboration Technology.
Collaboration Invention shall have the meaning set forth in Section 3.2(a) hereof.
Collaboration Invention Patent shall have the meaning set forth in Section 3.2(a) hereof.
Collaboration Technology shall have the meaning set forth in Section 3.2(a) hereof.
Dimera Agreement means the Reciprocal License Agreement, dated as of May 19, 2004, among
Columbia Laboratories, Inc., Columbia Laboratories (Bermuda) Ltd. and Dimera Incorporated.
Effective Date means the date set forth in the Preamble.
Excluded Asset Patents shall have the meaning set forth in the definition of Excluded Asset
Technology.
Excluded Asset Technology means (a) the Patents (Excluded Asset Patents) and Know-How
Controlled by Seller and/or its Affiliates as of the First Closing Date which relate primarily to
the Products and are not included in the Purchased Assets, and (b) the Seller Next Generation
Delivery System Patents.
Non-US Asset Purchaser shall have the meaning set forth in Section 2.3(a) hereof.
Non-US Rights to Intellectual Property shall have the meaning set forth in Section 2.3(a)
hereof.
Product Infringement shall have the meaning set forth in Section 3.4(a)(i) hereof.
Purchased Asset Patents shall have the meaning set forth in the definition of Purchased
Asset Technology.
Purchased Asset Technology means the Patents (Purchased Asset Patents) and Know-How
included in the Purchased Assets.
Seller Next Generation Delivery System Invention shall have the meaning set forth in Section
3.2(b) hereof.
Seller Next Generation Delivery System Patents means any Patent Controlled by Seller and/or
its Affiliates containing at least one claim that, without a license thereunder, would be infringed
by the manufacture, use, marketing, importing, exporting, sale, offer for sale or other
Commercialization of any product utilizing a Seller Next Generation Delivery System.
Seller Next Generation Delivery System Technology shall have the meaning set forth in
Section 3.2(b) hereof.
Territory means worldwide.
2
ARTICLE II.
CERTAIN LICENSES RELATING TO THE PRODUCTS
2.1 Grant of Licenses.
(a) Grant of Technology Licenses to Buyer. Subject to the terms and conditions of
this Agreement, the PCA, the Ascend Agreement, the Merck-Serono Agreement, and the Dimera
Agreement, Seller hereby grants to Buyer an exclusive (even as to Seller and its Affiliates),
irrevocable, perpetual, royalty-free and fully paid-up (except as provided in the PCA) license,
with the right to grant sublicenses subject to Section 2.2, under the Excluded Asset Technology and
Seller Next Generation Delivery System Technology to Develop, manufacture, have manufactured, use,
import, export, market, sell, offer to sell or otherwise Commercialize the Products in the
Territory in any and all fields.
(b) Grant of Technology Licenses to Seller. Subject to the terms and conditions of
this Agreement and the PCA, including without limitation Section 8.11 of the PCA, Buyer hereby
grants to Seller:
(i) a non-exclusive, non-transferable (except pursuant to Section 6.8), royalty-free and fully
paid-up license under the Buyer Technology to manufacture, have manufactured, import and export the
Products for the purpose of supply of such Products to Buyer under the terms and conditions of the
Supply Agreement;
(ii) a non-exclusive, non-transferable (except pursuant to Section 6.8), royalty-free and
fully paid-up license under the Buyer Technology, Collaboration Technology and Buyer Introduced
Technology for the sole purpose of conducting the Seller Development Activities during the Joint
Development Period;
(iii) an exclusive (even as to Buyer and its Affiliates), irrevocable, perpetual, royalty-free
and fully paid-up license, with the right to grant sublicenses
subject to Section 2.2, under (A) the
Purchased Asset Technology and Collaboration Technology (but solely to the extent such
Collaboration Technology arises out of clinical trials conducted by or on behalf of Seller on the
Product known as progesterone/COL-1620 vaginal gel containing progesterone in a concentration of
either four percent (4%) or eight percent (8%)) to the extent required to permit Seller or its
Affiliate to perform under and comply with the terms of the
Merck-Serono Agreement and (B) the Purchased Asset Technology to the
extent required to permit Seller or its Affiliate to perform under
and comply with the terms of the Dimera
Agreement; and
(iv) a non-exclusive, irrevocable, perpetual, royalty-free and fully paid-up license, with the
right to grant sublicenses subject to Section 2.2, under Collaboration Technology to Develop,
manufacture, have manufactured, use, import, export, market, sell, offer to sell or otherwise
Commercialize the Seller Next Generation Delivery System to the extent that it incorporates or
otherwise delivers any product other than Products in the Territory in any and all fields.
2.2 Sublicenses. In the event that a Party shall have the right to grant sublicenses
under licenses granted pursuant to Section 2.1 of this Agreement, each such Party shall ensure that
its sublicensee shall be subject to a written agreement with terms and condition
3
that are consistent with, and no less protective of, the other Party than the terms and
conditions hereunder, provided that, it is acknowledged that the Seller shall have no obligation to
amend the Merck-Serono Agreement or the Dimera Agreement notwithstanding that such agreements
include licenses that constitute sublicenses hereunder.
2.3 Non-U.S. Rights.
(a) To the extent that rights licensed by Seller hereunder are to be used in connection with
or in order to exploit the Non-United States Purchased Assets purchased by a wholly-owned
Subsidiary of Parent pursuant to Section 11.1 of the PCA (such licensed rights, the Non-US Rights
to Intellectual Property, and such wholly-owned Subsidiary, the Non-US Asset Purchaser), such
Non-US Rights to Intellectual Property shall be licensed to the Non-US Asset Purchaser.
(b) To the extent that rights licensed to Seller hereunder are rights to use the Non-United
States Purchased Assets purchased by the Non-US Asset Purchaser, such rights shall be licensed to
Columbia Laboratories (Bermuda) Ltd.
ARTICLE III.
DEVELOPMENT UNDER THE PCA
3.1 Invention Disclosures. Each Party shall promptly disclose to the other Party any
inventions and other Know-How, including any inventions or other Know-How related to the Products
or any Next Generation Product, arising under the Parties activities conducted pursuant to the PCA
during the Joint Development Period. Such disclosures shall be provided in writing and in
sufficient detail for the other Party to understand the scope and nature of such inventions and
other Know-How. Any such disclosure shall be treated as the Confidential Information (as defined
in the PCA) of the disclosing Party, subject to the terms of this Article III.
3.2 Ownership of Inventions. All inventions arising from the Parties activities
pursuant to the PCA during the Joint Development Period, including any Patents covering such
inventions, shall be owned as follows:
(a) All inventions arising from the Parties activities under the PCA (each, a Collaboration
Invention) and any Patent covering any such an invention (each, a Collaboration Invention
Patent) and Know-How arising from the Parties activities under the PCA (Collaboration Invention
Patents and such Know-How, collectively, Collaboration Technology) shall be owned by Buyer.
Notwithstanding the previous sentence, Collaboration Invention and Collaboration Technology shall
exclude any Seller Next Generation Delivery System Inventions and Seller Next Generation Delivery
System Technology. Seller and Affiliates of Seller shall assign, and hereby assign, to Buyer all
right, title and interest in and to Collaboration Inventions, and all right, title and interest in,
to and under Collaboration Technology, in each case, held by Seller and/or Affiliates of Seller.
Seller shall, and shall cause its Affiliates to, cooperate with Buyer and take all reasonable
actions and execute agreements, instruments and documents as may be reasonably required to perfect
Buyers right, title and
4
interest in and to Collaboration Inventions and Buyers right, title and interest in, to and
under Collaboration Technology.
(b) All inventions arising from the Parties activities under the PCA that relate solely to
the Seller Next Generation Delivery System (each a Seller Next Generation Delivery System
Invention) and any Patent covering such an invention (each such Patent to constitute a Seller Next
Generation Delivery System Patent) and Know-How arising from the Parties activities under the PCA
that relates solely to the Seller Next Generation Delivery System (Seller Next Generation Delivery
System Patents and such Know-How, collectively, Seller Next Generation Delivery System
Technology) shall be owned by Seller. Buyer and Affiliates of Buyer shall assign, and hereby
assign, to Seller all right, title and interest in and to Seller Next Generation Delivery System
Inventions, and all right, title and interest in, to and under Seller Next Generation Delivery
System Technology, in each case, held by Buyer and/or Affiliates of Buyer. Buyer shall, and shall
cause its Affiliates to, cooperate with Seller and take all reasonable actions and execute
agreements, instruments and documents as may be reasonably required to perfect Sellers right,
title and interest in and to Seller Next Generation Delivery System Inventions and Sellers right,
title and interest in, to and under Seller Next Generation Delivery System Technology.
(c) Determination of inventorship shall be made in accordance with United States patent laws.
3.3 Patent Prosecution.
(a) Purchased Asset Patents and Collaboration Invention Patents.
(i) Subject to Sections 3.3(a)(ii) and 3.3(a)(iii), Buyer will have the responsibility for,
and the obligation with respect to, filing, prosecuting and maintaining the Purchased Asset Patents
and Collaboration Invention Patents, at Buyers sole cost and expense. Seller will fully cooperate
with Buyer, at Buyers expense, in connection with the filing, prosecution and maintenance of such
Purchased Asset Patents and such Collaboration Invention Patents, including by providing access to
relevant Persons and executing all documentation reasonably requested by Buyer or its Affiliates.
(ii) Buyer will consult with Seller and keep Seller reasonably informed of the status of the
Purchased Asset Patents and Collaboration Invention Patents, and will provide Seller with all
material filings and correspondences with the patent authorities with respect to such Purchased
Asset Patents and such Collaboration Invention Patents for Sellers review and comment; provided
that Buyer shall have full and complete control over the filing, prosecution and maintenance of the
Purchased Asset Patents and the Collaboration Invention Patents.
(iii) Buyer will notify Seller of any decision not to file applications for, or to cease
prosecution and/or maintenance of, or not to continue to pay the expenses of prosecution and/or
maintenance of, any Purchased Asset Patent or Collaboration Invention Patent. Buyer will provide
such notice at least sixty (60) days prior to any filing or payment due date, or any other due date
that requires action, in connection with such Purchased Asset Patent
or Collaboration Invention Patent.
5
In such event, Buyer shall permit Seller, at Sellers sole discretion and expense, to file or
to continue prosecution or maintenance of such Purchased Asset Patent or such Collaboration
Invention Patent, in each case, in Buyers name.
(b) Excluded Asset Patents. Seller will have the responsibility for, and the
obligation with respect to, filing, prosecuting and maintaining the Excluded Asset Patents at
Sellers sole cost and expense. Buyer will fully cooperate with Seller, at Sellers expense, in
connection with the filing, prosecution and maintenance of the Excluded Asset Patents, including by
providing access to relevant Persons and executing all documentation reasonably requested by Seller
or its Affiliates. Seller shall have full and complete control over the filing, prosecution and
maintenance of the Excluded Asset Patents; provided that, so long as Buyer is Developing and/or
Commercializing a Product utilizing the Seller Next Generation Delivery System, Seller will:
(i) consult with Buyer and keep Buyer reasonably informed of the status of the Seller Next
Generation Delivery System Patents with respect to such Product, and will provide Buyer with all
material filings and correspondences with the patent authorities with respect to such Seller Next
Generation Delivery System Patents for Buyers review and comment; and
(ii) notify Buyer of any decision not to file applications for, or to cease prosecution and/or
maintenance of, or not to continue to pay the expenses of prosecution and/or maintenance of, any
Seller Next Generation Delivery System Patents with respect to such Product. Seller will provide
such notice at least sixty (60) days prior to any filing or payment due date, or any other due date
that requires action, in connection with any such Seller Next Generation Delivery System Patent and
Buyer, at Buyers sole discretion and expense, will have a right to file or to continue prosecution
or maintenance of such Seller Next Generation Delivery System Patent in Sellers name.
3.4 Patent Infringement.
(a) Purchased Asset Patents and Collaboration Invention Patents.
(i) Each Party will notify the other of any infringement by a Third Party of any of the
Purchased Asset Patents, Collaboration Invention Patents or Seller Next Generation Delivery System
Patents that cover a Product of which such Party becomes aware, including any patent
certification filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or
similar provisions in other jurisdictions and of any declaratory judgment, opposition, or similar
action alleging the invalidity, unenforceability or non-infringement of any of the Purchased Asset
Patents, Collaboration Invention Patents or Seller Next Generation Delivery System Patents that
cover a Product (collectively Product Infringement).
(ii) Buyer will have the sole right to bring and control any legal action in connection with
Product Infringement at Buyers own expense as it reasonably determines appropriate, and Seller
shall have the right, at Sellers own expense, to be represented in any such action by counsel of
its own choice.
6
(iii) If Buyer fails to bring an action or proceeding with respect to, or to terminate,
infringement of any Purchased Asset Patents, Collaboration Invention Patents or Seller Next
Generation Delivery System Patents that cover a Product (A) within ninety (90) days following
notice of alleged infringement or (B) prior to ten (10) days before the time limit, if any, set
forth in the appropriate laws and regulations for the filing of such actions, whichever comes
first, Seller shall have the right, upon prior consultation with Buyer, to bring and control any
such action at Sellers own expense and by counsel of its own choice.
(iv) At the request of the Party prosecuting the Product Infringement action or proceeding,
the other Party, at the prosecuting Partys expense, shall provide reasonable assistance in
connection therewith, including by executing reasonably appropriate documents, cooperating in
discovery and joining as a party to the action if required.
(v) In connection with any such proceeding, Buyer shall not enter into any settlement
admitting the invalidity of, or otherwise impairing the Purchased Asset Patents, Collaboration
Invention Patents or Seller Next Generation Delivery System Patents that cover a Product in any
manner that would impair royalties payable pursuant to the PCA without the prior written consent of
Seller, which will not be unreasonably withheld or delayed.
(vi) Any recoveries resulting from an action relating to a claim of Product Infringement shall
be first applied against payment of each Partys costs and expenses in connection therewith. Any
remainder will be considered Net Sales for purposes of Section 2.8(d) of the PCA.
(b) Excluded Asset Patents.
(i) Each Party will notify the other of any infringement by a Third Party of any of the
Excluded Asset Patents of which such Party becomes aware, including any patent certification
filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or similar provisions
in other jurisdictions and of any declaratory judgment, opposition, or similar action alleging the
invalidity, unenforceability or non-infringement of any of such Excluded Asset Patent.
(ii) Seller will have the sole right to bring and control any legal action in connection with
infringement of any Excluded Asset Patent (other than Seller Next Generation Delivery System
Patents that cover a Product) at Sellers own expense as it reasonably determines appropriate.
(iii) If Seller fails to bring an action or proceeding with respect to, or to terminate,
infringement of any Excluded Asset Patent (other than Seller Next Generation Delivery System
Patents) (A) within ninety (90) days following notice of alleged infringement or (B) prior to ten
(10) days before the time limit, if any, set forth in the appropriate laws and regulations for the
filing of such actions, whichever comes first, Buyer shall have the right, upon prior consultation
with Seller, to bring and control any such action at its own expense and by counsel of its own
choice.
(iv) At the request of the Party prosecuting the infringement action or proceeding, the other
Party shall provide reasonable assistance in connection therewith,
7
including by executing reasonably appropriate documents, cooperating in discovery and joining
as a party to the action if required.
(v) In connection with any such proceeding, the Party prosecuting the infringement action or
proceeding shall not enter into any settlement admitting the invalidity of, or otherwise impairing
any Excluded Asset Patent (other than Seller Next Generation Delivery System Patents) utilized in a
Product in any manner that would impair the other Partys Development and/or Commercialization of
such Product or a product utilizing the Seller Next Generation Delivery System without the prior
written consent of the other Party, which will not be unreasonably withheld or delayed.
(vi) Any recoveries resulting from an action relating to a claim of infringement of any
Excluded Asset Patent (other than Seller Next Generation Delivery System Patents) utilized in a
Product shall be first applied against payment of each Partys costs and expenses in connection
therewith. Any remainder will be retained by Seller.
3.5 Third Party Agreements. Each Party shall ensure that any agreement entered into
with Third Parties engaged to perform Development activities pursuant to the PCA provides for
ownership of inventions and other rights in favor of such Party consistent with this Agreement.
ARTICLE IV.
CONSIDERATION; NO IMPLIED LICENSES
4.1 Consideration. The rights and obligations provided under this Agreement are being
provided as a condition to the First Closing under the PCA. As such, no further consideration,
financial or otherwise, will be due under this Agreement, except as expressly provided herein.
4.2 No Implied Licenses. Any Intellectual Property rights of a Party not expressly
granted to the other Party under the provisions of this Agreement shall be retained by such Party.
Except as expressly provided in this Agreement, a Party does not grant to the other Party any right
or license in any Intellectual Property right, whether by implication, estoppel or otherwise.
ARTICLE V.
TERM AND TERMINATION
5.1 Term. The term of this Agreement shall commence on the Effective Date and shall
continue until the Parties mutually agree in writing to terminate this Agreement.
5.2 Bankruptcy. Any licenses granted under or pursuant to this Agreement by either
Party to the other Party are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of Title 11, US Code (the Bankruptcy Code), licenses of rights to intellectual property as
defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that during the term of
this Agreement, each Party, as a licensee of rights under this Agreement, shall
8
retain and may fully exercise all of its rights and elections under the Bankruptcy Code. The
Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or
against a Party under the Bankruptcy Code, then the other Party (which is not a Party to such
proceeding) will be entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property licensed to such other Party under this Agreement and all embodiments of
such intellectual property, and same, if not already in such other Partys possession, will be
promptly delivered by the Party to such other Party (a) upon any such commencement of a bankruptcy
proceeding upon its written request therefor, unless the Party subject to such proceeding elects to
continue, and thereafter continues, to perform all of its obligations under this Agreement, or (b)
if not delivered under (a) above, following the rejection of this Agreement by or on behalf of the
Party subject to such proceeding upon written request therefor by the non-subject Party.
ARTICLE VI.
MISCELLANEOUS
6.1 Disclaimer of Warranty. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS
AGREEMENT OR THE PCA, NEITHER PARTY MAKES ANY REPRESENTATIONS NOR GRANTS ANY WARRANTIES, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE RELATED TO ANY AND ALL OF
THE INTELLECTUAL PROPERTY LICENSED HEREUNDER, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS, STATUTORY OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.
6.2 Governing Law. This Agreement (including any claim or controversy arising out of
or relating to this Agreement) shall be governed by and construed in accordance with the Laws of
the State of Delaware without regard to conflict of law principles that would result in the
application of any Law other than the Laws of the State of Delaware.
6.3 Waiver. Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. The failure of any Party to enforce any condition or part of this Agreement at any time
shall not be construed as a waiver of that condition or part, nor shall it forfeit any rights to
future enforcement thereof.
6.4 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (a) when received if
delivered personally, (b) when transmitted if telecopied (which is confirmed), (c) upon receipt, if
sent by registered or certified mail (postage prepaid, return receipt requested) and (d) the day
after it is sent, if sent for next-day delivery to a domestic address by overnight mail or courier,
to the Parties at the following addresses:
9
If to Seller, to:
Columbia
Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
Attention: General Counsel
Facsimile: 973.994.3001
with copies (which shall not constitute notice) sent concurrently to:
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
If to Buyer, to:
Coventry
Acquisition, Inc.
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
with copies (which shall not constitute notice) sent concurrently to:
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
provided, however, that if any Party shall have designated a different address by notice to the
others, then to the last address so designated.
6.5 (a) Relationship of the Parties. The Parties are independent contractors.
Nothing herein is intended, or shall be deemed, to constitute a partnership, agency, joint venture
or employment relationship between the Parties. Neither Party shall be responsible for the other
Partys acts or omissions; and neither Party shall have authority to speak for, represent or
obligate the other Party in any way without prior written authority from the other Party. Subject
to the terms of this Agreement, the activities and resources of each Party shall be managed by such
Party, acting independently and in its individual capacity.
(b) No Third Party Beneficiaries. This Agreement is solely for the benefit of the
Parties hereto and their respective Affiliates and no provision of this Agreement shall be deemed
to confer upon any third parties any remedy, claim, liability, reimbursement, claim of action or
other right in excess of those existing without reference to this Agreement.
6.6 Amendment; Entire Agreement. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both Parties hereto. This
Agreement, the PCA, the Other Agreements and the Confidentiality Agreement contain the entire
agreement of the Parties hereto with respect to the Transactions, superseding all negotiations,
prior discussions and preliminary agreements made prior to the Effective Date.
6.7 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other Regulatory Authority to be
10
invalid, void, unenforceable or against its regulatory policy such determination shall not
affect the enforceability of any others or of the remainder of this Agreement.
6.8 Assignment and Transfer.
(a) Neither this Agreement nor any right or obligation hereunder may be assigned or otherwise
transferred by either Party without the prior written consent of the other Party, except that
either Party may, without consent of the other Party, assign or otherwise transfer this Agreement
and its rights and obligations hereunder in whole or in part: (i) to any Affiliate; (ii) in
connection with a merger, reorganization or a sale or transfer of all or substantially all of the
assets to which this Agreement relates. Any attempted assignment or other transfer not in
accordance with this Section 6.8 shall be void. Any permitted assignee shall assume in writing all
assigned obligations of its assignor under this Agreement. The Party making any assignment or
other transfer permitted under this Section 6.8 shall provide prompt written notice to the other
Party of such assignment or transfer. The assignor shall remain jointly and severally liable with
any such assignee(s) with respect to all obligations and liabilities of the assignor hereunder.
(b) Successors and Assigns. Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of the Parties hereto and their successors and permitted
assigns.
6.9 Arbitration.
(a) All disputes, differences, controversies and claims of the Parties arising out of or
relating to the Agreement (individually, a Dispute and, collectively, Disputes), except as
otherwise provided under this Agreement, shall be resolved by final and binding arbitration
administered by the American Arbitration Association (AAA) under its Commercial Arbitration
Rules, subject to the provisions of this Section 6.9.
(b) Following the delivery of a written demand for arbitration by either Party, each of Buyer
and Seller shall choose one (1) arbitrator within ten (10) Business Days after the date of such
written demand and the two chosen arbitrators shall mutually, within ten (10) Business Days after
selection select a third (3rd) arbitrator (each, an Arbitrator and together, the Arbitrators),
each of whom shall be a retired judge selected from a roster of arbitrators provided by the AAA.
If the third (3rd) Arbitrator is not selected within fifteen (15) Business Days after delivery of
the written demand for arbitration (or such other time period as the Parties may agree), the
Parties shall promptly request that the commercial panel of the AAA select an independent
Arbitrator meeting such criteria.
(c) The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association; provided, however, that notwithstanding any provisions of the Commercial Arbitration
Rules to the contrary, unless otherwise mutually agreed to by Buyer and Seller, the sole discovery
available to each Party shall be its right to conduct up to two (2) non expert depositions of no
more than three (3) hours of testimony each.
11
(d) The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the Parties agree to extend such time. The award shall be final
and binding upon the Parties.
(e) Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the Parties, including without limitation any proceeding to enforce this Section 6.9, to review
or confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery Court
sitting in the county of New Castle, Delaware (the Enforcing Court). By execution and delivery
of this Agreement, each Party accepts the jurisdiction of the Enforcing Court.
(f) Each Party shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section 6.9, including attorneys fees, unless determined otherwise by the
Arbitrator.
(g) The Parties agree that the existence, conduct and content of any arbitration pursuant to
this Section 6.9 shall be kept confidential and no Party shall disclose to any Person any
information about such arbitration, except in connection with such arbitration or as may be
required by Law or by any Regulatory Authority (or any exchange on which such Partys securities
are listed) or for financial reporting purposes in such Partys financial statements.
(h) Notwithstanding the foregoing, none of the provisions of this Section 6.9 shall restrict
the right of any Party to seek injunctive relief or other equitable remedies, to enjoin any breach
or threatened breach of this Agreement or otherwise specifically enforce any provision of this
Agreement.
6.10 Remedies.
(a) Injunctive Relief. The Parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached and that such damages would not be fully
compensable by an award of money damages. It is accordingly agreed that the Parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement without posting a bond or other
undertaking, this being in addition to any other remedy to which they are entitled at law or in
equity. The parties agree that notwithstanding Section 6.9, any Action brought for an injunction,
or for specific performance shall be heard and exclusively in the Delaware Chancery Court sitting
in New Castle County and each Party waives any objection which it may now or hereafter have to the
laying of venue of any such proceeding, and irrevocably submits to the jurisdiction of such courts
in any such suit, action or proceeding.
(b) Indemnification. Seller represents and warrants to Buyer that, other than the
Non-US Rights to Intellectual Property, any Intellectual Property licensed by Seller to Buyer
hereunder (including without limitation any Excluded Asset Technology and Seller Next Generation
Delivery System Technology licensed by Seller to Buyer pursuant to Section 2.1(a)) is owned
directly by Columbia Laboratories, Inc., and has not been assigned or otherwise transferred to any
other Person. Seller shall indemnify, reimburse and defend Buyer and its
12
Affiliates and each of their respective Representatives, successors and assigns from and
against, and hold them harmless from, any Taxes (including without limitation any withholding
Taxes) arising from any breach of the foregoing representation and warranty.
6.11 Interpretation. Unless the context of this Agreement otherwise requires, (a)
words of one gender include the other gender; and (b) words using the singular or plural number
also include the plural or singular number, respectively. Reference to days are to calendar days
unless specified otherwise. References to any statute, act, or regulation are to that statute,
act, or regulation as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof. The headings contained in this Agreement are for convenience of
reference only and shall not be considered in interpreting this Agreement. The words hereof,
herein and hereunder and words of like import used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. Whenever the words
include, includes or including are used in this Agreement, they shall be deemed to be
followed by the words without limitation, whether or not they are in fact followed by those words
or words of like import. The language in all parts of this Agreement shall be construed, in all
cases, according to its fair meaning. The Parties acknowledge that each Party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.
6.12 Counterparts. This Agreement may be executed in two or more counterparts
(including by facsimile or by an electronic scan delivered by electronic mail), each of which shall
be deemed to be an original, but all of which, taken together, shall constitute one and the same
agreement and shall become effective when counterparts have been signed by each of the Parties
hereto delivered to the other Parties, it being understood that all Parties need not sign the same
counterpart.
6.13 Further Actions. Each Party will duly execute and deliver, or cause to be duly
executed and delivered, such further instruments and do and cause to be done such further acts and
things, as may be reasonably necessary or as the other Party may reasonably request in connection
with this Agreement in order to carry out more effectively the provisions and purposes hereof.
[Remainder of Page Left Intentionally Blank]
13
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of
the date first above written.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
COLUMBIA LABORATORIES (BERMUDA) LTD.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
COVENTRY ACQUISITION, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
Exhibit
E
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
COLUMBIA LABORATORIES, INC.
Columbia Laboratories, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the Corporation), DOES HEREBY CERTIFY:
FIRST: The first paragraph of Article FOURTH of the Restated Certificate of Incorporation, as
previously amended, of the Corporation is hereby deleted in its entirety and replaced with the
following:
The total number of shares of capital stock which the Corporation is
authorized to issue is one hundred fifty-one million (151,000,000) shares, of which
one hundred fifty million (150,000,000) shares shall be denominated common stock,
$.01 par value per share (Common Stock), and one million (1,000,000) shares shall
be denominated preferred stock, $.01 par value per share (Preferred Stock).
SECOND: The aforesaid amendment was duly adopted in accordance with the applicable provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Columbia Laboratories, Inc. has caused this Certificate to be signed by
[], its [], this [] day of [], 2010.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
Annex B
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
COLUMBIA LABORATORIES, INC.
Columbia Laboratories, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the Corporation), DOES HEREBY CERTIFY:
FIRST: The first paragraph of Article FOURTH of the Restated Certificate of Incorporation, as
previously amended, of the Corporation is hereby deleted in its entirety and replaced with the
following:
The total number of shares of capital stock which the Corporation is
authorized to issue is one hundred fifty-one million (151,000,000) shares, of which
one hundred fifty million (150,000,000) shares shall be denominated common stock,
$.01 par value per share (Common Stock), and one million (1,000,000) shares shall
be denominated preferred stock, $.01 par value per share (Preferred Stock).
SECOND: The aforesaid amendment was duly adopted in accordance with the applicable provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Columbia Laboratories, Inc. has caused this Certificate to be signed by
[], its [], this [] day of [], 2010.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
Annex C
March 3, 2010
STRICTLY PRIVATE AND CONFIDENTIAL
Board of Directors
Columbia Laboratories, Inc.
354 Eisenhower Parkway
Plaza I, Second Floor
Livingston, NJ 07039
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of view, to Columbia
Laboratories, Inc., a Delaware corporation (the Company), of the Consideration (as defined below)
to be received by the Company under the proposed Purchase and Collaboration Agreement, to be dated
as of March 3, 2010 (the Agreement), by and among the Company, Watson Pharmaceuticals, Inc., a
Nevada corporation (Parent), and Coventry Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent (Buyer), pursuant to which the Company will transfer, or cause
to be transferred, the Purchased Assets (as defined below) to Buyer, and Buyer will assume certain
associated liabilities (the Transaction).
Pursuant to the Agreement and subject to the terms and conditions thereof, the Company will sell
and Buyer will purchase (a) certain assets (the Purchased Assets) of the Company primarily
relating to the research, development, regulatory approval, distribution, marketing, sale and
promotion of all pharmaceutical products containing progesterone as an active ingredient (each, a
Product) and (b) 11,200,000 shares (the Shares) of common stock of the Company, par value $0.01
per share (Common Stock). In consideration for the Purchased Assets and the Shares, Buyer will
pay to the Company: (i) at the initial closing, $47,000,000, (ii) upon the delivery of results from
the Companys Phase III clinical trial being conducted for a pre-term birth indication (PTB
Indication) for the drug branded Prochieve (the Clinical Trial Results), and (A) if the
Clinical Trial Results reflect a primary endpoint p-value that is less than or equal to 0.05 and
greater than 0.01, $6,000,000 or (B) if the Clinical Trial Results reflect a primary endpoint
p-value that is less than or equal to 0.01, $8,000,000; provided, however, in each case, the
Clinical Trial Results reflect a secondary endpoint p-value that is less than or equal to 0.05 (the
Clinical Trial Results Milestone Payment), (iii) upon acceptance by the U.S. Food and Drug
Administration of a new drug application or a supplemental new drug application regarding the PTB
Indication, $5,000,000, (iv) upon the first commercial sale of a product for the PTB Indication in
the U.S., $30,000,000, (v) upon the filing and acceptance by the applicable
regulatory authority of an application for the authorization to market a Product for the PTB
Indication in any country or jurisdiction outside of the U.S., $500,000, (vi) upon a grant by the
applicable regulatory authority outside of the U.S. of regulatory approval to market a Product for
the PTB Indication, $2,000,000 (each of clauses (ii)
Board of Directors, Columbia Laboratories, Inc., March 3, 2010 Page 2
through (vi), a Milestone Payment), and (vii) periodic royalty payments (each a Royalty
Payment) based on the sales of certain Products, including such Products associated with the PTB
Indication (each a Royalty Product), at the rates of (A) 10% of the portion of annual U.S. net
sales which are less than or equal to $150,000,000, (B) 15% of the portion of annual U.S. net sales
which are greater than $150,000,00 and less than or equal to $250,000,000, (C) 20% of the portion
of annual U.S. net sales which are greater than $250,000,000, and (D) 10% of annual net sales
outside of the U.S. in a country where Buyer or its affiliates are commercializing any such
Product; provided, however, that (x) if Buyer or any of its affiliates grants any licenses,
sublicenses, distribution or marketing rights or otherwise collaborates or partners with a third
party to commercialize any Royalty Product (a Third Party Collaboration) in a country outside of
the U.S., in lieu of royalties payable in respect of net sales, the Company will be entitled to 20%
of gross profits associated with such commercialization in such country, (y) if generic entry by a
third party with respect to any Product occurs in any country, such that the quarterly net sales of
such Product in such country is reduced by 50% in relation to the average quarterly net sales of
such Product over the last four complete quarters (a Generic Entry), and certain other
circumstances set forth in the Agreement are met, the royalty rate shall be reduced by 50%, and (z)
in the event that a generic entry by the Buyer or any of its affiliates with respect to any Product
in a country occurs in certain circumstances permitted by the Agreement, in lieu of royalties
payable in respect of net sales for such generic product, the Company will be entitled to 20% of
gross profits associated the commercialization of such generic product in such country
(collectively, the Consideration).
RBC Capital Markets Corporation (RBC), as part of its investment banking services, is
regularly engaged in the valuation of businesses and their securities in connection with mergers
and acquisitions, corporate restructurings, underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for corporate and other purposes.
We have been engaged to render this opinion to the Board of Directors of the Company (the
Board) and will be entitled to receive a fee upon delivery thereof, without regard to the
conclusion reached herein or whether the Transaction is consummated. In addition, the Company has
agreed to indemnify us for certain liabilities arising out of our engagement. In the ordinary
course of business, RBC or an affiliate may act as a market maker and/or broker in the publicly
traded securities of the Company and receive customary compensation, and may also actively trade
securities of the Company for our own account and the accounts of our customers, and, accordingly,
RBC and its affiliates may hold a long or short position in such securities.
For the purposes of rendering our opinion, we have undertaken such review and inquiries as we
deemed necessary or appropriate under the circumstances, including the following: (i) we reviewed a
draft of the Agreement provided to us on March 3, 2010 (the Latest Draft Agreement); (ii) we
reviewed financial information and estimates relating to the Purchased Assets and to the operations
associated therewith that were provided to us by the Companys management, including estimates as
to corporate overhead costs attributable thereto and the Companys payment of the first $7,000,000
of development costs associated with the PTB Indication and other mutually agreed-upon product
development (the Forecasts); (iii) we conducted discussions with members of senior management of
the Company with
Board of Directors, Columbia Laboratories, Inc., March 3, 2010 Page 3
respect to the prospects and financial outlook of the Purchased Assets; and (iv) we performed
such other studies and analyses as we deemed appropriate.
In arriving at our opinion, we performed the following analyses in addition to the review,
inquiries, and analyses referred to in the preceding paragraph: (i) we reviewed selected market
valuations of publicly-traded companies that we deemed comparable to the Purchased Assets; and (ii)
we performed a discounted cash flow analysis using the Forecasts.
Several analytical methodologies have been employed and no one method of analysis should be
regarded as critical to the overall conclusion we have reached. Each analytical technique has
inherent strengths and weaknesses, and the nature of the available information may further affect
the value of particular techniques. The overall conclusions we have reached are based on all the
analysis and factors presented, taken as a whole, and also on application of our own experience and
judgment. Such conclusions may involve significant elements of subjective judgment and qualitative
analysis. We therefore give no opinion as to the standalone value or merit of any one or more
parts of the analyses.
In rendering our opinion, we have assumed and relied upon the accuracy and completeness of the
financial, legal, tax, operating and other information provided to us by the Company, and have not
assumed responsibility for independently verifying and have not independently verified such
information. For all forward-looking financial information with respect to the Purchased Assets,
we have relied on the Forecasts. We assumed that the Forecasts were reasonably prepared and
represent the best currently available estimates and good faith judgments of the Companys
management as to the Purchased Assets financial performance and express no opinion as to any
aspect of the Forecasts or the assumptions on which they are based.
For the purposes of our analyses, we have assumed that (i) the passage of each clinical phase,
regulatory approval or product launch, as contemplated by the Agreement, will be realized, in such
time periods indicated in the Forecasts, and (ii) each associated Milestone Payment and Royalty
Payment payable to the Company after the initial closing will be paid, in
each foregoing case, on a probability risk-adjusted basis. In connection with the foregoing,
we have assumed, with the consent of the Companys management, that there will be no Third Party
Collaboration or Generic Entry related to any Product in any country during the length of the
Forecasts. Furthermore, we have assumed for purposes of our analyses that the Clinical Trial
Results Milestone Payment to be received by the Company will be $6,000,000. We express no opinion
with respect to the actual likelihood of any of the foregoing to occur.
In rendering our opinion, we have not assumed any responsibility to perform, and have not
performed, an independent evaluation or appraisal of any of the assets or liabilities of the
Company, including any Purchased Assets or liabilities of the Company. We have not assumed any
obligation to conduct, and have not conducted, a physical inspection of the property or facilities
of the Company, including any property or facilities relating to the Purchased Assets. We have not
investigated, and make no assumption regarding, any litigation or other claims affecting the
Company or the Purchased Assets. Our opinion relates to the Purchased Assets as part of an
on-going going concern and, accordingly, we express no opinion regarding the
Board of Directors, Columbia Laboratories, Inc., March 3, 2010 Page 4
liquidation value of the Purchased Assets. In addition, we have not performed any review
or analysis regarding the fairness of the Consideration on an after-tax basis.
We have assumed, in all respects material to our analysis, that all conditions to the
consummation of the Transaction will be satisfied without waiver thereof, that the representations
and warranties of each party contained in the Agreement are true and correct and that each party
will perform all of the covenants and agreements required to be performed by it under the
Agreement. We have assumed that the executed version of the Agreement will not differ, in any
respect material to our opinion, from the Latest Draft Agreement. In addition, we have relied upon
the Company to advise us promptly if any information previously provided to us has become
inaccurate or is required to be updated during our review.
Our opinion speaks only as of the date hereof, is based on the conditions as they exist and
information which we have been supplied as of the date hereof, and is without regard to any market,
economic, financial, legal, or other circumstances or event of any kind or nature which may exist
or occur after such date. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon events occurring after the date hereof and do not have an obligation to update, revise
or reaffirm this opinion. We are not expressing an opinion as to the fairness of the amount or
nature of any compensation to any officers, directors or employees of any party, or any class of
such persons, relative to the Consideration. We express no opinion as to what
the value of Common Stock or the Shares will be when issued pursuant to the Transaction or the
price at which Common Stock will trade at any time.
This opinion is provided for the information and assistance of the Board in connection with
the proposed Transaction. This opinion should not be construed as creating any fiduciary duty on
the part of RBC to any shareholder of the Company or any other person or entity. All advice
(written and oral) and this opinion rendered by RBC in connection with the proposed Transaction are
intended for the use and benefit of the Board. Such advice or opinions may not be reproduced,
summarized, excerpted from or referred to in any public document or given to any other person
without the prior written consent of RBC, except as provided in the following sentence. Such
opinion may be included in any disclosure document filed by the Company with the Securities and
Exchange Commission with respect to the proposed Transaction and subsequently mailed to the
Companys stockholders; provided however, that such opinion must be reproduced in full and that any
description of or reference to RBC be in a form reasonably acceptable to RBC and its counsel. RBC
shall have no responsibility for the form or content of any such disclosure document, other than
the opinion itself. This opinion was approved by a fairness committee of RBC.
Our opinion does not address the merits of the underlying decision by the Company to engage in
the Transaction or the relative merits of such Transaction compared to any alternative business
strategy or transaction in which the Company might engage and does not constitute recommendation to
any member of the Board as to how to vote in connection with the proposed Transaction.
Board of Directors, Columbia Laboratories, Inc., March 3, 2010 Page 5
Our opinion addresses solely the fairness to the Company, from a financial point of view,
of the Consideration. Our opinion does not in any way address other terms or conditions of any of
the proposed Transaction.
Based on our experience as investment bankers and subject to the foregoing, including the
various assumptions and limitations set forth herein, it is our opinion that, as of the date
hereof, the Consideration to be received by the Company is fair, from a financial point of view, to
the Company.
Very truly yours,
RBC CAPITAL MARKETS CORPORATION
Annex D
NOTE PURCHASE AND AMENDMENT AGREEMENT*
Note Purchase and Amendment Agreement, dated as of March 3, 2010 (this Agreement), by
and among Columbia Laboratories, Inc., a Delaware corporation (the Company), the holders of the
Notes (as defined below) listed on Schedule I attached hereto (each a Holder and
collectively, the Holders).*
PRELIMINARY STATEMENT
The Holders own the aggregate principal amount of the Companys Convertible Subordinated Notes
due December 31, 2011 (the Notes) set forth on Schedule I; the Notes owned by the Holders
being referred to herein as the Holder Notes.
The Notes were purchased by the Holders pursuant to that certain Securities Purchase
Agreement, dated December 21, 2006 (the SPA), among the Company, the Holders and the other
purchasers of the Notes named therein.
The Holders wish to sell to the Company, and the Company wishes to purchase, the Holder Notes,
on the terms and conditions hereinafter set forth.
In consideration of the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Note Purchase. At the Closing, on the terms and subject to the conditions hereof and in
consideration of the Purchase Price (as defined below) and the agreements of the Company set forth
herein, each Holder will sell, convey, transfer, assign and deliver to the Company, and the Company
will purchase, take delivery of and acquire from each Holder, all of such Holders right, title and
interest in the Holder Notes.
1.2 Purchase Price. The aggregate purchase price (the Purchase Price) for the Holder Notes
shall be (i) $11,699,998.54 in cash (the Cash Consideration), plus accrued and unpaid interest on the Notes
(calculated in accordance with the Notes) up to (but excluding) the Closing Date payable in cash,
(ii) warrants to purchase 3,488,370 shares of the Companys common stock, $0.01 par value per share
(the Common Stock), substantially in the form attached as Exhibit A hereto (the
Warrants) and (iii) 3,333,330 shares of Common Stock (the Shares),
in each case as allocated among the Holders as set forth on Schedule I.
1.3 Amendment Consent. Each Holder hereby irrevocably consents and agrees that the Notes shall be
amended as set forth in the amendment (the Amendment) to the Notes, in the form attached as
Exhibit B hereto. The Amendment will become effective on the date that the Note Amendment
Condition is satisfied; provided, on the Amendment Termination Date (as defined below), if
it occurs, the Amendment will terminate and be of no further force and effect, and from and after
the Amendment Termination Date, the Notes shall no longer be modified by the Amendment. The
Company will notify the Holders when the Note Amendment Condition
|
|
|
* |
|
See Attachment A hereto for important information regarding the Note Purchase and Amendment Agreements. |
has been satisfied. Amendment
Termination Date means the earliest of (i) August 31, 2010, only if the Closing has not occurred on or
prior to August 31, 2010, (ii) the date, if any, after
the date hereof and prior to the Closing Date, on which holders of at least 25% of the aggregate
principal amount of the Notes have not consented to the Amendment or have rightfully terminated the
Note Purchase and Amendment Agreements (as defined in Section 7.10) that they are a party to (in
accordance with the terms of such Note Purchase and Amendment Agreements), and (iii) the Business Day following the date on which the Sale Condition is satisfied, only if the Closing has not occurred on or prior to such Business Day.
1.4 Closing. The closing of the purchase and sale of the Holder Notes (the Closing) shall take
place at the offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York 10022 at 10:00 a.m.
New York City time on the date on which the Sale Condition is satisfied; provided, that,
(i) all of the other conditions set forth in Sections 1.5, 1.6 and 1.7 have been satisfied or
waived (by the appropriate party) on or prior to such date, (ii) all closings under all Note
Purchase and Amendment Agreements (as defined in Section 7.10) shall occur on the same date
and (iii) the satisfaction of the Sale Condition shall occur contemporaneously with the Closing, or
at such other place, date and time as the parties hereto may agree in accordance with Section 7.10
(the Closing Date).
1.5 General Closing Conditions. The respective obligations of the Company and the Holders to
consummate the Closing are subject to the satisfaction or waiver (jointly by the Company and the
Holders) at or prior to the Closing of the following conditions:
(a) The initial consummation, on the same date as the Closing, by the Company of the
transaction (or series of related transactions) publicly announced by the Company in a Current
Report on Form 8-K filed by the Company on or prior to the date which is one Business Day after the
date hereof (the Form 8-K) with the Securities and Exchange Commission (the SEC), which
transaction includes the license, sale, transfer or other disposition of rights or assets of the
Company related to, and/or the co-development, co-promotion, co-marketing, distribution or other
collaboration with respect to, one or more of the Companys products (and a sale of
Company capital stock), pursuant to which the Company receives proceeds of at least $40 million in
cash consideration at the initial closing thereof (the Sale Condition);
(b) The filing, after the date hereof, with, and the acceptance of such filing by, the
Secretary of State of the State of Delaware of an amendment to the Companys certificate of
incorporation to increase the number of the Companys authorized shares of Common Stock (the
Charter Amendment);
(c) The Company shall have received written consents from the holders of at least 75% of the
outstanding principal amount of the Notes to the Amendment (the Note Amendment Condition);
(d) The Company shall have obtained (i) all necessary blue sky law permits and qualifications,
or secured exemptions therefrom, required by any state for the sale and offer of the Warrants (and
the shares of Common Stock issuable upon exercise of the Warrants (the Warrant Shares and
collectively with the Warrants and the Shares, the Securities)) and the Shares issued pursuant to this Agreement and (ii) if the
Company determines it to be necessary, approval by the Companys stockholders of the transactions
(or certain of or all of them) contemplated by the Note Purchase
2
and Amendment Agreements (as defined in Section 7.10) to the extent required by the listing
rules of the NASDAQ Global Market or otherwise (the Stockholder Approval);
(e) The Company shall have satisfied in full its obligations in respect of the Senior Debt (as
defined in the Notes) and obtained an acknowledgement from the holder of the Senior Debt in
substantially the form of Exhibit C hereto (the Senior Debt Satisfaction); and
(f) No governmental authority (including a court) of competent jurisdiction shall have issued
an order, decree or ruling, or taken any other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement (including the Amendment), which order,
decree, ruling or other action is in effect at the time the Closing would otherwise occur.
1.6 Conditions to the Obligations of the Company. The obligation of the Company to consummate the
Closing is subject to the satisfaction or waiver (by the Company in its sole discretion) at or
prior to the Closing of the following conditions:
(a) The representations and warranties of each Holder contained in Article II shall be true
and correct in all material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date (unless any such representation or warranty expressly relates to
an earlier date, in which case such representation or warranty shall be true and correct only as of
such earlier date);
(b) All covenants and agreements contained in this Agreement to be performed by the Holders on
or prior to the Closing Date shall have been performed or complied with in all material respects;
and
(c) The Holders shall have made the deliveries required pursuant to Section 1.8.
1.7 Conditions to the Obligations of the Holders. The obligations of the Holders to consummate
the Closing are subject to the satisfaction or waiver (by the Holders in their sole discretion) at
or prior to the Closing of the following conditions:
(a) (i) the representation and warranty of the Company contained in Section 3(h) shall be true
and correct in all material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date and (ii) each of the other representations and warranties of the
Company set forth in Article III shall be true and correct in all respects as of the date hereof
and as of the Closing Date as though made on and as of the Closing Date (unless any such
representation or warranty expressly relates to a specified date, in which case such representation
or warranty shall be true and correct only as of such specified date), except where the failure of
such representations and warranties to be so true and correct would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect;
(b) All covenants and agreements 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;
and
(c) The Company shall have made the deliveries required pursuant to Section 1.9.
3
1.8 Closing Deliveries by the Holders. Each Holder shall (and covenants and agrees to), at the Closing, deliver to the Company
the original Holder Notes, duly endorsed for transfer to the Company or its designated purchaser or
accompanied by duly executed note powers in blank.
1.9 Closing Deliveries by the Company. The Company shall (and covenants and agrees to), at the Closing, deliver or cause to be
delivered to the Holders (a) a wire transfer of immediately available funds in the aggregate amount
of the Cash Consideration, (b) the Warrants and (c) the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE HOLDERS
Each Holder agrees, represents and warrants (both as of the date of this Agreement and as of
the Closing Date) as follows:
(a) Each Holder that is an entity is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, with full entity power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. Each Holder that is
an individual is competent to enter into this Agreement. Each Holder has duly executed and
delivered this Agreement. The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action of each Holder and this Agreement constitutes a valid and
binding obligation of each Holder, enforceable against each Holder in accordance with its terms.
(b) Each Holder is the lawful owner, of record and beneficially, of the principal amount of
Holder Notes set forth opposite its name on Schedule I hereto under the column Principal
Amount of Holder Notes Owned, free and clear of all Encumbrances. At the Closing, the Company
will acquire good and valid title to the Holder Notes, free and clear of all Encumbrances and
thereafter no Holder will have any right, title or interest in and to any Holder Notes.
(c) The execution and delivery of this Agreement by each Holder, the performance by each
Holder of its obligations hereunder and the consummation of the transactions contemplated by this
Agreement do not (i) violate, contravene or breach the governing documents of any Holder; (ii)
violate, contravene or breach, or constitute a default under, any contract, agreement, indenture or
instrument to which any Holder is a party, or any Holders properties or assets are bound, or to
which any Holder may be subject; or (iii) violate, contravene or breach any statute or law or any
judgment, decree, order, regulation, or rule of any court or governmental authority applicable to
any Holder.
(d) No Holder is 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 its obligations hereunder or under the Holder Notes
in accordance with the terms hereof or thereof, or Transfer (as defined herein) the Holder Notes in
accordance with the terms hereof other than such as have been made or obtained, or, with respect to
filings with the SEC, which will be made as required by such Holder.
4
(e) Each
Holder is an accredited investor (as such term is defined
under Rule 501(a) of the
Securities Act, as defined herein). Each Holder is acquiring 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 and has no arrangement or understanding with any
other Persons regarding the sale or distribution of such Securities, except, in each case, as would
not result in a violation of the Securities Act of 1933, as amended (the Securities Act);
provided, however, that by making the representations herein, such Holder 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 from registration under the Securities Act. Each Holder agrees not to, 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) (collectively, Transfer) any of the Securities
except in compliance with the Securities Act.
(f) Each Holder understands that the Securities being offered and sold to it under the
Agreement are being offered and sold in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws (including the Securities Act) and
that the Company is relying upon the truth and accuracy of, and each Holders compliance with the
representations, warranties, agreements, acknowledgments and understandings of such Holder set
forth herein in order to determine the availability of such exemptions and the eligibility of each
Holder to acquire the Securities.
(g) Each Holder acknowledges and understands that its investment in the Securities involves a
significant degree of risk, including, without limitation, (i) an investment in the Company is
speculative, and only those who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (ii) such Holder may not be able to liquidate its
investment; (iii) transferability of the Securities may be limited; (iv) such Holder 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 (v) such Holder has, in connection with such Holders decision to
engage in the transactions contemplated by this Agreement, 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. Each Holder understands that a description of certain
risks relating to an investment in the Company are set forth in the Companys filings with the
SEC and each Holder has carefully reviewed such filings.
(h) Each Holder 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 or of any of the transactions contemplated hereby.
(i) Transfer or Resale.
(i) Each Holder 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 Securities may not be transferred unless (A) the resale thereof is
5
registered pursuant to an effective registration statement under the Securities Act,
(B) such Holder has executed and delivered to the Company a certificate in
substantially the form annexed hereto as Exhibit D (the
Certificate),
in which case such Holder may Transfer its Shares and Warrants in accordance
with Rule 144 under the Securities Act, or (C)
each such Holder 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 the registration requirements of the Securities Act;
and
(ii) Neither the Company nor any other Person is under any obligation to register the
resale by any Holder of any Securities of the Company acquired pursuant to this Agreement,
except as provided in Article V hereof.
(iii)
Subject to Section 2(j), each Holder understands that the Securities will bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed against transfer
of the Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE 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. COLUMBIA
LABORATORIES, INC. SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO COLUMBIA LABORATORIES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED
PURSUANT TO THE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.
(j) In the event that a Holder provides the Company with the Certificate, the Company shall
promptly provide such Holder, at such Holders request, without any expense to such Holder
(other than applicable transfer taxes and similar governmental charges, if any), with new
certificates representing the Shares and Warrants held by such Holder not bearing the legend
described in Section 2(i)(iii). For the avoidance of doubt, a Holder may provide the Certificate at
any time prior to, on or following the Closing Date, including with respect to the Shares and
Warrants that will delivered on the Closing Date in accordance with Section 1.9. If a Holder
provides the Company with the Certificate on or prior to the Closing Date, the Shares and the
Warrants to be issued to such Holder at the Closing shall be issued without any restrictive
legend.
(k) Each Holder is a resident of the jurisdiction set forth across from its name on to
Schedule I hereto.
(l) Between the time that a Holder learned about the transactions contemplated by this
Agreement and the public announcement thereof, no Holder has engaged in any short sales or similar
transactions with respect to the Common Stock, nor has any Holder, directly or indirectly,
knowingly caused any Person to engage in any short sales or similar transactions with respect to
Common Stock.
(m) The Holders and their Affiliates (as defined in the rules promulgated under the Securities
Act) and their Associates (as defined in the rules promulgated under the Securities Act)
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 (the Rights
Agreement)) and, immediately after the Closing will Beneficially Own, less than 15% of the
outstanding shares of Common Stock. No Holder or any affiliate or associate thereof
6
is or has been an interested stockholder (as each such term is defined in Section 203 of the
Delaware General Corporation Law).
(n) No Holder will, after giving effect to the consummation of the transactions contemplated by this Agreement, (i) beneficially own (as determined under Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act)) 19.9% or more of the shares of Common Stock and/or (ii) possess 19.9% or more of the voting power of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company agrees, represents and warrants (both as of the date of this Agreement and as of
the Closing Date) as follows:
(a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, with full corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The Company has duly executed and delivered this
Agreement. The execution, delivery and, subject to obtaining the Stockholder
Approval, performance of this Agreement has been duly authorized by
all necessary corporate action of the Company and this Agreement constitutes a valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
(b) The execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder and the consummation of the transactions contemplated by this
Agreement by the Company do not (a) violate, contravene or breach the certificate of incorporation
or by-laws of the Company (subject to the filing of the Charter Amendment with the Secretary of
State of the State of Delaware and obtaining the Stockholder Approval); (b) violate, contravene or breach, or constitute a default under,
any contract, agreement, indenture or instrument to which the Company is a party or by which any of
its property or assets are bound, or to which the Company may be subject (subject to the filing of
the Charter Amendment with the Secretary of State of the State of Delaware, the Senior Debt
Satisfaction and obtaining the Stockholder Approval); or (c) violate, contravene or breach any statute or law or any judgment, decree,
order, regulation, or rule of any court of governmental authority applicable to the Company
(subject to obtaining the Stockholder Approval).
(c) Subject to the filing of the Charter Amendment with the Secretary of State of the State of
Delaware,
and obtaining the Stockholder Approval, (i) the Securities will be duly authorized, (ii) upon
issuance in accordance with the terms of this Agreement, 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, (iii)
upon issuance in
accordance with the terms of the Warrants, the Warrant 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 and (iv) assuming the representations and warranties of the Holders set forth in Article II are true
and correct, the offer and issuance by the Company of the Warrants and the Shares in exchange
for the Holder Notes is exempt from the registration requirements of the Securities Act pursuant
to Section 4(2) thereof.
(d) 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 its obligations hereunder or under the
Warrants in accordance with the terms hereof or thereof, or to issue and sell the Shares and
Warrants (and the Warrant Shares) in
accordance with the terms hereof, other than such as have been made or obtained, and except for the
registration of the Warrant Shares and the Shares under the Securities Act pursuant to Article V to the extent required hereby, any filings
required to be made under federal and state securities laws, any required filings or notifications
regarding the issuance or listing of additional shares with the NASDAQ Global Market, the filing
of the Charter Amendment with the Secretary of State of the State of Delaware and obtaining the
Stockholder Approval (if applicable).
7
(e) On the date of this Agreement, the authorized capital stock of the Company consisted of
(i) 100,000,000 shares of Common Stock, of which 65,630,051 shares were issued and outstanding,
(ii) 120,000 shares of Series A Convertible Preferred Stock, $0.01 par value per share, none of
which were issued or outstanding, (iii) 150,000 shares of Series B Convertible Preferred Stock,
$0.01 par value per share, of which 130 shares were issued and outstanding, (iv) 6,660 shares of
Series C Convertible Preferred Stock, $0.01 par value per share, of which 600 shares were issued
and outstanding, (v) 100,000 shares of Series D Junior Participating Preferred Stock, $0.01 par
value per share, none of which were issued or outstanding and (vi) 100,000 shares of Series E
Convertible Preferred Stock, $0.01 par value per share, of which 59,000 shares were issued and
outstanding (clauses (ii) through (vi), collectively, the Preferred Stock). On the date of this
Agreement, 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. On the date of this
Agreement, options to purchase an aggregate of 5,960,304 shares of Common Stock were outstanding.
On the date of this Agreement, warrants to purchase an aggregate of 10,942,755 shares of Common
Stock were outstanding. On the date of this Agreement, no stockholder of the Company has
preemptive rights with respect to the Securities and there are no outstanding securities or
obligations issued by the Company (other than under the Note Purchase and Amendment Agreements)
that are convertible into, or exercisable or exchangeable for, any shares of Common Stock other
than (i) options granted under the Companys stock option plans, (ii) the Preferred Stock, (iii)
the warrants and options described in this paragraph, (iv) the Notes and (v) under the Rights
Agreement.
(f) From January 1, 2009 through the date of this Agreement, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (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 included in the SEC Documents 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 such 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 SECs 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).
8
(g) As of the date hereof, the issued and outstanding shares of Common Stock are listed on
NASDAQ Global Market.
(h) The Company has received written consents from the holders of at least 75% of the
outstanding principal amount of the Notes to the Amendment, and such holders have entered into
agreements with the Company to sell their Notes to the Company for the same purchase price per
$1.00 of principal amount of Notes as the Holders.
(i) The Company will have at the Closing sufficient cash, available lines of credit or other
sources of immediately available funds to enable it to (i) to make payment of the Cash
Consideration and (ii) consummate the Senior Debt Satisfaction.
(j) The
Company is not, and has never been, an issuer of the type defined in Rule 144(i)(1) under the Securities Act.
ARTICLE IV
COVENANTS
4.1 No Transfer or Conversion. Each Holder agrees that from the date hereof until the earlier of
the termination of this Agreement (in accordance with the terms hereof) or the Closing that it will not (x) Transfer any Holder Note
owned thereby (or any portion thereof) (other than to the Company at the Closing) or (y) exercise
any right to convert the Note (or any portion thereof) into any other security. A pledge of the
Holder Notes in connection with a bona fide margin agreement or other loan financing arrangement
that is secured by the Holder Notes shall not be deemed to be a Transfer of the Holder Notes so
long as the pledge does not prohibit the Holders ability to deliver the Holder Notes at the
Closing; provided, further, that any pledgee or other party that becomes the owner
of Holder Notes as a result of exercising remedies with respect to such pledge shall have agreed,
prior to exercising any such remedies, to and be obligated to comply with this Agreement (as if it
were a Holder).
4.2 Release. From and after the Closing, each Holder agrees that all obligations of the Company
arising under or in respect of the Holder Notes will have been
satisfied and discharged and irrevocably waived in full.
4.3 Reporting Status; Listing Obligation. The Common Stock is registered under Section 12 of the
Exchange Act. The Company covenants only to each Affiliate Holder that during the period in which the registration statement filed pursuant to Article V
hereto remains effective, the Company agrees to use commercially reasonable efforts to timely file
(or obtain extensions in respect thereof and file within the applicable grace period) with the SEC
all reports required to be filed by the Company under the Exchange Act, and the Company will use
its commercially reasonable efforts to maintain 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. Until each Holder Transfers all of the Shares
and Warrant Shares, the Company shall use commercially reasonable efforts to maintain the
listing of its Common Stock on a national stock exchange in the United States.
4.4 Securities Laws Disclosure; Publicity. As soon as reasonably practicable but not later
than one Business Day after the date of this Agreement, the Company shall issue a press release and
shall file the Form 8-K with the SEC, in each case announcing the signing of this Agreement, the
signing of the agreement relating to the Sale Condition and describing the terms of the
transactions contemplated hereby and thereby and including as an exhibit to the Form 8-K
the material transaction documents, in the form required by the Exchange Act. At the time of
the filing of the Form 8-K with the SEC, no Holder 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 Form 8-K. The Company shall
not publicly disclose the name of any Holder, or include the name of any Holder in any
filing with the SEC or any regulatory agency, without the prior written consent of such Holder,
which shall not be unreasonably withheld, except in connection with the filing of this Agreement with the SEC, in any
registration statement contemplated by Article V (and amendments and supplements relating
thereto) filed with the SEC, in any proxy statement used by the Company in connection with its efforts to obtain the
Stockholder Approval and/or obtain the approval of its stockholders of the transaction
contemplated by Section 1.5(a) and/or 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 Holders with
prior notice of such disclosure.
9
4.5 Furnishing of Information. As long as any Holder owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, the Company will use commercially reasonable
efforts to prepare and furnish to the Holders and make publicly available in accordance with Rule
144(c) under the Securities Act such information as is required for
the Holders to sell the Shares and the Warrant
Shares under Rule 144 under the Securities Act. The Company further covenants that it will use
commercially reasonable 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 Holder to sell the Shares and the Warrant
Shares without registration under the Securities Act within the requirements of the exemption
provided by Rule 144 under the Securities Act.
4.6 Reservation of Shares. So long as any Holder owns any Warrants, 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 then issuable as Warrant Shares upon exercise of
the Warrants then outstanding (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants).
4.7 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 of the
Securities hereunder or under the Warrants, 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, including, without limitation,
Section 2(i) hereof;
provided, that, a Holder and its pledgee shall be required to comply with the provisions of
Section 2(i) hereof in order to effect a Transfer of the 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.
4.8
Holding. For the purposes of Rule 144(d) under the Securities Act, the Company
acknowledges that, the holding period of the Shares and the Warrants may be tacked
onto the holding period of the Holder Notes. The Company agrees not to take a position
contrary to that set forth in the preceding sentence. Subject to Section 2(i) hereof
and a Holder
delivering to the Company the Certificate at any time reasonably requested by the Company,
the Company agrees to take all commercially reasonable actions, including, without limitation,
the issuance by its legal counsel (which may be its internal counsel) of any legal opinions,
necessary (i) to cause the Companys transfer agent to issue to such Holder certificates
evidencing the Shares and the Warrants held thereby that are free of any restrictive
legends (including those set forth in Section 2(i)(iii)) and to instruct the Companys
transfer agent for its Common Stock not to issue any stop-order with respect to the Transfer
of the Shares and Warrants held by such Holder and (ii) upon any cashless exercise of the
Warrants pursuant to Section 2.3 thereof, to cause the Companys transfer agent to issue to
such Holder certificates evidencing the Warrant Shares acquired in connection with such
cashless exercise that are free of any restrictive legends (including those set forth in
Section 2(i)(iii)) and to instruct the Companys transfer agent for its Common Stock not to
issue any stop-order with respect to the Transfer of the Warrant Shares acquired in
connection with such cashless exercise.
4.9 Conditions to Closing. The parties hereto will use commercially reasonable efforts to cause
the conditions to Closing to be satisfied and the Closing to occur as expeditiously as possible;
provided, that nothing contained herein shall obligate the Company to fulfill the Sale
Condition, to consummate the Senior Debt Satisfaction or obtain the Stockholder Approval.
4.10
Preemptive Rights. If, during the period commencing on the day after the Closing
Date and ending forty-five (45) days after the date that the Company publicly announces the results
of the Phase III clinical trial currently being conducted by the Company with respect to its
vaginal gel product, Prochieve 8%, to reduce the risk of preterm birth in women with a short cervix
as measured by transvaginal ultrasound in mid-pregnancy results, the Company issues (other than in
an Exempt Issuance) any shares of Common Stock for a purchase price that is less than $2.00 per
share of Common Stock or securities that are convertible into or exercisable for shares of Common
Stock for a total purchase price (which shall include the purchase price paid for each such
security plus the conversion or exercise price payable thereunder to acquire a share of Common
Stock) that is less than $2.00 per share of Common Stock, on the date of any such issuance, the
Company will deliver to each Holder written notice thereof (the Sale Offer). During the ten (10)
day period following delivery of the Sale Offer, each Holder shall have the right, exercisable by
delivering written notice to the Company (the Exercise Notice), to sell to the Company all or any
number of the Warrants held by such Holder (as specified in such Exercise Notice) for an amount in
cash equal to the product of (a) a fraction, the numerator of which is equal to the number of
Warrants such Holder elects to sell to the Company as specified by such Holder in the Exercise
Notice and the denominator of which is equal to 7,750,000 and (b) $3,999,996 (the Warrant
Price). Such Exercise Notice shall be accompanied by the certificate representing the Warrants to
be sold by such Holder, duly endorsed for transfer (and the number of Warrants such Holder sells to
the Company under this Section 4.10 shall be cancelled and not exercisable). If a Holder does not
deliver an Exercise Notice to the Company during such ten (10) day period, the Sale Offer for such
Holder shall expire and such Holder shall have no further rights with respect thereto. If a Holder
elects pursuant to an Exercise Notice to have the Company purchase Warrants from such Holder, the
Company shall pay the Warrant Price in cash to such Holder within twenty (20) days after the
Company receives the Exercise Notice to such account as shall be specified in writing by such
Holder by wire transfer of immediately available funds. Notwithstanding anything to the contrary
contained herein, the Company shall not be required to purchase any Warrants under this Section
4.10 to the extent such purchase would violate the Delaware General Corporation Law or the board of
directors of the Company reasonably determines, after receiving advice from counsel, that it could
have liability in connection therewith under the Delaware General Corporation Law. Exempt
Issuance shall mean any or all of the following (a) the issuance of any shares of Common Stock
pursuant to the conversion or exercise of any options, warrants, preferred stock or other
convertible securities of the Company that are outstanding on the date hereof and/or on the Closing
Date, (b) the issuance of any (x) options, warrants, other convertible securities or rights to
purchase shares of Common Stock (and the issuance of any shares of Common Stock pursuant thereto)
or (y) shares of Common Stock, in each case, pursuant to any of the Companys compensatory or stock
option plans or programs or as compensation to any officer, director, consultant, agent, advisor or
employee of the Company or any subsidiary thereof, (c) the issuance of any shares of Common Stock
in connection with the transactions described in Section 1.5(a), (d) the issuance of shares of
Common Stock and warrants under the Note Purchase and Amendment Agreements (and the issuance of any
shares of Common Stock under such warrants), the issuance of any securities pursuant to the Rights Plan (and the issuance of any
securities underlying such securities) and (f) the issuance of any warrants to purchase shares of
Common Stock (and the issuance of any shares of Common Stock thereunder) pursuant to any agreement
that the Company is a party to as of the date hereof.
4.11
Ownership Cap. Each Holder agrees that from the date hereof until the
earlier of the termination of this Agreement and/or the Closing (and after giving
effect to the consummation of the transactions contemplated by this Agreement) that it
will not (i) beneficially own
(as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the shares of
Common Stock and/or (ii) possess 19.9% or more of the voting power of the Company.
10
ARTICLE V
REGISTRATION RIGHTS
The Company will use commercially reasonable efforts to file, as soon as reasonably
practicable after the Closing, but in no event later than ninety (90) days after
the Closing, a
registration statement with the SEC covering the resale of the Shares and the Warrant
Shares that are issued or issuable hereunder or under the Warrants to an Affiliate Holder.
For the avoidance of doubt, the Shares issued to and the Warrant Shares issuable under
the Warrants to any Holder that is not an Affiliate
Holder shall not be covered by such registration statement. Reference is made
to Section 6 of the SPA. The Company and each Affiliate Holder agrees that the terms, conditions and
provisions of such Section 6 are hereby incorporated herein by this reference and shall apply,
mutatis mutandis, to the Shares and the Warrant Shares issued or issuable to an Affiliate Holder (and not to the Warrants) and such Shares and Warrant Shares shall be
deemed to be Registrable Securities and the Company and each Affiliate Holder (as if each such Affiliate Holder were
a Purchaser under the SPA) shall comply with each of the provisions thereof, except that (a) the
registration statement with respect to the resale of such Shares and Warrant Shares shall be filed with the SEC
no later than ninety (90) days after the Closing Date (as defined herein) (and the definition of
Filing Date in the SPA shall be deemed to be modified to reflect the foregoing), (b) the
Effectiveness Deadline shall mean the date which is two hundred seventy (270) calendar days after
the Closing Date (as defined herein) (and the definition of Effectiveness Deadline in the SPA
shall be deemed to be modified to reflect the foregoing) and (c) Section 6.4 of the SPA shall be
deemed to be modified so that (x) the amount that the Company shall be obligated to pay to any
Affiliate Holder during a Non-Liquidity Payment Period (as defined in the SPA) and during which a
Registration Default (as defined in the SPA) remains uncured, shall be such Affiliate Holders Warrant
Percentage (as set forth across from such Affiliate Holders name on Schedule I) multiplied by
$50,000 (and, notwithstanding anything to the contrary in the SPA, such amount may not be modified without the prior written consent of the Company) and (y) the maximum aggregate amount that the Company shall be required to pay to the
Purchasers (as defined in Section 7.10) under this Agreement and the Other Purchase Agreements (as
defined in Section 7.10) in respect of Registration Defaults (i.e., amounts payable under Section
6.4 of the SPA) shall be equal to the product of $250,000 and the sum of all of the Warrant
Percentages of the Affiliate Holders as set forth on each Schedule I to
each of the Note Purchase and Amendment Agreements (and, notwithstanding anything
to the contrary in the SPA, such amount may not be modified without the prior
written consent of the Company). For the avoidance of doubt, the reference to
the Closing Date in Section 6.5(a) of the SPA shall be deemed to
be a reference to the Closing Date of this Agreement.
ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated prior to the Closing:
(a) at any time by mutual written consent of all of the parties hereto;
(b) by any party hereto, by delivery of written notice of termination to the others, if the
Closing has failed to occur on or before August 31, 2010; provided, that such failure is not
due to (x) the failure of the Company to comply in all material respects with its obligations under
this Agreement if the Company is the party seeking to terminate this Agreement pursuant to this
Section 6.1(b) or (y) the failure of any Holder to comply in all material respects with its
obligations under this Agreement if any Holder is the party seeking to terminate this Agreement
pursuant to this Section 6.1(b); or
(c) by any party hereto, by delivery of written notice of termination to the others, if any
governmental authority (including a court) of competent jurisdiction shall have issued an order,
decree or ruling, or taken any other action, permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement (including the Amendment) and such
order, decree, ruling or other action shall have become final and non-appealable; provided,
that in order for any party to seek to terminate this Agreement pursuant to this Section 6.1(c) it
11
must have used its commercially reasonable efforts to lift and rescind such order, decree,
ruling or other action.
6.2 Effect of Termination. Upon termination of this Agreement pursuant to Section 6.1, this
Agreement shall forthwith become null and void and there shall be no liability or obligation of any
party hereto arising hereunder, except that the provisions of this Article VI and Articles VII and
VIII shall survive any termination of this Agreement and any party that has willfully breached this
Agreement shall have liability to the others therefor. On the date of any termination of this
Agreement, the Holders consents to the Amendment will terminate as of the date of the termination
of this Agreement and be of no further force and effect as of such date.
ARTICLE VII
MISCELLANEOUS
7.1 Governing Law; Jurisdiction; Service of Process; No 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 transactions
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 TRANSACTIONS CONTEMPLATED HEREBY.
7.2 Specific Performance. The parties acknowledge that the subject matter of this Agreement is
unique and that no adequate remedy of law would be available for breach of this Agreement by any
party. Accordingly, the Company and each Holder agree that each party hereto shall be entitled to
an appropriate decree of specific performance or other equitable remedies to enforce this Agreement
(without any bond or other security being required), and the Company and each Holder hereby waives
the defense in any action or proceeding brought to enforce this Agreement that there exists an
adequate remedy at law.
7.3 Expenses. Each party shall bear its own expenses incident to the preparation, negotiation,
execution and delivery of this Agreement; provided, that the Company will pay the
reasonable out-of-pocket and reasonably documented attorneys fees and expenses actually incurred
by the Holders in connection with the negotiation, execution and delivery of this Agreement not to
exceed, in the aggregate, the amount set forth on Schedule I across from the caption
Expenses Cap.
12
7.4 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.
7.5 Parties In Interest. This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto, and nothing in this Agreement, express or implied, is intended to confer upon
any other Person any rights or remedies of any nature whatsoever under or by reason of this
Agreement. References herein to parties or parties hereto are to the signatories of this
Agreement.
7.6 Assignment. No party hereto may assign this Agreement or any of its rights arising hereunder,
in whole or in part, to any other Person; provided, however, that any Holder may,
after the Closing, assign its rights under Sections 4.3, 4.5, 4.7 and Article V hereunder to any
transferee of the Securities (and such transferee will be deemed to be a Holder for purposes of
such Sections); provided, further, that any such transferee executes and delivers
to the Company a joinder to this Agreement, in form and substance reasonably satisfactory to the
Company, agreeing to be bound by the provisions hereof (and those incorporated herein) as if it
were a Holder.
7.7 Survival. Notwithstanding any investigation made by any party to this Agreement, all
representations, warranties, covenants and agreements made in this Agreement shall survive any
investigation made by the Company or any Holder and the Closing.
7.8 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 statute or rule of law will not affect the validity or enforceability of any other
provision hereof.
7.9 Independent Nature of Holders Obligations and Rights. The obligations of a Holder under
this Agreement are several and not joint with the obligations of any other Holder, and no Holder
shall be responsible in any way for the performance of the obligations of any other Holder under
this Agreement. Nothing contained herein and no action taken by any Holder pursuant hereto, shall
be deemed to constitute the Holders as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Holders 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. Each Holder shall be entitled
to independently protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
7.10 Exclusive Agreement; Amendment; Waivers. This Agreement supersedes all prior agreements
among the parties with respect to its subject matter, is (together with the Exhibits and Schedule
hereto and any side letters entered into as of the date hereof between the Company and any
Holder) intended as a complete and exclusive statement of the terms of the agreement
13
among the parties with respect thereto. This Agreement cannot be waived, amended, changed or
terminated except by a written instrument executed by the Company and the Purchasers (as defined
below) that would be entitled to receive a Majority of the Warrants (as defined below) at the
closings under all of the Note Purchase and Amendment Agreements (as defined below);
provided, however, that to the extent that such waiver, amendment or modification
made after the date of this Agreement adversely affects a
particular Purchaser, decreases the Purchase Price or alters the relative proportion of the Cash
Consideration, the Shares and the Warrant consideration, such waiver, amendment or modification shall not be
effective against such Purchaser without the consent of such Purchaser; provided
further, that any waiver, amendment or modification made after the date of this Agreement
that has the effect of providing for additional conditions to Closing shall require the consent of
the Company and the Purchasers that would be entitled to receive a Supermajority of the Warrants at
the closings under all of the Note Purchase and Amendment Agreements. The failure of a party to
insist upon strict adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing and signed by the party
providing the waiver (either the Company or the requisite Purchasers). On or after the date
hereof, the Company expects to enter into one or more note purchase and amendment agreements on
substantially similar terms to this Agreement with (some or all of) the other holders of the Notes
(the Other Purchase Agreements and together with this Agreement, the Note Purchase and Amendment
Agreements). For purposes of this Section 7.10, (a) Purchasers shall mean the parties
(including the Holders) that execute the Note Purchase and Amendment Agreements other than the
Company and Majority of the Warrants shall mean warrants to be issued by the Company at the
closings under the Note Purchase and Amendment Agreements that would entitle the Purchasers to
acquire at least 50.1% of the total number of shares of Common Stock purchasable under such
warrants on the date such warrants are initially issued (without regard to any provisions in such
warrants which limit the ability of a Purchaser to exercise any such warrants). Supermajority of
the Warrants shall mean warrants to be issued by the Company at the closings under the Note
Purchase and Amendment Agreements that would entitle the Purchasers to acquire at least 66 2/3% of
the total number of shares of Common Stock purchasable under such warrants on the date such
warrants are initially issued (without regard to any provisions in such warrants which limit the
ability of a Purchaser to exercise any such warrants). The parties hereto acknowledge and agree
that the Company has or may enter into side letters with certain Purchasers relating to the subject
matter of this Agreement.
7.11 Counterparts; Signatures by Facsimile; Captions. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original, but all of which together shall
constitute the same instrument. 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. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this Agreement.
7.12 Notices. All notices, consents and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by
telecopier (with receipt confirmed), provided that a copy is mailed by registered or certified
mail, return receipt requested, or (c) when received by the addressee, if sent by
Express
14
Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below, in the case of the Company or on Schedule
I, in the case of any Holder (or to such other addresses and telecopier numbers as a party may
designate as to itself by notice to the other parties):
If to the Company:
Columbia Laboratories, Inc.
354 Eisenhower Parkway
Livingston, New Jersey 07039
Attention: Lawrence A. Gyenes
Senior Vice President, Chief Financial Officer & Treasurer
Telephone: (973) 486-8860
Telecopier: (866) 994-3001
with a copy to:
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Attention: Adam H. Golden, Esq.
and Steven G. Canner, Esq.
Telephone: (212) 836-8030
Telecopier: (212) 836-8689
ARTICLE VIII
DEFINITIONS
8.1 As used in this Agreement, the following terms have the meanings specified or referred to
in this Article VIII.
Affiliate
Holder means any Holder that is an affiliate (as such term is defined under Rule 405 of the Securities Act) of the Company on the Closing Date.
Business Day Any day that is not a Saturday or Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.
Encumbrance Any security interest, mortgage, lien, charge, adverse claim or restriction
of any kind, including, but not limited to, any restriction on the use, voting, transfer, receipt
of income or other exercise of any attributes of ownership, except for restrictions on the Transfer
of securities under the terms of the Warrant, this Agreement, the Securities Act, and the rules and
regulations of the SEC thereunder and restrictions imposed by the Blue Sky laws of any
jurisdiction that do not interfere with the purchase and sale of the Notes contemplated hereby.
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.
Person Any individual, corporation, partnership, limited liability company, joint
venture, trust, association, unincorporated organization, other entity, or governmental body.
[Remainder of this page intentionally left blank.]
15
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
/s/ Lawrence A. Gyenes |
|
|
|
Name: |
Lawrence A. Gyenes |
|
|
|
Title: |
Senior Vice President, Chief Financial Officer and Treasurer |
|
|
|
PERRY PARTNERS INTERNATIONAL INC.
By: Perry Corp., Investment Manager of Perry Partners International, Inc.
|
|
|
By: |
/s/ Michael C. Neus
|
|
|
|
Name: |
Michael C. Neus |
|
|
|
Title: |
General Counsel |
|
|
|
PERRY PARTNERS, L.P.
By: Perry Corp., General Partner of Perry Partners L.P.
|
|
|
By: |
/s/ Michael C. Neus
|
|
|
|
Name: |
Michael C. Neus |
|
|
|
Title: |
General Counsel |
|
|
[Signature page to Note Purchase and Amendment Agreement]
EXHIBIT A
[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. THESE 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. COLUMBIA LABORATORIES, INC. SHALL BE ENTITLED TO REQUIRE
AN OPINION OF COUNSEL SATISFACTORY TO COLUMBIA LABORATORIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THESE
SECURITIES WERE ISSUED.]1
COLUMBIA LABORATORIES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void
After , 20152
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
3
shares of common stock of the Company, $0.01 par value per share
(the Common Stock), subject to adjustment as provided herein. This Warrant is one of a series of
substantially similar Warrants being issued as of the date hereof
(the Issuance Date) pursuant to the terms of those certain Note Purchase
and Amendment Agreements (the NPA Warrants), dated
on or after March 3, 2010,
each by and among the Company and certain other persons or entities (each a Purchaser and together,
the Purchasers), including the original Holder of
this Warrant (the Note Purchase Agreements and
including the Note Purchase and Amendment Agreement, dated as of March 3, 2010, between the
Company and the original Holder, the Note Purchase Agreement). Capitalized terms not otherwise
defined herein shall have the respective meanings ascribed to such terms in the Note Purchase
Agreement.
|
|
|
1 |
|
Legend shall be removed if the Certificate contemplated in Section 2(i)(i)(B) of the Note
Purchase Agreement has been delivered to the Company in accordance with the terms therein (or
omitted if the Certificate is delivered on or prior to the Closing Date).
|
|
2 |
|
Insert five-year anniversary of Issuance Date. |
|
3 |
|
Insert applicable numbers from Schedule I to Note Purchase
Agreement. |
A-1
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
, 20154, unless sooner exercised or
terminated as provided below.
(d)
Exercise Price shall mean $1.35, 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) 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
|
|
|
4 |
|
Insert five-year anniversary of Issuance Date. |
|
A-2
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 Holders 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 Companys 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 Holders or its designees 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 Companys 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 the Note Purchase Agreement or the Company places
(or cauces to be placed) a restrictive legend thereon in accordance with Section 4.3(b) hereof. 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 Holders 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.
A-3
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 Companys Failure to Timely Deliver Securities. If within three Trading Days after the
Companys 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 Companys share
register or credit the Holders balance account with DTC for the number of Exercise Shares to which
the Holder is entitled upon such Holders exercise hereunder or if the Company fails to deliver to
the Holder the certificate or certificates representing the applicable Exercise Shares (or credit
the Holders 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 Holders request and in the Holders discretion, either (i) pay cash to the Holder
in an amount equal to the Holders total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the Buy-In Price), at which point the Companys
obligation to deliver such certificate (and to issue such Exercise Shares) or credit such Holders
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 Holders
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-4
(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 Persons 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 Companys most recent
Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and
Exchange
A-5
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 NPA 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 NPA Warrants or otherwise without breaching the Companys 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 NPA 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 total number of shares of Common Stock underlying the NPA Warrants issued to such
Holder pursuant to the Note Purchase Agreements on the Issuance Date and the denominator of which
is the aggregate number of shares of Common Stock underlying the NPA Warrants issued to the
Purchasers pursuant to the Note Purchase Agreements 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 Holders NPA Warrants, the transferee shall be allocated a pro rata portion of
such Holders 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 NPA Warrants shall exercise all of such Holders NPA
Warrants into a number of shares of Common Stock which, in the aggregate, is less than such
Holders Exchange Cap Allocation, then the difference between such Holders 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 NPA Warrants on a pro rata basis in
proportion to the shares of Common Stock underlying the NPA 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
A-6
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 Companys 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 present 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 V of the Note Purchase Agreement, if applicable,
the Exercise Shares, and except as would not result in a violation of the Securities Act of 1933, as amended. 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 of 1933, as amended, and will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
A-7
buy, purchase or
otherwise acquire or take a pledge of) the Exercise Shares except in accordance with
the provisions of Article V of the Note Purchase Agreement, if applicable, or pursuant to and in accordance with
the Securities Act of 1933, as amended.
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 of 1933, as amended, 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 of 1933, as amended, which
exemptions depend upon, among other things, the bona fide nature of the Holders 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 Warrants
and/or the Exercise Shares 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
Warrants and/or the Exercise Shares. 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 of 1933, as amended, 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 Note Purchase Agreement, if applicable, the
Exercise Shares, 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 of 1933,
as amended, covering such proposed disposition and such disposition is made in accordance
with said registration statement;
(ii)
Solely with respect to the Warrant, the Holder shall have furnished to the Company the Certificate, after which the Holder may dispose of such Warrant in accordance with the provisions of Rule 144 under the Securities Act of 1933, as amended;
(iii) Solely with respect to the Exercise Shares that the Holder acquires pursuant to the
cashless exercise provisions of Section 2.3 hereof, and only if the Holder shall have furnished to the Company the Certificate at the time of such cashless exercise,
the Holder may dispose of such Exercise Shares in accordance with the provisions of Rule 144 under the Securities Act of 1933, as amended; or
(iv) 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 of 1933, as amended, 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 under the
Securities Act of 1933, as amended.
(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 (except such legend will
not be placed on Exercise Shares acquired under the Warrant pursuant to a cashless exercise
pursuant to Section 2.3 if immediately prior to such cashless exercise the Holder provides the Certificate to the Company):
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
A-8
APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. COLUMBIA LABORATORIES, INC. SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO COLUMBIA LABORATORIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THE
SECURITIES WERE ISSUED.
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.
A-9
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, (i) the transfer of this Warrant shall not be registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and under applicable state securities or
blue sky laws, and (ii) the Holder has not furnished to the Company the Certificate at such time, the Company may require, as a condition of allowing such transfer (A) 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 of 1933, as amended, and under applicable state securities or blue sky laws, and
(B) that the holder or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company; provided, in any case that the transferee shall 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 of 1933, as amended, or a qualified institutional buyer as defined in Rule 144A(a) under the
Securities Act of 1933, as amended.
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 issued pursuant to the Note Purchase Agreements,
provided, however, that such modification, amendment or waiver is made with respect
to all unexercised Warrants issued pursuant to the Note Purchase Agreements 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
A-10
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 Note Purchase Agreements, 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 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]
A-11
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized
officer as of ___, 2010.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
Address: |
|
|
|
|
|
|
|
|
Attention: [] |
|
|
|
Facsimile: [] |
|
|
A-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
A-13
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and, if applicable, hereby directs
[Insert name of Companys transfer agent] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated , 2010 from the Company
and acknowledged and agreed to by [Insert name of Companys transfer agent].
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
A-14
ASSIGNMENT FORM
(To assign the foregoing Warrant, subject to compliance with Section 4.3 of the Warrant,
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: , 201_
Holders Signature:
Holders 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.
A-15
Exhibit B
FORM OF AMENDMENT NO. 1
TO
CONVERTIBLE SUBORDINATED NOTE
This Amendment No. 1 (this Amendment) to each of Columbia Laboratories, Inc.s (the
Company) Convertible Subordinated Notes due December 31, 2011 (each, a Note and collectively,
the Notes), is made as of March 3, 2010. Except as otherwise provided herein, capitalized
terms used herein shall have the meanings set forth in the Notes. For purposes hereof, the Note
Purchase Agreements shall mean the Note Purchase and Amendment Agreements, dated on or after
March 3, 2010, each by and among the Company and certain other persons relating to the Notes.
1. The definition of Fundamental Transaction is hereby amended and restated in its entirety to
read as follows:
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, excluding, in each case of clauses (A)(i), (ii), (iii), (iv) and/or (v) and/or (B) of this
definition a Permitted Transaction. A Permitted Transaction shall mean, the transaction (or
series of related transactions) publicly announced by the Company in a Current Report on Form 8-K
filed by the Company with the Securities and Exchange Commission on or prior to the date that is
one Business Day after the date of Amendment No. 1 to the Notes (the Form 8-K), which transaction
includes the license, sale, transfer or other disposition of rights or assets of the Company
related to, and/or the co-development, co-promotion, co-marketing, distribution or other
collaboration with respect to, one or more of the Companys products with (and possibly a sale of
Company capital stock), pursuant to which the Company (is to, or) receives proceeds of at least $40
million in cash consideration at the initial closing thereof. For the avoidance of doubt, a
Permitted Transaction shall not include any transaction (or series of related transactions) (x)
that is not contemplated by the Form 8-K and (y) the initial closing of which does not occur
contemporaneously with the closings under the Note
B-1
Purchase and Amendment Agreements, each dated on or after March 3, 2010, each by and among the
Company and certain holders of the Notes. Business Day shall mean any day that is not a Saturday
or Sunday or other day on which commercial banks in The City of New York are authorized or required
by law to remain closed.
2. Except as provided herein, the Notes remain in full force and effect.
3. On the Amendment Termination Date (as defined in the Note Purchase Agreements), if it
occurs, this Amendment shall automatically terminate and be of no further force and effect as of
the Amendment Termination Date.
4. All issues and questions concerning the construction, validity, enforcement and
interpretation of this Amendment 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 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.
[Remainder of page intentionally blank.]
B-2
IN WITNESS WHEREOF, the Company has duly executed this AMENDMENT as of the date first above
written.
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
B-3
Exhibit C
SENIOR DEBT SATISFACTION
Reference is made to that certain letter agreement, dated March 3, 2010
(the Letter Agreement), between Columbia Laboratories, Inc. (the
Company) and PharmaBio Development Inc. (PharmaBio). This
acknowledgement is delivered pursuant to the Letter Agreement.
PharmaBio acknowledges and agrees that all of the Senior Debt (as defined
in the Companys Convertible Subordinated Notes due December 31, 2011) has
been satisfied and paid in full.
Acknowledged this ___ day of ___ 2010.
|
|
|
|
|
|
PHARMABIO DEVELOPMENT INC.
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
C-1
Exhibit D
FORM OF
CERTIFICATE OF NON-AFFILIATE HOLDER
Reference is made to those certain Note Purchase and Amendment Agreements, dated on or after
March 3, 2010 (the Agreement), by and among Columbia Laboratories, Inc. (the Company) and
certain other parties (the Holders). This Certificate is being delivered pursuant to Section
2(i)(i)(B) of the Agreement. All capitalized terms used and not otherwise defined herein shall
have the respective meanings provided in the Agreement.
The undersigned[, being a duly authorized officer or representative of the]1 Holder
hereby certifies that:
(1) such Holder is not an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company nor has such Holder been such an affiliate during the three (3)
months preceding the date hereof;
(2) such Holder acquired its Holder Notes at least one year prior to the date hereof; and
(3) to such Holders knowledge, all of the
[Shares] [Warrants] [Warrant Shares]2 to be issued to the
Holder without restrictive legends contemporaneously herewith may be sold by such Holder under Rule 144 under the Securities Act during any ninety (90)
day period.
DATED:
______ ___, 20___
|
|
|
|
|
|
[HOLDER] |
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Title: |
|
|
|
|
|
|
1 |
|
This Certificate shall be executed, in the case of
an entity by a duly authorized officer or representative thereof or in the
case of an individual, by such individual. |
|
2 |
|
Insert all applicable securities that the Holder is requiring the Company to issue without restrictive legends. |
D-1
SCHEDULE I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
Name/Address of |
|
Jurisdiction of |
|
Principal Amount of |
|
Warrant |
|
Cash |
|
|
|
|
|
Covered by |
Holder |
|
Organization |
|
Holder Notes Owned |
|
Percentage |
|
Consideration* |
|
Shares |
|
Warrants |
PERRY PARTNERS
INTERNATIONAL INC.
767 5thAve.
19th Floor
New York, NY 10153
(212) 583-4146
|
|
British Virgin
Islands
|
|
$ |
12,415,903.50 |
|
|
|
31.04 |
% |
|
$ |
8,070,337.28 |
|
|
|
2,299,257 |
|
|
|
2,406,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERRY PARTNERS, L.P.
767 5thAve.
19th Floor
New York, NY 10153
(212) 583-4146
|
|
Delaware
|
|
$ |
5,584,094.25 |
|
|
|
13.96 |
% |
|
$ |
3,629,661.26 |
|
|
|
1,034,073 |
|
|
|
1,082,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
Principal Amount of
Holder Notes Owned:
|
|
|
|
$ |
17,999,997.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Cap:
|
|
|
|
$ |
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Excluding accrued and unpaid interest on the
Notes. |
ATTACHMENT A TO NOTE PURCHASE AND AMENDMENT AGREEMENTS
Note Purchase and Amendment Agreements substantially similar to
the Note Purchase and Amendment Agreement included as Annex D to
this proxy statement, each, dated as of March 3, 2010, were
entered into between Columbia Laboratories, Inc. and the Holders
listed on this Attachment A. Set
forth below are the material details in which such Note Purchase and Amendment Agreements differ
from the Note Purchase and Amendment Agreement included as Annex D to
this Current Report on Form 8-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation |
|
|
|
|
Principal |
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
Holder Notes |
|
Warrant |
|
Cash |
|
Covered by |
|
Common |
|
|
Holder |
|
Owned |
|
Percentage |
|
Consideration* |
|
Warrants |
|
Stock |
|
Expenses Cap |
14159 L.P. |
|
$ |
140,000 |
|
|
|
0.35 |
% |
|
$ |
91,000 |
|
|
|
27,132 |
|
|
|
25,909 |
|
|
|
|
(1) |
BAKER BROTHERS LIFE SCIENCES, L.P. |
|
$ |
4,256,000 |
|
|
|
10.64 |
% |
|
$ |
2,766,400 |
|
|
|
824,806 |
|
|
|
787,624 |
|
|
|
|
(1) |
667, L.P. (#1) |
|
$ |
805,000 |
|
|
|
2.01 |
% |
|
$ |
523,250 |
|
|
|
156,008 |
|
|
|
148,790 |
|
|
|
|
(1) |
667, L.P. (#2) |
|
$ |
719,000 |
|
|
|
1.80 |
% |
|
$ |
467,350 |
|
|
|
139,341 |
|
|
|
133,244 |
|
|
|
|
(1) |
BAKER TISCH INVESTMENTS, L.P. (#1) |
|
$ |
42,000 |
|
|
|
0.11 |
% |
|
$ |
27,300 |
|
|
|
8,140 |
|
|
|
8,143 |
|
|
|
|
(1) |
BAKER TISCH INVESTMENTS, L.P. (#2) |
|
$ |
38,000 |
|
|
|
0.10 |
% |
|
$ |
24,700 |
|
|
|
7,364 |
|
|
|
7,402 |
|
|
|
|
(1) |
KENNETH E. BEEBE AND JANET E. BEEBE |
|
$ |
100,000 |
|
|
|
0.25 |
% |
|
$ |
65,000 |
|
|
|
19,379 |
|
|
|
18,582 |
|
|
|
|
(2) |
KIRK AND DANA BEEBE |
|
$ |
100,000 |
|
|
|
0.25 |
% |
|
$ |
65,000 |
|
|
|
19,379 |
|
|
|
18,582 |
|
|
|
|
(2) |
BEEBE 88 PARTNERS |
|
$ |
30,000 |
|
|
|
0.08 |
% |
|
$ |
19,500 |
|
|
|
4,984 |
|
|
|
5,946 |
|
|
|
|
(2) |
BEEBE 98 PARTNERS |
|
$ |
40,000 |
|
|
|
0.08 |
% |
|
$ |
26,000 |
|
|
|
6,646 |
|
|
|
5,946 |
|
|
|
|
(2) |
THE ASCEND FUND |
|
$ |
1,500,000 |
|
|
|
3.75 |
% |
|
$ |
975,000 |
|
|
|
290,699 |
|
|
|
278,722 |
|
|
|
|
(2) |
CURRAN FAMILY PARTNERS II |
|
$ |
2,000,000 |
|
|
|
5.00 |
% |
|
$ |
1,300,000 |
|
|
|
387,597 |
|
|
|
370,371 |
|
|
$ |
1,500 |
|
HIGHBRIDGE INTERNATIONAL LLC |
|
$ |
6,000,000 |
|
|
|
15.00 |
% |
|
$ |
3,900,000 |
|
|
|
1,162,790 |
|
|
|
1,111,112 |
|
|
$ |
15,000 |
|
KNOTT PARTNERS, LP |
|
$ |
136,000 |
|
|
|
00.34 |
% |
|
$ |
88,400 |
|
|
|
26,355 |
|
|
|
25,165 |
|
|
|
|
(3) |
KNOTT PARTNERS OFFSHORE MASTER FUND, LP |
|
$ |
3,940,000 |
|
|
|
9.85 |
% |
|
$ |
2,561,000 |
|
|
|
763,566 |
|
|
|
729,047 |
|
|
|
|
(3) |
SHOSHONE PARTNERS, LP |
|
$ |
628,000 |
|
|
|
1.57 |
% |
|
$ |
408,200 |
|
|
|
121,705 |
|
|
|
116,203 |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation |
|
|
|
|
Principal |
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
Holder Notes |
|
Warrant |
|
Cash |
|
Covered by |
|
Common |
|
|
Holder |
|
Owned |
|
Percentage |
|
Consideration* |
|
Warrants |
|
Stock |
|
Expenses Cap |
FINDERNE, LLC |
|
$ |
55,000 |
|
|
|
0.14 |
% |
|
$ |
35,750 |
|
|
|
10,661 |
|
|
|
10,362 |
|
|
|
|
(3) |
COMMONFUND HEDGED EQUITY COMPANY |
|
$ |
158,000 |
|
|
|
0.40 |
% |
|
$ |
102,700 |
|
|
|
30,619 |
|
|
|
29,606 |
|
|
|
|
(3) |
MULSANNE PARTNERS, LP |
|
$ |
83,000 |
|
|
|
0.21 |
% |
|
$ |
53,950 |
|
|
|
16,086 |
|
|
|
15,543 |
|
|
|
|
(3) |
MORRISON FAMILY TRUST DTD 51593 |
|
$ |
700,000 |
|
|
|
1.75 |
% |
|
$ |
455,000 |
|
|
|
135,659 |
|
|
|
129,420 |
|
|
|
|
(4) |
MORRISON 1997 CRT |
|
$ |
430,000 |
|
|
|
1.08 |
% |
|
$ |
279,500 |
|
|
|
83,333 |
|
|
|
79,870 |
|
|
|
|
(4) |
LAURIE C. MORRISON TRUST |
|
$ |
100,000 |
|
|
|
00.25 |
% |
|
$ |
65,000 |
|
|
|
19,381 |
|
|
|
18,488 |
|
|
|
|
(4) |
|
|
|
* |
|
Excluding accrued and unpaid interest on the
Notes. |
|
(1) |
|
14159 L.P., BAKER BROTHERS LIFE SCIENCES, L.P., 667, L.P. (#1), 667, L.P. (#2), BAKER
TISCH INVESTMENTS, L.P. (#1) and BAKER TISCH INVESTMENTS, L.P. (#2) have an expense cap of $4,500, in
the aggregate. |
|
(2) |
|
KENNETH E. BEEBE AND JANET E. BEEBE, KIRK AND DANA BEEBE, BEEBE 88 PARTNERS, BEEBE 98 PARTNERS
and THE ASCEND FUND have an expense cap of $1,500, in the aggregate. |
|
(3) |
|
KNOTT PARTNERS, LP, KNOTT PARTNERS OFFSHORE MASTER FUND, LP, SHOSHONE PARTNERS, LP, FINDERNE,
LLC, COMMONFUND HEDGED EQUITY COMPANY and MULSANNE PARTNERS, LP have an expense cap of $4,000, in
the aggregate. |
|
(4) |
|
MORRISON FAMILY TRUST DTD 51593, MORRISON 1997 CRT and LAURIE C. MORRISON TRUST have an expense
cap of $1,000, in the aggregate. |
2
COLUMBIA LABORATORIES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [], 2010
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COLUMBIA LABORATORIES, INC.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PURCHASE AND COLLABORATION AGREEMENT, AND
THE ASSET SALE CONTEMPLATED THEREBY, AND APPROVED THE CHARTER AMENDMENT, AND RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSALS 1, 2 AND 3.
The undersigned hereby appoints each of Stephen G. Kasnet and Frank C. Condella, Jr. as
Proxies, each with the power to appoint a substitute, to represent and to vote, with all the powers
the undersigned would have if personally present, all the shares of Common Stock $.01 par value per
share, or, as the case may be, shares of Series B Convertible Preferred Stock, $.01 par value per
share, or shares of Series E Convertible Preferred Stock, $.01 par value per share, of Columbia
Laboratories, Inc. (Columbia) held of record by the undersigned on [], 2010, at the Columbias
Special Meeting of Stockholders (the Special Meeting), to be held on [], 2010, or at any
adjournment or adjournments thereof.
1. Proposal to approve the sale of substantially all of Columbias assets primarily relating to
the research, development, regulatory approval, manufacture, distribution, marketing, sale and
promotion of pharmaceutical products containing progesterone as an active ingredient, and the
transfer of certain related liabilities (the Asset Sale), pursuant to the Purchase and
Collaboration Agreement.
The Board of Directors recommends a vote FOR Item 1.
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
2. Proposal to approve the Charter Amendment to Columbias Restated Certificate of Incorporation
(the Charter Amendment) to increase the number of authorized shares of Columbias common stock,
$0.01 par value per share, from 100,000,000 to 150,000,000.
The Board of Directors recommends a vote FOR Item 2.
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
3. Proposal to adjourn the Special Meeting to a later date, if necessary or appropriate, to allow
for the solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale
and/or Charter Amendment if there are insufficient votes to approve the Asset Sale and/or Charter
Amendment, as applicable.
The Board of Directors recommends a vote FOR Item 3.
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
(continued, and to be signed, on the reverse side.)
1
(continued from other side)
This Proxy, when properly executed will be voted in the manner directed herein by the
undersigned stockholder.
UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3 AND WILL BE
VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING.
|
|
|
|
|
|
|
|
|
DATED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Signature)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Signature, if held jointly)
|
|
|
|
|
|
|
|
|
|
|
|
When shares are held jointly, each Stockholder named should
sign. If only one signs, his or her signature will be binding.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If the Stockholder is
a corporation, sign in full corporate name by a duly authorized
officer, giving full title as such. If the Stockholder is a
partnership, a partner should sign in full partnership name by
authorized person(s). |
PLEASE MARK, DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY USING THE ENVELOPE PROVIDED.
2
GRAPHIC
3
y83374a2y8337402.gif
GRAPHIC
begin 644 y83374a2y8337402.gif
M1TE&.#EA70"%`,0``````/___T!`0#\__L#`P("`@+Z^_G]__J"@H.#@X#`P
M,/#P\-#0T&!@8"`@(!`0$+"PL'!P<)"0D%!04&]O_IZ>_O[^_@``_O___P``
M`````````````````````````"'Y!`$``!@`+`````!=`(4```7_("9B@35<
M:*JN;.N^<.P:5FW78UZ>LU$M6@HO0<7GM.^/26[9?-\JRZ.Z_]"3F]&:H!Z?'>&AHB$?HIY
MC#J.CW*11Y.4:Y91F)EDFUIXGIJ"=HVBHY^E?:BI7:"%KERPG;)3M*VVMZN)
MNJ^\I[Z_@JS"L\"2N<9`M*7.S]#1TM/$<-37V-G9?10#WM_@X>+C%=KFU,5D
M!^?LT.E>Z^WR3N]=\?/XILEE]_GR]5SZ^6,'L(K`@>8*4CF(<%LO>`W;*9S"
M,"*ZA_8LGINXI*+&:!R5>/SX+&22D221_UU2UC$E-I-!4+K$@C'@S(O!U-V<
M!A.(S)WZ5O(#"K*F0:+NC"Y$6E(I1:;.>O[XN5.J#ZHWK?;`.E.K#*XNO<8`
MFU(L#+(DS;Y`^U&M"[8:W;:`:U$N"[H1[:[`VU"O"KX(_:8`/%`P"L+^#%]`
MG$\Q8WR.H:KDQ%*DY&HY(5ZFF3GCYC!.6WY&T]GFZ$'[=)X.2GGHZLBO0UN.
M7?HH[=2:3\/6+7L9GO[\(+W[/]?)6SJ.W_KSU>O/M@[]G07[^A?KS\;_7OYX_>O_E`2B>
M@-\1R)V!V36S6O]@:03@X(,01BCAA!16:.&%&$Z8Q88<=NCAAR"&*.*())9H
MXHD>+E"``P``,$$".4`@0(L.1+"`"`@(@``4$0C`P`@]_BC`D#MBP,"0/F*`
M))(2`)GD"`T(T"2*"@#P@``/6`DC!@BTJ`"6`"AP8P$`%`#%C`2,@"8&+;HH
M@@1MIMGFG!&(L*8("="((ID"W+C`C`U@D.<#:6*P0`,`!$JFF4;$-P8:ITC+-"BBF6>^>FCD2(*
MHP,.K-FI"*XZX&FA&+!(9J`F[BHKL+\N>JR:F+;8)0)Y1MDL`$AF6>3_G1"X
MF>6-)1K;Z*S)QOHML+H"$.VSY:0KPA5`HPHKK1F
MFD.H9JX)I[H`G#IB`ED*4,",#W!;I0(0$%!`EJ3R6<#.!:0)YP,(V&RE")UV
MF6C(+?(<099IKLDBJ2(,:^*1;3J@LL'J3DFFNHS..&>1G>8)`,+3JLLNI`Q(
MFL.@*"9`@,HY\%L`M`438/?=]-I<@`1Y%VKWC0P0<./==W-KI.!NPUVOX"@V
M[OCCD$245V[YY9AGGH,`.30PY94*U'FD_P`T8W`EZ3`RX"L&/5Z)P.BE
MGZZ`VSWGJJ.2J#>JY)1]1JE`D2-RCF>4=A:?Y`)B"@^!F0W,K::=/R+_IPC+
MVVSSIF8&KKL`#=SH\HZ'EB@\!A)`$,&/H`T_
M1C"!!(8;'_Z0C1L?DNHDO`DPH&(8:,"1R+A'U^@S!M@M<":40*!4!L-*"6"%!,A1B7A6@"UID&=^Z,4$`6&M>(QA```#L_
`
end
GRAPHIC
4
y83374a2y8337401.gif
GRAPHIC
begin 644 y83374a2y8337401.gif
M1TE&.#EA?P!(`/?_`.3HZNWP\:*TT5Q\LN'EZ=7=XNKM[O?G%51J:LK5W<2U
M+(2=P3IDHA4KC$)JIBE5FC%=G1@\CU%SKD5LI^K2%&M[7=W''R52F1U#C!@J
MA+'!UH>,3BU:G)RPT1O6#R1+A8":O_'5$2%%EL30VUMO9KFP,;7$UZJD.59XL=SBYHJCQ'V7
MO2E0@EAYL8RDQ:6WTKZR+WJ%4F*"M!@F@Y*HRO'<$66%M7&.N&Z,M[*H-KS)
MV"U2?JBYTR!%BNCK[(&)4'Z8OO/S]'*0N2I,@S)4?&"!M+2J-!Y%EAMS10FBVR+MI"FR*RH-K:M,A8PAZF[U"-)BI"42-/X\S7WJF\U=;?Y&!_LR9+=AQ`D$AU!E-_DY[3"
MUGV'4V1W7A@MAC-?G[C'V*&>0)>90^;/%Y6JS*.?/NK/%KNO,6B&M?W^_S9@
MH.ON[W>!5RU/F+&M,K6M+7B3NOS]^[;&V#Q:>1I`D/;9$UUYL*_`UCYHI$%G
MI)ZQT,:Y*O??%(ZCQA8WC$UTLH:?PBA.ESM4?*RF..SO\%I[L3E::W:4NF:)
MMM_DZ'.0OU!OJV2#LNC-&9.JR\^]*!H^@V^-M["_UE]_LHZFQR!`DS=:=Q@N
MBO[__?[^_?OZ^AM"E/KZ^OO[^\_9X(B@P^#EZ//T])JOS_S^_"!'B&*$L[C&
MU_GY^2!(E[/#U_?X^,C4W?7V]A4OC[O+V/GZ^J^H-^#)'5=VL!@@BRM'EK"G
M."!)F2=0F+:K-#1.EZJH+M?('TQGI1HSB+.L,T!><4=MJ!Q!?[*K-)"EQY2H
MRF&$M'R7O/____W]_?___R'Y!`$``/\`+`````!_`$@```C_`/T)'$BPH,
M"!,J7,BPH<.'!O]!G$BQHL6+#R5BW,BQH\>"&C^*'$E28TJ-&C2),J[6=P*5-_SI8^*ZBTI5"!
M3K-J-7HPZE-_SXH.[>=L[%=_8G7H"%NVI\)^TP3TJ*)&394>P/+.K'.CW]2IA1QDB`.CB@@'
M<3C`6K,&BQ`3$$SUD!!'714`1`,L_^!@1(H8%AQF&B6:$NI
M4O`F-4C7H/\=_PT08<*`!!8X(!]=2%'<5&CIL`\/WG00`!J67"`'`X#T0\8M
M75R!A@$)@,*#$:CT$X`MM-"RP"$W!%!##WV<11)KT-AC0@0R6'')$A]\((L"
M"*32`A!$%ME"$A$($<&23#;I`1\#+(A5/WC(T8X&17&1@0L_]/,#!UVP4%0R
M$"'($NZTP4P*J\P0RP(P2C0Z\$,,&0J@@@S8;"-*X"DG0@RP^H`44Q.,);I!!!#S`P`8&3&U3
M8L,+((`E$_6""1[``QH*\8H(<"`9R<`!!QA0#0*$!Q;!<($1*N&`%F(#*NTI
MG`.($(,A)$$&*F#$!N!@A3N,HP$MV$0L_W(QA'@,HP4-&`<1ELC$<9CM93AC
MD$`2(`"W804`&H!%*PQP`S*8P0RP"",R"G$MK)SB$%#PP@*J402WM<4A1VD(
MC0Y7@3I4@'$J:($"+D$#/_BA#8(8@SMB\`$+N`$#3J###A:Y2`1@@`@RH$44
M"<*5*1'E%$ZA9%4@8H,UV$`:T)"CJQI0A@\4HPR,BX`3M%",/>A!#WL`5`K.
MD0))#.$<*+"`+G69@DW00`@RF*0FD_)&L#Q#B@CQ"ES0\A`3]8$?"ZB!,Y!9
M$U>]@`@5X`0^K+!$&;3@$B@XP`$H$(0*[&`,2UC%.2ZQ@PJXLP(;<`<*4I"&
M)#0#@F.9@_M^T/^$$!@@E!(@R
M(D2`!J3X@@4JX`<::($"6D"`#!H@!&V<8605F,0,5B&(.^`3+=``1#5PP``?
M^,`5(IC"N1C2&D]<2*?2"$`HYF"[9**I'1E@Z$X'\M`R)$$;?QB$%FC@`93)
MX`R2R`0%8H&".NS@#./P@R!B``F$+-E3B
M`5U2IE@,.CBF+&`9R0`/&M0@AB9$Q9)%B,`;6%`)#_:A'(V80`;0
M`8("B"`.M(#!`IHPA3`LPQY]@`4$EF&*`(R.L3B.B)P.)X@/B`*21#C#$`8A
M"PK`%X>0P\`&'*$'&@1!`1LX024+``4`!%%RH!B#D,@`<,*(`-CN`"$U3#&KQEQ2B*H(,U
M)$-]!:"&IL:[$)`U`P.;0`$=V.7-3:3A"8Z(A2"TG"\,C&$3BY#$"=H`R!1L
M`1<(2,$)^'"%!1$E`97H@JU9%0IJ-((<`E`#!UX@[`#@H`O;2%4_L.&!%U2O
M!UUP``CZ`0@CO*`(1/]90P$:<80L5(,!+WB`(L0-:?+ZXZ%$*,,3EO"')#@1
M"-HHPR9D@803E$$&2W1"#!;AA!U$0`4T^$`%VI"*8N3"&+584%BLX8HP4T-&
MSE@!":H``V&`X0$OD,*'2M`%+@C.&63P!A_LT`^0B[P?C3!Y'@KSC`+8`@8#
MH/,+.!`"18P[TB"Q)BUR;HY!D((&^LO7&?[@B`,\P0D>:$`21(&`E4UB!YBP
M@`*B@`].1.$>63=.6%;P[3AD(2E9&`4M!O`#0,`-!FO'^!J($HEH\.'U(@CY
MR,/A@A=H8C)-8(`)2@`%$)C"!`\H_.%M_M`%$D$;,4""!79P0_EBHO(HD(3_
M'SQ0#V;00!`T0,`6M)`&46S``IO`NI2((@`7A+D);5H!`-```QZ,H@F4(0$9
M(&Q?U@7"4`XF(@9\0'C]<`S"UP_597PYL`*]P`/+H&`VP`+:$@*%\`!=0&XF
M84WR8ED[D`FR0`H((`1$0$J7@%:#,`16<#9*0@3CL`@Q8`4RX`9:,'`*TBA1
M<2),0`D/$`@"D`6S@`??X`E=P`@+4`C$8`1=@`,`4(`.<`0%0`7>\`!]T%R^
MP`,^<`C]4``7D`%2H`F-L``#$@:-(`"W=0&*$`ZW(`?'@'@$47U,8C85@`0'
MP`EIX`>,TP(T4`:;9D-$<#8JH`I.4$ZB0&4TT%8Y_X,6)(^V"/+-A?14P!B=`!R?P!T$0!'`P`Q00
M`]K0`!#D##9`#>30!`;`*OT@#B%`#H2PCV+I`'*P"Y]1$,ZP!FI`"P/$EPFV=P!BV@!;G0!K`V?](P`O;P
M#OQ`8V\4%98P`:/`#]\E$,\0``)@"B-04$UA!K1@`GE0F@O1#]*`!B!@`*=`
MEY+_5I0OD"2T\`)\\`+JF9X>,!LOD`B\P`?-P`>4H`V"X`9W0`1W\!]WD`Z\
M@`!GH)CS!X$0P`/1``NJ@14&@`AR(`=7(#5&\0EK813*]`U,H`*D&4=\91@&
M8`ORX`5$419"68SDZ0%"P`'H(`4#\`:(,`'>D"(/4`)7(`S;\`8X8`0>X%0"
M\@"[P`9L@`B@@`&2M)C]$`I7T`4A!X93@@W1D`&TP`4:-PU34`B`T"83$@"[
M=PH`D`,:<*$9:@,!````V0_6D`"$@(#(`$CT`2M__`-A4`%[$`)DQ05
M:'`%$6`"M,`&A8$6`&`/$:`*+R`,TY`#C>`%VB$&IH`,H1`"MF`*5-`(FB`,
M"4`&%PJB_:`!8K``.O4+L-`#/2`&5!`.T```"W`!E,`!_(`-`1``R,`/;&`*
MMG`$*T"G%FF4E,``4X`&R>`"KI`A!Q8'U:,/C\`!)-`/2D`+`P@"D.`)%[`M
M>&`$?#"IE`$##(`#E.`""M8/V;``/G`%FL("SE`#'!`-Q]`'5<`$RR``!"`%
M&1`-0$JN1W"A=(<O`(/:`+@,`*#U`%(\`/<0`!-7`(2N`M'*`$L$``MO``
MQV`&=L`"5'`MSU!]E``*(0`)K_\@![00.@OP`D+0`=*P`//`!%"0`\?`!X^0
M!?Z@!O&*J4*@"L\3C@!0`BR@`6`R`9$)"!#`#V8`)BQP"B/@`V]@#3F0?'*`
M!_Z0!Y@J`M]``C8`!4P@!+`P6`^`!3D0"KN0(/L'"!S``R7P"P"``PYZ"OY`
M"$8@!&80"L?5#0PBLSX0`@"`"+>0#"!`"*08#=B@(55@!C>`"AP@!Y60``9P
M!91`"QZ0(@LDKP`P`6`0`%[`!Q'@!0$@`N1*!E"X#0+1`0`F@`9E?`J0QPKP.@"2&0
M*M1Z$.K_4IXSVPAST`34H`M0P`!/$@>72P:]$*R'$`9\``J$8`T20`F/DS92
M$A6=.@`K``+UR`%4@*SE\`U0>#=K(`#V``%O@`0`ESV`&TX`(90A0:X`*,
MX`-*4@23T0&/8`(#4`1YD`>:0`QF$`!3`&92T%S08`DP%Q\7L`#&R;C48`T]
M\'I'8*Q\$`<=T`U4D#\X``G6P`$/T`@!(`RCNT!G\[3\:P^04.HP,@T`&(\`!&6PU$P;B```(,\``),`=Y$`=/_],!Y6`*-`/'6`"+E#&4=$*C^`!18`Z70`!U$``K0,*A5`4IX`&*P`(-[L+GW`8*T`4
MNE``W[8+@?P6D>6Z&<``D/!EE(`.H?"S.53)R.``$B``XO`-'E@"A0`-(Y`,
MP;`9%V`"E."_[!$5!.`#,!"9HL,!#J!3_6`&C\`#8!`*GD`)<6"RQ_`(`%&2`$"2`T(T`+E&`'_M`!C!!F"0`%E;"`"]`!FB`"7F```<"@+B`"V&`-
ML,`&14`&&H`#[5#)_<`:.A`&)I#)'/]@"!J0O;00"`G0"AP0`3K-#=B0!=R`
M!97@`3?B`+!0".30"H8@`M[0!7QP#`9@#:&PD\Z@"TJ@#&TR!R,`!=5``J8P
M`1.0#*90#360`S6V"PP@#&9@`-_`!F#``F#`!B.0`]_;%/V@");Z-Y88!T8=
M!Z`P`87[`*]@#S`@`94@'.TI2='P"@,P`*\@!*,K!?BH`8V0*LXP#09@`-^E
MKX;1#W,``%-`8[ZM"#4`"-T0`!*9#3T@6B_`*4D`%.&@$O`-_P_3=,
M!\=>!?H51''=!`4.4V)QQ!Z
M90-38`E%P`;TR@`ZON,\[@,,``,B8`=04`"[E^!0L>)`<1$2/A`.#@TKL%Q0
M'N52/@5@_N5A/N88L>1D?N;CB>9J3I1KWN9U
MZ>9PGN9Q/N=F/N=@7N=VCN7_L.=\WN=^_N>`'NB"/NB$7NB&?NB(!![H`0$`
!.S\_
`
end
GRAPHIC
5
y83374a2y8337405.gif
GRAPHIC
begin 644 y83374a2y8337405.gif
M1TE&.#EA1`$7`.8``,G&P<3!O?W\_+RXLY*-B)F4CJ*=FO[^_IJ6D]O8UO'P
M[LW*QO3T\K*MJ;6QK<&]N6IA7W5P;/CX]DY*2XN%@6)=6M31S:6@G//R\%)-
M2^+@W>[LZG)L:141$H1]>NOIYJJEHN#>V]G6T[>UL3HU,WUY=?OZ^D(\.]'.
MRN3BX"HE)?KZ^>CFY/#O[6IE8Q<3%49`/B`<'(>!?IZ9EKFTL/3S\3(M+%I5
M4N;DXHV(A7QW=>SJZ+NVLU=13TI$0ZVHI!T:&C4P,,S+RB8B(=?4T8^+BOGX
M^*>CH,K(Q9V9F@\,#7IT'QVRL,[+Q\[)P\O'PPT*"PX+#/___R'Y!```````
M+`````!$`1<```?_@'^"@X2%AH>(B8J+C(V*:1)N;F=JCH,'5))N;):=EFEK
MDA)IGJ6FIZBIJH(#6JT!-8@'&`^N6EH/"K()6K""!RBW"0*6*:U\;SBW`\S-
MS:ZMK5UTC6PL`05534Q,%1P4#B%&!XAT+0LS.DU83%@N8@8+&]2$1@M:?":6
M"JU3](4K4F@A$*$"MPH1"@2(L^*0FBX\]'!RI(97M&7.GDFC!Z861F;0!L@!
MD&`'E54H4?E9Z6?(`D0X(BAAJ:0"&$0*I/@I,X/<'P,O_,"PX&B'#S]A=-0H
ML+*/TZ=0HY)!PZC%A2=*^G2P0X;,D`Y.5*#@HA_*5,S8MGRI2$41UF6\0`GT84P,[.T$+2"`FXI+!CA
MJ+"2@X(#!?HH@0&AN?/GSSTT5-2B!^XL!2S@V+A04$)'+3\/GGP(8*'?P`
MJ=!`1`H<*40T@/`Y#),I/NO>S>MHKY^^A%#1`&1A!.$!`!JP@$,(75@QA!)*
M9,$':H_U`<-DC53FAQ(]0.>A$`2P`<>./.[8!AOD"0+A3"[])0<9&V9%!O\(J!7RP1!]W`"%'SD,H@8'
M842)@2(8N`!A!9,E%\8%39ZR@A-*=%#"EH77GQQ)D@.0/01PP6[&7(`#E;`&8,<_SP6&8:,:-@!"J5X\5D3
MBLPBQP3*S>#B(@_`<`51C0``@Q1S,L+U+4:NNK7A01=F##)D:X2<480=
M-)W0Q:F&F$%!2R*4$&<"/GW@0AAA;!'+(51LD1X3./@DY@7$K/(!&1;.E<@*
M!;Q0QACZ8%#!G59TF\@!+:#)H2Z"\M>(?P#^0<<10)#XP(V'U/"F'V2X]H>E
MDEFBJ1Z=?LH(GT_XH0+_IXPT`$08L3)"0P<=C/`B`4CYD,'))TMA@[HPS-#0
MKT4*PH(,0H(`CX$:4E+`S1TAR"U.VP91U`[(FG>COR`%A59KQQ
M_\>+%'XX(R:0'$,"./70QQ`A6*[&`EG,-),=!)S!R`\Q*(&`3RRP0Q]<<#Q!
M$"$(%FL`/5;@M3Z($2K#`C$=IE4,I3VQ^F4`8_G`!JE@!`EKCPPDM=#VD8
MJZ'$&&$!Z9'!=N(;7"/,!\1%I,\/ZTN$`7"#1`BI!_\+Z1G23(!@@$70@0!A
M*,,%@O2!UF7`7+]P`+F"0`0O0*$/04`!!_^0'"4PH0C`#*8P@9D#A2T"`P[`
M@AT@U`$5^(`#!/A""E!S`!E0JP"[;(1^5%`$!'CSF^`,9]STV`6PX.%:CM!`
MHH+`">O)$"D1&*8\@9G(/W"O`@S(IS[SJ8`=A$`.)2!7&1R@CTB23Q&41%PF
M#4&'+ER!=Q\0I2=GLA)/!@$`V?R#!H+0!R[8C0X%2*4"`X2`_DT@/&3@03:3
M@Q20N?2E+@U#^!J1A@T\@``5.`$9W+*5$VRA`7&@Q@&J<*=2GD(_2GB!4I?*
MU*8:;GESR!($WM@('`C0!D3_&+(,TF'H59`4@!/>&$(6RFC4*&>""#Y[P
ME3*<``3(4H3@#IJ(A`9Q)W<`@%[U&H`?+`$*';#!".@@44^^X`JAG,F%$B$#
MU!WA$&?@:`P'`0=4:FX(3$I$+S.@@\YZ]K.=M4(`3B&!$-`@!Q6X0EHX)+P#
MQ"T,,T"%?NP0`=#:]K/OTN,#LM0$*#*B:GW(0CMAZ+M$:"@,3;@M:.N0Q4%P
M;RN'B6Y6U),%'VSA`L5-Q%Q]>#Y+DBQ-,,V2$J#``585UFT;$$-%5P*!-CA*
M!&"I0`H40-_ZTO>*?9A!D]@``=',(':WFZ`:#D#@`AOX`&G(J",.H`8XA*`$
M`4,A_QUR@!L/F/&W=]S`@3=L8'[YQ0)!R4!C++&`+$FAD)/-U`PYS&&Q?J8"
M+8BQC&70QR>(P`A3L\1V)ZG42BKBDB_@@`>&[`$9$.`.%L!`'27ZO@=40@$P
M4([-_EL(#'!5!4_(LI:U7#\_7`&0A,A!'U[P!07C3C6F?$`,1,<".00%"^XU
MQ0@9X>$_@(%8-D!")TC6!PZ@.+L%FV'>;C@(*E`@/4_X@"EV[+$?*G2(BQ!E
M&'Q`A'\D(`M)0MT<@M0`.3ZA!Z`.M:A[X(,*QWD0%!AS'LP\P1RC8@5\",[$
M+*,$!RC`!J(CG9PSG#8`I:&_,G48`H%PAS\?,GN#+M@,TO\#@WHZ@M'E<_1=
M%QII3\9`"T&B0QZ(!:$^2$'/@L"!^X8`@`^8^]SH_H`(3N"'BQ8BU2]8M2+.
MC(HM-@$*('!$#G8H$R44H(Z*6(,!#'`:Y/$ZC_WJ0J*>$(=J_``L/0C;PHA[
M;!I:PH:(J$$1$I4!<.NXASQ^@8\3<4EJ*\)RAZ!`S;)R`S81("U6N/`OCD"M
M+2`+WO+6;*M5<0`Y9,D)5&%$!433A3_PX3-0((*"!?&`!_E@+G->1)U+UX0[
M52&NA[``IL/0@$%H5<5(L[@C,(Z(%10A#'YX`J`^+LE&=_?'0FP$R@W!!AU4
M]$XN,`$8H*2"FS1""F,N.JI5S>K_,;G:%&QPWPMRL+1$&,%I&?#(A!D`4N4`-Y8$0J
M@(B0F`4]L`9B!@2[EP@3D(D34`$4:`A?$`6:J(F`TPD/T`,3X`''\P,3,(4*
ME@>A^(JPJ(E-`&B"T`(!(`83D`5#``1*!01#$`09(`-(((![D@(.P`$^8`.(
MH2XQ0`9/4`%'D`)!L@-5,`$<4$6,0`09,`$&8'E_0`4HD`-10.@"NZ@N0(!E
M6-!&$40(9M`$L?B.F:@':X``\`B/2R`("X`'$T``C8`!!)")'J!HBP``-U"/
MH:@##+``H&B0F>@$1I`'>.`"1:@(9H`&9F`&:R!S!_`&%]F19@!PC4`'D>`&
M/L$&:)"1BV"2'6F1'GF1+&F1:/`&@5@]%O`%1Y`$20`"N``
M%Y`$!G`'`9`"(/D+1H`&UV<)=%"1&Y0(9I``
GRAPHIC
6
y83374a2y8337407.gif
GRAPHIC
begin 644 y83374a2y8337407.gif
M1TE&.#EA8`(*`.8``+V[NI".C?;U]1D6%D5#0ZFFI:RJJ[M[+"NK6UJ:<[+R&1B87AU=9R:F38R,E).3'5R<3TZ.<;$Q-73T8."
M@EU:6HB%A-S;VJ6DI"TI*.KIZ//R\>SJZC@U-=C7UN#?W<"^O>/AX%A65=K9
MV)62D;2RL6MH9]+1T-;5U"8B(FAE9)B5E,K)R+BVMM[=W'!M;7QZ>N7DXX6#
M@8!^?<3#PIJ8EZ6BH>3CXJ"=G,/!OS$N+0D&!Z*@GHV*B9:3DL;$PK.QL4A%
M1<_-S-[78N(ANWKZ]G8U^'@WX:%A=+0SD`]/8.`?L_.S:JHI];4TO#O
M[I.1D9*/CR@E)7]\?#LX-Z.AH#0P+[>UM,K(Q[NYMXJ(B$-`0'MX>*:DH^GH
MYGIW=W-P;Y>4DY"-BQ\<',W,R_7T\X^,BQ$.#H2#@W]\>BLH)R,@(/O[^_W]
M_?KZ^5M85_GX^/?W]N?GYO'P[[:TL[*PKTI(1_/S\DQ*2O___R'Y!```````
M+`````!@`@H```?_@']_0BL5/(*(B8J+C(V.CW\-5Y-7#9"7F)F:>'J:GI^+
M#2B@C'(;I*B@(1>('):@4ZR"`EL8J9@A%2L9"K>^F0V'?S%J@B%;O\F>"1G-
M#7:)7RL.1)H-(8(E!X(<7;Z2DTZROAW-&4X`RH(F'A!68FDRF'0C()`,)'*)
M($@"GWX0S'501_#1`0J,JIC0]\F&@CF^_!1@-(-!HCLC_#42`D0>)!.];@E`
MD3@P&O"O@A56*"QR0:](&8H5$=DS194D2`D\+7'!1+"B*J<>J/B`D0MYAA
MQ(/$K3X3G1#,W6(+\\K,K0PTNKS"!X%!S$04Q#+OL^=-AH*`L?YJ\^#.G`X$?8=@P
MY*#!XA\.9J!8X*/B#QTP8;B$@0$QDY\$B0H8\>-GP=LD.00)\?BB"0O('%;`
M?D&;=I,L+`0UB?(G`)_B6SH4]U,GTT%%/,I8$+'`VQ\(O1A,ENZ'@A!_32"(
M$%%'%HT/?T8P=STQD0$*7"S0L)>#PH0P$7BV3QI)U"&5`R,(LM(?.2"@A180
M)%?&="5(E@@+TU47`P$30!'!&IF<)`(5?ZC$V'0;]%#$'Q=`T!8'B>P1!Q4W
M4*"``#A`P04!$[$PFQ]\.,!#$]4UX4!@D(R!E/\@(Q3#0AF(=."#("HL)4@%
MO2Q'60\+/!A!%7_4X=D(CE7!!QZ"#%$:)B-00$<(`PS0PA\$V"+$$(B4P84(
M"$S908)_,%`=!Z>PD`%$!@PD0`T.`!F'!"(&:B:1H:.A*`3`.._5'&"$`XI0BH
M"OZ!@0-0QV2+"(G+!
M`+:`D(0183(K0`2L)A($UE@LYK$6,_P!!(M8O*($#G2*+,BZB21`@")&]/!'
M%9`M\@8?`@KR@!\Z8`&"B1F@D0@56OPAQ@`AC+``0X@4T<8/V-3`AS\8#'"!
MW(@8$4#F2(B0]T5&O&%5(B2X,$$9;FRA#^>"9%`?`6U((4@;",B!`4)38#'*
M!V8@/$!(!V0@"`QIL/W'"F\D;5BQD0(`17,)X@"'``(,PE
M$1G``@&6Z#"XU>%EBK###QK0!@%0P0@,"6$5VC`G0:B!5(G0`Q`$%4%2$
M!\H'!+,(H@ANP.,:$3``%6"@#0.P0-^4`P0/V(`1)#A``Z"0N&8N$0L3:0`%
M@J#","0!`;O[PPGL]@<6)"`Y`^@C`41@O"6T`0EM<(H`%:&!%BZB#$Y8P`&F
M@(`S).$[8'!`!`2!A5CZ8109$,$2H8`^]?U!;FGH@0>!((P0_O,/^!L&NQ#A
M!ABH9`+2B.&GA'@[#/`AE8W_F``0L"H(,4Q!"PD8`P%P8#@_+!$A?Y`!$+"@
MA1HPQ(-0^\$2^:"#.WC@`B[H2@H3@88*P*$$:5B`5*$5A`,<2#2`(
MCR*A7$BU12*NH,0E#N``<$1$"(3PAPR\P+`'@(*ZV)4$9@D"1']P0!Q.,``L
M:0%,[_,`'HN1C0G`10JC@)K;WF>$`O1`Q0K@1XV+`O
MF`@7)D`!(##A#WX``04(@)`DL$$0!M#`2NII6`D83P@#H!B41IH(/`"`FHCH
M@@?:H`\/Q"$!#&B#$7@JE24@P81YR(`$#*N"GJX/`4CXP0^,!P08O>\',4SJ
M$\@HB`@$H0`KX$`;)C#811`P!FV@@P,$C`Z1)1`C@,X$UM2(/M
M_&!8VO[!#B8X@@9(_3ZJ!@NK!1@N%B2VUQ6>`0Q`T$6GL?\LK;>U`0,N,*RV
MT,Q:**7!UB"ZPF<-Z^$$8&$(%]C#!$I,P)7`#0!Q**P!"&"`*J3A"F>`)1XH
M4(<$',`*(N"`!"S0@`L8P`7I<,UN%7:E%P@@#D(XPQ`&P('C_@$'0,#82O``
MA15]3+YF>(`:*E"=D@F"`D[HKB<.(`(@`WD)-/"##"Y@!2YL8W@,2$+/5E`"
M"4Q``@+@@QE"F`4XV&-N'[B4)OR`72#?,`TZN(`,$$#J&P3@`A>``@P280(N
MC$,'KUJGJ,_V!"T$X``Y>"B=K!#"!)```U@H>PR^,(&RPV8%0SB`#Q;`RDMH
M\P\"(,`W':#V^``!&HP:M6P@`+(.0++NC!`51`]#\,#X49X(`%0'^&'TB!
MS9>H@A86!`&4.8!Y9SA!%!Y@ACT\0`)Q$`#Y!'&^]!WZIU@PWB[W<(`=`/QV
M@OA*$@!P@0#$@0&8_FD;8D@#,GCZN&.`\-0_(`('7```:SPB).[0!N4E(0T0
M>4W948"#`.3`!P@@!@GC:]"22E5@!%$`>B)`?6T70BR`!F>P!F@@![BG(!L`
M9&/@`%J``7=6=D\P>Z!G>P8`!PUP`!WP`R001(A`1'^P!PCP'T)@%8V!")!A
M(7]@`'[`_P6`\P=$(%4UD`,D(`9A,`%]0AE7$`8_8`0[X`G($2.L9`(5P`(4
M]@=*\`4;T!5RX`"^D3C,&@H-%.1@$:9,`*1,@(?$`46
M\`-%&"86H4LGX@?7HP]XL`(3(`(1(@C),@)O<0FW4AR0L71<``49X`]=\`($
MH`4K\$C9`&!_$`(:``(OD"!]\%)_X`7JH1]7YBNTT0%$4APO`"G342(:$`86
MX`#N=`D<,#I-P%GD01M/8P9.,04KP@B9V$H;H`4Z*`\M,!]_L`$`0"2"T`(:
ML&J/(``Z@`!AX%`P\B11X@,;4#YVD`1+D#=-4&)S%%`B@(R,6&AM@`GL*.BH"2?N``3%`M
MTZ$#Z/@'ZC@'0\`'(G`"C`4N>0(H0A&54CF55%F55GF56)F56KF57)E]^-65
98!F68CF69%F69GF6:)F6:KF6;"F6@0``.S\_
`
end
GRAPHIC
7
y83374a2y8337406.gif
GRAPHIC
begin 644 y83374a2y8337406.gif
M1TE&.#EAQ@`/`.8``-31S;&LJMO9UOW]_'IV9>1C-C6TKFUL[RZN,S(Q:FDH\;"O:&=FF)>7,C%
MPJ>AGOCX]N;DX;RXM='/SI*-BOO[^K6QKEI55HV&@_/R\%A449B4E:ZJJ8>&
MAC(L+$A`/4E$0XJ'ASDT,RDE)5503='-RE514O3T\H2`?>/AWO'P[L[,R9&)
MAD,^/"`<'$Y*28J#@>SKZ:RHI>3BX=?3T(J%@OKZ^8Z(AF)95GYZ>9Z9E>CF
MXVUH9"8A(;>SL>KHYN_NZT9"09F4D@T*"UU95?3S\9V:F8Z'A"XI*962D5]:
M6OCW]C8R,:6AH%Q75&]K:/;U]&1@7GYX=8V*B'5O;69B85=24=#,QSPW-IR5
MD%Q544M(1Q`-#CXY.'=R<&!75!,0$?S\^_[^_O[___GY^/W]_7!I9/KY^/7T
M]%Q75^+AX%-/3_#O[5A35)J3CB,?'S8O+OS[^IR7E??W]?___R'Y!```````
M+`````#&``\```?_@'!L;`-_AH=M@T%PAX9MA7\#(&V-E7]M((*#FYQLEHT;
M-```#3*??R`
PKR0"/S\<(*]LL:>:G9N4B<`#;J?'R,F6/3$Q
M1$&'<`(%,79`)(UM1!@9?SQ
M;X=U44\.2F0IX0!,CQJ&/-CI=BH!AA.'YF3X$O!)EA=A^C2(Q<%.'V0C8K!C
M%Z/"'R5@PHRD4X6(!"C*8LHTA,*)$R9^#MG`81/'CUY_`"!84\40D!P%/@E8
MH2>#!R0M3$B=.G6.I09VD%"AP($#@`]3KG0P9$2'GB-)(C2`<2++&B*N_R8X
M@7BJ0@X6AMXT08*CB1@##2000*##@R$!3HX@"Z/G`=6I5+H9<,'DPV,O+Q!X
MN=-0@:=/-A2\:(H)`L:4$*9"\
M0QP'68DK$9!-7H#M%00G%TZ]6''[4Y4KIW"@0P[-Q.!`"U/,X$=KK[TQ`P).
MG*&!597,EH$1^V$CPPYK%'$(`P[H(0$ER2TW$Q'/?<+!'6U<@)\NEK`!00;>
M.0'>)W;AQ0`"9C`PCHL$M,&>>_#)YP)]GVQQQO\"IY1@1G^68-!"@`[HL`$<
M<(!P1Q0(`,$@$Q2@X5H.V65C0`[F4;#&!Y2PT46',G"``Q(>Q)(<'GYLH.>>
M&WQ6B0`Z(#`C3<804D?\"Q!P(P)2/7"6]$*JFD6-S5Q@[X'=,`#BD8,>0Q
M[P'`IYY63/+'?/4Y`L<6VU'1Y).G2$FE#G(TTH`*.C"(Q!4V.;&&$,P=`L4,
M>ACV1Q!9(,&!(3P4@,0'SH80;'(I$MM00\`,,G;?RP@QDXX!`&`5A0L$%L
M"*0`U"D3G)'%`_#&&V\)"+#0!@9KE&G)$F#H(<"G32*%[;4A0#.9'0%(H'`'
M(6"Q@`M<-/`JE)7(JJ+_`V8HL<02#$0P0PY]M.::KU.XMD8"0%F00QHP_D$!
M`D*<^T<-3*R!0`!^(N>""P7T[',!7U"`#`,47/#`$SMKT0`):P"H3+MF_"SU
M"O7"00<"QYUR1P$Y1`#P)_1F(77//?`S&0)3I)"""PCDT,(33;PS<:Q37IP#
M$RNLP$0+:'S`A\@V%1!""S:%(8XA;*3A1`44-$Z!`E>,$9\A)^3P@B5W%N/&
MYIS/Y$<&!:RAQ1(((('H,=]QKOKF.;:AQ1D2',.!`RX8\+4E[T6P>N>GNI"%
M!6*(H8`+4P1`,=BP?F*Q);,?^<47:7P0`24BK_$`%&Q8L$:$:?37P10Y["'^
M__@E/_!9!E,P64F)P2;#!@>I-A($URU#Q@^>E3-'/"`'6%```KZ@!'CXX`4:<,/^PH.7('!J
M`@(T0A7R]8<#-B*!QT!5(SR@`Q?@#%03K%@%*S$[6GWB2\+YPQ8>8!,$A$`#
M9V!!#0VA@"F\@!(M?"$>W@"".MJQCFPPAK#&T((`\.,0&QB>#@P`A31X4`#9
M\,`+]%`!(=J(?^+Y0P=:T`(%0`D.#>!"#K2@"\0WX`RCNV08J'
M8$,$QJ"'"6`0=V:0&05G5:L,GN$,*PAC;!QP2SWH`0>(_`0(TK`&)*)/?5-T
M00Y4P,QF-O,+KS2$#1:I@BZ0(0\/4`$2RB`&0\B@"U.80AEF0(81#(%X28!-
MNVYDB?Y=P@(APL$#(/"!(4S!!4"0FP#.@`1G.K,$2B@#`M#@SV:6`0"H;,0/
M6-F#TQVB#'I0PQ`F2E$U*`$#"*"H1H^0@!?HX(^5R,`-;M"#&AJ`#".5`@5B
MV`@#?*`#;5!"$?3%K`O<8`0XS2E.@5"!-1[``ET8@@->,(0'6*"&--#`$0A2
MAB-4@#.&H,$(#'`,`>1!:(=L"$('NG"1%Q0``D;H10UN(`2=ZA0"-0C!3^\G4)'=BK7_GZ@08D00(.G
COVER
8
filename8.htm
cover
Steven G. Canner
212 836-8136
Fax 212 836-6636
scanner@kayescholer.com
425 Park Avenue
New York, New York 10022-3598
212 836-8000
Fax 212 836-8689
www.kayescholer.com
April 29, 2010
Mr. Jeffrey Riedler
Assistant Director
Division of Corporation Finance
U.S. Securities and Exchange Commission
Mail Stop 4720
100 F Street, N.E.
Washington, D.C. 20549
|
|
|
Re: |
|
Columbia Laboratories, Inc.
Preliminary Proxy Statement on Schedule 14A
Amendment No. 1 Filed April 13, 2010
File No. 001-10352 |
Dear Mr. Riedler:
This letter is submitted on behalf of our client, Columbia Laboratories, Inc. (the Company),
in response to the comments of the staff (the Staff) of the Division of Corporation Finance of
the U.S. Securities and Exchange Commission (the SEC) with respect to Amendment No. 1 to the
Companys Preliminary Proxy Statement on Schedule 14A (File No. 001-10352) (the Proxy Statement)
set forth in your letter to Mr. Frank C. Condella, Jr., the Companys Interim Chief Executive
Officer, dated April 23, 2010 (the Comment Letter). In response to the aforementioned Staff
comments, Amendment No. 2 to the Proxy Statement (Amendment No. 2) is being filed concurrently
herewith. All references to page numbers herein refer to pages in Amendment No. 2. Capitalized
terms used but not defined herein have the meanings ascribed to them in Amendment No. 2.
Each comment presented by the Staff in the Comment Letter is set forth in italics below,
immediately followed by the Companys corresponding response. The information in the responses was
provided to us by the Company.
1. As discussed in an April 20, 2010 conference call, we believe that the Proxy Statement
should include a) unaudited financial statements of the Progesterone product line to be marketed by
Watson for the three years ended December 31, 2009 and b) Article 11 pro forma financial
information showing the effects of the Purchase and Collaboration Agreement with Watson and the
Note Repurchase Agreement. Also as discussed, provide us an analysis supporting your accounting
treatment of the Purchase and Collaboration Agreement with Watson, with reference to authoritative
literature.
RESPONSE: The Company has revised the Proxy Statement to include unaudited financial
statements relating to U.S. sales of Progesterone Products for each of the three fiscal years ended
December 31, 2009 on pages 127 through 128 of Amendment No. 2. However, as discussed with the
|
|
|
|
|
|
|
|
|
|
Mr. Jeffrey Riedler
|
|
- 2 -
|
|
April 29, 2010 |
Staff, these financial statements are limited to statements of revenue and direct costs
associated with the Companys U.S. sales of Progesterone Products because the Company does not
believe that it can present full financial statements with respect to the assets to be sold
pursuant to the Purchase and Collaboration Agreement prepared in accordance with generally accepted
accounting principles (GAAP), due to the general nature of the Asset Sale. Specifically, the
Company is of this view since, at the Closing, (i) the only assets to be sold to Buyer under the
Purchase and Collaboration Agreement are the Companys intangible assets principally related to the
Progesterone Products (i.e., regulatory filings, patents, trademarks, know-how,
information, specific contracts and other intellectual property), (ii) the Company will, in
essence, maintain the rights to produce Progesterone Products for international sales through Merck
Serono, (iii) Buyer will not acquire related assets under the Purchase and Collaboration Agreement,
such as inventory and accounts receivable (however, Buyer will, under the Supply Agreement, acquire
the Companys existing inventory of Progesterone Products at the time of the Closing) and (iv)
Buyer will, under the Purchase and Collaboration Agreement, only assume limited and specific
liabilities of the Company (i.e., liabilities arising (a) out of or relating to the use of
the assets on and after the relevant Closing Date and (b) under the specific assigned contracts, to
the extent arising after the Closing Date) and not assume accounts payable. Moreover, as detailed
in my letter, dated April 13, 2010, to the Staff and in the Proxy Statement, the Company, after the
Closing, will continue to manufacture Progesterone Products in the same manner that it currently
does and then sell Progesterone Products to Buyer under the Supply Agreement. As a result, the
Company will continue, after the Closing, to have in-process and newly manufactured finished goods
inventory for Progesterone Products as well as receivables relating to the sale of Progesterone
Products to Buyer and associated accounts payable and other liabilities. Also, the Company will
continue to reflect in its financial statements sales and costs of sales related to the sale of
Progesterone Products to Buyer. Finally, the Company believes that the presentation of such
financial statements included in Amendment No. 2 is common for the acquisition of assets, as
opposed to the acquisition of an entire business, and as the Staff pointed out during our
discussions, this presentation would mirror the presentation that Watson would have been required
to make in a Current Report on Form 8-K, if the Watson Transactions were material to Watson. Based
on our discussions with the Staff and for the reasons stated above, the Company respectfully
submits that the presentation of the historical unaudited financial statements relating to the
assets to be sold pursuant to the Purchase and Collaboration Agreement included in Amendment No. 2
is appropriate and provides meaningful information to the Companys stockholders.
The Company has also revised the Proxy Statement to include the pro forma financial statements
as required by Article 11 of S-X relating to the Watson Transactions and the Debt Retirement (which
will be accomplished through the utilization of a substantial portion of the Upfront Payment).
Please see pages 129 through 136 of Amendment No. 2.
Set forth on pages 13, 65 and 66 of Amendment No. 2 is an explanation of the Companys planned
accounting treatment for the Watson Transactions. That treatment was based on ASC 605-25, Revenue
Recognition for Multiple Element Arrangements (formerly EITF 00-210). The elements covered by the
Watson Transactions are:
|
A. |
|
The sale of intangible assets principally related to Progesterone Products (as
described above); |
|
|
B. |
|
The ongoing research and development project (the On-going R&D Project) for
additional usages of Progesterone Products (specifically, the preterm birth indication for
PROCHIEVE 8%); |
|
|
|
|
|
|
|
|
|
|
Mr. Jeffrey Riedler
|
|
- 3 -
|
|
April 29, 2010 |
|
C. |
|
The Supply Agreement for manufacture/sale of Progesterone Products for their current
indication (i.e., infertility) and for additional usages (i.e., the preterm
birth indication, subject to FDA approval). |
The Company believes that it is able to establish objective and reliable evidence for the
pricing under the Supply Agreement based upon similar arrangements that it has in place, as well as
similar arrangements in the pharmaceuticals industry. Thus, the Company is of the view that the
pricing under the Supply Agreement represents a fair price. However, the Company is not able to
establish objective and reliable evidence for either the intangible assets to be sold under the
Purchase and Collaboration Agreement or the On-going R&D Project. Thus, the excess of the $47
million Upfront Payment to be received from Buyer under the Purchase and Collaboration Agreement
over the fair market value of the 11.2 million shares of Common Stock and the book value of the
assets to be sold to Buyer under the Purchase and Collaboration Agreement will be deferred and
amortized over the future period of the On-going R&D Project, currently estimated by the Company to
be completed during the middle of 2011. The amortization of the deferred revenue will be based on
the costs incurred by the Company during each period compared to the Companys budget of total
estimated costs. The Company believes this methodology complies with the applicable accounting
standards set forth above and reflects the economics of the Watson Transactions.
2. We note your response to our prior comment 4. However, The Staff considers Mr. Curran to
be an affiliate of the company based on his substantial ownership, and therefore it does not appear
that your company is eligible to use Form S-3. Please confirm that when you deliver your proxy
statements you will also deliver the reports incorporated by reference into the proxy statement.
According to Amendment No. 4 to Schedule 13G filed by John P. Curran with the SEC on April 27,
2010, Mr. Curran reported beneficial ownership of 9.99% of our Common Stock. Based on this filing
and that the Company is not aware of any relationships that Mr. Curran and/or his affiliates have
with the Company (other than by virtue of Mr. Curran and his affiliates owning shares of Common
Stock, Notes and warrants to purchase shares of Common Stock (and being a party to the Securities
Purchase Agreement related thereto)), the Company submits that Mr. Curran is not an affiliate of
the Company. Therefore, for the reasons set forth in my letter, dated April 13, 2010, to Mr.
Riedler with respect to the Proxy Statement and the Staffs comments relating thereto, the Company
believes it has, as of the date hereof, met the requirements to incorporate information by
reference into the Proxy Statement and is not currently required to deliver the reports referred to
in comment No. 2 to stockholders.
In connection with the Staffs comments, the Company has requested us to inform you that it
acknowledges the following:
|
|
|
the Company is responsible for the adequacy and accuracy of the disclosure in the Proxy
Statement (and the amendments thereto); |
|
|
|
|
Staff comments or changes to disclosure in response to Staff comments in the filings do
not foreclose the SEC from taking any action with respect to the filing; and |
|
|
|
|
the Company may not assert Staff comments as a defense in any proceeding initiated by
the SEC or any person under the federal securities laws of the United States. |
|
|
|
|
|
|
|
|
|
|
Mr. Jeffrey Riedler
|
|
- 4 -
|
|
April 29, 2010 |
Thank you for your assistance in this matter. Please call upon the undersigned at (212) 836 -
8136 if we can be of further assistance. We thank you in advance for your customary courtesy.
|
|
|
|
|
|
|
Sincerely,
|
|
|
|
|
|
|
|
|
|
/s/ Steven G. Canner |
|
|
|
|
|
|
|
|
|
Steven G. Canner |
|
|
|
|
|
cc:
|
|
Mr. Mike Rosenthall |
|
|
Ms. Lisa Vanjoske |
|
|
Mr. James Rosenberg |
|
|
Mr. Frank C. Condella, Jr. |
|
|
Mr. Larry Gyenes |
|
|
Mr. Michael McGrane, Esq. |
-----END PRIVACY-ENHANCED MESSAGE-----