-----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, W2ocQFsgMw0PHZvP/2opc2ip9oTf5xqViwa/J1RApCeB9YHGTrougezsXbUBoyMB PwMHJ87lDOFe5lcUGSvRjw== 0000950170-00-000447.txt : 20000331 0000950170-00-000447.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950170-00-000447 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 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: 10-K SEC ACT: SEC FILE NUMBER: 001-10352 FILM NUMBER: 584131 BUSINESS ADDRESS: STREET 1: 2875 NORWEST 191 STREET STE 400 CITY: AVENTURA STATE: FL ZIP: 33180 BUSINESS PHONE: 3059336089 MAIL ADDRESS: STREET 1: 2875 NORWEST 191 STREET STE 400 CITY: AVENTURA STATE: FL ZIP: 33180 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- COMMISSION FILE NUMBER 1-10352 COLUMBIA LABORATORIES, INC. (Exact name of Company as specified in its charter) DELAWARE 59-2758596 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2875 NORTHEAST 191ST STREET, SUITE 400 AVENTURA, FLORIDA 33180 (Address of principal executive offices) (Zip Code) Company's telephone number, including area code: (305) 933-6089 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE (Title of each class) (Name of exchange where registered) Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Columbia Laboratories, Inc. Common Stock, $.01 par value, held by non-affiliates, computed by reference to the price at which the stock was sold as of February 29, 2000: $326,071,266. Number of shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding as of February 29, 2000: 29,314,489. PART I ITEM 1. BUSINESS GENERAL DESCRIPTION OF BUSINESS Columbia Laboratories, Inc. (the "Company") was incorporated as a Delaware corporation in December 1986. The Company's objective is to develop unique pharmaceutical products that treat female specific diseases and conditions including infertility, dysmenorrhea, endometriosis, hormonal deficiencies and the prevention of sexually transmitted diseases. Columbia's research in endocrinology has also led to the development of a product to treat "Andropause" in men. Columbia's products primarily utilize the Company's patented bioadhesive delivery technology, the ("Bioadhesive Delivery System"). Formulated products utilizing the Bioadhesive Delivery System consist principally of a polymer, polycarbophil, and an active ingredient. The Bioadhesive Delivery System is based upon the principle of bioadhesion, a process by which the polymer adheres to epithelial surfaces and to mucin, a naturally occurring secretion of the mucous membranes. The polymer remains attached to epithelial surfaces and/or the mucin and is discharged upon normal cell turnover or upon the detachment of the mucin from the mucous membranes, a physiological process which, depending upon the area of the body, occurs every 12 to 72 hours. This extended period of attachment permits the Bioadhesive Delivery System to be utilized in products when extended duration of effectiveness is desirable or required. The Company has focused on women's health care because of the significant number of women whose health and hygiene needs have not been met by available products and because the Company has found vaginal delivery to be particularly effective. The Company intends to continue to develop products that improve the delivery of previously approved drugs. The Company is currently engaged solely in one business segment -- the development and sale of pharmaceutical products and cosmetics. See footnote 7 to the consolidated financial statements for information on foreign operations. The Company's principal executive offices are located at 2875 Northeast 191st Street, Suite 400, Aventura, Florida 33180, and its telephone number is (305) 933-6089. The Company's subsidiaries, all of which are wholly-owned, are Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia Laboratories (France) SA ("Columbia France"), Columbia Laboratories (UK) Limited ("Columbia UK") and Columbia Research Laboratories, Inc. ("Columbia Research"). Except for historical information contained herein, the matters discussed in this document are forward looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products and prices, and other factors discussed elsewhere in this report. PRODUCTS CRINONE(R). The Company's first prescription drug is a sustained release, vaginally delivered, natural progesterone product. Crinone utilizes the Company's patented Bioadhesive Delivery System which enables the progesterone to achieve a "First Uterine Pass Effect"(C). Crinone is the first product to deliver progesterone directly to the uterus, thereby maximizing therapeutic benefit and avoiding side effects seen with orally-delivered synthetic progestins. In May 1997, the Company received U.S. marketing approval for Crinone from the U.S. Food and Drug Administration ("FDA") for use as a progesterone supplementation or replacement as part of an Assisted Reproductive Technology (ART) treatment for infertile women with progesterone deficiency. In July 1997, the 2 Company received U.S. marketing approval for Crinone from the FDA for the treatment of secondary amenorrhea (loss of menstrual period). Outside the U.S., Crinone has been approved for marketing for one or more medical indications in the following countries: the United Kingdom, Ireland, Finland, Argentina, Greece, Mexico, Colombia, Belgium, Italy, Germany and France. The medical indications include the treatment of secondary amenorrhea, progesterone supplementation or replacement as part of an ART treatment for infertile women, the prevention of hyperplasia and endometrial cancer in post-menopausal women receiving hormone replacement therapy ("HRT"), the reduction of symptoms of premenstrual syndrome ("PMS"), menstrual irregularities, dysmenorrhea and dysfunctional uterine bleeding. In May 1995, the Company entered into a worldwide, except for South Africa, license and supply agreement with American Home Products Corporation ("AHP") under which the Wyeth-Ayerst Laboratories division of AHP market Crinone. Under the terms of the agreement, the Company earned $17 million in milestone payments to date and will continue to receive additional milestone payments. The Company also supplied Crinone at a price equal to 30% of AHP's net selling price. On July 2, 1999, AHP assigned the license and supply agreement to Ares-Serono ("Serono"), a Swiss pharmaceutical company. Serono paid $68 million to AHP for the rights to Crinone and assumed AHP's financial obligations to the Company. ADVANTAGE-S(TM). Advantage-S, the Company's female contraceptive gel utilizes the Bioadhesive Delivery System with the active ingredient nonoxynol-9 (the"Product") and it has been marketed in the United States by the Company since July 1998 under an existing monograph for nonoxynol-9 spermicidal products. The Product had been marketed in the United States under the tradename Advantage 24(R) by Lake Pharmaceuticals, Inc. ("Lake"). In July 1997, the FDA alleged that the monograph did not permit a claim for 24-hour effectiveness. Although, the Company believes that its claim for 24-hour effectiveness was valid, it agreed with the FDA in February 1998 to market the Product without a claim for 24-hour effectiveness under the tradename of Advantage-S. During the period in which the Company was disputing the FDA allegations, the Company terminated its license agreement with Lake. In July 1998, the Company began marketing the Product in the United States under the tradename Advantage-S. Among Advantage-S benefits is that it utilizes the Company's Bioadhesive Delivery System, which enables the nonoxynol-9 to adhere to the cervix. In August 1998, the Company signed a distribution agreement with Advantage Technology Development Co. Ltd. ("Advantech") for the distribution of the Product in China under the tradename Advantage-LA(R). An introduction test was conducted by Advantech and was satisfactorily completed. The product is now being sold in selected larger cities within China under an agreement with the Chinese Health Authorities for what is known as "Trial Sales". Upon successful completion of the "Trial Sales" in 1999, the Chinese Health Authorities issued a Family Planning Import Sales Certificate allowing distribution of Advantage-LA throughout China. In Europe, the Company intends to register Advantage-S as an over-the-counter drug. Broader claims relating to prevention of sexually transmitted diseases (STD's) will be requested upon completion, if successful, of clinical studies now underway. The United Nations Global Program on AIDS (formerly known as the World Health Organization Global Program on AIDS) has completed a 600 women safety study on Advantage-S. Analysis of the data generated indicates that Advantage-S, as used in the study, was free of any serious side effects. In addition, Advantage-S was shown to be safer than any other nonoxynol-9 product studied. Studies to determine the efficacy of Advantage-S in preventing the heterosexual transmission of HIV and other STD's have begun in a National Institute of Health sponsored study in Kenya. Additional U.N. studies are underway in Thailand, India and the Ivory Coast. REPLENS(R). Replens replenishes vaginal moisture on a sustained basis and relieves the discomfort associated with vaginal dryness. Replens was the first product utilizing the Bioadhesive Delivery System. Replens is marketed in the United States by the Company who reacquired the marketing rights from the Warner-Lambert Company on April 1, 1998. Replens is marketed by various pharmaceutical companies throughout the rest of the world. In October 1999, the Company engaged an investment banking firm to act as its exclusive advisor in a planned divesture of certain of the Company's over-the-counter products which includes Replens. 3 OTHER PRODUCTS. The Company also markets Advanced Formula Legatrin PM(R), for the relief of occasional pain and sleeplessness associated with minor muscle aches such as night leg cramps; Legatrin(R) GCM Formula(TM), which nutritionally supports healthy joint function; Vaporizer in a bottle(R), a portable cough suppressant for the temporary relief of a cough due to the common cold; and Diasorb(R), a pediatric antidiarrheal product. These products do not utilize the Bioadhesive Delivery System. In October 1999, the Company engaged an investment banking firm to act as its exclusive advisor in a planned divestiture of certain of the Company's over-the-counter products which include Advanced Formula Legatrin PM, Legatrin GCM Formula, Vaporizer in a Bottle and Diasorb. In March 1999, the Company entered into a license and supply agreement with Mipharm SpA under which Mipharm SpA will be the exclusive marketer of the Company's previously unlicensed women's healthcare products in Italy, Portugal, Greece and Ireland with a right of first refusal for Spain. Under the terms of the agreement, the Company received $462,500, net of expenses, and expects to receive future milestone payments as products are made available by the Company. RESEARCH AND DEVELOPMENT The Company expended $6.7 million in 1999, $7.8 million in 1998 and $9.1 million in 1997 on research and development activities. The expenditures are primarily the result of costs associated with contracting for, supervising and administering the clinical studies on the Company's Crinone, Advantage-S, Chronodyne and Testosterone Bioadhesive Tablet products. These studies are coordinated from the Company's New York and Paris offices. CHRONODYNE(R). In June 1998, the Company announced that it had been granted an Investigational New Drug Application ("IND") by the FDA for terbutaline in Columbia's patented bioadhesive vaginal delivery system. This product is intended to relax the uterus and prevent uterine dyskinesia (abnormal contractions), and therefore may be useful in the treatment of disorders such as dysmenorrhea, difficult and painful menstruation and for the treatment and prevention of endometriosis, the growth of endometrial tissue outside the uterus. Dysmenorrhea is a disorder that afflicts nearly 25 million women in the U.S. which is more than 30% of all menstruating women. Endometriosis effects 5 million women in the U.S. of whom 30 to 40% are infertile. This vaginal form of terbutaline, trademarked Chronodyne by Columbia, takes advantage of the Company's patented "First Uterine Pass Effect" whereby the drug is preferentially delivered to the uterus. This results in high concentrations in the uterus, the target organ, and low concentrations in the systemic circulation thereby minimizing the potential for side effects. Pharmacokinetic studies have demonstrated that when Chronodyne is administered vaginally the common side effects of tachycardia (rapid heart rate) and tremor are avoided because the systemic serum levels of terbutaline are only a fraction of that seen after oral administration. Chronodyne represents a new approach in the treatment of dysmenorrhea. Traditionally, analgesics are used by women after the pain occurs with the result that only partial relief is obtained. Chronodyne can prevent pain from occurring by addressing the root cause of dysmenorrhea painful uterine contractions. Chronodyne would be used at the first sign of dysmenorrhea, therefore preventing painful contractions. It is a widely held theory that endometriosis is the result of retrograde (backward-flowing) menstruation. Endometriosis occurs when endometrial tissue flows backward through the fallopian tubes and attaches to nearby pelvic structures, such as the ovary, and then grows. It has been shown that women who develop endometriosis usually have a long history of dysmenorrhea. It has been shown that women with endometriosis have an abnormality of uterine contractility which prevents sperm from reaching the fallopian tubes, thereby causing infertility. The Company believes that Chronodyne can normalize uterine contractility and restore fertility. TESTOSTERONE BIOADHESIVE BUCCAL TABLET. In August 1998, the Company announced that studies had been completed demonstrating that its patented bioadhesive buccal tablet can completely replace the normal amount of testosterone produced by men. The new bioadhesive buccal tablet which is only 9 mm in diameter and insensible after 4 being inserted into the mouth, has been shown to deliver physiologic levels of testosterone. This contrasts with large transdermal patches which produce sub-physiologic levels because they deliver only 5 mg per day. Testosterone has traditionally been used to treat hypogonadel men. Hypogonadism in men is characterized by a deficiency or absence of endogenous testosterone production. However, recent data has demonstrated that men with low levels of testosterone may be at a greater risk of having a heart attack. Like the failure of the ovaries in menopausal women to produce estrogen, failure of the testes to product sufficient testosterone in men results in increasing levels of Follicle Stimulating Hormone (FSH) and Luteinizing Hormone (LH). The advent of "Andropause" in men may have the same impact as menopause in women- increased risk of cardiovascular disease, Alzheimer's disease and ultimately osteoporosis. Research sponsored by the Company has shown that testosterone apparently plays the same role in men as estradiol does in women, i.e., it acts as a potent coronary dilator. Acute administration of testosterone improves exercise-induced myocardial ischemia in men with coronary artery disease. Columbia's testosterone bioadhesive buccal tablet may play an important role in the treatment of angina and in the secondary prevention of a heart attack. PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY INFORMATION The Company purchased the patents underlying the Bioadhesive Delivery System from Bio-Mimetics, Inc. ("Bio-Mimetics"). The basic patent that covers the Bioadhesive Delivery System was issued in the United States in 1986 and by the European Patent Office in 1992. The Company has the exclusive right to the use of the Bioadhesive Delivery System subject to certain third party licenses issued by Bio-Mimetics that have been assigned to the Company and certain restrictions on the assignment of the patents. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations." During 1999, there were two United States patents granted to the Company. The first patent was for a method of treating or reducing ischemia or incidence of cardiovascular events by administering progesterone. The second patent was for the composition and method of moisturizing mammalian membranous tissue. During 1997, the Company was granted a United States patent covering the technology used in its product Advantage-S, which potentiates the activity of nonoxynol-9 against various organisms which can cause sexually transmitted diseases, including AIDS, gonorrhea, chlamydia, trichomonal infections, syphilis and genital herpes. During 1996, the Company was granted United States patents covering vaginal moisturization and the direct transport of progesterone to the uterus. In addition, a patent covering the treatment of ischemia through the delivery of Crinone was filed in the United States. The Company is continuing to develop the core Bioadhesive Delivery System and has filed additional patent applications covering tissue moisturization, vaginal moisturization and progesterone delivery. While patent applications do not ensure the ultimate issuance of a patent, it is the Company's belief that patents based on these applications will issue. Because the Company operates on a worldwide basis, the Company seeks worldwide patent protection for its technology and products. While having patent protection cannot ensure that no competitors will emerge, this is a fundamental step in protecting the technologies of the Company. The Company has filed "Replens", "Advantage 24", "Advantage-S", "Advantage-LA", "Crinone" and "Chronodyne"as trademarks in countries throughout the world. Applications for the registration of trademarks do not ensure the ultimate registration of these marks. The Company believes these marks will be registered. In addition, there can be no assurance that such trademarks will afford the Company adequate protection or that the Company will have the financial resources to enforce its rights under such trademarks. The Company also relies on confidentiality and nondisclosure agreements. There can be no assurance that other companies will not acquire information which the Company considers to be proprietary. Moreover, there can be 5 no assurance that other companies will not independently develop know-how comparable to or superior to that of the Company. MANUFACTURING Crinone, Advantage-S, Advantage 24, Advantage-LA and Replens are currently being manufactured and packaged by third-party manufacturers in Europe utilizing the "form, fill and seal" single step manufacturing process. Medical grade, cross-linked polycarbophil, the polymer used in the Company's products utilizing the Bioadhesive Delivery System, is currently available from only one supplier, B.F. Goodrich Company ("Goodrich"). The Company believes that Goodrich will supply as much of the material as the Company may require because the Company's products rank among the highest value-added uses of the polymer. There can be no assurance that Goodrich will continue to supply the product. In the event that Goodrich cannot or will not supply enough of the product to satisfy the Company's needs, the Company will be required to seek alternative sources of polycarbophil. There can be no assurance that an alternative source of polycarbophil will be obtained. All of the other raw materials used by the Company for its products utilizing the Bioadhesive Delivery System are available from several sources. OVER-THE-COUNTER DRUGS The Company currently markets six over-the-counter drugs: Advanced Formula Legatrin PM, for the relief of occasional pain and sleeplessness associated with minor muscle aches such as night leg cramps; Legatrin GCM Formula, which nutritionally supports healthy joint function; Diasorb, a pediatric antidiarrheal product; Vaporizer in a bottle, a portable cough suppressant, Replens and Advantage-S. These over-the-counter drugs are manufactured by third-party manufacturers. All of the raw materials for the non Bioadhesive Delivery System products used by the Company for its over-the-counter drugs are available from several sources. The over-the-counter drugs are sold to drug wholesalers, mass merchandisers and chain drug stores. The Company utilizes approximately 20 drug manufacturers' representative firms to make calls on the Company's trade customers. The manufacturers' representatives receive commissions based on sales made within their respective territories. The Company supports the activities of the manufacturers' representatives by advertising in consumer publications and convention participation. SALES The following table sets forth the percentage of the Company's consolidated net sales by product, for each product accounting for 5% or more of consolidated net sales in any of the three years ended December 31, 1999. 1999 1998 1997 ---------- ---------- ----------- Crinone 56% 25% 68% Replens 24 40 10 Advantage-S 3 4 3* Legatrin PM/Legatrin GCM 12 26 15 Other Products 5 5 4 ---------- ---------- ----------- 100% 100% 100% ========== ========== =========== * Prior to July 1997 the tradename was Advantage 24. The Company anticipates the percentage of sales attributable to Legatrin PM and the other products to decrease in future years as additional products utilizing the Bioadhesive Delivery System are introduced. AHP and Ares-Serono accounted for approximately 56% of 1999 consolidated net sales. AHP accounted for approximately 25% and 68% of 6 1998 and 1997 consolidated net sales, respectively. A retail customer accounted for approximately 9%, 15% and 5% of 1999, 1998 and 1997 consolidated net sales, respectively. Another customer accounted for approximately 5%, of 1999, consolidated net sales. COMPETITION While the Company has entered into the strategic alliance agreements for the marketing of its women's health care products, there can be no assurance that the Company and its partners will have the ability to compete successfully. The Company's success to a great extent is dependent on the marketing efforts of its strategic alliance partners, over which the Company has limited ability to influence. The markets which the Company and its strategic alliance partners operate in or intend to enter are characterized by intense competition. The Company and its partners compete against established pharmaceutical and consumer product companies which market products addressing similar needs. In addition, numerous companies are developing or, in the future, may develop enhanced delivery systems and products competitive with the Company's present and proposed products. Some of the Company's and its partners' competitors possess greater financial, research and technical resources than the Company or its partners. Moreover, these companies may possess greater marketing capabilities than the Company or its partners, including the resources to implement extensive advertising campaigns. Crinone, although a natural progesterone product, competes in markets with other progestins, both synthetic and natural, which may be delivered orally, by injections or by suppositories. Some of the more successful orally dosed products include Provera marketed by the Upjohn Company and Prempro and Premphase marketed by AHP. Although the Company is not aware of any product incorporating rate-controlled technology with respect to vaginal lubrication, the Company believes that Replens competes in the same markets as K-Y Jelly(R) and Gyne-Moisturin(R), vaginal lubricants marketed by Johnson & Johnson Products, Inc. and Schering-Plough Corporation, respectively. The Company also believes that Advantage-S, Legatrin PM and Diasorb compete against numerous products in their respective categories and that Vaporizer in a bottle(R) competes against Vicks Vaporsteam, a product distributed by Richardson-Vicks, Inc. GOVERNMENT REGULATION The Company is subject to both the applicable regulatory provisions of the FDA in the United States and the applicable regulatory agencies in those foreign countries where its products are manufactured and/or distributed. As in the United States, a number of foreign countries require premarketing approval by health regulatory authorities. Requirements for approval may differ from country to country and may involve different types of testing. There can be substantial delays in obtaining required approvals from regulatory authorities after applications are filed. Even after approvals are obtained, further delays may be encountered before the products become commercially available. In the United States, manufacturers of pharmaceutical products are subject to extensive regulation by various Federal and state governmental entities relating to nearly every aspect of the development, manufacture and commercialization of such products. The FDA, which is the principal regulatory authority in the United States for such products, has the power to seize adulterated or misbranded products and unapproved new drugs, to require their recall from the market, to enjoin further manufacture or sale and to publicize certain facts concerning a product. As a result of FDA regulations, pursuant to which new pharmaceuticals are required to undergo extensive and rigorous testing, obtaining premarket regulatory approval requires extensive time and cash expenditures. The manufacturing of the Company's products which are either manufactured and/or sold in the United States, is subject to current Good Manufacturing Practices prescribed by the FDA. The labeling of over-the-counter drugs in the United States, as well as advertising relating to such products, are subject to the review of the Federal Trade Commission ("FTC") pursuant to the general authority of the FTC to monitor and prevent unfair or deceptive trade practices. 7 PRODUCT LIABILITY The Company may be exposed to product liability claims by consumers. Although the Company presently maintains product liability insurance coverage in the amount of $15 million, there can be no assurance that such insurance will be sufficient to cover all possible liabilities. In the event of a successful suit against the Company, insufficiency of insurance coverage could have a materially adverse effect on the Company. EMPLOYEES As of February 29, 2000, the Company had 37 employees, 3 in management, 14 in research and development administration, 5 in manufacturing, 2 in marketing, and 13 in support functions. None of the Company's employees are represented by a labor union. The Company believes that its relationship with its employees is satisfactory. The Company has employment agreements with certain employees, some of whom are also stockholders of the Company. See "Executive Compensation-- Employment Agreements." ITEM 2. PROPERTIES As of February 29, 2000, the Company leases the following properties:
ANNUAL LOCATION USE SQUARE FEET EXPIRATION RENT - ---------------- --------------------- ------------ -------------- -------------- Aventura, FL Corporate office 4,580 June 2003 $ 119,000 Paris, France Research admin office 9,500 August 2001 324,000 Paris, France Business residence 2,600 June 2001 61,000 New York, NY Residential office 1,000 April 2000 50,000 Rockville Center, NY Research admin office 2,000 October 2004 53,000
ITEM 3. LEGAL PROCEEDINGS The Company filed an action in the United States District Court for the Southern District of Florida ("Florida Action") in November 1997 seeking a declaratory judgement on certain issues related to its relationship with Lake Consumer Products, Inc. ("Lake") as governed in the contract between the Company and Lake. Lake filed an action against the Company in the United States District Court, Northern District of Illinois ("Illinois Action") , for damages alleged by Lake to have been suffered by it as a result of the FDA's allegations in July 1997 that the Company's nonoxynol-9 product, then marketed by Lake under the tradename Advantage 24, was not permitted to be sold under the monograph. The IllinoisAction was dismissed by the Illinois Court and transferred to the Florida Court for consolidation as a counterclaim in the Florida Action. On March 16, 2000, the Company and Lake settled all outstanding issues in the consolidated Florida Action by the Company having bought out the contract for the sum of $1,200,000 ($600,000 in cash and $600,000 in the form of Company common stock). As a result, the Company reacquired the U.S. rights to the Advantage product and both parties agreed to have their legal actions dismissed. Other claims and law suits have been filed against the Company. In the opinion of management and counsel, none of these lawsuits are material and they are all adequately reserved for or covered by insurance or, if not so covered, are without any or have little merit or involve such amounts that if disposed of unfavorably would not have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's $.01 par value Common Stock ("Common Stock") trades on the American Stock Exchange under the symbol COB. The following table sets forth the high and low sales prices of the Common Stock on the American Stock Exchange, as reported on the Composite Tape. FISCAL YEAR ENDED DECEMBER 31, 1998 HIGH LOW - ------------------------------------ ------ ------- First Quarter $15.18 $11.25 Second Quarter 14.13 5.63 Third Quarter 8.94 2.50 Fourth Quarter 4.88 2.38 FISCAL YEAR ENDED DECEMBER 31, 1999 - ----------------------------------- First Quarter $6.81 $2.88 Second Quarter 9.06 5.88 Third Quarter 8.69 5.69 Fourth Quarter 8.31 5.50 At February 29, 2000, there were 396 shareholders of record of the Company's Common Stock, although the Company estimates that there are approximately 9,500 beneficial owners, 2 shareholders of record of the Company's Series A Convertible Preferred Stock ("Series A Preferred Stock"), 3 shareholders of record of the Company's Series B Convertible Preferred Stock ("Series B Preferred Stock") and 22 shareholders of record of the Company's Series C Convertible Preferred Stock ("Series C Preferred Stock"). Between January 7, 1999 and February 1, 1999 the Company sold (i) 6,660 shares of Series C Convertible Preferred Stock, convertible into shares of the Company's Common Stock, par value $.01 (the "Series C Convertible Preferred Stock"), and (ii) warrants to purchase up to an aggregate of 233,100 shares of Common Stock at an exercise price of $3.50 per share (the "Series C Warrants") for an aggregate purchase price of $6,660,000. The Series C Preferred Stock may be converted into Common Shares at a conversion price equal to the lesser of (i) $3.50 and (ii) 100% of the average of the closing prices of the Common Shares as reported on the AMEX for the three Trading Days immediately preceding the date of conversion. In accordance with Rule 501 of Regulation D under the Securities Act of 1933 (the "Securities Act"), it was not necessary in connection with the offer, sale and delivery of the Series C Preferred Stock to register the Series C Preferred Stock under the Securities Act. On January 28, 1999 the Company granted to Shephard Lane and Anthony Campbell, in exchange for services performed, warrants to purchase up to an aggregate of 125,000 shares of Common Stock at an exercise price of $4.8125 per share. On January 28, 1999 and September 23, 1999, the Company granted to James Apostolakis, warrants to purchase up to an aggregate of 100,000 and 75,000 shares, respectively, of common stock at an exercise price of $4.8125 and $7.50, respectively, per share. On October 25, 1999, the Company granted to Ryan Beck & Co., Inc., as part of a services agreement, warrants to purchase up to an aggregate of 12,500 shares of common stock at an exercise price of $7.0625 per share. 9 On August 31, 1998 the Company granted to Value Management & Research AG a warrant to purchase up to an aggregate of 120,000 shares of Common Stock at an exercise price of $5.00 per share in exchange for consulting services performed. The Series A Preferred Stock pays cumulative dividends at a rate of 8% per annum payable quarterly on the first business day of the subsequent quarter. As of December 31, 1999, dividends of $1,860 were payable on January 3, 2000. The Series C Preferred Stock issued in January 1999 pays cumulative dividends at a rate of 5% per annum payable quarterly on the last day of the quarter. The Company has never paid a cash dividend on its Common Stock and does not anticipate the payment of cash dividends in the foreseeable future. The Company intends to retain any earnings for use in the development and expansion of its business. Applicable provisions of the Delaware General Corporation Law may affect the ability of the Company to declare and pay dividends on its Common Stock as well as on its Preferred Stock. In particular, pursuant to the Delaware General Corporation Law, a company may pay dividends out of its surplus, as defined, or out of its net profits, for the fiscal year in which the dividend is declared and/or the preceding year. Surplus is defined in the Delaware General Corporation Law to be the excess of net assets of the company over capital. Capital is defined to be the aggregate par value of shares issued. ITEM 6. SELECTED FINANCIAL DATA The following consolidated selected financial data of the Company for the five years ended December 31, 1999 (not covered by the auditors' report), should be read in conjunction with the consolidated financial statements and related notes thereto. See "Item 8. Financial Statements and Supplementary Data."
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 ----------------------------------------------------------- Statement of Operations Data: (000's) NET SALES 18,921 $10,018 $16,547 $5,646 $9,905 NET INCOME ( LOSS) (1) (2,210) (13,860) 763 (13,079) (959) INCOME (LOSS) PER COMMON SHARE (0.09) (0.48) 0.03 (0.47) (0.04) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-DILUTED 28,853 28,679 29,982 27,615 25,487 BALANCE SHEET DATA: (000'S) WORKING CAPITAL (DEFICIENCY) $3,441 ($1,401) $5,140 $720 ($1,968) TOTAL ASSETS 12,988 11,880 15,002 9,980 7,687 LONG-TERM DEBT 10,000 10,000 -- -- -- STOCKHOLDERS' EQUITY (DEFICIENCY) (274) (4,333) 8,814 4,673 1,556
(1) 1999, 1998, 1997, 1996 and 1995 net income (loss) includes approximately $463,000, $73,000, $7.0 million, $2.0 million and $8.1 million, respectively, of license fee income. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS FORWARD-LOOKING INFORMATION The Company and its representatives from time to time make written or verbal forward looking statements, including statements contained in this and other filings with the Securities and Exchange Commission and in the Company's reports to stockholders, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, the Company's expectations regarding sales, earnings or other future financial performance and liquidity, product introductions, entry into new geographic regions and general optimism about future operations or operating results. Although the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors that could cause actual results to differ from expectations include, without limitation: (i) increased competitive activity from companies in the pharmaceutical industry, some of which have greater resources than the Company; (ii) social, political and economic risks to the Company's foreign operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States; (iii) changes in the laws, regulations and policies, including changes in accounting standards, that affect, or will affect, the Company in the United States and abroad; (iv) foreign currency fluctuations affecting the relative prices at which the Company and foreign competitors sell their products in the same market; and (v) the timely completion of studies and approvals by the FDA and other regulatory agencies. Additional information on factors that may affect the business and financial results of the Company can be found in filings of the Company with the Securities and Exchange Commission. All forward-looking statements should be considered in light of these risks and uncertainties. The Company assumes no responsibility to update forward-looking statements made herein or otherwise. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased from approximately $315,000 at December 31, 1998 to approximately $1,982,000 at December 31, 1999. The Company received approximately $6.4 million, net of expenses from the issuance and sale of Series C Convertible Preferred Stock. Offsetting this was the approximately $4.1 million of cash used in operating activities. In May 1995, the Company entered into a worldwide, except for South Africa, license and supply agreement with American Home Products Corporation ("AHP") under which the Wyeth-Ayerst Laboratories division of AHP market Crinone. On July 2, 1999 AHP assigned this license and supply agreement to Ares-Serono ("Serono"), a swiss pharmaceutical company. Under the terms of the agreement, as of February 28, 2000, the Company has earned $17 million in milestone payments and will continue to receive additional milestone payments. The Company also supplied Crinone at a price equal to 30% of AHP's net selling price. Serono paid $68 million to AHP for the rights to Crinone and assumed AHP's financial obligations to the Company. 11 In connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which assets consisted of the patents underlying the Company's Bioadhesive Delivery System, other patent applications and related technology, the Company pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of products based on the Bioadhesive Delivery System, to an aggregate of $7.5 million. The Company is required to prepay a portion of the remaining royalty obligation, in cash or stock at the option of the Company, if certain conditions are met. Through December 31, 1999, the Company has paid approximately $1.6 million in royalty payments. As of December 31, 1999, the Company has outstanding exercisable options and warrants that, if exercised, would result in approximately $50.9 million of additional capital. However, there can be no assurance that such options or warrants will be exercised. Significant expenditures anticipated by the Company in the near future are concentrated on research and development related to new products. The Company anticipates it will spend approximately $8.2 million on research and development in 2000 and an additional $200,000 on property and equipment. As of December 31, 1999, the Company had available net operating loss carryforwards of approximately $45 million to offset its future U.S. taxable income. In accordance with Statement of Financial Accounting Standards No. 109, as of December 31, 1999 and 1998, other assets in the accompanying consolidated balance sheet include deferred tax assets of approximately $17 million and $18 million, respectively, (comprised primarily of a net operating loss carryforward) for which a valuation allowance has been recorded since the realizability of the deferred tax assets are not determinable. In January 1999, the Company raised approximately $6.4 million, net of expenses, from the issuance and sale of Series C Convertible Preferred Stock. ("Preferred Stock"). The Preferred Stock, sold to twenty-four accredited investors, has a stated value of $1,000 per share. The Preferred Stock is convertible into common stock at the lower of: (i) $3.50 per common share and (ii) 100% of the average of the closing prices during the three trading days immediately preceding the conversion notice. If conversion is based on the $3.50 conversion price, conversion may take place after the underlying common stock is registered. If conversion is based on the alternative calculation, conversion cannot take place for fifteen months. The Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day of the quarter. Subsequent to year-end, the Company has received approximately $4.7 million from the exercise of outstanding options and warrants. The Company anticipates that cash generated from operations, together with the proceeds from the exercise of options and warrants will be sufficient to meet its working capital requirements for 2000. In October 1999, the Company engaged an investment banking firm to act as its exclusive advisor in a planned divestiture of certain of the Company's over-the-counter products. Subsequent to year-end, the Company has received a letter of intent from a prospective party who is in the process of completing due diligence procedures. The terms of the agreement are being negotiated. 12 RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1999 VERSUS DECEMBER 31, 1998 VERSUS DECEMBER 31, 1997 Net sales increased by approximately 89% in 1999 to approximately $18.9 million as compared to $10.0 million in 1998 and $16.5 million in 1997. Sales of Crinone accounted for approximately $10.6 million of net sales in 1999 as compared to approximately $2.5 million and $11.2 million in 1998 and 1997, respectively. AHP, the Company's former licensee for Crinone, had purchased large initial quantities of Crinone from the Company in 1997 and used this inventory to fulfill most of their 1998 Crinone requirements. The approximately $8.9 million increase in 1999 over 1998 was attributable to the replenishment of inventory utilized in 1998 and increased usage by consumers. Sales of Replens were approximately $4.5 million, $4.2 million and $1.6 million in 1999, 1998 and 1997, respectively. The increase in 1998 reflects the reacquisition of the product by the Company from the Warner-Lambert Company in April 1998. As a result of the reacquisition, the Company sells Replens directly to chain drugstores, food stores and mass merchandisers at wholesale prices instead of to Warner-Lambert at contract manufacturing prices which are much lower than wholesale prices. Gross profit as a percentage of sales increased in 1999 to approximately 70% as compared to approximately 43% in 1998 and approximately 60% in 1997. The increase in Crinone sales, with its approximately 80% gross profit, accounts for almost all of the increase in 1999 Selling and distribution expenses were approximately $3.9 million, $4.1 million and $2.9 million in 1999, 1998 and 1997, respectively. Selling and distribution expenses increased by approximately 41% in 1998 compared to 1997. Contributing to the approximately $1.2 million increase were additional expenses related to the reacquisition of Replens and the marketing of the product such as: amortization of the Replens trademark $230,000; media advertising $464,000; advertising billbacks $209,000; and broker commissions $133,000. General and administrative expenses decreased approximately $1.2 million or 21% to approximately $4.6 million in 1999 from approximately $5.8 million in 1998. The decrease was principally the result of an approximately $249,000 reduction in salaries, an approximately $490,000 reduction in professional services, including investor relations, and an approximately $227,000 reduction in legal expenses related to dissident shareholder activities. General and administrative expenses increased by 46% to $5.8 million in 1998 from $4.0 million in 1997. The principal reasons for the $1.8 million increase were an increase in legal expense from $707,000 in 1997 to $1,793,000 in 1998 and an increase in investor/public relations expenses from $543,000 in 1997 to $966,000 in 1998. The increase in legal fees reflected additional attorney charges related to litigation and dissident shareholder activities. The increase in investor/public relation expenses reflected work done in 1998 on Crinone media promotion and investor relations work performed in Europe. The European investor relations expense included $264,000 which represented the value of warrants granted to non-employees. Other increases in 1998 general and administrative expenses included $135,000 for salaries and benefits and $84,000 for insurance Research and development decreased in 1999 to approximately $6.7 million as compared to approximately $7.8 million in 1998. The $1.1 million decrease was primarily the result of a $125,000 reimbursement of expenses incurred in 1998 negotiated and received in 1999 and an approximately $742,000 reduction in Crinone studies and other research and development costs. Research and development expenditures decreased in 1998 to $7.8 million as compared to $9.1 million in 1997 as the number of Crinone studies continued to decline. License fees in 1999 of $462,500, net of expenses totaling $137,500, represent payments received in connection with the licensing agreement with Mipharm SpA entered into in March 1999. License fees in 1998 were $73,088. License fees in 1997 were $7.0 million representing milestone payments received in connection with the licensing agreement with AHP. Interest income in 1999 was $134,795. Interest income in 1998 was $141,564 as compared to $70,664 in 1997. The increase resulted from interest earned on the money received from the issuance of a $10 million note issued to SBC Warburg Dillon Read in March 1998, after paying $4.6 million to reacquire the rights to the product Replens in April 1998. 13 Interest expense amounted to $755,352, $599,773 and $24,186 in 1999, 1998 and 1997, respectively. Interest expense is primarily from interest on the $10 million note issued in March 1998 which bears an interest rate of 7.125%. As a result, the net loss for 1999 was $2,210,208 or $.09 per share as compared to a net loss of $13,859,734 or $0.48 per share in 1998 and net income of $762,906 or $0.03 per share in 1997. IMPACT OF THE YEAR 2000 Since January 1, 2000, the Company has not had any Year 2000-related problems associated with its internal systems or software, and is not aware of any Year 2000-related problems associated with the systems or software of its vendors, distributors or suppliers. Although the Company expects most material Year 2000 compliance problems to have arisen or occurred on or after January 1, 2000, there can be no assurance, however, that the Year 2000 problem will not adversely affect the Company's business, financial condition, results of operations or cash flows. It is possible that future Year 2000-related problems will arise after January 1, 2000. EURO On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing currencies ("legacy currencies") and one common currency (the "Euro"). The Euro trades on currency exchanges and may be used in business transactions. Under the regulations governing the transition to a single currency, there is a "no compulsion, no prohibition" rule which states that no one is obliged to use the Euro until the notes and coinage have been introduced on January 1, 2002. Beginning in January 2002, new euro-denominated bills and coins will be issued and legacy currencies will be withdrawn from circulation. The Company's operating subsidiaries affected by the Euro conversion have established plans to address the systems and business issues raised by the Euro currency conversion. These issues include: (1) the need to adapt computer and other business systems and equipment to accommodate Euro-denominated transactions, and (2) the competitive impact of cross-border price transparency, which may make it more difficult for business to charge different prices for the same products on a country-by-country basis particularly once the Euro currency is issued in 2002. Based upon current plans and assumptions, the Company does not expect that the Euro conversion will have a material adverse impact on its financial condition or results of operations. IMPACT OF INFLATION Sales revenues, manufacturing costs, selling and distribution expenses, general and administrative expenses and research and development costs tend to reflect the general inflationary trends. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company are annexed to this report on pages F-1 through F-21. An index to the financial statements appears on page F-1. The financial statement schedules are also annexed to this report on pages S-1 through S-4. An index to the financial statement schedules appears on page S-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On January 7, 1999, the Board of Directors of Columbia Laboratories, Inc. (the "Registrant") approved the engagement of Goldstein Golub Kessler LLP as the Registrant's independent certified public accountants to audit the Registrant's consolidated financial statements. During the last two fiscal years and each subsequent interim period, the Registrant has not consulted with Goldstein Golub Kessler LLP regarding the application of accounting principles to a 14 specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Registrant's financial statements or on any matter that was the subject of a disagreement or a reportable event. Simultaneously with the approval of the Registrant's new accountants, the Board of Directors dismissed Arthur Andersen LLP as the Registraint's independent certified public accountants. During the two most recent fiscal years or any subsequent interim period, there have been no adverse opinions, disclaimers of opinion or qualifications or modifications as to uncertainty, audit scope or accounting principles regarding the reports of Arthur Andersen LLP, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure of a nature which if not resolved to the satisfaction of Arthur Andersen LLP would have caused it to make reference to the subject matter of such disagreement in connection with its report. 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The executive officers and directors of the Company as of February 29, 2000 are as follows:
NAME AGE POSITION William J. Bologna 57 Chairman of the Board and Chief Executive Officer James J. Apostolakis 57 Vice Chairman of the Board and President David L. Weinberg 54 Vice President--Finance and Administration, Chief Financial Officer, Secretary and Treasurer Dominique de Ziegler, M.D. 52 Vice President--Pharmaceutical Development and Director Howard L. Levine, Pharm. D. 45 Vice President--Research and Development Annick Blondeau, Ph.D. 54 Vice President--Regulatory Affairs Jean Carvais, M.D. 72 Director Norman M. Meier 60 Director Denis M. O'Donnell, M.D. 46 Director Selwyn P. Oskowitz, M.D. 53 Director Robert C. Strauss 58 Director
16 WILLIAM J. BOLOGNA has been a director of the Company since inception, Chairman of the Company's Board of Directors since January 1992 and Chief Executive Officer since January 2000. From December 1988 to January 1992, Mr. Bologna served as Vice Chairman of the Company's Board of Directors. In addition, from 1980 to 1991, he was Chairman of Bologna & Hackett ("B&H"), an advertising agency specializing in pharmaceutical products which has in the past performed services for various international pharmaceutical companies. B&H ceased operations in May 1991. Prior to 1980, Mr. Bologna was employed by William Douglas McAdams, Inc., a company engaged in the marketing of pharmaceuticals, in a variety of positions, including Senior Vice President. In 1965, Mr. Bologna received his B.S. in Pharmacy from Fordham University. He received an MBA in Finance from Fordham University in 1971. JAMES J. APOSTOLAKIS has been a director and Vice Chairman of the Company's Board of Directors since January 1999 and President since January 2000. Mr. Apostolakis has been a Managing Director at Poseidon Capital Corporation, an investment banking firm, since February of 1998. Mr. Apostolakis has also served as President of Lexington Shipping & Trading Corporation, a company engaged in shipping operations, since 1973. From 1989 until 1992, Mr. Apostolakis served as a director on the Board of Directors of Grow Group, a paint and specialty chemicals company. From 1982 to 1988, he served as a director for Macmillan, Inc., a publishing and information services company. Mr. Apostolakis received an A.B. in Economics from the University of Pennsylvania in 1962 and an LL.B from Harvard University Law School in 1965. DAVID L. WEINBERG has been Vice President--Finance and Administration, Chief Financial Officer, Treasurer and Secretary of the Company from September 1997 to the present and previously from the inception of the Company to June 1991. From October 1991 until September 1997, Mr. Weinberg was employed by Transmedia Network Inc., a company specializing in consumer savings programs, where he served in various capacities including Vice President and Chief Financial Officer. From February 1981 until August 1986, Mr. Weinberg worked for Key Pharmaceuticals, Inc., a company engaged in the development, manufacturing, marketing and sales of pharmaceuticals until its sale to Schering-Plough Corporation. Mr. Weinberg served in various capacities including Vice President - - Finance, Treasurer and Secretary. Mr. Weinberg received a B.B.A. in Accounting from Hofstra University in 1968. DOMINIQUE DE ZIEGLER, M.D. has been Vice President--Pharmaceutical Development of the Company since January 1996 and a director since January 1998. Dr. de Ziegler has been employed by the Company since 1992 as Director of Research Development. In addition, from 1988 through 1991, Dr. de Ziegler was an Associate Professor at the Department of Obstetrics and Gynecology, Hospital A. Beclere in Clamart, France. In 1990, Dr. de Ziegler became a Diplomat of the American Board of Obstetrics and Gynecology, Reproductive Endocrinology and Infertility. Dr. de Ziegler is a member of the American Fertility Society, the American Society for Reproductive Endocrinogolists, The American Endocrine Society, the Society of Gynecologic Investigation and the Association Francaise pour l'Etude de la Menopause. Dr. de Zeigler has also been a journal editor and an "ad hoc" reviewer for Fertility Sterility, Human Reproduction, The Journal of In Vitro Fertilization and Embryo Transfer, Contraception Fertilite Sexualite and Reproduction Humaine et Hormone. HOWARD L. LEVINE, Pharm.D. has been Vice President-Research and Development since September, 1997. Dr. Levine has been employed by the Company since 1990. Prior to joining the Company, Dr. Levine was with the Medical Department of Pfizer Labs. Dr. Levine has held faculty and clinical practice positions at the University of Southern California, Long Island University and Duquesne University. He has instructed both pharmacy and medical students in clinical pharmacology, as well as providing numerous lectures for the continuing education of practitioners. Dr. Levine received his B.S. in Pharmacy from Oregon State University and Doctor of Pharmacy degree from the State University of New York at Buffalo in 1980. ANNICK BLONDEAU, PH. D. has been Vice President--Regulatory Affairs since June 1996. Dr. Blondeau has been employed by the Company since 1993 as Director of Regulatory Affairs. From 1984 through 1993, Dr. Blondeau was responsible for all of the international filings for Debat Centre R&D Garches, a large French pharmaceutical company. Dr. Blondeau also worked at Pfizer as Head of the Pharmacology Department. Dr. Blondeau received her doctorate in pharmacology and physiology from the Faculte des Sciences de Potiers France in 1971. 17 JEAN CARVAIS, M.D. has been a director of the Company since October 1996. Since 1984, Dr. Carvais has been an independent consultant in the pharmaceutical industry. Prior to that time, Dr. Carvais was President of The Research Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc Rorer. As such, he was involved in the development of a line of anti-cancer drugs, including Bleomycin and Adriamycin, as well as a new line of antibiotics and quinolones. Following the acquisition of Roger Bellon, S.A., Dr. Carvais became a member of Rhone-Poulenc's central research committee which directs the company's worldwide research and development activities. NORMAN M. MEIER has been a director of the Company since inception and served as President and Chief Executive Officer from inception until January 2000. Beginning in January 2000, Mr. Meier will serve in a non-executive position as Chairman Emeritus. From 1971 to 1977, Mr. Meier was Vice President of Sales and Marketing for Key Pharmaceuticals, Inc., a company which had been engaged in the marketing and sales of pharmaceuticals until its sale to Schering-Plough Corporation in June 1986. From 1977 until June 1986, Mr. Meier served as a consultant to Key Pharmaceuticals, Inc. In 1960, Mr. Meier received his B.S. in Pharmacy from Columbia University. He received his M.S. in Pharmacy Administration from Long Island University in 1964. Mr. Meier is also a director of Universal Heights, Inc. DENIS M. O'DONNELL, M.D. has been a director of the Company since January 1999. Dr. O'Donnell has been a Managing Director at Seaside Advisors LLC, a small cap investment fund, since 1997. From 1995 to 1997, Dr. O'Donnell served as President of Novavax, Inc., a pharmaceutical and drug delivery company. From 1991 to 1995, he was Vice President of IGI, Inc., a company engaged in the marketing of human and animal pharmaceuticals. Currently, Dr. O'Donnell served on the Board of Directors and the audit committees of both Novavax, Inc. and ELXSI, Inc., a restaurant and water inspection services company, and also serves on the Board of Directors of Ampersand Medical Corporation, a medical diagnostics company. SELWYN P. OSKOWITZ, M.D. has been a director of the Company since January 1999. Dr. Oskowitz has been a clinical professor of obstetrics, gynecology and reproductive biology at Harvard Medical School since 1993. He is a reproductive endocrinologist at, and the Director of, Boston IVF, a fertility clinic with which he has been associated since 1986. Dr. Oskowitz is also a former President of the Boston Fertility Society. ROBERT C. STRAUSS has been a director of the Company since January 1997. Since December 1997, Mr. Strauss has been the President & Chief Executive Officer of Noven Pharmaceuticals, Inc. Prior to joining Noven, Strauss was President, Chief Executive Officer and Chairman of the Board of Cordis Corporation. In the past he has held senior positions at Ivax Corporation, Touche-Ross & Company and Food Fair, Inc. Mr. Strauss received undergraduate and graduate degrees in physics and serves on the Board of Trustees for the University of Miami. Mr. Strauss holds a position on the Board of Directors of several companies including Procarda Corporation and Eclipse Surgical Corporation. Mr. Strauss also devotes his time to many civic duties, namely, the United Way of Miami-Dade County. During 1999, all filings of Forms 3, 4 and 5 were made on a timely basis. All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Directors receive no compensation for serving on the Board, except for the receipt of stock options and the reimbursement of reasonable expenses incurred in attending meetings. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. The Board of Directors has four standing committees, the Audit Committee, the Compensation/Stock Option Committee, the Finance Committee and Scientific Advisory Committee. 18 ITEM 11. EXECUTIVE COMPENSATION The tables, graph and descriptive information set forth below are intended to comply with the Securities and Exchange Commission compensation disclosure requirements applicable to, among other reports and filings, annual reports on Form 10-Ks. This information is being furnished with respect to the Company's Chief Executive officer ("CEO") and its four other executive officers, other than the CEO, whose salary and bonus exceeded $100,000 for the most recent fiscal year (collectively, the "Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- SECURITIES UNDERLYING NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS - --------------------------- ---- ------ ------- Norman M. Meier (1) 1999 $350,000 20,000 President and Chief 1998 400,000 250,000 Executive Officer 1997 301,000 250,000 William J. Bologna 1999 350,000 20,000 Chairman of the Board 1998 400,000 250,000 1997 294,000 250,000 Dominique de Ziegler 1999 221,800 25,000 Vice President- 1998 221,800 25,000 Pharmaceutical 1997 221,800 25,000 Development Howard L. Levine (2) 1999 250,000 60,000 Vice President- 1998 279,198 50,000 Research and Development 1997 82,500 - David L. Weinberg 1999 189,000 25,000 Vice President-Finance 1998 182,000 50,000 and Administration, 1997 51,000 25,000 Chief Financial Officer, Secretary and Tresurer
(1) Norman M. Meier served as President and Chief Executive Officer until January 2000. (2) Howard L. Levine was elected Vice President - Research and Development on September 29, 1997. (3) David L. Weinberg was elected Vice President-Finance and Administration, Chief Financial Officer, Secretary and Treasurer on September 29, 1997. 19 OPTION GRANTS DURING 1999
Number of % of total Securities Options Grant Underlying Granted to Exercise Date Options Employees Price Expiration Present Name Granted in 1999 ($/Share) Date Value (1) - ---- ------- ------- --------- ---- --------- Norman M. Meier 10,000 2.4% $5.75 3/24/09 $33,716 10,000 2.4% 8.25 6/2/09 48,375 William J. Bologna 10,000 2.4% 5.75 3/24/09 33,716 10,000 2.4% 8.25 6/2/09 48,375 Dominique de Ziegler 15,000 3.6% 5.75 3/24/09 50,574 10,000 2.4% 8.25 6/2/09 48,375 Howard L. Levine 50,000 12.0% 5.75 3/24/09 168,580 10,000 2.4% 8.25 6/2/09 48,375 David L. Weinberg 15,000 3.6% 5.75 3/24/09 50,574 10,000 2.4% 8.25 6/2/09 48,375
(1) The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (i) an exercise price equal to the fair market value of the underlying stock on the date of grant, (ii) an option term of three years, (iii) an interest rate of 6% that represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the expected option term, (iv) volatility of 86.7% calculated using daily stock prices for the one-year period ending on December 31, 1999 and (v) no annualized dividends paid with respect to a share of Common Stock at the date of grant. The ultimate values of the options will depend on the future price of the Company's Common Stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of the Company's Common Stock over the exercise price on the date the option is exercised. AGGREGATED OPTION EXERCISES DURING 1999 AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options at Options at Shares Acquired Value December 31, 1999 December 31, 1999 Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- -------- ----------- --------------- ----------- ------------- Norman M. Meier -- $- 1,122,250 80,000 $1,527,900 $ 17,500 William J. Bologna -- -- 1,118,750 80,000 1,513,900 17,500 Dominique de Ziegler -- -- 145,000 25,000 119,250 26,250 Howard L. Levine -- -- 250,000 60,000 -- 87,500 David L. Weinberg -- -- 75,000 25,000 -- 26,250
20 EMPLOYMENT AGREEMENTS In January 1996, the Company entered into five-year employment agreements with each of William J. Bologna and Norman M. Meier, to serve as Chairman and President of the Company, respectively. Pursuant to their respective employment agreements, each such employee is entitled to a base salary of $250,000. In addition, each such employee was granted options to purchase 150,000 shares of the Company's Common Stock at an exercise price of $7.25. Pursuant to the terms of such agreements, each employee has agreed to dedicate his services on a substantially full-time basis and has agreed for the term of his agreement and for two years thereafter not to compete with the Company. The employment agreements were amended effective September 15, 1997 to increase the base salary to $400,000. Messrs. Bologna and Meier agreed to a voluntary 25% reduction in base salary for the six month period ending June 30, 1999. Effective January 1, 2000, Mr. Bologna's employment agreement was amended. Under the terms of the amendment, the term of Mr. Bologna's agreement was extended by one year. In January 2000, Mr. Meier's employment agreement was amended. Under the terms of the amendment, Mr. Meier will be employed by the Company for two years beginning January 1, 2000 in a non-executive position with the title, Chairman Emeritus, at a salary of $200,000 per year. In January 2000, the Company entered into a two-year employment agreement with James J. Apostolakis to serve as Vice Chairman and President of the Company. Pursuant to his employment agreement, Mr. Apostolakis is entitled to a base salary of $200,000 per year. In July 1995, the Company entered into a three-year employment agreement with Dominique de Ziegler, to serve as Director of Research Development. Pursuant to this agreement, Dr. de Ziegler was paid an annual salary of $203,500. As additional compensation, Dr. de Ziegler was granted options to purchase 25,000 shares of the Company's Common Stock at an exercise prices of $7.25 per share. Pursuant to the terms of such agreement, Dr. de Ziegler agreed to dedicate his services on a substantially full-time basis and has agreed for the term of his agreement and for two years thereafter not to compete with the Company. Dr. de Ziegler's contract expired in July 1998. For the calendar years 21 1997, 1998 and 1999, Dr. de Ziegler's salary was increased to $221,800. On December 30, 1999, the Company entered into a one-year employment agreement with Dr. de Ziegler to serve as Director of Research and Development. Pursuant to this agreement, Dr. de Ziegler will receive an annual salary of $210,000 plus a housing allowance of approximately $36,000. The exercise price of all of the options granted pursuant to the aforementioned employment agreements are based on the closing price of the Company's Common Stock on the American Stock Exchange on the day of grant. 22 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of February 29, 2000, directors and named executive officers, individually and as a group, beneficially owned Common Stock as follows: Name of Shares, Nature of Interest Beneficial Owner and Percentage of Equity Securities(1) ----------------- ------------------------------------- Norman M. Meier (2) 1,927,850 6.3% William J. Bologna (3) 3,025,290 9.9% James J. Apostolakis (4) 1,307,078 4.4% David L. Weinberg (5) 94,000 * Dominique de Ziegler (5) 160,000 * Annick Blondeau (5) 135,000 * % Howard L. Levine (5) 300,000 1.0% Jean Carvais (5) 34,000 * Denis M. O'Donnell 11,000 * Selwyn P. Oskowitz 10,000 * Robert C. Strauss (5) 38,000 * The James J. Apostolakis Group (6) 1,524,900 5.2% c/o Lexington Shipping and Trading Corp. 950 Third Avenue, 27th Floor New York, New York 10022 The David M. Knott Group (7) 1,397,828 4.8% 485 Underhill Boulevard, Ste. 205 Syosset, New York 11791-3419 Anthony R. Campbell (8) 1,412,600 4.8% c/o TC Management 237 Park Avenue, Suite 800 New York, New York Officers and directors as a group (11 people) 7,042,218 21.4% * Represents less than 1 percent. (1) Includes shares issuable upon exercise of both options and warrants which are currently exercisable or which may be acquired within 60 days and shares issuable upon conversion of the Series A, Series B and Series C Preferred Stock (12.36 for the Series A Preferred Stock, 20.57 for the Series B Preferred Stock and 285.71 for the Series C Preferred Stock). (2) Includes 1,162,250 shares issuable upon exercise of options and warrants, which are currently exercisable or which may be acquired within 60 days. (3) Includes 20,570 shares issuable upon conversion of 1,000 shares of Series B Preferred Stock and 71,428 shares issuable upon conversion of 250 shares of Series C Preferred Stock. Includes 1,158,750 shares issuable upon exercise of options and warrants, which are currently exercisable or which may be acquired within 60 days. Includes 198,062 shares beneficially owned by Mr. Bologna's spouse. (4) Includes 71,428 shares issuable upon conversion of 250 shares of Series C Preferred Stock. Includes 293,750 shares issuable upon exercise of warrants which are currently exercisable or which may be acquired within 60 days. (5) Includes shares issuable upon exercise of options, which are currently exercisable or which may be acquired within 60 days, to purchase 90,000 shares with respect to Mr. Weinberg, 160,000 shares with respect to Dr. de 23 Ziegler, 135,000 shares with respect to Dr. Blondeau, 300,000 shares with respect to Dr. Levine, 34,000 shares with respect to Dr. Carvais, 11,000 shares with respect to Dr. O'Donnell, 10,000 shares with respect to Dr. Oskowitz and 37,000 shares with respect to Mr. Strauss. (6) Based on a Schedule 13D dated July 6, 1998, as amended by an Amendment No. 1 to Schedule 13D dated July 16, 1998, an Amendment No. 2 dated October 2, 1998, an Amendment No. 3 dated November 4, 1998 and an Amendment No. 4 dated December 14, 1998, Messrs. James J. Apostolakis, David Ray and Bernard Marden and, by reference to a Schedule 13D separately filed by David M. Knott, Mr. Knott and certain affiliated entities and, by reference to a Schedule 13D dated separately filed by Mr. Campbell, Mr. Campbell may be deemed to have acted together as a group for certain purposes. The information contained in the Schedule 13D reflects that Messrs. Apostolakis, Ray and Marden beneficially own 935,900, 214,000 and 375,700 shares of the Company's Common Stock, respectively. And each has sole voting and dispositive power with respect to all shares beneficially owned by such person. Such persons have indicated that their filings do not constitute an admission that they are members of a "group" for any purpose. (7) Base on a Schedule 13D dated July 6, 1998, as amended by an Amendment No. 1 to Schedule 13D dated October 2, 1998, an Amendment No. 2 dated November 23, 1998 and an Amendment No. 3 dated December 14, 1998, an Amendment No. 4 dated January 19, 1999 and an Amendment No. 5 dated January 27, 1999, Mr. Knott, Knott Partners, L.P., Dorset Management Corporation and Matterhorn Offshore Fund Limited, along with Messrs. Apostolakis, Ray, Marden and Campbell, may be deemed to have acted together as a group for certain purposes. Such persons have indicated, however, that their filings do not constitute an admission that they are members of a "group" for any purpose. The information contained in the Schedule 13D reflects that Mr. Knott beneficially owns 1,397,828 shares of the Company's Common Stock and (a) individually (i) has the sole power to vote and to dispose of (1) 52,120 shares of the Company's Common Stock held in his and his IRA's accounts and (2) 801,008 shares held in the account of Knott Partners, L.P., and (ii) shares with the respective account owners the power to dispose of (but not to vote) 600 shares held by the accounts of Mrs. Knott and her IRA, and (b) as President of Dorset Management Corporation (i) has the sole power to vote and dispose of 448,100 shares of the Company's Common Stock and (ii) shares with the respective account owner the power to vote and dispose of 96,100 shares held in the account of Matterhorn Offshore Fund Limited. (8) Based on a Schedule 13D dated November 4, 1998, as amended by an Amendment No. 1 dated December 14, 1998, and an Amendment No. 2 dated December 18, 1998, Mr. Campbell, and Messrs. Apostolakis, Ray, Marden and Knott and certain affiliated entities may be deemed to have acted together as a group for certain purposes. The information contained in the Schedule 13D reflects that Mr. Campbell beneficially owns 1,412,600 shares of the Company's Common Stock and has sole voting and dispositive power with respect to all shares beneficially owned by such person. Additionally, Mr. Campbell individually owns 42,500 shares of Common Stock and a trust estate for the benefit of Mr. Campbell's children owns 30,000 shares of Common Stock (as to which Mr. Campbell disclaims beneficial ownership). Mr. Campbell expressly disclaims beneficial ownership of any Common Stock beneficially owned by Messrs. Apostolakis, Ray, Marden or any other person. Such persons have also indicated that their filings do not constitute an admission that they are members of a "group" for any purpose. TC Management, as the general partner of Windsor LP and manager of the TC Managed Account, may be deemed to beneficially own the shares directly owned by Windsor LP and the TC Managed Account. TC Management, Windsor LP and TC Managed Account own 1,382,600, 1,238,800 and 101,300 shares of the Company's Common Stock, respectively. As of February 29, 2000, the Company knows of no persons other than shown above who beneficially own or exercise voting or dispositive control over 5% or more of the Company's outstanding Common Stock. 24 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1993, the Company loaned Messrs. Meier and Bologna, $80,000 and $110,350, respectively. The notes, which bear interest at 10% per annum and are unsecured but with full recourse, were due on or before December 7, 1996. The due dates of these notes have subsequently been extended through December 7, 1999. At December 31, 1999, the balances including interest remain outstanding and total $128,667 and $178,017, respectively. At March 29, 2000 the above notes remain outstanding. In connection with the issuance of the Series C Convertible Preferred Stock in January 1999, the Company received two notes receivable from Messrs. Meier and Bologna for $350,000 and $250,000, respectively. The notes bear interest at 5% per annum and were due on July 28, 1999. Mr. Meier's note was paid in December 1999 with interest through the date of payment and Mr. Bologna's note was paid in January 2000 with interest through the date of payment. On January 28, 1999 and September 23, 1999, the Company granted to James Apostolakis, warrants to purchase up to an aggregate of 100,000 and 75,000 shares, respectively, of common stock at an exercise price of $4.8125 and $7.50, respectively, per share. 25 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Indexes to financial statements and financial statement schedules appear on F-1 and S-1, respectively. EXHIBITS 3.1 -- Restated Certificate of Incorporation of the Company, as amended (1/) 3.2 -- Amended and Restated By-laws of Company (10/) 4.1 -- Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company, dated as of January 7, 1999 (10/) 4.2 -- Securities Purchase Agreement, dated as of January 7, 1999, between the Company and each of the purchasers named on the signature pages thereto (10/) 4.3 -- Securities Purchase Agreement, dated as of January 19, 1999, among the Company, David M. Knott and Knott Partners, L.P. (10/) 4.4 -- Securities Purchase Agreement, dated as of February 1, 1999, between the Company and Windsor Partners, L.P. (10/) 4.5 -- Registration Rights Agreement, dated as of January 7, 1999, between the Company and each of the purchasers named on the signature pages thereto (10/) 4.6 -- Form of Warrant to Purchase Common Stock (10/) 4.7 -- Warrant to Purchase Common Stock granted to James J. Apostolakis on September 23, 1999 10.1 -- Employment Agreement dated as of January 1, 1996, between the Company and Norman M. Meier (6/) 10.2 -- Employment Agreement dated as of January 1, 1996, between the Company and William J. Bologna (6/) 10.3 -- 1988 Stock Option Plan, as amended, of the Company (4/) 10.4 -- 1996 Long-term Performance Plan (7/) 10.5 -- License and Supply Agreement between Warner-Lambert Company and the Company dated December 5, 1991 (3/) 10.6 -- Asset Purchase, License and Option Agreement, dated November 22, 1989 (1/) 10.7 -- Employment Agreement dated as of April 15, 1997, between the Company and Nicholas A. Buoniconti (8/) 10.8 -- License and Supply Agreement for Crinone between Columbia Laboratories, Inc. (Bermuda) Ltd. and American Home Products dated as of May 21, 1995 (5/) 10.9 -- Addendum to Employment Agreement dated as of September 1, 1997, between the Company and Norman M. Meier (8/) 10.10 -- Addendum to Employment Agreement dated as of September 1, 1997, between the Company and William J. Bologna (8/) 10.11 -- Addendum to Employment Agreement dated as of September 1, 1997, between the Company and Nicholas A. Buoniconti (8/) 10.12 -- Convertible Note Purchase Agreement, 7 1/8% Convertible Subordinated Note due March 15, 2005 and Registration Rights Agreement all dated as of March 16, 1998 between the Company and SBC Warburg Dillon Read Inc. (9/) 10.13 -- Termination Agreement dated as of April 1, 1998 between the Company and the Warner-Lambert Company (9/) 10.14 -- Addendum to Employment Agreement dated as of October 8, 1998, between the Company and Nicholas A. Buoniconti. (10/) 10.15 -- Agreement dated as of December 14, 1998, by and among Columbia Laboratories, Inc., William J. Bologna, Norman M. Meier, James J. Apostolakis, David Ray, Bernard Marden, Anthony R. Campbell, David M. Knott and Knott Partners, L.P. (10/) 26 10.16 -- License and Supply Agreement for Crinone between Columbia Laboratories (Bermuda) Limited and Ares Trading S.A. dated as of May 20, 1999 10.17 -- Addendum to Employment Agreement dated as of January 1, 2000 between the Company and Norman M. Meier 10.18 -- Addendum to Employment Agreement dated as of January 1, 2000 between the Company and William J. Bologna 10.19 -- Employment Agreement dated as of January 1, 2000 between the Company and James J. Apostolakis 10.20 -- Employment Agreement dated December 30, 1999 between the Company and Dominique de Ziegler 10.21 -- Settlement Agreement and Release dated as of March 16, 2000 between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc. 21 -- Subsidiaries of the Company 27 -- Financial Data Schedule 1/ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-31962) declared effective on May 14, 1990. 2/ Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. 3/ Incorporated by reference to the Registrant's Current Report on Form 8-K, filed on January 2, 1992. 4/ Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. 5/ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-60123) declared effective August 28, 1995. 6/ Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995. 7/ Incorporated by reference to the Registrant's Proxy Statement dated August 26, 1996. 8/ Incorporated by reference to the Registrants Annual Report on Form 10-K for the year ended December 31, 1997. 9/ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. 10/ Incorporated by referenced to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998. REPORTS ON FORM 8-K On November 3, 1999, the Company filed a Form 8-K in which it exhibited its bi-monthly stockholders newsletter. 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COLUMBIA LABORATORIES, INC. Date: March 29, 2000 By: /s/ David L. Weinberg ---------------------------- ------------------------------ David L. Weinberg, Vice President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
/s/ William J. Bologna Chairman of the Board of Directors March 29, 2000 - -------------------------- and Chief Executive Officer William J. Bologna /s/ James J. Apostolakis Vice Chairman of the Board of Directors March 29, 2000 - -------------------------- and President James J. Apostolakis /s/ David L. Weinberg Vice President-Finance and March 29, 2000 - -------------------------- Administration, Chief Financial David L. Weinberg Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) /s/ Dominique de Ziegler Vice President - Pharmaceutical March 29, 2000 - -------------------------- Development and Director Dominique de Ziegler /s/ Jean Carvais Director March 29, 2000 - -------------------------- Jean Carvais /s/ Norman M. Meier Director March 29, 2000 - -------------------------- Norman M. Meier /s/ Denis M. O'Donnell Director March 29, 2000 - -------------------------- Denis M. O'Donnell /s/ Selwyn P. Oskowitz Director March 29, 2000 - -------------------------- Selwyn P. Oskowitz /s/ Robert C. Strauss Director March 29, 2000 - -------------------------- Robert C. Strauss
28 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page Report of Independent Certified Public Accountants F-2 Report of Independent Certified Public Accountants F-3 Consolidated Balance Sheets As of December 31, 1999 and 1998 F-4 Consolidated Statements of Operations for the Three Years Ended December 31, 1999 F-6 Consolidated Statements of Comprehensive Operations for the Three Years Ended December 31, 1999 F-7 Consolidated Statements of Stockholders' Equity (Deficiency) for the Three Years Ended December 31, 1999 F-8 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1999 F-10 Notes to Consolidated Financial Statements F-12 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Columbia Laboratories, Inc.: We have audited the accompanying consolidated balance sheets of Columbia Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, comprehensive operations, stockholders' equity (deficiency) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Columbia Laboratories, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. GOLDSTEIN GOLUB KESSLER LLP New York, New York February 18, 2000, except for the first paragraph under the caption "Legal Proceedings" in Note 6 as to which the date is March 16, 2000 F-2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Columbia Laboratories, Inc.: We have audited the accompanying consolidated statements of operations, comprehensive operations, stockholders' equity (deficiency) and cash flows of Columbia Laboratories, Inc. (a Delaware corporation) and Subsidiaries for the year ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Columbia Laboratories, Inc. and Subsidiaries for the year ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Miami, Florida, February 13, 1998. F-3 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 ASSETS
1999 1998 ---------------- --------------- CURRENT ASSETS: Cash and cash equivalents, of which $135,399 is interest-bearing as of December 31, 1999 $ 1,982,085 $ 315,288 Accounts receivable, net of allowance for doubtful accounts of $119,829 and $229,829 in 1999 and 1998, respectively 1,835,086 1,323,271 Inventories 1,848,816 2,411,434 Prepaid expenses 468,948 472,538 Other current assets 568,259 288,639 ---------------- --------------- Total current assets 6,703,194 4,811,170 ---------------- --------------- PROPERTY AND EQUIPMENT: Leasehold improvements 164,766 186,905 Machinery and equipment 2,160,288 2,159,970 Furniture and fixtures 178,297 193,092 ---------------- --------------- 2,503,351 2,539,967 Less-accumulated depreciation and amortization (1,494,798) (1,166,516) ---------------- --------------- 1,008,553 1,373,451 ---------------- --------------- INTANGIBLE ASSETS, net 4,860,212 5,283,277 OTHER ASSETS 415,654 411,648 ---------------- --------------- TOTAL ASSETS $ 12,987,613 $11,879,546 ================ ===============
(Continued) F-4 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
1999 1998 ------------- ------------- CURRENT LIABILITIES: Accounts payable $ 2,089,260 $ 4,153,151 Accrued expenses 1,072,567 1,480,839 Deferred revenue 100,000 578,150 ------------- ------------- Total current liabilities 3,261,827 6,212,140 ------------- ------------- CONVERTIBLE SUBORDINATED NOTE PAYABLE 10,000,000 10,000,000 ------------- ------------- TOTAL LIABILITIES 13,261,827 16,212,140 ------------- ------------- COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY (DEFICIENCY): Preferred stock, $.01 par value; 1,000,000 shares authorized: Series A Convertible Preferred Stock, 923 shares issued and outstanding in 1999 and 1998 (liquidation preference of $92,300 at December 31, 1999) 9 9 Series B Convertible Preferred Stock, 1,630 shares issued and outstanding in 1999 and 1998 (liquidation preference of $163,000 at December 31, 1999) 16 16 Series C Convertible Preferred Stock, 5,260 shares issued and outstanding in 1999 (liquidation preference of $5,610,000 at December 31, 1999) 53 -- Common stock, $.01 par value; 40,000,000 shares authorized; 29,124,686 and 28,684,687 shares issued and outstanding in 1999 and 1998, respectively 291,246 286,846 Capital in excess of par value 99,575,803 93,221,998 Accumulated deficit (100,198,848) (97,988,640) Accumulated other comprehensive income 57,507 147,177 ------------- ------------- Total stockholders' equity (deficiency) (274,214) (4,332,594) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 12,987,613 $ 11,879,546 ============= =============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1999 1998 1997 ------------ ------------ ------------ NET SALES $ 18,921,074 $ 10,017,644 $ 16,547,411 COST OF GOODS SOLD 5,655,350 5,707,814 6,630,820 ------------ ------------ ------------ Gross profit 13,265,724 4,309,830 9,916,591 ------------ ------------ ------------ OPERATING EXPENSES: Selling and distribution 3,938,756 4,099,446 2,908,504 General and administrative 4,575,702 5,785,895 3,972,077 Research and development 6,652,096 7,821,642 9,135,573 ------------ ------------ ------------ Total operating expenses 15,166,554 17,706,983 16,016,154 ------------ ------------ ------------ Loss from operations (1,900,830) (13,397,153) (6,099,563) ------------ ------------ ------------ OTHER INCOME (EXPENSE): License fees, net of expenses 462,500 73,088 7,038,853 Interest income 134,795 141,564 70,664 Interest expense (755,352) (599,773) (24,186) Other, net (82,321) (77,460) (137,862) ------------ ------------ ------------ (240,378) (462,581) 6,947,469 ------------ ------------ ------------ Income (loss) before income taxes (2,141,208) (13,859,734) 847,906 Provision for income taxes 69,000 -- 85,000 ------------ ------------ ------------ Net income (loss) $ (2,210,208) $(13,859,734) $ 762,906 ============ ============ ============ INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED $ (0.09) $ (0.48) $ 0.03 ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON AND POTENTIAL COMMON SHARES OUTSTANDING: BASIC 28,853,000 28,679,000 28,350,000 ============ ============ ============ DILUTED 28,853,000 28,679,000 29,982,000 ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1999 1998 1997 ------------ ------------ ------------ NET INCOME (LOSS) $ (2,210,208) $(13,859,734) $ 762,906 Other comprehensive income (loss): Foreign currency translation, net of tax 89,670 (79,000) (38,557) ------------ ------------ ------------ Comprehensive income (loss) $ (2,120,538) $(13,938,734) $ 724,349 ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-7 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE THREE YEARS ENDED DECEMBER 31, 1999
Series A Convertible Series B Convertible Series C Convertible Preferred Stock Preferred Stock Preferred Stock Common Stock -------------------- --------------------- --------------------- ----------------------- Number of Number of Number of Number of Shares Amount Shares Amount Shares Amount Shares Amount ----------- --------- ---------- ---------- ----------- --------- ----------- ------------- Balance, January 1, 1997 1,323 $13 1,630 $16 - - 28,071,596 $280,716 Options exercised - - - - - - 366,500 3,665 Warrants exercised - - - - - - 180,147 1,801 Conversion of preferred stock (400) (4) - - - - 4,944 49 Dividends on preferred stock - - - - - - - - Fair market value of warrants granted to non-employees - - - - - - - - Fair market value of options granted to non-employees - - - - - - - - Translation adjustment - - - - - - - - Net income - - - - - - - - ----------- --------- ---------- ---------- ----------- --------- ----------- ------------- Balance, December 31, 1997 923 9 1,630 16 - - 28,623,187 286,231 Options exercised - - - - - - 31,500 315 Warrants exercised - - - - - - 30,000 300 Dividends on preferred stock - - - - - - - - Fair market value of warrants granted to non-employees - - - - - - - - Fair market value of options granted to non-employees - - - - - - - - Translation adjustment - - - - - - - - Net loss - - - - - - - - ----------- --------- ---------- ---------- ----------- --------- ----------- ------------- Balance, December 31, 1998 923 9 1,630 16 - - 28,684,687 286,846 Capital in Accumulated Other Excess of Accumulated Comprehensive Par Value Deficit Income (Loss) Total ------------- ------------------ ----------------- ---------- Balance, January 1, 1997 $89,254,885 ($84,891,812) $29,620 $4,673,438 Options exercised 2,161,804 - - 2,165,469 Warrants exercised 860,095 - - 861,896 Conversion of preferred stock (45) - - - Dividends on preferred stock (8,088) - - (8,088) Fair market value of warrants granted to non-employees 269,264 - - 269,264 Fair market value of options granted to non-employees 50,123 - - 50,123 Translation adjustment - - 38,557 38,557 Net income - 762,906 - 762,906 ------------- ------------------ ----------- ------------- Balance, December 31, 1997 92,588,038 (84,128,906) 68,177 8,813,565 Options exercised 209,623 - - 209,938 Warrants exercised 145,950 - - 146,250 Dividends on preferred stock (6,714) - - (6,714) Fair market value of warrants granted to non-employees 39,696 - - 39,696 Fair market value of options granted to non-employees 245,405 - - 245,405 Translation adjustment - - 79,000 79,000 Net loss - (13,859,734) - (13,859,734) ------------- ------------------ ----------- -------------- Balance, December 31, 1998 93,221,998 (97,988,640) 147,177 (4,332,594)
(Continued) F-8 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE THREE YEARS ENDED DECEMBER 31, 1999
Series A Convertible Series B Convertible Series C Convertible Preferred Stock Preferred Stock Preferred Stock Common Stock -------------------- --------------------- --------------------- ------------------------ Number of Number of Number of Number of Shares Amount Shares Amount Shares Amount Shares Amount ----------- --------- ----------- ---------- ----------- --------- ----------- ------------ Balance, December 31, 1998 923 $9 1,630 $16 - - 28,684,687 $286,846 Issuance of preferred stock - - - - 6,660 $67 - - Options exercised - - - - - - 5,000 50 Warrants exercised - - - - - - 35,000 350 Dividends on preferred stock - - - - - - - - Fair market value of warrants granted to non-employees - - - - - - - - Fair market value of options granted to non-employees - - - - - - - - Translation adjustment - - - - - - - - Conversion of preferred stock - - - - (1,400) (14) 399,999 4,000 Net loss - - - - - - - - ----------- --------- ----------- ---------- ----------- --------- ----------- ------------ Balance, December 31, 1999 923 $9 1,630 $16 5,260 $53 29,124,686 $291,246 =========== ========= =========== ========== =========== ========= =========== ============ Capital in Accumulated Other Excess of Accumulated Comprehensive Par Value Deficit Income (Loss) Total ------------ ------------- ---------------- ------------ Balance, December 31, 1998 $93,221,998 ($97,988,640) $147,177 ($4,332,594) Issuance of preferred stock 6,373,277 - - 6,373,344 Options exercised 26,825 - - 26,875 Warrants exercised 122,150 - - 122,500 Dividends on preferred stock (287,994) - - (287,994) Fair market value of warrants granted to non-employees 112,172 - - 112,172 Fair market value of options granted to non-employees 11,361 - - 11,361 Translation adjustment - - (89,670) (89,670) Conversion of preferred stock (3,986) - - - Net loss - (2,210,208) - (2,210,208) ------------ ------------- ---------------- ------------ Balance, December 31, 1999 $99,575,803 ($100,198,848) $ 57,507 ($274,214) ============ ============= ================ ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-9 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1999 1998 1997 ---------------- ------------------ ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(2,210,208) $(13,859,734) $762,906 Adjustments to reconcile net income (loss) to net cash used in operating activities- Depreciation and amortization 968,845 992,358 913,945 Provision for (recovery of) doubtful accounts (110,000) 97,553 35,001 Provision for (recovery of) returns and allowances (4,335) 61,020 - Write-down of inventories - 1,176,200 - Issuance of warrants and options for consulting services 123,533 285,101 94,998 Write-off of property and equipment 27,766 52,111 3,411 Changes in assets and liabilities- (Increase) decrease in: Accounts receivable (397,480) 4,741,998 (4,818,322) Inventories 562,618 (1,334,959) (1,309,531) Prepaid expenses 3,590 5,319 (72,065) Other assets (283,626) 269,668 59,080 Increase (decrease) in: Accounts payable (1,942,234) 320,288 905,117 Accrued expenses (408,272) 161,439 130,322 Deferred revenue (478,150) (464,488) (15,336) ---------------- ------------------ ---------------- Net cash used in operating activities (4,147,953) (7,496,126) (3,310,474) ---------------- ------------------ ----------------
(Continued) F-10 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 1999 (Continued)
1999 1998 1997 ---------------- -------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of product rights - $ (4,615,644) - Purchase of property and equipment $ (108,648) (264,720) $(1,011,987) Acquisition of licensing rights (100,000) - - ---------------- -------------- --------------- Net cash used in investing activities (208,648) (4,880,364) (1,011,987) ---------------- -------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of preferred stock 6,373,344 - - Issuance of note payable - 10,000,000 - Dividends paid (409,651) - - Proceeds from exercise of options and warrants 149,375 356,188 3,027,365 ---------------- -------------- --------------- Net cash provided by financing activities 6,113,068 10,356,188 3,027,365 ---------------- -------------- --------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (89,670) 79,000 (10,108) ---------------- -------------- --------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,666,797 (1,941,302) (1,305,204) CASH AND CASH EQUIVALENTS, Beginning of year 315,288 2,256,590 3,561,794 ---------------- -------------- --------------- CASH AND CASH EQUIVALENTS, End of year $ 1,982,085 $ 315,288 $ 2,256,590 ================ ============== =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 712,500 $ 367,357 $ 20,825 ================ ============== =============== Taxes paid $ 134,000 $ 110,255 $ 54,076 ================ ============== ===============
The accompanying notes to consolidated financial statements are an integral part of these statements F-11 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - ---------------------------------------------- Organization- ------------ Columbia Laboratories, Inc. (the "Company") was incorporated as a Delaware corporation in December 1986. The Company's objective is to develop unique pharmaceutical products that treat female specific diseases and conditions including infertility, dysmenorrhea, endometriosis, hormonal deficiencies and the prevention of sexually transmitted diseases. Columbia's research in endocrinology has also led to the development of a product to treat "Andropause" in men. Columbia's products primarily utilize the Company's patented bioadhesive delivery technology. Principles of Consolidation- --------------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Accounting Estimates- -------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Foreign Currency- ---------------- The assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at current exchange rates and revenue and expense items are translated at average rates of exchange prevailing during the period. Resulting translation adjustments are accumulated as a separate component of stockholders' equity. Inventories- ----------- Inventories are stated at the lower of cost (first-in, first-out) or market. Components of inventory cost include materials, labor and manufacturing overhead. Inventories consist of the following: December 31, ------------------------------------------- 1999 1998 --------------- --------------- Finished goods $1,029,574 $1,550,917 Raw materials 819,242 860,517 --------------- --------------- $1,848,816 $2,411,434 =============== =============== Property and Equipment- ---------------------- Property and equipment are stated at cost less accumulated depreciation. Leasehold improvements are amortized over the life of the respective leases. Depreciation is computed on the straight-line basis over the estimated useful lives of the respective assets, as follows: Years ------- Machinery and equipment 5 - 10 Furniture and fixtures 5 F-12 Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs which do not extend the life of the assets are expensed. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation are eliminated from the accounts and any resultant gain or loss is credited or charged to operations. INTANGIBLE ASSETS- Intangible assets consist of the following: December 31, ----------------------------------- 1999 1998 --------------- --------------- Patents $2,600,000 $2,600,000 Trademarks 4,956,644 4,956,644 Licensing rights 100,000 - --------------- --------------- 7,656,644 7,556,644 Less accumulated amortization (2,796,432) (2,273,367) --------------- --------------- $4,860,212 $5,283,277 =============== =============== Patents are being amortized on a straight-line basis over their remaining lives (through 2003). Trademarks are being amortized on a straight-line basis over ten years to fifteen years. Licensing rights are being amortized over a period of five years. In April 1998, the Company and the Warner-Lambert Company signed an agreement terminating their December 1991 license and supply agreement under which the Warner-Lambert Company had distributed Replens, a vaginal moisturizer which had been developed by the Company. Under the terms of the termination agreement, the Company agreed to pay $4.6 million for the right to reacquire the product Replens, effective on April 9, 1998. The $4.6 million cost has been capitalized and is being amortized over a 15 year period, which represents the remaining term on the terminated December 1991 license and the patent underlying the product. Long-lived Assets- ----------------- Following the acquisition of any long-lived assets, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of the long-lived asset may warrant revision or that the remaining balance of the long-lived asset may not be recoverable. When factors indicate that a long-lived asset may be impaired, the Company uses an estimate of the underlying product's future cash flows, including amounts to be received over the remaining life of the long-lived asset from license fees, royalty income, and related deferred revenue, in measuring whether the long-lived asset is recoverable. Unrecoverable amounts are charged to operations. Income Taxes- ------------ The reconciliation of the effective income tax rate to the Federal statutory rate is as follows: 1999 1998 1997 ----------- ------------ ------------ Federal income tax rate (34.0)% (34.0)% 34.0% Increase in valuation allowance 34.0 34.0 -- Utilization of net operating loss carryover -- -- (34.0) U.S. Alternative Minimum Tax 3.2 -- 10.0 ----------- ------------ ------------ Effective income tax rate 3.2% 0.0% 10.0% =========== ============ ============ As of December 31, 1999, the Company has U.S. tax net operating loss carryforwards of approximately $45 million which expire through 2013. The Company also has unused tax credits of approximately $949,000 which expire at F-13 various dates through 2012. Utilization of net operating loss carryforwards may be limited in any year due to limitations in the Internal Revenue Code. Accordingly, the Company recorded a $69,000 and an $85,000 alternative minimum tax provision for U.S. Federal taxes in 1999 and 1997, respectively. As of December 31, 1999 and 1998, other assets in the accompanying consolidated balance sheets include deferred tax assets of approximately $17 million and $18 million, respectively, (comprised primarily of a net operating loss carryforward) for which a valuation allowance has been recorded since the realizability of the deferred tax assets are not determinable. Revenue Recognition- ------------------- Sales are recorded as products are shipped and services are rendered. Royalties and additional monies owed to the Company based on the strategic alliance partners sales are recorded as revenue as sales are made by the strategic alliance partners. License Fees- ------------ License fees are recognized as other income when the Company has no further obligations with respect to the payments and thus, the earnings process is complete. Advertising Expense- ------------------- All costs associated with advertising and promoting products are expensed in the year incurred. Advertising and promotion expense was approximately $858,000 in 1999, $758,000 in 1998 and $460,000 in 1997. Research and Development Costs- ------------------------------ Company sponsored research and development costs related to future products are expensed as incurred. Costs related to research and development contracts are charged to cost of sales upon recognition of the related revenue. Income/Loss Per Share- --------------------- Basic income per share is computed by dividing net income less preferred dividends by the weighted average number of common stock outstanding during the period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period assuming the exercise or conversion of all securities that are exercisable or convertible into common stock. Basic loss per share is computed by dividing the net loss plus preferred dividends by the weighted average number of shares of common stock outstanding during the period. Shares to be issued upon the exercise of the outstanding options and warrants or the conversion of the preferred stock are not included in the computation of loss per share as their effect is antidilutive. Statements of Cash Flows- ------------------------ For purposes of the statements of cash flows, the Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. Stock-Based Compensation- ------------------------ Under the provisions of Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation", companies can either measure the compensation cost of equity instruments issued under employee compensation plans using a fair value based method, or can continue to recognize compensation cost using the intrinsic value method under the provisions of Accounting Principles Board Opinion ("APB") No. 25. However, if the provisions of APB No. 25 are continued, pro forma disclosure of net income or loss and earnings or loss per share must be presented in the financial statements as if the fair value method had been applied. For the three years ended F-14 December 31, 1999, the Company has recognized compensation costs under the provisions of APB No. 25, and has provided the expanded disclosure required by SFAS No. 123 (see Note 4). Recent Accounting Pronouncements: The Company does not believe that any recently issued, but not yet effective accounting standards will have a material effect on the Company's consolidated financial position, results of operations or cash flows. (2) STRATEGIC ALLIANCE AGREEMENTS: In May 1995, the Company entered into a worldwide, except for South Africa, license and supply agreement with American Home Products Corporation ("AHP") under which the Wyeth-Ayerst Laboratories division of AHP marketed Crinone. Under the terms of the agreement, the Company earned $7 million in milestone payments in 1997 and expects to receive additional milestone payments in the future. The Company also supplies Crinone to AHP at a price equal to 30% of AHP's net selling price. On July 2, 1999, AHP assigned the license and supply agreement to Ares-Serono, a Swiss pharmaceutical company. The Company will supply Crinone to Ares-Serono under the same terms as in the agreement with AHP. The Company has also entered into strategic alliance agreements for the marketing and distribution of Replens and Advantage-S with various pharmaceutical companies. Pursuant to these agreements, the Company has received advance payments, of which $100,000 and $578,150, respectively, are reflected as deferred revenue in the accompanying December 31, 1999 and 1998 consolidated balance sheets. These advance payments will be recognized as products are shipped to the applicable strategic alliance partners or as sales are made by the strategic alliance partners. In March 1999, the Company entered into a license and supply agreement with Mipharm SpA under which Mipharm SpA will be the exclusive marketer of the Company's previously unlicensed women's healthcare products in Italy, Portugal, Greece and Ireland with a right of first refusal for Spain. Under the terms of the agreement, the Company has received $462,500, net of expenses, and expects to receive future milestone payments as products are made available by the Company. (3) CONVERTIBLE SUBORDINATED NOTE PAYABLE: On March 16, 1998, the Company issued to an institutional investor a $10 million convertible subordinated note due March 15, 2005. The note is subordinate to other senior securities of the Company and bears interest at 7 1/8% which is payable semi-annually on March 15 and September 15. The note is convertible into 662,032 shares of common stock at a price equal to $15.105 per share. The Company also granted certain registration rights to the investor, under which the earliest the shares underlying the note could be registered would be March 19,1999. The carrying amount of the Company's convertible subordinated note payable approximates fair value using the Company's estimated incremental borrowing rate. (4) STOCKHOLDERS' EQUITY (DEFICIENCY): Preferred Stock- In November 1989, the Company completed a private placement of 151,000 shares of Series A Convertible Preferred Stock ("Series A Preferred Stock"). The Series A Preferred Stock pays cumulative dividends at a rate of 8% per annum payable quarterly and each share is convertible into 12.36 shares of Common Stock. In August 1991, the Company completed a private placement of 150,000 shares of Series B Convertible Preferred Stock ("Series B Preferred Stock"). Each share of Series B Preferred Stock is convertible into 20.57 shares of Common Stock. Upon liquidation of the Company, the holders of the Series A and Series B Preferred Stock are entitled to $100 per share. In addition, the holders of Series A Preferred Stock are entitled to accumulated unpaid dividends. The Series A F-15 Preferred Stock shares are redeemable for cash, at the option of the Company, at specified redemption prices. The Series B Preferred Stock will be automatically converted into Common Stock upon the occurrence of certain events. Holders of the Series A and Series B Preferred Stock are entitled to one vote for each share of Common Stock into which the preferred stock is convertible. In January 1999, the Company raised approximately $6.4 million, net of expenses from the issuance and sale of Series C Convertible Preferred Stock ("Series C Preferred Stock"). The Series C Preferred Stock, sold to twenty-four accredited investors, has a stated value of $1,000 per share. The Series C Preferred Stock is convertible into common stock at the lower of: (i) $3.50 per common share and (ii) 100% of the average of the closing prices during the three trading days immediately preceding the conversion notice. If conversion is based on the $3.50 conversion price, conversion may take place after the underlying common stock is registered. If conversion is based on the alternative calculation, conversion cannot take place for fifteen months. The Series C Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day of the quarter. Warrants- -------- As of December 31, 1999, the Company had warrants outstanding for the purchase of 750,853 shares of Common Stock. Information on outstanding warrants is as follows: Exercise Price ----- $ 3.50 198,100 4.81 225,000 5.00 120,000 7.06 12,500 7.50 75,000 10.78 60,253 16.00 20,000 18.00 20,000 20.00 20,000 ---------- 750,853 ========== All the warrants are exercisable as of December 31, 1999. Stock Option Plan- ----------------- All employees, officers, directors and consultants of the Company or any subsidiary were eligible to participate in the Columbia Laboratories, Inc. 1988 Stock Option Plan, as amended (the "Plan"). Under the Plan, a total of 5,000,000 shares of Common Stock were authorized for issuance upon exercise of the options. As of October 1996, no further options will be granted pursuant to this Plan. In October 1996, the Company adopted the 1996 Long-term Performance Plan ("Performance Plan") which provides for the grant of stock options, stock appreciation rights and restricted stock to certain designated employees of the Company, non-employee directors of the Company and certain other persons performing significant services for the Company as designated by the Compensation/Stock Option Committee of the Board of Directors. Pursuant to the Performance Plan, an aggregate of 3,000,000 shares of Common Stock have been reserved for issuance. A summary of the status of the Company's two stock option plans as of December 31, 1999, 1998 and 1997 and changes during the years ending on those dates is presented below: F-16
1999 1998 1997 --------------------------- --------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------------------------- --------------------------- ------------------------- Outstanding at beginning of year 5,184,938 $9.13 4,557,274 $8.92 3,591,272 $6.25 Granted 512,500 5.97 904,000 11.52 1,332,500 14.72 Exercised (5,000) 5.38 (31,500) 6.66 (366,498) 5.92 Forfeited (21,000) 15.59 (244,836) 11.29 - - --------------- --------------- ------------- Outstanding at end of year 5,671,438 8.83 5,184,938 9.13 4,557,274 8.92 =============== =============== ============= Options exercisable at year end 5,038,938 4,210,938 2,984,774 =============== =============== =============
The following table summarizes information about stock options outstanding at December 31, 1999:
Options Outstanding Options Exercisable --------------------------------------------------------- ------------------------------------- Weighted Average Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at December 31, 1999 Life (Years) Price at December 31, 1999 Price - ---------------------------- --------------------------------------------------------- ------------------------------------- $3.19 - $4.00 110,000 8.99 $3.26 10,000 $4.00 $4.38 - $7.75 2,645,250 5.26 4.95 2,338,750 4.81 $8.00 - $12.13 1,697,000 7.17 10.76 1,471,000 11.04 $12.25 - $18.63 1,219,188 6.97 15.04 1,219,188 15.04 ------------------- --------------------- $3.19 - $18.63 5,671,438 6.27 8.83 5,038,938 9.10 =================== =====================
The Company applies APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost been determined based on the fair value at the grant dates for those awards consistent with the method of FASB Statement 123, the Company's net income or loss per share would have been decreased or increased to the pro forma amounts indicated below:
Net income (loss) As reported ($2,210,208) ($13,859,734) $762,906 ==================================================== Proforma ($4,311,608) ($17,479,167) ($7,013,855) ==================================================== Income (loss) per share As reported ($0.09) ($0.48) $0.03 ==================================================== Proforma ($0.15) ($0.61) ($0.25) ====================================================
The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (i) an exercise price equal to the fair market value of the underlying stock on the dates of grant, (ii) an option term of three years, (iii) a risk free rate of 6% that represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the option term, (iv) volatility of 86.7% for 1999 and 55% for 1998 and 1997 and (v) no annualized dividends paid with respect to a share of Common Stock at the date of grant. The ultimate values of the options will depend on the future price of the Company's Common Stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an F-17 optionee will realize upon exercise of an option will depend on the excess of the market value of the Company's Common Stock over the exercise price on the date the option is exercised. (5) INCOME (LOSS) PER COMMON AND POTENTIAL COMMON SHARE: The calculation of basic and diluted income (loss) per common and potential common share is as follows:
1999 1998 1997 ------------ ------------ ------------ Net income (loss) $ (2,210,208) $(13,859,734) $ 762,906 Less: Preferred stock dividends (287,994) (6,714) (8,088) Deduction related to Series C Convertible Preferred Stock (133,320) -- -- ------------ ------------ ------------ Net income (loss) applicable to common stock $ (2,631,522) $(13,866,448) $ 754,818 ============ ============ ============ Basic: Weighted average number of common shares outstanding 28,853,000 28,679,000 28,350,000 ============ ============ ============ Basic net income (loss) per common and potential common share $ (0.09) $ (0.48) $ 0.03 ============ ============ ============ Diluted: Weighted average number of common shares outstanding 28,853,000 28,679,000 28,350,000 Weighted average number of potential common shares -- -- 1,632,000 ------------ ------------ ------------ Weighted average number of common and potential common shares outstanding 28,853,000 28,679,000 29,982,000 ============ ============ ============ Diluted net income (loss) per common and potential common share $ (0.09) $ (0.48) $ 0.03 ============ ============ ============
(6) COMMITMENTS AND CONTINGENCIES: Cash and cash equivalents- The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The Company believes that there is no credit risk with respect to these accounts. F-18 Leases- ------ The Company leases office space, apartments and office equipment under noncancelable operating leases. Lease expense for each of the three years ended December 31, 1999, 1998 and 1997 totaled $641,569, $813,167 and $679,791 respectively. Future minimum lease payments as of December 31, 1999 are as follows: 2000 $ 612,774 2001 423,409 2002 209,158 2003 132,131 2004 60,684 Thereafter 9,425 ---------- $1,447,581 Royalties- --------- In 1989, the Company purchased the assets of Bio-Mimetics, Inc. which consisted of the patents underlying the Company's Bioadhesive Delivery System, other patent applications and related technology, for $2,600,000, in the form of 9% convertible debentures which were converted into 500,000 shares of Common Stock during 1991, and $100,000 in cash. In addition, Bio-Mimetics, Inc. receives a royalty equal to two percent of the net sales of products based on the Bioadhesive Delivery System up to an aggregate amount of $7,500,000. In addition, beginning in March 1995, the Company agreed to prepay a portion of the remaining royalty obligation if certain conditions are met. The Company may not assign the patents underlying the Bioadhesive Delivery System without the prior written consent of Bio-Mimetics, Inc. until the aggregate royalties have been paid. In May 1989, the Company signed an exclusive agreement to license the U.S. and Canadian marketing rights for Diasorb(R), a unique pediatric antidiarrheal product formerly marketed by Schering-Plough Corporation. Under the terms of the agreement, the Company is obligated to pay a royalty equal to 5% of the net sales of Diasorb. Employment Agreements- --------------------- The Company has employment agreements with certain employees, some of whom are also stockholders of the Company. The remaining terms of the employment agreements range from one to two years. Future base compensation to be paid under these agreements as of December 31, 1999 are as follows: 2000 $1,016,000 2001 801,750 ---------- $1,817,750 During 1993, the Company's stockholders approved an Incentive Compensation Plan covering all employees pursuant to which an aggregate of 5% of pretax earnings of the Company for any year will be awarded to designated employees of the Company. As a result of the Company's income in 1997, a provision for 5% of pretax income was included in general and administrative expenses. No provision was required in 1999 and 1998. Legal Proceedings- ----------------- The Company filed an action in the United States District Court for the Southern District of Florida ("Florida Action") in November 1997 seeking a declaratory judgement on certain issues related to its relationship with Lake Consumer Products, Inc. ("Lake") as governed in the contract between the Company and Lake. Lake filed an action against the Company in the United States District Court, Northern District of Illinois ("Illinois Action") , for damages alleged by Lake to have been suffered by it as a result of the FDA's allegations in July 1997 that the Company's nonoxynol-9 product, then marketed by Lake under the tradename Advantage 24, was not permitted to be sold under the monograph. The Illinois Action was dismissed by the Illinois Court and transferred to the Florida Court for consolidation as a counterclaim in the Florida Action. On March 16, 2000, the Company and Lake settled all outstanding issues in the consolidated Florida Action by the Company having bought out the contract for the sum of F-19 $1,200,000 ($600,000 in cash and $600,000 in the form of Company common stock). As a result, the Company reacquired the U.S. rights to the Advantage product and both parties agreed to have their legal actions dismissed. Other claims and law suits have been filed against the Company. In the opinion of management and counsel, none of these lawsuits are material and they are all adequately reserved for or covered by insurance or, if not so covered, are without any or have little merit or involve such amounts that if disposed of unfavorably would not have a material adverse effect on the Company. (7) OTHER RELATED-PARTY TRANSACTION: During 1993, the Company loaned two individuals who are officers, directors and stockholders of the Company an aggregate of $190,350. These notes, which bear interest at 10% per annum and which were due on or before December 7, 1997 were subsequently extended through December 7, 1999. At December 31, 1999, the aggregate balance of $306,684 remains outstanding and is included in other current assets in the accompanying 1999 consolidated balance sheet. In connection with the issuance of the Series C Convertible Preferred Stock in January 1999, the Company received two notes receivable from Norman M. Meier, the President and Chief Executive Officer, and from William J. Bologna, the Chairman of the Board, for $350,000 and $250,000, respectively. The notes bear interest at 5% per annum and were due on July 28, 1999. Mr. Meier's note was paid in December 1999 with interest through the date of payment and Mr. Bologna's note was paid in January 2000 with interest through the date of payment. The above notes are reflected in the accompanying balance sheets at their face value plus interest which approximates fair value. (8) SEGMENT INFORMATION: - ----------------------- The Company and its subsidiaries are engaged in one line of business, the development and sale of pharmaceutical products. Two customers (under the same contract) accounted for approximately 56% of 1999 consolidated net sales. One customer accounted for approximately 25% and 68% of 1998 and 1997 consolidated net sales, respectively. Another customer accounted for approximately 9%, 15% and 5% of 1999, 1998 and 1997 consolidated net sales, respectively. A third customer accounted for approximately 5%, of 1999, consolidated net sales. The following table shows selected information by geographic area: F-20
Income Net (loss) from Identifiable Sales Operations Assets ----------------- ------------------ ----------------- As of and for the year ended December 31, 1999- United States $16,376,205 $3,860,850 $9,047,230 Europe 2,544,869 (5,761,680) 3,940,383 ----------------- ------------------ ----------------- $18,921,074 ($1,900,830) $12,987,613 ================= ================== ================= As of and for the year ended December 31, 1998- United States $7,515,436 ($4,114,779) $7,965,715 Europe 2,502,208 (9,282,374) 3,913,831 ----------------- ------------------ ----------------- $10,017,644 ($13,397,153) $11,879,546 ================= ================== ================= As of and for the year ended December 31, 1997- United States $15,623,341 $4,984,325 $7,804,944 Europe 924,070 (11,083,888) 7,196,808 ----------------- ------------------ ----------------- $16,547,411 ($6,099,563) $15,001,752 ================= ================== =================
(9) SUBSEQUENT EVENT: In October 1999, the Company engaged an investment banking firm to act as its exclusive advisor in a planned divestiture of certain of the Company's over-the-counter products. Subsequent to year-end, the Company has received a letter of intent from a prospective party who is in the process of completing due diligence procedures. The terms of the agreement are being negotiated. F-21 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENT SCHEDULE Page ---- Report of Independent Certified Public Accountants S-2 Report of Independent Certified Public Accountants S-3 Schedule II - Valuation and Qualifying Accounts and Reserves S-4 S-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Columbia Laboratories, Inc.: We have audited in accordance with generally accepted auditing standards, the 1999 and 1998 financial statements of Columbia Laboratories, Inc. and Subsidiaries included in this Form 10-K and have issued our report thereon dated February 18, 2000, except for the first paragraph under the caption "Legal Proceedings" in Note 6 as to which the date is March 16, 2000. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The years ended December 31, 1999 and 1998 portions of this schedule have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. GOLDSTEIN GOLUB KESSLER LLP New York, New York February 18, 2000, except for the first paragraph under the caption "Legal Proceedings" in Note 6 as to which the date is March 16, 2000 S-2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Columbia Laboratories, Inc.: We have audited in accordance with generally accepted auditing standards, the 1997 financial statements of Columbia Laboratories, Inc. and Subsidiaries included in this Form 10-K and have issued our report thereon dated February 13, 1998. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The year ended December 31, 1997 portion of this schedule have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Miami, Florida, February 13, 1998. S-3 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1999
Charged to Balance at (credited to) Balance beginning costs and at end Description of period expenses Deductions of period - ---------------------------------------------- -------------- ---------------- -------------- ------------- YEAR ENDED DECEMBER 31, 1999: Allowance for doubtful accounts $229,829 $10,000 $120,000 $119,829 ============== ================ ============== ============= YEAR ENDED DECEMBER 31, 1998: Allowance for doubtful accounts $132,276 $105,000 $7,447 $229,829 ============== ================ ============== ============= YEAR ENDED DECEMBER 31, 1997: Allowance for doubtful accounts $97,275 $35,001 $ - $132,276 ============== ================ ============== =============
S-4 INDEX TO EXHIBITS EXHIBIT NUMBERS 4.7 -- Warrant to Purchase Common Stock granted to James J. Apostolakis on September 23, 1999 10.16 -- License and Supply Agreement for Crinone between Columbia Laboratories (Bermuda) Limited and Ares Trading S.A. dated as of May 20, 1999 10.17 -- Addendum to Employment Agreement dated as of January 1, 2000 between the Company and Norman M. Meier 10.18 -- Addendum to Employment Agreement dated as of January 1, 2000 between the Company and William J. Bologna 10.19 -- Employment Agreement dated as of January 1, 2000, between the Company and James J. Apostolakis 10.20 -- Employment Agreement dated December 30, 1999 between the Company and Dominique de Ziegler 10.21 -- Settlement Agreement and Release dated as of March 16, 2000 between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc. 21 -- Subsidiaries of the Company 27 -- Financial Data Schedule EX-4.7 2 EXHIBIT 4.7 EXHIBIT 4.7 THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT BE RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT. Void after 5:00 p.m. New York Time, on September 23, 2004. Warrant to Purchase 75,000 Shares of Common Stock. WARRANT TO PURCHASE 75,000 SHARES OF COMMON STOCK WARRANT TO PURCHASE COMMON STOCK OF COLUMBIA LABORATORIES, INC. This is to certify that, FOR VALUE RECEIVED, James Apostolakis or registered assigns ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from COLUMBIA LABORATORIES, INC., a Delaware corporation ("Company"), 75,000 fully paid, validly issued and nonassessable shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") exercisable at $7.50 per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares," and the exercise price of a share of Common Stock as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." (a) EXERCISE OF WARRANT. This Warrant may be exercised as to a minimum of 5,000 Warrant Shares at any time or from time to time until 5:00 P.M. New York time on September 23, 2004, provided, however, that if such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form. As soon as practicable after each such exercise of the Warrants, but not later than seven (7) business days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or the Holder's designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, together with the exercise price thereof in cash or certified or bank check and the investment letter described below, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. It shall be a condition of the exercise of this Warrant that the Holder shall deliver to the Company an investment letter in the form as customarily used by the Company from time to time in connection with the exercise of non-registered options and warrants which are issued by the Company. It is further understood that certificates for the Warrant Shares to be issued upon exercise of this Warrant shall contain a restrictive legend to the effect that such Warrant Shares are restricted securities as such term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act") and cannot be sold except in compliance with the Act and the rules and regulations promulgated thereunder. (b) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. If the Common Stock is listed on any national securities exchange, the Company shall also list such shares on such exchange subject to notice of issuance. (c) FRACTIONAL SHARES. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of a share, determined as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the NASDAQ system, the current market value shall be the last reported sale price of the Common Stock on such exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or system; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc., on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than the book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. (d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in the case of loss, theft or destruction of reasonable satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted as of the effective date of such event by multiplying such Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding immediately following such event and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior thereto. For example, if the Company declares a 2 for 1 stock distribution and the Exercise Price immediately prior to such event was $1.00 per share, the adjusted Exercise Price immediately after such event would be $.50 per share. Such adjustment shall be made successively whenever any event listed above shall occur. (2) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsection (1) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (3) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least twenty-five cents ($.25) in such price; provided, however, that any adjustments which by reason of this Subsection (3) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section (f) shall be made to the nearest cent or to the nearest one-hundredth of a Share, as the case may be. (4) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly cause a notice setting forth the adjusted Exercise Price and adjusted number of Shares issuable upon exercise of each Warrant to be mailed to the Holders, at their last addresses appearing in the Warrant Register, and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certified public accountants selected by its Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section (f), and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (5) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) to (3), inclusive above. (6) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. (g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder or any holder of a Warrant executed and delivered pursuant to Section (a), and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. (h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock, or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights, or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least 15 days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section (f) hereof. (j) REGISTRATION UNDER THE SECURITIES ACT OF 1933 (1) No later than two (2) years from the date hereof, the Company shall, if permitted by applicable regulation or any contractual provisions include in the filing of any new registration statement (other than a registration statement on Forms S-8, S-14, S-15 or any other Form not generally available for sale of securities to the public) ("Registration Statement") under the Act covering securities of the Company such information as may be required to permit a public offering of the Warrant Shares. The Company shall supply prospectuses and other documents in order to facilitate the public sale or other disposition of the Warrant Shares. The Company shall file any necessary post-effective amendments to such Registration Statement and use its best efforts to maintain the effectiveness thereof for a period of 36 months from the date of issuance of the Warrant Shares. The Company shall bear the entire cost and expense of a registration of securities initiated by it, under this Paragraph (1). The Holder shall, however, bear the fees of his own counsel and any transfer taxes or underwriting discounts or commissions applicable to the Warrant Shares sold by him. The Company may include other securities in any such registration statement. The Company shall do any and all other acts and things which may be necessary or desirable to enable the Holder to consummate the public sale or other disposition of the Warrant Shares, and furnish indemnification in the manner as set forth in Paragraph (2) (a) of this Section (j). The Holder shall furnish information and indemnification as set forth in Paragraph (2) (b) of this Section (j). Notwithstanding the foregoing, in the event that there is an underwritten offering of the Company's securities offered pursuant to said registration statement pursuant to the immediately preceding paragraph j(1), the underwriter shall have the right to refuse to permit any Warrant Shares, or to limit the amount of Warrant Shares, to be sold by the Holder to such underwriter(s) as such underwriter(s) may determine in its discretion, and the Holder shall refrain from selling such remainder of its Warrant Shares covered by such registration statement for the period of forty five (45) days following the effective date. (2) (a) Whenever pursuant to this Section (j) a registration statement relating to the Warrant Shares is filed under the Act, amended or supplemented, the Company will indemnify and hold harmless each holder of the securities covered by such registration statement, amendment or supplement (such holder being hereinafter called the "Distributing Holder"), and each person, if any who controls (within the meaning of the Act) the Distributing Holder, against any losses, claims, damages or liabilities, joint or several, to which the Distributing Holder or any such controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement or any preliminary prospectus or final prospectus constituting a part thereof or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse the Distributing Holder and each such controlling person for any legal or other expenses reasonable incurred by the Distributing Holder and each controlling person for any legal or other expenses reasonable incurred by the Distributing Holder or such controlling person or underwriter in connection with investigating or defending any such loss, claim damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, said preliminary prospectus, said final prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished by such Distributing Holder for use in the preparation thereof. (b) The Distributing Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed said registration statement and such amendments and supplements thereto, each person, if any, who controls the Company (within the meaning of the Act) against any losses, claims, damages or liabilities to which the Company or any such director, officer or controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in said registration statement, said preliminary prospectus, said final prospectus, or said amendment or supplement, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein no misleading, in each case to the extent, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in said registration statement, said preliminary prospectus, said final prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished by such distributing Holder for use in the preparation thereof; and will reimburse the Company or any such director, officer or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. (c) Promptly after receipt by an indemnified party under this Paragraph 2 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give the indemnifying party notice of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Paragraph 2. (d) In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, the extent that it may wish, jointly with any other indemnifying party similarly notified to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Paragraph 2 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. (e) The Company's agreements with respect to Warrant Shares in this Section (j) shall continue in effect regardless of the exercise or surrender of this Warrant. Issued as of September 23, 1999 COLUMBIA LABORATORIES, INC. By: /s/ David L. Weinberg ---------------------------- David L. Weinberg Vice President - Finance and Administration PURCHASE FORM Dated , 19 ------------ The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing ____________ shares of Common Stock of Columbia Laboratories, Inc., and hereby makes payment of ___________ in payment of the actual exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name _________________________________________ (Please typewrite or print in block letters) Address Signature ASSIGNMENT FORM FOR VALUE RECEIVED, ______________hereby sells, assigns and transfers unto Name ______________________________ (Please typewrite or print in block letters) Address the right to purchase Common Stock of Columbia Laboratories, Inc., represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date , 19 -------------- Signature EX-10.16 3 EXHIBIT 10.16 EXHIBIT 10.16 LICENSE AND SUPPLY AGREEMENT This License and Supply Agreement (the "Agreement") made and entered into as of this 20th day of May 1999 by and between Columbia Laboratories (Bermuda) Limited, a Bermuda corporation having its principal place of business at Rosebank Center, 14 Bermudiana Road, Pembroke, HM08 Bermuda ("Licensor"), and Ares Trading S.A., a Swiss company with its principal place of business at Chateau de Vaumarcus, 2028 Vaumarcus, Switzerland ("Licensee"); WITNESSETH: WHEREAS, Licensor and American Home Products Corporation of Five Giralda Farms, Madison, New Jersey 07940-0874, a Delaware corporation, represented by its Wyeth-Ayerst Laboratories Division ("AHPC") entered into a License and Supply Agreement dated as of May 21, 1995, as amended; WHEREAS, pursuant to an Assignment and Royalty Agreement (the "Assignment Agreement") AHPC will assign its right, title and interest in, to and under such License and Supply Agreement to Licensee; WHEREAS, this Agreement is an amended and restated version of such License and Supply Agreement; WHEREAS, this Agreement will become effective upon the completion of Closing under the Assignment Agreement (as such term is defined therein); WHEREAS, Licensor is the owner or exclusive licensee of, and has the right to grant licenses with respect to, certain Technology, Patents and the Trademarks (as hereinafter defined); and WHEREAS, Licensor wishes to grant to Licensee an exclusive license (subject only to Licensor's retained use and manufacturing rights) to the Technology, Patents and the Trademarks for use and sale of the Product (as hereinafter defined) in the Territory (as hereinafter defined), and Licensee wishes to receive such a license, on the terms and subject to the conditions set forth herein; NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows. 1. Definitions. As used in this Agreement, the following terms (except as otherwise expressly provided or unless the context otherwise requires) shall have the respective meanings set forth below ( it being understood that the terms defined in this Agreement shall include the singular number in the plural, and the plural number in the singular): (a) "Affiliate" shall mean any corporation or other business entity that either directly or indirectly controls a party to this Agreement, is controlled by such party, or is under common control of such party. As used herein, the term "control" means possession of the power to direct or cause the direction of the management and policies of a corporation or other entity whether through the ownership of voting securities, by contract or otherwise. (b) "Assignment Agreement" shall mean the Assignment and Royalty Agreement by and between AHPC and Licensee. (c) "Base Price" shall mean Direct Cost plus 20%. On a country by country basis, Licensor shall notify Licensee of the Base Price if the Base Price becomes relevant in calculating the Purchase Price. (d) "Confidential Information" shall mean all information and/or technical data which is disclosed by one party hereto to the other party hereto pursuant to this Agreement which the disclosing party treats as confidential and identifies as such, other than (i) information known to the receiving party or its Affiliates prior to the disclosure of such information to such party, provided said prior knowledge is supportable by documentary evidence, (ii) information which at the time of the disclosure is, or thereafter becomes, generally known to the public, provided that such public knowledge does not result from any act or disclosure by the receiving party or one of its Affiliates in violation of the terms of this Agreement, (iii) information which can be shown to be independently discovered, after the date hereof, by a party, or one of its Affiliates, without the aid, application or use of the disclosed information, or (iv) information obtained by the receiving party from a third party which is determined to be in lawful possession of such information, provided such third party is not in violation of any contractual or legal obligation to the disclosing party or one of its Affiliates with respect to such information. (e) "Direct Cost" shall mean the following direct costs of manufacturing the Product: raw material/ingredient costs, packaging costs, direct labor and direct overhead. (f) "Effective Date" shall mean the date of the completion of Closing under the Assignment Agreement (as such term is defined therein). (g) "FDA" shall mean the U.S. Food and Drug Administration. (h) "Field" shall mean the vaginal delivery of progesterone or progestational agents alone or in combination or co-administered with other active substances directed toward use in hormone replacement therapy as well as in the indications of secondary amenorrhea, in vitro fertilization, and prevention of endometrial hyperplasia and other indications where progesterone or progestational agents are commonly used except in a locally acting - non-systemic - contraceptive where progesterone or a progestational agent may be useful. (i) "Finished Package Form" shall mean applicators wrapped in aluminum foil with required leaflet printed in two colors and inserted into an appropriate box with customary trade dress printed in up to four colors. The boxes will be placed into appropriate outer cartons which will be printed in one color with required labeling and UPC codes. 2 (j) "Forecast" shall mean the official Licensee forecast as required by paragraphs 4 (i) and 4 (j). (k) "GMP" shall mean current good manufacturing practice regulations promulgated by the FDA and other regulatory agencies. (l) "Intellectual Property Rights" shall mean trade secrets, trademarks, tradenames, logos, trade dress, graphics, designs, patents, copyrights or other proprietary rights. (m) "NDA" shall mean a New Drug Application as defined by the FDA. (n) "Net Sales" shall mean the aggregate equivalent of gross revenue received by Licensee, its Affiliates or sublicensees from or on account of the sale of the Product to non affiliated third parties on which payments are due under this Agreement, less (i) reasonable credits or allowances, if any, actually granted on account of cash or trade discounts, recalls, rebates, rejection or return of the Product previously sold, (ii) excises, sales taxes, value added taxes, consumption taxes, duties or other taxes imposed upon and paid with respect to such sales (excluding income or franchise taxes of any kind) and (iii) separately itemized insurance and transportation costs incurred in shipping the Product to such third parties. No deduction shall be made for any item of cost incurred by Licensee or its Affiliates in preparing, manufacturing, shipping or selling the Product except as permitted pursuant to clauses (i), (ii) or (iii) of the foregoing sentence. Net Sales shall not include any transfer between Licensee and any of its Affiliates or sublicensees for resale. No transfer of the Product for test or development purposes or as free samples shall be considered a sale hereunder for accounting and payment purposes, (o) "Patents" shall mean the patents and/or patent applications filed in the Territory owned by the Licensor or its Affiliates or with respect to which Licensor or its Affiliates may now or hereafter have the right to grant licenses in the Territory, the claims of which may be infringed, absent a license, by the manufacture, use or sale of the Product within the Territory, including, without limitation, the patents and applications set forth in Schedule A hereto and any and all patents issued pursuant thereto, as well as any patents to be applied for or issued to Licensor or its Affiliates in the future during the term of this Agreement, which future patents and patent applications shall be added to Schedule A by written notice of Licensor to Licensee within thirty (30) days of such application and/or issuance. (p) "Product" shall mean progesterone/COL-1620 vaginal gel. (q) "Purchase Price" shall have the meaning set forth in Section 5 of this Agreement. (r) "Technology" shall mean all pharmacological, toxicological, preclinical, clinical, technical and other information, data and analysis and know-how relating to the registration, manufacture, packaging, use, marketing and sale of the Product (including, without limitation, all works copyrighted by Licensor) and all proprietary rights relating thereto owned by Licensor or its Affiliates or to which Licensor or its Affiliates has rights so as to be able to license, whether prior to or after the Effective Date, and relating or pertaining to the Product. 3 (s) "Territory" shall mean all countries and territories of the world except for sub-Saharan Africa, which is comprised of the following countries: The Republic of South Africa, Lesotho, Botswana, Zimbabwe, Namibia, Mozambique, Zaire, Kenya, Malawi, Mauritius, Seychelles, Madagascar, Zambia and Swaziland. (t) "Trademarks" shall mean the trademark "Crinone" or the trademark "Perlence" for use on cosmetic and pharmaceutical products used primarily for progesterone supplementation as set forth in Schedule B. (u) "Unit" shall mean a single applicator. (v) "Valid Claim" shall mean a claim which is contained in an unexpired, issued Patent which has not been held invalid or unenforceable by a decision of a court or patent office of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid by the owner through reissue or disclaimer. 2. Grant of License. ---------------- (a) Licensor grants to Licensee, and Licensee accepts from Licensor, on the terms and conditions stated herein, an exclusive (even as to Licensor and Licensor's Affiliates) right and license, with the right to sublicense, under the Patents and Technology to market, use and sell the Product in the Territory; provided, however that Licensee will only sublicense Product containing progesterone in a concentration of eight percent (8%) after prior consultation with Licensor. Licensor grants to Licensee, and Licensee accepts from Licensor, on terms and conditions stated herein, a nonexclusive right and license with the right to sublicense its Affiliates under the Patents and Technology to make and/or have made the Product anywhere in the world, but only for use or sale in the Territory. (b) Licensor grants to the Licensee, and Licensee accepts from Licensor, on the terms and conditions contained herein (i) an exclusive right and license, with the right to sublicense, to use the Trademarks in the distribution, advertising, marketing, use and sale of the Product (and any line extension to the Product as to which Licensee has obtained Licensor's prior written consent, not to be unreasonably withheld) in the Territory, and (ii) a nonexclusive right and license with the right to sublicense its Affiliates to use the Trademarks in the manufacture, labeling and packaging of the Product (and any line extensions to the Product as to which Licensee has obtained Licensor's prior written consent, not to be unreasonably withheld) anywhere in the world. Licensor shall not use, nor permit any of its Affiliates or other licensees to use, the Trademarks on any other product marketed, used or sold in the Territory. (c) Licensor's retained rights in the Territory in connection with the Product shall include only those rights under the Patents, the Trademarks and Technology to make, have made and use the Product as necessary for Licensor to fulfill its commitments now or in the future with respect to this Agreement and with respect to its licensees who market the Product outside the Territory, to otherwise operate its business (it being understood that Licensor, its Affiliates and other licensees shall not sell, use or market the Product within the Territory), and to make, have made, use, market and sell the Product, itself or through its Affiliates or licensees, outside the Territory. 4 (d) Licensor will use its best efforts to convince its licensee outside the Territory not to use the Trademarks. (e) Licensee may, at any time, request from Licensor, and Licensor agrees to grant directly to any party in any country of the Territory exclusive license rights consistent with those granted to Licensee herein. Accordingly, upon receipt of Licensee's request, Licensor shall enter into and sign a separate direct license agreement or agreements with the companies designated by Licensee in the request. All direct agreements shall be prepared by Licensee. In the absence or upon the expiration of laws and regulations to the contrary, the terms and conditions thereof shall not be less favorable by Licensor than those contained in this Agreement and shall be similar to the terms and conditions contained in this Agreement. Such agreements must be approved by Licensor, which approval shall not be unreasonably withheld. In those countries in which the validity of such a direct license agreement requires prior governmental approval or registration, such direct license agreement shall not be binding or have any force or effect until the required governmental approval or registration has been granted. Incidental out of pocket costs incurred by Licensor in the renegotiation of this Agreement, the execution of direct license agreements and matters pertaining thereto shall be for the account of Licensee, when prior approved by Licensee. (f) In the event that any local government would request or local regulations would require that the regulatory approval for the Product be held in the name of Licensee or should it reasonably appear that ownership of the registration for the Product by Licensee would facilitate regulatory approval, then Licensor, upon the request of Licensee, shall transfer to Licensee ownership of the regulatory approval for the Product for such country or countries. (g) Licensor shall make reasonable efforts to obtain from its licensee outside the Territory any right such licensee may have to market, use, sell, make and have made the Product and to use the Trademarks. Upon Licensor obtaining such rights, "Territory" under this Agreement shall be automatically redefined to mean "the world." Any incidental out of pocket costs incurred by Licensor in obtaining such rights shall be for the account of Licensee, when prior approved by Licensee. 3. License Fees. ------------ In consideration of the services by Licensor to research and develop the Product and to obtain respective local approvals for the Product, all to the benefit of Licensee pursuant to the license and other rights granted to Licensee hereunder, Licensee shall pay to Licensor the following (all dollars mean U.S. dollars): (a) Five hundred thousand dollars ($500,000) upon Licensee, its Affiliates or sublicensees filing a NDA for the Product for the treatment of hyperplasia. (b) Five million dollars ($5 million) upon FDA approval of the promotable claim made via NDA or other FDA procedure that the Product can be used concomitantly with estrogen in Hormone Replacement Therapy (HRT). 5 (c) Five million dollars ($5 million) when Net Sales of the Product in the United States reach sixty million dollars ($60 million) during two consecutive calendar years, provided that this level of Net Sales is achieved within seven (7) years of the Product launch in the United States. 6 4. Supply. ------ (a) During the term of the Agreement, Licensor shall supply, unless otherwise agreed, Licensee, its Affiliates and sublicensees with the Product on an exclusive basis in the Territory. All such Product shall be delivered in Finished Package Form. Also, during the term of the Agreement, Licensor shall not develop, license, manufacture nor sell to another party in the Territory any product in the Field. Licensor is not restricted from developing, licensing manufacturing or selling other hormones or drugs. Licensor represents that as of the Effective Date it has not entered into any arrangement which would contravene the intentions of this paragraph. (b) Although Licensor is responsible for production and quality control, Licensee has the right of inspection to ensure Licensor meets all appropriate standards set by the FDA or other appropriate regulatory authorities. (c) Licensor shall be obliged to maintain the registration of the manufacturing facilities with the appropriate regulatory authorities and to allow inspection of such facilities by regulatory authorities insofar as necessary or advisable in order to facilitate the supply to Licensee, its Affiliates or sublicensees of the Product, and promptly to notify Licensee of any inspection of its own or its contract supplier's manufacturing facilities by the regulatory authorities and promptly to provide Licensee with copies of any correspondence received from the regulatory authorities setting forth the results of any such inspection insofar as the Product is concerned. Furthermore, as may be required for regulatory purposes, Licensor grants Licensee the right to refer to, and shall cause its contract supplier to grant to Licensee access to, contract supplier's master file relating to the Product and undertakes to notify Licensee and provide Licensee with specific details of any changes to said master file or other filings by the contract supplier with the regulatory authorities relative to the Product. Licensor shall consult with Licensee before it or its contract supplier makes any material change in any manufacturing process for the Product. Licensor shall be kept duly informed without any delay by copy letter of any correspondence between Licensee and the contract supplier, in the event that any such communication should occur. (d) Upon reasonable prior notice given by Licensee to Licensor in writing, Licensor shall permit and shall cause its contract supplier to permit representatives of Licensee or designees of Licensee acceptable to Licensor and/or contract supplier to inspect any manufacturing, quality control or testing facilities used by or in connection with the manufacture or testing of the Product and annual GMP audits provided that such representatives or designees of Licensee shall conduct such inspections in a manner which shall cause the least possible interruption to Licensor's or the contract supplier's operations under the particular circumstances. Such inspection shall take place in a timely manner and shall be permitted to take place during any or all phases of manufacturing, quality control and testing, and shall provide for Licensor and/or the contract supplier's granting to Licensee access to information in its possession relevant to determining whether GMP are likely to be met with respect to manufacture of the Product. (e) Personnel of Licensee or Licensee's designee shall be entitled to witness the manufacturing of test batches, scale-up batches and full-size production batches which in each case will be used as NDA support batches filed by Licensee or in regulatory authority presentations. These batches would be prepared by the intended commercial process for the Product or prepared to 7 demonstrate the quality of the entire process (validation) or any single aspect of a critical manufacturing parameter. Licensee may witness and/or review the analytical laboratory testing of any of the above cited batches or of the methodology which will be used to support a regulatory authority presentation. Licensee may prospectively review, to the extent necessary for compliance with applicable GMP and for scheduling purposes, the protocols and actual study data and results (process, cleaning, sterilization, validation) as related to such batches. (f) Licensee shall keep all information disclosed to or obtained by Licensee under paragraphs 4 (c) (d) and (e) strictly confidential and not disclose the same to any other person, except to the extent reasonably necessary or appropriate under applicable regulations for Licensee to register the Product with the regulatory authorities or otherwise comply with applicable law. (g) The information disclosed shall be used only to check the compliance of the contract supplier with GMP or any other applicable regulation or any other purpose agreed by Licensor and the contract supplier. In no case, shall Licensee use such information to manufacture the Product, except in the case where such rights have been acquired from Licensor or transferred to Licensee. (h) Product in Finished Packaged Form shall be delivered by Licensor so as to comply with the packaging and labeling requirements set forth by the FDA or other appropriate regulatory agencies. (i) Licensee will supply Licensor with a sales Forecast between the time of submission of a registration file in any country of the Territory and the approval of such file by the appropriate regulatory authority in such country, so that Licensor can plan production. If Licensee or one of its Affiliates or sublicensees does not market the Product in a country within the later of (i) six (6) months after the Effective Date or (ii) six (6) months after approval for both marketing and price, where applicable (e.g. France, Spain and Italy), Licensee will pay to Licensor twenty percent (20%) of the first year Forecast for the Product in such country for each year of delay in marketing the Product in such country. It is additionally provided that such payment will be reduced in the event Licensee or one of its Affiliates or sublicensees introduces the Product in such country within the twelve (12) month period from the date of regulatory approval therein (including price approval) to the extent of thirty (30%) of Net Sales for such country during said twelve (12) month period. (j) Licensee will give Licensor, on the first business day of each calendar quarter, a Forecast of Licensee's, its Affiliates' and sublicensees' requirements of Product for each country in which the Product is marketed for the six (6) month period that begins three (3) months later. The first three (3) months of each six (6) month Forecast will be a firm order, and the Product described in the order will be delivered to Licensee, its Affiliates and sublicensees in accordance with the terms of the order, but not less than three (3) months from the date of the order. Licensor is obliged to supply the amount of Product requested in the firm order except to the extent that such amount is more than fifteen percent (15%) higher than the amount that had been forecasted for that period in the last Forecast received by Licensor. With respect to any amount ordered in excess of the fifteen percent (15%) limit, Licensor is obligated to use commercially reasonable efforts to supply the requested amount to Licensee, its Affiliates and sublicensees. (k) Licensor shall use reasonable commercial efforts to notify Licensee within thirty (30) days after the Effective Date and thereafter thirty (30) days prior to the end of each calendar year, of 8 factory vacation schedules for the coming year, and if Licensee receives notice of such vacation schedules, they will be incorporated into Licensee's Forecasts. (l) Licensor bears the expense and responsibility for transportation and insurance for the Product to the Licensee's choice of airport or seaport (FOB port) nearest to the manufacturing site where the Product is manufactured; thereafter, transportation, insurance and duties for the Product are the responsibility of Licensee. Each shipment of the Product shall be accompanied by a Certificate of Analysis for each lot within each shipment signed by authorized quality control/quality assurance personnel of Licensor or its contract manufacturer. (m) All Product manufactured and supplied hereunder shall meet the quality control specifications and the specifications in the applicable regulatory filing through the expiration date stated on that Product package. Such Product when delivered to Licensee, its Affiliates and sublicensees shall also not be adulterated or misbranded within the meaning of the U.S. Food, Drug and Cosmetic Act, as amended. In accordance with GMPs and other applicable laws and regulations, Licensor or its contract manufacturer will test each shipment of the Product to be supplied to Licensee, its Affiliates and sublicensees pursuant to this Agreement before delivery of such shipment to Licensee, its Affiliates and sublicensees to ensure that the Product meets these standards. Licensor or its contract manufacturer shall retain sufficient quantities of each shipment of the Product to verify on an on-going basis that such Product meets quality control specifications and the specifications in the applicable regulatory filing through its stated expiration date. Such Product shall be retained through its stated expiration date plus one year, or such longer period of time as may be required by GMPs and other applicable laws and regulations. (n) Licensee, its Affiliates and sublicensees shall have the right to reject any delivered Product that does not meet quality control specifications and the specifications in the applicable regulatory filing. Licensee must notify Licensor in writing of any such rejection within thirty (30) days (except as to latent defects), and Licensor has thirty (30) days to replace the rejected shipment with Product that meets the agreed upon specifications in the regulatory filings. The expense of return, manufacture of replacement Product and shipment of replacement Product are Licensor's. (o) Licensor will use its best efforts to provide Licensee, its Affiliates and sublicensees with its ordered amounts (up to fifteen percent (15%) over Licensee's Forecast) and with respect to any amount ordered in excess of the fifteen percent (15%) above Forecast, Licensor will use commercially reasonable efforts to supply the requested amounts. (p) In the event Licensor is unable, due to reasons beyond its control, to provide Licensee, its Affiliates and sublicensees the amount of Product set forth in any firm order, Licensor shall be obligated to provide such amount of Product to Licensee, its Affiliates and sublicensees through third parties with which Licensor contracts, and Licensor shall be responsible for any additional costs, including without limitation additional costs of manufacturing the Product, caused thereby, provided that the provisions of this sentence shall not apply to the extent that the amount of Product set forth in such firm order exceeds the Forecast by more than fifteen percent (15%). (q) In countries (e.g. in some countries in South America or in India) where the Purchase Price of thirty percent (30%) of Net Sales for Finished Package Form of the Product is below the Base 9 Price, Licensor will provide Licensee finished Product in tubes with reusable applicators or other appropriate presentation, at a negotiated second base price. In countries where import duties make it impractical to import Product in Finished Package Form (e.g. Argentina), Licensor will grant Licensee the right to manufacture the Product locally if requested by Licensee for such country and will be paid a royalty on Net Sales for such country, provided such royalty can be legally expatriated from any such country, equal to the difference between thirty percent (30%) of Net Sales in such country and Licensee's cost of manufacturing the Product for such country. This royalty shall be payable for such country until the expiration of any Valid Claims in such country or until a third-party vaginally-administered progesterone product captures fifteen percent (15%) or more of the sales of the Product in such country. Subsequent to either event taking place in any such country, the royalty payable to Licensor on Net Sales in such country shall be reduced to seven percent (7%) in consideration of rights to the Trademarks and Technology until May 21, 2015, and thereafter the royalty payable on Net Sales in such country shall be two percent (2%) in consideration of rights to the Trademarks until May 21, 2020. Thereafter Licensee shall have an irrevocable fully paid up license to the Product under the Technology and shall own the Trademarks and related goodwill (subject to the condition set forth in Section 13 hereto). (r) If after the ten (10) year period defined in Section 13, the parties cannot agree upon mutually acceptable terms for supply, Licensee has the option of converting this Agreement into a license agreement and Licensee will be free to manufacture, or have manufactured, the Product, provided that Licensee pays to Licensor on a quarterly basis a royalty for the license of the Patents, Technology and Trademarks of fifteen (15%) of Net Sales. The royalty pursuant to this paragraph (r) shall remain at fifteen (15%) of Net Sales for any country until the expiration of any Valid Claims in such country or until a third-party vaginally-administered progesterone product captures fifteen percent (15%) or more of the sales of the Product in such country. Subsequent to either event taking place in any country of the Territory, the royalty payable to Licensor on Net Sales in such country shall be reduced to seven percent (7%) in consideration of rights to the Trademarks and Technology until May 21, 2015, and thereafter the royalty payable on Net Sales in such country shall be two percent (2%) in consideration of right to the Trademarks until May 21, 2020. Thereafter Licensee shall have an irrevocable fully paid up license to the Product under the Technology and shall own the Trademarks and related goodwill (subject to the condition set forth in Section 13 hereto). (s) The procedure for communication and processing of customer complaints with respect to the Product shall be as set forth on Schedule D. During the term of this Agreement, each party shall make available to the other party information about the Product as may be necessary to carry out the provisions and purposes of this Agreement, including without limitation general medical information relating to the Product's storage, use and safety. Licensor shall provide prompt written notice to Licensee, including relevant references, of any information which Licensor believes in its reasonable judgment is material for medical information services. Material information shall include, but not be limited to, published or unpublished reports or other clinical or laboratory data received by Licensor about Product safety, contraindications, treatment programs in the indications specified by the approved Product insert, stability, storage and shipping, pharmacology, and other information Licensor believes in its reasonable judgment is relevant to safe and effective Product use. Licensor shall 10 provide reasonable follow-up information and prompt written replies to verbal or written questions from Licensee pertinent to medical information services about the Product. On a periodic basis as agreed by both parties, but no less than annually, Licensor shall provide a written summary of information about the Product, which Licensor believes in its reasonable judgment is material for the medical information services provided by Licensee. (t) In the event any regulatory authority having jurisdiction shall so request or order, or if either party has reason to believe that any corrective action should be taken with respect to the Product supplied hereunder, including without limitation any Product recall, customer notice, restriction, change, or market action, then such party shall immediately inform the other in writing. If the party owning the relevant registration file for such Product, after consultation with the other party, deems it necessary to effect a Product corrective action then such party shall effect such corrective action in accordance with procedures agreed upon by the parties. If the Product defect causing the corrective action shall be found to result solely from the manufacture and supply of the Product hereunder, then Licensor shall either supply a quantity of the Product without charge sufficient to enable Licensee and/or its Affiliates or sublicensees to replace all Product subject to the corrective action, or render a credit to Licensee, its Affiliates or sublicensees for such Product, at Licensee's option. Such replacement Product shall be delivered at Licensor's expense within thirty (30) days of the date on which the corrective action was effected, as Licensee may direct. In such event Licensor also agrees to reimburse Licensee, its Affiliates or sublicensees for other costs and expenses incurred with respect to such corrective action. If the Product defect causing the corrective action shall be found to result solely from Licensee's, its Affiliates' or sublicensees' marketing, use or sale of the Product hereunder, then the costs and expenses of such corrective action shall be paid by Licensee. If the Product defect causing the corrective action shall be found to result from a joint act or omission of the parties, then the parties shall negotiate in good faith an appropriate allocation of the costs and expenses of the corrective action. 5. Price and Payment Terms. ----------------------- (a) The Purchase Price to be paid by Licensee for the Product in Finished Package Form shall be the Base Price or thirty percent (30%) of Net Sales, whichever is greater, unless otherwise agreed as contemplated in paragraph 4(q). If the Base Price were to exceed thirty percent (30%) of Net Sales, the parties shall meet to discuss how to resolve the high cost of goods. The parties hereby acknowledge that the Base Price for the Product is contemplated for six (6) Units - twelve (12) days therapy in Finished Package Form. If Licensee orders the Product in Finished Package Form containing fewer than six (6) Units the Base Price shall be reduced. This reduction will reflect a pro rata reduction in the cost of the Product based on the number of Units specified as well as any reduction in the cost of packaging. If Licensee wishes to order the Product in Finished Package Form that contains more than six (6) Units the Base Price will be adjusted accordingly. (b) The following quantity discounts will be applied to annual purchases of the Product by Licensee, its Affiliates, or sublicensees: (i) Over ten (10) million Units - 3.33% - which would reduce the Purchase Price to twenty-nine percent (29 %) of Net Sales or the Base Price, whichever is greater. 11 (ii) Over twenty (20) million Units - 6.66% - which would reduce the Purchase Price to twenty-eight percent (28%) of Net Sales or the Base Price, whichever is greater. (iii) Over thirty (30) million Units - 10% - which would reduce the Purchase Price to twenty-seven percent (27%) of Net Sales or the Base Price, whichever is greater. (c) At Licensee's request, Licensor will supply promotional samples of the Product in Finished Package Form at a Purchase Price equal to Licensor's Direct Cost. (d) Licensee's invoice price for the Product purchased from Licensor shall be paid in U.S. dollars thirty (30) days after the later of (A) receipt by Licensee of an invoice for such Product, or (B) the shipment by Licensor of the corresponding Product. (i) Licensor's invoice price to Licensee and Licensee's payment to Licensor shall both be in U.S. dollars and shall be established for each Product pack for each country of the Territory at the commencement of each calendar year. For each country, the basis for the invoice price shall be the in-market local currency price from Licensee, its Affiliates or sublicensees to third parties converted into U.S. dollars at the exchange rate published in the Wall Street Journal prevailing at the close of business on the first working day of the applicable calendar year. (ii) Any necessary adjustments to such payments to reflect the actual Purchase Price for the Product shall be made forty-five (45) days after the end of each calendar quarter in the report described in paragraph 16 (a), by converting local currency Net Sales into U.S. dollars based on the local currency - U.S. dollar exchange rate published in the Wall Street Journal on the last working day of the applicable calendar quarter and calculating the Purchase Price on this basis. (iii) Underpayments or overpayments shall be calculated based on the Net Sales value of Units of the Product sold by Licensee, its Affiliates or sublicensees during the calendar quarter. Purchases by Licensee in excess of actual Unit sales by Licensee, its Affiliates or sublicensees during a given calendar quarter shall be carried over to the next calendar quarter for reconciliation. Volume discounts, as defined by paragraph 5(b), shall be taken into account in the last reconciliation of each calendar year. A credit for Licensee's out-of-pocket costs and expenses of conducting clinical trials and registering the Product in Japan, as defined by paragraph 7(c), shall also be taken into account in the last reconciliation of each calendar year, by each year offsetting the amount of such costs and expenses against the total annual amount due for purchases of the Product until all such costs and expenses have been offset. (e) If a vaginally administered progesterone-containing product is approved in any country of the Territory subsequent to the Effective Date which product captures fifteen percent (15%) or more of the sales of the Product in such country the parties shall renegotiate price based on the economic impact upon the Licensee for any such country or countries. 12 6. Marketing. --------- (a) Licensee will be responsible for marketing and sales of the Product in the Territory. Licensee will use its diligent efforts to make the Product a commercial success by making a commitment throughout the term of the Agreement, financial and otherwise, to the Product that is no less than its commitment to those of its own brands and products in similar circumstances that it actively and aggressively promotes, in accordance with the life cycle of such products, provided, however, that Licensee shall have no such obligations with respect to the Product containing progesterone in a concentration of four percent (4%). Licensee will ensure that any sublicense it makes under the Patents and Technology to market, use and sell the Product in the Territory will contain appropriate obligations of commercial diligence. (b) Licensee will provide quarterly sales and other marketing information useful to the Licensor in monitoring sales progress. (c) Licensor hereby authorizes Licensee to communicate directly with regulatory authorities with respect to regulatory files for the Product owned by Licensor to the extent necessary to fulfill Licensee's responsibilities for marketing and sales of the Product in the Territory. Licensor agrees, at Licensee's request, to execute any documents or take any other actions as may be necessary or desirable to obtain authorization for Licensee so to communicate directly with such regulatory authorities. 7. Clinical Trials and Registration (a) Licensor will be responsible for clinical trials and registration filings related to the Product throughout the world. All clinical trials contemplated and completed are attached in Schedule C together with their completion or estimated completion dates. These studies are designed to register the Product for the following indications: In-Vitro Fertilization (IVF) Secondary Amenorrhea Treatment of Hyperplasia Hormone Replacement Therapy The parties shall consult from time to time regarding the scope, details and timing of the clinical trials and registration filings. The parties may agree to allocate resources currently allocated to clinical trials and registration filings for the Product for the treatment of hyperplasia and for hormone replacement therapy (prevention of hyperplasia) to other indications. Licensor will use diligent efforts to conduct and complete the clinical trials and to prepare and submit the registration filings. In some countries additional approvals may be obtained based on the clinical trials enumerated in Schedule C for indications that are not at the moment approvable in the United States, specifically, benign mastopathies and premenstrual syndrome. (b) Licensee shall have the right to monitor and audit the clinical trials and/or other tests required by the protocols described in Schedule C for the Product. 13 (c) To the extent Licensee seeks to amend the labeling or support additional advertising claims for the Product beyond that which is contemplated in paragraph 7(a), at its sole discretion and expense it may design, conduct and control such additional clinical trials necessary to obtain FDA or other regulatory approval, provided, that Licensee shall give Licensor prior written notice of its intention to do so. In addition to the Phase I clinical trial for the Product in Japan described in Schedule C, Licensee shall also conduct clinical trials and register the Product in Japan. Licensor shall reimburse Licensee for all out-of-pocket costs and expenses incurred in conducting such clinical trials and registering the Product by providing Licensee a credit for this amount against the Purchase Price for the Product in accordance with the terms and conditions of paragraph 5(d). It is anticipated that the out-of-pocket costs and expenses for such clinical trials may include, without limitation, costs and expenses associated with clinical investigators, contract laboratories, and data analysis, but shall not include any incremental costs and expenses associated with retaining a contract research organization. Product and placebo necessary for the conduct of such clinical trials shall be supplied by Licensor free of charge, appropriately packaged and labeled and in accordance with the terms of paragraphs 4 (j), (l)-(p) and (t) hereof. Licensee shall own and have unrestricted rights to the clinical data generated as a result of clinical trials conducted by Licensee; provided that the results of such clinical trials shall be made available to Licensor free of charge to be filed in connection with Licensor's regulatory submissions outside the Territory. (d) Each party will immediately notify the other of any adverse or unexpected reaction or results or any actual or potential government action relevant to clinical trials of the Product and the parties will discuss with each other measures to be undertaken to resolve any such problem. 8. Maintenance of Patents and Trademarks. ------------------------------------- (a) Licensor shall keep Licensee currently advised of all steps taken or to be taken in the prosecution of all applications for Patents. Licensor shall have full and complete control over any reissue or reexamination or other proceedings relating to the Patents, the Trademarks and/or Technology and of any disclaimers thereof. Licensor shall bear all costs for the maintenance and enforcement of the Patents and Trademarks, as well as all costs for the filing, maintenance and enforcement of all additional Patents which may be filed by the Licensor during the term hereof. If Licensor fails to carry out such obligations set forth in this Section 8, Licensee may carry out such obligations on Licensor's behalf at Licensor's cost and may set off such cost against amounts due to Licensor hereunder provided that such action is commercially reasonable. (b) Trademark Use and Quality Control (i) Licensee agrees to list the Trademarks in accordance with good customary trademark practice, and to avoid taking any action that would in any manner impair or detract from the value of the Trademarks, or the goodwill and reputation of Licensor. Licensee acknowledges Licensor's ownership of the Trademarks and related goodwill, both in the Territory and outside the Territory. 14 (ii) Licensee agrees to use the Trademarks only in the form and manner and with appropriate legends as approved from time to time by Licensor, and not to use any other trademark or service mark in combination with the Trademarks without the prior written approval of Licensor, provided that such approval shall be granted unless Licensor reasonably objects on the basis that the proposed use would impair the value of the Trademarks. 9 Infringement of Patents, Technology and/or Trademarks. ----------------------------------------------------- (a) Licensee and Licensor shall each promptly notify the other following the discovery of any alleged infringement or unauthorized use of the Patents, Technology and/or Trademarks which may come to their attention. Licensor shall promptly undertake, at Licensor's expense, reasonable efforts to obtain a discontinuance of the infringement or unauthorized use and, if not successful, Licensor may, at its sole option, bring suit against such infringer. (b) If Licensor fails to obtain a discontinuance of such infringement and/or elects not to bring an infringement suit, then Licensor shall give notice in writing to Licensee within thirty (30) days of such failure or election and Licensee may, but is not required to, obtain a discontinuance of the alleged infringement or unauthorized use or bring an infringement suit; provided, that without the prior written consent of Licensor, Licensee shall not agree to any settlement with respect to such infringement or unauthorized use that compromises the value of the license granted hereunder. Any infringement suit by Licensee shall be in the name of Licensee, or in the name of Licensor, or jointly by both Licensee or Licensor, as may be required by the law of the forum. Licensor shall execute such documentation as may be reasonably required by Licensee with respect to such suit. (c) It is understood and agreed that the party to this Agreement that institutes suit shall bear solely all costs and expenses in connection therewith and shall be entitled to recover all costs first and then share 50/50 with the other party the balance of any sums received, obtained, collected or recovered whether by judgement, settlement or otherwise as a result of such suit; provided, however, that if a settlement by Licensee (with the prior written consent of Licensor to the extent required above) includes the granting by Licensee of rights hereunder to a third party, amounts received by Licensee from such settlement shall not be shared with Licensor and sales of Product by such third party pursuant to such rights shall not be included in Net Sales. In addition, with respect to any suit for infringement or unauthorized use of the Patents, Technology and/or Trademarks, the party that did not institute suit shall render all reasonable assistance to the party that did institute suit at the latter's expense, including, but not limited to, executing all documents as may be reasonably requested by the party that did institute the suit. The party that did institute suit shall keep the other party informed of, and shall from time to time consult with the other party regarding, the status of any such suit and shall provide the other party with copies of all pleadings filed in such suit. 10. Infringement of Third-Party Intellectual Property Rights. -------------------------------------------------------- (a) Each party hereto shall notify the other promptly of the receipt of notice of any action, suit or claim alleging infringement by the Patents, the Technology, the Trademarks or the Product of any Intellectual Property Rights of a third party. 15 (b) In no event shall Licensee settle any such allegation of infringement without the prior written consent of Licensor, which consent shall not be unreasonably withheld or delayed. In the event that the Licensor agrees in writing or Licensee in good faith determines that is necessary for Licensee to make royalty or other payments to a third party in order for Licensee to make, have made, use or sell or to continue making, having made, using or selling the Product, Licensee shall be entitled to offset such amounts so paid to any third party against any amounts which may become due to Licensor under this Agreement. 11. Confidentiality. --------------- Each party hereto shall hold all Confidential Information in confidence, use it only in connection with the performance of its obligations pursuant to this Agreement and use its diligent efforts (consistent with those which it uses to safeguard its own confidential information) to safeguard Confidential Information and to prevent the unauthorized use or disclosure of any Confidential Information. Each party hereto shall ensure that its Affiliates or employees who have access to any Confidential Information shall be made aware of and subject to these obligations. The receiving party may disclose Confidential Information to regulatory authorities for the purpose of seeking marketing approval of the Product pursuant to this Agreement and may also disclose Confidential Information to individuals who have a need to know to effectuate the development and commercialization of the Product pursuant to this Agreement, provided each such individual is bound by a confidentiality obligation comparable to the obligation set forth in this Section 11. The obligations of the parties hereto under this Section 11 shall survive for five (5) years after the expiration or termination of this Agreement. 12. Representations, Warranties and Covenants and Indemnification. ------------------------------------------------------------- (a) Licensor hereby represents, warrants and covenants the following: (i) Licensor is a corporation duly organized, existing and in good standing under the laws of Bermuda, with full right, power and authority to enter into and perform this Agreement and to grant all of the rights, powers and authorities herein granted. (ii) The execution, delivery and performance of this Agreement do not conflict with, violate or breach any agreement to which Licensor is a party, or Licensor's articles of incorporation or bylaws. (iii) This Agreement has been duly executed and delivered by Licensor and is a legal, valid and binding obligation enforceable against Licensor in accordance with its terms. (iv) Licensor shall comply with all applicable laws, consent decrees and regulations of any federal, state or other governmental authority in performing this Agreement. (v) To the best of Licensor's knowledge and belief as of the Effective Date, there are no issued or pending patents, trademarks or patent or trademark applications relating to the Product that would prevent Licensee from using or selling the Product in the Territory. 16 (vi) To the best of Licensor's knowledge and belief as of the Effective Date, there are no outstanding, pending or threatened product liability or breach of warranty or other similar claims, actions, suits, demands, investigations, arbitrations, administrative or other proceedings, or orders, injunctions, judgments or decrees of any court or government agency in connection with the Product in the Territory. (vii) To the best of Licensor's knowledge and belief as of the Effective Date, there are no outstanding, pending or threatened violations, notices of noncompliance, warning letters, orders, injunctions, judgements or decrees of any court or government agency, investigations, claims, actions, suits, demands, administrative or other proceedings that have resulted or might result in the revocation, suspension or modification of any regulatory approval for the Product in the Territory. (b) Licensee hereby represents, warrants and covenants the following: (i) Licensee is a corporation duly organized, existing and in good standing under the laws of Switzerland, with full right, power and authority to enter into and perform this Agreement. (ii) The execution, delivery and performance of this Agreement do not conflict with, violate or breach any agreement to which Licensee is a party, or Licensee's articles of organization or bylaws. (iii) This Agreement has been duly executed and delivered by Licensee and is a legal, valid and binding obligation enforceable against Licensee in accordance with its terms. (iv) Licensee shall comply with all applicable laws, consent decrees and regulations of any federal, state or other governmental authority in performing this Agreement. (c) Indemnification (i) Licensor agrees to indemnify and hold harmless Licensee, its Affiliates and sublicensees and their respective employees, agents, officers and directors from and against any claims, losses, liabilities, damages, costs and expenses (including reasonable attorneys' fees) incurred by Licensee, its Affiliates or sublicensees arising out of or in connection with any (A) breach by Licensor of any representation, warranty, covenant or obligation hereunder, (B) claim or demand of any kind for injury to a person or property arising from Licensor's or its contract manufacturer's manufacturing, packaging, or labeling of the Product; provided, that this indemnification shall not apply to the extent such claim or demand has resulted from manufacturing, packaging, or labeling conducted by or at the direction of Licensee, its Affiliates or sublicensees or from any negligent act or omission with respect to such Product by Licensee, its Affiliates, or sublicensees or their employees or agents, (C) act or omission on the part of Licensor or any of its employees, agents or contract manufacturers in the performance of this Agreement, and (D) payments, commissions or fees of any kind due to consultants or brokers retained by Licensor relating to the Product. (ii) Licensee agrees to indemnify and hold harmless Licensor and its Affiliates and their respective employees, agents, officers and directors from and against any claims, losses, liabilities, damages, costs and expenses (including reasonable attorneys' fees) incurred by Licensor or 17 its Affiliates arising out of or in connection with any (A) breach by Licensee of any representation, warranty, covenant or obligation hereunder, (B) claim or demand of any kind for injury to person or property arising from Licensee's, its Affiliates' or sublicensees' marketing, distribution and sale of the Product; provided, that this indemnification shall not apply to the extent such claim or demand has resulted from any negligent act or omission with respect to such Product by Licensor, its Affiliates, their employees, agents or contract manufacturers, (C) act or omission on the part of Licensee or any of its employees or agents in the performance of this Agreement, (D) third party claims alleging infringement of such third parties' Intellectual Property Rights as a result of the advertisement, promotion or marketing materials created by or at the direction of Licensee, its Affiliates or sublicensees and used in connection with the sale of the Product hereunder, and (E) payments, commissions or fees of any kind due to consultants or brokers retained by Licensee relating to the Product. (iii) A party seeking indemnification under this paragraph 12 (c) (the "Indemnified Party") must give prompt written notice thereof to the other party (the "Indemnifying Party"). The Indemnifying Party shall have the right to defend any such claim or demand subject to the right of the Indemnified Party to participate with counsel of its choice in such defense, but the fees and expenses of such additional counsel shall be at the expense of the Indemnified Party. The Indemnified Party shall cooperate fully in all respects with the Indemnifying Party in any such compromise, settlement or defense, including, without limitation, by making available all pertinent information and personnel under its control to the Indemnifying Party. The Indemnifying Party will not compromise or settle any claim or demand (other than, after consultation with Indemnified Party, a claim or demand to be settled by the payment of money damages and/or the granting of releases) without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. (iv) Each party shall maintain and keep in force for the term of this Agreement comprehensive general liability insurance including Products/Completed Operations, Contractual and Broad Form Property Damage covering its indemnification obligations hereunder with a minimum limit of Fifteen Million United States Dollars(U.S. $15,000,000) per annum combined single limit for Bodily Injury and Property Damage, to be increased as appropriate, consistent with prudent business practices prevailing in the pharmaceutical business. Such insurance shall be placed with a first class insurance carrier with at least a BBB rating by Standard & Poors. Promptly after execution and delivery of this Agreement, each party shall furnish a certificate of insurance to the other party evidencing the foregoing endorsements, coverage and limits, and providing that such insurance shall not expire or be canceled or modified without at least thirty (30) days prior notice to the other party. 13. Term of License. --------------- Except as otherwise provided for herein, and subject to the provisions of paragraph 4 (r), the duration of the Agreement shall be for ten (10) years from the Effective Date, renewable upon mutual agreement of the parties for five (5) year periods at commercial terms to be agreed upon. It is understood that if after the ten-year period or any subsequent five-year period the parties cannot agree upon mutually acceptable terms, Licensee will have the option of converting this Agreement into a license agreement and Licensee will be free to manufacture, or have manufactured, the Product. Under such circumstances, Licensor shall continue to supply the Product in Finished Package Form under the then current terms and conditions of this Agreement for as long as is necessary and will assist Licensee 18 as necessary, including without limitation by transferring to Licensee all Technology necessary or useful to give Licensee the capability of manufacturing the Product in such a way as to communicate such Technology to Licensee promptly, effectively and economically, so that Licensee can undertake manufacture of the Product and continue the sale of the Product without interruption. In the event that Licensee shall continue to market the Product under the terms of this Agreement for twenty-five (25) years from the Effective Date in each of the European Economic Community, Canada and the United States, Licensee shall thereafter own the Trademarks and related goodwill. 14. Termination. ----------- (a) This Agreement may be terminated upon the mutual written agreement of the parties. (b) Either party may terminate this Agreement forthwith by written notice to the other, if the other party commits a material breach of any part of this Agreement and such breach has not been remedied by the breaching party within sixty (60) days after written notice of such breach has been given by the other party. If the breach cannot be remedied within sixty (60) days, the breaching party may submit a plan within this sixty (60) day period, reasonably acceptable to the other party, outlining the steps that it intends taking to cure the breach and then must cure the breach in accordance with the terms of such plan or be subject to an action by the other party for termination of this Agreement pursuant to this paragraph 14 (b) for breach of such plan. (c) This Agreement may also be terminated by written notice of one party, if the other party shall be involved in financial difficulties as evidenced: (i) by its commencement of a voluntary case under any applicable bankruptcy code or statute, or by its authorizing, by appropriate proceedings, the commencement of such voluntary case; or (ii) by its failing to receive dismissal of any involuntary case under any applicable bankruptcy code or statute within sixty (60) days after initiation of such action or petition; or (iii) by its seeking relief as a debtor under any applicable law of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or by consenting to or acquiescing in such relief, or (iv) by the entry of an order by a court of competent jurisdiction finding it to be bankrupt or insolvent, or ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors or assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property or assets; or (v) by its making an assignment for the benefit of, or entering into a composition with its creditors, or appointing or consenting to the appointment of a receiver or other custodian for all or a substantial part of its property. (d) Licensee may terminate this Agreement at any time after three (3) years with one (1) year's written notice if the Product is not a commercial success, as determined by Licensee in its sole 19 discretion, and on ninety (90) days' notice at any time during the Agreement for reasons of safety or efficacy of the Product. (e) The failure by a party to exercise its rights to terminate this Agreement pursuant to this Section (14) in the event of any occurrence giving rise thereto shall not constitute a waiver of such rights in the event of any subsequent occurrence. (f) Termination of this Agreement shall not release either party from its obligations accrued prior to the effective date of termination nor deprive either party from any rights that this Agreement provides shall survive termination. The provisions of paragraphs 4 (q), (r), (s) and (t), Sections 11, 13, 16, 17, 24 and 29, and paragraph 12 (c) shall remain in full force and effect and shall survive the termination of this Agreement to the extent necessary to effect the express purposes of such paragraphs and Sections. 15. Publicity. --------- The parties hereto shall coordinate the preparation and issuance of any public announcement of this Agreement. Any such announcement shall comply with relevant Securities and Exchange Commission requirements and shall take into account any reasonable concern regarding the trade. The wording of such announcement shall be agreed upon by the parties before release. 16. Audits. ------ (a) Licensee shall keep accurate records of all Product sales and other relevant data concerning the Product for a period of two (2) years following the year in which such records were created and Licensee shall provide Licensor quarterly reports thereof forty-five (45) days after the end of the applicable calendar quarter. Such reports shall state the number of Units of Product manufactured by Licensee, its Affiliates or sublicensees and the number of Units of Product sold by Licensee, its Affiliates or sublicensees during the applicable quarter as well as the number of free samples of Product distributed and any Product returns made during such calendar quarter together with an accounting of any other applicable components of the amounts paid or to be paid hereunder with respect to such calendar quarter. Simultaneous with the delivery such report, Licensee shall make, or cause to be made, any additional payment due with respect to the Purchase Price for Product sold during such calendar quarter. Once a year, upon reasonable notice, at times mutually agreed upon and during business hours, Licensor at Licensor's cost may have the accounts of Licensee, its Affiliates or sublicensees for the preceding two (2) calendar years relating to the Product reviewed by independent certified public accountants appointed by Licensor and reasonably approved by Licensee, solely in order to verify amounts due under this Agreement. Licensor and Licensee shall mutually determine a general strategy for such audit in advance of its conduct. Said accountant shall not disclose to Licensor any information except that which should properly be contained in a quarterly report required under this Agreement. Licensee shall promptly pay any underpayment evidenced by such audit, and Licensor shall promptly refund any overpayment evidenced by such audit. In the event such an audit evidences an underpayment of more than five percent (5%) with respect to the amounts actually paid, Licensee shall promptly pay such underpayment to Licensor with interest at the prime rate as set by Citibank, from the time when such underpayment accrued, and shall reimburse Licensor for the reasonable costs and expenses (including fees) of such audit. 20 (b) Licensor shall keep accurate records of its Direct Costs of manufacturing the Product for a period of two (2) years following the year in which such records were created. Once a year, upon reasonable notice, at times mutually agreed upon and during business hours, Licensee at Licensee's cost may have the accounts of Licensor for the preceding two (2) calendar years relating to the Direct Costs of manufacturing the Product reviewed by independent certified public accountants appointed by Licensee and reasonably approved by Licensor, solely in order to verify amounts due under this Agreement. Licensor and Licensee shall mutually determine a general strategy for such audit in advance of its conduct. Said accountant shall not disclose to Licensee any information except that relating to the Direct Costs of manufacturing the Product. Licensor shall promptly refund any overpayment evidenced by such audit, and Licensee shall promptly pay any underpayment evidenced by such audit. In the event such audit evidences an overpayment of more than five percent (5%) with respect to the amounts actually paid, Licensor shall promptly refund such overpayment to Licensee with interest at the prime rate as set by Citibank, from the time when such overpayments accrued, and shall reimburse Licensee for the reasonable costs and expenses (including fees) of such audit. 17. Notices. ------- All notices required hereunder shall be in writing and shall be deemed to be properly given if sent by air courier to the party to be notified at the address set forth on page 1 hereof, or at such other latest address as either party may hereafter designate in writing to the other; provided that a copy of each notice to be sent to Licensor hereunder shall also be sent by the same means to William J. Bologna, Chairman of the Board, Columbia Laboratories Inc., 2875 N.E. 191st Street, Suite 400, Aventura, Florida 33180, U.S.A.; and further provided that a copy of each notice sent to Licensee hereunder shall also be sent by the same means to General Counsel, Ares-Serono International S.A., 15 bis chemin des Mines, 1202, Geneva, Switzerland. The date of service of any notice so sent by air courier shall be the date of receipt. 18. Ownership Change: Assignment; Successors. ---------------------------------------- This Agreement shall be binding on and inure to the benefit of the successors and assigns of the parties, including any Affiliate, subsidiary, division or any entity controlled by either party. Except as provided herein, Licensee may not sublicense or assign this Agreement, in whole or in part, without the consent in writing of Licensor, and any purported assignment without such consent (which may be withheld without reason) shall be void; provided, that Licensee may upon notice to Licensor assign all or any portion of this Agreement to any of its Affiliates, but may not then sell such Affiliate without Licensor's prior written consent unless this Agreement is first assigned back from such Affiliate to Licensee. Licensor may not assign its rights under this Agreement, in whole or in part, without consent in writing of Licensee; and any purported assignment without such consent (which may be withheld without reason) shall be void; provided, that Licensor may upon notice to Licensee assign all or any portion of this Agreement to any of its Affiliates, but may not then sell such Affiliate without Licensee's prior written consent unless this Agreement is first assigned back from such Affiliate to Licensor. If any person, individually, or in concert with others, shall acquire directly or indirectly, through one or more intermediaries, the beneficial ownership of fifty percent or more of the equity or 21 assets of Licensor or Licensee during the term of this Agreement, the party not being acquired may require from the new owners of the acquired party a written affirmation of its intent and capability to comply with all the terms of this Agreement. Under no circumstances shall such action by Licensor interfere with or compromise the continued supply of the Product to Licensee, provided however, that should such interference or compromise occur, Licensee in such event shall have the option of terminating this Agreement. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto, or their respective permitted successors and assigns, any benefits, rights or remedies. 22 19. Tax. --- All taxes levied on account of any payments accruing under this Agreement which constitute income to Licensor, shall be the obligation of Licensor, and if provision is made in law or regulation for withholding, such tax shall be deducted from any payment then due, paid to the proper taxing authority, and receipt for payment of the tax secured and promptly sent to Licensor. 20. Independent Contractors. ----------------------- The relationship of the parties under this Agreement is that of independent contractors. Neither party shall be deemed to be the agent of the other and neither is authorized to take any action binding upon the other. 21. Entire Agreement; Modification. ------------------------------ This Agreement, including the Schedules hereto, contains the entire understanding between the parties hereto relating to the subject matter hereof, there being no terms and conditions other than those set forth herein, and it supersedes all prior agreements, written or oral, between the parties hereto with respect to the matters covered hereunder. This Agreement may not be modified, altered or otherwise changed other than by an instrument in writing, duly executed by each of the parties hereto. 22. Severability. ------------ If any provision of this Agreement should be or becomes fully or partly invalid or unenforceable for any reason whatsoever or should be adjudged to violate any applicable law, this Agreement is to be considered divisible as to such provision and such provision is deemed to be deleted from this Agreement, and the remainder of this Agreement shall be valid and binding as if such provision were not included herein; provided, however, that this Agreement is not rendered fundamentally different in its content or effect. 23. Effect of Headings. ------------------ The headings for the sections and paragraphs of this Agreement are to facilitate reference only, do not form a part of this Agreement, and shall not in any way affect the interpretation hereof. 24. Choice of Law. ------------- This Agreement and performance hereof shall be construed and governed by the laws of the Commonwealth of Massachusetts and the United States. Any dispute, controversy, claim or difference arising between the parties out of, relating to, or in connection with this Agreement shall be submitted to the jurisdiction of the courts sitting in the Commonwealth of Massachusetts. 25. No Waiver. --------- No delay or omission or failure to exercise any right or remedy provided for herein shall be deemed to be a waiver thereof or acquiescence in the event giving rise to such right or remedy. 23 26. Counterparts. ------------ This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 27. Further Assurances. ------------------ Licensor and Licensee each agree to produce or execute such other documents or agreements as may be necessary or desirable for the execution and implementation of this Agreement and the consummation of the transactions contemplated hereby. 28. Schedules. --------- The terms and provisions of the Schedules attached to this Agreement are hereby incorporated herein as if fully set forth herein. 29. Bankruptcy. ---------- All Trademark, Patent and Technology rights and licenses granted to the Product under or pursuant to this Agreement by Licensor to Licensee are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, as amended from time to time (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101 (35A) of the Bankruptcy Code. The parties hereto agree that so long as Licensee, as a licensee of such rights under this Agreement, makes all payments to Licensor required under this Agreement, Licensee shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. The parties further agree that, in the event that any proceeding shall be instituted by or against Licensor seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking an entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or it shall take an action to authorize any of the foregoing actions, Licensee, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. The parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against Licensor under the Bankruptcy Code, Licensee shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiment of such intellectual property, and the same, if not already in its possession, shall be promptly delivered to Licensee (i) upon any such commencement of a bankruptcy proceeding upon written request therefor by Licensee, unless Licensor elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Licensor, upon written request therefor by Licensee. In addition the parties agree that in such event the intellectual property delivered to Licensee shall include all Technology necessary or useful to give Licensee the capability of manufacturing the Product and such Technology shall be delivered to Licensee in such a way as to communicate it to Licensee promptly, effectively and economically 24 30. Force Majeure. ------------- No failure or omission by a party hereto in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement nor shall it create any liability if the same shall arise from any cause or causes beyond the control of the party, including, but not limited to, the following, which, for the purposes of this Agreement, shall be regarded as beyond the control of the party in question: acts of God, acts or omissions of any government, any rules, regulations, or orders issued by any governmental authority or any officer, department, agency, or instrumentality thereof, fire, storm, flood, earthquake, accident, war, rebellion, insurrection, riot, invasion, strikes, lockouts; provided however, that the party so affected shall promptly advise the other party of the existence of such causes of nonperformance, shall use its best efforts to avoid or remove such causes of nonperformance and shall continue performance hereunder with the utmost dispatch whenever such causes are removed. 31. Performance by Affiliates. ------------------------- The parties agree that certain of their rights and obligations under this Agreement may be carried out by one or more of their Affiliates; provided, however, that each party shall remain responsible for the acts and omission of its Affiliates. The parties further understand and agree that no such Affiliate is a party to this Agreement, and, except as contemplated by this Agreement, is not the agent of such party for purposes hereof, is not authorized to bind such party and cannot enter into amendments to this Agreement, which can only be made in accordance with the terms of Section 21 hereof. IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first above written, Columbia Laboratories (Bermuda) Ltd. By: /s/ William J. Bologna ---------------------------- (Title) Chairman of the Board Ares Trading S.A. By: /s/ Ernesto Bertarelli ---------------------------- (Title) Authorized Representative 25 EX-10.17 4 EXHIBIT 10.17 EXHIBIT 10.17 ADDENDUM NO. 2 TO MEIER EMPLOYMENT AGREEMENT This second addendum ("Second Addendum") dated as of the 1st day of January 2000, by and between Columbia Laboratories Inc. ("Columbia") a corporation organized and existing under and by virtue of the laws of the State of Delaware, having its principal place of business at 2875 SE 191st Street, Aventura, Florida 33180 (hereinafter referred to as the "Company"), and Norman M. Meier, who resides at 934 S. South Lake Drive, Hollywood, Florida 33019 (hereinafter referred to as "Employee"). W I T N E S E T H: ----------------- WHEREAS, the Company is and will be engaged in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the employee, by reason of his knowledge, skill and ability has been uniquely qualified to aid the Company in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the Employee and the Company are desirous of continuing the employment relationship of the Employee, in a changed capacity, whereafter the Employee will provide ad hoc assistance to the Company in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the Company and Employee desire to enter into this Second Addendum to the Employee's employment agreement dated January 1, 1996, which agreement was previously modified by an addendum effective September 1, 1997, (the January 1, 1996 employment agreement and September 1, 1997 addendum are hereinafter collectively referred to as the "Agreement") so that the rights, duties, benefits and obligations of each to the other, in respect of the changed employment of the Employee for and by the Company, will be fully set forth under the terms and conditions set forth both in the Agreement, and herein, upon the execution hereof; and WHEREAS, the Compensation and Stock Option Committee of the Board of Directors of the Company have approved the continued employment of the Employee upon the terms and conditions set forth in the Agreement and herein, by a resolution issued by it, and have authorized the execution and delivery of this Second Addendum; and WHEREAS, the terms of the Employee's Agreement will only be modified by the specific terms and conditions set forth herein, which will modify and supersede any and all similar provisions in the Employee's Agreement, and any inconsistency between this Second Addendum and the Employee's Agreement will be resolved by the provisions hereinafter set forth. To the extent this Second Addendum does not change any provision of the Employment Agreement, those provisions will remain and continue to be effective. NOW, therefore, in consideration of the mutual promises contained herein, the payment of Ten ($10.00) dollars by each party to the other, the receipt of which is hereby duly acknowledged, and for other good and valuable consideration, the Company and Employee further agree as follows: EMPLOYMENT 2 The Company will continue to employ the Employee in an executive capacity, specifically as "Second Vice-Chairman." The Employee hereby accepts such employment and agrees to perform the services and duties specified herein. TERM The term of employment ("Term") shall be for a period of Two (2) years from the date hereof, unless sooner terminated in accordance with the terms and conditions set forth herein. DISABILITY If, during the Term, the Employee will become unable to perform his duties as provided for herein by reason of illness or injury, for a consecutive period of Three Hundred sixty-five (365) days, the Company may, on Ninety (90) days written notice to the Employee, terminate his office of Second Vice-Chairman. In the event of such termination, then Employee will remain an employee of the Company and receive the balance of his compensation and all of his fringe benefits as is set forth below in this Second Addendum, through to the Termination date set forth above in this Second Addendum. TERMINATION FOR CAUSE This Agreement may be immediately terminated by the Company for "cause" at any time, upon written notice to the Employee, after which all obligations of the Company to the Employee will thereupon cease. For the purposes of this Agreement, the term "cause" when used with reference to the termination of this Agreement, shall mean only the following: Willful misconduct, gross negligence or indictable criminal conduct against the Company, by the Employee in connection with the performance of his duties. DUTIES (a) The Employee shall perform the following duties in connection with his employment, all of which will be subject to the paramount directions of the Board of Directors: (i) To serve as Second Vice-Chairman of the Company; and (ii) To assist the Company (the "Assistance") in its business affairs and scientific dealings relating to the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products, as well as in the Company's dealings with other 3 companies, its regulatory affairs, banking and other financial institutions and other groups and institutions; and (iii) To provide such Assistance in the form of ad hoc services for the Company without specific assignment, as determined necessary by the Employee, and to report from time to time to the Board of Directors; and (iv) To continue to serve as a director of the Company, and then as, if and when so re-elected to continue to serve as a director of the Company, and also if so elected, to serve as a director of any subsidiary or affiliate of the Company. (b) Employee will, in the discharge of his duties, use his best efforts and skills for the affairs of the Company, and for the performance of the duties set forth herein. The Company acknowledges that the Employee will be the sole and exclusive party to determine where and when the Employee will provide his services (apart from board of directors meetings), and the Company explicitly acknowledges that the Employee is not required to maintain an office or regularly attend at office's of the Company, or regularly perform any Company services. The Employee is expressly permitted to participate in any outside business activity that he so desires to involve himself in, except those which will create a conflict of interest with the Company. COMPENSATION (a) Base Salary The Employee retroactive to and effective as of January 1, 2000, will receive for the discharge of his duties and activities on behalf of the Company as provided for herein, an annual salary ("Base Salary") of Two Hundred Thousand and No/00 ($200,000.00) dollars, which will be paid by the Company to the Employee in equal and regular installments not less frequently than monthly, in accordance with the Company's policy for payment of executive salaries. (b) Compensation Options The Employee may receive compensation options to purchase $.01 par value per share common stock of the Company ("Common"), if it is determined to be warranted in the sole discretion of the Board of Directors. 4 OPTIONS The Employee from time to time, may in the sole discretion of the Board of Directors, grant as additional compensation stock options ("Options's") to purchase shares of the Company's Common ("Grant"). If there is such a Grant then the Options's will be made pursuant to the Company's Stock Option Plan, as may be amended from time to time ("Plan"). The Company shall then enter into an Option agreement for the issuance of the Options's, which Option agreement will be subject to the terms and conditions contained in the Plan. FRINGE BENEFITS In addition to the Base Compensation set forth herein, the Employee will be entitled to receive the following benefits: (a) Any benefits under group hospitalization, health, dental care or sick leave plan, life or other insurance or death benefit plan, travel or accident insurance, for which any executives are or will become eligible. In the event the Employee is not eligible for health benefits as described above, by reason of age, location or otherwise the Employee will be provided equivalent benefits determined at the election of the Company. The Employee will be eligible to receive the foregoing benefits during the Eighteen (18) month period following the termination of his employment under this Agreement; and (b) No annual vacation will be given to Employee by reason of Employee's ad hoc status without regular assignment duties; and (c) The Employee may incur and will be reimbursed for reasonable expenses which are related to the Company's business, including expenses for entertainment, travel and similar items ("Approved Reimbursable Expenses"). All such reimbursement of Approved Reimbursable Expenses will be made within Thirty (30) days of receipt by the Company from the Employee of an itemized account and if necessary proper substantiation of Approved Reimbursable Expenses. In order to facilitate the payment of the Approved Reimbursable Expenses, the Company may furnish the Employee with Company acquired credit cards as may be available to other executive officers of the Company; and 5 (d) The Employee will be given access to a Company office, at any Company facility, with secretarial help and any and all reasonable facilities and services, where such an office and help is necessary to Employee to fulfill any ad hoc assignment. (e) The Employee will be given an automobile allowance or automobile lease plan to the extent of $7,500.00 per annum, paid in Twelve equal monthly installments, to be used to defray acquisition expense for a luxury automobile, and insurance and maintenance expenses for the automobile. 6 NOTICES Any notice required or permitted to be given under this Second Addendum and the Employee's employment Agreement will be sufficient if in writing and actually delivered, or if sent either by Federal Express, or postage prepaid, by certified mail, return receipt requested, with a copy by ordinary mail, to the addresses below: As to Company: 2875 SE 191st Street Aventura, Florida 33180 As to Employee: 934 S. South Lake Drive Hollywood, Florida 33019 Or to such other address as either party shall designate by written notice to the other. 1. ENTIRE ADDENDUM This Addendum contains the entire agreement and understanding of the Company and the Employee with respect to the subject matter contained herein, and shall incorporate, merge and supersede all prior agreements and understandings had between the Company and the Employee with respect to the subject matter contained herein, either oral or written, if any. No modification, change or amendment to this Second addendum, with respect to the subject matter contained herein, shall be binding upon the Company or the Employee unless the same is in writing, and signed by the party against whom enforcement of the modification, change or amendment is sought to be enforced. 1. MISCELLANEOUS (a) This Addendum and the implementation of it shall be subject to and governed by the laws of the State of Florida, and any legal proceedings relating to (i) the interpretation or, enforcement of any of the provisions of this Second Addendum or (ii) any dispute relating to the 7 employment relationship created by this Second Addendum, shall only be brought in the Circuit Court of the State of Florida, in and for the County of Dade. (b) The Article headings contained herein are for reference purposes only and shall not in any way affect the meaning or the interpretation of this Second Addendum. (c) The failure of any provision of this Second Addendum shall in no manner affect the right to enforce the remainder of this Second Addendum, and the waiver by either The Company or the Employee of any breach of any provision of this Second addendum shall not be construed to be a waiver by the Company or the Employee of any succeeding breach of such provision or a waiver by such party of any breach of any other provision of this Second Addendum. IN WITNESS WHEREOF, the parties hereto have executed this Addendum on January 1, 2000. BALANCE OF PAGE INTENTIONALLY BLANK - CONTINUED ON EXECUTION PAGE 8 EMPLOYEE: Witness: - ------------------- /s/ Norman Meier ------------------------- NORMAN MEIER COMPANY: COLUMBIA LABORATORIES, INC. Witness: - ------------------- /S/ William J. Bologna -------------------------- By: WILLIAM J. BOLOGNA CHAIRMAN OF THE BOARD 9 EX-10.18 5 EXHIBIT 10.18 EXHIBIT 10.18 ADDENDUM TO EMPLOYMENT AGREEMENT This addendum ("Addendum") dated as of the 1st day of January, 2000, between Columbia Laboratories Inc. ("Columbia") a corporation organized and existing under and by virtue of the laws of the State of Delaware, having its principal place of business at 2785 NE 191st Street, Aventura, Florida 33180 (hereinafter referred to as the "Company"), and William J. Bologna, who maintains a residence at 22 Place du General Catroux, Paris, 75017 (hereinafter referred to as "Employee"). W I T N E S E T H: ----------------- WHEREAS, the Company is and will be engaged in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the employee, by reason of his knowledge, skill and ability is uniquely qualified to aid the Company in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the Company is desirous of continuing the employment of the Employee to provide assistance to the Company in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products and the Employee is desirous of continuing his employment with the Company to assist it in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the Company and Employee desire to enter into this Addendum to the Employee's employment agreement (the "Agreement") so that the rights, duties, benefits and obligations of each in respect of the employment of the Employee for and by the Company will be fully set forth under the terms and conditions stated both in the Agreement and herein upon the execution hereof; and WHEREAS, the terms of the Employee's Agreement shall only be modified by the specific terms and conditions set forth herein, which shall modify and supersede any similar provisions in the Employee's employment agreement, if any, and any inconsistency between this Addendum and the Employee's Agreement shall be resolved by the provisions hereinafter set forth. NOW, therefore, in consideration of the mutual promises contained herein, the payment of Ten ($10.00) dollars by each party to the other, the receipt of which is hereby duly acknowledged, and for other good and valuable consideration, the Company and Employee further agree as follows: 1. TERM The Employee's term of his employment is extended for a period of one (1) year, and shall terminate on December 31, 2001. 2. DUTIES The Employee shall perform the duties of and serve as the "Chairman of the Board" of the Company, and as its "Chief Executive Officer." 3. NOTICES Any notice required or permitted to be given under this addendum and the Employee's employment agreement shall be sufficient if in writing and actually delivered, or if sent either 2 by Federal Express, or postage prepaid, by certified mail, return receipt requested, with a copy by ordinary mail, to the addresses below: As to Company: 2785 NE 191st Street Aventura, Florida 33180 As to Employee: 22 Place du General Catroux Paris, 75017 France or to such other address as either party shall designate by written notice to the other. 4. ENTIRE ADDENDUM This Addendum contains the entire agreement and understanding of the Company and the Employee with respect to the subject matter hereof, and shall incorporate, merge and supersede all prior agreements and understandings had between the Company and the Employee, either oral or written, if any. No modification, change or amendment to this Addendum, shall be binding upon the Company or the Employee unless the same is in writing, and signed by the party against whom enforcement of the modification, change or amendment is sought to be enforced. 5. MISCELLANEOUS (a) This Addendum and the implementation of it shall be subject to and governed by the laws of the State of Florida, and any legal proceedings relating to (i) the interpretation or enforcement of any of the provisions of this Addendum, or (ii) any dispute relating to the employment relationship created by the addendum, shall only be brought in the Circuit Court of the State of Florida, in and for the County of Dade. (b) The Article headings contained herein are for reference purposes only and shall not in any way affect the meaning or the interpretation of this Addendum. 3 (c) The failure of any provision of this Addendum shall in no manner affect the right to enforce the remainder of this Addendum, and the waiver by either The Company or the Employee of any breach of any provision of this Addendum shall not be construed to be a waiver by the Company or the Employee of any succeeding breach of such provision or a waiver by such party of any breach of any other provision of this Addendum. IN WITNESS WHEREOF, the parties hereto have executed this Addendum on March 8, 2000. EMPLOYEE: Witness: - ------------------------ /s/ William J. Bologna ------------------------ WILLIAM J. BOLOGNA COMPANY: COLUMBIA LABORATORIES, INC. Witness: - ------------------------ /s/ James J. Apostolakis ------------------------ By: JAMES A. APOSTOLAKIS PRESIDENT 4 EX-10.19 6 EXHIBIT 10.19 EXHIBIT 10.19 EMPLOYMENT AGREEMENT This agreement ("Agreement") dated as of the 1st day of January, 2000, between Columbia Laboratories Inc. ("Columbia") a corporation organized and existing under and by virtue of the laws of the State of Delaware, having its principal place of business at 2875 NE 191st Street, Aventura, Florida 33180 (hereinafter referred to as the "Company"), and James A. Apostolakis, who resides at 150 East 69th Street, New York, New York 10021 (hereinafter referred to as "Employee"). W I T N E S E T H: ----------------- WHEREAS, the Company is and will be engaged in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the employee, by reason of his knowledge, skill and ability is uniquely qualified to aid the Company in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the Company is desirous of employing the Employee to provide assistance to the Company in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products and the Employee is desirous of being employed by the Company to assist it in the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products; and WHEREAS, the Company and Employee desire to enter into this Agreement so that the rights, duties, benefits and obligations of each in respect of the employment of the Employee for and by the Company will be fully set forth under the terms and conditions stated herein upon the execution hereof; and WHEREAS, the Compensation and Stock Option Committee of the Board of Directors of the Company have approved the employment of the Employee upon the terms and conditions set forth herein by a resolution issued by it, and have authorized the execution and delivery of this Agreement. NOW, therefore, in consideration of the mutual promises contained herein, the payment of Ten ($10.00) dollars by each party to the other, the receipt of which is hereby duly acknowledged, and for other good and valuable consideration, the Company and Employee agree as follows: 1. EMPLOYMENT The Company hereby employs the Employee in an executive capacity, specifically as "President." The Employee hereby accepts such employment and agrees to perform the services and duties specified herein. 2. TERM (a) The term of this Agreement ("Term") shall be for a period of Two (2) years from the date hereof, unless sooner terminated in accordance with the terms and conditions set forth herein. (b) Upon the mutual agreement of the Employee and the Company, the Term may be extended for an additional period of years, either upon the terms and conditions set forth herein, or upon any other terms and conditions as may be mutually agreed in writing between the Employee and the Company. The foregoing 2 notwithstanding, this Agreement shall terminate as provided for in Article 2(a), and there shall not be any automatic renewal or other similar extension of the Term. 3. DISABILITY If, during the Term, the Employee shall become unable to perform his duties as provided for herein by reason of illness or injury, for a consecutive period of One Hundred and Eighty (180) days, the Company may, on Thirty (30) days written notice to the Employee, terminate the officership held by Employee. In the event of such termination, then Employee shall remain an employee of the Company and receive Seventy (70%) percent of his compensation and all of his fringe benefits as is set forth below in this Agreement at paragraphs "6" and "8" respectively. 4. TERMINATION FOR CAUSE This Agreement may be immediately terminated by the Company for "cause" at any time, upon written notice to the Employee, after which all obligations of the Company to the Employee shall thereupon cease. For the purposes of this Agreement, the term "cause" when used with reference to the termination of this Agreement, shall mean only any or all of the following: (a) Employee's absence from, or his failure to perform the duties of his employment, for any reason other than sickness or injury, at substantially all times during a period of Ninety (90) consecutive days; (b) Failure on the part of the Employee to (i) follow material instructions or policy of the Board of Directors given or adopted in good faith, or (ii) carry out an agreed policy or course of action as determined by (a) the Board of Directors or (b) a committee of the Board of Directors, any or all of which is or may be to the detriment of the Company; or (c) Willful misconduct, gross negligence or indictable criminal conduct against the Company, by the Employee in connection with the performance of the duties of his employment. 3 5. DUTIES (a) The Employee shall perform the following duties in connection with his employment, all of which shall be subject to the paramount directions of the Board of Directors: (i) To serve as "President" of the Company; and (ii) To assist the Company in its business affairs and scientific dealings relating to the development, testing, registration, manufacturing, licensing, marketing, and selling of pharmaceutical products, as well as in the Company's dealings with other companies, its regulatory affairs, banking and other financial institutions and other groups and institutions; and (iii) To undertake such specific assignments, consistent with his office and position, as may be given to him from time to time by the Board of Directors; and (iv) To continue to serve as a director of the Company, and then as, if and when so re-elected to continue to serve as a director of the Company, and also if so elected, to serve as a director of any subsidiary or affiliate of the Company. (b) Employee shall devote his best efforts and skills to the affairs of the Company, and to the performance of the duties set forth in this Article 5, on a substantially full-time basis. The Employee shall not participate in any outside business activity that will either (i) interfere with, or (ii) be a conflict of interest with the performance of the Employee's duties, activities and employment pursuant to this Agreement. The foregoing notwithstanding, the Employee has disclosed to the Company his other outside business interests ("Outside Business Interests") which are listed on Schedule "1" hereto and the Company with this full knowledge has consented to the Employee's continuance thereof. Moreover, the Company agrees to permit the Employee to involve himself in other similar Outside Business Interests, on condition that they similarly be disclosed and are added to Schedule "1" prior 4 to their being commenced. The Employee may also invest his assets and devote such reasonable time as is necessary to do so, so as to manage, protect and support the profitability of those invested assets. 6. COMPENSATION (a) Base Salary The Employee shall receive for the discharge of his duties and activities on behalf of the Company as provided for herein, an annual salary ("Base Salary") of Two Hundred Thousand ($200,000.00) dollars, which shall be paid by the Company to the Employee in equal and regular installments not less frequently than monthly, in accordance with the Company's policy for payment of executive salaries. (b) Bonus The Employee shall receive those benefits accorded to executive employees pursuant to the Company's Incentive Compensation Plan now in effect, or from any subsequent similar plan as shall be made available to senior executives of the Company. (c) Compensation Options The Employee may receive compensation options to purchase $.01 par value per share common stock of the Company ("Common"), together with those compensation options granted to other senior management, if it is determined to be warranted by the Board of Directors. 7. OPTIONS AND WARRANTS The Employee from time to time shall be granted as additional compensation stock options ("Options's") and/or warrants ("Warrants") to purchase shares of the Company's Common ("Grant"). The Grant of the Options's shall be made pursuant to the Company's 1988 Stock Option Plan, as may be amended from time to time ("Plan"). The Company shall enter into an Option agreement for the issuance of the Options's, which Option agreement shall be subject to the terms and conditions contained in the Plan. All Options's and/or Warrants 5 received by Employee will be exercisable at a price equal to the fair market value of the Company's Common on the date of the Grant. 8. FRINGE BENEFITS In addition to the Base Compensation set forth in Article 6 above, the Employee shall be entitled to receive the following benefits: (a) Any benefits under group hospitalization, health, dental care or sick leave plan, life or other insurance or death benefit plan, travel or accident insurance, or contingent compensation plan, or any other present or future plan, including any qualified retirement plan, for which any executives are or shall become eligible. In the event the Employee is not eligible for health benefits as described above, by reason of age, location or otherwise the Employee shall be provided equivalent benefits determined at the election of the Company. The Employee shall be eligible to receive the foregoing benefits during the five (5) years period following the termination of his employment under this Agreement; and (b) An annual vacation of either or a combination of (i) up to Four (4) consecutive weeks or (ii) up to any Thirty (30) days ("Vacation Period"), at such time or times as shall be approved by the Company, and which approval shall not be unreasonably refused. Full compensation shall be paid during any Vacation Period. Any portion of any Vacation Period not used within any year shall be accrued and will accumulate, and may be used by the Employee at any time during his employment in accordance with the provisions of this Article 8. In the event that the Employee has not used all of his accrued and accumulated vacation time at the termination of his employment, then the employee may then elect to have his accrued and accumulated Vacation Period time converted to annual Base Salary, pro rata at the then prevailing Base Salary, regardless of when the unused vacation time accrued; and (c) The Employee may incur and shall be reimbursed for reasonable expenses which are related to the Company's business, including expenses for entertainment, travel and similar items ("Approved Reimbursable Expenses"). All such reimbursement of Approved Reimbursable Expenses shall be made within Thirty (30) days of receipt by the Company from the Employee of an itemized account and if necessary proper substantiation of Approved Reimbursable Expenses. In order to facilitate the payment of the Approved 6 Reimbursable Expenses, the Company shall furnish the Employee with Company acquired credit cards as may be available to all other executive officers of the Company; and (d) The Employee shall be given a private office with secretarial help and any and all reasonable facilities and services, at a location where the Company maintains offices, so as to be suitable with his position as President, and so as to assist in the performance of his duties and activities. (e) The Employee shall be given an automobile allowance or automobile lease plan to the extent of $7,500.00 per annum, paid in Twelve equal monthly installments, to be used to defray acquisition expense for a luxury automobile, and insurance and maintenance expenses for the automobile. 9. DISCLOSURE OF INFORMATION AND NON-COMPETITION (a) The Employee recognizes and acknowledges that during the course of his employment he will have access to certain confidential information of the Company and that such information constitutes valuable, special and unique property of the Company. During the term of this Agreement and following termination of his employment hereunder, the Employee will not disclose information, including any trade secrets or confidential information of the Company obtained during the course of his employment with the Company, except such information as may have become part of the public domain through no fault of the Employee, which public domain determination shall only be made by the Company in a written acknowledgment made at the request of the Employee, before the Employee may be free to disclose any such claimed public domain information. (b) During the term of this Agreement, and for Two (2) years thereafter, the Employee will not, directly or indirectly, engage in any business enterprise or activity, which is competitive with the business of the Company either as an employee, consultant, partner, shareholder, or in any other capacity. For the purposes of this covenant not to compete, a competing business enterprise will be deemed competitive only if such business enterprise (i) conducts research, develops and/or tests products (the "Development") similar to the products the Company then has under Development, or (ii) offers for sale in any market in which the Company has significant sales, one or more products for which the major claimed usage or usages overlap materially with the product or products of the Company in existence at the time of termination of Employee's employment. Further, the Employee 7 agrees that he will not either during or within Two (2) years subsequent to the termination of his employment, disturb, entice, hire or in any other manner attempt to persuade any employee, dealer, supplier or customer of the Company to discontinue its business relationship with the Company. (c) The Employee and the Company acknowledge that it would be very difficult or impossible to measure the damages resulting from a breach of this Article 9, and that any such breach would cause immediate and irreparable harm. Therefore, in consequence of the foregoing, the Employee hereby agrees that any breach or threatened breach by him of any provision of this Article 9 shall entitle the Company, in addition to any other legal remedies available to it, to obtain from any Court of competent jurisdiction a temporary and permanent injunction in order to enjoin such breach or threatened breach, without the necessity on the part of the Company, in any application for such injunctive relief to show immediate and irreparable harm, which would be a requirement of such an application absent this covenant waiving those requirements. The Employee also covenants that the service of any papers to commence any legal proceedings including proceedings to obtain injunctive relief, may be done by utilizing Federal Express in lieu of any other form of personal delivery of the process or orders of the Court and upon doing so the service and notice provisions for the commencement of legal proceedings shall be satisfied. 10. DEATH DURING EMPLOYMENT If the Employee dies during the term of his employment, the Company shall pay to his estate compensation which would otherwise be payable to the Employee for the shorter of (i) Two (2) years from the date of his death, or (ii) through to the termination date of this Agreement. Said sums shall be paid in accordance with written directions given by the Employee to the Company, or lacking any such directions then to the surviving spouse of the Employee, or if there is no surviving 8 spouse, then to his surviving children in equal shares, or if there are none, then to his estate. 11. PATENTS AND PROPRIETARY RIGHTS During the Term of employment all work product emanating directly and/or indirectly from the Employees duties and activities effected on behalf of the Company ("Work Product"), shall be exclusively owned by the Company. In the event that any such Work Product is the subject of an application for patent, copyright, trade mark or similar proprietary protection ("Application"), then regardless of the name of the person or entity submitting the Application, the Employee hereby acknowledges the Company's exclusive rights in and to the Application for proprietary protection. In the event that the Application results in the issuance of the requested proprietary protection, e.g. a patent, then the Employee hereby acknowledges the Company's exclusive ownership therein, and the employee will execute any documents necessary to give effect and implement this ownership, including but not limited to an assignment of the Application and/or the issued proprietary protection. 12. NOTICES Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and actually delivered, or if sent either by Federal Express, or postage prepaid, by certified mail, return receipt requested, with a copy by ordinary mail, to the addresses below: As to Company: 2785 NE 191st Street Aventura, Florida 33180 As to Employee: 150 East 69th Street New York, New York 10021 or to such other address as either party shall designate by written notice to the other. 9 13. ASSIGNMENT The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. The Employee acknowledges that the services to be rendered by him are unique and personal, and accordingly, he may not assign any of his rights, duties, obligations or benefits under this Agreement. 14. ENTIRE AGREEMENT This Agreement contains the entire agreement and understanding of the Company and the Employee with respect to the subject matter hereof, and shall incorporate, merge and supersede all prior agreements and understandings had between the Company and the Employee, either oral or written, if any. No modification, change or amendment to this Agreement, shall be binding upon the Company or the Employee unless the same is in writing, and signed by the party against whom enforcement of the modification, change or amendment is sought to be enforced. 15. MISCELLANEOUS (a) This Agreement and the implementation of it shall be subject to and governed by the laws of the State of Florida, and any legal proceedings relating to (i) the interpretation or enforcement of any of the provisions of this Agreement, or (ii) any dispute relating to the employment relationship created by the Agreement, shall only be brought in the Circuit Court of the State of Florida, in and for the County of Dade. (b) The Article headings contained herein are for reference purposes only and shall not in any way affect the meaning or the interpretation of this Agreement. (c) The failure of any provision of this Agreement shall in no manner affect the right to enforce the remainder of this Agreement, and the waiver by either The Company or the Employee of any breach of 10 any provision of this Agreement shall not be construed to be a waiver by the Company or the Employee of any succeeding breach of such provision or a waiver by such party of any breach of any other provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on March 8, 2000. EMPLOYEE: Witness: - -------------------- /s/ James J. Apostolakis ------------------------ James A. Apostolakis COMPANY: COLUMBIA LABORATORIES, INC. Witness: - ------------------- /s/ William J. Bologna ------------------------ By: 11 EX-10.20 7 EXHIBIT 10.20 EXHIBIT 10.20 AGREEMENT This Agreement dated as of the 30 day of December, 1999, between COLUMBIA LABORATORIES INC., a corporation organized And existing under and by virtue of the laws of the State of Delaware, having an office at 2875 NE 191st Street, Suite 400, Aventura, FL 33180, USA (hereinafter referred to as the "Company") and DOMINIQUE DE ZIEGLER, with offices at Hopital deNyon, Nyon 1261, Switzerland (hereinafter referred to as "de Ziegler") W I T N E S S E T H: WHEREAS, the Company is and will be engaged in the development, testing, registration, manufacture, licensing and sale of pharmaceutical products; and WHEREAS, de Ziegler is a physician with Board certification in obstetrics, gynecology and reproductive endocrinology and, by reason of this and his other knowledge, skill and ability, is uniquely qualified to aid the Company in the development, testing, registration, manufacture, licensing and sale of pharmaceutical products; and WHEREAS, the Company is desirous of establishing a business relationship with de Ziegler to provide assistance to the Company in the development, testing, registration, manufacture, licensing and sale of pharmaceutical products and de Ziegler is desirous of assisting the Company in the development, testing, registration, manufacture, licensing and sale of pharmaceutical products; and WHEREAS, the Company and de Ziegler desire to enter into this Agreement so the rights, duties, benefits and obligations of each will be fully set forth herein; and NOW, THEREFORE, in consideration of the mutual promises contained by each party to the other, and for other good and valuable consideration, the Company and de Ziegler agree as follows: 1. NATURE OF ENGAGEMENT The Company and de Ziegler agree to establish the following professional and business relationship: a. de Ziegler shall be employed by the Company to provide services at its Paris, France offices; and b. de Ziegler shall be employed by the Company to perform medical research at his Nyon, Switzerland medical practice; and c. de Ziegler's workweek shall be divided between Paris, France and Nyon, Switzerland as follows: twenty (20%) percent France and eighty (80%) percent Switzerland. 2. TERM a. The term of this Agreement shall be for a period of one (1) year from the date hereof ("Initial Period"), unless sooner terminated in accordance with the terms and conditions set forth herein. b. At the end of the Initial Period, upon the mutual agreement of de Ziegler and the Company, the term of this Agreement may be extended for an additional period of years ("Renewal Period(s)"), either upon the terms and conditions set forth herein, or upon any other terms and conditions as may be mutually agreed in writing between de Ziegler and the Company. The foregoing provisions of this Subparagraph 2(b) notwithstanding, this Agreement shall terminate at the end of the Initial Period or Renewal Period(s), as the case may be, as provided for in this Paragraph 2, and there shall not be any automatic renewal or other similar extension of the term of employment. 3. DISABILITY If, during the effective term of this Agreement, de Ziegler shall become unable to perform his duties as provided for herein by reason of illness or injury, for a consecutive period of ninety (90) days ("Disability Period"), the Company may, on thirty (30) days' written notice to de Ziegler, immediately terminate this Agreement, with no further obligation to de Ziegler. 4. TERMINATION a. Company Termination for Cause 2 This Agreement may be immediately terminated by the Company for cause at any time, upon written notice to de Ziegler, after which all obligations of the Company to de Ziegler shall thereupon cease. For purposes of this Agreement, the term "Cause" when used in reference to the termination of this Agreement, shall mean only any or all of the following: i. Failure on the part of de Ziegler to follow material instructions or policy of the Board of Directors given or adopted in good faith, or carry out an agreed policy or course of action as determined by the Board of Directors or a committee of the Board of Directors, any or all of which may be to the detriment of the Company, provided the Company shall serve written notice to de Ziegler of his breach of this Subparagraph 4(a)(i) setting forth particularly de Ziegler's conduct creating the breach, and that de Ziegler shall cure such breach within thirty (30) days of such written notice and the failure to do so will then permit the Company to implement the provisions of this Paragraph 4; or ii. Willful misconduct or gross negligence of de Ziegler in connection with the performance of his duties and services; or iii. The termination of this Agreement shall automatically result in the cancellation of the Company's business relationship with de Ziegler and his medical practice. b. Termination by de Ziegler de Ziegler may terminate this Agreement without penalty of any kind upon ninety (90) days prior written notice to the Company. 5. DUTIES a. de Ziegler shall perform the following duties in connection with his engagement, all of which shall be subject to the paramount direction of the Board of Directors: i. To serve as a Member of the Board of Directors of the Company; i. To serve as Director of Research and Development; ii. To assist the Company in its business affairs and scientific dealings relating to the development, testing, registration, manufacture, licensing and sale 3 of pharmaceutical products, as well as in the Company's dealings with other companies; and iii. To undertake and conduct research for the Company within his private medical practice in Nyon, Switzerland, as may be given to him from time to time by the Board of Directors. b. de Ziegler shall devote his best efforts and skills to the affairs of the Company, and to the performance of the duties set forth in Subparagraph 5(a). de Ziegler shall not participate in any outside business activity that will either interfere with or be a conflict of interest with the performance of his duties pursuant to this Agreement. Notwithstanding the foregoing, de Ziegler will be permitted to maintain a private practice in Nyon, Switzerland. 6. COMPENSATION a. de Ziegler shall receive for the performance of his duties and services on behalf of the Company, as provided for herein, annual compensation of approximately Two Hundred Ten Thousand (US$210,000.00) United States Dollars, which shall be paid by the Company to de Ziegler in monthly installments. b. The aforesaid compensation shall be allocated twenty (20%) percent to de Ziegler's employment in France and eighty (80%) percent to his employment contract services in Nyon, Switzerland. The compensation paid to de Ziegler in Switzerland shall include a lodging allowance of approximately Thirty-Six Thousand (US$36,000.00) United States Dollars. Payment for the Nyon, Switzerland services shall be made to his medical practice. c. de Ziegler may receive a bonus if it is determined to be warranted by the Board of Directors in their sole discretion. 7. FRINGE BENEFITS In addition to the compensation set forth in Paragraph 6 above, de Ziegler shall be entitled to receive the following benefits virtue of his employment by the Company in France; a. Any benefits under group hospitalization, health, dental care or sick leave plan, life or other insurance or death benefit plan, travel or accident insurance, or contingent compensation plan, or any other present or future plan, including any 4 qualified retirement plan, for which any executive of the Company is or shall become eligible; and b. A vacation of up to four (4) weeks in each year, at such time or times as shall be approved by the Company, and which approval shall not be unreasonably refused. Full compensation shall be paid to de Ziegler and his medical practice during any such vacation period; and c. de Ziegler may incur and shall be reimbursed for reasonable expenses which are related to the Company's business, including expenses for entertainment, travel and similar items ("Approved Reimbursable Expenses"). All such reimbursement of Approved Reimbursable Expenses shall be made within sixty (60) days of receipt by the Company from de Ziegler of an itemized account and proper substantiation of such Approved Reimbursable Expenses. In order to facilitate the payment of Approved Reimbursable Expenses, the Company may furnish de Ziegler with Company acquired credit cards; and d. de Ziegler shall be given an office with secretarial help and any and all reasonable facilities and services as to be suitable with his position as Director of Research and Development so as to assist him in the performance of his duties and activities; and e. The Company shall provide de Ziegler with an apartment in Paris, France, which shall have a maximum rent per month of Eighteen Thousand (18,000) French francs. Notwithstanding the foregoing, de Ziegler may lease any apartment in Paris, France and the Company will pay monthly rental stipend to de Ziegler of no more than Eighteen Thousand (18,000) French francs. f. If de Ziegler's employment shall be terminated by the Company whatsoever the reason or cause, in addition to any benefits required to be paid by French law, de Ziegler's medical practice shall continue to receive monthly payments due it for a period of twelve (12) months. 8. DISCLOSURE OR INFORMATION De Ziegler recognizes and acknowledges that during the course of his professional relationship with the Company he will have access to certain confidential information and that such information constitutes valuable, special and unique property 5 of the Company. During the term of this Agreement and following termination thereof, de Ziegler will not disclose such information, including any trade secrets or confidential information of the Company obtained during the course of his relationship with the Company, except any information as may have become part of the public domain through no fault of de Ziegler. De Ziegler and the Company acknowledge it would be very difficult or impossible to measure the damages resulting from a breach of this Paragraph 8, and that any such breach would cause immediate and irreparable harm. Therefore, in consequent of the foregoing, de Ziegler hereby agrees that any breach or threatened breach by him of any provision of this Paragraph 8 shall entitle the Company, in addition to any other legal remedies available to it, to obtain from any court of competent jurisdiction a temporary and permanent injunction in order to enjoin such breach or threatened breach without the necessity on the part of the Company, in any application for such injunctive relief, to show immediate and irreparable harm, which would be a requirement of such an application absent this covenant waiving those requirements. de Ziegler also covenants the service of any papers to commence any legal proceedings including proceedings to obtain injunctive relief, may be done by utilizing Federal Express in lieu of any other form of personal delivery of the process of orders of the Court and upon doing so the service and notice provisions for the commencement of legal proceedings shall be satisfied. 9. DEATH DURING EMPLOYMENT If de Ziegler dies during the term of this Agreement, the Company shall pay compensation which would otherwise be payable to de Ziegler and to his medical practice for a period of six (6) months from the date of his death under this Agreement. Said sum shall be paid to the surviving spouse of de Ziegler, or if there is no surviving spouse, then to his surviving children in equal shares, or if there are none, then to his estate. 10. NOTICES Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and actually delivered, or if sent either by Federal Express, or 6 postage prepaid, by certified mail, return receipt requested, with a copy by ordinary mail to the addresses below: As to the Company: 2875 NE 191st Street, Suite 400 Aventura, FL 33180, USA As to de Ziegler: Hopital deNyon Nyon 1261, Switzerland Or such other address as either party shall designate by written notice to the other. 11. ASSIGNMENT The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. de Ziegler acknowledges the services to be rendered by him are unique and personal and, accordingly, he may not assign any of his rights, duties, obligations or benefits under this Agreement. 12. ENTIRE AGREEMENT This Agreement contains the entire agreement and understanding of the Company and de Ziegler with respect to the subject matter hereof, and shall incorporate, merge and supercede all prior agreements and understandings had between the Company and de Ziegler, either oral or written, if any. No modification, change or amendment to this Agreement shall be binding upon the Company or de Ziegler unless the same is in writing, and signed by both parties. 13. MISCELLANEOUS a. This Agreement and the implementation of it shall be subject to and governed by the laws of the State of New Jersey and any legal proceedings relating to (i) the interpretation or enforcement of any of the provisions of this Agreement, or (ii) any dispute relating to the employment relationship created by this Agreement shall, with the exception of a dispute under Paragraph 8 of this Agreement, be resolved by arbitration before the American Arbitration Association in their New Jersey offices, in accordance with their rules then in effect. Disputes under Paragraph 8 of this Agreement shall only be brought in the Courts of the State of New Jersey. 7 b. The paragraph headings contained herein are for references purposes only and shall not in any way affect the meaning or the interpretation of this Agreement. c. The failure of any provision of this Agreement shall in no matter affect the right to enforce the remainder of this Agreement, and the waiver by either the Company or de Ziegler of any breach of any provision of this Agreement shall not be construed to be a waiver by the Company or de Ziegler of any succeeding breach of such provision or a waiver by such party of any breach of any other provision of this Agreement. IN WITNESS WHEREOF, the parties here to have executed this Agreement as of the date first above written. COLUMBIA LABORATORIES, INC. By: /s/ William Bologna ---------------------------- William Bologna, Chairman /s/ Dominique de Ziegler ---------------------------- Dominique de Ziegler 8 EX-10.21 8 EXHIBIT 10.21 EXHIBIT 10.21 SETTLEMENT AGREEMENT AND RELEASE THIS SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is made by and between Columbia Laboratories, Inc., Columbia Laboratories (Bermuda) Ltd. ("Columbia"), on the one hand, and Lake Consumer Products, Inc., f/k/a Lake Pharmaceutical, Inc. ("Lake"), on the other. (The aforementioned parties may hereinafter be collectively referred to as the "Settling Parties"). WITNESSETH: WHEREAS, Columbia and Lake had a business relationship ("Relationship") regarding a spermicidal gel product of Columbia ("Product"). WHEREAS, Columbia and Lake entered into a License and Distribution Agreement effective as of July 1, 1994 regarding Columbia's spermicidal gel product ("Columbia/Lake Agreement"). WHEREAS, a dispute arose between Columbia and Lake with respect to the Columbia/Lake Agreement and Relationship, ("Dispute") leading to claims by Columbia and Lake in actions captioned COLUMBIA LABORATORIES, INC. AND COLUMBIA LABORATORIES (BERMUDA) LTD V. LAKE PHARMACEUTICAL, INC., United States District Court for the Southern District of Florida Case No. 97-3378-CIV-Gold ("Florida Action") and LAKE CONSUMER PRODUCTS, INC. V. COLUMBIA LABORATORIES, INC., United States District Court for the Northern District of Illinois Case No. 97 C 7951, transferred to the United States District Court for the Southern District of Florida under case no. 98-1091-CIV-Graham ("Illinois Action") (the Florida Action and the Illinois Action may collectively be referred to as the "Actions"). WHEREAS, the Settling Parties desire to settle and resolve all issues related to the Product, the Relationship, the Columbia/Lake Agreement, the Dispute and the Actions, as set forth below; NOW THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Settling Parties hereby agree as follows: I. LAKE RELEASE AND UNDERTAKINGS 1. In consideration of Columbia's promises, covenants, payments, representations, and warranties under this Agreement, Lake, its officers, directors and employees and its assigns and all persons claiming by, through, for or under it or on its behalf, and each of them, jointly and severally hereby fully, unconditionally, and forever release Columbia, and its respective present and past subsidiaries, parents, and other affiliated or related entities, and their respective predecessors, successors, assigns, officers, directors, agents, shareholders, employees, insurers, counsel and representatives, and each of them, of, from and against any and all claims, debts, demands, liabilities, fees, costs, expenses, damages and/or causes of action whatsoever, whether known or unknown, whether past, present, or future, accrued or unaccrued, that arise from or relate to the Relationship, including but not limited to (a) claims that arise from or relate to the Product, the Columbia/Lake Agreement, or the Dispute, and (b) claims that were or could have been raised in the Actions. This specifically includes, but is not limited to, a release as to all issues relating to the Product, its current uses and claims and any of the Product's actual or potential future uses and claims, including without limitation STD-related uses or claims, as well as any and all causes of action, debts, demands, liabilities, fees, costs, expenses, damages and/or defenses whatsoever sounding in fraud. 2. In further consideration of Columbia's promises, covenants, payments, representations, and warranties under this Agreement, Lake shall, upon (a) the Columbia Stock Issuance, and (b) payment of the first installment of the Columbia Payment, agree to the entry of a stipulation dismissing with prejudice its claims against Columbia in any of the Actions that are pending. 3. In further consideration of Columbia's promises, covenants, payments, representations, and warranties under this Agreement, Lake shall, upon (a) the Columbia Stock Issuance, and (b) payment of the first installment of the Columbia Payment, agree to the termination and buy-out of the Columbia/Lake Agreement as set forth in Article III of this Agreement. II. COLUMBIA PAYMENT, STOCK ISSUANCE, RELEASE, AND UNDERTAKINGS 1. In consideration of Lake's promises, covenants, representations, and warranties under this Agreement, Columbia will pay to Lake the sum of One Million Two Hundred Thousand Dollars ($1,200,000) as follows: (i) Six Hundred Thousand Dollars ( $600,000 ) in cash in five (5) consecutive monthly installments, the first installment to be paid by check in the sum of Two Hundred Thousand Dollars ($200,000) within three (3) business days of the execution of this Agreement and then One Hundred Thousand Dollars ($100,000) per month by check on the monthly anniversary of the first payment for the following four (4) consecutive months ("Columbia Payment"); and (ii) Six Hundred Thousand Dollars in the form of the common capital stock of Columbia Laboratories, Inc., valued at $11 1/8th, the February 25,2000 closing price as published in the February 26, 2000 New York Times, to be delivered to Lake within three (3) business days of the execution of this Agreement ("Columbia Stock Issuance"). After the Columbia Stock Issuance, Columbia will, at Columbia's cost, within ninety (90) days of the execution date of this Agreement, be required to file a registration statement with the Securities and Exchange Commission on a form suitable for resale of the common capital stock to be issued to Lake, and Columbia shall use its commercially reasonable best efforts to cause such registration statement to become effective, and to maintain the effectiveness of the registration statement for not less than 180 days, and shall supply Lake with sufficient copies of the related prospectus so as to permit Lake to satisfy its prospectus delivery requirements in connection with resale of the stock. 2. In further consideration of Lake's promises, covenants, representations, and warranties under this Agreement, Columbia, its officers, directors and employees and its assigns and all persons claiming by, through, for or under it or on its behalf, and each of them, jointly and severally hereby fully, unconditionally, and forever release Lake, and its respective present and past subsidiaries, parents, and other affiliated or related entities, and their respective predecessors, successors, assigns, officers, directors, agents, shareholders, employees, insurers, counsel and representatives, and each of them, of, from and against any and all claims, debts, demands, liabilities, fees, costs, expenses, damages and/or causes of action whatsoever, whether known or unknown, whether past, present, or future, accrued or unaccrued, that arise from or relate to the Relationship, including but not limited to (a) claims that arise from or relate to the Product, the Columbia/Lake Agreement, or the Dispute, and (b) claims that were or could have been raised in the Actions. This specifically includes, but is not limited to, a release as to all issues relating to the Product, its current uses and claims and any of the Product's actual or potential future uses and claims, including without limitation STD-related uses or claims, as well as any and all causes of action, debts, demands, liabilities, fees, costs, expenses, damages and/or defenses whatsoever sounding in fraud. 3. In further consideration of Lake's promises, covenants, representations, and warranties under this Agreement, Columbia shall agree to the entry of a stipulation dismissing with prejudice its claims against Lake in any of the Actions that are pending. 4. In further consideration of Lake's promises, covenants, representations, and warranties under this Agreement, Columbia shall agree to the termination and buy-out of the Columbia/Lake Agreement as set forth in Article III of this Agreement. III. AGREEMENT BUY-OUT AND TERMINATION The Settling Parties agree that the Columbia/Lake Agreement is hereby bought out and thereby terminated, with full legal force and effect, and accordingly neither of the Settling Parties has any future rights or responsibilities under the Columbia/Lake Agreement. IV. WARRANTIES AND REPRESENTATIONS 1. Each of the Settling Parties represents and warrants to the another that it has never assigned to anyone any (or any portion) of the claims, debts, demands, liabilities, expenses, damages, fees, costs and causes of action 2 which are the subject of this Agreement, and shall indemnify the other for any claim made by reason of such assignment. 2. Each of the Settling Parties represents and warrants to the other that it has sought and received the advice of its respective attorneys prior to entering into this Agreement and hereby acknowledges that it has read in full this Agreement, agrees to each and every term and condition set forth herein, and voluntarily agrees to be bound by same. Each of the Settling Parties also represents and warrants that it has not relied upon any representation or lack thereof by the other Party in reaching its decision to enter into this Agreement except for those representations and warranties listed in Section IV herein. In addition, Lake expressly acknowledges the possibility that the Product may, at some point in the future, immediate or otherwise, acquire additional claims, including but not limited to STD-related claims, and expressly acknowledges that it is not relying on any representations, or lack thereof, by Columbia in that regard in entering into this Agreement. Lake also expressly acknowledges that it is not relying upon any representations by Columbia, or lack thereof, as to the value or future value of the stock that it is receiving pursuant to Section II. Lake also expressly acknowledges that it is not relying upon any disclosure by Columbia or lack thereof in discovery in the Actions. 3. Each of the Settling Parties represents that the terms and conditions of this Agreement shall be kept confidential and will not be revealed to any other person or entity, except upon order of Court or upon required disclosure by the Settling Parties as provided by law or regulation, and except as may be required in the ordinary course of business. Should Columbia choose to seek an order sealing the files which relate in whole or in part to this Agreement, Lake will not object. V. PRODUCT LIABILITY CLAIMS The parties to this Settlement Agreement and Release are not releasing each other for indemnification or contribution claims arising out of third party consumer product liability or third party consumer tort claims concerning the Product. VI. MISCELLANEOUS It is understood and acknowledged by the Settling Parties that: 1. The terms herein do not constitute an admission of liability on the part of the Settling Parties; 2. if any provision of this Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective, provided that such remaining provisions do not increase the obligations or liabilities of the Settling Parties; 3. the Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument; 4. the Agreement is the entire agreement among the Settling Parties, supersedes and replaces any prior oral or written communications, representations, or understandings concerning the terms of this Agreement, may be modified only by an instrument in writing executed by the parties hereto, and is effective as of the date of execution set forth below; 5. the Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, and predecessors of the Settling Parties; 6. except as otherwise provided herein, the representations, warranties, covenants and agreements set forth in the Agreement will survive the execution, delivery, and performance hereof; 7. the headings contained in the Agreement are inserted for convenience only and shall not affect the meaning or construction of any of the terms in the Agreement; 8. in any action brought to enforce the terms of this Agreement, the prevailing party in such action shall be entitled to recover from the other party all reasonable costs thereof, including reasonable attorneys' fees and costs; 3 9. the parties agree that the United States District Court for the Southern District of Florida shall retain exclusive jurisdiction of the parties for purposes of interpretation and enforcement of this Agreement; and 10. this Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Florida, without regard to principles governing choice of law. IN WITNESS WHEREOF, the Settling Parties have caused this Agreement to be duly executed by its authorized officer on the date set forth below. Lake Consumer Products, Inc. _________________ By: /s/ Gary J. Burns ----------------- Its: President STATE OF ILLINOIS SS: COUNTY OF LAKE I HEREBY CERTIFY that on this date before an officer duly authorized in this State and County to take acknowledgments, personally appeared Gary J. Burns, as (Title) President, on behalf of Lake Consumer Products, Inc. f/k/a Lake Pharmaceutical, Inc. who acknowledged executing this Settlement Agreement and Release freely and voluntarily, and is personally known to me or produced the following as identification: WITNESS my hand and official seal in the County and State referenced above this 16th day of March, 2000. /s/ Susan M. Kellogg -------------------- Notary Public Notary Stamp: 4 Columbia Laboratories (Bermuda) Ltd. _________________ By: /s/James J. Apostolakis --------------------------------------- Its: President STATE OF NEW YORK SS: COUNTY OF NEW YORK I HEREBY CERTIFY that on this date before an officer duly authorized in this State and County to take acknowledgments, personally appeared James J. Apostolakis, as (Title) President, on behalf of Columbia Laboratories (Bermuda), Ltd. who acknowledged executing this Settlement Agreement and Release freely and voluntarily, and is personally known to me or produced the following as identification: WITNESS my hand and official seal in the County and State referenced above this 16th day of March, 2000. /s/Kenneth M. Swisstack ----------------------- Notary Public Notary Stamp: 5 Columbia Laboratories, Inc. _________________ By: /s/James J. Apostolakis ----------------------- Its: President STATE OF NEW YORK SS: COUNTY OF NEW YORK I HEREBY CERTIFY that on this date before an officer duly authorized in this State and County to take acknowledgments, personally appeared James J. Apostolakis, as (Title) President, on behalf of Columbia Laboratories, Inc. who acknowledged executing this Settlement Agreement and Release freely and voluntarily, and is personally known to me or produced the following as identification: WITNESS my hand and official seal in the County and State referenced above this 16th day of March, 2000. /s/Kenneth M. Swisstack ----------------------- Notary Public Notary Stamp: 6 EX-21 9 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Columbia Laboratories (Bermuda) Ltd. Columbia Laboratories (France) SA Columbia Laboratories (UK) Limited Columbia Research Laboratories, Inc. EX-27 10 FDS
5 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1,982,085 0 1,954,915 119,829 1,848,816 6,703,194 2,503,351 1,494,798 12,987,613 3,261,827 0 0 78 291,246 (565,538) 12,987,613 18,921,074 18,921,074 5,655,350 5,655,350 15,166,554 0 755,352 (2,141,208) 69,000 (2,210,208) 0 0 0 (2,210,208) (0.09) (0.09)
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