-----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, ChUdKVhILjn4UtmujTKhEZgmzz7Eu2bIV6+xa6V4oJyt6W3+nXOyzh96SHeGxr+s Q9Dgv6tGsnGPtRqVJUVHvg== 0001021408-03-005438.txt : 20030331 0001021408-03-005438.hdr.sgml : 20030331 20030331160907 ACCESSION NUMBER: 0001021408-03-005438 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030331 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: 1934 Act SEC FILE NUMBER: 001-10352 FILM NUMBER: 03630856 BUSINESS ADDRESS: STREET 1: 100 NORTH VILLAGE AVENUE STE 32 CITY: ROCKVILLE CENTRE STATE: NY ZIP: 11570 BUSINESS PHONE: 3059336089 MAIL ADDRESS: STREET 1: 100 NORTH VILLAGE AVENUE STE 32 CITY: ROCKVILLE CENTRE STATE: FL ZIP: 11570 10-K 1 d10k.txt 12/31/2002 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, 2002 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.) 354 Eisenhower Parkway Livingston, New Jersey 07039 (Address of principal executive offices) (Zip Code) Company's telephone number, including area code: (973) 994-3999 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. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes [X] No [ ] 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 March 21, 2003: $106,170,383. Number of shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding as of March 21 , 2003: 35,453,722. Documents Incorporated By Reference Portions of the Columbia Laboratories, Inc. ("Columbia" or the "Company") Proxy Statement for the 2003 Annual Meeting of Shareholders (the "Proxy Statement") are incorporated by reference into Part III of this Form 10-K. We expect to file our Proxy Statement with the Securities and Exchange and mail it to shareholders on or before April 14, 2003. Index to Annual Report on Form 10-K Year Ended December 31, 2002
Part I Page ---- Item I Business 1-10 Item 2 Properties 10 Item 3 Legal Proceedings 10 Item 4 Submission of Matters to a Vote of Security Holders 11 Part II Item 5 Market for Columbia's Common Stock and Related Stockholder Matters 13-15 Item 6 Selected Financial Data 15 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 16-19 Item 7A Quantitative and Qualitative Disclosures About Market Risk 19 Item 8 Financial Statements and Supplementary Data 20 Item 9 Changes In and Disagreements With Accountants on Accounting and Financial Disclosures 20 Part III Item 10 Directors and Executive Officers of the Company* 20 Item 11 Executive Compensation* 20 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters* 20 Item 13 Certain Relationships and Related Transactions* 20 Item 14 Controls and Procedures 20-21 Part IV Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K 22-25
* Items 11,12, 13 and portions of Items 10 are incorporated by reference to the Proxy Statement 2 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 is dedicated to research and development and commercialization of women's health care and endocrinology products, including those intended to treat infertility, endometriosis and hormonal deficiencies. The Company has developed products for vaginal delivery of hormones and other drugs and buccal delivery of hormones and peptides. The vaginal products adhere to the vaginal epithelium and the buccal products adhere to the mucosal membrane of the gum and cheek. Both forms provide sustained and controlled delivery of active drug ingredients into the bloodstream. This delivery system is particularly useful for active drug ingredients that cannot be administered orally. All formulated products utilize the Bioadhesive Delivery System ("BDS") consisting principally of a polymer, polycarbophil, and an active ingredient. The BDS 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 BDS 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 has also found buccal delivery to be advantageous for products for both men and women. The Company intends to continue to develop products that improve the delivery of previously approved and marketed drugs that cannot be delivered orally. The Company's principal executive offices are located at 354 Eisenhower Parkway, Livingston, New Jersey 07039, and its telephone number is (973) 994-3999. The Company's subsidiaries, all of which are wholly-owned, are Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia Laboratories (France) SA ("Columbia France"), which is in the process of being closed, Columbia Laboratories (UK) Limited ("Columbia UK") and Columbia Research Laboratories, Inc. ("Columbia Research"). The Company's website is http://www.columbialabs.com. The Company does not currently make its SEC filings available on its website because it is in the process of redesigning the site. The Company will provide electronic or paper copies of its filings free of charge upon request. Information contained on the Company's website or any other website is not incorporated into this Annual Report and does not constitute a part of this Annual Report. Financial Information About Segments The Company is currently engaged solely in one business segment -- the development, licensing and sale of pharmaceutical products, medical devices, and cosmetics. See footnote 9 to the consolidated financial statements for information on foreign operations. Products Crinone(R)/Prochieve(TM). Crinone is the brand name of the Company's progesterone gel sold by Ares Trading S.A. under a worldwide license. Prochieve is the brand name of the same progesterone gel sold by the Company in the United States under a June, 2002, sublicense from Ares Trading S.A pursuant to its worldwide 3 license to Crinone. The product is a sustained release, vaginally delivered, natural progesterone product. Progesterone is responsible for preparing the uterus for pregnancy and, if pregnancy occurs, maintaining it until birth, or, if pregnancy does not occur, inducing menstruation. The product utilizes the Company's patented BDS which enables the progesterone to achieve a "First Uterine Pass Effect"(C). The product is available in two strengths, an 8% progesterone gel and a 4% progesterone gel. It is the first product designed to deliver progesterone directly to the uterus, thereby providing a therapeutic benefit and avoiding high blood levels of progesterone seen with orally-delivered synthetic progestins Crinone/Prochieve in the 8% progesterone gel is approved in the U.S. for use in progesterone supplementation or replacement as part of an Assisted Reproductive Technology (ART) treatment for infertile women with progesterone deficiency. Crinone/Prochieve in both the 8% and 4% progesterone gels are approved in the U.S. for the treatment of secondary amenorrhea (loss of menstrual period). Crinone was first marketed in the U.S. in 1997. Prochieve was first marketed in the U.S. in September, 2002. Outside the U.S., Crinone has been approved for marketing for one or more medical indications in more than 28 countries. The medical indications include progesterone supplementation or replacement as part of an ART treatment for infertile women, the treatment of secondary amenorrhea, the prevention of hyperplasia in post-menopausal women receiving hormone replacement therapy ("HRT"), the reduction of symptoms of premenstrual syndrome ("PMS"), menstrual irregularities, dysmenorrhea and dysfunctional uterine bleeding. Prochieve is not marketed outside the U.S. In April 2001, the Company initiated a voluntary recall of batches of Crinone that were affected by a drug application problem that could cause the consistency of the gel to change over time. Investigations confirmed that the problem with the affected batches posed no safety risk to patients and that the active ingredient of the product was still effective. In connection with the recall, the Company halted further shipments of Crinone to its distributor, Ares Trading S.A. ("Serono"), pending the Company's revalidation of the manufacturing process. In August 2001, Serono filed a lawsuit in the Supreme Court of the State of New York (the "Action") naming the Company as defendant. The Action set forth claims for an alleged breach of contract for failure to supply Crinone in accordance with the supply agreement between the parties. In November 2001, the Company filed counterclaims against Serono. In June 2002, the Company reached a settlement with Serono. The companies agreed to release all claims against each other. Under the terms of the settlement, Columbia sublicensed rights to market a second brand of its 8% and 4% progesterone gel products under the brand name, Prochieve, to a defined audience of obstetricians, gynecologists and primary care physicians in the U.S. Serono agreed not to market Crinone to that audience and the Company agreed not to market Prochieve to fertility specialists in the U.S. Advantage-S(R). Advantage-S, the Company's female contraceptive gel utilizes the BDS with the active ingredient nonoxynol-9 (the "Product") and it has been marketed in the U.S. by the Company since July 1998 pursuant to FDA's ongoing review of over-the-counter drug products, including nonoxynol-9 spermicidal products. Among Advantage-S benefits is that it utilizes the Company's BDS, which enables the nonoxynol-9 to adhere to the cervix and permits formulation of the product with the lowest dose o nonoxynol-9 of all products on the market. The product is also sold in Canada by a licensee under the brand name, Advantage-24. 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 BDS. In May 2000, the Company sold the U.S. rights for Replens to Lil' Drug Store Products, Inc. for $4.5 million. Additionally, Lil' Drug Store agreed to buy up to $500,000 of Replens inventory from the Company and to pay future royalties of up to $2 million equal to 10% of future U.S. Replens sales. The Company has licensed and supplies Replens to other pharmaceutical companies in certain countries outside the U.S. RepHresh Vaginal Gel(TM). RepHresh Vaginal Gel(TM) is a feminine hygiene product that can eliminate vaginal odor. RepHresh works by maintaining vaginal pH in the normal physiologic range of 4.5 or below. RepHresh use the Company's BDS and adheres to the epithelial cells of the vaginal lining for 3 to 5 days. It is available in convenient pre-filled disposable applicators. RepHresh is also sold by a licensee in Italy under the brand name Miphil. 4 Other Products. The Company also marketed Advanced Formula Legatrin PM(R), until April 2000, for the relief of occasional pain and sleeplessness associated with minor muscle aches such as night le 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 May 2000, the Company licensed these products to Lil' Drug Store Products, Inc. Under the terms of these agreements, the Company receives license fees equal to 20% of the license's net sales. These agreements each have five-year terms with provisions for renewal and contain options that allow for the acquisition of the products by the licensee. On December 29, 2000, Lil' Drug Store purchased Vaporizer in a Bottle for $201,800. The production and sale of Diasorb is being discontinued during the first half of 2003. Sales Force. In July 2002, the Company concluded agreements with PharmaBio Development, Inc., and Innovex LP, both of which are affiliates of Quintiles Transnational Corp. Under the terms of the Innovex agreement, Innovex, will provide a dedicated team of 55 sales representatives on a three-year, fee-for-service basis, to commercialize the Company's women's healthcare products, i.e., Prochieve 8%, Prochieve 4%, Advantage-S, and RepHresh Vaginal Gel in the U.S.. The sales force was recruited and trained in August and September, and began in October, 2002, to call on a targeted list of approximately 10,000 obstetricians and gynecologists to encourage prescriptions and product recommendations for Prochieve 8%, Advantage-S, and RepHresh Vaginal Gel. The sales force will begin sales efforts for Prochieve 4% in April, 2003. In a second agreement dated July 2002, Quintiles' strategic investment group, PharmaBio Development agreed to pay $4.5 million, to be paid in four equal quarterly installments commencing third quarter 2002 for the right to receive a 5% royalty on the net sales of the Company's women's healthcare products in the United States for five years beginning in the first quarter of 2003. The royalty payments are subject to minimum ($8 million) and maximum ($12 million) amounts. Research and Development The Company expended $5.4 million in 2002, $7.1 million in 2001 and $4.8 million in 2000 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 development of the Company's male testosterone product trade named Striant (described below) and the delivery of peptides utilizing the BDS. These studies are now coordinated from the Company's headquarters in New Jersey. The Company cannot predict whether it will be successful in the development of the products listed below or any other products. Striant(TM) (Testosterone Buccal Bioadhesive Product). Striant(TM) (testosterone) Buccal Bioadhesive is a controlled and sustained release buccal bioadhesive product for hypogonadism. Hypogonadism is characterized by a deficiency or absence of endogenous testosterone production. Symptoms related to hypogonadism include diminished interest in sex, impotence, reduced lean body mass, decreased bone density, mood depression, fatigue and loss of energy. Striant(TM) is applied to gum tissue above the incisor teeth and releases testosterone for absorption across the oral mucosa as the product gradually hydrates. Striant(TM) allows for the slow release and absorptin of testosterone through gum and cheek surfaces that are in contact with the product One dose twice a day, in the morning and in the evening, maintains consistent physiologic levels of testosterone. It is estimated that hypogonadism affects between four and five million men in the United States, approximately one million of whom currently receive treatment. The Company completed Phase III trials of Striant in 2001. A study conducted in Europe showed treated patients to have 97% of the average blood levels of testosterone within the physiologic range as seen in healthy men, and to be within the physiologic range 85% of the total time. In October 2002, the Company announced that the U.S. Food and Drug Administration ("FDA") had accepted for review the Company's New Drug Application ("NDA") for Striant and that June 19, 2003, had been set as the goal date for the FDA to review and act on the NDA under the Prescription Drug User Fee Act. On December 3, 2002, the Company announced a submission for marketing approval to the United Kingdom Medicines Control Agency for Striant. Under current regulations, approval of Striant in the U.K is anticipated in the second half of 2003. Initial regulatory approval of the U.K. application will be the basis for mutual recognition applications to be filed in the rest of Europe. In October, 2002, the Company 5 executed a license and supply agreement for Striant(TM) with Ardana Bioscience, Ltd., Edinburgh, UK, for eighteen European countris (excluding Italy). Under the terms of the agreement, Ardana will market, distribute and sell Striant(TM). In exchange for these rights, The Company will receive total payments of $8 million, including $4 million in signature and milestone fees received in the fourth quarter of 2002. Additional milestone payments totaling $2 million are due upon marketing approvals in major European countries included in the agreement. A performance payment of $2 million is also due upon achievement of a certain level of sales. Ardana will purchase its requirements of product from the Company during the term of the agreement. In March 2003, the Company concluded agreements with PharmaBio Development, Inc., and Innovex LP, both of which are affiliates of Quintiles Transnational Corp., to commercialize Striant(TM) in the United States. Under the terms of the agreements, Quintiles' commercialization unit, Innovex LP, will provide a dedicated team of as many as 75 sales representatives for a two-and-a-half year term. Quintiles' strategic investment group, PharmaBio Development, Inc., will invest $15 million to be paid to Columbia over a 15-month period which began with the signing of the agreement. In return, PharmaBio will receive a 9% royalty on net sales of Striant in the United States up to agreed levels of annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments will commence with the launch of Striant and are subject to minimum ($30 million) and maximum ($55 million) amounts. Columbia will be responsible for product distribution, regulatory and medical affairs, marketing and manufacturing. Terbutaline Vaginal Gel. In December, 2002, the Company announced a development and license agreement with Ardana Bioscience, Ltd., for the Company's terbutaline vaginal gel product for development for the treatment of infertility, dysmenorrhea and endometriosis. The Company received a payment of $250,000 upon signing of the agreement, and will receive an additional $250,000 upon successful completion of the Phase II clinical trial. Under the terms of the agreement, the companies will work together to progress the product through clinical trials and applications for regulatory approvals. The Company will have the right to market the product in North America and Ardana will have rights focused in Europe. The parties would share equally in proceeds from licensing and distribution of the product in the rest of the world. Lidocaine Vaginal Gel. Lidocaine vaginal gel utilizes our BDS and is designed as a potential treatment for dysmenorrhea and gynecologic pain. We have completed the development work on this product and are in the final stages of a critical pilot trial in Europe. Results from this trial, should be available in early 2003 and will guide the Phase III program. We believe that this product will offer a new and novel approach to treating women who suffer from these painful conditions. Testosterone Vaginal Gel. In October 2000, the Company completed a Phase I trial of its testosterone progressive hydration vaginal tablet for women. The study demonstrated that testosterone could be delivered vaginally over a period of days. Vaginal gel and vaginal tablet forms have been developed, both of which provide multiple dosing advantages. A preliminary clinical plan, with a focus on reduction in fibroids as well as general testosterone replacement is under review by our clinical advisors. We plan to move this project into a more active stage in the second half of 2003. Peptide Delivery System. The Company has completed a program that demonstrates that the BDS can deliver therapeutic doses of the peptide, desmopressin, for extended periods of time. Based on these positive results, the Company has initiated partnering discussions related to a desmopressin buccal tablet. Licensing and Development Agreements In May 1995, the Company entered into a worldwide, except for South Africa, license and supply agreement with American Home Products Corporation, now Wyeth, ("Wyeth") for its Wyeth-Ayerst Laboratories division to market Crinone. The Company agreed to supply Crinone at a price equal to 30% of Wyeth's net selling price. In July, 1999, Wyeth assigned the license and supply agreement to Ares Trading, S.A., ("Serono"). In June, 2002, the license and supply agreement was amended and restated and a marketing sublicense was granted to the Company permitting the Company to sell progesterone gel under a second brand name, Prochieve, to the non-infertility specialist market in 6 the U.S. Under the marketing sublicense, the Company is obligated to pay Serono a royalty equal to 30% of its net sales to the non-infertilty specialist market. The Company is obligated to pay Serono an additional royalty of 40% of Prochieve's net sales to the infertility specialist market. Conversely, Serono is obligated to pay the Company an additional royalty of 40% of Crinone net sales to the non-infertility specialist market in the U.S. In March 1999, the Company entered into a license and supply agreement with Mipharm SpA ("Mipharm") under which Mipharm will be the exclusive marketer of the Company's women's healthcare products in Italy, Portugal, Greece and Ireland with a right of first refusal for Spain. Mipharm currently sells two licensed products in Italy. On July 31, 2002, the Company concluded agreements with PharmaBio Development, Inc., and Innovex LP, both of which are affiliates of Quintiles Transnational Corp., to commercialize the Company's portfolio of women's healthcare products in the United States. Under the terms of this agreement, Quintiles' commercialization unit, Innovex, will provide a dedicated team of 55 sales representatives on a three-year, fee-for-service basis, to commercialize the Company's women's healthcare products. In a second agreement dated July 31, 2002, Quintiles' strategic investment group, PharmaBio Development agreed to pay $4.5 million, to be paid in four equal quarterly installments commencing third quarter 2002 for the right to receive a 5% royalty on the net sales of the Company's women's healthcare products in the United States for five years beginning in the first quarter of 2003. The royalty payments are subject to minimum ($8 million) and maximum ($12 million) amounts and since the minimum amount is in excess of the amount to be received by the Company, the Company has recorded the $2.25 million received through December 31, 2002, as a liability. The excess of the minimum to be paid by the Company over the $4.5 million to be received by the Company will be recorded as an expense over the five-year term of the agreement. In October 2002, the Company and Ardana Bioscience, Ltd. entered into a license and supply agreement (described above) for Striant(TM)the Company's testosterone product in eighteen European countries (excluding Italy). In December 2002, The Company and Ardana Bioscience, Ltd. executed a development and license agreement (described above) for the Company's terbutaline vaginal gel product. In March 2003, the Company concluded agreements with PharmaBio Development, Inc., and Innovex LP, to commercialize Striant(TM) in the United States. Under the terms of the agreements, Innovex LP, will provide a dedicated team of as many as 75 sales representatives for a two-and-a-half year term. Quintiles' strategic investment group, PharmaBio Development, Inc., will invest $15 million to be paid to Columbia over a 15-month period which began with the signing of the agreement. In return, PharmaBio will receive a 9% royalty on net sales of Striant in the United States up to agreed levels of annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments will commence with the launch of Striant and are subject to minimum ($30 million) and maximum ($55 million) amounts and since the minimum amount is in excess of the amount to be received by the Company, the Company will record the investments by PharmaBio as a liability. The excess of the minimum to be paid by the Company over the $15 million to be received by the Company will be recorded as an expense over the term of the agreement. 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." 7 During 2002, there was one United States patent granted to the Company, for the use of certain polycarboxylic acid polymers for vaginal pH buffering to prevent miscarriage and premature labor associated with bacterial vaginosis. During 2001, there were two United States patents granted to the Company. One was for bioadhesive progressive hydration tablets and for the methods of making and using the same and the second was for the use of progesterone for maintaining amenorrhea. During 2000, there were three United States patents granted to the Company. The first patent was for the use of the polycarboxylic acid polymers to treat vaginal infections. The second patent was for using progesterone alone for treating or reducing ischemia. The third patent was for a pharmaceutical composition for treating dysmenorrhea and premature labor. 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 to increase the effects of estrogen. The second patent was for the composition and method of moisturizing mammalian membranous tissue. During 1996, the Company was granted United States patents covering vaginal moisturization and the direct transport of progesterone to the uterus. The Company continues to develop the core Bioadhesive Delivery System and has filed additional patent applications. Because the Company operates on a worldwide basis, the Company seeks worldwide patent protection for its technology and products. While patent applications do not ensure the ultimate issuance of a patent, and 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", "Prochieve", "RepHresh" "RepHresh Vaginal Gel", "Striant", 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 marks with pending applications 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 that the Company considers to be proprietary. Moreover, there can be no assurance that other companies will not independently develop know-how comparable, or superior, to that of the Company. Manufacturing Crinone, Prochieve, Advantage-S, Advantage 24, Advantage-LA, RepHresh and Replens are manufactured and packaged by third-party manufacturers in Europe. In May, 2002, the Company executed a non-exclusive supply agreement with Mipharm S.p.A., Milan, Italy, for the manufacture and supply of Striant. 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, Noveon, Inc. ("Noveon"). The Company believes that Noveon 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 Noveon will continue to supply the product. In the event that Noveon 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. 8 All of the other raw materials used by the Company for its products utilizing the BDS are available from several sources. Sales of Products The Company currently contracts with a third party to provide the Company with a full-time dedicated sales force of approximately 60 people. These people call on OB/GYN's and educate the doctors and other healthcare professionals in their offices on the benefits of Prochieve, Advantage-S and RepHresh. The Company also utilizes approximately 20 drug manufacturers' representative firms to make calls on the Company's trade customers on behalf of Advantage-S and RepHresh. The manufacturers' representatives receive commissions based on sales of those two products made within their respective territories. The Company's direct customers are drug wholesalers and chain drug stores. 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, 2002. 2002 2001 2000 ---- ---- ---- Crinone 38% 29% 73% Prochieve 37% 0% 0% Replens 13% 25% 12% Advantage-S 2% 11% 3% Legatrin PM/Legatrin GCM 0% 0% 7% Other Products and Royalty Income 10% 35% 5% --- --- --- 100% 100% 100% === === === Lil' Drug Stores, a customer/licensee, accounted for 14% of 2002 consolidated net sales and 44% of 2001 consolidated net sales. Serono accounted for approximately 41% 0f 2002 consolidated net sales, 29% of 2001 consolidated net sales and 73% of 2000 consolidated net sales. A third customer accounted for approximately 17% of 2002 consolidated net sales. Competition The Company has both entered into strategic alliance agreements for the marketing of its women's health care products and is marketing the products itself, but there can be no assurance that the Company or 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, and its own efforts, that also rely upon its contract sales force. The markets that 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/Prochieve, 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 Pfizer, Prometrium marketed by Solvay, Prempro and Premphase marketed by AHP. The Company also believes that Advantage-S and RepHresh compete against numerous products in their respective categories. 9 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 pre-marketing 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 pre-market 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, is 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. Product Liability The Company can 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 March 1, 2003, the Company had 25 employees, 7 in management, 5 in production, 5 in marketing and sales, and 8 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 an employment agreement with one employee, who is a stockholder of the Company. See "Executive Compensation--Employment Agreement." Item 2. Properties As of March 15, 2003, the Company leases the following properties: Annual Location Use Square feet Expiration Rent - -------------- --------------------- ----------- ----------- ------- Livingston, NJ Corporate office 12,780 July 2007 182,000 Paris, France Administrative office 2,100 August 2004 90,000 Item 3. Legal Proceedings In April 2001, the Company initiated a voluntary recall of batches of Crinone that were affected by a drug application problem that could cause the consistency of the gel to change over time. Investigations confirmed that the problem with the affected batches posed no safety risk to patients and that the active ingredient of the product 10 was still effective. In connection with the recall, the Company halted further shipments of Crinone to its distributor, Ares Trading S.A. ("Serono"), pending its revalidation of the manufacturing process. In August 2001, Serono filed a lawsuit in the Supreme Court of the State of New York (the "Action") naming the Company as defendant. The Action set forth claims for an alleged breach of contract for failure to supply Crinone in accordance with the supply agreement between the parties. In November 2001, the Company filed counterclaims against Serono. In June 2002, the Company reached a settlement with Serono. The companies agreed to release all claims against each other. Under the terms of the settlement, Columbia sublicensed rights to market a second brand of its 8% and 4% progesterone gel products under the brand name "Prochieve (TM)" to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. As part of the settlement, Columbia gave Ares a note for $3.96 million (fully-paid at March 15, 2003) to be paid over an eighteen-month period to cover out of pocket costs resulting from the recall. This amount is shown as litigation settlement expense in Operating Expenses of the Consolidated Statements of Operations. Other claims and lawsuits have been filed against the Company. Although the results of pending litigation are always uncertain, the Company does not believe the results of any such actions, individually or in the aggregate, will have a material adverse effect on our financial position or results of operation. Additionally, the Company believes that it has adequate reserves or adequate insurance coverage for any unfavorable outcome resulting from these actions. Item 4. Submission of Matters to a Vote of Security Holders None. Executive Officers of the Registrant Set forth is a list of names, ages, positions held and business experience of the persons serving as executive officers of the Company as of February 28, 2003. Officers serve at the discretion of the Board of Directors. There is no family relationship between any of the executive officers or between any of the executive officers and of Columbia's directors and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected, except with respect to Mr. Wilkinson's employment agreement: James J. Apostolakis (Age 60) has been a director and Vice Chairman of the Company's Board of Directors since January 1999 and served as President from January 2000 until April 2001. 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. William J. Bologna (Age 60) has been a director of the Company since inception, Chairman of the Company's Board of Directors since January 1992 and served as Chief Executive Officer from January 2000 until April 2001. 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. Meg Coogan (Age 49) joined the Company as Senior Vice President, Marketing and Sales in August 2002. For the previous 10 years Ms. Coogan held various positions within the Interpublic Group of Companies most recently as President of McCann Healthcare, a pharmaceutical advertising agency. Prior to McCann Healthcare, Ms. Coogan 11 was General Manager of Lowe McAdams. From 1983 to 1988 she held various sales and marketing positions within Ortho-McNeil, a Johnson & Johnson company. Ms. Coogan graduated from Rutgers University. Michael McGrane (Age 53) joined the Company as Vice President, General Counsel and Secretary in January, 2002. Prior to joining the Company, he served as Vice President, General Counsel and Secretary to The Liposome Company, Inc., a biotechnology company, from 1999 to 2001, and as Vice President, General Counsel and Secretary to Novartis Consumer Health, Inc., from 1997 to 1998. Prior to Novartis, Mr. McGrane held various positions with Sandoz Pharmaceuticals Corporation, including Associate General Counsel. Before joining Sandoz, he was Regulatory Counsel to the U.S. Food and Drug Administration. Mr. McGrane received his J.D. degree from Georgetown University and his B.A. degree from Cornell College. He is a member of the New Jersey bar. Robert S. Mills (Age 50) joined the company as Senior Vice President, Operations, in May, 2001. Prior to joining the company, he served as Senior Vice President, Manufacturing Operations at Watson Pharmaceuticals, from 1996-2001, and as Vice President, Operations at Alpharma, Inc. from 1993-1996. Prior to Alpharma, Mr. Mills held various positions with Aventis, SA, including Director-Plant Operations. Mr. Mills holds a B.S.Degree from Grove City College. David L. Weinberg (Age 57) has been Vice President--Finance and Administration, Chief Financial Officer and Treasurer of the Company from September 1997 to the present. From September 1997 until January 2002, he also served as Secretary and previously from the inception of the Company until June 1991, he served as Vice President--Finance and Administration, Chief Financial Officer, Treasurer and Secretary. 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. G. Frederick Wilkinson (Age 47) has been a director of the Company since 2001 and its President and Chief Executive Officer since April 15, 2001. Prior to joining the Company, he served as Chief Operating Officer and Senior Vice President, Sales and Marketing of Watson Pharmaceuticals, Inc. from June 1999. Previously, Mr. Wilkinson was Vice President of Watson Pharmaceuticals, Inc. from July 1997, and Executive Vice President - Sales and Marketing of Watson Laboratories, Inc. from July 1996. Prior to his employment at Watson, Mr. Wilkinson was the President and General Manager of Creighton Pharmaceuticals, a wholly owned subsidiary of Sandoz Pharmaceuticals, Inc. from 1994 to 1996. Prior to that, he held various marketing management positions at Sandoz from 1980. Mr. Wilkinson received his M.B.A. from Capital University in 1984 and his B.S. in Pharmacy from Ohio Northern University in 1979. 12 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. High Low ----- ----- Fiscal Year Ended December 31, 2001 First Quarter $6.50 $4.50 Second Quarter 8.09 5.16 Third Quarter 8.15 3.25 Fourth Quarter 4.85 2.67 Fiscal Year Ended December 31, 2002 First Quarter $5.18 $3.10 Second Quarter 6.00 4.07 Third Quarter 5.60 4.06 Fourth Quarter 4.59 2.90 At March 1, 2003, there were 400 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 B Convertible Preferred Stock ("Series B Preferred Stock") and 12 shareholders of record of the Company's Series C Convertible Preferred Stock ("Series C Preferred Stock"). Effective as of February 6, 2001, the Company entered into the Amended and Restated Common Stock Purchase Agreement with Acqua Wellington to sell up to $16.5 million of the Common Stock, under the Registration Statement, the Prospectus, and the related Prospectus Supplement dated February 6, 2001 and amended on April 13, 2001. Pursuant to the Purchase Agreement, the Company may, from time to time over the term of the Purchase Agreement and at its sole discretion, issue and sell to Acqua Wellington up to $16.5 million of the Common Stock, subject to certain conditions, at a price per share based on the daily volume weighted average price of the Common Stock over a certain period of time less a discount ranging from 5% to 7%. In addition, during the period in which the Company elects to issue and sell shares of the Common Stock to Acqua Wellington, the Company may also, at its sole discretion, grant Acqua Wellington a call option at the same discount for the applicable period to purchase additional shares of the Common Stock up to the applicable amount being sold by the Company in such period, subject to the overall limit of $16.5 million described above. The Company and Acqua Wellington have agreed to extend the term of the Agreement until February 6, 2005. All other terms remain the same. At March 1, 2003, $9 million may be sold under the Agreement, subject to the registration statement relating to the amendment becoming effective. During 2002, the Company issued 2,691,012 shares of its common stock to several institutional investors, which resulted in the Company receiving $11,962,067 after expenses. $6,500,000 of the gross proceeds was received pursuant to the Purchase Agreement described in the preceding paragraph. During the year 2001, the Company issued 2,146,459 shares of its common stock, which resulted in the Company receiving $8,962,936 after expenses. $1 million of the gross proceeds were received from Acqua Wellington pursuant to the Purchase Agreement described in the second preceding paragraph. 13 On March 12, 2002, the Company adopted a Stockholder Rights Plan ("Rights Plan") designed to protect company stockholders in the event of takeover activity that would deny them the full value of their investment. The Rights Plan was not adopted in response to any specific takeover threat. In adopting the Rights Plan, the Board declared a dividend distribution of one preferred stock purchase right for each outstanding share of common stock of the Company, payable to stockholders of record at the close of business on March 22, 2002. The rights will become exercisable only in the event, with certain exceptions, a person or group of affiliated or associated persons acquires 15% or more of the Company's voting stock, or a person or group of affiliated or associated persons commences a tender or exchange offer, which if successfully consummated, would result in such person or group owning 15% or more of the Company's voting stock. The rights will expire on March 12, 2012. Each right, once exercisable, will entitle the holder (other than rights owned by an acquiring person or group) to buy one one-thousandth of a share of a series of the Company's Series D Junior Participating Preferred Stock at a price of $30 per one-thousandth of a share, subject to adjustments. In addition, upon the occurrence of certain events, holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase either the Company's preferred stock or shares in an "acquiring entity" at approximately half of market value. Further, at any time after a person or group acquires 15% or more (but less than 50%) of the Company's outstanding voting stock, subject to certain exceptions, the Board of Directors may, at its option, exchange part or all of the rights (other than rights held by an acquiring person or group) for shares of the Company's common stock having a fair market value on the date of such acquisition equal to the excess of (i) the fair market value of preferred stock issuable upon exercise of the rights over (ii) the exercise price of the rights. The Company generally will be entitled to redeem the rights at $0.01 per right at any time prior to the close of business on the tenth day after there has been a public announcement of the beneficial ownership by any person or group of 15% or more of the Company's voting stock, subject to certain exceptions. On March 12, 2001, the Company granted to James Apostolakis warrants to purchase up to an aggregate of 100,000 shares of Common Stock at an exercise price of $5.85 per share. On March 12, 2001, the Company granted to Fred Wilkinson, pursuant to an employment agreement, warrants to purchase up to an aggregate of 350,000 shares of Common Stock at an exercise price of $8.35 per share. In May 2000, the Company granted to Ryan Beck & Co. Inc. and certain employees, 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. 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. The deliveryoffer, sale, and delivery of the Series C Preferred Stock was made pursuant to Rule 501 of Regulation D under the Securities Act of 1933. 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. and certain employees, 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. 14 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 selected financial data (not covered by the auditor's report) have been summarized from the Company's consolidated financial statements and are qualified in their entirety by reference to, and should be read in conjunction with such consolidated financial statements and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report.
2002 2001 2000 1999 1998 -------- -------- ------- ------- -------- Statement of Operations Data: (000's except per share data) Net sales $ 9,419 $ 2,154 $13,173 $18,921 $ 10,018 Net loss (1) (16,850) (15,846) (2,603) (2,210) (13,860) Loss per common share (0.50) (0.51) (0.09) (0.09) (0.48) Weighted average number of common shares outstanding-diluted 34,392 31,243 30,235 28,853 28,679 Balance Sheet Data: (000's) Working capital (deficiency) $ 4,717 $ 4,622 $10,936 $ 3,441 ($1,401) Total assets 12,766 8,560 15,519 12,988 11,880 Long-term debt 10,000 10,000 10,000 10,000 10,000 Stockholders' equity (deficiency) (8,395) (3,421) 3,494 (274) (4,333)
(1) 1999 and 1998 net loss includes approximately $463,000 and $73,000, respectively, of license fee income. 15 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. Some of these statements can be identified by the use of forward-looking terminology such as "prospects," "outlook," "believes," "estimates," "intends," "may," "will," "should," "anticipates," "expects" or "plans," or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategy or risks and uncertainties. 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) the successful marketing of products by the Company and its licensees; (ii) increased competitive activity from companies in the pharmaceutical industry, some of which have greater resources than the Company; (iii) 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; (iv) 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; (v) foreign currency fluctuations affecting the relative prices at which the Company and foreign competitors sell their products in the same market; (vi) failure to develop the Company's products or delay in development of the Company's products and (vii) the timely completion of studies and approvals by the FDA and other regulatory agencies. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the Cautionary Statements in this Annual Report. Readers are advised to consult any further disclosures the Company may make on related subjects in subsequent 10-Q, 8-K, and 10-K reports to the Securities and Exchange Commission. Critical Accounting Policies and Estimates The Company has identified the policies below as critical to its business operations and the understanding of its results of operations. For a detailed discussion on the application of these and other accounting policies, see Note 1 of the consolidated financial statements included in Item 14 of this Annual Report on Form 10-K, beginning on page F-11. Note that the preparation of this Annual Report on Form 10-K requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, 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. There can be no assurance that actual results will not differ from those estimates. Revenue recognition. The Company's revenue recognition is significant because revenue is a key component of the Company's results of operations. In addition, revenue recognition determines the timing of certain expenses, such as commissions and royalties. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter to quarter. Revenues from the sale of products are recorded at the time goods are shipped to customers. Provisions for returns, rebates and other allowances are estimated based on a percentage of sales and are recorded in the same period the related sales are recognized. 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 are recognized in net sales over the term of the license. 16 Impairment of intangible assets. The Company periodically evaluates its intangible assets for potential impairment indicators. Judgments regarding the existence of impairment indicators are based on legal factors, market condition and operational performance. Future events could cause the Company to conclude that impairment factors exist and that certain intangible assets are impaired. Any resulting impairment loss could have a material adverse impact on results of operations. Accounting For PharmaBio Agreements. In July 2002 and March 2003, the Company entered into agreements with PharmaBio Development, Inc. under which the Company received upfront money paid in quarterly installments in exchange for royalty payments on certain of the Company's products to be paid to PharmaBio for a fixed period of time. The royalty payments are subject to minimum and maximum amounts and because the minimum amounts are in excess of the amount to be received by the Company, the Company is recording the money received as a liability. The excess of the minimum to be paid by the Company over the amount received by the Company will be recorded as an expense over the terms of the agreements. Liquidity and Capital Resources Cash and cash equivalents increased from approximately $4,061,000 at December 31, 2001 to approximately $5,018,000 at December 31, 2002. The Company received approximately $11,962,000, net of expenses, from the sale of 2,691,012 shares of its common stock. The Company issued a note for $3,960,000 in June 2002 to settle litigation and paid down approximately $3,373,000 of the note by December 31, 2002 The Company used approximately $10,694,000 of cash for operating activities, approximately $188,000 for dividends and approximately $808,000 for fixed asset additions. The effect of exchange rate changes increased cash by approximately $98,000. Effective as of February 6, 2001, the Company entered into the Amended and Restated Common Stock Purchase Agreement with Acqua Wellington to sell up to $16.5 million of the Common Stock, under the Registration Statement, the Prospectus, and the related Prospectus Supplement dated February 6, 2001 and amended on April 13, 2001. Pursuant to the Purchase Agreement, the Company may, from time to time over the term of the Purchase Agreement and at its sole discretion, issue and sell to Acqua Wellington up to $16.5 million of the Common Stock, subject to certain conditions, at a price per share based on the daily volume weighted average price of the Common Stock over a certain period of time less a discount ranging from 5% to 7%. In addition, during the period in which the Company elects to issue and sell shares of the Common Stock to Acqua Wellington, the Company may also, at its sole discretion, grant Acqua Wellington a call option at the same discount for the applicable period to purchase additional shares of the Common Stock up to the applicable amount being sold by the Company in such period, subject to the overall limit of $16.5 million described above. The Company issued and sold $6.5 million and $1.0 million of its Common Stock to Acqua Wellington in 2002 and 2001, respectively. The Company and Acqua Wellington have agreed to extend the term of the Agreement until February 6, 2005. All other terms remain the same. At March 1, 2003, $9 million may be sold under the Agreement subject to the registration statement relating to the amendment becoming effective. For the fiscal year ended December 31, 2002, the Company had a net loss of $16.8 million, which was primarily the result of a lack of Crinone sales in the first four months of 2002, costly research and development activities and the start-up of the company's commercialization activities in the fourth quarter of 2002. The Company expects to report a loss for the fiscal year ended December 31, 2003. In 2002, the major sources of cash were from the sale of the Company's common stock to investors, $4.0 million dollars received from Ardana Bioscience Limited as part of the License and Supply agreement for Striant and from the receipt of $2.25 million from PharmaBio Development in exchange for a five-year 5% royalty on the net sales of the Company's women's healthcare products beginning January 1, 2003. The minimum payment under this agreement is $8 million and the maximum payment is $12 million. Under that agreement, the Company is to receive an additional $1.125 million in each of the first two quarters in 2003. 17 On March 6, 2003, the Company and PharmaBio entered into an additional agreement under which PharmaBio will pay the Company $3.0 million in each of the four quarters in 2003 and in the first quarter of 2004. In return, PharmaBio will receive a 9% royalty on the net sales of Striant in the United States, for seven years beginning in July 2003 up to agreed levels of annual sales revenues, and a 4.5% royalty of net sales above those levels. The minimum payment under this agreement is $30 million and the maximum payment is $55 million. In addition to the receipts from product sales and cash received from PharmaBio, the Company may need to raise additional funds from the sale of securities or otherwise. The Company cannot give assurance that additional financing will be available to the Company on acceptable terms, if at all. 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. 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, 2002, the Company has paid approximately $ 2,155,000 in royalty payments. As of December 31, 2002, the Company has outstanding exercisable options and warrants that, if exercised, would result in approximately $ 53.5 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 property and equipment. The Company anticipates it will spend approximately $1.0 million on property and equipment in 2003. As of December 31, 2002, the Company had available net operating loss carryforwards of approximately $64 million to offset its potential future U.S. taxable income. In accordance with Statement of Financial Accounting Standards No. 109, as of December 31, 2002 and 2001, other assets in the accompanying consolidated balance sheet include deferred tax assets of approximately $23 million and $21 million, respectively, (comprised primarily of a net operating loss carryforward) for which a valuation allowance has been recorded since the realizability of the deferred tax assets are not determinable. Results of Operations Net sales increased by approximately 337% in 2002 to approximately $9.4 million as compared to $2.2 million in 2001 and $13.2 million in 2000. Sales of Crinone accounted for approximately $3.6 million in 2002 as compared to approximately $528,000 in 2001 and approximately $9.6 million in 2000. In April 2001, the Company requested its licensee Serono to voluntarily recall a number of batches of Crinone. The Company resumed sales of Crinone to Serono in May 2002. In the 2002 third quarter, the Company began selling Prochieve 8% and 2002 revenues from this product approximated $3.5 million. Sales of the product Replens were approximately $1.2 million in 2002 as compared to $0.6 million and $1.6 million in 2001 and 2000, respectively. Gross profit as a percentage of sales increased in 2002 to 44% as compared to negative 23% in 2001 and 65% in 2000. The 44% gross profit percentage in 2002 was the result of the reintroduction of Crinone sales and the launch of 18 Prochieve 8% cost of goods sold for Prochieve includes a 30% royalty on net sales. The negative 23% gross profit percentage in 2001 resulted from the reduced sales caused by the Crinone recall and the inability to reduce fixed manufacturing costs. Selling and distribution expenses were approximately $6.1 million, $1.1 million and $2.1 million in 2002, 2001 and 2000, respectively. Selling and distribution expenses increased by approximately 474% in 2002 compared to 2001. The commencement of commercialization efforts by the Company in September 2002 accounted for the increase. The 50% decrease in 2001 compared to 2000 resulted from the sale by the Company of all but one of the Company's over-the-counter products in May 2000. General and administrative expenses increased approximately $881,000 or 21% to approximately $5.1 million in 2002 from approximately $4.3 million in 2001. The increase resulted from higher legal fees ($368,000), higher insurance costs ($112,000), and the hiring of additional administrative personnel ($413,000). General and administrative expenses increased approximately $272,000 or 7% to approximately $4.3 million in 2001 from approximately $4.0 million in 2000. The increase was principally the result of the hiring of additional management personnel. Research and development expenses decreased in 2002 to $5.4 million from $7.1 million in 2001. The completion in 2002 of many of studies on Striant begun in 2000 and 2001 was the reason for the decrease. Research and development expenses increased in 2001 to approximately $7.1 million as compared to approximately $4.8 million in 2000. The cost of Phase III studies for the Company's buccal testosterone product was the primary reason for the increase. Litigation settlement expense of $3,960,000 in 2002 represents the amount the Company agreed to pay Ares Trading S.A. to settle the litigation that followed the recall of Crinone in April 2001. Product recall costs in 2001 in the amount of $1,500,000 represented an estimate of the Company's direct out-of-pocket costs related to the voluntary recall of Crinone. In 2002, the remaining unused accrual amounting to 449,000 was reversed. Corporate restructuring expense in 2001, of $1,000,000, represents the costs of closing the Paris office. These costs included employee severance payments and other costs. Restructuring expense in 2000, of $285,000, related to costs associated with the Company's closing of its corporate and accounting operations in Florida. Interest income was approximately $52,000, $247,000 and $367,000 in 2002, 2001 and 2000, respectively. Interest expense amounted to approximately $853,000, $755,000 and $755,000 in 2002, 2001 and 2000, respectively. Interest expense is primarily from interest on the $10 million note issued in March 1998 which bears an interest rate of 7.125%. The increase in the 2002 interest expense resulted from the interest on the $3,960,000 note given to settle the litigation resulting from the Crinone recall in 2001. As a result, the net loss for 2002 was $16,849,789 or $0.50 per share as compared to a net loss of $15,845,627 or $0.51 per share in 2001 and a net loss of $2,602,931 or $0.09 per share in 2000. 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 7A. Quantitative and Qualitative Disclosures About Market Risks The Company does not believe that it has material exposure to market rate risk. The Company has only a fixed rate debt obligation that comes due in 2005. The Company may, however, require additional financing to fund 19 future obligations and no assurance can be given that the terms of future sources of financing will not expose the Company to material market risk. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data required by this item are set forth at the pages indicated in Item 14(a) below. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Company The information concerning directors required by Item 10 is incorporated by reference to Columbia's Proxy Statement for its 2003 Annual Meeting of Shareholders. The information concerning executive officers required by item 10 is contained in the discussion entitled Executive Officers of the Registrant in Part I hereof. Item 11. Executive Compensation The information required by Item 11 is incorporated by reference to Columbia's Proxy Statement for its 2003 Annual Meeting of Shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by Item 12 is incorporated by reference to Columbia's Proxy Statement for its 2003 Annual Meeting of Shareholders. Item 13. Certain Relationships and Related Transactions The information required by Item 13 is incorporated by reference to Columbia's Proxy Statement for its 2003 Annual Meeting of Shareholders. Item 14. Controls and Procedures The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding 20 required disclosure. The Company's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's chief executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934. Based upon that evaluation, the chief executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective . Subsequent to the date the Company carried out its evaluation, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls. 21 PART IV Item 15. Exhibits, Financial Statements and Financial Statement Schedules, and Reports on Form 8-K (a)(1)(2) Financial Statements and Financial Statement Schedules Indexes to financial statements and financial statement schedules appear on F-1 and F-24, respectively. (a)(3) Executive Compensatory Plans and Arrangements Employment Agreement dated as of January 1, 1996, between the Company and Norman M. Meier Employment Agreement dated as of January 1, 1996, between the Company and William J. Bologna Employment Agreement dated as of April 15, 1997, between the Company and Nicholas A. Buoniconti Addendum to Employment Agreement dated as of September 1, 1997, between the Company and Norman M. Meier Addendum to Employment Agreement dated as of September 1, 1997, between the Company and William J. Bologna Addendum to Employment Agreement dated as of September 1, 1997, between the Company and Nicholas A. Buoniconti Addendum to Employment Agreement dated as of October 8, 1998, between the Company and Nicholas A. Buoniconti Addendum to Employment Agreement dated as of January 1, 2000 between the Company and Norman M. Meier Addendum to Employment Agreement dated as of January 1, 2000 between the Company and William J. Bologna Employment Agreement dated as of January 1, 2000 between the Company and James J. Apostolakis Employment Agreement dated December 30, 1999 between the Company and Dominique de Ziegler Employment Agreement dated March 16, 2001 between the Company and G. Frederick Wilkinson (b) Reports on Form 8-K On March 12, 2003, the Company filed a form 8-K in which it had attached a copy of a Company press release dated March 11, 2003 titled "Columbia Laboratories Reports Year-Ended And Fourth Quarter 2002 Financial Results" (c) 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/ 22 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, as amended, of the Company/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/ 10.16A -- License and Supply Agreement by an between the Company and MiPharm SpA dated March 5, 1999/11/ 10.16B -- License and Supply Agreement for Crinone between Columbia Laboratories (Bermuda) Limited and Ares Trading S.A. dated as of May 20, 1999/12/ 10.17 -- Addendum to Employment Agreement dated as of January 1, 2000 between the Company and Norman M. Meier/12/ 10.18 -- Addendum to Employment Agreement dated as of January 1, 2000 between the Company and William J. Bologna/12/ 10.19 -- Employment Agreement dated as of January 1, 2000 between the Company and James J. Apostolakis/12/ 10.20 -- Employment Agreement dated December 30, 1999 between the Company and Dominique de Ziegler/12/ 10.21 -- Settlement Agreement and Release dated as of March 16, 2000 between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc./12/ 10.22 -- Replens Purchase and License Agreement dated April 18, 2000, between the Company and Lil' Drug Store Products, Inc./13/ 10.23 -- License Agreement dated April 18, 2000, between the Company and Lil' Drug Store Products, Inc./13/ 23 10.24 -- Distribution Agreement dated April 18, 2000, between the Company and Lil' Drug Store Products, Inc./13/ 10.25 -- Stock Purchase Agreement, dated January 31, 2001, between the Company and Ridgeway Investment Limited /14/ 10.26 -- Amended and Restated Common Stock Purchase Agreement by and between the Company and Acqua Wellington North American Equities Fund, Ltd., effective as of February 6, 2001./15/ 10.27 -- Employment Agreement dated March 16, 2001 between the Company and G. Frederick Wilkinson/16/ 10.28 -- Stock Purchase Agreement, dated May 10, 2001, between the Company and Ridgeway Investment Limited/17/ 10.29 -- Stock Purchase Agreement, dated July 23, 2001, between the Company and Ridgeway Investment Limited/18/ 10.30 -- Rights Agreement dated as of March 13, 2002, by and between Columbia Laboratories, Inc. and First Union National Bank, as Rights Agent/19/ 10.31 -- Semi-Exclusive Supply Agreement dated May 7, 2002 between the Company and Mipharm S.p.A./20/ 10.32 -- Amended and Restated Licence and Supply Agreement dated June 4, 2002 between the Company and Ares Trading S.A./20/ 10.33 -- Marketing License Agreement dated June 4, 2002 between the Company and Ares Trading S.A. and Serono, Inc./20/ 10.34 -- Master Services Agreement dated July 31, 2002 between the Company and Innovex LP/20/ 10.35 -- Stock Purchase Agreement dated July 31, 2002 By and Between Columbia Laboratories, Inc. and PharmaBio Development Inc./20/ 10.36 -- Investment and Royalty Agreement dated July 31, 2002 between the Company and PharmaBio Development Inc./20/ 10.37 -- License and Supply Agreement dated October 16, 2002 between the Company and Ardana Bioscience Limited/21/ 10.38 -- Development and License Agreement dated December 26, 2002 between the Company and Ardana Bioscience Limited/21/ 10.39 -- Amendment No. 1 to the Amended and Restated Common Stock Purchase Agreement by and between the Company and Acqua Wellington North American Equities Fund, Ltd., effective as of January 31, 2003/21/ 10.40 -- Investment and Royalty Agreement dated March 5, 2003 between the Company and PharmaBio Development Inc./21/ 10.41 -- Sales Force Work Order #8872 pursuant to the Master Services Agreement having an Effective Date of July 31, 2002, between the Company and Innovex LP/21/ 21 -- Subsidiaries of the Company/21/ 99.1 -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith./21/ 99.2 -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith./21/ /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. 24 /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 May 10, 2000. /8/ Incorporated by reference to the Registrant's 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 reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998. /11/ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. /12/ Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 /13/ Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. /14/ Incorporated by reference to the Registrant's Current Report on Form 8-K, dated January 31, 2001. /15/ Incorporated by reference to the Registrant's Registration Statement on Form S-3 (File No. 333-38230) declared effective May 7, 2001. /16/ Incorporated by reference to the Registrant's Current Report on Form 8-K, dated March 16, 2001. /17/ Incorporated by reference to the Registrant's Current Report on Form 8-K, dated May 10, 2001. /18/ Incorporated by reference to the Registrant's Current Report on Form 8-K, dated July 23, 2001. /19/ Incorporated by reference to the Registrant's Current Report on Form 8-K, dated March 12, 2002. /20/ Incorporated by reference to the registrant's Quarterly Report on Form 10-Q dated August 14, 2002. /21/ Filed herewith. 25 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 26, 2003 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 31, 2003 - -------------------------- William J. Bologna /s/ James J. Apostolakis Vice Chairman of the Board of March 26, 2003 - -------------------------- Directors James J. Apostolakis /s/ Fred Wilkinson President and Chief Executive March 28, 2003 - -------------------------- Officer Fred Wilkinson /s/ David L. Weinberg Vice President-Finance and March 26, 2003 - -------------------------- Administration, Chief Financial David L. Weinberg Officer and Treasurer (Principal Financial and Accounting Officer) /s/ Jean Carvais Director March 27, 2003 - -------------------------- Jean Carvais /s/ Max Link Director March 31, 2003 - -------------------------- Max Link /s/ Denis M. O'Donnell Director March 28, 2003 - -------------------------- Denis M. O'Donnell /s/ Selwyn P. Oskowitz Director March 31, 2003 - -------------------------- Selwyn P. Oskowitz /s/ Robert C. Strauss Director March 28, 2003 - -------------------------- Robert C. Strauss 26 CEO CERTIFICATION I, Fred Wilkinson, Chief Executive Officer of the Company, certify that: 1. I have reviewed this annual report on Form 10-K of Columbia Laboratories, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 28, 2003 /s/ Fred Wilkinson ----------------------------- Fred Wilkinson Chief Executive Officer 27 CFO CERTIFICATION I, David L. Weinberg, Chief Financial Officer of the Company, certify that: 1. I have reviewed this annual report on Form 10-K of Columbia Laboratories, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 28, 2003 /s/ David L. Weinberg ----------------------------- David L. Weinberg Chief Financial Officer 28 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page ---- Report of Independent Certified Public Accountants F-2 Consolidated Balance Sheets as of December 31, 2002 and 2001 F-3 Consolidated Statements of Operations for the Three Years Ended December 31, 2002 F-5 Consolidated Statements of Comprehensive Operations for the Three Years Ended December 31, 2002 F-6 Consolidated Statements of Stockholders' Equity (Deficiency) for the Three Years Ended December 31, 2002 F-7 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2002 F-9 Notes to Consolidated Financial Statements F-11 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, 2002 and 2001, and the related consolidated statements of operations, comprehensive operations, stockholders' equity (deficiency) and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. 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, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. GOLDSTEIN GOLUB KESSLER LLP New York, New York February 14, 2003, except for Note 11 as to which the date is March 5, 2003 F-2 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 ASSETS
2002 2001 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents, of which $3,152,745 is interest-bearing as of December 31, 2002 $ 5,018,365 $ 4,060,836 Accounts receivable, net of allowance for doubtful accounts of $30,000 and $40,000 in 2002 and 2001, respectively 2,198,181 811,648 Inventories 2,325,210 992,453 Prepaid expenses 825,833 538,262 Loans receivable, related parties 211,122 200,087 ----------- ----------- Total current assets 10,578,711 6,603,286 ----------- ----------- PROPERTY AND EQUIPMENT: Machinery and equipment 2,268,502 2,237,332 Computer software 401,356 25,084 Office equipment and furniture and fixtures 535,359 173,547 ----------- ----------- 3,205,217 2,435,963 Less - accumulated depreciation and amortization (2,332,782) (2,079,329) ----------- ----------- 872,435 356,634 ----------- ----------- INTANGIBLE ASSETS, net 1,163,341 1,453,281 ----------- ----------- OTHER ASSETS 151,820 146,823 ----------- ----------- TOTAL ASSETS $12,766,307 $ 8,560,024 =========== ===========
(Continued) F-3 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 (Continued)
2002 2001 ------------- ------------- CURRENT LIABILITIES: Notes payable - short-term $ 586,667 $ -- Accounts payable 3,489,118 630,468 Accrued expenses 1,785,606 1,350,735 ------------- ------------- Total current liabilities 5,861,391 1,981,203 NOTES PAYABLE - long-term 10,000,000 10,000,000 DEFERRED REVENUE 3,949,859 -- OTHER LONG-TERM LIABILITIES - Royalties payable 1,350,000 -- ------------- ------------- TOTAL LIABILITIES 21,161,250 11,981,203 ------------- ------------- COMMITMENTS AND CONTINGENCIES (Note 7) STOCKHOLDERS' EQUITY (DEFICIENCY): Preferred stock, $.01 par value; 1,000,000 shares authorized: Series B Convertible Preferred Stock, 1,130 and 1,630 shares issued and outstanding in 2002 and 2001, respectively (liquidation preference of $113,000 at December 31, 2002) 11 16 Series C Convertible Preferred Stock, 3,750 shares issued and outstanding in 2002 and 2001, respectively 38 38 (liquidation preference of $3,750,000 at December 31, 2002) Common stock, $.01 par value; 100,000,000 shares authorized; 35,453,722 and 32,752,425 shares issued and outstanding in 2002 and 2001, respectively 354,537 327,524 Capital in excess of par value 126,664,805 114,917,247 Accumulated deficit (135,497,195) (118,647,406) Accumulated other comprehensive income (loss) 82,861 (18,598) ------------- ------------- Total stockholders' equity (deficiency) (8,394,943) (3,421,179) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 12,766,307 $ 8,560,024 ============= =============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-4 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 2002 2002 2001 2000 ------------ ------------ ------------ NET SALES $ 9,418,549 $ 2,153,854 $ 13,173,129 COST OF GOODS SOLD 5,228,519 2,658,690 4,547,164 ------------ ------------ ------------ Gross profit 4,190,030 (504,836) 8,625,965 ------------ ------------ ------------ OPERATING EXPENSES: Selling and distribution 6,053,732 1,054,472 2,120,551 General and administrative 5,135,121 4,254,143 3,981,696 Research and development 5,350,156 7,132,720 4,767,135 Litigation settlement expense 3,960,000 -- -- Product recall costs (449,489) 1,500,000 -- Corporate restructuring expense -- 1,000,000 285,000 ------------ ------------ ------------ Total operating expenses 20,049,520 14,941,335 11,154,382 ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest income 51,844 246,937 367,294 Interest expense (852,864) (755,398) (755,427) Other, net (189,279) 109,005 313,619 ------------ ------------ ------------ (990,299) (399,456) (74,514) ------------ ------------ ------------ Net loss $(16,849,789) $(15,845,627) $ (2,602,931) ============ ============ ============ LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.50) $ (0.51) $ (0.09) ============ ============ ============ WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: BASIC AND DILUTED 34,392,060 31,243,307 30,235,000 ============ ============ ============ The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 2002 2002 2001 2000 ------------ ------------ ----------- NET LOSS $(16,849,789) $(15,845,627) $(2,602,931) Other comprehensive income: Foreign curency translation, net of tax 101,459 18,054 58,051 ------------ ------------ ----------- Comprehensive loss $(16,748,330) $(15,827,573) $(2,544,880) ============ ============ =========== The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE THREE YEARS ENDED DECEMBER 31, 2002
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, 2000 923 $ 9 1,630 $16 5,260 $ 53 29,124,686 $291,246 Options exercised -- -- -- -- -- -- 793,107 7,931 Warrants exercised -- -- -- -- -- -- 166,488 1,665 Dividends on preferred stock -- -- -- -- -- -- -- -- Fair market value of warrants granted to non-employees -- -- -- -- -- -- -- Fair market value of options granted to non-employees -- -- -- -- -- -- -- -- Shares issued for product acquisition 53,933 540 Translation adjustment -- -- -- -- -- -- -- -- Conversion of preferred stock (890) (9) -- -- (1,210) (12) 356,710 3,567 Net loss -- -- -- -- -- -- -- -- ---- --- ----- --- ------ ---- ---------- -------- Balance, December 31, 2000 33 -- 1,630 16 4,050 41 30,494,924 304,949 Issuance of common stock 2,146,459 21,465 Options exercised -- -- -- -- -- -- 7,500 75 Warrants exercised -- -- -- -- -- -- 8,557 85 Dividends on preferred stock -- -- -- -- -- -- -- -- Fair market value of options granted to non-employees -- -- -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- -- -- Conversion of preferred stock (33) -- -- -- (300) (3) 94,985 950 Net loss -- -- -- -- -- -- -- -- ---- --- ----- --- ------ ---- ---------- -------- Balance, December 31, 2001 -- $-- 1,630 $16 3,750 $ 38 32,752,425 $327,524 ---- --- ----- --- ------ ---- ---------- -------- Capital in Accumulated Other Excess of Accumulated Comprehensive Par Value Deficit Income (Loss) Total ------------ ------------- ----------------- ------------ Balance, January 1, 2000 $ 99,575,803 $(100,198,848) $ 57,507 $ (274,214) Options exercised 5,045,604 -- -- 5,053,535 Warrants exercised 836,298 -- -- 837,963 Dividends on preferred stock (217,940) -- -- (217,940) Fair market value of warrants granted to non-employees 60,009 -- -- 60,009 Fair market value of options granted to non-employees 95,506 -- -- 95,506 Shares issued for product acquisition 599,460 600,000 Translation adjustment -- -- (58,051) (58,051) Conversion of preferred stock (3,546) -- -- -- Net loss -- (2,602,931) -- (2,602,931) ------------ ------------- -------- ------------ Balance, December 31, 2000 105,991,194 (102,801,779) (544) 3,493,877 Issuance of common stock 8,962,936 8,984,401 Options exercised 41,175 -- -- 41,250 Warrants exercised 12,165 -- -- 12,250 Dividends on preferred stock (201,663) -- -- (201,663) Fair market value of options granted to non-employees 112,387 -- -- 112,387 Translation adjustment -- -- (18,054) (18,054) Conversion of preferred stock (947) -- -- -- Net loss -- (15,845,627) -- (15,845,627) ------------ ------------- -------- ------------ Balance, December 31, 2001 $114,917,247 $(118,647,406) $(18,598) $ (3,421,179) ------------ ------------- -------- ------------
(Continue) F-7 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE THREE YEARS ENDED DECEMBER 31, 2002 (Continued)
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, 2001 -- $-- 1,630 $16 3,750 $38 32,752,425 $327,524 Issuance of common stock 2,691,012 26,910 Dividends on preferred stock -- -- -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- -- -- Conversion of preferred stock -- -- (500) (5) -- -- 10,285 103 Net loss -- -- -- -- -- -- -- -- --- --- ----- --- ----- --- ---------- -------- Balance, December 31, 2002 -- $-- 1,130 $11 3,750 $38 35,453,722 $354,537 === === ===== === ===== === ========== ======== Capital in Accumulated Other Excess of Accumulated Comprehensive Par Value Deficit Income (Loss) Total ------------ ------------- ----------------- ------------ Balance, December 31, 2001 $114,917,247 $(118,647,406) $(18,598) $ (3,421,179) Issuance of common stock 11,935,156 11,962,066 Dividends on preferred stock (187,500) -- -- (187,500) Translation adjustment -- -- 101,459 101,459 Conversion of preferred stock (98) -- -- -- Net loss -- (16,849,789) -- (16,849,789) ------------ ------------- -------- ------------ Balance, December 31, 2002 $126,664,805 $(135,497,195) $ 82,861 $ (8,394,943) ============ ============= ======== ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-8 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 2002
2002 2001 2000 ------------ ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(16,849,789) $(15,845,627) $(2,602,931) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 579,412 688,198 753,588 Provision for doubtful accounts (1,191) 17,000 (6,523) Provision for returns and allowances 310,183 368,273 164,816 Write-down of inventories 453,797 166,905 197,626 Loss on disposal of fixed assets 6,384 27,961 47,817 Gain on sale of assets -- -- (158,629) Issuance of warrants and options for consulting services -- 112,387 155,515 Changes in assets and liabilities - (Increase) decrease in: Accounts receivable (1,695,525) 2,105,880 (1,626,008) Inventories (1,786,554) (179,620) 671,452 Prepaid expenses (287,571) 220,341 (289,655) Other assets (16,032) 195,141 441,861 Increase (decrease) in: Accounts payable 2,858,650 (165,040) (1,293,752) Accrued expenses 1,784,871 220,889 (42,721) Deferred revenue 3,949,859 (100,000) -- ------------ ------------ ----------- Net cash used in operating activities (10,693,506) (12,167,312) (3,587,544) ------------ ------------ -----------
(Continued) F-9 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 2002 (Continued)
2002 2001 2000 ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of assets $ -- $ -- $4,119,729 Purchase of property and equipment (808,104) (188,602) (16,168) Acquisition of intangibles -- -- (525,000) ----------- ----------- ---------- Net cash provided by (used in) investing activities (808,104) (188,602) 3,578,561 ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock 11,962,067 8,984,401 -- Issuance of note payable 3,960,000 -- -- Payment of note payable (3,373,333) -- -- Dividends paid (187,500) (201,663) (217,940) Proceeds from exercise of options and warrants -- 53,500 5,891,498 ----------- ----------- ---------- Net cash provided by financing activities 12,361,234 8,836,238 5,673,558 ----------- ----------- ---------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 97,905 (14,195) (51,953) ----------- ----------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 957,529 (3,533,871) 5,612,622 CASH AND CASH EQUIVALENTS, Beginning of year 4,060,836 7,594,707 1,982,085 ----------- ----------- ---------- CASH AND CASH EQUIVALENTS, End of year $ 5,018,365 $ 4,060,836 $7,594,707 =========== =========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 807,595 $ 712,500 $ 712,500 =========== =========== ========== Taxes paid $ 93,900 $ 58,300 $ 19,700 =========== =========== ========== NON-CASH INVESTING AND FINANCING ACTIVITIES Common stock issued for trademark $ -- $ -- $ 600,000 =========== =========== ==========
The accompanying notes to consolidated financial statements are an integral part of these statements F-10 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 is dedicated to research and development of women's healthcare and endocrinology products, including those intended to treat infertility, endometriosis and hormonal deficiencies. The Company is also developing hormonal products for men and a buccal delivery system for peptides. The Company's products primarily utilize its patented Bioadhesive Delivery System 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. Accounts Receivable- Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts, The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. 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, --------------------- 2002 2001 ---------- -------- Finished goods $1,564,136 $426,206 Raw materials 761,074 566,247 ---------- -------- $2,325,210 $992,453 ========== ======== Shipping costs are included in selling and distribution expenses. F-11 Property and Equipment- Property and equipment is 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 Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs that do not extend the term 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. Concentration of Credit Risk- The Company sells its products to customers worldwide. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Management believes that the Company is not subject to any significant concentrations of credit risk. Intangible Assets- Intangible assets consist of the following: December 31, ------------------------- 2002 2001 ----------- ----------- Patents $ 2,600,000 $ 2,600,000 Trademarks 1,566,000 1,581,644 Licensing rights 100,000 100,000 ----------- ----------- 4,266,000 4,281,644 Less accumulated amortization (3,102,659) (2,828,363) ----------- ----------- $ 1,163,341 $ 1,453,281 =========== =========== 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 was capitalized and was being amortized over a 15-year period. Effective May 5, 2000, the Company sold various tangible and intangible assets related to the U.S. rights for Replens for a total of $4.5 million cash. The gain of approximately $159,000 was included in Other Income, net in the accompanying consolidated statements of operations. On March 16, 2000, the Company acquired the U.S. rights for the product Advantage-S. The cost of the acquisition was $1,225,000 (in cash and Company common stock) which is being amortized over a 15-year period. Aggregate amortization expense for the year ended December 31, 2002 was $289,941. F-12 Future estimated amortization expense is as follows: 2003 $242,924 2004 83,334 2005 81,667 2006 81,667 2007 81,667 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. Accrued Expenses- Accrued expenses consist of the following: December 31, ----------------------- 2002 2001 ---------- ---------- Royalties $1,105,696 $ 35,694 Professional fees 108,629 305,602 Interest 210,273 267,813 Other 361,008 184,566 Product recall costs -- 404,060 Corporate restructuring expense -- 153,000 ---------- ---------- $1,785,606 $1,350,735 ========== ========== Income Taxes- The reconciliation of the effective income tax rate to the Federal statutory rate is as follows: 2002 2001 2000 ----- ----- ----- Federal income tax rate (34.0)% (34.0)% (34.0)% Increase in valuation allowance 34.0 34.0 34.0 ----- ----- ----- Effective income tax rate 0.0% 0.0% 0.0% ===== ===== ===== As of December 31, 2002, the Company has U.S. tax net operating loss carryforwards of approximately $64 million which expire through 2022. The Company also has unused tax credits of approximately $949,000 which expire at various dates through 2012. Utilization of net operating loss carryforwards may be limited in any year due to limitations in the Internal Revenue Code. As of December 31, 2002 and 2001, other assets in the accompanying consolidated balance sheets include deferred tax assets of approximately $23 million and $21 million, respectively F-13 (comprised primarily of a net operating loss carryforward), for which a 100% valuation allowance has been recorded since the realizability of the deferred tax assets are not determinable. Revenue Recognition- Revenues from the sale of products are recorded at the time goods are shipped to customers. Provisions for returns, rebates and other allowances are estimated based on a percentage of sales and are recorded in the same period the related sales are recognized. 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 in net sales over the term of the license. Advertising Expense- All costs associated with advertising and promoting products are expensed in the year incurred. Advertising and promotion expense was approximately $1,317,000 in 2002, $55,000 in 2001 and $503,000 in 2000. Research and Development Costs- Company-sponsored research and development costs related to future products are expensed as incurred. Loss per Share- 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 diluted 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. F-14 Stock-based Compensation- The Company applies APB No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for the stock option plans and warrants issued to employees. Had compensation cost been determined based on the fair value at the grant dates for those awards consistent with the method of SFAS 123, the Company's net loss per share would have been increased to the pro forma amounts indicated below. 2002 2001 2000 ------------ ------------ ----------- Net loss, as reported $(16,849,789) $(15,845,627) $(2,602,931) Deduct: Total stock-based employee compensation expense determined under-fair-value based methods for all awards (1,826,347) (4,427,817) (1,584,554) ------------ ------------ ----------- Pro forma net loss $(18,676,136) $(20,273,444) $(4,187,485) ============ ============ =========== Loss per share: As reported $ (0.50) $ (0.51) $ (0.09) ============ ============ =========== Pro forma $ (0.54) $ 0.65 $ 0.15 ============ ============ =========== 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 5% in 2002 and 2001(6% in 2000) 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 57.8% for 2002, 86.4% for 2001 and 87.2% for 2000 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. The weighted-average fair value of options and warrants granted to employees during 2002 and 2001 was $1.81 and $3.66, respectively. Product Recall Costs- Product recall costs represent the direct out-of-pocket costs related to the recall of the product Crinone that took place in April 2001. In 2002, the unused portion of the accrual was reversed. Corporate Restructuring Expense- During the second quarter of 2001, the Company's management decided to close the France office. The Company recorded a restructuring charge for the anticipated costs associated with closing the office consisting of employee severance payments and other costs. 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. Reclassification of Prior-year Amounts- Prior-year financial statements have been reclassified to conform to the 2002 presentation. (2) STRATEGIC ALLIANCE AGREEMENTS: In May 1995, the Company entered into a worldwide license and supply agreement, except for South Africa, with American Home Products Corporation ("AHP") under which the Wyeth-Ayerst Laboratories division of AHP F-15 marketed Crinone. The Company supplied 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 supplies Crinone to Ares Trading S.A. ("Serono") under the same terms as in the agreement with AHP. In June 2002, as part of the settlement of litigation between the two companies, the Company acquired the right to market a second brand of its 8% and 4% progesterone gel products under the trade name "Prochieve (TM)" to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. Under this agreement the Company is required to pay a 30% royalty to Serono based on net sales of the products. The Company paid approximately $985,000 to Serono in accordance with this agreement for the year ended December 31, 2002. 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 $540,000, net of expenses, and expects to receive future milestone payments as products are made available by the Company. Effective May 5, 2000, the Company sold various tangible and intangible assets, related to the U.S. rights for Replens, to Lil' Drug Store Products, Inc. for a total of $4.5 million cash. Additionally, the purchaser agreed to buy up to $500,000 of Replens inventory from the Company and to pay future royalties of up to $2 million equal to 10% of future U.S. sales of Replens. Additionally, effective May 5, 2000, the Company licensed its Legatrin PM, Legatrin GCM, Vaporizer in a Bottle and Diasorb brands to the same purchaser mentioned above. Under the terms of these agreements, the Company will receive license fees equal to 20% of the licensee's net sales of these brands. These agreements each have five-year terms with provisions for renewal and contain options that allow the licensee to acquire these brands from the Company. On December 29, 2000, Lil' Drug Store Products, Inc. acquired the Vaporizer in a Bottle brand for $201,800. On July 31, 2002, the Company and Quintiles Transnational Corp. ("Quintiles") entered into an agreement to commercialize the Company's portfolio of women's healthcare products in the United States. Under the terms of this agreement, Quintiles' commercialization unit, Innovex, will provide a dedicated team of 55 sales representatives on a three-year, fee-for-service basis, to commercialize the Company's women's healthcare products. In a second agreement dated July 31, 2002, Quintiles' strategic investment group, PharmaBio Development, agreed to pay $4.5 million, to be paid in four equal quarterly installments commencing third quarter 2002 for the right to receive a 5% royalty on the net sales of the Company's women's healthcare products in the United States for five years beginning in the first quarter of 2003. The royalty payments are subject to minimum ($8 million) and maximum ($12 million) amounts and since the minimum amount is in excess of the amount to be received by the Company, the Company has recorded the $2.25 million received through December 31, 2002 as a liability. The excess of the minimum to be paid by the Company over the $4.5 million to be received by the Company will be recorded as an expense over the five-year term of the agreement. On October 16, 2002, the Company and Ardana Bioscience, Ltd. ("Ardana") entered into a license and supply agreement for the Company's Striant(TM) testosterone buccal bioadhesive product in 18 European countries (excluding Italy). Under the terms of the agreement, Ardana will market, distribute and sell Striant(TM). In exchange for these rights, the Company will receive total payments of $8 million, including $4 million in signature and milestone fees received in the fourth quarter of 2002. Initial regulatory approval of the U.K. application will be the basis for mutual recognition applications to be filed in the rest of Europe. Additional milestone payments totaling $2 million are due upon marketing approvals in major European countries included in the agreement. A performance payment of $2 million is also due upon achievement of a certain level of sales. Ardana will purchase its requirements of product from the Company during the term of the agreement. The agreement shall continue for a period of the later of 10 years from the first commercial sale of the finished product by Ardana or the date of expiration or lapse of the last to expire or lapse Company's patent rights in the territory, determined on a country by country basis. The Company will recognize revenue on this agreement over a 10-year period and accordingly has recognized revenue of $50,141 in the accompanying consolidated statements of operations. The remaining $3,949,854 is shown as deferred revenue in the accompanying consolidated balance sheets. The Company has also entered into strategic alliance agreements with various pharmaceutical companies for the foreign marketing and distribution of Replens, RepHresh and Advantage-S. F-16 (3) PRODUCT RECALL: On April 5, 2001, the Company announced that it had requested its licensee, Serono, to voluntarily recall a number of batches of Crinone, a progesterone vaginal gel used in the treatment of infertile women. The recall was initiated due to an application problem of the gel in the recalled batches. The Company estimated that the direct out-of-pocket costs related to the recall would cost approximately $1.5 million, which was recorded in the first quarter of 2001. The Company's original estimate of the expenses necessary to complete the product recall exceeded the actual expense by approximately $449,000. This amount is shown as a reduction in 2002 operating expenses in the consolidated statements of operations. (4) NOTES PAYABLE: Notes payable consist of the following: December 31, ------------------------- 2002 2001 ----------- ----------- 7.125% convertible subordinated note payable - due March 2005 $10,000,000 $10,000,000 9.00% note payable - payable in monthly installments 586,667 -- ----------- ----------- 10,586,667 10,000,000 Less: current portion (586,667) -- ----------- ----------- $10,000,000 $10,000,000 =========== =========== 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 7.125% which is payable semiannually 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. As part of the settlement with Serono in June 2002, the Company issued to Serono a promissory note payable in the original amount of $3,960,000 with interest on the unpaid balance at the fixed rate of 9.00% per annum. Principal and interest are paid in equal monthly installments of $220,000 of principal plus accrued interest. Pursuant to the note, the Company is obligated to pay down the note by an amount equal to one-third of the proceeds from the sale by the Company of its equity securities. The Company paid $1,833,333 (one-third of the $5,500,000 raised by the Company through the sale of its Common Stock in July 2002). The payment was applied in reverse order of payments due. At December 31, 2002, the Company is required to make monthly payments of $220,000 through February 2003 and a final payment of $146,667 in March 2003. The carrying amount of the Company's notes payable approximate fair value using the Company's estimated incremental borrowing rate. (5) 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 paid cumulative dividends at a rate of 8% per annum F-17 payable quarterly and each share was convertible into 12.36 shares of Common Stock. At December 31, 2002, all of the Series A Preferred Stock has been converted. 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 B Preferred Stock are entitled to $100 per share. The Series B Preferred Stock will be automatically converted into Common Stock upon the occurrence of certain events. Holders of the Series B Preferred Stock are entitled to one vote for each share of Common Stock into which the preferred stock is convertible. In April 2002, 500 shares of the Series B Preferred Stock were converted into 10,285 shares of the Common Stock. 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 24 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 or (ii) 100% of the average of the closing prices during the three trading days immediately preceding the conversion notice. The Series C Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day of the quarter. On March 12, 2002, the Company adopted a Stockholder Rights Plan ("Rights Plan") designed to protect company stockholders in the event of takeover activity that would deny them the full value of their investment. The Rights Plan was not adopted in response to any specific takeover threat. In adopting the Rights Plan, the Board declared a dividend distribution of one preferred stock purchase right for each outstanding share of Common Stock of the Company, payable to stockholders of record at the close of business on March 22, 2002. The rights will become exercisable only in the event, with certain exceptions, a person or group of affiliated or associated persons acquires 15% or more of the Company's voting stock, or a person or group of affiliated or associated persons commences a tender or exchange offer, which if successfully consummated, would result in such person or group owning 15% or more of the Company's voting stock. The rights will expire on March 12, 2012. Each right, once exercisable, will entitle the holder (other than rights owned by an acquiring person or group) to buy one one-thousandth of a share of a series of the Company's Series D Junior Participating Preferred Stock at a price of $30 per one-thousandth of a share, subject to adjustments. In addition, upon the occurrence of certain events, holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase either the Company's preferred stock or shares in an "acquiring entity" at approximately half of market value. Further, at any time after a person or group acquires 15% or more (but less than 50%) of the Company's outstanding voting stock, subject to certain exceptions, the Board of Directors may, at its option, exchange part or all of the rights (other than rights held by an acquiring person or group) for shares of the Company's common stock having a fair market value on the date of such acquisition equal to the excess of (i) the fair market value of preferred stock issuable upon exercise of the rights over (ii) the exercise price of the rights. The Company generally will be entitled to redeem the rights at $0.01 per right at any time prior to the close of business on the tenth day after there has been a public announcement of the beneficial ownership by any person or group of 15% or more of the Company's voting stock, subject to certain exceptions. These rights are deemed to have no value and accordingly have not been recorded in the accompanying financial statements. Common Stock- Effective as of February 6, 2001, the Company entered into the Amended and Restated Common Stock Purchase Agreement with an institutional investor to sell up to $16.5 million of the Common Stock, under the Registration Statement, the Prospectus and the related Prospectus Supplement dated February 6, 2001 and amended on April 13, 2001. Pursuant to the Purchase Agreement, the Company may, from time to time over the two-year term of the Purchase Agreement and at its sole discretion, issue and sell to the institutional investor up to $16.5 million of the Common Stock, subject to certain conditions, at a price per share based on the daily volume weighted average price of the Common Stock over a certain period of time less a discount ranging from 5% to 7%. In addition, during the period in which the Company elects to issue and sell shares of the Common Stock to the institutional investor, the Company may also, at its sole discretion, grant the institutional investor a call option at the same discount for the applicable F-18 period to purchase additional shares of the Common Stock up to the applicable amount being sold by the Company in such period, subject to the overall limit of $16.5 million described above. The Company and the institutional investor have agreed to extend the term of the Agreement until February 6, 2005. All other terms remain the same. At December 31, 2002, $9 million may be sold under the Agreement subject to the filing of a registration relating to the amendment becoming effective. During 2002, the Company issued 2,691,012 shares of its common stock to several institutional investors, which resulted in the Company receiving $11,962,067 after expenses. $6,500,000 of the gross proceeds was received pursuant to the Purchase Agreement described in the preceding paragraph. Warrants- As of December 31, 2002, the Company had warrants outstanding for the purchase of 921,475 shares of Common Stock. Information on outstanding warrants is as follows: Exercise Price - -------- $3.50 146,475 4.81 225,000 5.85 100,000 7.06 25,000 7.50 75,000 8.35 350,000 ------- 921,475 ======= During 2001, a warrant to purchase 350,000 shares of Common Stock at an exercise price of $8.35 was issued pursuant to an employment agreement with the Company's new President and Chief Executive Officer. A warrant to purchase 100,000 shares of Common Stock at an exercise price of $5.85 per share was issued to an officer and director of the Company. As of December 31, 2002, 658,975 warrants were exercisable. Stock Option Plans- 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 were 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 6,000,000 shares of Common Stock have been reserved for issuance. F-19 A summary of the status of the Company's two stock option plans as of December 31, 2002, 2001 and 2000 and changes during the years ending on those dates is presented below:
2002 2001 2000 -------------------- -------------------- -------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------- -------- --------- -------- --------- -------- Outstanding at beginning of year 6,218,643 $8.69 5,550,143 $9.06 5,671,438 $ 8.83 Granted 692,500 4.18 761,000 5.94 687,000 8.21 Exercised -- -- (7,500) 5.50 (793,107) 6.40 Forfeited (127,000) 8.67 (85,000) 8.99 (15,188) 13.25 --------- --------- --------- Outstanding at end of year 6,784,143 8.23 6,218,643 8.69 5,550,143 9.06 ========= ========= ========= Options exercisable at year end 5,566,943 5,420,043 4,803,143 ========= ========= =========
The following table summarizes information about stock options outstanding at December 31, 2002:
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, 2002 Life (Years) Price at December 31, 2002 Price - --------------- -------------------- ------------ -------- -------------------- -------- $3.19 - $4.00 482,500 8.43 $ 3.53 110,000 $ 3.26 $4.06 - $7.90 3,312,143 4.80 5.20 2,476,443 5.11 $8.06 - $12.13 1,830,500 5.10 10.60 1,821,500 10.61 $12.25 - $18.63 1,159,000 4.15 15.09 1,159,000 15.09 --------- --------- $3.19 - $18.63 6,784,143 5.03 8.23 5,566,943 8.95 ========= =========
F-20 (6) LOSS PER COMMON AND POTENTIAL COMMON SHARE: The calculation of basic and diluted loss per common and potential common share is as follows: 2002 2001 2000 ------------ ------------ ----------- Net loss $(16,849,789) $(15,845,627) $(2,602,931) Less: Preferred stock dividends (187,500) (201,663) (217,940) ------------ ------------ ----------- Net loss applicable to common stock $(17,037,289) $(16,047,290) $(2,820,871) ============ ============ =========== Basic and diluted: Weighted average number of common shares outstanding 34,392,060 31,243,307 30,235,000 ============ ============ =========== Basic and diluted net loss per common share $ (0.50) $ (0.51) $ (0.09) ============ ============ =========== (7) 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. 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, 2002, 2001 and 2000 totaled $323,977, $450,550 and $548,914, respectively. Future minimum lease payments as of December 31, 2001 are as follows: 2003 $323,512 2004 274,841 2005 209,172 2006 201,097 2007 125,216 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 2% 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 F-21 terms of the agreement, the Company is obligated to pay a royalty equal to 5% on United States net sales of Diasorb. In November 2002, the Company was informed by the licensor that the license will not be renewed after May 19, 2003. U. S. Diasorb sales in 2002 were $148,555 on which the Company received $29,000 in royalty income. In June 2002, as part of the settlement of litigation between Serono and the Company, the Company acquired the right to market a second brand of its 8% and 4% progesterone gel products under the trade name "Prochieve (TM)" to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. Under this agreement the Company is required to pay a 30% royalty to Serono based on net sales of the products. On July 31, 2002, Quintiles' strategic investment group, PharmaBio Development agreed to pay $4.5 million, to be paid in four equal quarterly installments commencing third quarter 2002 for the right to receive a 5% royalty on the net sales of the Company's women's healthcare products in the United States for five years beginning in the first quarter of 2003. The royalty payments are subject to minimum and maximum amounts. Geographic Area of Operations- Included in the Company's Consolidated Balance sheet at December 31, 2002 are the net assets of the Company's subsidiaries located in Bermuda, France and the United Kingdom that total approximately $7.5 million. Employment Agreements- In March 2001, the Company entered into a three-year employment agreement with an individual to serve as President and Chief Executive Officer of the Company. Pursuant to his employment agreement, the employee is entitled to a base salary of $450,000 per year plus a minimum 10% bonus. Additionally, the employee was granted options to purchase 500,000 shares of the Company's Common Stock at an exercise price of $5.85 per share and a warrant to purchase 350,000 shares of the Company's Common Stock at an exercise price of $8.35 per share. The options and warrants vest ratably over a four-year period. 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. No provision was required in 2002, 2001 and 2000. In November 2002, the Incentive Compensation Plan was terminated by the Board of Directors. Legal Proceedings- In August 2001, Ares Trading S.A. ("Serono") filed a lawsuit in the Supreme Court of the State of New York (the "Action") naming the Company as defendant. The Action set forth claims for an alleged breach of contract for failure to supply Crinone(R) in accordance with the supply agreement between the parties. In November 2001, the Company filed counterclaims against Serono. In June 2002, the Company reached a settlement with Serono. The companies agreed to release all claims against each other in Serono's suit against the Company and the Company's counterclaims against Serono. Under the terms of the settlement, Columbia has rights to market a second brand of its 8% and 4% progesterone gel products under the trade name "Prochieve (TM)" to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. Following the settlement, Columbia shipped additional Crinone product to Ares for the U.S. and European markets. Columbia had previously shipped three batches of Crinone(R) 8% which were used to support the March 8th re-launch by Serono in the U.S. This product was shipped at no charge to replace recalled product. As part of the settlement, Columbia gave Ares a note for $3.96 million (currently $586,667) to be paid over an eighteen-month period to cover out of pocket costs resulting from the recall. This amount is shown as litigation settlement expense in Operating Expenses of the Consolidated Statements of Operations. Other claims and lawsuits have been filed against the Company. Although the results of pending litigation are always uncertain, the Company does not believe the results of any such actions, individually or in the aggregate, will have a material adverse effect on our financial position or results of operation. Additionally, the Company believes that it has adequate reserves or adequate insurance coverage for any unfavorable outcome resulting from these actions. F-22 (8) RELATED-PARTY TRANSACTIONS: During 1993, the Company loaned two individuals, who at the time were employees, directors and stockholders of the Company, an aggregate of $190,350. These notes that bore interest at 10% per annum and which were due on or before December 7, 1997, were subsequently extended through December 7, 1999. One of the loans was paid in full, including interest, in 2001. At December 31, 2002, a balance of $211,122 remains outstanding, from a current officer, director and shareholder, and is included in "loans receivable, related party" in the accompanying 2002 Consolidated Balance Sheet at its face value plus interest which approximates fair value. (9) SEGMENT INFORMATION: The Company and its subsidiaries are engaged in one line of business, the development, licensing and sale of pharmaceutical products. One customer/licensee accounted for approximately 14% of 2002 and 44% of 2001 consolidated net sales. A second customer accounted for 41% of 2002 consolidated net sales, 29% of 2001 consolidated net sales and 73% of 2000 consolidated net sales. A third customer accounted for approximately 17% of 2002 consolidated net sales. The following table shows selected information by geographic area: Net Loss from Identifiable Sales Operations Assets ------------ ------------ ------------ As of and for the year ended December 31, 2002- United States $ 6,458,323 $ (8,190,386) $ 5,301,288 Europe 2,960,226 (7,669,104) 7,465,019 ------------ ------------ ------------ $ 9,418,549 $(15,859,490) $ 12,766,307 ============ ============ ============ As of and for the year ended December 31, 2001- United States $ 1,019,187 $ (8,748,062) $ 5,809,982 Europe 1,134,667 (6,698,109) 2,750,042 ------------ ------------ ------------ $ 2,153,854 $(15,446,171) $ 8,560,024 ============ ============ ============ As of and for the year ended December 31, 2000- United States $ 10,346,482 $ (137,527) $ 7,361,419 Europe 2,826,647 (2,390,890) 8,157,812 ------------ ------------ ------------ $ 13,173,129 $ (2,528,417) $ 15,519,231 ============ ============ ============ F-23 (10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED): The following table summarizes selected quarterly data for the years ended December 31, 2002 and 2001:
First Second Third Fourth Full Quarter Quarter Quarter Quarter Year ----------- ----------- ----------- ------------ ------------ 2002 Net sales $ 576,811 $ 2,455,149 $ 4,040,534 $ 2,346,055 $ 9,418,549 Gross profit (374,470) 1,553,401 2,124,162 886,937 4,190,030 Loss from operations (3,163,815) (4,597,202) (1,632,507) (6,465,966) (15,859,490) Net loss (3,380,942) (4,855,498) (1,879,189) (6,734,160) (16,849,789) Basic and diluted loss per common share (0.10) (0.14) (0.05) (0.19) (0.50) 2001 Net sales $ 926,975 $ 654,747 $ 411,354 $ 160,778 $ 2,153,854 Gross profit 322,349 (57,577) (263,667) (505,941) (504,836) Loss from operations (3,754,147) (4,300,713) (3,085,986) (4,305,325) (15,446,171) Net loss (3,818,929) (4,430,124) (3,240,507) (4,356,067) (15,845,627) Basic and diluted loss per common share (0.13) (0.14) (0.10) (0.14) (0.51)
(11) SUBSEQUENT EVENT: On March 5, 2003, Columbia Laboratories, Inc. and Quintiles Transnational Corp. announced an agreement to commercialize Columbia's Striant(TM) testosterone buccal bioadhesive product in the United States. Striant is currently under review by the U.S. Food and Drug Administration (FDA) for treatment of hypogonadism in men with a PDUFA date of June 19, 2003. Under the terms of the agreement, Quintiles' commercialization unit, Innovex, will provide a dedicated team of approximately 75 sales representatives for two-and-a-half years. Quintiles' strategic investment group, PharmaBio Development, will invest $15 million to be paid to Columbia over a 15-month period commencing with the signing of this agreement. In return, Quintiles will receive a 9% royalty on net sales of Striant in the United States up to agreed annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments will commence with the launch of Striant and are subject to minimum ($30 million) and maximum ($55 million) amounts. Columbia will be responsible for product distribution, regulatory and medical affairs, marketing and manufacturing. F-24 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENT SCHEDULE Page ---- Report of Independent Certified Public Accountants F-26 Schedule II-Valuation and Qualifying Accounts and Reserves F-27 F-25 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 financial statements of Columbia Laboratories, Inc. and Subsidiaries for each of the three years in the period ended December 31, 2001 included in this Form 10-K and have issued our report thereon dated February 14, 2003, except for Note 11 as to which the date is March 5, 2003. 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. This schedule has been subjected to the auditing procedures applied in the audits 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. GOLDSTEIN GOLUB KESSLER LLP New York, New York February 14, 2003, except for Note 11 as to which the date is March 5, 2003 F-26 COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 2002
Charged to Balance at (credited to) Balance beginning costs and at end Description of period expenses Deductions of period - ---------------------------------- ---------- ------------- ---------- --------- YEAR ENDED DECEMBER 31, 2002: Allowance for doubtful accounts $ 40,000 $(1,191) $ 8,809 $ 30,000 ======== ======= ======= ======== YEAR ENDED DECEMBER 31, 2001: Allowance for doubtful accounts $ 23,000 $17,000 $ -- $ 40,000 ======== ======= ======= ======== YEAR ENDED DECEMBER 31, 2000: Allowance for doubtful accounts $119,289 $(6,523) $90,306 $ 23,000 ======== ======= ======= ========
F-27 EXHIBIT INDEX Exhibit Numbers 10.37 -- License and Supply Agreement dated October 16, 2002 between the Company and Ardana Bioscience Limited 10.38 -- Development and License Agreement dated December 26, 2002 between the Company and Ardana Bioscience Limited 10.39 -- Amendment No. 1 to the Amended and Restated Common Stock Purchase Agreement by and between the Company and Acqua Wellington North American Equities Fund, Ltd., effective as of January 31, 2003 10.40 -- Investment and Royalty Agreement dated March 5, 2003 between the Company and PharmaBio Development Inc. 10.41 -- Sales Force Work Order #8872 pursuant to the Master Services Agreement having an Effective Date of July 31, 2002, between the Company and Innovex LP 21 -- Subsidiaries of the Company 99.1 -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 99.2 -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. EX-10.37 3 dex1037.txt LICENSE AND SUPPLY AGREEMENT Exhibit 10.37 Dated October 16th, 2002 ARDANA BIOSCIENCE LIMITED and COLUMBIA LABORATORIES (BERMUDA), LTD. and COLUMBIA LABORATORIES, INC. ------------------------------- LICENSE AND SUPPLY AGREEMENT ------------------------------- [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. LICENSE AND SUPPLY AGREEMENT, dated as of October 16th, 2002, between ARDANA BIOSCIENCE LIMITED, a company incorporated in England, with its registered office c/o Dundas & Wilson CS, Bush House, Aldwych, London WC2B 4PA, England ("Ardana") and COLUMBIA LABORATORIES (BERMUDA), LTD., a Bermuda corporation, having its office at Rosebank Center, 14 Bermudiana Road, Pembroke, HM08 Bermuda ("Columbia") and COLUMBIA LABORATORIES, INC., a US corporation incorporated in Delaware having its principal place of business at 220 S. Orange Avenue, Livingston, NJ 07039 ("Inc"). RECITALS: A. Columbia and its Affiliates (as hereafter defined) are engaged in, among other things, the research, development, manufacture, marketing, distribution and sale of drug products in Europe, the United States, and throughout the world. B. Ardana is engaged in, among other things, the research, development, marketing, distribution and sale of drug products in the Territory (as hereafter defined). C. Columbia is the owner of certain Patent Rights, Trademarks and Regulatory Applications (as hereafter defined) relating to the Product (as hereafter defined). D. It is intended that Columbia UK (as hereafter defined) shall file the European Regulatory Application (as hereinafter defined) relating to the Product and shall transfer the MAs (as hereafter defined) resulting from the same to Ardana upon receiving Regulatory Approval. E. Columbia is willing to grant to Ardana a license in the Territory and to supply Ardana with its requirements of Finished Product (as hereafter defined) for this purpose and Ardana desires to acquire such license and to buy such Finished Products upon and subject to the terms and conditions set forth hereunder. F. Inc has been made a party to this Agreement solely for the purposes of Clause 19.10 NOW THEREFORE, the Parties hereto agree as follows: 1 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1. DEFINITIONS 1.1 As used in this Agreement, the following definitions (in addition to other definitions set forth in this Agreement) shall apply: 1.1.1 "Affiliate" shall mean any entity controlling, controlled by or under the common control of Columbia or Ardana, as the case may be. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of more than (50%) percent of the outstanding shares or other voting rights of the subject entity or possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such entity; 1.1.2 "Agreement" shall mean this license and supply agreement (which expression shall be deemed to include the Recitals and Exhibits hereto); 1.1.3 "Applicable Laws" means all applicable laws, rules, regulations, directives and guidelines (including any amendments, extensions or replacements thereto) (i) in the Territory that apply to the Commercialization of the Product in the Territory; and (ii) in or outside the Territory that apply to the performance of either Party's obligations or covenants under this Agreement; 1.1.4 "Business Days" shall mean 9.30 am to 5.30 pm local time on a day other than a Saturday, Sunday, or public holiday in the UK (or any part thereof) or the USA; 1.1.5 "cGMP" shall mean manufacture in accordance with: (a) EC Directive 91/356/EEC as may be amended from time to time; (b) the current guide to good manufacturing practice for medicinal products published by the European Commission; and (c) the equivalent law or regulation in any country in the Territory; 2 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.6 "Certificate of Analysis" shall mean a document of that name as described in detail in the current guide to good manufacturing practice for medicinal products published by the European Commission; 1.1.7 "CMC Data " means that part of a Regulatory Application or Regulatory Approval containing the data and other know how relating to the chemistry and manufacturing controls and other manufacturing processes for the Product, including relating to the Packaging and Labelling; 1.1.8 "Columbia Patent Rights" means all Patent Rights owned by or licensed to Columbia containing claims reciting or covering Product as more particularly set out in Exhibit A; 1.1.9 "Columbia UK" means a company registered in England and Wales under company number 02425939 with the name Columbia Laboratories (UK) Limited; 1.1.10 "Commencement Date" means the date of execution of this Agreement; 1.1.11 "Commercialization", "Commercializing", or "Commercialize" shall mean all activities in the Territory relating to the import, export, promotion, marketing, detail, distribution, storage, handling, offering for sale and sale of the Finished Product; 1.1.12 "European Regulatory Application" means the Regulatory Application to be filed by Columbia UK with the Medicines Control Agency in the UK seeking Regulatory Approval for the Product in the UK and to be used by Columbia UK as the basis for mutual recognition Regulatory Applications in the Territory, as the same is modified or amended from time to time during the Regulatory Application process; 1.1.13 "Expert's Decision" means the procedure set out in Exhibit E; 1.1.14 "FDA" means the Governmental Authority in the USA with the name "Food and Drug Administration"; 3 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.15 "Finished Product" means Product in final Packaged and Labelled form ready for ultimate commercial sale or use 1.1.16 "First Commercial Sale" means the first invoiced commercial sale by Ardana, its Affiliates, agents or sublicensees in any country in the Territory after grant of Regulatory Approval and pricing approval (if required) for Finished Product in such country; 1.1.17 "Force Majeure" means in relation to either Party, any event or circumstance which is beyond the reasonable control of that Party and without the fault or negligence of that Party so affected which results in or causes the failure of that Party to perform any or all of its obligations under this Agreement, including, without limitation, inevitable accidents, perils of navigation, floods, fire, storms, drought, or other weather-related conditions, earthquakes, asteroid or meteor activity, explosion, hostilities, sabotage, act of vandalism, war (whether declared or undeclared), civil disturbances, order or act of any government, whether de jure or de facto or any official purporting to act under authority of any such government, illegality arising from domestic or foreign laws or regulations, insurrections, quarantine or custom restrictions, damage in factories or warehouses, strikes, lockouts, other labor difficulty or other disturbance at the Parties or the suppliers of Product, raw materials and/or excipients, energy or other supplies, breakdown of machinery or instruments or acts of God or other similar events beyond the reasonable control of the Party so affected resulting in hindrance of the performance by either Party of its obligations hereunder; 1.1.18 "Good Clinical Practice" or "GCP" shall mean clinical practice as set out in: (a) ICH Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any amendment thereof; and (b) any guidelines concerning good clinical practice published from time to time by the European Commission pursuant to Directive 2001/20/EC or any amendment thereof; and 4 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (c) US Code of Federal Regulations Title 21, Parts 50 (Protection of Human Subjects) and 56 (Institutional Review Boards), as may be amended from time to time; and (d) the Declaration of Helsinki as last amended at the 52nd World Medical Association October 2000 and any further amendments thereto; and (e) National Institute of Health Standards for the protection of human subjects as may be amended from time to time; and the equivalent law or regulation in any relevant territory. 1.1.19 "Good Industry Practice" shall mean in relation to any undertaking and any circumstance, the exercise of that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances; 1.1.20 "Governmental Authority" shall mean all governmental and regulatory bodies, agencies, departments or entities that regulate, direct or control commercial and other related activities in the Territory, including any relevant government health authority (or successor agency thereof) in any country or countries in the Territory whose approval is necessary to market the Finished Product in such country or countries in the Territory; 1.1.21 "Indication" shall mean all indications in men, including hypogonadism; 1.1.22 "Insolvency Event" shall mean, in relation to either Party, any one of the following: (a) a notice shall have been issued to convene a meeting for the purpose of passing a resolution to wind up that Party or such resolution shall have been passed other than a resolution for the solvent reconstruction or reorganisation of that Party or for the purpose of inclusion of any part of the share capital of that Party in the Official List of the London Stock Exchange or in the list of the American Stock Exchange or 5 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. quotation of the same on the National Association of Securities Dealers Automated Quotation System or any other international stock exchange or an application by that Party for registration as a public company in accordance with the requirements of the Companies Act 1985; or (b) a resolution shall have been passed by that Party's directors to seek a winding up or an administration order or a petition for a winding up or administration order shall have been presented against that Party which, in the case of a petition presented against a Party, shall not have been appealed within 7 days of having been lodged or such an order shall have been made and shall have been dismissed within thirty (30) days thereafter; or (c) a receiver, administrative receiver, receiver and manager, interim receiver, custodian, sequestrator or similar officer is appointed in respect of that Party or over a substantial part of its assets or any third party takes steps to appoint such an officer in respect of that Party or an encumbrancer takes steps to enforce and enforces its security which shall not have been dismissed by a court of competent jurisdiction within thirty (30) days thereafter; or (d) a proposal for a voluntary arrangement shall have been made in relation to that Party under Part I Insolvency Act 1986; or (e) a step or event shall have been taken or arisen outside the United Kingdom which is similar or analogous to any of the steps or events listed at (a) to (d) above in the case of Columbia under the laws of Bermuda and in the case of Columbia Laboratories Inc under the laws of USA but for avoidance of doubt including in the case of Columbia Laboratories, Inc. filing of a petition under the US Bankruptcy Code including a filing under Chapter 11 proceedings, which, in the case of a filing made against a Party, shall not have been appealed within 7 days of having been lodged or such an order shall have been made and dismissed within thirty (30) days thereafter; or 6 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (f) that Party takes any step (including starting negotiations) with a view to readjustment, rescheduling or deferral of any part of that Party's indebtedness, or proposes or makes any general assignment, composition or arrangements with or for the benefit of all or some of that Party's creditors or makes or suspends or threatens to suspend making payments to all or some of that Party's creditors or the Party submits to any type of voluntary arrangement; or (g) where that Party is resident in the United Kingdom it is deemed to be unable to pay its debts within the meaning of Section 123 Insolvency Act 1986; 1.1.23 "Label", "Labelled" or "Labelling" shall mean all labels and other written, printed or graphic matter upon (i) the Product or any container or wrapper utilized with the Product, or (ii) any written material accompanying the Product, including, without limitation, package inserts and patient information leaflet; 1.1.24 "Major Markets" shall mean [***]; 1.1.25 "Marketing Authorisation" or "MA" means any Regulatory Approval for Finished Product granted by the Governmental Authority of any country of the Territory as the same may be varied from time to time during the Term of this Agreement; 1.1.26 "Minimum Purchase Requirements" means the minimum purchase requirements set out in Exhibit D as the same may be amended from time to time during the term of this Agreement under the provisions of Clause 7.5; 1.1.27 "NDA Filing" means the Regulatory Application for Product which is a new drug application submitted by Columbia Laboratories, Inc. with the FDA on August 19 2002; 7 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.28 "Net Sales" with respect to Finished Product shall mean the gross amount received by a Party, its Affiliates or sub-licensees for sale of Finished Product to unrelated third parties less: (a) quantity, trade and/or cash discounts actually granted; (b) amounts repaid or credited and allowances including cash, credit or free goods allowances, given by reason of chargebacks, retroactive price reductions or billing errors and rebates (including government-mandated rebates), actually allowed or paid; (c) amounts refunded or credited for Finished Product which was rejected, spoiled, damaged, outdated or returned; (d) freight, shipment and insurance costs incurred transporting Finished Product to a third party purchaser; (e) taxes, tariffs, customs duties and surcharges and other governmental charges incurred in connection with the sale, exportation or importation of Finished Product. Subject to the foregoing provisions if there are any other issues surrounding the calculation of Net Sales these shall to the extent possible be determined in accordance with UK GAAP or its successor. The transfer of Finished Product by a Party or one of its Affiliates to another Affiliate or sub-licensee shall not be considered a sale. In such cases Net Sales shall be determined based on the invoiced sale price by the Affiliate or sub-licensee to the first third party trade purchasers, less the deduction allowed under this Clause. Upon the sale or other disposal of Finished Product other than in a bona fide arms length transaction exclusively for money or upon any use of Finished Product for the purposes which do not result in a disposal of that Finished Product in consideration of sales revenue customary in the country of sale (including, without limitation, the sale of the Finished Product as a "loss 8 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. leader" or in conjunction with the sale of another product in the transaction commonly known as "bundling"), such sale, other disposal or use shall be deemed to constitute a sale at the relevant open market price in that country in which the sale, other disposal or use occurs, or, if that price is not ascertainable, a reasonable price assessed on an arm's length basis or the goods or services provided in exchange of the supply. Disposal of Finished Product for, or use of Finished Product, in clinical or pre-clinical trials or as free samples to be in quantities common in the industry for this sort of Product shall not give rise to any deemed sale under this Clause; 1.1.29 "Option Countries" shall mean the countries listed in Exhibit C; 1.1.30 "Parties" shall mean Columbia and Ardana and "Party" shall mean either Columbia or Ardana; 1.1.31 "Package", "Packaged" and "Packaging" shall mean all primary and secondary packaging components, including, without limitation, cartons, partitions, shippers, or any other like matter used in packaging the Product; 1.1.32 "Patent Rights" shall mean patent applications and patents, author certificates, inventor certificates, utility certificates, improvement patents and models and certificates of addition and all foreign counterparts of them, including any divisional applications and patents, refilings, renewals, continuations, continuations-in-part, patents of addition, extensions, (including patent term extensions,) reissues, substitutions, confirmations, registrations, revalidations, pipeline and administrative protections and additions, and any equivalents of the foregoing in any and all countries of the Territory or to any of them, as well as any supplementary protection certificates and equivalent protection rights in respect of any of them; 1.1.33 "Product" shall mean the testosterone buccal bioadhesive product for men that contains 30 mg testosterone as described in the NDA filing and once the European Regulatory Application is first filed as described in the same (and then no longer described in the NDA filing) and once the UK MA is issued as described in such MA as the same may be varied from time to time; 9 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.34 "QA Tests" shall mean the quality assurance tests and testing regimes for Finished Product as set out in the MA; 1.1.35 "Qualified Person" means a person qualified in accordance with Article 49 or 50 of EU Directive 2001/83, who is responsible under Applicable Law in all or any part of the Territory for ensuring compliance with such Applicable Law and for carrying out certain specified actions required by such Applicable Law; 1.1.36 "Quarter" shall mean each period of three months ending on 31 March, 30 June, 30 September or 31 December and "Quarterly" shall be construed accordingly; 1.1.37 "Regulatory Application" shall mean a regulatory application or other application (including any supplements or amendments thereto) required to be filed or filed with a Governmental Authority in a country in connection with the marketing and sale of the Finished Product in such country; 1.1.38 "Regulatory Approval" shall mean any and all consents or other authorisations or approvals required from a Governmental Authority to market and sell Finished Product in any country, but excluding any form of pricing or reimbursement approval; 1.1.39 "SmPC" shall mean the summary of product characteristics containing the information set out in Article 11 of EU Directive 2001/83; 1.1.40 "Specifications" shall mean the specifications for Finished Product set forth in each MA in the Territory; 1.1.41 "Technical Agreement" shall mean the agreement to be made between the Parties as specified in Clause 11.4; 1.1.42 "Territory" shall mean those European countries listed in Exhibit B; 1.1.43 "Trade Dress" means those aspects of the Packaging of the Finished Product involving the design, get up and trade dress thereof which are not required or dictated by the MA including the style of printing; 10 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.44 "Trademark(s)" shall mean one or more trademarks or trade names that are owned or licensed by or on behalf of Columbia or its Affiliates that the Parties identify pursuant to Clause 4.1 for use in connection with the sale or promotion of the Finished Product by Ardana in the Territory provided that such trademark or trade name is approved by any relevant Governmental Authority in the Territory in relation to the European Regulatory Application and any subsequent MA. As at the Commencement Date, the trademark "STRIANT(TM)" shall be deemed to be the nominated trademark of Columbia hereunder as the First Trademark (as defined in Clause 4.1) but it remains subject to the approval of the Governmental Authorities in the Territory. 1.2 Further Definitions. In addition to the definitions set forth under Clause 1.1 above, the following definitions have the meanings in the Clauses corresponding thereto, as set forth below: Definition Clause ---------- ------ MiPharm Agreement 2.3 First Trademark 4.1 New Trademark 4.1 Trademark Usage Manual 4.5 FCPA 6.14 Purchase Price 7.1 Assessing Party 7.2 Assessed Party 7.2 Committee 8.1 Members 8.1 Chairman 8.1 Initiating Party 9.1 Additional Studies 9.5 Forecasts 10.1 11 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Purchase Order 10.2 Visual Inspection 10.6 Recall Costs 11.3 Indemnified Party 13.3 Indemnified Party 13.4 Term 15 Assessing Party 16.5.6 Assessed Party 16.5.6 Assignee 19.4 Remaining Party 19.4 Expert Exhibit E 2. license/appointment 2.1 Subject to the provisions of Clause 2.2 and 2.3 Columbia hereby grants to Ardana for the Term an exclusive license for and in the Territory to and under Columbia Patent Rights and the Trademarks to develop, manufacture, have manufactured, use, import, have imported, market, distribute and sell or have marketed, distributed and sold the Product and Finished Product. Ardana shall only have the right to sub-license any such rights on the basis that Ardana shall notify Columbia of the identity of any proposed third party licensee and Columbia shall have [***] to approve such licensee (which approval shall not be unreasonably withheld) and provided that the terms of appointment of such licensee shall prevent the further appointment of sub-licensees without first obtaining Ardana's and Columbia's prior written approval (which approval may be withheld by Columbia in its sole discretion). 2.2 Ardana undertakes and agrees that unless and until it exercises its right to manufacture or have manufactured Product and/or Finished Product under the provisions of Clause 16.5 of this Agreement it shall not utilise the license granted to it under Clause 2.1 to manufacture or have manufactured Product and/or Finished Product but instead shall obtain all of its requirements for the same from Columbia on the terms of Clauses 5, 7 and 10 of this Agreement. 12 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2.3 Ardana acknowledges that Columbia has granted to MiPharm S.p.A. a non-exclusive license under the Columbia Patent Rights for the sole purpose of manufacturing the Product in accordance with an agreement made between Columbia and MiPharm dated 7 May 2002 ("MiPharm Agreement"). Columbia agrees during the term of this Agreement not to extend the scope of the grant of license rights under the Columbia Patent Rights granted in the Territory to MiPharm beyond the manufacturing rights set out in the MiPharm Agreement but for the avoidance of doubt it is declared that as this Agreement does not include Italy in the Territory, Columbia shall be free to grant MiPharm marketing and distribution rights under the Columbia Patent Rights for Italy (and after taking into consideration Clause 3 for anywhere else outside the Territory if Columbia so chooses). 2.4 Columbia shall forthwith following the Commencement Date supply to Ardana a copy of the CMC Data forming part of the NDA Filing. As and when any variation to such CMC Data is made Columbia shall supply a copy thereof to Ardana. 2.5 As soon as Columbia UK has made the first European Regulatory Application Columbia shall supply to Ardana a copy of the European Regulatory Application. As and when any variation to the European Regulatory Application is made Columbia shall supply a copy thereof to Ardana. 2.6 Columbia hereby assigns to Ardana any and all copyright, database rights or other rights in data, know how and other intellectual property (but for the avoidance of doubt excluding the Columbia Patent Rights and the Trademarks) which subsist in or relate to the European Regulatory Application in any country of the Territory. 2.7 It is acknowledged and agreed that under the provision of Clause 5.1.1 Columbia will procure that Columbia UK progresses the European Regulatory Application using all commercially reasonable efforts to obtain an MA in each country of the Territory. Forthwith following the grant of each MA in the Territory, Columbia shall procure that Columbia UK provides Ardana with a copy thereof and transfers to Ardana such MA. Forthwith following the Commencement Date, Columbia shall procure that Columbia UK signs transfer forms to be used for such purposes in such circumstances to the extent that such transfer forms are used and are available from the relevant Governmental Authorities. Until the MA is granted in each country of the Territory, 13 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. although Columbia UK shall be named in each European Regulatory Application, it shall hold the same on trust for Ardana. 2.8 Once Ardana is the MA holder in any country of the Territory: 2.8.1 Ardana hereby grants to Columbia irrevocable permission to cross refer to any MA when Columbia UK is continuing with the mutual recognition procedure in relation to the Territory and, when Columbia is making Regulatory Application for Product in any country outside the Territory and upon Columbia's request, Ardana will, within 30 days of such request, supply Columbia with a copy of the MA; 2.8.2 Ardana shall sign a transfer form to be used in the circumstances of Clause 16.3.3. and only in such circumstances to the extent that such transfer forms are used and are available from the relevant Governmental Authorities; and 2.8.3 on or before the approval of the MA in the last of the Major Markets, and from time to time thereafter, Columbia may identify a country in the European Union (subject to the approval of Ardana which shall not be unreasonably withheld) and Ardana shall forthwith supply to Columbia a copy of the MA for such country. As and when any variation to such MA is made Ardana shall supply a copy thereof to Columbia. 2.9 Columbia undertakes and agrees that during the Term it will not, and will procure that its Affiliates do not, appoint any other licensee, distributor, reseller or other person to market, distribute and sell the Product or Finished Product in the Territory nor will it, and it will procure that its Affiliates do not, directly supply for their own account the Product or Finished Product to distributors, resellers or users located within the Territory. 2.10 Columbia shall, and Columbia shall procure that its Affiliates shall, during the Term promptly refer to Ardana (or as Ardana shall direct) all enquiries they receive for Finished Product for sale or ultimate delivery within the Territory. 14 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2.11 Ardana shall exercise its rights conferred under this Clause 2 as principal and it shall not sell or otherwise dispose of Finished Product on behalf of, or in the name of Columbia or any of its Affiliates. 2.12 Ardana shall not claim any agency or other relationship which indicates any authority to bind Columbia or its Affiliates contractually or incur liabilities on behalf of Columbia or its Affiliates. 2.13 Columbia shall at its own cost and expense be solely responsible for the filing, prosecution and maintenance of the Columbia Patent Rights and the Trademarks in the Territory, and shall use its reasonable efforts to prosecute all patent applications forming part of Columbia Patent Rights and all trademark applications forming part of Trademarks in all countries of the Territory (including the conduct of any claims or proceedings relating to them including any opposition reissue or re-examination or proceedings). Columbia will take account of Ardana's interest hereunder when making any submission to a patent or trademark office in relation to the Columbia Patent Rights or Trademarks in the Territory. 2.13.1 In the event that Columbia declines to pay the official fee to maintain any issued Columbia Patent Rights or Trademark in the Territory, Columbia shall provide Ardana with written notice thereof prior to the expiration of any deadline relating to such activities, but in any event at least twenty (20) Business Days prior notice. In such circumstances Ardana shall have the right to decide, with reason and with written notice thereof at least five (5) Business Days prior to the deadline, to require Columbia to pay such fee to maintain such Columbia Patent Rights or Trademark in Columbia's own name and expense and Columbia shall do so. 2.13.2 In the event that Columbia declines to file or, having filed, declines to further prosecute and maintain any Columbia Patent Rights or Trademarks in the Territory, Columbia shall provide Ardana with written notice thereof prior to the expiration of any deadline relating to such activities, but in any event at least thirty-five (35) Business Days prior notice. In such circumstances Ardana shall have the right to decide, with reason and with written notice at least thirty (30) Business Days prior to the deadline, that 15 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Columbia should continue to file or prosecute such Columbia Patent Rights or Trademarks. Columbia shall then have the option, with at least twenty (20) Business Days notice to Ardana, to: 2.13.2.1 continue to file or prosecute such Columbia Patent Rights or Trademarks in Columbia's own name and expense; or 2.13.2.2 allow Ardana to file or prosecute such Columbia Patent Rights or Trademarks in Columbia's name and at Columbia's expense using counsel of Ardana's own choice, in which instance Ardana shall invoice Columbia for such expenses within 30 days of the end of each Quarter, such invoice to be payable within 30 days. 2.14 Ardana shall promptly notify Columbia in writing if it becomes aware of any infringement or unauthorized use by a third party of the Columbia Patent Rights or Trademarks in the Territory. 2.15 In the event of an infringement of the Columbia Patent Rights or Trademarks by a third party in the Territory, Columbia shall have first right to bring any action or proceedings, and shall have sole control of the conduct of any such proceedings, including, the right to settle them, provided such settlement does not adversely affect Ardana's rights and interests within the Territory in accordance with the following: 2.15.1 as an exclusive licensee in the Territory, Ardana at its election shall have the right to be joined as a co-plaintiff and to be separately represented by counsel of its own choice and at its own cost and expense. In such a situation, if Columbia and Ardana succeed in any such proceedings in relation to an infringement in the Territory, whether at trial or by way of settlement, in obtaining a financial payment to Columbia and/or Ardana: 2.15.1.1 Columbia shall first deduct for itself all of its costs and expenses incurred in relation to such proceedings; and 2.15.1.2 Ardana shall then be entitled for itself all of its costs and expenses incurred in relation to such proceedings; and 16 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2.15.1.3 either if in such proceedings a court has allocated damages to Columbia and Ardana respectively each shall be entitled to retain such damages within the Territory subject to the provisions of sub-clauses 2.15.1.1 and 2.15.1.2 or, if in such proceedings a court has not so allocated damages within the Territory the Parties shall share such damages [***], subject to the provisions of sub-clauses 2.15.1.1 and 2.15.1.2; 2.15.2 if Ardana elects not to be joined as a co-plaintiff and not to be separately represented, Ardana shall, at Columbia's reasonable request and expense, provide Columbia with reasonable assistance in relation to such action or proceedings in the Territory. If Columbia succeeds in any such proceedings in relation to an infringement in the Territory, whether at trial or by way of settlement, in obtaining a financial payment to Columbia, Columbia shall first deduct for itself all of its costs and expenses incurred in relation to such proceedings in the Territory, and, in the event of any balance remaining in relation to the Territory, [***] shall be allocated to Columbia and [***] to Ardana; 2.15.3 If Columbia fails to institute an action or proceeding in relation to an infringement in the Territory for more than [***] from becoming aware of the infringement pursuant to this Clause 2.15 and if Ardana wishes to do so, Ardana shall so notify Columbia and Ardana shall have the right to do so and Columbia shall do all such acts and things at Ardana's cost and expense as Ardana shall reasonably request to assist Ardana in such proceedings, including, lending its name to such proceedings. Ardana shall have sole control of the conduct of any such proceedings, including the right to settle them, provided such settlement does not adversely affect Columbia's rights and interests outside of the Territory, and shall be entitled to retain any financial payment awarded in such proceedings or agreed in any such settlement for its own account. Columbia shall do all such acts and things and sign all such documents as may be necessary to give Ardana the full benefit of this Clause 2.15.4. 17 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2.16 If during the Term, either Party receives any notice, claim or proceedings from any third party alleging infringement of that third party's Patent Rights or trademarks by reason of any Party's activities in relation to this Agreement, then the Party receiving that notice shall: 2.16.1 forthwith notify the other Party of the notice, claim or proceeding; 2.16.2 neither Party shall make any admission of liability; 2.16.3 the Parties shall consult with each other, taking advice from their patent or trademark attorneys as to whether they consider the third party intellectual property infringed and if so whether the claim of infringement is valid; 2.16.4 in the event that the Parties consider that there is infringement of such third party's intellectual property rights in relation to the Territory, the Parties shall discuss in good faith whether to design around or to challenge the same. If the Parties agree that it is not possible or commercially reasonable to design around such third party intellectual property, or cannot so agree, and, nevertheless, agree to defend the incoming infringement claim from the third party, the Parties shall do so using a single counsel to be jointly appointed by them at their joint cost and expense. Alternatively, the Parties may agree to seek a license from such third party in which case Columbia shall be responsible for doing so. If the Parties can obtain a license upon terms acceptable to each Party in its sole discretion, at that time the Parties shall agree on any fees and royalties that are necessary to obtain and maintain such a license which shall be shared between the Parties in proportions which are agreed between them in good faith which proportions are fair and equitable between them reflecting the respective value of the license to them. 3. EXTENSION OF THE TERRITORY 3.1 [***] 18 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4. TRADEMARKS 4.1 The Parties agree that, subject to consultation through the Committee, it shall be Columbia's responsibility and expense to provide a single Trademark (the "First Trademark") for Finished Product satisfactory to the Governmental Authorities in the Territory which can be used for launch of such Finished Product in the Territory. For the avoidance of doubt it is declared and agreed that subject to the views of such Governmental Authorities, this may or may not be the Trademark STRIANT. If at any time thereafter Columbia or Ardana desires Ardana to sell the Product in the Territory under a trademark other than the First Trademark, Columbia or Ardana, as the case may be, shall send written notice to the other requesting a Committee meeting to consider the selection of a different Trademark. In the event a different Trademark is proposed by a Party: (i) the different Trademark (the "New Trademark") must be acceptable to Columbia (acting reasonably) having regard to Columbia's desire to have a global Trademark, (ii) the New Trademark must be acceptable to the Government Authority in each jurisdiction where a use of the New Trademark would require making the change to the applicable Regulatory Application or Regulatory Approval, (iii) all costs (including reasonable attorneys' fees) for filing and prosecuting applications to register, and maintaining registration of such New Trademark in the Territory will be paid by (A) Ardana, if Ardana requested the New Trademark, or (B) Columbia, if Columbia requested the New Trademark, and (iv) any New Trademarks shall be registered in the name of, be owned by and be the sole 19 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. property of Columbia and subject to the terms and conditions set forth in this Clause 4. 4.2 In relation to any Trademark other than the First Trademark, if any Governmental Authority in any country of the Territory insists on the use of a trademark other than such Trademark in such country, Columbia or Ardana, as the case may be, shall send written notice to the other requesting a Committee meeting to consider the issue. At such Committee meeting the Parties shall agree either (i) that the country in question is sufficiently significant that the Trademark should be changed in all countries of the Territory (in which case the terms set out in Clause 4.1(i) (ii) and (iv) shall apply) or (ii) that the preferable course is to adopt a different trademark only in such country (in which case the term set out in Clause 4.1(iv) shall apply). In either case all costs (including reasonable attorneys' fees) for filing and prosecution any new trademark applications will be shared equally by the Parties. 4.3 Ardana agrees to Commercialize Finished Product solely under the Trademark. Ardana shall ensure that each reference to and use of the Trademark by Ardana in any marketing material related to the Finished Product is acceptable to Columbia as specified in Clause 4.6 and is accompanied by an acknowledgement that the Trademark is a trademark or registered trademark owned by Columbia and used by Ardana under license. 4.4 The initial Trade Dress for the Finished Product shall be as set out in the European Regulatory Application. Once Ardana is the MA holder it may request Columbia to modify or alter the Trade Dress for the Finished Product. In such a case Columbia shall implement such modifications or alterations on the following terms: 4.4.1 Ardana shall supply Columbia with full details of such new Trade Dress and if the cost and expense of printing Packaging with such new Trade Dress is greater than the cost and expense of the [***] used by or on behalf of Columbia for the Trade Dress set out in the European Regulatory Application, Columbia shall, within 60 days of receipt of details of such new Trade Dress, advise Ardana in writing of such additional cost and expense relating to preparing and printing such new Trade Dress specified as a price 20 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. in Euros per 60 tablet package (or other package volumes as agreed between the Parties); 4.4.2 if Ardana decides to proceed, Ardana shall be responsible for commissioning and acquiring all related artwork, plates and other materials necessary to print the Packaging in the new Trade Dress; and 4.4.3 if Ardana decides to proceed, the additional price of Product identified by Columbia under Clause 4.4.1 shall be added to the purchase price under Clause 7.1. 4.5 Columbia shall provide Ardana with a copy of Columbia's Trademark Usage Manual relating to the manner of use of the Trademark, and may update the Trademark Usage Manual from time to time as Columbia finds appropriate and necessary. Ardana shall comply with the Trademark Usage Manual. 4.6 A copy of the marketing material (which the Parties agree may be in draft layout) using or otherwise containing the Trademarks in the form to be distributed, referenced or otherwise used by Ardana in connection with its Commercialization of the Product shall be provided to Columbia not less than thirty (30) days before Ardana intends to release, distribute, reference or use such material and Columbia shall have fifteen (15) Business Days from receipt of the same to provide Ardana with any comments or suggested amendments in relation to the use of the Trademark. Ardana shall take such reasonable comments or suggested amendments into account subject always to Ardana's responsibilities as the holder or intended holder of the MA relating to Product. If Columbia does not provide any comments or suggested amendments within such fifteen (15) Business Day period Columbia shall be deemed to have approved the use of the Trademarks in such marketing material. The restrictions of this Clause 4.6 shall not apply in relation to marketing or promotional material relating to Ardana (as opposed to the Commercialization of Product) and Ardana shall be free to use the Trademarks in Ardana's own promotional material and presentations (for example, company presentations during fund raising activities), provided, always, that it does so in accordance with the Trademark Usage Manual. 21 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4.7 The final decision on Packaging, design and Labelling shall be Ardana's; provided, however, that (i) with respect to all Finished Product manufactured by Columbia's contract manufacturer Mipharm S.p.A., as far as practicable, subject to Applicable Laws and the MAs, on the Packaging there will be printed "Manufactured by Mipharm S.p.A., Milan, Italy" and (ii) the Packaging and Labelling will be marked with all relevant patent numbers in each country of the Territory, as may be required by local patent law or practice or otherwise permitted under Applicable Law and the MAs. 4.8 Columbia shall as directed by Ardana (acting in accordance with the requirement of the relevant MA), ensure that the external Packaging of the Finished Product includes Ardana's name and logo, which name and logo as holder of the MA in the Territory shall be in as large a typeface and in as prominent a position as is required and/or is permissible under the Applicable Law of each country of the Territory. Save to the extent Ardana may be required to do so by a Governmental Authority or pursuant to the requirements of the MA, Ardana shall not alter the Packaging or Labelling of the Product nor shall Ardana conceal or otherwise obscure, remove or otherwise interfere with the Trademarks or other markings, which Columbia, in its sole discretion, may include on the Packaging or Labelling of the Product. 4.9 Ardana shall provide Columbia with information and examples as to Ardana's use of the Trademarks, as Columbia may request, to permit Columbia's proper maintenance and registrations of the Trademarks. 4.10 Ardana expressly acknowledges that Columbia owns the Trademarks, and the considerable goodwill associated therewith. Ardana shall not attack, dispute, or contest the validity of Columbia's ownership of the Trademarks or any registrations issued or issuing with respect thereto, both during the Term and/or thereafter. Ardana further agrees that any use of the Trademarks by Ardana shall be for the benefit of Columbia and any goodwill accrued in connection with the use and display of the Trademarks shall accrue solely to the benefit of Columbia and not Ardana. In the event Ardana acquires any rights relating to the Trademark for any reason, Ardana agrees to assign to Columbia, at no cost to Columbia, all such rights, together with any related goodwill. Ardana shall not do or perform any act that may endanger, 22 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. destroy, or similarly affect the value of the goodwill pertaining to the Trademarks nor do any act that might support a petition to cancel or otherwise invalidate any registration relating to the Trademarks or cause the applicable registrar to require a disclaimer of exclusive rights in such Trademarks nor assist any other person or other entity, directly or indirectly, in so doing. Ardana will, at any time, upon the request of Columbia, execute any documents reasonably required by Columbia to confirm Columbia's ownership of all such rights in the Trademarks. 4.11 Ardana shall not sell or otherwise distribute any Finished Product under any other trademark, logo or other indicia other than as contemplated under the terms and conditions of this Agreement. 4.12 Ardana shall not use any trademarks or trade names (other than the Trademarks) so resembling the Trademarks so as to be likely to cause confusion, dilution, or deception. Ardana shall not register the Trademarks in its own name nor attempt to register any trademarks, marks, or trade names confusingly similar to the Trademarks. 5. COLUMBIA OBLIGATIONS 5.1 Upon and subject to the terms and conditions of this Agreement, Columbia hereby agrees at its own cost and expense: 5.1.1 to procure that Columbia UK uses commercially reasonable efforts to obtain an MA in each Major Market of the Territory by filing and progressing the European Regulatory Application. In the event that any Governmental Authority in a Major Market requests that any further clinical trials, studies or investigations be conducted in the Territory before such Governmental Authority grant an MA, Columbia shall promptly conduct or have conducted such trials, studies or investigations at Columbia's cost and expense. 5.1.2 to provide Ardana with reasonable advance notice of all material meetings or calls with Governmental Authorities in the Territory relating to the European Regulatory Applications and permit a maximum of 2 Ardana personnel to attend such meetings or calls as an observer at Ardana's sole cost and expense; 23 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5.1.3 to manufacture or have manufactured and to supply to Ardana such amounts of the Finished Product for Ardana's Commercialization of the Product in the Territory, as Ardana may order from time to time on terms and otherwise in accordance with Clause 10 below and to manufacture or have manufactured and supply the Finished Product in the manner specified in the relevant MA of each country of the Territory and in accordance with cGMP, the Specifications and the Technical Agreement; 5.1.4 to use commercially reasonable efforts to obtain a manufacturing authorisation for the purposes of manufacturing Finished Product in relation to each and every site at which manufacture (or any part thereof) of Finished Product shall occur, to provide Ardana with a copy of such manufacturing authorisation(s) and to provide Ardana with advance written notice of any proposed change to such manufacturing authorisation(s) in order that Ardana may make any relevant variations to the Regulatory Approval(s); 5.1.5 to ensure that Product is handled and stored by it in accordance with all Applicable Laws and to ensure that it creates and retains manufacturing, analytical and distribution records, testing and releasing materials, undertakes production and quality controls, including in-process controls and all necessary stability studies, and analysis relating to the Product all in accordance with the Specification and cGMP; 5.1.6 to have in place a Qualified Person, which Qualified Person shall be responsible for batch release of Product in the Territory and to supply Finished Product which has been released in the Territory for sale in the Territory by a Qualified Person in accordance with Applicable Laws; 5.1.7 to put in place and maintain a technical agreement with each of its contract manufacturers from time to time (including in particular Mipharm) as required by any Governmental Authority which technical agreement shall be identical to the extent required by any Governmental Authority in the Territory (save as to the parties) to the Technical Agreement to be agreed pursuant to Clause 11.4; 24 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5.1.8 to procure that Ardana, or its duly appointed agent, shall have the right to inspect the premises of Columbia or Columbia's contract manufacturer(s) where the Finished Product is manufactured, Packaged or Labelled, which inspections may take place no more often than once per year upon advance notice at any reasonable time; 5.1.9 to ensure that no changes in chemistry and manufacturing controls specified in the CMC Data in the MA for the Finished Product in the Territory are made without Ardana's having obtained the prior approval of each applicable Governmental Authority for such changes if such approval is required; 5.1.10 to keep Ardana informed in a timely manner of any information brought to Columbia's attention which in Columbia's reasonable judgment could lead to a variation of the MA, SmPC, Packaging or Labelling (subject to any overriding provisions of the pharmacovigilance procedures agreed pursuant to Clause 11.3); 5.1.11 to provide Ardana with reasonable assistance in relation to any questions or issues raised by any Governmental Authority relating to Finished Product or the Regulatory Approvals, including, but not limited to, the provision of any relevant background data relating to Product in Columbia's possession or control; 5.1.12 to supply the Finished Product in Packaging as required by Ardana which incorporates all information (including the patient information leaflet) that may be required by the relevant MA, any Governmental Authority or any Applicable Law from time to time; 5.1.13 to notify Ardana promptly of any proposed inspections by any Governmental Authority (either in the Territory or outside of the Territory) of the facilities at which Finished Product is manufactured and procure that Ardana has a right to attend on such occasions if the inspection is by a Governmental Authority in the Territory and in any event Columbia shall inform Ardana of the outcome; 25 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5.1.14 to establish and maintain a scientific service for scientific information relating to the Product and to liaise with Ardana in relation to any enquiries made to such service; 5.1.15 to retain and archive all documentation relating to the Product including, in particular, documentation relating to regulatory matters and to clinical trials of Product; and 5.1.16 to investigate promptly and report to Ardana all significant customer complaints or reports of incidents relating to the Finished Product affecting quality of which it has knowledge and co-operate with Ardana in the handling of such complaints and in accordance with Clause 11.2 and to provide a copy of each investigation report under this Clause 5.1.16 to Ardana. 6. ARDANA OBLIGATIONS 6.1 Upon and subject to the terms and conditions of this Agreement, Ardana hereby agrees at its own cost and expense: 6.1.1 subject to provisions of Clause 2.7 to maintain the MAs received in relation to the Territory, including by filing variations to such MAs as necessary; and 6.1.2 to provide Columbia with reasonable advance notice of all material meetings or calls with Governmental Authorities relating to the MAs. A maximum of 2 Columbia personnel may attend such meetings or calls at its own cost and expense. 6.2 Ardana, as the holder of the MAs in the Territory and without limiting its obligations under this Agreement or under any Applicable Law, shall comply with the content and terms of all MAs. 6.3 Ardana shall establish and maintain a scientific service for scientific information relating to the Product and shall liaise with Columbia in relation to any enquiries made to such service; 26 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 6.4 Ardana shall use its reasonable commercial efforts to promote, market and sell the Finished Product, in each country within the Territory launching the same in such country within [***] of both Regulatory Approval and any relevant pricing and/or reimbursements approvals being obtained in such country (provided that it is acknowledged that the decision to launch prior to such approvals shall be in Ardana's sole discretion) and to establish a sales force appointed and trained in accordance with Good Industry Practice to promote the Finished Product in the Major Markets. Ardana shall use its reasonable commercial efforts to obtain any relevant pricing approvals in the countries where such approval is required. Additionally, Ardana shall: 6.4.1 comply at all times with all Applicable Laws pertaining to the Commercialization of the Product, as applicable, including without limitation, purchase, storage, handling, marketing, promotion, distribution, offering for sale and sale of the Product in each country of the Territory; 6.4.2 notify Columbia of the identity of any proposed third party distributor and Columbia shall have [***] to approve such distributor (which approval shall not be unreasonably withheld) and provided that the terms of appointment of such distributor shall prevent the further appointment of sub-distributors without first obtaining Ardana's and Columbia's prior written approval (which approval may be withheld for any or no reason); 6.4.3 either itself or through its agents or distributors maintain adequate facilities for the efficient Commercialization of the Finished Product throughout the Territory; 6.4.4 purchase from Columbia such quantities of the Finished Product as will enable Ardana to maintain sufficient stocks to meet all reasonably foreseeable demands for the Finished Product in the Territory; 6.4.5 in dealing with or handling the Finished Product follow the reasonable instructions of Columbia, and provide for or have provided the storage of the Finished Product in a manner consistent with the terms of the applicable MA and Applicable Law; 27 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 6.4.6 in marketing and selling the Finished Product, 6.4.6.1 not make any statements, representations, warranties or guarantees concerning the Finished Product which are contrary to the MA for the Finished Product or Applicable Laws; and 6.4.6.2 avoid any misleading or deceptive marketing practices or any other promotional activities that may harm or otherwise damage Columbia's or its Affiliates image or reputation, whether within the Territory or outside the Territory; 6.4.7 keep the Committee (as hereinafter defined) informed of the Commercialization of the Finished Product in the Territory (including but not limited to sales of the Finished Product) by way of a monthly written report detailing the level of sales made during the previous month (as reasonably available to Ardana at the time of compiling such report) and summarising any material developments relating to Product during the previous month (for example obtaining pricing and/or reimbursement approval in a particular country in the Territory). Such report shall be submitted within thirty (30) days of the end of each calendar month. Ardana shall also promptly inform the Committee of any other information that it now has or which it may receive in the future which in Ardana's opinion is likely to be of interest, benefit, or use to Columbia in relation to the sale of the Finished Products outside the Territory; 6.4.8 maintain or have maintained the Finished Product, pending distribution and sale to customers, in a facility that is properly equipped (including temperature and humidity control) to store pharmaceutical and other sensitive products. Columbia, or its duly appointed agent, shall have the right to inspect the premises of Ardana or sub-contractor where the Finished Product is held, stored, and/or distributed, and Ardana shall permit such inspection or arrange for such inspection no more often than once per year, upon advance notice at any reasonable time, of the methods and procedures used in the distribution, storage and sale of the Finished Product and provide 28 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. to Columbia all government inspection reports and certificates relating thereto promptly upon Ardana's or its sub-contractors' receipt thereof; 6.4.9 investigate promptly and report to Columbia all significant customer complaints or reports of incidents relating to the Finished Product affecting quality of which it has knowledge and co-operate with Columbia in the handling of such complaints and in accordance with Clause 11.1. Ardana shall provide a copy of each investigation report under this Clause 6.4.9 to Columbia. 6.4.10 keep Columbia informed in a timely manner of any information brought to Ardana's attention which in Ardana's reasonable judgment could lead to a variation of the MA, SmPC, Packaging or Labelling (subject to any overriding provisions of the pharmacovigilance procedures agreed pursuant to Clause 11.2); and 6.4.11 retain and archive all documentation relating to the Product, including, in particular, documentation relating to regulatory matters and to clinical trials of Product; 6.5 Ardana agrees that it shall not, without Columbia's prior written approval (not to be unreasonably withheld), distribute or sell in the Territory a testosterone product for the Indication other than the Product. 6.6 Ardana shall not Commercialize the Product in conjunction or otherwise together with any other products as a loss leader without Columbia's prior written approval, which approval may be withheld by Columbia for any reason, provided always that Ardana shall be permitted to sell and promote Finished Product with other products on an arms-length basis in accordance with Good Industry Practice. 6.7 Ardana shall be responsible for all costs and expenses associated with its Commercialization activities. 6.8 Ardana, at its sole cost and expense, shall be responsible for obtaining all necessary permissions, consents and licences (other than the MAs), required to Commercialize the Finished Product in each country in the Territory under any Applicable Law, 29 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. including without limitation, any import approvals, wholesale dealer's licenses and pricing and reimbursement approvals. Columbia agrees to reasonably cooperate with Ardana in obtaining any such additional necessary authorizations and approvals required to launch the Finished Product in each country in the Territory, including representatives of Columbia attending meetings with the relevant Governmental Authorities if so requested by Ardana together with Ardana at Columbia's own cost and expense for such attendance. 6.9 Ardana shall be responsible for setting the sales price of Finished Product in the Territory. 6.10 Ardana shall during the Term of this Agreement fulfil all of its obligations and covenants hereunder in a manner that is consistent with Good Industry Practice: 6.11 Ardana shall not: 6.11.1 advertise the Finished Product or canvass or solicit orders for the Finished Product outside the Territory; or 6.11.2 open branches for the sale of the Finished Product outside the Territory; or 6.11.3 maintain distribution depots for the Finished Product outside the Territory. 6.12 Ardana affirms that it is familiar with the Foreign Corrupt Practices Act of 1977 of the United States of America, as amended by the Foreign Corrupt Practices Act Amendments of 1988 and as may be further amended and supplemented from time to time ("FCPA"). Ardana warrants, covenants, represents and agrees that, in connection with the performance of this Agreement or with the sale of any Product, neither Ardana nor any of its principals, employees or agents will perform any act that may constitute a violation of the FCPA or that may cause a violation under the FCPA by Ardana or Columbia. Ardana shall certify the accuracy and veracity of the foregoing representation and warranty from time to time in writing, as Columbia shall request. 7. PRICE, PAYMENT TERMS AND SALES TARGETS 30 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 7.1 Ardana shall purchase from Columbia all of its requirements for the Finished Product at a fixed cost of Euro [***] for a package of 60 tablets (the "Purchase Price") (or as otherwise agreed between the Parties in respect of different package volumes). Such price shall apply before and from First Commercial Sale subject to review at each anniversary of the first of the month following First Commercial Sale as follows: 7.1.1 Columbia shall inform Ardana whether there has been any increase to the cost of Columbia obtaining Finished Product from its contract manufacturer; 7.1.2 Columbia shall use its reasonable efforts to avoid any such proposed increase under its manufacturing agreement with its contract manufacturer and to source Finished Product at a more competitive price (in accordance with the provisions of such agreement); and 7.1.3 in the event that having fulfilled its obligations under Clause 7.1.2 the cost of supply of Finished Product to Columbia is increased then the Purchase Price may be increased by Columbia provided that such increase shall be no greater than the increase in [***] for the previous 12 month period; 7.1.4 for the avoidance of doubt any increase in the Purchase Price pursuant to this Clause 7.1 shall only apply to the extent of any increase in the price of supply of Product to Columbia. 7.2 Columbia shall keep and shall procure that its Affiliates, agents, distributors and subcontractors keep true and accurate records and books of account containing all data necessary for the verification by Ardana under sub-clauses 7.1.1 to 7.1.4. Those records and books of account shall be kept for seven (7) years following the end of the year to which they relate. Upon Ardana's (the "Assessing Party") written request a firm of accountants appointed by agreement between the Parties (or, failing such agreement within ten (10) Business Days of the initiation of discussions between them on this point and at the request of either Party by the President for the time being of the Institute of Chartered Accountants of England and Wales in London) shall carry out a review procedure in relation to Columbia's (the "Assessed Party") cost of obtaining Finished Product as follows: 31 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 7.2.1 such firm of accountants shall be given access to and shall be permitted to examine such books and records upon twenty (20) Business Days notice having been given by the Assessing Party and at all reasonable times on Business Days for the purpose of certifying to the Assessing Party that Columbia applied the provisions of sub-clauses 7.1.1 to 7.1.4; 7.2.2 prior to any such examination taking place, such firm of accountants shall undertake to the Assessed Party in a deed that they shall keep all information and data contained in such books and records, strictly confidential and shall not disclose such information or copies of such books and records to any third person including the Assessing Party, but shall only use the same for the purpose of the calculations which they need to perform in order to issue the certificate to the Assessing Party which this Clause 7.2 envisages; 7.2.3 any such access examination and certification shall occur no more frequently than once per year and will not go back over records more than two (2) years old unless a discrepancy is found; 7.2.4 the Assessed Party shall make available personnel to answer queries on all books and records required for the purpose of the certification; 7.2.5 if the certification shows that the Assessed Party has not applied the provisions of sub-clauses 7.1.1 to 7.1.4 the Parties shall forthwith recalculate the price which should have been paid by Ardana and any monies which such recalculation shows as being due and owing by one Party to the other shall be paid by that Party. The cost of the accountant shall be the responsibility of the Assessed Party if the recalculation shows that the Assessed Party has charged the Assessing Party a price more than [***] in excess of the recalculated price and the responsibility of the Assessing Party otherwise. 7.3 Upon shipment of Product to Ardana, Columbia shall submit invoices therefor to Ardana. Ardana shall pay each invoice in full within thirty (30) days after the date of invoice. All payments shall be made in Euros. 32 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 7.4 It is acknowledged and agreed that the Minimum Purchase Requirements operate as follows: if in any year following the date of First Commercial Sale Ardana has not purchased from Columbia the volume of Product set out in the Minimum Purchase Requirements for that year because of lack of market demand or other reason. In such circumstances Ardana shall at its option: 7.4.1 issue a Purchase Order or Purchase Orders to Columbia in accordance with the procedures set out in Clause 10 for the outstanding quantities for delivery during that year in which case there shall be no breach of this Agreement by Ardana; or 7.4.2 fail to purchase the outstanding quantities during such year in which case Ardana shall be in material breach of this Agreement and the remedy provisions of Clause 16.1.1 shall not apply. 7.5 No later than 180 days before the end of the [***] period commencing on the date of First Commercial Sale and covered by the Minimum Purchase Requirements the Parties shall meet and shall seek to agree Minimum Purchase Requirements for the [***] of this Agreement. If the Parties fail to agree such new Minimum Purchase Requirements on or before 90 days before the end of [***] the setting of the Minimum Purchase Requirements for the [***] period shall be referred to the Expert's Decision. In making this decision the expert shall: 7.5.1 invite written submissions from each of the Parties putting forward justification for the Minimum Purchase Requirements which they are proposing; and 7.5.2 invite oral submissions of no more than [***] utilising whatever experts the Parties so choose putting forward justification for the Minimum Purchase Requirements which they are proposing. 8. COMMERCIALISATION COMMITTEE 8.1 Ardana and Columbia shall create a Commercialisation Committee (the "Committee") to consist initially of two persons as voting members ("Members"), one of whom shall be nominated by Ardana and one of whom shall be nominated by Columbia. Each 33 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Member shall be entitled to exercise one (1) vote each on the Committee, whether or not present at any Committee meeting. Columbia shall also be entitled to appoint one of its nominees to be the chairman of the Committee ("Chairman"). In the event of a deadlock in relation to those issues set out in Clauses 8.6, the Chairman shall be entitled to cast the deciding vote. The Committee will meet no less frequently then [***]. 8.2 Each of Ardana and Columbia shall be entitled to remove their Member and appoint a replacement therefor. The number of Members may be altered if agreed to by Ardana and Columbia in writing; provided, however, that, each of Ardana and Columbia shall be entitled to appoint an equal number of Members. 8.3 The quorum for meetings of the Committee shall be two (2) Members. The venue for meetings not held by teleconference shall alternate between the offices of Ardana in Edinburgh, Scotland and the offices of Columbia's Affiliate in Livingston, New Jersey or such other venue as may be agreed. Each party shall be responsible for its own expenses including travel and accommodation costs incurred in connection with Committee meetings. 8.4 The Committee shall have power to invite persons whose special skills or influence might advance the Commercialisation of the Product, in confidence and upon behalf of the Committee, to attend and address meetings of the Committee. Each party shall give the other reasonable advance notice of the identity of any such additional attendees which it intends to participate in the Committee meeting in question. For the avoidance of doubt it is agreed that such persons shall not be Members and shall not have a right to vote or participate in the decision making process of the Committee. 8.5 The Chairperson shall take responsibility for promptly preparing the minutes of any Committee meeting, receiving approval of those minutes from the other Committee Member who participated in the meeting, obtaining each Member's signature on the approved minutes and promptly distributing a copy of the signed minutes to each Party. 34 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 8.6 The Committee shall be a co-ordination, liaison and communication forum in relation to the global issues relating to Product and shall only be a decision making forum in relation to strategic regulatory issues affecting the Product, provided, always, that Ardana shall never be required to agree to or implement any decision of the Committee which would be contrary to Ardana's responsibilities as the holder of the MAs in the Territory or to Applicable Laws. 9. CLINICAL STUDIES, TRIALS AND INVESTIGATIONS 9.1 Either Party (the "Initiating Party"), may from time to time, propose to the other Party that additional clinical trials, studies or investigations be initiated in relation to the Product including adding a further indication to the European Regulatory Application or the MAs ("Additional Studies"). The Parties shall meet and discuss the same in good faith and if the Parties agree the plans and protocols for such Additional Studies (including which Party shall be the sponsor of such Additional Studies) and the cost of such Additional Studies will be shared equally between the Parties. If the Parties do not agree to jointly fund such Additional Studies then the provisions of Clause 9.2 and 9.3 shall apply. 9.2 If Ardana is the Initiating Party it shall obtain the prior written approval of Columbia, which approval may be withheld by Columbia for any reason or no reason, on the proposed Additional Studies prior to initiating such Additional Studies and shall prepare, maintain and deliver to Columbia, complete and accurate copies of records and reports, including progress, safety and final reports. Columbia shall reasonably cooperate and assist Ardana in obtaining any Regulatory Approvals required for additional indications or other revised Labelling of Product in the Territory justified by the outcome of such Additional Studies, including attendance at meetings with relevant Governmental Authorities and Ardana shall file (if applicable) variations to the MAs and use its reasonable efforts to obtain such variations to the MAs relating to such Additional Studies at its own cost and expense. 9.3 If Columbia is the Initiating party, Columbia shall give Ardana the opportunity to comment upon such Additional Studies and shall keep Ardana informed of the progress of such Additional Study and shall provide to Ardana a written report of the outcome of such Additional Studies. Columbia shall prepare, maintain and deliver to 35 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Ardana, complete and accurate copies of records and reports, including progress, safety and final report. Columbia shall reasonably cooperate and assist Ardana in obtaining any variations to the MAs required for additional indications or other revised Labelling of Product in the Territory justified by the outcome of such Additional Studies including attendance at meetings with relevant Governmental Authorities and Ardana shall file (if applicable) for such variations to the MAs and use its reasonable efforts to obtain such variations to the MAs relating to such Additional Studies at its own cost and expense. 9.4 Where Ardana is the Initiating Party a final report of the Additional Study results from all Additional Study sites shall be prepared by Ardana and reviewed by Columbia, and may thereafter be released or submitted for publication by Ardana for use at conferences and publication in scientific journals. 9.5 All rights in and to any data, results, information, inventions, discoveries and/or improvements arising out of the performance of an Additional Study, whether patentable or not, conceived, made, obtained or developed ("the Data Package") pursuant to an Additional Study shall vest in and remain the property of Columbia, provided always that the rights in such Data Package shall be the subject of the license to Ardana under Clause 2.1 and the assignment to Ardana under Clause 2.6. If Columbia uses the Data Package outside the Territory by licensing or otherwise authorising the use of the same by a third party (including the appointment of a distributor): 9.5.1 if such Data Package has been generated pursuant to an Additional Study funded by Ardana then notwithstanding that Columbia owns such rights in such Data Package in the event that Columbia grants to a third party any such rights to use such Data Package it shall pay to Ardana one hundred percent (100%) of the consideration received from such third party for the right to use such Data Package; 9.5.2 if such Data Package has been generated pursuant to an Additional Study funded jointly between Ardana and Columbia then in the event that Columbia grants to a third party any right to use such Data Package it shall 36 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. pay to Ardana fifty per cent (50%) of the consideration received from such third party for the grant of the right to use such Data Package. 10. FORECASTS; ORDERS; DELIVERY AND ACCEPTANCE 10.1 No later than three months prior to the anticipated date of First Commercial Sale of Finished Product in the Territory and each Quarter thereafter, Ardana shall prepare and provide Columbia with a written forecast by Quarter of its requirements for Product ("Forecasts") for the immediately succeeding four full Quarters, including, with respect to the first Forecast, the period between the anticipated date of First Commercial Sale and the beginning of the first Quarter following First Commercial Sale. The amounts set forth for the first Quarter in each Forecast shall constitute a firm purchase order and shall be binding upon Ardana. The amounts set forth in the following three (3) Quarters shall constitute Ardana's non-binding, good faith estimate of the Product requirements of Ardana for such periods; provided, however, that in relation to the amounts set forth for the second Quarter when such Quarter becomes the first Quarter of the next Forecast the amounts set forth in such first Quarter shall not be less than eighty percent (80%) nor shall Columbia be obligated to supply greater than one hundred twenty percent (120%) of the amounts set forth in the immediately preceding Forecast for such Quarter, but Columbia may agree to supply such greater amount in its sole discretion. 10.2 Each firm purchase order provided to Columbia by Ardana pursuant to Clause 10.1 above shall be in writing and shall specify the description of the Finished Product ordered, the quantity ordered, the price and required delivery date therefore ("Purchase Order"). In the event of a conflict between the terms and conditions of any Purchase Order and this Agreement, the terms and conditions of this Agreement shall prevail. Columbia shall have no obligation to supply quantities of Finished Product (i) in the event Ardana places orders for amounts of Product that are smaller than Columbia or its contract manufacture standard manufacturing batch size for the Product and the amount of Product remaining after filling orders from other Columbia customers are not available in sufficient quantity to fill the order placed by Ardana; or (ii) in relation to quantities of Finished Product specified in the Purchase Order in excess of one hundred and twenty percent (120%) the quantities specified in the previous Forecast for such Quarter provided under Clause 10.1 above. 37 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 10.3 Columbia shall within ten (10) days of the receipt of any Purchase Order from Ardana made pursuant to Clause 10.2 give written notice to Ardana if it cannot fulfil such Purchase Order and the provisions of Clause 16.1 shall apply. 10.4 All Finished Product supplied under this Agreement shall be delivered Ex Works (INCOTERMS 2000) Columbia's or its nominee's manufacturing and/or distribution facility in Europe and shall be accompanied by a written certificate of analysis signed by the Qualified Person confirming that such quantity of Finished Product meets the Specification. Ardana shall secure transport and insurance with its own providers at its sole cost and expense. Ardana shall pay all freight, insurance charges, taxes, import and export duties, inspection fees and other charges applicable to the sale and transport of Finished Product purchased by Ardana hereunder which amounts shall be separately set forth on Columbia's invoices to Ardana. Title and risk of loss and damages to Finished Product purchased by Ardana hereunder shall pass to Ardana upon receipt of the Finished Product by the carrier designated by Ardana at Columbia's facility. Columbia acknowledges that it shall be obliged to supply Finished Product to Ardana from a manufacturing and/or distribution facility in Europe. In the event that Columbia manufactures or has manufactured the Finished Product outside Europe it shall so notify Ardana and the delivery terms set out in this Clause 10.4 shall be amended such that Columbia shall supply Finished Product to Ardana CIF (INCOTERMS 2000) to a delivery site in Europe and provided that such Finished Product is released in the Territory by a Qualified Person in the Territory. For the avoidance of doubt this shall not result in any change to the Purchase Price. 10.5 Following receipt of a shipment of Finished Product from Columbia, Ardana or its designated agent shall, within thirty (30) days, carry out a visual inspection (as defined below) of such shipment to ensure that Packaging and Labelling of Finished Product has taken place in accordance with the Specification and is accompanied by an associated Certificate of Analysis and if Ardana determines in its sole discretion (exercised reasonably) that it has not so taken place it shall promptly notify rejection of shipment to Columbia in writing. Subject to the provisions of Clause 10.7, if Ardana does not notify Columbia of rejection of such shipment within such thirty (30) days, such shipment of Finished Product shall be deemed to have been accepted. 38 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 10.6 For the purposes of this Agreement, "visual inspection" shall mean: 10.6.1 comparing the applicable order against the documentation accompanying the shipment to verify that the delivery date, identity, quantity and exterior shipment labelling comply with the order; 10.6.2 verifying that the Certificate of Analysis for the shipment states that the Product conforms in all material respects to the applicable Specifications; and 10.6.3 visually inspecting the exterior of the shipment of Finished Products to verify that the shipment appears to be in good condition. For the avoidance of doubt, visual inspection does not include laboratory analysis. 10.7 Notwithstanding the foregoing, Columbia shall remain liable to Ardana to the extent provided in Clause 10.8 or 10.9 as appropriate for any latent defect that subsequently is discovered which renders the Finished Product unsaleable, if such defect is due to the failure of the Finished Product to meet Specification and/or cGMP and provided that Ardana immediately inform Columbia by a notice in writing of such defect and rejection of the relevant shipment not later than ten (10) days from the date of discovery of such latent defect. 10.8 Within 10 days of receipt by Columbia of a notice of rejection from Ardana in accordance with Clauses 10.5 or 10.7 Columbia shall indicate in writing to Ardana whether Columbia is issuing a return authorisation or not. In the event that a return authorisation is so issued Ardana shall return to Columbia at Columbia's expense the quantities of Finished Product in question and Columbia shall replace such quantities within sixty (60) days or as soon as reasonably practicable thereafter. If the payment in respect of such quantities is outstanding, it shall be postponed until such replacement quantities are received and accepted by Ardana in accordance with this Clause 10. 10.9 After receipt of any rejection notice from Ardana pursuant to Clause 10.5 or Clause 10.7 if Columbia does not issue a return authorisation under Clause 10.8, Columbia shall analyze any batch of Finished Product rejected by Ardana for nonconformity 39 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. with the Specifications within thirty (30) days of receipt of such notice, and present its findings with respect to such Finished Product to Ardana. If such tests confirm non-conformity with the Specification Columbia shall promptly supply to Ardana (at Columbia's cost and expense) a conforming batch in the same quantity as the rejected batch and shall reimburse Ardana for any out of pocket costs or expenses incurred by Ardana including shipping charges in relation to such non-conforming batch. If the Parties cannot agree on whether the batch of Finished Product in question conforms to the Specifications, an independent qualified laboratory reasonably acceptable to both Parties, and at a cost equally shared by both Parties, shall analyze both Ardana's and Columbia's samples of Product in question, and the definitive results of such laboratory shall be binding on the Parties. If the batch of Finished Product in question is determined to be nonconforming, such nonconforming Finished Product shall be held for Columbia's disposition, or shall be returned to Columbia, in each case at Columbia's expense, as directed by Columbia no later than fifteen (15) days following such determination. Columbia shall replace each nonconforming batch of Finished Product, or the nonconforming portion thereof, with conforming Finished Product within sixty (60) days or as soon as reasonably practical after receipt of notice of rejection thereof. If the batch of Finished Product in question is determined to be conforming and provided that the Certificate of Analysis did not indicate it to be nonconforming, such Finished Product shall be returned to Ardana at Ardana's cost and expense. 10.10 Columbia shall use its commercially reasonable efforts to establish or have established a second manufacturing site for of the Finished Product. 10.11 Columbia shall, at its own cost and expense hold for Ardana [***] stocks of Finished Product for each of the Major Markets at levels commensurate with the quantities ordered by Ardana in its previous Quarterly Purchase Order for Finished Product in such country. In the event that Columbia is forced to supply these safety stocks to Ardana in order to meet Ardana's Purchase Order(s) in circumstances where Columbia cannot replenish these safety stocks as a result of any failure of Columbia's contract manufacturer to supply Columbia with Finished Product manufactured in accordance with cGMP and to Specification for whatever reason, such failure to replenish the safety stocks shall not constitute a breach of this Clause 10.11 by 40 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Columbia provided always that Columbia shall replenish such safety stocks as soon reasonably practicable. 10.12 Columbia shall employ stock rotation methods and techniques consistent with Good Industry Practice so as to ensure that Finished Product delivered to Ardana has a minimum of [***] of its shelf life unexpired. 11. REGULATORY AND OTHER MATTERS 11.1 Except as may otherwise be agreed, Ardana shall refer any significant complaints or reports of incidents which it or any of its Affiliates receives concerning the Finished Product affecting quality to Columbia within four (4) working days of Ardana's receipt of the same, provided, that all complaints concerning suspected or actual Finished Product tampering, contamination or mix-up shall be delivered within one (1) working day of receipt of the same by Ardana or any Affiliate or subcontractor of Ardana. For the avoidance of doubt, to the extent that any such complaint amounts to or relates to an Adverse Reaction the terms of the pharmacovigilance procedures to be agreed by the Parties pursuant to Clause 11.2 shall apply in relation to such complaint: in the event of any inconsistency between the application of this Clause 11.1 and such pharmacovigilance procedures, the terms of such pharmacovigilance procedure shall prevail. 11.2 The Parties agree that within nine months of the Commencement Date they shall agree on a product recall procedure, subject always to the other provisions of this Agreement, a Packaging and Labelling procedure, and a pharmacovigilance procedure, all in accordance with Applicable Laws. 11.3 Notwithstanding that the Parties shall agree upon product recall procedure pursuant to Clause 11.2, the Parties agree that the costs of recall shall be met as follows: if a recall arises due to any act or omission by Ardana the cost of goods sold, distribution expenses and third-party recall expenses (collectively, the "Recall Costs") shall be borne by Ardana; if a recall arises from any other reason then the Recall Costs shall be borne by Columbia. Ardana shall maintain records of all sales of Product and customers sufficient for Ardana (as appropriate) to adequately administer a recall for the period required by Applicable Law. 41 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 11.4 Within 9 months (or such other period as is agreed by the Parties) of the Commencement Date the Parties shall agree upon a technical agreement as required pursuant to Directive 2001/83. 11.5 In addition to the requirements of Clauses 11.1 and 11.3 and the items agreed under Clause 11.2, each Party agrees to keep the other Party informed, commencing within two (2) working days of notification of any action by, or notification or other information which it receives (directly or indirectly) from any Governmental Authority, which (a) raises any material concerns regarding the safety or efficacy of any Product, (b) which indicates or suggests a potential material liability for either Party to third parties arising in connection with any Product, or (c) which is reasonably, likely to lead to a Recall of any Product, including in all cases, but not limited to: 11.5.1 Governmental Authority inspections of manufacturing, distribution or other related facilities, in which Product is manufactured, stored or otherwise present; 11.5.2 receipt of a warning letter from any Governmental Authority relating to any Product; or 11.5.3 initiation of any Governmental Authority investigations, detention, seizure or injunction concerning any Product. 11.6 Columbia shall keep Ardana regularly informed of all material correspondence and communications with any Governmental Authority in the Territory concerning the manufacture, Specification, quality or Packaging of the Finished Product by it or its contract manufacturer. 11.7 If Columbia is advised by its legal advisers that it must communicate with any Governmental Authority in the Territory on any matter the subject of Clauses 11.5 or 11.6, Columbia shall so advise Ardana immediately and, unless prohibited by Applicable Law, Columbia shall provide Ardana in advance with a copy of any proposed written communication with any such Governmental Authority and shall comply with any and all reasonable directions of Ardana concerning any meeting or written or oral communication with such Governmental Authority. 42 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 12. SIGNATURE AND MILESTONE FEE 12.1 Signature Fee. In consideration of the obligations of Columbia under Clauses 2.4 and 2.5 and in partial consideration of the rights assigned hereunder under Clause 2.6 Ardana shall pay Columbia a non-refundable signature fee of two million dollars (US$2,000,000) upon execution of this Agreement or subsequent date agreed upon. 12.2 Milestone Fees. 12.2.1 Ardana shall pay to Columbia a non-refundable milestone payment of: 12.2.1.1 one million dollars (US$1,000,000) upon acceptance by the Governmental Authority in the UK the Medicines Control Agency of the European Regulatory Application being complete and sufficient for the purpose of seeking Regulatory Approval in the UK in further partial consideration of the rights assigned hereunder under Clause 2.6; 12.2.1.2 one million dollars (US$1,000,000) on or before December 15, 2002,in further partial consideration of the rights assigned hereunder under Clause 2.6; 12.2.1.3 eight hundred thousand dollars (US$800,000) upon receipt of the MA for the Product in [***] in consideration of Columbia's obligations under Clause 2.7 in relation thereto; 12.2.1.4 [***] dollars ($[***]) upon Marketing Authorisation for the Product received in [***] for a total of US$1,200,000 and in consideration of Columbia's obligations under Clause 2.7 in relation thereto; and 12.2.1.5 in final partial consideration of the rights assigned hereunder under Clause 2.6, two million dollars ($2,000,000) within sixty (60) days of the end of the calendar month in which cumulative Net Sales of the Product by Ardana, its Affiliates and/or its licensees for all of the countries in the Territory exceed US$[***]. Until this payment is 43 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. made Ardana shall report to Columbia as specified in Clauses 16.5.5 and 16.5.6. Columbia will invoice Ardana for the payment set out in 12.2.1.2 and, provided that Ardana received such invoice, it shall pay to Columbia the sum due under such clause on or before the 15th December 2002. Columbia will invoice Ardana for each payment due under Clauses 12.2.1.3 to 12.2.1.5 on the occurrence of the event and, provided that Ardana receives such invoice, Ardana shall pay such invoice within 15 Business Days of receipt of invoice. 12.3 All payments under the terms of the Agreement are expressed to be exclusive of value added tax howsoever arising. 12.4 All payments made to Ardana under the Agreement shall be made by telegraphic transfer to the account of Ardana Bioscience Limited at: [***] Account Name: [***] Account code: [***] Sort Code: [***] SWIFT Code: [***] or any other bank account that may be notified by Ardana to Columbia from time to time. 12.5 All payments made to Columbia under the Agreement shall be made by telegraphic transfer to the account of Columbia at: [***] Account Name: [***] Account Code: [***] 44 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ABA Code: [***] or any other bank account that may be notified by Columbia to Ardana from time to time. 12.6 If either Party fails to make any payment to the other Party hereunder on the due date for payment without prejudice to any other right or remedy available to that Party, that Party expecting payment shall be entitled to charge the other Party interest (both before and after judgement) on the amount unpaid at the base rate of the Bank of England from time to time or any successor rate thereto plus five per cent (5%) calculated on a daily basis until payment in full is made without prejudice to that Party's right to receive payment on the due date. 13. WARRANTIES, INDEMNIFICATION; LIMITATION OF LIABILITY; AND INSURANCE 13.1 Each Party represents and warrants to the other Party that: 13.1.1 it has the corporate power and authority and the legal right to enter into this Agreement and that this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms. The execution, delivery and performance of the Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is or by which it is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it; 13.1.2 such Party has not, and during the term of the Agreement will not, without the prior written consent of the other Party grant any rights to any third party that would conflict with the rights granted to the other Party hereunder; 13.1.3 in the case of Columbia it has the right to grant the licenses granted under Clause 2.1 and to make the assignment under Clause 2.6 and to enter into its other obligations under this Agreement and that it has taken any corporate 45 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. action with Columbia Affiliates which is necessary for this to be the case and that it has the authority to act as agent for Columbia UK in the matters specified in this Agreement and the corporate power to procure Columbia UK as specified in this Agreement. Columbia further hereby warrants and undertakes that at the Commencement Date that save as otherwise disclosed to Ardana in writing it has not assigned, licensed, mortgaged, charged or otherwise disposed of or encumbered the right, title or interest in the Columbia Patent Rights and that so far as it is aware the exercise by Ardana of its rights hereunder shall not infringe the Patent Rights or trademarks or other intellectual property rights of any third party; 13.1.4 it is a corporation duly organised, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated; and 13.1.5 the execution and delivery of this agreement and the performance of such Party's obligations do not constitute a default or require any consent under any other contractual obligation of such Party. 13.2 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT COLUMBIA MAKES NO WARRANTIES OR REPRESENTATIONS, IMPLIED OR EXPRESS, WITH RESPECT TO THE PRODUCT, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, USE, PERFORMANCE, NON-INFRINGEMENT OR PATENTABILITY AND ANY SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. 13.3 Subject to the provisions of Clause 13.4 and 13.5 Columbia shall be responsible for and shall indemnify Ardana and its directors, officers, servants and agents (collectively "the Indemnified Party") against any and all liability, loss, damage, cost and expense (including legal costs) incurred or suffered by the Indemnified Party as a result of 13.3.1 that part of any claim brought against Ardana by a Third Party which arises as a result of any activities of Columbia, its Affiliates or contract 46 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. manufacturers under or in relation to this Agreement being a claim that use of any Finished Product(s) has caused death or bodily injury; or 13.3.2 a breach of warranty by Columbia under Clauses 13.1. An Indemnified Party that intends to claim indemnification under this Clause 13.3 shall promptly notify Columbia of any Third Party claim in respect of which the Indemnified Party intends to claim that indemnification. The Indemnified Party shall not compromise or settle the claim prior to any such notice. Columbia may assume and control the defence of any such Third Party claim, provided however, that an Indemnified Party shall have the right to retain its own counsel at its own cost and expense, if representation of that Indemnified Party by the counsel retained by Columbia would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by that counsel in the proceedings. The Indemnified Party shall co-operate with Columbia and its legal representatives in the investigation of any matter covered by this indemnification. 13.4 Subject to the provisions of Clause 13.5, Ardana shall be responsible for and shall indemnify Columbia and its Affiliates, directors, officers, servants and agents (collectively "the Indemnified Party") against any and all liability, loss, damage, cost and expense (including legal costs) incurred or suffered by the Indemnified Party 13.4.1 as a result of that part of any claim brought against Columbia or its Affiliates by a Third Party which arises as a result of the activities by Ardana or its affiliates, sublicensees, distributors or agents under this Agreement being a claim that use of any Finished Products has caused death or bodily injury; or 13.4.2 as a result of a breach of warranty by Ardana under Clause 13.1. An Indemnified Party that intends to claim indemnification under this Clause 13.4 shall promptly notify Ardana of any Third Party claim in respect of which the Indemnified Party intends to claim the indemnifications. The Indemnified Party shall not compromise or settle the claim prior to any such notice. Ardana may assume and control the defence of any such Third Party claim, provided however, that an Indemnified Party shall have the right to retain its own counsel at its own cost and expense, if representation of that Indemnified Party by the counsel retained by Ardana 47 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by that counsel in the proceedings. The Indemnified Party shall co-operate with Ardana and its legal representatives in the investigation of any matter covered by this indemnification. 13.5 Neither Party shall be liable to the other in contract, tort, negligence, breach of statutory duty or otherwise for any loss, damage, costs or expenses of any nature whatsoever incurred or suffered by the other or its Affiliates: 13.5.1 of a direct nature where the same is a loss of turnover, profits, business or goodwill; or 13.5.2 an indirect or consequential or punitive nature, including any indirect or consequential economic loss or other indirect or consequential loss of turnover, profits, loss of enterprise value, business or goodwill or otherwise. 13.6 Columbia shall secure and maintain comprehensive general liability insurance with insurers having an AM Best rating within the top 2 categories at the time (at the date of this Agreement known as "superior" or "excellent"), including, product liability, contractual liability, personal injury, and insurance against claims regarding the manufacture, delivery, storage, handling and use of Product under this Agreement, in such amounts as it customarily maintains for similar products and activities in accordance with prudent insurance practice, but in no event less than the US dollar equivalent of [***] pounds sterling (GB(pound)[***]) per occurrence and in the aggregate per year. Columbia shall use commercially reasonable efforts following First Commercial Sale and at intervals thereafter in accordance with Good Industry Practice to increase this cover to a level of [***] dollars (US$[***]) in the aggregate per year if this is achievable by Ardana. 13.7 Ardana shall secure and maintain comprehensive general liability insurance with insurers having an AM Best rating within the top 2 categories at the time (at the date of this Agreement known as "superior" or "excellent") including product liability, contractual liability, personal injury, and insurance against claims regarding the delivery, storage and handling and use of Product under this Agreement, in such amounts as it customarily maintains for similar products and activities in accordance 48 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. with prudent insurance practice, but in no event less than [***] pounds sterling (GB(pound)[***]) per occurrence and in the aggregate per year. Ardana shall use commercially reasonable efforts following First Commercial Sale and at intervals thereafter in accordance with Good Industry Practice to increase this cover to a level in pounds equal to [***] dollars (US$[***]) in the aggregate per year if this is achievable by Columbia. 13.8 Each Party shall maintain such insurance described in Clauses 13.6 and 13.7 during the term of this Agreement and thereafter for so long as it customarily maintains insurance for itself for similar products and activities. Each Party shall note the interest of the other Party on such insurance and shall use commercially reasonable efforts to name the other Party as an additional insured on such insurance if this is also achievable by the other Party and shall provide the other Party proof of such insurance upon request. Each Party shall cause such insurance policies to provide that the other Party shall be given at least thirty (30) days notice of any cancellation, termination or change in such insurance. 14. CONFIDENTIALITY 14.1 The content of the NDA Filing and the European Regulatory Applications and any of the information pertaining to the Product or their respective businesses that has been prior to the Commencement Date or will be communicated by Ardana to Columbia, on the one hand, or by Columbia to Ardana, on the other hand, including without limitation, trade secrets, business methods and plans, and pricing, cost, manufacturing and customer information shall be treated by Columbia and Ardana, respectively, and their respective Affiliates, officers, directors, employees, agents and representatives, as confidential information and shall not be disclosed to third parties or be used except in connection with the transactions and business set forth in this Agreement; provided, however, that such confidential information shall not be subject to the restrictions and prohibitions set forth in this Clause 14 to the extent that such confidential information: 14.1.1 is available to the public in public literature or otherwise, or after disclosure by one Party to the other becomes public knowledge through no default of the Party receiving such confidential information; 49 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 14.1.2 was (as evidenced in writing) known to the Party receiving such confidential information prior to the receipt of such confidential information by such Party, whether received before or after the date of this Agreement; 14.1.3 is obtained by the Party receiving such confidential information from a source free to disclose such information other than the Party supplying such confidential information; 14.1.4 is required to be disclosed pursuant to any order of a court having jurisdiction or any lawful action of a Governmental Authority having jurisdiction over the disclosing Party or court of competent jurisdiction but only to the extent such disclosure is so required; provided, however that in the event of such an order or action, the Party ordered to disclose such confidential information shall give the other Party reasonably timely notice of the disclosure order in order to allow such Party to seek a protective order or such other appropriate relief with respect to the confidential information; or 14.1.5 in the case of the European Regulatory Applications is required to be disclosed to the relevant Governmental Authorities in the Territory and thereafter once an MA is granted is contained in the Packaging, Labelling or SmPC. 14.2 Each Party shall take all precautions as it normally takes with its own confidential information to prevent any improper disclosure of such confidential information to any independent third party. 14.3 No public announcements or other disclosure to third parties concerning the financial or other terms of this Agreement shall be made, whether directly or indirectly, by either Party to this Agreement, except as may be legally required or as may be required for recording purposes, without first obtaining the approval of the other Party and agreement upon the nature and text of such announcement or disclosure, with the exception that: 14.3.1 a Party may disclose the full terms of this Agreement to its investment bankers, lawyers, accountants and other professional advisors or a third 50 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. party seeking to invest in, lend funds to acquire or merge with or be acquired by such Party without the other Party's prior approval provided that such disclosure is made under terms of confidentiality whether express or implied; and 14.3.2 a Party may disclose the terms of this Agreement to any securities exchange or regulatory authority or government body to which either Party is subject or submits, wherever situated, including (without limitation) the US Securities Exchange Commission, the UK Stock Exchange or the Panel on Take-overs and Mergers, whether or not the requirement has the force of law provided that it takes advantage of all provisions to keep confidential as many terms of this Agreement as possible. 14.4 In respect of those public announcements and disclosures not permitted by Clause 14.3 the Party desiring to make any such public announcement or other disclosure shall inform the other Party of the proposed announcements or disclosure in reasonably sufficient time prior to public release, and shall provide the other Party with a written copy thereof, in order to allow such Party to comment upon such announcement or disclosure, which comments shall be provided by such other Party within five (5) working days. The Parties shall jointly develop press releases and information materials that can be used by either Party for presentations to financial advisers and similar recipients. 15. TERM The term of this Agreement (the "Term") shall commence on the date hereof and shall continue for a period of the later of: (i) ten (10) years from the First Commercial Sale of the Finished Product by Ardana; or (ii) the date of expiration or lapse of the last to expire or lapse of rights under any Columbia Patent Rights in the Territory on a country by country basis. The Term shall automatically extend for successive periods of one (1) year each unless either Party provides written notice to the other, at least ninety (90) days prior to the end of the then existing Term, of its intention not to renew this Agreement. 51 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 16. TERMINATION 16.1 This Agreement may be terminated immediately upon written notice of termination given by either Ardana on the one hand (in circumstances where either Columbia is in breach as specified in Clause 16.1.1 or Columbia or Columbia Laboratories, Inc. satisfy the criteria of Clause 16.1.2) or Columbia on the other hand (where Ardana satisfies the criteria below): 16.1.1 in the event that the other Party commits a material breach or default under this Agreement, which breach or default shall not be remedied within sixty (60) days after the receipt of written notice thereof by the person in breach or default provided always that: 16.1.1.1 in the case of a breach by Ardana of Clause 12.2 in which case the remedy period shall be ten (10) days; and 16.1.1.2 in the case of a breach by Columbia under any of the manufacturing and supply obligations of this Agreement the remedy period shall be ninety (90) days; or 16.1.2 in the event that an Insolvency Event occurs in relation to such person. 16.2 Termination of this Agreement (whether under this Clause 16, upon expiration of the Term, or otherwise) shall be without prejudice to any rights of either Party against the other that may have accrued to the date of such termination. 16.3 Upon the effective date of expiration or earlier termination of this Agreement by Columbia pursuant to Clause 16.1 and subject always to the provisions of Clause 6.6: 16.3.1 Ardana shall remit to Columbia any payments that are due and payable as of the date of expiration or termination; 16.3.2 Ardana's rights and license under Clause 2.1 within the Territory shall terminate and Ardana shall reassign to Columbia the subject matter of Clause 2.6. At Columbia's request Ardana shall execute an undated assignment to achieve this which Columbia shall only have the right to date such that it is effective under the circumstances of this Clause 16.3; 52 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 16.3.3 Ardana shall supply to Columbia a copy of all MAs within 30 days of the date of termination and commensurate with Applicable law Ardana shall transfer to Columbia or its nominee all MAs in the Territory and Ardana shall not following any such termination use such MA. In the event that in any country of the Territory such a transfer is not possible, Ardana shall ensure that Columbia has the benefit of the MA and to this end hereby grants to Columbia irrevocable permission to cross refer to any such MA when filing an MA for Finished Product in its own name; 16.3.4 Columbia and Ardana shall return to each other all confidential information supplied by one Party to the other, including all copies and originals thereof; 16.3.5 At Columbia's option, (i) Ardana may have [***] from the Commencement Date of expiration or termination to sell all existing stocks of Product inventory (including, at Columbia's option, any Product ordered by Ardana but not yet delivered by Columbia, which Columbia may obligate Ardana to purchase), and/or (ii) Ardana shall purchase any unused Packaging and Labelling held by Columbia or its contract manufacturer bearing Ardana's name or trademark, and/or (iii) Columbia may cancel any or all outstanding Product Orders; and/or (iv) Columbia may repurchase all or some of the Product previously delivered but not sold at a price equal to the price paid by Ardana therefor less (a) any sums owed by Ardana to Columbia; and (b) any sums attributable to any damage to Finished Product. 16.3.6 Ardana shall at Columbia's cost and expense promptly pack and ship to such destination as Columbia may direct all Finished Product other than that in relation to which Columbia exercises its option under Clause 16.3.5; 16.3.7 The provisions of Clauses 13 and 14 shall continue to apply. 16.4 Upon termination of this Agreement as a result of a non-renewal notice by Columbia pursuant to Clause 15: 16.4.1 the provisions of Clause 16.3.2, 16.3.3 and 16.3.4 shall apply; 53 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 16.4.2 Columbia shall repurchase all of the Finished Product (other than Finished Product which has become unsaleable due to any act or omission of Ardana or any of its Affiliates) then owned by Ardana at a price equal to the price paid by Ardana therefor less (a) any sums owed by Ardana to Columbia; and (b) any sums attributable to any damage to Finished Product; and Ardana shall have no obligation to purchase Product ordered by Ardana but not yet delivered by Columbia; 16.4.3 [***] 16.4.4 the provisions of Clauses 13 and 14 shall continue to apply. 16.5 Upon termination of this Agreement by Ardana pursuant to Clause 16.1: 16.5.1 the license granted to Ardana under Clause 2.1 shall continue; 16.5.2 if at the date of termination any of the European Regulatory Applications are still being progressed Columbia shall procure that Columbia UK ceases such activity and shall procure that to the extent possible under Applicable Law Columbia UK transfers the outstanding European Regulatory Applications into the name of Ardana. In the event that in any country of the Territory such a transfer is not possible Columbia shall ensure that Ardana can proceed with the European Regulatory Applications in Ardanas own name and to this end hereby grants to Ardana (in so granting acting as duly authorized agent for Columbia UK) irrevocable permission to cross refer to the European Regulatory Applications in the name of Columbia UK when filing such European Regulatory Applications in Ardana's own name; 54 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 16.5.3 Thereafter Ardana shall have the right exercisable in its discretion to terminate its obligation to obtain its requirements of Finished Product from Columbia under Clause 2.2 and the corresponding manufacturing and supply provisions of this Agreement set out in Clauses 5, 7 and 10 on giving 30 days written notice to Columbia. 16.5.4 Where Ardana terminates the manufacture and supply arrangements under the provisions of Clause 16.5.3 Ardana shall pay to Columbia a royalty equal to [***]. If Ardana exercises its rights under Clause 16.5.3, Columbia will at its own cost and expense procure that its contract manufacturer or contract manufacturers provide such reasonable technical and other assistance as may be required in order to ensure that Ardana is able to manufacture or have manufactured Finished Product. Ardana shall be free to contract for the manufacture and supply of Product and/or Finished Product with any contract manufacturer previously appointed by Columbia; 16.5.5 Ardana shall make the payments due to Columbia under Clause 16.5.4 at Quarterly intervals. Within 30 days of the end of each Quarter Ardana shall prepare a statement which shall show on a country by country basis in the Territory for the previous Quarter all monies due to Columbia. That statement shall be submitted to Columbia within 30 days of the end of the Quarter to which it relates together with remittance of the monies due. The following provisions shall also apply: 16.5.5.1 Ardana shall pay the sums due to Columbia from a single source in Euros. Such payments shall be made free and clear of and without deduction or deferment in respect of any disputes or claims whatsoever and/or as far as is legally possible in respect of any taxes imposed by or under the authority of any government or public authority. Any tax (other than VAT) which Ardana is required to pay or withhold in respect of the payments to be made to Columbia hereunder shall be deducted from the amount otherwise due provided that, in regard to any such deduction, Ardana shall give Columbia such assistance, 55 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. which shall include the provision of such documentation as may be required by any revenue authority and other revenue services, as may reasonably be necessary to enable Columbia to claim exemption therefrom or obtain a repayment thereof or a reduction thereof and shall upon request provide such additional documentation from time to time as is needed to confirm the payment of tax. For the avoidance of doubt it is declared and agreed that Ardana shall be liable to pay Columbia the full amount of all sums due notwithstanding any reason why monies in respect of any relevant sales cannot be remitted to the country in which they are headquartered. 16.5.5.2 Where Finished Product is sold in a currency other than Euros the rate of exchange to be used for converting such other currency into Euros shall be the midpoint rate at which such other currency can be sold for Euros as listed in the Financial Times published on the first working date after the last working date for the period for which payment is to be made. 16.5.6 Ardana shall keep and shall procure that its Affiliates, agents, distributors and sublicensees keep true and accurate records and books of account containing all data necessary for the calculation of the amounts payable by it to Columbia pursuant to this Agreement, and in particular but without limitation data relating to the calculation of Net Sales. Those records and books of account shall be kept for seven (7) years following the end of the Year to which they relate. Upon Columbia's (the "Assessing Party") written request a firm of accountants appointed by agreement between the Parties (or, failing such agreement within ten (10) Business Days of the initiation of discussions between them on this point and at the request of either Party by the President for the time being of the Institute of Chartered Accountants of England and Wales in London) shall carry out a review procedure in relation to Ardana's (the "Assessed Party") as follows: 56 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 16.5.6.1 such firm of accountants shall be given access to and shall be permitted to examine and copy such books and records upon twenty (20) Business Days notice having been given by the Assessing Party and at all reasonable times on Business Days for the purpose of certifying to the Assessing Party that the Net Sales calculated by the Assessed Party its Affiliates and/or agents, distributors or licensees during any Year was calculated in accordance with Clause 1.1.28 or, if this is not their opinion, to indicate that this is the case and to specify in detail why the Net Sales figures were not so calculated. The Parties shall then recalculate the Net Sales in accordance with such detailed guidance; 16.5.6.2 prior to any such examination taking place, such firm of accountants shall undertake to the Assessed Party in a deed that they shall keep all information and data contained in such books and records, strictly confidential and shall not disclose such information or copies of such books and records to any third person including the Assessing Party, but shall only use the same for the purpose of the calculations which they need to perform in order to issue the certificate to the Assessing Party which this Clause 16.5.6 envisages; 16.5.6.3 any such access examination and certification shall occur no more frequently than once per year and will not go back over records more than two (2) years old unless a discrepancy is found; 16.5.6.4 the Assessed Party shall make available personnel to answer queries on all books and records required for the purpose of that certification; 16.5.6.5 the cost of the accountant shall be the responsibility of the Assessed Party if the Parties recalculation shows the Assessed Party's previous figures supplied to the Assessing Party to be 57 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. inaccurate by more than five per cent (5%) and the responsibility of the Assessing Party otherwise. Within ten (10) Business Days following any such recalculation any monies which such recalculation shows as being due and owing by one Party to the other shall be paid by that Party. 16.5.7 at its option, Columbia shall continue to prosecute, maintain and defend the Columbia Patent Rights and Trademarks as specified in Clause 2 or shall transfer to Ardana the files and papers necessary for Ardana to do so, following which Ardana shall undertake such prosecution, maintenance and defence using its reasonable commercial judgement and deduct the cost and expense thereof from the royalties payable by Ardana under Clause 16.5.4. 16.5.8 the provisions of Clauses 2.3 to 2.6 inclusive, 2.8 as appropriate, 2.9 to 2.16 inclusive, 3, 4, 9, 11, 13, 14, 18 and 19 shall continue to apply. 17. FORCE MAJEURE 17.1 The obligations of the either Party hereunder shall be suspended during the time and to the extent that such Party is prevented from complying therewith due to Force Majeure. 17.2 As soon as possible after being affected by a Force Majeure circumstance, the Party so affected shall furnish to the other Party all particulars of the Force Majeure and the manner in which its performance is thereby prevented or delayed. The Party whose obligations hereunder have been suspended shall promptly and diligently pursue appropriate action to enable it to lift the Force Majeure situation, except that a Party shall not be obligated to settle any strike, lockout or other labor difficulty on terms contrary to its wishes. 18. RECORDS INSPECTION; RECORD RETENTION 18.1 Columbia shall ensure that its contract manufacturer retains all production records of the processing and manufacture of the Finished Product in accordance with all relevant guidelines and applicable laws in the Territory. Columbia will retain samples of the Product as are required in all countries where Regulatory Approval has been obtained. Once during each calendar year, Columbia shall ensure and/or Columbia 58 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. shall permit Ardana or its duly authorized representatives, upon reasonable written notice and at any reasonable time during normal business hours, can visit and inspect the production, testing, packing, and shipping facilities for the Product during normal business hours to verify compliance with this Agreement. 18.2 Once during each calendar year, Ardana shall permit Columbia or its duly authorized representatives, upon reasonable written notice and at any reasonable time during normal business hours, to have access to, and to inspect distribution, packaging and/or storage facilities relating to the Product. Any inspection shall be at the expense the Party conducting such inspection. 18.3 Retention of Records. All documentation, records, raw data, and specimens pertaining to this Agreement will be held for the length of time required under Applicable Law. 19. GENERAL PROVISIONS 19.1 Independent Contractors. Ardana and Columbia are independent of each other and nothing contained herein shall be construed to create a joint venture, partnership or similar relationship. Neither Party is authorized to, nor shall it, incur any liability whatsoever for which the other may become directly, indirectly or contingently liable. 19.2 Dispute Resolution; Consent to Jurisdiction. This Agreement shall be construed and interpreted in accordance with English law without regard to principles related to conflicts of laws. The parties expressly agree that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to the interpretation and construction of this Agreement. In an effort to resolve informally and amicably any claim, controversy or dispute (whether such claim, sounds in contract, tort, or otherwise) arising out of or relating to this Agreement, or the breach thereof (a "Dispute"), each Party shall notify the other in writing of a Dispute hereunder that requires resolution. Such notice shall set forth the nature of the Dispute, the amount, if any, involved and the remedy sought. Each Party shall designate a representative who shall be empowered to investigate, discuss and seek to settle the Dispute. If the two representatives are unable to settle the Dispute within thirty (30) days after proper notification, the Dispute shall be submitted to the Chief Executive Officer of each Party for consideration for an additional thirty (30) days. If the Dispute remains 59 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. unresolved after said sixty (60) day period, either Party shall have a right to commence any action, suit or proceeding with respect to such Dispute in a court of competent jurisdiction. The venue for such action, suit or proceeding shall be in the English Courts. No provision of, or the exercise of any rights under, this Agreement shall limit the right of the parties to obtain, apply for, or resort to court ordered injunctive relief. Ardana and Columbia each further irrevocably consent to the service of any complaint, summons, notice or other process by delivery thereof to it by any manner in which notices may be given pursuant to this Agreement. 19.3 Notices. 19.3.1 Any notice or other communication given pursuant to or made under or in connection with the matters contemplated by this Agreement shall be in writing in the English language and shall be delivered by hand or by courier or shall be sent by recorded delivery to the address of the recipient set out in Exhibit F or as specified by the recipient from time to time in accordance with Clause 19.3.3. Notices sent by hand or by courier shall require a written receipt of delivery. Notices sent by fax or E-Mail shall not be valid of themselves and must be confirmed in hard copy form by hand or by recorded delivery. 19.3.2 Any notice given pursuant to this Clause shall be deemed to have been received: 19.3.2.1 if delivered by hand or by courier, at the time of delivery as evidenced in the receipt of delivery; or 19.3.2.2 if sent by recorded delivery, at the time of delivery. 19.3.3 A Party may notify the other Parties to this Agreement of a change of its name, relevant addressee, address or facsimile number for the purposes of Exhibit F provided that such notification shall only be effective on: 19.3.3.1 the date specified in the notification as the date on which the change is to take place; or 60 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 19.3.3.2 if no date is specified or the date specified is less than (five) clear Business Days after the date on which the notice is given, the date falling five clear Business Days after notice of any such change has been given. 19.4 Assignment. Columbia shall not assign this Agreement without also assigning to the same assignee the Columbia Patent Rights and Trademarks and conversely may not assign the rights the Columbia Patent Rights and Trade Marks (other than to an Affiliate) without also assigning to the same assignee this Agreement. Ardana shall not assign this Agreement without also assigning to the same assignee the rights the subject of Clause 2.6 and the MAs and conversely may not assign the rights the subject of Clause 2.6 and the MAs (other than to an Affiliate) without also assigning to the same assignee this Agreement. This Agreement shall not be assignable by either Ardana on the one hand or by Columbia on the other hand ("Assignor") without the written consent of the other ("Remaining Party") such consent not to be unreasonably withheld, provided however that either Party may assign this Agreement to any Affiliate or to a corporation with which such Party may merge or consolidate, or to which it may transfer all or substantially all of its assets to which this Agreement relates, subject to obtaining a direct deed of undertaking from such corporation addressed to the Remaining Party agreeing to be bound by all the terms of this Agreement. 19.5 Amendment and Waiver. This Agreement (including the Exhibits hereto) may be amended, modified, superseded or cancelled, and any other of the terms or conditions hereof may be modified, only by a written instrument executed by both parties hereto or, in the case of a waiver, by the Party waiving compliance. Failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same, and no waiver of any nature, whether by conduct or otherwise, in any one or more instances, shall be deemed to be or considered as a further or continuing waiver of any other provision of this Agreement. 19.6 Severability. In the event that any one or more of the agreements, provisions or terms contained herein shall be declared invalid, illegal or unenforceable in any respect, the 61 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. validity of the remaining agreements, provisions of terms contained herein shall in no way be affected, prejudiced or invalidated thereby. 19.7 Entire Agreement. This Agreement, together with the Exhibits hereto, contains the entire agreement between the parties hereto and supersedes any agreements between them with respect to the subject matter hereof. 19.8 Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 19.9 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 19.10 Columbia Laboratories, Inc. hereby agrees, by executing this Agreement in the space provided below and subject to Ardana's full compliance with the procedures set forth in Clause 13.3 to indemnify, defend and hold Ardana harmless for all liability, loss, damage, cost and expense (including legal costs) incurred or suffered by Ardana as a result of any breach of warranty by Columbia under 13.1 in the event that Columbia fails to satisfy any claim of Ardana for such breach under the provisions of Clause 13.3. 62 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ARDANA BIOSCIENCE COLUMBIA LABORATORIES LIMITED (BERMUDA), LTD. By: /S/ Simon G. Best By: /S/ Fred Wilkinson -------------------------------------- ------------------------------- Simon G. Best Fred Wilkinson Name Name CEO President Title Title 16th October 2002 16th October 2002 Date Date AGREED TO SOLELY FOR PURPOSES OF CLAUSE 19.10: COLUMBIA LABORATORIES, INC. By: /S/ Fred Wilkinson -------------------------------------- Fred Wilkinson Name President & CEO Title 16th October 2002 Date 63 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT A EUROPEAN PATENTS AND APPLICATIONS "Basic Bioadhesive" Family Patent No: EP 163 696 B1 and all corresponding national patents in the Territory EP 501 523 B1 and all corresponding national patents in the Territory The Parties acknowledge that without SPC extension these patents will expire in November 2003. "Buccal Tablet" Family Published Patent Application No: EP 1 105 104 A1 and any future corresponding nation patents in the Territory 64 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT B TERRITORY Austria Belgium Denmark Finland France Germany Greece Ireland Luxembourg Netherlands Portugal Spain Sweden United Kingdom Norway Switzerland Liechtenstein Monaco 65 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 66 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT C OPTION COUNTRIES [***] 67 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT D MINIMUM PURCHASE REQUIREMENTS - ----------------------------------- ------------------------------------------ YEAR UNITS - ----------------------------------- ------------------------------------------ [***] [***] - ----------------------------------- ------------------------------------------ Assumptions 1. Years start from the first of the month following First Commercial Sale in a Major Market in the Territory 2. [***] assumes regulatory approval in UK occurs before [***] 3. [***] assumes regulatory and reimbursement approval in [***] 4. If either of these assumptions proves incorrect the Parties will renegotiate the Minimum Purchase Requirements in this table under the provisions of Clause 7.5. 5. A unit is one 60 tablet package or the equivalent number of tablets in other package volumes. 68 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT E EXPERT'S DECISION 1. Any matter or dispute to be determined by an expert under this Agreement. ("Expert") shall be referred to a person suitably qualified to determine that particular matter or dispute who shall be nominated jointly by the Parties or, failing agreement between the Parties within twenty (20) Business Days of a written request by either Party to the other seeking to initiate the Expert's decision procedure, either party may request the President for the time being of the Association of the British Pharmaceutical Industry or any successor body to it to nominate the Expert. 2. The Parties shall with fourteen (14) days of the appointment of the Expert meet with him/her in order to agree the program for oral written and oral submissions provided for in Clause 7.5. 3. In all cases the terms of appointment of the expert by whomsoever appointed shall include: 3.1. a commitment by the Parties to share equally the expert's fee; 3.2. a requirement on the expert to act fairly as between the Parties and according to the principles of natural justice; 3.3. a requirement on the expert to hold professional indemnity insurance both then and for three years following the date of his/her determination; 3.4. a commitment by the Parties to supply to the expert the submissions the subject of Clause 7.5 all such assistance, documents and information as he/she may require for the purpose of his or her determination. 3.5. a commitment by the Parties that all negotiations connected with the dispute shall be conducted in confidence and without prejudice to the rights of the parties in any future proceedings. 69 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4. The expert shall give a written decision which shall contain a factual analysis, his/her conclusions and the reasons for his conclusions. 5. The expert's decision shall be final and binding on the Parties (save in the case of negligence or manifest error). 6. The parties expressly acknowledge and agree that they do not intend the reference to the expert to constitute an arbitration within the scope of any arbitration legislation, the expert's decision is not a quasi judicial procedure and the parties shall have no right of appeal against the expert's decision provided always that this shall not be construed as waiving any rights the parties might have against the expert for breaching his/her terms of appointment or otherwise being negligent. 70 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT F NAMES AND ADDRESSES FOR NOTICES If to Columbia Laboratories (Bermuda), Ltd., Columbia Laboratories (Bermuda), Ltd. P.O. Box HM 1179 Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda Attention: Secretary Tel: (441) 295-2244 Fax: (441) 292-8666 (441) 295-5328 If to Columbia Laboratories, Inc., Columbia Laboratories, Inc. 220 South Orange Avenue Livingston, New Jersey 07039 Attention: President Tel: (973) 994-3999 Fax: (973) 994-3001 With copy to: Columbia Laboratories, Inc. 220 South Orange Avenue Livingston, New Jersey 07039 Attention: General Counsel Tel: (973) 994-3999 Fax: (973) 994-3001 If to Ardana Biosciences Limited: COO Ardana Biosciences Limited 58 Queen Street Edinburgh EH2 3NS 71 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 72 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EX-10.38 4 dex1038.txt DEVELOPMENT AND LICENSE AGREEMENT Exhibit 10.38 ARDANA BIOSCIENCE LIMITED and COLUMBIA LABORATORIES (BERMUDA), LTD. and COLUMBIA LABORATORIES, INC. ---------- DEVELOPMENT AND LICENSE AGREEMENT ---------- 1 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DEVELOPMENT AND LICENSE AGREEMENT, dated as of 26 December 2002, between ARDANA BIOSCIENCE LIMITED, a company incorporated in England, with its registered office c/o Dundas & Wilson CS, Bush House, Aldwych, London WC2B 4PA, England ("Ardana") and COLUMBIA LABORATORIES (BERMUDA), LTD., a Bermuda corporation, having its office at Rosebank Center, 14 Bermudiana Road, Pembroke, HM08 Bermuda ("Bermuda") and COLUMBIA LABORATORIES, INC., a US corporation incorporated in Delaware having its principal place of business at 354 Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039 ("COB") (jointly, "Columbia", which shall be used to refer to either or both Bermuda and COB as appropriate -- COB generally with regard to US activities, rights, and obligations, and Bermuda generally with regard to activities, rights, and obligations outside the US). RECITALS: (A) COB owns certain Patent Rights in the USA relating to a bioadhesive delivery technology and in relation to certain uterine pass technology and is also the owner of certain Know How in relation to their use in conjunction with a treatment agent in a clinical setting. Bermuda owns certain corresponding Patent Rights which exist outside the USA. (B) Ardana is a specialty pharmaceutical company specialising in the research, development, marketing and sale of products in the field of reproductive health. (C) The parties are interested in co-developing the bioadhesive delivery and uterine pass technologies in conjunction with the compound known as terbutaline in North America and Europe with a view to obtaining marketing authorisations for and subsequently selling the resultant product in North America and Europe, and arranging for the sale of such product in the rest of the world. (D) This Agreement sets out the terms upon which such co-development is to be conducted and provides for the subsequent rights and obligations of the Parties. NOW THEREFORE, the Parties hereto agree as follows: 2 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1. DEFINITIONS 1.1 As used in this Agreement, the following definitions (in addition to other definitions set forth in this Agreement) shall apply: 1.1.1 "Affiliate" shall mean any entity controlling, controlled by or under the common control of Columbia or Ardana, as the case may be. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of more than (50%) percent of the outstanding shares or other voting rights of the subject entity or possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such entity. 1.1.2 "Agreement" shall mean this development and license agreement (which expression shall be deemed to include the Recitals and Exhibits hereto). 1.1.3 "Allocable Overhead" - either a standard percentage rate agreed to by the Parties for each of them to be added to an item of cost, failing which means the addition to an item of cost of other relevant pro-rated costs incurred by a party or for its account which are attributable to the operation by such party of its service departments including human relations, information systems, payroll, purchasing, supervisory and other internal groups or which are attributable to its occupancy provided that such party normally allocates such service department costs to its departments or project groups based on space occupied or headcount or other activity-based method in a manner consistently applied by such party. Allocable Overhead shall not include any costs attributable to corporate activities of an exceptional nature including, by way of example of each, costs relating to acquisitions or disposals or other corporate transactions, or to routine corporate activities not related directly to the subject of this Agreement including, for example, public and investor relations activities, and CEO functions. 1.1.4 "Applicable Laws" means all applicable laws, rules, regulations, directives and guidelines (including any amendments, extensions or replacements thereto) (i) in any country that apply to the development or to the 3 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Commercialization of the Product in such country; and (ii) in any country that apply to the performance of either Party's obligations or covenants under this Agreement. 1.1.5 "Ardana Negative Election" - an election by Ardana pursuant to Clause 4.1 that it wishes to discontinue the co-development and Commercialisation of Candidate Product and resultant Product. 1.1.6 "Ardana Positive Election" - an election by Ardana pursuant to Clause 4.1 that it wishes to continue with the co-development and Commercialisation of Candidate Product and resultant Product. 1.1.7 "Ardana Territory" - Europe, together with (with the exception of the use of this definition in the provisions of Clause 8) any territory allocated to Ardana under the provisions of Clause 8.1. 1.1.8 "Business Days" shall mean 9.30 am to 5.30 pm local time on a day other than a Saturday, Sunday, or public holiday in the UK (or any part thereof) or the USA (or any part thereof). 1.1.9 "cGMP" shall mean manufacture in accordance with: (a) EC Directive 91/356/EEC as may be amended from time to time; (b) the current guide to good manufacturing practice for medicinal products published by the European Commission; (c) U.S. Code of Federal Regulations Title 21, Parts 210 and 211, as may be amended from time to time; and (d) the equivalent law or regulation in any country . 1.1.10 "Candidate Product" - the compound known as Terbutaline delivered utilising the Columbia Technology as a vaginal gel in a finished pharmaceutical dosage form, for the indications determined by the DC for so long as the DC exists. 4 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.11 "Certificate of Analysis" shall mean a document of that name as described in detail in the current guide to good manufacturing practice for medicinal products published by the European Commission. 1.1.12 "Clinical Trial Material" or "CTM" - Candidate Product manufactured in compliance with cGMP in a form suitable for administration and dosing to humans in Clinical Trials. 1.1.13 "Clinical Trials" - means any or all of the Phase I Clinical Trials, Phase II Clinical Trials or Phase III Clinical Trials. 1.1.14 "Columbia IP" - all intellectual property or other rights relating to or comprised in the Columbia Technology, including without limitation all Patent Rights (including the Patent Rights listed in Exhibit A), Know How, trade secrets, technology, disclosures, inventions, discoveries, and other information whether patentable or not, owned or licensed by Columbia or a Columbia Affiliate at the Commencement Date, or thereafter. 1.1.15 "Columbia Negative Election" - an election by Columbia pursuant to Clause 4.1 that it wishes to discontinue the co-development and commercialisation of Candidate Product and resultant Product. 1.1.16 "Columbia Patent Rights" - the Patent Rights relating to or comprised in the Columbia Technology, at or after the Commencement Date. 1.1.17 "Columbia Positive Election" - an election by Columbia pursuant to Clause 4.1 that it wishes to continue with the co-development and Commercialisation of Candidate Product and resultant Product. 1.1.18 "Columbia Technology" - Columbia's proprietary delivery, bioadhesive delivery, and uterine pass technologies, disclosed to Ardana for the purposes of carrying out the Development Program in relation to Candidate Product and which shall include without limitation the inventions claimed or disclosed in the Patent Rights listed in Exhibit A, and all related Know How owned or licensed to Columbia as of the Commencement Date including, 5 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. without limitation, any pre-clinical or clinical data relating to the use thereof with or without Terbutaline, as well as any and all Improvements that arise during the term of this Agreement. 1.1.19 "Columbia Territory" - North America together with (with the exception of the use of this definition in the provisions of Clause 8) any territory allocated to Columbia under the provisions of Clause 8.1. 1.1.20 "Commencement Date" means the date of execution of this Agreement. 1.1.21 "Commercialization", "Commercializing", or "Commercialize" shall mean all activities in the Territory relating to the import, export, promotion, marketing, detail, distribution, storage, handling, offering for sale and sale of the Finished Product including: (1) determining the pricing of Product in a country and, if relevant, obtaining the pricing or reimbursement approval for Product in such country; (2) establishing the Trade Marks to be used for Product in a country; (3) establishing the Trade Dress, Packaging and Labelling for Product in a country; (4) establishing the commercial launch program and the distribution chain for Product in a country. 1.1.22 "Commercialization Committee" - the joint committee of the Parties established pursuant to Clause 5.6.6 for the co-ordination of Commercialization and liaison between the Parties in respect of the same. 1.1.23 "Commercialisation Costs" - any costs and expenses incurred by either Party in relation to commercialisation. 1.1.24 "Commercialisation Know How" - any and all Know How relating to Commercialisation. 6 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.25 "Common Technical Document" or "CTD" - the common technical document relating to the Candidate Product which shall be generated pursuant to the Development Program and which is sufficient to fulfill the requirements for filing an application for Regulatory Approval with the FDA and for Marketing Authorisation with the EMEA. 1.1.26 "Confidential Information" - means all materials, trade secrets, or other commercially sensitive information, including without limitation, proprietary information, that the Disclosing Party reasonably deems and treats as confidential when disclosed or made available to, or otherwise coming into the possession of, the other Party in relation to the performance of this Agreement which for the avoidance of doubt shall in the case of obligations on Ardana in relation to Confidential Information, include without limitation Know How forming part of Columbia IP and, in the case of both Ardana and Columbia, shall include without limitation Joint Program Know How and Commercialisation Know How. 1.1.27 "Co-ordination Committee" or "CC" - the committee to be established pursuant to Clause 8.4 for the management by the Parties of the clinical development and Commercialisation by a ROW Partner. 1.1.28 "Development Budget" - a budget for a particular Year of the Development Program being an estimate of Development Costs to third parties to be incurred by the Parties in relation to the Development Program during such year. 1.1.29 "Development Committee" or "DC" - the joint committee of the Parties established pursuant to Clause 2 to manage the Development Program subject to referral to the Chief Executive Officers of the Parties as specified in Clause 2. 1.1.30 "Development Costs" - means: (a) all reasonable costs and expenses (priced on a competitive basis) paid by either of the Parties to third parties in connection with the Second 7 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Development Program (including, for the avoidance of doubt, the preparation of the CTD) conducted externally (whether through a direct relationship with a consultant or a clinical investigator or through a contract research organisation) and in all cases including the costs and expenses incurred to such third party for data management, statistical designs and studies, report preparation and other administrative expenses of such third party associated with the Second Development Program; (b) all costs and expenses paid by either of the Parties to third parties including to outside patent attorneys, legal counsel and experts for the preparation, filing, prosecution and maintenance of Joint Program Patent Rights including costs of patent interference, opposition, re-examination, reissue, and revocation proceedings or requests for patent term or SPC extensions relating thereto to the extent the same occurs during the period of the Development Program; and (c) the Fully Burdened Manufacturing Costs incurred in connection with supply of CTM for the Second Development Program. For the avoidance of doubt it is stated that Development Costs shall not include related Allocable Overhead nor shall they include Commercialisation Costs (the treatment of which is governed by Clause 5.6). 1.1.31 "Development Program" - the First Development Program and the Second Development Program. 1.1.32 "Documents" - reports, research notes, charts, graphs, comments, computations, analyses, recordings, photographs, paper, notebooks, books, files, ledgers, records, tapes, discs, diskettes, CD-ROM, computer information storage means and any other media on which Know How can be permanently stored. 1.1.33 "EMEA" - European Medicines Evaluation Agency or any successor group thereto. 8 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.34 "Europe" - shall mean Austria, Belgium, Denmark, Finland, France, Germany, Luxembourg, Netherlands, Spain, Sweden, United Kingdom, Norway, Switzerland, Liechtenstein, Monaco, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Malta, Cyprus, Turkey, Albania, Bosnia and Herzegovina, Croatia, Kosovo, The Former Yugoslav Republic Of Macedonia, Serbia, and Montenegro. For the avoidance of doubt, Europe, for purposes of this Agreement, shall not mean Greece, Ireland, Italy (including San Marino and Vatican City), and Portugal, unless and until the conditions of Clause 21.2 shall have been met. 1.1.35 "FDA" means the Governmental Authority in the USA with the name "Food and Drug Administration" or any successor agency thereof. 1.1.36 "Finished Product" - Product Packaged and Labelled and ready for ultimate commercial sale or use. 1.1.37 "First Commercial Sale" - the first invoiced commercial sale by a Party, its Affiliates, agents or sublicensees in any country after grant of Regulatory Approval or Marketing Authorisation and pricing approval for Product (if required in that country) in such country by the appropriate Governmental Authority. 1.1.38 "First Development Program" - the detailed program of work commencing upon the Commencement Date to be conducted by the Parties comprising Formulation Work and the clinical development of Candidate Product up to the Point of Proof of Principle which is set out in Exhibit B hereto. 1.1.39 "Force Majeure" means in relation to either Party, any event or circumstance which is beyond the reasonable control of that Party and without the fault or negligence of that Party so affected which results in or causes the failure of that Party to perform any or all of its obligations under this Agreement, including, without limitation, inevitable accidents, perils of navigation, floods, fire, storms, drought, or other weather-related conditions, 9 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. earthquakes, asteroid or meteor activity, explosion, hostilities, sabotage, act of vandalism, war (whether declared or undeclared), civil disturbances, order or act of any government, whether de jure or de facto or any official purporting to act under authority of any such government, illegality arising from domestic or foreign laws or regulations, insurrections, quarantine or custom restrictions, damage in factories or warehouses, strikes, lockouts, other labor difficulty or other disturbance at the Parties or the suppliers of Product, raw materials and/or excipients, energy or other supplies, breakdown of machinery or instruments or acts of God or other similar events beyond the reasonable control of the Party so affected resulting in hindrance of the performance by either Party of its obligations hereunder. 1.1.40 "Formal Presentation" - in relation to the results of any preclinical study or any Clinical Trial means an oral presentation of the results of such preclinical study or Clinical Trial following its conclusion with supporting written evidence but does not mean the final formal written report of the results of the preclinical study or Clinical Trial containing the final assessment of the results properly quality assured. 1.1.41 "Formulation Work" - the work to be conducted by Columbia under the First Development Program as set out in the First Development Program in relation to the formulation of the Candidate Product. 1.1.42 "FTE" - a period of time equivalent to the number of hours that an employee in the full time employment of either Party shall be obliged to spend at work in any twelve (12) month period of continuous employment. 1.1.43 "Fully Burdened Manufacturing Cost" - means: the cost of producing the CTM or Finished Product including raw material costs, direct labour costs, direct utilities and other energy costs and direct product quality assurance/control costs and including any applicable Allocable Overhead. For the avoidance of doubt such Fully Burdened 10 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Manufacturing Costs chargeable under this Agreement the Parties will apply GAAP in a consistent manner. 1.1.44 "Good Clinical Practice" or "GCP" shall mean clinical practice as set out in: (a) ICH Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any amendment thereof; and (b) any guidelines concerning good clinical practice published from time to time by the European Commission pursuant to Directive 2001/20/EC or any amendment thereof; and (c) US Code of Federal Regulations Title 21, Parts 50 (Protection of Human Subjects) and 56 (Institutional Review Boards), as may be amended from time to time; and (d) the Declaration of Helsinki as last amended at the 52nd World Medical Association October 2000 and any further amendments thereto; and (e) National Institute of Health Standards for the protection of human subjects as may be amended from time to time; and the equivalent law or regulation in any relevant territory. 1.1.45 "Good Industry Practice" shall mean in relation to any undertaking and any circumstance, the exercise of that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances. 1.1.46 "Good Laboratory Practice" or "GLP" - laboratory practice as set out in: (a) Directive 87/18/EEC as may be amended from time to time; and (b) US Code of Federal Regulations, Title 21, Part 58 (Good Laboratory Practice for Nonclinical Laboratory Studies) as may be amended from time to time; and 11 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (c) the equivalent law or regulation in any territory. 1.1.47 "Governmental Authority" shall mean all governmental and regulatory bodies, agencies, departments or entities that regulate, direct or control commercial and other related activities the subject of this Agreement, including any relevant government health authority (or successor agency thereof) in any country or countries including the FDA and the EMEA whose approval is necessary to market the Finished Product in such country or countries in the Territory. 1.1.48 "Improvements" - all improvements, enhancements, or modifications, whether or not patentable, to the Columbia Technology, including without limitation any new formulations, technologies, or other inventions either made, obtained, or licensed by or on behalf of either of Columbia or its Affiliates, during the term of this Agreement or made or obtained by Ardana during the term of this Agreement provided that in the case of Ardana all such improvements, enhancements, or modifications were so made and obtained utilising or derived from the Columbia Technology and such improvements, enhancements, or modifications shall not include any of the same independently developed by or on behalf of Ardana without access to the Columbia Technology. For the avoidance of doubt, at the request of Columbia, Ardana shall establish by clear and convincing evidence that any improvements, enhancements, or modifications to be excluded from Improvements were made or obtained by or on behalf of Ardana independently without access to the Columbia Technology. Also for the avoidance of doubt it is declared and agreed that Improvements: 1.1.48.1 includes, without limitation, the results of any and all Formulation Work; and 1.1.48.2 excludes: (a) all pre-clinical and clinical data generated after the Commencement Date and during the Term of this Agreement to the extent it relates to the use of terbutaline with such Columbia Technology; and 12 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (b) all discoveries unrelated to the subject matters of the Columbia Technology, such as, for example, a new indication for terbutaline that is independent of the delivery formulation or mechanism. 1.1.49 "Insolvency Event" shall mean, in relation to either Party, any one of the following: (a) a notice shall have been issued to convene a meeting for the purpose of passing a resolution to wind up that Party or such resolution shall have been passed other than a resolution for the solvent reconstruction or reorganisation of that Party or for the purpose of inclusion of any part of the share capital of that Party in the Official List of the London Stock Exchange or in the list of the American Stock Exchange or quotation of the same on the National Association of Securities Dealers Automated Quotation System or any other international stock exchange or an application by that Party for registration as a public company in accordance with the requirements of the Companies Act 1985; or (b) a resolution shall have been passed by that Party's directors to seek a winding up or an administration order or a petition for a winding up or administration order shall have been presented against that Party which, in the case of a petition presented against a Party, shall not have been appealed within 7 days of having been lodged or such an order shall have been made and shall have been dismissed within thirty (30) days thereafter; or (c) a receiver, administrative receiver, receiver and manager, interim receiver, custodian, sequestrator or similar officer is appointed in respect of that Party or over a substantial part of its assets or any third party takes steps to appoint such an officer in respect of that Party or an encumbrancer takes steps to enforce and enforces its security which shall not have been dismissed by a court of competent jurisdiction within thirty (30) days thereafter; or 13 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (d) a proposal for a voluntary arrangement shall have been made in relation to that Party under Part I Insolvency Act 1986; or (e) a step or event shall have been taken or arisen outside the United Kingdom which is similar or analogous to any of the steps or events listed at (a) to (d) above in the case of Bermuda under the laws of Bermuda and in the case of COB under the laws of USA but for avoidance of doubt including in the case of COB filing of a petition under the US Bankruptcy Code including a filing under Chapter 11 proceedings, which, in the case of a filing made against a Party, shall not have been appealed within 7 days of having been lodged or such an order shall have been made and dismissed within thirty (30) days thereafter; or (f) that Party takes any step (including starting negotiations) with a view to readjustment, rescheduling or deferral of any part of that Party's indebtedness, or proposes or makes any general assignment, composition or arrangements with or for the benefit of all or some of that Party's creditors or makes or suspends or threatens to suspend making payments to all or some of that Party's creditors or the Party submits to any type of voluntary arrangement; or (g) where that Party is resident in the United Kingdom it is deemed to be unable to pay its debts within the meaning of Section 123 Insolvency Act 1986. 1.1.50 "Joint Program IP" -Joint Program Patent Rights and any other intellectual property or other rights relating to or comprised in Joint Program Know How, including without limitation all Patent Rights, trade secrets, technology, disclosures, inventions, discoveries, and other information, whether patentable or not, which for the avoidance of doubt excludes any Columbia IP or any rights to Columbia Technology. 1.1.51 "Joint Program Know How" - Know How conceived, generated or developed by or on behalf of either Party during the performance of the 14 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Development Program including in particular any Know How comprising or relating to the CTD but which for the avoidance of doubt excludes any Know How relating to the Columbia Technology. 1.1.52 "Joint Program Patent Rights" - any Patent Rights claiming or covering or otherwise based on inventions forming part of Joint Program Know How, but which for the avoidance of doubt excludes any Columbia Patent Rights. 1.1.53 "Know How" - technical and other information which is not in the public domain, including information comprising or relating to concepts, discoveries, data, designs, formulae, ideas, inventions, methods, models, assays, research plans, procedures, designs for experiments and tests and results of experimentation and testing (including results of research or development), processes (including manufacturing processes, specifications and techniques), laboratory records, chemical, pharmacological, toxicological, clinical, analytical and quality control data, trial data, case report forms, data analyses, reports, manufacturing data or summaries and information contained in submissions to and information from ethical committees and regulatory authorities. Know How includes Documents containing Know How. The fact that an item is known to the public shall not be taken to preclude the possibility that a compilation including the item, and/or a development relating to the item, is not known to the public. 1.1.54 "Label", "Labelled" or "Labelling" shall mean all labels and other written, printed or graphic matter upon (i) the Product or any container or wrapper utilized with the Product, or (ii) any written material accompanying the Product, including, without limitation, package inserts and patient information leaflet. 1.1.55 "Marketing Authorisation or MA" - the Regulatory Approval required from a Governmental Authority in any country to market and sell Product in such country, but not any form of pricing or reimbursement approval. 1.1.56 "Net Revenues" - shall mean in the case where pursuant to Clause 4.5 or 5.8 a Third Party is licensed to develop, use, import, have imported, market, 15 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. distribute and sell or have marketed, distributed or sold Product on a worldwide basis or in the case where pursuant to Clause 8 it has been decided to appoint a ROW Partner to develop, use, import, have imported, market, distribute and sell or have marketed, distributed or sold the Product in any territory of ROW Net Revenues shall mean all sums received by either Party in respect of such licence whether signature fees, up-front payments, milestone payments, royalty payments or any other payments whatsoever except for Fully Burdened Manufacturing Costs paid to Columbia if Columbia manufacture Product for such Third Party licensee which shall be separately paid to Columbia. 1.1.57 "Net Sales" with respect to Finished Product shall mean the gross amount received by a Party, its Affiliates or sub-licensees for sale of Finished Product to unrelated third parties less: (a) quantity, trade and/or cash discounts actually granted; (b) amounts repaid or credited and allowances including cash, credit or free goods allowances, given by reason of charge backs, retroactive price reductions or billing errors and rebates (including government-mandated rebates), actually allowed or paid; (c) amounts refunded or credited for Finished Product which was rejected, spoiled, damaged, outdated or returned; (d) freight, shipment and insurance costs incurred transporting Finished Product to a third party purchaser; (e) taxes, tariffs, customs duties and surcharges and other governmental charges incurred in connection with the sale, exportation or importation of Finished Product. Subject to the foregoing provisions if there are any other issues surrounding the calculation of Net Sales these shall to the extent possible be determined in accordance with GAAP or its successor in the UK in the case of Ardana and in the US in the case of Columbia. 16 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. The transfer of Finished Product by a Party or one of its Affiliates to another Affiliate or sub-licensee shall not be considered a sale. In such cases Net Sales shall be determined based on the invoiced sale price by the Affiliate or sub-licensee to the first third party trade purchasers, less the deduction allowed under this Clause. Upon the sale or other disposal of Finished Product other than in a bona fide arms length transaction exclusively for money or upon any use of Finished Product for the purposes which do not result in a disposal of that Finished Product in consideration of sales revenue customary in the country of sale (including, without limitation, the sale of the Finished Product as a "loss leader" or in conjunction with the sale of another product in the transaction commonly known as "bundling"), such sale, other disposal or use shall be deemed to constitute a sale at the relevant open market price in that country in which the sale, other disposal or use occurs, or, if that price is not ascertainable, a reasonable price assessed on an arm's length basis or the goods or services provided in exchange of the supply. Disposal of Finished Product for, or use of Finished Product, in clinical or pre-clinical trials or as free samples to be in quantities common in the industry for this sort of Product shall not give rise to any deemed sale under this Clause. 1.1.58 "North America" shall mean Antigua and Barbuda, The Bahamas, Barbados, Belize, Bermuda, Canada, Costa Rica, Cuba, Dominica, Domican Republic, El Salvador, Greenland, Grenada, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago, and the USA. 1.1.59 "Parties" shall mean Columbia and Ardana and "Party" shall mean either Columbia or Ardana, however in either instance Columbia shall include, as appropriate in context, COB with regard to US activities, rights, and obligations, and/or Bermuda with regard to activities, rights, and obligations outside the US. 17 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.60 "Package", "Packaged" and "Packaging" shall mean all primary and secondary packaging components, including, without limitation, cartons, partitions, shippers, or any other like matter used in packaging the Product. 1.1.61 "Patent Rights" shall mean patent applications and patents, author certificates, inventor certificates, utility certificates, improvement patents and models and certificates of addition and all foreign counterparts of them, including any divisional applications and patents, refilings, renewals, continuations, continuations-in-part, patents of addition, extensions (including patent term extensions), reissues, substitutions, confirmations, registrations, revalidations, pipeline and administrative protections and additions, and any equivalents of the foregoing, as well as any supplementary protection certificates and equivalent protection rights in respect of any of them. 1.1.62 "Phase I Clinical Trial" - shall mean a small scale human clinical trial normally conducted in healthy volunteers or patients with the aim of establishing the pharmacokinetic, pharmacodynamic and early safety profile. 1.1.63 "Phase II Clinical Trial" - shall mean a human clinical trial where a product is tested in a number of patients for the purpose of establishing further safety data, dose ranging and/or preliminary data on the efficacy of product. 1.1.64 "Phase III Clinical Trial" - shall mean a human clinical trial conducted in a sufficient number of patients to establish safety and efficacy for the particular indication tested and required for the filing to obtain Marketing Authorisation. 1.1.65 "Point of Proof of Principle" - completion of Phase II Clinical Trials for Candidate Product as evidenced by the provision by Ardana to Columbia of first a Formal Presentation followed by the final formal written report of the results of the Phase II Clinical Trials containing the final assessment of the results properly quality assured. 18 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.1.66 "Product" - a finished pharmaceutical product comprising the Candidate Product in relation to which Marketing Authorisation and pricing approval has been granted by the appropriate Governmental Authority for any country for at least one indication. For the avoidance of doubt it is declared and agreed that if the product can be marketed and sold without pricing approval nothing in this definition requires pricing approval for it to be classified as Product for the purposes of this Agreement. 1.1.67 "QA Tests" - the quality assurance tests and testing regimes for CTM to be agreed by the DC. 1.1.68 "Qualified Person" means a person qualified in accordance with Article 49 or 50 of EU Directive 2001/83, who is responsible under Applicable Law in all or any part of the Territory for ensuring compliance with such Applicable Law and for carrying out certain specified actions required by such Applicable Law. 1.1.69 "Quarter" shall mean each period of three months ending on 31 March, 30 June, 30 September or 31 December and "Quarterly" shall be construed accordingly. 1.1.70 "Regulatory Application" shall mean a regulatory application or other application (including any supplements or amendments thereto) required to be filed or filed with a Governmental Authority in a country in connection with the marketing and sale of the Finished Product in such country. 1.1.71 "Regulatory Approval" shall mean any and all consents or other authorisations or approvals required from a Governmental Authority to market and sell Finished Product in any country, but excluding any form of pricing or reimbursement approval. 1.1.72 "Responsible Party" - shall mean the Party with responsibility for a particular task or tasks in relation to the filing, prosecution, maintenance, enforcement or defence of any Joint Program Patent Rights or the Party responsible for the development and Commercialisation of Candidate 19 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Product or resultant Product in a country or countries in ROW as the case may be. 1.1.73 "Rest of the World" or "ROW" - all countries of the world excluding the Ardana Territory and the Columbia Territory. 1.1.74 "ROW Partner" - any Third Party entity with whom either or both of the Parties contract either to be an agent or distributor of the Product in any territory of ROW or to be a licensee in any such territory of ROW. 1.1.75 "ROW Partner IP" - Know How and Patent Rights conceived, generated or otherwise developed, owned, or licensed by any ROW Partner and not included in Columbia IP. 1.1.76 "Second Development Program" - the program of work to follow the First Development Program in the event of an Ardana Positive Election and a Columbia Positive Election and which is to be conducted by Ardana and Columbia hereunder for the clinical development of Candidate Product in the Ardana Territory (in the case of Ardana) and the Columbia Territory (in the case of Columbia) being all further development work which may be required for the purpose of preparing a CTD and for filing an application for Regulatory Approval with the FDA and for Marketing Authorisation with the EMEA, an outline for which is attached in Exhibit C hereto and the detail of which and the Development Budget for each year of which shall be determined by the Development Committee (in the case of the Development Budget subject to the provisions of Clause 2.2.3). 1.1.77 "SmPC" shall mean the summary of product characteristics containing the information set out in Article 11 of EU Directive 2001/83. 1.1.78 "Solely Owned IP" - Solely Owned Patent Rights and any other intellectual property or other rights relating to or comprised in Solely Owned Know How, including without limitation all Patent Rights, trade secrets, technology, disclosures, inventions, discoveries, and other information, whether patentable or not, but which for the avoidance of doubt excludes 20 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. any Columbia IP, any rights to Columbia Technology, and any Joint Program IP. 1.1.79 "Solely Owned Know How" - Know How conceived, generated or developed by or on behalf of only one of the Parties during the period when it is proceeding to develop the Product alone under the provisions of Clauses 4.3, 4.4, 5.4.1, 18.4.1 or 18.5.1 including in particular any Know How comprising or relating to the CTD, but which for the avoidance of doubt excludes any Know How relating to the Columbia Technology and any Joint Program Know How. 1.1.80 "Solely Owned Patent Rights" - any Patent Rights claiming or covering or otherwise based on inventions forming part of Solely Owned Know How, but which for the avoidance of doubt excludes any Columbia Patent Rights and any Joint Program Patent Rights. 1.1.81 "Specification" - the specification for CTM to be agreed by the DC. 1.1.82 "Territory" shall mean the Ardana Territory or the Columbia Territory as appropriate. 1.1.83 "Trade Dress" means those aspects of the Packaging of the Finished Product involving the design, get up and trade dress thereof which are not required or dictated by the Regulatory Approval or Marketing Authorisation including the style of printing. 1.1.84 "Trade Marks" - registered and unregistered trade or service marks, and applications for registration of such marks, including trade dress in each case with any and all associated goodwill and all rights or forms of protection of a similar or analogous nature including rights which protect goodwill whether arising or granted under the law of any jurisdiction. 1.1.85 "Year" - twelve (12) months commencing on 1 January and ending on 31 December. 1.2 In this Agreement: 21 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.2.1 Unless the context otherwise requires all references to a particular Clause, Schedule or paragraph shall be a reference to that Clause, Schedule or paragraph, in or to this Agreement as it may be amended from time to time pursuant to this Agreement; 1.2.2 The table of contents and headings are inserted for convenience only and shall be ignored in construing this Agreement; 1.2.3 Unless the contrary intention appears words importing the masculine gender shall include the feminine and vice versa and words in the singular include the plural and vice versa; 1.2.4 Unless the contrary intention appears words denoting persons shall include any individual, partnership, company, corporation, joint venture, trust, association (incorporated or incorporated), organisation or other entity, in each case whether or not having legal personality; 1.2.5 Reference to any statute, directive or regulation includes any modification or re-enactment of that statute or regulation; and 1.2.6 Reference to the word "include" or "including" are to be construed without limitation to the generality of the preceding words. 2. DEVELOPMENT COMMITTEE 2.1 With effect from the Commencement Date the Parties shall establish and run a Development Committee ("DC") as follows: 2.1.1 the DC shall comprise two (2) persons as voting members ("Members") and Ardana and Columbia respectively shall be entitled to appoint one (1) Member and to replace the Member appointed by it. The initial Members shall be appointed by each Party prior to the first DC meeting. Ardana and Columbia respectively shall each notify the other of any change in the identities of their Member from time to time. Both sides shall use reasonable endeavours to keep an appropriate level of continuity in representation. Members may be represented at any meeting by another person designated 22 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. by the absent Member. Meetings of the DC shall be co-chaired by the two Members and such co-chairpersons shall only be entitled to exercise one (1) vote each as Members at the DC and shall not have any right to a veto or casting vote; 2.1.2 the quorum for meetings of the DC shall be the two (2) Members. Conclusions and decisions of the DC shall be made by unanimous agreement of the Members present wherever possible and shall be minuted by or upon behalf of the Chairpersons. Both Parties will use their reasonable efforts to build consensus. If the DC does not reach unanimous agreement regarding any matter such matter shall be referred for resolution to the Chief Executive Officer of each Party; 2.1.3 the venue for meetings not held by teleconference shall alternate between the offices of Ardana in Edinburgh, Scotland and the offices of COB in Livingston, New Jersey or such other venue as may be agreed. Each Party shall be responsible for its own expenses including travel and accommodation costs incurred in connection with DC meetings; 2.1.4 notwithstanding that each Party shall have only one Member of the DC the Parties acknowledge that other individuals may attend from either Party which additional attendees may change according to the subject matter of DC meeting. Each Party shall give the other reasonable advance notice of the identity of any such additional attendees which it intends to participate in the DC meeting in question. For the avoidance of doubt it is agreed that such persons shall not be Members and shall not have a right to vote or participate in the decision making process of the DC; and 2.1.5 the DC Members shall take alternate responsibility for promptly preparing the minutes of any DC meeting, receiving approval of those minutes from the other DC Member who participated in the meeting, signing and dating the approved minutes and promptly distributing a copy of the signed minutes to each Party. It is only such signed and dated minutes which shall constitute a decision of the DC. 23 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2.2 The DC will be the key management decision making and liaison body in control of the Development Program and: 2.2.1 shall hold meetings in person or by teleconference as frequently as the members of the DC may agree shall be necessary during the term of this Agreement or more frequently upon the reasonable request of either Party, but in any event no less frequently than once a Quarter. Dates of meetings requested by the DC to be held in person shall be agreed by the Parties not less than thirty (30) days beforehand; responsibility for arranging the meetings, including, at least, providing notice and an agenda, shall alternate between the Parties; the first meeting will take place as soon as practicable after the Commencement Date, but in no event later than twenty (20) Business Days after the Commencement Date and will be organised by Ardana; 2.2.2 to the extent that any details of the work to be conducted under the First Development Program and the Second Development Program have not been agreed by the Parties and set out in the Development Program at the Commencement Date the DC shall as necessary from time to time agree such details (subject to the provisions of Clause 5.1) including the indications to be pursued and the design of all Clinical Trials and the timescales therefor; 2.2.3 shall agree the Development Budget for each Year of the Second Development Program which Development Budget shall require ratification by the Chief Executive Officer of each Party; 2.2.4 shall agree the number of FTEs to be engaged by each Party (for the avoidance of doubt FTEs in this context means employees of a Party and not employees of a third party) on the Development Program at such Party's cost and expense which FTE commitment shall require ratification by the Chief Executive Officer of each Party; 2.2.5 if the DC whether on its own initiative or whether as a result of a decision of the Co-ordination Committee requests modification or changes to the 24 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Development Program which would result in the total Development Costs for any Year exceeding the Development Budget for that Year then such modifications or changes shall not be implemented by the DC (notwithstanding the agreement of the DC Members) unless and until a corresponding increase to the Development Budget is ratified by the Chief Executive Officer of each Party; 2.2.6 shall prioritise all work programs being conducted pursuant to the Development Program; 2.2.7 shall develop a global clinical development and regulatory strategy for the Product; 2.2.8 shall determine when all regulatory filings should be made for Regulatory Approval and Marketing Authorisation; 2.2.9 shall establish a mechanism for the representation of each Party at all meetings or calls with Governmental Authorities attended or made by Ardana or Columbia in relation to the Candidate Product provided always that such attendees shall have observer status only in meetings in the other Party's territory; 2.2.10 shall establish a mechanism for the co-ordination of the registration and mutual exchange of regulatory dossiers, summaries and expert reports for Regulatory Approval and Marketing Authorisation with the respective Governmental Authorities; 2.2.11 shall review the Members' Quarterly progress reports provided pursuant to Clause and monitor the progress of the Development Program by the Parties, their Affiliates, agents and/or their sub-contractors; 2.2.12 shall provide a Quarterly report to the respective management of each Party detailing the progress of the Development Program; 2.2.13 shall determine in conjunction with the Party's patent attorneys when patent application filings for Joint Program Patent Rights should be made which 25 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. decision shall require ratification by the Chief Executive Officer of each Party; 2.2.14 shall agree the Specifications for CTM and the QA Tests therefor; 2.2.15 shall devise the pharmacovigilance procedures to apply during the Development Program which meets all Legal Requirements; 2.2.16 shall perform such other functions and responsibilities as are given to it under the express provisions of this Agreement or as it shall determine but for the avoidance of doubt it is declared and agreed that the DC shall have no authority to amend the terms of this Agreement. For the avoidance of doubt it is declared and agreed that the DC has no powers or responsibilities in relation to Commercialisation nor the appointment of the ROW Partner. 3. THE FIRST DEVELOPMENT PROGRAM 3.1 Ardana shall at its own cost and expense but within the limit set out in the Development Budget carry out, control and be responsible for the conduct of all clinical studies up to the Point of Proof of Principle the subject of the First Development Program as established by the DC and shall as soon as practicable following completion of the same provide Columbia with a Formal Presentation and subsequently a final formal written report of the results of the Phase II Clinical Trials containing the final assessment of the results properly quality assured. 3.2 Columbia shall at its own cost and expense but within the limit set out in the Development Budget carry out, control and be responsible for the conduct of the Formulation Work as established by the DC and shall keep Ardana informed in writing of the progress and results of such Formulation Work. 3.3 During the First Development Program the provisions of Clause 5.3 shall apply in relation to those Development Costs described in subsection (b) of the definition of Development Costs. 26 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 3.4 The general obligations with regard to the conduct of the Development Program set out in Clause 6 shall apply in relation to the Parties conduct of the First Development Program. 3.5 During the period of the First Development Program each Party agrees that it shall not without the other Party's prior written approval (not to be unreasonably withheld) seek to develop, distribute or sell anywhere in the World a 'B'-adrenergic agonist based product that would compete with the Product. 27 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4. POINT OF PROOF OF PRINCIPLE ELECTIONS 4.1 Following the Point of Proof of Principle each Party shall have [***] to decide whether it wishes to continue with the co-development and Commercialisation of the Candidate Product and resultant Product in the Ardana Territory or the Columbia Territory as the case may be and each Party shall give written notice of its decision to the other Party on such [***] or the day agreed by the Parties, under seal, following which on the [***] day the Parties shall each break the seal to reveal the election of the other Party and then the following provisions of this Clause 4.1 shall apply as follows: 4.1.1 If Ardana or Columbia elects to continue with the co-development and Commercialisation of Candidate Product and resultant Product this shall be an Ardana Positive Election or a Columbia Positive Election, respectively. 4.1.2 If Ardana or Columbia elects not to continue with the co-development and Commercialisation of Candidate Product and resultant Product this shall be an Ardana Negative Election or a Columbia Negative Election, respectively. 4.2 In the event of an Ardana Positive Election and a Columbia Positive Election the Parties shall proceed with the co-development and Commercialisation of the Candidate Product and the resultant Product pursuant to the terms of this Agreement on the following terms: 4.2.1 Ardana shall on the terms of Clauses 13.4 and the other terms of this Agreement have the exclusive right to Commercialise Candidate Product and resultant Product in the Ardana Territory; 4.2.2 Columbia shall on the terms of Clause 13.2 and the other terms of this Agreement have the exclusive right to Commercialise Candidate Product and resultant Product in the Columbia Territory; 4.2.3 the DC shall produce the detailed Second Development Program and each Party shall carry out, control and be responsible for their respective tasks under the Second Development Program under the direction of the DC on the terms of Clause 5; and 28 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 4.2.4 the Parties shall agree the approach to be taken for the development and commercialisation of Candidate Product and resultant Product in the ROW Territory pursuant to Clause 8. 4.3 In the event of an Ardana Positive Election and a Columbia Negative Election, Columbia shall have [***] to elect to change its position to a Positive Election, in which case Clause 4.2 shall apply. However, if Columbia maintains its Negative Election, the DC shall be disbanded and the Commercialisation Committee shall not be formed, Ardana shall on the terms of Clause 13.6 have the exclusive fully paid up royalty free right to continue with the worldwide development and commercialisation of Candidate Product and resultant Product either alone or in conjunction with a Third Party without further obligations to Columbia. In such circumstances the provisions of Clause 14.1, 14.3, 14.4, 14.6, and 14.7 shall continue to apply and shall be deemed expanded in scope to place similar obligations on Columbia in relation to non-European Columbia IP as requested by Ardana, but shall be at Ardana's sole reasonable expense: (1) for any additional filings requested by Ardana with regard to any Columbia IP over and above those filings which exist as of the Commencement Date, and (2) for any filings of Columbia IP regarding Columbia Technology developed after the Commencement Date requested by Ardana in countries other than those listed in Exhibit E. So long as Columbia's election remains a Negative Election, Ardana shall assume sole responsibility for the prosecution, maintenance, defence and enforcement of Joint Program IP at its own cost and expense, providing Columbia with at least 60 days advance notice, with copies, of all proposed filings and proposed correspondence, and prompt copies of all actual filings and correspondence. Columbia shall retain joint ownership in the Joint Program IP with rights to use or exploit the Joint Program IP other than with regard to the Candidate Product and resultant Product (in either case with any indication). If Ardana does not significantly continue and forward the development and commercialization of the Candidate Product and resulting Product consistent with Good Industry Practice in [***], all of Ardana's exclusive rights to the Joint Program IP regarding the Candidate Product and resultant Product shall become non-exclusive as to Columbia. 4.4 In the event of a Columbia Positive Election and an Ardana Negative Election, Ardana shall have [***] to elect to change its position to a Positive Election, in which 29 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. case Clause 4.2 shall apply. However, if Ardana maintains its Negative Election, the DC shall be disbanded and the Commercialisation Committee shall not be formed, Ardana shall lose all rights under, and shall not use or exploit in any way the Columbia IP, and Columbia shall on the terms of Clause 13.7 have the exclusive fully paid up royalty free right to continue with the worldwide development and commercialisation of Candidate Product and resultant Product either alone or in conjunction with a Third Party without further obligation to Ardana. In such circumstances the provisions of Clauses 14.3, 14.6 and 14.7 shall continue to apply. So long as Ardana's election remains a Negative Election, Columbia shall assume sole responsibility for the prosecution, maintenance, defence and enforcement of Joint Program IP at its own cost and expense, providing Ardana with at least 60 days advance notice, with copies, of all proposed filings and proposed correspondence, and prompt copies of all actual filings and correspondence. Ardana shall retain joint ownership in the Joint Program IP with rights to use or exploit the Joint Program IP other than with regard to the Candidate Product and resultant Product (in either case with any indication). If Columbia does not significantly continue and forward the worldwide development and commercialization of the Candidate Product and resulting Product consistent with Good Industry Practice in [***], all of Columbia's exclusive rights to the Joint Program IP regarding the Candidate Product and resultant Product shall become non-exclusive as to Ardana. 4.5 In the event of an Ardana Negative Election and a Columbia Negative Election, the DC shall be disbanded and the Commercialisation Committee shall not be formed. Ardana shall not use or exploit in any way whatsoever the Columbia IP, and neither Party shall use or exploit in any way whatsoever the Joint Program IP in relation to the Candidate Product or resultant Product for any indication, without the other Party's prior written consent. Each of the Parties shall use their reasonable efforts to find and appoint a Third Party to continue the worldwide development and commercialisation of the Candidate Product and resultant Product. The Parties shall agree upon a co-ordinated approach to this if this eventuality arises. The appointment of such Third Party shall be on the basis that such Third Party shall be granted an exclusive worldwide licence under the Columbia IP and each Party's interest in the Joint Program IP to develop, use, import, have imported, market, distribute and sell or have marketed, distributed and sold Candidate Product and resultant Product for all 30 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. indications. The Net Revenues from any such Third Party appointment shall be shared equally between the Parties on the terms of Clause 8. Columbia agrees that it shall either manufacture and supply to such Third Party its requirements of CTM and Finished Product for [***] (which shall be paid separately to Columbia by such Third Party as a term of the licensing agreement with such third party) or shall grant such Third Party appropriate royalty-bearing licences under the Columbia IP to permit such Third Party to manufacture or have manufactured such CTM and Finished Product. The Net Revenues from any such royalty-bearing licences shall be shared equally between the Parties on the terms of Clause 8. 5. SECOND DEVELOPMENT PROGRAM 5.1 As soon as practicable following an Ardana Positive Election and a Columbia Positive Election the Parties shall cause the DC to meet to agree the detailed work program for the Second Development Program and the Development Budget for the first Year of the Second Development Program. The Parties agree that in relation to any Clinical Trials to be carried out as part of the Second Development Program: 5.1.1 Ardana shall be the sole sponsor of and for organising any such Clinical Trials to be carried out in the Ardana Territory and for the Development Costs to be paid in respect thereof (recouping the appropriate share of such Development Costs under the provisions of Clause 5.3) and Ardana shall make all Regulatory Applications in respect of such Clinical Trials or in respect of any subsequent Marketing Authorisation in the Ardana Territory in its own name; 5.1.2 Columbia shall be the sole sponsor of and for organising any such Clinical Trials to be carried out in the Columbia Territory and for the Development Costs to be paid in respect thereof (recouping the appropriate share of such Development Costs under the provisions of Clause 5.3) and Columbia shall make all Regulatory Applications in respect of such Clinical Trials or in respect of any subsequent Regulatory Approval in the Columbia Territory in its own name. 31 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5.2 Subject to the provisions of Clause 5.1 each Party shall carry out those tasks and parts of the work program for the Second Development Program allocated to it by the DC provided always that neither Party shall be obliged to commit more FTE to the Second Development Program in any Year than determined under Clause 2.2.4. 5.3 The Parties shall be jointly responsible on a 50:50 basis for all Development Costs incurred by them in carrying out the Second Development Program. Within thirty (30) days of the end of each Quarter each party shall supply the other with a report of the Development Costs paid by it during that Quarter which report shall set out the tasks undertaken (which tasks shall be cross-referenced to the Second Development Program) and the Development Costs paid in relation to such task. Within forty-five (45) days of the end of each Quarter there shall be a reconciliation prepared of the Development Costs incurred during such Quarter by the Parties which reconciliation shall be in the form of an invoice from one Party to the other Party and a balancing payment as necessary by such Party to the other shall be made so that each Party has borne 50% of the Development Cost for that Quarter. For the avoidance of doubt it is declared and agreed that the sharing of Development Costs shall commence from the point that each Party makes a positive election pursuant to Clause 4 and the Parties acknowledge and agree that subject to the provisions of Clause 3.3 any costs and expenses incurred prior to that date are not chargeable to Development Costs. 5.4 If at the time that the DC seeks ratification of the Development Budget for any Year during the Second Development Program or the FTE commitment for any Year it is not so ratified by either Party's Chief Executive Officer in writing within 3 months of the commencement of the Year to which it relates (such Party's reasonable request for changes to the Second Development Program and consequential changes to the Development Budget or FTE commitment having been acceded to by the other Party) this shall be deemed notice of withdrawal from the Second Development Program by the Party refusing to ratify. Upon any such notice of withdrawal: 5.4.1 the provisions of Clauses 4.3 and 4.4 shall be deemed to apply such that the continuing Party shall have the fully paid up royalty free worldwide right to continue alone with development, commercialization, marketing, and sale of Candidate Product and any resulting Product; 32 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5.4.2 the withdrawing Party shall upon the continuing Party's written request deliver up to the continuing Party all Documents containing any Know How (save for a single copy to be retained for evidential purposes by the withdrawing Party's lawyers), and any other Know How, held by the withdrawing Party relating to the Candidate Product and/or the resultant Product; 5.4.3 the withdrawing Party shall not use or otherwise exploit in any way, either directly or indirectly the Joint Program IP as it relates to the Candidate Product or any resulting Product in either case for all indications; 5.4.4 only the continuing Party shall be free to use and exploit all Joint Program IP as it relates to the Candidate Product or any resulting Product in either case for all indications as it sees fit with no obligation to the withdrawing Party in respect thereof provided however that both Parties shall be free to use and exploit all Joint Program IP, except as it relates to the Candidate Product or any resulting Product in either case for all indications, as each sees fit with no obligation to the withdrawing Party in respect thereof; 5.4.5 if the withdrawing Party is Columbia the licences granted by Columbia to Ardana pursuant to Clause 13.6 shall continue in full force and effect and shall be extended to the Columbia Territory and ROW and Columbia shall do all such acts and things as may be necessary to perfect this obligation and the provisions of Clauses 14.1, 14.3, 14.4, 14.6, and 14.7 shall continue to apply and shall be deemed expanded in scope to place similar obligations on Columbia in relation to non-European Columbia IP owned by Columbia at Ardana's request and sole reasonable expense. In such circumstances Ardana shall assume sole responsibility for the prosecution, maintenance, defence and enforcement of Joint Program IP at its own cost and expense, under the same terms, obligations, and consequences, and the same standards for maintaining exclusive rights, as set forth in Clause 4.3; 5.4.6 if the withdrawing Party is Ardana the licence granted by Ardana to Columbia pursuant to Clause 13.7 shall continue in full force and effect and shall be extended to the Ardana Territory and ROW and Ardana shall do all 33 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. such acts and things as may be necessary to perfect this obligation and the provisions of Clauses 14.3, 14.6, and 14.7 shall continue to apply. In such circumstances Columbia shall assume sole responsibility for the prosecution, maintenance, defence and enforcement of Joint Program IP at its own cost and expense, under the same terms, obligations, and consequences, and the same standards for maintaining exclusive rights, as set forth in Clause 4.4; 5.4.7 if the withdrawing Party is Columbia and it has obligations to manufacture and supply CTM and Finished Product under the terms of a Manufacturing and Supply Agreement entered into pursuant to Clause 9 these shall continue; 5.4.8 the withdrawing Party shall commensurate with legislative and regulatory requirements, transfer to the continuing Party or its nominee all Regulatory Approvals, Marketing Authorisations, Regulatory Applications and other regulatory filings and approvals for Candidate Product or resultant Product in all countries of the territory of the withdrawing Party and any country in the ROW Territory in relation to which the withdrawing Party has been appointed the Responsible Party pursuant to Clause 8. In the event that in any country such a transfer is not possible, the withdrawing Party shall use reasonable endeavours to ensure that the continuing Party has the benefit of the relevant Regulatory Approvals, Marketing Authorisations, Regulatory applications and other regulatory filings and approvals and, to this end, consents to any Governmental Authority cross-referencing to the data and information on file with any Governmental Authority as may be necessary to facilitate the granting of second Marketing Authorisations, applications, regulatory filings and approvals to the continuing Party, and the withdrawing Party agrees to complete whatever other procedures are reasonably necessary in relation to the same to enable the continuing Party (either itself or in conjunction with a third party) freely to develop and sell the Product in substitution for the withdrawing Party; and 5.4.9 the withdrawing Party shall use its reasonable endeavours to assign to the continuing Party the benefit of any agreement made between the 34 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. withdrawing Party, and a sub- licensee in relation to Product in ROW or any agreement between the withdrawing Party and an agent or distributor in any country to which Clause 8.1 relates. 5.5 In the event that during the course of the Development Program the DC identifies a strategic, legal, commercial, safety, efficacy, formulation, scientific or technical reason which means that both Parties wish to abandon the development of the Candidate Product, then this Agreement shall terminate by their mutual agreement to do so (such mutual agreement being said decision of the DC ratified by both the CEO of Ardana and the CEO of Columbia). Following any such termination Ardana shall not use or exploit in any way whatsoever the Columbia IP, and both Parties shall not use or exploit the Joint Program IP in relation to the Candidate Product or resultant Product in either case for any indication without the other Party's prior written consent. 5.6 In the event that the Second Development Program continues to its satisfactory conclusion and filings for Regulatory Approval are made in the Columbia Territory and filings for Marketing Authorisation are made in the Ardana Territory as specified in Clause 5.1 and subsequently such Regulatory Approvals and/or Marketing Authorisations are granted: 5.6.1 Columbia shall own and hold the Regulatory Approvals for the Columbia Territory and thereafter shall be solely responsible for ensuring that all Applicable Laws and other regulatory or other obligations arising as a result thereof or in relation thereto are met. 5.6.2 Ardana shall own and hold the Marketing Authorisations for the Ardana Territory and thereafter shall be solely responsible for ensuring that all Applicable Laws and other regulatory or other obligations arising as a result thereof or in relation thereto are met. 5.6.3 Columbia shall be solely responsible (as between Columbia and Ardana) at its own cost and expense for the Commercialisation of the Product in the Columbia Territory and shall have the exclusive benefit of all revenues generated in relation thereto. It is agreed that whilst the final decision on 35 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Packaging and Labelling shall be Columbia's, the Packaging and Labeling will be marked with all relevant patent numbers in each country of the Territory, as may be required by local patent law or practice or otherwise permitted under Applicable Law and the MAs. 5.6.4 Ardana shall be solely responsible (as between Ardana and Columbia) at its own cost and expense for the Commercialisation of the Product in the Ardana Territory and shall have the exclusive benefit of all revenues generated in relation thereto. It is agreed that whilst the final decision on Packaging and Labelling shall be Ardana's, the Packaging and Labeling will be marked with all relevant patent numbers in each country of the Territory, as may be required by local patent law or practice or otherwise permitted under Applicable Law and the MAs. 5.6.5 As and when any variation to any Regulatory Approval or Marketing Authorisation is made each Party shall supply a copy thereof to the other Party. 5.6.6 The Parties shall co-ordinate and liaise with each other in connection with Commercialisation of the Product in the Ardana Territory and Columbia Territory respectively and shall establish a separate committee for this purpose. In particular but not limiting the foregoing each party shall supply details of its Commercialisation Know How to the other. The Commercialisation Committee: (a) shall be constituted as specified in Clause 2.1.1; (b) shall be purely a co-ordination, liaison and communication forum and shall not be a decision making body (all decisions about Commercialisation being reserved exclusively to Ardana in respect of the Ardana Territory and Columbia in respect of the Columbia Territory); (c) shall meet as specified in Clauses 2.2.1 and 2.1.3; and 36 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (d) shall be a channel for communication between the Parties requesting amendments to this Agreement (if any such requests are made) so that Commercialisation by such Party can occur in the most tax efficient manner for such Party. 5.7 Each Party shall be responsible for acquiring any and all Trade Marks for Product(s) in their respective territory and shall have sole responsibility for selection, clearance and registration of said Trade Marks in such territory provided always that the Parties shall liaise with each other in relation thereto. The Parties agree that, for Trade Marks owned jointly by the Parties or owned by one Party and used by or on behalf of the other Party, the Party using the Mark will ensure that the manner, form, and quality of all use of such Trade Marks will be at the approval of at least one Party owner of the Marks, which approval shall not be unreasonably withheld. 5.8 If at any time following First Commercial Sale by Columbia in the Columbia Territory or by Ardana in the Ardana Territory either of them should decide to withdraw the Product from such territory on a permanent basis for whatever reason they shall give 90 days written notice of the same to the other Party and this shall be deemed a notice of withdrawal under Clause 5.4 and if the other Party so wishes it shall have the exclusive 90 day right to run from the date of receipt of such written notice and exercisable by notice in writing to the withdrawing Party to take over such territory on the terms of Clauses 5.4.1 to 5.4.9 respectively. If the other Party does not exercise such right by issuing such a notice before the end of such 90 day period the withdrawing party shall be free to solicit interest from other Third Party licensees in respect of such territory and if any such Third Party is ultimately appointed the withdrawing Party shall pay the other Party [***]. 5.9 During the period of the Second Development Program neither Party shall have any right to develop the Candidate Product for any indication other than those indications determined by the DC. 37 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 6. development obligations 6.1 Each Party shall carry out its part of the Development Program in the following manner: 6.1.1 with all reasonable due diligence and using reasonable efforts to ensure that appropriate levels of experience and expertise and personnel are contributed to conduct the Development Program in a timely and cost-effective manner; 6.1.2 in accordance with GLP, GCP and cGMP or other Applicable Laws where so permitted (including obtaining any and all ethics committee approvals required and utilising investigator driven studies where appropriate) and during the Second Development Program in accordance with the pharmacovigilance procedures established by the DC; and 6.1.3 keeping or causing to be kept detailed written laboratory notebooks and other records and reports of the progress of its part of the Development Program in sufficient detail and in good scientific manner for all purposes including patent purposes, especially in accordance with practice within the USA. Such notebooks and other records must properly reflect all work done on the Development Program and the results achieved thereunder. 6.2 Each Party shall have the right to sub-contract the whole of or part of its part of the Development Program provided always that the appointment of any sub-contractor shall be on the following terms: 6.2.1 the Party in question shall be responsible for all acts and omissions of the sub-contractor as if performed by the Party; 6.2.2 the Party in question shall pay the sub-contractor for work carried out by the subcontractor (and for the avoidance of doubt such payment shall form part of the Development Costs); 6.2.3 that as between the Party and the sub-contractor, all results emerging from such work and any related intellectual property shall vest in such Party; and 38 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 6.2.4 that the sub-contractor shall be obligated in terms the same as Clause 16 (Confidentiality) of this Agreement. 7. OBLIGATIONS OF THE PARTIES 7.1 Upon and subject to the terms and conditions of this Agreement and only in the circumstances of a Columbia Positive Election and an Ardana Positive Election, each Party hereby agrees: 7.1.1 at its sole cost and expense, to be responsible for obtaining all necessary permissions, consents and licences (other than the MAs), required to Commercialize the Finished Product in each country in its Territory under any Applicable Law, including without limitation, any import approvals, wholesale dealer's licenses and pricing and reimbursement approvals. Each of the Parties agrees to reasonably cooperate with the other in obtaining any such additional necessary authorizations and approvals required to launch the Finished Product in each country in the such other Party's Territory; 7.1.2 to provide the other Party with reasonable assistance in relation to any questions or issues raised by any Governmental Authority in the other Party's Territory relating to Finished Product or any application for Marketing Authorisation; 7.1.3 to establish and maintain at its own cost and expense a scientific service for scientific information relating to the Product and to liaise with the other Party in relation to any enquiries made to such service; 7.1.4 to maintain the MAs received in relation to its Territory, including by filing variations to such MAs as necessary; 7.1.5 to provide the other Party with reasonable advance notice of all material meetings or calls with Governmental Authorities relating to the MAs. A maximum of 2 personnel from the other Party may attend such meetings or calls at its own cost and expense; 39 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 7.1.6 the holder of the MA in each Territory to comply with the content and terms of all MAs and any Applicable Law; 7.1.7 use its reasonable commercial efforts to promote, market and sell the Finished Product, in each country within its Territory launching the same in such country [***] of both Marketing Authorisation and any relevant pricing and/or reimbursements approvals being obtained in such country (provided that it is acknowledged that the decision to launch prior to such approvals shall be in the Party's sole discretion) and use its reasonable commercial efforts to obtain any relevant pricing approvals in the countries where such approval is required; 7.1.8 to keep the Commercialization Committee informed of the Commercialization of the Finished Product in the Territory (including but not limited to sales of the Finished Product) by way of a monthly written report detailing the level of sales made during the previous month (as reasonably available to the Party at the time of compiling such report) and summarising any material developments relating to Product during the previous month (for example obtaining pricing and/or reimbursement approval in a particular country in the Territory). Such report shall be submitted within thirty (30) days of the end of each calendar month. Each Party shall also promptly inform the Commercialization Committee of any other information that it now has or which it may receive in the future which in its opinion is likely to be of interest, benefit, or use to the other Party in relation to the sale of the Finished Products; 7.1.9 to investigate promptly all significant customer complaints or reports of incidents relating to the Finished Product affecting quality of which it has knowledge and co-operate in the handling of such complaints and in accordance with Clause 10.1; 7.1.10 to keep the other Party informed in a timely manner of any information brought to its attention which in its reasonable judgment could lead to a variation of the MA, SmPC, Packaging or Labelling (subject to any 40 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. overriding provisions of the pharmacovigilance procedures agreed pursuant to Clause 2.2.15); 7.1.11 retain and archive all documentation relating to the Product, including, in particular, documentation relating to regulatory matters and to clinical trials of Product; 7.1.12 each Party shall be responsible for setting the sales price of Finished Product in its Territory; 7.1.13 each Party shall during the Term of this Agreement fulfil all of its obligations and covenants hereunder in a manner that is consistent with Good Industry Practice; 7.1.14 a Party shall not: 7.1.14.1 advertise the Finished Product or canvass or solicit orders for the Finished Product outside its Territory; or 7.1.14.2 open branches for the sale of the Finished Product outside its Territory; or 7.1.14.3 maintain distribution depots for the Finished Product outside its Territory. 7.1.15 it shall not during the term of this Agreement without the other Party's prior written approval (not to be unreasonably withheld) seek to develop, distribute or sell anywhere in the World outside its own Territory a 'B'-adrenergic agonist based product that would compete with the Product. 7.2 Ardana affirms that it is familiar with the Foreign Corrupt Practices Act of 1977 of the United States of America, as amended by the Foreign Corrupt Practices Act Amendments of 1988 and as may be further amended and supplemented from time to time ("FCPA"). Ardana warrants, covenants, represents and agrees that, in connection with the performance of this Agreement or with the sale of any Product, neither Ardana nor any of its principals, employees or agents will perform any act that may constitute a violation of the FCPA or that may cause a violation under the FCPA by Ardana or Columbia. Ardana shall certify the accuracy and veracity of the 41 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. foregoing representation and warranty from time to time in writing, as Columbia shall request. 8. REST OF THE WORLD TERRITORY 8.1 The Parties agree that no action shall be taken in relation to the development and/or Commercialisation of Candidate Product or resultant Product in ROW until after the Point of Proof of Principle and an Ardana Positive Election and a Columbia Positive Election. For [***] following the expiry of the [***] period to which Clause 4.1 provides each Party shall have the right to bid by giving written advice to the other for any country of ROW to be added to its Territory. In the event of such a bid the Parties shall seek to negotiate and agree the commercial and financial terms therefor within [***] following the expiry of the second [***] period and assuming that such agreement is reached the country or countries in question shall be added to the relevant Territory on the basis of such agreed terms. 8.2 Either following such bidding and agreement procedure or following the expiry of the ninety (90) day period to which Clause 4.1 refers in the event that neither Party invokes the bidding procedure, as the case may be, the Parties shall consult with each other and shall agree upon and nominate one of the Parties as Responsible Party to seek a licensee to develop, use, import, have imported, market, distribute and sell or have marketed, distributed and sold Candidate Product and resultant Product in all remaining territories of ROW. 8.3 Such Responsible Party shall use its reasonable endeavours to find an appropriate Third Party and structure, negotiate and reach agreement with such ROW Partner on the basis that: 8.3.1 each Party shall grant to the ROW Partner the necessary licences under the Columbia IP and Joint Program IP which the ROW Partner will require to develop and Commercialise Candidate Product and resultant Product in the ROW Territory (or part thereof); 8.3.2 the ROW Partner agrees to make available to Ardana and Columbia all ROW Partner IP (especially Know How being clinical data); 42 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 8.3.3 the ROW Partner agrees to appropriate provisions envisioned in Clause 8.4 relating to a Co-ordination Committee; 8.3.4 the ROW Partner shall be responsible for all Commercialisation Costs in relation to ROW; 8.3.5 Columbia either itself or through a Third Party manufacturer shall arrange for the manufacture of CTM and/or Finished Product for the ROW Partner and shall supply to the ROW Partner its requirements for such CTM and/or Finished Product at a price equal to [***]; 8.3.6 Ardana and Columbia share [***]. Notwithstanding that the Responsible Party seeks such ROW Partner and negotiates such agreement both Parties shall enter into the agreement appointing such ROW Partner. 8.4 Ardana and Columbia agree that in relation to the development and Commercialisation of the Candidate Product in the Columbia Territory and territories added under Clause 8.1 by Columbia, in the Ardana Territory and territories added under Clause 8.1 by Ardana and in ROW by the ROW Partner(s) co-ordination of their activities and sharing of clinical data will be of paramount importance. As part of the appointment of a ROW Partner (with appropriate terms being included in the licensing agreement entered into with such ROW Partner) the Parties shall cause to be established a Co-ordination Committee. The Co-ordination Committee shall be a means of the Parties managing the activities of the ROW Partner and linking these activities into the global clinical development and regulatory strategy established by the DC. 9. MANUFACTURE 9.1 Until the Point of Proof of Principle all quantities of CTM required by Ardana shall be supplied by Columbia free of charge. In the event of an Ardana Positive Election and a Columbia Positive Election, or an Ardana Positive Election and a Columbia Negative Election, all quantities of CTM required by DC or Ardana for Clinical Trials shall be supplied by Columbia on the financial terms of Clause 9.3 or Clause 9.4, 43 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. respectively until a full Manufacturing and Supply Agreement between the Parties as contemplated in Clause 9.3 and 9.4 is executed. Columbia shall manufacture such CTM to Specification and shall carry out the QA Tests. The CTM shall be supplied to ARDANA Ex Works a site in the European Union (Ex Works as defined in INCOTERMS 2000). Upon taking delivery of each shipment of CTM Ardana may also carry out any relevant parts of the QA Tests and any CTM found by Ardana not to meet Specification shall upon reasonable evidence being furnished to Columbia by Ardana shall be replaced as soon as reasonably practicable by Columbia free of charge. 9.2 DC shall provide Columbia with a written forecast of DC's requirements of CTM until the Point of Proof of Principle promptly following the Commencement Date which forecast shall be reviewed and updated by DC Quarterly. 9.3 In the event of an Ardana Positive Election and a Columbia Positive Election Columbia within 60 days thereafter shall give written notice, together with a draft Manufacturing and Supply Agreement, to Ardana that Columbia or one of its Affiliates will manufacture and supply, or arrange for the manufacture and supply of, all quantities of CTM required by DC for Clinical Trials and will manufacture and supply all quantities of Finished Product required by Ardana for sale for [***] (or such additional time as required to qualify a second manufacturer in accordance with Good Industry Practice) after First Commercial Sale the financial terms of which Manufacturing and Supply Agreement shall be that the supply shall be made at a price equal to [***] therefor on terms of delivery Ex Works (INCOTERMS 2000) a site in European Union (such price to be an element of Development Cost during the period of the Second Development Program). 9.4 In the event of an Ardana Positive Election and a Columbia Negative Election Columbia shall within 60 days thereafter give written notice, together with a draft Manufacturing and Supply Agreement, to Ardana that Columbia or one of its Affiliates will themselves manufacture and supply all quantities of CTM required by Ardana for Clinical Trials at a price equal to [***] therefor on terms of delivery Ex Works (INCOTERMS 2000) a site in European Union and will manufacture and supply, or arrange for the manufacture and supply of, all quantities of Finished 44 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Product required by Ardana for sale for [***] (or such additional time as required to qualify a second manufacturer in accordance with Good Industry Practice) after First Commercial Sale the financial terms of which Manufacturing and Supply Agreement shall be that the supply shall be made at a price equal to [***] therefor on terms of delivery Ex Works (INCOTERMS 2000) a site in European Union (such price to be an element of Development Cost during the period of the Second Development Program). 9.4 In the event of an Ardana Positive Election and a Columbia Negative Election Columbia shall within 60 days thereafter give written notice, together with a draft Manufacturing and Supply Agreement, to Ardana that Columbia or one of its Affiliates will themselves manufacture and supply all quantities of CTM required by Ardana for Clinical Trials at a price equal to [***] therefor on terms of delivery Ex Works (INCOTERMS 2000) a site in European Union and will manufacture and supply, or arrange for the manufacture and supply of, all quantities of Finished Product required by Ardana for sale for [***] (or such additional time as required to qualify a second manufacturer in accordance with Good Industry Practice) after First Commercial Sale the financial terms of which Manufacturing and Supply Agreement shall be that the supply shall be made at a price equal to [***] such price to be based on delivery terms Ex Works (INCOTERMS 2000) a site in the European Union. 9.5 If Columbia gives Ardana notice under Clause 9.3 or 9.4, the Parties shall negotiate in good faith the terms of a manufacturing and supply agreement that includes the financial terms set forth in Clause 9.3 or 9.4 ("Manufacturing and Supply Agreement"), respectively using their commercially reasonable efforts to conclude and execute the same within 90 days of the date of Columbia's written notice under Clause 9.3 or 9.4 respectively. 9.6 A term of any Manufacturing and Supply Agreement shall be that Columbia shall use its commercially reasonable efforts to establish or have established a second manufacturing site for the Finished Product. 10. REGULATORY AND OTHER MATTERS 10.1 In circumstances of a Columbia Positive Election and an Ardana Positive Election: 10.1.1 each Party agrees to keep the other Party informed, commencing within two (2) working days of notification of any action by, or notification or other information which it receives (directly or indirectly) from any Governmental Authority, which (a) raises any material concerns regarding the safety or efficacy of any Product, or (b) which indicates or suggests a potential material liability for either Party to third parties arising in connection with any Product. 10.1.2 each Party agrees to keep the other Party regularly informed of all material correspondence and communications with any Governmental Authority in its Territory concerning the manufacture, Specification, quality, Packaging or labeling of the Finished Product. 10.2 If either Party is advised by its legal advisers that it must communicate with any Governmental Authority in its Territory on any matter the subject of Clause 10.1, 45 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. such Party shall so advise the other Party immediately and, unless prohibited by Applicable Law, such Party shall provide the other Party in advance with a copy of any proposed written communication with any such Governmental Authority and shall comply with any and all reasonable directions of the other Party concerning any meeting or written or oral communication with such Governmental Authority. 11. PAYMENTS AND AUDIT PROCEDURES 11.1 In consideration of Columbia entering into this Agreement Ardana shall make the following payments to Columbia: 11.1.1 $250,000 within thirty days of the Commencement Date; 11.1.2 $250,000 within thirty days of the successful outcome of the first Clinical Trial for Candidate Product as specified in the First Development Program. 11.2 Each Party shall keep and shall procure that its Affiliates, agents, distributors and sublicensees keep true and accurate records and books of account containing all data necessary for the calculation of the amounts payable by it to the other Party pursuant to this Agreement, and in particular but without limitation data relating to the calculation of Net Revenues and Development Costs. Those records and books of account shall be kept for seven (7) years following the end of the Year to which they relate. Upon a Party's (the "Assessing Party") written request a firm of independent accountants appointed by approval of the Parties which approval shall not be unreasonably delayed or withheld, shall carry out an audit procedure in relation to the other party (the "Assessed Party") and: 11.2.1 such firm of accountants shall be given access to and shall be permitted to examine and copy such books and records upon twenty (20) Business Days notice having been given by the Assessing Party and at all reasonable times on Business Days for the purpose of certifying to the Assessing Party that the Net Revenues and Development Costs calculated by the Assessed Party its Affiliates and/or agents, distributors or licensees during any Year was calculated currently in accordance with this Agreement and if such certification cannot be given specifying the reasons why which will enable the Parties to recalculate the relevant sums; 46 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 11.2.2 prior to any such examination taking place, such firm of accountants shall undertake to the Assessed Party in a deed that they shall keep all information and data contained in such books and records, strictly confidential and shall not disclose such information or copies of such books and records to any third person including the Assessing Party, but shall only use the same for the purpose of the calculations which they need to perform in order to issue the certificate to the Assessing Party which this Clause 11.2 envisages; 11.2.3 any such access examination and certification shall occur no more frequently than once per year and will not go back over records more than two (2) years old unless a discrepancy is found; 11.2.4 the Assessed Party shall make available personnel to answer queries on all books and records required for the purpose of that certification; and 11.2.5 if the certification shows that the Assessed Party has not calculated the Net Revenues and Development Costs correctly the Parties shall forthwith recalculate these sums and any monies which such recalculation shows as being due and owing by one Party to the other shall be paid by that Party. The cost of the accountant shall be the responsibility of the Assessed Party if the recalculation shows the Assessed Party's previous figures supplied to the Assessing Party to be inaccurate by more than five per cent (5%) and the responsibility of the Assessing Party otherwise. 11.3 All payments under the terms of the Agreement are expressed to be exclusive of value added tax howsoever arising. 11.4 Unless otherwise approved or reasonably directed in writing by the Parties, all payments made by the Parties shall be made in United States dollars. All cost of foreign currency conversion to United States dollars shall be paid by the party making the payment without deductions for taxes, assessments, fees or charges of any kind. All payment amounts shall be converted to United States dollars on the last business day of each calendar month. Any necessary currency conversions shall be made using the United States dollar buying price quoted for such conversion into United States 47 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. dollars in the Wall Street Journal on the last business day of each month wherein the conversion takes place. 11.5 All payments made to Ardana under the Agreement shall be made by telegraphic transfer to the account of Ardana Bioscience Limited at: [***] Account Name: [***] Account code: [***] Sort Code: [***] SWIFT Code: [***] or any other bank account that may be notified by Ardana to Columbia from time to time. 11.6 All payments made to Bermuda under the Agreement shall be made by telegraphic transfer to the account of Bermuda at: [***] Account Name: [***] Account Code: [***] ABA Code: [***] or any other bank account that may be notified by Bermuda to Ardana from time to time. 11.7 All payments made to COB under the Agreement shall be made by telegraphic transfer to the account of COB at: [***] Account Name: [***] Account Code: [***] ABA Code: [***] or any other bank account that may be notified by COB to Ardana from time to time. 48 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 11.8 If either Party fails to make any payment to the other Party hereunder on the due date for payment without prejudice to any other right or remedy available to that Party, that Party expecting payment shall be entitled to charge the other Party interest (both before and after judgement) on the amount unpaid at the base rate of the Bank of England from time to time or any successor rate thereto plus five per cent (5%) calculated on a daily basis until payment in full is made without prejudice to that Party's right to receive payment on the due date. 12. INTELLECTUAL PROPERTY - OWNERSHIP 12.1 Columbia owns or shall own the Columbia IP and during the period of this Agreement shall not assign, transfer, mortgage, charge or otherwise dispose of the same in any manner that curtails the rights and licenses granted in this Agreement to Ardana, without the prior written consent of Ardana. Subject to the licences granted to Ardana hereunder and the other provisions of this Agreement Columbia shall be free to use, exploit, and dispose of the Columbia IP without obligation to Ardana. 12.2 Any and all Joint Program IP shall vest in and be owned by Ardana and Columbia jointly in equal undivided shares and neither Party shall have the right to themselves use or to licence a Third Party the right to use the Joint Program IP except as expressly set out in this Agreement. Neither Party shall during the period of this Agreement assign, transfer, mortgage, charge or otherwise dispose of or encumber the same without the prior written consent of the other. 12.3 The Party proceeding to develop the Product alone under the provisions of Clauses 4.3, 4.4, 5.4.1, 18.4.1 or 18.5.1 shall be the sole and exclusive owner of all right, title and interest in and to the Solely Owned IP. 12.4 Both Parties shall do all such acts and things and shall execute all such deeds and documents as are necessary to give full effect to the provisions of Clause 12.1, 12.2, or 12.3, as applicable. 13. INTELLECTUAL PROPERTY - LICENCES AND CONTRACTUAL EXCLUSIVITY 49 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 13.1 Columbia hereby grants to Ardana a sole worldwide sub-licensable licence under the Columbia IP only for the purposes of carrying out the First Development Program. Columbia and Ardana hereby grant to each other the sub-licensable right for each other and their Affiliates to use the Joint Program IP for the purposes of carrying out the First Development Program. 13.2 If Ardana makes an Ardana Positive Election and Columbia makes a Columbia Positive Election pursuant to Clause 4 Ardana hereby grants to Columbia an exclusive fully paid up royalty free licence with the right to sub-license in accordance with Clause 13.3 in the Columbia Territory under Ardana's interest in the Joint Program IP to use the same as may be necessary in connection with the Second Development Program and to develop, have developed, make, have made, anywhere in the world, and to import, have imported, market, distribute and sell and have marketed, distributed and sold the Product only in the Columbia Territory. 13.3 Columbia shall be entitled to sublicense the rights granted to it under Clause 13.2 to any Affiliate and to Third Parties provided that Columbia has notified Ardana of the identity of any intended sublicensee (including in circumstances where the sublicensee is an Affiliate of Columbia, other than COB) and provides Ardana with a copy of any such sublicence at the same time as it is made. Columbia shall only have the right to sub-license any such rights on the basis that Columbia shall notify Ardana of the identity of any proposed third party licensee and Ardana shall have thirty (30) days to approve such licensee (which approval shall not be unreasonably withheld) and provided that the terms of appointment of such licensee shall prevent the further appointment of sub-licensees without first obtaining Ardana's prior written approval (which approval may be withheld by Ardana in its sole discretion). Notwithstanding this permission to sub-license Columbia shall remain responsible for all of its obligations hereunder and if the acts or omissions of any such sublicensee cause Columbia to be in breach of this Agreement Columbia shall be responsible therefor (with all the express consequences provided for under this Agreement and any implied consequences) regardless of any remedy which Columbia may have against the sublicensee for breach of the sublicence. In particular but without limitation, Columbia shall ensure that any sublicensee performs its financial obligations under that sublicence and Columbia indemnifies Ardana against any and all loss, damage, 50 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. cost or expense which Ardana may incur as a result of failure by a sublicensee of Columbia to perform such obligations. 13.4 If Ardana makes an Ardana Positive Election and Columbia makes a Columbia Positive Election pursuant to Clause 4 Columbia hereby grants to Ardana an exclusive fully paid-up, royalty-free licence with the right to sublicence in accordance with Clause 13.5 in the Ardana Territory under the Columbia IP and under Columbia's interest in the Joint Program IP in both cases such licence being to use the same as may be necessary in connection with the Second Development Program and to develop, have developed, make, have made, anywhere in the world, and to import, have imported, market, distribute, sell and have marketed, distributed and sold the Product only in the Ardana Territory. Ardana undertakes and agrees that unless and until it exercises its right to manufacture or have manufactured Product and/or Finished Product under the provisions of or following the consequences of Clauses 18.5.6 and 18.6 of this Agreement it shall not utilise the license granted to it under this Clause 13.4 to manufacture or have manufactured Product and/or Finished Product but instead shall obtain all of its requirements for the same from Columbia on the terms of Clause 9 of this Agreement. 13.5 Ardana shall be entitled to sublicense the rights granted to it under Clause 13.4 to any Affiliate and to Third Parties provided that Ardana has notified Columbia of the identity of any intended sublicensee (including in circumstances where the sublicensee is an Affiliate of Ardana) and provides Columbia with a copy of any such sublicence at the same time as it is made. Ardana shall only have the right to sub-license any such rights on the basis that Ardana shall notify Columbia of the identity of any proposed third party licensee and Columbia shall have thirty (30) days to approve such licensee (which approval shall not be unreasonably withheld) and provided that the terms of appointment of such licensee shall prevent the further appointment of sub-licensees without first obtaining Columbia's prior written approval (which approval may be withheld by Columbia in its sole discretion). Notwithstanding this permission to sub-license Ardana shall remain responsible for all of its obligations hereunder and if the acts or omissions of any such sublicensee cause Ardana to be in breach of this Agreement Ardana shall be responsible therefor (with all the express consequences provided for under this Agreement and any implied 51 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. consequences) regardless of any remedy which Ardana may have against the sublicensee for breach of the sublicence. In particular but without limitation, Ardana shall ensure that any sublicensee performs its financial obligations under that sublicence and Ardana indemnifies Columbia against any and all loss, damage, cost or expense which Columbia may incur as a result of failure by a sublicensee of Ardana to perform such obligations. 13.6 If Ardana makes an Ardana Positive Election pursuant to Clause 4 but Columbia makes and does not reverse a Columbia Negative Election pursuant to Clause 4 Columbia hereby grants to Ardana a worldwide exclusive fully paid-up, royalty-free, sub-licensable licence under the Columbia IP and under Columbia's interest in the Joint Program IP only to develop or have developed Candidate Product for all indications and to make, have made, use, import, have imported, market, distribute, sell and have marketed, distributed and sold the Product for all indications. Ardana undertakes and agrees that unless and until it exercises its right to manufacture or have manufactured Product and/or Finished Product under the provisions of or following the consequences of Clauses 18.5.6 and 18.6 of this Agreement it shall not utilise the license granted to it under this Clause 13.6 to manufacture or have manufactured Product and/or Finished Product but instead shall obtain all of its requirements for the same from Columbia on the terms of Clause 9 of this Agreement. 13.7 If Columbia makes a Columbia Positive Election pursuant to Clause 4 but Ardana makes and does not reverse an Ardana Negative Election pursuant to Clause 4, Ardana hereby grants to Columbia a worldwide exclusive, fully paid-up, royalty-free worldwide, sub-licensable licence under Ardana's interest in the Joint Program IP only to develop or have developed Candidate Product for all indications and to make, have made, use, import, have imported, market, distribute and sell and have marketed, distributed and sold Product for all indications. 13.8 The Parties shall do all such acts and things and shall execute all such deeds and documents as may be necessary or desirable to register any of the foregoing licences at local patent offices. 52 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 13.9 Each Party shall, and shall procure that its Affiliates shall, during the Term promptly refer to the other Party (or as the other Party shall direct) all enquiries they receive for Finished Product for sale or ultimate delivery within the other Party's Territory. 13.10 Each Party shall exercise its rights conferred under this Clause 13 as principal and it shall not sell or otherwise dispose of Finished Product on behalf of, or in the name of the other Party or any of its Affiliates. 13.11 Each Party shall not claim any agency or other relationship which indicates any authority to bind the other Party or its Affiliates contractually or incur liabilities on behalf of the other Party or its Affiliates. 14. INTELLECTUAL PROPERTY - PROSECUTION, MAINTENANCE AND ENFORCEMENT 14.1 Columbia shall at its own cost and expense be solely responsible for the filing, prosecution and maintenance of the Columbia Patent Rights in the Ardana Territory, and shall use its reasonable efforts to prosecute all patent applications forming part of Columbia Patent Rights in all countries of the Ardana Territory, to the extent such Patent Rights are subject to the licenses granted Ardana in this Agreement (including the conduct of any disputes or proceedings relating to them including any opposition, reissue, re-examination, or proceedings). Columbia will take account of Ardana's interest hereunder when making any submission to a patent in relation to the Columbia Patent Rights in the Ardana Territory. 14.1.1 In the event that Columbia declines to pay the official fee to maintain any issued Columbia Patent Rights necessary to maintain the licenses granted Ardana in the Ardana Territory, Columbia shall provide Ardana with written notice thereof prior to the expiration of any deadline relating to such activities, but in any event at least twenty (20) Business Days prior notice. In such circumstances Ardana shall have the right to decide, with reason and with written notice thereof at least five (5) Business Days prior to the deadline, to require Columbia to pay such fee to maintain such Columbia Patent Rights in Columbia's own name and expense and Columbia shall do so. 53 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 14.1.2 In the event that Columbia declines to file or, having filed, declines to further prosecute and maintain any pending Columbia Patent Rights necessary to maintain the licenses granted Ardana in the Ardana Territory, Columbia shall provide Ardana with written notice thereof prior to the expiration of any deadline relating to such activities, but in any event at least thirty-five (35) Business Days prior notice. In such circumstances Ardana shall have the right to decide, with reason and with written notice at least thirty (30) Business Days prior to the deadline, that Columbia should continue to file or prosecute such Columbia Patent Rights. Columbia shall then have the option to decide, with at least twenty (20) Business Days notice to Ardana, to: 14.1.2.1 continue to file or prosecute such Columbia Patent Rights in Columbia's own name and expense; or 14.1.2.2 allow Ardana reasonably to file or prosecute such Columbia Patent Rights in Columbia's name and at Columbia's reasonable expense using counsel of Ardana's own choice, in which instance Ardana shall invoice Columbia for such expenses within 30 days of the end of each Quarter, such invoice to be payable within 30 days. 14.2 Each Party shall disclose to the other Party any invention arising pursuant to the Development Program, such disclosures to be provided within twenty (20) Business Days after the Party determines that an invention has been made. Such disclosures shall be treated as Confidential Information. The DC shall confirm, subject, if needed, to advice from each of Columbia's and Ardana's patent counsel, whether the invention falls within Columbia IP or Joint Program IP. If the invention falls within Columbia IP the provisions of Clause 14.1 shall then apply. If the invention falls within Joint Program IP, the DC shall decide, subject to advice from each of Columbia's and Ardana's patent counsel, whether to file for Patent Rights applications claiming such invention. In the event Patent Rights are not filed on such invention disclosures by either Party, such invention disclosures shall be considered Joint Program Know How. If the DC decides that a filing for Joint Program Patent 54 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Rights should be made Ardana shall during the period of the Development Program be the Responsible Party in relation to the preparation, filing, prosecution and maintenance of such Joint Program Patent Rights and for conducting any interferences, oppositions, reexaminations, reissues, revocations or requests for patent term or SPC extensions relating thereto, subject to Columbia's right to at least 30 days advance notice, with copies, of all proposed filings and proposed correspondence, as well as an opportunity for input regarding all such matters, and prompt copies of all actual filings and correspondence. Subject always to the provisions of Clause 8.3.4 all costs and expenses associated with such Joint Program Patent Rights incurred during the period of the Development Program shall be considered part of Development Costs. Thereafter and subject always to the provision of Clause 8.3.4 in the event of an Ardana Positive Election and a Columbia Positive Election Ardana shall be the Responsible Party in relation to the Ardana Territory and all costs and expenses incurred in relation to the Ardana Territory shall be the sole responsibility of Ardana and Columbia shall be the Responsible Party in relation to the Columbia Territory and all costs and expenses incurred in relation to the Columbia Territory shall be the sole responsibility of Columbia. The Responsible Party promptly shall provide copies of all correspondence with the respective patent office to the other Party and shall use reasonable efforts to keep the other Party informed of the progress of such prosecution. No filing for or Joint Program Patent Rights shall be abandoned by the Responsible Party unless both Parties have agreed to such action; otherwise, the abandoning Responsible Party will transfer the filing or Joint Program Patent Rights to the other Party, at the other Party's request. 14.3 If either Party learns of any infringement or threatened infringement by a Third Party of Columbia IP or Joint Program IP then such Party shall promptly notify the other Party and shall provide such other Party with available evidence of such infringement. In the case of Columbia learning of such infringement or threatened infringement of Columbia IP the obligation set out in this Clause 14.3 shall only apply where Columbia reasonably believes the infringement or threatened infringement to be relevant to Ardana's licenses pursuant to this Agreement. 14.4 In the event of an infringement of the Columbia Patent Rights (to the extent licensed to Ardana) and/or Joint Program IP by a third party in the Ardana Territory, Columbia 55 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. shall have first right to bring any action or proceedings, and shall have sole control of the conduct of any such proceedings, including, the right to settle them, provided such settlement does not adversely affect Ardana's rights and interests within the Ardana Territory in accordance with the following: 14.4.1 as an exclusive licensee to the Joint Program IP and to certain portions of the Columbia Patent Rights in the Ardana Territory, Ardana at its election shall have the right to be joined as a co-plaintiff and to be separately represented by counsel of its own choice and at its own cost and expense. In such a situation, if Columbia and Ardana succeed in any such proceedings in relation to an infringement in the Ardana Territory, whether at trial or by way of settlement, in obtaining a financial payment to Columbia and/or Ardana with respect to the Joint Program IP or to the portion of the Columbia Patent Rights licensed to Ardana: 14.4.1.1 Columbia shall first deduct for itself all of its costs and expenses incurred in relation to such proceedings; and 14.4.1.2 Ardana shall then be entitled for itself all of its costs and expenses incurred in relation to such proceedings; and 14.4.1.3 either if in such proceedings a court has allocated damages to Columbia and Ardana respectively each shall be entitled to retain such damages within the Ardana Territory subject to the provisions of sub-clauses 14.4.1.1 and 14.4.1.2 or, if in such proceedings a court has not so allocated damages within the Ardana Territory the 56 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Parties shall share such damages related to Ardana's licenses [***], subject to the provisions of sub-clauses 14.4.1.1 and 14.4.1.2; 14.4.2 If Ardana elects not to be joined as a co-plaintiff and not to be separately represented, Ardana shall, at Columbia's reasonable request and expense, provide Columbia with reasonable assistance in relation to such action or proceedings in the Ardana Territory. If Columbia succeeds in any such proceedings in relation to an infringement in the Ardana Territory, whether at trial or by way of settlement, in obtaining a financial payment to Columbia, Columbia shall first deduct for itself all of its costs and expenses incurred in relation to such proceedings in the Ardana Territory, and, in the event of any balance remaining in relation to the Ardana Territory, [***] shall be allocated to Columbia and [***] to Ardana; 14.4.3 If Columbia fails to institute an action or proceeding in relation to an infringement in the Ardana Territory for more than ninety (90) days from becoming aware of the infringement pursuant to this Clause 14.4 and if Ardana wishes to do so, Ardana shall so notify Columbia and Ardana shall have the right to do so and Columbia shall do all such acts and things at Ardana's cost and expense as Ardana shall reasonably request to assist Ardana in such proceedings, including, lending its name to such proceedings. Ardana shall have sole control of the conduct of any such proceedings, including the right to settle them, provided such settlement does not adversely affect Columbia's rights and interests outside of the Ardana Territory, provided that Columbia, at its election, shall have the right to be joined as a co-plaintiff and to be separately represented by counsel of its own choice and at its own cost and expense, and the terms of Clauses 14.4.1 and 14.4.2 with regard to Ardana shall be applicable to Columbia, provided that if Columbia does not elect to join the proceeding as a co-plaintiff, Ardana shall be entitled to retain [***] of the damages in relation to the Ardana Territory. At Ardana's reasonable request and expense, Columbia shall do all such acts and things and sign all such documents as may be necessary to give Ardana the full benefit of this Clause 14.4.3. 57 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 14.5 As of and after the Commencement Date on an ongoing basis, each Party shall have disclosed, and will promptly disclose to the other Party any Patent Rights owned by or licensed to the disclosing Party, other than Joint Program Patent Rights as well as any Third Party Patent Rights that are or become known to it that claim or disclose Candidate Product or Product, processes relating to the manufacture thereof or methods for their use, or otherwise are relevant to the collaboration established hereunder. In the event that any such Third Party Patent Rights are identified the cost of any freedom to operate searches and analyses with respect to Candidate Product and Products will be chargeable to Development Costs and the Parties will agree through the DC on an allocation of responsibilities between themselves regarding such searches and analyses. 14.6 Each Party shall promptly take all necessary steps to facilitate the other's application (made either on the other's own initiative or upon request by the first Party ) for extensions to the term of Columbia Patent Rights, and/or Joint Program IP in any country including applications for supplementary protection certificates and patent term extensions for the same in respect of Products. Each Party shall use its best efforts to obtain any and all such extensions to the extent permitted by law or regulation. 14.7 If during or after the Term of this Agreement, either Party receives any notice, claim or proceedings from any third party alleging infringement of that third party's intellectual property rights by reason of any Party's activities in relation to this Agreement, then: 14.7.1 the Party receiving that notice shall forthwith notify the other Party of the notice, claim or proceeding; 14.7.2 neither Party shall make any admission of liability; 14.7.3 the Parties shall consult with each other, taking advice from their patent attorney as to whether they consider the third party intellectual property infringed and if so whether the claim of infringement is valid; and 14.7.4 in the event that the Parties whose activities are accused (the Accused Parties) consider that there is a genuine issue of infringement of such third 58 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. party's intellectual property rights , the Parties shall discuss in good faith whether to design around or to challenge the same. If the Parties agree that it is not possible or commercially reasonable to design around such third party intellectual property, or cannot so agree, and, nevertheless, agree to defend the incoming infringement claim from the third party, the Accused Parties shall do so using a single counsel to be jointly appointed by them at their joint cost and expense, unless an Accused Party reasonably believes that it is in its best interests to be separately represented, in which case each Accused Party shall be responsible for its own costs and expenses. Alternatively, the Parties may agree to seek a license from such third party in which case Columbia shall be responsible for doing so. If Columbia does not itself require a license to cover Columbia's activities, Columbia may choose to allow Ardana to be responsible for seeking a license for itself. If the Accused Parties can obtain a license upon terms acceptable to each Party in its sole discretion, at that time the Parties shall agree on any fees and royalties that are necessary to obtain and maintain such a license which shall be shared between the Parties in proportions which are agreed between them in good faith which proportions are fair and equitable between them reflecting the respective value of the license to them, including without limitation whether and the extent to which a Party's Territory is covered by the license. 15. WARRANTIES, INDEMNIFICATION; LIMITATION OF LIABILITY; AND INSURANCE 15.1 Each Party represents and warrants to the other Party that: 15.1.1 it has the corporate power and authority and the legal right to enter into this Agreement, to grant the licenses granted and to enter into its other obligations, that it has taken any necessary corporate action with Affiliates, and that this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms. The execution, delivery and performance of the Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is or by 59 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. which it is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it; 15.1.2 such Party has not, and during the term of the Agreement will not, without the prior written consent of the other Party grant any rights to any third party that would conflict with the rights granted to the other Party hereunder; 15.1.3 it is not aware that the exercise by either Party of its respective rights and licenses hereunder would infringe the Patent Rights or other intellectual property rights of any third party; 15.1.4 it is a corporation duly organised, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated; and 15.1.5 the execution and delivery of this agreement and the performance of such Party's obligations do not constitute a default or require any consent under any other contractual obligation of such Party. 15.2 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT COLUMBIA MAKES NO WARRANTIES OR REPRESENTATIONS, IMPLIED OR EXPRESS, WITH RESPECT TO THE PRODUCT OR ANY OF THE RIGHTS, LICENSES, OR ACTIVITIES GRANTED OR CONTEMPLATED HEREIN. SPECIFICALLY AND WITHOUT LIMITATION, COLUMBIA MAKES NO EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, USE, PERFORMANCE, NON-INFRINGEMENT, VALIDITY, OR PATENTABILITY AND ANY SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. 15.3 Subject to the provisions of Clause 15.4 and 15.5 Columbia shall be responsible for and shall indemnify Ardana and its directors, officers, servants and agents (collectively "the Indemnified Party") against any and all liability, loss, damage, cost and expense (including legal costs) incurred or suffered by the Indemnified Party as a result of: 60 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 15.3.1 any Columbia activity related to the Candidate Product or resulting Product after Ardana gives up its rights and relevant activity pursuant to Clause 4.4, 5.4, or 18.4.1; 15.3.2 that part of any claim brought against Ardana by a Third Party which arises as a result of any activities of Columbia, its Affiliates or contract manufacturers under or in relation to this Agreement being a claim that use of any Finished Product(s) has caused death or bodily injury; or 15.3.3 a breach of warranty by Columbia under Clause 15.1. An Indemnified Party that intends to claim indemnification under this Clause 15.3 shall promptly notify Columbia of any Third Party claim in respect of which the Indemnified Party intends to claim that indemnification. The Indemnified Party shall not compromise or settle the claim prior to any such notice. Columbia may assume and control the defence of any such Third Party claim, provided however, that an Indemnified Party shall have the right to retain its own counsel at its own cost and expense, if representation of that Indemnified Party by the counsel retained by Columbia would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by that counsel in the proceedings. The Indemnified Party shall co-operate with Columbia and its legal representatives in the investigation of any matter covered by this indemnification. 15.4 Subject to the provisions of Clause 15.5, Ardana shall be responsible for and shall indemnify Columbia and its Affiliates, directors, officers, servants and agents (collectively "the Indemnified Party") against any and all liability, loss, damage, cost and expense (including legal costs) incurred or suffered by the Indemnified Party: 15.4.1 any Ardana activity related to the Candidate Product or resulting Product after Columbia gives up its rights and relevant activity pursuant to Clause 4.3, 5.4, or 18.5.1; 15.4.2 as a result of that part of any claim brought against Columbia or its Affiliates by a Third Party which arises as a result of the activities by Ardana or its affiliates, sublicensees, distributors or agents under this Agreement being a claim that use of any Finished Products has caused death or bodily injury; or 61 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 15.4.3 as a result of a breach of warranty by Ardana under Clause 15.1. An Indemnified Party that intends to claim indemnification under this Clause 15.4 shall promptly notify Ardana of any Third Party claim in respect of which the Indemnified Party intends to claim the indemnifications. The Indemnified Party shall not compromise or settle the claim prior to any such notice. Ardana may assume and control the defence of any such Third Party claim, provided however, that an Indemnified Party shall have the right to retain its own counsel at its own cost and expense, if representation of that Indemnified Party by the counsel retained by Ardana would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by that counsel in the proceedings. The Indemnified Party shall co-operate with Ardana and its legal representatives in the investigation of ay matter covered by this indemnification. 15.5 Neither Party shall be liable to the other in contract, tort, negligence, breach of statutory duty or otherwise for any loss, damage, costs or expenses of any nature whatsoever incurred or suffered by the other or its Affiliates: 15.5.1 of a direct nature where the same is a loss of turnover, profits, business or goodwill; or 15.5.2 an indirect or consequential or punitive nature, including any indirect or consequential economic loss or other indirect or consequential loss of turnover, profits, loss of enterprise value, business or goodwill or otherwise. 15.6 Columbia shall secure and maintain comprehensive general liability insurance with insurers having an AM Best rating within the top 2 categories at the time (at the date of this Agreement known as "superior" or "excellent"), including, product liability, contractual liability, personal injury, and insurance against claims regarding the development, manufacture, delivery, storage, handling and use of Product under this Agreement, in such amounts as it customarily maintains for similar products and activities in accordance with prudent insurance practice, but in no event less than the US dollar equivalent of [***] pounds sterling (GB(pound)[***]) per occurrence and in the aggregate per year. Columbia shall use commercially reasonable efforts following First Commercial Sale and at intervals thereafter in accordance with Good Industry 62 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Practice to increase this cover to a level of [***] dollars (US$[***]) in the aggregate per year if this is achievable by Ardana. 15.7 Ardana shall secure and maintain comprehensive general liability insurance with insurers having an AM Best rating within the top 2 categories at the time (at the date of this Agreement known as "superior" or "excellent") including product liability, contractual liability, personal injury, and insurance against claims regarding the development, delivery, storage and handling and use of Product under this Agreement, in such amounts as it customarily maintains for similar products and activities in accordance with prudent insurance practice, but in no event less than [***] pounds sterling (GB(pound)[***]) per occurrence and in the aggregate per year. Ardana shall use commercially reasonable efforts following First Commercial Sale and at intervals thereafter in accordance with Good Industry Practice to increase this cover to a level in pounds equal to [***]dollars (US$[***]) in the aggregate per year if this is achievable by Columbia. 15.8 Each Party shall maintain such insurance described in Clauses 15.6 and 15.7 during the term of this Agreement and thereafter for so long as it customarily maintains insurance for itself for similar products and activities. Each Party shall note the interest of the other Party on such insurance and shall use commercially reasonable efforts to name the other Party as an additional insured on such insurance if this is also achievable by the other Party and shall provide the other Party proof of such insurance upon request. Each Party shall cause such insurance policies to provide that the other Party shall be given at least thirty (30) days notice of any cancellation, termination or change in such insurance. 15.9 Ardana shall have the control of and be responsible for the Clinical Trials conducted under the First Development Program and the Phase III Clinical Trials conducted in the Ardana Territory under the Second Development Program and shall be the sponsor of such trials and in such capacity, shall, notwithstanding its indemnity rights under Clause 15.3 be responsible for the initial payment of any compensation due to any participants in such trials who suffer death or bodily injury pursuant to any legal rights or applicable industry guidelines. 63 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 15.10 Columbia shall have the control of and be responsible for the Formulation Work and the Phase III Clinical Trials conducted in the Columbia Territory under the Second Development Program and shall be the sponsor of such trials and in such capacity, shall, notwithstanding its indemnity rights under Clause 15.4, be responsible for the initial payment of any compensation due to any participants in such trials who suffer death or bodily injury pursuant to any legal rights or applicable industry guidelines. 16. CONFIDENTIALITY 16.1 The Parties agree not to disclose the Confidential Information to third parties nor to use the Confidential Information except to the extent necessary in connection with the transactions and business set forth in this Agreement; provided, however, that such Confidential Information shall not be subject to the restrictions and prohibitions set forth in this Clause 16 to the extent that such Confidential Information: 16.1.1 is available to the public in public literature or otherwise, or after disclosure by one Party to the other becomes public knowledge through no default of the Party receiving such Confidential Information; 16.1.2 was (as evidenced in writing) known to the Party receiving such confidential information prior to the receipt of such Confidential Information by such Party, whether received before or after the date of this Agreement; 16.1.3 is obtained by the Party receiving such confidential information from a source free to disclose such information other than the Party supplying such Confidential Information; 16.1.4 is required to be disclosed pursuant to any order of a court having jurisdiction or any lawful action of a Governmental Authority having jurisdiction over the disclosing Party or court of competent jurisdiction but only to the extent such disclosure is so required; provided, however that in the event of such an order or action, the Party ordered to disclose such Confidential Information shall give the other Party reasonably timely notice of the disclosure order in order to allow such Party to seek a protective order or such other appropriate relief with respect to the confidential information; or 64 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 16.1.5 in the case of Regulatory Applications is required to be disclosed to the relevant Governmental Authorities. 16.2 Each Party shall take all precautions as it normally takes with its own Confidential Information to prevent any improper disclosure of such Confidential Information to any independent third party. 16.3 No public announcements or other disclosure to third parties concerning the financial or other terms of this Agreement shall be made, whether directly or indirectly, by either Party to this Agreement, except as may be legally required or as may be required for recording purposes, without first obtaining the approval of the other Party and agreement upon the nature and text of such announcement or disclosure, with the exception that: 16.3.1 a Party may disclose the full terms of this Agreement to its investment bankers, lawyers, accountants and other professional advisors or a third party seeking to invest in, lend funds to acquire or merge with or be acquired by such Party without the other Party's prior approval provided that such disclosure is made under terms of confidentiality whether express or implied; and 16.3.2 a Party may disclose the terms of this Agreement to any securities exchange or regulatory authority or government body to which either Party is subject or submits, wherever situated, including (without limitation) the US Securities Exchange Commission, the UK Stock Exchange or the Panel on Take-overs and Mergers, whether or not the requirement has the force of law provided that it takes advantage of all provisions to keep confidential as many terms of this Agreement as possible. 16.4 In respect of those public announcements and disclosures not permitted by Clause 16.3 the Party desiring to make any such public announcement or other disclosure shall inform the other Party of the proposed announcements or disclosure in reasonably sufficient time prior to public release, and shall provide the other Party with a written copy thereof, in order to allow such Party to comment upon such announcement or disclosure, which comments shall be provided by such other Party 65 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. within five (5) working days. The Parties shall jointly develop press releases and information materials that can be used by either Party for presentations to financial advisers and similar recipients. 17. TERM 17.1 This agreement shall commence on the commencement date and shall continue in force until no payments are due hereunder or until termination under Clause 18 whichever is the earlier. 18. TERMINATION 18.1 Ardana shall have the right at any time from the Commencement Date until the Point of Proof of Principle to terminate this Agreement upon 30 days notice of termination in writing to Columbia. 18.2 This Agreement may be terminated immediately upon written notice of termination given by either Ardana on the one hand (in circumstances where either Bermuda or COB is in breach as specified in Clause 18.2.1 or Bermuda or COB satisfy the criteria of Clause 18.2.2) or Bermuda on the other hand (where Ardana satisfies the criteria below): 18.2.1 in the event that during the period of the Development Program the other Party commits a material breach or default under this Agreement, which breach or default shall not be remedied within sixty (60) days after the receipt of written notice thereof by the person in breach or default provided always that in the case of a breach by Ardana of Clause 11.1 in which case the remedy period shall be ten (10) days; or 18.2.2 in the event that at any time an Insolvency Event occurs in relation to such person. 18.3 For the avoidance of doubt it is declared and agreed that following completion of the Development Program neither Ardana on the one hand nor Columbia on the other hand shall have the right to terminate this Agreement for a material breach by the other but instead shall have a remedy in damages against the other. 66 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 18.4 Upon the termination of this Agreement by Ardana under Clause 18.1 or by Columbia pursuant to Clause 18.2: 18.4.1 the provisions of Clause 4.4 apart from the first sentence shall be deemed to apply such that Columbia shall have the fully paid up royalty free right to continue alone; 18.4.2 Ardana shall upon Columbia's written request deliver up to Columbia all Joint Program IP and all Documents containing any Know How comprised in the Joint Program IP and all copies made (save for a single copy to be retained for evidential purposes by the Ardana's lawyers) and any other Know How held by the Ardana relating to the Candidate Product and/or the resultant Product; 18.4.3 Ardana shall not use or otherwise exploit in any way, either directly or indirectly the Columbia IP in any manner, or the Joint Program IP with regard to the Candidate Product or resultant Product in either case in relation to all indications, or directly or indirectly the Joint Program Know How at all; 18.4.4 Columbia shall be free to use and exploit all Joint Program IP as it sees fit with no obligation to Ardana in respect thereof; 18.4.5 Columbia shall have the option, on a case by case basis, to assume sole responsibility for the prosecution, maintenance, defence and enforcement of Joint Program IP at its own cost and expense, though Ardana shall retain joint ownership and rights under the Joint Program IP other than as related to the Candidate Product or resulting Product in either case in relation to all indications; 18.4.6 Ardana shall commensurate with legislative and regulatory requirements, transfer to Columbia or its nominee all Regulatory Approvals, Marketing Authorisations, Regulatory Applications and other regulatory filings and approvals for Candidate Product or resultant Product in all countries of the territory of the Ardana and any country in the ROW Territory in relation to which the Ardana has been appointed the Responsible Party pursuant to 67 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Clause 8. In the event that in any country such a transfer is not possible, the Ardana shall use reasonable endeavours to ensure that Columbia has the benefit of the relevant Regulatory Approvals, Marketing Authorisations, Regulatory applications and other regulatory filings and approvals and, to this end, consents to any Governmental Authority cross-referencing to the data and information on file with any Governmental Authority as may be necessary to facilitate the granting of second Marketing Authorisations, applications, regulatory filings and approvals to Columbia, and Ardana agrees to complete whatever other procedures are reasonably necessary in relation to the same to enable Columbia (either itself or in conjunction with a third party) freely to develop and sell the Product in substitution for Ardana; 18.4.7 Ardana shall use its reasonable endeavours to assign to Columbia the benefit of any agreement made between Ardana, and a sub-licensee in relation to Product in ROW or any agreement between Ardana and an agent or distributor in any country to which Clause 8.1 relates; 18.4.8 Ardana shall remit to Columbia any payments that are due and payable as of the date of expiration or termination; 18.4.9 Columbia and Ardana shall return to each other all confidential information supplied by one Party to the other, including all copies and originals thereof; 18.4.10 as well as the other provisions of this Agreement which survive its termination whether directly or indirectly by virtue of the provisions of this Clause 18.4, the provisions of Clauses 12, 15, 16, and 20, as applicable, shall continue to apply. 18.5 Upon termination of this Agreement by Ardana pursuant to Clause 18.2: 18.5.1 the provisions of Clause 4.3 apart from the first sentence shall be deemed to apply such that Ardana shall have the fully paid up royalty free right to continue alone; 68 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 18.5.2 Columbia shall upon Ardana's written request deliver up to Ardana all Joint Program IP and all Documents containing any Know How comprised in the Joint Program IP and all copies made (save for a single copy to be retained for evidential purposes by Columbia's lawyers) and any other Know How held by Columbia relating to the Candidate Product and/or the resultant Product; 18.5.3 Columbia shall not use or otherwise exploit in any way, either directly or indirectly the Joint Program IP with regard to the Candidate Product or resultant Product in either case in relation to all indications, or directly or indirectly the Joint Program Know How at all; 18.5.4 Ardana shall be free to use and exploit all Joint Program IP as it sees fit with no obligation to Columbia in respect thereof; 18.5.5 Ardana shall have the option, on a case by case basis, to assume sole responsibility for the prosecution, maintenance, defence and enforcement of Joint Program IP at its own cost and expense, though Columbia shall retain joint ownership and rights under the Joint Program IP other than as related to the Candidate Product or resulting Product in either case in relation to all indications; 18.5.6 if Columbia has entered into a Manufacturing and Supply Agreement this may at Ardana's option exercisable on 90 days written notice to Columbia be given within 30 days of the date of termination either continue or be terminated and if Ardana exercises its rights to terminate the Manufacturing and Supply Agreement, Columbia will at its own cost and expense provide such reasonable technical and other assistance as may be required in order to ensure that Ardana is able to manufacture or have manufactured Finished Product. Ardana shall be free to contract for the manufacture and supply of Product and/or Finished Product with any contract manufacturer; 18.5.7 Columbia shall commensurate with legislative and regulatory requirements, transfer to Ardana or its nominee all Regulatory Approvals, Marketing Authorisations, Regulatory Applications and other regulatory filings and 69 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. approvals for Candidate Product or resultant Product in all countries of the Columbia Territory and any country in the ROW Territory in relation to which Columbia has been appointed the Responsible Party pursuant to Clause 8. In the event that in any country such a transfer is not possible, Columbia shall use reasonable endeavours to ensure that Ardana has the benefit of the relevant Regulatory Approvals, Marketing Authorisations, Regulatory applications and other regulatory filings and approvals and, to this end, consents to any Governmental Authority cross-referencing to the data and information on file with any Governmental Authority as may be necessary to facilitate the granting of second Regulatory Approvals, Marketing Authorisations, Regulatory Applications, regulatory filings and approvals to Ardana, and Columbia agrees to complete whatever other procedures are reasonably necessary in relation to the same to enable the continuing Party(either itself or in conjunction with a third party) freely to develop and sell the Product in substitution for the withdrawing Party; 18.5.8 Columbia shall use its reasonable endeavours to assign to Ardana the benefit of any agreement made between Columbia, and a sub- licensee in relation to Product in ROW or any agreement between Columbia and an agent or distributor in any country to which Clause 8.1 relates; 18.5.9 at its option, Columbia shall continue to prosecute, maintain and defend the Columbia Patent Rights and Trademarks as specified in Clause 2 or shall follow the procedures set forth above at Clause 14.1.2; 18.5.10 as well as the other provisions of this Agreement which survive its termination whether directly or indirectly by virtue of the provisions of this Clause 18.5 the provisions of Clauses 12, 15, 16, and 20, as applicable, shall continue to apply. 18.6 Termination of this Agreement (whether under this Clause 18, upon expiration of the Term, or otherwise) shall be without prejudice to any rights of either Party against the other that may have accrued to the date of such termination. 70 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 19. FORCE MAJEURE 19.1 The obligations of the either Party hereunder shall be suspended during the time and to the extent that such Party is prevented from complying therewith due to Force Majeure. 19.2 As soon as possible after being affected by a Force Majeure circumstance, the Party so affected shall furnish to the other Party all particulars of the Force Majeure and the manner in which its performance is thereby prevented or delayed. The Party whose obligations hereunder have been suspended shall promptly and diligently pursue appropriate action to enable it to lift the Force Majeure situation, except that a Party shall not be obligated to settle any strike, lockout or other labor difficulty on terms contrary to its wishes. 20. GENERAL PROVISIONS 20.1 Independent Contractors. Ardana and Columbia are independent of each other and nothing contained herein shall be construed to create a joint venture, partnership or similar relationship. Neither Party is authorized to, nor shall it, incur any liability whatsoever for which the other may become directly, indirectly or contingently liable. 20.2 Dispute Resolution; Consent to Jurisdiction. This Agreement shall be construed and interpreted in accordance with the law of the State of Delaware without regard to principles related to conflicts of laws. The parties expressly agree that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to the interpretation and construction of this Agreement. In an effort to resolve informally and amicably any claim, controversy or dispute (whether such claim, sounds in contract, tort, or otherwise) arising out of or relating to this Agreement, or the breach thereof (a "Dispute"), each Party shall notify the other in writing of a Dispute hereunder that requires resolution. Such notice shall set forth the nature of the Dispute, the amount, if any, involved and the remedy sought. Each Party shall designate a representative who shall be empowered to investigate, discuss and seek to settle the Dispute. If the two representatives are unable to settle the Dispute within thirty (30) days after proper notification, the Dispute shall be submitted to the Chief Executive Officer of each Party for consideration for an additional thirty (30) days. If 71 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. the Dispute remains unresolved after said sixty (60) day period, either Party shall have a right to commence any action, suit or proceeding with respect to such Dispute in a U.S. federal court of competent jurisdiction in Delaware. The venue for such action, suit or proceeding shall be in the U.S. federal Courts in Delaware. No provision of, or the exercise of any rights under, this Agreement shall limit the right of the parties to obtain, apply for, or resort to court ordered injunctive relief. Ardana and Columbia each further irrevocably consent to the service of any complaint, summons, notice or other process by delivery thereof to it by any manner in which notices may be given pursuant to this Agreement. 20.3 Notices. 20.3.1 Any notice or other communication given pursuant to or made under or in connection with the matters contemplated by this Agreement shall be in writing in the English language and shall be delivered by hand or by courier or shall be sent by recorded delivery to the address of the recipient set out in Exhibit F or as specified by the recipient from time to time in accordance with Clause 20.3.3. Notices sent by hand or by courier shall require a written receipt of delivery. Notices sent by fax or E-Mail shall not be valid of themselves and must be confirmed in hard copy form by hand or by recorded delivery. 20.3.2 Any notice given pursuant to this Clause shall be deemed to have been received: 20.3.2.1 if delivered by hand or by courier, at the time of delivery as evidenced in the receipt of delivery; or 20.3.2.2 if sent by recorded delivery, at the time of delivery. 20.3.3 A Party may notify the other Parties to this Agreement of a change of its name, relevant addressee, address or facsimile number for the purposes of Exhibit F provided that such notification shall only be effective on: 20.3.3.1 the date specified in the notification as the date on which the change is to take place; or 72 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 20.3.3.2 if no date is specified or the date specified is less than (five) clear Business Days after the date on which the notice is given, the date falling five clear Business Days after notice of any such change has been given. 20.4 Assignment. Columbia shall not assign this Agreement without also assigning to the same assignee the relevant portions of the Columbia IP and its interest in the Joint Program IP and all related Regulatory Application and Regulatory Approvals the subject matter of this Agreement and conversely may not assign the rights in the relevant portion of the Columbia IP and in its interest in the Joint Program IP and all related Regulatory Applications and Regulatory Approvals the subject matter of this Agreement and Trade Marks (other than to an Affiliate) without also assigning to the same assignee this Agreement. Ardana shall not assign this Agreement without also assigning to the same assignee its rights in the Joint Program IP and all related Regulatory Applications and Marketing Authorisations the subject matter of this Agreement and conversely may not assign its rights in the Joint Program IP and all related Regulatory Applications and Marketing Authorizations the subject matter of this Agreement (other than to an Affiliate) without also assigning to the same assignee this Agreement. This Agreement shall not be assignable by either Ardana on the one hand or by Columbia on the other hand ("Assignor") without the written consent of the other ("Remaining Party") such consent not to be unreasonably withheld, provided however that either Party may assign this Agreement to any Affiliate or to a corporation with which such Party may merge or consolidate, or to which it may transfer all or substantially all of its assets to which this Agreement relates, subject to obtaining a direct deed of undertaking from such corporation addressed to the Remaining Party agreeing to be bound by all the terms of this Agreement. 20.5 Amendment and Waiver. This Agreement (including the Exhibits hereto) may be amended, modified, superseded or cancelled, and any other of the terms or conditions hereof may be modified, only by a written instrument executed by both parties hereto or, in the case of a waiver, by the Party waiving compliance. Failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same, and no waiver of any nature, whether by conduct or otherwise, in any one or more instances, shall be 73 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. deemed to be or considered as a further or continuing waiver of any other provision of this Agreement. 20.6 Severability. In the event that any one or more of the agreements, provisions or terms contained herein shall be declared invalid, illegal or unenforceable in any respect, the validity of the remaining agreements, provisions of terms contained herein shall in no way be affected, prejudiced or invalidated thereby. 20.7 Entire Agreement. This Agreement, together with the Exhibits hereto, contains the entire agreement between the parties hereto and supersedes any agreements between them with respect to the subject matter hereof. 20.8 Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 20.9 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 21. MIPHARM AGREEMENT AND TESTOSTERONE FOR WOMEN 21.1 The Parties recognize the existence of, and that this Agreement is subject to, a license and supply agreement made between Bermuda and Mipharm SpA ("Mipharm") dated 5 March 1999 (the "Mipharm Agreement"), a copy of which is attached hereto as Exhibit F. 21.2 From the Commencement Date and up to the elections by the Parties under Clause 4.1, or such other date as the Parties may agree in writing, Columbia shall, consistent with Good Industry Practice, take all commercially reasonable acts to remove Chronodyne(R) (terbutaline gel) from the grant of the license to Mipharm under the Mipharm Agreement, such that the Mipharm Agreement does not affect the Candidate Product or resultant Product. Upon the removal of Chronodyne(R) (terbutaline gel) from the grant of the 74 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. license to Mipharm under the Mipharm Agreement such that the Mipharm Agreement does not affect the Candidate Product or resultant Product, this Agreement shall be deemed to be amended to add Greece, Ireland, Italy (including San Marino and Vatican City), and Portugal to the definition of Europe. When undertaking its obligations under this Clause 21.2 Columbia shall regularly liaise with Ardana and Ardana shall, insofar as it communicates with Mipharm about the removal of Chronodyne (terbutaline gel) from the grant of the license to MiPharm, regularly liaise with Columbia. [***] 21.2.1 [***] 21.2.2 [***] 21.2.3 [***] 21.3 [***] [***] 75 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ARDANA BIOSCIENCE COLUMBIA LABORATORIES LIMITED (BERMUDA), LTD. By: /S/ Maureen Lindsay By: /S/ Fred Wilkinson ----------------------------------- ----------------------------------- Maureen Lindsay Fred Wilkinson Name Name Chief Operating Officer President Title Title December 2002 December 2002 Date Date /S/ Mike Piper /S/ Michael McGrane ----------------------------------- ----------------------------------- Witness (Signature) Witness (Signature) Mike Piper Michael McGrane Witness Name (Printed) Witness Name (Printed) COLUMBIA LABORATORIES, INC. By: /S/ Fred Wilkinson ----------------------------------- Fred Wilkinson Name President & CEO Title December 2002 Date /S/ Michael McGrane ----------------------------------- Witness (Signature) /S/ Michael McGrane ----------------------------------- Witness Name (Printed) 76 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT A WORLDWIDE PATENTS AND APPLICATIONS "Basic Bioadhesive" Family United States: Patent No. 4,615,697; EPO (2) (Austria, Belgium, Switzerland/Liechtenstein, Germany, France, Luxembourg, Netherlands, Sweden, United Kingdom): Patent No. 163 696; and Patent No. 501 523; Australia: Patent No. 565,354; Hong Kong: Patent No. 1214/1997; and Japan: Patent No. 2,113,953. The Parties acknowledge that without SPC extensions the expiration date of the EPO patents is in November 2004. 79 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. "Uterine Pass" Family United States (2): Patent No. 6,126,959; and Application No. 09/510,527; EPO (Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Monaco, Netherlands, Portugal, Spain, Sweden, Switzerland/Liechtenstein, United Kingdom): Application No. 98943548.2; Argentina: App. No. P980104558; Malaysia: App. No. PI 9804131; Australia: Patent No. 738,460; Mexico: App. No. 002448; Brazil: App. No. PI 9812134-0; Morocco: App. No. 25.251; Canada: App. No. 2,303,339; New Zealand: Patent No. 502,926; Chile: App. No. 2185-98; Norway: App. No. 20001287; China: App. No. 98808946.7; Peru: App. No. 867.98; Colombia: App. No. 98 052.730; Philippines: App. No. 1998-02371; Georgia: Patent No. P2645; Romania: App. No. A/00269; Hong Kong: App. No. 00104419.5; Russia: App. No. 2000-108551; Hungary: App. No. P0003784; South Africa: Patent No. 98/08328; Israel: App. No. 134,564; Tangiers: App. No. 1653; Japan: App. No. 2000511486; Ukraine: App. No. 2000042000/M; and Korea (So.): App. No. 102000700261; Venezuela: App. No. 2026/98. 80 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. "Treatment of Endometriosis/Infertility" Family United States: Application No. 10/089,796; EPO (Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal, Spain, Sweden, Switzerland/Liechtenstein, United Kingdom): Application No. 00964272.9; Argentina: App. No. 000105228; Malaysia: App. No. 20004608; Australia: App. No. 75250/00; Mexico: App. No. 2002/003453; Brazil: App. No. PI0014548-3; Morocco: App. No. 26584; Canada: App. No. 2,385,974; New Zealand: App. No. 518429; Chile: App. No. 2679-2000; Norway: App. No. 2002 1591; China: App. No. 00813807.9; Peru: App. No. 001044/2000; Colombia: App. No. 00075387; Philippines: App. No. 2000-02714; Georgia: App. No. 2000004769; Russia: App. No. 2002111682; Hong Kong: App. No. 02105660.6; Singapore: App. No. 200201447-0; Hungary: App. No. Not Yet Available; South Africa: App. No. 2002/2182; India: App. No. 2002/00380; Taiwan: App. Nos. 89120706; Israel: App. No. 148784; Tangiers: App. No. 2222; Japan: App. No. 2001-527787; Turkey: App. No. 02/899; Korea (So.): App. No. 2002-7004330; Ukraine: App. No. 2002043631/M; and Venezuela: App. No. 2000-002213. 81 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT B FIRST DEVELOPMENT PROGRAM [***] 82 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT C SECOND DEVELOPMENT PROGRAM [***] 83 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT D NAMES AND ADDRESSES FOR NOTICES If to Columbia Laboratories (Bermuda), Ltd.: Columbia Laboratories (Bermuda), Ltd. P.O. Box HM 1179 Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda Attention: Secretary Tel: (441) 295-2244 Fax: (441) 292-8666 (441) 295-5328 If to Columbia Laboratories, Inc., Columbia Laboratories, Inc. 354 Eisenhower Parkway Plaza 1 Second Floor Livingston, New Jersey 07039 Attention: President Tel: (973) 994-3999 Fax: (973) 994-3001 With copy to: Columbia Laboratories, Inc. 354 Eisenhower Parkway Plaza 1 Second Floor Livingston, New Jersey 07039 Attention: General Counsel Tel: (973) 994-3999 Fax: (973) 994-3001 If to Ardana Biosciences Limited: COO Ardana Biosciences Limited 58 Queen Street Edinburgh EH2 3NS 84 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT E DEFAULT PATENT COUNTRIES [***] 85 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT F THE "MIPHARM AGREEMENT" (Attached separately.) 86 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EX-10.39 5 dex1039.txt AMEND NO 1 TO COMMON STOCK PURCHASE AGEEMENT Exhibit 10.39 AMENDMENT NO.1 TO AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT This AMENDMENT NO. 1 to AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT (the "Amendment") is dated as of January 31, 2003 by and between Columbia Laboratories, Inc., a Delaware corporation (the "Company") and Acqua Wellington North American Equities Fund, Ltd., a limited liability company organized under the laws of the Commonwealth of The Bahamas (the "Purchaser") and is an amendment to that certain Amended and Restated Common Stock Purchase Agreement effective as of February 6, 2001 (the "Agreement") by and between the Company and the Purchaser. The parties hereto agree as follows: Article I. Definitions/Construction 1.1 Definitions. Except as otherwise defined in this Amendment, all capitalized terms shall have the meaning ascribed to them in the Agreement. 1.2 Scope of Amendment. To the extent necessary to give effect to the matters set forth in this Amendment, this Amendment shall serve to amend the Agreement and shall be considered part of the Agreement. Subject to the foregoing, the Agreement shall remain in full force and effect without modification. 1.3 Counterparts. This Amendment may be executed in counterparts, all of which together shall constitute one and the same instrument. Article II. Amendments to the Agreement 2.1 Section 7.1 of the Agreement is hereby amended by deleting the section in its entirety and substituting in lieu thereof the following Section 7.1: "SECTION 7.1 Termination by Mutual Consent. The term of this Agreement shall expire on the earlier of (i) February 6, 2005, (ii) the date that all of the shares of Common Stock registered under the Registration Statement have been issued and sold or (iii) the date that the Purchaser has purchased in the aggregate $16,500,000 pursuant to all Draw Downs and Call Options granted and exercised (the "Investment Period"). This Agreement may be terminated at any time by mutual written consent of the parties." 2.2 Address For Notice. The address for communications to the Company, as contemplated by Section 9.4 of the Agreement shall be: If to the Company: Columbia Laboratories, Inc. 354 Eisenhower Parkway, Plaza 1, Second Floor Livingston, NJ 07039 Tel. No.: (973) 994-3999 Fax No.: (973) 994-3001 Attention: General Counsel With copies to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel. No.: (212) 310-8000 Fax No.: (212) 310-8007 Attention: Malcolm Landau, Esq. [Remainder of Page Intentionally Left Blank - Signature Page Follows] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officer as of the date first above written. COLUMBIA LABORATORIES, INC. By: /S/ David L. Weinberg ----------------------------- Name: David L. Weinberg Title: Vice President ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD. By: /S/ Deirdre M. McCoy ----------------------------- Name: Deirdre M. McCoy Title: Vice President EX-10.40 6 dex1040.txt INVESTMENT AND ROYALTY AGREEMENT Exhibit 10.40 INVESTMENT AND ROYALTY AGREEMENT This Investment and Royalty Agreement (this "Agreement") is made as of March 5, 2003, by and between Columbia Laboratories, Inc., a Delaware corporation ("Columbia"), and PharmaBio Development Inc., a North Carolina corporation ("PharmaBio"). Columbia and PharmaBio may each be referred to herein individually as a "Party" and collectively as the "Parties." Background and Overview Columbia has requested and PharmaBio is willing to provide certain funds to Columbia, subject to and upon the terms and conditions below. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I Definitions 1.1 "Adverse Marketing Event" shall mean the occurrence after the Product Launch Date of any of the following: (i) Columbia or its licensees shall withdraw, or be required by the FDA or other Governmental Authority to withdraw, the Product from the market in the Territory for any reason for a period that is greater than [***] days and that is, or is reasonably expected to be, not greater than [***] days; or (ii) Columbia or its licensees shall fail to have a supply of the Product, consistent with past quantities and practices, or shall fail to supply Product, in response to orders thereof, for a period of time that is, or is reasonably expected to be, greater than [***] days. 1.2 "Affiliate" shall mean, as to any person or entity, any corporation or business entity controlled by, controlling, or under common control with such person or entity. For this purpose, "control" shall mean direct or indirect beneficial ownership of at least fifty percent (50%) of the voting stock or income interest in such corporation or other business entity, or such other relationship as, in fact, constitutes actual control. 1.3 "Annual Period" shall mean a twelve-month period beginning on the first day of the month following the Product Launch Date and each anniversary thereof, subject to extension as described in Section 2.5, except the first Annual Period shall also include the period from the Product Launch Date to the first day of the month following the Product Launch Date. 1.4 "Approvable Letter" shall mean a letter from the FDA pursuant to 21 CFR 314.110 with respect to the NDA for the Product with labeling substantially similar to the labeling requested by Columbia in the NDA as in effect on the date hereof. [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.5 "Approval Letter" shall mean a letter from the FDA pursuant to 21 CFR 314.105 with respect to the NDA for the Product with labeling substantially similar to the labeling requested by Columbia in the NDA as in effect on the date hereof. 1.6 "Business Day" shall mean any day other than a Saturday, Sunday or legal holiday on which banks in North Carolina and New York are open for the conduct of their banking business. 1.7 "Columbia SEC Reports" shall have the meaning specified in Section 3.3 herein. 1.8 "Commission" means the United States Securities and Exchange Commission. 1.9 "Debt" shall mean (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. For the avoidance of doubt, Debt shall not include day-to-day obligations and payables incurred by Columbia in the ordinary course of business. 1.10 "Exchange Act" means the Securities Exchange Act of 1934, as from time to time amended, and the rules and regulations of the Commission promulgated thereunder. 1.11 "Existing Royalty Agreement" shall mean the Investment and Royalty Agreement between the Parties dated July 31, 2002 (regarding Advantage-S, Crinone, Prochieve and RepHresh). 1.12 "Event of Default" shall have the meaning set forth in Section 2.1. 1.13 "FDA" shall mean the United States Food and Drug Administration. 1.14 "GAAP" shall mean generally accepted accounting principles. 1.15 "Governmental Authority" means any foreign, Federal, state or local court or governmental or regulatory agency or authority. 1.16 "Innovex" shall mean Innovex LP, a New Jersey limited partnership, whose address is 10 Waterview Boulevard, Parsippany, NJ 07054, which is an Affiliate of PharmaBio. 1.17 "Law" means any United States Federal, state, local or foreign law, statute, rule, regulation, order, writ, injunction, judgment or decree of any Governmental Authority. 1.18 "Lien" shall mean any lien, security interest, mortgage, pledge, encumbrance, charge or claim. 2 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.19 "Market Withdrawal" shall mean the occurrence after the Product Launch Date of any of the following: (i) Columbia or its licensees shall withdraw, or be required by the FDA or other Governmental Authority to withdraw, the Product from the market in the Territory for any reason for a period that is, or is reasonably expected to be, greater than [***] days; or (ii) Columbia or its licensees shall fail to have a supply of the Product, consistent with past quantities and practices, for a period of time that is, or is reasonably expected to be, greater than [***] days. 1.20 "Master Services Agreement" shall mean the agreement dated July 31, 2002, between Columbia and Innovex, together with the Sales Force Work Order dated as of the date hereof under such agreement, pursuant to which Innovex agrees to provide contract sales services to Columbia, as well as any the work orders thereunder relating to the Product. 1.21 "Material Adverse Effect" shall mean a material adverse effect on the business, operations, properties or financial condition of Columbia and its Subsidiaries, taken as a whole, or a material adverse effect on the manufacture, marketing, distribution or sale of the Product in the Territory, taken as a whole; provided, however, that the following shall be excluded from any determination as to whether a Material Adverse Effect has occurred: (i) any effect resulting from or arising in connection with this Agreement or the transactions contemplated thereby, (ii) the effects of changes or conditions generally affecting the pharmaceutical industry, and (iii) changes in general economic, financial market, regulatory or political conditions. 1.22 "Minimum Sales Force Level" shall mean a Columbia sales force size of not less than [***] full-time Columbia sales representatives promoting the Product in the first detailing position, provided that any open sales territory for which Columbia or Innovex is actively recruiting a sales representative shall be counted as a Columbia sales representative for purposes of this definition. 1.23 "NDA" shall mean a "new drug application" as such term is used under the United States Federal Food, Drug and Cosmetic Act, as amended from time to time, and all regulations promulgated thereunder. 1.24 "Net Sales" shall mean the gross amount billed or invoiced by Columbia or an Affiliate or any licensee or sublicensee (or other transferee), or on behalf of or for the benefit of Columbia or an Affiliate or any licensee or sublicensee (or other transferee), for sales of the Product, to a third party in the Territory, less the following items, but only to the extent such items are included in such gross amount and without duplication: (i) discounts, including cash and quantity discounts, charge-back payments, refunds and rebates granted to managed health care organizations or similar organizations or to federal, state and local governments (including, without limitation, Medicaid rebates), their agencies, and purchasers and reimbursers or to trade customers, including but not limited to, wholesalers and chain and pharmacy buying groups; 3 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (ii) actual credits or allowances resulting from customer claims, damaged goods, rejections or returns of the Product, including recalls, regardless of the party requesting such; (iii) freight, postage, shipping and insurance charges actually allowed or paid for delivery of the Product, to the extent billed; (iv) taxes, duties or other governmental charges levied on, absorbed or otherwise imposed on sale of the Product, including without limitation value-added taxes, or other governmental charges otherwise measured by the billing, when included in billing, as adjusted for rebates, charge-backs and refunds, but not including income or similar taxes; and (v) actual write-offs of uncollectible customer accounts for recorded sales, provided that (x) any subsequent collection of such uncollectible accounts shall be restored as Net Sales at the time of collection and (y) Columbia shall follow commercially reasonable practices of collecting and otherwise administering such accounts. 1.25 "Not Approvable Letter" shall mean a letter from the FDA pursuant to 21 CFR 314.120 with respect to the NDA for the Product. 1.26 "Product" shall mean (i) the controlled and sustained release bioadhesive buccal product containing testosterone for which Columbia has filed NDA # 21-543, and which Columbia plans to market in the Territory under the trademark Striant, and shall also include such product in any and all dosages or strengths and for any and all indications in men and any and all "off-label" uses and (ii) any other controlled and sustained release bioadhesive buccal product with testosterone as the active ingredient either alone or in combination with another active ingredient in any and all dosages or strengths and for any and all indications in men and any and all "off-label" uses. For the avoidance of doubt, sales of the Product for "off-label" uses by women shall be included in Net Sales. 1.27 "Product Launch Date" shall mean the first date that commercial quantities of the Product are sold in the Territory. 1.28 "Royalty Term" shall mean the seven (7) consecutive Annual Periods beginning on the Product Launch Date. 1.29 "Securities Act" means the Securities Act of 1933, as from time to time amended, and the rules and regulations of the Commission promulgated thereunder. 1.30 "Subsidiary" and "Subsidiaries" shall have the respective meanings specified in Section 3.5. 1.31 "Territory" shall mean the United States of America and all states thereof, the District of Columbia, and Puerto Rico. 4 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 1.32 "Transaction Agreements" shall mean, collectively, this Agreement and the Master Services Agreement. 1.33 "Transactions" shall mean, collectively, the transactions contemplated by the Transaction Documents. 1.34 "Warburg Note" shall mean that certain 7 1/8% Convertible Subordinated Note (No. R-1 $10,000,000) issued by Columbia to SBC Warburg Dillon Read Inc. dated March 16, 1998 (including any refinancing, replacement, substitution or restatement of such Note). ARTICLE II Investment and Royalties; Related Agreements 2.1 PharmaBio will make the following payments to Columbia: Quarterly Payment Date Amount ---------------------- ---------- March 7, 2003 $3,000,000 June 1, 2003 $3,000,000 September 1, 2003 $3,000,000 December 1, 2003 $3,000,000 March 1, 2004 $3,000,000 Notwithstanding the foregoing, if on or before a Quarterly Payment Date set forth above, (i) Columbia has received a Not Approvable Letter, or (ii) PharmaBio has made payments under this Section 2.1 of at least [***] and Columbia has not received an Approval Letter, then PharmaBio may, in its sole discretion, suspend making any additional payments under this Section 2.1 until such time as Columbia receives an Approval Letter. If PharmaBio suspends one or more quarterly payments under the preceding sentence and Columbia subsequently receives an Approval Letter, promptly thereafter (and in any case within [***] PharmaBio shall pay Columbia any quarterly payments that PharmaBio had suspended. If PharmaBio suspends one or more payments under this Section 2.1 and Columbia has not received an Approval Letter, but Columbia has received an Approvable Letter, then PharmaBio agrees to discuss in good faith with Columbia mutually acceptable arrangements under which PharmaBio could continue payments or a portion thereof under this Section 2.1, prior to receipt of an Approval Letter. Notwithstanding the foregoing, upon the occurrence of an Event of Default, PharmaBio may at any time, if an Event of Default shall then be continuing, by written notice to Columbia, terminate all of its future funding obligations under this Section 2.1, so long as Innovex is not in default in any material respect of its performance of its material 5 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. obligations under the Master Services Agreement and the work orders thereunder relating to the Product. "Event of Default" shall mean and include each of the following: (a) Columbia shall fail to pay any royalties to PharmaBio when the same become due and payable to PharmaBio and [***] Business Days have elapsed following receipt of written notice of such non-payment from PharmaBio to Columbia; (b) Any material representation or warranty made by Columbia under this Agreement shall prove to have been untrue or incorrect in any material respect when made; (c) Columbia shall fail to perform or comply with any material agreement or covenant made by Columbia under this Agreement in any material respect; (d) Columbia shall sell, assign, license, lease or otherwise transfer all or substantially all of its assets or properties owned (or otherwise held by it) relating to the Product, in one or a series of related transactions, without the prior written consent of PharmaBio; (e) A Market Withdrawal shall occur; (f) Columbia shall not have received an Approval Letter for the Product from the FDA by [***]; (g) Columbia shall receive a Not Approvable Letter, and does not receive an Approval Letter for the Product within 6 months thereafter; (h) Columbia shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other Laws relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other Laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing; (i) A case or other proceeding shall be commenced against Columbia in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other Laws relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for Columbia or any of its subsidiaries or for all or any substantial part of their respective assets, and such case or proceeding shall continue without dismissal or stay for a period 6 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. of sixty (60) consecutive days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered; or (j) Any indebtedness of Columbia or any of its subsidiaries in excess of $[***] shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity thereof, and Columbia shall fail to pay the same within [***] days of such declaration. The Parties agree that an Event of Default under the terms of this Agreement shall constitute an Event of Default under the Existing Royalty Agreement. If an Event of Default occurs under Section 2.1(a) of the Existing Royalty Agreement because of Columbia's failure to pay royalties when due, PharmaBio may, in its sole discretion, suspend making any additional payments under Section 2.1 of this Agreement until such time as the Event of Default under Section 2.1(a) of the Existing Royalty Agreement no longer is continuing. 2.2 In the event that (i) PharmaBio terminates all of its future funding obligations under Section 2.1 upon an Event of Default, or (ii) Columbia terminates this Agreement under Section 8.1, then Columbia shall pay to PharmaBio the aggregate amount (the "Repayment Amount") by which the aggregate amount of payments by PharmaBio under this Agreement (the "Aggregate Payments") exceeds the aggregate amount of royalties, if any, paid by Columbia to PharmaBio under this Agreement, plus accrued interest, in full satisfaction of Columbia's obligations under this Agreement. For purposes of this calculation, interest shall (i) accrue on the Aggregate Payments at a rate equal to the greater of [***] or the Prime Rate as announced from time to time by Wachovia Bank, N.A. (or its successor) plus [***] and (ii) accrue from the date of the payment of funds by PharmaBio to Columbia until the Repayment Amount is paid by Columbia. The Repayment Amount shall be immediately due and payable in full, except that in the case of an Event of Default described in Sections 2.1(b), 2.1(c), 2.1(e), 2.1(f) and 2.1(g), the Repayment Amount shall be paid over [***] years in [***] equal monthly installments beginning thirty (30) days after PharmaBio's termination of its funding obligations or Columbia's termination of the Agreement, as the case may be. PharmaBio shall have no obligation to terminate its funding obligations upon an Event of Default and in lieu thereof may exercise its remedies under the other provisions of this Agreement. In the event that the Repayment Amount becomes due and payable pursuant to this Section 2.2, Columbia acknowledges and agrees that the Repayment Amount shall constitute indebtedness of Columbia payable to the order of PharmaBio. 2.3 In consideration of PharmaBio's funding commitments set forth in Section 2.1, with respect to each Annual Period of the Royalty Term, Columbia shall pay PharmaBio royalties equal to nine percent (9%) of Net Sales during an Annual Period up to the Net Sales Baseline applicable to such Annual Period as set forth in the table below and royalties equal to four and one-half percent (4 1/2 %) of Net Sales during an Annual Period in excess of such Net Sales Baseline. 7 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ---------------------------------- Annual Period Net Sales Baseline ---------------------------------- 1 [***] ---------------------------------- 2 [***] ---------------------------------- 3 [***] ---------------------------------- 4 [***] ---------------------------------- 5 [***] ---------------------------------- 6 [***] ---------------------------------- 7 [***] ---------------------------------- Notwithstanding anything to the contrary contained in this Agreement, the total royalties payable to PharmaBio under this Section 2.3 shall not (i) exceed in the aggregate for all Annual Periods the amount of $55,000,000 (the "Maximum Royalty Amount"), or (ii) be less than $30,000,000 in the aggregate for all Annual Periods (the "Minimum Royalty Amount"). With respect to the Minimum Royalty Amount: if by the end of the third Annual Period without regard to extension of any Annual Period under Section 2.5, PharmaBio has not received at least $[***] in aggregate royalties under this Section 2.3 (with respect to Net Sales for the first three Annual Periods without regard to extension of any Annual Period under Section 2.5), then Columbia will pay PharmaBio the difference between the amount of royalties actually received and $[***]; and at the end of the seventh (7th) Annual Period, if PharmaBio has not received at least $30,000,000 in aggregate royalties under this Section 2.3, then Columbia will pay PharmaBio the difference between the amount of royalties actually received and $30,000,000, provided that the time for payments under this sentence shall be extended by the period of any extension of the Royalty Term under Section 2.5, provided further that in no event shall such extension for payments under this sentence be extended more than six (6) months beyond the original due date. The Minimum Royalty Amount shall be payable by Columbia to PharmaBio notwithstanding the actual sales of the Product or other Product-related events, including without limitation any Adverse Marketing Event or Market Withdrawal. Notwithstanding the foregoing provisions of this Section 2.3 and provided Columbia has made all royalty payments with respect to all Annual Periods through the applicable "Calculation Date" in the table below, if, on the applicable Calculation Date, the aggregate royalties paid to PharmaBio for all Annual Periods, through and including the Annual Period that includes the Calculation Date, equals or exceeds the applicable Termination Amount in the table below, the obligation of Columbia to pay royalties to PharmaBio under this Section 2.3 with respect to Annual Periods after the Calculation Date shall terminate. ---------------------------------------------------- Calculation Date Termination Amount ---------------------------------------------------- End of the Third Annual Period [***] ---------------------------------------------------- 8 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ---------------------------------------------------- End of the Fourth Annual Period [***] ---------------------------------------------------- End of the Fifth Annual Period [***] ---------------------------------------------------- End of the Sixth Annual Period [***] ---------------------------------------------------- The royalty payments under this Section 2.3 shall be paid by Columbia on a quarterly basis as soon as reasonably practicable following the end of each calendar quarter (but not later than forty five (45) days following the end of each calendar quarter, except following the fourth calendar quarter, in which case Columbia shall have up to 60 days) during the seven (7) Annual Periods in the Royalty Term. Accompanying each of Columbia's payments to PharmaBio under this Section, Columbia will provide to PharmaBio a report showing the applicable Net Sales and the calculation of the resulting royalty payment. Columbia also shall provide PharmaBio with all sales data for the Product that are available to Columbia. 2.4 As further consideration for PharmaBio's funding commitments set forth in Section 2.1, Columbia shall reimburse PharmaBio for the fees and expenses of its outside legal counsel as counsel for Quintiles in connection with the negotiation, execution, and closing of this Agreement and the consummation of the transactions contemplated thereby, which attorneys' fees and expenses shall be offset by PharmaBio against the initial payment amount otherwise due to Columbia under Section 2.1. 2.5 Columbia shall use its commercially reasonable efforts to commercialize the Product in the Territory. Without limiting the foregoing, Columbia will provide a sales force of an average size, calculated on a quarterly basis, not less than the Minimum Sales Force Level during the Royalty Term. If, at any time during such period, (a) Columbia reduces the Product's average sales force below the Minimum Sales Force Level for a period of more than [***] days and Innovex is not in default in any material respect of its performance of its material obligations under the Master Services Agreement and the work orders thereunder relating to the Product, (b) an Adverse Marketing Event shall occur, or (c) a Market Withdrawal shall occur, then Columbia and PharmaBio will negotiate in good faith to restructure PharmaBio's commitments under Section 2.1 and the corresponding royalty amounts under Section 2.3, which negotiations will take into account the implications of the reduced sales force size or Adverse Marketing Event or Market Withdrawal, as the case may be, on future sales of the Product. If the Parties are unable to agree to such restructuring within [***] days after PharmaBio gives written notice to Columbia of its intent to pursue a remedy under this Section 2.5, then, provided Innovex is not in default in any material respect of its performance of its material obligations under the Master Services Agreement and the work orders thereunder relating to the Product, PharmaBio may, at its sole discretion by written notice to Columbia, elect to (i) suspend all future funding obligations under Section 2.1; and (ii) extend the Royalty Term (including, without limitation, the then-current Annual Period). During the suspension and extension period, PharmaBio shall continue to receive royalties at the rate equal to the royalty amount applicable immediately prior to the effective date of such suspension and extension. If PharmaBio elects this remedy, the then-current Annual Period for royalty payments under Section 2.3, and the funding commitments under Section 2.1, shall be extended until the Minimum Sales Force Level is satisfied or the 9 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Adverse Marketing Event no longer exists or the Market Withdrawal no longer exists, as the case may be. The funding commitments under Section 2.1 shall resume as soon as Columbia achieves the Minimum Sales Force Level or the Adverse Marketing Event no longer exists or the Market Withdrawal no longer exists, as the case may be, and the end of the then current Annual Period shall be extended for the amount of such suspension and extension period, such that PharmaBio enjoys the full length of the seven (7) Annual Periods described in Section 2.3 with the benefit of the Minimum Sales Force Level or absence of the Adverse Marketing Event or absence of the Market Withdrawal, as the case may be, for seven (7) full twelve-month periods, and the term "Royalty Term" shall, for all purposes under this Agreement, be extended accordingly. 2.6 Each Party hereto shall keep or cause to be kept such records as are required to determine, in a manner consistent with GAAP, the sums or credits due under this Agreement. Each Party shall have the right, at such Party's expense, through a certified public accountant or like person reasonably acceptable to the other Party, upon execution of a customary confidentiality agreement, to examine such records during regular business hours upon reasonable notice during the term of this Agreement and for twelve (12) months after its termination; provided however, that (i) such examination shall not take place more than once a year and shall not cover such records for more than the preceding Annual Period, and (ii) such accountant shall report to both Parties only as to the accuracy of the reports or payments provided or made by the other Party under this Agreement. Any adjustments required as a result of overpayments or underpayments identified through a Party's exercise of examination rights, and any other adjustments that may be required from time to time in order to correct overpayments or underpayments under this Agreement, shall be made by subtracting or adding, as appropriate, amounts from or to the next royalty payment in accordance with Section 2.3. The Party requesting the examination shall bear the full cost of the examination unless such examination correctly discloses that the discrepancy for the Annual Period differs by more than five (5) percent from the amount the accountant determines is correct, in such case the owing Party shall pay the reasonable fees and expenses charged by the accountant. In the event that a Party disputes an invoice or other payment obligation under this Agreement, such Party shall timely pay the amount of the invoice or other payment obligation, and the Parties shall resolve such dispute in accordance with Article XIII. 2.7 Without the prior written approval of PharmaBio, Columbia shall not, nor shall it allow any Affiliate or third party acting on behalf of or for the benefit of Columbia or any Affiliate to, commercialize or promote a product that could reasonably be expected to compete with the Product in the Territory during the Royalty Term. 2.8 The Chief Financial Officers ("CFOs") of Columbia and PharmaBio shall coordinate the activities of the Parties under this Agreement. The CFOs shall meet or communicate (in person or by telephone conference) on a regular basis as may be reasonably requested by either of them, but no less frequently than semi-annually about the performance of the Parties under this Agreement. The Parties acknowledge that a Steering Committee will be established as described in the Master Services Agreement. The Parties agree that, in addition to the activities described in the Master Services Agreement, the Steering 10 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Committee will coordinate and facilitate the overall commercialization relationship among PharmaBio and its Affiliates and Columbia and its Affiliates, including with respect to this Agreement. 2.9 Columbia agrees not to sell, assign, license, lease or otherwise transfer all or any substantial portion of its assets or properties owned (or otherwise held) relating to the Product in one or a series of related transactions, without the prior written consent of PharmaBio, which consent shall not be unreasonably withheld or delayed. 2.10 Without the prior written consent of PharmaBio, which consent shall not be unreasonably withheld or delayed, Columbia shall not create or incur or allow to be created, incurred or exist any Debt, except Debt which is junior and subordinate in right of payment to the Minimum Royalty Amount and the Repayment Amount (such Debt being referred to herein as "Junior Debt"), so long as prior to the creation of such Junior Debt the holder thereof has agreed to subordination terms and conditions in form and substance reasonably satisfactory to PharmaBio providing for the subordination of the Junior Debt to the Minimum Royalty Amount and the Repayment Amount. Columbia and PharmaBio agree that Columbia's payment obligations under this Agreement, including the Minimum Royalty Amount and the Repayment Amount, shall be and constitute "Senior Indebtedness" as such term is used in the Warburg Note. 2.11 Without the prior written consent of PharmaBio, which consent shall not be unreasonably withheld or delayed, Columbia shall not create or incur or allow to be created, incurred or exist any Lien upon or with respect to any of Columbia's assets or properties, except Liens securing Debt or other obligations which are junior and subordinate in right of payment to the Minimum Royalty Amount and the Repayment Amount (such Liens being referred to herein as "Junior Liens"), so long as prior to the creation of such Junior Liens the holder thereof has agreed to subordination terms and conditions in form and substance reasonably satisfactory to PharmaBio providing for the subordination of the Junior Liens to the Minimum Royalty Amount and the Repayment Amount. 2.12 Columbia shall have sole responsibility for all FDA and regulatory related obligations regarding the Product. Columbia shall also have responsibility for manufacturing, distribution and marketing of the Product, except as set forth in the Master Services Agreement. ARTICLE III Representations and Warranties of Columbia Columbia hereby represents and warrants to PharmaBio as of the date hereof as follows: 3.1 Organization and Qualification. Columbia is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware, and Columbia is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is required, except where failure to so qualify would not have a Material Adverse Effect. Columbia has all requisite corporate power and authority to own, lease 11 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. and operate its properties and to carry on its businesses as now conducted and as proposed to be conducted. 3.2 Authority and Consents. Columbia has all necessary corporate power and authority to execute and deliver the Transaction Agreements and to consummate the Transactions. The execution and delivery of the Transaction Agreements and consummation of the Transactions have been duly authorized by all necessary corporate action on the part of Columbia and no other corporate proceedings on the part of Columbia are necessary to authorize the Transaction Agreements or to consummate the Transactions. The Transaction Agreements have been duly and validly executed and delivered by Columbia and constitute valid, legal and binding agreements of Columbia, enforceable against Columbia in accordance with their respective terms. No consent, authorization or order of, or filing or registration with, any Governmental Authority is required to be obtained or made by Columbia for the execution, delivery and performance of the Transaction Agreements or the consummation of the Transactions. Neither the execution, delivery and performance of the Transaction Agreements by Columbia nor the consummation by Columbia of the Transactions will (i) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws of Columbia; (ii) violate any Law applicable to Columbia or any of its Subsidiaries or the Transactions; or (iii) result in the creation of any Lien upon any assets of Columbia or any of its Subsidiaries pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which Columbia or any of its Subsidiaries is a party or by which Columbia or any of its Subsidiaries or any of their respective properties may be bound, except in the case of clauses (ii) and (iii) for such violation, Lien or default which would not, individually or in the aggregate, have and which could not reasonably be expected to have a Material Adverse Effect. 3.3 Columbia SEC Reports; Financial Statements. Columbia has made available to PharmaBio (i) Columbia's Annual Reports on Form 10-K for each of the fiscal years ended December 31, 2000 and December 31, 2001; (ii) all definitive proxy statements relating to Columbia's meetings of stockholders (whether annual or special) held since January 1, 2001; and (iii) all other reports or registration statements filed by Columbia with the Commission since January 1, 2001 (all such filings at (i) through (iii), collectively, the "Columbia SEC Reports"). As of their respective filing dates, the Columbia SEC Reports were prepared in all material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, applicable to the Columbia SEC Reports. None of such forms, reports or registration statements contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Columbia included in the Columbia SEC Reports complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto when the same were filed and fairly presented, in conformity with GAAP 12 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of Columbia and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments). Columbia has filed with the Commission on a timely basis, or received a valid extension of such time of filing, all forms, reports and documents required to be filed by it under the Exchange Act since January 2, 2001. 3.4 Absence of Undisclosed Liabilities. Except as and to the extent specifically reflected or reserved against on the consolidated balance sheets of Columbia as of December 31, 2001, included in Columbia's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, or otherwise disclosed in the Columbia SEC Reports, neither Columbia nor any of its Subsidiaries have any material debts, liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, arising out of transactions entered into, or any state of facts existing on or prior to the date of this Agreement that would be required under GAAP to be reported on the balance sheet of Columbia, other than liabilities and obligations (1) arising in the ordinary course of business after December 31, 2001, which do not have a Material Adverse Effect, or (2) arising in connection with the Transactions, which do not have a Material Adverse Effect. 3.5 Subsidiaries. Schedule 3.5 attached hereto sets forth each subsidiary of Columbia as of the date hereof (each a "Subsidiary" and together its "Subsidiaries"), showing the jurisdiction of its incorporation or organization and showing the percentage of each person's ownership of the outstanding stock or other interests of such Subsidiary. Each Subsidiary is duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation and is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect. Each Subsidiary has all requisite corporate power and authority to carry on its business as now conducted. 3.6 Absence of Changes. Except as disclosed by Columbia in the Columbia SEC Reports, since December 31, 2001, (a) Columbia and its Subsidiaries have not incurred any liabilities or obligations (indirect or contingent) or entered into any written or oral agreements or other transactions which are outside of the ordinary course of business which have had or which would reasonably be expected to have, and there have been no changes in the business or operations of Columbia or any of the Subsidiaries which have had or which would reasonably be expected to have, a Material Adverse Effect; (b) Columbia and its Subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; and (c) Columbia has not paid or declared any dividends or other distributions with respect to its common stock and Columbia is not in default in the payment of principal or interest on any outstanding debt obligations. 3.7 No Defaults. Except as to defaults, violations and breaches which individually or in the aggregate would not have a Material Adverse Effect on Columbia, neither Columbia nor 13 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. any of its Subsidiaries is in violation or default of any provision of its certificate of incorporation or bylaws, or other organizational documents, or in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties are bound; and there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of default or default on the part of Columbia or any Subsidiary as defined in such documents or instruments, except such defaults which individually or in the aggregate would not have a Material Adverse Effect on Columbia. 3.8 Material Agreements. (a) Except as included or incorporated by reference in, or otherwise referred to in, the Columbia SEC Reports, or listed on Schedule 3.8(a), neither Columbia nor any of its Subsidiaries is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-1 (collectively, "Material Agreements") if Columbia was registering securities under the Securities Act. The Material Agreements are in full force and effect and Columbia or its Subsidiary, as the case may be, has in all material respects performed all the obligations required to be performed by it to date under such agreements, has received no notice of default and, to the best of Columbia's knowledge, neither Columbia nor any of its Subsidiaries nor any party obligated to Columbia or to any Subsidiary is in default under any Material Agreement now in effect, the result of which could reasonably be expected to cause a Material Adverse Effect. All Material Agreements constitute valid and binding obligations of Columbia or one or more of its Subsidiaries, as the case may be, enforceable against Columbia or such Subsidiaries in accordance with their respective terms. (b) Schedule 3.8(b) sets forth each of the material contracts related to the Product. Each of the contracts set forth on Schedule 3.8(b) is in full force and effect and Columbia and its Affiliates have in all material respects performed all their respective obligations required to be performed by them to date under such agreements, have received no notice of default and, to the best of Columbia's knowledge, neither Columbia nor its Affiliates nor any party obligated to Columbia is in default under such agreements, the result of which could reasonably be expected to cause a Material Adverse Effect on Columbia. 3.9 No Litigation or Other Actions. There are no legal or governmental actions, suits, proceedings or investigations pending or, to Columbia's knowledge, threatened to which Columbia or any of its Subsidiaries is or may be a party or of which property owned, licensed or leased by Columbia or any of its Subsidiaries is or may be the subject, which actions, suits, proceedings or investigations, individually or in the aggregate, might prevent or might reasonably be expected to have a material adverse affect on the Transactions or result in a Material Adverse Effect; and no labor disturbance by the employees of Columbia or any of its Subsidiaries exists or, to Columbia's knowledge, is imminent which might reasonably be expected to have a Material Adverse Effect, except 14 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. as provided on Schedule 3.11. Neither Columbia nor any of its Subsidiaries is a party to or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body administrative agency or other governmental body. 3.10 Properties (Other than Intellectual Property). Columbia and each of the Subsidiaries have valid title to all the properties and assets reflected as owned by such entities in the Columbia SEC Reports, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if any, reflected in the Columbia SEC Reports, (ii) those which are not material in amount and do not adversely affect the use made and proposed to be made of such property by Columbia or its Subsidiaries, or (iii) those on Schedule 3.11. Columbia and each Subsidiary holds its leased properties under valid and binding leases. Columbia and each Subsidiary owns, leases or licenses all such properties necessary for the conduct of its respective business (as described in the Columbia SEC Reports). 3.11 Intellectual Property. Set forth on Schedule 3.11 are all of the patents, patent applications, trademark applications, and trademark registrations in the Territory used or held for use to develop, commercialize, market, make and distribute the Product. Columbia and each of its Subsidiaries owns or has valid and enforceable rights to use all Intellectual Property (as defined below) necessary to conduct their respective businesses as described in the Columbia SEC Reports including without limitation the Intellectual Property described on Schedule 3.11 and any other Intellectual Property used or held for use to develop, commercialize, market, make and distribute the Product in the Territory (collectively, the "Columbia Intellectual Property"). To the knowledge of Columbia, none of the Columbia Intellectual Property infringes, misappropriates or makes any unauthorized use of any Intellectual Property of any other person, except as provided on Schedule 3.11. Neither Columbia nor any of its Subsidiaries has received notice or other communication of any actual, alleged, or potential infringement, misappropriation or unauthorized use of Intellectual Property owned or used by any other person, except as provided on Schedule 3.11. To the knowledge of Columbia, no person is infringing, misappropriating or making any unauthorized use of any the Columbia Intellectual Property, except as would not reasonably be expected to have a Material Adverse Effect. Except as included or incorporated by reference in, or otherwise referred to in the Columbia SEC Reports, neither Columbia nor any of its Subsidiaries has entered into any agreement or arrangement, and neither Columbia nor any of its Subsidiaries is subject to any judgment, order or decree of any court or governmental or regulatory body limiting the ability of Columbia or its Subsidiaries, as applicable, to exploit freely the Columbia Intellectual Property or to transact business in any market with any person, except as provided on Schedule 3.11. There is no pending or, to the knowledge of Columbia, threatened action, claim, suit, proceeding or investigation before any court or any governmental or regulatory body challenging the validity, scope, ownership, or right to use the Columbia Intellectual Property, except as provided on Schedule 3.11. There are no actions, claims, suits or proceedings by Columbia or any of its Subsidiaries against any other person regarding the Columbia Intellectual Property or the Intellectual Property of such person. Columbia is not aware of any Intellectual Property owned or controlled by any other person, or of any facts, circumstances or events, that would materially impair or prevent Columbia or its Subsidiaries from developing, commercializing, 15 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. marketing, making and distributing the Product as contemplated by the Columbia SEC Reports. "Intellectual Property" shall mean all: trade, business and product names; trademarks; service marks; copyrights; patents; inventions; discoveries; trade secrets; business and technical information; proprietary compilations of data or information; know-how; formulas and techniques; methods; regulatory filings and approvals; computer software; all intellectual property rights, registrations, licenses and applications pertaining to any of the foregoing; and all related documentation and goodwill. 3.12 Compliance. Each of Columbia and its Subsidiaries has been and is in compliance in all material respects with all applicable Laws in respect of the conduct of its respective business, the ownership of its respective properties and the Product, except where failure to so comply would not reasonably be expected to have a Material Adverse Effect. Each of Columbia and its Subsidiaries has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its respective business as now being conducted unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 3.13 Taxes. Columbia has filed all federal, state, local and foreign income and other tax returns required to be filed by it and has paid or accrued all taxes shown as due thereon, except where failure to do so would not reasonably be expected have a Material Adverse Effect, and Columbia has no knowledge of a tax deficiency which has been or might be asserted or threatened against it or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect. 3.14 Insurance. Columbia maintains insurance with sound and reputable insurance companies of the types and in the amounts that Columbia reasonably believes is adequate for its business, including, but not limited to, insurance covering all real and personal property owned, licensed or leased by Columbia and its Subsidiaries against all risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. 3.15 Employees. As of the date hereof, Columbia has no collective bargaining arrangements or agreements covering any of its employees. As of the date hereof, since January 1, 2001, no officer, consultant or key employee of Columbia whose termination, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, has terminated or, to the knowledge of Columbia, has any present intention of terminating his or her employment or engagement with Columbia. 3.16 Debt. No Debt is outstanding or owed by Columbia except the Debt listed on Schedule 3.16. Set forth on Schedule 3.16 is a list of all amounts of outstanding Debt of Columbia for borrowed money and the maturity dates thereof. 3.17 Liens. No Lien exists upon or with respect to any of Columbia's properties or assets. 16 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 3.18 FDA Matters. Columbia has (a) complied in all material respects with all applicable Laws in its preparation and submission of the NDA for the Product and in conducting the related clinical trials; and (b) not made to the FDA any untrue statement of a material fact regarding the Product (whether in any submission or otherwise) and not failed to disclose to the FDA any material fact required to be disclosed to it by the FDA regarding the Product. 3.19 Grant of Rights. Columbia has not granted any right to any Third Party which would conflict with the rights granted under the Transaction Agreements to PharmaBio or Innovex, as the case may be, nor entered into any agreement which would impair its ability to perform its obligations under the Transaction Agreements. ARTICLE IV Additional Covenants 4.1 Compliance with Certain Material Agreements. Columbia shall perform and fulfill all of its obligations, and shall cause its Affiliates to perform and fulfill all of their respective obligations under each of the agreements listed on Schedule 3.8(b) as necessary to maintain Columbia's and its Affiliates' respective rights in such agreements in full force and effect in all material respects. Columbia shall provide written notice to PharmaBio within five (5) Business Days of Columbia's or any of its Affiliate's receipt of any notice from any other parties to any of the agreements listed on Schedule 3.8(b) proposing or threatening to terminate any such agreement. 4.2 Notice of Events of Default. Columbia agrees to provide prompt written notice of the occurrence of any Adverse Marketing Event or any Event of Default to PharmaBio but in any case not later than three Business Days after any such event. 4.3 FDA Correspondence. Columbia agrees to promptly (and in any case not later than three Business Days after receipt) provide to PharmaBio copies of material correspondence to or from the FDA related to the Product including, without limitation, any Not Approvable Letter or other FDA action letters. 4.4 Diligence. Columbia agrees to exercise commercially reasonable efforts to obtain FDA approval for and to launch the Product in the Territory. 4.5 Compliance. Columbia shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all applicable Laws in respect of the conduct of its respective business, the ownership of its respective properties and the Product, except where failure to so comply would not reasonably be expected to have a Material Adverse Effect. Columbia and its Subsidiaries shall maintain in full force and effect all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of their respective business as now being conducted unless the failure to possess such franchises, permits, licenses, consents and other 17 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. governmental or regulatory authorizations and approvals, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 4.6 Grant of Rights. During the term of this Agreement, Columbia will not grant, and shall ensure its Subsidiaries do not grant, any right to any third party which would conflict with the rights granted to the PharmaBio hereunder or enter into any agreement which would impair its ability to perform its obligations under this Agreement. 4.7 Maintenance of Insurance. Columbia shall at all times maintain insurance in full force and effect with sound and reputable insurance companies of the types and in the amounts that Columbia reasonably believes is adequate for its business, including, but not limited to, insurance covering all real and personal property owned, licensed or leased by Columbia and its Subsidiaries against all risks customarily insured against by similarly situated companies. 4.8 Subscription Right. (a) If at any time after the date hereof until the date on which PharmaBio (which for purposes of this Section 4.8 shall include its Affiliates) shall no longer own at least [***] of the shares of Columbia Common Stock purchased by PharmaBio under the Stock Purchase Agreement by and between PharmaBio and Columbia dated July 31, 2002, Columbia proposes to issue equity securities of Columbia of any kind, the primary purpose of which is to raise more than five million dollars ($5,000,000) in any six (6) month period in equity capital (the term "equity securities" shall include for these purposes any warrants, options or other rights to acquire equity securities and debt securities convertible into equity securities), other than (i) to the public in a firm commitment underwriting pursuant to a registration statement filed under the Securities Act, (ii) in connection with bona fide acquisitions, mergers, joint ventures or similar transactions, the terms of which are approved by Columbia's Board of Directors, (iii) pursuant to the Amended and Restated Common Stock Purchase Agreement by and between Columbia and Acqua Wellington North American Equities Fund, Ltd. effective as of February 6, 2001, or (iv) pursuant to any stock option, stock purchase or similar plan or arrangement for the benefit of the employees of Columbia or its Subsidiaries, adopted by the Board of Directors, then, Columbia shall: (i) give written notice to PharmaBio (no less than fifteen (15) days prior to the closing of such issuance) setting forth in reasonable detail (A) the material terms and provisions of the securities proposed to be issued (the "Proposed Securities"), (B) the price and other terms of the proposed sale of such securities; (C) the amount of such securities proposed to be issued; and (D) such other information as PharmaBio may reasonably request in order to evaluate the proposed issuance; and (ii) offer to issue and sell to PharmaBio, on such terms as the Proposed Securities are issued, upon full payment by PharmaBio, a portion of the Proposed Securities equal to a percentage determined by dividing (A) the number of shares of Common Stock of Columbia then held by PharmaBio, by (B) the total number of shares 18 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. of Common Stock then outstanding, including for purposes of this calculation all shares of Common Stock issuable upon conversion or exercise in full of any convertible or exercisable securities (other than employee stock options) then outstanding (including shares of Common Stock issuable upon conversion of convertible securities or issuable upon exercise of outstanding warrants). (b) PharmaBio must exercise its purchase rights hereunder within ten (10) days after receipt of such notice from Columbia. The closing of the exercise of such subscription right shall take place simultaneously with the closing of the sale of the Proposed Securities giving rise to such subscription right. (c) Upon the expiration of the 10-day offering period described above, Columbia will be free to sell such Proposed Securities that PharmaBio has not elected to purchase during the ninety (90) days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to PharmaBio. Any Proposed Securities offered or sold by Columbia after such 90-day period must be reoffered to PharmaBio pursuant to this Section 4.8. The election by PharmaBio not to exercise its subscription rights under this Section 4.8 in any one instance shall not affect its right as to any subsequent proposed issuance. ARTICLE V Confidentiality and Ownership of Information 5.1 Columbia on the one part and PharmaBio on the other part each acknowledges that, in the course of discussions and negotiations leading to this Agreement and performing its obligations hereunder, it has received or may receive information from the other Party which is proprietary to the disclosing Party and which the disclosing Party wishes to protect from public disclosure ("Confidential Information"). Each receiving Party agrees to retain in confidence, during the Royalty Term, and thereafter for a period of five (5) years, all Confidential Information disclosed to it by or on behalf of the other Party, and that it will not, without the written consent of such other Party, use Confidential Information for any purpose other than the purposes indicated herein or disclose such information to a third party. These restrictions shall not apply to Confidential Information which: (i) is or becomes public knowledge (through no fault of the receiving Party); (ii) is made lawfully available to the receiving Party by an independent third party that, to the knowledge of the receiving Party, is under no duty of confidentiality to the disclosing Party; (iii) is already in the receiving Party's possession at the time of receipt from the disclosing Party (and such prior possession can be demonstrated by competent evidence by the receiving Party); (iv) is independently developed by the receiving Party and/or Affiliates (and such independent development can be demonstrated by competent evidence by the receiving Party); or (v) is required by Law to be disclosed by the receiving Party, provided, however, if reasonably possible, such receiving Party gives the disclosing Party sufficient advance written notice to permit it to seek a protective order or other similar order with respect to such Confidential Information and, thereafter, the receiving Party may disclose only the minimum Confidential Information required to be 19 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. disclosed in order to comply with such and only to the government authority or agency or in the proceeding which is the subject of such order. 5.2 PharmaBio on the one hand and Columbia on the other hand shall limit disclosure of the other Party's Confidential Information to only those of their respective officers, representatives, agents and employees who are directly concerned with the performance of this Agreement and have a legitimate need to know such Confidential Information in the performance of their duties and shall ensure that their respective officers, representatives, agents and employees to whom Confidential Information is disclosed do not further disclose such Confidential Information to any third party except as otherwise permitted hereunder. 5.3 All Columbia inventions, processes, know-how, patents, trade secrets, copyrights, trade names, trademarks, service marks, marketing materials, proprietary materials or other intellectual property of any kind, and all improvements to any of the foregoing (collectively, "Columbia Property"), disclosed, used, improved, modified or developed in connection with the relationship contemplated by this Agreement shall remain the sole and exclusive property of Columbia. 5.4 Columbia acknowledges that PharmaBio (and its Affiliates) possess certain inventions, processes, know-how, trade secrets, improvements, other intellectual properties and other assets, including but not limited to analytical methods, procedures and techniques, computer technical expertise and software, and business practices, which have been independently developed by PharmaBio and/or its Affiliates (collectively "PharmaBio Property"). Any PharmaBio Property or improvements thereto which are disclosed, used, improved, modified or developed under or during the term of this Agreement shall remain the sole and exclusive property of PharmaBio or the respective Affiliate. 5.5 Neither PharmaBio nor Columbia or any of their Affiliates shall make any public announcements regarding this Agreement or the terms and conditions thereof without the prior written approval of the other Party, which approval shall not be unreasonably withheld or delayed, except to the extent such disclosure is required by Law. ARTICLE VI Grant of Certain Preferred Rights by Columbia to PharmaBio For so long as Innovex is providing services related to the Product under the Master Services Agreement or any replacement agreement, Columbia hereby grants to PharmaBio (which for purposes of this Article VI shall mean and include its Affiliates) a preferred provider relationship whereby PharmaBio shall have a first and preferred opportunity to negotiate for a period of [***] with Columbia (which for purposes of this Article VI shall mean and include its Affiliates) to provide to Columbia any services which PharmaBio provides to customers, which Columbia has decided to outsource or otherwise engage a service provider to perform during the Royalty Term, and which involve payments individually or in the aggregate of $500,000 or more, including without limitation clinical and pre-clinical development, coordination and execution services, 20 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. sales and marketing services, commercialization services, and similar services. Columbia shall allow and grant PharmaBio the right to provide such services if PharmaBio agrees to provide such services on competitive terms and conditions. 21 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ARTICLE VII Independent Contractor Relationship For the purposes of this Agreement, Columbia and PharmaBio are independent contractors and nothing contained in this Agreement shall be construed to place them in the relationship of partners, principal and agent, employer and employee or joint venturers. Neither Columbia nor PharmaBio shall have the power or right to bind or obligate the other Party, nor shall either Party hold itself out as having such authority. ARTICLE VIII Additional Termination Provisions 8.1 Columbia may terminate this Agreement for material breach upon sixty (60) days written notice specifying the nature of the breach, if such breach (i) has not been substantially cured within the sixty (60) day period or (ii) is not curable within such 60-day period and the breaching Party has not commenced and diligently continued during such 60-day period reasonable actions to cure such breach. During the 60-day cure period for termination due to breach, each Party will continue to perform its obligations under this Agreement. Any termination under this Section 8.1 shall be without prejudice to any claims for damages or other relief by Columbia. 8.2 This Agreement shall terminate upon the payment by Columbia to PharmaBio of either (i) the Maximum Royalty Amount or (ii) the applicable Termination Amount. ARTICLE IX Indemnification and Liability Limits 9.1 PharmaBio shall indemnify, defend and hold harmless Columbia, its Affiliates and its and their respective directors, officers, employees and agents from and against any and all losses, claims, actions, damages, liabilities, penalties, costs and expenses (including reasonable attorneys' fees and court costs) (collectively, "Losses"), resulting from any: (i) breach by PharmaBio (or its employees) of its obligations hereunder; (ii) willful misconduct or grossly negligent acts or omissions of PharmaBio or its employees; and (iii) violation by PharmaBio or its employees of any Laws applicable to the performance of PharmaBio's obligations under this Agreement; except, in each case, to the extent such Losses are determined to have resulted from the gross negligence or willful misconduct of Columbia or its employees. 9.2 Columbia shall indemnify, defend and hold harmless PharmaBio, its Affiliates and its and their respective directors, officers, employees and agents from and against any and all Losses resulting from any: (i) third party claim arising from the manufacture, storage, handling, packaging, labeling, production, transportation, distribution, marketing, testing, 22 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. use, sale or other disposition of the Product; (ii) breach by Columbia (or its employees) of its obligations hereunder; (iii) willful misconduct or grossly negligent acts or omissions of Columbia or its employees; and (iv) violation by Columbia or its employees of any Laws applicable to the performance of Columbia' obligations under this Agreement; except, in each case, to the extent such Losses are determined to have resulted from the gross negligence or willful misconduct of PharmaBio or its employees. 9.3 In the event of a third party claim or lawsuit, the Party seeking indemnification hereunder (the "Indemnified Party") shall give the Party obligated to indemnify (the "Indemnifying Party") prompt written notice of any claim or lawsuit (including a copy thereof), provided that the failure of an Indemnified Party to notify the Indemnifying Party on a timely basis will not relieve the Indemnifying Party of any liability that it may have to the Indemnified Party unless the Indemnifying Party demonstrates that the defense of such action is materially prejudiced by the Indemnified Party's failure to give such notice. The Indemnified Party and its employees shall fully cooperate with Indemnifying Party and its legal representatives in the investigation and defense of any matter the subject of indemnification, which defense shall be managed by the Indemnifying Party in a manner, including the selection of legal counsel, reasonably acceptable to the Indemnified Party. The Indemnified Party shall not unreasonably withhold its approval of the settlement of any such claim, liability, or action by Indemnifying Party covered by this indemnification provision; provided that such settlement does not include an admission or acknowledgement of liability or fault of the Indemnified Party. 9.4 Neither PharmaBio nor Columbia, nor any of such Party's Affiliates, directors, officers, employees, subcontractors or agents shall have, under any legal theory (including, but not limited to, contract, negligence and tort liability), any liability to any other Party hereto for any loss of profits, opportunity or goodwill, or any type of special, incidental, indirect or consequential damage or loss, in connection with or arising out of this Agreement. For the avoidance of doubt, a claim by PharmaBio for royalties on Net Sales payable by Columbia hereunder or a claim by Columbia for payments pursuant to Section 2.1 shall not be limited in any way pursuant to the provisions set forth in the preceding sentence. ARTICLE X Notices Any notice required to be given by either Party shall be in writing. All notices shall be to the Parties and addresses listed below, and shall be deemed sufficiently given (i) when received, if delivered personally or sent by facsimile transmission with confirmed receipt, or (ii) one Business Day after the date mailed by first class mail or sent by an internationally recognized overnight delivery service with charges prepaid. 23 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. If to PharmaBio: PharmaBio Development Inc. 4709 Creekstone Drive Suite 200, Riverbirch Building Durham, NC 27703 Attention: President Fax: 919-998-2090 With a copy to: PharmaBio Development Inc. 4709 Creekstone Drive Suite 200, Riverbirch Building Durham, NC 27703 Attention: General Counsel Fax: 919-998-2090 If to Columbia: Columbia Laboratories, Inc. 354 Eisenhower Parkway Livingston, NJ 07039 Attention: President Fax 973-994-3001 With a copy to: Columbia Laboratories, Inc. 354 Eisenhower Parkway Livingston, NJ 07039 Attention: General Counsel Fax 973-994-3001 ARTICLE XI Assignment No Party may assign any of its rights or obligations under this Agreement to any third party other than an Affiliate without the written consent of the other Party, which consent shall not be unreasonably withheld or delayed, but no such assignment shall relieve the assigning Party of any of its obligations hereunder. Any permitted assignee of rights or obligations hereunder shall, in a writing to the other Party, expressly assume performance of such rights or obligations. Nothing in this Article XI shall preclude the transfer of a Party's rights and obligations under this Agreement in conjunction with a merger in which such Party is not the surviving entity. Any attempted assignment in violation of this Section shall be null and void. ARTICLE XII General Provisions 12.1 Sections 2.1, 2.2, 2.3 and 2.6 and Articles V, IX, XI, XII and XIII shall survive the termination of this Agreement for any reason. 24 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 12.2 This Agreement contains the entire understanding of the Parties with respect to the subject matter herein and cancels all previous agreements (oral and written), negotiations and discussions dealing with the same subject matter. The Parties, from time to time during the term of this Agreement, may modify any of the provisions hereof only by an instrument in writing duly executed by the Parties. 12.3 No failure or delay on the part of a Party in either exercising or enforcing any right under this Agreement will operate as a waiver of, or impair, any such right. No single or partial exercise or enforcement of any such right will preclude any other or further exercise or enforcement thereof or the exercise or enforcement of any other right. No waiver of any such right will have effect unless given in a signed writing. No waiver of any such right will be deemed a waiver of any other right. The rights and remedies set forth in this Agreement are cumulative and not exclusive of any rights or remedies provided by Law or otherwise. Termination of this Agreement by a Party shall not affect any other rights or remedies which may be available to such Party against a defaulting Party. 12.4 If any part or parts of this Agreement are held to be illegal, void or ineffective, the remaining portions of this Agreement shall remain in full force and effect. If any of the terms or provisions are in conflict with any applicable Laws, then such term(s) or provision(s) shall be deemed inoperative to the extent that they may conflict therewith, and shall be deemed to be modified or conformed with such Laws. In the event of any ambiguity respecting any term or terms hereof, the Parties agree to construe and interpret such ambiguity in good faith in such a way as is appropriate to ensure its enforceability and viability. 12.5 The headings contained in this Agreement are used only as a matter of convenience, and in no way define, limit, construe or describe the scope or intent of any section of this Agreement. 12.6 Each Party represents and warrants to the other that the individual signing below for such Party is authorized and empowered to bind such Party to the terms of this Agreement. 12.7 Neither Party shall be liable to the other for delay or failure in the performance of the obligations on its part contained in this Agreement (other than payment obligations) if and to the extent that such failure or deal is due to circumstances beyond its control ("Force Majeure") which it could not have avoided by the exercise of reasonable diligence including but not limited to: act of God; war or insurrection; civil commotion; destruction of essential facilities or materials by earthquake, fire, flood or storm; labor disturbance (whether or not any such labor disturbance is within the power of the affected Party to settle); epidemic; or other similar event; provided, however, that the Party so affected shall notify the other Party promptly should such circumstances arise, giving an indication of the likely extent and duration thereof, and shall use all commercially reasonable efforts to avoid, remove or alleviate such causes of non-performance and shall resume performance of its obligations hereunder with the utmost dispatch whenever such causes are removed. In the event of Force Majeure lasting more than three (3) months, 25 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. the Parties agree to meet and discuss how this Agreement can be justly and fairly implemented under the circumstances. 12.8 Each party shall, without further consideration, take such further action and execute and deliver such further documents as may be reasonably requested by the other party in order to carry out the provisions and purposes of this Agreement. 12.9 This Agreement and any amendment hereto may be executed in any number of counterparts and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. The execution of this Agreement and any such amendment by any party hereto will not become effective until counterparts hereof have been executed by both parties hereto. This Agreement may be executed by either party by delivery of such party's facsimile signature thereon. 12.10 The parties intend and agree that PharmaBio's payments under Section 2.1 of this Agreement (i) shall not be an equity investment in Columbia; (ii) shall not give PharmaBio any rights or interest in the capital stock of Columbia; and (iii) shall not entitle PharmaBio to any rights of a stockholder of Columbia. ARTICLE XIII Dispute Resolution 13.1 Governing Law. This Agreement, including, without limitation, the interpretation, performance, enforcement, breach or termination thereof and any remedies relating thereto, shall be governed by and construed in accordance with the Laws of the State of Delaware, United States of America, as applied to agreements executed and performed entirely in the State of Delaware, without regard to conflicts of law rules. 13.2 Internal Review. In the event that a dispute, difference, claim, action, demand, request, investigation, controversy, threat, or request for testimony or information or other question arises pertaining to any matters which arise under, out of, in connection with, or in relation to this Agreement (a "Dispute") and either Party so requests in writing, prior to the initiation of any formal legal action, the Dispute will be submitted to the Chief Executive Officers of Columbia and PharmaBio. For all Disputes referred to the Chief Executive Officers, the Chief Executive Officers shall use their good faith efforts to meet at least two times in person and to resolve the Dispute within ten (10) days after such referral. 13.3 Arbitration. (a) If the Parties are unable to resolve any Dispute under Section 13.2, then either Party may by election within ten (10) days after the end of the period set forth in Section 13.2, require the matter to be settled by final and binding arbitration by sending written notice of such election to the other Party clearly marked "Arbitration Demand". Thereupon such Dispute shall be arbitrated in accordance 26 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. with the terms and conditions of this Section 13.3. Notwithstanding the foregoing, either Party may apply to a court of competent jurisdiction for a temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm. (b) The arbitration panel will be composed of three arbitrators, one of whom will be chosen by Columbia, one by PharmaBio, and the third by the two so chosen. If both or either of Columbia or PharmaBio fails to choose an arbitrator or arbitrators within fourteen (14) days after receiving notice of commencement of arbitration, or if the two arbitrators fail to choose a third arbitrator within fourteen (14) days after their appointment, the American Arbitration Association shall, upon the request of both or either of the Parties to the arbitration, appoint the arbitrator or arbitrators required to complete the panel. The arbitrators shall have reasonable experience in the matter under dispute. The decision of the arbitrators shall be final and binding on the Parties, and specific performance giving effect to the decision of the arbitrators may be ordered by any court of competent jurisdiction. (c) Nothing contained herein shall operate to prevent either Party from asserting counterclaim(s) in any arbitration commenced in accordance with this agreement, and any such Party need not comply with the procedural provisions of this Section 13.3 in order to assert such counterclaim(s). (d) The arbitration shall be filed with the office of the American Arbitration Association ("AAA") located in Delaware or such other AAA office as the Parties may agree upon (without any obligation to so agree). The arbitration shall be conducted pursuant to the Commercial Arbitration Rules of AAA as in effect at the time of the arbitration hearing, such arbitration to be completed in a sixty (60) day period. In addition, the following rules and procedures shall apply to the arbitration: (i) The arbitrators shall have the sole authority to decide whether or not any Dispute between the Parties is arbitrable and whether the Party presenting the issues to be arbitrated has satisfied the conditions precedent to such Party's right to commence arbitration as required by this Section 13.3. (ii) The decision of the arbitrators, which shall be in writing and state the findings the facts and conclusions of law upon which the decision is based, shall be final and binding upon the Parties, who shall forthwith comply after receipt thereof. Judgment upon the award rendered by the arbitrator may be entered by any competent court. Each Party submits itself to the jurisdiction of any such court, but only for the entry and enforcement to judgment with respect to the decision of the arbitrators hereunder. 27 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (iii) The arbitrators shall have the power to grant all legal and equitable remedies (including, without limitation, specific performance) and award compensatory damages provided by applicable Law, but shall not have the power or authority to award punitive damages. No Party shall seek punitive damages in relation to any matter under, arising out of, or in connection with or relating to this Agreement in any other forum. (iv) The Parties shall bear their own costs in preparing for and participating in the resolution of any Dispute pursuant to this Section 13.3, and the costs of the arbitrator(s) shall be equally divided between the Parties; provided, however, that each Party shall bear the costs incurred in connection with any Dispute brought by such Party that the arbitrators determine to have been brought in bad faith. [signature page follows] 28 [***]A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. [signature page to Striant Investment and Royalty Agreement] IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto through their duly authorized officers as of the date first set forth above. PHARMABIO DEVELOPMENT INC. COLUMBIA LABORATORIES, INC. By: /S/ William D. Robb By: /S/ Fred Wilkinson ---------------------------------- ------------------------------- Name: William D. Robb Name: Fred Wilkinson Title: Vice President, PharmaBio Title: President & CEO Development, Inc. SCHEDULES Schedule Description 3.5 Subsidiaries 3.8(a) Material Agreements; Required to Be Filed with SEC 3.8(b) Material Agreements; Material Contracts Related to the Product 3.11 No Litigation or Other Actions; Properties (Other than Intellectual Property); Intellectual Property 3.16 Debt Schedule 3.5 Subsidiaries Subsidiaries of Columbia Laboratories, Inc., (all of which are wholly-owned) are: Columbia Laboratories (Bermuda) Ltd. Incorporated in Bermuda Columbia Laboratories (France) SA Incorporated in France Columbia Laboratories (UK) Limited Incorporated in the United Kingdom Columbia Research Laboratories, Inc. Incorporated in Delaware Schedule 3.8(a) Material Agreements Not Yet Filed With SEC 1. License and Supply Agreement between Ardana Bioscience Limited, Columbia Laboratories (Bermuda), Ltd., and Columbia Laboratories, Inc., dated as of October 16, 2002. 2. Development and License Agreement between Ardana Bioscience Limited, Columbia Laboratories (Bermuda), Ltd., and Columbia Laboratories, Inc., dated as of December 26, 2002. 3. The Transaction Agreements. Schedule 3.8(b) Material Agreements Related to the Product 1. Semi-exclusive Supply Agreement by and between Mipharm S.p.A., and Columbia Laboratories (Bermuda) Limited, dated as of May 7, 2002. 2. License and Supply Agreement between Ardana Bioscience Limited, Columbia Laboratories (Bermuda), Ltd., and Columbia Laboratories, Inc., dated as of October 16, 2002. 3. The Transaction Agreements. Schedule 3.11 Intellectual Property Product Intellectual Property: 1. U.S. Patent No. 4,615,697 2. U.S. Patent No. 6,248,358 3. U.S. Patent Application Serial No. 09/596,073 4. U.S. Patent Application Serial No. 09/877,218 5. U.S. Trademark Application No. 76,442,855 for "Striant" 6. U.S. Trademark Registrations - None Interferences and Other Matters: 1. [***] 2. The Joint United Nations Program on HIV/AIDS (UNAIDS) issued a study report on June 13, 2000, that nonoxynol-9 in a gel form is not effective in protecting women from HIV infection. The gel form used in the study was the Company's Advantage-S product. The study results may affect the value of the Company's U.S. Patent No. 5,667,492, and related international patents and applications. Schedule 3.16 Debt 7.125% Convertible Subordinated Note Due March 15, 2005. Payable to SBC Warburg Dillon Read Inc. $10,000,000 Note to Ares Trading SA payable in monthly installments of $220,000 plus interest at 9% on the average balance outstanding during the month 146,667 ----------- $10,146,667 EX-10.41 7 dex1041.txt SALES FORCE WORK ORDER Exhibit 10.41 SALES FORCE WORK ORDER # 8872 EFFECTIVE DATE OF WORK ORDER: The Date of NDA Approval (defined below) or any other date agreed to by the Parties in writing This Sales Force Work Order is entered into between Columbia Laboratories, Inc. ("Columbia"), and Innovex LP ("Innovex"), pursuant to the Master Services Agreement, having an Effective Date of July 31, 2002, between Columbia and Innovex, and is subject to all the terms and conditions set forth therein, except as may be otherwise expressly provided herein. Columbia and Innovex may each be referred to herein individually as a "Party" and collectively as the "Parties." A. BRIEF DESCRIPTION OF SALES FORCE PROJECT: Sales Force Innovex is providing Columbia a full time sales force of approximately 60 to 75 sales representatives with 5 to 7 managers which will be assigned to promoting Striant(TM) to a selected list of approximately 8,000 endocrinologists, urologists, and HVP primary care physicians, or such other products and physicians designated by Columbia to Innovex in writing. The sales force will be on a [***] cycle. Columbia's objective is to maximize the quality of the calls to drive sales of Striant(TM). B. PROJECT TEAMS: Columbia Contact Person: Meg Coogan Senior Vice President, Marketing & Sales address: 354 Eisenhower Parkway 2nd Floor South Livingston, NJ 07039 phone: 973-994-3999 fax: 973-994-3001 Innovex Contact Person: Bob McGowan VP of Field Operations address: 10 Waterview Blvd. Parsippany, NJ 07054 phone: 973-257-4500 x3023 fax: 814-269-2123 Routine correspondence relevant to the operation of the sales force should be sent to the above-named contact persons. All notices or similar communications in regard to the terms or a change of terms of this Work Order are to be sent to the parties named in the Master Services Agreement - Section 16. Notices. 1 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. C. PROJECT TERM AND KEY DATES (unless otherwise agreed by the Parties in writing): - ----------------------------------------------------------------------- Project Start Date First day of the month following NDA Approval - ----------------------------------------------------------------------- District Manager Start Date First day of the month following NDA Approval - ----------------------------------------------------------------------- Sales Representative Start Date 4 to 6 weeks after Project Start Date - ----------------------------------------------------------------------- Home Study Begins 4 to 6 weeks after Project Start Date - ----------------------------------------------------------------------- Initial In-Class Training Start Date One week after Sales Representative Start Date - ----------------------------------------------------------------------- Last Sales Representative Field Day December 31, 2005 - ----------------------------------------------------------------------- Project End Date December 31, 2005 - ----------------------------------------------------------------------- "Project Term" shall mean the period of time beginning on the Project Start Date and ending on the Project End Date. Provided, however, that this Work Order shall terminate if and when the Royalty Agreement terminates. D. DEFINITIONS 1. "Day Worked" shall mean a day during which a Sales Representative details or presents to Prescribers, or attends scheduled company training and/or specifically designated home study. A "Day Worked" by a District Manager shall mean a day during which the District Manager performs duties and responsibilities described in the Work Order. Days Worked shall not include days on leave, holidays, sick days or vacations. 2. "Detail" shall mean an interactive face-to-face contact by a Sales Representative with a Prescriber or the Prescriber's legally empowered designee, during which a promotional message involving the Product is given in accordance with the Promotional Program. When used as a verb, "detail," "details" and "detailed" shall mean to engage in a Detail as defined herein. 3. "NDA Approval" shall mean the issuance by the FDA of an Approval Letter pursuant to 21 CFR 314.105 with respect to NDA # 21-543 filed by Columbia for the Product. 4. "Prescriber" shall mean, in the case of pharmaceutical products, physicians and other health care professionals legally authorized to write prescriptions for pharmaceutical products and, in the case of medical devices, physicians and other health care professionals. 2 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5. "Product" shall mean Striant(TM) (testosterone) buccal bioadhesive product that contains 30 mg testosterone and that is the subject of NDA # 21-543 filed by Columbia, and any other pharmaceutical product designated by Columbia to Innovex in writing. 6. "Promotional Expense Budget" shall mean the funding and guidelines for use of such funding that are provided by Columbia for use by the Sales Force when detailing and presenting Product. 7. "Promotional Material" shall mean the Product labeling and package inserts, sales aids and detailing materials, presentation materials and other promotional support items provided by Columbia to Innovex, for use in promotion of the Product. 8. "Promotional Program" shall mean the marketing plan, strategy and promotional message for the Product, which will include use of the Promotional Material and the Promotional Expense Budget. 9. "Royalty Agreement" shall mean the Investment and Royalty Agreement by and between Columbia and PharmaBio Development, Inc., a North Carolina corporation, whose address is 4709 Creekstone Drive, Suite 200, Riverbirch Building, Durham, NC 27703, which is an affiliate of Innovex, pursuant to which PharmaBio agrees to purchase the right to receive royalties on the Product. 10. "Sales Force" shall mean the Sales Representatives, District Managers, and National Sales Manager, individually and as a group, that have been assigned to deliver Details and Presentations of the Product in accordance with the terms of this Agreement. 11. "Sales Representative" shall mean an Innovex employee who has been trained and equipped to detail and present to Prescribers. 12. "Target Prescriber" shall mean one of the specifically identified Prescribers within a Sales Representative's territory to be detailed and presented to by the Sales Representative. 13. "Territory" shall mean the United States and Puerto Rico. In connection with an individual Sales Representative, the territory shall be the geographic area assigned to the individual Sales Representative. E. INNOVEX RIGHTS, RESPONSIBILITIES AND OBLIGATIONS 1. Sales Force. The Sales Force will be composed of the following Innovex employees: ------------------------------ Number Position Title ------------------------------ 60-75 Sales Representatives ------------------------------ 5-7 District Managers ------------------------------ 3 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. In addition, Innovex will provide appropriate management oversight of the Sales Force, including that of an Innovex National Sales Manager, which shall be the same National Sales Manager that provides oversight of the sales force provided by Innovex to Columbia under Work Order #8795. Columbia may request that Innovex provide additional Sales Representatives, by submitting a written request in substantially the form attached hereto as Exhibit 1, ("Additional Sales Representative Request Form"). As the total number of Sales Representatives increases for the Sales Force, additional District Managers will also be increased in order to maintain a maximum ratio of District Managers to Sales Representatives of 1:12. 2. Recruitment. Innovex shall be responsible for recruitment and re-recruitment (replacement) of the Sales Representatives and District Managers in accordance with the Sales Force Qualifications described below. Innovex shall be responsible for the cost of recruitment, background checks and drug screens. If Columbia elects to participate in the final selection of members of the Sales Force, Columbia shall approve or disapprove qualified candidates within five (5) business days after each qualified candidate is submitted to Columbia for final selection. A "qualified candidate" must meet the Sales Force Qualifications. 3. Sales Force Qualifications. Innovex will exercise best efforts to recruit from a diverse candidate base. A qualified candidate for Sales Representatives shall meet the following minimum qualifications: four-year college degree (B.A., B.S. or equivalent); minimum one year outside sales experience, preferably within pharmaceuticals. At least 40% of Sales representatives shall have a minimum of one year of pharmaceutical sales experience, of which at least 30% shall be in endocrinology or urology. A qualified candidate for District Manager shall meet the following minimum qualifications: four-year college degree (B.A., B.S. or equivalent); minimum 2 years outside sales experience, minimum one year previous management experience in pharmaceutical sales. 4. Position Descriptions and Duties. Innovex shall manage, supervise and evaluate the performance of the National Sales Manager, District Managers and Sales Representatives in accordance with the responsibilities and duties identified below. All Sales Force employees shall demonstrate the following: work ethic and integrity; planning, organizing and territory management skills; strong interpersonal skills; excellent communication skills; critical thinking and analysis; problem solving; decisiveness; sound judgment; Columbia-focused selling skills; basic computer skills; ability to listen and learn. Sales Representatives . Generate sales within an assigned territory . Maintain and update current and prospective target physician profiles . Keep current with market knowledge and competitive products . Maintain a professional image for Columbia and Columbia Products . Participate in all training and sales meetings . Plan and organize territory to meet sales and call targets . Make sales presentations (Details and Presentations) - individual, one-on-one, in-services 4 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. . Comply with PDMA . Make complete, accurate and timely submission of all time-keeping, call activity and expense reports . Compliance with Promotional Program, and proper use of Promotional Materials and Promotional Expense Budgets . Participate or coordinate Lunch & Learns, dinner programs, weekend events, as appropriate . Have appropriate interaction with co-promotional partners or counterparts National Sales Manager, District Managers . Recruit, interview and select Sales Representatives and subordinate managers . Handle 120 day and annual performance review, personnel issues, discipline and termination of Sales Representatives and subordinate managers . National Sales Manager and District Managers shall make regular field visits: to develop and motivate Sales Representatives for attainment of sales objectives; to assess and monitor field activity and work schedules; to monitor and manage field reporting by District Managers and Sales Representatives, including call reporting. . Communicate with Columbia management on regular and timely basis . Assist with the planning and delivery of training, and periodic sales meetings . Review and approve expense reports; monitor compliance with expense policies. . Monitors compliance with Promotional Program, and proper use of Promotional Materials and Promotional Expense Budgets . Monitors compliance with PDMA . Monitors time-keeping and attendance 5. Sales Force Compensation; Benefits. Innovex shall compensate the Sales Force employees with a combination of salary and variable incentive (bonus). Innovex shall establish a target average salary and salary matrix, which recognizes greater experience and training, and preferred selection criteria. The terms and conditions of a variable incentive compensation plan ("Incentive Plan") shall be mutually determined by Innovex and Columbia, including eligibility criteria and performance targets. The plan may also include incentive awards such as trips and prizes. Innovex shall administer the Incentive Plan, determine eligibility and pay the incentive compensation and awards, in accordance with the Incentive Plan. Sales Force employees shall be eligible to receive an auto allowance, and shall be entitled to participate in the Innovex employee benefit plans for health and dental care, 401K, employee stock purchase and stock ownership plans, in accordance with company eligibility criteria. 6. Training and Periodic Sales Meetings. Innovex shall facilitate the participation of the Sales Force in Columbia's initial training of the Sales Force, backfill training of replacement District Managers and Sales Representatives and all follow-up training, including periodic sales meetings. Columbia may use the Innovex National Trainer provided under Work Order #8795 as may be reasonable, necessary and appropriate in support of this Project. In all cases, Innovex shall monitor and observe all Columbia training. Innovex may have Sales Force Members participate in the Innovex Leadership Development Program. 5 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 7. Promotional Activities. Innovex shall be responsible for managing and monitoring the promotional activities of the Sales Force, in strict adherence to the Promotional Program and using only the Promotional Materials provided by Columbia. Sales Representatives shall not be permitted to develop, create or use any other promotional material or literature in connection with the promotion of the Product. The Sales Representatives will be required to immediately cease the use of any Promotional Materials when instructed to do so by Columbia. Innovex shall monitor that Promotional Materials are not changed, (including, without limitation, by underlining or otherwise highlighting any text or graphics or adding any notes thereto) by the Sales Representatives. Sales Representatives shall be required to limit their statements and claims regarding the Product, including as to efficacy and safety, to those which are consistent with the Product labels, package inserts and Promotional Materials. The Sales Representatives shall not be permitted to add, delete or modify claims of the efficacy or safety in the promotion of the Product, nor shall the Sales Representatives be permitted to make any untrue or misleading statements or comments about the Products or any Columbia competitors or competitor products. 8. Project Reports. Innovex shall provide Columbia a monthly Project report, which shall include: (i) headcount, reported nationally, by region/district; vacancy rates, turnover, personnel transfers to Columbia, status of recruitment/hiring; (ii) Project status, milestones, and progress toward achieving objectives; (iii) financial accountability, tracking expenses against budget; and (iv) if required by the Work Order, call reporting and sample accountability. 9. Reporting by Sales Representatives. Sales Representatives shall be required to report all field activities and expenditures in a manner that is timely, accurate and honest, and in accordance with policies and procedures for the applicable reporting systems. Innovex District Managers shall routinely reinforce the importance of compliance with the reporting guidelines and policies (e.g. sample accountability, call reporting, promotional budget expenditures, travel expenses). Newly hired Sales Representatives shall receive training on the reporting systems, guidelines and policies during the initial sales training program. 10. SFA and Call Reporting. Innovex shall provide a sales force automation tool, including automated call reporting functions. Innovex shall equip the Sales Force with computer hardware and software, and shall bear the cost of database and system administration, licenses, access to data/replication lines, help desk support, and training of the Sales Force in proper use of the computers and software. 11. Management and Discipline of the Sales Force. Innovex shall be responsible to manage the Sales Force. Innovex has sole authority to remove employees from the Sales Force. In conformance with Innovex policy, Innovex shall provide appropriate employee counseling and discipline, up to and including termination, on its own initiative and upon the reasonable request of Columbia, to Sales Force members who violate employment rules and who are otherwise under performing their job responsibilities. Innovex will promptly follow-up on any reports made by Columbia of Sales Force member non-compliance and will apply such 6 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. counseling or discipline as may be warranted in Innovex's judgement consistent with Innovex's prior employment practices. 12. Business Cards; Detail Bags. Innovex shall supply the Sales Force with business cards, the content of which shall be subject to approval by Columbia, such approval not to be unreasonably withheld. Innovex shall supply the Sales Force with detail bags. Columbia shall provide Innovex with camera ready artwork of Columbia's logo or other content Columbia wishes to include on the business cards. F. COLUMBIA RIGHTS, RESPONSIBILITIES AND OBLIGATIONS 1. Promotional Program and Promotional Materials. Columbia shall be responsible for providing a Promotional Program, Promotional Materials and Promotional Expense Budget that (i) will not involve the counseling or promotion of a business arrangement that violates federal or state law; (ii) will be in compliance with the AMA Guidelines on Gifts to Physicians from Industry; and (iii) shall not require or encourage the Sales Representatives to offer, pay, solicit or receive any remuneration from or to Prescribers to induce referrals or purchase of Columbia Product. Columbia shall be responsible for providing written guidelines for proper use of the Columbia's Promotional Expense Budget. 2. Training and Periodic Sales Meetings. Columbia shall be responsible for the following: . Programming, materials and facilities for initial Sales Force training. The initial training agenda shall include one day designated for Innovex training regarding personnel management, compensation and benefits and field administration. . Programming, materials and facilities for periodic sales meetings or product launch meetings as designated by Columbia. Any reasonable, documented and approved expenses incurred by Innovex in conjunction with Sales Force training shall be a Pass-Through Expense to Columbia. 3. Sales Data. Columbia shall be solely responsible for obtaining historic and ongoing sales data regarding Columbia Products. Columbia shall be solely responsible to pay any applicable per representative fee required by any third party, except for the fee imposed by the American Medical Association. Columbia shall provide Innovex with the data reasonably necessary to maintain Sales Force effectiveness including but not limited to, (i) Exponent sales/total Rx data by territory, district, region, and nation; and (ii) Early view by territory. 4. Sales Force Travel Expenses. Columbia shall be responsible for all Sales Force travel, lodging and meal expenses, when necessary, documented, and actually incurred by the Sales Force in the amounts authorized in the annual Sales Force travel expense budget set forth on Exhibit 2 attached hereto. Columbia shall have no responsibility for, or obligation to pay for, travel expenses exceeding the budget without Columbia's consent. 7 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 5. No Recruitment. Through the Project End Date and for one year thereafter, neither party shall attempt to actively recruit or solicit any personnel of the other party without the prior written consent of such party; except as otherwise provided herein and provided that, notwithstanding the foregoing, a party shall be permitted to engage in general recruitment through advertisements or recruiting through head-hunters so long as Innovex employees and personnel are not specifically targeted. 6. Transfer of Ancillary Services. On or after one year after the Sales Representative Start Date, Columbia may, upon 60 days prior notice to Innovex, assume direct responsibility for call reporting, sample accountability and reporting, and computers and support services related to the Sales Force. Should Columbia assume such services, it shall remain responsible to pay the monthly fee set forth in paragraphs (G)(4)&(5) of this Work Order. G. FEES AND PASS-THROUGH EXPENSES 1. Daily Fees. Columbia shall pay Innovex a Daily Fee for each Day Worked by Sales Representatives and District Managers during the Project Term and thereafter if required for Project close-out. The Daily Fees and total estimated Daily Fees during the first year of the Project Term are stated in the following table:
- ----------------------------------------------------------------------------------- Estimated Estimated Total Days Estimated Sales Force Positions Number Daily Rate Days Worked Worked Total Fees - ----------------------------------------------------------------------------------- Sales Representatives 75 [***] [***] [***] [***] - ----------------------------------------------------------------------------------- District Managers 7 [***] [***] [***] [***] - ----------------------------------------------------------------------------------- Estimated Total Fees [***] - -----------------------------------------------------------------------------------
Effective the first anniversary of the Sales Representative Start Date, these Daily Rates may be increased by up to [***]%. Effective the second anniversary of the Sales Representative Start Date, the then effective Daily Rates may be increased by up to [***]%. 2. Take-On Fee. a. Individual Sales Force Members. Innovex shall charge Columbia a fee for each Sales Force member that becomes employed by Columbia or an affiliate during the Project Term, or six months thereafter if Columbia does not exercise its rollover rights with respect to such member under paragraph (g)(2)(b); provided however, that Columbia may only hire a Sales Force member during such period upon providing Innovex 15 days notice of Columbia's desire to so hire and, in the case of Sales Representatives only upon Innovex express consent. For each hire, Columbia shall pay Innovex the following: [***]% of the employee's Innovex annual salary during the first year after the Sales Representative Start Date; [***]% during the second year after the Sales Representative Start Date; and [***]% thereafter.,. These amounts shall be included in Innovex's regular invoicing. 8 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (i) Use of Take-on Fees. Innovex, in its sole discretion, may make the fees paid by Columbia under paragraph G(2)(a) available for the Sales Force retention initiatives as may be warranted and prudent during the Project Term. The Steering Committee may make recommendations to Innovex on such expenditures. b. Sales Force Rollover. Columbia may hire directly [***]% or more of the Sales Force contemporaneously with the Project End Date by providing Innovex 90 days notice and without any payment to Innovex, whatsoever. 3. Incentive Plan Administration. Columbia shall pay Innovex an amount equal to (i) the amount of all non-salary compensation earned by Sales Force members in accordance with the terms of the Incentive Plan or otherwise requested by Columbia; and (ii) an amount equal to [***]% of such compensation for Innovex's employer costs (payroll taxes, benefits). 4. SFA Fees. For Innovex's provision of sales force automation services as set forth in paragraph E(10) of this Work Order, Columbia shall pay a monthly service fee in an amount to be agreed between the Parties before the Project Start Date that will apply per Sales Representative and District Manager through the Project End Date. 5. Payment Schedule. Innovex shall send Columbia an estimated cost for each month fifteen (15) days in advance, including all incentive compensation and related employer costs. Columbia shall pay the estimated monthly charge on the first day of the month by wire transfer to the account designated by Innovex. At the end of each calendar month Innovex shall provide Columbia a list of the billable Sales Force personnel and the total number of Days Worked multiplied by the respective Daily Fee rate and all Fees, Take-on Fees and Pass-Through Expenses. Innovex shall add any underpayment to, and deduct any overpayment from, the next estimate sent to Columbia. The parties shall use good faith efforts to reconcile any disputed amount as soon as practicable. One half of any amount in dispute for more than 30 days shall be credited against the next estimate (provided the amount in dispute was paid by Columbia based on a previous estimate) sent to Columbia and remain as a credit until the dispute is resolved. 6. Initial Payment. Ten (10) days before the Project Start Date or five (5) days after the NDA Approval, whichever is earlier, Columbia shall make a payment to Innovex in the amount of [***] to be credited against the first estimated payments due to Innovex under this Agreement. 7. Changes in Scope; Additional Services. All prices and costs contained in this Work Order are subject to revision as needed to reflect changes in the scope of services being provided by Innovex. Additional services will be provided at Innovex's normal and customary rates. 8. Expense Allocation Chart. The financial responsibility of Innovex and Columbia for expenses and costs of Sales Force operation shall be allocated in accordance with the terms of this Work Order, which are summarized for illustrative purposes in the "Sales Force Expense Allocation" chart (Attachment A). 9 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. H. ADDITIONAL TERMS 1. Steering Committee. Columbia shall make all decisions with respect to the strategy for the marketing and Promotion of the Products. However, other issues may arise under the terms of this Agreement or between the parties while operating under this Agreement which are appropriate for consultation between the parties to ensure maximum productivity of the Sales Force, including, but not limited to, the establishment of work rules or the response to greater than expected Sales Force turnover and other changing market conditions. The parties shall, therefore, establish a Steering Committee, chaired by Columbia and consisting of up to three (3) members from each party. The chairperson's duties shall include site selection, logistics, agenda and facilitation; provided however, that an Innovex Committee member may submit agenda items to the Chair and such items shall be included in the next regular meeting of the Steering Committee. Each member of the Committee shall be an employee or member of the Board of Directors of the party that appointed such member. Initial appointments shall be made within fourteen (14) days of the date of this Agreement. A member of the Committee may be removed at any time, with or without cause, by the party that appointed such member. The Committee shall meet each quarter, or otherwise at the call of the chairperson to review, coordinate, and discuss issues regarding the Promotional Program. In addition, the Committee shall review and resolve issues pertaining to this Agreement. The members of the Committee will use reasonable efforts to reach consensus on all decisions. In Witness Whereof, Columbia and Innovex have caused this Work Order # 8872 to be duly executed on their behalf by their authorized representatives and made effective as of Effective Date of Work Order appearing above. Accepted and Agreed to by: Columbia Laboratories, Inc. INNOVEX LP by: Innovex America Holding Company, its General Partner /S/ Fred Wilkinson /S/ Kevin D. Overs - ------------------ ------------------ By: Fred Wilkinson By: Kevin D. Overs Title: President & CEO Title: CFO Date: March 5, 2003 Date: 3/5/03 10 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Attachment A to Sales Force Work Order SALES FORCE EXPENSE ALLOCATION Project # 8872
- --------------------------------------------------------------------------------------------------------------- Category Innovex Pass Through Columbia Direct Expenses Direct Expenses Expenses - --------------------------------------------------------------------------------------------------------------- Salary, including payroll taxes, for Sales Representatives, District X Managers - --------------------------------------------------------------------------------------------------------------- Incentive compensation (bonus) for Sales Representatives, District X Manager, plus [***]% - --------------------------------------------------------------------------------------------------------------- Benefits package, including (401k), ESOP, ESPP, medical, dental, Rx, X vacation, holidays - --------------------------------------------------------------------------------------------------------------- Auto Costs in territory, including monthly allowance, parking and tolls. X - --------------------------------------------------------------------------------------------------------------- Basic Business Expenses in territory, including phone, paper X supplies, postage and voice mail. - --------------------------------------------------------------------------------------------------------------- Business Cards & Detail Bags X - --------------------------------------------------------------------------------------------------------------- Call Reporting ; SFA X - --------------------------------------------------------------------------------------------------------------- Computers for Sales Representatives, including software, helpdesk X support, data/replication lines - --------------------------------------------------------------------------------------------------------------- Computers for DMs, NSM, including software, helpdesk support, X data/replication lines - --------------------------------------------------------------------------------------------------------------- Infrastructure support (operations, HR, finance, legal) X - --------------------------------------------------------------------------------------------------------------- Liability Insurance: employment, workers comp, E & O, CGL, auto X - --------------------------------------------------------------------------------------------------------------- Recruitment and re-recruitment, includes drug screens, background and X motor vehicle checks - --------------------------------------------------------------------------------------------------------------- Meetings: Columbia national, regional and district meetings; product X launches - --------------------------------------------------------------------------------------------------------------- Promotional Expense Budget (access money) X - --------------------------------------------------------------------------------------------------------------- Promotional Program and Promotional Materials (sales aids) X - --------------------------------------------------------------------------------------------------------------- Promotional marketing expenses, including sales data X - --------------------------------------------------------------------------------------------------------------- Training program, materials and facilities; initial and follow-up X - --------------------------------------------------------------------------------------------------------------- Travel Expenses (air, hotel, meals, T&E) for Sales Reps, District X Managers, National Sales Manager X *Interviewing X *Training X *Territory travel for field management purposes X - ---------------------------------------------------------------------------------------------------------------
11 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT 1 to Sales Force Work Order ADDITIONAL SALES REPRESENTATIVE REQUEST FORM This Request for Additional Sales Representative is issued pursuant to the Master Sales Services Agreement between Columbia and Innovex LP, dated as of July 31, 2002, and Work Order/Sales Force # 8872.
- ---------------------------------------------------------------------------------------------------- PART 1 To be completed by Columbia Attach any relevant, helpful information - ---------------------------------------------------------------------------------------------------- NUMBER OF SALES REPRESENTATIVES REQUESTED - ---------------------------------------------------------------------------------------------------- TERRITORY LOCATION(S) - ---------------------------------------------------------------------------------------------------- REQUESTED START DATE - ---------------------------------------------------------------------------------------------------- AUTHORIZED COLUMBIA REPRESENTATIVE Signature: SUBMITTING REQUEST ------------------------------ Name: Title: Date: Phone: Fax: - ---------------------------------------------------------------------------------------------------- PART 2 To Be Completed by Innovex Innovex shall respond within ten (10) business days after receipt of the Additional Sales Representatives Request. - ---------------------------------------------------------------------------------------------------- This Additional Sales Representative Request is Accepted, and Recruitment shall begin immediately: Request Form was Received by Innovex on the following date: ----------------------------------------- (sign and date) Contact Person: --------------------- Phone: - ---------------------------------------------------------------------------------------------------- Request is Not Accepted (identify above information which must be clarified or changed before Request may be accepted by Innovex): ----------------------------------------- (sign and date) Contact Person: Phone: - ----------------------------------------------------------------------------------------------------
12 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT 2 to Sales Force Work Order ANNUAL TRAVEL BUDGET 6/2/03 - 6/1/04 ("Year One"): [***] for Initial Sales Force Training [***] for POA Meetings and Field Based Travel 6/2/04 - 6/1/05 ("Year Two"): Year One budget plus [***]% 6/2/05 - 12/31/05 ("Year Three"): Seven-twelfths of the Year Two budget, plus [***]% 13 [***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EX-21 8 dex21.txt SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Columbia Laboratories (Bermuda) Ltd. Columbia Laboratories (France) SA Columbia Laboratories (UK) Limited Columbia Research Laboratories, Inc. EX-99.1 9 dex991.txt CEO CERTIFICATE EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Columbia Laboratories, Inc. (the "Company") on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Fred Wilkinson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Fred Wilkinson -------------------------- Fred Wilkinson Chief Executive Officer March 28, 2003 EX-99.2 10 dex992.txt CFO CERTIFICATE EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Columbia Laboratories, Inc. (the "Company") on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David L. Weinberg, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ David L. Weinberg ------------------------------- David L. Weinberg Chief Financial Officer March 28, 2003 -----END PRIVACY-ENHANCED MESSAGE-----