UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C.
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FORM
10-K
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x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
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ACT
OF 1934
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For
the fiscal year ended December 31, 2008
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
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EXCHANGE
ACT OF 1934
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For
the transition period from ____________ to
____________
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Commission
File number 1-10352
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(Exact
name of registrant as specified in its charter)
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Delaware
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59-2758596
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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354
Eisenhower Parkway
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Livingston,
New Jersey
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07039
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(973)
994-3999
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Securities
registered pursuant to Section 12(b) of the Act: None
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Securities
registered pursuant to Section 12(g) of the Act:
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Common
Stock, $.01 par value
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NASDAQ
Global Market
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(Title
of each class)
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(Name
of exchange on which
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registered)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
o
No
x
.
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
o
No
x
.
Indicate
by check mark whether the registrant (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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) 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 a large accelerated filer, an
accelerated filer or a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
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o
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Accelerated
filer
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x
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Non-accelerated
filer
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o
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Smaller
reporting company
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o
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
o
Yes
x
No
The
aggregate market value of Common Stock held by non-affiliates of the registrant
on June 30, 2008, the last business day of the registrant’s most recently
completed second fiscal quarter, based on the closing price on that date of
$3.30, was $171.7 million.
Number of
shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding as
of March 3, 2009 are 54,459,386.
Documents
Incorporated By Reference
Portions
of the Columbia Laboratories, Inc. (“Columbia” or the “Company”) Proxy Statement
for the 2009 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 United States Securities and Exchange Commission
(“SEC”) and mail it to shareholders on or before April 10, 2009.
.
Index
to Annual Report on Form 10-K
Fiscal
Year Ended December 31, 2008
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Page
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Part
I
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Item
1
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Business
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1
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Item
1A
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Risk
Factors
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18
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Item
1B
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Unresolved
Staff Comments
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26
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Item
2
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Properties
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26
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Item
3
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Legal
Proceedings
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26
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Item
4
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Submission
of Matters to a Vote of Security Holders
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27
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Part
II
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Item
5
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Market
for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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29
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Item
6
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Selected
Financial Data
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33
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Item
7
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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34
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Item
7A
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Quantitative
and Qualitative Disclosures about Market Risks
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47
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Item
8
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Financial
Statements and Supplementary Data
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47
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Item
9
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
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47
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Item
9A
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Controls
and Procedures
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47
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Item
9B
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Other
Information
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50
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Part
III
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Item
10
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Directors
and Executive Officers of the Registrant
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51
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Item
11
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Executive
Compensation*
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51
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Item
12
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters*
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51
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Item
13
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Certain
Relationships and Related Transactions*
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51
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Item
14
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Principal
Accountant Fees and Services *
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41
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Part
IV
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Item
15
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Exhibits
and Financial Statement Schedules
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52
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*
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Items
11, 12, 13, 14 and portions of Item 10 are incorporated by reference to
the Company’s 2009 Proxy Statement.
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The
“Company,” “Columbia,” “we,” “our” and “us” as used in this Annual Report on
Form 10-K refer to Columbia Laboratories, Inc., a Delaware corporation, and
its subsidiaries.
“CRINONE
®
,”
“PROCHIEVE
®
” and
“STRIANT
®
” are
registered trademarks of Columbia Laboratories, Inc. RepHresh
®
,
Replens
®
and Advantage-S
®
are
registered trademarks of Lil’ Drug Store Products, Inc. Other brands, names and
trademarks contained in this Annual Report are the property of their respective
owners.
Item 1.
Business
General
We are in
the business of developing, manufacturing and selling pharmaceutical products
that utilize our proprietary bioadhesive drug delivery technologies. We are
focused predominantly on the women’s reproductive healthcare market, but our
product development projects address the broader women’s healthcare market. Our
bioadhesive vaginal gel products provide patient-friendly solutions for
infertility, pregnancy support, amenorrhea, and other obstetric, gynecologic and
medical conditions.
Our sales
organization in the United States (“U.S.”) currently promotes our natural
progesterone gel product, CRINONE 8%. We also continue to sell
PROCHIEVE 8% in the U.S. CRINONE and PROCHIEVE are two brands of the same
product that is approved in the U.S. for supplementation or replacement of
progesterone as part of an Assisted Reproductive Technology (“ART”) treatment
for infertile women with progesterone deficiency and for treatment of secondary
amenorrhea. Outside the U.S. CRINONE has been approved for marketing for one or
more medical indications including supplementation or replacement as part of an
ART treatment for infertile women, treatment of secondary amenorrhea, the
prevention of hyperplasia in postmenopausal women receiving hormone replacement
therapy (“HRT”), the reduction of symptoms of premenstrual syndrome (“PMS”),
menstrual irregularities, dysmenorrhea, and dysfunctional uterine bleeding. We
reacquired the U.S. marketing rights to CRINONE in December 2006, and promote
CRINONE to a full range of reproductive endocrinologists, obstetricians and
gynecologists who treat infertility. We also promote STRIANT testosterone buccal
system for the treatment of hypogonadism in men, however, our continuing focus
in fiscal 2009 is to increase prescriptions of CRINONE.
We derive
additional revenues from our established marketing partnerships, through which
certain of our products are commercialized in global territories outside the
U.S. and U.S. markets on which we are not currently focused.
We also
seek opportunities to develop new products using our drug delivery technology,
both proprietary projects and for strategic partners; to expand our product base
and thereby leverage our sales force; and, to partner or divest products that
fall outside our core women’s healthcare focus.
All of
our products and product candidates utilize our Bioadhesive Delivery System
(“BDS”), which consists 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 or mucosa. Our vaginal products
adhere to the vaginal epithelium and the buccal products adhere to the mucosal
membrane of the gum and cheek. The polymer remains attached to epithelial
surfaces or mucosa and is discharged upon normal cell turnover, a physiological
process that, depending upon the area of the body, occurs every 12 to 72 hours,
or longer. Both vaginal and buccal BDS products provide sustained and controlled
delivery of active drug ingredients. Its extended period of attachment permits
use of BDS in products when extended duration of effectiveness is desirable or
required. The Company intends to continue to leverage the advantages of BDS drug
delivery by developing new BDS products that improve the delivery of approved
drugs that have low oral bioavailability, or where systemic levels of the active
ingredient must be curtailed. In addition, this delivery system is particularly
useful for active drug ingredients that cannot be ingested.
OUR
STRATEGY
Our goal
is to become a significant player in the women’s reproductive healthcare market,
providing patient-friendly solutions for infertility, obstetric, gynecologic and
other women’s medical conditions. The key elements of our strategy
are:
Focus on building revenues from our
products for the treatment of infertility in women.
Since 2002, Columbia
has been increasingly focused on products for the treatment of infertility in
women. In 2006, we reacquired U.S. marketing rights for CRINONE
8%
progesterone gel from Merck Serono S.A. (“Merck Serono”). Our CRINONE
progesterone gel forms the core to build a broader infertility business. We aim
to build CRINONE 8% by building relationships with reproductive endocrinologists
in infertility (REI); leveraging those relationships to influence prescribing
habits of obstetricians and gynecologists (OB/GYN) who prescribe clomiphene
citrate to treat infertility; and using multiple published clinical trials to
support the use of CRINONE to assist the infertility cycle and for pregnancy
support. Over 1.2 million infertility treatments are performed every year in the
U.S. In each instance, we believe the REI and OB/GYN could improve the
likelihood of successful implantation by using supplemental progesterone.
CRINONE is also used for pregnancy support during the first 10 to 12 weeks of
gestation. This largely untapped market provides growth potential over and above
infertility cycle supplementation. Our 35 person sales force calls on those
physicians that treat over 80% of all infertility patients.
Develop a preterm birth prevention
indication for
PROCHIEVE 8%
.
Our lead R&D
opportunity is the study of PROCHIEVE 8% to reduce the risk of preterm birth in
women with a short cervix as measured by transvaginal ultrasound in
mid-pregnancy. This opportunity arose from significant positive data obtained
from secondary analyses of our earlier recurrent Phase III preterm study. Based
on those positive data and our discussions with the FDA, we designed the Phase
III PREGNANT (
PR
OCHIEVE
®
E
xtending
G
estatio
N
A
N
ew
T
herapy) study. The Company is conducting the Phase III clinical study with
PROCHIEVE 8% progesterone gel to prevent preterm birth and improve infant
outcomes for those women with a short cervix at mid-pregnancy. This randomized,
double-blind, placebo-controlled clinical trial will evaluate the effect of
PROCHIEVE 8% on reducing the risk of preterm birth in women with a cervical
length between 1.0 and 2.0 centimeters as measured by transvaginal ultrasound at
mid-pregnancy. The primary endpoint is a reduction in the incidence of preterm
birth at less than or equal to 32 weeks gestation vs. placebo. If successful, we
would apply to FDA for approval of a label indication for this use. In October
2008, we announced a collaboration with the Perinatology Research Branch (PRB)
of the Eunice Kennedy Shriver National Institutes of Child Health and Human
Development (NICHD) under which we amended the study protocol to reflect the
addition of nine NICHD sponsored sites and an increase in the number of patients
from 300 to 450. With the increase in patients, the power of the
study to show improvements in both the obstetrical endpoints and infant outcomes
becomes even stronger. All clinical data, whether generated by NICHD sites or
our sites, will be collected centrally and, assuming success in the study, the
results will be available to us for regulatory filings. We believe that, if the
study is successful, the participation of the NICHD will have a positive impact
on physicians’ adoption of PROCHIEVE 8% to reduce the risk of preterm birth in
women with a short cervix at mid-pregnancy as measured by transvaginal
ultrasound, which will lead to improved patient care and a more rapid reduction
in the incidence of preterm birth.
License and acquire products to
leverage our sales force.
In addition to collaborations, we
also seek opportunistically to license and acquire under-promoted FDA-approved
pharmaceuticals that complement our current women’s infertility product offering
to generate additional near-term revenues from our commercial
infrastructure.
Continue existing and establish new
collaborations to commercialize selected drugs.
Collaborations with
pharmaceutical companies have played an important role in helping us develop and
commercialize our products. These collaborations enable us to address markets,
and commercialize products, that fall outside our core focus. We plan to
continue to rely on collaborators to commercialize certain of our drugs and drug
candidates, either outside the U.S. or in U.S. markets in which we are not
currently concentrating our resources. We also seek opportunities to apply our
technology to approved compounds manufactured and sold by potential strategic
partners for therapeutic areas outside our focus.
Continue existing and establish new
collaborations to develop selected drug candidates.
Collaborations with
pharmaceutical companies and third-party researchers have played an important
role in helping us advance the development of certain investigational drug
candidates. We plan to continue to seek strategic partners for certain
investigational projects to cost-effectively advance our clinical projects while
retaining U.S. marketing rights for Columbia.
Segments
The
Company is currently engaged solely in one business segment -- the development,
licensing and sale of pharmaceutical products. In certain foreign countries
these products may be classified as medical devices or cosmetics by those
countries’ regulatory agencies. See Note 10 to the consolidated
financial statements for information on foreign operations.
Operations
Our sales
and marketing organization operates solely in the United States, and is
specifically focused on a select group of REIs and OB/GYNs. We also market
STRIANT to general endocrinologists, urologists and a select number of primary
care physicians. Our marketing and sales efforts for STRIANT are primarily
focused on maintaining the current prescription levels. We have entered into
partnerships to commercialize our products outside the U.S. and within certain
markets in the U.S. , and seek to enter into additional partnerships to
commercialize our products in new countries and with additional audiences in the
United States that we do not currently address.
We are
substantially dependent on four manufacturers for the products that we sell to
marketing partners around the world and commercialize ourselves in the U.S. We
sell five vaginal gel products that are each manufactured in bulk by Fleet
Laboratories Limited, Watford, Herts, United Kingdom (“Fleet”) and filled into
overwrapped single-use disposable applicators by Maropack AG, Zell, Switzerland
(“Maropack”). Our single buccal product is manufactured for us by Mipharm
S.p.A., Milan, Italy (“Mipharm”). Noveon, Inc. (“Noveon”) is the only
supplier of medical grade, cross-linked polycarbophil, the polymer used in our
BDS-based products.
Our
wholly owned subsidiary, Columbia Laboratories (Bermuda) Ltd., entered into an
agreement dated July 12, 1996, with Fleet to manufacture our progesterone
vaginal gel products for delivery in bulk containers. Pursuant to the agreement
Fleet built and operates a dedicated suite for the manufacture of hormone
products. Fleet may pass on increases in the cost of materials on three months
notice and increases in labor on the anniversaries of the agreement. The
original term of the agreement was 10 years after which either party may
terminate the agreement on twelve (12) months prior written notice. Payments
under the agreement are made in pounds sterling. Fleet also manufactures the
Company’s non-progesterone vaginal gel products for delivery in bulk containers
pursuant to individual purchase orders.
Columbia
Laboratories (Bermuda) Ltd.) has an agreement with Maropack to fill our bulk
vaginal gel products into overwrapped single-use disposable applicators. The
current term of the agreement is one (1) year with automatic one (1) year
renewals. Either party may terminate the agreement on six (6) months prior
written notice before the end of any renewal term. Prices are renegotiated
annually based on forecasted production volumes. Payments under the agreement
are made in Swiss francs.
Columbia
Laboratories (Bermuda) Ltd., entered into an agreement dated May 7, 2002 with
Mipharm to manufacture at least eighty-five percent (85%) of our requirements
for our STRIANT testosterone buccal product for sale in the United States,
Europe and Latin America. Pursuant to the agreement Mipharm built and operates a
dedicated suite for the manufacture of hormone products, one-half the cost of
which was paid by us. The original term of the agreement is twelve (12) years
with automatic three (3) year renewals. Either party may terminate the agreement
on twelve (12) months prior written notice before the end of any term. The price
of the product may increase based on increases in labor costs in Italy or raw
materials. Payments under the agreement are made in Euros.
Products
Progesterone
Products are:
|
·
|
CRINONE
8% progesterone gel marketed and sold by us in the U.S.
|
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|
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·
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CRINONE
8% sold by us to Merck Serono for resale outside the
U.S.
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·
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PROCHIEVE
8% progesterone gel sold by us in the U.S.
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·
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PROCHIEVE
4% progesterone gel sold to Ascend for sale in the
U.S.
|
Other
Products are:
|
·
|
STRIANT
testosterone buccal system marketed by us in the U.S.
|
|
|
|
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·
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STRIANT
sold to MiPharm for resale in Italy.
|
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·
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Replens
®
Vaginal
Moisturizer sold to Lil' Drug Store for resale outside the
U.S.
|
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|
|
·
|
RepHresh
®
Vaginal Gel
sold to Lil' Drug Store for resale on a worldwide
basis.
|
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|
·
|
Royalty
and licensing revenues.
|
Progesterone
Products: CRINONE and PROCHIEVE
Progesterone
is a hormone manufactured by a woman’s ovaries in the second half of the
menstrual cycle and by the placenta during pregnancy. Progesterone is
responsible for preparing the uterus for pregnancy and, if pregnancy occurs,
maintaining it until birth, or, if pregnancy does not occur, inducing
menstruation.
Our
principal product is a sustained release gel that delivers natural progesterone
vaginally. Our vaginal progesterone gel product is marketed under the two brand
names CRINONE and PROCHIEVE. CRINONE/PROCHIEVE utilizes the Company’s patented
BDS, which enables the progesterone to achieve a preferential uptake of drug
from the vagina to the uterus, or a “First Uterine Pass Effect™.” 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
metabolites seen with orally-delivered synthetic progestins.
The
Company sells CRINONE and PROCHIEVE brand progesterone gels in the U.S. CRINONE
brand progesterone gel is sold outside the U. S. by Merck Serono under a
worldwide (excluding the U.S.) license from the Company.
CRINONE
/PROCHIEVE in the 8% progesterone gel is approved in the U.S. for 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 is approved in the
U.S. for the treatment of secondary amenorrhea (loss of menstrual period).
Outside the U.S., CRINONE has been approved for marketing for one or more
medical indications in 60 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.
CRINONE
8% is principally marketed to REIs who generally perform the more technical
procedures to assist women who are infertile to become pregnant. Our 2009 focus
for CRINONE commercialization will be to continue to seek to convert sales of
pharmacy compounded intramuscular progesterone injections and progesterone
suppositories to sales of CRINONE. Marketing materials showing our compilation
of 16 clinical trials that have been conducted to compare CRINONE to other forms
of progesterone provide us with a compelling case for the efficacy of CRINONE.
These data show that CRINONE is as effective as, and in some cases numerically
more effective than, all the other delivery systems for progesterone. In the six
clinical trials that included an arm evaluating patient preference, patients
preferred CRINONE over the competing product in all six clinical trials. Our
sales force uses these materials to persuade physicians to prescribe CRINONE
over the competing progesterone injections and suppositories that are pharmacy
compounded, as well as over Endometrin®, a vaginal progesterone tablet that
requires three doses per day to achieve results comparable to once-daily
CRINONE.
PROCHIEVE
8% continues to be available to obstetricians and gynecologists who may use
progesterone in conjunction with clomiphene citrate to assist women who are
infertile become pregnant. We expect that in 2009 we will invest significant
resources in the development program for PROCHIEVE 8% to reduce the risk of
preterm birth in women with a short cervix as measured by transvaginal
ultrasound at mid-pregnancy. This program includes a clinical trial in pregnant
women which we have named the PREGNANT study. In 2007, we reported data from our
completed clinical trial of PROCHIEVE 8% in pregnant women with a history of
prior pre-term birth. In that clinical trial, the study endpoints were not met,
and the trial demonstrated that there was no benefit from administering vaginal
progesterone to that patient population. However, a secondary analysis of the
data from that earlier study demonstrated a statistically significant
improvement in the rate of preterm birth and infant outcomes in trial
participants who had a short cervix at mid-pregnancy. This secondary analysis
was conducted on a subset of patients with a short cervix at mid-pregnancy from
the previous trial and the PREGNANT clinical trial is designed to confirm these
data in a larger trial. The PREGNANT study was designed based in part on the
data set forth in the White Journal and discussions with the FDA. This
randomized, double-blind, placebo-controlled Phase III clinical trial is
designed to evaluate the ability of PROCHIEVE 8% to reduce the risk of preterm
birth in women with a short cervix of between 1.0 and 2.0 centimeters as
measured by transvaginal ultrasound at mid-pregnancy. The primary endpoint of
this clinical trial is a reduction in preterm births at less than or equal to 32
weeks versus placebo. If the results of the PREGNANT trial confirm the results
seen in the earlier clinical trial, we expect to file a NDA supplement seeking
approval of PROCHIEVE 8% for this indication and utilize the name PROCHIEVE
solely in connection with the preterm birth indication.
The most
common side effects of CRINONE /PROCHIEVE 8% are breast enlargement,
constipation, somnolence, nausea, headache, and perineal pain. The most common
side effects of PROCHIEVE 4% when used in combination with estrogen include
cramps, fatigue, depression, emotional lability, sleep disorder, and headache.
CRINONE /PROCHIEVE is contraindicated in the U.S. in patients with active
thrombophlebitis or thromboembolic disorders, or a history of hormone-associated
thrombophlebitis or thromboembolic disorders, missed abortion, undiagnosed
vaginal bleeding, liver dysfunction or disease, and known or suspected
malignancy of the breast or genital organs.
Other
Vaginal Gel Women’s Products
Replens
®
Vaginal Moisturizer
. Our BDS
vaginal gel, without an active pharmaceutical ingredient, is sold as Replens
Vaginal Moisturizer. Replens is indicated for replenishment of vaginal moisture
on a sustained basis and to relieve the discomfort associated with vaginal
dryness. Replens was the first product developed utilizing the BDS. In May 2000,
the Company sold the U.S. rights for Replens to Lil’ Drug Store Products, Inc.
(“Lil’ Drug Store”), pursuant to an agreement under which the Company received
royalties of 10% of sales of Replens in the U.S until October 2005. On June 29,
2004, the Company sold the remaining worldwide marketing rights for Replens to
Lil’ Drug Store and executed two related agreements with Lil’ Drug Store: a five
year supply agreement for Lil’ Drug Store’s requirements for Replens in non-U.S.
markets that expires October 31, 2009, and a promotion agreement that expired at
the end of 2006. See “Licensing and Development Agreements.”
RepHresh
®
Vaginal Gel.
RepHresh Vaginal
Gel 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.
Using the BDS, RepHresh adheres to the epithelial cells of the vaginal lining
for three or more days. It is available in convenient, pre-filled, disposable
applicators. On June 29, 2004, the Company sold the worldwide marketing rights
to the product to Lil’ Drug Store and executed two related agreements with Lil’
Drug Store: a five year supply agreement that expires October 31, 2009, and a
promotion agreement that expired at the end of 2006. Columbia sells product on a
worldwide basis to Lil’ Drug Store. See “Licensing and Development
Agreements.”
Advantage-S
â
Bioadhesive Contraceptive
Gel.
The Company marketed one additional product, Advantage-S
â
a female contraceptive gel, until June 2004. On June 29, 2004, the Company sold
worldwide marketing rights to Advantage-S
to
Lil’ Drug Store. The production and sale of Advantage-S was discontinued during
2006. See “Licensing and Development Agreements.”
Products
Outside of the Women’s Reproductive Healthcare Market
STRIANT
(testosterone buccal system)
.
STRIANT is approved in the U.S., and several European countries for treatment of
hypogonadism in men, but is currently marketed only in the U.S. and Italy.
Hypogonadism is characterized by a deficiency or absence of endogenous
testosterone production. Signs and symptoms of hypogonadism can include
decreased libido (sexual desire), erectile dysfunction (ED), fatigue,
depression, reduced muscle mass, and osteoporosis. The purpose of testosterone
replacement therapy is to provide and maintain normal levels of testosterone. It
is estimated that hypogonadism affects 38.7% of men aged 45 years or older in
the United States, approximately one million of whom currently receive
treatment. The treatment for hypogonadism is to replace testosterone through one
of many available delivery systems including transdermal patches, topical gels,
injectable formulations of testosterone and the STRIANT buccal
system.
STRIANT
utilizes the BDS to achieve controlled and sustained delivery of testosterone
via the buccal cavity - the small depression in the mouth where the gum meets
the upper lip above the incisor teeth. The product, which has the appearance of
a small monoconvex tablet, rapidly adheres to the buccal mucosa. STRIANT is
absorbed into the bloodstream and delivered directly into the superior vena cava
(major blood vessel), bypassing the gastrointestinal system and liver. In
clinical trials, STRIANT produced circulating testosterone concentrations in
hypogonadal males approximating physiologic levels seen in healthy young
men.
The
clinical data supporting the approval of STRIANT by the U.S. Food and Drug
Administration (“FDA”) were generated from a 12-week U.S. multi-center,
open-label, single arm trial that evaluated the efficacy, safety and
tolerability of STRIANT in 98 men with hypogonadism. The most frequent adverse
events that occurred with STRIANT in that trial at an incidence of 1% or greater
which were possibly, probably or definitely related to the use of STRIANT were:
gum or mouth irritation (9.2%), bitter taste (4.1%), gum pain (3.1%), gum
tenderness (3.1%), headache (3.1%), gum edema (2.0%), and taste perversion
(2.0%). A total of 16 patients reported 19 gum-related adverse events. Of these,
ten patients (10.2%) reported 12 events of mild intensity, four patients (4.1%)
reported five events of moderate intensity, and two patients (2.0%) reported two
events of severe intensity. Four patients (4.1%) discontinued treatment with
STRIANT due to gum- or mouth-related adverse events, including two with severe
gum irritation, one with mouth irritation and one with "bad taste in mouth." The
majority of the gum-related adverse events were transient and resolved within
one to 14 days. Patients on STRIANT should be advised to regularly inspect the
gum region where they apply STRIANT and report any abnormality to their health
care professional.
STRIANT
is not indicated for women and must not be used in women. Testosterone
supplements may cause fetal harm. STRIANT should not be used in patients with
known hypersensitivity to any of its ingredients, including testosterone U.S.P
that is chemically synthesized from soy. Androgens are contraindicated in men
with carcinoma of the breast or known carcinoma of the prostate. Edema with or
without congestive heart failure may be a serious complication in patients with
preexisting cardiac, renal or hepatic disease. In addition to discontinuation of
the drug, diuretic therapy may be required. Gynecomastia frequently develops and
occasionally persists in patients being treated with androgens for hypogonadism.
The treatment of hypogonadal men with testosterone esters may potentiate sleep
apnea in some patients, especially those with risk factors such as obesity or
chronic lung diseases. Geriatric patients treated with androgens may be at an
increased risk for the development of prostatic hyperplasia and prostatic
carcinoma. In diabetic patients, the metabolic effects of androgens may decrease
blood glucose and, therefore, insulin requirements.
We market
and sell STRIANT in the U.S. STRIANT sales comprise less than 1% of the market
for testosterone replacement products in 2008. Due to our focus on increasing
prescriptions for our progesterone gel products and increasing our overall
business in products for women’s reproductive health, our marketing and sales
organization is not undertaking activities beyond those that we believe are
required to maintain current U.S. sales of STRIANT.
In October 2002, the Company and Ardana
plc (then Ardana Biosciences, Ltd., “Ardana”) entered into a license and supply
agreement under which Ardana licensed and sold STRIANT in several European
countries (excluding Italy). See “Licensing and Development Agreements.” In July
2008, we terminated the license and supply agreement with Ardana. Prior to
termination, Ardana had marketed and sold STRIANT in the United Kingdom itself,
and sold STRIANT in Ireland, Germany, Sweden, Finland, Norway, Denmark, and the
Netherlands through other distributors. Distribution in those countries has been
discontinued as we work to return rights to the marketing authorizations to our
subsidiary in the United Kingdom.
In May
2003, the Company and Mipharm entered into a license and supply agreement under
which Mipharm will market, distribute and sell STRIANT in Italy. See “Licensing
and Development Agreements.” Mipharm launched STRIANT into the Italian market in
November, 2007.
Advance Formula Legatrin PM.
In May 2000, the Company licensed Advanced Formula Legatrin PM
®
, a
product
for the
relief of occasional pain and sleeplessness associated with minor muscle aches
to Lil’ Drug Store, who pays the Company a royalty of 20% of the net sales of
the product. The license agreement had an initial five-year term with provisions
for automatic renewal. The license for Advanced Formula Legatrin PM was renewed
to May 2010. See “Licensing and Development Agreements.”
Research
and Development
The
Company spent $6.2 million in 2008, $5.8 million in 2007 and $6.6 million in
2006 on research and development activities. The expenditures in 2008, 2007 and
2006 were primarily costs associated with the Company’s clinical study of
PROCHIEVE 8% (progesterone gel) for the prevention of recurrent preterm birth,
discussed below. The expenditures in 2008 also included costs associated with
the development of a vaginally-administered lidocaine candidate to prevent and
relieve dysmenorrhea. The Company cannot predict whether it will be successful
in the development of the products listed below or any other product
candidates.
Generally
the Company’s drug development activities take the following steps in the U.S.
(and comparable steps in foreign countries). After the Company formulates an
active drug ingredient into the BDS, it files an Investigational New Drug
Application (“IND”) with the FDA to begin to test the product in humans. The IND
becomes effective and the studies may begin if the FDA does not disapprove the
IND within 30 days of its submission. The IND describes how, where, and by whom
the studies will be conducted; information about the safety of the active drug
ingredient; how it is thought to work in the body; any toxic effects it may
have; and how it is manufactured. All clinical studies must also be reviewed and
approved by an Institutional Review Board (“IRB”) that is responsible for the
study site. Progress reports on clinical studies must be submitted at least
annually to the FDA and the IRB.
Clinical
studies are divided into three phases.
Phase I studies
typically involve small numbers of normal, healthy volunteers. Phase I studies
are intended to assess a drug’s safety profile, including the safe dosage range.
Phase I studies also determine how the drug is absorbed, distributed,
metabolized, and excreted, as well as the duration of its action.
Columbia has
historically developed products using already approved active ingredients and
developed them in our BDS technology. This has typically meant that Phase I
studies are not required. Phase II studies involve volunteer patients (people
with the disease intended to be treated) to assess the drug’s effectiveness.
Phase III studies
usually involve larger numbers of patients in clinics and hospitals to confirm
the product’s efficacy and identify possible adverse events. Phase III studies
are the “pivotal” studies that regulatory agencies require to show both safety
and efficacy on a statistically representative population of people intended to
be treated.
Following
the completion of all three phases of clinical trials, the Company analyzes all
of the data and files a New Drug Application (“NDA”) with the FDA if the data
successfully demonstrate both safety and effectiveness. The NDA contains all of
the scientific information that the Company has gathered. NDAs typically run
thousands of pages. If the FDA approves the NDA, the new product becomes
available for physicians to prescribe. The Company must continue to submit
periodic reports to the FDA, including any cases of adverse reactions and
appropriate quality-control records. For some medicines, the FDA requires
additional studies after approval (Phase IV studies) to evaluate long-term
effects of the drug. The development, clinical testing and filing of an
application to the respective regulatory agencies of those countries where the
drug is intended to be approved for marketing and sales can cost millions of
dollars.
PROCHIEVE 8% in Preventing Preterm
Birth
. In February 2007, we reported the results of our Phase III
multi-center, randomized, double-blind, placebo-controlled, clinical trial
designed to assess the efficacy, safety and tolerability of PROCHIEVE 8% in
preventing preterm birth in pregnant women with a previous preterm birth before
35 weeks gestation. The study did not achieve a statistically significant
reduction in the incidence of preterm birth at week 32, the primary endpoint in
the study population. The incidence and profile of adverse events in patients
receiving PROCHIEVE 8% was similar to placebo.
In April
2007, we reported that evaluation of a secondary endpoint of the study revealed
a possible effect of PROCHIEVE 8% in delaying cervical shortening. Although an
effect on cervical length was not the primary focus of this trial, pursuant to
the study protocol, cervical length measurements were performed on all women at
baseline (approximately at 20 weeks gestation) and at 28 weeks gestation. Data
from the study show a statistically significant delay in cervical shortening in
patients treated with PROCHIEVE 8%, and suggest a correlation between the
cervical length data, PROCHIEVE 8% administration, and both a reduction in the
likelihood of preterm birth and an improvement in infant outcomes.
Evaluation
of treatment by cervical length at baseline revealed that the “responders” to
progesterone were patients with a short cervix at baseline. Further evaluation
of all randomized patients, including patients randomized with a short cervix
only, show that patients with a cervical length less than 3.0 cm had a
significant treatment effect to reduce the incidence of preterm birth at less
than 37 weeks gestation. A further evaluation of the patients with baseline
short cervical length revealed that in women with a baseline cervical length
less than 2.8 cm, there was a statistically significant reduction in preterm
birth at less than or equal to 32 weeks gestation. These delays in delivery were
associated with significant improvements in infant outcomes.
We
believe that these data may provide an explanation for previous studies
conducted by others showing an effect of progesterone administration in
preventing preterm delivery. While previous clinical trials have been conducted
in a study population of women who have experienced prior pre-term deliveries,
those trials did not measure cervical length. We believe that it is possible
that the group of women who responded to progesterone in earlier trials may
correspond to the women in our clinical trial whose cervices were shorter at
baseline. Due to the fact that our study measured cervical length at baseline,
certain women with a short cervix who were treated at clinics where a cervical
cerclage is the standard of care, were not randomized into our trial. Our trial
therefore eliminated some of the population of patients that the secondary
analyses indicate should benefit from progesterone treatment. On the basis of
these analyses and discussions with the FDA, we designed the PREGNANT study
which is underway. This randomized, double-blind, placebo-controlled Phase III
clinical trial is designed to evaluate the ability of PROCHIEVE 8% to reduce the
risk of preterm birth in women with a short cervix of between 1.0 and 2.0
centimeters as measured by transvaginal ultrasound at mid-pregnancy. The primary
endpoint of the PREGNANT clinical trial is a reduction in preterm births at less
than or equal to 32 weeks gestation versus placebo.
In 2008,
we recruited 19 study sites, filed the protocol with each site’s IRB and trained
their staff on the protocol for the PREGNANT study. We began enrollment in the
study in 2008 and will complete enrollment in 2009 and will complete this study
in 2009 with all the babies delivered in time to report results in the first
half of 2010.
In
October 2008, we announced a collaboration with the Perinatology Research Branch
(PRB) of the Eunice Kennedy Shriver National Institutes of Child Health and
Human Development (NICHD) under which we amended the study protocol to reflect
the addition of nine NICHD sponsored sites and an increase in the number of
patients from 300 to 450. With the increase in patients, the power of
the study to show improvements in both the obstetrical endpoints and infant
outcomes becomes even stronger. All clinical data, whether generated by NICHD
sites or our sites, will be collected centrally and, assuming success in the
study, the results will be available to us for regulatory filings. We believe
that, if the study is successful, the participation of the NICHD will have a
positive impact on physicians’ adoption of PROCHIEVE 8% to reduce the risk of
preterm birth in women with a short cervix at mid-pregnancy as measured by
transvaginal ultrasound, which will lead to improved patient care and a more
rapid reduction in the incidence of preterm birth.
We are
seeking a potential partnership for this product candidate, ideally to
co-develop and co-market it. A partnership makes sense because
numerous pre-marketing activities should begin occurring 18 months to 24 months
prior to an expected launch. Our level of financial and human
resources make it difficult to effectively conduct all the pre-marketing
activities that would allow the sales of this product which could meet a
significant un-met medical need to grow as quickly as they should. We
believe a partner with both the financial and human resources that we currently
lack will significantly benefit the launch and growth of this product candidate
should the clinical trial and FDA approval be successful.
Vaginally Administered
Lidocaine.
The Company has conducted clinical development activities for
vaginally-administered lidocaine in dysmenorrhea, a common gynecologic
disorder
characterized by
recurrent uterine cramping and pain before and during menses. Dysmenorrhea
affects approximately 50% of menstruating women, 10% of whom have cramps severe
enough to incapacitate them from one to three days each month. Current
treatments address the pain but not the underlying problem. Our hypothesis is
that administration of lidocaine vaginally using our BDS technology can minimize
or prevent the severe cramping that results in the debilitating pain of
dysmenorrhea. A European clinical trial conducted by the Company in 2003
demonstrated that vaginally-administered lidocaine reduced the frequency of
uterine contractions, as well as the intensity and frequency of uterine pain.
Subjects were evaluated following vasopressin-induced cramping in the late
luteal phase of the menstrual cycle, near menses.
Based on
single and multi-dose pharmacokinetic studies of vaginally-administered
lidocaine, the Company initiated a 70-patient Phase II cross-over study in
patients with dysmenorrhea. We announced results from this clinical trial in
September 2008. The primary endpoint of the study was to show a difference
between lidocaine and placebo in terms of the time-weighted average
patient-assessed pain intensity over four treatment days. Data from the clinical
trial did not show a significant difference between the pain scores for the
lidocaine and placebo treatment cycles. Patients in the clinical trial were also
asked to make a subjective assessment of the treatment at the end of each cycle,
and to compare the first and second cycles to one another. The data suggest a
trend for patients to favor their lidocaine treatment cycle. The clinical trial
did not reveal any significant adverse events and those adverse events that
occurred were similar in both kind and frequency for lidocaine and placebo. We
are evaluating if it is feasible to enhance this lidocaine effect through
modifications to the dosing regimen and treatment protocol. We will continue to
seek a potential partnership for this product candidate, ideally to co-develop
and co-market it. A partnership makes sense because many young women affected by
dysmenorrhea are seen by pediatricians and family practice physicians, not
OB/GYNs, and the pediatric and family practice markets fall outside our
strategic focus.
PROCHIEVE 4% for the Prevention of
Endometrial Hyperplasia
. In 2004 a third party, five-year study was
initiated to evaluate the long-term effects of Hormone Replacement Therapy in
menopausal women. The study investigators selected PROCHIEVE 4% as the active
progesterone to be administered to all menopausal women with an intact uterus
who receive estrogen to prevent them from developing endometrial hyperplasia. We
are supplying PROCHIEVE 4% for this trial, therefore, our costs are minimal, but
we will have access to the data and could possibly utilize the data for
publication purposes in a peer reviewed medical journal.
Terbutaline Vaginal Gel.
In
December 2002, the Company entered into a development and license agreement with
Ardana to develop the Company’s terbutaline vaginal gel product candidate for
the treatment of infertility, dysmenorrhea and endometriosis. In 2007, Ardana
elected to suspend development of the product as a result of slow recruitment in
a proof of concept clinical trial. In July 2008, we terminated the development
and license agreement pursuant to our rights under the agreement to terminate it
in the event of the insolvency of Ardana. Ardana announced in June 2008 that it
suspended trading in its shares, was no longer in a position to continue its
operations, and had appointed administrators of the company.
Testosterone Progressive Hydration
Vaginal Tablet.
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. A preliminary clinical plan, with a focus on reducing the size of systemic
uterine fibroids is under review. We are not currently investing further in this
drug candidate due to our investment in the PREGNANT trial. We may consider
further investment, if resources allow, at a later date.
Vaginally Administered Carbamide
Peroxide.
The Company is conducting pre-clinical development activities
for a vaginally-administered carbamide peroxide product for treating or
preventing vaginal infections. The product candidate is being investigated to
determine the benefit of releasing and maintaining a very low concentration of
peroxide over an extended period of time, in order to provide the benefits of
oxygen release without adversely affecting normally-desired local vaginal flora.
We do not plan to invest fully in development of this drug candidate at this
time, but may consider further investment as resources become available at a
later date.
Peptide Delivery System.
The
Company has completed a program that demonstrates that the BDS can deliver
therapeutic doses of small chain peptides for extended periods of time using the
Company’s progressive hydration buccal technology.
Licensing
and Development Agreements
Merck
Serono S.A.
In May
1995, the Company entered into a license and supply agreement with American Home
Products Corporation, now Wyeth, (“Wyeth”) for its Wyeth-Ayerst Laboratories
division to market CRINONE worldwide. 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 Serono (now Merck Serono). In June 2002, the
license and supply agreement was amended and restated and a marketing sublicense
was granted to the Company. Under the terms of the license and sublicense, Merck
Serono marketed CRINONE in the U.S. to a defined list of fertility specialists
and the Company was free to market PROCHIEVE to all other physicians in the
U.S., including obstetricians, gynecologists and primary care physicians.
Mipharm
S.p.A.
In March
1999, the Company entered into a license and supply agreement with Mipharm under
which Mipharm is the exclusive marketer of the Company’s women’s healthcare
products (other than CRINONE) in Italy, Portugal, Greece and Ireland with a
right of first refusal for Spain. Mipharm currently sells Replens
®
in Italy
and sells RepHresh
®
in Italy
under the name MipHil.
In May
2003, the Company and Mipharm entered into an agreement under which Mipharm will
market, distribute and sell STRIANT in Italy. In exchange for these rights,
Mipharm is obligated to pay the Company an aggregate of $1.4 million upon
achievement of certain milestone events, including $0.4 million that was paid in
2003. We received a payment of $0.1 million, less VAT withholding, in 2004 on
account of the UK approval of STRIANT and a payment of $0.2 million, less VAT
withholding, in 2007 on marketing authorization received by Mipharm in Italy.
Mipharm will provide additional performance payments upon the achievement of
certain levels of sales in Italy, and the Company will receive a percentage
markup on the cost of goods for each unit sold. Mipharm is a manufacturer of
STRIANT under a May 2002 agreement. In 2007, Mipharm launched sales of STRIANT
in
Italy.
Ardana
plc
In
October 2002, the Company and Ardana entered into a license and supply agreement
under which Ardana would market, distribute and sell STRIANT in 18 European
countries (excluding Italy). Under the agreement the Company received $6.0
million. In December 2002, the Company and Ardana executed a development and
license agreement (described above) to develop the Company’s terbutaline vaginal
gel product. In 2007, Ardana elected to suspend development of the product as a
result of slow recruitment in a proof of concept clinical trial. In July 2008,
we terminated the license and supply agreement and the development and license
agreement pursuant to our rights under the agreements to terminate it in the
event of the insolvency of Ardana. Ardana announced in June 2008 that it
suspended trading in its shares, was no longer in a position to continue its
operations, and had appointed administrators of the company. In the quarter
ended September 30, 2008, the Company recognized $2.9 million of deferred
revenue from the cancellation of the agreement.
Lil’
Drug Store Products, Inc.
In June
2004, the Company and Lil’ Drug Store entered into an asset purchase agreement,
a five year supply agreement, and a 2½ year promotion agreement. Under the
agreements, Lil’ Drug Store acquired the Company’s over-the-counter women’s
healthcare products, RepHresh
®
Vaginal
Gel and Advantage-S
®
Bioadhesive Contraceptive Gel, and foreign marketing rights for Replens
®
Vaginal
Moisturizer. The Company sold the U.S. marketing rights for Replens to Lil’ Drug
Store in May 2000. Under the
terms of the asset
purchase agreement, Lil’ Drug Store also purchased the U.S. inventory of
RepHresh and Advantage-S from the Company. The production and sale of
Advantage-S was discontinued during 2006. The Company supplies RepHresh and
foreign requirements for Replens under the supply agreement, which expires on
October 31, 2009. The promotion agreement expired at the end of
2006.
Ascend
Therapeutics, Inc.
In
September 2007, the Company and Ascend entered into a five year license and
supply agreement for the Company’s PROCHIEVE 4% progesterone gel, pursuant to
which Ascend is responsible for marketing and sales of PROCHIEVE 4% in the U.S.
Ascend will purchase product from the Company at a transfer price equal to 35%
of Ascend’s net selling price with minimum annual purchase obligations that
increase over the life of the agreement.
Financing
Agreements
On July
31, 2002, PharmaBio Development (“PharmaBio”), an affiliate of Quintiles
Transnational Corp. agreed to pay $4.5 million in four equal quarterly
installments commencing third quarter 2002 for the right to receive a 5% royalty
on net sales of the Company’s women’s healthcare products in the U.S. for five
years, beginning in the first quarter of 2003. The royalty payments were subject
to aggregate minimum ($8 million) and maximum ($12 million) amounts. Because the
minimum amount exceeded $4.5 million, the Company recorded the amounts received
as liabilities. The excess of the minimum ($8 million) paid by the Company over
the $4.5 million received by the Company was recognized as interest expense over
the five-year term of the agreement, assuming an interest rate of 17%. The final
payment under this agreement was made in February 2008.
On March
5, 2003, the Company and PharmaBio entered into a second agreement under which
PharmaBio paid $15 million to the Company over a 15-month period that commenced
with the signing of the agreement. In return, PharmaBio receives a 9% royalty on
net sales of STRIANT in the U.S. up to agreed annual sales levels, and a 4.5%
royalty of net sales above those levels. The royalty term is seven years.
Royalty payments commenced in the third quarter of 2003 and are subject to the
aggregate minimum ($30 million) and maximum ($55 million) amounts. Because the
minimum amount exceeds $15 million, the Company has recorded the amounts
received as liabilities. The excess of the minimum ($30 million) to be paid by
the Company over the $15 million received by the Company is being recognized as
interest expense over the seven-year term of the agreement, assuming an interest
rate of 15%. As of December 31, 2008, the Company has paid $13.3 million in
royalties (including the true-up payment) to PharmaBio under this agreement. The
balance of the minimum royalty payments, estimated to be approximately $16.4
million, is due November, 2010.
We
actively seek protection for our products and technology by means of United
States and foreign patents, trademarks, and copyrights, as appropriate. The
following table sets forth United States patents granted to the Company since
2002.
Year
Granted
|
|
Nature
of Patent
|
2006
|
|
Bioadhesive
progressive hydration tablets using desmopressin or prostaglandin E2 as
the active
|
|
|
|
2004
|
|
Compositions
and methods for safely preventing or treating premature labor using a
beta-adrenergic agonist, such as terbutaline.
|
|
|
|
2004
|
|
Methods
of safely treating endometriosis or infertility, and for improving
fertility, using a beta-adrenergic agonist.
|
|
|
|
2003
|
|
Use
of progestin therapy for maintaining amenorrhea.
|
|
|
|
2003
|
|
Bioadhesive
progressive hydration tablet.
|
|
|
|
2002
|
|
Use
of certain polycarboxylic acid polymers for vaginal pH buffering to
prevent miscarriage and premature labor associated with bacterial
vaginosis.
|
The
Company continues to develop the core BDS and has filed additional patent
applications in the United States and other countries around the world. In 2008,
we filed patent applications in the U.S. and around the world for use of
progesterone to prevent or treat preterm birth in women with a short cervix. Our
patent applications, if allowed, would strengthen our intellectual property
position, providing patent protection until the year 2028 for PROCHIEVE 8% in
women with a short cervix at mid-pregnancy. We believe our patents are important
to our business and we intend to continue to protect them, including through
legal action, when appropriate. While patent applications do not ensure the
ultimate issuance of a patent, and having patent protection cannot ensure that
competitors will not emerge, this is a fundamental step in protecting the
Company’s technologies.
The
following table sets forth the expiration dates of the principal U.S. patents
for the Company’s marketed products and current development
projects.
Subject of patent
|
|
Year
of Expiration
|
|
Product
or Project
|
Progressive
hydration tablets
|
|
2019
|
|
STRIANT
—
testosterone
progressive hydration vaginal tablet
—
peptide
delivery system
|
|
|
|
|
|
|
|
|
|
|
First
Uterine Pass Effect™
|
|
2018
|
|
vaginally
administered lidocaine
—
terbutaline
vaginal gel
—
testosterone
vaginal gel
|
|
|
|
|
|
|
|
|
|
|
Progesterone
delivery
|
|
2013
|
|
CRINONE
/PROCHIEVE
|
|
|
|
|
|
The
Company owns registrations of “CRINONE”, “STRIANT”, and “STRIANT SR” as
trademarks in countries throughout the world and “PROCHIEVE” in the U.S.
Applications for the registration of trademarks do not ensure the ultimate
registration of these marks; however, 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 to protect
its intellectual property. 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.
Sales
of Products
Our
products consist of our “Progesterone Products” that we promote through our own
sales force to reproductive endocrinologists and obstetricians and
gynecologists, sell to wholesalers and specialty pharmacies, and sell to
licensees for resale. We supplement our Progesterone Products revenues by
selling other products that use our BDS, which we refer to as “Other Products.”
Most of the Other Product revenue is based on sales of products to licensees. As
of December 31, 2008:
Progesterone
Products are:
|
·
|
CRINONE
8% progesterone gel marketed and sold by us in the U.S.
|
|
|
|
|
·
|
CRINONE
8% sold by us to Merck Serono for resale outside the
U.S.
|
|
|
|
|
·
|
PROCHIEVE
8% progesterone gel sold by us in the U.S.
|
|
|
|
|
·
|
PROCHIEVE
4% progesterone gel sold to Ascend for sale in the
U.S.
|
Other
Products are:
|
·
|
STRIANT
testosterone buccal system marketed by us in the U.S.
|
|
|
|
|
·
|
STRIANT
sold to MiPharm for resale in Italy.
|
|
|
|
|
·
|
Replens
®
Vaginal
Moisturizer sold to Lil' Drug Store for resale outside the
U.S.
|
|
|
|
|
·
|
RepHresh
®
Vaginal Gel
sold to Lil' Drug Store for resale on a worldwide
basis.
|
|
|
|
|
·
|
Royalty
and licensing revenues.
|
Prior to
establishing our own sales force in 2002, we generally out-licensed marketing
rights to our products. In October 2002, our sales force began to call on
obstetricians and gynecologists to encourage prescriptions for PROCHIEVE 8%. The
sales force began sales efforts for PROCHIEVE 4% in April 2003, and in September
2003 began to call on endocrinologists, urologists and certain primary
healthcare doctors to encourage prescriptions for STRIANT.
On
December 22, 2006, the Company acquired the U.S. marketing rights to CRINONE and
added reproductive endocrinologists to its infertility physician targets. In
addition to these specialists, who typically handle the more sophisticated
infertility treatments, the Company’s sales force calls on obstetricians and
gynecologists, general endocrinologists, urologists and certain primary
healthcare physicians. The sales force was expanded to 35 in the second half of
2007, and is predominantly focused on promoting CRINONE to women’s reproductive
healthcare providers with the aim of building the Company’s infertility
business.
Success
of Marketing Efforts
Our
business is dependent on market acceptance of our products by physicians,
healthcare payors, patients, and the medical community. Medical doctors’
willingness to prescribe our products depends on many factors,
including:
|
·
|
Perceived
efficacy of our products;
|
|
|
|
|
·
|
Convenience
and ease of administration;
|
|
|
|
|
·
|
Prevalence
and severity of adverse side effects in both clinical trials and
commercial use;
|
|
|
|
|
·
|
Availability
of alternative treatments;
|
|
|
|
|
·
|
Cost
effectiveness;
|
|
|
|
|
·
|
The
pricing of our products; and
|
|
|
|
|
·
|
Our
ability to obtain third party coverage or reimbursement for our
products.
|
Even
though we have received regulatory approval for CRINONE/PROCHIEVE and STRIANT,
and even if we receive regulatory approval and satisfy the above criteria for
any of our other investigational indications and product candidates, physicians
may not prescribe our products. We promote CRINONE and STRIANT on our own behalf
in the U.S. We have entered into agreements with other companies for the
distribution and marketing of PROCHIEVE 4% in the U.S., RepHresh
®
in the
U.S. and foreign countries, and of Replens
®
,
CRINONE, and STRIANT in certain countries outside the U.S. Factors that could
affect our success in marketing our products include:
|
·
|
The
effectiveness of our production, distribution and marketing
capabilities;
|
|
|
|
|
·
|
The
successful marketing of our products by our distribution and marketing
partners;
|
|
|
|
|
·
|
The
success of competing products; and
|
|
|
|
|
·
|
The
availability and extent of reimbursement from third party
payors.
|
If any of
our products or product candidates fail to achieve market acceptance, we or our
marketing partners may be unable to sell the products successfully, which would
limit our ability to generate revenue and could harm our
business.
Competition
We and
our marketing partners compete against established pharmaceutical and consumer
product companies which market products addressing similar needs. Further,
numerous companies are developing, or may develop, enhanced delivery systems and
products that compete with our present and proposed products. It is possible
that we may not have the resources to withstand these and other competitive
forces. Some of these competitors possess greater financial, research and
technical resources than our Company or our partners. Moreover, these companies
may possess greater marketing capabilities than our Company or our partners,
including the resources to implement extensive advertising
campaigns.
The
pharmaceutical industry is subject to change as new delivery technologies are
developed, new products enter the market, generic versions of available drugs
become available and treatment paradigms evolve to reflect these and other
medical research discoveries. We face significant competition in all areas of
our business. The rapid pace of change in the pharmaceutical industry
continually creates new opportunities for existing competitors and start-ups and
can quickly render existing products less valuable. Customer requirements and
physician and patient preferences continually change as new treatment options
emerge, are more or less heavily promoted and become less expensive. As a
result, we may not gain, and may lose, market share.
CRINONE/PROCHIEVE,
a natural progesterone product, competes in markets with other progestins, both
synthetic and natural, that may be delivered by pharmacy-compounded injections,
by pharmacy-compounded vaginal suppositories, with Prometrium
®
(oral
micronized progesterone) marketed by Solvay Pharmaceuticals, Inc. (“Solvay”),
and Endometrin
®
(progesterone vaginal insert) marketed by Ferring Pharmaceuticals, Inc.
(“Ferring”). CRINONE/PROCHIEVE and Endometrin are the only progestin products
approved by FDA for use in infertility or for use in pregnant women. Endometrin
was approved by the FDA in June 2007.
STRIANT
competes against other testosterone products that can be delivered by injection,
transdermal patch and transdermal gel. Some of the more successful testosterone
products include AndroGel
®
(testosterone gel) marketed by Unimed Pharmaceuticals, Inc. (“Unimed”),
Testim
®
(testosterone gel) marketed by Auxilium Pharmaceuticals Inc. (“Auxilium”), and
Androderm
®
(testosterone transdermal system) marketed by Watson Pharma, Inc. (“Watson”)
Competition is based primarily on delivery method. Transdermal testosterone gels
currently have the largest market share and transdermal testosterone patches
have the next largest market share, followed by injectable products. STRIANT is
priced comparably to the gels and patches.
Customers
Our
customers include trade customers, such as drug wholesalers, specialty
pharmacies, and chain drug stores, and our marketing partners. We make calls on
the Company’s trade customers and doctors to promote CRINONE, PROCHIEVE and
STRIANT. Our practice, in the case of our trade customers, is to ship our
products promptly upon receipt of purchase orders from customers; consequently,
backlog orders are not significant. In the case of our marketing partners, firm
purchase orders are received by the Company ninety to one hundred twenty days in
advance of the expected shipping date.
Revenue
by Product
The
following table sets forth the percentage of the Company's consolidated net
revenues, consisting of sales, licensing fees, sales force promotional fees, and
royalty revenues, by revenue source for each product accounting for 3% or more
of consolidated revenues in any of the three years ended December
31:
|
|
2008
|
|
2007
|
|
2006
|
|
CRINONE®
|
|
59%
|
|
64%
|
|
39%
|
|
RepHresh®
|
|
9%
|
|
11%
|
|
4%
|
|
Replens®
|
|
8%
|
|
8%
|
|
16%
|
|
PROCHIEVE®
|
|
7%
|
|
5%
|
|
16%
|
|
STRIANT®
|
|
6%
|
|
7%
|
|
5%
|
|
Royalty
income
|
|
9%
|
|
2%
|
|
12%
|
|
Sales
force promotional fees
|
|
0%
|
|
0%
|
|
4%
|
|
Licensing
fees
|
|
2%
|
|
3%
|
|
4%
|
|
|
|
100%
|
|
100%
|
|
100%
|
|
The
following table presents information about Columbia’s net revenues, including
royalty and license revenue, by customer for each of the three years ended
December 31:
in
millions
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
Merck-Serono
(formerly Serono)
|
$ 9.2
|
|
$ 8.2
|
|
$ 8.2
|
|
Lil'
Drug Store Products, Inc.
|
6.2
|
|
6.0
|
|
4.6
|
|
Cardinal
Healthcare
|
5.6
|
|
6.0
|
|
2.1
|
|
McKesson
|
5.0
|
|
3.9
|
|
1.9
|
|
All
others (none over 5%)
|
10.3
|
|
5.5
|
|
0.6
|
|
|
$ 36.3
|
|
$ 29.6
|
|
$ 17.4
|
|
|
|
|
|
|
|
|
Sales
by Geographic Area
The
following table sets forth the Company's consolidated net revenues, based on
sales by geographic area, for each area accounting for 5% or more of
consolidated revenues in any of the three years ended December 31:
in
millions
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
United
States
|
$ 18.1
|
|
$ 15.2
|
|
$ 8.0
|
|
Switzerland
|
9.2
|
|
8.1
|
|
5.7
|
|
Other
European Countries
|
9.0
|
|
6.3
|
|
3.7
|
|
Subtotal
International
|
18.2
|
|
14.4
|
|
9.4
|
|
|
$ 36.3
|
|
$ 29.6
|
|
$ 17.4
|
|
|
|
|
|
|
|
|
Employees
As of
February 25, 2009, the Company had 62 employees: 3 in management, 4 in
production, 39 in sales and marketing, and 16 in support functions. Our success
is highly dependent on our ability to attract and retain qualified employees.
Competition for employees is intense in the pharmaceutical industry. We believe
we have been successful in our efforts to recruit qualified employees, but we
cannot guarantee that we will continue to be as successful in the future. None
of the Company's employees are represented by a labor union or are subject to
collective bargaining agreements. We believe that our relationship with our
employees is good.
The
Company has employment agreements with three employees, Mr. Mills, president and
chief executive officer, Mr. McGrane, senior vice president, general counsel and
secretary, and Mr. Meer, senior vice president, chief financial officer and
treasurer. The Board of Directors of the Company has adopted an amended and
restated Incentive Plan and an Indemnification Agreement for Officers and
Directors and an Executive Change of Control Severance Agreement for
Officers. On March 11, 2009, the Company entered into amended and
restated employment agreements and new Executive Change in Control Severance
Agreements with Messrs. Mills, McGrane, and Meer in order to effect certain
technical changes required in order to comply with Internal Revenue Code 409A
and the regulations thereunder.
Available
Information
The
Company's Internet address is
www.columbialabs.com
. Through
a link on the “Investor” section of this website, which is also accessible at
www.cbrxir.com
, we make
available, free of charge, our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as
soon as reasonably practicable after we electronically file such material with
or furnish it to the SEC. In addition, we will provide electronic or paper
copies of our filings free of charge upon request. Information contained on our
corporate website or any other website is not incorporated into this Annual
Report and does not constitute a part of this Annual Report.
In
addition, the public may read and copy any materials filed by the Company with
the SEC at the SEC’s Reference Room, which is located at 100 F Street NE,
Washington, D.C., 20549. Interested parties may call (800) SEC-0330 for further
information on the Reference Room. The SEC also maintains a website containing
reports, proxy materials and information statements, among other information, at
http://www.sec.gov.
Corporate
Information
Columbia
was incorporated as a Delaware corporation in 1986. Our principal executive
offices are located at 354 Eisenhower Parkway, Livingston, New Jersey 07039, and
our telephone number is (973) 994-3999. The Company's wholly-owned subsidiaries
are Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia
Laboratories (France) SA ("Columbia France") and Columbia Laboratories (UK)
Limited ("Columbia UK”).
Item 1A. Risk
Factors
We
have a history of losses and we may continue to incur losses.
We have
had a history of losses since our founding. For the fiscal year ended December
31, 2008, we had a net loss of $14.1 million. If we and our partners are
unable to successfully develop and market our products, and otherwise increase
sales of our products, and contain our operating expenses, we may not have
sufficient funds to continue operations unless we are able to raise additional
funds from sales of securities or otherwise. Additional financing may not be
available to us on acceptable terms, if at all.
Our business is heavily dependent on
the continued sale of CRINONE
8%, PROCHIEVE
4%,
Replens, and RepHresh
by our marketing
partners.
Our
operating results are heavily dependent on the revenues and royalties derived
from the sale of CRINONE 8% to Merck Serono for sale outside the U.S. and the
sale of Replens
and
RepHresh to Lil’ Drug Store. Revenues from sales of these partnered products in
2008 comprised approximately 49% of our total revenues, including approximately
$6.0 million in sales to Lil’ Drug Store. Our supply agreement with Lil’ Drug
Store for sales to them of RepHresh and Replens expires on October 31, 2009. We
do not control the amount and timing of marketing resources that our partners
devote to our products. Failure of Merck Serono to effectively market CRINONE 8%
in its territories outside the U.S., and the expiration of the supply agreement
with Lil’ Drug Store could have a material adverse effect on our business,
financial condition and results of operations.
The
price of our Common Stock has been and may continue to be volatile.
Historically,
the market price of our Common Stock has fluctuated over a wide range. In 2007,
our Common Stock traded in a range from $1.04 to $5.25 per share. In 2008, our
Common Stock traded in a range from $0.92 to $4.47 per share. It is likely that
the price of our Common Stock will fluctuate in the future. The market prices of
securities of small specialty pharmaceutical companies, including ours, from
time to time experience significant price and volume fluctuations. In
particular, the market price of our Common Stock may fluctuate significantly due
to a variety of factors, including: the results of clinical trials for our
product candidates; FDA’s determination with respect to new drug applications
for new products and new indications; and our ability to develop additional
products. In addition, the occurrence of any of the risks described in these
“Risk Factors” could have a material and adverse impact on the market price of
our Common Stock.
The
current stock market and credit market conditions are extremely volatile and may
restrict our ability to raise additional funds to meet our capital
needs.
The
current stock market and credit market conditions are extremely
volatile. It is difficult to predict whether these conditions will
continue or worsen and, if so, whether the conditions would impact the Company
and whether the impact would be material. In particular, constriction
and volatility in the equity and debt markets may restrict our future ability to
access these markets to meet our future capital or liquidity needs.
A
decline in the price of our common stock could affect our ability to raise
further working capital and adversely impact our ability to continue
operations.
A
prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. Because a significant portion of our operations has been and will
continue to be financed through the sale of equity securities and equity linked
securities (warrants and convertible debt), a decline in the price of our common
stock could be especially detrimental to our liquidity and our operations. Such
reductions may force us to reallocate funds from other planned uses and may have
a significant negative effect on our business plans and operations, including
our ability to develop our product candidates and continue our current
operations. If we are unable to raise sufficient capital in the
future, and we are unable to generate funds from operations sufficient to meet
our obligations, we will not be able to have the resources to continue our
normal operations.
We
have a substantial amount of debt.
As of
December 31, 2008, we had outstanding approximately $40 million principal
amount of our convertible debt due December 31, 2011. In addition, as of
December 31, 2008 we had remaining future minimum payments due to PharmaBio
pursuant to certain financing agreements of approximately $16.6 million, payable
in November 2010. Our annual interest expense is more than $8 million of
which approximately $3.2 million is the annual cash portion of the expense
relating to the convertible debt, for the next three years. Unless we generate
substantial additional sales from our products or raise substantial additional
capital, we may not be able to pay the interest on our debt or repay our debt at
maturity.
The
development of our pharmaceutical products is uncertain and subject to a number
of significant risks.
Some of
our pharmaceutical products are in various stages of development. In the U.S.
and most foreign countries, we must complete extensive human clinical trials
that demonstrate the safety and efficacy of a product in order to apply for
regulatory approval to market the product.
The
process of developing product candidates involves a degree of risk and may take
several years. Product candidates that appear promising in the early phases of
development may fail to reach the market for several reasons,
including:
|
·
|
Clinical
trials may show our product candidates to be ineffective for the
indications studied or to have harmful side effects;
|
|
|
|
|
·
|
Product
candidates may fail to receive regulatory approvals required to bring the
products to market;
|
|
|
|
|
·
|
Manufacturing
costs or other factors may make our product candidates uneconomical;
and
|
|
|
|
|
·
|
The
proprietary rights of others and their competing products and technologies
may prevent our product candidates from being effectively
commercialized.
|
Success
in early clinical trials does not ensure that large-scale clinical trials will
be successful. Clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory
approvals.
The
length of time necessary to complete clinical trials and to submit an
application for marketing approval for a final decision by a regulatory
authority varies significantly and may be difficult to predict. The speed with
which we can complete clinical trials and applications for marketing approval
will depend on several factors, including the following:
|
·
|
The
rate of patient enrollment, which is a function of factors including the
size of the patient population, the proximity of patients to clinical
sites, the eligibility criteria for the study, and the nature of the study
protocol;
|
|
|
|
|
·
|
Institutional
review board, or IRB, approval of the study protocol and the informed
consent form;
|
|
|
|
|
·
|
Prior
regulatory agency review and approval;
|
|
|
|
|
·
|
Analysis
of data obtained from clinical activities, which are susceptible to
varying interpretations and which interpretations could delay, limit or
prevent regulatory approval;
|
|
|
|
|
·
|
Changes
in the policies of regulatory authorities for drug approval during the
period of product development; and
|
|
|
|
|
·
|
The
availability of skilled and experienced staff to conduct and monitor
clinical studies and to prepare the appropriate regulatory
applications.
|
In
addition, developing product candidates is very expensive and will continue to
have a significant impact on our ability to generate profits. Factors affecting
our product development expenses include:
|
·
|
Our
ability to raise any additional funds that we need to complete our
trials;
|
|
|
|
|
·
|
The
number and outcome of clinical trials conducted by us and/or our
collaborators;
|
|
|
|
|
·
|
The
number of products we may have in clinical development;
|
|
|
|
|
·
|
In
licensing or other partnership activities, including the timing and amount
of related development funding, license fees or milestone payments;
and
|
|
|
|
|
·
|
Future
levels of our revenue.
|
Clinical
trials are expensive and can take years to complete, and there is no guarantee
that the clinical trials will demonstrate sufficient safety and/or efficacy of
the products to meet FDA requirements, or those of foreign regulatory
authorities.
We
may experience adverse events in clinical trials, which could delay or halt our
product development.
Our
product candidates may produce serious adverse events. These adverse events
could interrupt, delay or halt clinical trials of our product candidates and
could result in FDA or other regulatory authorities denying approval of our
product candidates for any or all targeted indications. An Institutional Review
Board or independent data safety monitoring board, the FDA, other regulatory
authorities, or we ourselves may suspend or terminate clinical trials at any
time. Our product candidates may prove not to be safe for human
use.
Delays
or failures in obtaining regulatory approvals may delay or prevent marketing of
the products that we are developing.
Other
than PROCHIEVE 8% (progesterone gel) which is being evaluated for the prevention
of preterm birth in women with a short cervix at mid-pregnancy, and PROCHIEVE 4%
(progesterone gel), which is being evaluated for the prevention of endometrial
hyperplasia in women with an intact uterus undergoing estrogen replacement
therapy, none of our product candidates have received regulatory approval from
the FDA or any foreign regulatory authority. The regulatory approval process
typically is extremely expensive, takes many years, and the timing or likelihood
of any approval cannot be accurately predicted. Delays in obtaining regulatory
approval can be extremely costly in terms of lost sales opportunities and
increased clinical trial costs. If we fail to obtain regulatory approval for our
current or future product candidates or expanded indications for currently
marketed products, we will be unable to market and sell such products and
indications and therefore may never be profitable.
As part
of the regulatory approval process, we must conduct clinical trials for each
product candidate to demonstrate safety and efficacy. The number of clinical
trials that will be required varies depending on the product candidate, the
indication being evaluated, the trial results, and the regulations applicable to
any particular product candidate.
The
results of initial clinical trials of our product candidates do not necessarily
predict the results of later-stage clinical trials. Product candidates in later
stages of clinical trials may fail to show the desired safety and efficacy
despite having progressed through initial clinical trials. The data collected
from the clinical trials of our product candidates may not be sufficient to
support FDA or other regulatory approval. In addition, the continuation of a
particular study after review by an IRB or independent data safety monitoring
board does not necessarily indicate that our product candidate will achieve the
clinical endpoint.
The FDA
and other regulatory agencies can delay, limit or deny approval for many
reasons, including:
|
·
|
A
product candidate may not be deemed to be safe or
effective;
|
|
|
|
|
·
|
The
manufacturing processes or facilities we have selected may not meet the
applicable requirements; and
|
|
|
|
|
·
|
Changes
in their approval policies or adoption of new regulations may require
additional clinical trials or other
data.
|
Any delay
in, or failure to receive, approval for any of our product candidates could
prevent us from growing our revenues or achieving profitability.
Healthcare
insurers and other payors may not pay for our products or may impose limits on
reimbursement.
Our
ability to commercialize our prescription products will depend, in part, on the
extent to which reimbursement for our products is available from third-party
payors, such as health maintenance organizations, health insurers and other
public and private payors. If we succeed in bringing new prescription products
to market or expand the approved label for existing products, we cannot be
assured that third-party payors will pay for such products, or establish and
maintain price levels sufficient for realization of an appropriate return on our
investment in product development.
Many
health maintenance organizations and other third-party payors use formularies,
or lists of drugs for which coverage is provided under a healthcare benefit
plan, to control the costs of prescription drugs. Each payor that maintains a
drug formulary makes its own determination as to whether a new drug will be
added to the formulary and whether particular drugs in a therapeutic class will
have preferred status over other drugs in the same class. This determination
often involves an assessment of the clinical appropriateness of the drug and, in
some cases, the cost of the drug in comparison to alternative products. Our
current or our future products may not be added to payors’ formularies, our
products may not have preferred status to alternative therapies, and formulary
decisions may not be conducted in a timely manner. Once reimbursement at an
agreed level is approved by a third-party payor, we may lose that reimbursement
entirely or we may lose the similar or better reimbursement we receive compared
to competitive products. As reimbursement is often approved for a period of
time, this risk is greater at the end of the time period, if any, for which the
reimbursement was approved. We may also decide to enter into discount or
formulary fee arrangements with payors, which could result in us receiving lower
or discounted prices for CRINONE, PROCHIEVE and STRIANT or future
products.
We
face significant competition from pharmaceutical and consumer product companies,
which may adversely impact our market share.
We and
our marketing partners compete against established pharmaceutical and consumer
product companies that market products addressing similar needs. Further,
numerous companies are developing, or may develop, enhanced delivery systems and
products that compete with our present and proposed products. It is possible
that we may not have the resources to withstand these and other competitive
forces. Some of these competitors may possess greater financial, research and
technical resources than our company or our partners. Moreover, these companies
may possess greater marketing capabilities than our company or our partners,
including the resources to implement extensive advertising
campaigns.
The
pharmaceutical industry is subject to change as new delivery technologies are
developed, new products enter the market, generic versions of available drugs
become available, and treatment paradigms evolve to reflect these and other
medical research discoveries. We face significant competition in all areas of
our business. The rapid pace of change in the pharmaceutical industry
continually creates new opportunities for existing competitors and start-ups,
and can quickly render existing products less valuable. Customer requirements
and physician and patient preferences continually change as new treatment
options emerge, are more or less heavily promoted, and become less expensive. As
a result, we may not gain, and may lose, market share.
CRINONE/PROCHIEVE,
a natural progesterone product, competes in markets with other progestins, both
synthetic and natural, including Endometrin® (progesterone vaginal insert)
marketed by Ferring, Prometrium
®
(oral
micronized progesterone) marketed by Solvay, pharmacy-compounded injections and
pharmacy-compounded vaginal suppositories. In June 2007, Ferring obtained FDA
approval for, and launched, Endometrin
®
a
competing product for use in infertility. Ferring is one of the leading
companies in the infertility market and, in addition to Endometrin, offers
gonadotropin hormones generally used for the treatment of infertility. Ferring
may have greater awareness among key reproductive endocrinology opinion leaders
than Columbia.
STRIANT
competes against other testosterone products that can be delivered by injection,
transdermal patch and transdermal gel. Some of the more successful testosterone
products include AndroGel
®
(testosterone gel) marketed by Unimed, Testim
®
(testosterone gel) marketed by Auxilium, and Androderm
®
(testosterone transdermal system) marketed by Watson. Competition is based
primarily on delivery method. Transdermal testosterone gels currently have the
largest market share and transdermal testosterone patches have the next largest
market share, followed by injectable products. STRIANT is priced comparably to
the gels and patches.
In the
past, certain studies of female hormone replacement therapy products, such as
estrogen, have reported an increase in health risks. Progesterone is a natural
female hormone, present at normal levels in most women through their lifetimes.
However, some women require progesterone supplementation due to a natural or
chemical-related progesterone deficiency. It is possible that data suggesting
risks or problems may come to light in the future which could demonstrate a
health risk associated with progesterone or progestin supplementation or our 8%
and 4% progesterone gels. It is also possible that future study results for
hormone replacement therapy could be negative and could result in negative
publicity about the risks and benefits of hormone replacement therapy. As a
result, physicians and patients may not wish to prescribe or use progestins,
including our progesterone gels.
Similarly,
while testosterone is a natural male hormone, present at normal levels in most
men through their lifetimes, some men require testosterone replacement therapy,
or TRT, to normalize their testosterone levels. It is possible that data
suggesting risks or problems may come to light in the future that could
demonstrate a health risk associated with TRT or STRIANT. It is also possible
that future study results for hormone replacement therapy could be negative and
could result in negative publicity about the risks and benefits of TRT. As a
result, physicians and patients may not wish to prescribe or use TRT products,
including STRIANT.
In
addition investors may become concerned about these issues and decide to sell
our Common Stock. These factors could adversely affect our business and the
price of our Common Stock.
We
may be exposed to product liability claims.
We could
be exposed to future product liability claims by consumers. Although we
presently maintain product liability insurance coverage at what we believe is a
commercially reasonable level, such insurance may not be sufficient to cover all
possible liabilities. An award against us in an amount greater than our
insurance coverage could have a material adverse effect on our operations. Some
customers require us to have a minimum level of product liability insurance
coverage before they will purchase or accept our products for distribution. If
we fail to satisfy insurance requirements, our ability to achieve broad
distribution of our products could be limited. This could have a material
adverse effect upon our business and financial condition.
Steps taken by us to protect our
proprietary rights might not be adequate, in which case competitors may infringe
on our rights or develop similar products.
The U.S. and foreign patents upon
which our original Bioadhesive Delivery System was based have
expired.
Our
success and competitive position are partially dependent on our ability to
protect our proprietary position for our technology, products and product
candidates. We rely primarily on a combination of patents, trademarks,
copyrights, trade secret laws, third-party confidentiality and nondisclosure
agreements, and other methods to protect our proprietary rights. The steps we
take to protect our proprietary rights, however, may not be adequate. Third
parties may infringe or misappropriate our patents, copyrights, trademarks, and
similar proprietary rights. Moreover, we may not be able or willing, for
financial, legal or other reasons, to enforce our rights.
Bio-Mimetics, Inc. held the patent upon which our original
Bioadhesive Delivery System, or BDS, was based and granted us a license under
that patent. Bio-Mimetics’ patent contained broad claims covering controlled
release products that include a bioadhesive. However, this U.S. patent and its
corresponding foreign patents expired in November 2003. Based upon the
expiration of the original Bio-Mimetics patent, other parties will be permitted
to make, use or sell products covered by the claims of the Bio-Mimetics patent,
subject to other patents, including those which we hold. We have obtained
numerous patents with claims covering improved methods of formulating and
delivering therapeutic compounds using the BDS. We cannot assure you that any of
these patents will enable us to prevent infringement, or that our competitors
will not develop alternative methods of delivering compounds, potentially
resulting in competitive products outside the protection that may be afforded by
our patents. Other companies may independently develop or obtain patent or
similar rights to equivalent or superior technologies or processes.
Additionally, although we believe that our patented technology has been
independently developed and does not infringe on the proprietary rights of
others, we cannot assure you that our products do not and will not infringe on
the proprietary rights of others. In the event of infringement, we may be
required to modify our technology or products, obtain licenses or pay license
fees. We may not be able to do so in a timely manner or upon acceptable terms
and conditions. This may have a material adverse effect on our
operations.
The
standards that the U.S. Patent and Trademark Office and its foreign counterparts
use to grant patents are not always applied predictably or uniformly and can
change. Limitations on patent protection in some countries outside the U.S., and
the differences in what constitutes patentable subject matter in these
countries, may limit the protection we seek outside of the U.S. For example,
methods of treating humans are not patentable subject matter in many countries
outside of the U.S. In addition, laws of foreign countries may not protect our
intellectual property to the same extent as would laws of the U.S. In
determining whether or not to seek a patent or to license any patent in a
particular foreign country, we weigh the relevant costs and benefits, and
consider, among other things, the market potential of our product candidates in
the jurisdiction and the scope and enforceability of patent protection afforded
by the law of the jurisdiction.
We own
registrations of the following as trademarks in countries throughout the world:
CRINONE, STRIANT, and STRIANT SR, and PROCHIEVE in the U.S. These trademarks,
however, may not afford us adequate protection or we may not have the financial
resources to enforce our rights under these trademarks.
We
are subject to government regulation, which could affect our ability to sell
products.
Nearly
every aspect of the development, manufacture and commercialization of our
pharmaceutical products is subject to time-consuming and costly regulation by
various governmental entities, including the Food and Drug Administration, or
FDA, the Drug Enforcement Administration and state agencies, as well as
regulatory agencies in those foreign countries in which our products are
manufactured or distributed. The FDA 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.
We employ
various quality control measures in our efforts to ensure that our products
conform to their intended specifications and meet the standards required under
applicable governmental regulations, including FDA’s current Good Manufacturing
Practices regulations. Notwithstanding our efforts, our products or the
ingredients we purchase from our suppliers for inclusion in our products may
contain undetected defects or non-conformities with specifications. Such defects
or non-conformities could compel us to recall the affected product, make changes
to or restrict distribution of the product, or take other remedial actions. The
occurrence of such events may harm our relations with or result in the loss of
customers, injure our reputation, impair market acceptance of our products, harm
our financial results, and, in certain circumstances, expose us to product
liability or other claims.
We
are dependent on third-party suppliers of raw materials for our products, the
loss of whom could impair our ability to manufacture and sell our
products.
Medical
grade, cross-linked polycarbophil, the polymer used in our BDS-based products is
currently available from only one supplier, Noveon, Inc., or Noveon. We believe
that Noveon will supply as much of the material as we require because our
products rank among the highest value-added uses of the polymer. In the event
that Noveon cannot or will not supply enough of the product to satisfy our
needs, we will be required to seek alternative sources of polycarbophil. An
alternative source of polycarbophil may not be available on satisfactory terms
or at all, which would impair our ability to manufacture and sell our
products.
We
are dependent upon third-party developers and manufacturers, the loss of which
could result in a loss of revenues.
We rely
on third parties to develop and manufacture our products, including Fleet, which
manufacturers our vaginal gel products in bulk, Maropack, which fills our
vaginal gel products into applicators and Mipharm which manufacturers STRIANT.
These third parties may not be able to satisfy our needs in the future, and we
may not be able to find or obtain FDA approval of alternate developers and
manufacturers. Delays in the development and manufacture of our products could
have a material adverse effect on our business. This reliance on third parties
could have an adverse effect on our profit margins. Any interruption in the
manufacture of our products would impair our ability to deliver our products to
customers on a timely and competitive basis, and could result in the loss of
revenues.
The
loss of our key executives could have a significant impact on our
company.
Our
success depends in large part upon the abilities and continued service of our
executive officers and other key employees. Our employment agreements with our
executive officers are terminable by them on short notice. The loss of key
employees may result in a significant loss in the knowledge and experience that
we, as an organization, possess, and could cause significant delays in, or
outright failure of, the development and commercialization of our products and
product candidates. If we are unable to attract and retain qualified and
talented senior management personnel, our business may suffer.
We
may be limited in our use of our net operating loss carryforwards.
As of
December 31, 2008, we had certain net operating loss carryforwards of
approximately $150.6 million that may be used to reduce our future U.S. federal
income tax liabilities. Our ability to use these loss carryforwards to reduce
our future U.S. federal income tax liabilities could be lost if we were to
experience more than a 50% change in ownership within the meaning of Section
382(g) of the Internal Revenue Code. If we were to lose the benefits of these
loss carryforwards, our future earnings and cash resources would be materially
and adversely affected.
Sales of large amounts of Common
Stock may adversely affect our market price.
The issuance of preferred stock or
convertible debt may adversely affect rights of common
stockholders.
As of
March 3, 2009, we had 54,459,386 shares of Common Stock outstanding, of which
50,746,125 shares were freely tradable by non-affiliates. As of that date,
approximately 3,713,258 shares of Common Stock were restricted or held by
affiliates. We also have the following securities outstanding: series B
convertible preferred stock, series C convertible preferred stock, series E
convertible preferred stock, convertible subordinated notes, warrants, and
options. If all of these securities are exercised or converted, an additional
20,913,096 shares of Common Stock will be outstanding, all of which will
have been registered for resale under the Securities Act. The exercise and
conversion of these securities is likely to dilute the book value per share of
our Common Stock. In addition, the existence of these securities may adversely
affect the terms on which we can obtain additional equity
financing.
In March
2002, our Board of Directors authorized shares of series D junior participating
preferred stock in connection with its adoption of a stockholder rights plan,
under which we issued rights to purchase series D convertible preferred stock to
holders of our Common Stock. Upon certain triggering events, such rights become
exercisable to purchase shares of Common Stock (or, in the discretion of our
Board of Directors, series D convertible preferred stock) at a price
substantially discounted from the then current market price of our Common
Stock.
Under our
certificate of incorporation, our Board of Directors has the authority to issue
up to 1.0 million shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
our stockholders. In addition, we may issue convertible debt without shareholder
approval. The rights of the holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of any shares of preferred
stock or convertible debt that may be issued in the future. While we have no
present intention to authorize or issue any additional series of preferred stock
or convertible debt, such preferred stock or convertible debt, if authorized and
issued, may have other rights, including economic rights senior to the Common
Stock, and, as a result, their issuance could have a material adverse effect on
the market value of our Common Stock.
We acquired marketing rights
to
CRINONE
in the United States in December
2006, and we may never realize the anticipated benefits of the
acquisition.
In
December 2006, we purchased the marketing rights in the United States to CRINONE
from Merck Serono, and we began in 2007 to call on reproductive
endocrinologists, a medical specialty in infertility. Our goal is to grow
CRINONE prescribing practices with these specialists. We believe the
reproductive endocrinologists are particularly important because of their
influence on prescribing practices of obstetricians and gynecologists who also
treat infertility. Our efforts to grow the CRINONE business may not be
successful and we may fail to realize the anticipated benefits of the
acquisition.
Our
corporate compliance program cannot guarantee that we are in compliance with all
potentially applicable regulations.
We are a
relatively small company and we rely heavily on third parties to conduct many
important functions. As a pharmaceutical company, we are subject to a large body
of legal and regulatory requirements. In addition, as a publicly traded company
we are subject to significant regulations, including the Sarbanes-Oxley Act of
2002, some of which have either only recently been adopted or are currently
proposals subject to change. We cannot assure you that we are or will be in
compliance with all potentially applicable laws and regulations. Failure to
comply with all potentially applicable laws and regulations could lead to the
imposition of fines, cause the value of our common stock to decline, impede our
ability to raise capital or lead to the de-listing of our stock.
Various
federal and state laws pertain to health care fraud and abuse, including
anti-kickback laws, false claims laws and physician self-referral laws.
Violations of these laws are punishable by criminal and/or civil sanctions,
including, in some instances, imprisonment and exclusion from participation in
federal and state health care programs, including Medicare, Medicaid, and
veterans’ health programs. We do not currently participate in government
programs, including Medicare (except Medicare Part D), Medicaid and veteran’s
health programs and we have not been challenged by a governmental authority
under any of these laws and believe that our operations are in compliance with
such laws.
However,
because of the far-reaching nature of these laws, we may be required to alter
one or more of our practices to be in compliance with these laws. Health care
fraud and abuse regulations are complex, and even minor, inadvertent
irregularities can potentially give rise to claims that the law has been
violated. Any violations of these laws could result in a material adverse effect
on our business, financial condition and results of operations. If there is a
change in law, regulation or administrative or judicial interpretations, we may
have to change our business practices or our existing business practices could
be challenged as unlawful, which could have a material adverse effect on our
business, financial condition and results of operations.
We could
become subject to false claims litigation under federal or state statutes, which
can lead to civil money penalties, criminal fines and imprisonment, and/or
exclusion from participation in federal health care programs. These false claims
statutes include the federal False Claims Act, which allows any person to bring
suit alleging the false or fraudulent submission of claims for payment under
federal programs or other violations of the statute and to share in any amounts
paid by the entity to the government in fines or settlement. Such suits, known
as qui tam actions, have increased significantly in recent years and have
increased the risk that companies like us may have to defend a false claim
action. We could also become subject to similar false claims litigation under
state statutes. If we are unsuccessful in defending any such action, such action
may have a material adverse effect on our business, financial condition and
results of operations.
Anti-takeover
provisions could impede or discourage a third-party acquisition of our company.
This could prevent stockholders from receiving a premium over market price for
their stock.
We are a
Delaware corporation. Anti-takeover provisions of Delaware law impose various
obstacles to the ability of a third party to acquire control of our company,
even if a change in control would be beneficial to our existing stockholders. In
addition, our Board of Directors has adopted a stockholder rights plan and has
designated a series of preferred stock that could be used defensively if a
takeover is threatened. Our incorporation under Delaware law, our stockholder
rights plan, and our ability to issue additional series of preferred stock,
could impede a merger, takeover or other business combination involving our
company or discourage a potential acquiror from making a tender offer for our
Common Stock. This could reduce the market value of our Common Stock if
investors view these factors as preventing stockholders from receiving a premium
for their shares.
We
are exposed to market risk from foreign currency exchange rates.
With two
operating subsidiaries and third party manufacturers in Europe, economic and
political developments in the European Union can have a significant impact on
our business. All of our products are currently manufactured in Europe. We are
exposed to currency fluctuations related to payment for the manufacture of our
products in Euros and other currencies and selling them in U.S. dollars and
other currencies.
None.
Item 2.
Properties
As of
December 31, 2008, the Company leased the following properties:
Location
|
|
Use
|
|
Square
feet
|
|
Expiration
|
|
Annual
Rent
|
|
Livingston,
NJ
|
|
|
Corporate
office
|
|
|
9,450
|
|
|
October,
2013
|
|
$
|
214,594
|
|
Paris,
France
|
|
|
European
logistics office
|
|
|
150
|
|
|
3
months notice
|
|
$
|
16,043
|
|
Item 3. Legal
Proceedings
Claims
and lawsuits have been filed against the Company and its subsidiaries from time
to time. Although the results of pending claims 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 the Company’s financial
position or results of operation. Additionally, the Company believes that it has
adequate reserves or insurance coverage in respect of these claims, but no
assurance can be given as to the sufficiency of such reserves or insurance in
the event of any unfavorable outcome resulting from these actions.
In
connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which
assets consisted of the patents underlying the Company's BDS, other patent
applications, and related technology, the Company agreed to pay Bio-Mimetics a
royalty equal to two percent of the net sales of products based on the assets up
to an aggregate of $7.5 million or until the last of the relevant patents
expired. The Company determined that the obligation to pay royalties on STRIANT,
PROCHIEVE, and CRINONE terminated in September of 2006, with the expiration of a
certain Canadian patent, but continues on Replens
®
and
RepHresh
®
. On
December 28, 2007, Bio-Mimetics filed a complaint in the United States District
Court for Massachusetts (
Bio-Mimetics, Inc. v. Columbia
Laboratories, Inc.
) alleging breach of contract, violation of the
covenant of good faith and fair dealing, and unjust enrichment for the Company’s
failure to continue royalty payments on STRIANT, PROCHIEVE, and CRINONE. To
date, the Company has paid approximately $3.3 million in royalty payments and
Bio-Mimetics seeks a judgment that we are obligated to pay the remaining $4.2
million in full. The Company has denied all such allegations and believes it has
no contractual liability to Bio-Mimetics for the disputed royalty payments and
intends to defend this action vigorously.
Item 4. Submission of
Matters to a Vote of Security Holders
No
matters were submitted to a vote of security holders during the fourth quarter
of the fiscal year ended December 31, 2008.
Our
executive officers and Directors as of March 11, 2009, were as
follows:
Name
|
|
Age
|
|
Position
with the Company
|
Robert
S. Mills
|
|
56
|
|
President
and Chief Executive Officer, Director
|
Michael
McGrane
|
|
59
|
|
Senior
Vice President, General Counsel and Secretary
|
James
A. Meer
|
|
63
|
|
Senior
Vice President, Chief Financial Officer and Treasurer
|
Stephen
G. Kasnet
|
|
62
|
|
Chairman
of the Board
|
Edward
A. Blechschmidt
|
|
56
|
|
Vice
Chairman of the Board
|
Valerie
L. Andrews
|
|
49
|
|
Director
|
Anthony
R. Campbell
|
|
61
|
|
Director
|
Frank
C. Condella
|
|
54
|
|
Director
|
James
S. Crofton
|
|
56
|
|
Director
|
Denis
M. O’Donnell, M.D.
|
|
55
|
|
Director
|
Selwyn
P. Oskowitz, M.D.
|
|
63
|
|
Director
|
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 the Company’s directors. 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 Messrs. Mills’,
McGrane’s and Meer’s employment agreements.
Mr. Mills
was promoted to President and Chief Executive Officer on March 6, 2006. On
January 5, 2006, Mr. Mills was elected President and Chief Operating Officer and
was elected to the Company’s Board of Directors. Mr. Mills joined Columbia in
May 2001 as Senior Vice President, Operations and was named Chief Operating
Officer in September 2003. Prior to joining the Company, Mr. Mills served five
years as Senior Vice President, Manufacturing Operations, at Watson
Pharmaceuticals, Inc. from 1996 to 2001. During his 33-year career in the
pharmaceutical industry he also served as Vice President, Operations, at
Alpharma, Inc. from 1993 to 1996 and held various positions with Aventis SA,
including Director-Plant Operations. Mr. Mills holds a B.S. degree from Grove
City College.
Mr.
McGrane has served as Senior Vice President since January 2006, and our General
Counsel and Secretary since January 2002. He joined the Company from The
Liposome Company, Inc., a biotechnology company, where he served as Vice
President, General Counsel and Secretary from 1999 to 2001, prior to which he
was Vice President, General Counsel and Secretary to Novartis Consumer Health,
Inc. from 1997 to 1998. Previously, Mr. McGrane held various positions,
including Associate General Counsel, with Novartis Pharmaceuticals Corporation
from 1984 to 1996, and was Regulatory Counsel to the U.S. Food and Drug
Administration from 1975 to 1984. 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.
Mr. Meer
has served as Senior Vice President, Chief Financial Officer and Treasurer since
December 2006. He has over 35 years of financial experience in both
privately-held and publicly-traded companies, of which over 15 years are in the
life sciences industry. He most recently served from 2004 to 2006 as Senior Vice
President, Chief Financial Officer, Secretary and Treasurer of Pharmos
Corporation, a biotechnology company, prior to which he was a consultant from
2001 to 2004 to pharmaceutical and biotech companies providing strategic and
financial advice. Mr. Meer previously served eight years as Vice President and
Treasurer of Schein Pharmaceutical, Inc., where he was responsible for capital
formation, including a successful IPO, strategic planning and investor
relations. He also held senior financial positions with public companies
including EnviroSource, Inc., John Labatt Ltd. and General Host Corporation. Mr.
Meer holds an M.B.A. degree from Pace University and a B.A. degree on economics
from Rutgers College.
Mr. Kasnet
has been a director of the Company since August 2004 and Chairman of the Board
since November 2004. He is the Chairman of Dartmouth Street Capital LLC, which
he joined in 2007. He was President and Chief Executive Officer of Harbor Global
Company, Ltd., from June 2000 through 2006. He previously held senior management
positions with various financial organizations, including Pioneer Group, Inc.;
First Winthrop Corporation and Winthrop Financial Associates; and Cabot and
Forbes. He serves as Chairman of the Board of Rubicon Ltd. (forestry) and is a
director of Tenon Ltd. (wood products). He was Chairman of Warren Bank from 1990
to 2003. He is also a trustee and vice president of the board of The Governor’s
Academy, Byfield, MA.
Mr. Blechschmidt
has been a director of Columbia since August 2004 and Vice Chairman of the Board
since November 2004. He was Chief Executive Officer of Novelis, Inc. (aluminum
rolled products) from December 2006 to May 2007. He was Chairman, Chief
Executive Officer and President of Gentiva Health Services (home healthcare)
from March 2000 until his retirement in July 2002. He previously served as Chief
Executive Officer and a Director of Olsten Corporation (“Olsten”) (staffing
services), the conglomerate from which Gentiva Health Services was split off and
taken public. Before joining Olsten, Mr. Blechschmidt was President and Chief
Executive Officer of both Siemens' Nixdorf Americas (information technology) and
Siemens' Pyramid Technology (information technology), prior to which he served
more than 20 years with Unisys Corporation (information technology), ultimately
as Chief Financial Officer. He is currently a director of Healthsouth Corp.
(healthcare), Lionbridge Technologies, Inc. (business services) Diamond Foods,
Inc (snack foods) and VWR International, LLC, (laboratory supplies)
Ms.
Andrews has been a director of Columbia since October 2005 and is Vice President
and Deputy General Counsel of Vertex Pharmaceuticals Inc. Before joining Vertex
in 2002, Ms. Andrews was Executive Director of Licensing for Massachusetts
General and The Brigham and Women’s Hospitals, and prior to that a partner in
the law firm of Hill & Barlow. She served as a law clerk to Chief Judge
Levin H. Campbell of the United States Court of Appeals for the First Circuit
from 1988 to 1989, and earlier rose to the rank of Captain in the United States
Air Force.
Mr.
Campbell has been a director of Columbia since December 2008 and is a Portfolio
Manager and Senior Analyst for Dorset Management Corporation since January 2000
and a Director of Knott Partners Management, LLC (investment advisors) since
2004. Mr. Campbell founded Windsor Partners, L.P. (investment
advisors) in 1986. He was Principal and Managing Director of Berg
Capital Corporation, a registered investment advisor, from 1984 through 1985,
and also served as General Partner of Chelsea Partners, a private investment
partnership, during that time. Mr. Campbell was a Vice President at
the First Boston Corporation from 1975 through 1984, and from 1969 until 1975
was at McLeod, Young, Weir, Ltd. (investment advisors) in Canada and was
appointed a Vice President in 1973. He is currently a director of Magna
Entertainment (pari-mutuel wagering).
Mr.
Condella has been a director of Columbia since March 2009. He was Chief
Executive Officer of Skyepharma plc (pharmaceuticals) from March 2006 to
September 2008, President of European Operations and Managing Director, UK at
IVAX Corporation (pharmaceuticals) from 2002 to February 2006, and President and
Chief Executive Officer of Faulding Pharmaceutical Co. (pharmaceuticals), from
2000 to 2001. Previously he was Vice-President of Specialty Care Products at
Hoffman-La Roche (pharmaceuticals) and Vice-President and General Manager of the
Lederle unit of American Home Products (pharmaceuticals). Mr.
Condella is a non-executive director of Skyepharma plc and Fulcrum Pharma
plc (pharmaceuticals).
Mr.
Crofton has been a director of Columbia since October 2005. He has been Senior
Vice President and Chief Financial Officer of Sarnoff Corporation (technology)
since 1999. Previously, Mr. Crofton was Chief Financial Officer of EA
Industries, Inc. (electronics manufacturing), and prior to that served in
various positions, including Vice President of Finance, with Unisys Corporation
((information technology)). He is currently a Director of American Mold Guard,
Inc (construction materials).
Dr.
O’Donnell has been a director of the Company since January 1999, and is Managing
Director of Seaside Capital, LLC. From 2004 to 2005, he also served as Chief
Executive Officer of Molecular Diagnostics, Inc. (medical diagnostics and
screening). Dr. O’Donnell served as Chairman of the Board of Directors of
Novavax, Inc. (pharmaceuticals) from 2000 to 2005, President from 1995 to 1997,
and Vice President from 1991 to 1995. He remains a Director of Novavax, Inc. and
serves on both the Board of Directors and audit committee of ELXSI, Inc.
(restaurant and water inspection services).
Dr.
Oskowitz has been a director of the Company since January 1999. Dr. Oskowitz has
been an assistant professor of obstetrics, gynecology and reproductive biology
at Harvard Medical School since 1993. He is a reproductive endocrinologist at,
and Director of, Boston IVF, a fertility clinic with which he has been
associated since 1986. Dr. Oskowitz is a past President of the Boston Fertility
Society.
The Board
of Directors of the Company has adopted a Code of Business Conduct and Ethics
applicable to all Board members, executive officers and all employees. The Code
of Business Conduct and Ethics is available on the Company’s website, under the
investor relations tab. We will provide an electronic or paper copy of this
document free of charge upon request. If substantial amendments to the Code of
Business Conduct and Ethics are executed, or if waivers are granted, the Company
will post and disclose the nature of such amendments or waivers on the Company’s
website or in a report on Form 8-K.
PART
II
Item 5. Market for the
Registrant’s Common Equity and Related Stockholder Matters
and
Issuer Purchases of Equity
Securities
The
Company’s Common Stock is traded on the NASDAQ Global Market under the symbol
CBRX. The following table sets forth for the periods indicated the high and low
sales prices of the Common Stock on the NASDAQ Global Market.
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
2007
|
|
First
Quarter
|
|
$
|
5.25
|
|
$
|
1.04
|
|
Second
Quarter
|
|
|
3.20
|
|
|
1.29
|
|
Third
Quarter
|
|
|
2.72
|
|
|
2.00
|
|
Fourth
Quarter
|
|
|
2.96
|
|
|
2.03
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
2008
|
First
Quarter
|
|
$
|
2.51
|
|
$
|
1.89
|
|
Second
Quarter
|
|
|
4.29
|
|
|
2.13
|
|
Third
Quarter
|
|
|
4.47
|
|
|
2.15
|
|
Fourth
Quarter
|
|
|
2.76
|
|
|
.92
|
|
At March
3, 2009, there were approximately 300 shareholders of record of the Company’s
Common Stock, one shareholder of record of the Company’s Series B convertible
preferred stock (“Series B Preferred Stock”), 4 shareholders of record of the
Company’s contingently redeemable Series C Convertible Preferred Stock (“Series
C Preferred Stock”) and 7 shareholders of record of the Company’s Series E
convertible preferred stock (“Series E Preferred Stock”). The Company estimates
that there were approximately 5,100 beneficial owners of its Common Stock on
such date.
The
Series C Preferred Stock was issued and sold by the Company in January 1999 to
24 accredited investors, through which the Company raised approximately $6.4
million, net of expenses. The Series C Preferred Stock has a stated value of
$1,000 per share, and is convertible into Common Stock at the lower of: (i)
$3.50 per share of Common Stock, and (ii) 100% of the average of the closing
prices during the three trading days immediately preceding the conversion notice
(not to exceed 2,469,810 shares as of December 31, 2008). The Series C Preferred
Stock pays a 5% dividend, payable quarterly in arrears on the last day of the
quarter. The security holders of Series C Preferred Stock have certain
redemption rights due to events beyond the control of the Company such as
delisting, dividend defaults and certain other defaults. The terms of the Series
C Preferred Stock have remained the same since inception.
During
2005, the Company raised $6.9 million from the issuance and sale of 69,000
shares of Series E Preferred Stock. The Series E Preferred Stock has a stated
value of $100 per share. Each share of the Series E Preferred Stock may be
converted by the holder into 50 shares of Common Stock, subject to adjustment,
and will automatically be converted into Common Stock at that rate upon the date
that the average of the daily market prices of the Company’s Common Stock for
the 20 consecutive trading days preceding such date exceeds $6.00 per share. The
Series E Preferred Stock pays no dividends and contains voting rights equal to
the number of shares of Common Stock into which each share of Series E Preferred
Stock is convertible. Upon liquidation of the Company, the holders of the Series
E Preferred Stock are entitled to $100 per share.
On March
10, 2006, the Company raised $30 million in gross proceeds to the Company from
the issuance and sale of 7,428,220 shares of its Common Stock at a price of
$4.04 per share and warrants to purchase 1,857,041 shares of Common Stock with
an exercise price of $5.39 per share. The warrants became exercisable on
September 9, 2006, and expire on March 13, 2011, unless earlier exercised or
terminated. Proceeds were used for general corporate purposes.
On December 22, 2006, the Company raised approximately $40
million in gross proceeds to the Company from the issuance and sale of
convertible subordinated notes. The notes bear interest at a rate of 8% per
annum and mature on December 31, 2011. They are convertible into shares of
Common Stock at a conversion price of $5.25. Investors also received warrants to
purchase 2,285,714 shares of Common Stock at an exercise price of $5.50 per
share. The warrants became exercisable on June 20, 2007, and expire on December
22, 2011, unless earlier exercised or terminated. The Company used the proceeds
of this offering to acquire from Merck Serono the U.S. marketing rights to
CRINONE for $33 million, purchase Serono’s current inventory of that product,
and pay other costs related to the transaction. On April 1, 2007, the Company
recorded a liability from the contract with Merck Serono for certain sales
returns associated with sales made by Merck Serono. The Company recorded the
estimated liability of $1,000,000 as an increase in the purchase price that is
being amortized aver the remaining term of the license. The balance of
approximately $3.7 million was used for general corporate
purposes.
All of
such securities were issued in unregistered offerings pursuant to Section 4(2)
of the Securities Act of 1933, as amended or Regulation D
thereunder.
On August
26, 2008, the Company raised approximately $4.7 million in gross proceeds
to the Company from the issuance and sale of 1,333,000 shares of its common
stock at a price of $3.50 per share in a registered offering. During 2008,
outstanding options were exercised resulting in the issuance of 318,149 shares
of Common Stock and the receipt of $0.6 million by the Company. Proceeds were
used for general corporate purposes. In addition, 350 shares of Series C
Preferred Stock were converted into 235,426 shares of Common Stock, and 4,547
shares of Series E Preferred Stock were converted into 227,350 shares of Common
Stock.
Equity
Compensation Plan Information
The
following table sets forth aggregate information for the fiscal year ended
December 31, 2008, regarding the Company’s compensation plans, including
individual compensation agreements, under which equity securities of the Company
are authorized for issuance:
Plan
Category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
4,863,488
|
|
$
|
3.47
|
|
|
7,453,221
|
|
Equity
compensation plans not approved by security holders
|
|
|
625,000
|
|
$
|
7.28
|
|
|
0
|
|
Total
|
|
|
5,488,488
|
|
$
|
3.91
|
|
|
7,453,221
|
|
The
Company has two shareholder-approved equity compensation plans. The 1996
Long-term Performance Plan (the “1996 Plan”), adopted in October 1996, provided
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 Committee of the Board of
Directors. On May 13, 2008, shareholders approved the 2008 Long-term
Incentive Plan (the “2008 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 Committee of the Board of Directors. Upon approval of the 2008
Plan, the Company stopped making grants under the 1996 Plan.
Stockholder
Rights Plan
On March
12, 2002, the Company adopted a Stockholder Rights Plan (the “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.
Dividend
Policy
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. The Company is required to pay a 5% dividend on its Series C Preferred
Stock on the last day of each quarter.
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
Series C 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 unless
otherwise established by the Board of Directors.
Comparison of
Five-Year Cumulative Total Return*
|
Columbia Laboratories, Inc.,
Russell 2000 Index, Value Line Drug, And Peer
Group
|
(Performance
Results Through 12/31/08)
|
*
Assumes $100 invested at the close of trading on December 31, 2003 in
Columbia Laboratories, Inc. Common Stock, Russell 2000 Index, Value Line
Drug, and Peer Group.
|
|
Source: Value Line,
Inc.
|
|
|
|
|
|
|
|
Factual
material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained
herein.
|
Peer
Group Companies are Acadia Pharmaceuticals, Inc., Adolor Corp., Ariad
Pharmaceuticals, Inc., ArQule, Inc., BioSante Pharmaceuticals, Inc.,
Cytokinetics, DepoMed, Inc., GenVec Inc., MiddleBrook Pharmaceuticals, Inc.,
Neurocrine Biosciences, Inc., SuperGen, Inc., Targacept, Inc., Unigene, and
Vical, Inc.
The
following selected financial data (not covered by the auditors’ reports) are
derived from the Company’s audited 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 Annual
Report. The historical results are not necessarily indicative of the results we
expect for future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
(000's
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
|
|
|
$36,340
|
|
$29,627
|
|
$17,393
|
|
$22,041
|
|
$17,860
|
Gross
Profit
|
|
|
|
|
25,406
|
|
20,613
|
|
9,573
|
|
13,929
|
|
10,072
|
Operating
Expenses
|
|
|
|
32,663
|
|
28,721
|
|
20,733
|
|
21,160
|
|
32,044
|
Interest
Expense
|
|
|
|
7,882
|
|
7,946
|
|
2,670
|
|
3,491
|
|
3,928
|
Net
Loss
|
|
|
|
|
(14,077)
|
|
(14,292)
|
|
(12,485)
|
|
(10,104)
|
|
(26,067)
|
Loss
per common share
|
|
|
|
(0.27)
|
|
(0.28)
|
|
(0.26)
|
|
(0.25)
|
|
(0.64)
|
Weighted
average number of common
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding-basic and diluted
|
|
|
52,439
|
|
51,124
|
|
48,089
|
|
41,752
|
|
40,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data at December 31
|
|
|
|
|
|
|
|
|
|
|
|
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital (deficiency)
|
|
|
$12,305
|
|
$14,461
|
|
$23,410
|
|
($3,471)
|
|
$9,303
|
Total
Assets
|
|
|
|
|
45,622
|
|
56,589
|
|
65,839
|
|
14,732
|
|
29,268
|
Notes
payable
|
|
|
|
30,075
|
|
27,536
|
|
25,299
|
|
-
|
|
-
|
Long-term
portion of financing agreements
|
|
13,126
|
|
11,426
|
|
13,277
|
|
10,921
|
|
20,299
|
Redeemable
Preferred Series C Stock
|
|
|
775
|
|
1,125
|
|
3,200
|
|
3,250
|
|
3,250
|
Shareholders'
equity (deficiency)
|
|
|
(5,893)
|
|
2,015
|
|
12,616
|
|
(20,573)
|
|
(17,157)
|
Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) is intended to help the reader understand the
Company’s financial condition and results of operations. The MD&A is
provided as a supplement to, and should be read in conjunction with, our
financial statements and the accompanying notes (“Notes”).
We are in
the business of developing, manufacturing and selling pharmaceutical products
that utilize our proprietary bioadhesive drug delivery technologies. We are
focused predominantly on the women’s reproductive healthcare market but our
product development projects address the broader women’s healthcare market. Our
bioadhesive vaginal gel products provide patient-friendly solutions for
infertility, pregnancy support, amenorrhea, and other obstetric, gynecologic and
medical conditions.
We have a
35 person sales organization that promotes our two natural progesterone gel
products, CRINONE 8% and PROCHIEVE 8% in the United States. We acquired the U.S.
marketing rights to CRINONE in December 2006, and can now promote these products
to a full range of reproductive endocrinologists, obstetricians and
gynecologists who treat infertility. We also promote STRIANT testosterone buccal
system for the treatment of hypogonadism in men; however, our focus is on
increasing prescriptions of our infertility products.
We derive
additional revenues from our established marketing partnerships, through which
certain of our products are commercialized in global territories outside the
U.S. and U.S. markets on which we are not currently focused.
Through
our development organization, we seek opportunities to develop new products
using our drug delivery technology and obtain new label indications for our
existing products. We expect that we will retain proprietary rights to certain
of these products and label indications, particularly where they are
complementary to our existing sales and marketing capabilities. We also expect
to seek strategic partners for, or to divest, products that fall outside our
core women’s healthcare focus.
Our net
loss for 2008 was $14.1 million, or $0.27 per basic and diluted common share. We
expect to continue to incur operating losses in the near future because of the
significant non-cash items related to the CRINONE acquisition that our future
financial statements will reflect, significant sales, distribution and research
and development costs and increased payments on our consolidated debt. Our sales
and distribution expenses are expected to be flat to lower in 2009. In 2009, we
expect that our research and development expenses will be higher than those in
2008, primarily as a result of our investment in our PREGNANT clinical trial of
PROCHIEVE 8% for the prevention of preterm birth in women with a short cervix at
mid-pregnancy.
Our 2008
revenues reflect the second full year of our marketing efforts for both brands
of 8% progesterone gel in the U.S., and in particular, our attention to CRINONE
8%. In 2008, we undertook significant activities to add marketing materials and
activities for CRINONE 8% along with the full year effect of the expansion of
our sales force. Our CRINONE 8% sales and marketing activities in 2008
included:
|
|
|
|
·
|
Continued
strong presence at the annual meeting of the American Society of
Reproductive Medicine in 2008, which we believe effectively emphasized our
objective of becoming a major player in the market for infertility
treatments
|
|
|
|
|
·
|
Emphasis
on marketing materials showing 16 clinical trials that have been conducted
to compare CRINONE to other forms of progesterone, which provided us with
a compelling case for the efficacy of CRINONE. We believe that these data
show that CRINONE is as effective as, and in some cases numerically more
effective than other delivery systems for progesterone. In the six
clinical trials that included an arm evaluating patient preference,
patients preferred CRINONE over the competing product in all six clinical
trials;
|
|
|
|
|
·
|
Meetings
of our Infertility Advisory Committee of respected reproductive
endocrinologists from around the United States who provide us with insight
on how to best communicate to physicians and patients all the clinical
information that is available for CRINONE
|
|
|
|
|
·
|
Outreach
to key opinion leaders and a number of reproductive endocrinologists who
have agreed to speak on behalf of
CRINONE
|
Our
partner Merck Serono has exclusive rights to market CRINONE in all countries
outside of the United States. Increased sales of CRINONE in non-U.S. markets by
Merck Serono, who pays us a transfer price on CRINONE sales, contributed to
revenue growth in 2008. Non-U.S. progesterone sales were up 13% over 2007. We
expect that CRINONE sales will continue to increase in markets outside the U.S.,
including China which approved the product for marketing in December
2008.
We expect
that our 2009 focus for CRINONE commercialization will be to seek to convert
sales of pharmacy compounded intramuscular progesterone injections and
progesterone suppositories to sales of CRINONE and vaginal tablets. We believe
that these products share 75% of the total U.S. progesterone market. If we are
able to communicate the information that we have compiled on CRINONE, through
direct marketing to physicians and presentations by key opinion leaders in the
reproductive endocrinology field, we expect to be able to persuade physicians to
prescribe CRINONE over competing injections, suppositories and vaginal
tablets.
Our sales
force is focused on promoting our CRINONE 8% to the infertility specialty
market. We plan to execute on the foundation we laid in 2007 and 2008 for
CRINONE 8% and expect that CRINONE will be a key revenue driver in
2009.
Clinical
development of PROCHIEVE 8% for Prevention of Preterm Birth in Women with
Mid-pregnancy Short Cervix.
We expect
that in 2009 we will invest significant resources in the development program for
PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix as
measured by transvaginal ultrasound at mid-pregnancy. This program includes a
clinical trial in pregnant women that we have named the PREGNANT study. In 2007,
we reported data from our completed clinical trial of PROCHIEVE 8% in pregnant
women with a history of prior pre-term birth. In that clinical trial, the study
endpoints were not met, and the trial demonstrated that there was no benefit of
administering vaginal progesterone to this patient population. However,
secondary analyses of the data from this earlier study demonstrated a
statistically significant improvement in the rate of preterm birth and infant
outcomes in trial participants who had a short cervix in mid-pregnancy. The
PREGNANT clinical trial is designed to confirm these data in a larger trial. If
the results of the PREGNANT trial confirm the results seen in the earlier
clinical trial, we expect to file a NDA supplement seeking approval of PROCHIEVE
8% for this indication.
The
clinical trial data were published in October 2007 in the peer-reviewed journal
Ultrasound in Obstetrics &
Gynecology
(also known as the “White Journal”), which, was followed by
the publication of an abstract entitled “
Progesterone Reduces the Rate of
Cervical Shortening in Women at Risk for Preterm Birth
” in the December
2007 supplement of the
American Journal of Obstetrics and
Gynecology
. Because we were able to publish data in advance of the 2008
Annual Meeting of the Society for Maternal-Fetal Medicine in late January 2008,
the data underlying this abstract were discussed in an oral presentation at that
meeting.
The
PREGNANT study was designed based in part on the data set forth in the White
Journal and discussions with the FDA. This randomized, double-blind,
placebo-controlled Phase III clinical trial is designed to evaluate the ability
of PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix
of between 1.0 and 2.0 centimeters as measured by transvaginal ultrasound at
mid-pregnancy. The primary endpoint of this clinical trial is a reduction in
preterm births at less than or equal to 32 weeks versus placebo.
In October
2008 we
announced a collaboration with the Perinatology Research Branch (PRB) of the
Eunice Kennedy Shriver National Institutes of Child Health and Human Development
(NICHD) under which we amended the study protocol to reflect the addition of
nine NICHD sponsored sites and an increase in the number of patients from 300 to
450. With the increase in patients, the power of the study to show
improvements in both the obstetrical endpoints and infant outcomes becomes even
stronger. All clinical data, whether generated by NICHD sites or our sites, will
be collected centrally and, assuming success in the study, the results will be
available to us for regulatory filings. We believe that, if the study is
successful, the participation of the NICHD will have a positive impact on
physicians’ adoption of PROCHIEVE 8% to reduce the risk of preterm birth in
women with a short cervix at mid-pregnancy as measured by transvaginal
ultrasound, which will lead to improved patient care and a more rapid reduction
in the incidence of preterm birth.
Clinical
development of vaginally-administered lidocaine for the treatment of
dysmenorrhea.
In 2008,
we continued to invest in our vaginal lidocaine drug candidate which we were
evaluating to treat the severe uterine cramps that result in the debilitating
pain of dysmenorrhea. In the U.S. alone, this common, painful condition
seriously affects about 5.6 million women in the age range of 20 to 45 to the
point where they frequently miss work. This figure exclude very young women
between the onset of menstruation and age 20 who can suffer dysmenorrhea at a
higher percentage than the more mature female population between the ages of 20
and 45.
In
September 2008, we announced results from a 70-patient Phase II cross-over study
in patients with dysmenorrhea. The primary endpoint of the study was to show a
difference between lidocaine and placebo in terms of the time-weighted average
patient-assessed pain intensity over four treatment days. Data from the clinical
trial did not show a significant difference between the pain scores for the
lidocaine and placebo treatment cycles. Patients in the clinical trial were also
asked to make a subjective assessment of the treatment at the end of each cycle,
and to compare the first and second cycles to one another. The data suggest a
trend for patients to favor their lidocaine treatment cycle. The clinical trial
did not reveal any significant adverse events and those adverse events that
occurred were similar in both kind and frequency for lidocaine and placebo. We
are evaluating if it is feasible to enhance this lidocaine effect through
modifications to the dosing regimen and treatment protocol. We will continue to
seek a potential partnership for this product candidate, ideally to co-develop
and co-market it.
Results
of Operations
Summary
Our
products consist of Progesterone Products that we promote through our own sales
force to REIs and OB/GYNs and sell to wholesalers and specialty pharmacies and
from sales to licensees. We supplement our Progesterone Product revenue by
selling other products that use our BDS which we refer to as “Other Products”.
Most of the Other Product revenue is based on sales of products to
licensees.
Fiscal 2008
Progesterone
Products are:
|
·
|
CRINONE
8% progesterone gel marketed and sold by us in the U.S.
|
|
|
|
|
·
|
CRINONE
8% sold by us to Merck Serono for resale outside the
U.S.
|
|
|
|
|
·
|
PROCHIEVE
8% progesterone gel sold by us in the U.S.
|
|
|
|
|
·
|
PROCHIEVE
4% progesterone gel sold to Ascend for sale in the
U.S.
|
Other
Products are:
|
·
|
STRIANT
testosterone buccal system marketed by us in the U.S.
|
|
|
|
|
·
|
STRIANT
sold to MiPharm for resale in Italy.
|
|
|
|
|
·
|
Replens
®
Vaginal
Moisturizer sold to Lil' Drug Store for resale outside the
U.S.
|
|
|
|
|
·
|
RepHresh
®
Vaginal Gel
sold to Lil' Drug Store for resale on a worldwide
basis.
|
|
|
|
|
·
|
Royalty
and licensing
revenues.
|
All of
our products are manufactured in Europe by third parties on behalf of our
foreign subsidiaries who sell the products to our worldwide licensees, and to
the Company in the case of the products we commercialize ourselves in the United
States. Because our European revenues reflect these sales and are reduced only
by our product manufacturing costs, we have historically shown a profit from our
European operations.
Revenues
from our United States operations principally relate to the Company’s products
that we promote to physicians through our sales representatives, as well as
income from products that we have licensed. The Company charges our United
States operations all Selling and Distribution expenses that support our
marketing, sales and distribution efforts. Research and Development expenses are
charged to our United States operations for product development which
principally supports new products and new label indications for products to be
sold in this country. In addition, the majority of our General and
Administrative expenses represent the Company’s management activities as a
public company and are charged to our United States operations. The amortization
of the repurchase of the U.S. rights to CRINONE is also charged to our United
States operations. As a result, we have historically shown a loss from our
United States operations that has been significantly greater than, and offsets,
the profits from our European operations.
Net
Revenues
(In
thousands, except percentages)
|
2008
|
|
Percentage
from
prior
year
|
2007
|
|
Percentage
from
prior
year
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
$36,340
|
|
23%
|
|
$29,628
|
|
70%
|
|
$17,393
|
|
Net revenues increased 23% in 2008 to
$36.3 million as compared to $29.6 million in 2007 and $17.4 million in
2006. Net revenues from Progesterone Products increased 18% to $24.1
million from $20.5 million in 2007 and $11.2 million in 2006. Unit
sales increased for Progesterone Products from 2007 to 2008 by 30%
worldwide. This volume increase was offset by price and other sales
adjustments due Merck Serono. The increase in net revenues from
Progesterone Products in 2008 is as a result of expanding the sales force across
the U.S. in late 2007 and realizing the growth from converting doctors over to
CRINONE. U.S. sales increased by 21%. International CRINONE marketed
by Merck Serono grew by 13%. The growth in 2007 in Progesterone Products was
primarily as a result of the acquisition of U.S. CRINONE marketing rights
purchased from Merck Serono in December 2006 and the cancellation of the sale of
a semi-annual batch of CRINONE to Merck Serono in anticipation of the U.S.
rights acquisition.
Net revenues from Other Products
increased by 33% to $12.2 million in 2008 from $9.2 million in 2007. The
principal driver of the increase is the recognition of the deferred revenue from
Ardana as a result of their bankruptcy. The deferred income that
accelerated as a result of the bankruptcy was $2.9
million. International sales of Replens were up 16%. Net
revenues in 2007 were up 48% over 2006 from $6.2 million to $9.2
million. The principal drivers for the increase during this period
were additional batch orders of RepHresh from Lil’ Drug Stores and increased
STRIANT sales.
Gross profit as a percentage of net
revenues was 70% in 2008 as compared with 70% in 2007 and 55% in
2006. Although the gross profit percentage did not change, there were
a number of offsetting events including the recognition of the deferred income
from the Ardana bankruptcy with no underlying costs, increases in CRINONE and
STRIANT profitability primarily through the effects of higher volume and, to a
lesser extent, price increases offset by international CRINONE price adjustments
recognized for government tenders during the period, lowering international
CRINONE margins. For 2007, the gross profit percentage for
Progesterone Products improved 26% based on the shift from the previous Merck
Serono license arrangement to the current full U.S. ownership of CRINONE. Gross
profit percentage on Other Products decreased to 63% in 2007 from 73% in 2006
principally due to the loss of promotion fee income from Lil’ Drug
Store.
Selling
and Distribution
(In
thousands, except percentages)
|
2008
|
|
Percentage
from
prior
year
|
2007
|
|
Percentage
from
prior
year
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and distribution
|
$12,797
|
|
27%
|
|
$10,112
|
|
53%
|
|
$6,600
|
As
a percentage of revenue
|
35%
|
|
1pp
|
|
34%
|
|
(4)pp
|
|
38%
|
|
|
|
|
|
|
|
|
|
|
Note:
PP - percentage points
Selling
and distribution expenses include payroll, employee benefits, equity
compensation and other personnel-related costs associated with sales and
marketing personnel, and advertising, promotions, tradeshows, seminars, and
other marketing-related programs. Selling and distribution expenses were
approximately $12.8 million, $10.1 million and $6.6 million in 2008, 2007 and
2006 respectively. Selling and distribution expenses increased by approximately
27% in 2008 compared to 2007 and increased by approximately 53% in 2007 compared
to 2006. The primary reason for the 2008 increase was a full contingent of 35
sales persons for 2008 versus 2007 when the sales force was increased from 26 to
35 in the fourth quarter, and an increase in marketing expenses for CRINONE. The
increase in 2007 from 2006 reflects increases in sales force and marketing
expenses.
Included
in the 2008 expenses were sales force and management costs of approximately $7.4
million, product marketing expenses of approximately $4.6 million and $0.8
million in sales information and distribution costs. Expenses in 2007 included
approximately $5.2 million in sales force costs, approximately $3.7 million in
product marketing expenses and approximately $1.0 million in distribution costs.
Expenses in 2006 included approximately $4.0 million in sales force costs,
approximately $2.2 million in product marketing expenses and approximately $0.5
million in distribution costs.
General
and Administrative
(In
thousands, except percentages)
|
2008
|
|
Percentage
from
prior
year
|
2007
|
|
Percentage
from
prior
year
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
$8,615
|
|
10%
|
|
$7,825
|
|
6%
|
|
$7,402
|
As
a percentage of revenue
|
25%
|
|
(1)pp
|
|
26%
|
|
(17)pp
|
|
43%
|
General
and administrative costs include payroll, employee benefits, equity
compensation, and other personnel-related costs associated with finance, legal,
regulatory affairs, information technology, facilities and certain human
resources, and other administrative personnel, as well as legal costs and other
administrative fees. General and Administrative expenses increased by
approximately $0.8 million, or 10%, to approximately $8.6 million in 2008 from
approximately $7.8 million in 2007, which was an increase of $0.4 million from
$7.4 million in 2006. The increase in 2008 reflects additional legal fees for
patent applications and the Bio-Mimetics litigation of $0.4 million and
additional accounting expenses from the change in auditors and restatement of
2006 financial statements in the amount of $0.3 million. The increase in 2007
reflects Statement 123R stock compensation expense over 2006 of $0.3 million and
an increase in professional expenses.
Research
and Development
(In
thousands, except percentages)
|
2008
|
|
Percentage
from
prior
year
|
2007
|
|
Percentage
from
prior
year
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
$6,206
|
|
7%
|
|
$5,779
|
|
(12)%
|
|
$6,596
|
As
a percentage of revenue
|
17%
|
|
(3)
pp
|
|
20%
|
|
(18)
pp
|
|
38%
|
Research and development expenses
increased $0.4 million in 2008 from 2007. The increase is primarily
related to medical science liaison contracted services to respond to medical
information requests about CRINONE and PROCHIEVE. These service fees
were partially offset by lower lidocaine trial expenses as the trial was
completed in the third quarter of 2008 and the bulk of the enrollment and
investigator fees were incurred in 2007. The PREGNANT trial expenses
in 2008 were lower than in 2007 when most of the trial start up costs were
incurred. Research and development expenses in 2006 reflect the
completion of enrollment in our clinical trial in recurrent preterm birth, the
results of which were reported in February 2007.
Amortization of CRINONE
®
Acquisition
The
Company purchased the marketing rights for U.S. sales of CRINONE
®
8% from
Merck Serono in December 2006 for $33 million. In the second quarter of 2007,
the Company recognized a $1 million adjustment to the purchase price to reflect
contingent liabilities for Merck Serono sales returns. The $33 million charge is
being amortized over 6.75 years, and the $1 million charge is being amortized
over 6.5 years. Amortization expense of the acquisition cost for CRINONE
®
U.S.
marketing rights for 2007 and 2008 was $5.0 million. The 2006 charge was $0.1
million.
Other
Income and Expense
Interest
expense was $7.9 million, $7.9 million and $2.7 million in 2008, 2007 and 2006,
respectively. In December of 2006, the Company issued $40 million in convertible
subordinated notes. Interest expense of 2008 includes cash interest of $3.2
million and $2.8 million in charges associated with amortization of the
beneficial conversion feature, amortization of the warrant costs and issuance
costs.
Interest
expense in 2008, 2007, and 2006 included approximately $1.9 million, $2.3
million and $2.5 million, respectively as a result of amortizing the difference
between the minimum amounts to be paid to PharmaBio and the amounts received as
interest expense under the PharmaBio agreements as interest
expense.
State
Income Tax Benefit
In each of 2008, 2007 and 2006 the
Company realized proceeds from the sale of its New Jersey state net operating
losses of $0.9 million, $0.8 million, and $0.5 million,
respectively.
Net
Loss
The net
loss for 2008 was $14.1 million or $0.27 per share as compared to a net loss of
$14.3 million, or $0.28 per share, in 2007, a net loss of $12.5 million or $0.26
per share in 2006.
Contractual
Obligations
As
previously disclosed, in July 2002 and March 2003, the Company entered into
agreements with PharmaBio, under which we received upfront money in exchange for
royalty payments on our women’s healthcare products and STRIANT, respectively.
We owe royalty payments to PharmaBio for a fixed period of time. These royalty
payments are subject to minimum and maximum amounts. On February 29, 2008, the
Company made the final payment under the 2002 agreement. The remaining minimum
payment on the 2003 agreement must be made in November 2010. In
addition, the Company enters into operating leases for many of our facility and
equipment needs. These leases allow us to conserve cash by paying a monthly
lease rental fee for the use of, rather than purchasing, facilities and
equipment. At the end of the lease, we have no further obligation to the
lessor.
On
December 22, 2006, the Company issued (i) subordinated convertible notes in
aggregate principal amount of $40 million (the “Convertible Notes”) and
(ii) warrants to purchase 2,285,714 shares of Common Stock (the “Warrants”)
with an exercise price of $5.50 per share. A portion of the proceeds were used
to acquire the U.S. marketing rights to CRINONE
®
and the
balance was used to pay related expenses and for working capital. The
Convertible Notes bear interest at the rate of 8% per annum, payable quarterly
in arrears commencing April 1, 2007. The Convertible Notes are convertible into
shares of Common Stock at a conversion price of $5.25 per share. The conversion
price is subject to adjustment if the Company subdivides or combines the
outstanding Common Stock and under certain other circumstances. The maturity
date of the Convertible Notes is December 31, 2011. In the event of a
“change of control”, as defined in the Convertible Notes, the holder of each
note is entitled to a “make-whole premium” if the holder exercises its rights to
convert the Convertible Note, in whole or in part, during the “change of control
redemption/conversion period,” as defined in the Convertible Notes. The
make-whole premium is calculated in accordance with paragraph 5(e)(iii)(B) of
the notes and decreases as our Common Stock price increases and the date of the
change of control extends from the closing. No make-whole premium is due if the
stock price is $3.50 or less or $10.50 or greater. The Convertible Notes contain
customary events of default. The Convertible Notes are subordinated to the
Company’s obligations to PharmaBio. The Warrants were exercisable beginning on
June 20, 2007, and ending on December 22, 2011, at an exercise price of
$5.50 per share, subject to adjustment in certain circumstances. The Company
will be required to make certain cash payments to the holders of the Convertible
Notes and Warrants if it does not meet its registration obligations under the
agreement relating to the transaction.
Our
future contractual obligations include the following:
|
For
the Fiscal Years Ended December 31,
|
|
|
|
|
|
|
Total
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
Beyond
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$40
million convertible notes
|
$40,000
|
|
|
|
|
|
$40,000
|
|
|
|
|
Interest
on $40 million convertible notes
|
10,400
|
|
$ 3,200
|
|
$ 3,200
|
|
4,000
|
|
|
|
|
PharmaBio
Striant®
|
|
|
|
|
|
|
|
|
|
|
|
finance
agreement
|
16,572
|
|
168
|
|
16,404
|
|
|
|
|
|
|
Operating
lease obligations
|
1,206
|
|
270
|
|
271
|
|
245
|
|
$ 233
|
|
$ 187
|
Executive
agreements
|
1,481
|
|
1,481
|
|
|
|
|
|
|
|
|
Total
|
$ 69,659
|
|
$ 5,119
|
|
$
19,875
|
|
$ 44,245
|
|
$ 233
|
|
$ 187
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent
Accounting Pronouncements
In June
2008, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues
Task Force (“EITF”) Issue No. 07-5,
“Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”)
. EITF 07-5 provides that an entity should use a two step approach
to evaluate whether an equity-linked financial instrument (or embedded feature)
is indexed to its own stock, including evaluating the instrument’s contingent
exercise and settlement provisions. It also clarifies on the impact of foreign
currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The Company does not expect an effect with
the adoption of EITF 07-5 on the Company’s financial condition and results of
operations.
In June
2008, the Financial Accounting Standards Board (“FASB”) issued Emerging Issues
Task Force (“EITF”) Issue No. 08-4, “
Transition Guidance for Conforming
to Issue No. 98-5 (“EITF no. 08-4”)”.
The objective of EITF No. 08-4 is
to provide transition guidance for conforming changes made to EITF No. 98-5,
“Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Rations
,” that result from EITF No. 00-27
“Application of Issue No. 98-5 to
Certain Convertible Instruments,”
and SFAS No. 150,
“Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.”
This
issue is effective for financial statements issued for fiscal years ending after
December 15, 2008. Early application is permitted. The Company is currently
evaluating the impact of adoption of EITF No. 08-4 on the accounting for the
convertible notes and related warrants transactions.
In May
2008, the FASB issued FASB Staff Position (“FSP”) No. APB 14-1,
“Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)”
(“FSP APB 14-1”). FSP APB 14-1 clarifies that convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14,
“Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants”
. Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is not permitted. The Company does not expect
an effect with the adoption of FSP APB 14-1 on the Company’s financial condition
and results of operations.
In March
of 2008, FASB issued SFAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities”
– An Amendment of FASB Statement No.
133, which expands the disclosure requirements in Statement 133 about an
entity’s derivative instruments and hedging activities. It is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The Company does not expect an effect with the adoption of
SFAS No. 161 on its financial position, cash flows, and statements of
operations.
In
September 2006, the FASB issued SFAS No. 157,
“Fair Value Measurements”
(“SFAS No. 157”), which clarifies the definition of fair value, establishes
guidelines for measuring fair value, and expands disclosures regarding fair
value measurements. SFAS No. 157 does not require any new fair value
measurements and eliminates inconsistencies in guidance found in various prior
accounting pronouncements. On February 12, 2008, the FASB issued FSP 157-b (“FSB
157-b”) which delays the effective date of SFAS No. 157 for one year for all
non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). SFAS No. 157 and FSP 157-b are effective for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
year. The effective date of SFAS No. 157 would be deferred to Fiscal years
beginning after November 15, 2008 and for interim periods within those years for
certain non-financial assets and liabilities. The Company has adopted SFAS No.
157 for financial assets and liabilities in 2008 which had no effect and is
evaluating the effect on non financial assets and liabilities will have on its
financial position, cash flows or results of operations.
In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, “
The Fair Value Option
for Financial Assets and Financial Liabilities
” (“SFAS 159”). SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at fair
value. SFAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar assets and liabilities. SFAS 159 is effective
for financial statements issued for fiscal years beginning after November 15,
2007. The adoption of SFAS No. 159 on January 1, 2008 did not have a material
impact on our financial statements.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “
Business Combinations
” (“SFAS
141(R)”). SFAS 141(R) will change the accounting for business combinations.
Under SFAS 141(R), an acquiring entity will be required to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value with limited exceptions. SFAS 141(R) will change the accounting
treatment and disclosure for certain specific items in a business combination.
SFAS 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. SFAS 141(R) will impact the
Company in the event of any future acquisition.
In
December 2007, the FASB also issued SFAS No. 160, “
Non-controlling Interests in
Consolidated Financial Statements—an Amendment of Accounting Research Bulletin
No. 51
” (“SFAS 160”). SFAS 160 establishes new accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the
recognition of a non-controlling interest (minority interest) as equity in the
Consolidated Financial Statements and separate from the parent’s equity. The
amount of net income attributable to the non-controlling interest will be
included in consolidated net income on the face of the income statement. SFAS
No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if the parent
retains its controlling financial interest. In addition, this statement requires
that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the
non-controlling equity investment on the deconsolidation date. SFAS No. 160 also
includes expanded disclosure requirements regarding the interests of the parent
and its non-controlling interest. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
Company does not expect an effect with the adoption of SFAS No. 160 will have on
its financial position, cash flows or results of operations.
In June
2008, the FASB issued FSP No. 03-6-1
“Determining Whether Instruments
Granted In Share-Based Payment Transactions are Participating Securities”
(“FSP -3-6-1”). FSP 03-6-1 clarifies that unvested share-based payment awards
that contain nonforfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and are to be included in the
computation of earnings per share under the two-class method described in SFAS
No. 128, “Earnings Per Share.” FSP 03-6-1 is effective for the Company on
January 1, 2009 and requires all presented prior-period earnings per share data
to be adjusted retrospectively. The Company is currently evaluating the impact
that adopting FSP 03-6-1 will have on its financial position, cash flows, and
statements of operations.
In
October 2008, the FASB issued FSP No. 157-3,
“Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active”
(“FSP
157-3”). FSP 157-3 clarifies the application of SFAS 157 in a market that is not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for that financial asset is
not active. FSP 157-3 was effective for the Company on September 26, 2008 for
all financial assets and liabilities recognized or disclosed at fair value in
our Condensed Consolidated Financial Statements on a recurring basis (at least
annually). The adoption of FSP157-3 did not have a material impact on the
Company’s financial position, cash flows, and statements of
operations.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have, or are reasonably likely to
have, a current or future material effect on our financial condition, changes in
financial condition, revenue or expenses, results of operations, liquidity,
capital expenditures or capital resources.
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.
Liquidity
and Capital Resources
Cash and
cash equivalents were $12 million and $17 million at December 31, 2008 and
December 31, 2007 respectively.
The
Company believes the approximately $12 million of cash on hand at December 31,
2008 will allow it to sustain its operations for the next twelve
months.
Cash
provided by (used in) operating, investing, and financing activities is
summarized as follows:
|
|
2008
|
|
2007
|
|
2006
|
Cash
flows:
|
|
|
|
|
|
|
Operating
activities
|
$ (5,136,488)
|
|
$ (7,914,299)
|
|
$ (13,080,977)
|
Investing
activities
|
(375,926)
|
|
(102,021)
|
|
(33,015,757)
|
Financing
activities
|
959,191
|
|
(40,803)
|
|
64,208,356
|
Operating
Activities:
The net loss in 2008 of $14.1 million
is reduced by non-cash items totaling $10.1 million leaving cash losses of $4.0
million. Changes to assets and liabilities increased the amount to $5.1
million.
The net loss in 2007 of $14.3 million
is reduced by non cash-items totaling $10.4 million leaving cash operating
losses of $3.9 million. Changes to assets and liabilities increased by $5.4
million leaving cash flow from operations as a use of funds at $7.9 million.
Changes to assets and liabilities reflect the effects of the increased revenues
of CRINONE
®
,
STRIANT
®
and
RepHresh
®
.
Accounts receivable grew by $1.5 million. Inventory grew by $1.0 million.
Accounts payable and accrued expenses decreased by $1.4 million and $0.2 million
respectively. The reduction in accrued expenses related to: sales returns of
$1.3 million, miscellaneous expenses and interest.
Investing
Activities:
In 2008 the Company invested $0.4
million in processing equipment and computer equipment and software
upgrades.
In 2007,
the Company purchased office equipment at a cost of $0.1 million.
Net cash
raised in financing activities in 2008 was $1.0 million. The Company raised $4.1
million in equity placement of 1,333,000 shares in August. Stock option
exercises raised an additional $0.6 million through the issuance of 318,149
shares. Other financing activities included the final payment made to PharmaBio
under the 2002 Women’s Healthcare products arrangement of $3.6 million. The
Company bought $0.1 million of treasury stock and paid $0.1 million in Series C
Preferred Stock dividends.
Net cash
used in financing activities in 2007 of $0.04 million represents Series C
Preferred Stock dividends, purchase of treasury stock and the proceeds from the
exercise of options.
As
previously discussed, on July 31, 2002, we entered into an investment and
royalty agreement with PharmaBio under which we received $4.5 million in return
for a 5% royalty to PharmaBio on 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 were subject to aggregate minimum ($8 million) and
maximum ($12 million) amounts. Because the minimum amount exceeded $4.5 million,
the Company recorded the amounts received as liabilities. The excess of the
minimum ($8 million) paid by the Company over the $4.5 million received by the
Company was recognized as interest expense over the five-year term of the
agreement, assuming an interest rate of 17%. The final payment under this
agreement was made in February 2008.
Also, as
previously discussed, on March 5, 2003, we entered into a second investment and
royalty agreement with PharmaBio under which we received $15 million in return
for a 9% royalty to PharmaBio 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 commenced in the 2003
third quarter and are subject to aggregate minimum ($30 million) and maximum
($55 million) amounts, including a true-up payment due on November 14, 2006 for
the difference between royalties paid to that period and $13 million. On April
14, 2006, the Company made an advance payment of $11.6 million on the
contractually required true-up payment. This amount represented the
present value of a $12 million true-up payment due November 14, 2006, calculated
using a six percent annual discount factor. Because the minimum amount exceeds
$15 million, the Company has recorded the amounts received as liabilities. The
excess of the minimum ($30 million) to be paid by the Company over the $15
million received by the Company is being recognized as interest expense over the
seven-year term of the agreement, assuming an interest rate of 15%. As of
December 31, 2008, the Company has paid $13.3 million in royalties (including
the true-up payment) to PharmaBio under this agreement. The balance of the
minimum royalty payments, estimated to be approximately $16.4 million, is due
November, 2010.
The
Company has an effective registration statement that we filed with the
Securities and Exchange Commission (the “SEC”) using a shelf registration
process. Under the shelf registration process, we may offer from time to time
Common Stock, preferred stock, debt securities and warrants up to an aggregate
amount of $50 million. To date the Company has sold approximately $0.8 million
in Common Stock under the registration statement. We cannot be certain that
additional funding will be available on acceptable terms, or at all. To the
extent that we raise additional funds by issuing equity securities, our
stockholders may experience significant dilution. Any debt financing, if
available, may involve restrictive covenants that impact our ability to conduct
our business. If we are unable to raise additional capital when required or on
acceptable terms, we may have to significantly delay, scale back or discontinue
the marketing of one or more of our products and the development and/or
commercialization of one or more of our product candidates.
As of
December 31, 2008, the Company had outstanding exercisable options and warrants
that, if exercised, would result in approximately $44.5 million of additional
capital and would cause the number of shares of Common Stock outstanding to
increase. However, there can be no assurance that any such options or warrants
will be exercised. The aggregate intrinsic value of exercisable options and
warrants at December 31, 2008 were $0 and $0, respectively.
In
connection with the 1989 purchase of the assets of Bio-Mimetics, which assets
consisted of the patents underlying the Company's BDS, other patent applications
and related technology, the Company pays Bio-Mimetics a royalty equal to two
percent of the net sales of products based on the BDS up to an aggregate of $7.5
million or until the last of the relevant patents expires. The Company is
required to prepay 25% of the remaining royalty obligation, in cash or stock at
the option of the Company, if the closing price of the Company’s Common Stock is
$20 or more on March 2, or within 30 days after that date, of any year. Royalty
payments on STRIANT, PROCHIEVE
®
, and
CRINONE
®
expired
in September of 2006, but continue on Replens
®
and
RepHresh
®
. On
December 28, 2007, Bio-Mimetics filed a complaint in the United States District
Court for Massachusetts
(Bio-Mimetics, Inc. v Columbia
Laboratories, Inc.)
alleging breach of contract, violation of the
covenant of good faith and fair dealing, and unjust enrichment for the Company’s
failure to continue royalty payments on STRIANT
®,
PROCHIEVE
®,
and
CRINONE
®.
To date, the Company has paid approximately $3.3 million in royalty
payments and Bio-Mimetics seeks a judgment that we are obligated to pay the
remaining $4.2 million in full. The Company denies the allegations and intends
to
defend this action vigorously.
The
Company anticipates it will spend approximately $0.1 million on equipment in
2009.
As of
December 31, 2008, the Company had available net operating loss carryforwards of
approximately $150.6 million to offset its potential future U.S. taxable income.
There can be no assurance that the Company will have sufficient income to
utilize the net operating loss carryforwards or that the net operating loss
carryforwards will be available at that time.
In
accordance with Statement of Financial Accounting Standards No. 109, as of
December 31, 2008 and 2007, other assets in the accompanying consolidated
balance sheet include deferred tax assets of approximately $56.1 million, $60.5
million, respectively, (comprised primarily of a net operating loss
carryforward) for which a valuation allowance has been recorded because the
probability of realizing the deferred tax assets are not determinable. With
respect to the Company’s net operating loss carryforwards in 2008, it undertook
an analysis to determine whether the utilization of this tax asset would be
limited by Section 382 of the Internal Revenue Code; the Company at December 31,
2008 believed its assets would not be limited.
Critical
Accounting Policies and Estimates
Our
financial statements and accompanying notes are prepared in accordance with U.S.
Generally Accepted Accounting Principles (“GAAP”). The preparation of financial
statements requires management to make estimates and assumptions that affect the
reported amount 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. There can be no
assurance that actual results will not differ from those estimates. These
estimates and assumptions are affected by management’s application of accounting
policies. Critical accounting policies for us include revenue recognition,
impairment of intangible assets, and accounting for the agreements with
PharmaBio. For a detailed discussion on the application of these and other
accounting policies, see Note 1 of the consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K.
Revenue recognition.
The
Company’s revenue recognition is significant because revenue is a key component
of our 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 on sales of products by Columbia are discussed in detail
below. License fees are recorded over the life of the
license. Royalty revenues, based on sales by licensees, are recorded
as revenues as those sales are made by licensees.
Sales Returns.
Revenues from
the sale of products are recorded at the time goods are shipped to customers.
The Company believes that it has not made any shipments in excess of its
customers' ordinary course of business inventory levels. Our return policy
allows product to be returned for a period beginning three months prior to the
product expiration date and ending twelve months after the product expiration
date. Provisions for returns on sales to wholesalers, distributors and retail
chain stores are estimated based on a percentage of sales, using such factors as
historical sales information, distributor inventory levels and product
prescription data, and are recorded as a reduction to sales in the same period
as the related sales are recognized. We also continually analyze the reserve for
future sales returns and increase such reserve if deemed appropriate. The
Company purchases prescription data on all its products from IMS Health, a
leading provider of market intelligence to the pharmaceutical and healthcare
industries. The Company also purchases certain information regarding inventory
levels from its larger wholesale customers. This information includes for each
of the Company’ products, the quantity on hand, the number of days of inventory
on hand, and a 28 day forecast of sales by units. Using this information and
historical information, the Company estimates potential returns by taking the
number of product units sold by the Company by expiration date and then
subtracting actual units and potential units that may be sold to end users
(consumers) based on prescription data up to five months prior to the product’s
expiration date. The Company records a provision for returns on a quarterly
basis using an estimated rate and adjusts the provision if its analysis
indicates that the potential for product non-salability exists. Sales
adjustments for international sales are estimated to recognize changes in
foreign exchange rates and government tenders that may fluctuate within a
year.
Adjustments for Stock-Based
Compensation on Prior Year Financial Statements
. As of January 1, 2006,
the Company adopted FAS 123R, using the modified prospective transition method.
FAS 123R requires the measurement and recognition of compensation expense for
all stock-based awards made to the Company’s employees and directors including
stock options and other stock-based awards based on estimated fair
values.
Forward-Looking
Statements
This
Annual Report on Form 10-K contains statements that are forward-looking. These
statements 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, completion or outcome of clinical studies,
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.
These
forward looking expectations are based on current assumptions within the bounds
of management’s knowledge of our business and operations and which management
believes are reasonable. These assumptions are subject to risks and
uncertainties, and actual results could differ materially from expectations
because of issues and uncertainties such as those listed in “Risk Factors” and
elsewhere in this Annual Report, which, among others, should be considered in
evaluating our future financial performance. 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
reports filed with the SEC.
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 may, however, require additional financing to fund 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. Expenditures primarily related
to manufacturing in 2008 were approximately $0.3 million less than they would
have been if the average 2007 exchange rates had been in effect in
2008.
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 15, set forth in this annual report.
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure
None
Item 9 A. Controls and
Procedures
Evaluation
of Disclosure Controls and Procedures
The
Company maintains disclosure controls and procedures designed to ensure that the
information the Company must disclose in its filings with the SEC is recorded,
processed, summarized and reported on a timely basis. The Company ’s management,
under the supervision and with the participation of the Chief Executive Officer
and the Chief Financial Officer, evaluated the effectiveness of the Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of December 31, 2008.
Based on this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2008, the Company’s disclosure
controls and procedures were effective.
Changes
in Internal Control over Financial Reporting
There were no changes in the Company’s
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a – 15 or 15d – 15
that occurred during the last fiscal quarter that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Management’s Annual Report on
Internal Control
over
Financial
Reporting
The
Company’s management is responsible for establishing and maintaining an adequate
system of internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, a system of internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Further, because of changes in conditions,
effectiveness of internal control over financial reporting may vary over
time.
Management
of the Company conducted an evaluation of the effectiveness, as of December 31,
2008, of the Company’s internal control over financial reporting based on the
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the “COSO Framework”). Based on its
evaluation under the COSO Framework, management has concluded that the Company’s
internal control over financial reporting was effective as of December
31, 2008.
BDO
Seidman, LLP, an independent registered public accounting firm, has issued an
attestation report on the Company’s internal control over financial reporting
(see Report of Independent Registered Public Accounting Firm).
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders
of
Columbia Laboratories, Inc.
Livingston,
NJ
We have
audited Columbia Laboratories, Inc.’s internal control over financial reporting
as of December 31, 2008, based on criteria established in
Internal Control – Integrated
Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). The Company’s management is responsible for maintaining effective
internal control over financial reporting and for it’s assessment of the
effectiveness of internal control over financial reporting, included in the
accompanying “Item 9A, Management’s Report on Internal Control Over Financial
Reporting”. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Columbia Laboratories, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2008,
based on the COSO criteria.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Columbia
Laboratories, Inc. as of December 31, 2008, and the related consolidated
statements of operations and comprehensive operations, shareholders’ deficiency,
and cash flows for the year then ended and our report dated March 9, 2009
expressed an unqualified opinion thereon.
/s/ BDO
Seidman, LLP
BDO
Seidman, LLP
Woodbridge,
NJ
March 9,
2009
Item 9 B. Other
Information
In the
fourth quarter of 2008 the Company reported all required disclosures on Form
8-K.
PART
III
Item 10. Directors and
Executive Officers of the Company
The
information concerning directors and all audit committee financial experts
required by Item 10 is incorporated herein by reference to Columbia’s Proxy
Statement for its 2008 Annual Meeting of Shareholders. The information
concerning compliance with Section 16(a) of the Exchange Act is incorporated
herein by reference to Columbia’s Proxy Statement for its 2009 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 herein by reference to
Columbia’s Proxy Statement for its 2009 Annual Meeting of Shareholders under the
heading “Executive Compensation”.
Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters
The
information required by Item 12 is incorporated herein by reference to
Columbia’s Proxy Statement for its 2009 Annual Meeting of Shareholders under the
heading “Ownership of the Company”.
Item 13. Certain
Relationships and Related Transactions
The
information required by Item 13 is incorporated herein by reference to
Columbia’s Proxy Statement for its 2009 Annual Meeting of Shareholders under the
heading “Certain Relationships and Related Transactions”.
Item 14. Principal
Accountant Fees and Services
The
information required by Item 14 is incorporated herein by reference to
Columbia’s Proxy Statement for its 2009 Annual Meeting of Shareholders under the
heading “Relationship with Independent Auditors”.
PART
IV
Item 15. Exhibits and
Financial Statement Schedules
(a)(1)(2)
Financial Statements and Financial Statement Schedules
Indexes
to financial statements and financial statement schedules appear on F-1 and
F-26, respectively.
(b)
Exhibits
Exhibit
No
|
Description
|
3.1
|
Restated
Certificate of Incorporation of the Company, as amended
(14)
|
|
|
3.2
|
Amended
and Restated By-laws of Company
(3)
|
|
|
4.1
|
Certificate
of Designations, Preferences and Rights of Series C Convertible Preferred
Stock of the Company, dated as of January 7, 1999
(3)
|
|
|
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
(3)
|
|
|
4.3
|
Securities
Purchase Agreement, dated as of January 19, 1999, among the Company, David
M. Knott and Knott Partners, L.P.
(3)
|
|
|
4.4
|
Form
of Warrant to Purchase Common Stock
(3)
|
|
|
4.5
|
Warrant
to Purchase Common Stock granted to James J. Apostolakis on September 23,
1999 (5)
|
|
|
4.6
|
Certificate
of Designations of Series E Convertible Preferred Stock, filed May 10,
2005 with the Delaware Secretary of State
(13)
|
|
|
4.7
|
Preferred
Stock Purchase Agreement, dated as of May 10, 2005, among Columbia
Laboratories, Inc., Perry Partners L.P. and Perry Partners International,
Inc.
(13)
|
|
|
4.8
|
Securities
Purchase Agreement, dated March 10, 2006, by and between Columbia
Laboratories, Inc. and the Purchasers listed on Exhibit A thereto
(15)
|
|
|
4.9*
|
Form
of Restricted Stock Agreement
(17)
|
|
|
4.10*
|
Form
of Option Agreement
(24)
|
|
|
4.11
|
Securities
Purchase Agreement, dated December 21, 2006, by and between Columbia
Laboratories, Inc. and the Purchasers listed on Exhibit A thereto
(19)
|
|
|
10.1
|
1996
Long-term Performance Plan, as amended, of the Company
(2)
|
|
|
10.2
|
Asset
Purchase, License and Option Agreement between Bio-Mimetics, Inc. and
Columbia Laboratories, Inc., dated November 22, 1989
(1)
|
|
|
10.3
|
License
and Supply Agreement by and between the Company and Mipharm S.p.A. dated
March 5, 1999
(4)
|
|
|
10.4
|
Settlement
Agreement and Release dated as of March 16, 2000 between Columbia
Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc.
(5)
|
|
|
10.5
|
License
Agreement dated April 18, 2000, between the Company and Lil’ Drug Store
Products, Inc.
(6)
|
|
|
10.6
|
Rights
Agreement dated as of March 13, 2002, by and between Columbia
Laboratories, Inc. and First Union National Bank, as Rights Agent
(7)
|
Exhibit
No.
|
Description
|
10.7†
|
Semi-Exclusive
Supply Agreement dated May 7, 2002 between the Company and Mipharm S.p.A.
(8)
|
|
|
10.8†
|
Amended
and Restated License and Supply Agreement dated June 4, 2002 between the
Company and Ares Trading S.A.
(8)
|
|
|
10.9†
|
Investment
and Royalty Agreement dated March 5, 2003 between the Company and
PharmaBio Development Inc.
(9)
|
|
|
10.10†
|
License
and Supply Agreement Dated May 27, 2003 between the Company and Mipharm
S.p.A.
(10)
/
|
|
|
10.11*
|
Form
of Indemnification Agreement for Officers and Directors
(11)
|
|
|
10.12†
|
Asset
Purchase Agreement Dated June 29, 2004, between the Company and Lil’ Drug
Store Products, Inc.
(12)
/
|
|
|
10.13†
|
Supply
Agreement dated June 29, 2004, between the Company and Lil’ Drug Store
Products, Inc.
(12)
/
|
|
|
10.14
|
Letter
Agreement Supplement to STRIANT Investment and Royalty Agreement dated
April 14, 2006
(16)
|
|
|
10.15*
|
Separation
Agreement by and between Columbia Laboratories, Inc. and David L. Weinberg
effective as of December 12, 2006
(18)
/
|
|
|
10.16†
|
Agreement,
dated December 21, 2006, by and among Ares Trading S.A., Serono,
Inc., the Company and its wholly-owned subsidiary, Columbia Laboratories
(Bermuda), Ltd
(19)
|
|
|
10.17
|
Amendment
No. 1 to the Amended and Restated License and Supply Agreement,
entered into December 21, 2006, by and between Ares Trading S.A and
Columbia Laboratories (Bermuda), Ltd.
(19)
/
|
|
|
10.18
|
Description
of the Registrant’s Compensation and Reimbursement Practices for
Non-employee Directors.
(20)
|
|
|
10.19
|
Lease
Agreement between Allwood Associates I and Columbia Laboratories, Inc.,
dated July 6, 2007
(20)
|
|
|
10.20†
|
License
and Supply Agreement between Columbia Laboratories, Inc. and Ascend
Therapeutics, Inc., dated September 27, 2007
(21)
/
|
|
|
10.21
|
Supply
Agreement between Columbia Laboratories (Bermuda) Limited and Fleet
Laboratories Limited, dated July 12, 1996
(22)
/
|
|
|
10.22
|
Packaging
Agreement between Columbia Laboratories (Ireland) Ltd. and Maropack AG,
dated October 28, 1993
(22)
|
|
|
10.23*
|
Columbia
Laboratories, Inc., 2008 Long-Term Incentive Plan
(23)
/
|
|
|
10.24*
|
Columbia
Laboratories, Inc., Amended and Restated Incentive Plan
(24)
/
|
|
|
10.25*
|
Form
of Executive Change of Control Severance Agreement
(24)
|
|
|
10.26*
|
Amended
and Restated Employment Agreement by and between Columbia Laboratories,
Inc. and Robert S. Mills dated March 11, 2009
(24)
|
|
|
10.27*
|
Amended
and Restated Employment Agreement by and between Columbia Laboratories,
Inc. and Michael McGrane dated March 11, 2009
(24)
|
|
|
10.28*
|
Amended
and Restated Employment Agreement by and between Columbia Laboratories,
Inc. and James Meer dated March 11, 2009
(24)
/
|
|
|
14
|
Code
of Ethics of the Company (
11)
/
|
|
|
21
|
Subsidiaries
of the Company
(24)
|
|
|
23.1
|
Consent
of Goldstein Golub Kessler LLP
(24)
/
|
Exhibit
No.
|
Description
|
23.2
|
Consent
of McGladrey & Pullen, LLP
(24)
|
|
|
23.3
|
Consent
of BDO Seidman, LLP
(24)
/
|
|
|
31(i).1
|
Certification
of Chief Executive Officer of the Company
(24)
|
|
|
31(i).2
|
Certification
of Chief Financial Officer of the Company
(24)
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(24)
|
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(24)
|
|
|
†
|
Confidential
treatment has been requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the
SEC.
|
|
|
*
|
Management
contract or compensatory plans or
arrangements
|
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 Proxy Statement dated May 10,
2000
|
|
|
3/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1998
|
|
|
4/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999
|
|
|
5/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1999
|
|
|
6/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000
|
|
|
7/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated March
12, 2002
|
|
|
8/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q dated
August 14, 2002
|
|
|
9/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2002
|
|
|
10/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q dated
August 14, 2003
|
|
|
11/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2003
|
|
|
12/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q dated
August 4, 2004
|
|
|
13/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated May 12,
2005
|
|
|
14/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2005
|
|
|
15/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated March
16, 2006
|
|
|
16/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated April
17, 2006
|
|
|
17/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated May 17,
2006
|
|
|
18/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated
December 15, 2006
|
|
|
19/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated
December 26, 2006
|
|
|
20/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, dated
August 8, 2007
|
|
|
21/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, dated
November 8, 2007
|
|
|
22/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2007
|
|
|
23/
|
Incorporated
by reference to the Registrant’s Proxy Statement dated April 8,
2008
|
|
|
24/
|
Filed
herewith
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
|
COLUMBIA
LABORATORIES, INC.
|
|
|
|
Date:
March 11, 2009
|
By:
|
/s/ James
A. Meer
|
|
James
A. Meer, Senior 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 Registrant and in the
capacities and on the dates indicated.
/s/ Robert
S. Mills
|
|
President
and Chief Executive Officer
|
|
March
11, 2009
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/ James
A. Meer
|
|
Senior
Vice President, Chief
|
|
March
11, 2009
|
|
|
Financial
Officer and Treasurer
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Valerie
L. Andrews
|
|
Director
|
|
March
13, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ Edward
A. Blechschmidt
|
|
Vice
Chairman of the Board of Directors
|
|
March
11, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ Anthony
R. Campbell
|
|
Director
|
|
March
11, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ Frank
C. Condella, Jr.
|
|
Director
|
|
March
11, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ James
S. Crofton
|
|
Director
|
|
March
13, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ Stephen
G. Kasnet
|
|
Chairman
of the Board of Directors
|
|
March
11, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ Denis
M. O’Donnell
|
|
Director
|
|
March
11, 2009
|
|
|
|
|
|
|
|
|
|
|
/s/ Selwyn
P. Oskowitz
|
|
Director
|
|
March
11, 2009
|
|
|
|
|
|
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL
STATEMENTS
|
Page
|
|
|
Reports
of Independent Registered Public Accounting Firms
|
F-2 –
F-4
|
|
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-5
– F-6
|
|
|
Consolidated
Statements of Operations for the Three Years Ended December 31,
2008
|
F-7
|
|
|
Consolidated
Statements of Comprehensive Operations for the Three Years Ended December
31, 2008
|
F-8
|
|
|
Consolidated
Statements of Shareholders' Equity (Deficiency) for the Three Years Ended
December 31, 2008
|
F-9–
F-10
|
|
|
Consolidated
Statements of Cash Flows for the Three Years Ended December 31,
2008
|
F-11
– F-12
|
|
|
Notes
to Consolidated Financial Statements
|
F-13
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
Columbia
Laboratories, Inc.
Livingston,
NJ
We have
audited the accompanying consolidated balance sheet of Columbia Laboratories,
Inc. as of December 31, 2008 and the related consolidated statements of
operations and comprehensive operations, shareholders’ deficiency, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Columbia Laboratories, Inc.
at December 31, 2008, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Columbia Laboratories, Inc.’s internal control
over financial reporting as of December 31, 2008, based on criteria established
in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report dated March 9,
2009 expressed an unqualified opinion thereon.
/s/ BDO
Seidman, LLP
BDO
Seidman, LLP
Woodbridge,
NJ
March 9,
2009
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
of
Columbia Laboratories, Inc.:
We have
audited the consolidated balance sheet of Columbia Laboratories, Inc. and
Subsidiaries as of December 31, 2007, and the related consolidated statements of
operations, comprehensive operations, shareholders’ equity (deficiency) and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Columbia Laboratories, Inc.
and Subsidiaries as of December 31, 2007 and the results of its operations and
its cash flows for the year then ended, in conformity with U.S. generally
accepted accounting principles.
As
disclosed in Note 2 to the consolidated financial statements, effective January
1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
109”.
We also
have audited the adjustments described in Note 2 to the consolidated financial
statements included in the 2007 Form 10-K. In our opinion, such adjustments are
appropriate and have been properly applied. We were not engaged to audit,
review, or apply any procedures to the 2006 consolidated financial statements of
the Company other than with respect to the adjustments and, accordingly, we do
not express an opinion or any other form of assurance on the 2006 consolidated
financial statements taken as a whole.
/s/
McGladrey & Pullen, LLP
McGLADREY
& PULLEN, LLP
New York,
New York
March 25,
2008
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
of
Columbia Laboratories, Inc.:
We have
audited, before the effects of the adjustments described in Note 2 to the
consolidated financial statements included in the 2007 Form 10-K, the
accompanying consolidated statements of operations, comprehensive operations,
shareholders' equity (deficiency) and cash flows of Columbia Laboratories, Inc.
(a Delaware corporation) and Subsidiaries for the year ended December 31, 2006.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
We were
not engaged to audit, review or apply any procedures to the adjustments
described in Note 2 to the consolidated financial statements included in the
2007 Form 10-K and, accordingly, we do not express an opinion or any other form
of assurance about whether any adjustments are appropriate and have been
properly applied. Those adjustments were audited by McGladrey and Pullen,
LLP.
/s/
Goldstein Golub Kessler LLP
GOLDSTEIN
GOLUB KESSLER LLP
New York,
New York
March 15,
2007
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
AS OF DECEMBER 31, 2008 AND
2007
ASSETS
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents of which $12,099,318 and
|
|
|
$12,497,382
|
|
|
|
$17,221,811
|
|
$16,982,742
is interest bearing
|
|
|
|
|
|
|
|
|
Accounts
receivable, net of allowances for
|
|
|
3,562,277
|
|
|
|
3,810,993
|
|
doubtful
accounts of $100,000 and $95,733
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
2,377,139
|
|
|
|
3,047,129
|
|
Prepaid
expenses and other current assets
|
|
|
1,102,525
|
|
|
|
1,287,300
|
|
Total
current assets
|
|
|
19,539,323
|
|
|
|
25,367,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
2,479,602
|
|
|
|
2,252,222
|
|
Computer
software
|
|
|
534,302
|
|
|
|
444,332
|
|
Office
equipment and furniture and fixtures
|
|
|
698,920
|
|
|
|
643,390
|
|
|
|
|
3,712,824
|
|
|
|
3,339,944
|
|
Less-accumulated
depreciation and amortization
|
|
|
(2,890,967
|
)
|
|
|
(2,687,977
|
)
|
|
|
|
821,857
|
|
|
|
651,967
|
|
INTANGIBLE
ASSETS - NET
|
|
|
23,815,060
|
|
|
|
28,859,788
|
|
OTHER
ASSETS
|
|
|
1,446,249
|
|
|
|
1,710,289
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
$45,622,489
|
|
|
|
$56,589,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
AS OF DECEMBER 31, 2008 AND
2007
LIABILITIES AND
SHAREHOLDERS’ EQUITY
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion of financing agreements
|
$ 168,034
|
|
$ 3,786,538
|
|
Accounts
payable
|
2,085,463
|
|
2,215,942
|
|
Accrued
expenses
|
4,980,643
|
|
4,903,881
|
|
|
Total
Current Liabilities
|
7,234,140
|
|
10,906,361
|
NOTES
PAYABLE
|
30,074,966
|
|
27,536,178
|
DEFERRED
REVENUE
|
305,433
|
|
3,580,880
|
LONG-TERM
PORTION OF FINANCING AGREEMENTS
|
13,126,210
|
|
11,425,601
|
TOTAL
LIABILITIES
|
50,740,749
|
|
53,449,020
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingently
Redeemable Series C Preferred Stock
|
775,000
|
|
1,125,000
|
|
|
|
775
and 1,125 shares issued and outstanding in 2008
|
|
|
|
|
|
|
2007,
respectively (liquidation preferance of $775,000 and
|
|
|
|
|
|
|
$1,125,000)
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY (DEFICIENCY):
|
|
|
|
|
Preferred
stock, $.01 par value; 1,000,000 shares authorized
|
|
|
|
|
|
Series
B Convertible Preferred Stock, 130 shares issued
|
|
|
|
|
|
|
and
outstanding (liquidation preference of $13,000)
|
1
|
|
1
|
|
|
Series
E Convertible Preferred Stock, 59,000 and 63,547 shares
|
|
|
|
|
|
|
issued
and outstanding (liquidation preference of $5,900,000 and
$6,354,700)
|
590
|
|
635
|
Common
Stock $.01 par value; 100,000,000 shares
|
|
|
|
|
|
|
authorized;
54,007,579 and 51,730,151 shares issued
|
540,076
|
|
517,302
|
Capital
in excess of par value
|
228,686,942
|
|
222,376,941
|
Less
cost of 63,644 and 18,000 treasury shares
|
(189,229)
|
|
(54,030)
|
Accumulated
deficit
|
(235,109,705)
|
|
(221,033,196)
|
Accumulated
other comprehensive income
|
178,065
|
|
207,604
|
Shareholders'
equity (deficiency)
|
(5,893,260)
|
|
2,015,257
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ 45,622,489
|
|
$ 56,589,277
|
|
|
|
|
|
|
|
The
accompanying notes to consolidated financial statements
are an
integral part of these statements
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES
|
|
|
$36,340,132
|
|
|
|
$29,627,638
|
|
|
|
$17,393,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUES
|
|
|
10,934,615
|
|
|
|
9,014,540
|
|
|
|
7,819,843
|
|
Gross
Profit
|
|
|
25,405,517
|
|
|
|
20,613,098
|
|
|
|
9,573,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and distribution
|
|
|
12,796,636
|
|
|
|
10,111,796
|
|
|
|
6,600,371
|
|
General
and administrative
|
|
|
8,615,381
|
|
|
|
7,824,741
|
|
|
|
7,402,188
|
|
Research
and development
|
|
|
6,206,157
|
|
|
|
5,778,641
|
|
|
|
6,596,339
|
|
Amortization
of licensing right
|
|
|
5,044,728
|
|
|
|
5,005,768
|
|
|
|
134,444
|
|
Total
operating expenses
|
|
|
32,662,902
|
|
|
|
28,720,946
|
|
|
|
20,733,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(7,257,385
|
)
|
|
|
(8,107,848
|
)
|
|
|
(11,160,104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
299,805
|
|
|
|
979,953
|
|
|
|
862,068
|
|
Interest
expense
|
|
|
(7,882,183
|
)
|
|
|
(7,946,048
|
)
|
|
|
(2,669,771
|
)
|
Other,
net
|
|
|
(100,516
|
)
|
|
|
(5,440
|
)
|
|
|
(55,773
|
)
|
|
|
|
(7,682,894
|
)
|
|
|
(6,971,535
|
)
|
|
|
(1,863,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before taxes
|
|
|
(14,940,279
|
)
|
|
|
(15,079,383
|
)
|
|
|
(13,023,580
|
)
|
State
income tax benefits
|
|
|
863,770
|
|
|
|
787,593
|
|
|
|
538,201
|
|
Net
loss
|
|
|
$(14,076,509
|
)
|
|
|
$(14,291,790
|
)
|
|
|
$(12,485,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
PER COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARE
- BASIC AND DILUTED
|
|
|
$(0.27
|
)
|
|
|
$(0.28
|
)
|
|
|
$(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
- AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
|
52,439,327
|
|
|
|
51,124,266
|
|
|
|
48,088,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to consolidated financial statements
are an
integral part of these statements.
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE OPERATIONS
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
$(14,076,509
|
)
|
|
|
$(14,291,790
|
)
|
|
|
$(12,485,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
curency translation
|
|
|
(29,539
|
)
|
|
|
8,560
|
|
|
|
21,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
$(14,106,048
|
)
|
|
|
$(14,283,230
|
)
|
|
|
$(12,463,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to consolidated financial statements
are an
integral part of these statements.
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
Series
B Convertible
Preferred
Stock
|
Series
E Convertible
Preferred
Stock
|
Common
Stock
|
|
|
|
Capital
in
Excess
of
Par
Value
|
Treasury
Stock
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
|
|
|
|
Number
of
Shares
|
Amount
|
|
Number
of
Shares
|
Amount
|
|
Number
of
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December
31, 2005
|
130
|
|
$ 1
|
|
69,000
|
|
$ 690
|
|
41,754,784
|
|
$ 417,548
|
|
$ 172,090,055
|
|
$ -
|
|
$
(193,258,323)
|
|
$ 177,143
|
|
$ (20,572,886)
|
|
Cumulative
effect adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
997,705
|
|
|
|
(997,705)
|
|
-
|
|
-
|
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
7,428,220
|
|
74,282
|
|
28,691,844
|
|
|
|
|
|
|
|
28,766,126
|
|
Options
exercised
|
|
|
|
|
|
|
|
|
335,049
|
|
3,350
|
|
1,018,409
|
|
|
|
|
|
|
|
1,021,759
|
|
Share
based compensation expense
|
|
|
|
|
|
|
|
|
161,875
|
|
1,619
|
|
1,246,830
|
|
|
|
|
|
|
|
1,248,449
|
|
Beneficial
conversion & warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
value
for convertible notes
|
|
|
|
|
|
|
|
|
|
|
|
|
14,754,656
|
|
|
|
|
|
|
|
14,754,656
|
|
Conversion
of Series C Preferred Stock
|
|
|
|
|
|
|
|
|
14,285
|
|
143
|
|
49,857
|
|
|
|
|
|
|
|
50,000
|
|
Purchase
of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,880)
|
|
|
|
|
|
(26,880)
|
|
Dividends
on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
(161,379)
|
|
|
|
|
|
|
|
(161,379)
|
|
Translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,901
|
|
21,901
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,485,378)
|
|
|
|
(12,485,378)
|
|
Balance,
December 31, 2006
|
130
|
|
$ 1
|
|
69,000
|
|
$ 690
|
|
49,694,213
|
|
$ 496,942
|
|
$ 218,687,977
|
|
$
(26,880)
|
|
$
(206,741,406)
|
|
$ 199,044
|
|
$ 12,616,368
|
|
Options
exercised
|
|
|
|
|
|
|
|
|
43,050
|
|
431
|
|
62,810
|
|
|
|
|
|
|
|
63,241
|
|
Share
based compensation expense
|
|
|
|
|
|
|
|
|
155,690
|
|
1,557
|
|
1,646,365
|
|
|
|
|
|
|
|
1,647,922
|
|
Conversion
of Series C Preferred Stock
|
|
|
|
|
|
|
|
|
1,564,548
|
|
15,645
|
|
2,059,355
|
|
|
|
|
|
|
|
2,075,000
|
|
Conversion
of Series E Preferred Stock
|
|
|
|
|
(5,453)
|
|
(55)
|
|
272,650
|
|
2,727
|
|
(2,672)
|
|
|
|
|
|
|
|
-
|
|
Purchase
of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,150)
|
|
|
|
|
|
(27,150)
|
|
Dividends
on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
(76,894)
|
|
|
|
|
|
|
|
(76,894)
|
|
Translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,560
|
|
8,560
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,291,790)
|
|
|
|
(14,291,790)
|
|
Balance,
December 31, 2007
|
130
|
|
$ 1
|
|
63,547
|
|
$ 635
|
|
51,730,151
|
|
$ 517,302
|
|
$ 222,376,941
|
|
$ (54,030)
|
|
$
(221,033,196)
|
|
$ 207,604
|
|
$ 2,015,257
|
|
(Continued)
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
Series
B Convertible
Preferred
Stock
|
Series
E Convertible
Preferred
Stock
|
Common
Stock
|
|
Capital
in
Excess
of
Par
Value
|
Treasury
Stock
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
|
|
|
Number
of
Shares
|
Amount
|
|
Number
of
Shares
|
Amount
|
|
Number
of
Shares
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
130
|
|
$ 1
|
|
63,547
|
|
$ 635
|
|
51,730,151
|
|
$ 517,302
|
|
$ 222,376,941
|
|
$ (54,030)
|
|
$ (221,033,196)
|
|
$ 207,604
|
|
$ 2,015,257
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
|
1,333,000
|
|
13,330
|
|
4,082,298
|
|
|
|
|
|
|
|
4,095,628
|
Options
exercised
|
|
|
|
|
|
|
|
|
|
318,149
|
|
3,182
|
|
591,673
|
|
|
|
|
|
|
|
594,855
|
Conversion
of Series C Preferred Stock
|
|
|
|
|
|
|
|
|
|
235,426
|
|
2,354
|
|
347,646
|
|
|
|
|
|
|
|
350,000
|
Conversion
of Series E Preferred Stock
|
|
|
|
|
|
(4,547)
|
|
(45)
|
|
227,350
|
|
2,273
|
|
(2,228)
|
|
|
|
|
|
|
|
-
|
Share
based compensation expense
|
|
|
|
|
|
|
|
|
|
163,503
|
|
1,635
|
|
1,345,756
|
|
|
|
|
|
|
|
1,347,391
|
Purchase
of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,199)
|
|
|
|
|
|
(135,199)
|
Dividends
on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,144)
|
|
|
|
|
|
|
|
(55,144)
|
Translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,539)
|
|
(29,539)
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,076,509)
|
|
|
|
(14,076,509)
|
Balance,
December 31, 2008
|
|
130
|
|
$ 1
|
|
59,000
|
|
$ 590
|
|
54,007,579
|
|
$ 540,076
|
|
$ 228,686,942
|
|
$
(189,229)
|
|
$
(235,109,705)
|
|
$ 178,065
|
|
$
(5,893,260)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to consolidated financial statements are an integral part of
these statements.
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
loss
|
$ (14,076,509)
|
|
$ (14,291,790)
|
|
$ (12,485,379)
|
Adjustments
to reconcile net loss to net
|
|
|
|
|
|
|
cash
used in operating activities -
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
5,510,802
|
|
5,462,888
|
|
395,003
|
|
|
Amortization
of beneficial conversion features
|
1,466,591
|
|
1,265,496
|
|
30,344
|
|
|
Amortization
of warrants
|
1,092,197
|
|
971,548
|
|
23,449
|
|
|
Provision
for doubtful accounts
|
4,267
|
|
15,000
|
|
105,855
|
|
|
Provision
for sales returns
|
1,399,991
|
|
992,502
|
|
1,802,868
|
|
|
Write-down
of inventories
|
746,905
|
|
80,961
|
|
612,094
|
|
|
Share
based compensation
|
1,347,391
|
|
1,647,922
|
|
1,248,448
|
|
|
Non-cash
interest expense on financing agreements
|
1,702,842
|
|
1,381,407
|
|
(4,539,253)
|
|
|
Recognition
of deferred income (Ardana)
|
(2,891,188)
|
|
-
|
|
-
|
|
|
Loss
on disposal of fixed assets
|
3,048
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities -
|
|
|
|
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
Accounts
receivable
|
244,449
|
|
(1,520,937)
|
|
1,345,895
|
|
|
Inventories
|
(76,915)
|
|
(1,023,052)
|
|
(895,699)
|
|
|
Prepaid
expenses and other current assets
|
184,775
|
|
(293,534)
|
|
(104,645)
|
|
|
Other
assets
|
943
|
|
(418,405)
|
|
(1,416,416)
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
Accounts
payable
|
(130,480)
|
|
(1,370,828)
|
|
1,681,389
|
|
|
Accrued
expenses
|
(1,281,338)
|
|
(211,709)
|
|
(1,009,251)
|
|
|
Deferred
revenue
|
(384,259)
|
|
(601,768)
|
|
124,321
|
|
|
|
Net
cash (used in) operating activities
|
(5,136,488)
|
|
(7,914,299)
|
|
(13,080,977)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
$ (375,926)
|
|
$ (102,021)
|
|
$ (15,757)
|
|
Acquisition
of intangibles
|
-
|
|
-
|
|
(33,000,000)
|
|
|
Net
cash used in investing activities
|
(375,926)
|
|
(102,021)
|
|
(33,015,757)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Net
proceeds from issuance of common stock
|
4,095,628
|
|
-
|
|
28,766,126
|
|
Proceeds
from issuance of subordinated
|
|
|
|
|
|
|
|
convertible
notes
|
-
|
|
-
|
|
39,999,998
|
|
Proceeds
from exercise of options
|
594,855
|
|
63,241
|
|
1,021,759
|
|
Payment
for purchase of treasury stock
|
(135,199)
|
|
(27,150)
|
|
(26,880)
|
|
Payment
pursuant to financing agreements
|
(3,540,949)
|
|
-
|
|
(5,391,268)
|
|
Dividends
paid
|
(55,144)
|
|
(76,894)
|
|
(161,379)
|
|
Net
cash or provided by or (used in) financing activities
|
959,191
|
|
(40,803)
|
|
64,208,356
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES ON
|
|
|
|
|
|
|
CASH
|
(171,206)
|
|
8,557
|
|
21,901
|
|
|
|
|
|
|
|
|
NET
(DECREASE)/ INCREASE IN CASH AND
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
(4,724,429)
|
|
(8,048,566)
|
|
18,133,522
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS,
|
|
|
|
|
|
|
Beginning
of year
|
17,221,811
|
|
25,270,377
|
|
7,136,854
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS,
|
|
|
|
|
|
|
End
of year
|
$ 12,497,382
|
|
$ 17,221,811
|
|
$ 25,270,377
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH
|
|
|
|
|
|
|
FLOW
INFORMATION
|
|
|
|
|
|
|
Interest
paid
|
$ 3,200,000
|
|
$ 2,488,889
|
|
$ -
|
|
|
|
|
|
|
|
|
|
Taxes
paid
|
$ 27,403
|
|
$ 34,759
|
|
$ 49,492
|
|
|
|
|
|
|
|
|
|
Accrual
of financing costs
|
$ -
|
|
$ 25,000
|
|
$ 1,275,000
|
|
|
|
|
|
|
|
|
|
Increase
of US Crinone License Right cost
|
$ -
|
|
$ 1,000,000
|
|
$ -
|
|
|
|
|
|
|
|
|
|
Conversion
of Series C preference shares to
|
$ 350,000
|
|
$ 2,075,000
|
|
$ 50,000
|
|
|
common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Series E preference shares to
|
|
|
|
|
|
|
|
common
stock
|
$ 454,700
|
|
$ 545,300
|
|
$ -
|
|
|
|
|
|
|
|
|
The
accompanying notes to consolidated financial statements
are an
integral part of these statements.
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
:
Organization
-
Columbia
Laboratories, Inc. (the "Company" or “Columbia”) was incorporated as a Delaware
corporation in December 1986. The Company is primarily dedicated to research,
development, and commercialization of women’s healthcare and endocrinology
products, including those that treat or are intended to treat infertility,
endometriosis, dysmenorrhea, preterm birth for women with a short cervix at
mid-pregnancy and hormonal deficiencies. The Company has also developed 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 accounting principles
generally accepted in the United States of America 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. Significant estimates are used for, but are not
limited to sales return reserves, license fees, payments to distributors,
intangible assets, and share based compensation. Actual results could differ
from those estimates in the near term.
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 shareholders'
equity. Transaction gains and losses are reflected in the Statements of
Operations.
Accounts
Receivable-
Accounts
receivable are reported at their outstanding unpaid principal balances reduced
by allowances 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.
The
estimated fair value of the convertible subordinated notes payable and
beneficial conversion feature amounted to $33,009,841 and $40,000,000 at
December 31, 2008 and 2007, respectively. This value is the aggregate of the
estimated future cash flows associated with the settlement of the notes payable
and the intrinsic value of the beneficial conversion feature. The fair value of
accounts receivable, accounts payable and the financing agreements described in
Note 5 approximates their carrying amount.
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,
|
|
|
|
|
2008
|
|
2007
|
|
Finished
goods
|
$ 1,745,222
|
|
$ 1,734,052
|
|
Raw
materials
|
631,917
|
|
1,313,077
|
|
|
$ 2,377,139
|
|
$ 3,047,129
|
|
|
|
|
|
|
Shipping
costs are included in selling and distribution expenses and amounted to
approximately $152,000, $102,000 and $39,000, in 2008, 2007 and 2006
respectively.
Property and
Equipment
-
Property
and equipment is stated at cost less accumulated depreciation. Leasehold
improvements are amortized over the lesser of the useful life or the term of the
respective leases. Depreciation is computed on the straight-line basis over the
estimated useful lives of the respective assets, as follows:
|
|
Years
|
|
|
|
|
|
Software
|
|
|
3
|
|
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.
Depreciation
expense amounted to approximately $203,000, $215,000 and $250,000 in 2008, 2007
and 2006, respectively.
Concentration of
Risk-
The
Company sells its products to customers worldwide. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
See Note 10 for customer concentrations.
The
Company depends on one supplier for a key excipient (ingredient) used in its
products and one supplier for one of the active pharmaceutical
ingredients.
On
December 22, 2006, the Company acquired the U.S. rights to CRINONE (progesterone
gel).
The
cost of the acquisition was $33,000,000 in cash and is being amortized over a
6.75-year period. On April 1, 2007, the Company recorded a liability from the
contract with Merck Serono for certain sales returns associated with sales made
by Merck Serono. The Company recorded the estimated liability of $1,000,000 as
an increase in the purchase price that is being amortized over the remaining
term of the license.
|
2008
|
|
2007
|
Balance
at January 1
|
$ 34,000,000
|
|
$ 34,000,000
|
Accumulated
amortization
|
(10,184,940)
|
|
(5,140,212)
|
Balance
at December 31
|
$ 23,815,060
|
|
$ 28,859,788
|
|
|
|
|
Amortization
expense amounted to $5,044,728, $5,005,768 and $134,444 in 2008, 2007, and 2006,
respectively.
Amortization
expense for future periods are expected to be:
Year
|
Amortization
|
2009
|
$ 5,044,728
|
2010
|
5,044,728
|
2011
|
5,044,728
|
2012
|
5,044,728
|
2013
|
3,636,148
|
Total
|
$
23,815,060
|
|
|
Income
Taxes
Deferred
tax assets or liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities, as measured by
enacted tax rates. A valuation allowance is provided against deferred income tax
assets in circumstances where management believes the recoverability of a
portion of the assets is more likely than not. The Company has provided a full
valuation allowance against its net deferred tax assets as of December 31, 2008
and 2007.
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 revenue in measuring whether the long-lived asset is
recoverable. Unrecoverable amounts are charged to operations.
Accrued Expenses
-
Accrued
expenses consist of the following:
|
2008
|
|
2007
|
Sales
returns & price adjustments
|
$ 2,789,316
|
|
$
1,923,765
|
Salaries
|
332,657
|
|
757,587
|
Interest
|
800,000
|
|
800,000
|
Professional
fees
|
483,193
|
|
441,525
|
Inventory
management fees
|
359,376
|
|
553,463
|
Marketing
expenses
|
34,652
|
|
244,177
|
Royalties/Other
|
181,449
|
|
183,364
|
|
$ 4,980,643
|
|
$
4,903,881
|
|
|
|
|
|
|
|
|
Revenue
Recognition
Revenues
on sales of products by Columbia are discussed in detail below. License fees are
recorded over the life of the license. Royalty revenues, based on sales by
licensees, are recorded as revenue as those sales are made by the
licensees.
Sales Return
Reserves-
Revenues
from the sale of products are recorded at the time goods are shipped to
customers. The Company believes that it has not made any shipments in excess of
its customers' ordinary course of business inventory levels. The Company’s
return policy allows product to be returned for a period beginning three months
prior to the product expiration date and ending twelve months after the product
expiration date. Provisions for returns on sales to wholesalers, distributors
and retail chain stores are estimated based on a percentage of sales, using such
factors as historical sales information, distributor inventory levels and
product prescription data, and are recorded as a reduction to sales in the same
period as the related sales are recognized. The Company assumes that its
customers are using the first-in, first-out method in filling orders so that the
oldest saleable product is used first. The Company records a provision for
returns on a quarterly basis using an estimated rate and adjusts the provision
if its analysis indicates that the potential for product non-saleability
exists.
An
analysis of the reserve for sales returns is as follows:
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
Balance
at beginning of year
|
$ 1,923,765
|
|
$ 1,240,234
|
|
$ 745,882
|
Addition
Related to Crinone® purchase
|
|
|
1,000,000
|
|
-
|
Adjusted
Balance at Beginning of year
|
1,923,765
|
|
2,240,234
|
|
745,882
|
Provision:
|
|
|
|
|
|
Related
to current year sales
|
674,020
|
|
527,819
|
|
210,275
|
Related
to prior years' sales
|
725,971
|
|
500,000
|
|
1,592,592
|
|
1,399,991
|
|
1,027,819
|
|
1,802,867
|
|
|
|
|
|
|
Returns:
|
|
|
|
|
|
Related
to current year sales
|
(130,551)
|
|
(61,125)
|
|
(46,825)
|
Related
to 2006 Crinone purchase
|
(300,152)
|
|
(328,896)
|
|
-
|
Related
to prior years' sales
|
(1,028,737)
|
|
(954,267)
|
|
(1,261,690)
|
|
(1,459,440)
|
|
(1,344,288)
|
|
(1,308,515)
|
|
|
|
|
|
|
Balance
at end of year
|
$ 1,864,316
|
|
$ 1,923,765
|
|
$ 1,240,234
|
|
|
|
|
|
|
The
Company believes that the greatest potential for uncertainty in estimating sales
returns is the estimation of future prescriptions. They are wholly dependent on
the Company’s ability to sell and market the products. If prescriptions are
lower in future periods, then the current reserve will be
inadequate.
In the
2006 fourth quarter, the Company purchased the U.S. rights to CRINONE for $33
million. As part of the transaction, the Company repurchased inventory and
reversed sales of $0.6 million in the fourth quarter. In 2007, the Company
recorded an estimated liability of $1.0 million for certain sales returns
associated with sales made by Merck Serono.
Sales
returns provisions for the year 2008 were $1.4 million of which $0.7 million was
based on 2008 sales and the balance was based on previous year sales. In 2007,
sales return provisions were $2.0 million including $1.0 million in the second
quarter as an increase in the purchase price of the U.S. rights to CRINONE for
future returns as a result of product sold by Merck Serono that was still in the
channel at the time of purchase of such rights. The provision in 2007 increased
by $0.3 million from 2006 levels to primarily reflect the increase in sales of
progesterone products. During 2007, the Company undertook to reduce further its
PROCHIEVE inventory levels in distribution channels.
Sales
returns provisions for the year 2006 were $1.8 million, including $1.1 million
in the fourth quarter. One customer returned approximately $0.5 million of
product due to short dating. In addition, the Company increased its reserve by
$0.4 million. The Company carried out a plan in 2006 to bring STRIANT inventory
levels in distribution channels to demand levels.
License Fees
-
License
revenue consists of up-front, milestone and similar payments under license
agreements and is recognized when earned under the terms of the applicable
agreements. Milestone payments represent payments for the occurrence of
contract-specified events and coincide with the achievement of a substantive
element in a multi-element arrangement. License revenue, including milestone
payments, is deferred and recognized in revenues over the estimated product life
cycle or the length of relevant patents, whichever is shorter.
Payments to
Distributors-
The
Company estimates fees it pays its distributors and specialty pharmacies for
customer services that include supplemental sales calling, providing information
about their customers and the processing of sales returns. The fees for these
services have historically been charged to selling and distribution expenses. In
2008, these charges were split between selling and marketing expenses and as
reduction to sales; the costs charged to selling and distribution expense in
2008 were $0.5 million and costs charged as a reduction to sales were $0.7
million 2008. In 2007 these fees were $0.6 million and were charged to selling
and distribution expense.
Advertising Expense
-
All costs
associated with advertising and promoting products are expensed in the year
incurred. Advertising and promotion expense was approximately $2.1 million in
2008, $0.9 million in 2007 and $1.3 million in 2006 and is included in selling
and distribution expense.
Research and Development
Costs-
Company-sponsored
research and development costs related to future products are expensed as
incurred.
Share-based
compensation
-
On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which
requires the measurement and recognition of compensation expense for all
stock-based awards made to employees and directors including employee stock
options based on estimated fair values. SFAS 123(R) supersedes previous
accounting under Accounting Principles Board Opinion No. 25, “Accounting
for Stock Issued to Employees” (“APB 25”) for periods beginning in fiscal year
2006. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB
107”) providing supplemental implementation guidance for SFAS 123(R). The
Company has applied the provisions of SAB 107 at the same time it adopted SFAS
123(R).
SFAS
123(R) requires companies to estimate the fair value of stock-based awards on
the date of grant using an option pricing model. The value of the portion of the
award that is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company’s Consolidated Statements of
Operations. The Company adopted SFAS 123(R) using the modified prospective
transition method which requires the recognition of expense relative to
existing, unvested awards from January 1, 2006. The Company’s Consolidated
Financial Statements, as of and for the years ended December 31, 2008, 2007
and 2006, reflect the impact of SFAS 123(R). Employee stock-based compensation
expenses for the years ended December 31, 2008, 2007 and 2006, was $1,314,571, $
1,490,059 and $1,065,383 respectively, which consisted primarily of stock-based
compensation expense related to employee stock options recognized under SFAS
123(R).
Share-based compensation expense recognized during a period is
based on the value of the portion of share-based awards that is ultimately
expected to vest. Stock-based compensation expense recognized in the years ended
December 31, 2008, 2007 and 2006 included compensation expense for share-based
awards granted prior to, but not yet vested as of December 31, 2005, based
on the fair value on the grant date estimated in accordance with the pro forma
provisions of SFAS 123, and compensation expense for the stock-based awards
granted or modified subsequent to December 31, 2005, based on the fair
value on the grant date estimated in accordance with the provisions of SFAS
123(R). In conjunction with the adoption of SFAS 123(R), the Company is
continuing to use the straight line method of attributing the value of
stock-based compensation expense. Because stock-based compensation expense to be
recognized in the results for periods beginning after December 31, 2005, is
based on awards ultimately expected to vest, the amounts will be reduced for
estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
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. Diluted earnings per share gives effect to dilutive options, warrants
and other potential Common Stock outstanding during the year. 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 anti-dilutive. Outstanding options and
warrants excluded from the calculation amounted to 9,731,213, 9,704,058 and
9,554,307, at December 31, 2008, 2007 and 2006, respectively.
Cash Equivalents
-
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.
Reclassifications
-
For
comparability purposes, certain 2007 and 2006 amounts in the Consolidated
Financial Statements have been reclassified, where appropriate, to conform to
the financial statement presentation used in 2008. The sale of New
Jersey operating losses has been reclassified from Other Income Expense to State
Income Tax Benefits. For the years ended December 31, 2006 and 2007, this
amounted to $538,201 and $787,593, respectively.
Recent Accounting
Pronouncements
In June
2008, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues
Task Force (“EITF”) Issue No. 07-5,
“Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”)
. EITF 07-5 provides that an entity should use a two step approach
to evaluate whether an equity-linked financial instrument (or embedded feature)
is indexed to its own stock, including evaluating the instrument’s contingent
exercise and settlement provisions. It also clarifies on the impact of foreign
currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The Company does not expect an effect with
the adoption of EITF 07-5 on the Company’s financial condition and results of
operations.
In June
2008, the Financial Accounting Standards Board (“FASB”) issued Emerging Issues
Task Force (“EITF”) Issue No. 08-4, “
Transition Guidance for Conforming
to Issue No. 98-5 (“EITF no. 08-4”)”.
The objective of EITF No. 08-4 is
to provide transition guidance for conforming changes made to EITF No. 98-5,
“Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Rations
,” that result from EITF No. 00-27
“Application of Issue No. 98-5 to
Certain Convertible Instruments,”
and SFAS No. 150,
“Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.”
This
issue is effective for financial statements issued for fiscal years ending after
December 15, 2008. Early application is permitted. The Company is currently
evaluating the impact of adoption of EITF No. 08-4 on the accounting for the
convertible notes and related warrants transactions.
In May
2008, the FASB issued FASB Staff Position (“FSP”) No. APB 14-1,
“Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)”
(“FSP APB 14-1”). FSP APB 14-1 clarifies that convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14,
“Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants”
. Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is not permitted. The Company does not expect
an effect with the adoption of FSP APB 14-1 on the Company’s financial condition
and results of operations.
In March
of 2008, FASB issued SFAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities”
– An Amendment of FASB Statement No.
133, which expands the disclosure requirements in Statement 133 about an
entity’s derivative instruments and hedging activities. It is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The Company does not expect an effect with the adoption of
SFAS No. 161 on its financial position, cash flows, and statements of
operations.
In
September 2006, the FASB issued SFAS No. 157,
“Fair Value Measurements”
(“SFAS No. 157”), which clarifies the definition of fair value, establishes
guidelines for measuring fair value, and expands disclosures regarding fair
value measurements. SFAS No. 157 does not require any new fair value
measurements and eliminates inconsistencies in guidance found in various prior
accounting pronouncements. On February 12, 2008, the FASB issued FSP 157-b (“FSB
157-b”) which delays the effective date of SFAS No. 157 for one year for all
non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). SFAS No. 157 and FSP 157-b are effective for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
year. The effective date of SFAS No. 157 would be deferred to Fiscal years
beginning after November 15, 2008 and for interim periods within those years for
certain non-financial assets and liabilities. The Company has adopted SFAS No.
157 for financial assets and liabilities in 2008 which had no effect and is
evaluating the effect on non financial assets and liabilities will have on its
financial position, cash flows or results of operations.
In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, “
The Fair Value Option
for Financial Assets and Financial Liabilities
” (“SFAS 159”). SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at fair
value. SFAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar assets and liabilities. SFAS 159 is effective
for financial statements issued for fiscal years beginning after November 15,
2007. The adoption of SFAS No. 159 on January 1, 2008 did not have a material
impact on our financial statements.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “
Business Combinations
” (“SFAS
141(R)”). SFAS 141(R) will change the accounting for business combinations.
Under SFAS 141(R), an acquiring entity will be required to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value with limited exceptions. SFAS 141(R) will change the accounting
treatment and disclosure for certain specific items in a business combination.
SFAS 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. SFAS 141(R) will impact the
Company in the event of any future acquisition.
In
December 2007, the FASB also issued SFAS No. 160, “
Non-controlling Interests in
Consolidated Financial Statements—an Amendment of Accounting Research Bulletin
No. 51
” (“SFAS 160”). SFAS 160 establishes new accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the
recognition of a non-controlling interest (minority interest) as equity in the
Consolidated Financial Statements and separate from the parent’s equity. The
amount of net income attributable to the non-controlling interest will be
included in consolidated net income on the face of the income statement. SFAS
No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if the parent
retains its controlling financial interest. In addition, this statement requires
that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the
non-controlling equity investment on the deconsolidation date. SFAS No. 160 also
includes expanded disclosure requirements regarding the interests of the parent
and its non-controlling interest. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
Company does not expect an effect with the adoption of SFAS No. 160 will have on
its financial position, cash flows or results of operations.
In June
2008, the FASB issued FSP No. 03-6-1
“Determining Whether Instruments
Granted In Share-Based Payment Transactions are Participating Securities”
(“FSP -3-6-1”). FSP 03-6-1 clarifies that unvested share-based payment awards
that contain nonforfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and are to be included in the
computation of earnings per share under the two-class method described in SFAS
No. 128, “Earnings Per Share.” FSP 03-6-1 is effective for the Company on
January 1, 2009 and requires all presented prior-period earnings per share data
to be adjusted retrospectively. The Company is currently evaluating the impact
that adopting FSP 03-6-1 will have on its financial position, cash flows, and
statements of operations.
In
October 2008, the FASB issued FSP No. 157-3,
“Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active”
(“FSP
157-3”). FSP 157-3 clarifies the application of SFAS 157 in a market that is not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for that financial asset is
not active. FSP 157-3 was effective for the Company on September 26, 2008 for
all financial assets and liabilities recognized or disclosed at fair value in
our Condensed Consolidated Financial Statements on a recurring basis (at least
annually). The adoption of FSP157-3 did not have a material impact on the
Company’s financial position, cash flows, and statements of
operations.
(2) INCOME
TAXES
Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes - An Interpretation
of FASB No 109.” FIN 48 provides detailed guidance for the financial statement
recognition, measurement and disclosure of uncertain tax positions recognized in
the financial statements in accordance with SFAS No. 109. Tax positions must
meet a “more-likely-than-not” recognition threshold at the effective date to be
recognized upon the adoption of FIN 48 and in subsequent periods. Upon the
adoption of FIN 48, the Company had no unrecognized tax benefits. During the
year ended December 31, 2008, the Company recognized the expiration of certain
tax losses and had no adjustments for uncertain tax benefits.
The
reconciliation of the effective income tax rate to the federal statutory rate is
as follows:
|
|
2008
|
|
2007
|
|
2006
|
Federal
income tax rate
|
-34.0%
|
|
-35.0%
|
|
-34.0%
|
Statutory
rate over expected future
|
|
|
|
|
|
federal
benefit
|
0.0%
|
|
1.0%
|
|
0.0%
|
Foreign
income tax benefit/loss
|
-18.2%
|
|
-12.6%
|
|
-8.4%
|
State
tax net of federal benefit
|
-11.0%
|
|
-9.9%
|
|
-8.2%
|
Permanent
Items:
|
|
|
|
|
|
Incentive
Stock Options
|
1.0%
|
|
0.0%
|
|
0.0%
|
R&D
Credit
|
|
0.0%
|
|
0.0%
|
|
1.0%
|
Other
|
|
1.0%
|
|
1.6%
|
|
2.6%
|
Effect
of permanent differences
|
2.0%
|
|
1.6%
|
|
3.6%
|
Effective
income tax rate
|
-61.2%
|
|
-54.9%
|
|
-47.0%
|
Increase
in valuation allowance
|
55.4%
|
|
49.7%
|
|
42.9%
|
Effective
income tax rate
|
-5.8%
|
|
-5.2%
|
|
-4.1%
|
|
|
|
|
|
|
|
As of
December 31, 2008, the Company has U.S. tax net operating loss carryforwards of
approximately $150.6 million which expire through 2028. The Company also has
unused tax credits of approximately $1.3 million which expire at various dates
through 2027. Utilization of net operating loss carryforwards may be limited in
any year due to limitations in the Internal Revenue Code.
The
Company recognizes interest and penalties, if any, related to uncertain tax
positions in general and administrative expenses. No interest and penalties
related to uncertain tax positions were accrued at December 31,
2008.
|
|
|
|
|
|
|
|
|
|
|
Deferred
Tax Assets (Liabilities)
|
2008
|
|
2007
|
|
|
|
|
|
|
FASB
123R
|
$ 533,937
|
|
$ 973,848
|
|
Allowance
for doubtful accounts
|
28,125
|
|
26,525
|
|
Allowance
for returns
|
591,241
|
|
346,412
|
|
Inventory
reserve
|
163
|
|
71,889
|
|
Book
accumulated depreciation net of tax
|
(19,096)
|
|
(8,779)
|
|
Accum
amortization - CRINONE license
|
2,096,436
|
|
1,054,663
|
|
Vacation accrual
|
15,000
|
|
14,634
|
|
Inventory
capitalization
|
25,604
|
|
17,318
|
|
Patents
|
112,500
|
|
-
|
|
Long
term debt (book amortization beneficial conversion)
|
(2,152,372)
|
|
(2,694,844)
|
|
Federal
net operating loss
|
50,962,090
|
|
58,983,654
|
|
State
net operating loss
|
2,573,071
|
|
-
|
|
Unused
R&D credit
|
1,323,385
|
|
1,743,065
|
|
Net
Deferred Tax Assets
|
56,090,084
|
|
60,528,385
|
|
|
|
|
|
|
Less
Valuation Allowance:
|
|
|
|
|
Federal
|
(56,090,084)
|
|
(60,528,385)
|
|
|
|
|
|
|
Deferred
Tax Assets
|
$ -
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
In 2008,
the Company reduced net operating loss amounts and valuation allowances by $22.8
million due to the expiration of tax losses.
The
Company files income tax returns as well as multiple state, local and foreign
jurisdiction tax returns. Tax years ended December 31, 2005 or later
remain subject to examination by the IRS. State and local jurisdiction tax
returns remain subject to examination for tax years ended December 31, 2005 or
later.
(3)
STRATEGIC ALLIANCE AGREEMENTS:
In May
1995, the Company entered into a worldwide license and supply agreement with
American Home Products Corporation (“Wyeth”) under which its Wyeth-Ayerst
Laboratories division marketed CRINONE. The Company supplied CRINONE to Wyeth at
a price equal to 30% of Wyeth’s net selling price. On July 2, 1999, Wyeth
assigned the license and supply agreement to Ares-Serono (now “Merck Serono”).
In June 2002 the Company acquired the right to market a second brand of its 8%
and 4% progesterone gel products under the trade name “PROCHIEVE
®
” to
obstetricians, gynecologists and all other physicians in the United States that
were not on Merck Serono’s target list of fertility specialists. Under this
agreement the Company paid a 30% royalty to Merck Serono based on net sales of
the product and an additional royalty of 40% of PROCHIEVE’s net sales to the
infertility specialist market. The Company paid approximately $1,365,000 to
Merck Serono in accordance with this agreement in 2006. In December 2006, the
Company acquired the U.S. marketing rights to CRINONE from Merck Serono and
eliminated further PROCHIEVE royalty payments. The Company continues to supply
CRINONE to Merck Serono for all non-U.S. requirements. During the year ended
December 31, 2008, the Company recorded an adjustment to revenues of $350,000
related to estimated price adjustments for CRINONE sold to Merck Serono in
2007. Also the Company recorded a $575,000 charge for estimated 2008
price adjustments under the agreement. These adjustments are for the
effects of government tenders awarded and foreign exchange differences from
established rates at the beginning of each year.
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 $0.5 million, net of expenses, and expects
to receive future milestone payments as products are made available by the
Company.
Effective
May 5, 2000, the Company licensed its Legatrin
®
PM brand
to Lil’ Drug Store. Under the terms of this agreement, the Company receives
license fees equal to 20% of the licensee’s net sales of Legatrin PM. This
agreement had a five-year term with provisions for renewal and contains an
option that allows the licensee to acquire this brand from the Company. The
license for Advanced Formula Legatrin PM renewed automatically to May
2010.
On October 16, 2002, the Company and Ardana entered into a
license and supply agreement for STRIANT in 18 European countries (excluding
Italy). Under the agreement the Company received $6.0 million. In July 2008, the
Company terminated the development and license agreement pursuant to its rights
under the agreement to terminate it in the event of the insolvency of Ardana.
Ardana announced in June 2008 that it suspended trading in its shares, was no
longer in a position to continue its operations, and had appointed
administrators of the company. In the quarter ended September 30, 2008, the
Company recognized $2.9 million of deferred revenue from the cancellation of the
agreement. The Company recognized license revenue under this agreement of $3.2,
$0.7, and $0.7 million in 2008, 2007, and 2006, respectively.
In May
2003, the Company and Mipharm entered into an agreement under which Mipharm will
market, distribute and sell STRIANT in Italy. In exchange for these rights,
Mipharm is obligated to pay the Company an aggregate of $1.4 million upon
achievement of certain milestone events, including $350,000 that was paid in
2003. The Company received a payment of $100,000, less VAT withholding, in 2004
on account of the UK approval of STRIANT and a payment of $150,000, less VAT
withholding, in 2007 on marketing authorization in Italy in late 2006. Mipharm
will provide additional performance payments upon the achievement of certain
levels of sales in Italy, and the Company will receive a percentage markup on
the cost of goods for each unit sold. Mipharm is a manufacturer of STRIANT under
a May 2002 agreement. The Company is recognizing the license revenue on this
agreement over a 132 month period and accordingly has recognized revenue of
$53,199, $41,574 and $41,574 in 2008, 2007, and 2006, respectively. The
remaining $305,433 as of December 31, 2008 is shown as deferred revenue in the
accompanying consolidated balance sheets.
In June
2004, the Company sold the worldwide rights to its over-the-counter products
Advantage-S
®
Contraceptive Gel and RepHresh
®
Vaginal
Gel and the foreign rights to Replens
®
Vaginal
Moisturizer to Lil’ Drug Store. The Company also sold its existing finished
goods inventory of these products to Lil’ Drug Store. Additionally, the
companies executed a five year supply agreement and a two and one-half year
agreement for the Company’s sales force to promote these products to
obstetricians and gynecologists in the United States which expired in December
2006. The production and sale of Advantage-S was discontinued during 2006. The
Company continues to receive revenues from the manufacture and sale of RepHresh
and Replens to Lil’ Drug Store and royalties on sales of these products
manufactured by third parties through October 2009.
On
September 27, 2007, the Company entered into a License and Supply Agreement with
Ascend Therapeutics, Inc. (“Ascend”), pursuant to which the Company granted
Ascend an exclusive, five year license to market and sell the Company’s
PROCHIEVE 4% (progesterone gel) product in the United States effective January
1, 2008. Ascend will purchase product from Columbia at a transfer price equal to
35% of Ascend’s net selling price with minimum annual purchase obligations that
increase over the life of the agreement.
(4) NOTES
PAYABLE:
On
December 22, 2006, the Company raised approximately $40 million in gross
proceeds to the Company from the sale of convertible subordinated notes to a
group of existing institutional investors. The notes bear interest at a rate of
8% per annum and are subordinated to the PharmaBio financing agreements (see
Note 5) and mature on December 31, 2011. They are convertible into a total of
approximately 7.6 million shares of Common Stock at a conversion price of $5.25.
Investors also received warrants to purchase 2,285,714 shares of Common Stock at
an exercise price of $5.50 per share. The warrants became exercisable on June
20, 2007, and expire on December 22, 2011, unless earlier exercised or
terminated. The Company used the proceeds of this offering to acquire
from Merck Serono the U.S. marketing rights to CRINONE for $33.0 million and
purchased Merck Serono’s existing inventory of that product. The balance of the
proceeds was used to pay other costs related to the transaction and for general
corporate purposes.
The Company recorded original issue discounts of $6,272,566 to
the notes based upon the fair value of warrants granted. In addition, beneficial
conversion features totaling $8,482,090 have been recorded as a discount to the
notes. These discounts are being amortized at an imputed rate over the five year
term of the related notes. For the years ended December 31, 2008, 2007 and 2006,
$2,535,788, $2,237,043 and $53,793, respectively, of amortization related to
these discounts is classified as interest expense in the consolidated
statements of operations. Unamortized discounts of $9,925,034 and $12,463,822
have been reflected as a reduction to the face value of the convertible notes in
the consolidated balance sheets as of December 31, 2008 and 2007,
respectively.
(5) FINANCING
AGREEMENTS:
In an
agreement dated July 31, 2002, PharmaBio Development (“PharmaBio”), 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 were subject to
minimum ($8 million) and maximum ($12 million) amounts, and because the minimum
amount exceeds $4.5 million, the Company has recorded the amounts received as
liabilities. The excess of the minimum ($8 million) to be paid by the Company
over the $4.5 million received by the Company is being recognized as interest
expense over the five-year term of the agreement, assuming an interest rate of
17%. The Company recorded $0, $617,016 and $615,709 as interest expense for the
years 2008, 2007 and 2006, respectively. The agreement called for a true-up
payment, if by February 28, 2005, the Company had not made $2,750,000 in royalty
payments to PharmaBio. The amounts paid to PharmaBio were $0 for 2008, $647,884
for 2007 and $548,464 for 2006. The final payment of $3.6 million was made on
February 29, 2008.
In an
agreement dated March 5, 2003 (the “STRIANT Agreement”), PharmaBio agreed to pay
the Company $15 million in five quarterly installments commencing with the
signing of the STRIANT Agreement. In return, PharmaBio 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 commenced in the 2003 third quarter and are subject to
minimum ($30 million) and maximum ($55 million) amounts. Because the minimum
amount exceeds the $15 million received by the Company, the Company has recorded
the amounts received as liabilities. The excess of the minimum ($30 million) to
be paid by the Company over the $15 million received by the Company is being
recognized as interest expense over the seven-year term of the STRIANT
Agreement, assuming an interest rate of 15%. The Company recorded $1,878,364,
$1,648,756 and $1,900,640 as interest expense in 2008, 2007 and 2006,
respectively. The STRIANT Agreement called for a true-up payment on November 14,
2006 equal to the difference between royalties paid through and for the third
quarter of 2006 and $13,000,000. On April 14, 2006, the Company entered into a
letter agreement (the “Letter Agreement”) with PharmaBio pursuant to which the
Company agreed to pay approximately $12 million of this true-up payment seven
months early. Accordingly, on April 14, 2006, the Company paid PharmaBio
$11,585,235 (the “Early Payment”), which was the present value of a November 14,
2006 $12 million true-up payment using a six percent (6%) annual discount
factor. In consideration of such payment, PharmaBio agreed that PharmaBio would
be deemed (solely for purposes of the STRIANT Agreement) to have received on
account of that payment $12 million for purposes of the true-up payment. In the
event that, as of the payment date for the true-up payment, the aggregate amount
of royalties paid under the STRIANT Agreement, including the Early Payment,
exceeded $13 million, the Company would have been entitled to have such excess
reimbursed. Including the Early Payment, the Company has paid PharmaBio
approximately $13.3 million through 2008. The balance of the minimum
royalty payments, estimated to be $16.4 million, is due November
2010.
Liabilities
from financing agreements consist of the following:
|
December
31
|
|
|
|
2008
|
|
2007
|
|
|
|
|
July
31, 2002 financing agreement
|
-
|
|
$ 3,620,653
|
March
5, 2003 financing agreement
|
13,294,244
|
|
11,591,486
|
|
13,294,244
|
|
15,212,139
|
Less:
current portion
|
168,034
|
|
3,786,538
|
|
$ 13,126,210
|
|
$ 11,425,601
|
|
|
|
|
(6)
CONTINGENTLY REDEEMABLE SERIES C CONVERTIBLE PREFERRED 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, has a stated redemption 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 (not to exceed 2,705,236 shares). The Series C Preferred Stock
pays a 5% dividend, payable quarterly in arrears on the last day of the quarter.
In 2003, 500 shares of Series C Preferred Stock were converted into 142,857
Common Shares, in 2006, 50 shares of Series C Preferred Stock were converted
into 14,285 Common Shares, in 2007, 2,075 shares of Series C Preferred Stock
were converted into 1,564,548 Common Shares and in 2008, 350 shares of Series C
Preferred Stock were converted into 235,426 Common Shares. Each holder of Series
C Preferred Stock has the right to redeem all or a portion of their shares in
cash and upon the occurrence of certain events under the Series C Preferred
Stock certificate of designations.
(7) SHAREHOLDERS’
EQUITY
Preferred Stock
-
Authorized Preferred Stock is 1,000,000 shares at a par value of $0.01 per
share.
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 shares of Common Stock. At December 31,
2008 only 130 shares remain outstanding.
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.
On March
12, 2002, the Company adopted a Shareholder Rights Plan (“Rights Plan”) designed
to protect company shareholders 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 shareholders 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.
On May
10, 2005, the Company raised $6.9 million from the issuance and sale of 69,000
shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”). The
Series E Preferred Stock has a stated value of $100 per share. Each share of the
Series E Preferred Stock may be converted by the holder into 50 shares of Common
Stock, subject to adjustment, and will automatically be converted into Common
Stock at that rate upon the date that the average of the daily market prices of
the Company’s Common Stock for the 20 consecutive trading days preceding such
date exceeds $6.00 per share. The Series E Preferred Stock pays no dividends and
contains voting rights equal to the number of shares of Common Stock into which
each share of Series E Preferred Stock is convertible. Upon liquidation of the
Company, the holders of the Series E Preferred Stock are entitled to $100 per
share. In 2007, 5,453 shares of Series E Preferred Stock were converted into
272,650 shares of Common Stock. In 2008, 4,547 shares of Series E Preferred
Stock were converted into 227,350 shares of Common Stock.
Common
Stock-
During
2008, the Company issued 1,330,000 shares of Common Stock in an offering with
proceeds net of offering costs of $4,095,628. The Company issued 318,149 shares
of Common Stock for the exercise of stock options for proceeds of
$594,855. Also, in 2008, 350 shares of Contingently Redeemable Series
C Preferred Stock were converted into 235,426 Shares of Common Stock and 4,547
shares of Series E Preferred Stock were converted into 227,350 Shares of Common
Stock. The Company granted 163,503 shares of restricted stock to its key
employees and to members of the Board of Directors.
During
2007, the Company issued 43,050 shares of Common Stock for the exercise of stock
options with proceeds of $63,241, and 155,690 shares of restricted Common Stock
were granted to its key employees and to members of the Board of
Directors. Also, in 2007, 2,075 shares of Contingently Redeemable
Series C Preferred Stock were converted into 1,564,548 Shares of Common
Stock.
In March
2006, the Company issued 7,428,220 shares of its Common Stock to a group of new
and existing investors, which resulted in the Company receiving $28,766,126,
after expenses. Also, in 2006, 50 shares of Contingently Redeemable
Series C Preferred Stock were converted into 14,285 Shares of Common
Stock.
As of
December 31, 2008, the Company had warrants outstanding for the purchase of
4,867,755 shares of Common Stock. Information on outstanding warrants is as
follows:
Weighted
Average Exercise Price
|
Warrants
|
|
|
|
$ 4.81
|
|
200,000
|
5.39
|
|
1,857,041
|
5.50
|
|
2,285,714
|
5.85
|
|
100,000
|
7.50
|
|
75,000
|
8.35
|
|
350,000
|
$ 5.69
|
|
4,867,755
|
|
|
|
During
2006, warrants to purchase 1,857,041 shares of the Company’s Common Stock at an
exercise price of $5.39 per share were issued to investors in the March 2006
financing which by their terms expire March 11, 2011. Also in 2006, warrants to
purchase 2,285,714 shares of the Company’s Common Stock at an exercise price of
$5.50 per share were issued to investors in the December 2006 financing
which by their terms expire on December 22, 2011.
No
warrants were exercised in 2008, 2007, or 2006. No warrants were issued in 2008
and 2007.
As of
December 31, 2008, all warrants were exercisable.
(8) STOCK-BASED
COMPENSATION
The
following table summarizes the impact of the adoption of SFAS 123(R) on
stock-based compensation costs on the Company’s Consolidated Statements of
Operations for the years ended December 31, 2008, 2007 and 2006:
|
Twelve
Months Ended
|
|
|
|
December
31,
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
Employee
stock-based compensation in:
|
|
|
|
|
|
Cost
of revenue
|
$ 68,046
|
|
$ 148,589
|
|
$ 82,720
|
|
|
|
|
|
|
Selling
and distribution
|
175,375
|
|
160,573
|
|
87,032
|
General
and administrative
|
973,148
|
|
1,014,702
|
|
733,695
|
Research
and development
|
98,002
|
|
166,195
|
|
161,936
|
Total
employee stock-based compensation
|
|
|
|
|
|
in
operating expenses
|
1,246,525
|
|
1,341,470
|
|
982,663
|
|
|
|
|
|
|
Total
employee stock-based compensation
|
$ 1,314,571
|
|
$ 1,490,059
|
|
$ 1,065,383
|
|
|
|
|
|
|
Stock
based compensation for consultants amounted to $32,820, $157,863 and $183,065
for 2008, 2007 and 2006, respectively. No tax benefit has been recognized due to
net losses during the periods presented. In 2006, the Company took a charge of
$181,000 for extending the term of vested stock options for one of its former
officers.
As of
December 31, 2008, total unamortized share-based compensation cost related to
non-vested stock options was $2,119,299 which is expected to be recognized over
the remaining vesting period of the outstanding options, up to the next 29
months. The Company selected the Black-Scholes option pricing model as the most
appropriate model for determining the estimated fair value for share-based
awards. The use of the Black-Scholes model requires the use of extensive actual
employee exercise behavior data and the use of a number of complex assumptions
including expected volatility, risk-free interest rate, and expected
dividends.
The
assumptions used to value options granted are as follows:
|
2008
|
|
2007
|
|
2006
|
Risk
free interest rate
|
2.25%
|
|
4.53%
|
|
4.87%
|
Expected
term
|
4.75
years
|
|
4.52
years
|
|
4.84
years
|
Dividend
yield
|
0.0
|
|
0.0
|
|
0.0
|
Expected
volatility
|
85.49%
|
|
85.68%
|
|
72.42%
|
The
Company estimated the volatility of its stock based on expected volatility of
the Company’s stock which includes consideration of historical volatility in
accordance with guidance in SFAS 123(R) and SAB 110. The Company did not
consider implied volatility because there are no comparable options traded on
its stock. The risk-free interest rate assumption is based upon observed
interest rates appropriate for the estimated term of the employee stock options.
The dividend yield assumption is based on the Company’s history and expectation
of dividend payouts on Common Stock.
The
expected term of employee stock options represents the weighted-average period
that employees are expected to hold the options before exercise. The Company
derived the expected term assumption based on the Company’s historical
settlement experience, while giving consideration to options that have life
cycles less than the contractual terms and vesting schedules in accordance with
guidance in SFAS 123(R) and SAB 107.
Stock Option Plans
-
In May of
2008, the Company adopted the 2008 Long-term Incentive Plan (“2008 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 Committee of the
Board of Directors. Six million shares of Common Stock have been reserved for
issuance under the 2008 Plan.
In
October 1996, the Company adopted the 1996 Long-term Performance Plan (“1996
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. Upon approval of the 2008 Plan, the
Company stopped granting options under the 1996 Plan.
The
Company’s stock options have a maximum term of ten years from the date of grant.
Options granted prior to 2006 have a ten year term. Since 2006, the Company has
been granting stock options with a seven year term. Options generally vest over
a four-year period, with 25% vesting on each of the first four anniversaries of
the date of grant. The 2007 annual option grant to employees vested 25% of the
grant upon the grant date with the balance to vest equally over the next three
years. The 2008 annual grant vests over 4 years. The Company’s general policy is
to issue new shares upon the exercise of stock options
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Average
|
|
|
Average
|
|
|
Average
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Price
|
|
Shares
|
Price
|
|
Shares
|
Price
|
Outstanding
at beginning of year
|
4,936,335
|
$4.64
|
|
4,686,552
|
$8.57
|
|
5,960,525
|
$7.79
|
Granted
|
1,275,700
|
2.58
|
|
1,710,850
|
1.50
|
|
434,900
|
4.29
|
Exercised
|
(318,149)
|
1.87
|
|
(43,050)
|
1.47
|
|
(335,049)
|
3.05
|
Forfeited
|
(1,030,398)
|
9.10
|
|
(1,418,017)
|
12.84
|
|
(1,373,824)
|
6.27
|
Outstanding
at end of year
|
4,863,488
|
3.47
|
|
4,936,335
|
4.64
|
|
4,686,552
|
8.57
|
|
|
|
|
|
|
|
|
|
Options
exercisable at year end
|
2,688,841
|
|
|
3,196,121
|
|
|
3,782,060
|
|
|
|
|
|
|
|
|
|
|
The
weighted average grant date fair values of options granted in 2008, 2007 and
2006 was $2.58, $1.50 and $4.29 per share respectively.
The
following table summarizes the range of exercise prices and the weighted average
prices for options outstanding, options exercisable and unvested options at
December 31, 2008:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted-
|
|
|
|
Weighted-
|
|
Range
of
|
|
Number
|
|
Remaining
|
|
Average
|
|
Number
|
|
Average
|
|
Exercise
|
|
Outstanding
at
|
|
Contractual
|
|
Exercise
|
|
Exercisable
at
|
|
Exercise
|
|
Prices
|
|
12/31/08
|
|
Life
(Years)
|
|
Price
|
|
12/31/08
|
|
Price
|
|
$1.17
- $1.91
|
|
1,289,841
|
|
5.29
|
|
$ 1.41
|
|
515,619
|
|
$ 1.42
|
|
$2.05
- $3.09
|
|
1,656,450
|
|
5.64
|
|
$ 2.50
|
|
556,425
|
|
$ 2.53
|
|
$3.19
- $4.80
|
|
1,040,897
|
|
4.77
|
|
$ 4.05
|
|
743,197
|
|
$ 4.04
|
|
$4.81
- $7.53
|
|
648,800
|
|
2.54
|
|
$ 6.20
|
|
646,100
|
|
$ 6.21
|
|
$7.75
- $10.68
|
|
227,500
|
|
1.43
|
|
$ 8.97
|
|
227,500
|
|
$ 8.97
|
|
$1.42
- $10.675
|
|
4,863,488
|
|
3.47
|
|
$ 3.33
|
|
2,688,841
|
|
$ 4.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
weighted average exercise price and the weighted average remaining contractual
life of the outstanding options expected to vest at December 31, 2008 amounted
to $4.16 and 3.96 years, respectively.
The
aggregate intrinsic value of options outstanding, options expected to vest and
options exercisable at December 31, 2008 were $0, $0, and $0, respectively. The
intrinsic value of options exercised in 2008, 2007, and 2006, respectively, were
$1,121,000, $97,000, and $1,491,000.
During
2008, cash received from the exercise of options was $594,855.
Restricted
stock grants consist of grants of the Company’s Common Stock that may vest in
the future. The Board has set a one, two, or four year vesting period for most
of the issued restricted shares. The fair value of each restricted share grant
is equal to the market price of the Company’s Common Stock at the date of grant.
Expense relating to restricted shares is at the closing price amortized ratably
over the vesting period.
A summary
of the Company’s restricted stock activity and related information for 2008 is
as follows:
|
|
2008
|
|
|
|
2007
|
|
|
|
2006
|
|
|
|
|
|
|
Weighted-
|
|
|
|
Weighted-
|
|
|
|
Weighted-
|
|
|
|
|
Average
Grant
|
|
|
|
Average
Grant
|
|
|
|
Average
Grant
|
|
|
Shares
|
|
Date
Fair Value
|
|
Shares
|
|
Date
Fair Value
|
|
Shares
|
|
Date
Fair Value
|
Unvested
at beginning of period
|
197,096
|
|
$ 2.36
|
|
146,875
|
|
$ 4.49
|
|
-
|
|
$ -
|
Granted
|
|
172,553
|
|
$ 2.36
|
|
159,390
|
|
$ 1.79
|
|
167,875
|
|
$ 4.48
|
Vested
|
|
(122,484)
|
|
$ 2.94
|
|
(105,469)
|
|
$ 1.69
|
|
(15,000)
|
|
$ 4.34
|
Forfeited
|
|
(9,050)
|
|
$ 1.94
|
|
(3,700)
|
|
$ 1.40
|
|
(6,000)
|
|
$ 4.34
|
Unvested
at December 31,
|
|
238,115
|
|
$ 2.23
|
|
197,096
|
|
$ 2.36
|
|
146,875
|
|
$ 4.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2008, there was $0.3 million of total unrecognized compensation
costs related to non-vested restricted share-based compensation. The
remaining cost is expected to be recognized over a weighted average period
of 0.7 years. The total fair value of shares vested during the years ended
December 31, 2008, 2007 and 2006 was $0.4 million, $0.2 million and $0.1
respectively.
(9) 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 and office equipment under noncancelable operating
leases. Lease expense for each of the three years ended December 31, 2008, 2007
and 2006 totaled $330,772, $209,478 and $223,122, respectively. Future minimum
lease payments as of December 31, 2008 are as follows:
|
|
|
2009
|
|
$ 270,075
|
2010
|
|
271,226
|
2011
|
|
244,532
|
2012
|
|
233,066
|
2013
|
|
187,031
|
|
|
$ 1,205,930
|
Royalties
-
In 1989,
the Company purchased the assets of Bio-Mimetics Inc., which assets consisted of
the patents underlying the Company’s Bioadhesive Delivery System (BDS), 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. is entitled
to a royalty equal to 2% of the net sales of products based on the BDS up to an
aggregate amount of $7,500,000. The royalty payments are payable over the life
of the patent(s) which are specific to each product or fifteen years, whichever
is longer. The Company is required to prepay 25% of the remaining royalty
obligation, in cash or stock at the option of the Company, if the closing price
of the Company’s Common Stock is $20 or more on March 2,
or
within 30 days after the date, of any year. The Company may not assign the
patents underlying the BDS without the prior written consent of Bio-Mimetics,
Inc. until the aggregate royalties have been paid. Royalty expense under this
agreement amounted to $132,023, $114,466 and $245,416 in 2008, 2007 and 2006,
respectively. See “Legal Proceedings”
Legal Proceedings
-
Claims
and lawsuits have been filed against the Company from time to time. Although the
results of pending claims 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 the Company’s financial position or results of
operation. Additionally, the Company believes that it has adequate reserves or
adequate insurance coverage in respect of these claims, but no assurance can be
given as to the sufficiency of such reserves or insurance in the event of any
unfavorable outcome resulting from these actions.
In
connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which
assets consisted of the patents underlying the Company's BDS, other patent
applications, and related technology, the Company agreed to pay Bio-Mimetics a
royalty equal to two percent of the net sales of products based on the assets up
to an aggregate of $7.5 million or until the last of the relevant patents
expired. The Company determined that the obligation to pay royalties on STRIANT,
PROCHIEVE, and CRINONE terminated in September of 2006, with the expiration of a
certain Canadian patent, but continues on Replens
®
and
RepHresh
®
. On
December 28, 2007, Bio-Mimetics filed a complaint in the United States District
Court for Massachusetts (
Bio-Mimetics, Inc. v. Columbia
Laboratories, Inc.
) alleging breach of contract, violation of the
covenant of good faith and fair dealing, and unjust enrichment for the Company’s
failure to continue royalty payments on STRIANT, PROCHIEVE, and CRINONE. To
date, the Company has paid approximately $3.3 million in royalty payments and
Bio-Mimetics seeks a judgment that we are obligated to pay the remaining $4.2
million in full. The Company has denied all such allegations and believes it has
no contractual liability to Bio-Mimetics for the disputed royalty payments and
intends to defend this action vigorously.
(10) GEOGRAPHIC INFORMATION
AND CUSTOMER CONCENTRATION:
Geographic
Information
The
Company and its subsidiaries are engaged in one line of business, the
development, licensing and sale of pharmaceutical products. The Company conducts
its international business through its Bermuda subsidiary which contracts with
various manufacturers located in the United Kingdom, Switzerland and Italy, to
make product for both its international and domestic operations. Most
arrangements with licensees are made by the Bermuda company. These customers
sell their products into several countries. The Company’s two largest
international customer are Merck Serono and Lil’ Drug Store.
The
following table shows selected information by geographic area:
|
|
|
|
(Loss)
profit from
|
|
Identifiable
|
|
|
Revenues
|
|
Operations
|
|
Assets
|
As
of and for the year
|
|
|
|
|
|
ended December
31, 2008-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$ 18,062,013
|
|
$ (14,978,075)
|
|
$ 38,806,638
|
|
Switzerland
|
9,168,230
|
|
-
|
|
-
|
|
Other
|
9,109,889
|
|
-
|
|
-
|
|
Subtotal
International
|
18,278,119
|
|
7,720,690
|
|
6,815,851
|
|
|
$ 36,340,132
|
|
$ (7,257,385)
|
|
$ 45,622,489
|
|
|
|
|
|
|
|
As
of and for the year
|
|
|
|
|
|
ended December
31, 2007-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$ 15,257,884
|
|
$ (14,339,632)
|
|
$ 49,253,642
|
|
Switzerland
|
8,101,831
|
|
-
|
|
-
|
|
Other
|
6,267,923
|
|
-
|
|
-
|
|
Subtotal
International
|
14,369,754
|
|
6,231,784
|
|
7,335,635
|
|
|
$ 29,627,638
|
|
$ (8,107,848)
|
|
$ 56,589,277
|
|
|
|
|
|
|
|
As
of and for the year
|
|
|
|
|
|
ended
December 31, 2006-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$ 7,950,735
|
|
$ (14,827,488)
|
|
$ 60,632,896
|
|
Switzerland
|
5,716,289
|
|
-
|
|
-
|
|
Other
|
3,726,057
|
|
-
|
|
-
|
|
Subtotal
International
|
9,442,346
|
|
3,667,384
|
|
5,205,848
|
|
|
$ 17,393,081
|
|
$ (11,160,104)
|
|
$ 65,838,744
|
|
|
|
|
|
|
|
Customer
Concentration
The
following table presents information about Columbia’s revenues by customer,
including royalty and license revenue:
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
MerckSerono
|
|
$ 9,168,230
|
|
$ 8,151,292
|
|
$ 8,234,198
|
Lil'
Drug Store Products, Inc.
|
|
6,218,949
|
|
5,958,925
|
|
4,637,928
|
Cardinal
Healthcare
|
|
5,612,748
|
|
6,098,510
|
|
2,060,152
|
McKesson
|
|
4,990,960
|
|
3,888,354
|
|
1,892,728
|
All
others (none over 5%)
|
|
10,349,245
|
|
5,530,557
|
|
568,075
|
|
|
$ 36,340,132
|
|
$
29,627,638
|
|
$
17,393,081
|
Revenue
by Product
The
following table sets forth the breakdown of the Company's consolidated net
revenues, consisting of sales, royalty and licensing income, by revenue source
for each product accounting for 10% or more of consolidated revenues in any of
the three years ended December 31:
|
|
2008
|
|
2007
|
|
2006
|
CRINONE®
|
|
$ 21,439,847
|
|
$ 18,904,512
|
|
$ 6,719,027
|
RepHresh®
|
|
3,316,193
|
|
3,326,927
|
|
724,519
|
PROCHIEVE®
|
|
2,697,255
|
|
1,527,727
|
|
2,965,721
|
Other
|
|
8,886,837
|
|
5,868,472
|
|
6,983,814
|
|
|
$ 36,340,132
|
|
$ 29,627,638
|
|
$ 17,393,081
|
|
|
|
|
|
|
|
The
following table summarizes selected quarterly data for the years ended December
31, 2008 and 2007:
2008
|
First
Quarter
|
|
Second
Quarter
|
Third
Quarter
|
|
Fourth
Quarter
|
Full
Year
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$ 8,672,333
|
|
$ 8,832,718
|
|
$ 8,162,945
|
|
$ 6,912,266
|
|
$ 32,580,262
|
Fee
income and other
|
306,637
|
|
320,252
|
|
2,975,696
|
(1)
|
157,285
|
|
3,759,870
|
income
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
6,018,874
|
|
6,203,162
|
|
8,279,049
|
|
4,904,432
|
|
25,405,517
|
Loss
from operations
|
(2,378,635)
|
|
(2,399,902)
|
|
(86,884)
|
|
(2,391,964)
|
|
(7,252,385)
|
Net
loss
|
(4,248,795)
|
|
(4,326,171)
|
|
(2,050,136)
|
|
(3,451,407)
|
|
(14,076,509)
|
Basic
and diluted loss
|
|
|
|
|
|
|
|
|
|
per common share
|
$ (0.08)
|
|
$ (0.08)
|
|
$ (0.04)
|
|
$ (0.06)
|
|
$ (0.27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$ 6,362,381
|
|
$ 7,009,075
|
|
$ 6,906,298
|
|
$ 8,081,998
|
|
$ 28,359,752
|
Fee
income and other
|
|
|
|
|
|
|
|
|
|
income
|
322,239
|
|
277,939
|
|
401,781
|
|
265,927
|
|
1,267,886
|
Gross
profit
|
4,612,433
|
|
4,483,725
|
|
5,578,997
|
|
5,937,943
|
|
20,613,098
|
Loss
from operations
|
(1,842,496)
|
|
(1,865,255)
|
|
(1,886,598)
|
|
(2,513,499)
|
|
(8,107,848)
|
Net
loss
|
(3,535,975)
|
|
(3,589,375)
|
|
(3,724,362)
|
|
(3,442,078)
|
|
(14,291,790)
|
Basic
and diluted loss
|
|
|
|
|
|
|
|
|
|
per common share
|
$ (0.07)
|
|
$ (0.07)
|
|
$ (0.07)
|
|
$ (0.07)
|
|
$ (0.28)
|
|
|
|
|
|
|
|
|
|
|
|
*The
addition of earnings (loss) per share by quarter may not equal total
earnings (loss) per share for the year.
|
|
(1)
Recognition of deferred royalty income (Ardana) $2,924,852
|
|
|
|
|
(12) SUBSEQUENT
EVENT
On
January 7, 2009, the Company raised $750,000 through the sale of 451,807 shares
of it common stock at a price of $1.66 per share to Numoda Corporation, the
contract research company managing the Company’s PREGNANT trial.
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
Columbia
Laboratories, Inc.
Livingston,
NJ
The audit
referred to in our report dated March 9, 2009 relating to the consolidated
financial statements of Columbia Laboratories, Inc., which is contained in Item
8 of this Form 10-K
also
included the audit of the financial statement schedule listed in the
accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our
audit.
In our
opinion such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
(Signed
BDO Seidman, LLP)
Woodbridge,
NJ
March 9,
2009
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
of
Columbia Laboratories, Inc.
Our audit
of the consolidated financial statements referred to in our report dated March
25, 2008 included elsewhere in this Annual Report on Form 10-K also included the
2007 information in the financial statement schedule of Columbia Laboratories,
Inc. listed in Item 15(a) of this Form 10-K. This schedule is the responsibility
of Columbia Laboratories, Inc.’s management. Our responsibility is to express an
opinion based on our audits of the consolidated financial
statements.
In our
opinion, the 2007 information in the financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/
McGladrey & Pullen, LLP
McGLADREY
& PULLEN, LLP
New York,
New York
March 25,
2008
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
of
Columbia Laboratories, Inc.:
We have
audited in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the financial statements of Columbia
Laboratories, Inc. and Subsidiaries for the year ended December 31, 2006
included in this Form 10-K and have issued our report thereon dated March 15,
2007. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/
Goldstein Golub Kessler LLP
GOLDSTEIN
GOLUB KESSLER LLP
New York,
New York
March 15,
2007
COLUMBIA LABORATORIES, INC.
AND SUBSIDIARIES
SCHEDULE II – VALUATION
AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED
DECEMBER 31, 2008
|
|
|
|
Charged
to
|
|
|
|
|
|
|
|
Balance
at
|
|
(credited
to)
|
|
|
|
Balance
|
|
|
|
beginning
|
|
costs
and
|
|
|
|
at end
|
|
|
Description
|
of
year
|
|
expenses
|
|
Deductions
(A)
|
|
of
year
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR
ENDED DECEMBER 31, 2008:
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
$ 95,733
|
|
$ 4,267
|
|
$ -
|
|
$ 100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR
ENDED DECEMBER 31, 2007:
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
$ 100,000
|
|
$ 15,000
|
|
$ 19,267
|
|
$ 95,733
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR
ENDED DECEMBER 31, 2006:
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
$ 50,000
|
|
$ 105,855
|
|
$ 55,855
|
|
$ 100,000
|
|
|
|
|
|
|
|
|
|
|
|
(A)
Deductions represent the write-off of uncollectible accounts.
EXHIBIT
INDEX
Exhibit
No
|
Description
|
3.1
|
Restated
Certificate of Incorporation of the Company, as amended
(14)
|
|
|
3.2
|
Amended
and Restated By-laws of Company
(3)
|
|
|
4.1
|
Certificate
of Designations, Preferences and Rights of Series C Convertible Preferred
Stock of the Company, dated as of January 7, 1999
(3)
|
|
|
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
(3)
|
|
|
4.3
|
Securities
Purchase Agreement, dated as of January 19, 1999, among the Company, David
M. Knott and Knott Partners, L.P.
(3)
|
|
|
4.4
|
Form
of Warrant to Purchase Common Stock
(3)
|
|
|
4.5
|
Warrant
to Purchase Common Stock granted to James J. Apostolakis on September 23,
1999 (5)
|
|
|
4.6
|
Certificate
of Designations of Series E Convertible Preferred Stock, filed May 10,
2005 with the Delaware Secretary of State
(13)
|
|
|
4.7
|
Preferred
Stock Purchase Agreement, dated as of May 10, 2005, among Columbia
Laboratories, Inc., Perry Partners L.P. and Perry Partners International,
Inc.
(13)
|
|
|
4.8
|
Securities
Purchase Agreement, dated March 10, 2006, by and between Columbia
Laboratories, Inc. and the Purchasers listed on Exhibit A thereto
(15)
|
|
|
4.9*
|
Form
of Restricted Stock Agreement
(17)
|
|
|
4.10*
|
Form
of Option Agreement
(24)
|
|
|
4.11
|
Securities
Purchase Agreement, dated December 21, 2006, by and between Columbia
Laboratories, Inc. and the Purchasers listed on Exhibit A thereto
(19)
|
|
|
10.1
|
1996
Long-term Performance Plan, as amended, of the Company
(2)
|
|
|
10.2
|
Asset
Purchase, License and Option Agreement between Bio-Mimetics, Inc. and
Columbia Laboratories, Inc., dated November 22, 1989
(1)
|
|
|
10.3
|
License
and Supply Agreement by and between the Company and Mipharm S.p.A. dated
March 5, 1999
(4)
|
|
|
10.4
|
Settlement
Agreement and Release dated as of March 16, 2000 between Columbia
Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc.
(5)
|
|
|
10.5
|
License
Agreement dated April 18, 2000, between the Company and Lil’ Drug Store
Products, Inc.
(6)
|
|
|
10.6
|
Rights
Agreement dated as of March 13, 2002, by and between Columbia
Laboratories, Inc. and First Union National Bank, as Rights Agent
(7)
|
|
|
10.7†
|
Semi-Exclusive
Supply Agreement dated May 7, 2002 between the Company and Mipharm S.p.A.
(8)
|
|
|
10.8†
|
Amended
and Restated License and Supply Agreement dated June 4, 2002 between the
Company and Ares Trading S.A.
(8)
|
|
|
10.9†
|
Investment
and Royalty Agreement dated March 5, 2003 between the Company and
PharmaBio Development Inc.
(9)
|
Exhibit
No.
|
Description
|
10.10†
|
License
and Supply Agreement Dated May 27, 2003 between the Company and Mipharm
S.p.A.
(10)
/
|
|
|
10.11*
|
Form
of Indemnification Agreement for Officers and Directors
(11)
|
|
|
10.12†
|
Asset
Purchase Agreement Dated June 29, 2004, between the Company and Lil’ Drug
Store Products, Inc.
(12)
/
|
|
|
10.13†
|
Supply
Agreement dated June 29, 2004, between the Company and Lil’ Drug Store
Products, Inc.
(12)
/
|
|
|
10.14
|
Letter
Agreement Supplement to STRIANT Investment and Royalty Agreement dated
April 14, 2006
(16)
|
|
|
10.15*
|
Separation
Agreement by and between Columbia Laboratories, Inc. and David L. Weinberg
effective as of December 12, 2006
(18)
/
|
|
|
10.16†
|
Agreement,
dated December 21, 2006, by and among Ares Trading S.A., Serono,
Inc., the Company and its wholly-owned subsidiary, Columbia Laboratories
(Bermuda), Ltd
(19)
|
|
|
10.17
|
Amendment
No. 1 to the Amended and Restated License and Supply Agreement,
entered into December 21, 2006, by and between Ares Trading S.A and
Columbia Laboratories (Bermuda), Ltd.
(19)
/
|
|
|
10.18
|
Description
of the Registrant’s Compensation and Reimbursement Practices for
Non-employee Directors.
(20)
|
|
|
10.19
|
Lease
Agreement between Allwood Associates I and Columbia Laboratories, Inc.,
dated July 6, 2007
(20)
|
|
|
10.20†
|
License
and Supply Agreement between Columbia Laboratories, Inc. and Ascend
Therapeutics, Inc., dated September 27, 2007
(21)
/
|
|
|
10.21
|
Supply
Agreement between Columbia Laboratories (Bermuda) Limited and Fleet
Laboratories Limited, dated July 12, 1996
(22)
/
|
|
|
10.22
|
Packaging
Agreement between Columbia Laboratories (Ireland) Ltd. and Maropack AG,
dated October 28, 1993
(22)
|
|
|
10.23*
|
Columbia
Laboratories, Inc., 2008 Long-Term Incentive Plan
(23)
/
|
|
|
10.24*
|
Columbia
Laboratories, Inc., Amended and Restated Incentive Plan
(24)
/
|
|
|
10.25*
|
Form
of Executive Change of Control Severance Agreement
(24)
|
|
|
10.26*
|
Amended
and Restated Employment Agreement by and between Columbia Laboratories,
Inc. and Robert S. Mills dated March 11, 2009
(24)
|
|
|
10.27*
|
Amended
and Restated Employment Agreement by and between Columbia Laboratories,
Inc. and Michael McGrane dated March 11, 2009
(24)
|
|
|
10.28*
|
Amended
and Restated Employment Agreement by and between Columbia Laboratories,
Inc. and James Meer dated March 11, 2009
(24)
/
|
|
|
14
|
Code
of Ethics of the Company (
11)
/
|
|
|
21
|
Subsidiaries
of the Company
(24)
|
|
|
23.1
|
Consent
of Goldstein Golub Kessler LLP
(24)
/
|
|
|
23.2
|
Consent
of McGladrey & Pullen, LLP
(24)
|
|
|
23.3
|
Consent
of BDO Seidman, LLP
(24)
/
|
|
|
31(i).1
|
Certification
of Chief Executive Officer of the Company
(24)
|
|
|
Exhibit
No.
|
Description
|
31(i).2
|
Certification
of Chief Financial Officer of the Company
(24)
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(24)
|
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(24)
|
|
|
†
|
Confidential
treatment has been requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the
SEC.
|
|
|
*
|
Management
contract or compensatory plans or
arrangements
|
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 Proxy Statement dated May 10,
2000
|
|
|
3/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1998
|
|
|
4/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999
|
|
|
5/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1999
|
|
|
6/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000
|
|
|
7/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated March
12, 2002
|
|
|
8/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q dated
August 14, 2002
|
|
|
9/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2002
|
|
|
10/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q dated
August 14, 2003
|
|
|
11/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2003
|
|
|
12/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q dated
August 4, 2004
|
|
|
13/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated May 12,
2005
|
|
|
14/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2005
|
|
|
15/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated March
16, 2006
|
|
|
16/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated April
17, 2006
|
|
|
17/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated May 17,
2006
|
|
|
18/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated
December 15, 2006
|
|
|
19/
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K, dated
December 26, 2006
|
|
|
20/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, dated
August 8, 2007
|
|
|
21/
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, dated
November 8, 2007
|
|
|
22/
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2007
|
|
|
23/
|
Incorporated
by reference to the Registrant’s Proxy Statement dated April 8,
2008
|
|
|
24/
|
Filed
herewith
|
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Columbia
Laboratories, Inc.
Livingston,
NJ
We hereby
consent to the incorporation by reference in the Registration Statements on Form
S-3 (No. 333-125671, 333-75275, 333-132803, 333-140107 and 333-155530) and Form
S-8 (No. 333-116072 and 333-152008) of Columbia Laboratories, Inc. of our
reports dated March 9, 2009, relating to the consolidated financial statements,
and the effectiveness of Columbia Laboratories, Inc.’s internal control over
financial reporting, which appear in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated March 9, 2009
relating to the financial statement schedule, which appears in this Form
10-K.
(
Signed
manually
)
BDO
Seidman, LLP
Woodbridge,
NJ
March 9,
2009
Exhibit
23.2
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in Registration Statements on Form S-3
(No. 333-125671, 333-75275, 333-132803, 333-140107 and 333-155530) and Form S-8
(No. 333-116072 and 333-152008) of Columbia Laboratories, Inc. of our
reports dated March 25, 2008 relating to our audit of the consolidated financial
statements and the financial statement schedule as of and for the year ended
December 31, 2007 and the adjustments to the consolidated financial statements
for the year ended December 31, 2006 which appear in this Annual Report on Form
10-K of Columbia Laboratories, Inc. for the year ended December 31, 2008. Our
report dated March 25, 2008 included an explanatory paragraph that effective
January 1, 2007, Columbia Laboratories, Inc. adopted Financial Accounting
Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109”.
/s/
McGladrey & Pullen, LLP
McGLADREY
& PULLEN, LLP
New York,
New York
March 13,
2009
EXHIBIT
23.3
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to the incorporation by reference in Registration Statements on Form S-3
(No. 333-125671, 333-75275, 333-132803, 333-140107 and 333-155530 ) and Form S-8
(No. 333-116072 and 333-152008) of Columbia Laboratories, Inc. of our report
dated March 15, 2007 relating to our audit of the consolidated financial
statements for the year ended December 31, 2006, which includes an explanatory
paragraph stating that we did not audit certain adjustments, and our report
dated March 15, 2007 relating to our audit of the financial statement schedule,
which appear in this Annual Report on Form 10-K of Columbia Laboratories, Inc.
for the year ended December 31, 2008.
/s/
Goldstein Golub Kessler LLP
GOLDSTEIN
GOLUB KESSLER LLP
New York,
New York
March 13,
2009
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE
SECURITIES EXCHANGE ACT OF 1934
I, Robert
S. Mills certify that:
1. I have
reviewed this report on Form 10-K of Columbia Laboratories, Inc.;
2. Based
on my knowledge, this annual 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 report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this 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 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- 15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13(a)-15(f) ) and 15d-15(f) for the registrant and
have:
a)
designed such disclosure controls and procedures , or caused such disclosure
controls and procedures to be designed under our supervision, 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)
designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c )
evaluated the effectiveness of the registrant ’ s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures , as of the end of the period covered
by this report based on such evaluation ; and
(d)
disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
5. The
registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting , to the
registrant ’ s auditors and the audit committee of registrant ’ s board of
directors (or persons performing the equivalent functions) :
a) all
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant ’ s ability to record, process, summarize and
report financial information; and
b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date:
March 13, 2009
|
|
/S/ Robert S.
Mills
|
|
|
Robert
S. Mills
|
|
|
Chief
Executive Officer
|
EXHIBIT
31(i).2
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE
SECURITIES EXCHANGE ACT OF 1934
I, James
A. Meer certify that:
1. I have
reviewed this report on Form 10-K of Columbia Laboratories, Inc.;
2. Based
on my knowledge, this annual 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 report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this 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 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 - 15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13(a)-15(f) ) and 15d-15(f) for the registrant and
have:
a)
designed such disclosure controls and procedures , or caused such disclosure
controls and procedures to be designed under our supervision, 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)
designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c )
evaluated the effectiveness of the registrant ’ s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures , as of the end of the period covered
by this report based on such evaluation ; and
(d)
disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
5. The
registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting , to the
registrant ’ s auditors and the audit committee of registrant ’ s board of
directors (or persons performing the equivalent functions) :
a) all
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant ’ s ability to record, process, summarize and
report financial information ; and
b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date:
March 13, 2009
|
|
/S/ James A.
Meer
|
|
|
James
A. Meer
|
|
|
Chief
Financial Officer
|
EXHIBIT
32.1
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, 2008 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Robert S. Mills,
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/ Robert S.
Mills
|
|
Robert
S. Mills
|
|
Chief
Executive Officer
March
13 , 2009
|
EXHIBIT
32.2
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 Annual Report of Columbia Laboratories, Inc. (the “Company”)
on Form 10-K for the period ended December 31, 2008 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, James A. Meer,
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/ James A.
Meer
|
|
James
A. Meer
|
|
Chief
Financial Officer
|
|
March
13, 2009
|
Exhibit
4.10
Columbia
Laboratories, Inc.
|
2008
|
Name:
|
Address:
|
|
City
& State:
|
Grant
Number:
|
|
Grant
Date:
|
/2008
|
Yearly
Vesting Schedule
|
|
Beginning
|
Percent
|
Shares
|
Option
Type:
|
ISO
or NQSO
|
Shares
Granted:
|
|
Year
1
|
25%
|
25,000
|
|
Year
2
|
25%
|
25,000
|
Grant
Price:
|
|
|
|
Year
3
|
25%
|
25,000
|
|
Year
4
|
25%
|
25,000
|
Vesting
Update:
|
/09
@ 25.00%
|
Expiration
Date:
|
/2015
|
|
|
|
NOTICE
OF GRANT OF A STOCK OPTION FOR THE
|
PURCHASE
OF SHARES OF THE COMMON STOCK OF
|
|
Columbia
Laboratories, Inc.
|
|
Robert
S. Mills or James A. Meer
|
CEO
/ President/ Sr. Vice President CFO & Treasurer
|
|
By
affixing your signature to this Notice, you acknowledge receipt of a copy
of the Agreement and the Plan to which the Agreement and this Stock Option
Grant is subject and agree that the Options Granted hereunder shall be
subject to such Plan and Agreement and shall be governed by their terms
and provisions.
|
|
|
___________________________
|
|
___________
|
|
Name:
|
|
Date
|
|
COLUMBIA
LABORATORIES, INC.
INCENTIVE
PLAN
The
objectives of the Columbia Laboratories Incentive Plan are to:
·
|
Encourage
and reward Participants for achievement of the Company’s financial,
tactical and strategic objectives;
|
·
|
Reinforce
a strong performance orientation with variability in awards based on
individual contribution and teamwork;
and
|
·
|
Provide
a fully competitive compensation package that will attract, reward and
retain high caliber employees.
|
The Plan
year is the Company’s fiscal year, January 1 through December 31.
3.
|
Eligibility and
Participation
|
In
general, active exempt and non-exempt employees as of March 1 of the Plan year
are eligible to participate in the Incentive Plan. Employees who are eligible
for another term incentive plan (e.g., sales incentives) are not eligible to
participate. Participants who are hired after February 28, but before October 1,
of the Plan year are eligible for a pro-rated incentive award based on their
hire date. Participants hired on or after October 1, of the Plan year are not
eligible to participate that Plan year.
To be
eligible for an incentive award, a Participant must be actively employed on the
date of distribution of awards for the Plan year. The following are
exceptions
to this
general rule:
·
|
If
a Participant leaves the Company before the award distribution date for
any of the following reasons, he or she will be eligible to receive a
pro-rated target award based on the period of active employment during the
year:
|
o
|
Retirement
with the consent of the Company
|
o
|
Inability
to perform the work as a result of injury, ill-health or
disability
|
·
|
A
Participant who takes an unpaid leave of absence (such as NJFLA) will be
eligible for a pro-rated award for the period of active employment during
the plan year. A Participant who begins an unpaid leave of absence and
does not return prior to December 31 will be eligible for a pro-rated
award upon return to work. Participants who do not return to
work will not be eligible for an
award.
|
·
|
Each
eligible Participant has an individual incentive target that is expressed
in units as a percentage of base
salary. Individual incentive targets are
established on the basis of position level and are higher for positions of
greater responsibility..
|
·
|
Performance
criteria and relative weightings of each corporate goal are approved
annually by the Compensation Committee and the Board of
Directors.
|
·
|
Each
year the funding of the annual incentive pool is determined by the
Compensation committee on the basis of attainment of each of the financial
and strategic goals for the fiscal year, and then finally determined by
the Board. The total number of units in the pool may be more or less than
the target incentive pool based on Company
performance.
|
·
|
Individual
awards will take into account performance against individual objectives
and within the context of the overall annual incentive fund available for
awards.
|
5.
|
Individual Incentive
Targets
|
The
following incentive targets (expressed in units as a percentage of annualized
base salary) will apply to participants in the Plan based on their position and
level of responsibility in the Company.
*
Position
|
Incentive
Target
|
Officer
|
30%
|
Executive
Director
Senior
Director
Director
|
25%
|
Associate
Director
|
20%
|
Senior
Manager
Manager
|
15%
|
Supervisor
Administrator
|
10%
|
Non-exempt
|
4%
|
The
incentive targets for the President and Chief Executive Officer; Senior Vice
President, General Counsel and Secretary; and Senior Vice President,
Chief Financial Officer and Treasurer are governed by their respective
employment agreements.
The
incentive pool is based upon the sum of all eligible Participants’ incentive
targets multiplied by the Board approved funding level (0% - 125%).
7.
|
Determination of
Annual Incentive Pool
|
The
annual incentive pool is initially determined by the Compensation Committee of
the Board of Directors on the basis of the following: the attainment of the
financial and strategic goals for the Plan year as established by the Board of
Directors; competitive economic factors; the regulatory environment; the timely
and successful development of products; the Company’s exposure to product
liability and other lawsuits and contingencies; market and customer acceptance
and demand for the Company’s pharmaceutical products; reliability of supply of
the Company’s pharmaceutical products by contract manufacturers; product
recalls; relationships with significant customers; reimbursement policies of
third party payors; and general economic conditions. The annual incentive pool
is finally determined by the Board of Directors.
Thethejeletermin
The total
amount of the incentive pool sets the maximum that may be paid out in the total
awards to all individual Participants.
8.
|
Calculation of
Individual Awards
|
To
determine a Participant’s actual award once the incentive pool funding
percentage is approved, involves two calculations: (a) determination
of the Participant’s target award, and (b) application of the individual’s
performance factor.
(a)
|
Determination
of the Participant’s target award
|
The
target award for the individual Participant is determined using the following
formula:
Annualized
salary x position award target x pool funding percentage = target award in
units
Example
: Salary
of $75,000 x position target award of 15% x pool funding percentage of 110% =
target award of 12,375 units.
Note that
the target award is based on a Participant’s salary and position level in effect
on December 31 of the Plan year.
(b)
|
Application
of individual’s performance factor
|
As a
result of the annual performance review, each Participant receives an overall
performance rating. The rating reflects how well the individual
performed against his or her personal objectives and the Company
objectives.
Using the
following table as a guide, the individual’s target award (as determined in (a)
above) may be modified to reflect his or her overall performance
rating.
For
example, assume that the Participant whose target award is 12,375 units has a
performance rating of exceeds expectations. The manager may recommend
an award ranging from 12,375 units (100%) to 15,469 units (125%) to reflect
individual performance. If that individual’s rating is meets
expectations, the award range would be 9,281 units (75%) to 12,375 units
(100%). Any individual with a rating of below expectations will not
receive an award.
Overall
Performance Level Against Individual and Company
Objectives
|
Award
Guideline
(%
of Target Award)
|
Exceeds expectations
|
125
-
150%
|
High-Meets
expectations
|
100
- 125%
|
Meets
expectations
|
75
- 100%
|
Low
- Meets expectations
|
0 -
75%
|
Below
Expectations
|
0%
|
The sum of all individual
awards may not exceed the overall incentive pool allocated to the Company, as
explained in section 7 above.
The form
and timing of awards is at the discretion of the Company, but these will be made
to participants on or before March 15 following completion of the fiscal
year. If awards are made in the form of option grants, each unit
awarded will be equal to a number of options as determined by the Compensation
Committee of the Board in its sole discretion. Cash payments, if any, will be
made after the deduction of withholdings required by law or as authorized by the
recipient.
The
Company has complete discretion regarding all aspects of the Incentive Plan’s
implementation and administration, and may change the Plan in whole or in part
or eliminate the Plan entirely at any time.
The
decision as to whether or not a Participant is eligible to receive an award
under the Plan rests solely with the Company, which also reserves the right to
forego awards or make reduced awards. The Company’s determination
will be final and binding.
Participation
in this plan does not in any way whatsoever create a contractual relationship
between the Participant and the Company.
The
impact of any award made under the Plan on other employee benefit programs will
be governed by the terms of those programs.
The Plan
is managed by the Compensation Committee of the Board of
Directors. The Committee has full power and discretion to interpret
and administer the Plan.
EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT dated as of ___________________ (as the same may be amended,
restated, supplemented or otherwise modified from time to time hereafter, this
“Agreement”), is entered into between Columbia Laboratories, Inc., a Delaware
corporation having its corporate offices at 354 Eisenhower Parkway, Livingston,
New Jersey (“Columbia” or the “Company”), and ________________
(“Executive”).
WITNESSETH
:
WHEREAS, the Company desires to create
a greater incentive for Executive to remain in the employ of the Company,
particularly in the event of any possible change or threatened change in control
of the Company; and
NOW THEREFORE, in partial consideration
of Executive’s past and future services to the Company and the mutual covenants
contained herein, the parties hereby agree as follows:
1.
Termination Following A
Change in Control
(a)
Qualifying
Termination
. Executive shall be entitled to the compensation
and benefits listed in Paragraph 1(b), in addition to compensation and benefits
to which Executive would otherwise be entitled as of the date of termination, if
Executive’s employment with the Company is terminated either (i) by the Company
for any reason other than for Cause within 90 days before a Change in Control or
within one year following the occurrence of any Change in Control or successive
Change in Control or (ii) by Executive for Good Reason within one year following
the occurrence of any Change in Control or successive Change in Control, and in
each case Executive properly executes, and does not revoke or attempt to revoke,
a valid and reasonable release of claims against the Company, its affiliates and
their employees and agents.
(b)
Compensation and
Benefits
. Within ten business days after a Change in Control
event (or the last day of any period during which any release may be revoked by
Executive), the Company shall make a lump sum cash payment to Executive, subject
to any mandatory tax withholding, equal to one times Executive’s Base Salary and
Bonus for the year prior to the Change in Control plus a lump sum payment equal
to the value of the Fringe Benefits provided to Executive for the year prior to
the Change in Control.
2.
Definitions
.
(a)
Bonus
. “Bonus”
shall mean the greater of (i) the bonus, if any, paid to Executive in the year
prior to the Qualifying Termination, (ii) the bonus, if any, paid to Executive
in the year prior to the Change in Control, or (iii) the Executive’s target
bonus at the time of the Change in Control.
(b)
Base
Salary
. “Base Salary” shall mean the greater of
(i) the annual rate of base salary in effect for Executive at the time of the
Qualifying Termination or (ii) the annual rate of base salary in effect for
Executive at the time of the Change in Control.
(c)
Cause
. “Cause”
shall mean termination based on (i) gross negligence, recklessness or
malfeasance in the performance of Executive’s duties; (ii) Executive
committing any criminal act; (iii) Executive committing any act of fraud or
other material misconduct resulting or intending to result directly or
indirectly in gain or personal enrichment at the expense of Company;
(iv) Executive willfully engaging in any conduct relating to the business
of Company that could reasonably be expected to have a materially detrimental
effect on the business or financial condition of the Company;
(v) misconduct which materially discredits or damages Company, or violates
Company’s policies or procedures, after Company has notified Executive of the
actions Company deems to constitute non-compliance; (vi) Executive
materially breaches Executive’s obligations relating to confidential
information, non-solicitation and non-competition.
(d)
Change In
Control
. “Change in Control” shall have occurred if
(a) there shall have consummated (i) any consolidation or merger of
Company in which Company is not the continuing or surviving entity or pursuant
to which shares of Company’s common stock would be converted to cash, securities
or other property, other than a merger of Company in which the holders of
Company’s common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving entity immediately
after the merger, or (ii) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the company; or (b) the stockholders of the Company
approve a plan or proposal for the liquidation or dissolution of the Company; or
(c) any person (as that term is used in Sections 13(d) and 14(d)(z) of the
Securities and Exchange Act, as amended (the “Exchange Act”)) shall become a
beneficial owner (within the meaning of Rule 13d-2 under the Exchange Act) of
40% or more of Company’s outstanding common stock; or (d) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by Company’s
stockholders, of each new director was approved by a vote of at least 50% of the
directors eligible to vote who were directors at the beginning of the
period.
(e)
Good
Reason
. For purposes of this Agreement, “Good Reason” shall
mean the termination by Executive of Executive’s employment with the Company and
all its affiliates and subsidiaries that are considered a single employer within
the meaning of Sections 414(b) and 414(c) of the Code which is due to (i) a
material diminution of Executive’s responsibilities, or working conditions, or
duties; (ii) a material diminution in the Executive’s base salary; (iii) a
material negative change in the terms or status of this Agreement; or (iv) a
relocation, without Executive’s consent, of the Executive’s office more than 100
miles from its location at the commencement of this Agreement; provided,
however, the Executive shall provide written notice to the Company of the
initial existence of the condition causing the change in terms or status no more
than ninety (90) days after the change in terms or status occurs and the Company
shall have thirty (30) days to resolve the issue causing the change in terms or
status. If the Company resolves such issue, then Executive’s
employment shall not be subject to the Good Reason provisions of this Agreement
as to such issue.
3.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
4.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable.
5.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement sets
forth the entire Agreement between the Company and Executive with respect to the
subject matter herein, supersedes any and all prior agreements between the
Company and Executive with respect to the subject matter herein, and shall not
be amended or added to except in writing signed by the Company and
Executive. Executive understands that Executive may not assign
Executive’s duties and obligations under this Agreement to any other party and
that the Company may, at any time and without further action by or the consent
of Executive, assign this Agreement to any of its affiliated
companies.
6.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
7.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure to the
benefit of the successors and assigns of the Company.
8.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey, attn.: General Counsel, and (b) in the case of
Executive, to Executive's last known address as reflected in the Company's
records, or to such other address as Executive shall designate by written notice
to the Company. Any notice given hereunder shall be deemed given at
the time of receipt thereof by the person to whom such notice is
given.
9.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first set forth above.
EXECUTIVE
COLUMBIA LABORATORIES, INC.
________________________ ________________________________
By: James
A. Meer
Its: Senior
Vice President, and ChiefFinancial Officer
Exhibit
10.26
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT dated as of March 11, 2009 (as the same may be amended, restated,
supplemented or otherwise modified from time to time hereafter, this
“Agreement”), is entered into by and between Columbia Laboratories, Inc., a
Delaware corporation having its corporate offices at 354 Eisenhower Parkway,
Livingston, New Jersey 07039 (the “Company”), and Robert S. Mills
(“Executive”).
WITNESSETH
:
WHEREAS, Executive was elected
President of the Company on January 5, 2006; and
WHEREAS, Executive was also elected
Chief Executive Officer of the Company on March 6, 2006; and
WHEREAS, the Company wishes to continue
the employment of Executive on the terms and conditions set forth in this
Agreement; and
WHEREAS, the Company and Executive
desire to enter into this Agreement so the rights, duties, benefits, and
obligations of each regarding Executive’s employment for and by the Company will
be fully set forth under the terms and conditions stated within this
Agreement;
NOW THEREFORE, in consideration of the
mutual promises and undertakings hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1.
Term
. The
term of this Agreement shall commence on the date first written above and
continue through March 31, 2010, unless this Agreement is earlier terminated in
accordance with Section 6 or 8 hereof. The term shall be
automatically extended without further action of either party for additional
one-year periods, unless written notice of either party’s intention not to
extend has been given to the other party hereto at least sixty (60) days prior
to the expiration of the then effective term.
2.
Title;
Duties
.
(a) Executive
shall be the President and Chief Executive Officer of the
Company. Executive will perform duties customarily associated with
such position, including, but not limited to, duties relating to the overall
management of the development, testing, registration, manufacturing, licensing,
marketing and selling of pharmaceutical products for the Company and its
affiliates, and such other duties commensurate with the job description as may
be assigned to him from time to time by the Board of Directors of the Company
(the “Board”) or its designee. Executive shall be employed at the
Company’s offices located in Livingston, New Jersey. Executive will
report to the Company’s Board in accordance with applicable law, the Company’s
bylaws, and otherwise as reasonably necessary to keep the Board apprised of
material business issues.
(b) Executive
agrees to devote his entire business time and attention to the performance of
his duties under this Agreement. He shall perform his duties to the
best of his ability and shall use his best efforts to further the interests of
the Company. Executive shall perform his duties and will be required to travel
as reasonably necessary to perform the services required of him under this
Agreement. Executive represents and warrants to the Company that he
is able to enter into this Agreement and that his ability to enter into this
Agreement and to fully perform his duties hereunder are not limited to or
restricted by any agreements or understandings between Executive and any other
person. For the purposes of this Agreement, the term “person” means
any natural person, corporation, partnership, limited liability partnership,
limited liability company, or any other entity of any nature.
(c) Executive
will observe the reasonable rules, regulations, policies and/or procedures which
the Company may now or hereafter establish governing the conduct of its
business, except to the extent that any such rules, regulations, policies and/or
procedures may be inconsistent with the terms of this Agreement, in which case
the terms of this Agreement shall control.
3.
Employment
Contract.
The Company and Executive acknowledge that the terms
of his employment are set forth in this Agreement. If Executive’s
employment terminates for any reason, Executive shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement, or as may otherwise be available in accordance with the
Company’s established written plans and written policies at the time of
termination. For the avoidance of doubt the Company and Executive agree that the
employment agreement dated February 25, 2005 between the Company and Executive
is hereby terminated.
4.
Compensation
.
(a) Subject
to tax withholdings and deductions to cover Executive contributions to, and
payments under, applicable Executive benefit and welfare plans and programs, the
Company will pay Executive an annual base compensation of $390,000 per year to
be paid in accordance with the Company’s normal payroll practices during the
term of this Agreement (“Base Salary”). The Company’s Board of
Directors (the “Board”) or Compensation Committee of the Board (or any committee
of the Board that shall replace such committee) shall review annually
Executive’s compensation for increases during the term of this Agreement in
conjunction with the Company’s regular review of the salaries of other executive
level employees and in consultation with the Company President. At
such time, the Company will consider (without any obligation to implement)
upward adjustments to Executive’s compensation under this Agreement in a manner
consistent with the Company’s practices in effect from time to
time.
(b) In
addition to Base Salary, Executive also will be eligible to receive an annual
performance bonus as the Board or Compensation Committee of the Board (or any
committee of the Board that shall replace such committee) shall, in its sole
discretion, deem appropriate based upon the parameters and criteria contained in
the Company’s bonus plan. He shall be eligible for a Target Annual Bonus of 50%
of his Base Salary as then in effect. This bonus, if any, shall be
paid to the Executive no later than March 15 following the end of each calendar
year.
(d) Executive
also shall be eligible in the sole discretion of the Board or the Compensation
Committee of the Board (or any committee of the Board that shall replace such
committee) to participate in the Company’s stock option plan as is from time to
time in effect, subject to the terms and conditions of such plan. The Executive
shall receive a grant of 40,000 restricted shares of the Company’s stock which
shares are to vest on the first business day of the calendar month following the
Company’s announcement of the results of the Phase III multi-center, randomized,
double-blind, placebo-controlled, clinical trial designed to assess the
efficacy, safety and tolerability of Prochieve® 8% (progesterone gel) in
preventing preterm delivery in pregnant women who are at increased risk for
preterm birth. Stock options granted to Executive prior to the date hereof shall
not be affected by this Agreement in any manner.
5.
Benefits
.
(a) Executive
and Executive’s eligible dependents shall be eligible for all employee benefit
programs (including any pension, 401(k), group life insurance, group medical and
dental, vision, and short-term and long-term disability policies, plans, and
programs) generally available to other executive level employees of the Company
during the term of this Agreement, in accordance with the terms of those benefit
plans.
(b) Executive
shall be entitled to accrue paid time off (“PTO”) during the term of this
Agreement in accordance with the Company’s standard policy and in an amount
commensurate with other executive level employees of the Company.
(c) In
accordance with the policies of the Company in effect from time to time,
Executive will be entitled to reimbursement for approved ordinary and
necessary business expenses incurred by him during the term of this Agreement in
his capacity as an Executive of the Company.
6.
Termination
.
(a)
Death
. Executive’s
employment shall terminate immediately upon his death.
(b)
Disability
. Executive’s
employment shall terminate upon Executive having a “Disability.” For
purposes of this Agreement, “Disability” means a determination by Company in
accordance with applicable law that, as a result of a physical or mental
illness, Executive is unable to perform the essential functions of his job with
or without reasonable accommodation for a period of six (6) months.
(c)
Termination by Company for
Cause
. Upon delivery of written notice of termination for
“Cause” from Company to Executive, Executive’s employment shall
terminate. Termination for “Cause” shall mean termination based on
(i) Executive’s failure or refusal to perform, in any material respect, his
duties faithfully and diligently in accordance with this
Agreement; (ii) gross negligence, recklessness or malfeasance in
the performance of Executive’s duties; (iii) Executive committing any
criminal act; (iv) Executive committing any act of fraud or other material
misconduct resulting or intending to result directly or indirectly in gain or
personal enrichment at the expense of Company; (v) Executive willfully
engaging in any conduct relating to the business of Company that could
reasonably be expected to have a materially detrimental effect on the business
or financial condition of the Company; (vi) misconduct which materially
discredits or damages Company, or violates Company’s policies or procedures,
after Company has notified Executive of the actions Company deems to constitute
non-compliance; (vii) Executive materially breaches his obligations under
Sections 9 and 10 below, relating to confidential information, non-solicitation
and non-competition.
Termination for Cause pursuant to
subsections (i), (ii), (iv), or (v) of this Paragraph (c) of Section 6 shall not
take effect unless and until the Company complies with the provisions of this
paragraph. Executive shall be given written notice by the Company of
its intention to terminate him for Cause, stating in detail the particular
act(s) or failure(s) to act that constitute the grounds on which the proposed
termination for Cause is based. That written notice shall be given to
Executive within ninety (90) days of the Company’s learning of such act(s) or
failure(s) to act. Executive shall then have thirty (30) days after
receipt of such written notice to cure such conduct, to the extent such cure is
possible. If Executive fails to cure such conduct on or before the
end of the thirty (30) day period, Executive shall be terminated for
Cause. If Executive’s conduct is not curable, no notice need be given
by the Company before terminating Executive for Cause.
(d)
Resignation for Good
Reason
. Executive may terminate his employment with “Good
Reason” (as defined below) upon no fewer than thirty (30) days prior written
notice to the Company specifying the reason(s) for the
termination. Upon receipt of Executive’s notice of intent to
terminate his employment for Good Reason, Company shall have a right to cure the
alleged breach or other conduct alleged by Executive to constitute Good Reason
within the thirty (30) day period. For purposes of this Agreement,
“Good Reason” shall mean the termination by Executive of Executive’s employment
with the Company and all its affiliates and subsidiaries that are considered a
single employer within the meaning of Sections 414(b) and 414(c) of the Code
which is due to (i) a material diminution of Executive’s responsibilities, or
working conditions, or duties; (ii) a material diminution in the Executive’s
base salary; (iii) a material negative change in the terms or status of this
Agreement; or (iv) a relocation, without Executive’s consent, of the Executive’s
office more than 100 miles from its location at the commencement of this
Agreement; provided, however, the Executive shall provide written notice to the
Company of the initial existence of the condition causing the change in terms or
status no more than ninety (90) days after the change in terms or status occurs
and the Company shall have thirty (30) days to resolve the issue causing the
change in terms or status. If the Company resolves such issue, then
Executive’s employment shall not be subject to the Good Reason provisions of
this Agreement as to such issue.
(e)
Resignation Without Good
Reason
. Executive may terminate his employment without Good
Reason upon no fewer than thirty (30) days prior written notice to the
Company.
(f)
Termination by Company
Without Cause
. Executive’s employment shall terminate thirty
(30) days after written notice delivered to Executive of Company’s termination
of Executive’s employment for reason other than Death, Disability or
Cause.
7.
Compensation Upon
Termination
(a) If
Executive’s employment is terminated by Company for Cause, by Death or
Disability, or if Executive resigns Without Good Reason, Executive shall be
entitled to receive:
(i)
|
the Base Salary
through the date of termination;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the
date of Executive’s termination; and
|
|
|
(iii)
|
such Employee
Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company.
|
(b) If
Executive’s Employment is terminated by Company without Cause or by Executive
with Good Reason, Executive shall be entitled to:
(i)
|
the Base Salary
through the date of termination;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the
date of Executive’s termination;
|
|
|
(iii)
|
receive a lump sum
payment within sixty (60) days following Executive’s termination of
employment equal to (1) one times Executive’s Annual Base Salary at the
rate immediately in effect before Executive’s Termination Date; and (2)
the greater of (A) the cash bonus paid to Executive in the preceding year
pursuant to the Company’s bonus plan or (B) the Executive’s target bonus
in effect at the time of the termination.
|
|
|
(iv)
|
if Executive elects
to continue medical, dental, and vision coverage under the health care
continuation provisions of COBRA, Company shall reimburse Executive for
the related premium cost for employee and dependent coverage for a period
of twelve (12) months following Executive’s date of termination of
employment.
|
(c) If
Executive’s Employment is terminated as a result of Company providing written
notice to Executive pursuant to Section 1 of this Agreement of Company’s
intention not to extend the term of the Agreement, Executive shall be entitled
to:
(i)
|
the Base Salary
through the end of the term;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the end
of the term;
|
|
|
(iii)
|
receive a lump sum
payment within sixty (60) days following Executive’s termination of
employment equal to (1) one times Executive’s Annual Base Salary at the
rate immediately in effect before the end of the
term.
|
8.
Change in
Control
.
(a) In
the event of “Change in Control” of Company, as defined in the Executive Change
in Control Severance Agreement dated as of March 11, 2009 (the “Change in
Control Agreement”) between the Company and Executive attached hereto as Exhibit
A and incorporated by reference as if fully set forth herein, Executive shall be
entitled to the benefits, if any, available to him pursuant to the Change in
Control Agreement.
9.
Restrictive
Covenants
.
(a) During
Executive’s employment and for a period of one (1) year following the
termination of Executive’s employment for any reason, Executive will not compete
directly with the Company anywhere in the world by rendering services or
providing assistance for himself or on behalf of any other person or entity, in
any line of business in which the Company is engaged or has made preparations to
engage, as of the termination date of Executive’s employment with the
Company. The term “compete” as used herein means that Executive
engages in research, development, design, consulting, manufacturing, marketing,
promotion or sales with respect to the Company’s business for a third party or
for its or his own interest.
(b) Executive
agrees that during the period stated in subsection (a) above, he will not
(i) directly solicit or encourage in any manner the resignation of any
employee of the Company or any of its subsidiaries; or (ii) directly or
indirectly solicit or divert customers, vendors, or business of the Company or
any of its subsidiaries (
provided
that
Executive may deal with any such customers or vendors in any manner which does
not violate the provisions of subsection (a) above); or (iii) attempt to
influence, directly or indirectly, any person or entity to cease, reduce, alter,
or rearrange any business relationship with the Company or any of its
subsidiaries.
(c) Executive
acknowledges and agrees that he considers the restrictions set forth in this
Section 9 to be reasonable both individually and in the aggregate and that the
duration, geographic scope, extent and application of these restrictions are no
greater than is necessary for the protection of the Company’s legitimate
interests. It is the desire and intent of Executive and the Company
that the provisions of this Section 9 shall be enforced to the fullest extent
possible under the laws and public policies of the State of New
Jersey. The Company and Executive further agree that if any
particular provision or portion of this Section 9 shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made. The Company and Executive further agree that in
the event that any restriction herein shall be found to be void or unenforceable
but would be valid or enforceable if some part or parts thereof were deleted or
the period or area of application reduced, such restriction shall apply with
modification as may be necessary to make it valid and Executive and the Company
empower a court of competent jurisdiction to modify, reduce or otherwise reform
such provision(s) in such fashion as to carry out the parties’ intent to grant
the Company the maximum allowable protection consistent with the applicable law
and facts and the express exceptions contained herein.
(d) Without
limiting the foregoing, Executive will not be deemed to be in competition with
the Company by reason of his employment by an enterprise (“Subsequent Employer”)
whose businesses include both (i) activities that involve the Company
Technology (“Covered Business”); and (ii) activities that do not involve
the Company Technology (“Excluded Business”) upon satisfaction of the following
conditions: (A) Executive delivers to the Subsequent Employer a
copy of this Agreement or an extract thereof setting forth fully and completely
the restrictions set forth in this Section 9; (B) the Subsequent Employer
executes and delivers to the Company a written agreement in which, as a
condition to Executive’s employment, the Subsequent Employer
(1) acknowledges receipt of such restriction, (2) agrees to employ
Executive only in the Excluded Business, (3) agrees to cause the executive
in charge of the Covered Business to acknowledge such restrictions in writing
and agree that Executive will not be permitted to participate in the Covered
Business, (4) agrees to establish reasonable internal policies and
procedures to prevent violation of such restrictions or disclosure by Executive
to personnel engaged in the Covered Business, and (5) agrees that the
Company shall be entitled to enforce such agreement directly against the
Subsequent employer; and (C) Executive and the Subsequent Employer perform
their obligations pursuant to this Agreement and such agreement.
10.
Confidentiality
.
The Employee Proprietary
Information and Inventions Agreement dated March 14, 2003, between the Company
and Executive is attached hereto as Exhibit B and incorporated by reference as
if fully set forth herein.
11.
Cooperation
: Executive
agrees to cooperate on a reasonable basis in the truthful and honest prosecution
and/or defense of any claim in which the Company, its affiliates, and/or its
subsidiaries may have an interest (subject to reasonable limitations concerning
time and place), which may include without limitation making himself available
on a mutually agreed, reasonable basis to participate in any proceeding
involving the Company, its affiliates, and/or its subsidiaries, allowing himself
to be interviewed by representatives of the Company, its affiliates, and/or its
subsidiaries without asserting or claiming any privilege against the Company,
its affiliates, and/or its subsidiaries, appearing for depositions and testimony
without requiring a subpoena and without asserting or claiming any privilege
against the Company, its affiliates, and/or its subsidiaries, and producing
and/or providing any documents or names of other persons with relevant
information without asserting or claiming any privilege against the Company, its
affiliates, and/or its subsidiaries; provided that, if such services are
required after the end of any period during which he is eligible for severance
benefits, if any, the Company, its affiliates, and/or its subsidiaries shall
provide Executive with reasonable compensation for the time actually expended in
such endeavors and shall pay his reasonable expenses incurred at the prior and
specific request of the Company, its affiliates, and/or its
subsidiaries.
12.
Remedies
. Executive
acknowledges and agrees that the Company’s remedy at law for a breach or
threatened breach of the provisions of this Agreement would be inadequate and,
in recognition of this fact, in the event of a breach or threatened breach by
Executive of any provision of this Agreement, it is agreed that, in addition to
any available remedy at law, the Company shall be entitled to, without posting
any bond, specific performance, temporary restraining order, temporary or
permanent injunction, or any other equitable relief or remedy which may then be
available; provided, however, nothing herein shall be deemed to relieve the
Company of its burden to prove grounds warranting such relief nor preclude
Executive from contesting such grounds or facts in support
thereof. Nothing herein contained shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach hereof.
13.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
14.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable. The Parties agree that the covenants set forth herein
are reasonable. Without limiting the foregoing, it is the
intent of the parties that the covenants set forth herein be enforced to the
maximum degree permitted by applicable law. As such, the parties ask
that if any court of competent jurisdiction were to consider any provision of
this Agreement to be overly broad based on the circumstances at the time
enforcement is requested, that such court “blue pencil” the provision and
enforce the provision to the full extent that such court deems it to be
reasonable in scope.
15.
Indemnification
.
The
Indemnification Agreement dated April 8, 2004, between the Company and Executive
is attached hereto as Exhibit C and incorporated by reference as if fully set
forth herein.
16.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement, together
with the Exhibits incorporated by reference as if fully set forth herein, sets
forth the entire employment agreement between the Company and Executive,
supersedes any and all prior agreements between the Company and Executive,
and shall not be amended or added to except in writing signed by the Company and
Executive. Executive understands that he may not assign his duties
and obligations under this Agreement to any other party and that the Company
may, at any time and without further action by or the consent of Executive,
assign this Agreement to any of its affiliated companies.
17.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
18.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure the
benefit of the successors and assigns of the Company.
19.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey 07039, attn.: General Counsel, and (b) in the
case of Executive, to Executive's last known address as reflected in the
Company's records, or to such other address as Executive shall designate by
written notice to the Company. Any notice given hereunder shall be
deemed given at the time of receipt thereof by the person to whom such notice is
given.
20.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the dates set forth below.
EXECUTIVE
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/ Robert S.
Mills
|
/s/
Stephen G. Kasnet
|
Robert S.
Mills
|
Stephen G. Kasnet,
Chairman
|
|
|
Date:
March 11, 2009
|
Date:
March 11,
2009
|
Exhibit
A
EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT dated as of March 11, 2009 (as the same may be amended,
restated, supplemented or otherwise modified from time to time hereafter, this
“Agreement”), is entered into between Columbia Laboratories, Inc., a Delaware
corporation having its corporate offices at 354 Eisenhower Parkway, Livingston,
New Jersey (“Columbia” or the “Company”), and
Robert S. Mills
(“Executive”).
WITNESSETH
:
WHEREAS, the Company desires to create
a greater incentive for Executive to remain in the employ of the Company,
particularly in the event of any possible change or threatened change in control
of the Company; and
NOW THEREFORE, in partial consideration
of Executive’s past and future services to the Company and the mutual covenants
contained herein, the parties hereby agree as follows:
1.
Termination Following A
Change in Control
(a)
Qualifying
Termination
. Executive shall be entitled to the compensation
and benefits listed in Paragraph 1(b), in addition to compensation and benefits
to which Executive would otherwise be entitled as of the date of termination, if
Executive’s employment with the Company is terminated either (i) by the Company
for any reason other than for Cause within 90 days before a Change in Control or
within one year following the occurrence of any Change in Control or successive
Change in Control or (ii) by Executive for Good Reason within one year following
the occurrence of any Change in Control or successive Change in Control and
Executive properly executes, and does not revoke or attempt to revoke, a valid
and reasonable release of claims against the Company, its affiliates and their
employees and agents.
(b)
Compensation and
Benefits
.
(i)
Lump Sum
Payment
. Within ten business days after a Change in Control
event (or the last day of any period during which any release may be revoked by
Executive), the Company shall make a lump sum cash payment to Executive, subject
to any mandatory tax withholding, equal to one times Executive’s Base Salary and
Bonus for the year prior to the Change in Control plus a lump sum payment equal
to the value of the Fringe Benefits provided to Executive for the year prior to
the Change in Control.
(ii)
Excise Tax Gross-Up
Payment
. In the event it shall be determined that any payment
or distribution of any type to or for the benefit of the Executive directly or
indirectly by the Company, any affiliate of the Company, any person who acquires
ownership or effective control of the company or ownership of a substantial
portion of the company’s assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
thereunder) or any affiliate of such person, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the “Total Payments”), is or will be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are collectively referred to as the “Excise Tax”), then the Executive shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments. Such Gross-Up
Payment shall be made no later than the end of the calendar year following the
calendar year during which the Excise Tax is incurred.
2.
Definitions
.
(a)
Bonus
. “Bonus”
shall mean the greater of (i) the bonus, if any, paid to Executive in the year
prior to the Qualifying Termination, (ii) the bonus, if any, paid to Executive
in the year prior to the Change in Control, or (iii) the Executive’s target
bonus at the time of the Change in Control.
(b)
Base
Salary
. “Base Salary” shall mean the greater of (i) the annual
rate of base salary in effect for Executive at the time of the Qualifying
Termination or (ii) the annual rate of base salary in effect for Executive at
the time of the Change in Control.
(c)
Cause
. “Cause”
shall mean termination based on (i) gross negligence, recklessness or
malfeasance in the performance of Executive’s duties; (ii) Executive
committing any criminal act; (iii) Executive committing any act of fraud or
other material misconduct resulting or intending to result directly or
indirectly in gain or personal enrichment at the expense of Company;
(iv) Executive willfully engaging in any conduct relating to the business
of Company that could reasonably be expected to have a materially detrimental
effect on the business or financial condition of the Company;
(v) misconduct which materially discredits or damages Company, or violates
Company’s policies or procedures, after Company has notified Executive of the
actions Company deems to constitute non-compliance; (vi) Executive
materially breaches Executive’s obligations relating to confidential
information, non-solicitation and non-competition.
(d)
Change In
Control
. “Change in Control” shall have occurred if (a) there
shall have consummated (i) any consolidation or merger of Company in which
Company is not the continuing or surviving entity or pursuant to which shares of
Company’s common stock would be converted to cash, securities or other property,
other than a merger of Company in which the holders of Company’s common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving entity immediately after the merger, or (ii) any
sale, lease, exchange or transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the company; or
(b) the stockholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company; or (c) any person (as that term
is used in Sections 13(d) and 14(d)(z) of the Securities and Exchange Act, as
amended (the “Exchange Act”)) shall become a beneficial owner (within the
meaning of Rule 13d-2 under the Exchange Act) of 40% or more of Company’s
outstanding common stock; or (d) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire
Board shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by Company’s stockholders, of each new
director was approved by a vote of at least 50% of the directors eligible to
vote who were directors at the beginning of the period.
(e)
Good
Reason
. For purposes of this Agreement, “Good Reason” shall
mean the termination by Executive of Executive’s employment with the Company and
all its affiliates and subsidiaries that are considered a single employer within
the meaning of Sections 414(b) and 414(c) of the Code which is due to (i) a
material diminution of Executive’s responsibilities, or working conditions, or
duties; (ii) a material diminution in the Executive’s base salary; (iii) a
material negative change in the terms or status of this Agreement; or (iv) a
relocation, without Executive’s consent, of the Executive’s office more than 100
miles from its location at the commencement of this Agreement; provided,
however, the Executive shall provide written notice to the Company of the
initial existence of the condition causing the change in terms or status no more
than ninety (90) days after the change in terms or status occurs and the Company
shall have thirty (30) days to resolve the issue causing the change in terms or
status. If the Company resolves such issue, then Executive’s
employment shall not be subject to the Good Reason provisions of this Agreement
as to such issue.
3.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
4.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable.
5.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement sets
forth the entire Agreement between the Company and Executive with respect to the
subject matter herein, supersedes any and all prior agreements between the
Company and Executive with respect to the subject matter herein, and shall not
be amended or added to except in writing signed by the Company and
Executive. Executive understands that Executive may not assign
Executive’s duties and obligations under this Agreement to any other party and
that the Company may, at any time and without further action by or the consent
of Executive, assign this Agreement to any of its affiliated
companies.
6.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
7.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure to the
benefit of the successors and assigns of the Company.
8.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey, attn.: General Counsel, and (b) in the case of
Executive, to Executive's last known address as reflected in the Company's
records, or to such other address as Executive shall designate by written notice
to the Company. Any notice given hereunder shall be deemed given at
the time of receipt thereof by the person to whom such notice is
given.
9.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first set forth above.
EXECUTIVE
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/ Robert S.
Mills
|
/s/James
A. Meer
|
Robert S.
Mills
|
By: James A.
Meer
|
|
Its: Senior Vice
President and Financial Officer
|
|
|
Exhibit
B
EMPLOYEE
PROPRIETARY INFORMATION
AND
INVENTIONS AGREEMENT
This Employee Proprietary Information
and Inventions Agreement (the "Agreement") is made as of March 14, 2003, between
Robert S. Mills
(referred to below as “I”, “My”, “Myself”, or “Me”) and Columbia Laboratories,
Inc., having an office at 364 Eisenhower Parkway, Livingston, NJ 07039 (referred
to below together with its subsidiaries and affiliates as the
"Company").
RECITALS
A. The
Company is engaged in a continuous program of research, development, production,
distribution, and marketing with respect to its present and future business;
and
B. I
understand that My employment with the Company creates a relationship of
confidence and trust between the Company and Me with respect to any information:
(a) applicable to the business of the Company, or (b) applicable to the business
of any client or customer of the Company, that may be made known to Me by the
Company, any client or customer of the Company, or learned by Me during the
period of My employment. I understand that this information constitutes a very
valuable asset of the Company.
NOW, THEREFORE, in consideration of My
employment by the Company and the salary and other employee benefits I will
receive from the Company for My service, which in all cases are subject to
Section 10(a) of this Agreement, and including specifically, but without
limitation, the options that I received effective March 14, 2003, I hereby agree
as follows:
1.
Proprietary
Information
. The Company possesses and will come to possess
information that has been created, discovered or developed, or has otherwise
become known to the Company (including without limitation, information created,
discovered, developed or made known by or to Me arising out of My employment by
the Company), and/or in which property rights have been assigned or otherwise
conveyed to the Company, which information has commercial value in the business
in which the Company is engaged. All of the aforementioned
information is hereinafter called "Proprietary Information." Any information
disclosed to Me or to which I have access (whether I or others originated it)
during the time I am employed by the Company, that the Company or I reasonably
consider Proprietary Information or that the Company treats as Proprietary
Information, will be presumed to be Proprietary Information.
By way of illustration, but not
limitation, Proprietary Information includes trade secrets, processes, formulae,
data and know-how, improvements, inventions, techniques, marketing plans,
strategies, forecasts, customer lists, and finance and business
systems.
(a)
Company as Sole
Owner
. I agree and acknowledge that all Proprietary
Information, and all Inventions (defined below in Section 6(a) of this
Agreement), shall be the sole property of the Company and its assigns, and the
Company and its assigns shall be the sole owner of all patents and trade secrets
and any other rights in connection therewith.
(b)
Assignment of Rights;
Obligation of Confidentiality
. I hereby assign to the Company
any rights I may have or acquire in all Proprietary Information. At
all times during My employment by the Company and at all times after termination
of such employment, I will keep in confidence and trust all Proprietary
Information and, except as I may be authorized to make disclosure in the
ordinary course of performing My duties as an employee of the Company, I will
not disclose, sell, use, lecture upon or publish any Proprietary Information or
anything relating to it without the prior written consent of the
Company.
2.
No
Competition
. I agree that during the period of My employment
by the Company I will not, without the Company's prior written consent, engage
in any employment or other activity for any person, company or entity engaged in
any business that is competitive with the Company's business.
3.
Other Proprietary
Rights
. All documents, data, records, apparatus, equipment,
chemicals, molecules, organisms, and other physical property, whether or not
pertaining to Proprietary Information, furnished to Me by the Company or
produced by Me or others in connection with My employment shall be and remain
the sole property of the Company and shall be returned promptly to the Company
as and when requested by the Company. Should the Company not so
request, I shall return and deliver all such property upon termination of My
employment by Me or the Company for any reason and I will not take with Me any
such property or any reproduction of such property upon such
termination.
4.
No
Solicitation
. I agree that for a period of one (1) year
following termination of My employment, I will not solicit or in any manner
encourage any employee of the Company to leave the Company's
employ.
5.
Obligations Regarding
Inventions
.
(a) I
will promptly disclose to the Company, or any persons designated by it, and will
not use Myself or disclose to anyone else at any time during or after My
employment without the prior written consent of the Company, all improvements,
inventions, formulae, processes, techniques, know-how and data (whether or not
they can be patented, trademarked or copyrighted), made, conceived, reduced to
practice or learned by Me, either alone or jointly with others, during the
period of My employment, which are related to or useful in the business of the
Company, or which the Company would be interested in, or result from tasks
assigned to Me by the Company, or result from use of any premises owned, leased
or contracted for by the Company (all said improvements, inventions, formulae,
processes, techniques, know-how, and data initiated or developed during My
employment shall be collectively hereinafter called "Inventions"); such
disclosure shall continue after termination of My employment with the Company
with respect to any Invention, which in all cases are subject to Section 5(c) of
this Agreement.
(b)
Company Sole Owner of Patent
Rights
. I will promptly and fully disclose the existence and
describe the nature of any such Invention to the Company in writing and without
request. I agree that all Inventions shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents, copyrights, trade secrets, and other intellectual property rights
(collectively, "Patent Rights") in connection therewith. I will, with respect to
any such Invention, keep current, accurate and complete records that will belong
to the Company and will be kept stored on the Company premises while I am
employed by the Company and shall be turned over to the Company immediately upon
termination of My employment.
(c)
Assignment of Inventions and
Patent Rights; Duty to Cooperate
. I hereby assign to the
Company any rights I may have or acquire in all Inventions. I further
agree as to all Inventions and Proprietary Information to assist the Company in
every proper way (but at the Company's expense) to obtain and from time to time
enforce Patent Rights regarding the Inventions or Proprietary Information in any
and all countries, and to that end I will execute all documents for use in
applying for and obtaining such patents or copyrights thereon and enforcing
same, as the Company may desire, together with any assignments thereof to the
Company or entities or persons designated by it. I agree further that
these obligations to assist the Company in obtaining and enforcing Patent Rights
in any and all countries shall continue beyond the termination of My employment,
in return for which assistance after termination the Company shall
compensate Me at a reasonable rate for time actually spent by Me at the
Company's request on such assistance.
6.
Prior Inventions
List
.
[Please
initial one of the following two entries.]
_____ As
a matter of record, I have attached hereto a complete list of all inventions or
improvements relevant to the subject matter of My employment by the Company
which have been made or conceived or first reduced to practice by Me alone or
jointly with others prior to My employment by the Company which I desire to
remove from the operation of this Agreement; and I warrant that such list is
complete.
_RSM_
No
such list is attached to this Agreement, and I represent that I have made no
such inventions or improvements at the time of signing this
Agreement.
7.
No Breach of
Confidentiality
. I represent that My performance of all terms
of this Agreement and that My employment by the Company does not and will not
breach any obligation of confidentiality that I have to others, which existed
prior to My employment by the Company. I have not brought or used,
and will not bring with Me to the Company or use any equipment, supplies,
facility or trade secret information of any former employer or any other person,
which information is not generally available to the public, unless I have
obtained written authorization for their possession and use, and promptly
provided such written authorization to the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict with this Agreement.
8.
Injunctive
Relief
. I acknowledge and agree that the Company’s remedy at
law for a breach or threatened breach of any of the provisions of this Agreement
would be inadequate and, in recognition of that fact, in the event of any such
breach or threatened breach, I agree that, in addition to its remedy at law, the
Company shall be entitled to equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy that may then be available. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach.
9.
Not Debarred.
I
warrant and represent that I have never been, and am not currently an individual
who has been, debarred by the United States Food and Drug Administration (“FDA”)
pursuant to 21 U.S.C. §336a (a) or (b) (“Debarred Individual”) from providing
services in any capacity to a person that has an approved or pending drug
product application. I further warrant and represent that I have no
knowledge of any FDA investigations of, or debarment proceedings against, Me or
any person or entity with which I am, or have been, associated, and I will
immediately notify the Company if I become aware of any such investigations or
proceedings during the term of My employment with the Company.
10.
Miscellaneous
Provisions
.
(a)
Employment
. Nothing
in this Agreement shall alter My at will employee status or be construed to
create a specific term of employment or a promise of continued employment.
Either I or the Company may terminate the employment relationship for any reason
at any time, with or without notice.
(b)
Enforceability
. If
one or more of the provisions contained in this Agreement shall, for any reason,
be held to be excessively broad as to scope, activity, subject or otherwise, so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with then applicable law. If any
provision of this Agreement shall be declared invalid, illegal or unenforceable,
such provision shall be severed and all remaining provisions shall continue in
full force and effect.
(c)
Assignment.
This
Agreement is not assignable by Me without the written consent of the Company,
which consent may be withheld for any reason or no reason. In light
of the very personal and critical nature of this Agreement, I recognize that it
is unlikely such consent would ever be granted.
(d)
Entire
Agreement.
This Agreement contains the entire agreement
between Me and the Company with respect to the subject matter of this Agreement
and supersedes all prior or contemporaneous oral or written agreements,
statements, representations, or understandings between Me and the Company, or
any employee of the Company. This Agreement may be amended only by a written
instrument signed by Me and the Company.
(e)
Effective
Date
. This Agreement shall be effective as of the first day of
My employment by the Company, as affirmed or reaffirmed by my signature
below.
(f)
Binding
Effect
. This Agreement shall be binding upon Me, My heirs,
executors, assigns and administrators and shall inure to the benefit of the
Company, its successors and assigns.
(g)
Governing
Law
. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without regard to its rules
on conflicts of law.
COLUMBIA
LABORATORIES, INC.
|
EMPLOYEE
|
|
|
By:
/s/David L.
Weinberg
|
/s/Robert S. Mills
3/25/03
|
|
Signature
|
Name:
David L.
Weinberg
|
|
|
Robert S.
Mills
|
Title:
Vice President
|
|
Exhibit
C
INDEMNIFICATION
AGREEMENT
This Agreement is made and entered into
this 8
th
day of
April, 2004 (“Agreement”) by and between Columbia Laboratories, Inc., a Delaware
corporation (“Corporation”) and
Robert S. Mills
(“Indemnitee”).
WHEREAS the Board of Directors (the
“Board”) has determined that the best interests of the Corporation require that
persons serving as directors of, and in other capacities for, the Corporation
receive better protection from the risk of claims and actions against them
arising out of their service to and activities on behalf of such corporations;
and
WHEREAS, this Agreement is a supplement
to and in furtherance of Article VI of the amended and restated by-laws of the
Corporation, any rights granted by the Certification of Incorporation of the
Corporation and any resolutions adopted pursuant thereto and shall not be deemed
to be a substitute therefore nor to diminish or abrogate any rights of the
Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to
serve, continue to serve and take on additional service for or on behalf of the
Corporation on the condition that Indemnitee be indemnified according to the
terms of this Agreement;
NOW, THEREFORE, in consideration of the
premises and the covenants contained herein, the Corporation and Indemnitee do
hereby covenant and agree as follows:
Section
1. Definitions
.
For purposes of this
Agreement:
(a) “Change
in Control” shall be deemed to have occurred if (a) there shall have
consummated (i) any consolidation or merger of Company in which Company is
not the continuing or surviving entity or pursuant to which shares of Company’s
common stock would be converted to cash, securities or other property, other
than a merger of Company in which the holders of Company’s common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving entity immediately after the merger, or (ii) any
sale, lease, exchange or transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the company; or
(b) the stockholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company; or (c) any person (as that term
is used in Sections 13(d) and 14(d)(z) of the Securities and Exchange Act, as
amended (the “Exchange Act”)) shall become a beneficial owner (within the
meaning of Rule 13d-2 under the Exchange Act) of 40% or more of Company’s
outstanding common stock; or (d) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire
Board shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by Company’s stockholders, of each new
director was approved by a vote of at least 50% of the directors eligible to
vote who were directors at the beginning of the period.
(b) “Disinterested
Director” means a director of the Corporation who is not and was not a party to
the Proceeding in respect of which indemnification is sought by
Indemnitee.
(c) “Effective
Date” means the date first written above.
(d) “Expenses”
mean all reasonable attorneys’ fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees and all other
disbursements and expenses of the type customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a Proceeding.
(e) “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced in
matters of corporation law and neither presently is, nor in the past five years
has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(f) “Proceeding”
means an action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative, except one initiated by an Indemnitee
pursuant to Section 11 of this Agreement to enforce Indemnitee’s rights under
this Agreement.
Section
2. Services by Indemnitee
.
Indemnitee agrees to serve as an
officer or director of the corporation, and, at its request, as a director,
officer, employee, agent or fiduciary of certain other corporations and
entities. Indemnitee may at any time and for any reason resign from
any such position (subject to any other contractual obligation or any obligation
imposed by operation of law).
Section
3. Indemnification - General
.
The Corporation shall indemnify, and
advance Expenses to, Indemnitee as provided in this Agreement to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time
permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.
Section
4. Proceeding Other Than Proceedings by or in the Right of the
Corporation
.
Indemnitee shall be entitled to the
rights of indemnification provided in this Section if, by reason of Indemnitee’s
employment or service as an officer or director, Indemnitee is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding, other
than a Proceeding brought by or in the right of the Corporation to procure a
judgment in its favor. Pursuant to this Section, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonable incurred by Indemnitee or on Indemnitee’s
behalf in connection with any such Proceeding if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal Proceeding,
had no reasonable cause to believe Indemnitee’s conduct was
unlawful.
Section
5. Proceedings by or in the Right of the
Corporation
.
Indemnitee shall be entitled to the
rights of indemnification provided in this Section if, by reason of his
Corporate Status, Indemnitee is, or is threatened to be made, a party to any
threatened, pending or completed Proceeding brought by or in the right of the
Corporation to procure a judgment in its favor. Pursuant to this
Section, Indemnitee shall be indemnified against Expenses, judgments, penalties,
fines and amounts paid in settlement, actually and reasonably incurred by
Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the
Corporation. Notwithstanding the foregoing, no indemnification
against such Expenses shall be made in respect of any claim, issue or matter in
any such Proceeding as to which Indemnitee shall have been adjudged to be liable
to the Corporation if applicable law prohibits such indemnification unless the
Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that
indemnification against Expenses may nevertheless be made by the
Corporation.
Section
6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful
.
Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
employment or service as an officer or director, a party to and is successful,
on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith. If Indemnitee is not
wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Corporation shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in
connection with each successfully resolved claim, issue or
matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section
7. Indemnification for Expenses of a Witness
.
Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
employment or service as an officer or director, a witness in any Proceeding,
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee’s behalf in connection
therewith.
Section
8. Advancement of Expenses
.
The Corporation shall advance all
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within thirty (30) days after the receipt by the
Corporation of a statement or statement from Indemnitee requesting such advance
or advances from time to time, whether prior to or after final disposition of
such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section
9. Procedure for Determination of Entitlement to
Indemnification
.
(a) To
obtain indemnification under this Agreement in connection with any Proceeding,
and for the duration thereof, Indemnitee shall submit to the Corporation a
written request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly
upon receipt of any such request for indemnification, advise the board in
writing that Indemnitee has requested indemnification.
(b) Upon
written request by Indemnitee for indemnification pursuant to Section 9(a)
hereof, a determination, if required by applicable law, with respect to
Indemnitee’s entitlement thereto shall be made in such
case: (i) if a Change in Control shall have occurred, by
Independent Counsel (unless Indemnitee shall request that such determination be
made by the Board or the stockholders in the manner provided for in clauses (ii)
or (iii) or this Section 9(b)) in written opinion to the Board, a copy of which
shall be delivered to Indemnitee; (ii) if a Change of Control shall not
have occurred, (A) by the Board by a majority vote of a quorum consisting
of Disinterested Directors, or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable, or even if such quorum is obtainable,
if such quorum of Disinterested Directors so directs, either (x) by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee, or (y) by the stockholders of the Corporation, as
determined by such quorum of Disinterested Directors, or a quorum of the Board,
as the case may be; or (iii) as provided in Section 10(b) of this
Agreement. If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within thirty (30) days
after such determination. Indemnitee shall cooperate with the persons
or entity making such determination with respect to Indemnitee’s entitlement to
indemnification, including providing to such persons or entity upon request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with
the persons or entity making such determination shall be borne by the
Corporation (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) If
required, Independent Counsel shall be selected as
follows: (i) if a Change of Control shall not have occurred,
Independent Counsel shall be selected by the Board by a majority vote of a
quorum consisting of Disinterested Directors and the Corporation shall give
written notice to Indemnitee advising Indemnitee of the identity of Independent
Counsel so selected; or (ii) if a Change of Control shall have occurred,
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board, in which event (i) shall
apply), and Indemnitee shall give written notice to the Corporation advising it
of the identity of Independent Counsel so selected. In either event,
Indemnitee or the Corporation, as the case may be, may, within seven (7) days
after such written notice of selection shall have been given, deliver to the
Corporation or to Indemnitee, as the case may be, a written objection to such
selection. Such objection may be asserted only on the ground that
Independent Counsel so selected does not meet the requirements of “Independent
Counsel” as defined in Section 1 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has determined that such objection
is without merit. If, within twenty (20) days after submission by
Indemnitee of a written request for indemnification pursuant to Section 9(a)
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery of the
State of Delaware, or any court in the State of New Jersey in which such
petition would be cognizable, for resolution of any objection which shall have
been made by the Corporation or Indemnitee to the other’s selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by such court or by such other person as such court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 9(b)
hereof. The Corporation shall pay any and all reasonable fees and
expenses incurred by such Independent Counsel in connection with its actions
pursuant to this Agreement, and the Corporation shall pay all reasonable fees
and expenses incident to the procedures of this Section 9(c) regardless of the
manner in which such Independent Counsel was selected or
appointed. Upon the due commencement date of any judicial proceeding
pursuant to Section 11(a)(iii) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then
prevailing).
Section
10. Presumptions and Effects of Certain
Proceedings
.
(a) If
a Change in Control shall have occurred, in making a determination with respect
to entitlement to indemnification hereunder, the person or persons or entity
making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 9(a) of this Agreement, and the
Corporation shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
(b) The
person or entity empowered or selected under Section 8 of this Agreement shall
make the determination of whether Indemnitee is entitled to indemnification as
soon as practicable after receipt by the Corporation of the request
therefore.
(c) The
termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of
nolo contendere
or its
equivalent, shall not (except as otherwise expressly provided in this Agreement)
of itself adversely affect the right of Indemnitee to indemnification or create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that Indemnitee’s conduct was unlawful.
Section
11. Remedies of Indemnitee
.
(a) In
the event that (i) a determination is made pursuant to Section 9 or 10 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is made by Independent Counsel pursuant to Section 9 of this
Agreement and such determination shall not have been made and delivered in a
written opinion within ninety (90) days after receipt by the Corporation of the
request for indemnification, (iv) or (iv) payment of indemnification
is not made within thirty (30) days after such determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Sections 9 or 10 of this Agreement, Indemnitee shall
be entitled to an adjudication in an appropriate court of the State of Delaware
or the State of New Jersey , of Indemnitee’s entitlement to such indemnification
or advancement of Expenses. Indemnitee shall commence such proceeding
seeking an adjudication or an award within one hundred eighty (180) days
following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 11(a).
(b) In
the event that a determination shall have been made pursuant to Section 9 of
this Agreement that Indemnitee is not entitled to indemnification, any judicial
proceeding commenced pursuant to this Section shall be conducted in all respects
as a
de novo
trial and
Indemnitee shall not be prejudiced by any reason of that adverse
determination. If a Change of Control shall have occurred, in any
judicial proceeding commenced pursuant to this Section the Corporation shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If
a determination shall have been made or deemed to have been made pursuant to
Section 9 or 10 of this Agreement that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to this Section, absent (i) a
misstatement by Indemnitee or Indemnitee’s representative of a material fact, or
an omission of any material fact necessary to make Indemnitee’s or Indemnitee’s
representative’s statement not materially misleading, in connection with the
request for indemnification, or (ii) prohibition of such indemnification
under applicable law.
(d) The
Corporation shall be precluded from asserting in any judicial proceeding
commenced pursuant to this Section that the procedures and presumptions of this
Agreement are not valid, binding and enforceable and shall stipulate in any such
court that the Corporation is bound by all the provisions of this
Agreement.
(e) In
the event that Indemnitee, pursuant to this Section, seeks a judicial
adjudication of Indemnitee’s rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the Corporation and
shall be indemnified by the Corporation against, any and all expenses (of the
kinds described in the definition of Expenses) actually and reasonably incurred
by Indemnitee in such judicial adjudication, but only if Indemnitee prevails
therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
Section
12. Non-Exclusivity; Survival of Rights; Insurance
Subrogation
.
(a) The
rights of indemnification and to receive advancement of Expenses as provided by
this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law, the certificate of
incorporation or by-laws of the Corporation, any agreement, a vote of
stockholders or resolution of directors or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in Indemnitee’s employment or service as an officer or director
prior to such amendment, alteration or repeal.
(b) To
the extent that the corporation maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, agents or
fiduciaries of the corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person
serves at the request of the Corporation, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee, agent or
fiduciary under such policy or policies.
(c) In
the event of any payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
(d) The
Corporation shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
Section
13. Duration of Agreement
.
This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date
that Indemnitee shall have ceased to serve as a director, officer, employee,
agent or fiduciary of the Corporation or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which Indemnitee
served at the request of the Corporation; (b) the final termination of all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 11 of this
Agreement. This Agreement shall be binding upon the Corporation and
its successors and assigns and shall inure to the benefit of Indemnitee and
Indemnitee’s heirs.
Section
14. Severability
.
If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section
15. Exception to Right of Indemnification or Advancement of
Expenses
.
Except as provided in Section 11(e),
Indemnitee shall not be entitled to indemnification or advancement of Expenses
under this Agreement with respect to any Proceeding, or any claim therein,
brought or made by Indemnitee against the Corporation. For the
purposes of this Section 15, a Proceeding in the right of the Corporation shall
not be deemed to constitute a Proceeding brought or made by the
Corporation.
Section
16. Identical Counterparts
.
This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section
17. Headings
.
The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction
thereof.
Section
18. Modification and Waiver
.
No supplement, modification or
amendment to this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
Section
19. Notice by Indemnitee
.
Indemnitee agrees promptly to notify
the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/Robert
S. Mills
|
By:
/s/David L.
Weinberg
|
Robert S.
Mills, Indemnitee
|
Name: David L.
Weinberg
|
|
Title:
Vice President, Finance and Chief Financial Officer
|
|
|
I,
Michael McGrane, Secretary, certify that the Board of Directors has authorized
the Corporation to enter into this Agreement by a resolution adopted at its
February 26, 2004 meeting.
|
/s/Michael
McGrane
|
|
Michael
McGrane
|
|
Secretary
|
Exhibit
10.27
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT dated as of March 11, 2009 (as the same may be amended, restated,
supplemented or otherwise modified from time to time hereafter, this
“Agreement”), is entered into by and between Columbia Laboratories, Inc., a
Delaware corporation having its corporate offices at 354 Eisenhower Parkway,
Livingston, New Jersey 07039 (the “Company”), and Michael McGrane
(“Executive”).
WITNESSETH
:
WHEREAS, Executive was elected Senior
Vice President, General Counsel, and Secretary of the Company on January 5,
2006; and
WHEREAS, the Company wishes to continue
the employment of Executive on the terms and conditions set forth in this
Agreement; and
WHEREAS, the Company and Executive
desire to enter into this Agreement so the rights, duties, benefits, and
obligations of each regarding Executive’s employment for and by the Company will
be fully set forth under the terms and conditions stated within this
Agreement;
NOW THEREFORE, in consideration of the
mutual promises and undertakings hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1.
Term
. The
term of this Agreement shall commence on the date first written above and
continue through March 31, 2010, unless this Agreement is earlier terminated in
accordance with Section 6 or 8 hereof. The term shall be
automatically extended without further action of either party for additional
one-year periods, unless written notice of either party’s intention not to
extend has been given to the other party hereto at least sixty (60) days prior
to the expiration of the then effective term.
2.
Title;
Duties
.
(a) Executive
shall be the Senior Vice President, General Counsel, and Secretary of the
Company. Executive will perform duties customarily associated with
such position, including, but not limited to, duties relating to the management
of the legal affairs of the Company and its affiliates, and such other duties
commensurate with the job description as may be assigned to him from time to
time by the President of the Company (the “Company President”) or his
designee. Executive shall be employed at the Company’s offices
located in Livingston, New Jersey. Executive will report to the
Company President.
(b) Executive
agrees to devote his entire business time and attention to the performance of
his duties under this Agreement. He shall perform his duties to the
best of his ability and shall use his best efforts to further the interests of
the Company. Executive shall perform his duties and will be required to travel
as reasonably necessary to perform the services required of him under this
Agreement. Executive represents and warrants to the Company that he
is able to enter into this Agreement and that his ability to enter into this
Agreement and to
fully
perform his duties hereunder are not limited to or restricted by any agreements
or understandings between Executive and any other person. For the
purposes of this Agreement, the term “person” means any natural person,
corporation, partnership, limited liability partnership, limited liability
company, or any other entity of any nature.
(c) Executive
will observe the reasonable rules, regulations, policies and/or procedures which
the Company may now or hereafter establish governing the conduct of its
business, except to the extent that any such rules, regulations, policies and/or
procedures may be inconsistent with the terms of this Agreement, in which case
the terms of this Agreement shall control.
3.
Employment
Contract.
The Company and Executive acknowledge that the terms
of his employment are set forth in this Agreement. If Executive’s
employment terminates for any reason, Executive shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement, or as may otherwise be available in accordance with the
Company’s established written plans and written policies at the time of
termination.
4.
Compensation
.
(a) Subject
to tax withholdings and deductions to cover Executive contributions to, and
payments under, applicable Executive benefit and welfare plans and programs, the
Company will pay Executive an annual base compensation of $295,700 per year to
be paid in accordance with the Company’s normal payroll practices during the
term of this Agreement (“Base Salary”). The Company’s Board of
Directors (the “Board”) or Compensation Committee of the Board (or any committee
of the Board that shall replace such committee) shall review annually
Executive’s compensation for increases during the term of this Agreement in
conjunction with the Company’s regular review of the salaries of other executive
level employees and in consultation with the Company President. At
such time, the Company will consider (without any obligation to implement)
upward adjustments to Executive’s compensation under this Agreement in a manner
consistent with the Company’s practices in effect from time to
time.
(b) In
addition to Base Salary, Executive also will be eligible to receive an annual
performance bonus as the Board or Compensation Committee of the Board (or any
committee of the Board that shall replace such committee) shall, in its sole
discretion, deem appropriate based upon the parameters and criteria contained in
the Company’s bonus plan and in consultation with the Company President. He
shall be eligible for a Target Annual Bonus of 40% of his Base Salary as then in
effect. This bonus, if any, shall be paid to the Executive no later
than March 15 following the end of each calendar year.
(d) Executive
also shall be eligible in the sole discretion of the Board or the Compensation
Committee of the Board (or any committee of the Board that shall replace such
committee) to participate in the Company’s stock option plan as is from time to
time in effect, subject to the terms and conditions of such plan. The Executive
shall receive a grant of 30,000 restricted shares of the Company’s stock which
shares are to vest on the first business day of the calendar month following the
Company’s announcement of the results of the Phase III multi-center, randomized,
double-blind, placebo-controlled, clinical trial designed to assess the
efficacy, safety and tolerability of Prochieve® 8% (progesterone gel) in
preventing preterm delivery in pregnant women who are at increased risk for
preterm birth. Stock options granted to Executive prior to the date hereof shall
not be affected by this Agreement in any manner.
5.
Benefits
.
(a) Executive
and Executive’s eligible dependents shall be eligible for all employee benefit
programs (including any pension, 401(k), group life insurance, group medical and
dental, vision, and short-term and long-term disability policies, plans, and
programs) generally available to other executive level employees of the Company
during the term of this Agreement, in accordance with the terms of those benefit
plans.
(b) Executive
shall be entitled to accrue paid time off (“PTO”) during the term of this
Agreement in accordance with the Company’s standard policy and in an amount
commensurate with other executive level employees of the Company.
(c) In
accordance with the policies of the Company in effect from time to time,
Executive will be entitled to reimbursement for approved ordinary and
necessary business expenses incurred by him during the term of this Agreement
commensurate with other executive level employees of the Company.
6.
Termination
.
(a)
Death
. Executive’s
employment shall terminate immediately upon his death.
(b)
Disability
. Executive’s
employment shall terminate upon Executive having a “Disability.” For
purposes of this Agreement, “Disability” means a determination by Company in
accordance with applicable law that, as a result of a physical or mental
illness, Executive is unable to perform the essential functions of his job with
or without reasonable accommodation for a period of six (6) months.
(c)
Termination by Company for
Cause
. Upon delivery of written notice of termination for
“Cause” from Company to Executive, Executive’s employment shall
terminate. Termination for “Cause” shall mean termination based on
(i) Executive’s failure or refusal to perform, in any material respect, his
duties faithfully and diligently in accordance with this
Agreement; (ii) gross negligence, recklessness or malfeasance in
the performance of Executive’s duties; (iii) Executive committing any
criminal act; (iv) Executive committing any act of fraud or other material
misconduct resulting or intending to result directly or indirectly in gain or
personal enrichment at the expense of Company; (v) Executive willfully
engaging in any conduct relating to the business of Company that could
reasonably be expected to have a materially detrimental effect on the business
or financial condition of the Company; (vi) misconduct which materially
discredits or damages Company, or violates Company’s policies or procedures,
after Company has notified Executive of the actions Company deems to constitute
non-compliance; (vii) Executive materially breaches his obligations under
Sections 9 and 10 below, relating to confidential information, non-solicitation
and non-competition.
Termination for Cause pursuant to
subsections (i), (ii), (iv), or (v) of this Paragraph (c) of Section 6 shall not
take effect unless and until the Company complies with the provisions of this
paragraph. Executive shall be given written notice by the Company of
its intention to terminate him for Cause, stating in detail the particular
act(s) or failure(s) to act that constitute the grounds on which the proposed
termination for Cause is based. That written notice shall be given to
Executive within ninety (90) days of the Company’s learning of such act(s) or
failure(s) to act. Executive shall then have thirty (30) days after
receipt of such written notice to cure such conduct, to the extent such cure is
possible. If Executive fails to cure such conduct on or before the
end of the thirty (30) day period, Executive shall be terminated for
Cause. If Executive’s conduct is not curable, no notice need be given
by the Company before terminating Executive for Cause.
(d)
Resignation for Good
Reason
. Executive may terminate his employment with “Good
Reason” (as defined below) upon no fewer than thirty (30) days prior written
notice to the Company specifying the reason(s) for the
termination. Upon receipt of Executive’s notice of intent to
terminate his employment for Good Reason, Company shall have a right to cure the
alleged breach or other conduct alleged by Executive to constitute Good Reason
within the thirty (30) day period. For purposes of this Agreement,
“Good Reason” shall mean the termination by Executive of Executive’s employment
with the Company and all its affiliates and subsidiaries that are considered a
single employer within the meaning of Sections 414(b) and 414(c) of the Code
which is due to (i) a material diminution of Executive’s responsibilities, or
working conditions, or duties; (ii) a material diminution in the Executive’s
base salary; (iii) a material negative change in the terms or status of this
Agreement; or (iv) a relocation, without Executive’s consent, of the Executive’s
office more than 100 miles from its location at the commencement of this
Agreement; provided, however, the Executive shall provide written notice to the
Company of the initial existence of the condition causing the change in terms or
status no more than ninety (90) days after the change in terms or status occurs
and the Company shall have thirty (30) days to resolve the issue causing the
change in terms or status. If the Company resolves such issue, then
Executive’s employment shall not be subject to the Good Reason provisions of
this Agreement as to such issue.
(e)
Resignation Without Good
Reason
. Executive may terminate his employment without Good
Reason upon no fewer than thirty (30) days prior written notice to the Company.
Without Good Reason as used in this Agreement refers to any reason not included
as a Good Reason in section 6(d).
(f)
Termination by Company
Without Cause
. Executive’s employment shall terminate thirty
(30) days after written notice delivered to Executive of Company’s termination
of Executive’s employment for reason other than Death, Disability or
Cause.
7.
Compensation Upon
Termination
(a) If
Executive’s employment is terminated by Company for Cause, by Death or
Disability, or if Executive resigns Without Good Reason, Executive shall be
entitled to receive:
(i)
|
the Base Salary
through the date of termination;
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(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the
date of Executive’s termination; and
|
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(iii)
|
such Employee
Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company.
|
(b) If
Executive’s Employment is terminated by Company without Cause or by Executive
with Good Reason, Executive shall be entitled to:
(i)
|
the Base Salary
through the date of termination;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the
date of Executive’s termination;
|
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(iii)
|
if Executive elects
to continue medical, dental, and vision coverage under the health care
continuation provisions of COBRA, Company shall reimburse Executive for
the related premium cost for employess and dependent coverage for a period
of twelve (12) months following Executive's date of termination of
employment.
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(iv)
|
if Executive elects
to continue medical, dental, and vision coverage under the health care
continuation provisions of COBRA, Company shall reimburse Executive for
the related premium
|
(c) If
Executive’s Employment is terminated as a result of Company providing written
notice to Executive pursuant to Section 1 of this Agreement of Company’s
intention not to extend the term of the Agreement, Executive shall be entitled
to:
(i)
|
the Base
Salary through the end of the term;
|
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(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the end
of the term;
|
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(iii)
|
receive a lump sum
payment within sixty (60) days following Executive’s termination of
employment equal to (1) one times Executive’s Annual Base Salary at the
rate immediately in effect before the end of the
term.
|
8.
Change in
Control
.
(a) In
the event of “Change in Control” of Company, as defined in the Executive Change
in Control Severance Agreement dated as of March 11, 2009 (the “Change in
Control Agreement”) between the Company and Executive attached hereto as Exhibit
A and incorporated by reference as if fully set forth herein, Executive shall be
entitled to the benefits, if any, available to him pursuant to the Change in
Control Agreement.
9.
Restrictive
Covenants
.
(a) During
Executive’s employment and for a period of one (1) year following the
termination of Executive’s employment for any reason, Executive will not compete
directly with the Company anywhere in the world by rendering services or
providing assistance for himself or on behalf of any other person or entity, in
any line of business in which the Company is engaged or has made preparations to
engage, as of the termination date of Executive’s employment with the
Company. The term “compete” as used herein means that Executive
engages in research, development, design, consulting, manufacturing, marketing,
promotion or sales with respect to the Company’s business for a third party or
for its or his own interest.
(b) Executive
agrees that during the period stated in subsection (a) above, he will not
(i) directly solicit or encourage in any manner the resignation of any
employee of the Company or any of its subsidiaries; or (ii) directly or
indirectly solicit or divert customers, vendors, or business of the Company or
any of its subsidiaries (
provided
that
Executive may deal with any such customers or vendors in any manner which does
not violate the provisions of subsection (a) above); or (iii) attempt to
influence, directly or indirectly, any person or entity to cease, reduce, alter,
or rearrange any business relationship with the Company or any of its
subsidiaries.
(c) Executive
acknowledges and agrees that he considers the restrictions set forth in this
Section 9 to be reasonable both individually and in the aggregate and that the
duration, geographic scope, extent and application of these restrictions are no
greater than is necessary for the protection of the Company’s legitimate
interests. It is the desire and intent of Executive and the Company
that the provisions of this Section 9 shall be enforced to the fullest extent
possible under the laws and public policies of the State of New
Jersey. The Company and Executive further agree that if any
particular provision or portion of this Section 9 shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made. The Company and Executive further agree that in
the event that any restriction herein shall be found to be void or unenforceable
but would be valid or enforceable if some part or parts thereof were deleted or
the period or area of application reduced, such restriction shall apply with
modification as may be necessary to make it valid and Executive and the Company
empower a court of competent jurisdiction to modify, reduce or otherwise reform
such provision(s) in such fashion as to carry out the parties’ intent to grant
the Company the maximum allowable protection consistent with the applicable law
and facts and the express exceptions contained herein.
(d) Without
limiting the foregoing, Executive will not be deemed to be in competition with
the Company by reason of his employment by an enterprise (“Subsequent Employer”)
whose businesses include both (i) activities that involve the Company
Technology (“Covered Business”); and (ii) activities that do not involve
the Company Technology (“Excluded Business”) upon satisfaction of the following
conditions: (A) Executive delivers to the Subsequent Employer a
copy of this Agreement or an extract thereof setting forth fully and completely
the restrictions set forth in this Section 9; (B) the Subsequent Employer
executes and delivers to the Company a written agreement in which, as a
condition to Executive’s employment, the Subsequent Employer
(1) acknowledges receipt of such restriction, (2) agrees to employ
Executive only in the Excluded Business, (3) agrees to cause the executive
in charge of the Covered Business to acknowledge such restrictions in writing
and agree that Executive will not be permitted to participate in the Covered
Business, (4) agrees to establish reasonable internal policies and
procedures to prevent violation of such restrictions or disclosure by Executive
to personnel engaged in the Covered Business, and (5) agrees that the
Company shall be entitled to enforce such agreement directly against the
Subsequent employer; and (C) Executive and the Subsequent Employer perform
their obligations pursuant to this Agreement and such agreement.
10.
Confidentiality
.
The Employee Proprietary
Information and Inventions Agreement dated March 14, 2003, between the Company
and Executive is attached hereto as Exhibit B and incorporated by reference as
if fully set forth herein.
11.
Cooperation
: Executive
agrees to cooperate on a reasonable basis in the truthful and honest prosecution
and/or defense of any claim in which the Company, its affiliates, and/or its
subsidiaries may have an interest (subject to reasonable limitations concerning
time and place), which may include without limitation making himself available
on a mutually agreed, reasonable basis to participate in any proceeding
involving the Company, its affiliates, and/or its subsidiaries, allowing himself
to be interviewed by representatives of the Company, its affiliates, and/or its
subsidiaries without asserting or claiming any privilege against the Company,
its affiliates, and/or its subsidiaries, appearing for depositions and testimony
without requiring a subpoena and without asserting or claiming any privilege
against the Company, its affiliates, and/or its subsidiaries, and producing
and/or providing any documents or names of other persons with relevant
information without asserting or claiming any privilege against the Company, its
affiliates, and/or its subsidiaries; provided that, if such services are
required after the end of any period during which he is eligible for severance
benefits, if any, the Company, its affiliates, and/or its subsidiaries shall
provide Executive with reasonable compensation for the time actually expended in
such endeavors and shall pay his reasonable expenses incurred at the prior and
specific request of the Company, its affiliates, and/or its
subsidiaries.
12.
Remedies
. Executive
acknowledges and agrees that the Company’s remedy at law for a breach or
threatened breach of the provisions of this Agreement would be inadequate and,
in recognition of this fact, in the event of a breach or threatened breach by
Executive of any provision of this Agreement, it is agreed that, in addition to
any available remedy at law, the Company shall be entitled to, without posting
any bond, specific performance, temporary restraining order, temporary or
permanent injunction, or any other equitable relief or remedy which may then be
available; provided, however, nothing herein shall be deemed to relieve the
Company of its burden to prove grounds warranting such relief nor preclude
Executive from contesting such grounds or facts in support
thereof. Nothing herein contained shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach hereof.
13.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
14.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable. The Parties agree that the covenants set forth herein
are reasonable. Without limiting the foregoing, it is the
intent of the parties that the covenants set forth herein be enforced to the
maximum degree permitted by applicable law. As such, the parties ask
that if any court of competent jurisdiction were to consider any provision of
this Agreement to be overly broad based on the circumstances at the time
enforcement is requested, that such court “blue pencil” the provision and
enforce the provision to the full extent that such court deems it to be
reasonable in scope.
15.
Indemnification
.
The
Indemnification Agreement dated April 8, 2004, between the Company and Executive
is attached hereto as Exhibit C and incorporated by reference as if fully set
forth herein.
16.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement, together
with the Exhibits incorporated by reference as if fully set forth herein, sets
forth the entire employment agreement between the Company and Executive,
supersedes any and all prior agreements between the Company and Executive,
and shall not be amended or added to except in writing signed by the Company and
Executive. Executive understands that he may not assign his duties
and obligations under this Agreement to any other party and that the Company
may, at any time and without further action by or the consent of Executive,
assign this Agreement to any of its affiliated companies.
17.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
18.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure to the
benefit of the successors and assigns of the Company.
19.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey 07039, attn.: General Counsel, and (b) in the
case of Executive, to Executive's last known address as reflected in the
Company's records, or to such other address as Executive shall designate by
written notice to the Company. Any notice given hereunder shall be
deemed given at the time of receipt thereof by the person to whom such notice is
given.
20.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the dates set forth below.
EXECUTIVE
|
COLUMBIA
LABORATORIES, INC.
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|
|
/s/
Michael McGrane
|
/s/
Stephen G. Kasnet
|
Michael
McGrane
|
Stephen G. Kasnet,
Chairman
|
|
|
Date:
March 11, 2009
|
Date:
March 11,
2009
|
Exhibit
A
EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT dated as of March 11, 2009 (as the same may be amended,
restated, supplemented or otherwise modified from time to time hereafter, this
“Agreement”), is entered into between Columbia Laboratories, Inc., a Delaware
corporation having its corporate offices at 354 Eisenhower Parkway, Livingston,
New Jersey (“Columbia” or the “Company”), and
Michael McGrane
(“Executive”).
WITNESSETH
:
WHEREAS, the Company desires to create
a greater incentive for Executive to remain in the employ of the Company,
particularly in the event of any possible change or threatened change in control
of the Company; and
NOW THEREFORE, in partial consideration
of Executive’s past and future services to the Company and the mutual covenants
contained herein, the parties hereby agree as follows:
1.
Termination Following A
Change in Control
(a)
Qualifying
Termination
. Executive shall be entitled to the compensation
and benefits listed in Paragraph 1(b), in addition to compensation and benefits
to which Executive would otherwise be entitled as of the date of termination, if
Executive’s employment with the Company is terminated either (i) by the Company
for any reason other than for Cause within 90 days before a Change in Control or
within one year following the occurrence of any Change in Control or successive
Change in Control or (ii) by Executive for Good Reason within one year following
the occurrence of any Change in Control or successive Change in Control, and in
each case Executive properly executes, and does not revoke or attempt to revoke,
a valid and reasonable release of claims against the Company, its affiliates and
their employees and agents.
(b)
Compensation and
Benefits
.
(i)
Lump Sum
Payment
. Within ten business days after a Change in Control
event (or the last day of any period during which any release may be revoked by
Executive), the Company shall make a lump sum cash payment to Executive, subject
to any mandatory tax withholding, equal to one times Executive’s Base Salary and
Bonus for the year prior to the Change in Control plus a lump sum payment equal
to the value of the Fringe Benefits provided to Executive for the year prior to
the Change in Control.
(ii)
Excise Tax Gross-Up
Payment
. In the event it shall be determined that any payment
or distribution of any type to or for the benefit of the Executive directly or
indirectly by the Company, any affiliate of the Company, any person who acquires
ownership or effective control of the company or ownership of a substantial
portion of the company’s assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
thereunder) or any affiliate of such person, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the “Total Payments”), is or will be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are collectively referred to as the “Excise Tax”), then the Executive shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments. Such Gross-Up
Payment shall be made no later than the end of the calendar year following the
calendar year during which the Excise Tax is incurred.
2.
Definitions
.
(a)
Bonus
. “Bonus”
shall mean the greater of (i) the bonus, if any, paid to Executive in the year
prior to the Qualifying Termination, (ii) the bonus, if any, paid to Executive
in the year prior to the Change in Control, or (iii) the Executive’s target
bonus at the time of the Change in Control.
(b)
Base
Salary
. “Base Salary” shall mean the greater of (i) the
annual rate of base salary in effect for Executive at the time of the Qualifying
Termination or (ii) the annual rate of base salary in effect for Executive at
the time of the Change in Control.
(c)
Cause
. “Cause”
shall mean termination based on (i) gross negligence, recklessness or
malfeasance in the performance of Executive’s duties; (ii) Executive
committing any criminal act; (iii) Executive committing any act of fraud or
other material misconduct resulting or intending to result directly or
indirectly in gain or personal enrichment at the expense of Company;
(iv) Executive willfully engaging in any conduct relating to the business
of Company that could reasonably be expected to have a materially detrimental
effect on the business or financial condition of the Company;
(v) misconduct which materially discredits or damages Company, or violates
Company’s policies or procedures, after Company has notified Executive of the
actions Company deems to constitute non-compliance; (vi) Executive
materially breaches Executive’s obligations relating to confidential
information, non-solicitation and non-competition.
(d)
Change In
Control
. “Change in Control” shall have occurred if
(a) there shall have consummated (i) any consolidation or merger of
Company in which Company is not the continuing or surviving entity or pursuant
to which shares of Company’s common stock would be converted to cash, securities
or other property, other than a merger of Company in which the holders of
Company’s common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving entity immediately
after the merger, or (ii) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the company; or (b) the stockholders of the Company
approve a plan or proposal for the liquidation or dissolution of the Company; or
(c) any person (as that term is used in Sections 13(d) and 14(d)(z) of the
Securities and Exchange Act, as amended (the “Exchange Act”)) shall become a
beneficial owner (within the meaning of Rule 13d-2 under the Exchange Act) of
40% or more of Company’s outstanding common stock; or (d) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by Company’s
stockholders, of each new director was approved by a vote of at least 50% of the
directors eligible to vote who were directors at the beginning of the
period.
(e)
Good
Reason
. For purposes of this Agreement, “Good Reason” shall
mean the termination by Executive of Executive’s employment with the Company and
all its affiliates and subsidiaries that are considered a single employer within
the meaning of Sections 414(b) and 414(c) of the Code which is due to (i) a
material diminution of Executive’s responsibilities, or working conditions, or
duties; (ii) a material diminution in the Executive’s base salary; (iii) a
material negative change in the terms or status of this Agreement; or (iv) a
relocation, without Executive’s consent, of the Executive’s office more than 100
miles from its location at the commencement of this Agreement; provided,
however, the Executive shall provide written notice to the Company of the
initial existence of the condition causing the change in terms or status no more
than ninety (90) days after the change in terms or status occurs and the Company
shall have thirty (30) days to resolve the issue causing the change in terms or
status. If the Company resolves such issue, then Executive’s
employment shall not be subject to the Good Reason provisions of this Agreement
as to such issue.
3.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
4.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable.
5.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement sets
forth the entire Agreement between the Company and Executive with respect to the
subject matter herein, supersedes any and all prior agreements between the
Company and Executive with respect to the subject matter herein, and shall not
be amended or added to except in writing signed by the Company and
Executive. Executive understands that Executive may not assign
Executive’s duties and obligations under this Agreement to any other party and
that the Company may, at any time and without further action by or the consent
of Executive, assign this Agreement to any of its affiliated
companies.
6.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
7.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure to the
benefit of the successors and assigns of the Company.
8.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey, attn.: General Counsel, and (b) in the case of
Executive, to Executive's last known address as reflected in the Company's
records, or to such other address as Executive shall designate by written notice
to the Company. Any notice given hereunder shall be deemed given at
the time of receipt thereof by the person to whom such notice is
given.
9.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first set forth above.
EXECUTIVE
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COLUMBIA
LABORATORIES, INC.
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|
|
/s/
Michael McGrane
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/s/
Robert S. Mills
|
Michael
McGrane
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By:
Robert S. Mills
|
|
Its:
President and Chief Executive Officer
|
Exhibit
B
EMPLOYEE
PROPRIETARY INFORMATION
AND
INVENTIONS AGREEMENT
This Employee Proprietary Information
and Inventions Agreement (the "Agreement") is made as of March 14, 2003, between
Michael McGrane (referred to below as “I”, “My”, “Myself”, or “Me”) and Columbia
Laboratories, Inc., having an office at 364 Eisenhower Parkway, Livingston, NJ
07039 (referred to below together with its subsidiaries and affiliates as the
"Company").
RECITALS
A. The
Company is engaged in a continuous program of research, development, production,
distribution, and marketing with respect to its present and future business;
and
B. I
understand that My employment with the Company creates a relationship of
confidence and trust between the Company and Me with respect to any information:
(a) applicable to the business of the Company, or (b) applicable to the business
of any client or customer of the Company, that may be made known to Me by the
Company, any client or customer of the Company, or learned by Me during the
period of My employment. I understand that this information constitutes a very
valuable asset of the Company.
NOW, THEREFORE, in consideration of My
employment by the Company and the salary and other employee benefits I will
receive from the Company for My service, which in all cases are subject to
Section 10(a) of this Agreement, and including specifically, but without
limitation, the options that I received effective March 14, 2003, I hereby agree
as follows:
1.
Proprietary
Information
. The Company possesses and will come to possess
information that has been created, discovered or developed, or has otherwise
become known to the Company (including without limitation, information created,
discovered, developed or made known by or to Me arising out of My employment by
the Company), and/or in which property rights have been assigned or otherwise
conveyed to the Company, which information has commercial value in the business
in which the Company is engaged. All of the aforementioned
information is hereinafter called "Proprietary Information." Any information
disclosed to Me or to which I have access (whether I or others originated it)
during the time I am employed by the Company, that the Company or I reasonably
consider Proprietary Information or that the Company treats as Proprietary
Information, will be presumed to be Proprietary Information.
By way of illustration, but not
limitation, Proprietary Information includes trade secrets, processes, formulae,
data and know-how, improvements, inventions, techniques, marketing plans,
strategies, forecasts, customer lists, and finance and business
systems.
(a)
Company as Sole
Owner
. I agree and acknowledge that all Proprietary
Information, and all Inventions (defined below in Section 6(a) of this
Agreement), shall be the sole property of the Company and its assigns, and the
Company and its assigns shall be the sole owner of all patents and trade secrets
and any other rights in connection therewith.
(b)
Assignment of Rights;
Obligation of Confidentiality
. I hereby assign to the Company
any rights I may have or acquire in all Proprietary Information. At
all times during My employment by the Company and at all times after termination
of such employment, I will keep in confidence and trust all Proprietary
Information and, except as I may be authorized to make disclosure in the
ordinary course of performing My duties as an employee of the Company, I will
not disclose, sell, use, lecture upon or publish any Proprietary Information or
anything relating to it without the prior written consent of the
Company.
2.
No
Competition
. I agree that during the period of My employment
by the Company I will not, without the Company's prior written consent, engage
in any employment or other activity for any person, company or entity engaged in
any business that is competitive with the Company's business.
3.
Other Proprietary
Rights
. All documents, data, records, apparatus, equipment,
chemicals, molecules, organisms, and other physical property, whether or not
pertaining to Proprietary Information, furnished to Me by the Company or
produced by Me or others in connection with My employment shall be and remain
the sole property of the Company and shall be returned promptly to the Company
as and when requested by the Company. Should the Company not so
request, I shall return and deliver all such property upon termination of My
employment by Me or the Company for any reason and I will not take with Me any
such property or any reproduction of such property upon such
termination.
4.
No
Solicitation
. I agree that for a period of one (1) year
following termination of My employment, I will not solicit or in any manner
encourage any employee of the Company to leave the Company's
employ.
5.
Obligations Regarding
Inventions
.
(a) I
will promptly disclose to the Company, or any persons designated by it, and will
not use Myself or disclose to anyone else at any time during or after My
employment without the prior written consent of the Company, all improvements,
inventions, formulae, processes, techniques, know-how and data (whether or not
they can be patented, trademarked or copyrighted), made, conceived, reduced to
practice or learned by Me, either alone or jointly with others, during the
period of My employment, which are related to or useful in the business of the
Company, or which the Company would be interested in, or result from tasks
assigned to Me by the Company, or result from use of any premises owned, leased
or contracted for by the Company (all said improvements, inventions, formulae,
processes, techniques, know-how, and data initiated or developed during My
employment shall be collectively hereinafter called "Inventions"); such
disclosure shall continue after termination of My employment with the Company
with respect to any Invention, which in all cases are subject to Section 5(c) of
this Agreement.
(b)
Company Sole Owner of Patent
Rights
. I will promptly and fully disclose the existence and
describe the nature of any such Invention to the Company in writing and without
request. I agree that all Inventions shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents, copyrights, trade secrets, and other intellectual property rights
(collectively, "Patent Rights") in connection therewith. I will, with respect to
any such Invention, keep current, accurate and complete records that will belong
to the Company and will be kept stored on the Company premises while I am
employed by the Company and shall be turned over to the Company immediately upon
termination of My employment.
(c)
Assignment of Inventions and
Patent Rights; Duty to Cooperate
. I hereby assign to the
Company any rights I may have or acquire in all Inventions. I further
agree as to all Inventions and Proprietary Information to assist the Company in
every proper way (but at the Company's expense) to obtain and from time to time
enforce Patent Rights regarding the Inventions or Proprietary Information in any
and all countries, and to that end I will execute all documents for use in
applying for and obtaining such patents or copyrights thereon and enforcing
same, as the Company may desire, together with any assignments thereof to the
Company or entities or persons designated by it. I agree further that
these obligations to assist the Company in obtaining and enforcing Patent Rights
in any and all countries shall continue beyond the termination of My employment,
in return for which assistance after termination the Company shall
compensate Me at a reasonable rate for time actually spent by Me at the
Company's request on such assistance.
6.
Prior Inventions
List
.
[Please
initial one of the following two entries.]
_____ As
a matter of record, I have attached hereto a complete list of all inventions or
improvements relevant to the subject matter of My employment by the Company
which have been made or conceived or first reduced to practice by Me alone or
jointly with others prior to My employment by the Company which I desire to
remove from the operation of this Agreement; and I warrant that such list is
complete.
__MM_ No
such list is attached to this Agreement, and I represent that I have made no
such inventions or improvements at the time of signing this
Agreement.
7.
No Breach of
Confidentiality
. I represent that My performance of all terms
of this Agreement and that My employment by the Company does not and will not
breach any obligation of confidentiality that I have to others, which existed
prior to My employment by the Company. I have not brought or used,
and will not bring with Me to the Company or use any equipment, supplies,
facility or trade secret information of any former employer or any other person,
which information is not generally available to the public, unless I have
obtained written authorization for their possession and use, and promptly
provided such written authorization to the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict with this Agreement.
8.
Injunctive
Relief
. I acknowledge and agree that the Company’s remedy at
law for a breach or threatened breach of any of the provisions of this Agreement
would be inadequate and, in recognition of that fact, in the event of any such
breach or threatened breach, I agree that, in addition to its remedy at law, the
Company shall be entitled to equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy that may then be available. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach.
9.
Not Debarred.
I
warrant and represent that I have never been, and am not currently an individual
who has been, debarred by the United States Food and Drug Administration (“FDA”)
pursuant to 21 U.S.C. §336a (a) or (b) (“Debarred Individual”) from providing
services in any capacity to a person that has an approved or pending drug
product application. I further warrant and represent that I have no
knowledge of any FDA investigations of, or debarment proceedings against, Me or
any person or entity with which I am, or have been, associated, and I will
immediately notify the Company if I become aware of any such investigations or
proceedings during the term of My employment with the Company.
10.
Miscellaneous
Provisions
.
(a)
Employment
. Nothing
in this Agreement shall alter My at will employee status or be construed to
create a specific term of employment or a promise of continued employment.
Either I or the Company may terminate the employment relationship for any reason
at any time, with or without notice.
(b)
Enforceability
. If
one or more of the provisions contained in this Agreement shall, for any reason,
be held to be excessively broad as to scope, activity, subject or otherwise, so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with then applicable law. If any
provision of this Agreement shall be declared invalid, illegal or unenforceable,
such provision shall be severed and all remaining provisions shall continue in
full force and effect.
(c)
Assignment.
This
Agreement is not assignable by Me without the written consent of the Company,
which consent may be withheld for any reason or no reason. In light
of the very personal and critical nature of this Agreement, I recognize that it
is unlikely such consent would ever be granted.
(d)
Entire
Agreement.
This Agreement contains the entire agreement
between Me and the Company with respect to the subject matter of this Agreement
and supersedes all prior or contemporaneous oral or written agreements,
statements, representations, or understandings between Me and the Company, or
any employee of the Company. This Agreement may be amended only by a written
instrument signed by Me and the Company.
(e)
Effective
Date
. This Agreement shall be effective as of the first day of
My employment by the Company, as affirmed or reaffirmed by my signature
below.
(f)
Binding
Effect
. This Agreement shall be binding upon Me, My heirs,
executors, assigns and administrators and shall inure to the benefit of the
Company, its successors and assigns.
(g)
Governing
Law
. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without regard to its rules
on conflicts of law.
COLUMBIA
LABORATORIES, INC.
|
EMPLOYEE
|
|
|
By:
/s/
David L.
Weinberg
|
/s/
Michael McGrane
|
|
Signature
|
Name:
David L.
Weinberg
|
|
|
Michael
McGrane
|
Title:
Vice President
|
|
|
|
Exhibit
C
INDEMNIFICATION
AGREEMENT
This Agreement is made and entered into
this 8
th
day of
April, 2004 (“Agreement”) by and between Columbia Laboratories, Inc., a Delaware
corporation (“Corporation”) and
Michael McGrane
(“Indemnitee”).
WHEREAS the Board of Directors (the
“Board”) has determined that the best interests of the Corporation require that
persons serving as directors of, and in other capacities for, the Corporation
receive better protection from the risk of claims and actions against them
arising out of their service to and activities on behalf of such corporations;
and
WHEREAS, this Agreement is a supplement
to and in furtherance of Article VI of the amended and restated by-laws of the
Corporation, any rights granted by the Certification of Incorporation of the
Corporation and any resolutions adopted pursuant thereto and shall not be deemed
to be a substitute therefore nor to diminish or abrogate any rights of the
Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to
serve, continue to serve and take on additional service for or on behalf of the
Corporation on the condition that Indemnitee be indemnified according to the
terms of this Agreement;
NOW, THEREFORE, in consideration of the
premises and the covenants contained herein, the Corporation and Indemnitee do
hereby covenant and agree as follows:
Section
1. Definitions
.
For purposes of this
Agreement:
(a) “Change
in Control” shall be deemed to have occurred if (a) there shall have
consummated (i) any consolidation or merger of Company in which Company is
not the continuing or surviving entity or pursuant to which shares of Company’s
common stock would be converted to cash, securities or other property, other
than a merger of Company in which the holders of Company’s common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving entity immediately after the merger, or (ii) any
sale, lease, exchange or transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the company; or
(b) the stockholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company; or (c) any person (as that term
is used in Sections 13(d) and 14(d)(z) of the Securities and Exchange Act, as
amended (the “Exchange Act”)) shall become a beneficial owner (within the
meaning of Rule 13d-2 under the Exchange Act) of 40% or more of Company’s
outstanding common stock; or (d) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire
Board shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by Company’s stockholders, of each new
director was approved by a vote of at least 50% of the directors eligible to
vote who were directors at the beginning of the period.
(b) “Disinterested
Director” means a director of the Corporation who is not and was not a party to
the Proceeding in respect of which indemnification is sought by
Indemnitee.
(c) “Effective
Date” means the date first written above.
(d) “Expenses”
mean all reasonable attorneys’ fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees and all other
disbursements and expenses of the type customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a Proceeding.
(e) “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced in
matters of corporation law and neither presently is, nor in the past five years
has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(f) “Proceeding”
means an action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative, except one initiated by an Indemnitee
pursuant to Section 11 of this Agreement to enforce Indemnitee’s rights under
this Agreement.
Section
2. Services by Indemnitee
.
Indemnitee agrees to serve as an
officer or director of the corporation, and, at its request, as a director,
officer, employee, agent or fiduciary of certain other corporations and
entities. Indemnitee may at any time and for any reason resign from
any such position (subject to any other contractual obligation or any obligation
imposed by operation of law).
Section
3. Indemnification - General
.
The Corporation shall indemnify, and
advance Expenses to, Indemnitee as provided in this Agreement to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time
permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.
Section
4. Proceeding Other Than Proceedings by or in the Right of the
Corporation
.
Indemnitee shall be entitled to the
rights of indemnification provided in this Section if, by reason of Indemnitee’s
employment or service as an officer or director, Indemnitee is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding, other
than a Proceeding brought by or in the right of the Corporation to procure a
judgment in its favor. Pursuant to this Section, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonable incurred by Indemnitee or on Indemnitee’s
behalf in connection with any such Proceeding if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal Proceeding,
had no reasonable cause to believe Indemnitee’s conduct was
unlawful.
Section
5. Proceedings by or in the Right of the
Corporation
.
Indemnitee shall be entitled to the
rights of indemnification provided in this Section if, by reason of his
Corporate Status, Indemnitee is, or is threatened to be made, a party to any
threatened, pending or completed Proceeding brought by or in the right of the
Corporation to procure a judgment in its favor. Pursuant to this
Section, Indemnitee shall be indemnified against Expenses, judgments, penalties,
fines and amounts paid in settlement, actually and reasonably incurred by
Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the
Corporation. Notwithstanding the foregoing, no indemnification
against such Expenses shall be made in respect of any claim, issue or matter in
any such Proceeding as to which Indemnitee shall have been adjudged to be liable
to the Corporation if applicable law prohibits such indemnification unless the
Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that
indemnification against Expenses may nevertheless be made by the
Corporation.
Section
6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful
.
Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
employment or service as an officer or director, a party to and is successful,
on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith. If Indemnitee is not
wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Corporation shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in
connection with each successfully resolved claim, issue or
matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section
7. Indemnification for Expenses of a Witness
.
Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
employment or service as an officer or director, a witness in any Proceeding,
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee’s behalf in connection
therewith.
Section
8. Advancement of Expenses
.
The Corporation shall advance all
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within thirty (30) days after the receipt by the
Corporation of a statement or statement from Indemnitee requesting such advance
or advances from time to time, whether prior to or after final disposition of
such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section
9. Procedure for Determination of Entitlement to
Indemnification
.
(a) To
obtain indemnification under this Agreement in connection with any Proceeding,
and for the duration thereof, Indemnitee shall submit to the Corporation a
written request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly
upon receipt of any such request for indemnification, advise the board in
writing that Indemnitee has requested indemnification.
(b) Upon
written request by Indemnitee for indemnification pursuant to Section 9(a)
hereof, a determination, if required by applicable law, with respect to
Indemnitee’s entitlement thereto shall be made in such
case: (i) if a Change in Control shall have occurred, by
Independent Counsel (unless Indemnitee shall request that such determination be
made by the Board or the stockholders in the manner provided for in clauses (ii)
or (iii) or this Section 9(b)) in written opinion to the Board, a copy of which
shall be delivered to Indemnitee; (ii) if a Change of Control shall not
have occurred, (A) by the Board by a majority vote of a quorum consisting
of Disinterested Directors, or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable, or even if such quorum is obtainable,
if such quorum of Disinterested Directors so directs, either (x) by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee, or (y) by the stockholders of the Corporation, as
determined by such quorum of Disinterested Directors, or a quorum of the Board,
as the case may be; or (iii) as provided in Section 10(b) of this
Agreement. If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within thirty (30) days
after such determination. Indemnitee shall cooperate with the persons
or entity making such determination with respect to Indemnitee’s entitlement to
indemnification, including providing to such persons or entity upon request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with
the persons or entity making such determination shall be borne by the
Corporation (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) If
required, Independent Counsel shall be selected as
follows: (i) if a Change of Control shall not have occurred,
Independent Counsel shall be selected by the Board by a majority vote of a
quorum consisting of Disinterested Directors and the Corporation shall give
written notice to Indemnitee advising Indemnitee of the identity of Independent
Counsel so selected; or (ii) if a Change of Control shall have occurred,
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board, in which event (i) shall
apply), and Indemnitee shall give written notice to the Corporation advising it
of the identity of Independent Counsel so selected. In either event,
Indemnitee or the Corporation, as the case may be, may, within seven (7) days
after such written notice of selection shall have been given, deliver to the
Corporation or to Indemnitee, as the case may be, a written objection to such
selection. Such objection may be asserted only on the ground that
Independent Counsel so selected does not meet the requirements of “Independent
Counsel” as defined in Section 1 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has determined that such objection
is without merit. If, within twenty (20) days after submission by
Indemnitee of a written request for indemnification pursuant to Section 9(a)
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery of the
State of Delaware, or any court in the State of New Jersey in which such
petition would be cognizable, for resolution of any objection which shall have
been made by the Corporation or Indemnitee to the other’s selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by such court or by such other person as such court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 9(b)
hereof. The Corporation shall pay any and all reasonable fees and
expenses incurred by such Independent Counsel in connection with its actions
pursuant to this Agreement, and the Corporation shall pay all reasonable fees
and expenses incident to the procedures of this Section 9(c) regardless of the
manner in which such Independent Counsel was selected or
appointed. Upon the due commencement date of any judicial proceeding
pursuant to Section 11(a)(iii) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then
prevailing).
Section
10. Presumptions and Effects of Certain
Proceedings
.
(a) If
a Change in Control shall have occurred, in making a determination with respect
to entitlement to indemnification hereunder, the person or persons or entity
making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 9(a) of this Agreement, and the
Corporation shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
(b) The
person or entity empowered or selected under Section 8 of this Agreement shall
make the determination of whether Indemnitee is entitled to indemnification as
soon as practicable after receipt by the Corporation of the request
therefore.
(c) The
termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of
nolo contendere
or its
equivalent, shall not (except as otherwise expressly provided in this Agreement)
of itself adversely affect the right of Indemnitee to indemnification or create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that Indemnitee’s conduct was unlawful.
Section
11. Remedies of Indemnitee
.
(a) In
the event that (i) a determination is made pursuant to Section 9 or 10 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is made by Independent Counsel pursuant to Section 9 of this
Agreement and such determination shall not have been made and delivered in a
written opinion within ninety (90) days after receipt by the Corporation of the
request for indemnification, (iv) or (iv) payment of indemnification
is not made within thirty (30) days after such determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Sections 9 or 10 of this Agreement, Indemnitee shall
be entitled to an adjudication in an appropriate court of the State of Delaware
or the State of New Jersey , of Indemnitee’s entitlement to such indemnification
or advancement of Expenses. Indemnitee shall commence such proceeding
seeking an adjudication or an award within one hundred eighty (180) days
following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 11(a).
(b) In
the event that a determination shall have been made pursuant to Section 9 of
this Agreement that Indemnitee is not entitled to indemnification, any judicial
proceeding commenced pursuant to this Section shall be conducted in all respects
as a
de novo
trial and
Indemnitee shall not be prejudiced by any reason of that adverse
determination. If a Change of Control shall have occurred, in any
judicial proceeding commenced pursuant to this Section the Corporation shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If
a determination shall have been made or deemed to have been made pursuant to
Section 9 or 10 of this Agreement that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to this Section, absent (i) a
misstatement by Indemnitee or Indemnitee’s representative of a material fact, or
an omission of any material fact necessary to make Indemnitee’s or Indemnitee’s
representative’s statement not materially misleading, in connection with the
request for indemnification, or (ii) prohibition of such indemnification
under applicable law.
(d) The
Corporation shall be precluded from asserting in any judicial proceeding
commenced pursuant to this Section that the procedures and presumptions of this
Agreement are not valid, binding and enforceable and shall stipulate in any such
court that the Corporation is bound by all the provisions of this
Agreement.
(e) In
the event that Indemnitee, pursuant to this Section, seeks a judicial
adjudication of Indemnitee’s rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the Corporation and
shall be indemnified by the Corporation against, any and all expenses (of the
kinds described in the definition of Expenses) actually and reasonably incurred
by Indemnitee in such judicial adjudication, but only if Indemnitee prevails
therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
Section
12. Non-Exclusivity; Survival of Rights; Insurance
Subrogation
.
(a) The
rights of indemnification and to receive advancement of Expenses as provided by
this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law, the certificate of
incorporation or by-laws of the Corporation, any agreement, a vote of
stockholders or resolution of directors or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in Indemnitee’s employment or service as an officer or director
prior to such amendment, alteration or repeal.
(b) To
the extent that the corporation maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, agents or
fiduciaries of the corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person
serves at the request of the Corporation, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee, agent or
fiduciary under such policy or policies.
(c) In
the event of any payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
(d) The
Corporation shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
Section
13. Duration of Agreement
.
This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date
that Indemnitee shall have ceased to serve as a director, officer, employee,
agent or fiduciary of the Corporation or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which Indemnitee
served at the request of the Corporation; (b) the final termination of all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 11 of this
Agreement. This Agreement shall be binding upon the Corporation and
its successors and assigns and shall inure to the benefit of Indemnitee and
Indemnitee’s heirs.
Section
14. Severability
.
If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section
15. Exception to Right of Indemnification or Advancement of
Expenses
.
Except as provided in Section 11(e),
Indemnitee shall not be entitled to indemnification or advancement of Expenses
under this Agreement with respect to any Proceeding, or any claim therein,
brought or made by Indemnitee against the Corporation. For the
purposes of this Section 15, a Proceeding in the right of the Corporation shall
not be deemed to constitute a Proceeding brought or made by the
Corporation.
Section
16. Identical Counterparts
.
This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section
17. Headings
.
The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction
thereof.
Section
18. Modification and Waiver
.
No supplement, modification or
amendment to this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
Section
19. Notice by Indemnitee
.
Indemnitee agrees promptly to notify
the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/ Michael
McGrane
|
By:
/s/ David L.
Weinberg
|
Michael McGrane,
Indemnitee
|
Name: David L.
Weinberg
|
|
Title:
Vice President, Finance and Chief Financial
Officer
|
I, David
L. Weinberg, Vice President, Finance and Chief Financial Officer, certify that
the Board of Directors has authorized the Corporation to enter into this
Agreement by a resolution adopted at its February 26, 2004 meeting.
|
/s/
David L. Weinberg
|
|
David L.
Weinberg
|
|
Vice President,
Finance and
|
|
Chief Financial
Officer
|
EXHIBIT
10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
dated as of March 11, 2009 (as the same may be amended, restated, supplemented
or otherwise modified from time to time hereafter, this “Agreement”), is entered
into by and between Columbia Laboratories, Inc., a Delaware corporation having
its corporate offices at 354 Eisenhower Parkway, Livingston, New Jersey 07039
(the “Company”), and James Meer (“Executive”).
WITNESSETH
:
WHEREAS, the Company wishes to employ
Executive on the terms and conditions set forth in this Agreement;
and
WHEREAS, the Company and Executive
desire to enter into this Agreement so the rights, duties, benefits, and
obligations of each regarding Executive’s employment for and by the Company will
be fully set forth under the terms and conditions stated within this
Agreement;
NOW THEREFORE, in consideration of the
mutual promises and undertakings hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1.
Term
. The
term of this Agreement shall commence on the date first written above and
continue through March 31, 2010, unless this Agreement is earlier terminated in
accordance with Section 6 or 8 hereof. The term shall be
automatically extended without further action of either party for additional
one-year periods, unless written notice of either party’s intention not to
extend has been given to the other party hereto at least sixty (60) days prior
to the expiration of the then effective term.
2.
Title;
Duties
.
(a) Executive
shall be the Senior Vice President, Chief Financial Officer, and Treasurer of
the Company. Executive will perform duties customarily associated
with such position, including, but not limited to, duties relating to the
management of the financial affairs of the Company and its affiliates, investor
relations matters, and such other duties commensurate with the job description
as may be assigned to him from time to time by the chief executive officer of
the Company (the “Company CEO”). Executive shall be employed at the
Company’s offices located in Livingston, New Jersey. Executive will
report to the Company CEO.
(b) Executive
agrees to devote his entire business time and attention to the performance of
his duties under this Agreement. He shall perform his duties to the
best of his ability and shall use his best efforts to further the interests of
the Company. Executive shall perform his duties and will be required to travel
as reasonably necessary to perform the services required of him under this
Agreement. Executive represents and warrants to the Company that he
is able to enter into this Agreement and that his ability to enter into this
Agreement and to
fully
perform his duties hereunder are not limited to or restricted by any agreements
or understandings between Executive and any other person. For the
purposes of this Agreement, the term “person” means any natural person,
corporation, partnership, limited liability partnership, limited liability
company, or any other entity of any nature. It shall not be a violation of this
Agreement for Executive to serve on corporate boards or committees (it being
agreed that in no event shall Executive serve on the board of directors or
advisory board of more than two other corporations and the acceptance of any new
directorship after the date hereof shall be subject to the approval of the
Company (which shall not be unreasonably withheld), so long as such activities
do not unreasonably interfere with the performance of Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. Notwithstanding the foregoing, it is agreed and acknowledged that
Executive presently serves on advisory boards of two other
corporations,
(c) Executive
will observe the reasonable rules, regulations, policies and/or procedures which
the Company may now or hereafter establish governing the conduct of its
business, except to the extent that any such rules, regulations, policies and/or
procedures may be inconsistent with the terms of this Agreement, in which case
the terms of this Agreement shall control.
3.
Employment
Contract.
The Company and Executive acknowledge that the terms
of his employment are set forth in this Agreement. If Executive’s
employment terminates for any reason, Executive shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement, or as may otherwise be available in accordance with the
Company’s established written plans and written policies at the time of
termination.
4.
Compensation
.
(a) Subject
to tax withholdings and deductions to cover Executive contributions to, and
payments under, applicable executive benefit and welfare plans and programs, the
Company will pay Executive an annual base compensation of $275,000 per year to
be paid in accordance with the Company’s normal payroll practices during the
term of this Agreement (“Base Salary”). The Company’s Board of
Directors (the “Board”) or Compensation Committee of the Board (or any committee
of the Board that shall replace such committee) shall review annually
Executive’s compensation for increases during the term of this Agreement in
conjunction with the Company’s regular review of the salaries of other executive
level employees and in consultation with the Company CEO. At such
time, the Company will consider (without any obligation to implement) upward
adjustments to Executive’s compensation under this Agreement in a manner
consistent with the Company’s practices in effect from time to
time.
(b) In
addition to Base Salary, Executive also will be eligible to receive an annual
performance bonus as the Board or Compensation Committee of the Board (or any
committee of the Board that shall replace such committee) shall, in its sole
discretion, deem appropriate based upon the parameters and criteria contained in
the Company’s bonus plan and in consultation with the Company CEO. He shall be
eligible for a Target Annual Bonus of 35% of his Base Salary as then in
effect. This bonus, if any, shall be paid to the Executive no later
than March 15 following the end of each calendar year.
(c)
Executive
also shall be eligible in the sole discretion of the Board or the Compensation
Committee of the Board (or any committee of the Board that shall replace such
committee) to participate in the Company’s stock option plan as is from time to
time in effect, subject to the terms and conditions of such plan. The Executive
shall receive on his first day of employment with the Company an initial grant
of 100,000 options to purchase shares of the Company’s stock which shares are to
vest at the rate of one-quarter on each of the first four anniversaries of the
grant date. The Executive shall receive on his first day of employment with the
Company an initial grant of 10,000 restricted shares of the Company’s stock
which shares are to vest upon the determination by the Compensation Committee of
the Board that the Company has obtained analyst coverage by at least two
independent or sell-side research providers to ensure that the Company has
broader market awareness.
5.
Benefits
.
(a) Executive
and Executive’s eligible dependents shall be eligible for all employee benefit
programs (including any pension, 401(k), group life insurance, group medical and
dental, vision, and short-term and long-term disability policies, plans, and
programs) generally available to other executive level employees of the Company
during the term of this Agreement, in accordance with the terms of those benefit
plans.
(b) Executive
shall be entitled to accrue paid time off (“PTO”) during the term of this
Agreement in accordance with the Company’s standard policy and in an amount
commensurate with other executive level employees of the Company.
(c) In
accordance with the policies of the Company in effect from time to time,
Executive will be entitled to reimbursement for approved ordinary and
necessary business expenses incurred by him during the term of this Agreement
commensurate with other executive level employees of the Company.
6.
Termination
.
(a)
Death
. Executive’s
employment shall terminate immediately upon his death.
(b)
Disability
. Executive’s
employment shall terminate upon Executive having a “Disability.” For
purposes of this Agreement, “Disability” means a determination by Company in
accordance with applicable law that, as a result of a physical or mental
illness, Executive is unable to perform the essential functions of his job with
or without reasonable accommodation for a period of six (6) months.
(c)
Termination by Company for
Cause
. Upon delivery of written notice of termination for
“Cause” from Company to Executive, Executive’s employment shall
terminate. Termination for “Cause” shall mean termination based on
(i) Executive’s failure or refusal to perform, in any material respect, his
duties faithfully and diligently in accordance with this
Agreement; (ii) gross negligence, recklessness or malfeasance in
the performance of Executive’s duties; (iii) Executive committing any
criminal act; (iv) Executive committing any act of fraud or other material
misconduct resulting or intending to result directly or indirectly in gain or
personal enrichment at the expense of Company; (v) Executive willfully
engaging in any conduct relating to the business of Company that could
reasonably be expected to have a materially detrimental effect on the business
or financial condition of the Company; (vi) misconduct which materially
discredits or damages Company, or violates Company’s policies or procedures,
after Company has notified Executive of the actions Company deems to constitute
non-compliance; (vii) Executive materially breaches his obligations under
Sections 9 and 10 below, relating to confidential information, non-solicitation
and non-competition.
Termination for Cause pursuant to
subsections (i), (ii), (iv), or (v) of this Paragraph (c) of Section 6 shall not
take effect unless and until the Company complies with the provisions of this
paragraph. Executive shall be given written notice by the Company of
its intention to terminate him for Cause, stating in detail the particular
act(s) or failure(s) to act that constitute the grounds on which the proposed
termination for Cause is based. That written notice shall be given to
Executive within ninety (90) days of the Company’s learning of such act(s) or
failure(s) to act. Executive shall then have thirty (30) days after
receipt of such written notice to cure such conduct, to the extent such cure is
possible. If Executive fails to cure such conduct on or before the
end of the thirty (30) day period, Executive shall be terminated for
Cause. If Executive’s conduct is not curable, no notice need be given
by the Company before terminating Executive for Cause.
(d)
Resignation for Good
Reason
. Executive may terminate his employment with “Good
Reason” (as defined below) upon no fewer than thirty (30) days prior written
notice to the Company specifying the reason(s) for the
termination. Upon receipt of Executive’s notice of intent to
terminate his employment for Good Reason, Company shall have a right to cure the
alleged breach or other conduct alleged by Executive to constitute Good Reason
within the thirty (30) day period. For purposes of this Agreement,
“Good Reason” shall mean the termination by Executive of Executive’s employment
with the Company and all its affiliates and subsidiaries that are considered a
single employer within the meaning of Sections 414(b) and 414(c) of the Code
which is due to (i) a material diminution of Executive’s responsibilities, or
working conditions, or duties; (ii) a material diminution in the Executive’s
base salary; (iii) a material negative change in the terms or status of this
Agreement; or (iv) a relocation, without Executive’s consent, of the Executive’s
office more than 100 miles from its location at the commencement of this
Agreement; provided, however, the Executive shall provide written notice to the
Company of the initial existence of the condition causing the change in terms or
status no more than ninety (90) days after the change in terms or status occurs
and the Company shall have thirty (30) days to resolve the issue causing the
change in terms or status. If the Company resolves such issue, then
Executive’s employment shall not be subject to the Good Reason provisions of
this Agreement as to such issue.
(e)
Resignation Without Good
Reason
. Executive may terminate his employment without Good
Reason upon no fewer than thirty (30) days prior written notice to the Company.
Without Good Reason as used in this Agreement refers to any reason not included
as a Good Reason in section 6(d).
(f)
Termination by Company
Without Cause
. Executive’s employment shall terminate thirty
(30) days after written notice delivered to Executive of Company’s termination
of Executive’s employment for reason other than Death, Disability or
Cause.
7.
Compensation Upon
Termination (Other than a Change in Control)
(a) If
Executive’s employment is terminated by Company for Cause, by Death or
Disability, or if Executive resigns Without Good Reason, Executive shall be
entitled to receive:
(i)
|
the Base Salary
through the date of termination;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the
date of Executive’s termination; and
|
|
|
(iii)
|
such Employee
Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company.
|
(b) If
Executive’s Employment is terminated by Company without Cause or by Executive
with Good Reason, Executive shall be entitled to:
(i)
|
the Base Salary
through the date of termination;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the
date of Executive’s termination;
|
|
|
(iii)
|
if Executive elects
to continue medical, dental, and vision coverage under the health care
continuation provisions of COBRA, Company shall reimburse Executive for
the related premium cost for employess and dependent coverage for a period
of twelve (12) months following Executive's date of termination of
employment.
|
|
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(iv)
|
if Executive elects
to continue medical, dental, and vision coverage under the health care
continuation provisions of COBRA, Company shall reimburse Executive for
the related premium
|
(c) If
Executive’s Employment is terminated as a result of Company providing written
notice to Executive pursuant to Section 1 of this Agreement of Company’s
intention not to extend the term of the Agreement, Executive shall be entitled
to:
(i)
|
the Base
Salary through the end of the term;
|
|
|
(ii)
|
reimbursement for
any previously unreimbursed business expenses properly incurred and
documented by Executive in accordance with Company policy prior to the end
of the term;
|
|
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(iii)
|
receive a lump sum
payment within sixty (60) days following Executive’s termination of
employment equal to (1) one times Executive’s Annual Base Salary at the
rate immediately in effect before the end of the
term.
|
8.
Change in
Control
.
(a) In
the event of “Change in Control” of Company, as defined in the Executive Change
in Control Severance Agreement to be executed on the date hereof (the “Change in
Control Agreement”) between the Company and Executive and attached hereto as
Exhibit A and incorporated by reference as if fully set forth herein, Executive
shall be entitled solely to the benefits, if any, available to him pursuant to
the Change in Control Agreement, and the benefits otherwise available under this
Agreement shall not apply.
9.
Restrictive
Covenants
.
(a) During
Executive’s employment and for a period of one (1) year following the
termination of Executive’s employment for any reason, Executive will not compete
directly with the Company anywhere in the world by rendering services or
providing assistance for himself or on behalf of any other person or entity, in
any line of business substantially similar to, or competitive with, the business
in which the Company is engaged or has made preparations to engage, as of the
termination date of Executive’s employment with the Company.
(b) Executive
agrees that during the period stated in subsection (a) above, he will not
(i) directly solicit or encourage in any manner the resignation of any
employee of the Company or any of its subsidiaries; or (ii) directly or
indirectly solicit or divert customers, vendors, or business of the Company or
any of its subsidiaries (
provided
that
Executive may deal with any such customers or vendors in any manner which does
not violate the provisions of subsection (a) above); or (iii) attempt to
influence, directly or indirectly, any person or entity to cease, reduce, alter,
or rearrange any business relationship with the Company or any of its
subsidiaries.
(c) Executive
acknowledges and agrees that he considers the restrictions set forth in this
Section 9 to be reasonable both individually and in the aggregate and that the
duration, geographic scope, extent and application of these restrictions are no
greater than is necessary for the protection of the Company’s legitimate
interests. It is the desire and intent of Executive and the Company
that the provisions of this Section 9 shall be enforced to the fullest extent
possible under the laws and public policies of the State of New
Jersey. The Company and Executive further agree that if any
particular provision or portion of this Section 9 shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made. The Company and Executive further agree that in
the event that any restriction herein shall be found to be void or unenforceable
but would be valid or enforceable if some part or parts thereof were deleted or
the period or area of application reduced, such restriction shall apply with
modification as may be necessary to make it valid and Executive and the Company
empower a court of competent jurisdiction to modify, reduce or otherwise reform
such provision(s) in such fashion as to carry out the parties’ intent to grant
the Company the maximum allowable protection consistent with the applicable law
and facts and the express exceptions contained herein.
(d) Without
limiting the foregoing, Executive will not be deemed to be in competition with
the Company by reason of his employment by an enterprise (“Subsequent Employer”)
whose businesses include both (i) activities that involve the Company
Technology (“Covered Business”); and (ii) activities that do not involve
the Company Technology (“Excluded Business”) upon satisfaction of the following
conditions: (A) Executive delivers to the Subsequent Employer a
copy of this Agreement or an extract thereof setting forth fully and completely
the restrictions set forth in this Section 9; (B) the Subsequent Employer
executes and delivers to the Company a written agreement in which, as a
condition to Executive’s employment, the Subsequent Employer
(1) acknowledges receipt of such restriction, (2) agrees to employ
Executive only in the Excluded Business, (3) agrees to cause the executive
in charge of the Covered Business to acknowledge such restrictions in writing
and agree that Executive will not be permitted to participate in the Covered
Business, (4) agrees to establish reasonable internal policies and
procedures to prevent violation of such restrictions or disclosure by Executive
to personnel engaged in the Covered Business, and (5) agrees that the
Company shall be entitled to enforce such agreement directly against the
Subsequent Employer; and (C) Executive and the Subsequent Employer perform
their obligations pursuant to this Agreement and such agreement.
10.
Confidentiality
.
The Employee Proprietary
Information and Inventions Agreement dated December 6, 2006, between the Company
and Executive and attached hereto as Exhibit B and incorporated by reference as
if fully set forth herein.
11.
Cooperation
: Executive
agrees to cooperate on a reasonable basis in the truthful and honest prosecution
and/or defense of any claim in which the Company, its affiliates, and/or its
subsidiaries may have an interest (subject to reasonable limitations concerning
time and place), which may include without limitation making himself available
on a mutually agreed, reasonable basis to participate in any proceeding
involving the Company, its affiliates, and/or its subsidiaries, allowing himself
to be interviewed by representatives of the Company, its affiliates, and/or its
subsidiaries without asserting or claiming any privilege against the Company,
its affiliates, and/or its subsidiaries, appearing for depositions and testimony
without requiring a subpoena and without asserting or claiming any privilege
against the Company, its affiliates, and/or its subsidiaries, and producing
and/or providing any documents or names of other persons with relevant
information without asserting or claiming any privilege against the Company, its
affiliates, and/or its subsidiaries; provided that, if such services are
required after the end of any period during which he is eligible for severance
benefits, if any, the Company, its affiliates, and/or its subsidiaries shall
provide Executive with reasonable compensation for the time actually expended in
such endeavors and shall pay his reasonable expenses incurred at the prior and
specific request of the Company, its affiliates, and/or its
subsidiaries.
12.
Remedies
. Executive
acknowledges and agrees that the Company’s remedy at law for a breach or
threatened breach of the provisions of this Agreement would be inadequate and,
in recognition of this fact, in the event of a breach or threatened breach by
Executive of any provision of this Agreement, it is agreed that, in addition to
any available remedy at law, the Company shall be entitled to, without posting
any bond, specific performance, temporary restraining order, temporary or
permanent injunction, or any other equitable relief or remedy which may then be
available; provided, however, nothing herein shall be deemed to relieve the
Company of its burden to prove grounds warranting such relief nor preclude
Executive from contesting such grounds or facts in support
thereof. Nothing herein contained shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach hereof.
13.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
14.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable. The Parties agree that the covenants set forth herein
are reasonable. Without limiting the foregoing, it is the
intent of the parties that the covenants set forth herein be enforced to the
maximum degree permitted by applicable law. As such, the parties ask
that if any court of competent jurisdiction were to consider any provision of
this Agreement to be overly broad based on the circumstances at the time
enforcement is requested, that such court “blue pencil” the provision and
enforce the provision to the full extent that such court deems it to be
reasonable in scope.
15.
Indemnification
.
The
Indemnification Agreement dated December 6, 2006, between the Company and
Executive, is attached hereto as Exhibit C and incorporated by reference as if
fully set forth herein.
16.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement, together
with the Exhibits incorporated by reference as if fully set forth herein, sets
forth the entire employment agreement between the Company and Executive,
supersedes any and all prior agreements between the Company and Executive,
and shall not be amended or added to except in writing signed by the Company and
Executive. Executive understands that he may not assign his duties
and obligations under this Agreement to any other party and that the Company
may, at any time and without further action by or the consent of Executive,
assign this Agreement to any of its affiliated companies.
17.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
18.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure to the
benefit of the successors and assigns of the Company.
19.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey 07039, attn.: General Counsel, and (b) in the
case of Executive, to Executive's last known address as reflected in the
Company's records, or to such other address as Executive shall designate by
written notice to the Company. Any notice given hereunder shall be
deemed given at the time of receipt thereof by the person to whom such notice is
given.
20.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the dates set forth below.
EXECUTIVE
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/
James A. Meer
|
/s/
Stephen G. Kasnet
|
James Meer
|
Stephen G. Kasnet,
Chairman
|
|
|
Date:
March 11, 2009
|
Date:
March 11,
2009
|
Exhibit
A
EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS EXECUTIVE CHANGE IN CONTROL
SEVERANCE AGREEMENT dated as of March 11, 2009 (as the same may be amended,
restated, supplemented or otherwise modified from time to time hereafter, this
“Agreement”), is entered into between Columbia Laboratories, Inc., a Delaware
corporation having its corporate offices at 364 Eisenhower Parkway, Livingston,
New Jersey (“Columbia” or the “Company”), and James Meer
(“Executive”).
WITNESSETH
:
WHEREAS, the Company desires to create
a greater incentive for Executive to remain in the employ of the Company,
particularly in the event of any possible change or threatened change in control
of the Company; and
NOW THEREFORE, in partial consideration
of Executive’s future services to the Company and the mutual covenants contained
herein, the parties hereby agree as follows:
1.
Termination Following A
Change in Control
(a)
Qualifying
Termination
. Executive shall be entitled to the compensation
and benefits listed in Paragraph 1(b), in addition to compensation and benefits
to which Executive would otherwise be entitled as of the date of termination, if
Executive’s employment with the Company is terminated either (i) by the Company
for any reason other than for Cause within 90 days before a Change in Control or
within one year following the occurrence of any Change in Control or successive
Change in Control or (ii) by Executive for Good Reason within one year following
the occurrence of any Change in Control or successive Change in Control and
Executive properly executes, and does not revoke or attempt to revoke, a valid
and reasonable release of claims against the Company, its affiliates and their
employees and agents.
(b)
Compensation and
Benefits
. Within ten business days after a Change in Control
event (or the last day of any period during which any release may be revoked by
Executive), the Company shall make a lump sum cash payment to Executive, subject
to any mandatory tax withholding, equal to one times Executive’s Base Salary and
Bonus for the year prior to the Change in Control plus a lump sum payment equal
to the value of the Fringe Benefits provided to Executive for the year prior to
the Change in Control.
2.
Definitions
.
(a)
Bonus
. “Bonus”
shall mean the greater of (i) the bonus, if any, paid to Executive in the year
prior to the Qualifying Termination, (ii) the bonus, if any, paid to Executive
in the year prior to the Change in Control, or (iii) the Executive’s target
bonus at the time of the Change in Control.
(b)
Base
Salary
. “Base Salary” shall mean the greater of (i) the
annual rate of base salary in effect for Executive at the time of the Qualifying
Termination or (ii) the annual rate of base salary in effect for Executive at
the time of the Change in Control.
(c)
Cause
. “Cause”
shall mean termination based on (i) gross negligence, recklessness or
malfeasance in the performance of Executive’s duties; (ii) Executive
committing any criminal act; (iii) Executive committing any act of fraud or
other material misconduct resulting or intending to result directly or
indirectly in gain or personal enrichment at the expense of Company;
(iv) Executive willfully engaging in any conduct relating to the business
of Company that could reasonably be expected to have a materially detrimental
effect on the business or financial condition of the Company;
(v) misconduct which materially discredits or damages Company, or violates
Company’s policies or procedures, after Company has notified Executive of the
actions Company deems to constitute non-compliance; (vi) Executive
materially breaches Executive’s obligations relating to confidential
information, non-solicitation and non-competition.
(d)
Change In
Control
. “Change in Control” shall have occurred if
(a) there shall have consummated (i) any consolidation or merger of
Company in which Company is not the continuing or surviving entity or pursuant
to which shares of Company’s common stock would be converted to cash, securities
or other property, other than a merger of Company in which the holders of
Company’s common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving entity immediately
after the merger, or (ii) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the company; or (b) the stockholders of the Company
approve a plan or proposal for the liquidation or dissolution of the Company; or
(c) any person (as that term is used in Sections 13(d) and 14(d)(z) of the
Securities and Exchange Act, as amended (the “Exchange Act”)) shall become a
beneficial owner (within the meaning of Rule 13d-2 under the Exchange Act) of
40% or more of Company’s outstanding common stock; or (d) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by Company’s
stockholders, of each new director was approved by a vote of at least 60% of the
directors eligible to vote who were directors at the beginning of the
period.
(e)
Good
Reason
. For purposes of this Agreement, “Good Reason” shall
mean the termination by Executive of Executive’s employment with the Company and
all its affiliates and subsidiaries that are considered a single employer within
the meaning of Sections 414(b) and 414(c) of the Code which is due to (i) a
material diminution of Executive’s responsibilities, or working conditions, or
duties; (ii) a material diminution in the Executive’s base salary; (iii) a
material negative change in the terms or status of this Agreement; or (iv) a
relocation, without Executive’s consent, of the Executive’s office more than 100
miles from its location at the commencement of this Agreement; provided,
however, the Executive shall provide written notice to the Company of the
initial existence of the condition causing the change in terms or status no more
than ninety (90) days after the change in terms or status occurs and the Company
shall have thirty (30) days to resolve the issue causing the change in terms or
status. If the Company resolves such issue, then Executive’s
employment shall not be subject to the Good Reason provisions of this Agreement
as to such issue.
3
.
Applicable
Laws and Consent to Jurisdiction
. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.
4.
Severability
.
The provisions of this Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable.
5.
Miscellaneous
;
Waiver
. Executive further agrees that this Agreement sets
forth the entire Agreement between the Company and Executive with respect to the
subject matter herein, supersedes any and all prior agreements between the
Company and Executive with respect to the subject matter herein, and shall not
be amended or added to except in writing signed by the Company and
Executive. Executive understands that Executive may not assign
Executive’s duties and obligations under this Agreement to any other party and
that the Company may, at any time and without further action by or the consent
of Executive, assign this Agreement to any of its affiliated
companies.
6.
Counterparts
.
This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.
7.
Successors
and
Assigns
.
This Agreement
shall be binding on the successors and heirs of Executive and shall inure to the
benefit of the successors and assigns of the Company.
8.
Notices
. Any
notice required or permitted hereunder shall be in writing and shall be
sufficiently given if personally delivered or if sent by registered or certified
mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 364 Eisenhower
Parkway, Livingston, New Jersey, attn.: General Counsel, and (b) in the case of
Executive, to Executive's last known address as reflected in the Company's
records, or to such other address as Executive shall designate by written notice
to the Company. Any notice given hereunder shall be deemed given at
the time of receipt thereof by the person to whom such notice is
given.
9.
Code
Section 409A Compliance
. Executive acknowledges and agrees
that he has been advised that, before entering into this Agreement, he should
consult with his financial, legal or tax adviser to determine the risk to him of
the imposition of tax under Internal Revenue Code Section
409A. Executive shall have no claim against the Company with respect
to Code Section 409A. This Agreement is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the
extent a provision of this Agreement is contrary to or fails to address the
requirements of Code Section 409A and related treasury regulations, this
Agreement shall be construed and administered as necessary to comply with such
requirements to the extent allowed under applicable treasury
regulations.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first set forth above.
EXECUTIVE
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/
James A. Meer
|
/s/
Robert S. Mills
|
James A.
Meer
|
By:
Robert S. Mills
|
|
Its:
President and Chief Executive
Officer
|
Exhibit
B
EMPLOYEE
PROPRIETARY INFORMATION
AND
INVENTIONS AGREEMENT
This Employee Proprietary Information
and Inventions Agreement (the "Agreement") is made as of December 6, 2006,
between James Meer (referred to below as “I”, “My”, “Myself”, or “Me”) and
Columbia Laboratories, Inc., having an office at 364 Eisenhower Parkway,
Livingston, NJ 07039 (referred to below together with its subsidiaries and
affiliates as the "Company").
RECITALS
A. The
Company is engaged in a continuous program of research, development, production,
distribution, and marketing with respect to its present and future business;
and
B. I
understand that My employment with the Company creates a relationship of
confidence and trust between the Company and Me with respect to any information:
(a) applicable to the business of the Company, or (b) applicable to the business
of any client or customer of the Company, that may be made known to Me by the
Company, any client or customer of the Company, or learned by Me during the
period of My employment. I understand that this information constitutes a very
valuable asset of the Company.
NOW, THEREFORE, in consideration of My
employment by the Company and the salary and other employee benefits I will
receive from the Company for My service, which in all cases are subject to
Section 10(a) of this Agreement, I hereby agree as follows:
1.
Proprietary
Information
. The Company possesses and will come to possess
information that has been created, discovered or developed, or has otherwise
become known to the Company (including without limitation, information created,
discovered, developed or made known by or to Me arising out of My employment by
the Company), and/or in which property rights have been assigned or otherwise
conveyed to the Company, which information has commercial value in the business
in which the Company is engaged. All of the aforementioned
information is hereinafter called "Proprietary Information." Any information
disclosed to Me or to which I have access (whether I or others originated it)
during the time I am employed by the Company, that the Company or I reasonably
consider Proprietary Information or that the Company treats as Proprietary
Information, will be presumed to be Proprietary Information.
By way of illustration, but not
limitation, Proprietary Information includes trade secrets, processes, formulae,
data and know-how, improvements, inventions, techniques, marketing plans,
strategies, forecasts, customer lists, and finance and business
systems.
(a)
Company as Sole
Owner
. I agree and acknowledge that all Proprietary
Information, and all Inventions (defined below in Section 6(a) of this
Agreement), shall be the sole property of the Company and its assigns, and the
Company and its assigns shall be the sole owner of all patents and trade secrets
and any other rights in connection therewith.
(b)
Assignment of Rights;
Obligation of Confidentiality
. I hereby assign to the Company
any rights I may have or acquire in all Proprietary Information. At
all times during My employment by the Company and at all times after termination
of such employment, I will keep in confidence and trust all Proprietary
Information and, except as I may be authorized to make disclosure in the
ordinary course of performing My duties as an employee of the Company, I will
not disclose, sell, use, lecture upon or publish any Proprietary Information or
anything relating to it without the prior written consent of the
Company.
2.
No
Competition
. I agree that during the period of My employment
by the Company I will not, without the Company's prior written consent, engage
in any employment or other activity for any person, company or entity engaged in
any business that is competitive with the Company's business.
3.
Other Proprietary
Rights
. All documents, data, records, apparatus, equipment,
chemicals, molecules, organisms, and other physical property, whether or not
pertaining to Proprietary Information, furnished to Me by the Company or
produced by Me or others in connection with My employment shall be and remain
the sole property of the Company and shall be returned promptly to the Company
as and when requested by the Company. Should the Company not so
request, I shall return and deliver all such property upon termination of My
employment by Me or the Company for any reason and I will not take with Me any
such property or any reproduction of such property upon such
termination.
4.
No
Solicitation
. I agree that for a period of one (1) year
following termination of My employment, I will not solicit or in any manner
encourage any employee of the Company to leave the Company's
employ.
6.
Obligations Regarding
Inventions
.
(a) I
will promptly disclose to the Company, or any persons designated by it, and will
not use Myself or disclose to anyone else at any time during or after My
employment without the prior written consent of the Company, all improvements,
inventions, formulae, processes, techniques, know-how and data (whether or not
they can be patented, trademarked or copyrighted), made, conceived, reduced to
practice or learned by Me, either alone or jointly with others, during the
period of My employment, which are related to or useful in the business of the
Company, or which the Company would be interested in, or result from tasks
assigned to Me by the Company, or result from use of any premises owned, leased
or contracted for by the Company (all said improvements, inventions, formulae,
processes, techniques, know-how, and data initiated or developed during My
employment shall be collectively hereinafter called "Inventions"); such
disclosure shall continue after termination of My employment with the Company
with respect to any Invention, which in all cases are subject to Section 6(c) of
this Agreement.
(b)
Company Sole Owner of Patent
Rights
. I will promptly and fully disclose the existence and
describe the nature of any such Invention to the Company in writing and without
request. I agree that all Inventions shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents, copyrights, trade secrets, and other intellectual property rights
(collectively, "Patent Rights") in connection therewith. I will, with respect to
any such Invention, keep current, accurate and complete records that will belong
to the Company and will be kept stored on the Company premises while I am
employed by the Company and shall be turned over to the Company immediately upon
termination of My employment.
(c)
Assignment of Inventions and
Patent Rights; Duty to Cooperate
. I hereby assign to the
Company any rights I may have or acquire in all Inventions. I further
agree as to all Inventions and Proprietary Information to assist the Company in
every proper way (but at the Company's expense) to obtain and from time to time
enforce Patent Rights regarding the Inventions or Proprietary Information in any
and all countries, and to that end I will execute all documents for use in
applying for and obtaining such patents or copyrights thereon and enforcing
same, as the Company may desire, together with any assignments thereof to the
Company or entities or persons designated by it. I agree further that
these obligations to assist the Company in obtaining and enforcing Patent Rights
in any and all countries shall continue beyond the termination of My employment,
in return for which assistance after termination the Company shall
compensate Me at a reasonable rate for time actually spent by Me at the
Company's request on such assistance.
6.
Prior Inventions
List
.
[Please
initial one of the following two entries.]
_____ As
a matter of record, I have attached hereto a complete list of all inventions or
improvements relevant to the subject matter of My employment by the Company
which have been made or conceived or first reduced to practice by Me alone or
jointly with others prior to My employment by the Company which I desire to
remove from the operation of this Agreement; and I warrant that such list is
complete.
__JM_ No
such list is attached to this Agreement, and I represent that I have made no
such inventions or improvements at the time of signing this
Agreement.
7.
No Breach of
Confidentiality
. I represent that My performance of all terms
of this Agreement and that My employment by the Company does not and will not
breach any obligation of confidentiality that I have to others, which existed
prior to My employment by the Company. I have not brought or used,
and will not bring with Me to the Company or use any equipment, supplies,
facility or trade secret information of any former employer or any other person,
which information is not generally available to the public, unless I have
obtained written authorization for their possession and use, and promptly
provided such written authorization to the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict with this Agreement.
8.
Injunctive
Relief
. I acknowledge and agree that the Company’s remedy at
law for a breach or threatened breach of any of the provisions of this Agreement
would be inadequate and, in recognition of that fact, in the event of any such
breach or threatened breach, I agree that, in addition to its remedy at law, the
Company shall be entitled to equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy that may then be available. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach.
9.
Not Debarred.
I
warrant and represent that I have never been, and am not currently an individual
who has been, debarred by the United States Food and Drug Administration (“FDA”)
pursuant to 21 U.S.C. §336a (a) or (b) (“Debarred Individual”) from providing
services in any capacity to a person that has an approved or pending drug
product application. I further warrant and represent that I have no
knowledge of any FDA investigations of, or debarment proceedings against, Me or
any person or entity with which I am, or have been, associated, and I will
immediately notify the Company if I become aware of any such investigations or
proceedings during the term of My employment with the Company.
10.
Miscellaneous
Provisions
.
(a)
Employment
. Nothing
in this Agreement shall alter My at will employee status or be construed to
create a specific term of employment or a promise of continued employment.
Either I or the Company may terminate the employment relationship for any reason
at any time, with or without notice.
(b)
Enforceability
. If
one or more of the provisions contained in this Agreement shall, for any reason,
be held to be excessively broad as to scope, activity, subject or otherwise, so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with then applicable law. If any
provision of this Agreement shall be declared invalid, illegal or unenforceable,
such provision shall be severed and all remaining provisions shall continue in
full force and effect.
(c)
Assignment.
This
Agreement is not assignable by Me without the written consent of the Company,
which consent may be withheld for any reason or no reason. In light
of the very personal and critical nature of this Agreement, I recognize that it
is unlikely such consent would ever be granted.
(d)
Entire
Agreement.
This Agreement contains the entire agreement
between Me and the Company with respect to the subject matter of this Agreement
and supersedes all prior or contemporaneous oral or written agreements,
statements, representations, or understandings between Me and the Company, or
any employee of the Company. This Agreement may be amended only by a written
instrument signed by Me and the Company.
(e)
Effective
Date
. This Agreement shall be effective as of the first day of
My employment by the Company, as affirmed or reaffirmed by my signature
below.
(f)
Binding
Effect
. This Agreement shall be binding upon Me, My heirs,
executors, assigns and administrators and shall inure to the benefit of the
Company, its successors and assigns.
(g)
Governing
Law
. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without regard to its rules
on conflicts of law.
COLUMBIA
LABORATORIES, INC.
|
EMPLOYEE
|
|
|
By:
/s/
Robert S.
Mills
|
/s/
James A. Meer
|
|
Signature
|
Name:
Robert S.
Mills
|
|
|
James A.
Meer
|
Title:
President & Chief Executive
Officer
|
|
|
|
Exhibit
C
INDEMNIFICATION
AGREEMENT
This Agreement is made and entered into
this 6
th
day of
December, 2006 (“Agreement”) by and between Columbia Laboratories, Inc., a
Delaware corporation (“Corporation”) and James Meer (“Indemnitee”).
WHEREAS the Board of Directors (the
“Board”) has determined that the best interests of the Corporation require that
persons serving as directors of, and in other capacities for, the Corporation
receive better protection from the risk of claims and actions against them
arising out of their service to and activities on behalf of such corporations;
and
WHEREAS, this Agreement is a supplement
to and in furtherance of Article VI of the amended and restated by-laws of the
Corporation, any rights granted by the Certification of Incorporation of the
Corporation and any resolutions adopted pursuant thereto and shall not be deemed
to be a substitute therefore nor to diminish or abrogate any rights of the
Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to
serve, continue to serve and take on additional service for or on behalf of the
Corporation on the condition that Indemnitee be indemnified according to the
terms of this Agreement;
NOW, THEREFORE, in consideration of the
premises and the covenants contained herein, the Corporation and Indemnitee do
hereby covenant and agree as follows:
Section
1. Definitions
.
For purposes of this
Agreement:
(a) “Change
in Control” shall be deemed to have occurred if (a) there shall have
consummated (i) any consolidation or merger of Company in which Company is
not the continuing or surviving entity or pursuant to which shares of Company’s
common stock would be converted to cash, securities or other property, other
than a merger of Company in which the holders of Company’s common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving entity immediately after the merger, or (ii) any
sale, lease, exchange or transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the company; or
(b) the stockholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company; or (c) any person (as that term
is used in Sections 13(d) and 14(d)(z) of the Securities and Exchange Act, as
amended (the “Exchange Act”)) shall become a beneficial owner (within the
meaning of Rule 13d-2 under the Exchange Act) of 40% or more of Company’s
outstanding common stock; or (d) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire
Board shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by Company’s stockholders, of each new
director was approved by a vote of at least 50% of the directors eligible to
vote who were directors at the beginning of the period.
(b) “Disinterested
Director” means a director of the Corporation who is not and was not a party to
the Proceeding in respect of which indemnification is sought by
Indemnitee.
(c) “Effective
Date” means the date first written above.
(d) “Expenses”
mean all reasonable attorneys’ fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees and all other
disbursements and expenses of the type customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a Proceeding.
(e) “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced in
matters of corporation law and neither presently is, nor in the past five years
has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(f) “Proceeding”
means an action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative, except one initiated by an Indemnitee
pursuant to Section 11 of this Agreement to enforce Indemnitee’s rights under
this Agreement.
Section
2. Services by Indemnitee
.
Indemnitee agrees to serve as an
officer or director of the corporation, and, at its request, as a director,
officer, employee, agent or fiduciary of certain other corporations and
entities. Indemnitee may at any time and for any reason resign from
any such position (subject to any other contractual obligation or any obligation
imposed by operation of law).
Section
3. Indemnification - General
.
The Corporation shall indemnify, and
advance Expenses to, Indemnitee as provided in this Agreement to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time
permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.
Section
4. Proceeding Other Than Proceedings by or in the Right of the
Corporation
.
Indemnitee shall be entitled to the
rights of indemnification provided in this Section if, by reason of Indemnitee’s
employment or service as an officer or director, Indemnitee is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding, other
than a Proceeding brought by or in the right of the Corporation to procure a
judgment in its favor. Pursuant to this Section, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonable incurred by Indemnitee or on Indemnitee’s
behalf in connection with any such Proceeding if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal Proceeding,
had no reasonable cause to believe Indemnitee’s conduct was
unlawful.
Section
5. Proceedings by or in the Right of the
Corporation
.
Indemnitee shall be entitled to the
rights of indemnification provided in this Section if, by reason of his
Corporate Status, Indemnitee is, or is threatened to be made, a party to any
threatened, pending or completed Proceeding brought by or in the right of the
Corporation to procure a judgment in its favor. Pursuant to this
Section, Indemnitee shall be indemnified against Expenses, judgments, penalties,
fines and amounts paid in settlement, actually and reasonably incurred by
Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the
Corporation. Notwithstanding the foregoing, no indemnification
against such Expenses shall be made in respect of any claim, issue or matter in
any such Proceeding as to which Indemnitee shall have been adjudged to be liable
to the Corporation if applicable law prohibits such indemnification unless the
Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that
indemnification against Expenses may nevertheless be made by the
Corporation.
Section
6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful
.
Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
employment or service as an officer or director, a party to and is successful,
on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith. If Indemnitee is not
wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Corporation shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in
connection with each successfully resolved claim, issue or
matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section
7. Indemnification for Expenses of a Witness
.
Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
employment or service as an officer or director, a witness in any Proceeding,
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee’s behalf in connection
therewith.
Section
8. Advancement of Expenses
.
The Corporation shall advance all
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within thirty (30) days after the receipt by the
Corporation of a statement or statement from Indemnitee requesting such advance
or advances from time to time, whether prior to or after final disposition of
such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section
9. Procedure for Determination of Entitlement to
Indemnification
.
(a) To
obtain indemnification under this Agreement in connection with any Proceeding,
and for the duration thereof, Indemnitee shall submit to the Corporation a
written request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly
upon receipt of any such request for indemnification, advise the board in
writing that Indemnitee has requested indemnification.
(b) Upon
written request by Indemnitee for indemnification pursuant to Section 9(a)
hereof, a determination, if required by applicable law, with respect to
Indemnitee’s entitlement thereto shall be made in such
case: (i) if a Change in Control shall have occurred, by
Independent Counsel (unless Indemnitee shall request that such determination be
made by the Board or the stockholders in the manner provided for in clauses (ii)
or (iii) or this Section 9(b)) in written opinion to the Board, a copy of which
shall be delivered to Indemnitee; (ii) if a Change of Control shall not
have occurred, (A) by the Board by a majority vote of a quorum consisting
of Disinterested Directors, or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable, or even if such quorum is obtainable,
if such quorum of Disinterested Directors so directs, either (x) by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee, or (y) by the stockholders of the Corporation, as
determined by such quorum of Disinterested Directors, or a quorum of the Board,
as the case may be; or (iii) as provided in Section 10(b) of this
Agreement. If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within thirty (30) days
after such determination. Indemnitee shall cooperate with the persons
or entity making such determination with respect to Indemnitee’s entitlement to
indemnification, including providing to such persons or entity upon request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with
the persons or entity making such determination shall be borne by the
Corporation (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) If
required, Independent Counsel shall be selected as
follows: (i) if a Change of Control shall not have occurred,
Independent Counsel shall be selected by the Board by a majority vote of a
quorum consisting of Disinterested Directors and the Corporation shall give
written notice to Indemnitee advising Indemnitee of the identity of Independent
Counsel so selected; or (ii) if a Change of Control shall have occurred,
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board, in which event (i) shall
apply), and Indemnitee shall give written notice to the Corporation advising it
of the identity of Independent Counsel so selected. In either event,
Indemnitee or the Corporation, as the case may be, may, within seven (7) days
after such written notice of selection shall have been given, deliver to the
Corporation or to Indemnitee, as the case may be, a written objection to such
selection. Such objection may be asserted only on the ground that
Independent Counsel so selected does not meet the requirements of “Independent
Counsel” as defined in Section 1 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has determined that such objection
is without merit. If, within twenty (20) days after submission by
Indemnitee of a written request for indemnification pursuant to Section 9(a)
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery of the
State of Delaware, or any court in the State of New Jersey in which such
petition would be cognizable, for resolution of any objection which shall have
been made by the Corporation or Indemnitee to the other’s selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by such court or by such other person as such court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 9(b)
hereof. The Corporation shall pay any and all reasonable fees and
expenses incurred by such Independent Counsel in connection with its actions
pursuant to this Agreement, and the Corporation shall pay all reasonable fees
and expenses incident to the procedures of this Section 9(c) regardless of the
manner in which such Independent Counsel was selected or
appointed. Upon the due commencement date of any judicial proceeding
pursuant to Section 11(a)(iii) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then
prevailing).
Section
10. Presumptions and Effects of Certain
Proceedings
.
(a) If
a Change in Control shall have occurred, in making a determination with respect
to entitlement to indemnification hereunder, the person or persons or entity
making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 9(a) of this Agreement, and the
Corporation shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
(b) The
person or entity empowered or selected under Section 8 of this Agreement shall
make the determination of whether Indemnitee is entitled to indemnification as
soon as practicable after receipt by the Corporation of the request
therefore.
(c) The
termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of
nolo contendere
or its
equivalent, shall not (except as otherwise expressly provided in this Agreement)
of itself adversely affect the right of Indemnitee to indemnification or create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that Indemnitee’s conduct was unlawful.
Section
11. Remedies of Indemnitee
.
(a) In
the event that (i) a determination is made pursuant to Section 9 or 10 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is made by Independent Counsel pursuant to Section 9 of this
Agreement and such determination shall not have been made and delivered in a
written opinion within ninety (90) days after receipt by the Corporation of the
request for indemnification, (iv) or (iv) payment of indemnification
is not made within thirty (30) days after such determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Sections 9 or 10 of this Agreement, Indemnitee shall
be entitled to an adjudication in an appropriate court of the State of Delaware
or the State of New Jersey , of Indemnitee’s entitlement to such indemnification
or advancement of Expenses. Indemnitee shall commence such proceeding
seeking an adjudication or an award within one hundred eighty (180) days
following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 11(a).
(b) In
the event that a determination shall have been made pursuant to Section 9 of
this Agreement that Indemnitee is not entitled to indemnification, any judicial
proceeding commenced pursuant to this Section shall be conducted in all respects
as a
de novo
trial and
Indemnitee shall not be prejudiced by any reason of that adverse
determination. If a Change of Control shall have occurred, in any
judicial proceeding commenced pursuant to this Section the Corporation shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If
a determination shall have been made or deemed to have been made pursuant to
Section 9 or 10 of this Agreement that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to this Section, absent (i) a
misstatement by Indemnitee or Indemnitee’s representative of a material fact, or
an omission of any material fact necessary to make Indemnitee’s or Indemnitee’s
representative’s statement not materially misleading, in connection with the
request for indemnification, or (ii) prohibition of such indemnification
under applicable law.
(d) The
Corporation shall be precluded from asserting in any judicial proceeding
commenced pursuant to this Section that the procedures and presumptions of this
Agreement are not valid, binding and enforceable and shall stipulate in any such
court that the Corporation is bound by all the provisions of this
Agreement.
(e) In
the event that Indemnitee, pursuant to this Section, seeks a judicial
adjudication of Indemnitee’s rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the Corporation and
shall be indemnified by the Corporation against, any and all expenses (of the
kinds described in the definition of Expenses) actually and reasonably incurred
by Indemnitee in such judicial adjudication, but only if Indemnitee prevails
therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
Section
12. Non-Exclusivity; Survival of Rights; Insurance
Subrogation
.
(a) The
rights of indemnification and to receive advancement of Expenses as provided by
this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law, the certificate of
incorporation or by-laws of the Corporation, any agreement, a vote of
stockholders or resolution of directors or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in Indemnitee’s employment or service as an officer or director
prior to such amendment, alteration or repeal.
(b) To
the extent that the corporation maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, agents or
fiduciaries of the corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person
serves at the request of the Corporation, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee, agent or
fiduciary under such policy or policies.
(c) In
the event of any payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
(d) The
Corporation shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
Section
13. Duration of Agreement
.
This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date
that Indemnitee shall have ceased to serve as a director, officer, employee,
agent or fiduciary of the Corporation or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which Indemnitee
served at the request of the Corporation; (b) the final termination of all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 11 of this
Agreement. This Agreement shall be binding upon the Corporation and
its successors and assigns and shall inure to the benefit of Indemnitee and
Indemnitee’s heirs.
Section
14. Severability
.
If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section
15. Exception to Right of Indemnification or Advancement of
Expenses
.
Except as provided in Section 11(e),
Indemnitee shall not be entitled to indemnification or advancement of Expenses
under this Agreement with respect to any Proceeding, or any claim therein,
brought or made by Indemnitee against the Corporation. For the
purposes of this Section 15, a Proceeding in the right of the Corporation shall
not be deemed to constitute a Proceeding brought or made by the
Corporation.
Section
16. Identical Counterparts
.
This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section
17. Headings
.
The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction
thereof.
Section
18. Modification and Waiver
.
No supplement, modification or
amendment to this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
Section
19. Notice by Indemnitee
.
Indemnitee agrees promptly to notify
the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
|
COLUMBIA
LABORATORIES, INC.
|
|
|
/s/ James A.
Meer
|
By:
/s/ Robert S.
Mills
|
James A. Meer,
Indemnitee
|
Name: Robert
S. Mills
|
|
Title:
President, and Chief Executive Officer
|
I,
Michael McGrane, Secretary, certify that the Board of Directors has authorized
the Corporation to enter into this Agreement by a resolution adopted at a
meeting on November 30, 2006.
/S/ Michael
McGrane
Michael McGrane
Secretary