Exhibit 2.1
PURCHASE AND COLLABORATION AGREEMENT
by and among
COLUMBIA
LABORATORIES, INC.,
COVENTRY
ACQUISITION, INC.
and
WATSON PHARMACEUTICALS, INC.
Dated as of March 3, 2010
TABLE OF CONTENTS
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Page
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ARTICLE I. DEFINITIONS
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1
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1.1
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Definitions
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1
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1.2
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Other Definitional Provisions
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1
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ARTICLE II. PURCHASE AND SALE
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2
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2.1
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Purchase and Sale of Assets
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2
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2.2
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Shares
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3
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2.3
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Excluded and Other Assets
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3
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2.4
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Assumed Liabilities
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4
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2.5
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Excluded Liabilities
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4
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2.6
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Nonassignable Assets
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5
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2.7
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Purchase Price
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5
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2.8
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Milestone and Royalty Payments
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6
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2.9
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Purchase Price Allocation
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13
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2.10
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Withholding
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14
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ARTICLE III. CLOSING
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14
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3.1
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Closing
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14
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3.2
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Transactions at First Closing
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15
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3.3
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Transactions at Second Closing
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17
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
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17
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4.1
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Organization
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17
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4.2
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Authority; Board Action
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18
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4.3
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No Conflicts; Enforceability
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19
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4.4
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Title; Sufficiency of Assets
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19
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4.5
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Capitalization
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20
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4.6
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Intellectual Property
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21
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4.7
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Absence of Litigation
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22
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4.8
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Real and Personal Property
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22
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4.9
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Taxes
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22
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4.10
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Environmental, Safety and Health
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23
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4.11
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Compliance with Laws
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24
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4.12
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Permits
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24
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4.13
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Regulatory Matters
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24
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4.14
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Suppliers
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26
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4.15
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SEC Documents, Financial Statements
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26
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4.16
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Absence of Certain Changes or Events
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27
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4.17
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Contracts
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27
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4.18
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Brokers, Etc.
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27
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i
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Page
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4.19
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Insurance
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27
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4.20
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Investment Company
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28
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4.21
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Exchange
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28
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4.22
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Application of Takeover Protections
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28
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4.23
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Fairness Opinion
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28
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER
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28
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5.1
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Organization
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28
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5.2
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Authority
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28
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5.3
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Investment Purpose; Status
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29
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5.4
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Securities Laws
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29
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5.5
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Ownership Cap
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30
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5.6
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Acknowledgement of Risk
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30
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5.7
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No Conflicts; Enforceability
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30
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5.8
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Litigation
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31
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5.9
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Financing
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31
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5.10
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No Short Sales
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31
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5.11
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Brokers, Etc.
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31
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5.12
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Independent Investigation
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31
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ARTICLE VI. COVENANTS PRIOR TO CLOSING
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31
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6.1
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Access to Information
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31
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6.2
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Conduct of the Business
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32
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6.3
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[Omitted.]
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34
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6.4
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Proxy Statement; Seller Stockholders Meeting
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34
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6.5
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No Solicitation; Acquisition Proposals
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35
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6.6
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Transition Activities
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37
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6.7
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Trade Inventory
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38
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6.8
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Cooperation Regarding Financial Statements; etc.
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38
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6.9
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Notifications; Updated Schedules
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38
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6.10
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Further Assurances; Further Documents
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38
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6.11
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Listing
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39
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6.12
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Ownership Cap
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39
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ARTICLE VII. CONDITIONS TO CLOSING
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40
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7.1
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Conditions Precedent to Obligations of Buyer and Seller at the First Closing
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40
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7.2
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Conditions Precedent to Buyers Obligations at the First Closing
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40
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7.3
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Conditions Precedent to Sellers Obligations at the First Closing
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41
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7.4
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Conditions Precedent to Obligations of Buyer and Seller at the Second Closing
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41
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7.5
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Conditions Precedent to Buyers Obligations to the Second Closing
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41
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7.6
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Conditions Precedent to Sellers Obligations to the Second Closing
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42
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ARTICLE VIII. ADDITIONAL COVENANTS
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42
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8.1
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Confidentiality; Publicity
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42
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ii
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Page
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8.2
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Use of Trade or Service Marks; Name Change
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42
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8.3
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Notification of Customers
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42
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8.4
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Products Returns, Rebate Charges and Wholesaler Charges
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42
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8.5
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Regulatory Matters
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43
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8.6
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Tax Matters
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44
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8.7
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Development
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46
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8.8
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Commercialization
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50
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8.9
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Joint Development Committee
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51
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8.10
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Joint Commercialization Committee
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53
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8.11
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Covenant Not to Compete
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54
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ARTICLE IX. TERMINATION AND SURVIVAL
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55
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9.1
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Termination
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55
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9.2
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Procedure and Effect of Termination
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56
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ARTICLE X. INDEMNIFICATION
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57
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10.1
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Survival of Representations
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57
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10.2
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Indemnification by Seller
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58
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10.3
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Indemnification by Buyer
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59
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10.4
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Limitation on Losses; Calculation of Losses; Treatment of Indemnification Payments
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59
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10.5
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No Termination of Indemnification
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60
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10.6
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Procedures
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60
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10.7
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Sole Remedy
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62
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10.8
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Effect of Investigation or Knowledge
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62
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ARTICLE XI. MISCELLANEOUS
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62
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11.1
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Assignment; Binding Effect
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62
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11.2
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Guarantee of Obligations
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62
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11.3
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Expenses
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63
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11.4
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Notices
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63
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11.5
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Severability
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64
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11.6
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Amendments; Entire Agreement
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64
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11.7
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No Third-Party Beneficiaries
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64
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11.8
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Waiver
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64
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11.9
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Governing Law
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65
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11.10
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Arbitration
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65
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11.11
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Injunctive Relief
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66
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11.12
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Headings
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66
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11.13
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Counterparts
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66
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11.14
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Schedules
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66
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11.15
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Construction
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67
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iii
SCHEDULES AND EXHIBITS
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Annex 1.1
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Definitions
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Exhibit A
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Asset Transfer Documentation
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Exhibit B
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Form of Investors Rights Agreement
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Exhibit C
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Form of Supply Agreement
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Exhibit D
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Form of License Agreement
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Exhibit E
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Form of Charter Amendment
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iv
PURCHASE AND COLLABORATION AGREEMENT
THIS
PURCHASE AND COLLABORATION AGREEMENT
(this
Agreement
), dated as of March 3, 2010 (the
Execution Date
), is entered into by and among
Columbia Laboratories, Inc., a Delaware corporation
(
Seller
), Watson Pharmaceuticals, Inc., a Nevada
corporation (
Parent
) (solely for purposes of
Section 11.2
herein) and Coventry Acquisition, Inc., a Delaware
corporation and wholly-owned Subsidiary of Parent (
Buyer
). Each of Seller and Buyer is sometimes
referred to herein, individually, as a
Party
and, collectively, as the
Parties
.
RECITALS
WHEREAS
, subject to the terms and conditions of this Agreement, Seller wishes to sell the
Purchased Assets and eleven million two hundred thousand (11,200,000) shares (the
Shares
) of
common stock, $.01 par value per share, of Seller (the
Common Stock
), and transfer the Assumed
Liabilities to Buyer, and Buyer wishes to purchase the Purchased Assets, the Shares and assume the
Assumed Liabilities from Seller.
NOW, THEREFORE
, in consideration of the foregoing and the representations, warranties,
covenants, agreements and provisions set forth herein and in the Other Agreements, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions
. Unless the context requires otherwise, all capitalized terms used herein shall have the meanings
specified in
Annex 1.1
or elsewhere in this Agreement, as applicable.
1.2
Other Definitional Provisions
.
(a) When a reference is made in this Agreement to an Article, Section, Exhibit, Schedule,
Recital or Preamble, such reference is to an Article, Section, Exhibit, Schedule, Recital or
Preamble of or to this Agreement unless otherwise indicated.
(b) The words hereof, herein, hereto and hereunder and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(c) A term defined in the singular has a comparable meaning when used in the plural, and vice
versa.
(d) Words of one gender include the other gender.
(e) The term dollars and $ means United States dollars.
(f) The word including means including without limitation and the words include and
includes have corresponding meanings.
ARTICLE II.
PURCHASE AND SALE
2.1
Purchase and Sale of Assets
. On the terms and subject to the conditions hereof and in consideration of the Purchase Price
paid or payable to Seller by Buyer, Seller will sell, convey, transfer, assign and deliver or cause
its Subsidiaries to sell, convey, transfer, assign and deliver to Buyer, and Buyer will purchase,
take delivery of and acquire from Seller or its Subsidiaries, all of Sellers and its Subsidiaries
right, title and interest in and to the following assets, properties, rights and interests, free
and clear of any Encumbrances (collectively, the
Purchased Assets
):
(a) the Patents listed on
Schedule 2.1(a)
;
(b) the Trademarks listed on
Schedule 2.1(b)
;
(c) all Promotional Materials in Sellers possession and control and all Copyrights thereto;
(d) all Regulatory Filings and Regulatory Approvals primarily related to the Products, other
than the PTB NDA and the PTB Supplemental NDA, including the Regulatory Approvals listed on
Schedule 2.1(d)
and all files related thereto;
(e) the Contracts listed on
Schedule 2.1(e)
(the
Assigned Contracts
);
(f) all Books and Records and complete and correct copies of all Tax Returns and other
documents pertaining to Taxes, if any, primarily related to the Purchased Assets or the Business in
Sellers possession or control;
provided
, that Seller shall be entitled to exclude or appropriately
redact such documents, information, materials and data from the applicable Books and Records to the
extent not related to Purchased Assets or the Business and retain the original (in the case of such
exclusion) or a copy (in the case of such redaction) thereof;
provided
,
further
, that any such
exclusion or redaction may not degrade or impair Buyers ability to use any such Books and Records;
(g) to the extent in Sellers possession or control, all pre-clinical, clinical and process
development data and reports primarily relating to the research, Commercialization or Development
of the Products, including all raw data from clinical trials of Prochieve or other Products, all
case report forms relating thereto and all statistical programs developed (or modified in a manner
material to the use or function thereof (other than through user preferences)) to analyze data from
such clinical trials; all market research data, market intelligence reports, statistical programs
(if any) used for marketing and sales research primarily related to the marketing and sale of
Products; data contained in laboratory notebooks primarily relating to the Products; all adverse
experience reports and files primarily related to the Products (including source documentation) and
all periodic adverse experience reports and all data contained in electronic data bases primarily
relating to adverse experience reports and periodic adverse experience reports for the Products;
all analytical and quality control data for the Products; and all correspondence with the FDA
primarily relating to the Products (all of the foregoing referenced in this paragraph (g),
collectively,
Product Data
);
2
(h) all refunds, credits and claims for refunds or credits relating to Property Taxes
allocable to any Post-Closing Tax Period, in favor of Seller or any of its Affiliates or any of
their respective employees to the extent relating to any Purchased Asset or any Assumed Liability;
and
(i) the Regulatory Filings and Regulatory Approval, to the extent made or obtained by or on
behalf of Seller, necessary for Commercializing the PTB Indication, which Regulatory Filings and
Regulatory Approval will consist of an Original NDA (the
PTB NDA
)
or, with the approval of the
Joint Development Committee, an Efficacy Supplement to NDA No. 20,701 (the
PTB Supplemental NDA
).
For the purposes hereof, the
First Closing Date Purchased Assets
shall consist of the Purchased
Assets listed in
Section 2.1(a)-(h)
above and the
Second Closing Date Purchased Assets
shall consist of the Purchased Assets listed in
Section 2.1(i)
.
2.2
Shares
. On the terms and subject to the conditions hereof and in consideration of the Purchase Price
paid or payable to Seller by Buyer, Seller will issue and sell the Shares to Buyer, and Buyer will
purchase, take delivery and receive from Seller the Shares.
2.3
Excluded and Other Assets
.
(a) Notwithstanding anything to the contrary contained in this Agreement, all assets,
properties, rights and interests of Seller or its Affiliates not specifically identified as
Purchased Assets in
Section 2.1
(collectively, the
Excluded Assets
) are expressly
excluded from the purchase and sale contemplated hereby and as such are not included in the
Purchased Assets and shall remain the assets, property rights and interests of Seller or its
Affiliates, as applicable. The Excluded Assets include, without limitation, the assets listed on
Schedule 2.3
.
(b) Notwithstanding paragraphs (f) and (g) of
Section 2.1
, Seller shall be entitled to
retain copies of and shall have the right to use any Books and Records, Tax Returns and other
documents pertaining to Taxes and Product Data in connection with its use of the Excluded Assets
and its businesses not constituting the Business.
(c) (i) To the extent rights or assets held by Seller or any of its Subsidiaries are necessary
for the operation or conduct of the Business but such rights or assets are not included in the
Purchased Assets and Buyer is not otherwise provided with the use of such rights or assets pursuant
to the Other Agreements, from and after the First Closing, Seller or one of its Subsidiaries shall
provide Purchaser with access to and the right to use such rights or assets so as to allow Buyer to
use such rights or assets in substantially the same manner as used by Seller or its Subsidiaries in
the operation or conduct of the Business immediately prior to the First Closing.
(ii) To the extent any Purchased Asset is necessary for the operation or conduct of
Sellers or one of its Subsidiaries business not constituting the Business or the use by
Seller or its Affiliates of the Excluded Assets and Seller is not otherwise provided with
the use of such rights or assets pursuant to the Other Agreements, from and after the First
Closing, Buyer or one of its Subsidiaries shall provide Seller with access to and the right
to use such Purchased Asset so as to allow Seller and its Subsidiaries to
3
continue to use such Purchased Asset in substantially the same manner as used by Seller
or its Subsidiaries in the operation or conduct of Sellers or one of its Subsidiaries
business not constituting the Business or the use by Seller or its Affiliates of the
Excluded Assets immediately prior to the First Closing.
(iii) In the event of a conflict between this
Section 2.3(c)
and the License
Agreement, the provisions of the License Agreement shall control.
(d) Notwithstanding any other provision of this Agreement or the Other Agreements to the
contrary, Buyers rights with respect to the Purchased Assets and Business outside the United
States shall be subject to the Merck-Serono Agreement. Seller shall not and shall cause its
Subsidiaries not to amend or modify the Merck-Serono Agreement in a manner adverse to Buyer without
Buyers prior written consent. For purposes of this
Section 2.3(d)
, United States means
the several United States, the District of Columbia and Puerto Rico.
2.4
Assumed Liabilities
. On the terms and subject to the conditions hereof, Buyer shall assume and pay, perform or
otherwise discharge, when due, any and all of the following Liabilities (collectively, the
Assumed
Liabilities
):
(a) all Liabilities arising out of or relating to the use of the First Closing Date Purchased
Assets on and after the First Closing Date;
(b) all Liabilities under the Assigned Contracts, to the extent such Liabilities arise on or
after the First Closing Date; and
(c) all Liabilities arising out of or relating to the use of the Second Closing Date Purchased
Assets after the Second Closing Date.
For purposes hereof, (i) the
First Closing Date Assumed Liabilities
shall consist of the Assumed
Liabilities listed in
Section 2.4(a)-(b)
above and Buyer shall assume and pay, perform or
otherwise discharge when due the First Closing Date Assumed Liabilities on and following the First
Closing Date and (ii) the
Second Closing Date Assumed Liabilities
shall consist of the Assumed
Liabilities listed in
Section 2.4(c)
and Buyer shall assume and pay, perform or otherwise
discharge when due the Second Closing Date Assumed Liabilities on and following the Second Closing
Date. Notwithstanding anything in this Agreement to the contrary, the Assumed Liabilities with
respect to Taxes shall consist of (i) any Liability for Property Taxes imposed (x) on the First
Closing Date Purchased Assets attributable to the Post-Closing Tax Period or (y) on the Second
Closing Date Purchased Assets attributable to the Second Post-Closing Tax Period, in each case to
the extent and in the manner in which Buyer is liable for Property Taxes as set forth in
Section 8.6(c)
, and (ii) any Liability for Transfer Taxes for which Buyer is liable
pursuant to
Section 8.6(a)
.
2.5
Excluded Liabilities
. Seller shall retain and shall be responsible for, and Buyer shall not assume or have any
responsibility for, any of the Liabilities of Seller not specifically included in the Assumed
Liabilities pursuant to
Section 2.4
(the
Excluded Liabilities
). Notwithstanding anything
in this Agreement to the contrary, the Excluded Liabilities with respect to Taxes shall consist of
(i) any Liability of Seller for Taxes (including any Liability of Seller for the Taxes of any other
Person under Treasury Regulations
4
Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor,
by Contract, or otherwise) other than Property Taxes imposed on the Purchased Assets and Transfer
Taxes, (ii) any Liability for Property Taxes otherwise imposed (x) on the First Closing Date
Purchased Assets attributable to the Pre-Closing Tax Period or (y) on the Second Closing Date
Purchased Assets attributable to the Second Pre-Closing Tax Period, in each case to the extent and
in the manner in which Seller is liable for Property Taxes as set forth in
Section 8.6(c)
,
and (iii) any Liability for Transfer Taxes for which Seller is liable pursuant to
Section
8.6(a)
.
2.6
Nonassignable Assets
. In the event that Seller is unable to sell, assign, transfer or convey any Purchased Asset
(including any Contracts, Regulatory Filings or Regulatory Approvals) to Buyer due to a failure to
obtain a required consent of a Third Party (such asset, a
Nonassignable Asset
), such
Nonassignable Asset shall be held, as of and from the applicable Closing, by Seller for the benefit
and burden of Buyer, and the covenants and obligations thereunder shall be fully performed by Buyer
on Sellers behalf (to the extent such covenants and obligations are Assumed Liabilities) at
Buyers sole cost, and all rights and benefits (to the extent such rights and benefits are
Purchased Assets) existing thereunder shall be for Buyers account. To the extent permitted by
applicable Law and by the terms of the applicable Nonassignable Asset, each of Seller and Buyer
shall take or cause to be taken such actions as the other Party may reasonably request which are
required to be taken or appropriate in order to provide Buyer with, and relieve Seller of, the
benefits and burdens of the Nonassignable Asset, including, if appropriate, entry into subcontracts
for the performance thereof. Seller shall promptly pay over to Buyer the net amount (after
expenses and Taxes) of all payments received by it in respect of all Nonassignable Assets with
respect to periods from and after the applicable Closing. Buyer shall promptly pay over to Seller
any payments, and perform and discharge any obligations (including any and all Taxes, but only to
the extent not deducted in computing a payment made by Seller pursuant to the preceding sentence),
owed by Seller with respect to such Nonassignable Assets during the period when Buyer enjoys the
full benefit of such Nonassignable Asset.
2.7
Purchase Price
. In addition to any other amounts due hereunder, in consideration of the sale, assignment,
conveyance, license and delivery of the Purchased Assets and the Shares pursuant to this Agreement,
Buyer shall: (a) at the First Closing pay to Seller, by wire transfer of immediately available
funds directly to the Seller Account, an amount equal to Forty-Seven Million Dollars ($47,000,000)
(the
Upfront Payment
), (b) pay to Seller the amounts required pursuant to and in accordance with
Section 2.8
(the
Post-Closing Payments
) by wire transfer of immediately available funds
directly to the Seller Account and (c) assume the Assumed Liabilities (the items set forth in
clauses (a) through (c) collectively, the
Purchase Price
).
5
2.8
Milestone and Royalty Payments
.
(a)
Clinical Trial Milestone Payment
.
(i)
Milestone Payment
.
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Milestone
(the
Clinical Trial Results Milestone
)
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Milestone Payment
(the
Clinical Trial Results
Milestone Payment
)
|
Upon completion of the statistical analysis,
and delivery to Buyer of a report from
Sellers Third Party statistician for the
PREGNANT Study in accordance with Section
2.8(a)(ii), if the primary endpoint,
reduction in preterm birth (as currently
prespecified in the clinical trial protocol),
achieves a p value of ≤ 0.01 and the
secondary endpoint, infant outcomes composite
score (to be agreed to with the FDA in the
final statistical analysis plan), achieves a
p value of ≤ 0.05; OR
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U.S. $8,000,000; OR
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Upon completion of the statistical analysis,
and delivery to Buyer of a report from
Sellers Third Party statistician for the
PREGNANT Study in accordance with Section
2.8(a)(ii), if the primary endpoint,
reduction in preterm birth (as currently
prespecified in the clinical trial protocol),
achieves a p value of > 0.01 and ≤ 0.05
and the secondary endpoint, infant outcomes
composite score (to be agreed to by the FDA
in the final statistical analysis plan),
achieves a p value of ≤ 0.05.
|
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U.S. $6,000,000
|
For avoidance of doubt, Seller shall be entitled to a maximum of one (1) Clinical Trial Results
Milestone Payment.
(ii)
Notice and Payment
.
Seller shall provide to Buyer written notice of achievement of a Clinical Trial Results
Milestone, together with a report from Sellers Third Party statistician with completed tables from
the PREGNANT Study Statistical Analysis Plan. Upon receipt of such notice, Buyer will have a
period of thirty (30) days to review such notice and data. If Buyer reasonably believes that the
Clinical Trial Results Milestone was not achieved, it shall notify Seller within such thirty (30)
day period and the Parties shall discuss and attempt to resolve the dispute. If the Parties are
unable to resolve the dispute within fifteen (15) days of Sellers receipt of Buyers
6
notice, the matter shall be submitted for resolution pursuant to
Section 11.10
. Buyer
shall pay to Seller the Clinical Trial Results Milestone Payment within two (2) Business Days
following expiration of such thirty (30) day period or resolution of any dispute in accordance with
this
Section 2.8(a)(ii)
, as applicable.
(b)
Other Milestone Payments
.
(i)
Milestone Payment
.
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Milestone
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Milestone Payment
|
Acceptance by the FDA of a PTB NDA
or a PTB Supplemental NDA filed by
or on behalf of Seller or Buyer with
the approval of the Joint
Development Committee (the
PTB NDA
Acceptance Milestone
)
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U.S. $5,000,000 (
PTB NDA Acceptance
Milestone Payment
)
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First commercial sale of a PTB
Product by or on behalf of Buyer in
the U.S. (the
PTB Product Launch
Milestone
)
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U.S. $30,000,000 (
PTB Product
Launch
Milestone Payment
)
|
For purposes hereof:
PTB Product
means the Product approved by the PTB US Approval.
For avoidance of doubt, Seller shall be entitled to a maximum of one (1) PTB NDA Acceptance
Milestone Payment and one (1) PTB Product Launch Milestone Payment.
(ii)
Notice and Payment
.
(A) If Seller achieves the PTB NDA Acceptance Milestone, Seller shall
provide to Buyer written notice of achievement of such PTB NDA Acceptance
Milestone. Upon receipt of such notice, Buyer will have a period of ten (10)
days to review such notice (the
Review Period
). If Buyer reasonably
believes that the PTB NDA Acceptance Milestone was not achieved, it shall
notify Seller within such ten (10) day period and the Parties shall discuss
and attempt to resolve the dispute. If the Parties are unable to resolve
the dispute within ten (10) days of Sellers receipt of Buyers notice, the
matter shall be submitted for resolution pursuant to
Section 11.10
.
Buyer shall pay to Seller the PTB NDA Acceptance Milestone Payment within
two (2) Business Days following expiration of the Review Period or
resolution of any dispute in accordance with this
Section
2.8(b)(ii)(A)
, as applicable. If Buyer achieves the PTB NDA Acceptance
Milestone, Buyer shall provide to Seller written notice of achievement of
the PTB NDA Acceptance Milestone promptly but in no event later than ten
(10) days after such achievement, which notice shall be accompanied by
payment to Seller of the PTB NDA Acceptance Milestone Payment.
7
(B) If Buyer achieves the PTB Product Launch Milestone, Buyer shall
provide to Seller written notice of achievement of the PTB Product Launch
Milestone promptly but in no event later than ten (10) days after such
achievement, which notice shall be accompanied by payment to Seller of the
PTB Product Launch Milestone Payment.
(c)
Ex-U.S. Filing and Approval Milestone Payments
.
(i)
Milestone Payments
.
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Milestone
|
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Milestone
Payment
|
(the
Ex-U.S. Filing/Approval Milestone
)
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Filing and acceptance by the applicable Regulatory
Authority of an MAA in a country or jurisdiction outside
the United States seeking Regulatory Approval to market
a Product for the PTB Indication (the
Ex-U.S. Filing
Milestone
)
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U.S. $500,000
|
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Grant by the applicable Regulatory Authority in a
country or jurisdiction outside the United States of
Regulatory Approval to market a Product for the PTB
Indication (the
Ex-U.S. Approval Milestone
)
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U.S. $2,000,000
|
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For avoidance of doubt, Seller shall be entitled to payment for a maximum of one (1) Ex-U.S. Filing
Milestone (i.e., a maximum payment of U.S. $500,000) and one (1) Ex-U.S. Approval Milestone (i.e.,
a maximum payment of U.S. $2,000,000).
(ii)
Notice and Payment
.
Buyer
shall provide to Seller written notice of achievement of an Ex-U.S.
Filing Milestone or Ex-U.S. Approval Milestone promptly but in no event later than ten (10) days after such achievement, which notice
shall be accompanied by payment to Seller of the applicable milestone
payment.
(d)
Royalty Payments; Gross Profit Share
.
(i)
Royalty Rates
. Buyer shall make the following royalty payments to Seller
on a country-by-country basis during the applicable Royalty Product Term or PTB Royalty
Product Term, based on annual aggregate Net Sales of Royalty Products and PTB Royalty
Products in the Territory, at the applicable rates set forth below.
8
(A) For sales of Royalty Products and PTB Royalty Products in the U.S.:
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Total Net Sales in any Calendar Year
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Royalty Rate
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Portion of aggregate Net Sales of Royalty Products
and PTB Royalty Products which are less than or
equal to U.S. $150,000,000
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Ten percent (10%)
|
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Portion of aggregate Net Sales of Royalty Products
and PTB Royalty Products which are greater than U.S.
$150,000,000 but less than or equal to U.S.
$250,000,000
|
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Fifteen percent (15%)
|
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Portion of aggregate Net Sales of Royalty Products
and PTB Royalty Products which are greater than U.S.
$250,000,000
|
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Twenty percent (20%)
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(B) For sales of Royalty Products and PTB Royalty Products outside the
U.S. in a country where Buyer or its Affiliates is Commercializing Royalty
Products and/or PTB Royalty Products, the royalty rate on annual Net Sales
shall equal ten percent (10%).
(C) Notwithstanding
Section 2.8(d)(i)(B)
,
if Buyer or any of its Affiliates grants any licenses, sublicenses,
distribution or marketing rights, or otherwise collaborates or partners with
a Third Party to Commercialize any Royalty Products or PTB Royalty Products
in any country outside the U.S., in lieu of royalties on Net Sales of
Royalty Products or PTB Royalty Products under
Section 2.8(d)(i)(B),
as applicable, which may become payable with respect to such country, Buyer
and Seller shall share Gross Profits arising from the Commercialization of
such Royalty Products or PTB Royalty Products, as applicable, in such
country with Buyer entitled to eighty percent (80%) and Seller entitled to
twenty percent (20%) of such Gross Profits.
(D) Royalties under
Section 2.8(d)(i)(A)
or
2.8(d)(i)(B)
, and payments by Buyer to Seller with respect to
sharing of Gross Profits under
Section 2.8(d)(i)(C)
, with respect to
a Royalty Product (other than a PTB Royalty Product) sold in any country in
the Territory, will be payable on a country-by-country basis from the First
Closing Date until the latest of (i) the expiration of the last to expire
Valid Claim of any Patent in the Purchased Assets or licensed by Buyer under
the License Agreement, and covering such Royalty Product in such country,
(ii) the expiration of any period of Regulatory Exclusivity applicable to
such Royalty Product in such country and (iii) the tenth
(10
th
) anniversary
of the date of Launch by Buyer of such Royalty Product in such country (or,
if no such Launch occurs, the tenth
(10
th
) anniversary of the First Closing
Date) (the
Royalty Product Term
).
9
(E) Royalties under
Section 2.8(d)(i)(A)
or
2.8(d)(i)(B)
, and payments by Buyer to Seller with respect to
sharing of Gross Profits under
Section 2.8(d)(i)(C)
, with respect to
a PTB Royalty Product sold in any country in the Territory, will be payable
on a country-by-country basis from the First Closing Date until the latest
of (i) the expiration of the last to expire Valid Claim of any Patent in the
Purchased Assets or licensed by Buyer under the License Agreement and
covering such PTB Royalty Product in such country, (ii) the expiration of
any period of Regulatory Exclusivity applicable to such PTB Royalty Product
in such country and (iii) the tenth (10
th
) anniversary of the date of Launch
by Buyer of such PTB Royalty Product in such country (or, if no such Launch
occurs, the tenth (10
th
) anniversary of the First Closing Date
(the
PTB Royalty Product Term
).
With respect to any Royalty Product which contains only Synthetic Progesterone (and, for the
avoidance of doubt, no Natural Progesterone) sales of such Royalty Product shall only generate Net
Sales for purposes of this
Section 2.8(d)
if such Royalty Product is approved in the
applicable country for the PTB Indication or any other indication for which Prochieve is approved
in the U.S. as of the Execution Date.
(ii)
Generic Entry
. In the event of Generic Entry with respect to a Royalty
Product or a PTB Royalty Product in any country in the Territory, then the royalty rates
applicable to Net Sales of such Royalty Product or PTB Royalty Product in such country in
accordance with
Section 2.8(d)(i)(A)
or
(B)
, as applicable, shall be reduced
by fifty percent (50%). Unless there is Impending Generic Entry with respect to a Royalty
Product or PTB Royalty Product in a country, neither Buyer nor its Affiliates may introduce
its own Generic Equivalent of such Product in such country. In the event of such Impending
Generic Entry, in lieu of royalties on Net Sales of such Generic Equivalent which may become
payable with respect to such country, Buyer and Seller shall share Gross Profits arising
from the Commercialization of such Generic Equivalent in such country, with Buyer entitled
to eighty percent (80%) and Seller entitled to twenty percent (20%) of such Gross Profits.
For purposes hereof,
Impending Generic Entry
means that Launch of a Generic Equivalent for
a Royalty Product or PTB Royalty Product in a country is likely to occur within three (3)
months, as mutually determined by the Parties. In the event of any dispute with respect
thereto, the matter will be resolved in accordance with
Section 11.10
.
(iii)
Payment
. Buyer shall make the royalty payments to Seller and payments by
Buyer to Seller with respect to sharing of Gross Profits described in
Sections
2.8(d)(i)(A)
,
(B)
and
(C)
above on a quarterly basis not later than
forty-five (45) days after the end of each calendar quarter (with payments made in respect
of each of the first three (3) calendar quarters of each applicable calendar year
constituting Buyers good faith estimate of the royalty (or share of Gross Profits) owed for
such quarter, and with the payment made in respect of the fourth calendar quarter of such
calendar year including a true up for the first three (3) calendar quarters payments,
based on actual amounts owed by Buyer in respect of such three (3) calendar quarters
relative to amounts paid by Buyer).
10
(iv)
Other Revenue; Pricing
. Buyer agrees that it shall not, and shall cause
its Affiliates not to, and, after the First Closing Date, Buyer shall cause all licensees,
sublicensees, distributors or other agents to whom it or its Affiliates grant rights to
Commercialize any Product (to the extent such rights include the right to promote and sell
such Product) not to, distribute, bundle or otherwise sell such Product in any manner that
would have the effect of reducing the Net Sales or Gross Profits arising from the
Commercialization of such Product in favor of other revenue not subject to the royalties or
sharing of Gross Profits set forth in
Sections 2.8(d)(i)(A)
,
(B)
and
(C)
;
provided
, that this clause (iv) will not apply to actions which have an
unintended effect of causing such reduction.
(v)
Reports
. In connection with any payments made pursuant to
Sections
2.8(d)(i)(A)
,
(B)
and
(C)
, Buyer shall simultaneously deliver to Seller
a schedule setting forth in reasonable detail the calculation of Net Sales and Gross Profits
and the amounts payable by it pursuant to each of the clauses of
Sections
2.8(d)(i)(A)
,
(B)
and
(C)
, in each case, on a Product-by-Product and
country-by-country basis, and including deductions from gross sales to arrive at Net Sales.
(vi)
Books and Records; Audit Rights
.
(A) Each Party shall keep, and shall require its Affiliates to keep,
complete, true and accurate books and records in accordance with GAAP (or
other internationally recognized accounting standard in use by such Party)
in relation to this Agreement, including Development Costs under
Section
8.7
and, with respect to Buyer, in relation to Net Sales, Gross Profits
and royalties. Each Party will keep such books and records at its principal
place of business (or the place of business of its Subsidiaries) for at
least three (3) years following the calendar quarter to which they pertain.
After the First Closing Date, Buyer shall ensure that any licensees,
sublicensees, distributors or other agents to whom it or its Affiliates
grant rights to Commercialize any Product (to the extent such rights include
the right to promote and sell such Product) to be bound by similar record
keeping obligations in relation to Net Sales, Gross Profits and royalties.
(B) Each Party (the
Audit Rights Holder
) may, upon written request
and at its expense (except as provided for in
Section
2.8(d)(vi)(F)
), cause an internationally-recognized independent
accounting firm selected by it (except one that serves as such Partys
independent auditors or to whom the auditee otherwise has a reasonable
objection) (the
Audit Team
) to audit during ordinary business hours the
books and records of the other Party (
Auditee
) and its Affiliates (and
with respect to Buyer, its licensees, sublicensees, distributors or other
agents) for a given calendar year and the correctness of any payments made
or required to be made to or by such Party during such calendar year, and
any report, data or calculation underlying such payment (or lack thereof),
pursuant to the terms of this Agreement.
11
(C) In respect of each audit of the Auditees books and records: (i)
the Auditee shall be audited not more frequently than once per year; and
(ii) the Audit Rights Holder shall only be entitled to audit books and
records of an Auditee from the three (3) calendar years prior to the
calendar year in which the audit request is made.
(D) In order to initiate an audit for a particular calendar year, the
Audit Rights Holder must provide written notice to the Auditee, which notice
shall include one or more proposed dates for the audit and which notice
shall be given not less than forty-five (45) days prior to the first
proposed audit date. The Auditee will reasonably accommodate the scheduling
of such audit. The Auditee shall provide the Audit Team(s) with full and
complete access to the applicable books and records relating to the Products
and otherwise reasonably cooperate with such audit.
(E) The audit report and basis for any determination by an Audit Team
shall be made available for review and comment by the Auditee, and the
Auditee shall have the right, at its expense, to request a further
determination by such Audit Team as to matters which the Auditee disputes
(to be completed no more than thirty (30) days after the applicable audit
report is provided to such Auditee and to be limited to the disputed
matters). If the Parties disagree as to such further determination, the
Audit Rights Holder and the Auditee shall mutually select an
internationally-recognized independent accounting firm that shall make a
final determination as to the remaining matters in dispute, which
determination shall be binding upon the Parties.
(F) If any audit finds any under-reporting or underpayment, or
overcharging by any Party, the underpaying or overcharging Party shall remit
such underpayment or reimburse such overcharge to the other Party within
fifteen (15) days of receiving the final audit report establishing such
obligation. Further, if the audit for any one or more calendar years shows
an under-reporting or underpayment or an overcharge by the Auditee for that
period in excess of five percent (5%) of the amounts properly determined,
the Auditee shall reimburse the Audit Rights Holder for its out-of-pocket
expenses, including the fees and expenses paid by it to the Audit Team(s),
in connection with said audit, which reimbursement shall be made within
thirty (30) days of receiving appropriate invoices and other support for
such audit-related costs.
(G) After the First Closing Date, Buyer shall ensure that any
licensees, sublicensees, distributors or other agents to whom it or its
Affiliates grant rights to Commercialize any Product (to the extent such
rights include the right to promote and sell such Product), to be bound by
similar audit provisions.
12
(vii)
Foreign Exchange
. The royalties and payments by Buyer with respect to
sharing of Gross Profits received by this
Section 2.8
will be payable in U.S.
dollars. For the purpose of computing the Net Sales of or Gross Profits arising from the
Commercialization of Products sold in a currency other than U.S. dollars, such currency
shall be converted from the local currency to U.S. dollars by Buyer using the relevant
exchange rate, as reported by the Wall Street Journal, in effect on the last Business Day of
the relevant calendar quarter in which such sales were made (or such Gross Profits were
realized).
(e)
License or Assignment of Rights
. Notwithstanding anything to the contrary in this Agreement, Buyer shall not sell, assign,
transfer, dispose of or convey any of the Purchased Assets or rights in any Products to any other
Person unless such Person has agreed to be bound by the terms and conditions of this
Section
2.8
;
provided
,
however
, that Buyer shall and hereby does guarantee the payment by such Person
of amounts payable to Seller pursuant to this
Section 2.8
.
(f)
Interest
. If a Party fails to pay in full on or before the date due any payment that is required to be
paid under this Agreement, such Party will also pay to the other Party, on demand, interest on any
such amount beginning on such due date at an annual rate (calculated on the basis of a 360-day
year) equal to the base rate as announced by JPMorgan N.A., or any successor thereto, in New
York, New York in effect on such due date, plus two percent (2%) to be assessed from the date
payment of the amount in question first became due.
(g)
Set Off
. The Post-Closing Payments (if any) payable pursuant to this
Section 2.8
shall be subject
to reduction for (i) claims for indemnification made by Buyer pursuant to
Article X
,
which are finally determined pursuant to
Section 10.6
to
be due and owing to Buyer and
(ii) breach of Sellers obligation to use the cash in the Development Bank Account exclusively for
Development Costs during the Seller Expense Period as required by
Section 8.7(c)
.
2.9
Purchase Price Allocation
. Seller and Buyer agree that the Purchase Price shall be allocated among the Purchased Assets and
the Shares, and the portion of the Purchase Price allocated to the Purchased Assets shall be
allocated among the Purchased Assets in accordance with Section 1060 of the Code, pursuant to an
allocation schedule (the
Allocation Schedule
) as agreed by Buyer and Seller in accordance with
this
Section 2.9
. Buyer shall provide to Seller the Allocation Schedule within ninety (90)
days after the First Closing Date. Thereafter, Seller shall have thirty (30) days either to (a)
agree with and accept the Allocation Schedule or (b) in good faith suggest changes to the
Allocation Schedule and attempt to agree with Buyer as to the contents of the Allocation Schedule.
Seller and Buyer shall provide each other promptly with any other information required to complete
the Allocation Schedule. If Seller and Buyer agree on the Allocation Schedule within one hundred
and thirty-five (135) days following the First Closing Date, Seller and Buyer shall file IRS Form
8594 and any required attachments thereto (
Form 8594
), together with all federal, state and local
Tax Returns, in a manner consistent with and in accordance with the Allocation Schedule. In
addition, Seller and Buyer hereby undertake and agree to timely file any information that may be
required to be filed pursuant to the U.S. Treasury Regulations promulgated under Section 1060(b) of
the Code in a manner consistent with and in accordance with the Allocation Schedule. In any
proceeding
13
related to the determination of any Tax, neither Buyer nor Seller shall contend or represent that
the Allocation Schedule is not a correct allocation of the Purchase Price. If Seller and Buyer are
unable to reach an agreement within one hundred and thirty-five (135) days following the First
Closing Date, Seller and Buyer shall, within fifteen (15) days after the expiration of such one
hundred and thirty-five (135) day period, at their joint expense, engage the Independent Accounting
Firm to determine the appropriate Allocation Schedule, and they shall use their commercially
reasonable efforts to cause the Independent Accounting Firm to determine the Allocation Schedule in
a manner that is reasonable and in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder, within thirty (30) days after it is retained for such purpose.
The determination of the Allocation Schedule by the Independent Accounting Firm shall be binding on
Seller and Buyer. Not later than thirty (30) days prior to filing its respective Form 8594
relating to this transaction, Seller and Buyer shall each deliver to the other party a copy of its
Form 8594, and within ten (10) days after filing its Form 8594 with the IRS pursuant to this
Section 2.9
, each Party shall provide the other with a copy of such form as filed. To the
extent required by applicable Law, the Allocation will be revised to reflect any adjustment of the
Purchase Price pursuant to this Agreement.
2.10
Withholding
. Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to Seller such amounts as Buyer is required to deduct and withhold under the
Code, or any Tax law, with respect to the making of such payment. To the extent that amounts are
so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Person in respect of whom such deduction and withholding was made.
ARTICLE III.
CLOSING
3.1
Closing
. Upon the terms and subject to the conditions of this Agreement:
(a) the closing of the purchase and sale of the Shares and the First Closing Date Purchased
Assets and the assumption of the First Closing Date Assumed Liabilities (the
First Closing
) shall
be held on a date to be specified by the Parties (the
First Closing Date
) no later than the third
(3
rd
) Business Day after satisfaction or waiver of each of the conditions set forth in
Sections 7.1
,
7.2
and
7.3
at the offices of Kaye Scholer LLP, 425 Park
Ave., New York, NY 10022 unless the Parties agree otherwise. The Parties will exchange (or cause
to be exchanged) at the First Closing the funds, agreements, instruments, certificates and other
documents, and do, or cause to be done, all of the things respectively required of each Party as
specified in
Section 3.2
; and
(b) the closing of the purchase and sale of the Second Closing Date Purchased Assets and the
assumption of the Second Closing Date Assumed Liabilities (the
Second Closing
and together with
the First Closing, the
Closing
), shall be held on a date to be specified by the Parties (the
Second Closing Date
and each of the First Closing Date and Second Closing Date, a
Closing Date
)
no later than the third (3rd) Business Day after satisfaction or waiver of the conditions set forth
in
Sections 7.4
,
7.5
and
7.6
at the offices of Kaye Scholer LLP, 425 Park
Ave., New York, NY 10022, unless the Parties agree otherwise. The Parties will exchange (or cause
to be exchanged) at the Second Closing the agreements,
14
instruments, certificates and other documents, and do, or cause to be done, all of the things
respectively required of each Party as specified in
Section 3.3
.
3.2
Transactions at First Closing
. At the First Closing, subject to the terms and conditions hereof:
(a)
Sellers Actions and Deliveries
. Seller shall deliver or cause to be delivered to
Buyer:
(i) executed counterparts of each of the following:
(A) Asset Transfer Documentation providing for the transfer to Buyer of
the First Closing Date Purchased Assets;
(B) all such filings and submissions of Seller to the FDA, duly
executed by Seller, as are necessary to transfer Sellers rights with
respect to Regulatory Approvals and Regulatory Filings included in the First
Closing Date Purchased Assets, including in accordance with 21 CFR 314.72
from Seller to Buyer;
(C) the Supply Agreement;
(D) the License Agreement; and
(E) the Investors Rights Agreement;
(ii) the Shares in accordance with
Section 3.2(c)
below;
(iii) complete and accurate copies of the following documents:
(A) a certificate of good standing of Seller from the Secretary of
State of the State of Delaware, as of a date reasonably close to (and in no
event more than five (5) days prior to) the First Closing Date;
(B) resolutions of the board of directors of Seller authorizing the
execution and delivery by Seller of this Agreement, the Other Agreements to
which Seller will be a party and all other instruments and documents to be
delivered by Seller in connection herewith and the consummation by Seller of
the Transactions, certified by the Secretary of Seller; and
(C) a certificate from the Secretary of Seller as to the incumbency and
signatures of its officers who will execute documents at the First Closing
or who have executed this Agreement; and
(iv) a duly executed certificate (in the form provided for in section 1.1445-2 of the
U.S. Treasury Regulations) from Seller providing that Seller is not a foreign person for
U.S. federal income tax purposes.
15
(b)
Buyers Actions and Deliveries
. Buyer shall deliver or cause to be delivered to
Seller:
(i) the Upfront Payment in full by wire transfer of immediately available funds
directly to the Seller Account;
(ii) executed counterparts of each of the following:
(A) Asset Transfer Documentation providing for the transfer to Buyer of
the First Closing Date Purchased Assets and the assumption by Buyer of the
First Closing Date Assumed Liabilities;
(B) all such filings and submissions of Buyer to the FDA, duly executed
by Buyer, as are necessary to transfer Sellers rights with respect to
Regulatory Approvals and Regulatory Filings included in the First Closing
Date Purchased Assets, including in accordance with 21 CFR 314.72 from
Seller to Buyer;
(C) the Supply Agreement;
(D) the License Agreement; and
(E) the Investors Rights Agreement; and
(iii) complete and accurate copies of the following documents:
(A) certificates of good standing of each of Buyer and Parent from the
Secretary of State of Delaware and Nevada, respectively, as of a date
reasonably close to (and in no event more than five (5) days prior to) the
First Closing Date;
(B) resolutions of the board of directors of each of Buyer and Parent
authorizing the execution and delivery by Buyer and Parent of this
Agreement, the Other Agreements to which Buyer will be a party and all other
instruments and documents to be delivered by Buyer in connection herewith
and the consummation by Buyer of the Transactions, as applicable, certified
by the Secretary of Buyer; and
(C) certificates from the Secretary of each of Buyer and Parent as to
the incumbency and signatures of its officers who will execute documents at
the First Closing or who have executed this Agreement.
(c)
Shares
. Seller will instruct the Transfer Agent to deliver to Buyer at the First
Closing a certificate representing the Shares in the name of Buyer, bearing the legends set forth
in
Section 5.4
and described in
Section 4.1(e)
of the Investors Rights Agreement.
16
(d)
Charter Amendment
. Seller shall, subject to obtaining the Required Seller
Stockholders Vote, take all actions necessary to cause the Charter Amendment to be filed with the
Secretary of State of the State of Delaware at or prior to the First Closing Date.
(e)
Certain Adjustments
. In the event Seller changes the number of outstanding shares
of Common Stock issued and outstanding prior to the First Closing Date as a result of a
reclassification, stock split (including a reverse split), dividend (including any dividend or
distribution with a record date prior to the First Closing Date), recapitalization, merger,
subdivision, issuer tender or exchange offer, or other similar transaction, the number of shares of
Common Stock issued to Buyer at the First Closing shall be equitably adjusted so as to preserve the
economic benefits that Buyer reasonably expected on the Execution Date to receive as a result of
the consummation transactions contemplated by this Agreement.
3.3
Transactions at Second Closing
. At the Second Closing, subject to the terms and conditions hereof:
(a)
Sellers Actions and Deliveries
. Seller shall deliver or cause to be delivered to
Buyer all such filings and submissions of Seller to the FDA, duly executed by Seller, as are
necessary to transfer Sellers rights with respect to the PTB NDA or the PTB Supplemental NDA, as
applicable, in accordance with 21 CFR 314.72 from Seller to Buyer.
(b)
Buyers Actions and Deliveries
. Buyer shall deliver or cause to be delivered to
Seller all such filings and submissions of Buyer to the FDA, duly executed by Buyer, as are
necessary to transfer Sellers rights with respect to the PTB NDA or the PTB Supplemental NDA, as
applicable, in accordance with 21 CFR 314.72 from Seller to Buyer.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the disclosure letter supplied by Seller to Buyer and dated as of the
Execution Date (the
Seller Disclosure Letter
), which letter identifies the section (or, if
applicable, subsection) to which such exception relates (
provided
,
however
, that such disclosure
shall also apply to particular matters represented or warranted in other sections and subsections
to the extent that it is readily apparent from the text of such disclosure), Seller represents and
warrants to Buyer as follows:
4.1
Organization
.
(a) Seller is duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own its assets, including the
Purchased Assets, and carry on its business as currently conducted as disclosed in the SEC
Documents. Seller is duly qualified to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the
case may be, would not reasonably be expected to have a Material Adverse Effect.
(b)
Schedule 4.1(b)
of the Seller Disclosure Letter sets forth a list of each of
Sellers Subsidiaries, including each such Subsidiarys jurisdiction of incorporation or
17
organization and Sellers direct or indirect beneficial ownership interest in such Subsidiary,
as of the Execution Date. Each such Subsidiary is a corporation or other legal entity duly
organized, validly existing and in good standing, if applicable, under the Laws of the jurisdiction
of its organization and has all requisite corporate or other organizational power and authority to
carry on its businesses as now being conducted and is qualified to do business and is in good
standing, if applicable, as a foreign corporation in each jurisdiction where the conduct of its
business requires such qualification, except where the failure to be so qualified or in good
standing or to have such power or authority, would not reasonably be expected to have a Material
Adverse Effect.
(c) Seller has delivered or made available to Buyer a copy of the certificate or articles of
incorporation and bylaws (or like organizational documents) of Seller and each of its Subsidiaries,
and each such copy is true, correct and complete in all material respects. Seller is not in
violation of any of the provisions of its Certificate of Incorporation or Bylaws. Each Subsidiary
of Seller is not in violation of any of the provisions of its respective certificate or articles of
incorporation or bylaws (or like organizational documents).
4.2
Authority; Board Action
.
(a) Seller has all requisite corporate power and authority and has taken all corporate actions
necessary to execute and deliver this Agreement and the Other Agreements to which Seller will
become a party and, subject to receipt of the Required Seller Stockholders Vote, the filing of the
Charter Amendment with the Secretary of State of the State of Delaware at or prior to the First
Closing and the satisfaction of the conditions set forth in
Article VII
, to consummate the
Transactions. The execution and delivery of this Agreement and the Other Agreements by Seller and
the consummation by Seller of the Transactions have been duly and validly authorized by the board
of directors of Seller and no other corporate proceedings on the part of Seller are necessary to
authorize this Agreement or the Other Agreements or to consummate the Transactions, other than
obtaining the Required Seller Stockholders Vote and the filing of the Charter Amendment with the
Secretary of State of the State of Delaware at or prior to the First Closing. This Agreement has
been (and, when executed and delivered by Seller, the Other Agreements will have been) duly and
validly executed and delivered by Seller and, assuming the due authorization, execution and
delivery by Buyer (Parent and the other parties hereto or thereto), constitutes (and, when executed
and delivered by Seller, each Other Agreement will constitute) a legal, valid and binding agreement
of Seller, enforceable against Seller in accordance with its terms, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other Laws
of general application relating to or affecting creditors rights generally (the
Equitable
Exceptions
).
(b) Sellers board of directors has unanimously (i) determined that the sale of the Purchased
Assets and the transfer of the Assumed Liabilities on the terms and subject to the conditions of
this Agreement are expedient and in the best interests of Seller, (ii) approved the sale and
issuance of the Shares on the terms and subject to the conditions of this Agreement, (iii)
determined that the approval of the Charter Amendment is advisable and in the best interests of the
stockholders of Seller, (iv) approved this Agreement and the Transactions and (v) subject to
Section 6.5
, resolved to recommend the approval of the asset sale contemplated by this
Agreement and the Charter Amendment by the stockholders of Seller (the
Seller Board Recommendation
) at the Seller Stockholders
Meeting.
18
4.3
No Conflicts; Enforceability
.
(a) Subject to obtaining the Required Seller Stockholders Vote and the filing of the Charter
Amendment with the Secretary of State of the State of Delaware at or prior to the First Closing,
the execution, delivery and performance of this Agreement by Seller and the Other Agreements to
which Seller is a party by Seller (i) except as set forth on
Schedule 4.3(a)
of the Seller
Disclosure Letter, are not prohibited or limited by, and will not result in the breach of or a
default under, any provision of the Certificate of Incorporation or Bylaws of Seller, (ii) assuming
all of the consents, approvals, authorizations and permits described in
Section 4.3(b)
and/or
Schedule 4.3(b)
of the Seller Disclosure Letter have been obtained and all the
filings and notifications described in
Section 4.3(b)
and/or
Schedule 4.3(b)
of the
Seller Disclosure Letter have been made and any waiting periods thereunder have terminated or
expired, conflict with any Law applicable to Seller, and (iii) except as set forth on
Schedule
4.3(a)
of the Seller Disclosure Letter, does not conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default under, or require the
consent of any Third Party pursuant to any Material Contract binding on Seller or any applicable
order, writ, injunction or decree of any Regulatory Authority to which Seller is a party or by
which Seller is bound or to which any of its assets is subject, except in the case of clauses (ii)
and (iii) only for such conflicts, breaches and defaults that would not reasonably be expected to
have either (A) a Material Adverse Effect or (B) an adverse effect on the Purchased Assets or the
Business.
(b) The execution, delivery and performance of this Agreement and the Other Agreements by
Seller and the consummation of the Transactions by Seller do not and will not require any consent,
approval, authorization or permit of, or filing with or notification to, any Regulatory Authority,
except (i) the filing of the Charter Amendment with the Secretary of State of the State of
Delaware, (ii) compliance with any applicable federal, foreign or state securities or blue sky
Laws, including, without limitation, filings required under the Exchange Act and the Securities
Act, (iii) any such consent, approval, authorization, permit, filing, or notification set forth on
Schedule 4.3(b)
of the Seller Disclosure Letter (including, without limitation, the filings
contemplated by
Sections 3.2(a)(i)(B)
and
3.3(a)
and (iv) any such consent,
approval, authorization, permit, filing, or notification the failure of which to make or obtain
would not reasonably be expected to have, individually or in the aggregate, an adverse effect on
the Purchased Assets or a Material Adverse Effect or to materially delay or impair or prevent,
consummation of the Transactions.
4.4
Title; Sufficiency of Assets
.
(a) Except as set forth on
Schedule 4.4(a)
of the Seller Disclosure Letter, Seller or
one of its Subsidiaries owns, leases, licenses or has the right to use the Purchased Assets, free
and clear of all Encumbrances other than Permitted Encumbrances, and has the right to sell and
transfer to Buyer the Purchased Assets and Assumed Liabilities, free and clear of all Encumbrances.
19
(b) The Purchased Assets and the assets set forth on
Schedule 2.3
of the Seller
Disclosure Letter constitute all of the assets of Seller and its Subsidiaries primarily relating to
the research, development, regulatory approval, manufacture, distribution, marketing, sale and
promotion of the Products (the
Business
).
4.5
Capitalization
.
(a) The authorized capital stock of Seller, as of March 1, 2010, consisted of (i)
100,000,000 shares of Common Stock, of which 65,626,451 shares were issued and outstanding, (ii)
120,000 shares of Series A Convertible Preferred Stock, $0.01 par value per share, none of which
were issued or outstanding, (iii) 150,000 shares of Series B Convertible Preferred Stock, $0.01 par
value per share, of which 130 shares were issued and outstanding, (iv) 6,660 shares of Series C
Convertible Preferred Stock, $0.01 par value per share, of which 600 shares were issued and
outstanding, (v) 100,000 shares of Series D Junior Participating Preferred Stock, $0.01 par value
per share, none of which were issued or outstanding and (vi) 100,000 shares of Series E Convertible
Preferred Stock, $0.01 par value per share, of which 59,000 shares were issued and outstanding (the
preferred stock referred to in clauses (ii) through (vi), collectively, the
Preferred Stock
). As
of March 1, 2010, all of the issued and outstanding shares of Common Stock and shares of
Preferred Stock have been duly authorized, validly issued and are fully paid and nonassessable and
free of preemptive rights of any stockholder of Seller. As of March 1, 2010, options and
warrants and convertible notes to purchase an aggregate of 24,522,106 shares of Common Stock were
outstanding and the shares of the Sellers Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series E Convertible Preferred Stock were convertible into 2,600,
504,201 and 2,950,000 shares of Common Stock, respectively. Sellers Restated Certificate of
Incorporation (as amended, the
Certificate of Incorporation
), as in effect on the Execution Date,
and Sellers Amended and Restated By-Laws (the
Bylaws
) as in effect on the Execution Date, are
each filed as exhibits to the SEC Documents. Subject to obtaining the Required Seller Stockholders
Vote and the filing of the Charter Amendment with the Secretary of State of the State of Delaware
on or prior to the First Closing Date, the Shares will be duly authorized and, upon issuance in
accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable
and will not be subject to preemptive rights of any stockholder of Seller.
(b) Except for the options, warrants, convertible notes and the Preferred Stock described in
Section 4.5(a)
or as otherwise set forth on
Schedule 4.5(a)
of the Seller
Disclosure Letter, as of March 1, 2010, there were no outstanding (i) securities of Seller
convertible into or exchangeable for shares of capital stock of Seller, (ii) options, warrants,
rights or other agreements or commitments to acquire from Seller, or obligations of Seller to
issue, any capital stock, (iii) obligations of Seller to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other similar agreement or
commitment relating to the issuance of any capital stock, or (iv) obligations of Seller or any of
its Subsidiaries to make any payments directly or indirectly based (in whole or in part) on the
price or value of the shares of Sellers capital stock.
20
4.6
Intellectual Property
.
(a) Except as set forth on
Schedule 4.6(a)
of the Seller Disclosure Letter, Seller or
one of its Subsidiaries owns and possesses all right, title and interest in and to its Intellectual
Property that is part of the Purchased Assets and has the right to assign such Intellectual
Property that is part of the Purchased Assets free and clear of any Encumbrances, subject to
Section 2.3(d)
. None of the Encumbrances identified in
Schedule 4.6(a)
of the
Seller Disclosure Letter will interfere with Sellers ability to perform its obligations under this
Agreement and the Other Agreements. All Intellectual Property that is part of the Purchased Assets
is fully transferable to Buyer in accordance with the terms of this Agreement without restriction
and without payment of any kind to any Person, subject to
Section 2.3(d)
.
(b)
Schedule 4.6(b)
of the Seller Disclosure Letter sets forth a complete and accurate
list of all Intellectual Property that is part of the Purchased Assets for which Seller has made a
filing or registered with a Regulatory Authority in the United States or a foreign country. Each
item of Intellectual Property listed in
Schedule 4.6(b)
of the Seller Disclosure Letter (i)
is in a form required by Applicable Law, (ii) has not been disclaimed, (iii) has been duly
maintained in accordance with applicable Law, including the submission of all filings required by
applicable Law, and (iv) there are no material actions that must be taken by Seller within one
hundred twenty (120) days after the First Closing Date for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Intellectual Property that is part of the Purchased
Assets.
(c) To Sellers Knowledge, all Patents, Trademarks and registered Copyrights, if any, that are
part of the Purchased Assets, other than pending applications, are valid and enforceable.
(d) Except as set forth on
Schedule 4.6(d)
of the Seller Disclosure Letter, (i) none
of the Intellectual Property that is part of the Purchased Assets is the subject of (A) any pending
adverse judgment, injunction, order, decree or agreement restricting (x) Sellers use thereof or
(y) assignment or license thereof by Seller, or (B) any threatened litigation or claim of
infringement made in writing or any pending litigation to which Seller is a party and (ii) to
Sellers Knowledge, there is no unauthorized use, infringement or misappropriation of any of
Sellers Intellectual Property that is part of the Purchased Assets by any Third Party and Seller
has not sent any Person any written claim, demand/or notice asserting infringement of the
Intellectual Property that is part of the Purchased Assets.
(e) To Sellers Knowledge, the Intellectual Property that is part of the Purchased Assets and
the Excluded Assets that would (if not abandoned) be licensed to Buyer under the terms of the
License Agreement, is all that is necessary for the Development, manufacture, and Commercialization
of Products currently under Development or being Commercialized by Seller, in accordance with
Sellers past practice.
(f) Except as set forth on
Schedule 4.6(f)
of the Seller Disclosure Letter, (i) Seller
has not granted any licenses to the Intellectual Property that is part of the Purchased Assets to
Third Parties, (ii) Seller is not party to any agreements with Third Parties that materially limit
or restrict Sellers use of the Intellectual Property that is part of the Purchased
21
Assets and (iii) no royalties are paid or payable by Seller or Buyer on or with respect to any of the Intellectual
Property that is part of the Purchased Assets except as provided in this Agreement in
Section
2.7
and
Section 2.8
.
(g) All material issuance, renewal, maintenance and other payments that are or have become due
with respect to the Intellectual Property that is part of the Purchased Assets have been timely
paid by or on behalf of Seller.
(h) To Sellers Knowledge, the Development, manufacture, and Commercialization of Products in
accordance with Sellers past practice or as currently contemplated by Seller does not and would
not infringe or misappropriate any Intellectual Property of any Third Party anywhere in the world.
4.7
Absence of Litigation
. As of the Execution Date, except as set forth on
Schedule 4.7
of the Seller Disclosure
Letter, there is no material claim, action, suit, proceeding or investigation pending or, to the
Knowledge of Seller, threatened in writing, against Seller or any of its Subsidiaries. Except as
set forth on
Schedule 4.7
of the Seller Disclosure Letter, there are no suits, claims,
actions, proceedings or investigations that would reasonably be expected to have (i) an adverse
effect on the Purchased Assets or the Business, and (ii) with respect to Seller and its
Subsidiaries, individually or in the aggregate, a Material Adverse Effect. To the Knowledge of
Seller, except as set forth on
Schedule 4.7
of the Seller Disclosure Letter, neither Seller
nor any of its Subsidiaries is a party or subject to or in default under any order, decree, or
injunction, and there are no outstanding orders, decrees, or injunctions of any Regulatory
Authority that apply to the Purchased Assets or Seller that restricts the ownership, disposition or
use of the Purchased Assets by Seller, or the conduct of the Business of Seller as being conducted
by it on the Execution Date. To the Knowledge of Seller, there is not pending any investigation by
the SEC involving Seller or any current or former director or officer of Seller.
4.8
Real and Personal Property
. Seller has good and marketable title to, or has valid rights to lease or otherwise use, all
items of real and personal property that are material to Seller free and clear of all Encumbrances
and imperfections of title except those that (i) do not materially interfere with the use of such
property by Seller or (ii) would not reasonably be expected to have a Material Adverse Effect.
4.9
Taxes
.
(a) Each of Seller and its Subsidiaries has timely filed (taking into account all properly and
timely requested extensions of time within which to file) all required U.S. federal, state and
non-U.S. income and franchise Tax Returns and has paid all required Taxes whether or not shown as
due on such Tax Returns. Neither Seller nor any of its Subsidiaries is currently the beneficiary
of any extension of time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction in which Seller or any of its Subsidiaries does not file Tax Returns
that such entity is or may be subject to taxation by that jurisdiction.
(b) There are no Encumbrances on any of the Purchased Assets for Taxes (other than for current
Taxes not yet due and payable). None of the Purchased Assets are property that is required to be
treated for any Tax purposes as being owned by any other Person.
22
(c) No deficiencies for material Taxes with respect to Seller or any if its Subsidiaries have
been claimed, proposed or assessed in writing by any Tax authority. There are no audits,
investigations, disputes, notices of deficiency, claims or other Actions, pending or threatened in
writing, for or relating to any material Liability for Taxes of Seller or any if its Subsidiaries.
(d) The unpaid Taxes of Seller and its Subsidiaries did not, as of the date of the Financial
Statements, exceed the reserve for Liability for Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth on the face of the
balance sheets contained in the Financial Statements (rather than in any notes thereto). Since the
date of the most recent Financial Statements, neither Seller nor any of its Subsidiaries has
incurred any material Liability for Taxes outside the ordinary course of business or otherwise
inconsistent with past custom and practice.
(e) Seller has delivered or made available to Buyer complete and accurate copies of all
material federal, state and local income Tax Returns of Seller and any predecessor for the 2008 Tax
year.
(f) Each of Seller and its Subsidiaries has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholders of Seller or other Person.
(g) Neither Seller nor any of its Subsidiaries has ever been a member of an affiliated group
filing a consolidated U.S. federal income Tax Return (other than a group the common parent of which
is Seller) or any similar group for U.S. federal, state, local or non-U.S. Tax purposes. Neither
Seller nor any of its Subsidiaries has any Liability for the Taxes of any Person (other than Taxes
of Seller or any of its Subsidiaries) (i) under U.S. Treasury Regulation Section 1.1502-6 (or any
similar provision of U.S. state, local or non-U.S. law), (ii) as a transferee or successor, (iii)
by Contract or (iv) otherwise.
(h) None of Seller and any of its Subsidiaries or predecessors has been a party to any
transaction intended to qualify under Section 355 of the Code.
(i) Neither Seller nor any of its Subsidiaries is or has ever been a party to or bound by any
Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar Contract.
(j) Neither Seller nor any of its Subsidiaries is or was a surrogate foreign corporation
within the meaning of Section 7874(a)(2)(B) of the Code or is treated as a U.S. corporation under
Section 7874(b) of the Code.
4.10
Environmental, Safety and Health
.
(a) Except as set forth on
Schedule 4.10
of the Seller Disclosure Letter, (i) the
Purchased Assets and Sellers operations as described in the SEC Documents are now and for the
previous three (3) years immediately prior to the Execution Date have been in material compliance
with all applicable Environmental, Safety and Health Laws, (ii) Seller has obtained all the
material permits required under Environmental, Safety and Health Laws that are necessary
23
to operate the Business as currently operated as described in the SEC Documents, and all such
permits are in good standing or Seller has timely applied for their issuance, amendment or renewal,
(iii) there are no Environmental Claims pending or, to Sellers Knowledge, threatened in writing
against Seller, and, (iv) to Sellers Knowledge, there are no facts or circumstances that would
reasonably be expected to form the basis of any material Environmental Claim against Seller that
would reasonably be expected to have a Material Adverse Effect.
(b) Seller is not in possession of any material audits, studies, analyses, tests or monitoring
pertaining to Hazardous Substances in, on or under any Site or pertaining to Sellers compliance
with Environmental, Safety and Health Laws and, to Sellers Knowledge, no such audits, studies,
analyses, tests or monitoring have been conducted in the previous three years preceding the
Execution Date.
(c) To Sellers Knowledge, neither the execution and delivery of this Agreement nor the
consummation of the Transactions triggers any requirement under the New Jersey Industrial Site
Recovery Act, or other Law of similar effect, that is reasonably likely to result in Buyer or
Seller incurring any material liability or obligation.
4.11
Compliance with Laws
. Seller has, since January 1, 2008, complied in all material respects and is, as of the Execution
Date, in compliance in all material respects with all Laws and/orders of all Regulatory Authorities
with respect to its business, and no notice, charge, claim, action or assertion has been received
by Seller or has been filed, commenced or, to the Knowledge of Seller, threatened in writing
against Seller alleging any violation of any of the foregoing. The subject matter of
Section
4.6
,
Section 4.9
,
Section 4.10
,
Section 4.12
,
Section 4.13
and
Section 4.15
is excluded from the provisions of this
Section 4.11
and the
representations and warranties of Seller with respect to those subject matters are exclusively set
forth in those referenced sections.
4.12
Permits
. Seller has all material franchises, permits, licenses, authorizations, registrations,
certificates, approvals, exemptions, consents, confirmations, orders, waivers and clearances and
any similar authority necessary for the conduct of the Business as being conducted by it on the
Execution Date. Seller has all franchises, permits, licenses and any similar authority necessary
for the conduct of all other business, other than the Business, as being conducted by it on the
Execution Date, except for such franchise, permit, license or similar authority, the lack of which
would not reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 4.12
of the Seller Disclosure Letter, Seller has not received any written notice
of any Action relating to revocation or modification of any such franchise, permit, license or
similar authority.
4.13
Regulatory Matters
.
(a) Seller is the sole and exclusive owner of the Product Regulatory Approvals and all Product
Regulatory Approvals are in full force and effect.
(b) Seller is conducting the Business in material compliance with the Product Regulatory
Approvals and all applicable Laws.
24
(c) Seller has filed with the FDA all material applications, exemptions, requests, notices,
information, supplemental applications and annual or other reports, including adverse experience
reports, product deviation reports and annual reports with respect to each NDA and IND, related to
Sellers Development, manufacture, testing, study, distribution or sale of Products. To the
Knowledge of Seller, all applications, exemptions, requests, notices, submissions, information,
claims, reports and statistics, and other data and conclusions derived therefrom, utilized as the
basis for or submitted in connection with any and all requests for a Regulatory Approval of the FDA
or other Regulatory Authorities relating to the Products, when submitted to the FDA or other
Regulatory Authorities were true, complete and correct in all material respects as of the date of
submission and any necessary or required material updates, changes, corrections or modifications to
such applications, exemptions, requests, notices, submissions, information, claims, reports or
statistics have been submitted to FDA and other Regulatory Authorities.
(d) All pre-clinical and clinical trials conducted by or on behalf of the Seller with regard
to the Products were and are being conducted in material compliance with experimental protocols,
procedures and controls pursuant to accepted professional scientific standards and all applicable
Laws promulgated by the FDA relating thereto, including without limitation the FDCA and its
applicable implementing regulations. No IND filed by or on behalf of Seller with the FDA regarding
the Products has been terminated or suspended by the FDA, and neither the FDA nor any applicable
foreign Regulatory Authority has commenced, or, to the Knowledge of Seller, threatened to initiate,
any action to place a clinical hold order on, or otherwise terminate or suspend, any ongoing
clinical investigation conducted by or on behalf of Seller involving the Products.
(e) Seller has made available to Buyer all material information in its possession or control
concerning the safety, efficacy, side effects or toxicity of the Products (in animals or humans),
associated with or derived from any pre-clinical or clinical use, studies, investigations or tests
of the Product. Since January 1, 2005, no Product has been recalled, suspended, discontinued, or
withdrawn from the market, and no Product is currently involved in any ongoing, and to the
Knowledge of Seller, threatened or potential recall, discontinuance, withdrawal, or suspension from
the market within the Territory. Seller has no Knowledge of any serious adverse events from the
use of the Products that are not disclosed in the package inserts, adverse experience reports or
periodic safety update for the Products.
(f) As of the Execution Date, Seller has not received notice that Seller, its Products or any
of the Purchased Assets or the ownership, manufacturing, operation, storage, Development,
Commercialization, warehousing, packaging, labeling, handling, testing, and/or marketing thereof is
in material violation of any Regulatory Approval or applicable Law and such violation has not been
remedied, except for such violations that would not reasonably be expected to have a Material
Adverse Effect. To the Knowledge of Seller, there are no facts or circumstances existing which
would lead to any suspension, loss of or material modification to any Regulatory Approval or
refusal by a Regulatory Authority to renew or accept for filing any Regulatory Approval on terms
not substantially less advantageous, in the aggregate, to Seller than the terms of those Regulatory
Approvals currently in force. There are no outstanding orders, injunctions or decrees of any
Regulatory Authority that apply to Seller that restrict the ownership, disposition or use of
Products by Seller.
25
(g) To the Knowledge of Seller, (i) there are no investigations, audits, actions or other
proceedings pending with respect to a violation by the Seller of the FDCA or other applicable Law
that would reasonably be expected to result in material administrative, criminal or material civil
liability and (ii) there are no facts or circumstances existing that would reasonably be expected
to serve as a basis for such an investigation, audit, action or other proceeding.
4.14
Suppliers
. Seller has used reasonable business efforts to maintain, and, to the Knowledge of the Seller,
currently maintains, good working relationships with all of the material suppliers to the Business.
Schedule 4.14
of the Seller Disclosure Letter also specifies for the period beginning on
January 1, 2009 and ending on the Execution Date the names of the material suppliers to the
Business. None of such suppliers has given Seller or any of its Subsidiaries written notice
terminating, canceling or threatening to terminate or cancel any Contract or relationship with the
Seller or any of its Subsidiaries relating to the Business. To the Knowledge of Seller, such
suppliers are manufacturing and otherwise operating in material compliance with applicable FDA
requirements with respect to the products and materials supplied to Seller.
4.15
SEC Documents, Financial Statements
. Seller has timely filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC since January 1, 2007 pursuant to the reporting requirements of the
Exchange Act (all of the foregoing filed prior to the Execution Date and financial statements and
schedules thereto and documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to herein as the
SEC Documents
). As of their respective dates, the SEC
Documents complied as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Financial Statements and the related notes have been prepared in
accordance with GAAP during the periods involved (except (i) as may be otherwise indicated in the
Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes, may be condensed or summary statements or may conform to
the SECs rules and instructions for Reports on Form 10-Q) and fairly present in all material
respects the consolidated financial position of Seller as of the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments). All material agreements
that were required to be filed as exhibits to the SEC Documents under Item 601 of Regulation S-K
prior to the Execution Date to which Seller or any Subsidiary of Seller is a party, or the property
or assets of Seller or any Subsidiary of Seller are subject, have been filed as exhibits to the SEC
Documents.
26
4.16
Absence of Certain Changes or Events
. Except as set forth on
Schedule 4.16
of the Seller Disclosure Letter or as otherwise
expressly contemplated by this Agreement or the Other Agreements, from December 31, 2008 to the
Execution Date, Seller has conducted its business, including the Business, in the ordinary course
of business, consistent with past practice and Seller has not, with respect to the Business or any
of the Purchased Assets:
(a) sold, transferred, leased, subleased, licensed or otherwise disposed of any assets that
would constitute Purchased Assets or any other material assets necessary for the conduct of the
Business.
(b) surrendered, revoked or otherwise terminated any material permits relating to the
Business, except in connection with any renewal or reissuance thereof;
(c) waived, released or assigned any rights, which rights, but for such waiver, release or
assignment, would have been classified as Purchased Assets, other than in the ordinary course of
business consistent with past practice;
(d) made any election or change to any election in respect to Taxes, adopted or changed any
accounting method in respect to Taxes, entered into any Tax allocation agreement, Tax sharing
agreement, Tax indemnity agreement or closing agreement relating to any Tax, settled or compromised
on any claim, notice, audit report or assessment in respect of Taxes, changed any annual Tax
accounting period, filed any material amended Tax Return, or surrendered any right to claim a Tax
refund; or
(e) agreed, whether in writing or otherwise, to do any of the foregoing, except as expressly
contemplated by this Agreement.
4.17
Contracts
. All Material Contracts (other than those Contracts that constitute Material Contracts solely by
reason of clause (i) of the definition thereof) are listed on
Schedule 4.17
of the Seller
Disclosure Letter. To the Knowledge of Seller, all Material Contracts are valid and enforceable
against the other parties thereto in accordance with their respective terms, (i) subject to the
Equitable Exceptions and (ii) except as rights to indemnity and contribution may be limited by
state or federal securities Laws or public policy underlying such Laws. Seller is not in material
breach of or default under any of the Material Contracts, and to the Knowledge of Seller, no other
party to a Material Contract is in material breach of or default under any Material Contract. As
of the Execution Date, Seller has not received written notice of termination of any of the Material
Contracts. Complete and correct copies of all Material Contracts and amendments thereto have been
made available to Buyer.
4.18
Brokers,
Etc.
No broker, investment banker, agent, finder or other intermediary acting on behalf of Seller
or under the authority of Seller, except for Torreya Partners LLC (whose fees shall be borne solely
by Seller), is or will be entitled to any brokers or finders fee or any other commission or
similar fee directly or indirectly in connection with any of the Transactions.
4.19
Insurance
. Seller is insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as Seller believes are prudent and customary for a company (i) in the
businesses and location in which Seller is engaged, and
27
(ii) with the resources of Seller. As of the Execution Date, Seller has not received any written
notice that Seller will not be able to renew its existing insurance coverage as and when such
coverage expires.
4.20
Investment Company
. Seller is not an investment company as such term is defined in the Investment Company Act of
1940, as amended (the
Investment Company Act
). Seller shall conduct its business in a manner so
that it will not become subject to the Investment Company Act.
4.21
Exchange
. As of the Execution Date, except as set forth on
Schedule 4.21
of the Seller Disclosure
Letter, the issued and outstanding shares of Common Stock are listed on the Exchange, and, to
Sellers Knowledge, there are no proceedings to revoke or suspend such listing. Except as set
forth on
Schedule 4.21
of the Seller Disclosure Letter, Seller is in compliance in all
material respects with the requirements of the Exchange for continued listing of the Common Stock
thereon.
4.22
Application of Takeover Protections
. The execution and
delivery of this Agreement and the consummation of the Transactions will not impose any restriction
on Buyer, under any share acquisition, business combination, poison pill (including any
distribution under a rights agreement), or other similar anti-takeover provisions under the
Certificate of Incorporation or the Laws of the State of Delaware.
4.23
Fairness Opinion
. Prior to the execution of this Agreement, RBC Capital Markets Corporation has delivered to
Sellers board of directors its written opinion to the effect that, as of the date thereof and
based upon and subject to the limitations, assumptions and other matters set forth therein, the
Upfront Payment and the Post-Closing Payments to be received by Seller are fair, from a financial
point of view, to Seller.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1
Organization
. Buyer is duly incorporated, and validly existing and in good standing under the laws of
Delaware. Buyer has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
5.2
Authority
. Buyer has all requisite corporate power and authority and has taken all actions necessary to
execute and deliver this Agreement and the Other Agreements to which Buyer will become a party and,
subject to the satisfaction of the conditions set forth in
Article VII
, to consummate the
Transactions. The execution and delivery of this Agreement and the Other Agreements by Buyer and
the consummation by Buyer of the Transactions have been duly and validly authorized by the board of
directors of Buyer and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or the Other Agreements or to consummate the Transactions. This Agreement
has been (and, when executed and delivered by Buyer, the Other Agreements will have been) duly and
validly executed and delivered by Buyer and, assuming the due authorization, execution and delivery
by Seller,
28
constitutes (and, when executed and delivered by Buyer, each Other Agreement will constitute) a
legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as enforceability may be limited by Equitable Exceptions.
5.3
Investment Purpose; Status
. Buyer is an accredited investor as such term is defined in Rule 501(a) under the Securities
Act. Buyer is purchasing the Shares for its own account and not with a view toward the sale or
distribution thereof and has no intention of selling or distributing any of the Shares or any
arrangement or understanding with any other Persons regarding the sale or distribution of the
Shares. Buyer will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares except in accordance with the Securities Act and the Investors Rights Agreement.
5.4
Securities Laws
.
(a) Buyer understands that the Shares are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States federal and state
securities laws and that Seller is relying upon the truth and accuracy of, and Buyers compliance
with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set
forth herein in order to determine the availability of such exemptions and the eligibility of Buyer
to acquire the Shares.
(b) The Investors Rights Agreement will contain provisions restricting the transfer of the
Shares.
(c) In addition to the legends described in the Investors Rights Agreement, the certificates
representing the Shares will bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such Shares):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS
OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS. COLUMBIA LABORATORIES, INC. (THE COMPANY) SHALL BE ENTITLED TO
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
5.5
Ownership Cap
.
Assuming compliance by Seller with
Section 6.2(b)(i), neither Buyer nor Parent will, after giving effect to the consummation of the Transactions, (i) beneficially own (as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the shares of Common Stock and/or (ii) possess 19.9% or more of the voting power of Seller.
5.6
Acknowledgement of Risk
.
(a) Buyer acknowledges and understands that its investment in the Shares involves a
significant degree of risk, including, without limitation, (i) the Purchased Assets represent a
significant portion of Sellers business operations and the Transactions will alter Sellers
business operations following their consummation; (ii) an investment in Seller is
29
speculative, and only buyers who can afford the loss of their entire investment should
consider investing in Seller and the Shares; (iii) Buyer may not be able to liquidate its
investment; (iv) transferability of the Shares is limited and restricted; (v) in the event of a
disposition of the Shares, Buyer could sustain the loss of its entire investment; and (vi) Seller
has not paid any dividends on the Common Stock since January 1, 2001, and does not anticipate the
payment of dividends in the foreseeable future. Such risks are more fully set forth in the SEC
Documents.
(b) Buyer is able to bear the economic risk of holding the Shares for an indefinite period,
and has knowledge and experience in financial and business matters such that it is capable of
evaluating the risks of the investment in the Shares.
(c) Buyer has, in connection with Buyers decision to purchase the Shares, not relied upon any
representations or other information (whether oral or written) other than as set forth in the
representations and warranties of Seller contained herein, and Buyer has, with respect to all
matters relating to this Agreement and the offer and sale of the Shares, relied solely upon the
advice of Buyers own counsel and has not relied upon or consulted any counsel to Seller.
5.7
No Conflicts; Enforceability
.
(a) The execution, delivery and performance of this Agreement by Buyer and Parent and the
Other Agreements to which Buyer or Parent is a party by Buyer or Parent (i) are not prohibited or
limited by, and will not result in the breach of or a default under, any provision of the
certificate or articles of incorporation or bylaws of Buyer or Parent, (ii) conflict with any Law
applicable to Buyer or Parent, and (iii) does not conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, any material agreement
binding on Buyer or Parent or any applicable order, writ, injunction or decree of any Regulatory
Authority to which Buyer or Parent is a party or by which Buyer or Parent is bound.
(b) The execution, delivery and performance of this Agreement and the Other Agreements by
Buyer or Parent and the consummation of the Transactions by Buyer do not and will not require any
consent, approval, authorization or permit of, or filing with or notification to, any Regulatory
Authority, except (i) the filing of the Charter Amendment with the Secretary of State of the State
of Delaware, (ii) compliance with any applicable federal, foreign or state securities or blue sky
Laws, including, without limitation, filings received under the Exchange Act or Securities Act and
(iii) any material consent, approval, authorization, permit, filing, or notification the failure of
which to make or obtain would not reasonably be expected to materially delay or impair or prevent,
consummation of the Transactions.
5.8
Litigation
. There is no Action pending or, to Buyers knowledge, threatened in writing, directly or
indirectly involving Buyer or Parent (or to Buyers knowledge, any Third Party) that would
prohibit, hinder, materially delay or otherwise impair Buyers ability to perform its obligations
hereunder or under the Other Agreements, including the assumption of the Assumed Liabilities, would
affect the legality, validity or enforceability of this Agreement or the Other Agreements, or
prevent or materially delay the consummation of the Transactions.
5.9
Financing
. Buyer has, or has available to it, and at the Closing will have, sufficient immediately
available funds, marketable securities, other investments or capital
30
commitments to enable Buyer to consummate the Transactions on the terms and conditions set forth
herein.
5.10
No Short Sales
. Neither Buyer nor Parent has ever engaged in any short sales or similar transactions with
respect to the Common Stock or other securities of Seller, nor has Buyer or Parent ever, directly
or indirectly, knowingly caused any Person to engage in any short sales or similar transactions
with respect to the Common Stock or other securities of Seller.
5.11
Brokers, Etc.
No broker, investment banker, agent, finder or other intermediary acting on behalf of Buyer or
Parent or under the authority of Buyer or Parent is or will be entitled to any brokers or finders
fee or any other commission or similar fee directly or indirectly in connection with any of the
Transactions.
5.12
Independent Investigation
. In making the decision to enter into this Agreement and the Other Agreements and to consummate
the Transactions, Buyer and Parent have conducted their own independent investigation, review and
analysis of the Purchased Assets, the Assumed Liabilities, the Products, the Shares and Seller,
which investigation, review and analysis was done by Buyer, Parent and their respective Affiliates
and Representatives. Buyer acknowledges that it and its Representatives have been provided
adequate access to the personnel, properties, premises and records of Seller for such purpose. In
entering into this Agreement and the Other Agreements, Buyer acknowledges that Buyer and Parent and
their respective Affiliates have relied solely upon the aforementioned investigation, review and
analysis and not on any factual representations or opinions of Seller or its Representatives
(except the specific representations and warranties of Seller set forth in
Article IV
).
ARTICLE VI.
COVENANTS PRIOR TO CLOSING
6.1
Access to Information
. From the Execution Date until the First Closing Date, except as otherwise prohibited by
applicable Law or the terms of any Contract entered into prior to the Execution Date or as would be
reasonably expected to violate the attorney-client privilege of Seller, Seller shall afford Buyer
and its Representatives reasonable access, during regular business hours and at agreed-upon times,
at Buyers sole cost and expense, to Sellers personnel, properties pertaining to Purchased Assets
and the Assumed Liabilities;
provided
, that such access shall not unreasonably interfere with
Sellers business and operations.
6.2
Conduct of the Business
.
(a) From the Execution Date through the First Closing Date, except as expressly permitted by
this Agreement or as set forth on
Schedule 6.2(a)
of the Seller Disclosure Letter, Seller
shall conduct its business only in the ordinary course of business consistent with past practice
(including, with respect to Products, research and development efforts, advertising, manufacturing
and inventory levels thereof) and use commercially reasonable efforts to keep intact the Purchased
Assets and the Business, and preserve the relationships of the Business with customers, suppliers,
licensors, licensees, distributors, sales personnel, regulatory authorities and other Persons, in
each case, who are material to the Business. Without limiting the generality of the foregoing, from
the Execution Date to the First Closing Date, Seller shall:
31
(i) use Commercially Reasonable Efforts to keep in full force and effect, without
amendment, all material rights relating to the Business, except those that expire in
accordance with their terms;
(ii) use commercially reasonable efforts to comply in all material respects with all
requirements of Law and contractual obligations, in each case applicable to the operation of
the Business;
(iii) maintain all Books and Records related to the Business in accordance with past
practice;
(iv) not fail to maintain its existing insurance coverage to the extent relating to the
Business in all material respects in effect as of the Execution Date; and
(v) confer with Buyer prior to (A) effecting any material personnel changes that would
affect Development of the Products, (B) amending the Prochieve PTB Development Plan or
otherwise making any material decision with respect to Development of the Products, or (C)
entering into any discussions with, or making any commitments to, any Regulatory Authority
with respect to the Products or the Business.
(b) Without limiting the generality of the lead-in paragraph of
Section 6.2(a)
, and
except as set forth in
Schedule 6.2(b)
of the Seller Disclosure Letter or as otherwise
expressly permitted by the terms of this Agreement, from the Execution Date to the First Closing
Date, without the prior written consent of Buyer (which shall not be unreasonably withheld or
delayed), Seller shall not:
(i) declare, set aside or pay any dividend or distribution or other capital return in
respect of any shares of capital stock of Seller, except with respect to Preferred Stock to
the extent required by the terms thereof, or redeem, purchase or acquire any shares of
capital stock of Seller other than Preferred Stock to the extent required by the terms
thereof, in connection with any existing Seller equity plans or in the ordinary course of
business consistent with past practice;
(ii) subject any Purchased Assets to any material Encumbrances, other than Encumbrances
set forth on
Schedule 4.4(a)
of the Seller Disclosure Letter;
(iii) sell, transfer, lease, sublease, license or otherwise dispose of or grant any
option or rights in, to or under any Purchased Assets;
(iv) enter into any Material Contract primarily relating to the Products or terminate
(other than in accordance with its terms), extend or amend any such Material Contract;
(v) abandon, terminate or materially alter the administration of any Development
activities relating to any Product (other than for safety concerns or in accordance with the
terms of existing agreements with respect to such clinical trials) or terminate or
materially alter Sellers support of clinical trials sponsored by clinical investigators
with respect to any Product;
32
(vi) abandon, terminate or materially reduce its marketing activities (including
expenditures for promotional activities and sales force activity) for any Product or
materially change the size of, or its business relationship with, the sales force for
Prochieve;
(vii) commence, sponsor or commit to participate in any clinical trials or investigator
sponsored trials with respect to any Product or provide any clinical grants with respect to
any Product;
(viii) commit to comply with any obligations imposed by a Regulatory Authority with
respect to any Product;
(ix) abandon any patents or patent filings or any litigation seeking to enforce
Sellers interest in any Intellectual Property of Seller that is a Purchased Asset or
Excluded Asset that would (if not abandoned) be licensed to Buyer under the terms of the
License Agreement, other than in the ordinary course of business consistent with past
practice;
(x) to the extent that doing so would relate to the Purchased Assets or the Business
and would have a material effect on the Purchased Assets or the Business after the
applicable Closing Date, make any election or change to any election with respect to Taxes,
adopt or change any accounting method with respect to Taxes, enter into any Tax allocation
agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to
any Tax, settle or compromise on any claim, notice, audit report or assessment in respect of
Taxes, consent to any extension or waiver of the limitation period applicable to any claim
or assessment with respect to Taxes, change any annual Tax accounting period, file any
amended Tax Return, or surrender any right to claim a Tax refund; or
(xi) agree, whether in writing or otherwise, to do any of the foregoing set forth in
clauses (ii) through (x) above.
(c) From the Execution Date to the First Closing Date, except as expressly permitted by this
Agreement, each Party shall not, without the prior written consent of the other Party, take any
action that would, or that could reasonably be expected to, result in any of the conditions to the
purchase and sale of the Purchased Assets set forth in
Article VII
not being satisfied.
6.3
[Omitted.]
6.4
Proxy Statement; Seller Stockholders Meeting
.
(a)
Proxy Statement
. As promptly as practicable after the Execution Date, unless this Agreement is terminated pursuant to
Article
IX
, Seller shall prepare and file with the SEC a proxy statement relating to the Seller
Stockholders Meeting (together with any amendments thereof or supplements thereto, the
Proxy
Statement
);
provided,
that Seller shall not file the Proxy Statement with the SEC
later than March 19, 2010 without the consent of Buyer, such consent not to be unreasonably withheld. Seller, after consultation with Buyer, will use commercially reasonable efforts to
respond to any comments made by the SEC with respect to the Proxy Statement as
33
promptly as practicable following receipt of the same. Buyer shall furnish all information as
Seller may reasonably request in connection with such actions and the preparation of the Proxy
Statement. Subject to
Section 6.5
, as promptly as practicable after the clearance of the
Proxy Statement by the SEC, Seller shall mail the Proxy Statement to its stockholders. Subject to
Section 6.5
, the Proxy Statement shall include the Seller Board Recommendation. Seller
will advise Buyer, promptly after it receives notice thereof, of any request by the SEC for
amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC
for additional information. If at any time prior to the Seller Stockholders Meeting, any event or
circumstance relating to Buyer, or its officers or directors, should be discovered by Buyer which
should be set forth in an amendment or a supplement to the Proxy Statement, Buyer shall promptly
inform Seller. If at any time prior to the Seller Stockholders Meeting, any event or circumstance
relating to Seller or any Subsidiary of Seller, or their respective officers or directors, should
be discovered by Seller which should be set forth in an amendment or a supplement to the Proxy
Statement, Seller shall promptly inform Buyer. All documents that Seller is responsible for filing
with the SEC in connection with the Transactions will comply as to form and substance in all
material respects with the applicable requirements of the Exchange Act and other applicable Laws
and will not contain any untrue statement of a material fact, or omit to state any material fact
required to be stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b)
Information Supplied
. None of the written information supplied or to be supplied
by Buyer or any of its Affiliates, directors, officers, employees, agents or Representatives
expressly for inclusion or incorporation by reference in the Proxy Statement or any other documents
filed or to be filed with the SEC in connection with the Transactions, will, as of the time such
documents (or any amendment thereof or supplement thereto) are mailed to Sellers stockholders and
at the time of Seller Stockholders Meeting, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. All documents
that Buyer is responsible for filing with the SEC in connection with the Transactions will comply
as to form in all material respects with the applicable requirements of the Exchange Act and will
not contain any untrue statement of a material fact, or omit to state any material fact required to
be stated therein in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the written information supplied or to be supplied
by Seller or any of its Subsidiaries or Representatives expressly for inclusion or incorporation by
reference in any document to be filed by Buyer with the SEC in connection with the Transactions,
will, as of the time such documents (or any amendment thereof or supplement thereto) are filed,
contain any untrue statement of a material fact, or omit to state any material fact required to be
stated therein in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c)
Seller Stockholders Meeting
. Seller shall call and hold a meeting of its
stockholders (the
Seller Stockholders Meeting
) as promptly as practicable following the date on
which the Proxy Statement is cleared by the SEC for the purpose of obtaining the Required Seller
Stockholders Vote. Except as permitted by
Section 6.5
, the Proxy Statement shall include
the Seller Board Recommendation.
34
(d)
No Restriction
. Nothing in this
Section 6.4
shall be deemed to
prevent Seller or the board of directors of Seller from taking any action they are permitted or
required to take under, and in compliance with,
Section 6.5
or are required to take under
applicable Law.
6.5
No Solicitation; Acquisition Proposals
.
(a) From the Execution Date until the First Closing Date or, if earlier, the termination of
this Agreement pursuant to
Article IX
, Seller shall not, and shall cause its Subsidiaries
not to, and shall use commercially reasonable efforts to cause its Representatives not to, directly
or indirectly: (i) solicit, initiate or knowingly or intentionally facilitate any inquiry with
respect to, or the making, submission or announcement of, any Acquisition Proposal or any proposal
that would reasonably be expected to lead to any Acquisition Proposal, (ii) furnish to any Person
any non-public information relating to Seller or any of its Subsidiaries in connection with an
Acquisition Proposal (except to the extent specifically permitted pursuant to
Section
6.5(b)
), (iii) participate or engage in discussions or negotiations with any Person with
respect to any Acquisition Proposal, except to notify such Person as to the existence of the
provisions of this Agreement or to the extent specifically permitted pursuant to
Section
6.5(b)
, (iv) approve, endorse or recommend any Acquisition Proposal (except to the extent
specifically permitted pursuant to
Section 6.5(d)
), or (v) enter into any letter of intent
or similar document or any agreement, commitment or understanding contemplating or otherwise
relating to any Acquisition Proposal or a transaction contemplated thereby (except for
confidentiality agreements specifically permitted pursuant to
Section 6.5(b)
). Without
limiting the foregoing, it is agreed that any violation of the restrictions set forth in the
preceding sentence by any Representative of Seller or any Subsidiary of Seller shall be a breach of
this
Section 6.5(a)
by Seller. On the Execution Date, subject to
Section 6.5(b)
Seller shall, and shall cause each of its Subsidiaries to, immediately cease and use commercially
reasonable efforts to cause its Representatives to terminate any solicitation, discussion or
negotiation with any Persons conducted by Seller or its Subsidiaries or any of their
Representatives prior to the Execution Date with respect to any Acquisition Proposal.
(b) Notwithstanding anything to the contrary contained in
Section 6.5(a)
, if at any
time following the Execution Date and prior to the earlier of obtaining the Required Seller
Stockholder Vote and the termination of this Agreement pursuant to
Article IX
(i) Seller
has fully complied with its obligations in
Section 6.5(a)
and has received an Acquisition
Proposal from any Person or group (as determined under Section 13(d)(3) of the Exchange Act) that
the board of directors of Seller believes in good faith to be bona fide, and (ii) the board of
directors of Seller determines in good faith, after consultation with its financial advisors and
outside counsel, that such Acquisition Proposal constitutes or may reasonably be expected to result
in a Superior Proposal, then Seller may (A) furnish information (including non-public information)
with respect to Seller and its Subsidiaries to the Person or group making such Acquisition Proposal
and (B) participate in discussions or negotiations with the Person or group making such Acquisition
Proposal regarding such Acquisition Proposal;
provided
, that Seller (x) will not, and will not
allow its Subsidiaries to (and will use commercially reasonable efforts to cause its
Representatives not to), disclose any non-public information to such Person or group without first
entering or having entered into a confidentiality agreement with such Person or group that is at
least as restrictive on such Person or group as the Confidentiality Agreement is on Buyer and (y)
will promptly provide to Buyer any material non-public information concerning Seller or its
35
Subsidiaries provided by Seller to such other Person or group which was not previously made
available to Buyer, except to the extent restricted by applicable Laws.
(c) From and after the Execution Date, Seller shall promptly (within 48 hours of, or the next
Business Day immediately following, if later) notify Buyer in the event that any of Seller, its
Subsidiaries or its Representatives receives any Acquisition Proposal or written indication by any
Person or group that it is considering making an Acquisition Proposal and shall disclose to Buyer
the identity of the other Person making such Acquisition Proposal. Seller shall keep Buyer
informed (orally and in writing) on a current basis of the occurrence of any material changes or
developments of the status of any such Acquisition Proposal or written indication (including the
material terms and conditions thereof and of any material modification thereto), and any material
developments related thereto.
(d) Notwithstanding anything to the contrary contained in
Section 6.5(a)
, the board of
directors of Seller may, at any time prior to obtaining the Required Seller Stockholder Vote,
withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner
adverse to Buyer, the Seller Board Recommendation and/or endorse or recommend to Sellers
stockholders any Superior Proposal (a
Change of Board Recommendation
) if, but only if, (A) the
board of directors of Seller concludes in good faith, after consultation with outside counsel, that
failure to take such action would be inconsistent with its fiduciary obligations under applicable
Law and (B) in the case of any Superior Proposal, Seller has given Buyer five (5) Business Days
prior written notice that the board of directors intends to make a Change of Board Recommendation
(the
Superior Proposal Notice
) and for a period of not less than five (5) Business Days after
Buyers receipt of such Superior Proposal Notice, Seller shall, if requested by Buyer, negotiate in
good faith with Buyer to revise this Agreement so that the Acquisition Proposal that constituted a
Superior Proposal no longer constitutes a Superior Proposal (a
Former Superior Proposa
l). The
terms and conditions of this
Section 6.5
shall again apply to any inquiry or proposal made
by any Person who withdraws a Superior Proposal or who made a Former Superior Proposal (after
withdrawal or after such time as their proposal is a Former Superior Proposal). Seller may, if it
receives an Acquisition Proposal, delay the mailing of the Proxy Statement and/or the holding of
the Seller Stockholders Meeting, in each case to provide a reasonable opportunity for the board of
directors of Seller to consider such Acquisition Proposal and to determine the effect of the same,
if any, on the Seller Board Recommendation. Except as permitted by this
Section 6.5
, the
Proxy Statement shall include the Seller Board Recommendation.
(e) Nothing contained in this Agreement shall prohibit the board of directors of Seller from
disclosing the fact that the board of directors of Seller has received an Acquisition Proposal and
the terms of such Acquisition Proposal, if the board of directors of Seller determines, after
consultation with its outside legal counsel, that (i) failure to make such disclosure would be
inconsistent with its fiduciary duties under applicable Law or (ii) Seller is otherwise required to
make such disclosure.
(f) For purposes of this Agreement, (i)
Acquisition Proposal
means any inquiry, offer or
proposal, or any indication of interest in making an offer or proposal, made by a Person or group
at any time which is structured to permit such Person or group to acquire beneficial ownership of
any Purchased Assets or at least twenty-five percent (25%) of the assets
36
of, or equity interest in, Seller and its Subsidiaries, taken as a whole, pursuant to a
merger, consolidation or other business combination, sale of shares of capital stock, sale of
assets, tender offer or exchange offer or similar transaction, in each case other than the
Transactions, and (ii)
Superior Proposal
means any bona fide Acquisition Proposal made by a
Person or group (except that references in the definition thereof to at least twenty-five percent
(25%) of the assets of, or equity interest in, Seller and its Subsidiaries, taken as a whole,
shall be replaced by more than fifty percent (50%) of the assets of, or equity interests in,
Seller and its Subsidiaries, taken as a whole), in each case other than the Transactions, made in
writing that the board of directors of Seller has determined in its good faith judgment (after
consultation with its financial advisors and outside counsel and after taking into account all
legal, financial, regulatory and other aspects of the proposal, including the financing terms
thereof) is more favorable to Seller and/or Sellers stockholders than the Transactions.
Notwithstanding anything to the contrary contained herein, in no event shall any acquisition by any
Person or group from Seller at any time after the termination of this Agreement of any equity
securities (as defined in Section 2(a)(1) of the Securities Act) of Seller constitute an
Acquisition Proposal or a Superior Proposal if the board of directors of Seller shall in good faith
determine that such acquisition is made in connection with a bona fide financing or capital raising
arrangement (an
Equity Financing
), nor shall any agreement entered into by any Person or group
with Seller after the termination of this Agreement in connection with or relating to an Equity
Financing constitute an Acquisition Proposal or a Superior Proposal.
(g) Notwithstanding anything to the contrary contained in this Agreement, the obligation of
Seller to call, give notice of, convene and hold the Seller Stockholders Meeting and to hold a
vote of Sellers stockholders on the asset sale contemplated by this Agreement and the Charter
Amendment shall not be limited or otherwise affected by the commencement, disclosure, announcement
or submission to it of any Acquisition Proposal (whether or not a Superior Proposal), or by any
Change of Board Recommendation. Seller agrees that it shall not submit to the vote of its
stockholders any Acquisition Proposal (whether or not a Superior Proposal) or propose to do so.
6.6
Transition Activities
. Between the Execution Date and the First Closing Date, Seller shall
promptly furnish Buyer with such reasonable sample quantities of any Promotional Materials that
Seller may have utilized in connection with Products during the three (3) month period prior to the
Execution Date, for use by Buyer in preparing its own Promotional Materials. All costs and
expenses incurred by Buyer with respect to creating any Promotional Materials shall be borne by
Buyer.
6.7
Trade Inventory
. Between the Execution Date and the First Closing, Seller shall use
Commercially Reasonable Efforts to distribute Products to its wholesalers and other customers in
quantities such that the volume of Products in the marketplace (including such amounts held by
distributors, wholesalers, retailers and customers) remains at levels consistent with the levels
established during the two (2) years preceding the Execution Date.
6.8
Cooperation Regarding Financial Statements; etc.
In the event that Buyer is required to
include any audited financial statements with respect to the Business in any filing to be made by
Buyer under the Securities Act or Exchange Act, with respect to or as a result of the transactions
contemplated by this Agreement, Seller shall (i) use commercially reasonable
37
efforts to provide Buyer with the financial statements and other information and documents
pertaining to the Business that Buyer will be required by applicable rules and regulations of the
SEC to include in its filings and (ii) use commercially reasonable efforts to cause the independent
auditors for Seller to promptly deliver such information and provide access to files and work
papers in connection therewith as Buyer may reasonably request. Buyer shall reimburse Seller for
any reasonable out of pocket costs incurred by Seller in connection therewith.
6.9
Notifications; Updated Schedules
. Between the Execution Date and the First Closing Date:
(a) Seller, on the one hand, and Buyer, on the other hand, shall promptly notify the other
Party in writing of any fact, change, condition, matter, circumstance, claim, event or occurrence
or nonoccurrence of any event of which it is aware that will or is reasonably likely to result in
any of the conditions set forth in
Article VII
becoming incapable of being satisfied;
(b) Seller shall give prompt notice to Buyer of (i) the existence, occurrence or
non-occurrence of any fact, change, condition, matter, circumstance, claim or event the existence,
occurrence or non-occurrence of which would cause the representations or warranties of Seller
contained in
Article IV
to be untrue or inaccurate in any material respect at or prior to
the First Closing Date and (ii) any material failure of Seller to perform, comply with or satisfy
any covenant, condition or agreement to be performed, complied with or satisfied by it hereunder.
With respect to a notice contemplated by clause (i) of the first sentence of this paragraph (b) if
the notice expressly acknowledges that the facts, changes, conditions, matters, circumstances
claims and/or events (occurrence or nonoccurrence of which) described therein occurred after the
Execution Date and would give rise to the failure of a condition in favor of Buyer set forth in
Article VII
(a
MAE Notice
) the Schedules included in the Seller Disclosure Letter hereto
shall be deemed to include the information contained in any such MAE Notice (other than for
purposes of
Articles VII
and
IX
) and no claim may be made by any Buyer Indemnitee
(including under
Article X
hereof) for Losses hereunder with respect to any of the facts,
changes, conditions, matters, circumstances, claims or other events (or the existence, occurrence
or nonoccurrence thereof) described in any such MAE Notice. A notice contemplated by clause (i)
(other than a MAE Notice) or clause (ii) of the first sentence of this paragraph (b) shall not be
deemed to update the Schedules included in the Seller Disclosure Letter or adversely affect Buyers
rights under this Agreement, including for the purposes of Buyers rights under
Articles
VII
,
IX
and
X
of this Agreement.
(c) Seller may, by delivery to Buyer, update the Schedules to correct typographical or
immaterial errors and, upon Buyers written approval, any such updated Schedule shall replace the
corresponding Schedule delivered by Seller in connection with the execution of this Agreement.
6.10
Further Assurances; Further Documents
.
(a) Each of the Parties shall use its commercially reasonable efforts, in the most expeditious
manner practicable, (i) to satisfy or cause to be satisfied all the conditions
38
precedent that are set forth in
Article VII
, as applicable to each of them, (ii) to
cause the Transactions to be consummated and (iii) without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably required on its part in
order to consummate the Transactions.
(b) Each of Buyer and Seller shall, and shall cause its respective Subsidiaries to, at the
request of another Party, take all actions such other Party may reasonably request to transfer the
Purchased Assets and the Assumed Liabilities on the terms and conditions of this Agreement in
connection with the consummation of the Transactions.
(c) Each of Buyer and Seller shall, and shall cause its respective Subsidiaries to, at the
request of another Party, execute and deliver to such other Party all such further instruments,
assignments, assurances and other documents as such other Party may reasonably request in
connection with the consummation of the Transactions.
6.11
Listing
. Seller shall use commercially reasonable efforts to cause the Shares to be listed
on the Exchange, or upon such other primary exchange on which the Common Stock is then listed, upon
their issuance if the Common Stock is listed upon any such exchange as of the First Closing Date.
6.12
Ownership Cap
.
From the Execution Date until the First Closing Date and after giving effect to the consummation of the Transactions, subject to Sellers
compliance with Section 6.2(b)(i), Buyer shall not and shall cause parent not to
(i) beneficially own (as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the shares of Common Stock and/or
(ii) possess 19.9% or more of the voting power of Seller.
ARTICLE VII.
CONDITIONS TO CLOSING
7.1
Conditions Precedent to Obligations of Buyer and Seller at the First Closing
. The
respective obligations of Buyer and Seller to consummate the transactions contemplated by this
Agreement to be consummated on the First Closing Date are subject to the satisfaction or waiver
(jointly by Buyer and Seller) at or prior to the First Closing Date of each of the following
conditions:
(a)
Order
. No Regulatory Authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions which are contemplated by this Agreement to be consummated on the
First Closing Date.
(b)
Stockholder Approval
. The Required Seller Stockholders Vote shall have been
obtained.
(c)
Charter Amendment
. The Charter Amendment shall have been filed with the Secretary
of State of the State of Delaware.
39
7.2
Conditions Precedent to Buyers Obligations at the First Closing
. The obligation of Buyer
to consummate the transactions contemplated by this Agreement to be consummated on the First
Closing Date is subject to the satisfaction at or prior to the First Closing Date of each of the
following additional conditions, any one or more of which may be waived by Buyer in its sole
discretion in writing:
(a)
Representations and Warranties
. Each of the representations and warranties of
Seller contained in
Article IV
, shall be true and correct as of the Execution Date and as
of the First Closing Date as though made on and as of the First Closing Date (unless any such
representation or warranty expressly relates to a particular date, in which case such
representation or warranty shall be true and correct only as of such date) except where the failure
of such representations and warranties to be true and correct would not, individually or in the
aggregate, be expected to have a Material Adverse Effect. Buyer shall have received a certificate
as to satisfaction of the conditions set forth in this
Section 7.2(a)
dated as of the First
Closing Date and executed by a duly authorized officer of Seller.
(b)
Performance
. Seller shall have performed and complied in all material respects
with each of the covenants, agreements and obligations Seller is required to perform, at or prior
to the First Closing Date, under this Agreement.
(c)
Deliveries/Actions
. Seller shall have made or caused to be made each of the
deliveries required to be made, and take each the actions required to be taken, by Seller under
Section 3.2(a)
.
(d)
No Material Adverse Effect
. No Material Adverse Effect shall have occurred since
the Execution Date.
(e)
Establishment of Development Bank Account
. Seller shall have established the
Development Bank Account in accordance with
Section 8.7(c)
.
7.3
Conditions Precedent to Sellers Obligations at the First Closing
. The obligation of
Seller to consummate the transactions contemplated by this Agreement to be consummated on the First
Closing Date is subject to the satisfaction on or prior to the First Closing Date of each of the
following additional conditions, any one or more of which may be waived by Seller in its sole
discretion in writing:
(a)
Representations and Warranties
. Each of the representations and warranties of
Buyer contained in
Article V
shall be true and correct in all material respects, as of the
Execution Date and as of the First Closing Date as though made on and as of the First Closing Date
(unless any such representation or warranty expressly relates to a particular date, in which case
such representation or warranty shall be true and correct only as of such date), except where the
failure of any representation or warranty to be true and correct would not prevent or materially
delay the consummation of the Transactions. Seller shall have received a certificate as to
satisfaction of the conditions set forth in this
Section 7.3(a)
dated as of the First
Closing Date and executed by a duly authorized officer of Buyer.
40
(b)
Performance
. Buyer shall have performed and complied in all material respects
with each of the covenants, agreements and obligations Buyer is required to perform at or prior to
the First Closing Date under this Agreement.
(c)
Deliveries/Actions
. Buyer shall have made or caused to be made each of the
deliveries required to be made, and take each the actions required to be taken, by Buyer under
Section 3.2(b)
.
7.4
Conditions Precedent to Obligations of Buyer and Seller at the Second Closing
. The
respective obligations of Buyer and Seller to consummate the transactions contemplated by this
Agreement to be consummated on the Second Closing Date are subject to the satisfaction or waiver
(jointly by Buyer and Seller) at or prior to the Second Closing Date of each of the following
conditions:
(a)
PTB US Development
. Completion of PTB US Development shall have occurred.
(b)
Order
. No Regulatory Authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions which are contemplated by this Agreement to be consummated on the
Second Closing Date.
(c)
First Closing
. The First Closing shall have occurred.
7.5
Conditions Precedent to Buyers Obligations to the Second Closing
. The obligation of Buyer
to consummate the transactions contemplated by this Agreement to be consummated on the Second
Closing Date are subject to the Seller making each of the deliveries required to be made, and take
each the actions required to be taken, by Seller under
Section 3.3(a)
each of which may be
waived in Buyers sole discretion in writing.
7.6
Conditions Precedent to Sellers Obligations to the Second Closing
. The obligation of
Seller to consummate the transactions contemplated by this Agreement to be consummated on the
Second Closing Date are subject to Buyer making each of the deliveries required to be made, and
take each the actions required to be taken, by Buyer under
Section 3.3(b)
each of which may
be waived in Sellers sole discretion in writing.
ARTICLE VIII.
ADDITIONAL COVENANTS
8.1
Confidentiality; Publicity
.
(a) The terms of the Confidentiality Agreement shall apply to any information provided by
Seller to Buyer pursuant to this Agreement.
(b) The Parties jointly agree that no public release or announcement concerning the
Transactions shall be issued by either of them without the prior written consent of the other
(which consent shall not be unreasonably withheld or delayed), except as such release or
announcement may be required by Law or the rules or regulations of any applicable United
41
States securities exchange or Regulatory Authority to which the relevant Party is subject or
submits, wherever situated, in which case the Party required to make the release or announcement
shall use its reasonable commercial efforts to allow, if reasonably practical, the other Party
reasonable time to comment on such release or announcement in advance of such issuance, it being
understood that the final form and content of any such release or announcement, to the extent so
required, shall be at the final discretion of the Party required to make such disclosure.
8.2
Use of Trade or Service Marks; Name Change
. Other than as expressly provided in this
Agreement and/or the Other Agreements, Buyer shall not use or permit any of its Affiliates or
distributors to use any of Sellers corporate marks, trademarks or service marks or names now or
hereafter owned or used by Seller.
8.3
Notification of Customers
. Promptly after the First Closing Date, Buyer and Seller shall
jointly notify all customers set forth on
Schedule 8.3
of the Seller Disclosure Letter of
the transfer to Buyer of the Purchased Assets and Assumed Liabilities (in each case, to the extent
transferred on the First Closing Date), and that all purchase orders for Products submitted after
the First Closing Date should be sent to Buyer at the address of Buyer set forth in
Section
11.4
.
8.4
Products Returns, Rebate Charges and Wholesaler Charges
.
(a)
NDC Numbers
. Following the First Closing Date, Buyer shall register with FDA to
obtain its own NDC numbers with respect to Products and shall use commercially reasonable efforts
to have in place as soon as reasonably practicable all resources such that sales can be
accomplished under the NDC numbers of Buyer. Thereafter, Buyer shall use, or cause to be used, its
new NDC numbers on all invoices, orders, drug labels and labeling and other communications with all
customers and Regulatory Authorities.
(b)
Products Returns
. Buyer shall be responsible for processing, or causing to be
processed, all Product returns requested on or after the First Closing Date, including any returns
of Products sold by Seller prior to the First Closing Date. Seller shall be responsible for
refunds owed with respect to Products sold prior to the First Closing Date;
provided
,
however
, if
Buyer and Seller sell Product from the same lot, then Buyer and Seller shall be responsible for
Products sold from such lot in proportion to their pro-rata sales of Products from such lot. (For
example, if Seller sold 80% of a lot prior to the First Closing Date and Buyer sells the remaining
20% of the lot after the First Closing Date, then Seller shall be responsible for 80% of the
refunds owed with respect to Products sold from such lot.) Buyer shall destroy, or cause to be
destroyed, all such returned Products in a manner consistent with applicable Law.
(c)
Rebate Charges
. Buyer shall be responsible for processing, or causing to be
processed, all Rebate Charges requested on or after the First Closing Date, including with respect
to any Products sold by Seller prior to the First Closing Date. Seller shall be responsible for
Rebate Charges for Products sold prior to the First Closing Date;
provided
,
however
, if Buyer and
Seller sell Product from the same lot, then Buyer and Seller shall be Rebate Charges for Products
sold from such lot in proportion to their pro-rata sales of Products from such lot.
42
(d)
Wholesaler Charges
. Buyer shall be responsible for processing, or causing to be
processed, all Wholesaler Charges requested on or after the First Closing Date, including with
respect to any Products sold by Seller prior to the First Closing Date.
(e)
Notices
. Buyer and Seller shall agree upon an appropriate notice with respect to
the transfer of Rebate Charge and Wholesaler Charge submissions to Buyer after the First Closing
Date.
8.5
Regulatory Matters
.
(a) Until the First Closing Date, Seller shall be solely responsible for (i) taking all
actions, paying all fees and conducting all communication with the appropriate Regulatory Authority
required by Law in respect of Regulatory Approvals, including preparing and filing all reports
(including adverse drug experience reports, product deviation reports, annual reports, with the
appropriate Regulatory Authority), (ii) submitting all applications for marketing authorizations of
new drugs, where such authorizations have not yet been granted, and variation of existing
authorizations, and (iii) investigating all complaints and adverse drug experiences with respect to
Products sold pursuant to such Regulatory Approvals.
(b) Until the Second Closing Date, Seller shall be solely responsible for (i) taking all
actions, paying all fees and conducting all communication with the appropriate Regulatory Authority
required by Law in respect of Regulatory Approvals solely for the PTB Indication, including
preparing and filing all reports (including adverse drug experience reports, product deviation
reports, annual reports, with the appropriate Regulatory Authority), (ii) submitting all
applications for marketing authorizations of new drugs solely for the PTB Indication, where such
authorizations have not yet been granted, and variation of existing authorizations, and (iii)
investigating all complaints and adverse drug experiences with respect to Products sold pursuant to
such Regulatory Approvals. The costs incurred by Seller for activities pursuant to this
Section 8.5(b)
shall constitute Development Costs of Seller subject to the Seller
Development Costs Cap.
(c) From and after the First Closing, Buyer, at its cost shall be solely responsible for
taking all actions and conducting all communication with third parties with respect to Products
sold pursuant to such Regulatory Approvals (whether sold before or after transfer of such
Regulatory Approval), including responding to all complaints in respect thereof, including
complaints related to tampering, contamination, or counterfeiting.
(d) Seller shall provide Buyer with such data as is reasonably necessary to comply with
Buyers reporting obligations for Best Price (as defined at 42 U.S.C. § 1396r-8(c)(1)(C)), Average
Manufacturers Price (as defined at 42 U.S.C. § 1396r-8(k)(1)) and Average Sales Price (as defined
at 42 U.S.C. § 1395w-3(a)(c)) for such period as is reasonably necessary, not to exceed one (1)
year after the First Closing Date.
(e) From and after the First Closing Date, Buyer promptly (and in any event within the time
periods required by Law) shall notify Seller within three (3) Business Days if Buyer receives a
complaint or a report of an adverse drug experience with respect to Products. In addition, Buyer
shall cooperate with Sellers reasonable requests and use Commercially
43
Reasonable Efforts to assist Seller in connection with the investigation of and response to
any complaint or adverse drug experience related to Products sold by Buyer.
(f) From and after the First Closing Date, Buyer shall be responsible for (i) conducting all
voluntary and mandatory recalls of units of Products sold pursuant to such Regulatory Approvals
(whether sold before or after transfer of such Regulatory Approval), including recalls required by
any Regulatory Authority and recalls of units of Products sold by Seller deemed necessary by Seller
in its reasonable discretion, (ii) conducting all communications and submitting all required
reports to any Regulatory Authority concerning the recalls and (iii) notifying customers and
consumers about the recalls. Seller promptly shall notify Buyer in the event that a recall of
Products sold by Seller is necessary. Seller shall be responsible for all costs associated with
recalls of Products sold prior to First Closing Date;
provided
,
however
, if Buyer and Seller sell
Product from the same lot, then Buyer and Seller shall be responsible for the cost of recalls of
Products sold from such lot in proportion to their pro-rata sales of Products from such lot.
(g) Seller and Buyer each agree to promptly prepare and file whatever filings, requests or
applications are required or deemed advisable to be filed with any Regulatory Authority in
connection with the Transactions and transfer and assumption of the Regulatory Approvals and to
cooperate with one another as reasonably necessary to accomplish the foregoing.
8.6
Tax Matters
.
(a) All Transfer Taxes shall be paid fifty percent (50%) by Seller and fifty percent (50%) by
Buyer. Any Tax Return that must be filed in connection with Transfer Taxes shall be duly prepared
and timely filed by the Party primarily or customarily responsible under applicable local Law for
filing such Tax Return (the
Filing Party
), and such Filing Party will use commercially reasonable
efforts to provide such Tax Return to the other Party at least ten (10) Business Days prior to the
date such Tax Return is due to be filed. The Parties agree to use their commercially reasonable
efforts to resolve any disagreements over such Tax Return as promptly as possible. The non-Filing
Party shall furnish its fifty percent (50%) share of such Transfer Taxes to the Filing Party no
later than the later of (x) five (5) Business Days after such Tax Returns have been provided by the
Filing Party or (y) two (2) Business Days prior to such filing. The Filing Party shall provide the
non-Filing Party with evidence reasonably satisfactory to the non-Filing Party that such Transfer
Taxes have been paid by the Filing Party.
(b) Buyer and Seller agree to furnish or cause to be furnished to the other, upon request, as
promptly as practicable, such information and assistance relating to the Purchased Assets,
including, without limitation, access to books and records, as is reasonably necessary for the
filing of all Tax Returns by Buyer or Seller, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority and the prosecution or defense of any claim, suit
or proceeding relating to any Tax. Each of Buyer and Seller shall retain all books and records
with respect to Taxes pertaining to the Purchased Assets for a period of at least seven (7) years
following the applicable Closing Date.
44
(c) Seller shall be responsible for and shall promptly pay when due (x) all Property Taxes
levied with respect to the First Closing Date Purchased Assets attributable to the Pre-Closing Tax
Period and (y) all Property Taxes levied with respect to the Second Closing Date Purchased Assets
attributable to the Second Pre-Closing Tax Period, and Buyer shall be responsible for and shall
promptly pay when due (x) all Property Taxes levied with respect to the First Closing Date
Purchased Assets attributable to the Post-Closing Tax Period and (y) all Property Taxes levied with
respect to the Second Closing Date Purchased Assets attributable to the Second Post-Closing Tax
Period. All Property Taxes levied with respect to the Purchased Assets for the First Closing
Straddle Period or the Second Closing Straddle Period (as the case may be) shall be apportioned
between Buyer and Seller based on the number of days of such Straddle Period included in the
Pre-Closing Tax Period or the Second Pre-Closing Tax Period (as the case may be) and the number of
days of such Straddle Period included in the Post-Closing Tax Period or the Second Pre-Closing Tax
Period (as the case may be). Seller shall be liable for the proportionate amount of such Property
Taxes that is attributable to the relevant Pre-Closing Tax Period, and Buyer shall be liable for
the proportionate amount of such Property Taxes that is attributable to the relevant Post-Closing
Tax Period. Upon receipt of any bill for such Property Taxes, Buyer or Seller, as applicable,
shall present a statement to the other setting forth the amount of reimbursement to which each is
entitled under this
Section 8.6(c)
together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration amount shall be paid by the party owing
it to the other within ten (10) days after delivery of such statement. In the event that Buyer or
Seller makes any payment for which it is entitled to reimbursement under this
Section
8.6(c)
, the applicable party shall make such reimbursement promptly but in no event later than
ten (10) days after the presentation of a statement setting forth the amount of reimbursement to
which the presenting party is entitled along with such supporting evidence as is reasonably
necessary to calculate the amount of reimbursement.
(d) Seller shall promptly notify Buyer in writing upon receipt by Seller of notice of any
pending or threatened Tax audits or assessments relating to the income, properties or operations of
Seller that reasonably may be expected to relate to or give rise to an Encumbrance on the Purchased
Assets. Each of Buyer and Seller shall promptly notify the other in writing upon receipt of notice
of any pending or threatened Tax audit or assessment challenging the Allocation Schedule.
(e) Buyer and Seller shall cooperate fully with each other in the conduct of any audit,
litigation or other proceeding relating to Taxes involving the Purchased Assets or the Allocation
Schedule. To the extent there arise any inquiries, claims, assessments, audits or similar events
with respect to Taxes relating to the Purchased Assets for a Pre-Closing Tax Period (any such
inquiry, claim, assessment, audit or similar event, a
Tax Matter
) and Seller acknowledges in
writing to Buyer that Seller shall be obligated to pay in full any Liability that results from a
Tax Matter under the terms of its indemnity under this Agreement (a
Complete Indemnity
Obligation
), then Seller shall be entitled, if it so elects at its own cost, risk and expense, by
written notice to Buyer within ten (10) Business Days of the institution thereof, to take sole
control of the conduct of such Tax Matter, including any settlement or compromise thereof,
provided
,
however
, that Seller shall keep Buyer reasonably informed of the progress of any such Tax
Matter and shall not effect any such settlement or compromise of such Tax Matter which would result
in a material adverse Tax consequence to Buyer without obtaining Buyers prior written consent
thereto, which shall not be unreasonably withheld or delayed; and,
45
provided
,
further
, that to the extent Seller would not have a Complete Indemnity Obligation to
Buyer hereunder in respect of any Tax Matter, Seller and Buyer shall each be entitled to exercise
joint control of the conduct of such Tax Matter with the other Party, with each bearing its own
costs and expenses. In the event of any conflict or overlap between the provisions of this
Section 8.6(e)
and
Section 10.6
(relating to indemnification procedures), the
provisions of this
Section 8.6(e)
shall control.
(f) Seller and Buyer hereby waive compliance with any bulk sales Laws (including Laws
relating to obtaining Tax clearance certificates and any requirement to withhold any amount from
payment of the Purchase Price or Post-Closing Payments) applicable to the sale to Buyer of the
Purchased Assets by Seller.
8.7
Development
.
(a)
Development Generally; Development Plan
.
(i) The Parties respective responsibilities for the Development of the Products shall
be set forth in the Development Plan, subject to this
Section 8.7
and the other
provisions of this Agreement. All Development activities after the First Closing Date will
be overseen and supervised by the Joint Development Committee.
(ii) The Parties will establish and, from and after the First Closing Date, actively
maintain and update a Development plan for the Development of Products (the
Development
Plan
), including a Development budget therefor (the
Development Budget
). The Development
Plan will include a Development plan for the Development by Seller of Prochieve for the PTB
Indication (the
Prochieve PTB Development Plan
). The initial Prochieve PTB Development
Plan is attached hereto as
Schedule 8.7
of the Seller Disclosure Letter. In
addition to the Prochieve PTB Development Plan, the Development Plan shall include detailed
plans and timelines for the Development of Next Generation Products after the First Closing
Date through to the projected date of Regulatory Approval in each Major Territory of a Next
Generation Product for the PTB Indication. Buyer shall prepare and the Joint Development
Committee shall approve a full Development Plan, as described in this
Section
8.7(a)(ii)
within sixty (60) days of the First Closing Date. The Development Plan and
Development Budget may be updated from time to time after First Closing Date by the Joint
Development Committee in accordance with
Section 8.9
.
(b)
Development of Prochieve for the PTB Indication
.
(i) From and after the First Closing Date until the Second Closing Date, Seller will be
responsible for Product Development activities related to Prochieve for the PTB Indication
as set forth in the Prochieve PTB Development Plan, including the conduct of the PREGNANT
Study. Seller shall use Commercially Reasonable Efforts to retain its employees who are
responsible for, or tasked with, achievement of Regulatory Approval for a PTB Product (the
PTB Product Team
) until the Second Closing Date. If, due to the departure of one or more
employees of Seller, the capabilities of the PTB Product Team are materially adversely
impacted prior to the Second Closing Date, Seller
46
shall use Commercially Reasonable Efforts promptly to replace any such employee(s). All
Development Costs in connection with such Product Development activities incurred by or on
behalf of Seller from and after the First Closing Date will be borne by Seller;
provided
,
that notwithstanding any other provision hereof or in the Other Agreements and
notwithstanding any amendments or updates to the Development Plan, Seller shall be required
to bear no more than seven million Dollars ($7,000,000) in such Development Costs (the
Seller Development Costs Cap
) and
provided
,
further
, that, if Buyer requests an increase
in the patient enrollment in the PREGNANT Study in excess of five hundred (500) patients,
any costs related to such increase, in excess of what is contemplated in the Development
Plan, shall be borne by Buyer. All Development Costs incurred by Seller and reasonably
documented after January 1, 2010 shall count towards the Seller Development Costs Cap. All
Development Costs in excess of the Seller Development Costs Cap will be borne by Buyer.
(c) On the First Closing Date, Seller shall establish a separate bank account at a
nationally recognized financial institution (the
Development Bank Account
) for the purpose
of paying Development Costs. The initial balance of the Development Bank Account shall be
equal to the excess of (A) the Seller Development Costs Cap minus (B) the amount of
reasonably documented Development Costs incurred by Seller after January 1, 2010 through the
First Closing Date. Seller shall provide to Buyer full access to review the balances in the
Development Bank Account on a current basis during the Seller Expense Period. Until the
earlier of the time that (x) Seller has fulfilled its responsibilities set forth in the
Development Plan and Development Budget and (y) Seller has incurred an amount of Development
Costs (including any reasonably documented Development Costs incurred by Seller after
January 1, 2010 and prior to the First Closing Date) equal to the Seller Development Costs
Cap (the
Seller Expense Period
), the funds in the Development Bank Account shall be used
exclusively for the payment of Development Costs.
(d)
Lifecycle Management
. The Parties Development activities hereunder
include and the Development Plan will reflect an active and sustained program with respect
to the lifecycle management of Products (including Development of a Next Generation Product
as contemplated by
Section 8.7(a)(ii)
) under the supervision of the Joint
Development Committee. Buyer will be responsible for all Development activities and
Development costs associated therewith,
provided
, that any such activities may be allocated
to Seller, at Buyers cost, with the mutual agreement of the Parties.
(e)
Seller Development Activities
.
(i) Seller shall use Commercially Reasonable Efforts to timely and diligently conduct
all Seller Development Activities. All Seller Development Activities shall be conducted by
Seller in accordance with the Development Plan.
(ii) No less than five (5) Business Days prior to each scheduled meeting of the Joint
Development Committee, Seller will provide the Buyer members of the Joint Development
Committee with a written report on the status and progress of Seller Development Activities,
which reports shall include information on progress
47
versus plan, spend versus budget (quarterly), protocol deviations, notable safety and
efficacy findings (including serious adverse events and events of interest from risk
management perspective), inspection, audit findings, and summaries of all interactions, and
copies of all correspondence, with Regulatory Authorities since the previous report.
(iii) In addition, Seller shall make available to Buyer such information about Seller
Development Activities as may be reasonably requested by Buyer from time to time.
(iv) Buyer shall have the right to review any data generated by Seller during the
conduct of Seller Development Activities, as may be reasonably requested by Buyer from time
to time.
(v) Seller shall promptly inform Buyer in writing about any unforeseen and/or material
results, problems, difficulties or issues in connection with the Seller Development
Activities or of which Seller is otherwise aware with respect to the Development of
Products.
(vi) Seller shall notify Buyer promptly upon scheduling, and provide Buyer with five
(5) days notice, of any Regulatory Authority meetings with FDA or EMEA held by Seller or its
Subsidiary for a Product, and Buyer, at its option, may attend such meetings.
(f)
Buyer Development Activities
.
(i) Buyer shall use Commercially Reasonable Efforts to timely and diligently conduct
all Buyer Development Activities. Without limiting the foregoing, Buyer shall use
Commercially Reasonable Efforts to achieve each of the Milestones set forth in
Section
2.8(a)
and (
b)
as soon as practicable, it being acknowledged that prior to the
Second Closing Date, conduct of the PREGNANT Study and Development efforts with respect to
the achievement of the PTB NDA Acceptance Milestone shall be Sellers responsibility. All
Buyer Development Activities shall be conducted by Buyer in accordance with the Development
Plan.
(ii) No less than five (5) Business Days prior to each scheduled meeting of the Joint
Development Committee, Buyer will provide the Seller members of the Joint Development
Committee with a written report on the status and progress of Buyer Development Activities,
which reports shall include information on progress versus plan, spend versus budget
(quarterly), protocol deviations, notable safety and efficacy findings (including serious
adverse events and events of interest from risk management perspective), inspection, audit
findings, and summaries of all interactions, and copies of all correspondence, with
Regulatory Authorities since the previous report.
(iii) In addition, Buyer shall make available to Seller such information about Buyer
Development Activities as may be reasonably requested by Seller from time to time.
48
(iv) Seller shall have the right to review any data generated by Buyer during the
conduct of Buyer Development Activities, as may be reasonably requested by Seller from time
to time.
(v) Buyer shall promptly inform Seller in writing about any unforeseen material
results, problems, difficulties or issues in connection with the Buyer Development
Activities or of which Buyer is otherwise aware with respect to the Development of the
Products.
(vi) Buyer shall notify Seller promptly upon scheduling, and provide Seller with five
(5) days notice, of any Regulatory Authority meetings with FDA or EMEA held by Buyer or its
Affiliate for a Product, and Seller, at its option, may attend such meetings.
(g)
Development Costs Reporting and Payment
. Each Party shall prepare and deliver to
the other Party quarterly written reports in a form approved by the Joint Development Committee
setting forth all Development Costs incurred in the performance of all Development activities, as
set forth in this Agreement and the Development Plan in the applicable calendar quarter by such
Party on an activity-by-activity basis. Such quarterly reports shall be submitted within thirty
(30) days after the end of the relevant calendar quarter for review by the Joint Development
Committee and Seller shall include in each such report an original invoice for Development Costs
incurred by Seller or its Subsidiaries payable hereunder, and Buyer shall pay Seller all such
amounts within thirty (30) days from the date of receipt by Buyer of the applicable invoice.
(h)
Compliance
. Each Party agrees that in performing its Development obligations
under this Agreement (a) it shall comply with all applicable current international regulatory
standards, including cGMP, cGLP, cGCP and other rules, regulations and requirements and (b) it will
not employ or use any person that has been debarred under Section 306(a) or 306(b) of the U.S.
Federal Food, Drug and Cosmetic Act.
(i)
Regulatory
.
(i) The Joint Development Committee shall determine plans and strategies for seeking
Regulatory Approvals for Products.
(ii) The Party responsible for Development of a Product shall also be responsible for
making all Regulatory Filings and seeking Regulatory Approval for such Product in the
applicable jurisdiction(s) and be responsible for conducting all meetings with Regulatory
Authorities in connection therewith (subject to
Sections 8.7(e)(vi)
and
8.7(f)(vi)
).
(iii) Buyer shall fully cooperate with and provide assistance to Seller in connection
with filings to any Regulatory Authority relating to the Products, including by executing
any required documents, providing access to personnel and providing such Party with copies
of all reasonably required documentation.
49
(iv) To the extent required, each Party shall grant or cause to be granted to the other
and its Affiliates or sublicensees cross-reference rights to any relevant drug master files
and other filings submitted by such Party or its Affiliates with any Regulatory Authority
relevant to the Products. In countries where cross-reference rights are deemed
insufficient, each Party shall assist the other in preparing and providing the relevant
Regulatory Authorities with equivalent Regulatory Filings in order to enable such other
Party to comply with its regulatory obligations and obtain the relevant Regulatory
Approvals.
(j)
Joint Development Period
. Notwithstanding the other provisions of this
Section 8.7
, Sellers role in the Development of Products as contemplated by this
Agreement, including its participation in the Joint Development Committee and its rights and
obligations set forth in this
Section 8.7
in relation thereto, shall terminate upon
termination of the Joint Development Period;
provided
, that such termination shall not limit or
restrict any rights or obligations of Buyer or Seller accrued prior to such termination.
8.8
Commercialization
.
(a)
Commercialization Generally
. Subject to the other provisions of this Agreement,
including the other provisions of this
Section 8.8
, Buyer shall be solely responsible to
Commercialize the Products in the Territory from and after the First Closing Date. All
Commercialization activities shall be conducted in accordance with the terms of this Agreement.
Buyer shall use Commercially Reasonable Efforts to Commercialize Products in order to maximize Net
Sales in the Territory during the Marketing Term.
(b)
Compliance with Laws
. In connection with all Commercialization activities under
this Agreement, Buyer and all of its sales representatives shall comply with all applicable rules,
regulations and requirements, including the Office of Inspector General Compliance Program Guidance
for Pharmaceutical Manufacturers, April 2003, PDMA, state Laws and regulations governing the
storage and distribution of pharmaceutical samples and aggregate spending on physician gifts,
entertainment and expenses, the PhRMA Code, Section 1128B(b) of the Social Security Act, the AMA
Guidelines on Gifts to Physicians from Industry, the Office of Inspector General Compliance Program
Guidance for Pharmaceutical Manufacturers, HIPAA and all other applicable Laws.
(c)
Promotional Materials
. Buyer shall be responsible for developing and
disseminating all promotional, advertising, communication and educational materials relating to the
Commercialization of the Products hereunder.
(d)
Launch
. Buyer shall or shall cause its Affiliates, agents, licensees,
sublicensees or distributors to Launch the PTB Product in the United States within six (6) months
after receipt of the PTB US Approval.
(e)
Potential Partners Ex-U.S
. To the extent Buyer or any Affiliate thereof is not
seeking Regulatory Approval or Commercializing any Royalty Products or PTB Royalty Products in a
country outside the U.S. and has no current plans to do so, Seller shall be entitled to seek
proposals from Third Parties to Develop and/or Commercialize Royalty Products and/or
50
PTB Royalty Products in such country. Prior to initiating efforts to identify or solicit
proposals from Third Parties, Seller shall notify the Buyer of its intent to do so. In such event
Buyer shall cooperate with Seller in such efforts, including providing Seller or any Third Party
such information and data regarding the Product as may be reasonably requested by Seller or such
Third Party, subject to such Third Party entering into a confidentiality agreement on terms
approved in writing by Buyer (such approval not to be unreasonably withheld). Any proposals
submitted by any such Third Party shall be reviewed and discussed by the Joint Commercialization
Committee, provided that any decision whether or not to pursue any such proposals shall be subject
to the approval of Buyer. For the avoidance of doubt, any activities of Seller contemplated by
this
Section 8.8(e)
shall not constitute a breach of
Section 8.11
.
8.9
Joint Development Committee
.
(a)
Generally
.
(i) The Parties will establish a Joint Development Committee, composed of three (3)
senior executives of Seller and three (3) senior executives of Buyer, two (2) of which will
have responsibility for Development activities within the appointing Partys organization.
Prior to the First Closing Date, each Party will designate its initial members to serve on
the Joint Development Committee and notify the other Party of the dates of availability for
the first meeting of the Joint Development Committee. Each Party may replace its
representatives on the Joint Development Committee on written notice to the other Party.
(ii) The Joint Development Committee will oversee and supervise all Development
activities for Products by the Parties pursuant to this Agreement. Without limiting the
foregoing, the Joint Development Committee shall: (A) review the Development Plan and
Development Budget no less frequently than once per calendar year and consider and approve
any proposed amendments or updates thereto; (B) be responsible for monitoring and reviewing
the activities of the Parties in connection with Development of Products under the
Development Plan and assessing overall performance and compliance by the Parties with the
Development Plan; (C) determine any matter within the Joint Development Committees
responsibility delegated to any sub-committees established pursuant to
Section
8.9(d)
with respect to which such sub-committees have been unable to reach agreement;
(D) perform any other activities related to the Development Plan as jointly requested by
both Parties from time to time; (E) be solely responsible for approving any submission to
the FDA of the PTB NDA or PTB Supplemental NDA; (F) be solely responsible for approving any
amendments, modifications, supplements or updates to the PTB NDA or PTB Supplemental NDA;
(G) be solely responsible for negotiating and accepting the PTB US Approval and (H) consider
and act upon such other matters as specified in this Agreement.
(b)
Meetings of the Joint Development Committee
.
(i) The Joint Development Committee shall meet on a quarterly basis and at such other
times as the Parties may agree, with at least thirty (30) days advance written notice to
each Party. The first meeting of the Joint Development Committee shall
51
be held as soon as reasonably practicable, but in no event later than thirty (30) days
following the First Closing Date. Meetings shall be held face to face at such dates and
places as are mutually agreed or by teleconference or videoconference should the members of
the Joint Development Committee mutually decide. Unless otherwise agreed by the Parties,
all in-person meetings of the Joint Development Committee shall be held on an alternating
basis between Sellers facility and Buyers facilities.
(ii) Each Party may from time to time invite a reasonable number of participants, in
addition to its representatives, to attend Joint Development Committee meetings, with the
consent of the other Party (which shall not be unreasonably withheld);
provided
, that if
either Party intends to have any Third Party (including any consultant) attend such a
meeting, such Third Party will be subject to the prior approval of the other Party and must
be bound by a confidentiality agreement acceptable to both Parties.
(iii) Buyer shall appoint one (1) of its representatives on the Joint Development
Committee to act as chairperson of the Joint Development Committee. The chairperson shall
set agendas for Joint Development Committee meetings;
provided
that the agendas will include
any reasonable matter requested by either Party. The chairperson shall be responsible for
recording, preparing and, within a reasonable time, issuing minutes of each Joint
Development Committee meeting, which draft minutes shall be subject to review and comment by
the Parties.
(iv) In order to have a quorum for the conduct of business at any Joint Development
Committee meeting, at least one (1) representative of each Party must be present.
(c)
Decision Making
.
(i) Decisions of the Joint Development Committee shall be made by unanimous vote, with
each Partys representatives to the Joint Development Committee collectively having one
vote. In the event of a disagreement among the Joint Development Committee with respect to
a matter to be decided by the Joint Development Committee as specified herein, the matter
shall be referred to the Senior Officers who shall attempt in good faith to resolve such
disagreement. If they cannot resolve such issue within thirty (30) days of the matter being
referred to them, then, subject to
Section 8.9(c)(ii)
below, the resolution and/or
course of conduct shall (x) in the case of decisions made in respect of matters described in
clauses (E) and (G) of the last sentence of
Section 8.9(a)(ii)
, be determined by
Buyer in its sole discretion and (y) in all other cases, be determined by Buyer in its
reasonable discretion.
(ii) Notwithstanding the foregoing, in no event shall Buyer in exercising its final
decision-making authority described in
Sections 8.9(c)(i)
have the right:
(A) to modify or amend the terms and conditions of this Agreement or to
determine any such issue in a manner that would conflict with the express
terms and conditions of this Agreement; or
52
(B) to approve or adopt any amendment, modification or update to the
Development Plan or Development Budget or take any other action that would
(A) unilaterally impose an obligation (financial or otherwise) on Seller
beyond those expressly provided in this Agreement, (B) excuse Buyer from any
of its obligations specifically enumerated under this Agreement, or (C)
reduce the rights of Seller specifically enumerated under this Agreement.
(d)
Sub-Committees
.
(i) The Joint Development Committee may, at any time it deems necessary or appropriate,
establish additional joint committees and delegate such of its responsibilities as it
determines appropriate to such joint committees.
(ii) In the event of a disagreement among the members of any such joint committee, the
matter shall be referred to the Joint Development Committee for resolution pursuant to
Section 8.9(c)
above.
8.10
Joint Commercialization Committee
.
(a)
Generally
.
(i) The Parties will establish a Joint Commercialization Committee composed of one (1)
representative of Seller and such number of representatives of Buyer as it shall determine,
in its discretion. Prior to the First Closing Date, each Party will designate its initial
members to serve on the Joint Commercialization Committee and notify the other Party of the
dates of availability for the first meeting of the Joint Commercialization Committee. Each
Party may replace its representatives on the Joint Commercialization Committee on written
notice to the other Party.
(ii) The Joint Commercialization Committee will provide a means for the exchange of
information between the Parties regarding Commercialization activities for Products.
Without limiting the foregoing, at each annual meeting of the Joint Commercialization
Committee, the Committee shall review and discuss Buyers Commercialization activities with
respect to Products during the prior year and review and discuss Buyers planned
Commercialization activities for the next year. In furtherance thereof, at each annual
meeting of the Joint Commercialization Committee, Buyer shall provide to Seller a
Commercialization presentation covering sales forecasts and the annual marketing plan,
including sales force allocations and activities. The Joint Commercialization Committee
shall also review and discuss opportunities or proposals to grant any license, sublicense,
distribution or marketing rights to any Third Party to Commercialize any Royalty Products or
PTB Royalty Products in any country outside the U.S. from time to time, including as
contemplated by
Section 8.8(e)
.
(b)
Meetings of the Joint Commercialization Committee
.
(i) The Joint Commercialization Committee shall meet on an annual basis, from time to
time at the request of Seller for the purpose contemplated by
53
Section
8.8(e)
, and at such other times as the Parties may agree, in each case, with at
least thirty (30) days advance written notice to each Party. The first meeting of the Joint
Commercialization Committee shall be held as soon as reasonably practicable, but in no event
later than ninety (90) days following the First Closing Date. Meetings shall be held face
to face at such dates and places as are mutually agreed or by teleconference or
videoconference should the members of the Joint Commercialization Committee mutually decide.
Unless otherwise agreed by the Parties, all in-person meetings of the Joint
Commercialization Committee shall be held at an alternating basis between Sellers facility
and Buyer facilities.
(ii) Each Party may from time to time invite a reasonable number of participants, in
addition to its representatives, to attend Joint Commercialization Committee meetings in a
non-voting capacity, with the consent of the other Party (which shall not be unreasonably
withheld);
provided
, that if either Party intends to have any Third Party (including any
consultant) attend such a meeting, such Third Party will be subject to the prior approval of
the other Party and must be bound by a confidentiality agreement acceptable to both Parties.
(c)
Decision Making
. The Joint Commercialization Committee shall have no
decision-making authority and the Commercialization of the Products in the Territory from and after
the First Closing Date shall be in accordance with
Section 8.8
hereof.
8.11
Covenant Not to Compete
.
(a) Seller understands that Buyer shall be entitled to protect and preserve the value of the
Business following the First Closing Date to the extent permitted by Law and that Buyer would not
have entered into this Agreement absent the provisions of this
Section 8.11
. During the
Joint Development Period and for a period of two (2) years thereafter (the
Non-Compete Period
),
Seller and its Subsidiaries, and any successor to all or substantially all of their assets, taken
as a whole, shall not, directly or indirectly (1) engage in the manufacture, Development or
Commercialization in the Territory (A) of Products containing Progesterone, or (B) any other
products which are approved or being Developed for any pre-term birth indication ((i) and (ii),
collectively,
Competing Activities
); or (2) engage in, own, manage, operate, advise, control or
in any way participate in the ownership, management, operation, financing or control of any
business engaged in Competing Activities (a
Competing Business
). The restrictions set forth in
this
Section 8.11
shall not be construed to preclude, prohibit or restrict (i) Seller, from
performing its obligations under this Agreement or the Other Agreements; (ii) any investment by
Seller or its Subsidiaries in any class of publicly traded debt or equity securities of any
Competing Business so long as Seller does not hold at any time during such period more than five
percent (5%) of such class of issued and outstanding voting securities of such publicly traded
company, and so long as Seller does not otherwise exercise any management or control with respect
to such Competing Business; or (iii) any activity set forth on
Schedule 8.11
.
(b) If a court determines that the foregoing restrictions are too broad or otherwise
unreasonable under applicable Law, including with respect to time or scope, the court is hereby
requested and authorized by the Parties to revise the foregoing restriction to include the
54
maximum
restrictions allowable under applicable Law. Each of the Parties acknowledges, however, that this
Section 8.11
has been negotiated by the Parties and that the
Territory and Non-Compete Period are reasonable in light of the circumstances pertaining to the
Parties.
(c) Notwithstanding any other provision of this Agreement, it is understood and agreed that
the remedy of indemnity payments pursuant to
Article X
and other remedies at law, if any,
would be inadequate in the case of any breach of the covenants contained in this
Section
8.11
, and, accordingly, Buyer shall be entitled to equitable relief, including the remedy of
specific performance, with respect to any breach or attempted breach of such covenants.
ARTICLE IX.
TERMINATION AND SURVIVAL
9.1
Termination
.
(a) This Agreement may be terminated prior to the First Closing Date:
(i) at any time before the First Closing Date by mutual written consent of Buyer and
Seller;
(ii) by either Party, by delivery of written notice of termination to the other, if the
First Closing Date has not occurred on or before August 30, 2010 (the
Outside Date
);
provided
, that such failure is not due to the failure of the Party seeking to terminate this
Agreement to comply in all material respects with its obligations under this Agreement;
(iii) by either Party, by delivery of written notice of termination to the other, if
the Seller Stockholders Meeting is held and the Required Seller Stockholders Vote is not
obtained at the Seller Stockholders Meeting (or at any adjournment thereof); or
(iv) by either Party, by delivery of written notice of termination to the other, if any
Regulatory Authority of competent jurisdiction shall have issued an order, decree or ruling,
or taken any other action permanently restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have become final and
non-appealable;
provided
that in order for either party to seek to terminate this Agreement
pursuant to this
Section 9.1(a)(iv)
, it must have used its commercially reasonable
efforts to lift and rescind such order, decree, ruling or other action.
(b) This Agreement may be terminated by Seller prior to the First Closing Date by delivery of
a written notice of termination to Buyer, if:
(i) (A) any representation or warranty of Buyer set forth in this Agreement shall have
become untrue, (B) such misrepresentation is not capable of being cured prior to the Outside
Date and (C) as a result of the preceding clauses (A) and (B), the condition set forth in
Section 7.3(a)
is not capable of being met; or
55
(ii) (A) a material breach of any covenant or obligation in this Agreement has been
committed by Buyer, (B) such breach has not been waived by Seller and such breach is not
cured by Buyer within ten (10) days after written notice thereof is delivered by Seller to
Buyer or is incapable of being cured by Buyer and (C) as a result of the preceding clauses
(A) and (B), the condition set forth in
Section 7.3(b)
is not capable of being met.
(c) This Agreement may be terminated by Buyer prior to the First Closing Date by delivery of a
written notice of termination to Seller, if:
(i) (A) any representation or warranty of Seller set forth in this Agreement shall have
become untrue, (B) such misrepresentation is not capable of being cured prior to the Outside
Date and (C) as a result of the preceding clauses (A) and (B), the condition set forth in
Section 7.2(a)
is not capable of being met;
(ii) (A) a material breach of any covenant or obligation in this Agreement has been
committed by Seller, (B) such breach has not been waived by Buyer and such breach is not
cured by Seller within ten (10) days after written notice thereof is delivered by Buyer to
Seller or is incapable of being cured by Seller and (C) as a result of the preceding clauses
(A) and (B), the condition set forth in
Section 7.2(b)
is not capable of being met;
or
(iii) if, prior to obtaining the Required Seller Stockholders Vote a Change of Board
Recommendation shall have occurred;
provided
, that any such termination must occur within
five (5) Business Days following the occurrence of any Change of Board Recommendation.
9.2
Procedure and Effect of Termination
.
(a) Upon termination of this Agreement by Seller or Buyer pursuant to
Section 9.1
,
this Agreement shall terminate forthwith and become void and there shall be no Liability or
obligation on the part of the Parties or their respective Representatives, except as provided in
this
Section 9.2
. Termination of this Agreement shall terminate all outstanding
obligations and liabilities between the Parties arising from this Agreement except those set forth
in: (i)
Section 8.1(a)
, this
Article IX
and
Article XI
; (ii) the
Confidentiality Agreement; and (iii) any other provisions of this Agreement that specifically state
that they shall survive termination of this Agreement.
(b) In the event that this Agreement is terminated pursuant to
Section 9.1(c)(iii)
,
then Seller shall pay to Buyer a fee of two million dollars ($2,000,000) (the
Termination Fee
)
within two (2) Business Days after such termination.
(c) In the event that an Acquisition Proposal has been publicly announced and, thereafter, (x)
this Agreement is terminated pursuant to
Section 9.1(a)(ii)
or
Section 9.1(a)(iii)
and (y) within twelve (12) months after the termination of this Agreement, Seller shall have
entered into an agreement regarding or consummated a transaction which would have constituted an
Acquisition Proposal (excluding an Equity Financing and/or any agreement relating thereto), then
Seller shall pay to Buyer, the Termination Fee upon the earlier of (i) two
56
(2) days following entering into any such agreement or (ii) immediately upon the consummation
of any such transaction.
(d) The Termination Fee shall be
the sole and exclusive remedy of Buyer under circumstances where the Termination Fee is payable by
Seller and upon payment of the Termination Fee in accordance with this
Section 9.2
, Seller
shall not have any further Liability or obligation relating to or arising out of this Agreement;
provided
,
however
, that nothing in this Agreement shall limit the ability of either Party to obtain
specific performance of this Agreement or to recover damages (including damages in excess of the
Termination Fee) in the event of fraud or a willful breach of this Agreement by the other Party.
(e) Each of the Parties acknowledges that the agreements contained in this
Section 9.2
are an integral part of the Transactions contemplated by this Agreement and that without these
agreements, Buyer would not enter into this Agreement. Accordingly, if Seller fails promptly to pay
an amount due pursuant to this
Section 9.2
, and, in order to obtain such payment, Buyer
commences a suit that results in a judgment against Seller, Seller shall pay to Buyer its
reasonable costs and expenses (including attorneys fees and expenses) in connection with such
suit, together with interest on the amount due from the date such payment was required to be made
until the date of payment at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.
ARTICLE X.
INDEMNIFICATION
10.1
Survival of Representations
.
(a) The representations and warranties and the covenants, agreements and obligations to be
performed on or prior to the First Closing Date (the
Pre-Closing Covenants
) contained in this
Agreement shall survive the First Closing Date solely for purposes of this
Article X
and
shall terminate and no longer survive at the close of business on the eighteenth (18
th
) month
anniversary of the First Closing Date (the
Basic Survival Period
);
provided
,
however
, that the
representations and warranties of Seller in
Sections 4.2
,
4.4
and
4.5
and
of the Buyer in
Sections 5.2
and
5.3
(collectively, the
Fundamental
Representations
) and the representations and warranties of Seller in
Section 4.9
shall
survive the First Closing Date until the expiration of the applicable statute of limitations (with
extensions) with respect to the matters addressed in such sections. The period of time a
representation, warranty or the Pre-Closing Covenants survives the First Closing Date pursuant to
the preceding sentence shall be the
Survival Period
with respect to such representation, warranty
or the Pre-Closing Covenants. Subject to
Section 10.6
, so long as a Party gives written
notice of an indemnification claim notice, including a description of the claim and the amount of
claimed Losses for such claim on or before the expiration of the applicable Survival Period, such
Indemnified Party shall be entitled to pursue its rights to indemnification under
Section
10.2
or
10.3
, as applicable. Subject to
Section 10.6
, in the event notice of
any claim(s) for indemnification under
Section 10.2
or
10.3
shall have been given
within the applicable Survival Period and such claim(s) have not been finally resolved by the
expiration of such Survival Period, the representations, warranties or Pre-Closing Covenants, as
applicable, that are the subject of such claim(s) shall survive the end of
57
the Survival Period of such representations, warranties or Pre-Closing Covenants until such
claim(s) are finally resolved, but such representations, warranties and Pre-Closing Covenants shall
only survive with respect to such asserted claim(s).
(b) The covenants and agreements contained in this Agreement that require by their terms
performance or compliance on and after the First Closing Date shall continue in force thereafter in
accordance with their terms or if no term is specified, indefinitely.
10.2
Indemnification by Seller
. Subject to the limitations and terms of this
Article X
and
Section 6.9(b)
, on and after the First Closing Date, Seller shall indemnify, reimburse
and defend Buyer and its Affiliates and each of their respective Representatives, successors and
assigns (
Buyer Indemnitees
) from and against, and hold them harmless from, any Losses incurred
(payable promptly upon written request), without duplication, to the extent arising from, in
connection with, or otherwise with respect to:
(a) subject to
Section 10.1
, any breach of any representation or warranty of Seller
contained in this Agreement;
(b) any breach of any representation and warranty of Seller under any Other Agreement or any
covenant, agreement or obligation of Seller contained in this Agreement or in any Other Agreement;
(c) any Excluded Liability; and
(d) any fees, expenses or other payments incurred or owed by Seller to any brokers, financial
advisors or other comparable Persons retained or employed by Seller in connection with the
Transactions.
10.3
Indemnification by Buyer
. Subject to the limitations and terms of this
Article X
,
on and after the First Closing Date, Buyer shall indemnify and defend Seller, its Affiliates and
each of their respective Representatives, successor and assigns (
Seller Indemnitees
) from and
against, and agrees to hold them harmless from, any Losses, as incurred (payable promptly upon
written request), without duplication, to the extent arising from, in connection with, or otherwise
with respect to:
(a) subject to
Section 10.1
, any breach of any representation or warranty of Buyer
contained in this Agreement;
(b) any breach of any representation or warranty of Buyer under any Other Agreement or any
covenant, agreement or obligation of Buyer contained in this Agreement or in any Other Agreement;
(c) any Assumed Liability;
(d) any fees, expenses or other payments incurred or owed by Buyer to any brokers, financial
advisors or other comparable Persons retained or employed by Buyer in connection with the
Transactions; and
58
(e) any Losses of Seller arising out of or resulting from the circumstances described in
Schedule 10.3(e)
.
10.4
Limitation on Losses; Calculation of Losses; Treatment of Indemnification Payments
.
(a) Seller and Buyer shall have no indemnification obligations pursuant to
Section
10.2(a)
and
Section 10.3(a)
as applicable, except to the extent that the aggregate
amount of Losses incurred or suffered by Indemnified Parties, that Buyer or Seller, as applicable, is otherwise
responsible for under
Section 10.2(a)
or
Section 10.3(a)
as applicable, exceeds
five hundred thousand dollars ($500,000) (the
Deductible
), at which time an Indemnified Party
shall be entitled to assert claims against Buyer or Seller, as applicable, for all Losses in excess of, but
excluding the Deductible;
provided
, that, subject to the immediately following proviso, the maximum
liability of Buyer and Seller for all claims by Indemnified Parties under
Section 10.2(a)
or
Section 10.3(a)
as applicable, shall not in any case exceed seven million five hundred
thousand dollars ($7,500,000) (the
Liability Cap
);
provided further
, that for purposes of claims
made by Buyer Indemnitees pursuant to
Sections 10.2(a)
or Seller Indemnitees pursuant to
Section 10.3(a)
arising from the breach of a Fundamental Representation or fraud or
intentional misrepresentation by Buyer or Seller, as applicable, the Liability Cap shall be inapplicable.
(b) The amount of any Loss for which indemnification is provided under
Section 10.2
or
Section 10.3
shall be reduced to take account of any Tax benefit actually realized by the
Indemnified Party arising from the incurrence or payment of any such Loss in the Tax year of such
incurrence or payment, or in the subsequent two (2) Tax years. In computing the amount of any such
Tax benefit, the Indemnified Party shall be deemed to recognize all other items of income, gain,
loss deduction or credit before recognizing any item arising from the receipt of any indemnity
payment under
Section 10.2
or
Section 10.3
or the incurrence or payment of any
indemnified Loss.
(c) The amount of Losses recoverable by an Indemnified Party under
Section 10.2
or
Section 10.3
shall be reduced by the amount of any payment received under insurance
policies or from any third-party indemnitor by such Indemnified Party (or an Affiliate thereof)
with respect to the Losses to which such claim for indemnification relates, less the reasonable
cost incurred in obtaining such payment. If an Indemnified Party (or an Affiliate) receives any
insurance or other payment in connection with any claim for Losses for which it has already
received an indemnification payment from the Indemnifying Party, it shall pay to the Indemnifying
Party, within thirty (30) days of receiving such payment, the amount of such payment (less the
reasonable cost incurred in obtaining such payment) not to exceed the amount previously received by
the Indemnified Party under
Section 10.2
or
Section 10.3
, as applicable, with
respect to such claim from the Indemnifying Party.
(d) Any indemnity payment under
Section 10.2
or
Section 10.3
shall be treated
as an adjustment to the Purchase Price, including for Tax purposes, to the maximum extent allowable
under applicable Law.
(e) Notwithstanding anything to the contrary herein, Seller shall not in any event be liable
to the Buyer Indemnitees and Buyer shall not in any event be liable to the Seller
59
Indemnitees on account of any indemnity obligation set forth in
Section 10.2
or
Section 10.3
, respectively, for any indirect, consequential or punitive damages (including,
but not limited to, lost profits, loss of use, damage to goodwill or loss of business).
10.5
No Termination of Indemnification
. Except with respect to the Pre-Closing Covenants, the
obligations to indemnify and hold harmless any Party pursuant to
Sections 10.2(b)-(d)
and
Section 10.3(b)-(e)
, shall not terminate.
10.6
Procedures
.
(a) In order for a party (the
Indemnified Party
) to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a claim made by any
Person against the Indemnified Party (a
Third-Party Claim
), such Indemnified Party must notify
the indemnifying party (the
Indemnifying Party
) in writing (and in reasonable detail) of the
Third-Party Claim within fifteen (15) Business Days after receipt by such Indemnified Party of
notice of the Third-Party Claim;
provided
,
however
, that failure to give such notification shall
not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall
have been actually prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within five (5) Business Days after the Indemnified Partys
receipt thereof, copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third-Party Claim.
(b) If a Third-Party Claim is made against an Indemnified Party, the Indemnifying Party shall
be entitled to participate in the defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by the Indemnifying Party. Should the Indemnifying Party so elect to
assume the defense of a Third-Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof unless (i) a conflict of interest arises between the
Indemnifying Party and the Indemnified Party such that legal counsel cannot represent both the
Indemnifying Party and the Indemnified Party or (ii) the Indemnified Party is advised in writing by
counsel that one or more legal defenses is available to it that are different from those of the
Indemnifying Party. If the Indemnifying Party assumes such defense, the Indemnified Party shall
have the right to participate in the defense thereof and to employ counsel, at its own expense
(except under the conditions described in the prior sentence), separate from the counsel employed
by the Indemnifying Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by
the Indemnified Party for any period during which the Indemnifying Party has not assumed the
defense thereof (other than during any period in which the Indemnified Party shall have failed to
give notice of the Third-Party Claim as provided above). If the Indemnifying Party chooses to
defend or prosecute a Third-Party Claim, all the Indemnified Parties shall cooperate in the defense
or prosecution thereof. Such cooperation shall include the retention and (upon the Indemnifying
Partys request) the provision to the Indemnifying Party of records and information that are
reasonably relevant to such Third-Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any material provided
hereunder. Whether or not the Indemnifying Party assumes the defense of a Third-Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third-Party Claim
60
without the Indemnifying Partys prior written consent (which consent shall not be
unreasonably withheld). The Indemnifying Party may not settle, compromise or discharge any
Third-Party Claim without the Indemnified Partys prior written consent (which shall not be
unreasonably withheld), unless such settlement, compromise or discharge shall obligate the
Indemnifying Party to pay the full amount of the Liability in connection with such Third-Party
Claim, releases the Indemnified Party completely in connection with such Third-Party Claim and does
not materially adversely affect the Indemnified Party.
(c) In the event any Indemnified Party should have a claim against any Indemnifying Party
under
Section 10.2
or
Section 10.3
that does not involve a Third-Party Claim being
asserted against or sought to be collected from such Indemnified Party, the Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying Party and in any event
prior to the expiration of the underlying representations and warranties, if applicable. Except as
provided in
Section 10.5
, the failure by any Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party from any Liability that it may have to
such Indemnified Party under
Section 10.2
or
Section 10.3
, except to the extent
that the Indemnifying Party shall have been actually prejudiced as a result of such failure. If
the Indemnifying Party disputes its Liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute
and, if not resolved through negotiations, such dispute shall be resolved in accordance with
Section 11.10
.
(d) To the extent of any conflict between this
Section 10.6
and
Section
8.6(e)
,
Section 8.6(e)
shall control.
10.7
Sole Remedy
. Each of Buyer and Seller acknowledges and agrees that its sole and exclusive
remedy after the First Closing Date with respect to any and all claims and causes of action
relating to this Agreement (including the Schedules), the Other Agreements and the Transactions,
the Purchased Assets, the Assumed Liabilities and the Shares (other than claims of, or causes of
action arising from fraud) shall be pursuant to the indemnification provisions set forth in this
Article X
or as provided in
Section 11.11
.
10.8
Effect of Investigation or Knowledge
. Any claim by Buyer or its Affiliates or any of their
Representatives for indemnification shall not be adversely affected by any investigation by or
opportunity to investigate afforded to Buyer, nor, subject to the limitations set forth in
Section 6.9(b)
, shall such a claim be adversely affected by Buyers knowledge on or before
any Closing Date of any breach of the type specified in
Section 10.2
or of any state of
facts that may give rise to such a breach. Subject to the limitations set forth in
Section
6.9(b)
, the waiver of any condition based on the accuracy of any representation or warranty, or
on the performance of or compliance with any covenant or obligation, will not adversely affect the
right to indemnification, payment of Losses or other remedy based on such representations,
warranties, covenants or obligations.
61
ARTICLE XI.
MISCELLANEOUS
11.1
Assignment; Binding Effect
. This Agreement shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors and assigns. Prior to the First Closing,
Buyer shall assign its rights and obligations to purchase certain Non-United States Purchased
Assets to a wholly-owned Subsidiary of Parent. In addition, from and after the First Closing Date,
either Party may (a) assign its rights and obligations under this Agreement or any part hereof to
one or more of its Affiliates without the consent of the other Party; and (b) assign this Agreement
in its entirety without the other Partys consent to an entity that acquires all or substantially
all of the assets of the assigning party to which this Agreement relates, whether by merger,
acquisition or otherwise;
provided
,
however
, that in the event Seller assigns this Agreement
pursuant to clause (b) above, Buyer shall have the right, at any time during the six (6) month
period after such assignment and upon thirty (30) days prior written notice to Seller or Sellers
successors and assigns, as applicable, to (i) terminate the Joint Development Period and Sellers
or Sellers successors and assigns role in the Development of Products as contemplated by
Section 8.7
(subject to
Section 8.7(j)
), (ii) disband the Joint Development
Committee and the rights and obligations set forth in
Section 8.9
, and (iii) disband the
Joint Commercialization Committee and terminate the rights and obligations set forth in
Section
8.10
. Other than as provided in this
Section 11.1
, neither Party may sell, transfer,
assign, license, sublicense, delegate, pledge or otherwise dispose of, whether voluntarily,
involuntarily, by operation of Law or otherwise, this Agreement or any of its rights or obligations
under this Agreement without the prior written consent of the other Party hereto and any attempted
assignment or transfer of this Agreement shall be null and void.
11.2
Guarantee of Obligations
.
(a) Parent will receive substantial benefits from the consummation of the Transactions, and
for other good and valuable consideration the sufficiency of which is clearly acknowledged as a
material inducement for Seller to enter into this Agreement, Parent hereby unconditionally and
irrevocably guarantees the prompt performance, payment and discharge when due, of each and every
obligation of Buyer and each and every successor or assignee of Buyer under this Agreement and the
Other Agreements and of the Non-US Asset Purchaser (as defined in the License Agreement) under the
License Agreement, including the payment obligations hereunder and thereunder. Seller will receive
substantial benefits from the consummation of the Transactions, and for other good and valuable
consideration the sufficiency of which is clearly acknowledged as a material inducement for Buyer
to enter into this Agreement, Seller hereby unconditionally and irrevocably guarantees the prompt
performance, payment and discharge when due, of each and every obligation of each and every
successor or assignee of Seller under this Agreement and the Other Agreements and of Columbia Laboratories (Bermuda) Ltd. under the License Agreement, including the payment obligations hereunder and
thereunder.
(b) This Agreement constitutes the legal, valid and binding obligation of the Parent,
enforceable against it in accordance with its terms. Parent has the unrestricted right, power and
authority to execute and deliver this Agreement and to perform its obligations under this
Agreement, and the execution, delivery and performance of this Agreement by Parent have
62
been duly authorized by all necessary action on behalf of Parent and this Agreement has been
duly executed and delivered by Parent.
11.3
Expenses
. Except as otherwise specified herein, each Party shall bear its own expenses
with respect to the preparation of this Agreement and the Transactions.
11.4
Notices
. All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given (a) when received if delivered
personally, (b) when transmitted if telecopied (which is confirmed), (c) upon receipt, if sent by
registered or certified mail (postage prepaid, return receipt requested) and (d) the day after it
is sent, if sent for next-day delivery to a domestic address by overnight mail or courier, to the
Parties at the following addresses:
If to Seller, to:
Columbia
Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
Attention: General Counsel
Facsimile: 973.994.3001
with copies (which shall not constitute notice) sent concurrently
to:
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
If to Buyer or Parent, to:
Watson
Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
with copies (which shall not constitute notice) sent concurrently
to:
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
provided
,
however
, that if any Party shall have designated a different address by notice to the
others, then to the last address so designated.
11.5
Severability
. If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction or other Regulatory Authority to be invalid, void, unenforceable
or against its regulatory policy such determination shall not affect the enforceability of any
others or of the remainder of this Agreement.
11.6
Amendments; Entire Agreement
. This Agreement may not be amended, supplemented or otherwise
modified except by an instrument in writing signed by both Parties hereto. This Agreement (and all
Annexes, Exhibits and Schedules attached hereto), the Other
63
Agreements and the Confidentiality Agreement contain the entire agreement of the Parties hereto
with respect to the Transactions, superseding all negotiations, prior discussions and preliminary
agreements made prior to the Execution Date. In the event of any conflict between any specific
provision of this Agreement and a provision of any of the Asset Transfer Documentation, the
provisions of this Agreement shall govern.
11.7
No Third-Party Beneficiaries
. This Agreement is solely for the benefit of the Parties
hereto and their respective Affiliates and no provision of this Agreement shall be deemed to confer
upon any third parties any remedy, claim, liability, reimbursement, claim of action or other right
in excess of those existing without reference to this Agreement;
provided
,
however
, the Buyer
Indemnitees and Seller Indemnitees that are not Parties are intended third-party beneficiaries of
this Agreement and shall be entitled to the benefits of
Article X
and enforce the same as
if they were Parties hereto (subject to the limitations contained therein).
11.8
Waiver
. Any term or condition of this Agreement may be waived at any time by the Party
that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in
a written instrument duly executed by or on behalf of the party waiving such term or condition. The
failure of any Party to enforce any condition or part of this Agreement at any time shall not be
construed as a waiver of that condition or part, nor shall it forfeit any rights to future
enforcement thereof. Except as provided in
Section 9.2
, all remedies either under this
Agreement or by Law or otherwise afforded, will be cumulative and not in the alternative.
11.9
Governing Law
. This Agreement (including any claim or controversy arising out of or
relating to this Agreement) shall be governed by and construed in accordance with the Laws of the
State of Delaware without regard to conflict of law principles that would result in the application
of any Law other than the Laws of the State of Delaware.
11.10
Arbitration
.
(a) All disputes, differences, controversies and claims of the Parties arising out of or
relating to the Agreement (individually, a
Dispute
and, collectively,
Disputes
), except as
otherwise provided under this Agreement, shall be resolved by final and binding arbitration
administered by the American Arbitration Association (
AAA
) under its Commercial Arbitration
Rules, subject to the provisions of this
Section 11.10
.
(b) Following the delivery of a written demand for arbitration by either Party, each of Buyer
and Seller shall choose one (1) arbitrator within ten (10) Business Days after the date of such
written demand and the two chosen arbitrators shall mutually, within ten (10) Business Days after
selection select a third (3
rd
) arbitrator (each, an
Arbitrator
and together, the
Arbitrators
), each of whom shall be a retired judge, subject to
Section 11.10(i)
below,
selected from a roster of arbitrators provided by the AAA. If the third (3
rd
)
Arbitrator is not selected within fifteen (15) Business Days after delivery of the written demand
for arbitration (or such other time period as the Parties may agree), the Parties shall promptly
request that the commercial panel of the AAA select an independent Arbitrator meeting such
criteria.
(c) The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association;
provided
,
however
, that notwithstanding any provisions of the
64
Commercial Arbitration Rules to the contrary, unless otherwise mutually agreed to by Buyer and
Seller, the sole discovery available to each Party shall be its right to conduct up to two (2)
non-expert depositions of no more than three (3) hours of testimony each.
(d) The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the Parties agree to extend such time. The award shall be final
and binding upon the Parties.
(e) Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the Parties, including without limitation any proceeding to enforce this section, to review or
confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery Court
sitting in the county of New Castle, Delaware (the
Enforcing Court
). By execution and delivery
of this Agreement, each Party accepts the jurisdiction of the Enforcing Court.
(f) Each Party shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section, including attorneys fees, unless determined otherwise by the Arbitrator.
(g) The Parties agree that the existence, conduct and content of any arbitration pursuant to
this section shall be kept confidential and no Party shall disclose to any Person any information
about such arbitration, except in connection with such arbitration or as may be required by Law or
by any Regulatory Authority (or any exchange on which such Partys securities are listed) or for
financial reporting purposes in such Partys financial statements.
(h) Notwithstanding the foregoing, none of the provisions of this
Section 11.10
shall
restrict the right of any Party to seek injunctive relief or other equitable remedies, to enjoin
any breach or threatened breach of this Agreement or otherwise specifically enforce any provision
of this Agreement.
(i) For purposes of resolving any disputes pursuant to
Section 2.8(a)(ii)
or
Section 2.8(d)(ii)
, the Arbitrators shall consist of current or former executives with
knowledge of and experience in the pharmaceutical industry.
11.11
Injunctive Relief
. Except as set forth in
Section 9.2
, the Parties hereto agree
that irreparable damage would occur in the event that any of the provisions of this Agreement,
including
Section 8.11
, were not performed in accordance with their specific terms or were
otherwise breached and that such damages would not be fully compensable by an award of money
damages. It is accordingly agreed that, except as set forth in
Section 9.2
, the Parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions of this Agreement without posting a bond or other
undertaking, this being in addition to any other remedy to which they are entitled at law or in
equity. The parties agree that notwithstanding
Section 11.10
, any Action brought for an
injunction or injunction, or for specific performance shall be heard and exclusively in the
Delaware Chancery Court sitting in New Castle County and each Party waives any objection which it
may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to
the jurisdiction of such courts in any such suit, action or proceeding.
65
11.12
Headings
. The headings of the Sections and subsections of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
11.13
Counterparts
. This Agreement may be executed in two or more counterparts (including by
facsimile or by an electronic scan delivered by electronic mail), each of which shall be deemed to
be an original, but all of which, taken together, shall constitute one and the same agreement and
shall become effective when counterparts have been signed by each of the Parties hereto delivered
to the other Parties, it being understood that all Parties need not sign the same counterpart.
11.14
Schedules
. Buyer agrees that any disclosure by Seller of any item or matter under any
Section or subsection in the Schedules delivered by Seller in connection with this Agreement, or in
attachments thereto, and documents referred to therein, (a) shall be deemed disclosure for all
purposes of
Article IV
and (b) shall not establish any threshold of materiality or concede
the materiality of any matter or item disclosed therein.
11.15
Construction
. The language in all parts of this Agreement shall be construed, in all
cases, according to its fair meaning. The Parties acknowledge that each Party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.
[Remainder of Page Intentionally Left Blank; Signature Pages to Follow.]
66
IN WITNESS WHEREOF
, the Parties hereto have caused this Purchase and Collaboration Agreement
to be executed by their respective duly authorized officers as of the date first above written.
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COLUMBIA LABORATORIES, INC.
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By:
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/s/ Frank C. Condella, Jr.
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Name:
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Frank C. Condella, Jr.
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Title:
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Interim Chief Executive Officer
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COVENTRY ACQUISITION, INC.
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By:
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/s/ Paul M. Bisaro
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Name:
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Paul M. Bisaro
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Title:
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Authorized Signatory
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WATSON PHARMACEUTICALS, INC.
(solely for purpose of
Section 11.2
)
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By:
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/s/ Paul M. Bisaro
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Name:
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Paul M. Bisaro
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Title:
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President and Chief Executive Officer
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ANNEX 1.1
DEFINITIONS
AAA
has the meaning set forth in
Section 11.10(a)
.
Acquisition Proposal
has the meaning set forth in
Section 6.5(f)
.
Action
means any claim, action, suit, arbitration, inquiry, audit, proceeding or
investigation by or before any Regulatory Authority.
Affiliate
of a Party or Person means any Person, whether de jure or de facto, that directly
or indirectly, controls, is controlled by, or is under common control with such Party or Person, as
applicable. Solely as used in this definition, control means (i) direct or indirect ownership of
more than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed
to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or
direct the affairs of such Party or Person, or (ii) the possession of the power to direct or cause
the direction of the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. For purposes of this Agreement, Buyer and Seller shall be
deemed not to be Affiliates. For purposes of this Agreement and the Confidentiality Agreement, any
Wholesaler Affiliate shall be deemed not to be an Affiliate of Buyer.
Agreement
has the meaning set forth in the Preamble.
Allocation Schedule
has the meaning set forth in
Section 2.9
.
ANDA
has the meaning set forth in the definition of Generic Equivalent.
Arbitrator
has the meaning set forth in
Section 11.10(b)
.
Asset Transfer Documentation
means the Asset Transfer Documentation in substantially the
form attached hereto as
Exhibit A
.
Assigned Contracts
has the meaning set forth in
Section 2.1(e)
.
Assumed Liabilities
has the meaning set forth in
Section 2.4
.
Audit Rights Holder
has the meaning set forth in
Section 2.8(d)(vi)(B)
.
Audit Team
has the meaning set forth in
Section 2.8(d)(vi)(B)
.
Auditee
has the meaning set forth in
Section 2.8(d)(vi)(B)
.
Basic Survival Period
has the meaning set forth in
Section 10.1(a)
.
Books and Records
means all books, records, files, documents, data, information and
correspondence primarily related to the conduct of the Business and not constituting Product Data.
Business
has the meaning set forth in
Section 4.4(b)
.
Business Day
means any day other than a Saturday, a Sunday or a day on which banks in New
York, New York, United States of America are authorized or obligated by Law to be closed.
Buyer
has the meaning set forth in the Preamble.
Buyer Development Activities
means all Development activities with respect to the Products
that are designated as Buyers responsibility in this Agreement or the Development Plan.
Buyer Indemnitees
has the meaning set forth in
Section 10.2
.
Bylaws
has the meaning set forth in
Section 4.5(a)
.
Certificate of Incorporation
has the meaning set forth in
Section 4.5(a)
.
Change of Board Recommendation
has the meaning set forth in
Section 6.5(d)
.
Charter Amendment
means the Amendment to the Certificate of Incorporation of Seller, in
substantially the form attached hereto as
Exhibit E
.
Clinical Trial Results Milestone
has the meaning set forth in
Section 2.8(a)
.
Clinical Trial Results Milestone Payment
has the meaning set forth in
Section
2.8(a)
.
Closing
has the meaning set forth in
Section 3.1(b)
.
Closing Date
has the meaning set forth in
Section 3.1(b)
.
Code
means the United States Internal Revenue Code of 1986, as amended.
Commercialize
means to import, market, detail, promote, advertise, distribute and sell; and
Commercialization
or
Commercializing
will have the corresponding meaning.
Commercially Reasonable Efforts
means the carrying out of obligations or tasks by a Party in
a sustained and diligent manner using good faith efforts and resources commonly used in the
pharmaceutical industry for a similar product (or activities designed to identify such product) of
similar commercial potential at a similar stage in its lifecycle, taking into consideration its
safety and efficacy, its cost to develop, the competitiveness of alternative products, its
proprietary position, the likelihood of Regulatory Approval, its profitability and all other
relevant factors, which efforts shall be consistent with the exercise of prudent scientific and
business judgment applied in the pharmaceutical industry by a party of similar size to products or
research, development, regulatory approval and marketing projects of similar scientific and
commercial potential. Without limiting the generality of the foregoing, Commercially
Reasonable Efforts requires that: (i) a Party promptly assign responsibility for such obligations
to specific employee(s) or consultant(s) who are held accountable for progress and monitor such
progress on an ongoing basis, (ii) such Party set and consistently seek to achieve specific and
meaningful objectives for carrying out such obligations and (iii) such Party consistently makes and
implements decisions and allocates resources designed to advance progress with respect to such
objectives.
Common Stock
has the meaning set forth in the
Recitals
.
Competing Activities
has the meaning set forth in
Section 8.11(a)
.
Competing Business
has the meaning set forth in
Section 8.11(a)
.
Complete Indemnity Obligation
has the meaning set forth in
Section 8.6(e)
.
Completion of PTB US Development
means the earliest of (i) PTB US Approval, (ii) mutual
agreement of the Parties to cease the development of the PTB Indication or (iii) December 31, 2012.
Confidentiality Agreement
means that certain Mutual NonDisclosure Agreement, dated as of
April 15, 2009 between Seller and Parent (including any amendments or supplements thereto).
Contracts
means any and all binding commitments, contracts, purchase orders, leases,
licenses or other agreements.
Control
or
Controlled
means, with respect to any Intellectual Property, the legal
authority or right (whether by ownership, license or otherwise) of a Party or its Affiliates to
grant a license or a sublicense of or under such Intellectual Property to another Person, without
breaching the terms of any agreement with a Third Party.
Copyrights
means any copyrights and copyrightable works, including all rights of authorship,
use, publication, reproduction, distribution, performance, transformation, moral rights and rights
of ownership of copyrightable works, copyright registrations, or any application therefore, in the
U.S. or any foreign country, and all rights to register and obtain renewals and extensions of
registrations.
Deductible
has the meaning set forth in
Section 10.4(a)
.
Delivery System
means a system for delivering a drug or other biological or chemical product
to a human or animal subject, including any oral formulation, patch, gel, progressive hydration
tablet or other drug delivery technology.
Develop
or
Development
means activities directly and specifically relating to the
pre-clinical and clinical drug development of a Product or the updating or review of the Product
labeling, including test method development and stability testing, assay development, toxicology,
formulation, quality assurance/quality control development, statistical analysis, pharmacokinetic
studies, clinical trials (including, without limitation, research to design clinical trials)
and any other research and development activities with respect to a Product.
Development
Bank Account
has the meaning set forth in
Section 8.7(c)
.
Development Budget
has the meaning set forth in
Section 8.7(a)(ii)
.
Development Costs
means expenses and other costs, including regulatory expenses, incurred by
or on behalf of a Party or its Affiliates in connection with the Development of the Products in
accordance with the applicable approved Development Plan (including the Development Budget), in
accordance with GAAP (or other internationally recognized accounting standard used by such Party),
including, without limitation, the costs of clinical trials, the preparation, collection and/or
validation of data from such clinical trials and the preparation of medical writing and publishing
on the data and results obtained from such clinical trials. Without limiting the generality of the
foregoing, Development Costs shall include, to the extent included in the scope set forth above:
(a) all out-of-pocket costs incurred by the Parties or their Affiliates, including payments
made to Third Parties with respect to any of the foregoing;
(b) the cost of clinical supply, including without limitation (i) costs of manufacturing or
procuring clinical supplies, including reasonable costs incurred in connection with the development
of the manufacturing process for such clinical supplies, but excluding any capital expenditures or
qualification or validation expenses relating to any manufacturing facility, (ii) expenses incurred
to purchase and/or package placebos and comparator drugs, and (iii) costs and expenses of disposal
of clinical samples; and
(c) the costs of Regulatory Filings.
Development Plan
has the meaning set forth in
Section 8.7(a)(ii)
.
Dispute
and, collectively,
Disputes
have the meanings set forth in
Section
11.10(a)
.
Efficacy Supplement
means an NDA submission to FDA requesting approval for a change to an
approved product, including a request for approval of a new indication for an approved product.
EMEA
means the European Medicines Agency or any successor European governmental agency
thereto.
Encumbrance
means any security interest, pledge, hypothecation, mortgage, lien or
encumbrance, other than any licenses of Intellectual Property.
Enforcing Court
has the meaning set forth in
Section 11.10(e)
.
Environmental Claim
means any and all administrative or judicial actions, suits, orders,
written claims, Encumbrances, notices, notices of violations, complaints, requests for information,
proceedings, or other written communication (written or oral), whether criminal or
civil, pursuant to any applicable Environmental, Safety and Health Law by any Person
(including any Regulatory Authority) alleging, asserting, or claiming any actual or potential (i)
violation of or Liability under any Environmental, Safety and Health Law, (ii) violation of any
environmental permit, or (iii) Liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property damage, personal injury, fines,
or penalties arising out of, based on or resulting from the presence, Release, or threatened
Release into the environment, of any Hazardous Substances at any location.
Environmental, Safety and Health Laws
means any and all applicable Laws that relate to
protection of the environment, or the imposition of Liability for, or standards of conduct
concerning, the manufacture, processing, generation, distribution, use, treatment, storage,
disposal, Release, cleanup, transport or handling of Hazardous Substances, including the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control Act, as amended,
any other so-called Superfund or Superlien Laws, and the Occupational Safety and Health Act of
1970, as amended, to the extent it relates to the handling of and exposure to hazardous or toxic
chemicals, and the state analogues thereto.
Equitable Exceptions
has the meaning set forth in
Section 4.2(a)
.
Equity Financing
has the meaning set forth in
Section 6.5(f)
.
Exchange
means the NASDAQ Global Market.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Excluded Assets
has the meaning set forth in
Section 2.3(a)
.
Excluded Liabilities
has the meaning set forth in
Section 2.5
.
Execution Date
means the date set forth in the Preamble.
Ex-U.S. Approval Milestone
has the meaning set forth in
Section 2.8(c)(i)
.
Ex-U.S. Filing Milestone
has the meaning set forth in
Section 2.8(c)(i)
.
Ex-U.S. Filing/Approval Milestone Payment
has the meaning set forth in
Section
2.8(c)(ii)
.
FDCA
means the United States Federal Food, Drug, and Cosmetic Act, as amended.
FDA
means the United States Food and Drug Administration, or any successor agency thereto.
Federal Health Care Program
means any plan or program that provides health benefits, whether
directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the
United States government (including the Medicare and Medicaid programs).
Filing Party
has the meaning set forth in
Section 8.6(a)
.
Financial Statements
means the financial statements of Seller included in the SEC Documents.
First Closing
has the meaning set forth in
Section 3.1(a)
.
First Closing Date
has the meaning set forth in
Section 3.1(a)
.
First Closing Date Assumed Liabilities
has the meaning set forth in
Section 2.4
.
First Closing Date Purchased Assets
has the meaning set forth in
Section 2.1
.
First Closing Straddle Period
means any Tax period beginning before or on and ending after
the First Closing Date.
Form 8594
has the meaning set forth in
Section 2.9
.
Former Superior Proposal
has the meaning set forth in
Section 6.5(d)
.
Fundamental Representations
has the meaning set forth in
Section 10.1(a)
.
GAAP
means United States generally accepted accounting principles.
Generic Entry
means, with respect to any Product in any country, that a Generic Equivalent
of such Product has been Launched by a Third Party and Net Sales of such Product in such country
for any calendar quarter thereafter have fallen by fifty percent (50%) from the average quarterly
Net Sales of such Product in such country over the last four (4) complete calendar quarters ending
prior to such Launch and such decline in Net Sales is directly attributable to the marketing or
sale in such country of such Generic Equivalent in such country.
Generic Equivalent
means, with respect to any Product in a given country, any true AB rated
generic product (i.e., a non-proprietary product) (1) with the same active ingredient(s) and
administration route as such Product, and (2) that obtained Regulatory Approval in such country
solely by means of an abbreviated NDA (
ANDA
) filing (or a similar procedure in a country other
than the United States) for establishing bioequivalence of such Product that does not require any
human clinical trials other than solely for purposes of establishing bioequivalence to the Product.
Gross Profit
means Net Sales less raw materials costs, conversion costs (direct labor),
laboratory testing, quality control, freight, packaging, manufacturing variances, FDA annual user
fees, depreciation and manufacturing management/overheads.
Hazardous Substance
means any material, substance, waste, compound, pollutant or contaminant
listed, defined, designated or classified as hazardous, toxic, flammable, explosive, reactive,
corrosive, infectious, carcinogenic, mutagenic or radioactive or otherwise regulated by any
Regulatory Authority under any Environmental, Safety and Health Law, including petroleum or
petroleum products (including crude oil) and any derivative or by-product thereof, natural gas,
synthetic gas and any mixture thereof, or any substance that is or contains polychlorinated
biphenyls (PCBs), radon gas, urea formaldehyde, asbestos-containing materials (ACMs) or lead, and,
for the avoidance of doubt, excluding radio frequencies.
Impending Generic Entity
has the meaning set forth in
Section 2.8(d)(ii)
.
IND
means an Investigational New Drug Application for a pharmaceutical product filed with
the FDA and all amendments and supplements thereto or equivalent applications in other countries.
Indemnified Party
has the meaning set forth in
Section 10.6(a)
.
Indemnifying Party
has the meaning set forth in
Section 10.6(a)
.
Independent Accounting Firm
means a nationally recognized firm of independent public
accountants, mutually selected by the Parties.
Indication
means the indication(s) for which a Product is being Developed or for which it is
approved, including assisted reproductive technology indications and the PTB Indication.
Intellectual Property
means intellectual property rights, including Trademarks, Copyrights,
Patents and Know-How, whether registered or unregistered, and all applications and registrations
therefor.
Investment Company Act
has the meaning set forth in
Section 4.20
.
Investors Rights Agreement
means the Investors Rights Agreement, in substantially the form
attached hereto as
Exhibit B
.
IRS
means the Internal Revenue Service of the United States.
Joint Development Period
means the period beginning on the First Closing Date and ending on
such date as (i) the Parties mutually decide to cease joint activities with respect to Development
of Products; provided, that Seller or Buyer may terminate the Joint Development Period by written
notice to the other Party at any time after the fifth (5
th
) anniversary of the First
Closing Date or (ii) terminated by Buyer pursuant to
Section 11.1
.
Know-How
means research and development data, information, reports, studies, validation
methods and procedures, unpatented inventions, knowledge, trade secrets, technical or other data,
or other materials, methods, procedures, processes, flow diagrams, materials, developments or
technology, including all biological, chemical, pharmacological, toxicological,
clinical, manufacturing, analytical, safety, quality assurance, quality control and other
data, information, reports or studies, other than any of the foregoing which is the subject of a
Patent.
Knowledge
means, with respect to Seller, the actual knowledge of any executive officer of
Seller.
Launch
means the launch of a Product in a country or jurisdiction within the Territory in
such quantities as are customary for the general introduction of a pharmaceutical product in such
country or jurisdiction.
Launch Quantities
has the meaning set forth in
Section 2.8(b)
.
Law
means each provision of any currently existing federal, provincial, state, local or
foreign law, statute, ordinance, order, code, rule or regulation, promulgated or issued by any
Regulatory Authority.
Liability
means, collectively, any indebtedness, guaranty, endorsement, claim, liability,
loss, damage, deficiency, cost, expense, obligation, commitment or responsibility, of whatever kind
or nature, fixed or unfixed, known or unknown, choate or inchoate, liquidated or unliquidated,
secured or unsecured, direct or indirect, matured or unmatured, or absolute, contingent or
otherwise, including any products liability.
Liability Cap
has the meaning set forth in
Section 10.4(a)
.
License Agreement
means the License Agreement between Buyer and Seller, in substantially the
form attached hereto as
Exhibit D
.
Losses
means, with respect to any claim or matter, all losses, obligations and other
Liabilities or other damages, diminution in value, fines, fees, Taxes, penalties, interest
obligations, deficiencies and reasonable expenses.
MAA
means an application for the authorization to market a pharmaceutical product in any
country or group of countries outside the United States, as defined in the applicable Laws and
filed with the Regulatory Authority of a given country or group of countries.
MAE Notice
has the meaning set forth in
Section 6.9(b)
.
Major Territories
means the (i) United States, (ii) at least one of France, Germany or the
United Kingdom, (iii) Japan, and (iv) at least one of Brazil, Russia, India, or China.
Marketing Term
means the period starting on the First Closing Date and ending, on a
country-by-country basis, upon expiration of the later to expire of the Royalty Product Term or the
PTB Royalty Term, as applicable, in such country.
Material Adverse Effect
means any state of facts, change, development, event, occurrence,
effect or condition that, individually or in the aggregate, is materially adverse to the business,
assets, liabilities, results of operations or financial condition of Seller and its Subsidiaries,
taken as a whole, but shall exclude any facts, change, development, event,
occurrence, effect or condition to the extent resulting or arising from any one or more of the
following: (a) changes, effects or events that generally affect the industr(ies) in which Seller
operates (including the pharmaceutical industry and Progesterone products industry) or the
manufacture, Development or Commercialization of Progesterone products (including legal and
regulatory changes) to the extent that they do not disproportionately affect Seller relative to
other industry participants, (b) general economic or political changes, effects or events affecting
the financing or securities markets generally to the extent that they do not disproportionately
affect Seller relative to other industry participants, (c) changes, developments or events caused
by an act of God or by acts of terrorism or war (whether or not declared) occurring after the
Execution Date (including, a material worsening of current conditions), (d) changes, effects or
events arising from, or in connection with, the consummation (or anticipated consummation) of the
Transactions or any of them, or the announcement of the execution of, this Agreement or the Other
Agreements, the pendency or public disclosure of this Agreement or the Transactions, (e) any change
in accounting practices or policies of Seller as required by GAAP, (f) any changes, effects or
events that result from any action taken pursuant to or in accordance with this Agreement, the
Other Agreements or at the written request of Buyer, (g) any failure of Seller to meet estimates or
expectations of Sellers revenues or earnings (it being understood that the facts or occurrences
giving rise or contributing to such failure may be deemed to constitute, or be taken into account
in determining, whether there has been or will be a Material Adverse Effect), or (h) any Action
made or brought (whether before or after the Execution Date) by any of the current or former
stockholders of Seller, arising out of this Agreement or the Transactions.
Material Contract
shall mean each Contract to which Seller or any of its Subsidiaries is a
party, in each case, with a Third Party (excluding Contracts that are the subject of
Section
4.6(f)
),
(i) which has been included in the list of exhibits of any SEC Document filed by Seller
with the SEC, since January 1, 2009;
(ii) which relates primarily to the Products and involves or is reasonably expected to
involve payment by or to Seller or any of its Subsidiaries after the First Closing Date of
more than $500,000 per year, including any such Contract relating to the clinical trial,
supply, manufacture, marketing or co-promotion of, or collaboration with respect to, any
Product or Product candidate;
(iii) which relates to or evidences third-party indebtedness for borrowed money of
Seller or any of its Subsidiaries in excess of $1.0 million;
(iv) which relates to the Products and contains any covenant limiting, in any material
respect, the ability of Seller or any of its Subsidiaries to engage in any line of business
or compete with any Third Party;
(v) which is a material Contract of the type described in clauses (i) (iii) above and
contains any provisions contemplating or relating to a change in control or similar event
with respect to Seller or any one or more of its Subsidiaries and having the effect of
providing that the consummation of the transactions contemplated by this Agreement or the
execution, delivery or effectiveness of this Agreement will materially
conflict with, result in a material violation or material breach of, or constitute a
default (with or without notice or lapse of time or both) under, such Contract or give rise
under such Contract to any right of, or result in, a termination, right of first refusal,
material amendment, revocation, cancellation or material acceleration, or a loss of a
material benefit or the creation of any material Encumbrance upon any of the properties or
assets of Seller or any of its Subsidiaries, or to any increased, accelerated or additional
material rights or material entitlements of any Person;
(vi) which relates to the Products and which involves the grant of a most favored
nation pricing or terms that (i) apply to Seller or any of its Subsidiaries or (ii)
following the consummation of the transactions contemplated by this Agreement would apply to
Buyer or any of its Subsidiaries;
(vii) which relates primarily to the Products and involves the settlement or other
resolution of any suit, claim, action, proceeding or investigation that has any continuing
obligations, Liabilities or restrictions on Seller or any of its Subsidiaries and which was
entered into within two (2) years prior to the Execution Date; or
(viii) which relates to the disposition or acquisition by Seller or any of its
Subsidiaries, with obligations to Third Parties remaining to be performed or liabilities
continuing after the Execution Date, of any assets related to the Purchased Assets or the
Business, other than Contracts for the sale of Product inventory in the ordinary course.
Merck-Serono Agreement
means the Amended and Restated License and Supply Agreement, dated
June 4, 2002, by and between Columbia Laboratories (Bermuda) Limited and Ares Trading S.A., as
amended by Amendment No. 1 thereto dated December 21, 2006, as amended, from time to time, subject
to
Section 2.3(d)
.
Natural Progesterone
has the meaning set forth in the definition of Progesterone.
NDA
means a New Drug Application for any product, as appropriate, requesting permission to
place a drug on the market in accordance with 21 C.F.R. Part 314, and all amendments or supplements
filed pursuant to the requirements of the FDA.
NDC
means the National Drug Code, which is the eleven digit code registered by a company
with the FDA with respect to a pharmaceutical product.
Net Sales
means with respect to sales of a Product by Buyer, and its Affiliates and/or
licensees, sublicensees, distributors or other agents, the amount of gross sales (in dollars or
other currencies) for such Product, reduced by the sum of the following items relating to such
sales that are actually given to or taken by, as applicable, Buyer and its Affiliates, licensees,
sublicensees, distributors or other agents, to the extent such deductions are accrued and
recognized under and in accordance with GAAP (or other internationally recognized accounting
standard in use by Buyer):
(a) trade, quantity and cash discounts;
(b) adjustments for price adjustments, billing errors, rejected goods, returns, product
recalls and damaged goods (excluding goods damaged while under the control of Buyer or its
Affiliates or their respective licensees, sub-licensees, or distributors);
(c) credits, charge-backs, reimbursements, and similar payments provided to wholesalers and
other distributors, buying groups, health care insurance carriers, pharmacy benefit management
companies, health maintenance organizations, other institutions or health care organizations or
other customers;
(d) rebates or other price reductions provided to any Regulatory Authority with respect to any
state or federal Medicare, Medicaid or similar programs;
(e) any invoiced charge for freight, insurance, handling, or other transportation costs
directly related to delivery of the Products;
(f) distributor fees per Contract based solely as a percentage of gross sales and
(g) Taxes that are in the nature of tariffs, duties, excise, sales, use or value-added Taxes;
provided
,
however
, that the foregoing deductions shall only be deducted once and only to the extent
not otherwise deducted from gross sales.
Next Generation Product
means a Product to be administered utilizing the Seller Next
Generation Delivery System or another Delivery System approved by the Joint Development Committee.
Nonassignable Asset
has the meaning set forth in
Section 2.6
.
Non-Compete Period
has the meaning set forth in
Section 8.11(a)
.
Non-United States Purchased Assets
means the following, to the extent included in the
Purchased Assets: (i) Sellers rights to the Development or Commercialization outside of the
geographic territory of the United States of (A) the Products in existence at the time of the First
Closing, (B) the Products in Development at the time of the First Closing, and (C) in-process
research and development in existence at the time of the First Closing; (ii) all income, royalties,
damages, and payments made, due or payable with respect to the rights described in the preceding
clause (i); and (iii) all causes of action (in law or equity) and rights to sue, counterclaim,
and/or recover related to the rights set forth in clauses (i) and (ii).
Original NDA
means a complete new NDA that has never before been submitted to the FDA.
Other Agreements
means, collectively, the License Agreement, the Supply Agreement, the
Investors Rights Agreement and Asset Transfer Documentation.
Outside Date
has the meaning set forth in
Section 9.1(a)(ii)
.
Parent
has the meaning set forth in the Preamble.
Party
or
Parties
has the meaning set forth in the Preamble.
Patents
means United States and non-United States patents, patent applications, and other
similar enforceable rights relating to the protection of inventions worldwide (and all rights
related thereto, including all reissues, reexaminations, divisions, continuations,
continuations-in-part, extensions or renewals of any of the foregoing).
Permitted Encumbrances
means (a) statutory liens for current Taxes not yet due and payable
or Taxes being contested in good faith by appropriate proceedings and for which adequate reserves
have been established on the balance sheet contained in the Financial Statements, (b) mechanics,
carriers, workers, repairers and other similar liens arising or incurred in the ordinary course
of business consistent with past practice relating to obligations as to which there is no default
on the part of Seller or the validity or amount of which is being contested in good faith by
appropriate proceedings, or pledges, deposits or other liens securing the performance of bids,
trade contracts, leases or statutory obligations (including workers compensation, unemployment
insurance or other social security legislation), and (c) all other Encumbrances that would not,
individually or in the aggregate, have a Material Adverse Effect.
Person
means any individual, corporation, partnership, joint venture, limited liability
company, trust or unincorporated organization or Regulatory Authority.
Post-Closing Payments
has the meaning set forth in
Section 2.7
.
Post-Closing Tax Period
means any Tax period beginning after the First Closing Date and that
portion of a First Closing Straddle Period beginning after the First Closing Date.
Pre-Closing Covenants
has the meaning set forth in
Section 10.1(a)
.
Pre-Closing Tax Period
means any Tax period ending on or before the First Closing Date and
that portion of any First Closing Straddle Period ending on the First Closing Date.
Preferred Stock
has the meaning set forth in
Section 4.5(a)
.
PREGNANT Study
means the Phase III clinical trial being conducted by Seller of Prochieve to
reduce the risk of preterm birth in women with a short cervix (the
PTB Indication
) as measured by
transvaginal ultrasound in mid-pregnancy.
Prochieve
means Sellers currently marketed eight percent (8%) vaginal gel Product that is
the subject of the PREGNANT Study.
Prochieve PTB Development Plan
has the meaning set forth in
Section 8.7(a)(ii)
.
Product Data
has the meaning set forth in
Section 2.1(g)
.
Product Regulatory Approvals
means Regulatory Approvals for Products sold by Seller or its
Subsidiaries.
Products
means all pharmaceutical products containing Progesterone as an active
pharmaceutical ingredient, including all forms and formulations thereof and regardless of Delivery
System utilized to administer such product or Indication(s) for which such products are approved.
Progesterone
means (i) pregn-4-ene-3,20-dione and 17-alpha-hydroxypregn-4-ene-3,20-dione
(
Natural Progesterone
), and (ii) 17-alpha-hydroxyprogesterone caproate, medroxyprogesterone
acetate, norethindrone, norethindrone acetate, norethindrone enanthate, desogestrel,
levonorgestrel, lynestrenol, ethynodiol diacetate, norgestrel, norgestimate, norethynodrel,
gestodene, drospirenone, trimegestone, levodesogestrel, gestodyne, nesterone, etonogestrel, and
derivatives from 19-nor-testoterone (
Synthetic Progesterone
).
Promotional Materials
means the advertising, promotional and media materials, sales training
materials, trade show materials and videos used by Seller primarily for the Commercialization of
Products.
Property Taxes
means real and personal ad valorem and specific property Taxes (other than
Transfer Taxes) imposed on a periodic basis and based on or with respect to (i) the assessed
valuations of assets or (ii) each article of a class of assets without regard to its value. For
the avoidance of doubt, Property Taxes shall not include any Taxes calculated based on income,
gross receipts, profits or sales.
Proxy Statement
has the meaning set forth in
Section 6.4(a)
.
PTB Indication
has the meaning set forth in the definition of PREGNANT Study.
PTB NDA
has the meaning set forth in
Section 2.1(i)
.
PTB NDA Acceptance Milestone
has the meaning set forth in
Section 2.8(b)(i)
.
PTB NDA Acceptance Milestone Payment
has the meaning set forth in
Section 2.8(b)(i)
.
PTB Product
has the meaning set forth in
Section 2.8(b)(i)
.
PTB Product Launch Milestone
has the meaning set forth in
Section 2.8(b)(i)
.
PTB Product Launch Milestone Payment
has the meaning set forth in
Section 2.8(b)(i)
.
PTB Product Team
has the meaning set forth in
Section 8.7(b)(i)
.
PTB Royalty Product
means any pharmaceutical product that contains Progesterone as an active
pharmaceutical ingredient covered by a Regulatory Approval indicated for pre-term birth, except any
and all Generic Equivalents of Products that are not (and never were) Commercialized pursuant to
this Agreement. For the avoidance of doubt, the foregoing exception shall not limit
Section
2.8(d)(ii)
.
PTB Royalty Product Term
has the meaning set forth in
Section 2.8(d)(i)(E)
.
PTB Supplemental NDA
has the meaning set forth in
Section 2.1(i)
.
PTB US Approval
means the approval by FDA of the PTB NDA or PTB Supplemental NDA, as
applicable, expanding the Prochieve label to include the PTB Indication, which approval has been
accepted by the Joint Development Committee.
PTO
means the United States Patent and Trademark Office.
Purchase Price
has the meaning set forth in
Section 2.7
.
Purchased Assets
has the meaning set forth in
Section 2.1
.
Rebate Charges
means amounts claimed by or under, or in respect of, Medicaid, state rebate
programs, pharmaceutical benefit management organizations, managed care organizations, and other
Persons as rebates under Contracts between such parties and Seller or Buyer, as the context
requires.
Regulatory Approval
means, with respect to a Product in any country or jurisdiction, any
approval, registration, license, permit, certificate, exemption, consent, confirmation, order,
waiver, clearance or authorization from a Regulatory Authority in a country or other jurisdiction
that is necessary to market and sell such Product in such country or jurisdiction.
Regulatory Authority
means any federal, state or local regulatory authority, regulatory
agency or other governmental body, including the FDA and EMEA.
Regulatory Exclusivity
means any exclusive marketing rights or data exclusivity rights
conferred by any Regulatory Authority with respect to a Product other than Patents, including
rights conferred in the United States under the Hatch-Waxman Act or the FDA Modernization Act of
1997 or rights similar thereto outside the United States.
Regulatory Filings
means, with respect to any Product, any submission to a Regulatory
Authority of any appropriate regulatory application and shall include, without limitation, any
submission to a regulatory advisory board, marketing authorization application, and any supplement
or amendment thereto. For the avoidance of doubt, Regulatory Filings shall include any IND, NDA,
MAA or the corresponding application in any other country or group of countries.
Release
means any releasing, spilling, leaking, pumping, pouring, placing, emitting,
emptying, discharging, injecting, escaping, leaching, disposing, or dumping into the environment,
whether intentional or unintentional, negligent or non-negligent, sudden or non-sudden, accidental
or non-accidental.
Representatives
means, with respect to any Person, the directors, officers, managers,
employees, independent contractors, agents, attorneys, advisors or consultants of such Person.
Required Seller Stockholders Vote
means the (i) adoption of a resolution by the holders of
Sellers outstanding capital stock having a majority of the voting power associated with all shares
of Sellers outstanding capital stock approving the sale and transfer of the Purchased Assets and
the Assumed Liabilities pursuant to this Agreement and (ii) approval of the Charter Amendment by the
(x) holders of a majority of the outstanding shares of the Common Stock and (y) holders of Sellers
capital stock having a majority of the voting power associated with all shares of Sellers
outstanding capital stock.
Review Period
has the meaning set forth in
Section 2.8(b)(ii)
Royalty Product
means any pharmaceutical product that contains Natural Progesterone or
17-alpha-hydroxyprogesterone caproate that is delivered transvaginally, except any and all Generic
Equivalents of Products that are not (and never were) Commercialized pursuant to this Agreement.
For the avoidance of doubt, the foregoing exception shall not limit
Section 2.8(d)(ii)
.
Royalty Product Term
has the meaning set forth in
Section 2.8(d)(i)(D)
.
SEC
means the United States Securities and Exchange Commission.
SEC Documents
has the meaning set forth in
Section 4.15
.
Second Closing
has the meaning set forth in
Section 3.1(b)
.
Second Closing Date
has the meaning set forth in
Section 3.1(b)
.
Second Closing Date Purchased Assets
has the meaning set forth in
Section 2.1
.
Second Closing Date Assumed Liabilities
has the meaning set forth in
Section 2.4
.
Second Post-Closing Tax Period
means any Tax period beginning after the Second Closing Date
and that portion of a Second Closing Straddle Period beginning after the Second Closing Date.
Second Pre-Closing Tax Period
means any Tax period ending on or before the Second Closing
Date, and that portion of any Second Closing Straddle Period ending on the Second Closing Date.
Second Closing Straddle Period
means any Tax period beginning before or on and ending after
the Second Closing Date.
Securities Act
means the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
Seller
has the meaning set forth in the Preamble.
Seller Account
means a bank account in the United States to be designated by Seller in a
written notice to Buyer at least three (3) Business Days before the First Closing or, with respect
to any payments due thereafter, at least three (3) Business Days prior to the date that such
payment becomes due and payable.
Seller Board Recommendation
has the meaning set forth in
Section 4.2(b)
.
Seller Disclosure Letter
has the meaning set forth in
Article IV
.
Seller Development Costs Cap
has the meaning set forth in
Section 8.7(b)(i)
Seller Development Activities
means all Development activities with respect to the Products
that are designated as Sellers responsibility in this Agreement or the Development Plan.
Seller Expense Period
has the meaning set forth in
Section 8.7(c)
.
Seller Indemnitees
has the meaning set forth in
Section 10.3
.
Seller Next Generation Delivery System
means the progressive hydration tablet technology
described in Sellers US Patent No. 6,248,358.
Seller Stockholders Meeting
has the meaning set forth in
Section 6.4(c)
.
Sellers SEC Filings
means all forms, reports and other documents filed with the SEC by
Seller under the Securities Act or Exchange Act, as the case may be since and including January 1,
2007.
Senior
Officers
means, for Seller, the Chief Executive Officer,
and for Buyer, the Chief Executive Officer of Parent.
Shares
has the meaning set forth in the Recitals.
Site
means any of the real properties owned, leased or operated by Seller and used in
connection with its business, including all soil, subsoil, surface waters and groundwater thereat.
Subsidiary
means, when used with reference to an entity, any other entity of which (a)
securities or other ownership interests having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions, or (b) a majority of the
outstanding securities of which, are owned directly or indirectly by such entity.
Superior Proposal
has the meaning set forth in
Section 6.5(f)
.
Superior Proposal Notice
has the meaning set forth in
Section 6.5(d)
.
Supply Agreement
means the Supply Agreement between Buyer and Seller, in substantially the
form attached hereto as
Exhibit C
.
Survival Period
has the meaning set forth in
Section 10.1(a)
.
Synthetic Progesterone
has the meaning set forth in the definition of Progesterone.
Tax
or
Taxes
means any and all taxes, assessments, levies, tariffs, duties or other
charges or impositions in the nature of a tax (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including income, estimated income, gross receipts, profits, business, license,
occupation, franchise, capital stock, real or personal property, sales, use, transfer, value added,
employment or unemployment, social security, disability, alternative or add-on minimum, customs,
excise, stamp, environmental, commercial rent or withholding taxes, whether contested or not.
Tax Matter
has the meaning set forth in
Section 8.6(e)
.
Tax Return
means any report, return (including any information return), claim for refund,
election, estimated Tax filing or payment, request for extension, document, declaration or other
information or filing required to be supplied to any taxing authority with respect to Taxes,
including attachments thereto and amendments thereof.
Termination Fee
has the meaning set forth in
Section 9.2(b)
.
Territory
means the world.
Third Party
means any Person other than a Party or its Affiliates.
Third-Party Claim
has the meaning set forth in
Section 10.6(a)
.
Trademarks
means trademarks, service marks, certification marks, trade dress, Internet
domain names, trade names, identifying symbols, designs, product names, company names, slogans,
logos or insignia, whether registered or unregistered, and all common law rights, applications and
registrations therefor, and all goodwill associated therewith.
Transactions
means the transactions contemplated by this Agreement and the Other Agreements.
Transfer Agent
means American Stock Transfer and Trust Company, LLC.
Transfer Taxes
means any and all transfer, documentary, sales, use, stamp, registration,
value added, recording and other similar Taxes and fees (including any penalties and interest)
incurred as a result of the transfer of the Purchased Assets, Shares and Assumed Liabilities
pursuant to the consummation of the transactions contemplated by this Agreement (including
recording fees and any real property or leasehold interest transfer tax and any similar Tax).
United States
or
U.S.
means the United States of America and its territories and
possessions.
Upfront Payment
has the meaning set forth in
Section 2.7
.
Valid Claim
means, with respect to any country, a claim of an issued Patent or Patent
application (that has been pending for no more than seven (7) years after the date from which such
Patent application claims priority) that has not expired or been revoked, held invalid or
unenforceable by a patent office, court or other governmental agency of competent jurisdiction in a
final and non-appealable judgment (or judgment from which no appeal was taken within the allowable
time period).
Wholesaler Affiliate
means an Affiliate of Buyer, substantially all of the business of which
consists of the wholesale distribution of pharmaceutical products.
Wholesaler Charges
means amounts claimed by wholesalers of the Products as chargebacks or
returns to the wholesaler under contracts between group purchasing organizations (collectively,
GPOs
) and Seller and amounts claimed by GPOs as administrative or marketing fees under contracts
between GPOs and Seller.
Exhibit
A
Asset Transfer Documentation
Exhibit B
INVESTORS RIGHTS AGREEMENT
Dated [], 2010
TABLE OF CONTENTS
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Page
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SECTION 1 DEFINITIONS
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1
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1.1
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Certain Definitions
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1
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SECTION 2 REGISTRATION RIGHTS
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4
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2.1
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Shelf-Registration
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4
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2.2
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Expenses
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5
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2.3
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Registration Procedures
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5
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2.4
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Indemnification
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7
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2.5
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Registration Covenants
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9
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2.6
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Rule 144 Reporting
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11
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SECTION 3 BOARD OF DIRECTORS
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11
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3.1
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Investor Designee
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11
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3.2
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Designation
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12
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3.3
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Change in Designee
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12
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3.4
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Information
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12
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3.5
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Termination of Rights
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12
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3.6
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No Compensation
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12
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3.7
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Confidentiality Agreement
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12
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SECTION 4 LOCK-UP AGREEMENT
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13
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4.1
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Lock-Up Agreement
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13
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4.2
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Stop-Transfer Instructions
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14
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4.3
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Termination of Lock-Up Agreement
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14
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SECTION 5 MISCELLANEOUS
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14
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5.1
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Amendment
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14
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5.2
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Notices
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14
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5.3
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Information
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15
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5.4
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Successors and Assigns
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15
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5.5
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Entire Agreement
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15
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5.6
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Delays or Omissions
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15
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5.7
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Severability
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15
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5.8
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Titles and Subtitles
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16
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5.9
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Counterparts
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16
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5.10
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Further Assurances
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16
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5.11
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Injunctive Relief
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16
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5.12
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Governing Law
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16
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5.13
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Arbitration
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16
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5.14
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Recapitalization, Exchanges, Etc.
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17
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5.15
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Conflict
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18
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i
INVESTORS RIGHTS AGREEMENT
This Investors Rights Agreement (this
Agreement
) is dated as of
[
]
, 2010, and is between
Columbia Laboratories, Inc., a Delaware corporation (the
Company
),
and Coventry Acquisition, Inc., a Delaware corporation (the
Investor
). All capitalized terms used and not defined herein shall have such meanings as set
forth in the Purchase and Collaboration Agreement, dated as of March 3, 2010, by and between the
Company and the Investor (the
Purchase and Collaboration Agreement
).
RECITALS
WHEREAS
, the Investor and the Company are parties to the Purchase and Collaboration Agreement
pursuant to which Investor, among other things, acquired from the Company 11,200,000 shares of
Common Stock (the
Shares
); and
WHEREAS
, the Company and the Investor are entering into this Agreement pursuant to the
Purchase and Collaboration Agreement.
NOW, THEREFORE
, in consideration of the foregoing and for other good and valuable
consideration, the sufficiency of which is acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions
. As used in this Agreement, the following terms shall have the meanings set forth below:
(a)
AAA
shall have the meaning set forth in Section 5.13(a).
(b)
Affiliate
shall mean, with respect to any Person (as defined below), any other Person
controlling, controlled by or under direct or indirect common control with such Person (for the
purposes of this definition
control,
when used with respect to any specified Person, shall mean
the power to direct the management and policies of such Person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms
controlling
and
controlled
shall have meanings correlative to the foregoing).
(c)
Agreement
shall have the meaning set forth in the Preamble.
(d)
Arbitrator
shall have the meaning set forth in Section 5.13(b).
(e)
Board
shall mean the Companys board of directors.
(f)
Business Day
shall mean a day Monday through Friday on which banks are generally open
for business in New York City.
(g)
Bylaws
shall mean the Companys Amended and Restated Bylaws, as amended from time to
time.
(h)
Certificate
shall mean the Companys Restated Certificate of Incorporation as filed with
the Secretary of State of the State of Delaware and as amended from time to time.
(i)
Commission
shall mean the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.
(j)
Common Stock
shall mean the Companys common stock, $0.01 par value per share.
(k)
Company
shall have the meaning set forth in the Preamble.
(l)
DGCL
shall mean the General Corporation Law of the State of Delaware.
(m)
Dispute
shall have the meaning set forth in Section 5.13(a).
(n)
Enforcing Court
shall have the meaning set forth in Section 5.13(e).
(o)
Exchange Act
shall mean the Securities Exchange Act of 1934, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(p)
Filing Date
shall have the meaning set forth in Section 2.1(a).
(q)
Financial Statements
shall mean the financial statements of the Company filed with the
Commission in connection with the registration contemplated under this Agreement.
(r)
Indemnified Party
shall have the meaning set forth in Section 2.4(c).
(s)
Indemnifying Party
shall have the meaning set forth in Section 2.4(c).
(t)
Initial Lock-Up Period
shall have the meaning set forth in Section 4.1(a).
(u)
Investor
shall have the meaning set forth in the Preamble.
(v)
Investor Designee
shall have the meaning set forth in Section 3.1.
(w)
Nasdaq Stock Market
shall have the meaning set forth in Section 2.3(i).
(x)
Person
shall mean any person, individual, corporation, limited liability company,
partnership, trust or other nongovernmental entity or any governmental agency, court, authority or
other body (whether foreign, federal, state, local or otherwise).
(y)
Purchase and Collaboration Agreement
shall have the meaning set forth in the Preamble.
2
(z) The terms
register,
registered
and
registration
refer to the registration effected
by preparing and filing a registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.
(aa)
Registrable Securities
shall mean (i) any Shares and (ii) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in replacement of the Shares
referenced in (i) above, in each case until Transferred by the Investor to the extent permitted by
this Agreement;
provided
,
however
, that Registrable Securities shall not include
any securities described in clause (i) or (ii) above which have previously been registered or which
have been sold to the public either pursuant to a Registration Statement or Rule 144, or which have
been sold in a private transaction.
(bb)
Registration Expenses
shall mean all expenses incurred by the Company in complying with
Section 2.1 hereof, including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to or required by any such registration
(but, for the avoidance of doubt, excluding the fees of legal counsel for the Investor).
(cc)
Registration Statement
shall mean any registration statement of the Company filed with
the Commission on the appropriate form pursuant to the Securities Act which covers any Registrable
Securities pursuant to the provisions of this Agreement and all amendments and supplements to any
such Registration Statement, including post-effective amendments, all exhibits thereto and all
materials incorporated by reference therein.
(dd)
Registration Period
shall have the meaning set forth in Section 2.1(b).
(ee)
Rule 144
shall mean Rule 144 as promulgated by the Commission under the Securities Act,
as such Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the Commission.
(ff)
Securities Act
shall mean the Securities Act of 1933, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(gg)
Selling Expenses
shall mean all underwriting discounts and the selling commissions and
stock transfer taxes applicable to the sale of Registrable Securities and the fees and
disbursements of counsel for the Investor.
(hh)
Shares
shall have the meaning set forth in the Recitals.
(ii)
Shelf Registration Statement
shall have the meaning set forth in Section 2.1(a).
(jj)
Subsidiary
shall mean, when used with reference to an entity, any other entity of which
(i) securities or other ownership interests having ordinary voting power to elect a
3
majority of the board of directors or other Persons performing similar functions, or (ii) a
majority of the outstanding securities of which, are owned directly or indirectly by such entity.
(kk)
Transaction Delay Notice
shall have the meaning set forth in Section 2.5(b).
(ll)
Transaction Delay Period
shall have the meaning set forth in Section 2.5(b).
(mm)
Transfer
and
Transferred
shall mean to directly or indirectly sell, transfer,
exchange, assign, pledge, hypothecate, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of.
SECTION 2
REGISTRATION RIGHTS
2.1 Shelf-Registration
.
(a) The Company shall use commercially reasonable efforts to file not later than ninety (90)
days before the end of the Initial Lock-Up Period (the
Filing Date
) a Registration Statement
pursuant to Rule 415 under the Securities Act with the Commission covering the resale of the
Registrable Securities on a delayed or continuous basis (the
Shelf Registration Statement
), and
effect the registration, qualifications or compliances (including, without limitation, the
execution of any required undertaking to file post-effective amendments, appropriate qualifications
or exemptions under applicable blue sky or other state securities laws and appropriate compliance
with applicable securities laws, requirements or regulations) of the Registrable Securities as
promptly as possible after the filing thereof. The Shelf Registration Statement will be on Form
S-3;
provided
, that if Form S-3 is not available for use by the Company on the Filing Date,
then the Registration Statement will be on such form as is then available.
(b) Except for such times as the Company is permitted hereunder to suspend the use of the
prospectus forming part of the Shelf Registration Statement pursuant to Section 2.5, use
commercially reasonable efforts to keep such registration, and any qualification, exemption or
compliance under state securities laws which the Company determines to obtain, continuously
effective, and to keep such Shelf Registration Statement free of any untrue statement of a material
fact or omission to state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, in light of the circumstances in which they were made,
until the earliest of the following: (i) the date of the fourth (4
th
) anniversary of
the date on which the Shelf Registration Statement is initially declared effective by the
Commission, (ii) the date all of the Registrable Securities have been Transferred by the Investor
and (iii) the date all of the Registrable Securities then held by the Investor may be sold by the
Investor under Rule 144 during any ninety (90) day period without complying with the provisions of
clause (c) or (f) of Rule 144. The period of time during which the Company is required hereunder
to keep the Shelf Registration Statement effective is referred to herein as the
Registration Period
. The rights of the Investor under this Section 2 shall terminate on the
last day of the Registration Period.
4
2.2 Expenses
. All Registration Expenses incurred in connection with any registration, qualification, exemption
or compliance pursuant to Section 2, shall be borne by the Company. All Selling Expenses relating
to the sale of Registrable Securities registered hereunder by or on behalf of the Investor shall be
borne by the Investor.
2.3 Registration Procedures
. In the case of the registration, qualification, exemption or compliance effected by the Company
pursuant to this Agreement, the Company shall:
(a) notify the Investor within three (3) Business Days:
(i) when the Shelf Registration Statement or any amendment thereto has been filed with the
Commission and when the Shelf Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or supplements to the Shelf Registration
Statement or the prospectus included therein, upon which the Company will use its commercially
reasonable efforts to file the same with the Commission;
(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, upon which the Company will use its
commercially reasonable efforts promptly to obtain the withdrawal of such suspension or address any
such proceedings, as applicable; and
(v) of the occurrence of any event that requires the making of any changes in the Shelf
Registration Statement or the prospectus forming a part thereof so that, as of such date, the Shelf
Registration Statement and the prospectus forming a part thereof, as applicable, do not contain an
untrue statement of material fact, and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the prospectus, in the light of
the circumstances under which they were made) not misleading (
provided
, that, in no event
shall such notice contain any material, non-public information);
(b) use commercially reasonable efforts to obtain the withdrawal of any order suspending the
effectiveness of the Shelf Registration Statement as soon as reasonably practicable;
(c) promptly furnish the Investor, without charge, at least one copy of the Shelf Registration
Statement and any post-effective amendment thereto, including Financial Statements and schedules,
and, if explicitly requested, all exhibits in the form filed with the Commission;
(d) during the Registration Period, promptly deliver to the Investor, without charge, as many
copies of the prospectus included in the Shelf Registration Statement and any
5
amendment or
supplement thereto as the Investor may reasonably request; and, subject to the limitations
contained herein, the Company consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by the Investor in connection with the offering
and sale of the Registrable Securities covered by the prospectus forming a part thereof or any
amendment or supplement thereto;
(e) during the Registration Period, if the Investor so requests, deliver to the Investor,
without charge, (i) one copy of the following documents: (A) its annual report to its stockholders,
if any (which annual report shall contain financial statements audited in accordance with generally
accepted accounting principles in the United States of America by an independent registered public
accounting firm of recognized standing), (B) its annual report on Form 10-K (or similar form), (C)
its definitive proxy statement with respect to its annual meeting of stockholders, (D) each of its
quarterly report(s) on Form 10-Q (or similar form), and (E) a copy of the full Shelf Registration
Statement (the foregoing, in each case, excluding exhibits); and (ii) if explicitly requested, all
exhibits excluded by the parenthetical to the immediately preceding clause (E);
(f) prior to any public offering of Registrable Securities pursuant to the Shelf Registration
Statement, promptly take such actions as may be necessary to register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such United States
jurisdictions as the Investor reasonably requests in writing;
provided
, that the Company
shall not for any such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction, and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered
by the Shelf Registration Statement;
(g) upon the occurrence of any event contemplated by Section 2.3(a)(v) above, except for such
times as the Company is permitted hereunder to suspend the use of the prospectus forming part of
the Shelf Registration Statement, pursuant to Section 2.5, the Company shall use commercially
reasonable efforts to as soon as reasonably practicable prepare a post effective amendment to the
Shelf Registration Statement or a supplement to the prospectus forming a part thereof, or file any
other required document so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, such prospectus will not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(h) otherwise use commercially reasonable efforts to comply in all material respects with all
applicable rules and regulations of the Commission which could affect the sale of the Registrable
Securities;
(i) use commercially reasonable efforts to cause the Registrable Securities included in the
Shelf Registration Statement to be listed on the NASDAQ Global Market (
NASDAQ Stock Market
) or,
if the Common Stock is not then listed on the NASDAQ Stock Market, on the principal national
securities exchange on which the Common Stock is then listed,
6
or if the Common Stock is not then
listed on a national securities exchange, authorized for quotation on any automated quotation
system on which the Common Stock is then quoted;
(j) during the Registration Period, furnish to the Investor, without charge, copies of any
correspondence from the Commission or the staff of the Commission to the Company or its
representatives relating to the Shelf Registration Statement or any document incorporated by
reference therein within five (5) Business Days after the Companys receipt thereof;
(k) use commercially reasonable efforts to take all other steps necessary to effect the
registration of the Registrable Securities contemplated hereby and to enable the Investor to sell
Registrable Securities under Rule 144; and
(l) if the Investor so requests in writing, permit a single counsel, designated by the
Investor to review and provide reasonable comments to the Shelf Registration Statement and all
amendments and supplements thereto, within three (3) Business Days prior to the filing thereof with
the Commission;
provided
, that, in the case of clause (l) above, the Company shall not be required (A) to
delay the filing of the Shelf Registration Statement or any amendment or supplement thereto to
incorporate any comments to the Shelf Registration Statement or any amendment or supplement thereto
by or on behalf of the Investor if such comments would require or result in a delay in the filing
of the Shelf Registration Statement, amendment or supplement, as the case may be, and the Company
reasonably believes (after consulting with legal counsel) that such comments are not necessary to
incorporate into the Shelf Registration Statement or any amendment or supplement thereto in order
to comply with the Securities Act or (B) to provide, and shall not provide, the Investor or its
representatives with material, non-public information unless the Investor agrees to receive such
information and enters into a written confidentiality agreement with the Company in a form
reasonably acceptable to the Company.
2.4 Indemnification.
(a) To the extent permitted by law, the Company shall (subject to Section 2.4(c) below)
indemnify the Investor, each of its directors and officers, and each person who controls the
Investor within the meaning of Section 15 of the Securities Act, with respect to any registration
that has been effected pursuant to this Agreement, against all claims, losses, damages and
liabilities (or action in respect thereof), including any of the foregoing incurred in settlement
of any litigation, commenced or threatened (subject to Section 2.4(c) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact contained in
the Shelf Registration Statement, prospectus or any amendment or supplement thereof, or based on
any omission (or alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading (in case of any prospectus, in light of
the circumstances in which they were made), or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and relating to any
action or inaction required of the Company in connection with any such registration, qualification
or compliance, and will reimburse the Investor and each person controlling the Investor, for
reasonable legal and other out-of-pocket expenses reasonably incurred in
7
connection with
investigating or defending any such claim, loss, damage, liability or action as incurred;
provided
that the Company will not be liable in any such case to the extent that any untrue
statement or omission is made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Investor specifically for use in preparation of the Shelf
Registration Statement, prospectus, amendment or supplement.
(b) The Investor will indemnify the Company, each of its directors and officers, and each
person who controls the Company within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section
2.4(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in the Shelf Registration Statement, prospectus, or any amendment or
supplement thereof, or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading (in case
of any prospectus, in light of the circumstances in which they were made), and will reimburse the
Company, such directors and officers, and each person controlling the Company for reasonable legal
and any other expenses reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the
extent, that such untrue statement or omission or allegation thereof is made in reliance upon and
in conformity with written information furnished to the Company by or on behalf of the Investor
specifically for use in preparation of the Shelf Registration Statement, prospectus, amendment or
supplement. Notwithstanding the foregoing, the Investors aggregate liability pursuant to this
Section 2.4(b) and Section 2.4(d) shall be limited to the net amount received by the Investor from
the sale of the Registrable Securities pursuant to the Shelf Registration Statement.
(c) Each party entitled to indemnification under this Section 2.4 (the
Indemnified Party
)
shall give notice to the party required to provide indemnification (the
Indemnifying Party
)
promptly after such Indemnified Party has actual knowledge of any claim, action or litigation as to
which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume
the defense of any such claim, action or litigation resulting therefrom;
provided
, that
counsel for the Indemnifying Party, who shall conduct the defense of such claim, action or
litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such Indemnified Partys
expense (and after the assumption of the defense of any such claim, action or litigation by the
Indemnifying Party, the Indemnified Party shall not be entitled to reimbursement or indemnification
for its legal or other out-of-pocket expenses incurred in action with investigating or defending
any such claim, action or litigation except for out-of-
pocket costs (excluding legal or other professional fees or expenses) solely to the extent
incurred by the Indemnified Party for it to comply with any order or legally binding determination
of a court or other governmental authority or to provide assistance in the defense or investigation
of such claim at the request or direction of the Indemnifying Party), and
provided
,
further
, that the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent
such failure is materially prejudicial to the Indemnifying Party in defending such claim, action or
litigation. The Indemnified Party shall not settle, compromise, or consent to the entry of any
judgment with respect to any such claim, action or litigation without the prior written consent of
the
8
Indemnifying Party (which consent will not be unreasonably withheld) and the Indemnifying
Party shall not be liable for any compromise, settlement or consent to the entry of any judgment
with respect to any claim, action or litigation effected without its prior written consent. No
Indemnifying Party, in its defense of any such claim, action or litigation, shall, except with the
consent of each Indemnified Party, settle, compromise or consent to entry of any judgment which
does not include as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim, action or litigation.
(d) If the indemnification provided for in this Section 2.4 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) The amount paid or payable by an Indemnified Party as a result of the losses, claims,
damages, and liabilities referred to in this Section 2.4 shall include the reasonable legal or
other expenses reasonably incurred by such Indemnified Party in connection with investigating or
defending any such action or claim, subject to the provisions of Section 2.4(c). No Person guilty
of fraudulent misrepresentation (within the meaning of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent misrepresentation.
(f) The obligations of the Company and the Investor under this Section 2.4 shall survive the
completion of any offering of Registrable Securities under the Shelf Registration Statement.
2.5 Registration Covenants.
(a) The Investor agrees that, upon receipt of any notice from the Company of the happening of
any event:
(i) requiring the preparation of a supplement or amendment to a prospectus relating to
Registrable Securities so that, as thereafter delivered to the Investor, such prospectus shall not
contain an untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, the Investor will
forthwith discontinue offering or Transferring Registrable Securities pursuant to the Shelf
Registration Statement and prospectus forming a part thereof contemplated by Section 2.1 until its
receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by
the Company, the Investor shall deliver to the Company all copies, other than
9
permanent file copies
then in the Investors possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice;
(ii) contemplated by Section 2.3(a)(iii), the Investor shall forthwith discontinue offering or
Transferring Registrable Securities pursuant to the Shelf Registration Statement and the prospectus
forming a part thereof contemplated by Section 2.1 until its receipt of a notice from the Company
stating that the stop order of the type referred to in Section 2.3(a)(iii) is no longer applicable
or that the Commission will not issue any such stop order pursuant to the proceedings of the type
referred to in Section 2.3(a)(iii); or
(iii) contemplated by Section 2.3(a)(iv), the Investor shall forthwith discontinue offering or
Transferring Registrable Securities pursuant to the Shelf Registration Statement and the prospectus
forming a part thereof contemplated by Section 2.1 until its receipt of a notice from the Company
that any suspension of the type referred to in Section 2.3(a)(iv) is no longer applicable or that
no Person will issue any such suspension pursuant to any proceedings (threatened or initiated) of
the type referred to in Section 2.3(a)(iv).
(b) Notwithstanding anything in this Agreement to the contrary, if the Company delivers to the
Investor a certificate, signed by an officer of the Company (the
Transaction Delay Notice
),
stating that in the good faith judgment of the Board (i) continued use of the Shelf Registration
Statement for purposes of effecting offers or sales of the Registrable Securities pursuant thereto
would require, under the Securities Act or the Exchange Act, premature disclosure in the Shelf
Registration Statement (or the prospectus that is a part thereof or any document that is or would
be incorporated therein) of material, nonpublic information concerning the Company, its business or
prospects or any proposed material transaction involving the Company, (ii) such premature
disclosure would be materially adverse to the Company, its business or prospects or any such
proposed material transaction or would make the successful consummation by the Company of any such
material transaction significantly less likely and (iii) it is therefore desirable to suspend the
use by the Investor of the Shelf Registration Statement (and the prospectus that is a part thereof)
for purposes of effecting offers or sales of the Registrable Securities pursuant thereto, then the
right of the Investor to use the Shelf Registration Statement (and the prospectus that is a part
thereof) for purposes of effecting offers or sales of the Registrable Securities pursuant thereto shall be suspended.
Notwithstanding the foregoing, the Company shall not under any circumstances be entitled to
exercise its right to suspend the use of the Shelf Registration Statement on more than two (2)
occasions during any twelve (12) month period, and each such suspension shall not be for more than
thirty (30) days per such occasion (the
Transaction Delay Period
). The Investor hereby covenants
and agrees that it will not sell any Registrable Securities pursuant to the Shelf Registration
Statement during the periods the Shelf Registration Statement is withdrawn or the ability to sell
thereunder is suspended as set forth in this Section 2.5(b). During the period the ability of the
Investor to sell Registrable Securities under the Shelf Registration Statement is suspended
pursuant to this Section 2.5(b) the Company shall not file a Registration Statement during the
related Transaction Delay Period for the offer or sale of any securities for its own account or for
the offer or sale of any securities for the account of any stockholder of the Company.
10
(c) As a condition to the inclusion of its Registrable Securities, the Investor shall furnish
to the Company such information, including completing an investor questionnaire in the form
provided by the Company, as shall be required in connection with any registration referred to in
this Section 2.
(d) The Investor acknowledges and agrees that the Registrable Securities sold pursuant to the
Shelf Registration Statement are not Transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Registrable Securities is accompanied
by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable
Securities have been Transferred in accordance with the Shelf Registration Statement and (ii) the
requirement of delivering a current prospectus has been satisfied.
(e) At the end of the Registration Period the Investor shall discontinue sales of Registrable
Securities pursuant to the Shelf Registration Statement upon receipt of notice from the Company of
its intention to remove from registration the Registrable Securities covered by the Shelf
Registration Statement which remain unsold, and the Investor shall notify the Company of the number
of Registrable Securities registered which remain unsold immediately upon receipt of such notice
from the Company.
2.6 Rule 144 Reporting
. With a view to making available the benefits of certain rules and regulations of the Commission
that may permit the sale of the Registrable Securities to the public without registration, the
Company agrees to use its commercially reasonable efforts to:
(a) Make and keep adequate current public information with respect to the Company available in
accordance with Rule 144; and
(b) File with the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act.
SECTION 3
BOARD OF DIRECTORS
3.1 Investor Designee
.
(a) Upon execution of this Agreement and in accordance with the terms of this Section 3, the
Investor shall have the right to designate one Person for election to the Board as its nominee in
its sole discretion (the
Investor Designee
). Within five (5) Business Days after the date
hereof, the Company shall take all commercially reasonable actions to expand the Board in
accordance with the Certificate, the Bylaws and the DGCL to create one vacancy on the Board and
appoint the Investor Designee to fill such vacancy.
(b) Subject to Section 3.5, following the appointment of the Investor Designee pursuant to
Section 3.1(a), for applicable subsequent elections of the members of the Board, the Company shall
take all such actions as are commercially reasonable to facilitate the Investor Designees
re-election to the Board.
(c) The Investor Designee must be eligible under applicable law and regulations of any
national securities exchange on which Company securities are traded to serve
11
on the Board;
provided
,
however
, that the Investor Designee shall not be required to be
independent under the listing rules of any applicable national securities exchange, if any, on
which Company securities are traded.
3.2 Designation
. The initial Investor Designee shall be
[
].
3.3 Change in Designee
. From time to time, subject to Section 3.5, the Investor may, in its sole discretion, notify the
Company in writing of its intention to remove the Investor Designee that is serving on the Board
and/or to select a new Investor Designee for election to the Board (whether to replace a prior
Investor Designee or to fill a vacancy on the Board caused by the resignation or removal of a prior
Investor Designee). Subject to Section 3.5, in the event of such an initiation of a removal or
selection of an Investor Designee under this Section 3.3, the Company shall take such commercially
reasonable actions as are necessary to facilitate such removal or election. Notwithstanding the
foregoing sentence, the Company shall not be required to hold a special meeting of stockholders to
replace an Investor Designee and in no event shall there be more than one Investor Designee on the
Board.
3.4 Information
. The Investor shall at the request of the Company provide, and shall cause the Investor Designee
to provide, all information regarding the Investor Designee that the Company may reasonably request
for inclusion in any proxy statement or other report that is required to contain such information
that the Company is required to file with the Commission or any national
securities exchange on which the Companys securities are listed. The Investor represents,
warrants and agrees that any such information supplied to the Company will not contain any untrue
statement of a material fact, or omit to state any material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading.
3.5 Termination of Rights
. The rights provided to the Investor under this Section 3 shall terminate at the first time when
the Investor ceases to hold at least ten percent (10%) of the then outstanding Common Stock;
provided
,
however
, that an Investor Designee who is appointed or elected prior to
the time when the Investor ceases to hold at least ten percent (10%) of the then outstanding Common
Stock may continue as a director of the Company until the Companys next meeting of stockholders
held after the time when the Investor ceases to hold at least ten percent (10%) of the then
outstanding Common Stock at which the stockholders are requested to take action with respect to the
election of directors of the Company. For purposes of this Section 3.5, in determining, at any
time, how many shares of Common Stock the Investor holds, only the Shares then held by the Investor
should be considered and no other shares of Common Stock held by the Investor shall be considered.
3.6 No Compensation
. The Investor Designee shall not be entitled to receive compensation in any form from the Company
in connection with such designation or in respect of his or her position as a member of the Board.
3.7 Confidentiality Agreement
. Notwithstanding anything contained herein to the contrary, no Investor Designee shall be
entitled to become a member of the Board unless and until he or she executes a confidentiality
agreement in a form agreed to by the Company, the Investor and the Investor Designee, each acting
reasonably.
12
SECTION 4
LOCK-UP AGREEMENT
4.1 Lock-Up Agreement.
(a) Except as otherwise permitted in this Section 4.1, the Investor agrees not to Transfer the
Shares or any legal or beneficial interest therein, without the prior written consent of the
Company, from the date hereof until the date which is six (6) months after the date of this
Agreement (the
Initial Lock-Up Period
);
provided
that the Investor shall have the right
to participate in any buy-back of Common Stock by the Company, any tender offer or exchange offer
for shares of Common Stock or in any extraordinary business combination or recapitalization
transaction involving the Company that is approved by the stockholders of the Company by a vote
required under applicable law.
(b) Notwithstanding Section 4.1(a), the Investor shall be permitted to Transfer any portion or
all of the Shares at any time to any Affiliate under common control with the Investor;
provided
, that any transferee agrees in writing to be bound by the provisions of this
Section 4 to the reasonable satisfaction of the Company;
provided
, further that any such
Transfer shall not relieve the Investor from its obligations hereunder.
(c) Following the Initial Lock-Up Period, subject to Sections 4.3 and 5.3, the Investor agrees
that it will not, during any fiscal quarter of the Company, Transfer more than two million
(2,000,000) of the Shares;
provided
,
however
, the restrictions in this Section
4.1(c) shall terminate eighteen (18) months following the date of this Agreement.
(d) In addition to the foregoing Transfer restrictions, the Investor shall not be entitled to
transfer any Registrable Securities at any time if such Transfer would violate the Securities Act,
or any state (or other jurisdiction) securities or blue sky laws applicable to the Company or the
applicable Transfer of Registrable Securities.
(e) Each certificate representing the Registrable Securities shall bear the following legend:
THE SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE
SECURITIES EVIDENCED BY THIS CERTIFICATE IS RESTRICTED BY THE TERMS
OF AN INVESTORS RIGHTS AGREEMENT, DATED AS OF [], 2010,
COPIES OF WHICH ARE ON FILE WITH THE ISSUER OF THIS CERTIFICATE. NO
SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION SHALL BE EFFECTIVE
UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH INVESTORS RIGHTS
AGREEMENT HAVE BEEN COMPLIED WITH IN FULL.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER
13
JURISDICTION AND
MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED
(OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.
(f) In the event that the restrictive legend set forth in Section 4.1(e) has ceased to be
applicable, the Company shall promptly provide the Investor or its permitted transferee, with new
certificates for such Registrable Securities not bearing the legend with respect to which the
restriction has ceased and terminated.
4.2 Stop-Transfer Instructions
. In order to enforce Section 4.1, the Company may impose stop-transfer instructions with respect
to any Company securities owned by the Investor.
4.3 Termination of Lock-Up Agreement
. This Section 4 shall terminate at the first time when the Investor, and its Affiliates (other
than the Company), in the aggregate, cease to hold at least ten percent (10%) of the then
outstanding Common Stock. For purposes of this Section 4.3, in determining, at any time, how many
shares of Common Stock the Investor and its Affiliates hold, only the Shares then held by the
Investor and its Affiliates shall be considered and no other shares of Common Stock held by the
Investor and/or its Affiliates shall be considered.
SECTION 5
MISCELLANEOUS
5.1 Amendment
. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument referencing this Agreement and
signed by the Company and the Investor.
5.2 Notices
. All notices and other communications required or permitted hereunder shall be in writing and
shall be mailed by registered or certified mail, postage prepaid, sent by electronic mail or
otherwise delivered by hand, messenger or courier service addressed:
(a) if to the Investor, to the address or electronic mail address of the Investor set forth
beneath its name on the signature pages hereto, as may be updated in accordance with the provisions
hereof, with a copy (which shall not constitute notice) to Latham & Watkins LLP, 650 Town Center
Drive, 20th Floor, Costa Mesa, CA 92626-1925, Attention: R. Scott Shean; and
(b) if to the Company, to the address or electronic mail address of the Company set forth
beneath its name on the signature pages hereto, as may be updated in accordance with the provisions
hereof, with a copy (which shall not constitute notice) to Kaye Scholer LLP, 425 Park Avenue, New
York, NY 10022, Attention: Adam H. Golden and Steven G. Canner.
Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given (i) if delivered by hand, messenger or courier service, when
delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid,
14
specifying next-business-day delivery, two (2) Business Days after deposit with the courier), (ii)
if sent via registered or certified mail, at the earlier of its receipt or five (5) days after the
same has been deposited in a regularly-maintained receptacle for the deposit of the United States
mail, addressed and mailed as aforesaid, or (iii) if sent via electronic mail, when directed to the
relevant electronic mail address, if sent during normal business hours of the recipient, or if not
sent during normal business hours of the recipient, then on the recipients next Business Day
in either case confirmed in writing.
5.3 Information
. The Investor hereby acknowledges that it is aware (and the Investor agrees that any Person,
including the Investor Designee, who otherwise receives from the Investor confidential non-public
information relating to the Company has been and will be advised) that the United States securities
laws restrict any Person who possesses material, non-public information regarding the Company from
purchasing or selling securities of the Company and from communicating such information to any
other Person under circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
5.4 Successors and Assigns
. Except as permitted by Section 4.1(b), this Agreement and the rights and obligations of the
parties hereunder shall not be assignable or otherwise transferred, in whole or in part, by the
Company or the Investor without the written consent of both parties hereto
.
Any attempted
assignment or transfer of this Agreement shall be null and void.
5.5 Entire Agreement
. This Agreement and the exhibits hereto, the Purchase and Collaboration Agreement and the Other
Agreements (as defined in the Purchase and Collaboration Agreement) constitute the full and entire
understanding and agreement between the parties with regard to the subject hereof and thereof
.
No
party hereto shall be liable or bound to any other party in any manner with regard to the subjects
hereof or thereof by any warranties, representations or covenants except as specifically set forth
herein or therein.
5.6 Delays or Omissions
. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy
accruing to any party to this Agreement upon any breach or default of any other party under this
Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any party of any breach
or default under this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.
5.7 Severability
. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or void, portions of such provision, or such provision in its
entirety, to the extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the same economic,
15
business and other purposes of the
illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in
accordance with its terms.
5.8 Titles and Subtitles
. The titles and subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement
.
All references in this Agreement to
sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits attached hereto.
5.9 Counterparts
. This Agreement may be executed and delivered by PDF signature and in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.
5.10 Further Assurances
. Each party hereto agrees to execute and deliver, by the proper exercise of its corporate,
limited liability company, partnership or other powers, all such other and additional instruments
and documents and do all such other acts and things as may be necessary to more fully effectuate
this Agreement.
5.11 Injunctive Relief
. The Parties hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached and that such damages would not be fully compensable by an award of money
damages. It is accordingly agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement without posting a bond or other undertaking, this being in addition to
any other remedy to which they are entitled at law or in equity.
5.12 Governing Law
. This Agreement (including any claim or controversy arising out of or relating to this Agreement)
shall be governed by and construed in accordance with the laws of the State of Delaware without
regard to conflict of law principles that would result in the application of any law other than the
laws of the State of Delaware.
5.13 Arbitration.
(a) All disputes, differences, controversies and claims of the parties hereto arising out of
or relating to this Agreement (individually, a
Dispute
and, collectively,
Disputes
), except as otherwise provided under this Agreement, shall be resolved by final and
binding arbitration administered by the American Arbitration Association (
AAA
) under its
Commercial Arbitration Rules, subject to the provisions of this Section 5.13.
(b) Following the delivery of a written demand for arbitration by either party hereto, each of
the Company and Investor shall choose one (1) arbitrator within ten (10) Business Days after the
date of such written demand and the two (2) chosen arbitrators shall mutually, within ten (10)
Business Days after selection, select a third (3
rd
) arbitrator (each, an
Arbitrator
and together, the
Arbitrators
), each of whom shall be a retired judge selected from a roster of
arbitrators provided by the AAA. If the third (3
rd
) Arbitrator is not selected within
fifteen (15) Business Days after the delivery of the written demand for arbitration (or such other
time period as the parties hereto may agree), the parties hereto shall promptly request that the
commercial panel of the AAA select an independent Arbitrator meeting such criteria
16
(c) The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association;
provided
,
however
, that notwithstanding any provisions of the
Commercial Arbitration Rules to the contrary, unless otherwise mutually agreed to by the Company
and the Investor, the sole discovery available to each party hereto shall be its right to conduct
up to two (2) non-expert depositions of no more than three (3) hours of testimony each.
(d) The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the parties hereto agree to extend such time. The award shall be
final and binding upon the parties hereto.
(e) Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the parties hereto, including without limitation any proceeding to enforce this Section 5.13, to
review or confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery
Court sitting in the county of New Castle, Delaware (the
Enforcing Court
). By execution and
delivery of this Agreement, each party hereto accepts the jurisdiction of the Enforcing Court.
(f) Each party hereto shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section 5.13, including attorneys fees, unless determined otherwise by the
Arbitrator.
(g) The parties hereto agree that the existence, conduct and content of any arbitration
pursuant to this Section 5.13 shall be kept confidential and no party hereto shall disclose to any
Person any information about such arbitration, except in connection with such arbitration or as may
be required by law or by any court, regulatory or governmental authority (or any exchange on which
such partys securities are listed) or for financial reporting purposes in such partys financial
statements.
(h) Notwithstanding the foregoing, none of the provisions of this Agreement (including this
Section 5.13) shall restrict the right of any party hereto to seek injunctive relief or other
equitable remedies, to enjoin any breach or threatened breach of this Agreement or otherwise
specifically enforce any provision of this Agreement.
5.14 Recapitalization, Exchanges, Etc
. The provisions of this Agreement shall apply to the full extent set forth herein with respect to
(i) the Registrable Securities, (ii) any and all securities into which the shares of Common Stock
are converted, exchanged or substituted in any recapitalization or other capital reorganization by
the Company and (iii) any and all equity securities of the Company or any successor or assign of
the Company (whether by merger, consolidation or otherwise) which may be issued in respect of, in
conversion of, in exchange for, or in substitution of, the shares of Common Stock and shall be
appropriately adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The Company shall cause any
successor or assign (whether by merger, consolidation or otherwise) to assume this Agreement or
enter into a new agreement with the Investor on terms substantially the same as this Agreement as a
condition of any such transaction.
17
5.15 Conflict
. In the event of any conflict between the Companys books and records and this Agreement or any
notice delivered hereunder, the Companys books and records will control absent fraud or error.
(signature page follows)
18
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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Address:
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354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, New Jersey 07039
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COVENTRY ACQUISITION, INC.
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By:
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Name:
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Title:
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Address:
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311 Bonnie Circle
Corona, California 92880-2882
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[
Signature Page to the Investors Rights Agreement
]
Exhibit C
SUPPLY AGREEMENT
THIS
SUPPLY AGREEMENT (this
Agreement
) is made
as of [
], 2010 (the
Effective Date
), by
and between Columbia Laboratories, Inc., a corporation existing and organized under the laws of the State of Delaware,
having a place of business at 354 Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039
(
Supplier
), and Coventry Acquisition, Inc.,
a corporation existing and organized under the laws of the State of
Delaware,
having a place of business at 311 Bonnie Circle, Corona, California
92880 (hereinafter
Buyer
). Capitalized terms used herein but not
otherwise defined herein shall have the definitions ascribed to them in the Purchase and
Collaboration Agreement (as hereinafter defined).
WITNESSETH
:
WHEREAS, Buyer and Supplier have entered into that certain Purchase and Collaboration
Agreement, dated as of March 3, 2010 (the
Purchase and Collaboration Agreement
), providing for the
purchase by Buyer from Supplier of certain assets related to, and a collaboration with respect to
the Development of, the Products (as hereinafter defined); and
WHEREAS, in connection with the Purchase and Collaboration Agreement, Buyer and Supplier have
agreed to enter into this Agreement pursuant to which Supplier will be the exclusive supplier of
the Products for Buyer.
NOW THEREFORE, in consideration of the premises, which are incorporated herein by reference,
and other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1.
SCOPE OF AGREEMENT
1.1
Appointment of Supplier
. Subject to the terms and conditions hereof, Buyer hereby
appoints Supplier as its exclusive source and supplier of all of the requirements of Buyer, its
Affiliates and Partners for the products identified on
Exhibit 1.1
hereto in the United
States in packaged, ready-for-sale form (the
Products
), and Supplier agrees to act as the
exclusive source and supplier of the requirements of Buyer, its Affiliates and Partners for the
Products. For purposes hereof Partner means any Third Party to whom Buyer or its Affiliates has
sold, assigned, transferred, disposed of, licensed or conveyed any of the Purchased Assets or
rights in any Products. Notwithstanding anything to the contrary, upon written notice from Buyer,
provided to Supplier in accordance with Section 19 at least thirty (30) days prior to the date of
any requested change, Buyer may designate any of Buyers Affiliates or Partners for the purpose of
furnishing purchase orders and for receipt of shipments of Products from Supplier; provided that,
at any time, there shall be only one such party and that any such designation shall not relieve
Supplier of its obligations hereunder.
1.2
Inventory on Hand
. Buyer shall purchase the quantities of finished goods Products in
inventory of Supplier or its Affiliates (
Inventory
) on the First Closing Date for the Purchase Price
determined in accordance with Section 5.1, including any partial Batches (as defined in Section 2.3
below). Within thirty (30) days after the Effective Date, Supplier shall deliver the Inventory to
Buyer in accordance with Section 3.1, subject to acceptance by Buyer in
accordance with
Section 3.2. Except as otherwise provided in this Agreement, the other terms and conditions of
this Agreement shall apply to such Product to the same extent as if it were ordered pursuant to a
Purchase Order furnished pursuant to Section 2.3.
2.
FORECASTS; PURCHASE ORDERS; MANUFACTURE
2.1
Supplier Forecasts
. Suppliers forecasts for Product in place immediately prior to the
First Closing Date shall govern for the first four (4) months after the First Closing Date.
Supplier shall use Commercially Reasonable Efforts during such period to meet Buyer requirements
for Product in excess of said pre-closing forecasts, but inability to supply such excess amounts of
Product shall not constitute a breach of this Agreement by Supplier.
2.2
Buyer Forecasts
. At the First Closing, and on or before the fifteenth
(15
th
) day of each calendar month during the Term (as hereinafter defined) Buyer shall
and agrees to submit to Supplier a written forecast of Buyers, its Affiliates and Partners
requirements, by calendar month, for the following twelve (12) calendar months for Product (the
Rolling Forecast
). The first Rolling Forecast shall include Suppliers forecast for the first
four (4) months after the First Closing and any additional amount of Product required by Buyer, its
Affiliates and Partners in each of the first four (4) calendar months after the First Closing. The
first four (4) calendar months of each Rolling Forecast for Products will be firm orders (the
Binding Forecast
). It is understood that such forecasts, updated monthly, that extend beyond the
Binding Forecast, are intended to be good faith estimates only, and shall not be binding upon Buyer
or Supplier. Buyer shall be bound to purchase from Supplier, and Supplier shall supply, one
hundred percent (100%) of those quantities of the Products set forth in each Binding Forecast.
Supplier shall comply with Purchase Orders for Products furnished pursuant to Section 2.3 and shall
use Commercially Reasonable Efforts to supply amounts in excess of one hundred percent (100%) of
the Binding Forecast amounts; provided, however, that inability to supply amounts in excess of one
hundred percent (100%) shall not constitute a breach of this Agreement by Supplier. Supplier shall
notify Buyer in writing of any prospective problems of which it is aware that might prevent it from
meeting Buyers forecasted order quantities or estimated delivery dates.
2.3
Binding Purchase Orders
. At the First Closing and with each Binding Forecast
referenced in Section 2.2 hereof, Buyer shall furnish to Supplier a binding purchase order (each,
a
Purchase Order
) for the quantity of the Products which Buyer shall purchase and Supplier shall
deliver in accordance with the most recent Binding Forecast and this Agreement. Supplier shall
acknowledge receipt of such Purchase Order. Each such Purchase Order shall designate the quantity
of the Products ordered, taking into consideration the fact that all Purchase Orders must be for
one or more full batches (each a
Batch
). A Batch of 8% Product, as identified on
Exhibit
1.1
, is approximately 610,000 individual applicators, provided however, that production yields
may vary, and a yield of between 580,000 and 620,000 individual applicators will be considered an
8% Product Batch. A Batch of 4% Product, as identified on
Exhibit 1.1
, is approximately
150,000 individual applicators, provided however, that production yields may vary, and a yield of
between 140,000 and 160,000 individual applicators will be considered a 4% Product Batch. The
initial Purchase Order(s) shall first be filled by utilizing Suppliers inventory on hand (other
than Inventory), including finished goods and in-transit and in-process inventory of Supplier,
labeled with the name and NDC number of Supplier, until exhausted. Each
2
Purchase Order shall
specify a delivery date for the ordered Product no earlier than ninety (90) days following
Suppliers receipt of the Purchase Order.
2.4
Buyers Ability to Require Supplier to Subcontract the Manufacture of Product
.
(a) In the event that (i) the parties reasonably determine that the demand for any Product is
projected to exceed (as evidenced by the Rolling Forecasts provided by Buyer to Supplier) or (ii)
the demand for any Product actually exceeds (as evidenced by Purchase Orders provided by Buyer to
Supplier) Suppliers capacity to supply Buyer with such Product, Buyer shall have the right to
require Supplier to employ a manufacturer selected by Buyer and reasonably acceptable to Supplier
(
Subcontract Manufacturer
), for the manufacture of such Product pursuant to the terms of this
Agreement. Buyer shall exercise this right by (A) specifying to Supplier the amount of any such
excess demand for such Product and the monthly period(s) in which such excess demand is expected to
occur or has occurred and (B) notifying Supplier of the amounts of such excess demand for such
Product which the Subcontract Manufacturer shall manufacture and supply to Supplier.
(b) If Supplier is unable to manufacture or supply substantially all of any Product required
to be supplied to Buyer under the terms of this Agreement for any reason whatsoever including, for
example, and without limitation, an injunction against such manufacture issued by a government
authority, Buyer shall have the right to require Supplier to employ a Subcontract Manufacturer,
selected by Buyer and reasonably acceptable to Supplier, for the manufacture of such Product for
the remaining Term pursuant to the terms of this Agreement. Buyers rights under this Section
2.4(b) shall be exercisable only if (i) Suppliers inability to manufacture or supply such Product
could reasonably be expected to result in the unavailability of such Product for commercial sale
for at least thirty (30) days, (ii) Buyer provides reasonable evidence of the Subcontract
Manufacturers ability to start manufacture of such Product more rapidly than Supplier could
restart manufacture of such Product, and (iii) Suppliers inability to manufacture or supply such
Product did not result, wholly or in part, from a breach by Buyer of its representations,
warranties or obligations under this Agreement.
(c) If, more than four (4) times in any two (2) year period, Supplier fails to supply, in
conforming form, all or substantially all of the amount of Products subject to an accepted Purchase
Order submitted in accordance with this Agreement (excluding amounts in excess of one hundred
percent (100%) of amounts covered by the applicable Binding Forecast) within thirty (30) days after
the delivery date specified for such Products in the respective Purchase Orders in accordance with
Section 2.3 (such failure, a
Critical Supply Failure
), such Critical Supply Failure shall
constitute a material breach under Section 10.2(c), and Buyer shall have the right, at Buyers sole
discretion, to (i) require Supplier to employ a Subcontract Manufacturer (selected by Buyer and
reasonably acceptable to Supplier), for the manufacture of such Product for the remaining Term
pursuant to the terms of this Agreement or (ii) terminate this Agreement pursuant to Section
10.2(c).
(d) Supplier agrees that, notwithstanding anything to the contrary in this Agreement, Buyer,
at any time after the Effective Date, may designate Buyer, or an Affiliate of Buyer or a Third
Party, for the manufacture and supply of Product, provided that (i) Buyer will bear the cost and
expense of establishing Buyer, or an Affiliate of Buyer or a Third Party, for the
3
manufacture and supply of any Product and (ii) Buyer, or an Affiliate of Buyer or a Third
Party, may only supply up to fifty percent (50%) of the amount of Product ordered in excess of
three (3) Batches per calendar year.
2.5
Provisions Applicable With Subcontract Manufacturer Supplier
. If, at any time,
Supplier subcontracts with a Subcontract Manufacturer pursuant to Sections 2.4(a) (c), or
subcontracts with an Affiliate or a Third Party other than pursuant to Sections 2.4(a) (c), for
the manufacture and supply of any Product, such Subcontract Manufacturer or such Affiliate or a
Third Party shall be reasonably acceptable to Buyer. Supplier shall provide the Subcontract
Manufacturer, the Affiliate or Third Party, as applicable, or cause the Subcontract Manufacturer,
the Affiliate or Third Party to be provided, with all rights required for the manufacture of such
Product and with all assistance reasonably requested by the Subcontract Manufacturer in setting up
and overseeing its manufacturing facility, including know-how concerning the manufacture of such
Product, and copies of all written or other tangible forms of recorded know-how reasonably related
to the manufacture of such Product. Supplier shall obtain and enforce agreements from any such
Subcontract Manufacturer, Affiliate or Third Party requiring the Subcontract Manufacturer,
Affiliate or Third Party to keep all such information conveyed to such Subcontract Manufacturer,
Affiliate or Third Party confidential and not to use any such rights, materials or information to
manufacture Products other than for Products for sale to Supplier.
3.
SHIPMENTS AND ACCEPTANCE
3.1
Delivery
. Supplier shall deliver all Products DDP (as such term is defined and used in
Incoterms 2000, ICC Official Rules for Interpretation of Trade Terms) to Buyers warehouse in
Gurnee, Illinois, United States, or any other single destination within the United States
identified by Buyer at least thirty (30) days prior to the requested delivery date. Title and risk
of loss will transfer from Supplier to Buyer upon delivery of Product to Buyer.
3.2
Inspection; Rejection
. Buyer may inspect the shipment of Product upon receipt to
verify such shipments conformity to the relevant Purchase Order as of the time the Product was
delivered to Buyer. If Buyer determines that any portion or all of any shipment of the Product did
not conform to the Purchase Order as of the time it was delivered to Buyer (each non-conforming
Product, a
Defective Product
), then Buyer shall be entitled to reject such portion or all of any
shipment of Product that includes Defective Product. Buyer shall notify Supplier in writing if the
shipment of Product includes Defective Product that existed at the time of the delivery of the
Products to Buyer. Such notification shall be made as soon as reasonably practicable after
discovery of the nonconformity, but not later than thirty (30) days after delivery of the Products.
Such notice shall specify the reasons for rejection. If Buyer does not so reject the Products
within thirty (30) days after delivery, Buyer shall be deemed to have accepted the Products. After
Buyer accepts a Product, or is deemed to have accepted a Product, except with respect to Latent
Defects (as defined herein below), Buyer shall have no recourse against Supplier except as set
forth in Section 6 hereof. After notice of rejection is received by Supplier, Buyer shall
cooperate with Supplier in determining whether such rejection is justified. Supplier shall notify
Buyer as soon as reasonably possible, but not later than thirty (30) days after receipt of the
notice from Buyer, whether it accepts Buyers basis for rejection. Notwithstanding anything to the
contrary, if a portion or all of any shipment of Product has a latent defect that renders such
Product a Defective Product prior to the expiry date of such Product and that
4
(a)
was not reasonably discoverable within the inspection period specified in this Section 3.2 and (b)
was attributable to Suppliers manufacture and/or supply and (iii) did not occur after receipt of
such Product by Buyer as described in Section 3.2 (each such defect, a
Latent Defect
), Buyer
shall promptly, and in no event more than twenty (20) days after the discovery or notification of
such Latent Defect, notify Supplier of such Latent Defect. If Supplier accepts Buyers
determination that the Product is a Defective Product or that the Product contains a Latent Defect,
then Buyer shall be entitled to the remedies set forth in Section 6.5 hereof. If Supplier does not
accept Buyers determination that the Product is a Defective Product or that the Product contains a
Latent Defect, and Buyer does not accept Suppliers conclusion, then Supplier and Buyer shall
jointly select an independent Third Party to determine whether it conforms to the Purchase Order.
The parties agree that such Third Partys determination shall be final. If the Third Party rules
that the Product conformed to the Purchase Order as of the time the Product was delivered to Buyer
or that the Product does not contain a Latent Defect, as applicable, then Buyer shall be deemed to
have accepted the Product at the agreed upon price and Buyer shall bear the cost of such
independent Third Party determination. If the Third Party rules that the Product does not conform
to the Purchase Order at the time the Product was delivered to Buyer or that the Product contains a
Latent Defect, then Buyer shall be entitled to the remedies set forth in Section 6.5 hereof and
Supplier shall bear the cost of such independent Third Party determination.
4.
RECORDS AND AUDIT RIGHTS, PUBLIC STATEMENTS; RECALLS
4.1
Records; Audit Rights
. Supplier shall maintain, and shall cause its Affiliates and
contract manufacturers and other agents to maintain, all records necessary to comply with all
applicable Laws relating to the manufacture, filling, packaging, testing, storage and shipment of
Products. All such records shall be maintained for such period as may be required by applicable
Laws; provided, however, that all records relating to the manufacture, stability and quality
control of Products shall be retained until the parties agree to dispose of such records. Buyer
and its authorized representatives shall have the right, at Buyers sole cost and expense, to
audit, inspect, and observe the manufacture, storage, disposal, and transportation of Products once
per contract year, during normal business hours upon thirty (30) days prior written notice;
provided that Buyer may conduct additional audits if required to address serious manufacturing
issues or complaints that necessitate reporting to a regulatory authority or for any for cause
audits.
4.2
Public Statements
. Neither party shall use, or authorize others to use, the name,
symbols, or marks of the other in any advertising or publicity material or make any form of
representation or statement with regard to the services provided hereunder which would constitute
an express or implied endorsement by such other of any commercial product or service without the
others prior written approval.
4.3
Recalls
. Buyer, in Buyers sole discretion, shall determine whether any Product must
be withdrawn or recalled from the market. To the extent legally required, Buyer shall notify all
regulatory authorities of any such withdrawal or recall. All costs of withdrawals or recalls
(including costs incurred by Supplier while assisting Buyer) shall be borne by Buyer, except in the
case of recalls or withdrawals caused solely by the negligence or willful malfeasance of Supplier,
its Affiliates or subcontractors or by the material breach by Supplier of its representations and
warranties in this Agreement, in which case Supplier shall credit Buyer
5
for the cost of the recalled or withdrawn Product and Buyers reasonable costs incurred with such
withdrawals or recalls. Buyer shall give Supplier prompt written notice of any withdrawals or
recalls that Buyer believes was caused or may have been caused by the negligence or willful
malfeasance of Supplier, its Affiliates or subcontractors or the material breach by Supplier of its
representations and warranties in this Agreement.
5.
PRICE AND PAYMENT
5.1
Price
.
(a) The purchase price for Products supplied hereunder (the
Purchase Price
) shall be one
hundred and ten percent (110%) of COGS calculated in accordance with this Section 5.1(a) and paid
in accordance with Section 5.1(d). For purposes hereof
COGS
means internal and external costs
incurred in manufacturing, acquiring, product testing activities for quality assurance and quality
control, packaging, transporting, storing and/or cGMP compliance determined in accordance with
United States generally accepted accounting principles, as consistently applied by Supplier in
accordance with Suppliers past practice and in the ordinary course of Suppliers business, in each
case to the extent related and allocable to the Product supplied to Buyer hereunder.
Notwithstanding the foregoing, COGS shall (i) include payroll taxes and customs charges
consistent in type and nature with those set forth on
Exhibit 5.1(a)
, and (ii) exclude any
and all (A) costs attributable to general corporate activities, including, by way of example,
executive management, investor relations, business development, legal affairs and finance, (B)
Taxes other than as described in clause (i) above, and (C) the NDA maintenance fee and applicable
FDA establishment fees.
Exhibit 5.1(a)
to this Agreement sets forth further detail on the
calculation of COGS. For purposes hereof cGMP means current good manufacturing practices of the
FDA and other appropriate agencies, as set forth in 21 C.F.R. Parts 210 and 211 and all applicable
FDA rules, regulations, guides and guidances, as amended from time to time and in effect during the
term of this Agreement.
(b) Buyer shall reimburse Supplier the amount actually paid by Supplier in connection with
applicable FDA establishment fees to the extent related and allocable to the Product supplied to
Buyer hereunder; provided, that, with respect to the period from the Effective Date through
September 30, 2010, Buyers liability for such establishment fees shall be an amount equal to
$457,200 multiplied by a fraction, the numerator of which is (i) the number of days during such
period, and the denominator of which is (ii) 365. Supplier shall provide Buyer with a detailed
invoice of any amounts due and payable pursuant to this Section 5.1(b) and Buyer shall pay the
amount of such invoice within thirty (30) days following receipt.
(c) Supplier shall at all times use Commercially Reasonable Efforts to keep the cost of
acquiring any Product from a contract manufacturer or Subcontract Manufacturer, if applicable, as
low as possible.
(d) For each Batch of Product supplied hereunder, Buyer shall pay Supplier the Purchase Price
(the
Batch Price
) calculated as set forth in this Section 5.1(d). For the period from the
Effective Date through December 31, 2010, the Batch Price for 8% Product and the Batch Price for 4%
Product shall equal the amount for such Product set forth on
Exhibit 5.1(d)
, subject to
adjustment in accordance with Section 5.1(e) below. For each calendar year
6
thereafter, Supplier shall notify Buyer of the Batch Price applicable to purchases of Product
during such calendar year no later than December 31
st
of the year immediately preceding
such calendar year. Such Batch Price shall be Suppliers good faith estimate of COGS for such
calendar year, determined based on Buyers Rolling Forecast, Suppliers projected costs for such
calendar year and foreign currency exchange rates in effect as of the last Business Day of November
immediately preceding Suppliers notice, subject to adjustment in accordance with Section 5.1(e);
provided, however, that, except for adjustment in accordance with Section 5.1(e), the Batch Price
in any calendar year shall not be greater than one hundred twenty percent (120%) of the Batch Price
in the prior, just-ended calendar year.
(e) The Batch Price shall be adjusted on a monthly basis to reflect foreign currency exchange
rates in effect as published in the
Wall Street Journal
on the last Business Day of the
month immediately preceding the applicable month.
(f) On or after each shipment of the Product, Supplier shall provide Buyer with an invoice
setting forth the Batch Price payable for such delivery pursuant to this Section 5. Each such
invoice shall, to the extent applicable, identify the Purchase Order number, quantities of the
Product, aggregate Batch Price of Product supplied pursuant to such Purchase Order and the total
amount to be remitted to Supplier.
(g) Buyer will pay amounts due pursuant to this Agreement within forty-five (45) days of the
date of invoice.
(h) Buyer will make all payments to Supplier, due pursuant to this Agreement, to Suppliers
accounts in the United States.
5.2
Intentionally Omitted
.
5.3
Interest
. If a party (or any successor thereto pursuant to the terms of this
Agreement) fails to pay in full on or before the date due any payment that is required to be paid
under this Agreement, such party (or any successor thereto pursuant to the terms of this Agreement)
will also pay to the other Party, on demand, interest on any such amount beginning on such due date
at an annual rate (calculated on the basis of a 360-day year) equal to the base rate as announced
by JPMorgan N.A., or any successor thereto, in New York, New York in effect on such due date, plus
three (3) percent to be assessed from the date payment of the amount in question first became due.
5.4
Taxes
.
(a) Supplier and Buyer each shall cooperate with the other party, as reasonably requested by
the other party, to minimize or eliminate Taxes to the extent legally permissible, including by
making available to such other party any existing resale certificates, exemption certificates or
other existing information relevant for such purpose.
(b) If applicable Tax Law requires Buyer to withhold any Tax from a payment to Supplier, Buyer
shall withhold such Tax and shall pay the amount withheld to the relevant Tax authority.
7
(c) As soon as practicable after any payment of withheld Taxes by Buyer to a Tax authority,
Buyer shall deliver to Supplier the original or a certified copy of a receipt issued by such Tax
authority evidencing such payment, a copy of the return reporting that payment or other evidence of
such payment reasonably satisfactory to Supplier.
6.
REPRESENTATIONS AND WARRANTIES
6.1
Representations and Warranties of Supplier
. Supplier represents and warrants to Buyer
that:
(a) the Products shall be manufactured and packaged in compliance with the provisions of the
Federal Food, Drug, and Cosmetic Act located at 21 U.S.C. §§ 301 to 397 (2000), as it may be
amended from time to time, and regulations promulgated thereunder (the
Act
), the laws or
regulations imposed by other involved health regulatory authorities within the Territory, and
cGMPs;
(b) as of the time of delivery to Buyer (i) Product (other than Inventory) with an FDA
approved shelf-life greater than or equal to thirty (30) months shall have minimum dating of not
less than twenty-four (24) months shelf-life prior to expiration, (ii) Product (other than
Inventory) with an FDA approved shelf-life less than thirty (30) months shall have minimum dating
of not less than eighteen (18) months shelf-life prior to expiration and (iii) Inventory shall have
minimum dating of not less than twelve (12) months shelf-life prior to expiration;
(c) as of the time any Product is delivered to Buyer and during the shelf life of such
Product, such Product shall conform to the specifications set forth in the NDA for such Product
(
the
Specifications
); and
(d) upon transfer of the risk of loss of a Product, as provided in Section 3.1, good and valid
title to such Product sold hereunder will be conveyed by Supplier to Buyer free and clear of any
Encumbrances created by Supplier.
6.2
Representations and Warranties of Buyer
. Buyer represents and warrants to Supplier
that Buyer will not make any false claims in any packaging, labeling, advertising or promotional
material regarding the Products.
6.3
EXCEPT AS OTHERWISE PROVIDED IN THE PURCHASE AND COLLABORATION AGREEMENT, THE WARRANTIES
SET FORTH IN SECTION 6.1 OF THIS AGREEMENT ARE THE EXCLUSIVE WARRANTIES GIVEN BY SUPPLIER TO BUYER
WITH RESPECT TO THE SUPPLY OF PRODUCTS HEREUNDER, AND ARE GIVEN AND ACCEPTED IN LIEU OF ANY AND ALL
OTHER WARRANTIES, GUARANTEES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.4
EXCEPT AS OTHERWISE PROVIDED IN THE PURCHASE AND COLLABORATION AGREEMENT, THE WARRANTIES
SET FORTH IN
8
SECTION 6.2 OF THIS AGREEMENT ARE THE EXCLUSIVE WARRANTIES GIVEN BY BUYER TO SUPPLIER WITH RESPECT TO
THE PURCHASE OF PRODUCT HEREUNDER, AND ARE GIVEN AND ACCEPTED IN LIEU OF ANY AND ALL OTHER
WARRANTIES, GUARANTEES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.5
Remedy
. Any Product delivered to Buyer by Supplier which is finally determined to be a
Defective Product or contain a Latent Defect in accordance with Section 3.2, shall be replaced at
Suppliers expense, as Buyers sole and exclusive remedy.
7.
INDEMNIFICATION
Each party agrees that it shall indemnify the other party for and hold such other party
harmless against any Losses incurred by such other party as a result of a breach of a
representation, warranty, covenant, agreement or obligation of such party contained in this
Agreement, in accordance with the terms and conditions contained in the Purchase and Collaboration
Agreement.
8.
INSURANCE
8.1
Coverage
. Each party shall maintain during the performance of this Agreement the
following insurance or self-insurance in amounts no less than that specified for each type:
(a) Commercial general liability insurance with combined limits of not less than $1,000,000
per occurrence, $1,000,000 per accident for bodily injury, including death, and property damage, a
general aggregate limit of not less than $1,000,000 and products/completed operations aggregate of
not less than $1,000,000 which coverage shall insure such party for product liability claims and
its obligations under this Agreement;
(b) Workers compensation insurance in the amounts required by the law of the state(s) in which
such partys workers are located and employers liability insurance with limits of not less than
$500,000 per occurrence;
(c) automobile liability insurance covering automobiles and trucks used by or on behalf of
such party either on or away from the other parties premises with combined single limit of not
less than $1,000,000 per occurrence and $1,000,000 per accident for bodily injury, including death,
and property damage, which policy shall include coverage for all hired, owned and no-owned
automobiles and trucks; and
(d) Product Liability Insurance with limits not less than $10,000,000.
8.2
Evidence
. Each party shall provide the other with evidence of its insurance or self insurance.
Each party shall provide to the other thirty (30) days prior, written notice of any cancellation
or material change in its coverage. Each party agrees to deliver to the other concurrently with
the execution of this Agreement and thereafter annually, a certificate from the
9
insurance company(ies) evidencing that all the insurance required by this Agreement is in force,
including a broad form vendors endorsement naming the other party as an additional insured.
9.
CONFIDENTIALITY
The terms of the Confidentiality Agreement shall apply to any information provided by Supplier
to Buyer.
10.
TERM AND TERMINATION
10.1
Term
. This Agreement shall come into effect on the Effective Date. Unless otherwise
terminated as provided in Section 10.2 or Section 12.2 hereof, this Agreement shall remain in force
through May 19, 2015 (for the purpose of this Section 10 the
Initial Term
). This Agreement shall
renew automatically in two (2) year increments after the Initial Term (each, a
Renewal Term
and,
collectively with the Initial Term, the
Term
) unless either party gives written notice to the
other of its intention to not renew at least one hundred and eighty (180) days prior to expiration
of the Initial Term or the then applicable Renewal Term.
10.2
Termination
.
(a)
Purchase and Collaboration Agreement
. Buyer shall have a right to terminate this
Agreement, upon one hundred and eighty (180) days prior written notice to Supplier, upon the
expiration or termination of the Joint Development Period, as provided in the Purchase and
Collaboration Agreement.
(b)
Insolvency
. A party may immediately terminate this Agreement without written
notice to the other party, if (i) the other party is the subject of voluntary or involuntary
bankruptcy proceedings instituted on behalf of or against such it (except for involuntary
bankruptcy proceedings which are dismissed within sixty (60) days); (ii) an administrative
receiver, receiver and manager, interim receiver, custodian, sequestrator or similar officer is
appointed in respect of the other party (collectively, the
Receiver
) and that party has not
caused the underlying action or the Receiver to be dismissed within sixty (60) days after the
Receivers appointment; (iii) the Board of Directors of the other party shall have passed a
resolution to wind up that party, or such a resolution shall have been passed other than a
resolution for the solvent reconstruction or reorganization of that party; (iv) a resolution shall
have been passed by that party or that partys directors to make an application for an
administration order or to appoint an administrator; or (e) the other party makes a general
assignment, composition or arrangement with or for the benefit of all or the majority of that
partys creditors, or makes, suspends or threatens to suspend making payments to all or the
majority of that partys creditors.
(c)
Default
. In the event either party commits a material breach or defaults in the
performance or observance of any of the material provisions of this Agreement, and such breach or
default is not cured within one hundred and twenty (120) days (or within fifteen (15) days in the
case of any payment default or obligation to pay royalties hereunder) after the receipt of notice
thereof from the other party specifying such breach or default, the party not in breach or default
shall be entitled (without prejudice to any of its other rights) to terminate this Agreement,
without additional penalty, termination fee or cost, by giving notice to take effect immediately.
10
11.
EFFECT OF EXPIRATION OR TERMINATION
11.1
Mutual Obligations
. Upon expiration or termination of this Agreement pursuant to
Section 10 with effect as of the effective date of termination:
(a) the party terminating this Agreement shall be released from all obligations and duties
imposed or assumed hereunder except from those provided in Sections 4.1, 4.2, 6, 7, 8 and 9 and
this Section 11 and Section 21; and
(b) the other party shall lose the benefit of any rights granted in this Agreement, except for
those accrued prior to the effective date of termination and those set forth in Sections 4.1, 4.2,
6, 7, 8 and 9 and this Section 11 and Section 21.
11.2
Purchase Orders
.
(a) Where this Agreement is terminated by Buyer pursuant to Section 10.2(a) or by Supplier
pursuant to Section 10.2(b) or 10.2(c), Supplier will be entitled, at its option, to fill or cancel
any Purchase Orders that were submitted by Buyer prior to such termination. If Supplier elects to
fill any such Purchase Orders, Supplier shall use commercially reasonable efforts to fill any such
Purchase Orders. If Supplier elects not to fill any such Purchase Orders, Buyer shall reimburse
Supplier for the costs (including, but not limited to, raw material costs) incurred in connection
with Purchase Orders that Supplier had started to supply prior to the termination of this Agreement
and that are canceled by Supplier pursuant to this Section 11.2(a).
(b) Where this Agreement is terminated by Buyer pursuant to Section 10.2(b) or 10.2(c),
Supplier will be entitled, at its option, to fill or cancel any Purchase Orders that were submitted
by Buyer, its Affiliates or sublicensees prior to such termination; provided that if Supplier
elects not to fill any such Purchase Orders, Supplier shall be liable for the costs (including, but
not limited to, raw material costs) incurred in connection with Purchase Orders that Supplier had
started to manufacture prior to the expiration or termination of this Agreement and that are
canceled by Supplier pursuant to this Section 11.2(b).
11.3
Financial Obligations
. In the event that this Agreement is terminated pursuant to
Section 10.2 by either party, Buyer shall make all payments accruing prior to the effective date of
termination to Supplier in the manner specified herein. Supplier may proceed to enforce payment of
all outstanding payments. Each party may proceed to collect any other monies owed to such party
and to exercise any or all of the rights and remedies contained herein or otherwise available to
such party by law or in equity, successively or concurrently at the option of such party.
11.4
Transition upon Termination; HSR
.
(a) Upon expiration or termination of this Agreement for any reason pursuant to Sections 10 or
12.2, Supplier and its Affiliates shall provide to Buyer, its Affiliates or Third Party designee(s)
such cooperation and assistance as may be reasonably required to facilitate Buyer, its Affiliates
or Third Party designee(s) to bring about a smooth and orderly transition to one or more new
manufacturers and suppliers of Product following such expiration or termination and continuing for
such period of time following such termination as is reasonably
11
necessary to fully effectuate such transition. Buyer shall pay the reasonable internal and
external costs incurred by Supplier in providing such cooperation and assistance.
(b) Upon the expiration or termination of this Agreement, Buyer and Supplier will determine
whether any transfer of rights under this Agreement to Buyer is subject to the premerger
notification requirements of the HSR Act. If HSR Act filings are required, Buyer and Supplier will
use commercially reasonable efforts to make such filings and cause the HSR Act waiting period to
expire or terminate.
11.5
No Release
. Termination of this Agreement for any reason whatsoever shall neither be
deemed a release, nor shall it relieve either party from any obligation under this Agreement which
may have accrued prior thereto.
12.
FORCE MAJEURE
12.1
Suspension of Obligations
. If by reason of force majeure, which shall mean for the
purpose of this Agreement (a) acts of God, war, riots, civil unrest, acts of the public enemy,
fires, earthquakes, severe weather or storms, or (b) to the extent beyond the reasonable control of
the affected party, strikes, labor disputes, labor shortages, product transportation interruptions
or shortages, accidents, unavailability of raw materials or supplies, or any act in consequence of
compliance with any order of any government or governmental authority, and, in the case of either
(a) or (b), the affected party is delayed or prevented from complying with its obligations under
this Agreement, such affected party shall promptly give notice to the other party with an estimated
date by which the contingency will be removed.
12.2
Termination
. To the extent that a party is or has been delayed or prevented by force
majeure from complying with its obligations under this Agreement, the other party may suspend the
performance of its obligations until the contingency is removed. If the party delayed or prevented
from complying with its obligations under this Agreement cannot permanently remove the contingency,
or if the contingency affecting such party results in a delay extending beyond three (3) months,
the other party (upon notice) shall have a right to terminate this Agreement and Section 11,
subject to Section 6.5(b), if applicable, shall apply, with the party delayed or prevented from
complying with its obligations under this Agreement deemed to be the non-terminating party.
13.
NOTICES
All notices, requests, claims, demands and other communications hereunder shall be in writing
and shall be deemed to have been duly given (a) when received if delivered personally, (b) when
transmitted if telecopied (which is confirmed), (c) upon receipt, if sent by registered or
certified mail (postage prepaid, return receipt requested) and (d) the day after it is sent, if
sent for next-day delivery to a domestic address by overnight mail or courier, to the parties at
the following addresses:
If to Supplier, to:
Columbia
Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, New Jersey 07039
Attention: General Counsel
Facsimile: 973.994.3001
12
with copies (which shall not constitute notice) sent concurrently to:
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
If to Buyer, to:
Coventry Acquisition, Inc.
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
with copies (which shall not constitute notice) sent concurrently to:
Latham & Watkins LLP
650 Town Center Drive
20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
provided, however, that if any party shall have designated a different address by notice to the
others, then to the last address so designated.
14.
ASSIGNMENT
Neither party may assign its rights and obligations under this Agreement without the other
partys prior written consent, except that: either party may (a) assign its rights and obligations
under this Agreement or any part hereof to one or more of its Affiliates without the consent of the
other party; and (b) assign this Agreement in its entirety without the other partys consent to an
entity that acquires all or substantially all of the business or assets of the assigning party to
which this Agreement relates, whether by merger, acquisition or otherwise; provided, however, that
in the event of Suppliers exercise of its right under clause (b), notwithstanding the Product
quantity and minimum order requirements set forth in Section 2.4(d), Buyer, or an Affiliate of
Buyer or a Third Party, may manufacture and supply any and all amounts of Product that Buyer, or an
Affiliate of Buyer or a Third Party, may require, without further obligation to Supplier under the
terms of this Agreement; provided, further, that to the extent an assignment of rights or
obligations by Supplier pursuant to this Section 14 increases the Taxes (including without
limitation any withholding Taxes) of, or the amounts owed under Section 5.1(a) subsection (i) by,
Buyer (or an Affiliate or Partner of Buyer that has been designated by Buyer pursuant to Section 1
as of the time of such assignment by Supplier), Supplier or the assignee shall indemnify Buyer (or
such Affiliate or Partner of Buyer) for and hold it harmless against such increase. In the case of
any permitted assignment, the assigning party shall remain responsible for the performance of this
Agreement by the assignee. The assigning party shall provide the other party with prompt written
notice of any such assignment. Any permitted assignee shall assume all obligations of its assignor
under this Agreement, and no permitted assignment shall relieve the assignor of liability
hereunder. Any attempted assignment in contravention of the foregoing shall be void. Subject to
the terms of this Agreement, this
13
Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
15.
NO WAIVER
The failure of either party to enforce any condition or part of this Agreement at any time
shall not be construed as a waiver of that condition or part, nor shall it forfeit any rights to
future enforcement thereof.
16.
RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement shall be deemed to constitute a partnership, joint
venture, or legal entity of any type between Supplier and Buyer, or to constitute one as the agent
of the other. Both parties shall act solely as independent contractors, and nothing in this
Agreement shall be construed to give either party the power or authority to act for, bind, or
commit the other party.
17.
HEADINGS, INTERPRETATION
The headings of sections of this Agreement are for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement in any way. Words denoting the singular
shall include the plural and vice versa; words denoting any gender shall include all genders; and
words denoting persons shall include bodies corporate, and vice versa.
18.
SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other Regulatory Authority to be invalid, void, unenforceable or against
its regulatory policy such determination shall not affect the enforceability of any others or of
the remainder of this Agreement.
19.
ENTIRE AGREEMENT; AMENDMENT OR MODIFICATION
This Agreement may not be amended, supplemented or otherwise modified except by an instrument
in writing signed by both parties hereto. This Agreement, the Purchase and Collaboration
Agreement, the Confidentiality Agreement and the Other Agreements contain the entire agreement of
the parties hereto with respect to the subject matter hereof, superseding all negotiations, prior
discussions and preliminary agreements made prior to the date hereof. No provision of this
Agreement may be amended or modified other than by a written document signed by authorized
representatives of both parties.
20.
FORMS
The parties recognize that, during the Term, a Purchase Order, acknowledgement form or similar
routine document (collectively
Forms
) may be used to implement or administer provisions of this
Agreement. Therefore, the parties agree that the terms of this Agreement will prevail in the event
of any conflict between this Agreement and the printed provision of such
14
Forms, or typed provisions of Forms that add to, vary, modify or are at conflict with the
provisions of this Agreement with respect to Product sold hereunder during the Term.
21.
GOVERNING LAW
This Agreement (including any claim or controversy arising out of or relating to this
Agreement) shall be governed by and construed in accordance with the Laws of the State of Delaware
without regard to conflict of law principles that would result in the application of any Law other
than the Laws of the State of Delaware.
22.
ARBITRATION
22.1 All disputes, differences, controversies and claims of the parties arising out of or
relating to this Agreement (individually, a
Dispute
and, collectively,
Disputes
), except as
otherwise provided under this Agreement, shall be resolved by final and binding arbitration
administered by the American Arbitration Association (
AAA
) under its Commercial Arbitration
Rules, subject to the provisions of this Section 22.
22.2 Following the delivery of a written demand for arbitration by either party, each of Buyer
and Supplier shall choose one (1) arbitrator within ten (10) Business Days after the date of such
written demand and the two chosen arbitrators shall mutually, within ten (10) Business Days after
their selection, select a third (3
rd
) arbitrator (each, an
Arbitrator
and together,
the
Arbitrators
), each of whom shall be a retired judge selected from a roster of arbitrators
provided by the AAA. If the third (3
rd
) Arbitrator is not selected within fifteen (15)
Business Days after delivery of the written demand for arbitration (or such other time period as
the Parties may agree), the parties shall promptly request that the commercial panel of the AAA
select an independent Arbitrator meeting such criteria.
22.3 The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association; provided, however, that notwithstanding any provisions of the Commercial Arbitration
Rules to the contrary, unless otherwise mutually agreed to by Buyer and Supplier, the sole
discovery available to each party shall be its right to conduct up to two (2) non-expert
depositions of no more than three (3) hours of testimony each.
22.4 The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the parties agree to extend such time. The award shall be final
and binding upon the parties.
22.5 Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the parties, including without limitation any proceeding to enforce this Section 22, to review
or confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery Court
sitting in the county of New Castle, Delaware (the
Enforcing Court
). By execution and delivery
of this Agreement, each party accepts the jurisdiction of the Enforcing Court.
22.6 Each party shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section 22, including attorneys fees, unless determined otherwise by the
Arbitrator.
15
22.7 The parties agree that the existence, conduct and content of any arbitration pursuant to
this Section 22 shall be kept confidential and no party shall disclose to any Person any
information about such arbitration, except as may be required by Law or by any Regulatory Authority
(or any exchange on which such Partys securities are listed) or for financial reporting purposes
in such partys financial statements.
22.8 Notwithstanding the forgoing, none of the provisions of this Agreement (including the
provision of this Section 22) shall restrict the right of any party to seek injunctive relief or
other equitable remedies, to enjoin any breach or threatened breach of this Agreement or otherwise
specifically enforce any provision of this Agreement.
16
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and
year first above mentioned.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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COVENTRY ACQUISITION, INC.
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By:
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Name:
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Title:
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Exhibit D
LICENSE AGREEMENT
This
LICENSE AGREEMENT
(the
Agreement
), dated as of
, 2010 (the
Effective Date
), is
entered into by and between Columbia Laboratories, Inc., a
Delaware corporation, and Columbia Laboratories (Bermuda) Ltd., a Bermuda corporation (together,
Seller
), and Coventry Acquisition, Inc., a Delaware corporation (
Buyer
). Seller and Buyer are each referred to herein as a
Party
, and collectively, as the
Parties.
RECITALS
WHEREAS
,
the Columbia Laboratories, Inc., Watson Pharmaceuticals, Inc., a Nevada
corporation and Buyer have entered into a Purchase and Collaboration Agreement, dated as
of March 3, 2010 (the
PCA
), for the sale by Seller, and the purchase by Buyer, of the First
Closing Date Purchased Assets on the First Closing Date and the Second Closing Date Purchased
Assets on the Second Closing Date (each as defined in the PCA);
WHEREAS,
pursuant to the PCA, the Parties will collaborate with respect to certain Development
activities relating to the Products (as defined in the PCA); and
WHEREAS
, as a condition to the First Closing (as defined in the PCA) under the PCA, Buyer will
grant to Seller certain licenses, and Seller will grant Buyer certain licenses, on the terms and
conditions set forth herein.
NOW
,
THEREFORE
, in consideration of the foregoing and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the following meanings.
All other capitalized terms used herein and not defined in this Agreement shall be as defined in
the PCA.
Ascend Agreement
means the License and Supply Agreement, dated as of September 27, 2007,
between Columbia Laboratories, Inc. and Ascend Therapeutics, Inc.
Buyer Introduced Technology
means all Patents and Know-How Controlled by Buyer from time to
time during the Joint Development Period covering technology identified by Buyer in writing for use
by Seller in Seller Development Activities.
Buyer Technology
means the Purchased Asset Technology and Collaboration Technology.
Collaboration Invention
shall have the meaning set forth in Section 3.2(a) hereof.
Collaboration Invention Patent
shall have the meaning set forth in Section 3.2(a) hereof.
Collaboration Technology
shall have the meaning set forth in Section 3.2(a) hereof.
Dimera Agreement
means the Reciprocal License Agreement, dated as of May 19, 2004, among
Columbia Laboratories, Inc., Columbia Laboratories (Bermuda) Ltd. and Dimera Incorporated.
Effective Date
means the date set forth in the Preamble.
Excluded Asset Patents
shall have the meaning set forth in the definition of Excluded Asset
Technology.
Excluded Asset Technology
means (a) the Patents (
Excluded Asset Patents
) and Know-How
Controlled by Seller and/or its Affiliates as of the First Closing Date which relate primarily to
the Products and are not included in the Purchased Assets, and (b) the Seller Next Generation
Delivery System Patents.
Non-US Asset Purchaser
shall have the meaning set forth in Section 2.3(a) hereof.
Non-US Rights to Intellectual Property
shall have the meaning set forth in Section 2.3(a)
hereof.
Product Infringement
shall have the meaning set forth in Section 3.4(a)(i) hereof.
Purchased Asset Patents
shall have the meaning set forth in the definition of Purchased
Asset Technology.
Purchased Asset Technology
means the Patents (
Purchased Asset Patents
) and Know-How
included in the Purchased Assets.
Seller Next Generation Delivery System Invention
shall have the meaning set forth in Section
3.2(b) hereof.
Seller Next Generation Delivery System Patents
means any Patent Controlled by Seller and/or
its Affiliates containing at least one claim that, without a license thereunder, would be infringed
by the manufacture, use, marketing, importing, exporting, sale, offer for sale or other
Commercialization of any product utilizing a Seller Next Generation Delivery System.
Seller Next Generation Delivery System Technology
shall have the meaning set forth in
Section 3.2(b) hereof.
Territory
means worldwide.
2
ARTICLE II.
CERTAIN LICENSES RELATING TO THE PRODUCTS
2.1
Grant of Licenses
.
(a)
Grant of Technology Licenses to Buyer
. Subject to the terms and conditions of
this Agreement, the PCA, the Ascend Agreement, the Merck-Serono Agreement, and the Dimera
Agreement, Seller hereby grants to Buyer an exclusive (even as to Seller and its Affiliates),
irrevocable, perpetual, royalty-free and fully paid-up (except as provided in the PCA) license,
with the right to grant sublicenses subject to Section 2.2, under the Excluded Asset Technology and
Seller Next Generation Delivery System Technology to Develop, manufacture, have manufactured, use,
import, export, market, sell, offer to sell or otherwise Commercialize the Products in the
Territory in any and all fields.
(b)
Grant of Technology Licenses to Seller
. Subject to the terms and conditions of
this Agreement and the PCA, including without limitation Section 8.11 of the PCA, Buyer hereby
grants to Seller:
(i) a non-exclusive, non-transferable (except pursuant to Section 6.8), royalty-free and fully
paid-up license under the Buyer Technology to manufacture, have manufactured, import and export the
Products for the purpose of supply of such Products to Buyer under the terms and conditions of the
Supply Agreement;
(ii) a non-exclusive, non-transferable (except pursuant to Section 6.8), royalty-free and
fully paid-up license under the Buyer Technology, Collaboration Technology and Buyer Introduced
Technology for the sole purpose of conducting the Seller Development Activities during the Joint
Development Period;
(iii) an exclusive (even as to Buyer and its Affiliates), irrevocable, perpetual, royalty-free
and fully paid-up license, with the right to grant sublicenses
subject to Section 2.2, under (A) the
Purchased Asset Technology and Collaboration Technology (but solely to the extent such
Collaboration Technology arises out of clinical trials conducted by or on behalf of Seller on the
Product known as progesterone/COL-1620 vaginal gel containing progesterone in a concentration of
either four percent (4%) or eight percent (8%)) to the extent required to permit Seller or its
Affiliate to perform under and comply with the terms of the
Merck-Serono Agreement and (B) the Purchased Asset Technology to the
extent required to permit Seller or its Affiliate to perform under
and comply with the terms of the Dimera
Agreement; and
(iv) a non-exclusive, irrevocable, perpetual, royalty-free and fully paid-up license, with the
right to grant sublicenses subject to Section 2.2, under Collaboration Technology to Develop,
manufacture, have manufactured, use, import, export, market, sell, offer to sell or otherwise
Commercialize the Seller Next Generation Delivery System to the extent that it incorporates or
otherwise delivers any product other than Products in the Territory in any and all fields.
2.2
Sublicenses
. In the event that a Party shall have the right to grant sublicenses
under licenses granted pursuant to Section 2.1 of this Agreement, each such Party shall ensure that
its sublicensee shall be subject to a written agreement with terms and condition
3
that are consistent with, and no less protective of, the other Party than the terms and
conditions hereunder, provided that, it is acknowledged that the Seller shall have no obligation to
amend the Merck-Serono Agreement or the Dimera Agreement notwithstanding that such agreements
include licenses that constitute sublicenses hereunder.
2.3
Non-U.S. Rights.
(a) To the extent that rights licensed by Seller hereunder are to be used in connection with
or in order to exploit the Non-United States Purchased Assets purchased by a wholly-owned
Subsidiary of Parent pursuant to Section 11.1 of the PCA (such licensed rights, the
Non-US Rights
to Intellectual Property
, and such wholly-owned Subsidiary, the
Non-US Asset Purchaser
), such
Non-US Rights to Intellectual Property shall be licensed to the Non-US Asset Purchaser.
(b) To the extent that rights licensed to Seller hereunder are rights to use the Non-United
States Purchased Assets purchased by the Non-US Asset Purchaser, such rights shall be licensed to
Columbia Laboratories (Bermuda) Ltd.
ARTICLE III.
DEVELOPMENT UNDER THE PCA
3.1
Invention Disclosures
. Each Party shall promptly disclose to the other Party any
inventions and other Know-How, including any inventions or other Know-How related to the Products
or any Next Generation Product, arising under the Parties activities conducted pursuant to the PCA
during the Joint Development Period. Such disclosures shall be provided in writing and in
sufficient detail for the other Party to understand the scope and nature of such inventions and
other Know-How. Any such disclosure shall be treated as the Confidential Information (as defined
in the PCA) of the disclosing Party, subject to the terms of this Article III.
3.2
Ownership of Inventions
. All inventions arising from the Parties activities
pursuant to the PCA during the Joint Development Period, including any Patents covering such
inventions, shall be owned as follows:
(a) All inventions arising from the Parties activities under the PCA (each, a
Collaboration
Invention
) and any Patent covering any such an invention (each, a
Collaboration Invention
Patent
) and Know-How arising from the Parties activities under the PCA (Collaboration Invention
Patents and such Know-How, collectively,
Collaboration Technology
) shall be owned by Buyer.
Notwithstanding the previous sentence, Collaboration Invention and Collaboration Technology shall
exclude any Seller Next Generation Delivery System Inventions and Seller Next Generation Delivery
System Technology. Seller and Affiliates of Seller shall assign, and hereby assign, to Buyer all
right, title and interest in and to Collaboration Inventions, and all right, title and interest in,
to and under Collaboration Technology, in each case, held by Seller and/or Affiliates of Seller.
Seller shall, and shall cause its Affiliates to, cooperate with Buyer and take all reasonable
actions and execute agreements, instruments and documents as may be reasonably required to perfect
Buyers right, title and
4
interest in and to Collaboration Inventions and Buyers right, title and interest in, to and
under Collaboration Technology.
(b) All inventions arising from the Parties activities under the PCA that relate solely to
the Seller Next Generation Delivery System (each a
Seller Next Generation Delivery System
Invention
) and any Patent covering such an invention (each such Patent to constitute a Seller Next
Generation Delivery System Patent) and Know-How arising from the Parties activities under the PCA
that relates solely to the Seller Next Generation Delivery System (Seller Next Generation Delivery
System Patents and such Know-How, collectively,
Seller Next Generation Delivery System
Technology
) shall be owned by Seller. Buyer and Affiliates of Buyer shall assign, and hereby
assign, to Seller all right, title and interest in and to Seller Next Generation Delivery System
Inventions, and all right, title and interest in, to and under Seller Next Generation Delivery
System Technology, in each case, held by Buyer and/or Affiliates of Buyer. Buyer shall, and shall
cause its Affiliates to, cooperate with Seller and take all reasonable actions and execute
agreements, instruments and documents as may be reasonably required to perfect Sellers right,
title and interest in and to Seller Next Generation Delivery System Inventions and Sellers right,
title and interest in, to and under Seller Next Generation Delivery System Technology.
(c) Determination of inventorship shall be made in accordance with United States patent laws.
3.3
Patent Prosecution
.
(a)
Purchased Asset Patents and Collaboration Invention Patents
.
(i) Subject to Sections 3.3(a)(ii) and 3.3(a)(iii), Buyer will have the responsibility for,
and the obligation with respect to, filing, prosecuting and maintaining the Purchased Asset Patents
and Collaboration Invention Patents, at Buyers sole cost and expense. Seller will fully cooperate
with Buyer, at Buyers expense, in connection with the filing, prosecution and maintenance of such
Purchased Asset Patents and such Collaboration Invention Patents, including by providing access to
relevant Persons and executing all documentation reasonably requested by Buyer or its Affiliates.
(ii) Buyer will consult with Seller and keep Seller reasonably informed of the status of the
Purchased Asset Patents and Collaboration Invention Patents, and will provide Seller with all
material filings and correspondences with the patent authorities with respect to such Purchased
Asset Patents and such Collaboration Invention Patents for Sellers review and comment; provided
that Buyer shall have full and complete control over the filing, prosecution and maintenance of the
Purchased Asset Patents and the Collaboration Invention Patents.
(iii) Buyer will notify Seller of any decision not to file applications for, or to cease
prosecution and/or maintenance of, or not to continue to pay the expenses of prosecution and/or
maintenance of, any Purchased Asset Patent or Collaboration Invention Patent. Buyer will provide
such notice at least sixty (60) days prior to any filing or payment due date, or any other due date
that requires action, in connection with such Purchased Asset Patent
or Collaboration Invention Patent.
5
In such event, Buyer shall permit Seller, at Sellers sole discretion and expense, to file or
to continue prosecution or maintenance of such Purchased Asset Patent or such Collaboration
Invention Patent, in each case, in Buyers name.
(b)
Excluded Asset Patents
. Seller will have the responsibility for, and the
obligation with respect to, filing, prosecuting and maintaining the Excluded Asset Patents at
Sellers sole cost and expense. Buyer will fully cooperate with Seller, at Sellers expense, in
connection with the filing, prosecution and maintenance of the Excluded Asset Patents, including by
providing access to relevant Persons and executing all documentation reasonably requested by Seller
or its Affiliates. Seller shall have full and complete control over the filing, prosecution and
maintenance of the Excluded Asset Patents; provided that, so long as Buyer is Developing and/or
Commercializing a Product utilizing the Seller Next Generation Delivery System, Seller will:
(i) consult with Buyer and keep Buyer reasonably informed of the status of the Seller Next
Generation Delivery System Patents with respect to such Product, and will provide Buyer with all
material filings and correspondences with the patent authorities with respect to such Seller Next
Generation Delivery System Patents for Buyers review and comment; and
(ii) notify Buyer of any decision not to file applications for, or to cease prosecution and/or
maintenance of, or not to continue to pay the expenses of prosecution and/or maintenance of, any
Seller Next Generation Delivery System Patents with respect to such Product. Seller will provide
such notice at least sixty (60) days prior to any filing or payment due date, or any other due date
that requires action, in connection with any such Seller Next Generation Delivery System Patent and
Buyer, at Buyers sole discretion and expense, will have a right to file or to continue prosecution
or maintenance of such Seller Next Generation Delivery System Patent in Sellers name.
3.4
Patent Infringement
.
(a)
Purchased Asset Patents and Collaboration Invention Patents
.
(i) Each Party will notify the other of any infringement by a Third Party of any of the
Purchased Asset Patents, Collaboration Invention Patents or Seller Next Generation Delivery System
Patents that cover a Product of which such Party becomes aware, including any patent
certification filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or
similar provisions in other jurisdictions and of any declaratory judgment, opposition, or similar
action alleging the invalidity, unenforceability or non-infringement of any of the Purchased Asset
Patents, Collaboration Invention Patents or Seller Next Generation Delivery System Patents that
cover a Product (collectively
Product Infringement
).
(ii) Buyer will have the sole right to bring and control any legal action in connection with
Product Infringement at Buyers own expense as it reasonably determines appropriate, and Seller
shall have the right, at Sellers own expense, to be represented in any such action by counsel of
its own choice.
6
(iii) If Buyer fails to bring an action or proceeding with respect to, or to terminate,
infringement of any Purchased Asset Patents, Collaboration Invention Patents or Seller Next
Generation Delivery System Patents that cover a Product (A) within ninety (90) days following
notice of alleged infringement or (B) prior to ten (10) days before the time limit, if any, set
forth in the appropriate laws and regulations for the filing of such actions, whichever comes
first, Seller shall have the right, upon prior consultation with Buyer, to bring and control any
such action at Sellers own expense and by counsel of its own choice.
(iv) At the request of the Party prosecuting the Product Infringement action or proceeding,
the other Party, at the prosecuting Partys expense, shall provide reasonable assistance in
connection therewith, including by executing reasonably appropriate documents, cooperating in
discovery and joining as a party to the action if required.
(v) In connection with any such proceeding, Buyer shall not enter into any settlement
admitting the invalidity of, or otherwise impairing the Purchased Asset Patents, Collaboration
Invention Patents or Seller Next Generation Delivery System Patents that cover a Product in any
manner that would impair royalties payable pursuant to the PCA without the prior written consent of
Seller, which will not be unreasonably withheld or delayed.
(vi) Any recoveries resulting from an action relating to a claim of Product Infringement shall
be first applied against payment of each Partys costs and expenses in connection therewith. Any
remainder will be considered Net Sales for purposes of Section 2.8(d) of the PCA.
(b)
Excluded Asset Patents
.
(i) Each Party will notify the other of any infringement by a Third Party of any of the
Excluded Asset Patents of which such Party becomes aware, including any patent certification
filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or similar provisions
in other jurisdictions and of any declaratory judgment, opposition, or similar action alleging the
invalidity, unenforceability or non-infringement of any of such Excluded Asset Patent.
(ii) Seller will have the sole right to bring and control any legal action in connection with
infringement of any Excluded Asset Patent (other than Seller Next Generation Delivery System
Patents that cover a Product) at Sellers own expense as it reasonably determines appropriate.
(iii) If Seller fails to bring an action or proceeding with respect to, or to terminate,
infringement of any Excluded Asset Patent (other than Seller Next Generation Delivery System
Patents) (A) within ninety (90) days following notice of alleged infringement or (B) prior to ten
(10) days before the time limit, if any, set forth in the appropriate laws and regulations for the
filing of such actions, whichever comes first, Buyer shall have the right, upon prior consultation
with Seller, to bring and control any such action at its own expense and by counsel of its own
choice.
(iv) At the request of the Party prosecuting the infringement action or proceeding, the other
Party shall provide reasonable assistance in connection therewith,
7
including by executing reasonably appropriate documents, cooperating in discovery and joining
as a party to the action if required.
(v) In connection with any such proceeding, the Party prosecuting the infringement action or
proceeding shall not enter into any settlement admitting the invalidity of, or otherwise impairing
any Excluded Asset Patent (other than Seller Next Generation Delivery System Patents) utilized in a
Product in any manner that would impair the other Partys Development and/or Commercialization of
such Product or a product utilizing the Seller Next Generation Delivery System without the prior
written consent of the other Party, which will not be unreasonably withheld or delayed.
(vi) Any recoveries resulting from an action relating to a claim of infringement of any
Excluded Asset Patent (other than Seller Next Generation Delivery System Patents) utilized in a
Product shall be first applied against payment of each Partys costs and expenses in connection
therewith. Any remainder will be retained by Seller.
3.5
Third Party Agreements
. Each Party shall ensure that any agreement entered into
with Third Parties engaged to perform Development activities pursuant to the PCA provides for
ownership of inventions and other rights in favor of such Party consistent with this Agreement.
ARTICLE IV.
CONSIDERATION; NO IMPLIED LICENSES
4.1
Consideration
. The rights and obligations provided under this Agreement are being
provided as a condition to the First Closing under the PCA. As such, no further consideration,
financial or otherwise, will be due under this Agreement, except as expressly provided herein.
4.2
No Implied Licenses
. Any Intellectual Property rights of a Party not expressly
granted to the other Party under the provisions of this Agreement shall be retained by such Party.
Except as expressly provided in this Agreement, a Party does not grant to the other Party any right
or license in any Intellectual Property right, whether by implication, estoppel or otherwise.
ARTICLE V.
TERM AND TERMINATION
5.1
Term
. The term of this Agreement shall commence on the Effective Date and shall
continue until the Parties mutually agree in writing to terminate this Agreement.
5.2
Bankruptcy
. Any licenses granted under or pursuant to this Agreement by either
Party to the other Party are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of Title 11, US Code (the
Bankruptcy Code
), licenses of rights to intellectual property as
defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that during the term of
this Agreement, each Party, as a licensee of rights under this Agreement, shall
8
retain and may fully exercise all of its rights and elections under the Bankruptcy Code. The
Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or
against a Party under the Bankruptcy Code, then the other Party (which is not a Party to such
proceeding) will be entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property licensed to such other Party under this Agreement and all embodiments of
such intellectual property, and same, if not already in such other Partys possession, will be
promptly delivered by the Party to such other Party (a) upon any such commencement of a bankruptcy
proceeding upon its written request therefor, unless the Party subject to such proceeding elects to
continue, and thereafter continues, to perform all of its obligations under this Agreement, or (b)
if not delivered under (a) above, following the rejection of this Agreement by or on behalf of the
Party subject to such proceeding upon written request therefor by the non-subject Party.
ARTICLE VI.
MISCELLANEOUS
6.1
Disclaimer of Warranty
. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS
AGREEMENT OR THE PCA, NEITHER PARTY MAKES ANY REPRESENTATIONS NOR GRANTS ANY WARRANTIES, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE RELATED TO ANY AND ALL OF
THE INTELLECTUAL PROPERTY LICENSED HEREUNDER, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS, STATUTORY OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.
6.2
Governing Law
. This Agreement (including any claim or controversy arising out of
or relating to this Agreement) shall be governed by and construed in accordance with the Laws of
the State of Delaware without regard to conflict of law principles that would result in the
application of any Law other than the Laws of the State of Delaware.
6.3
Waiver
. Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. The failure of any Party to enforce any condition or part of this Agreement at any time
shall not be construed as a waiver of that condition or part, nor shall it forfeit any rights to
future enforcement thereof.
6.4
Notices
. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (a) when received if
delivered personally, (b) when transmitted if telecopied (which is confirmed), (c) upon receipt, if
sent by registered or certified mail (postage prepaid, return receipt requested) and (d) the day
after it is sent, if sent for next-day delivery to a domestic address by overnight mail or courier,
to the Parties at the following addresses:
9
If to Seller, to:
Columbia
Laboratories, Inc.
354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
Attention: General Counsel
Facsimile: 973.994.3001
with copies (which shall not constitute notice) sent concurrently to:
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
If to Buyer, to:
Coventry
Acquisition, Inc.
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
with copies (which shall not constitute notice) sent concurrently to:
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
provided, however, that if any Party shall have designated a different address by notice to the
others, then to the last address so designated.
6.5 (a)
Relationship of the Parties
. The Parties are independent contractors.
Nothing herein is intended, or shall be deemed, to constitute a partnership, agency, joint venture
or employment relationship between the Parties. Neither Party shall be responsible for the other
Partys acts or omissions; and neither Party shall have authority to speak for, represent or
obligate the other Party in any way without prior written authority from the other Party. Subject
to the terms of this Agreement, the activities and resources of each Party shall be managed by such
Party, acting independently and in its individual capacity.
(b)
No Third Party Beneficiaries
. This Agreement is solely for the benefit of the
Parties hereto and their respective Affiliates and no provision of this Agreement shall be deemed
to confer upon any third parties any remedy, claim, liability, reimbursement, claim of action or
other right in excess of those existing without reference to this Agreement.
6.6
Amendment; Entire Agreement
. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both Parties hereto. This
Agreement, the PCA, the Other Agreements and the Confidentiality Agreement contain the entire
agreement of the Parties hereto with respect to the Transactions, superseding all negotiations,
prior discussions and preliminary agreements made prior to the Effective Date.
6.7
Severability
. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other Regulatory Authority to be
10
invalid, void, unenforceable or against its regulatory policy such determination shall not
affect the enforceability of any others or of the remainder of this Agreement.
6.8
Assignment and Transfer
.
(a) Neither this Agreement nor any right or obligation hereunder may be assigned or otherwise
transferred by either Party without the prior written consent of the other Party, except that
either Party may, without consent of the other Party, assign or otherwise transfer this Agreement
and its rights and obligations hereunder in whole or in part: (i) to any Affiliate; (ii) in
connection with a merger, reorganization or a sale or transfer of all or substantially all of the
assets to which this Agreement relates. Any attempted assignment or other transfer not in
accordance with this Section 6.8 shall be void. Any permitted assignee shall assume in writing all
assigned obligations of its assignor under this Agreement. The Party making any assignment or
other transfer permitted under this Section 6.8 shall provide prompt written notice to the other
Party of such assignment or transfer. The assignor shall remain jointly and severally liable with
any such assignee(s) with respect to all obligations and liabilities of the assignor hereunder.
(b)
Successors and Assigns
. Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of the Parties hereto and their successors and permitted
assigns.
6.9
Arbitration
.
(a) All disputes, differences, controversies and claims of the Parties arising out of or
relating to the Agreement (individually, a
Dispute
and, collectively,
Disputes
), except as
otherwise provided under this Agreement, shall be resolved by final and binding arbitration
administered by the American Arbitration Association (
AAA
) under its Commercial Arbitration
Rules, subject to the provisions of this Section 6.9.
(b) Following the delivery of a written demand for arbitration by either Party, each of Buyer
and Seller shall choose one (1) arbitrator within ten (10) Business Days after the date of such
written demand and the two chosen arbitrators shall mutually, within ten (10) Business Days after
selection select a third (3rd) arbitrator (each, an
Arbitrator
and together, the
Arbitrators
),
each of whom shall be a retired judge selected from a roster of arbitrators provided by the AAA.
If the third (3rd) Arbitrator is not selected within fifteen (15) Business Days after delivery of
the written demand for arbitration (or such other time period as the Parties may agree), the
Parties shall promptly request that the commercial panel of the AAA select an independent
Arbitrator meeting such criteria.
(c) The rules of arbitration shall be the Commercial Rules of the American Arbitration
Association; provided, however, that notwithstanding any provisions of the Commercial Arbitration
Rules to the contrary, unless otherwise mutually agreed to by Buyer and Seller, the sole discovery
available to each Party shall be its right to conduct up to two (2) non expert depositions of no
more than three (3) hours of testimony each.
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(d) The Arbitrators shall render an award by majority decision within three (3) months after
the date of appointment, unless the Parties agree to extend such time. The award shall be final
and binding upon the Parties.
(e) Any judicial proceeding arising out of or relating to this Agreement or the relationship
of the Parties, including without limitation any proceeding to enforce this Section 6.9, to review
or confirm the award in arbitration, shall be brought exclusively in the Delaware Chancery Court
sitting in the county of New Castle, Delaware (the
Enforcing Court
). By execution and delivery
of this Agreement, each Party accepts the jurisdiction of the Enforcing Court.
(f) Each Party shall pay its own expenses in connection with the resolution of Disputes
pursuant to this Section 6.9, including attorneys fees, unless determined otherwise by the
Arbitrator.
(g) The Parties agree that the existence, conduct and content of any arbitration pursuant to
this Section 6.9 shall be kept confidential and no Party shall disclose to any Person any
information about such arbitration, except in connection with such arbitration or as may be
required by Law or by any Regulatory Authority (or any exchange on which such Partys securities
are listed) or for financial reporting purposes in such Partys financial statements.
(h) Notwithstanding the foregoing, none of the provisions of this Section 6.9 shall restrict
the right of any Party to seek injunctive relief or other equitable remedies, to enjoin any breach
or threatened breach of this Agreement or otherwise specifically enforce any provision of this
Agreement.
6.10
Remedies
.
(a)
Injunctive Relief
. The Parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached and that such damages would not be fully
compensable by an award of money damages. It is accordingly agreed that the Parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement without posting a bond or other
undertaking, this being in addition to any other remedy to which they are entitled at law or in
equity. The parties agree that notwithstanding Section 6.9, any Action brought for an injunction,
or for specific performance shall be heard and exclusively in the Delaware Chancery Court sitting
in New Castle County and each Party waives any objection which it may now or hereafter have to the
laying of venue of any such proceeding, and irrevocably submits to the jurisdiction of such courts
in any such suit, action or proceeding.
(b)
Indemnification
. Seller represents and warrants to Buyer that, other than the
Non-US Rights to Intellectual Property, any Intellectual Property licensed by Seller to Buyer
hereunder (including without limitation any Excluded Asset Technology and Seller Next Generation
Delivery System Technology licensed by Seller to Buyer pursuant to Section 2.1(a)) is owned
directly by Columbia Laboratories, Inc., and has not been assigned or otherwise transferred to any
other Person. Seller shall indemnify, reimburse and defend Buyer and its
12
Affiliates and each of their respective Representatives, successors and assigns from and
against, and hold them harmless from, any Taxes (including without limitation any withholding
Taxes) arising from any breach of the foregoing representation and warranty.
6.11
Interpretation
. Unless the context of this Agreement otherwise requires, (a)
words of one gender include the other gender; and (b) words using the singular or plural number
also include the plural or singular number, respectively. Reference to days are to calendar days
unless specified otherwise. References to any statute, act, or regulation are to that statute,
act, or regulation as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof. The headings contained in this Agreement are for convenience of
reference only and shall not be considered in interpreting this Agreement. The words hereof,
herein and hereunder and words of like import used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. Whenever the words
include, includes or including are used in this Agreement, they shall be deemed to be
followed by the words without limitation, whether or not they are in fact followed by those words
or words of like import. The language in all parts of this Agreement shall be construed, in all
cases, according to its fair meaning. The Parties acknowledge that each Party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.
6.12
Counterparts
. This Agreement may be executed in two or more counterparts
(including by facsimile or by an electronic scan delivered by electronic mail), each of which shall
be deemed to be an original, but all of which, taken together, shall constitute one and the same
agreement and shall become effective when counterparts have been signed by each of the Parties
hereto delivered to the other Parties, it being understood that all Parties need not sign the same
counterpart.
6.13
Further Actions
. Each Party will duly execute and deliver, or cause to be duly
executed and delivered, such further instruments and do and cause to be done such further acts and
things, as may be reasonably necessary or as the other Party may reasonably request in connection
with this Agreement in order to carry out more effectively the provisions and purposes hereof.
[
Remainder of Page Left Intentionally Blank
]
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IN WITNESS WHEREOF
, the Parties hereto have caused this Agreement to be duly executed as of
the date first above written.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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COLUMBIA LABORATORIES (BERMUDA) LTD.
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By:
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Name:
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Title:
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COVENTRY ACQUISITION, INC.
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By:
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Name:
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Title:
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Exhibit E
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
COLUMBIA LABORATORIES, INC.
Columbia Laboratories, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the Corporation), DOES HEREBY CERTIFY:
FIRST: The first paragraph of Article FOURTH of the Restated Certificate of Incorporation, as
previously amended, of the Corporation is hereby deleted in its entirety and replaced with the
following:
The total number of shares of capital stock which the Corporation is
authorized to issue is one hundred fifty-one million (151,000,000) shares, of which
one hundred fifty million (150,000,000) shares shall be denominated common stock,
$.01 par value per share (Common Stock), and one million (1,000,000) shares shall
be denominated preferred stock, $.01 par value per share (Preferred Stock).
SECOND: The aforesaid amendment was duly adopted in accordance with the applicable provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Columbia Laboratories, Inc. has caused this Certificate to be signed by
[
]
, its
[
]
, this
[
]
day of
[
]
, 2010.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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Exhibit
10.1
NOTE PURCHASE AND AMENDMENT AGREEMENT
Note Purchase and Amendment Agreement, dated as of March 3, 2010 (this
Agreement
), by
and among Columbia Laboratories, Inc., a Delaware corporation (the
Company
), the holders of the
Notes (as defined below) listed on
Schedule I
attached hereto (each a
Holder
and
collectively, the
Holders
).
PRELIMINARY STATEMENT
The Holders own the aggregate principal amount of the Companys Convertible Subordinated Notes
due December 31, 2011 (the
Notes
) set forth on
Schedule I
; the Notes owned by the Holders
being referred to herein as the
Holder Notes
.
The Notes were purchased by the Holders pursuant to that certain Securities Purchase
Agreement, dated December 21, 2006 (the
SPA
), among the Company, the Holders and the other
purchasers of the Notes named therein.
The Holders wish to sell to the Company, and the Company wishes to purchase, the Holder Notes,
on the terms and conditions hereinafter set forth.
In consideration of the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1
Note Purchase
. At the Closing, on the terms and subject to the conditions hereof and in
consideration of the Purchase Price (as defined below) and the agreements of the Company set forth
herein, each Holder will sell, convey, transfer, assign and deliver to the Company, and the Company
will purchase, take delivery of and acquire from each Holder, all of such Holders right, title and
interest in the Holder Notes.
1.2
Purchase Price
. The aggregate purchase price (the
Purchase Price
) for the Holder Notes
shall be (i) $11,699,998.54 in cash (the
Cash Consideration
), plus accrued and unpaid interest on the Notes
(calculated in accordance with the Notes) up to (but excluding) the Closing Date payable in cash,
(ii) warrants to purchase 3,488,370 shares of the Companys common stock, $0.01 par value per share
(the
Common Stock
), substantially in the form attached as
Exhibit A
hereto (the
Warrants
) and (iii) 3,333,330 shares of Common Stock (the Shares),
in each case as allocated among the Holders as set forth on
Schedule I
.
1.3
Amendment Consent
. Each Holder hereby irrevocably consents and agrees that the Notes shall be
amended as set forth in the amendment (the
Amendment
) to the Notes, in the form attached as
Exhibit B
hereto. The Amendment will become effective on the date that the Note Amendment
Condition is satisfied;
provided
, on the Amendment Termination Date (as defined below), if
it occurs, the Amendment will terminate and be of no further force and effect, and from and after
the Amendment Termination Date, the Notes shall no longer be modified by the Amendment. The
Company will notify the Holders when the Note Amendment Condition
has been satisfied.
Amendment
Termination Date
means the earliest of (i) August 31, 2010, only if the Closing has not occurred on or
prior to August 31, 2010, (ii) the date, if any, after
the date hereof and prior to the Closing Date, on which holders of at least 25% of the aggregate
principal amount of the Notes have not consented to the Amendment or have rightfully terminated the
Note Purchase and Amendment Agreements (as defined in Section 7.10) that they are a party to (in
accordance with the terms of such Note Purchase and Amendment Agreements), and (iii) the Business Day following the date on which the Sale Condition is satisfied, only if the Closing has not occurred on or prior to such Business Day.
1.4
Closing
. The closing of the purchase and sale of the Holder Notes (the
Closing
) shall take
place at the offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York 10022 at 10:00 a.m.
New York City time on the date on which the Sale Condition is satisfied;
provided
, that,
(i) all of the other conditions set forth in Sections 1.5, 1.6 and 1.7 have been satisfied or
waived (by the appropriate party) on or prior to such date, (ii) all closings under all Note
Purchase and Amendment Agreements (as defined in Section 7.10) shall occur on the same date
and (iii) the satisfaction of the Sale Condition shall occur contemporaneously with the Closing, or
at such other place, date and time as the parties hereto may agree in accordance with Section 7.10
(the
Closing Date
).
1.5
General Closing Conditions
. The respective obligations of the Company and the Holders to
consummate the Closing are subject to the satisfaction or waiver (jointly by the Company and the
Holders) at or prior to the Closing of the following conditions:
(a) The initial consummation, on the same date as the Closing, by the Company of the
transaction (or series of related transactions) publicly announced by the Company in a Current
Report on Form 8-K filed by the Company on or prior to the date which is one Business Day after the
date hereof (the
Form 8-K
) with the Securities and Exchange Commission (the
SEC
), which
transaction includes the license, sale, transfer or other disposition of rights or assets of the
Company related to, and/or the co-development, co-promotion, co-marketing, distribution or other
collaboration with respect to, one or more of the Companys products (and a sale of
Company capital stock), pursuant to which the Company receives proceeds of at least $40 million in
cash consideration at the initial closing thereof (the
Sale Condition
);
(b) The filing, after the date hereof, with, and the acceptance of such filing by, the
Secretary of State of the State of Delaware of an amendment to the Companys certificate of
incorporation to increase the number of the Companys authorized shares of Common Stock (the
Charter Amendment
);
(c) The Company shall have received written consents from the holders of at least 75% of the
outstanding principal amount of the Notes to the Amendment (the
Note Amendment Condition
);
(d) The Company shall have obtained (i) all necessary blue sky law permits and qualifications,
or secured exemptions therefrom, required by any state for the sale and offer of the Warrants (and
the shares of Common Stock issuable upon exercise of the Warrants (the
Warrant Shares
and
collectively with the Warrants and the Shares, the
Securities
)) and the Shares issued pursuant to this Agreement and (ii) if the
Company determines it to be necessary, approval by the Companys stockholders of the transactions
(or certain of or all of them) contemplated by the Note Purchase
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and Amendment Agreements (as defined in Section 7.10) to the extent required by the listing
rules of the NASDAQ Global Market or otherwise (the
Stockholder Approval
);
(e) The Company shall have satisfied in full its obligations in respect of the Senior Debt (as
defined in the Notes) and obtained an acknowledgement from the holder of the Senior Debt in
substantially the form of
Exhibit C
hereto (the
Senior Debt Satisfaction
); and
(f) No governmental authority (including a court) of competent jurisdiction shall have issued
an order, decree or ruling, or taken any other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement (including the Amendment), which order,
decree, ruling or other action is in effect at the time the Closing would otherwise occur.
1.6
Conditions to the Obligations of the Company
. The obligation of the Company to consummate the
Closing is subject to the satisfaction or waiver (by the Company in its sole discretion) at or
prior to the Closing of the following conditions:
(a) The representations and warranties of each Holder contained in Article II shall be true
and correct in all material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date (unless any such representation or warranty expressly relates to
an earlier date, in which case such representation or warranty shall be true and correct only as of
such earlier date);
(b) All covenants and agreements contained in this Agreement to be performed by the Holders on
or prior to the Closing Date shall have been performed or complied with in all material respects;
and
(c) The Holders shall have made the deliveries required pursuant to Section 1.8.
1.7
Conditions to the Obligations of the Holders
. The obligations of the Holders to consummate
the Closing are subject to the satisfaction or waiver (by the Holders in their sole discretion) at
or prior to the Closing of the following conditions:
(a) (i) the representation and warranty of the Company contained in Section 3(h) shall be true
and correct in all material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date and (ii) each of the other representations and warranties of the
Company set forth in Article III shall be true and correct in all respects as of the date hereof
and as of the Closing Date as though made on and as of the Closing Date (unless any such
representation or warranty expressly relates to a specified date, in which case such representation
or warranty shall be true and correct only as of such specified date), except where the failure of
such representations and warranties to be so true and correct would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect;
(b) All covenants and agreements contained in this Agreement to be performed by the Company on
or prior to the Closing Date shall have been performed or complied with in all material respects;
and
(c) The Company shall have made the deliveries required pursuant to Section 1.9.
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1.8
Closing Deliveries by the Holders
. Each Holder shall (and covenants and agrees to), at the Closing, deliver to the Company
the original Holder Notes, duly endorsed for transfer to the Company or its designated purchaser or
accompanied by duly executed note powers in blank.
1.9
Closing Deliveries by the Company
. The Company shall (and covenants and agrees to), at the Closing, deliver or cause to be
delivered to the Holders (a) a wire transfer of immediately available funds in the aggregate amount
of the Cash Consideration, (b) the Warrants and (c) the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE HOLDERS
Each Holder agrees, represents and warrants (both as of the date of this Agreement and as of
the Closing Date) as follows:
(a) Each Holder that is an entity is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, with full entity power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. Each Holder that is
an individual is competent to enter into this Agreement. Each Holder has duly executed and
delivered this Agreement. The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action of each Holder and this Agreement constitutes a valid and
binding obligation of each Holder, enforceable against each Holder in accordance with its terms.
(b) Each Holder is the lawful owner, of record and beneficially, of the principal amount of
Holder Notes set forth opposite its name on
Schedule I
hereto under the column Principal
Amount of Holder Notes Owned, free and clear of all Encumbrances. At the Closing, the Company
will acquire good and valid title to the Holder Notes, free and clear of all Encumbrances and
thereafter no Holder will have any right, title or interest in and to any Holder Notes.
(c) The execution and delivery of this Agreement by each Holder, the performance by each
Holder of its obligations hereunder and the consummation of the transactions contemplated by this
Agreement do not (i) violate, contravene or breach the governing documents of any Holder; (ii)
violate, contravene or breach, or constitute a default under, any contract, agreement, indenture or
instrument to which any Holder is a party, or any Holders properties or assets are bound, or to
which any Holder may be subject; or (iii) violate, contravene or breach any statute or law or any
judgment, decree, order, regulation, or rule of any court or governmental authority applicable to
any Holder.
(d) No Holder is required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any regulatory or self regulatory agency
in order for it to execute, deliver or perform its obligations hereunder or under the Holder Notes
in accordance with the terms hereof or thereof, or Transfer (as defined herein) the Holder Notes in
accordance with the terms hereof other than such as have been made or obtained, or, with respect to
filings with the SEC, which will be made as required by such Holder.
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(e) Each
Holder is an accredited investor (as such term is defined
under Rule 501(a) of the
Securities Act, as defined herein). Each Holder is acquiring the Securities for its own account
and not with a present view toward the public sale or distribution thereof and has no intention of
selling or distributing any of such Securities and has no arrangement or understanding with any
other Persons regarding the sale or distribution of such Securities, except, in each case, as would
not result in a violation of the Securities Act of 1933, as amended (the
Securities Act
);
provided
,
however
, that by making the representations herein, such Holder does not
agree to hold any of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption from registration under the Securities Act. Each Holder agrees not to, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) (collectively,
Transfer
) any of the Securities
except in compliance with the Securities Act.
(f) Each Holder understands that the Securities being offered and sold to it under the
Agreement are being offered and sold in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws (including the Securities Act) and
that the Company is relying upon the truth and accuracy of, and each Holders compliance with the
representations, warranties, agreements, acknowledgments and understandings of such Holder set
forth herein in order to determine the availability of such exemptions and the eligibility of each
Holder to acquire the Securities.
(g) Each Holder acknowledges and understands that its investment in the Securities involves a
significant degree of risk, including, without limitation, (i) an investment in the Company is
speculative, and only those who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (ii) such Holder may not be able to liquidate its
investment; (iii) transferability of the Securities may be limited; (iv) such Holder is able
to bear the economic risk of holding the Securities for an indefinite period, and has knowledge and
experience in financial and business matters such that it is capable of evaluating the risks of the
investment in the Securities; and (v) such Holder has, in connection with such Holders decision to
engage in the transactions contemplated by this Agreement, not relied upon any representations or
other information (whether oral or written) other than as set forth in the representations and
warranties of the Company contained herein. Each Holder understands that a description of certain
risks relating to an investment in the Company are set forth in the Companys filings with the
SEC and each Holder has carefully reviewed such filings.
(h) Each Holder understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or endorsement of the
Securities or an investment therein or of any of the transactions contemplated hereby.
(i)
Transfer or Resale.
(i) Each Holder understands that the Securities have not been and are not being
registered under the Securities Act or any applicable state securities laws and,
consequently, the Securities may not be transferred unless (A) the resale thereof is
5
registered pursuant to an effective registration statement under the Securities Act,
(B) such Holder has executed and delivered to the Company a certificate in
substantially the form annexed hereto as Exhibit D (the
Certificate),
in which case such Holder may Transfer its Shares and Warrants in accordance
with Rule 144 under the Securities Act, or (C)
each such Holder has delivered to the Company an opinion of counsel (in form, substance
and scope reasonably acceptable to the Company) to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption
from the registration requirements of the Securities Act;
and
(ii) Neither the Company nor any other Person is under any obligation to register the
resale by any Holder of any Securities of the Company acquired pursuant to this Agreement,
except as provided in Article V hereof.
(iii)
Subject to Section 2(j), each Holder understands that the Securities will bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed against transfer
of the Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. COLUMBIA
LABORATORIES, INC. SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO COLUMBIA LABORATORIES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED
PURSUANT TO THE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.
(j) In the event that a Holder provides the Company with the Certificate, the Company shall
promptly provide such Holder, at such Holders request, without any expense to such Holder
(other than applicable transfer taxes and similar governmental charges, if any), with new
certificates representing the Shares and Warrants held by such Holder not bearing the legend
described in Section 2(i)(iii). For the avoidance of doubt, a Holder may provide the Certificate at
any time prior to, on or following the Closing Date, including with respect to the Shares and
Warrants that will delivered on the Closing Date in accordance with Section 1.9. If a Holder
provides the Company with the Certificate on or prior to the Closing Date, the Shares and the
Warrants to be issued to such Holder at the Closing shall be issued without any restrictive
legend.
(k) Each Holder is a resident of the jurisdiction set forth across from its name on to
Schedule I
hereto.
(l) Between the time that a Holder learned about the transactions contemplated by this
Agreement and the public announcement thereof, no Holder has engaged in any short sales or similar
transactions with respect to the Common Stock, nor has any Holder, directly or indirectly,
knowingly caused any Person to engage in any short sales or similar transactions with respect to
Common Stock.
(m) The Holders and their Affiliates (as defined in the rules promulgated under the Securities
Act) and their Associates (as defined in the rules promulgated under the Securities Act)
collectively Beneficially Own (as defined in the Rights Agreement, dated as of March 13, 2002,
between the Company and First Union National Bank, as rights agent, as amended (the
Rights
Agreement
)) and, immediately after the Closing will Beneficially Own, less than 15% of the
outstanding shares of Common Stock. No Holder or any affiliate or associate thereof
6
is or has been an interested stockholder (as each such term is defined in Section 203 of the
Delaware General Corporation Law).
(n) No Holder will, after giving effect to the consummation of the transactions contemplated by this Agreement, (i) beneficially own (as determined under Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act)) 19.9% or more of the shares of Common Stock and/or (ii) possess 19.9% or more of the voting power of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company agrees, represents and warrants (both as of the date of this Agreement and as of
the Closing Date) as follows:
(a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, with full corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The Company has duly executed and delivered this
Agreement. The execution, delivery and, subject to obtaining the Stockholder
Approval, performance of this Agreement has been duly authorized by
all necessary corporate action of the Company and this Agreement constitutes a valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
(b) The execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder and the consummation of the transactions contemplated by this
Agreement by the Company do not (a) violate, contravene or breach the certificate of incorporation
or by-laws of the Company (subject to the filing of the Charter Amendment with the Secretary of
State of the State of Delaware and obtaining the Stockholder Approval); (b) violate, contravene or breach, or constitute a default under,
any contract, agreement, indenture or instrument to which the Company is a party or by which any of
its property or assets are bound, or to which the Company may be subject (subject to the filing of
the Charter Amendment with the Secretary of State of the State of Delaware, the Senior Debt
Satisfaction and obtaining the Stockholder Approval); or (c) violate, contravene or breach any statute or law or any judgment, decree,
order, regulation, or rule of any court of governmental authority applicable to the Company
(subject to obtaining the Stockholder Approval).
(c) Subject to the filing of the Charter Amendment with the Secretary of State of the State of
Delaware,
and obtaining the Stockholder Approval, (i) the Securities will be duly authorized, (ii) upon
issuance in accordance with the terms of this Agreement, the Shares will be validly issued, fully
paid and non-assessable and will not be subject to preemptive rights or other similar rights of
stockholders of the Company, (iii)
upon issuance in
accordance with the terms of the Warrants, the Warrant Shares will be validly issued, fully paid
and non-assessable and will not be subject to preemptive rights or other similar rights of
stockholders of the Company and (iv) assuming the representations and warranties of the Holders set forth in Article II are true
and correct, the offer and issuance by the Company of the Warrants and the Shares in exchange
for the Holder Notes is exempt from the registration requirements of the Securities Act pursuant
to Section 4(2) thereof.
(d) The Company is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform its obligations hereunder or under the
Warrants in accordance with the terms hereof or thereof, or to issue and sell the Shares and
Warrants (and the Warrant Shares) in
accordance with the terms hereof, other than such as have been made or obtained, and except for the
registration of the Warrant Shares and the Shares under the Securities Act pursuant to Article V to the extent required hereby, any filings
required to be made under federal and state securities laws, any required filings or notifications
regarding the issuance or listing of additional shares with the NASDAQ Global Market, the filing
of the Charter Amendment with the Secretary of State of the State of Delaware and obtaining the
Stockholder Approval (if applicable).
7
(e) On the date of this Agreement, the authorized capital stock of the Company consisted of
(i) 100,000,000 shares of Common Stock, of which 65,630,051 shares were issued and outstanding,
(ii) 120,000 shares of Series A Convertible Preferred Stock, $0.01 par value per share, none of
which were issued or outstanding, (iii) 150,000 shares of Series B Convertible Preferred Stock,
$0.01 par value per share, of which 130 shares were issued and outstanding, (iv) 6,660 shares of
Series C Convertible Preferred Stock, $0.01 par value per share, of which 600 shares were issued
and outstanding, (v) 100,000 shares of Series D Junior Participating Preferred Stock, $0.01 par
value per share, none of which were issued or outstanding and (vi) 100,000 shares of Series E
Convertible Preferred Stock, $0.01 par value per share, of which 59,000 shares were issued and
outstanding (clauses (ii) through (vi), collectively, the
Preferred Stock
). On the date of this
Agreement, all of the issued and outstanding shares of Common Stock and Preferred Stock have been
duly authorized, validly issued and are fully paid and nonassessable. On the date of this
Agreement, options to purchase an aggregate of 5,960,304 shares of Common Stock were outstanding.
On the date of this Agreement, warrants to purchase an aggregate of 10,942,755 shares of Common
Stock were outstanding. On the date of this Agreement, no stockholder of the Company has
preemptive rights with respect to the Securities and there are no outstanding securities or
obligations issued by the Company (other than under the Note Purchase and Amendment Agreements)
that are convertible into, or exercisable or exchangeable for, any shares of Common Stock other
than (i) options granted under the Companys stock option plans, (ii) the Preferred Stock, (iii)
the warrants and options described in this paragraph, (iv) the Notes and (v) under the Rights
Agreement.
(f) From January 1, 2009 through the date of this Agreement, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the
Exchange Act
) (all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
SEC Documents
).
As of their respective dates, the SEC Documents complied as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and included, to the extent required, detailed
descriptions of material indebtedness for borrowed money, and, except as otherwise disclosed
therein, none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements included in the SEC Documents and the related
notes have been prepared in accordance with accounting principles generally accepted in the United
States, consistently applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes, may be condensed or summary statements or
may otherwise conform to the SECs rules and instructions for Reports on Form 10-Q) and fairly
present in all material respects the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments).
8
(g) As of the date hereof, the issued and outstanding shares of Common Stock are listed on
NASDAQ Global Market.
(h) The Company has received written consents from the holders of at least 75% of the
outstanding principal amount of the Notes to the Amendment, and such holders have entered into
agreements with the Company to sell their Notes to the Company for the same purchase price per
$1.00 of principal amount of Notes as the Holders.
(i) The Company will have at the Closing sufficient cash, available lines of credit or other
sources of immediately available funds to enable it to (i) to make payment of the Cash
Consideration and (ii) consummate the Senior Debt Satisfaction.
(j) The
Company is not, and has never been, an issuer of the type defined in Rule 144(i)(1) under the Securities Act.
ARTICLE IV
COVENANTS
4.1
No Transfer or Conversion
. Each Holder agrees that from the date hereof until the earlier of
the termination of this Agreement (in accordance with the terms hereof) or the Closing that it will not (x) Transfer any Holder Note
owned thereby (or any portion thereof) (other than to the Company at the Closing) or (y) exercise
any right to convert the Note (or any portion thereof) into any other security. A pledge of the
Holder Notes in connection with a bona fide margin agreement or other loan financing arrangement
that is secured by the Holder Notes shall not be deemed to be a Transfer of the Holder Notes so
long as the pledge does not prohibit the Holders ability to deliver the Holder Notes at the
Closing;
provided
,
further
, that any pledgee or other party that becomes the owner
of Holder Notes as a result of exercising remedies with respect to such pledge shall have agreed,
prior to exercising any such remedies, to and be obligated to comply with this Agreement (as if it
were a Holder).
4.2
Release
. From and after the Closing, each Holder agrees that all obligations of the Company
arising under or in respect of the Holder Notes will have been
satisfied and discharged and irrevocably waived in full.
4.3
Reporting Status; Listing Obligation
. The Common Stock is registered under Section 12 of the
Exchange Act. The Company covenants only to each Affiliate Holder that during the period in which the registration statement filed pursuant to Article V
hereto remains effective, the Company agrees to use commercially reasonable efforts to timely file
(or obtain extensions in respect thereof and file within the applicable grace period) with the SEC
all reports required to be filed by the Company under the Exchange Act, and the Company will use
its commercially reasonable efforts to maintain its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination. Until each Holder Transfers all of the Shares
and Warrant Shares, the Company shall use commercially reasonable efforts to maintain the
listing of its Common Stock on a national stock exchange in the United States.
4.4
Securities Laws Disclosure; Publicity
. As soon as reasonably practicable but not later
than one Business Day after the date of this Agreement, the Company shall issue a press release and
shall file the Form 8-K with the SEC, in each case announcing the signing of this Agreement, the
signing of the agreement relating to the Sale Condition and describing the terms of the
transactions contemplated hereby and thereby and including as an exhibit to the Form 8-K
the material transaction documents, in the form required by the Exchange Act. At the time of
the filing of the Form 8-K with the SEC, no Holder shall be in possession of any material,
nonpublic information received from the Company, any of its subsidiaries or any of their respective
officers, directors, employees or agents, that is not disclosed in the Form 8-K. The Company shall
not publicly disclose the name of any Holder, or include the name of any Holder in any
filing with the SEC or any regulatory agency, without the prior written consent of such Holder,
which shall not be unreasonably withheld, except in connection with the filing of this Agreement with the SEC, in any
registration statement contemplated by
Article V
(and amendments and supplements relating
thereto) filed with the SEC, in any proxy statement used by the Company in connection with its efforts to obtain the
Stockholder Approval and/or obtain the approval of its stockholders of the transaction
contemplated by Section 1.5(a) and/or to the extent such disclosure is required by law, regulations or
the rules of any securities exchange, in which case the Company shall provide the Holders with
prior notice of such disclosure.
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4.5
Furnishing of Information
. As long as any Holder owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, the Company will use commercially reasonable
efforts to prepare and furnish to the Holders and make publicly available in accordance with Rule
144(c) under the Securities Act such information as is required for
the Holders to sell the Shares and the Warrant
Shares under Rule 144 under the Securities Act. The Company further covenants that it will use
commercially reasonable efforts to take such further action as any Holder of Securities may
reasonably request, to the extent required from time to time, to
enable such Holder to sell the Shares and the Warrant
Shares without registration under the Securities Act within the requirements of the exemption
provided by Rule 144 under the Securities Act.
4.6
Reservation of Shares
. So long as any Holder owns any Warrants, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose of issuance, no less
than 100% of the number of shares of Common Stock then issuable as Warrant Shares upon exercise of
the Warrants then outstanding (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants).
4.7
Pledge of Securities
. The Company will not object if the Securities are pledged by a Holder
in connection with a bona fide margin agreement or other loan or financing arrangement that is
secured by the Securities. The pledge of Securities shall not be deemed to be a Transfer of the
Securities hereunder or under the Warrants, and no Holder effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement, including, without limitation,
Section 2(i) hereof;
provided
, that, a Holder and its pledgee shall be required to comply with the provisions of
Section 2(i) hereof in order to effect a Transfer of the Securities to such pledgee. The Company
hereby agrees to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with an acknowledgement of a pledge of the Securities to such
pledgee by a Holder.
4.8
Holding
. For the purposes of Rule 144(d) under the Securities Act, the Company
acknowledges that, the holding period of the Shares and the Warrants may be tacked
onto the holding period of the Holder Notes. The Company agrees not to take a position
contrary to that set forth in the preceding sentence. Subject to Section 2(i) hereof
and a Holder
delivering to the Company the Certificate at any time reasonably requested by the Company,
the Company agrees to take all commercially reasonable actions, including, without limitation,
the issuance by its legal counsel (which may be its internal counsel) of any legal opinions,
necessary (i) to cause the Companys transfer agent to issue to such Holder certificates
evidencing the Shares and the Warrants held thereby that are free of any restrictive
legends (including those set forth in Section 2(i)(iii)) and to instruct the Companys
transfer agent for its Common Stock not to issue any stop-order with respect to the Transfer
of the Shares and Warrants held by such Holder and (ii) upon any cashless exercise of the
Warrants pursuant to Section 2.3 thereof, to cause the Companys transfer agent to issue to
such Holder certificates evidencing the Warrant Shares acquired in connection with such
cashless exercise that are free of any restrictive legends (including those set forth in
Section 2(i)(iii)) and to instruct the Companys transfer agent for its Common Stock not to
issue any stop-order with respect to the Transfer of the Warrant Shares acquired in
connection with such cashless exercise.
4.9
Conditions to Closing
. The parties hereto will use commercially reasonable efforts to cause
the conditions to Closing to be satisfied and the Closing to occur as expeditiously as possible;
provided
, that nothing contained herein shall obligate the Company to fulfill the Sale
Condition, to consummate the Senior Debt Satisfaction or obtain the Stockholder Approval.
4.10
Preemptive Rights
. If, during the period commencing on the day after the Closing
Date and ending forty-five (45) days after the date that the Company publicly announces the results
of the Phase III clinical trial currently being conducted by the Company with respect to its
vaginal gel product, Prochieve 8%, to reduce the risk of preterm birth in women with a short cervix
as measured by transvaginal ultrasound in mid-pregnancy results, the Company issues (other than in
an Exempt Issuance) any shares of Common Stock for a purchase price that is less than $2.00 per
share of Common Stock or securities that are convertible into or exercisable for shares of Common
Stock for a total purchase price (which shall include the purchase price paid for each such
security plus the conversion or exercise price payable thereunder to acquire a share of Common
Stock) that is less than $2.00 per share of Common Stock, on the date of any such issuance, the
Company will deliver to each Holder written notice thereof (the
Sale Offer
). During the ten (10)
day period following delivery of the Sale Offer, each Holder shall have the right, exercisable by
delivering written notice to the Company (the
Exercise Notice
), to sell to the Company all or any
number of the Warrants held by such Holder (as specified in such Exercise Notice) for an amount in
cash equal to the product of (a) a fraction, the numerator of which is equal to the number of
Warrants such Holder elects to sell to the Company as specified by such Holder in the Exercise
Notice and the denominator of which is equal to 7,750,000 and (b) $3,999,996 (the Warrant
Price). Such Exercise Notice shall be accompanied by the certificate representing the Warrants to
be sold by such Holder, duly endorsed for transfer (and the number of Warrants such Holder sells to
the Company under this Section 4.10 shall be cancelled and not exercisable). If a Holder does not
deliver an Exercise Notice to the Company during such ten (10) day period, the Sale Offer for such
Holder shall expire and such Holder shall have no further rights with respect thereto. If a Holder
elects pursuant to an Exercise Notice to have the Company purchase Warrants from such Holder, the
Company shall pay the Warrant Price in cash to such Holder within twenty (20) days after the
Company receives the Exercise Notice to such account as shall be specified in writing by such
Holder by wire transfer of immediately available funds. Notwithstanding anything to the contrary
contained herein, the Company shall not be required to purchase any Warrants under this Section
4.10 to the extent such purchase would violate the Delaware General Corporation Law or the board of
directors of the Company reasonably determines, after receiving advice from counsel, that it could
have liability in connection therewith under the Delaware General Corporation Law.
Exempt
Issuance
shall mean any or all of the following (a) the issuance of any shares of Common Stock
pursuant to the conversion or exercise of any options, warrants, preferred stock or other
convertible securities of the Company that are outstanding on the date hereof and/or on the Closing
Date, (b) the issuance of any (x) options, warrants, other convertible securities or rights to
purchase shares of Common Stock (and the issuance of any shares of Common Stock pursuant thereto)
or (y) shares of Common Stock, in each case, pursuant to any of the Companys compensatory or stock
option plans or programs or as compensation to any officer, director, consultant, agent, advisor or
employee of the Company or any subsidiary thereof, (c) the issuance of any shares of Common Stock
in connection with the transactions described in Section 1.5(a), (d) the issuance of shares of
Common Stock and warrants under the Note Purchase and Amendment Agreements (and the issuance of any
shares of Common Stock under such warrants), the issuance of any securities pursuant to the Rights Plan (and the issuance of any
securities underlying such securities) and (f) the issuance of any warrants to purchase shares of
Common Stock (and the issuance of any shares of Common Stock thereunder) pursuant to any agreement
that the Company is a party to as of the date hereof.
4.11
Ownership Cap
. Each Holder agrees that from the date hereof until the
earlier of the termination of this Agreement and/or the Closing (and after giving
effect to the consummation of the transactions contemplated by this Agreement) that it
will not (i) beneficially own
(as determined under Rule 13d-3 under the Exchange Act) 19.9% or more of the shares of
Common Stock and/or (ii) possess 19.9% or more of the voting power of the Company.
10
ARTICLE V
REGISTRATION RIGHTS
The Company will use commercially reasonable efforts to file, as soon as reasonably
practicable after the Closing, but in no event later than ninety (90) days after
the Closing, a
registration statement with the SEC covering the resale of the Shares and the Warrant
Shares that are issued or issuable hereunder or under the Warrants to an Affiliate Holder.
For the avoidance of doubt, the Shares issued to and the Warrant Shares issuable under
the Warrants to any Holder that is not an Affiliate
Holder shall not be covered by such registration statement. Reference is made
to Section 6 of the SPA. The Company and each Affiliate Holder agrees that the terms, conditions and
provisions of such Section 6 are hereby incorporated herein by this reference and shall apply,
mutatis mutandis
, to the Shares and the Warrant Shares issued or issuable to an Affiliate Holder (and not to the Warrants) and such Shares and Warrant Shares shall be
deemed to be Registrable Securities and the Company and each Affiliate Holder (as if each such Affiliate Holder were
a Purchaser under the SPA) shall comply with each of the provisions thereof, except that (a) the
registration statement with respect to the resale of such Shares and Warrant Shares shall be filed with the SEC
no later than ninety (90) days after the Closing Date (as defined herein) (and the definition of
Filing Date in the SPA shall be deemed to be modified to reflect the foregoing), (b) the
Effectiveness Deadline shall mean the date which is two hundred seventy (270) calendar days after
the Closing Date (as defined herein) (and the definition of Effectiveness Deadline in the SPA
shall be deemed to be modified to reflect the foregoing) and (c) Section 6.4 of the SPA shall be
deemed to be modified so that (x) the amount that the Company shall be obligated to pay to any
Affiliate Holder during a Non-Liquidity Payment Period (as defined in the SPA) and during which a
Registration Default (as defined in the SPA) remains uncured, shall be such Affiliate Holders Warrant
Percentage (as set forth across from such Affiliate Holders name on
Schedule I
) multiplied by
$50,000 (and, notwithstanding anything to the contrary in the SPA, such amount may not be modified without the prior written consent of the Company) and (y) the maximum aggregate amount that the Company shall be required to pay to the
Purchasers (as defined in Section 7.10) under this Agreement and the Other Purchase Agreements (as
defined in Section 7.10) in respect of Registration Defaults (
i.e.
, amounts payable under Section
6.4 of the SPA) shall be equal to the product of $250,000 and the sum of all of the Warrant
Percentages of the Affiliate Holders as set forth on each Schedule I to
each of the Note Purchase and Amendment Agreements (and, notwithstanding anything
to the contrary in the SPA, such amount may not be modified without the prior
written consent of the Company). For the avoidance of doubt, the reference to
the Closing Date in Section 6.5(a) of the SPA shall be deemed to
be a reference to the Closing Date of this Agreement.
ARTICLE VI
TERMINATION
6.1
Termination
. This Agreement may be terminated prior to the Closing:
(a) at any time by mutual written consent of all of the parties hereto;
(b) by any party hereto, by delivery of written notice of termination to the others, if the
Closing has failed to occur on or before August 31, 2010;
provided
, that such failure is not
due to (x) the failure of the Company to comply in all material respects with its obligations under
this Agreement if the Company is the party seeking to terminate this Agreement pursuant to this
Section 6.1(b) or (y) the failure of any Holder to comply in all material respects with its
obligations under this Agreement if any Holder is the party seeking to terminate this Agreement
pursuant to this Section 6.1(b); or
(c) by any party hereto, by delivery of written notice of termination to the others, if any
governmental authority (including a court) of competent jurisdiction shall have issued an order,
decree or ruling, or taken any other action, permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement (including the Amendment) and such
order, decree, ruling or other action shall have become final and non-appealable;
provided
,
that in order for any party to seek to terminate this Agreement pursuant to this Section 6.1(c) it
11
must have used its commercially reasonable efforts to lift and rescind such order, decree,
ruling or other action.
6.2
Effect of Termination
. Upon termination of this Agreement pursuant to Section 6.1, this
Agreement shall forthwith become null and void and there shall be no liability or obligation of any
party hereto arising hereunder, except that the provisions of this Article VI and Articles VII and
VIII shall survive any termination of this Agreement and any party that has willfully breached this
Agreement shall have liability to the others therefor. On the date of any termination of this
Agreement, the Holders consents to the Amendment will terminate as of the date of the termination
of this Agreement and be of no further force and effect as of such date.
ARTICLE VII
MISCELLANEOUS
7.1
Governing Law; Jurisdiction; Service of Process; No Jury Trial
. This Agreement will be
governed by and interpreted in accordance with the laws of the State of New York without regard to
the principles of conflict of laws. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with any transactions
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY.
7.2
Specific Performance
. The parties acknowledge that the subject matter of this Agreement is
unique and that no adequate remedy of law would be available for breach of this Agreement by any
party. Accordingly, the Company and each Holder agree that each party hereto shall be entitled to
an appropriate decree of specific performance or other equitable remedies to enforce this Agreement
(without any bond or other security being required), and the Company and each Holder hereby waives
the defense in any action or proceeding brought to enforce this Agreement that there exists an
adequate remedy at law.
7.3
Expenses
. Each party shall bear its own expenses incident to the preparation, negotiation,
execution and delivery of this Agreement;
provided
, that the Company will pay the
reasonable out-of-pocket and reasonably documented attorneys fees and expenses actually incurred
by the Holders in connection with the negotiation, execution and delivery of this Agreement not to
exceed, in the aggregate, the amount set forth on
Schedule I
across from the caption
Expenses Cap.
12
7.4
Further Assurances
. Each party will do and perform, or cause to be done and performed, all
such further acts and things, and will execute and deliver all other agreements, certificates,
instruments and documents, as another party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
7.5
Parties In Interest
. This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto, and nothing in this Agreement, express or implied, is intended to confer upon
any other Person any rights or remedies of any nature whatsoever under or by reason of this
Agreement. References herein to parties or parties hereto are to the signatories of this
Agreement.
7.6
Assignment
. No party hereto may assign this Agreement or any of its rights arising hereunder,
in whole or in part, to any other Person;
provided
,
however
, that any Holder may,
after the Closing, assign its rights under Sections 4.3, 4.5, 4.7 and Article V hereunder to any
transferee of the Securities (and such transferee will be deemed to be a Holder for purposes of
such Sections);
provided
,
further
, that any such transferee executes and delivers
to the Company a joinder to this Agreement, in form and substance reasonably satisfactory to the
Company, agreeing to be bound by the provisions hereof (and those incorporated herein) as if it
were a Holder.
7.7
Survival
. Notwithstanding any investigation made by any party to this Agreement, all
representations, warranties, covenants and agreements made in this Agreement shall survive any
investigation made by the Company or any Holder and the Closing.
7.8
Severability
. If any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision will be deemed modified in order to conform
with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable
under any statute or rule of law will not affect the validity or enforceability of any other
provision hereof.
7.9
Independent Nature of Holders Obligations and Rights
. The obligations of a Holder under
this Agreement are several and not joint with the obligations of any other Holder, and no Holder
shall be responsible in any way for the performance of the obligations of any other Holder under
this Agreement. Nothing contained herein and no action taken by any Holder pursuant hereto, shall
be deemed to constitute the Holders as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Holders are in any way acting in concert or as a
group, or are deemed affiliates (as such term is defined under the Exchange Act) with respect to
such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled
to independently protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
7.10
Exclusive Agreement; Amendment; Waivers
. This Agreement supersedes all prior agreements
among the parties with respect to its subject matter, is (together with the Exhibits and Schedule
hereto and any side letters entered into as of the date hereof between the Company and any
Holder) intended as a complete and exclusive statement of the terms of the agreement
13
among the parties with respect thereto. This Agreement cannot be waived, amended, changed or
terminated except by a written instrument executed by the Company and the Purchasers (as defined
below) that would be entitled to receive a Majority of the Warrants (as defined below) at the
closings under all of the Note Purchase and Amendment Agreements (as defined below);
provided
,
however
, that to the extent that such waiver, amendment or modification
made after the date of this Agreement adversely affects a
particular Purchaser, decreases the Purchase Price or alters the relative proportion of the Cash
Consideration, the Shares and the Warrant consideration, such waiver, amendment or modification shall not be
effective against such Purchaser without the consent of such Purchaser;
provided
further
, that any waiver, amendment or modification made after the date of this Agreement
that has the effect of providing for additional conditions to Closing shall require the consent of
the Company and the Purchasers that would be entitled to receive a Supermajority of the Warrants at
the closings under all of the Note Purchase and Amendment Agreements. The failure of a party to
insist upon strict adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing and signed by the party
providing the waiver (either the Company or the requisite Purchasers). On or after the date
hereof, the Company expects to enter into one or more note purchase and amendment agreements on
substantially similar terms to this Agreement with (some or all of) the other holders of the Notes
(the
Other Purchase Agreements
and together with this Agreement, the
Note Purchase and Amendment
Agreements
). For purposes of this Section 7.10, (a)
Purchasers
shall mean the parties
(including the Holders) that execute the Note Purchase and Amendment Agreements other than the
Company and
Majority of the Warrants
shall mean warrants to be issued by the Company at the
closings under the Note Purchase and Amendment Agreements that would entitle the Purchasers to
acquire at least 50.1% of the total number of shares of Common Stock purchasable under such
warrants on the date such warrants are initially issued (without regard to any provisions in such
warrants which limit the ability of a Purchaser to exercise any such warrants).
Supermajority of
the Warrants
shall mean warrants to be issued by the Company at the closings under the Note
Purchase and Amendment Agreements that would entitle the Purchasers to acquire at least 66 2/3% of
the total number of shares of Common Stock purchasable under such warrants on the date such
warrants are initially issued (without regard to any provisions in such warrants which limit the
ability of a Purchaser to exercise any such warrants). The parties hereto acknowledge and agree
that the Company has or may enter into side letters with certain Purchasers relating to the subject
matter of this Agreement.
7.11
Counterparts; Signatures by Facsimile; Captions
. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original, but all of which together shall
constitute the same instrument. This Agreement, once executed by a party, may be delivered to the
other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this Agreement.
7.12
Notices
. All notices, consents and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given when (a) delivered by hand, (b) sent by
telecopier (with receipt confirmed), provided that a copy is mailed by registered or certified
mail, return receipt requested, or (c) when received by the addressee, if sent by
Express
14
Mail, Federal Express or other express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below, in the case of the Company or on
Schedule
I
, in the case of any Holder (or to such other addresses and telecopier numbers as a party may
designate as to itself by notice to the other parties):
If to the Company:
Columbia Laboratories, Inc.
354 Eisenhower Parkway
Livingston, New Jersey 07039
Attention: Lawrence A. Gyenes
Senior Vice President, Chief Financial Officer & Treasurer
Telephone: (973) 486-8860
Telecopier: (866) 994-3001
with a copy to:
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Attention: Adam H. Golden, Esq.
and Steven G. Canner, Esq.
Telephone: (212) 836-8030
Telecopier: (212) 836-8689
ARTICLE VIII
DEFINITIONS
8.1 As used in this Agreement, the following terms have the meanings specified or referred to
in this Article VIII.
Affiliate
Holder
means any Holder that is an affiliate (as such term is defined under Rule 405 of the Securities Act) of the Company on the Closing Date.
Business Day
Any day that is not a Saturday or Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.
Encumbrance
Any security interest, mortgage, lien, charge, adverse claim or restriction
of any kind, including, but not limited to, any restriction on the use, voting, transfer, receipt
of income or other exercise of any attributes of ownership, except for restrictions on the Transfer
of securities under the terms of the Warrant, this Agreement, the Securities Act, and the rules and
regulations of the SEC thereunder and restrictions imposed by the Blue Sky laws of any
jurisdiction that do not interfere with the purchase and sale of the Notes contemplated hereby.
Material Adverse Effect
means a material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole, or on the transactions contemplated hereby.
Person
Any individual, corporation, partnership, limited liability company, joint
venture, trust, association, unincorporated organization, other entity, or governmental body.
[Remainder of this page intentionally left blank.]
15
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COLUMBIA LABORATORIES, INC.
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By:
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/s/ Lawrence A. Gyenes
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Name:
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Lawrence A. Gyenes
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Title:
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Senior Vice President, Chief Financial Officer and Treasurer
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PERRY PARTNERS INTERNATIONAL INC.
By: Perry Corp., Investment Manager of Perry Partners International, Inc.
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By:
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/s/ Michael C. Neus
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Name:
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Michael C. Neus
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Title:
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General Counsel
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PERRY PARTNERS, L.P.
By: Perry Corp., General Partner of Perry Partners L.P.
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By:
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/s/ Michael C. Neus
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Name:
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Michael C. Neus
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Title:
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General Counsel
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[
Signature page to Note Purchase and Amendment Agreement
]
EXHIBIT A
[THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE SECURITIES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS. COLUMBIA LABORATORIES, INC. SHALL BE ENTITLED TO REQUIRE
AN OPINION OF COUNSEL SATISFACTORY TO COLUMBIA LABORATORIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THESE
SECURITIES WERE ISSUED.]
1
COLUMBIA LABORATORIES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void
After
, 2015
2
THIS CERTIFIES THAT, for value received,
, with its principal office at
, or its permitted assigns (the
Holder
), is entitled to subscribe for and
purchase at the Exercise Price (defined below) from Columbia Laboratories, Inc., a Delaware
corporation, with its principal office at 354 Eisenhower Parkway, Livingston, New Jersey 07039 (the
Company
), up to
3
shares of common stock of the Company, $0.01 par value per share
(the
Common Stock
), subject to adjustment as provided herein. This Warrant is one of a series of
substantially similar Warrants being issued as of the date hereof
(the Issuance Date) pursuant to the terms of those certain Note Purchase
and Amendment Agreements (the
NPA Warrants
), dated
on or after March 3, 2010,
each by and among the Company and certain other persons or entities (each a
Purchaser
and together,
the
Purchasers
), including the original Holder of
this Warrant (the
Note Purchase Agreements
and
including the Note Purchase and Amendment Agreement, dated as of March 3, 2010, between the
Company and the original Holder, the
Note Purchase Agreement
). Capitalized terms not otherwise
defined herein shall have the respective meanings ascribed to such terms in the Note Purchase
Agreement.
|
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1
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Legend shall be removed if the Certificate contemplated in Section 2(i)(i)(B) of the Note
Purchase Agreement has been delivered to the Company in accordance with the terms therein (or
omitted if the Certificate is delivered on or prior to the Closing Date).
|
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2
|
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Insert five-year anniversary of Issuance Date.
|
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3
|
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Insert applicable numbers from Schedule I to Note Purchase
Agreement.
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A-1
1. DEFINITIONS
. As used herein, the following terms shall have the following respective meanings:
(a)
Business Day
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.
(b)
Closing Bid Price
and
Closing Sale Price
means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the pink sheets by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.
(c)
Exercise Period
shall mean the period commencing 180 days after the date hereof and
ending at 5:00 p.m., New York time, on
, 2015
4
, unless sooner exercised or
terminated as provided below.
(d)
Exercise Price
shall mean $1.35, subject to adjustment pursuant to Section 5
below.
(e)
Exercise Shares
shall mean the shares of the Common Stock issued upon exercise of this
Warrant, subject to adjustment pursuant to the terms herein, including but not limited to
adjustment pursuant to Section 5 below.
(f)
Principal Market
means the principal securities exchange or securities market on which
the Common Stock is then traded.
(g)
Trading Day
means any day on which the Common Stock is traded on the Principal Market;
provided that Trading Day shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any
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Insert five-year anniversary of Issuance Date.
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A-2
day that the Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).
2. EXERCISE OF WARRANT
.
2.1 Method of Exercise
. Subject to the terms and conditions hereof (including, without
limitation, the limitations set forth in Section 2.5), this Warrant may be exercised by the Holder
at any time during the Exercise Period, in whole or in part, by (i) delivery of a written notice,
in the form attached hereto as Exhibit A (the
Exercise Notice
), of the Holders election to
exercise this Warrant to the Company and (ii) (A) payment to the Company of an amount equal to the
applicable Exercise Price multiplied by the number of shares of Common Stock as to which this
Warrant is being exercised (the
Aggregate Exercise Price
) in cash or by wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant is being exercised
pursuant to a Cashless Exercise (as defined in Section 2.3). The Holder shall not be required to
deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of
the Exercise Notice with respect to less than all of the Common Stock shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase
the remaining number of Exercise Shares. On or before the first Business Day following the date on
which the Company has received each of the Exercise Notice and the Aggregate Exercise Price (or
notice of a Cashless Exercise) (the
Exercise Delivery Documents
), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the
Holder and the Companys transfer agent (the
Transfer Agent
). On or before the third Business
Day following the date on which the Company has received all of the Exercise Delivery Documents
(the
Share Delivery Date
), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (
DTC
) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of Exercise Shares to which the Holder
is entitled pursuant to such exercise to the Holders or its designees balance account with DTC
through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a certificate, registered in
the Companys share register in the name of the Holder or its designee, for the number of Exercise
Shares to which the Holder is entitled pursuant to such exercise which certificates shall not bear
any restrictive legends unless required pursuant to the Note Purchase Agreement or the Company places
(or cauces to be placed) a restrictive legend thereon in accordance with Section 4.3(b) hereof. Upon delivery of
the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have
become the holder of record of the Exercise Shares with respect to which this Warrant has been
exercised, irrespective of the date such Exercise Shares are credited to the Holders DTC account
or the date of delivery of the certificates evidencing such Exercise Shares as the case may be. If
this Warrant is submitted in connection with any exercise pursuant to this Section 2.1 and the
number of Exercise Shares represented by this Warrant submitted for exercise is greater than the
number of Exercise Shares being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 2.4) representing the right to purchase
the number of Exercise Shares purchasable immediately prior to such exercise under this Warrant,
less the number of Exercise Shares with respect to which this Warrant is exercised. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant.
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Fractional shares shall be treated as provided in Section 6. The Company shall pay any and all taxes which
may be payable with respect to the issuance and delivery of Exercise Shares upon exercise of this
Warrant.
2.2 Companys Failure to Timely Deliver Securities
. If within three Trading Days after the
Companys receipt of the facsimile copy of a Exercise Notice the Company shall fail to issue and
deliver a certificate to the Holder and register such Exercise Shares on the Companys share
register or credit the Holders balance account with DTC for the number of Exercise Shares to which
the Holder is entitled upon such Holders exercise hereunder or if the Company fails to deliver to
the Holder the certificate or certificates representing the applicable Exercise Shares (or credit
the Holders balance account at DTC with the applicable Exercise Shares) within three Trading Days
after its obligation to do so under clause (ii) below and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of Exercise Shares issuable upon such exercise that the Holder
anticipated receiving from the Company (a
Buy-In
), then the Company shall, within three Business
Days after the Holders request and in the Holders discretion, either (i) pay cash to the Holder
in an amount equal to the Holders total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the
Buy-In Price
), at which point the Companys
obligation to deliver such certificate (and to issue such Exercise Shares) or credit such Holders
balance account with DTC shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Exercise Shares or credit such Holders
balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of Exercise Shares, times (B) the Closing Bid
Price on the date of exercise.
2.3 Cashless Exercise
. Notwithstanding any provisions herein to the contrary, if, at any time
during the Exercise Period, the Current Market Price (as defined below) of one share of Common
Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu
of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless
exercise by surrender of this Warrant at the principal office of the Company together with the
properly endorsed Notice of Exercise and the Company shall issue to the Holder a number of Exercise
Shares computed using the following formula:
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X =
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Y (B-A)
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B
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Where:
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X =
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the number of Exercise Shares to be issued to the Holder.
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Y =
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the number of Exercise Shares purchasable upon exercise of
all of the Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised.
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A = the Exercise Price.
B = the Current Market Price of one share of Common Stock.
Current Market Price
means on any particular date:
A-4
(a) if the Common Stock is traded on the Nasdaq Capital Market, the Nasdaq Global Market or
the Nasdaq Global Select Market (or their successors), the average of the closing prices of the
Common Stock of the Company on such market over the five trading days ending immediately prior to
the applicable date of valuation;
(b) if the Common Stock is traded on any registered national stock exchange but is not traded
on the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (or their
successors), the average of the closing prices of the Common Stock of the Company on such exchange
over the five trading days ending immediately prior to the applicable date of valuation;
(c) if the Common Stock is traded over-the-counter, but not on the Nasdaq Capital Market, the
Nasdaq Global Market, the Nasdaq Global Select Market or a registered national stock exchange, the
average of the closing bid prices over the 30-day period ending immediately prior to the applicable
date of valuation; and
(d) if there is no active public market for the Common Stock, the value thereof, as determined
in good faith by the Board of Directors of the Company upon due consideration of the proposed
determination thereof by the Holder.
2.4 Partial Exercise
. If this Warrant is exercised in part only, the Company shall, upon
surrender of this Warrant, execute and deliver, within 10 days of the date of exercise, a new
Warrant evidencing the rights of the Holder, or, subject to Section 8, such other person as shall
be designated in the Notice of Exercise, to purchase the balance of the Exercise Shares purchasable
hereunder. In no event shall this Warrant be exercised for a fractional Exercise Share, and the
Company shall not distribute a Warrant exercisable for a fractional Exercise Share. Fractional
shares shall be treated as provided in Section 6.
2.5 Limitations on Exercise
.
(a) The Company shall not effect the exercise of this Warrant, and the Holder shall not have
the right to exercise this Warrant, to the extent that after giving effect to such exercise, such
Person (together with such Persons affiliates) would beneficially own in excess of 9.99% of the
shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes
of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such sentence is being made,
but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates
and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its affiliates (including, without limitation,
any convertible notes or convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely
on the number of outstanding shares of Common Stock as reflected in (1) the Companys most recent
Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and
Exchange
A-5
Commission, as the case may be, (2) a more recent public announcement by the Company or (3)
any other notice by the Company or the Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written request of the Holder, the Company
shall within one Business Day confirm in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of the Company,
including the NPA Warrants, by the Holder and its affiliates since the date as of which such number
of outstanding shares of Common Stock was reported.
(b) The Company shall not be obligated to issue any shares of Common Stock upon exercise of
this Warrant, if the issuance of such shares of Common Stock would exceed that number of shares of
Common Stock which the Company may issue upon exercise, redemption or conversion, as applicable, of
the NPA Warrants or otherwise without breaching the Companys obligations under the rules or
regulations of the applicable Principal Market (the number of shares which may be issued without
violating such rules and regulations, the
Exchange Cap
), except that such limitation shall not
apply in the event that the Company (A) obtains the approval of its stockholders as required by the
applicable rules of the applicable Principal Market for issuances of shares of Common Stock in
excess of such amount or (B) obtains a written opinion from outside counsel to the Company that
such approval is not required, which opinion shall be reasonably satisfactory to the Holders.
Unless and until such approval or written opinion is obtained, no Holder shall be issued in the
aggregate, upon exercise or conversion, as applicable, of any NPA Warrants, shares of Common Stock
in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator
of which is the total number of shares of Common Stock underlying the NPA Warrants issued to such
Holder pursuant to the Note Purchase Agreements on the Issuance Date and the denominator of which
is the aggregate number of shares of Common Stock underlying the NPA Warrants issued to the
Purchasers pursuant to the Note Purchase Agreements on the Issuance Date (with respect to each
Purchaser, the
Exchange Cap Allocation
). In the event that any Holder shall sell or otherwise
transfer any of such Holders NPA Warrants, the transferee shall be allocated a pro rata portion of
such Holders Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to
such transferee with respect to the portion of the Exchange Cap Allocation allocated to such
transferee. In the event that any Holder of NPA Warrants shall exercise all of such Holders NPA
Warrants into a number of shares of Common Stock which, in the aggregate, is less than such
Holders Exchange Cap Allocation, then the difference between such Holders Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such Holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of NPA Warrants on a pro rata basis in
proportion to the shares of Common Stock underlying the NPA Warrants then held by each such holder.
In the event that the Company is prohibited from issuing any Warrant Shares for which an Exercise
Notice has been received as a result of the operation of this Section 2.5(b), the Company shall pay
cash in exchange for cancellation of such Warrant Shares, at a price per Warrant Share equal to the
difference between the Closing Sale Price and the Exercise Price as of the date of the attempted
exercise.
2.6 Insufficient Authorized Shares
. If at any time while any of the Warrants remain outstanding
the Company does not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon exercise of the Warrants at least a number
of shares of Common Stock equal to 100% of the number of shares of Common Stock as shall from time
to time be necessary to effect the exercise of all of the
A-6
Warrants then outstanding (the
Required Reserve Amount
) (such event an
Authorized Share Failure
), then the
Company shall immediately take all action necessary to increase the Companys authorized shares of
Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount
for the Warrants then outstanding. Without limiting the generality of the foregoing sentence, as
soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no
event later than 90 days after the occurrence of such Authorized Share Failure, the Company shall
hold a meeting of its stockholders for the approval of an increase in the number of authorized
shares of Common Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its stockholders
approval of such increase in authorized shares of Common Stock and to cause its board of directors
to recommend to the stockholders that they approve such proposal.
3. COVENANTS OF THE COMPANY
.
3.1 Covenants as to Exercise Shares
. The Company covenants and agrees that all Exercise Shares
that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance,
be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and agrees that the
Company will at all times during the Exercise Period have authorized and reserved, free from
preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant. If at any time during the Exercise Period the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this
Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock (or other securities as
provided herein) to such number of shares as shall be sufficient for such purposes.
3.2 Notices of Record Date
. In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Company shall mail to the Holder, at least ten days
prior to the date specified herein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.
4. REPRESENTATIONS OF HOLDER
.
4.1 Acquisition of Warrant for Personal Account
. The Holder represents and warrants that it is
acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a
present view toward the public sale or distribution of said Warrant or Exercise Shares or any part
thereof and has no present intention of selling or distributing said Warrant or Exercise Shares or any
arrangement or understanding with any other persons regarding the sale or distribution of said
Warrant or, except in accordance with the provisions of Article V of the Note Purchase Agreement, if applicable,
the Exercise Shares, and except as would not result in a violation of the Securities Act of 1933, as amended. The
Holder will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of) the Warrant except in
accordance with the Securities Act of 1933, as amended, and will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
A-7
buy, purchase or
otherwise acquire or take a pledge of) the Exercise Shares except in accordance with
the provisions of Article V of the Note Purchase Agreement, if applicable, or pursuant to and in accordance with
the Securities Act of 1933, as amended.
4.2 Securities Are Not Registered
.
(a) The Holder understands that the offer and sale of the Warrant or the Exercise Shares have
not been registered under the Securities Act of 1933, as amended, on the basis that no distribution
or public offering of the securities of the Company is to be effected and/or pursuant to specific
exemptions from the registration provisions of the Securities Act of 1933, as amended, which
exemptions depend upon, among other things, the bona fide nature of the Holders investment intent
as expressed herein. The Holder realizes that the basis for such exemptions may not be present if,
notwithstanding its representations, the Holder has a present intention of acquiring the Warrants
and/or the Exercise Shares for a fixed or determinable period in the future, selling (in connection
with a distribution or otherwise), granting any participation in, or otherwise distributing the
Warrants and/or the Exercise Shares. The Holder represents and warrants that it has no such
present intention.
(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely
unless they are subsequently registered under the Securities Act of 1933, as amended, or an
exemption from such registration is available. The Holder recognizes that the Company has no
obligation to register the Warrant or, except as provided in the Note Purchase Agreement, if applicable, the
Exercise Shares, or to comply with any exemption from such registration.
4.3 Disposition of Warrant and Exercise Shares
.
(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or
Exercise Shares in any event unless and until:
(i) There is then in effect a registration statement under the Securities Act of 1933,
as amended, covering such proposed disposition and such disposition is made in accordance
with said registration statement;
(ii)
Solely with respect to the Warrant, the Holder shall have furnished to the Company the Certificate, after which the Holder may dispose of such Warrant in accordance with the provisions of Rule 144 under the Securities Act of 1933, as amended;
(iii) Solely with respect to the Exercise Shares that the Holder acquires pursuant to the
cashless exercise provisions of Section 2.3 hereof, and only if the Holder shall have furnished to the Company the Certificate at the time of such cashless exercise,
the Holder may dispose of such Exercise Shares in accordance with the provisions of Rule 144 under the Securities Act of 1933, as amended; or
(iv) If reasonably requested by the Company, the Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder
to the effect that such disposition will not require registration of such Warrant or
Exercise Shares under the Securities Act of 1933, as amended, or any applicable state
securities laws; provided, that no opinion shall be required for any disposition made or to
be made in accordance with the provisions of Rule 144 under the
Securities Act of 1933, as amended.
(b) The Holder understands and agrees that all certificates evidencing the Exercise Shares to
be issued to the Holder may bear a legend in substantially the following form (except such legend will
not be placed on Exercise Shares acquired under the Warrant pursuant to a cashless exercise
pursuant to Section 2.3 if immediately prior to such cashless exercise the Holder provides the Certificate to the Company):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
A-8
APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. COLUMBIA LABORATORIES, INC. SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO COLUMBIA LABORATORIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED TO THE EXTENT THAT AN OPINION IS REQUIRED PURSUANT TO THE AGREEMENT UNDER WHICH THE
SECURITIES WERE ISSUED.
5. ADJUSTMENTS
. In the event of changes in the outstanding Common Stock of the Company by reason
of any stock split, stock dividend, recapitalization, reclassification, combination or exchange of
shares, reorganization, liquidation, dissolution, consolidation or merger effected by the Company,
the number and class of shares available under the Warrant in the aggregate and the Exercise Price
shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same
aggregate Exercise Price, the total number, class and kind of shares or other property, including
cash, as the Holder would have owned had the Warrant been exercised prior to the event and had the
Holder continued to hold such shares until after the event requiring adjustment. The form of this
Warrant need not be changed because of any adjustment in the Exercise Price and/or number, class
and kind of shares subject to this Warrant. The Company shall promptly provide a certificate from
its Chief Financial Officer notifying the Holder in writing of any adjustment in the Exercise Price
and/or the total number, class and kind of shares issuable upon exercise of this Warrant, which
certificate shall specify the Exercise Price and number, class and kind of shares under this
Warrant after giving effect to such adjustment. For the avoidance of doubt, if necessary to
effectuate the provisions of this paragraph 5, any successor to the Company or surviving entity in
a reorganization, consolidation or merger effected by the Company shall deliver to the Holder
confirmation (or a new warrant to the effect) that such successor or surviving entity shall have
all of the obligations of the Company under this Warrant with the same effect as if such successor
or surviving entity had been named as the Company herein, and that there shall be issued upon
exercise of this Warrant (or a new warrant) at any time after the consummation of such
reorganization, consolidation or merger, in lieu of the shares of Common Stock issuable upon the
exercise of this Warrant prior to such transaction, the total number, class and kind of shares or
other property, including cash, as the Holder would have owned had the Warrant been exercised prior
to such transaction and had the Holder continued to hold such shares until after such transaction.
6. FRACTIONAL SHARES
. No fractional shares shall be issued upon the exercise of this Warrant as a
consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable
upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise
would result in the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of issuance of any
fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the
product resulting from multiplying the fair market value of the Common Stock on the date of
exercise of this Warrant by such fraction.
7. NO STOCKHOLDER RIGHTS
. This Warrant in and of itself shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company.
A-9
8. TRANSFER OF WARRANT
. Subject to applicable laws and compliance with Section 4.3, this Warrant
and all rights hereunder are transferable, by the Holder in person or by duly
authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to
any transferee designated by Holder.
8.1
Upon such surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of
shares of Common Stock without having a new Warrant issued.
8.2
If, at the time of the surrender of this Warrant in connection with any transfer of this
Warrant, (i) the transfer of this Warrant shall not be registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and under applicable state securities or
blue sky laws, and (ii) the Holder has not furnished to the Company the Certificate at such time, the Company may require, as a condition of allowing such transfer (A) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion
of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that such transfer may be made without registration under
the Securities Act of 1933, as amended, and under applicable state securities or blue sky laws, and
(B) that the holder or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company; provided, in any case that the transferee shall be an accredited investor
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities
Act of 1933, as amended, or a qualified institutional buyer as defined in Rule 144A(a) under the
Securities Act of 1933, as amended.
9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
. If this Warrant is lost, stolen, mutilated or
destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose
(which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any
such new Warrant shall constitute an original contractual obligation of the Company, whether or not
the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
10. MODIFICATIONS AND WAIVER
. This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Company and (i) Purchasers
holding Warrants representing at least a majority of the number of Exercise Shares then issuable
upon exercise of any then unexercised Warrants issued pursuant to the Note Purchase Agreements,
provided
,
however
, that such modification, amendment or waiver is made with respect
to all unexercised Warrants issued pursuant to the Note Purchase Agreements and does not adversely
affect the Holder without adversely affecting all holders of Warrants in a similar manner; or (ii)
the Holder.
11. NOTICES, ETC
. All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by
confirmed email, telex or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one business day after deposit
A-10
with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address listed on
the signature page and to the Holders at the addresses on the Company records, or at such other
address as the Company or Holder may designate by ten days advance written notice to the other
party hereto.
12. ACCEPTANCE
. Receipt of this Warrant by the Holder shall constitute acceptance of and
agreement to all of the terms and conditions contained herein.
13. GOVERNING LAW
. This Warrant and all rights, obligations and liabilities hereunder shall be
governed by the laws of the State of New York without regard to the principles of conflict of laws.
14. DESCRIPTIVE HEADINGS
. The descriptive headings of the several paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. The language in this
Warrant shall be construed as to its fair meaning without regard to which party drafted this
Warrant.
15. SEVERABILITY
. The invalidity or unenforceability of any provision of this Warrant in any
jurisdiction shall not affect the validity or enforceability of such provision in any other
jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and
effect.
16. ENTIRE AGREEMENT
. This Warrant constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and undertakings of the parties, whether oral or written, with respect
to such subject matter.
17. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available under this Warrant and
the Note Purchase Agreements, at law or in equity (including a decree of specific performance
and/or other injunctive relief), and nothing herein shall limit the right of the Holder right to
pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The
Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Holder and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the holder of this
Warrant shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and without any bond or
other security being required.
[Signature Page Follows]
A-11
IN WITNESS WHEREOF
, the Company has caused this Warrant to be executed by its duly authorized
officer as of ___, 2010.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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Address:
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Attention: [
]
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Facsimile: [
]
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A-12
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
COLUMBIA LABORATORIES, INC.
The undersigned holder hereby exercises the right to purchase
of the shares
of Common Stock (
Exercise Shares
) of Columbia Laboratories, Inc., a Delaware corporation (the
Company
), evidenced by the attached Warrant to Purchase Common Stock (the
Warrant
).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:
a Cash Exercise with respect to
Exercise Shares; and/or
a Cashless Exercise with respect to
Exercise Shares.
2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Exercise Shares to be issued pursuant hereto, the holder shall pay
the Aggregate Exercise Price in the sum of $
to the Company in accordance with
the terms of the Warrant.
3. Delivery of Exercise Shares. The Company shall deliver to the holder
Exercise
Shares in accordance with the terms of the Warrant.
Date:
,
Name of Registered Holder
A-13
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and, if applicable, hereby directs
[Insert name of Companys transfer agent]
to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated
, 2010 from the Company
and acknowledged and agreed to by
[Insert name of Companys transfer agent]
.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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A-14
ASSIGNMENT FORM
(To assign the foregoing Warrant, subject to compliance with Section 4.3 of the Warrant,
execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED
, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
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Name:
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(Please Print)
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Address:
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(Please Print)
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Dated:
, 201_
Holders Signature:
Holders Address:
NOTE
: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.
A-15
Exhibit B
FORM OF AMENDMENT NO. 1
TO
CONVERTIBLE SUBORDINATED NOTE
This
Amendment No. 1
(this
Amendment
) to each of Columbia Laboratories, Inc.s (the
Company
) Convertible Subordinated Notes due December 31, 2011 (each, a
Note
and collectively,
the
Notes
), is made as of March 3, 2010. Except as otherwise provided herein, capitalized
terms used herein shall have the meanings set forth in the Notes. For purposes hereof, the Note
Purchase Agreements shall mean the Note Purchase and Amendment Agreements, dated on or after
March 3, 2010, each by and among the Company and certain other persons relating to the Notes.
1. The definition of Fundamental Transaction is hereby amended and restated in its entirety to
read as follows:
Fundamental Transaction
means that (A) the Company shall, directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person or Persons, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted
by the holders of more than 50% of the outstanding shares of Voting Stock (not including any shares
of Voting Stock held by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a
stock purchase agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the other Person or other Persons making or party to,
or associated or affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common
Stock, or (B) any person or group (as these terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act) is or shall become the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 50% of the aggregate Voting Stock of the
Company, excluding, in each case of clauses (A)(i), (ii), (iii), (iv) and/or (v) and/or (B) of this
definition a Permitted Transaction. A
Permitted Transaction
shall mean, the transaction (or
series of related transactions) publicly announced by the Company in a Current Report on Form 8-K
filed by the Company with the Securities and Exchange Commission on or prior to the date that is
one Business Day after the date of Amendment No. 1 to the Notes (the
Form 8-K
), which transaction
includes the license, sale, transfer or other disposition of rights or assets of the Company
related to, and/or the co-development, co-promotion, co-marketing, distribution or other
collaboration with respect to, one or more of the Companys products with (and possibly a sale of
Company capital stock), pursuant to which the Company (is to, or) receives proceeds of at least $40
million in cash consideration at the initial closing thereof. For the avoidance of doubt, a
Permitted Transaction shall not include any transaction (or series of related transactions) (x)
that is not contemplated by the Form 8-K and (y) the initial closing of which does not occur
contemporaneously with the closings under the Note
B-1
Purchase and Amendment Agreements, each dated on or after March 3, 2010, each by and among the
Company and certain holders of the Notes.
Business Day
shall mean any day that is not a Saturday
or Sunday or other day on which commercial banks in The City of New York are authorized or required
by law to remain closed.
2. Except as provided herein, the Notes remain in full force and effect.
3. On the Amendment Termination Date (as defined in the Note Purchase Agreements), if it
occurs, this Amendment shall automatically terminate and be of no further force and effect as of
the Amendment Termination Date.
4. All issues and questions concerning the construction, validity, enforcement and
interpretation of this Amendment shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to any choice of law rules or provisions (whether of
the State of New York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
[Remainder of page intentionally blank.]
B-2
IN WITNESS WHEREOF
, the Company has duly executed this
AMENDMENT
as of the date first above
written.
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COLUMBIA LABORATORIES, INC.
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By:
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Name:
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Title:
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B-3
Exhibit C
SENIOR DEBT SATISFACTION
Reference is made to that certain letter agreement, dated March 3, 2010
(the Letter Agreement), between Columbia Laboratories, Inc. (the
Company) and PharmaBio Development Inc. (PharmaBio). This
acknowledgement is delivered pursuant to the Letter Agreement.
PharmaBio acknowledges and agrees that all of the Senior Debt (as defined
in the Companys Convertible Subordinated Notes due December 31, 2011) has
been satisfied and paid in full.
Acknowledged this ___ day of ___ 2010.
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PHARMABIO DEVELOPMENT INC.
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By:
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Name:
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Title:
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C-1
Exhibit D
FORM OF
CERTIFICATE OF NON-AFFILIATE HOLDER
Reference is made to those certain Note Purchase and Amendment Agreements, dated on or after
March 3, 2010 (the Agreement), by and among Columbia Laboratories, Inc. (the Company) and
certain other parties (the Holders). This Certificate is being delivered pursuant to Section
2(i)(i)(B) of the Agreement. All capitalized terms used and not otherwise defined herein shall
have the respective meanings provided in the Agreement.
The undersigned[, being a duly authorized officer or representative of the]
1
Holder
hereby certifies that:
(1) such Holder is not an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company nor has such Holder been such an affiliate during the three (3)
months preceding the date hereof;
(2) such Holder acquired its Holder Notes at least one year prior to the date hereof; and
(3) to such Holders knowledge, all of the
[Shares] [Warrants] [Warrant Shares]
2
to be issued to the
Holder without restrictive legends contemporaneously herewith may be sold by such Holder under Rule 144 under the Securities Act during any ninety (90)
day period.
DATED:
______ ___, 20___
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[HOLDER]
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By:
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Name:
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Title:
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1
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This Certificate shall be executed, in the case of
an entity by a duly authorized officer or representative thereof or in the
case of an individual, by such individual.
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2
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Insert all applicable securities that the Holder is requiring the Company to issue without restrictive legends.
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D-1
SCHEDULE I
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Allocation
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Number of Shares
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Name/Address of
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Jurisdiction of
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Principal Amount of
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Warrant
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Cash
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Covered by
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Holder
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Organization
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Holder Notes Owned
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Percentage
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Consideration
*
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Shares
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|
Warrants
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PERRY PARTNERS
INTERNATIONAL INC.
767 5
th
Ave.
19
th
Floor
New York, NY 10153
(212) 583-4146
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British Virgin
Islands
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$
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12,415,903.50
|
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31.04
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%
|
|
$
|
8,070,337.28
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|
2,299,257
|
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2,406,182
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PERRY PARTNERS, L.P.
767 5
th
Ave.
19
th
Floor
New York, NY 10153
(212) 583-4146
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Delaware
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$
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5,584,094.25
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|
|
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13.96
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%
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|
$
|
3,629,661.26
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1,034,073
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|
|
|
1,082,188
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Aggregate
Principal Amount of
Holder Notes Owned:
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|
$
|
17,999,997.75
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Expenses Cap:
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$
|
100,000
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*
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Excluding accrued and unpaid interest on the
Notes.
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ANNEX
TO EXHIBIT 10.1
The following schedule was prepared in accordance with the provisions of Item 601 of Regulation
S-K. Note Purchase and Amendment Agreements substantially similar to
the Note Purchase and Amendment Agreement filed as Exhibit 10.1 to
this Current Report on Form 8-K, each, dated as of March 3, 2010, were
entered into between Columbia Laboratories, Inc. and the Holders
listed on this Annex. Set
forth below are the material details in which such Note Purchase and Amendment Agreements differ
from the Note Purchase and Amendment Agreement filed as Exhibit 10.1 to
this Current Report on Form 8-K.
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Allocation
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Principal
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Number of
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Amount of
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Shares
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|
|
Holder Notes
|
|
Warrant
|
|
Cash
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|
Covered by
|
|
Common
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Holder
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Owned
|
|
Percentage
|
|
Consideration
*
|
|
Warrants
|
|
Stock
|
|
Expenses Cap
|
14159 L.P.
|
|
$
|
140,000
|
|
|
|
0.35
|
%
|
|
$
|
91,000
|
|
|
|
27,132
|
|
|
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25,909
|
|
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(1)
|
BAKER BROTHERS LIFE SCIENCES, L.P.
|
|
$
|
4,256,000
|
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|
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10.64
|
%
|
|
$
|
2,766,400
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|
|
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824,806
|
|
|
|
787,624
|
|
|
|
|
(1)
|
667, L.P. (#1)
|
|
$
|
805,000
|
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|
|
2.01
|
%
|
|
$
|
523,250
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|
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156,008
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|
|
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148,790
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|
|
|
|
(1)
|
667, L.P. (#2)
|
|
$
|
719,000
|
|
|
|
1.80
|
%
|
|
$
|
467,350
|
|
|
|
139,341
|
|
|
|
133,244
|
|
|
|
|
(1)
|
BAKER TISCH INVESTMENTS, L.P. (#1)
|
|
$
|
42,000
|
|
|
|
0.11
|
%
|
|
$
|
27,300
|
|
|
|
8,140
|
|
|
|
8,143
|
|
|
|
|
(1)
|
BAKER TISCH INVESTMENTS, L.P. (#2)
|
|
$
|
38,000
|
|
|
|
0.10
|
%
|
|
$
|
24,700
|
|
|
|
7,364
|
|
|
|
7,402
|
|
|
|
|
(1)
|
KENNETH E. BEEBE AND JANET E. BEEBE
|
|
$
|
100,000
|
|
|
|
0.25
|
%
|
|
$
|
65,000
|
|
|
|
19,379
|
|
|
|
18,582
|
|
|
|
|
(2)
|
KIRK AND DANA BEEBE
|
|
$
|
100,000
|
|
|
|
0.25
|
%
|
|
$
|
65,000
|
|
|
|
19,379
|
|
|
|
18,582
|
|
|
|
|
(2)
|
BEEBE 88 PARTNERS
|
|
$
|
30,000
|
|
|
|
0.08
|
%
|
|
$
|
19,500
|
|
|
|
4,984
|
|
|
|
5,946
|
|
|
|
|
(2)
|
BEEBE 98 PARTNERS
|
|
$
|
40,000
|
|
|
|
0.08
|
%
|
|
$
|
26,000
|
|
|
|
6,646
|
|
|
|
5,946
|
|
|
|
|
(2)
|
THE ASCEND FUND
|
|
$
|
1,500,000
|
|
|
|
3.75
|
%
|
|
$
|
975,000
|
|
|
|
290,699
|
|
|
|
278,722
|
|
|
|
|
(2)
|
CURRAN FAMILY PARTNERS II
|
|
$
|
2,000,000
|
|
|
|
5.00
|
%
|
|
$
|
1,300,000
|
|
|
|
387,597
|
|
|
|
370,371
|
|
|
$
|
1,500
|
|
HIGHBRIDGE INTERNATIONAL LLC
|
|
$
|
6,000,000
|
|
|
|
15.00
|
%
|
|
$
|
3,900,000
|
|
|
|
1,162,790
|
|
|
|
1,111,112
|
|
|
$
|
15,000
|
|
KNOTT PARTNERS, LP
|
|
$
|
136,000
|
|
|
|
00.34
|
%
|
|
$
|
88,400
|
|
|
|
26,355
|
|
|
|
25,165
|
|
|
|
|
(3)
|
KNOTT PARTNERS OFFSHORE MASTER FUND, LP
|
|
$
|
3,940,000
|
|
|
|
9.85
|
%
|
|
$
|
2,561,000
|
|
|
|
763,566
|
|
|
|
729,047
|
|
|
|
|
(3)
|
SHOSHONE PARTNERS, LP
|
|
$
|
628,000
|
|
|
|
1.57
|
%
|
|
$
|
408,200
|
|
|
|
121,705
|
|
|
|
116,203
|
|
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Amount of
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Holder Notes
|
|
Warrant
|
|
Cash
|
|
Covered by
|
|
Common
|
|
|
Holder
|
|
Owned
|
|
Percentage
|
|
Consideration
*
|
|
Warrants
|
|
Stock
|
|
Expenses Cap
|
FINDERNE, LLC
|
|
$
|
55,000
|
|
|
|
0.14
|
%
|
|
$
|
35,750
|
|
|
|
10,661
|
|
|
|
10,362
|
|
|
|
|
(3)
|
COMMONFUND HEDGED EQUITY COMPANY
|
|
$
|
158,000
|
|
|
|
0.40
|
%
|
|
$
|
102,700
|
|
|
|
30,619
|
|
|
|
29,606
|
|
|
|
|
(3)
|
MULSANNE PARTNERS, LP
|
|
$
|
83,000
|
|
|
|
0.21
|
%
|
|
$
|
53,950
|
|
|
|
16,086
|
|
|
|
15,543
|
|
|
|
|
(3)
|
MORRISON FAMILY TRUST DTD 51593
|
|
$
|
700,000
|
|
|
|
1.75
|
%
|
|
$
|
455,000
|
|
|
|
135,659
|
|
|
|
129,420
|
|
|
|
|
(4)
|
MORRISON 1997 CRT
|
|
$
|
430,000
|
|
|
|
1.08
|
%
|
|
$
|
279,500
|
|
|
|
83,333
|
|
|
|
79,870
|
|
|
|
|
(4)
|
LAURIE C. MORRISON TRUST
|
|
$
|
100,000
|
|
|
|
00.25
|
%
|
|
$
|
65,000
|
|
|
|
19,381
|
|
|
|
18,488
|
|
|
|
|
(4)
|
|
|
|
*
|
|
Excluding accrued and unpaid interest on the
Notes.
|
|
(1)
|
|
14159 L.P., BAKER BROTHERS LIFE SCIENCES, L.P., 667, L.P. (#1), 667, L.P. (#2), BAKER
TISCH INVESTMENTS, L.P. (#1) and BAKER TISCH INVESTMENTS, L.P. (#2) have an expense cap of $4,500, in
the aggregate.
|
|
(2)
|
|
KENNETH E. BEEBE AND JANET E. BEEBE, KIRK AND DANA BEEBE, BEEBE 88 PARTNERS, BEEBE 98 PARTNERS
and THE ASCEND FUND have an expense cap of $1,500, in the aggregate.
|
|
(3)
|
|
KNOTT PARTNERS, LP, KNOTT PARTNERS OFFSHORE MASTER FUND, LP, SHOSHONE PARTNERS, LP, FINDERNE,
LLC, COMMONFUND HEDGED EQUITY COMPANY and MULSANNE PARTNERS, LP have an expense cap of $4,000, in
the aggregate.
|
|
(4)
|
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MORRISON FAMILY TRUST DTD 51593, MORRISON 1997 CRT and LAURIE C. MORRISON TRUST have an expense
cap of $1,000, in the aggregate.
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2