INVESTMENT AND ROYALTY AGREEMENT
This Investment and Royalty Agreement (this "Agreement") is made as of July 31,
2002, by and between Columbia Laboratories, Inc., a Delaware corporation
("Columbia"), and PharmaBio Development Inc., a North Carolina corporation
("PharmaBio").
Background and Overview
A. Contemporaneously with this Agreement, the parties are entering into a
Stock Purchase Agreement, whereby PharmaBio is purchasing shares of stock
of Columbia (the "Stock Purchase Agreement").
B. PharmaBio is willing to provide certain additional funds to Columbia,
subject to and upon the terms and conditions below.
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1.0 Definitions.
1.1 "Advantage-S" shall mean the over-the-counter vaginal contraceptive gel
product containing nonoxynol-9 currently marketed in the Territory as
Advantage-S(R), and any other over-the-counter vaginal contraceptive
product marketed by Columbia or its Affiliates, licensees or sublicensees
as a replacement or substitute for or in lieu of Advantage-S.
1.2 "Adverse Marketing Event" shall mean the occurrence of any of the
following: (i) Columbia or its licensees shall withdraw, or be required
by the FDA or other governmental authority to withdraw, Crinone or
Prochieve from the market for any reason for a period that is, or is
reasonably expected to be, greater than [***]days; or (ii) Columbia or
its licensees shall fail to have a supply of Crinone or Prochieve, or any
ingredients or components thereof, consistent with past quantities and
practices, for a period of time that is, or is reasonably expected to be,
greater than [***] days.
1.3 "Affiliate" shall mean, as to any person or entity, any corporation or
business entity controlled by, controlling, or under common control with
such person or entity. For this purpose, "control" shall mean direct or
indirect beneficial ownership of at least fifty percent (50%) of the
voting stock or income interest in such corporation or other business
entity, or such other relationship as, in fact, constitutes actual
control.
1.4 "Annual Period" shall mean a twelve-month period beginning on January 1,
2003 and each anniversary thereof.
1.5 "Crinone" shall mean the vaginal progesterone gel product containing
progesterone in a
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concentration of four percent (4%) or eight percent (8%) currently
marketed in the Territory by Serono, Inc. for secondary amenorrhea and
assisted reproductive technology and any other vaginal progesterone
product marketed by Columbia or its Affiliates, licensees or sublicensees
as a replacement or substitute for or in lieu of Crinone.
1.6 "Debt" shall mean (i) indebtedness for borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services,
(iv) obligations as lessee under leases which shall have been or should
be, in accordance with generally accepted accounting principles, recorded
as capital leases, and (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above. For the avoidance of
doubt, Debt shall not include day-to-day obligations and payables
incurred by Columbia in the ordinary course of business.
1.7 "FDA" shall mean the United States Food and Drug Administration.
1.8 "GAAP" shall mean generally accepted accounting principles.
1.9 "Liens" shall mean any lien, security interest, mortgage, pledge,
encumbrance, charge or claim.
1.10 "Master Services Agreement" shall mean the agreement and initial work
order, dated as of the date hereof, between Columbia and Innovex LP, a
New Jersey limited partnership, whose address is 10 Waterview Boulevard,
Parsippany, NJ 07054 ("Innovex"), which is an Affiliate of PharmaBio,
pursuant to which Innovex agrees to provide contract sales services to
Columbia.
1.11 "Minimum Sales Force Level" shall mean a Columbia sales force size of not
less than forty (40) Columbia sales representatives promoting Prochieve
in the first or second detailing positions, provided that any open sales
territory for which Columbia or Innovex is actively recruiting a sales
representative shall be counted as a Columbia sales representative for
purposes of this definition.
1.12 "Net Sales" shall mean the gross amount billed or invoiced by Columbia or
an Affiliate or any licensee or sublicensee (or other transferee), or on
behalf of or for the benefit of Columbia or an Affiliate or any licensee
or sublicensee (or other transferee), for sales of the Products, to a
third party in the Territory, less the following items, but only to the
extent such items are included in such gross amount and without
duplication:
(i) discounts, including cash and quantity discounts,
charge-back payments, refunds and rebates granted to
managed health care organizations or similar
organizations or to federal, state and local
governments (including, without limitation, Medicaid
rebates), their agencies, and purchasers and
reimbursers or to trade customers, including but not
limited to,
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wholesalers and chain and pharmacy buying groups;
(ii) actual credits or allowances resulting from customer
claims, damaged goods, rejections or returns of the
Products, including recalls, regardless of the party
requesting such;
(iii) freight, postage, shipping and insurance charges
actually allowed or paid for delivery of Products, to
the extent billed;
(iv) taxes, duties or other governmental charges levied on,
absorbed or otherwise imposed on sale of such
Products, including without limitation value-added
taxes, or other governmental charges otherwise
measured by the billing, when included in billing, as
adjusted for rebates, charge-backs and refunds, but
not including income or similar taxes; and
(v) actual write-offs of uncollectible customer accounts
for recorded sales, provided that (x) any subsequent
collection of such uncollectible accounts shall be
restored as Net Sales at the time of collection and
(y) Columbia shall follow commercially reasonable
practices of collecting and otherwise administering
such accounts.
Notwithstanding the foregoing, for so long as the Amended and Restated
License and Supply Agreement dated as of June 4, 2002 (the "License and
Supply Agreement") between Columbia Laboratories (Bermuda) Limited and
Ares Trading S.A. ("Ares") is in effect, then with respect to Crinone,
"Net Sales" shall mean the gross amount billed or invoiced by Columbia
or an Affiliate or any licensee or sublicensee (or other transferee),
or on behalf of or for the benefit of Columbia or an Affiliate or any
licensee or sublicensee (or other transferee), for sales of Crinone to
Ares or an Affiliate or any licensee or sublicensee (or other
transferee) (and shall not mean sales of Crinone by Ares or an
Affiliate or any licensee or sublicensee (or other transferree)), which
amount shall include any additional amounts paid by Ares or an
Affiliate or any licensee or sublicensee (or other transferee) with
respect to sales made in the "Non-Fertility Specialist Market"
including without limitation pursuant to Section 5(a) of the License
and Supply Agreement.
1.13 "Prochieve" shall mean the vaginal progesterone gel product containing
progesterone in a concentration of four percent (4%) or eight percent
(8%) to be marketed in the Territory under the trademark Prochieve(TM),
or any other trademark, for secondary amenorrhea and assisted
reproductive technology or any other vaginal progesterone product
marketed by Columbia or its Affiliates, licensees or sublicensees as a
replacement or substitute for or in lieu of Prochieve .
1.14 "Product" shall mean each of Advantage-S, Crinone, Prochieve, and
RepHresh and "Products" shall mean all of such products together, in
each case for any and all formulations, delivery mechanisms and
indications, including "off-label" uses.
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1.15 "Royalty Term" shall mean the five (5) consecutive Annual Periods
beginning on January 1, 2003.
1.16 "RepHresh" shall mean the vaginal get product to be marketed in the
Territory under the trademark RepHresh(TM), or any other trademark, for
the elimination of vaginal odor and maintaining physiologic vaginal pH or
any other vaginal gel product marketed by Columbia or its Affiliates,
licensees or sublicensees as a replacement or substitute for or in lieu
of RepHresh.
1.17 "Territory" shall mean the United States of America and all states
thereof, the District of Columbia, and Puerto Rico.
2.0 Investment and Royalties; Related Agreements.
2.1 PharmaBio will make the following payments to Columbia:
Payment Date Amount
September 30, 2002 $1,125,000
December 31, 2002 $1,125,000
March 31, 2003 $1,125,000
June 30, 2003 $1,125,000
Notwithstanding the foregoing, upon the occurrence of an Event of Default
(as defined below), PharmaBio may at any time, if an Event of Default
shall then be continuing, by written notice to Columbia terminate this
Agreement (including PharmaBio's obligations to pay the amounts set forth
above), so long as Innovex is not in default in any material respect of
its performance of its material obligations under the Master Services
Agreement and the work orders thereunder relating to the Products. "Event
of Default" shall mean and include each of the following:
(a) Columbia shall fail to pay any royalties to PharmaBio when the
same become due and payable to PharmaBio and [***]business days
have elapsed following receipt of written notice of such
non-payment from PharmaBio to Columbia;
(b) Any material representation or warranty made by Columbia under
this Agreement shall prove to have been untrue or incorrect in any
material respect when made;
(c) Columbia shall fail to perform or comply with any material
agreement or covenant made by Columbia under this Agreement in any
material respect;
(d) Columbia shall sell, assign, license, lease or otherwise transfer
all or substantially all of its assets or properties owned (or
otherwise held by it) relating to one or more of the Products, in
one or a series of related transactions, without the prior
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written consent of PharmaBio;
(e) An Adverse Marketing Event shall occur;
(f) Columbia shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition
seeking to take advantage of any other laws relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment
of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its
property, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
authorizing any of the foregoing;
(g) A case or other proceeding shall be commenced against Columbia in any
court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other
laws relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like for Columbia or any of its
subsidiaries or for all or any substantial part of their respective
assets, and such case or proceeding shall continue without dismissal
or stay for a period of sixty (60) consecutive days, or an order
granting the relief requested in such case or proceeding (including,
but not limited to, an order for relief under such federal bankruptcy
laws) shall be entered; or
(h) Any indebtedness of Columbia or any of its subsidiaries in excess of
$[***] shall be declared to be due and payable, or required to be
prepaid, prior to the stated maturity thereof, and Columbia shall fail
to pay the same within [***]days of such declaration.
In the event that PharmaBio terminates this Agreement upon an Event of
Default, then Columbia shall pay to PharmaBio the aggregate amount (the
"Repayment Amount") by which the aggregate amount of payments by PharmaBio
under this Agreement (the "Aggregate Payments") exceeds the aggregate
amount of royalties paid by Columbia to PharmaBio under this Agreement, in
full satisfaction of Columbia's obligations under this Agreement. For
purposes of this calculation interest shall accrue on the Aggregate
Payments at a rate equal to the Prime Rate as announced from time to time
by Wachovia Bank, N.A. (or its successor) plus [***]percent ([***]%),
beginning with the payment of funds by PharmaBio to Columbia until the
Repayment Amount is paid by Columbia. The Repayment Amount shall be payable
over two (2) years in eight (8) equal quarterly installments beginning
thirty (30) days after such termination. PharmaBio shall have no obligation
to exercise its remedies under this Section 2.1 and in lieu of this Section
2.1 may exercise its remedies under the other provisions of this Agreement.
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2.2 In consideration for the performance by PharmaBio of its funding
commitments set forth in Section 2.1, Columbia shall pay PharmaBio
royalties on Net Sales during the Royalty Term. The royalty payments
payable by Columbia to PharmaBio with respect to each Annual Period are as
follows:
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Annual Period during the Royalty on Net Sales
Royalty Term
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1 5%
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2 5%
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3 5%
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4 5%
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5 5%
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Notwithstanding anything to the contrary contained in this Agreement, the
total royalties payable to PharmaBio under this Section 2.2 shall not (i)
exceed in the aggregate for all Annual Periods the amount of $[***] (the
"Maximum Royalty Amount"), or (ii) provided PharmaBio is not in default of
its payment obligations hereunder (and ten (10) business days shall have
elapsed following receipt of written notice of such default from Columbia
to PharmaBio), be less than $[***]in the aggregate for all Annual Periods.
With respect to such minimum royalty commitment: if by February 28, 2005,
PharmaBio has not received at least $[***]in aggregate royalties under this
Section 2.2 (with respect to Net Sales during the Royalty Term through
December 31, 2004), then Columbia will pay PharmaBio the difference between
the amount of royalties actually received and $[***]; and at the end of the
fifth (5th) Annual Period, if PharmaBio has not received at least $[***]in
aggregate royalties under this Section 2.2, then Columbia will pay
PharmaBio the difference between the amount of royalties actually received
and $[***], provided that the time for payments under this sentence shall
be extended by the period of any extension of the Royalty Term under
Section 2.4, provided further that in no event shall such extension for
payments under this sentence be extended more than six (6) months beyond
the original due date. Such $[***]in minimum payments shall be payable by
Columbia to PharmaBio notwithstanding the actual sales of the Products or
other Product-related events, including without limitation any Adverse
Marketing Event.
The royalty payments under this Section 2.2 shall be paid by Columbia as
soon as reasonably practicable following the end of each calendar quarter
(but not later than forty five (45) days following the end of each calendar
quarter, except following the fourth quarter, in which case Columbia shall
have up to 60 days) during the five (5) Annual Periods in the Royalty Term.
Accompanying each of Columbia's payments to PharmaBio under this Section,
Columbia will provide to PharmaBio a report showing the applicable Net
Sales and the calculation of the resulting royalty payment. Columbia also
shall provide PharmaBio with all sales data for the Products that are
available to Columbia.
2.3 As further consideration for PharmaBio's funding commitments set forth in
Section 2.1,
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on the date of this Agreement, Columbia shall pay to PharmaBio a fee in the
amount of [***].
2.4 Columbia shall use its commercially reasonable efforts to commercialize the
Products in the Territory. In this regard, Columbia will provide a sales
force of an average size, calculated on a quarterly basis, not less than
the Minimum Sales Force Level during the Royalty Term. If, at any time
during such period, (a) Columbia reduces the Products' average sales force
below the Minimum Sales Force Level for a period of more than sixty (60)
days and Innovex is not in default in any material respect of its
performance of its material obligations under the Master Services Agreement
and the work orders thereunder relating to the Products or (b) an Adverse
Marketing Event shall occur, then Columbia and PharmaBio will negotiate in
good faith to restructure PharmaBio's commitments under Section 2.1 and the
corresponding royalty amounts under Section 2.2, which negotiations will
take into account the implications of the reduced sales force size or
Adverse Marketing Event, as the case may be, on future sales of the
Products. If the parties are unable to agree to such restructuring within
thirty (30) days after PharmaBio gives written notice to Columbia of its
intent to pursue a remedy under this Section 2.3, then, provided Innovex is
not in default in any material respect of its performance of its material
obligations under the Master Services Agreement and the work orders
thereunder relating to the Products, PharmaBio may, at its sole discretion
by written notice to Columbia, elect to (i) suspend all future funding
obligations under Section 2.1; and (ii) extend the Royalty Term (including,
without limitation, the then-current Annual Period). During the suspension
and extension period, PharmaBio shall continue to receive royalties at the
rate equal to the royalty amount applicable immediately prior to the
effective date of the suspension and extension period. If PharmaBio elects
this remedy, the then operating Annual Period for royalty payments under
Section 2.2, and the funding commitments under Section 2.1, shall be
extended until the Minimum Sales Force Level is satisfied or the Adverse
Marketing Event no longer exists, as the case may be. The funding
commitments under Section 2.1 shall resume as soon as Columbia achieves the
Minimum Sales Force Level or the Adverse Marketing Event no longer exists,
as the case may be, and the end of the then current Annual Period shall be
extended for the amount of the suspension and extension period, such that
PharmaBio enjoys the full length of the five (5) Annual Periods described
in Section 2.2 with the benefit of the Minimum Sales Force Level or absence
of the Adverse Marketing Event, as the case may be, for five (5) full
twelve-month periods, and the term "Royalty Term" shall, for all purposes
under this Agreement, be extended accordingly.
2.5 Each party hereto shall keep or cause to be kept such records as are
required to determine, in a manner consistent with GAAP, the sums or
credits due under this Agreement. Each party shall have the right, at such
party's expense, through a certified public accountant or like person
reasonably acceptable to the other party, upon execution of a customary
confidentiality agreement, to examine such records during regular business
hours upon reasonable notice during the term of this Agreement and for
twelve (12) months after its termination; provided however, that (i) such
examination shall not take place more than once a year and shall not cover
such records for more than the preceding Annual Period, and (ii) such
accountant shall report to both parties only as to
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the accuracy of the reports or payments provided or made by the other party
under this Agreement. Any adjustments required as a result of overpayments
or underpayments identified through a party's exercise of examination
rights, and any other adjustments that may be required from time to time in
order to correct overpayments or underpayments under this Agreement, shall
be made by subtracting or adding, as appropriate, amounts from or to the
next royalty payment in accordance with Section 2.2. The party requesting
the examination shall bear the full cost of the examination unless such
examination correctly discloses that the discrepancy for the Annual Period
differs by more than five (5) percent from the amount the accountant
determines is correct, in such case the owing party shall pay the
reasonable fees and expenses charged by the accountant. In the event that a
party disputes an invoice or other payment obligation under this Agreement,
such party shall timely pay the amount of the invoice or other payment
obligation, and the parties shall resolve such dispute in accordance with
Section 11.
2.6 Without the prior written approval of PharmaBio, Columbia shall not, nor
shall it allow any Affiliate or third party acting on behalf of or for the
benefit of Columbia or any Affiliate to, commercialize or promote a product
that could reasonably be expected to compete with a Product in the
Territory during the Royalty Term.
2.7 The Chief Financial Officers ("CFOs") of Columbia and PharmaBio shall
coordinate the activities of the parties under this Agreement. The CFOs
shall meet or communicate (in person or by telephone conference) on a
regular basis as may be reasonably requested by either of them, but no less
frequently than semi-annually about the performance of the parties under
this Agreement. The parties acknowledge that a Steering Committee will be
established as described in the Master Services Agreement. The parties
agree that, in addition to the activities described in the Master Services
Agreement, the Steering Committee will coordinate and facilitate the
overall commercialization relationship among PharmaBio and its Affiliates
and Columbia and its Affiliates, including with respect to this Agreement.
2.8 As further consideration for PharmaBio's funding obligations under this
Agreement, Columbia hereby makes the representations and warranties set
forth in Article III of the Stock Purchase Agreement.
2.9 Columbia agrees not to sell, assign, license, lease or otherwise transfer
all or any substantial portion of its assets or properties owned (or
otherwise held) relating to Crinone or Prochieve in one or a series of
related transactions, without the prior written consent of PharmaBio, which
consent shall not be unreasonably withheld or delayed.
2.10 Without the prior written consent of PharmaBio, which consent shall not be
unreasonably withheld or delayed, Columbia shall not create or incur or
allow to be created, incurred or exist any Debt, except Debt which is
junior and subordinate in right of payment to Columbia's minimum payment
obligations under Section 2.2 ("Junior Debt"), so long as prior to the
creation of such Junior Debt the holder thereof has agreed to subordination
terms and conditions in form and substance reasonably satisfactory to
PharmaBio providing for the subordination of the Junior Debt to such
minimum payment obligations.
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Columbia and PharmaBio agree that Columbia's payment obligations under this
Agreement, including such minimum payment obligations in Section 2.2, shall
be and constitute "Senior Indebtedness" as such term is used in the 7?%
Convertible Subordinated Note (No. R-1 $10,000,000) issued by Columbia to
SBC Warburg Dillon Read Inc. dated March 16, 1998 (including any
refinancing, replacement, substitution or restatement of such Note).
2.11 Without the prior written consent of PharmaBio, which consent shall not be
unreasonably withheld or delayed, Columbia shall not create or incur or
allow to be created, incurred or exist any Lien upon or with respect to any
of Columbia's assets or properties, except Liens securing Debt or other
obligations which are junior and subordinate in right of payment to
Columbia's minimum payment obligations under Section 2.2 ("Junior Liens"),
so long as prior to the creation of such Junior Liens the holder thereof
has agreed to subordination terms and conditions in form and substance
reasonably satisfactory to PharmaBio providing for the subordination of the
Junior Liens to such minimum payment obligations.
3.0 Confidentiality and Ownership of Information.
3.1 Columbia on the one part and PharmaBio on the other part each acknowledges
that, in the course of performing its obligations hereunder, it may receive
information from the other party which is proprietary to the disclosing
party and which the disclosing party wishes to protect from public
disclosure ("Confidential Information"). Each receiving party agrees to
retain in confidence, during the Royalty Term, and thereafter for a period
of five (5) years, all Confidential Information disclosed to it by or on
behalf of the other party, and that it will not, without the written
consent of such other party, use Confidential Information for any purpose
other than the purposes indicated herein or disclose such information to a
third party. These restrictions shall not apply to Confidential Information
which: (i) is or becomes public knowledge (through no fault of the
receiving party); (ii) is made lawfully available to the receiving party by
an independent third party that, to the knowledge of the receiving party,
is under no duty of confidentiality to the disclosing party; (iii) is
already in the receiving party's possession at the time of receipt from the
disclosing party (and such prior possession can be demonstrated by
competent evidence by the receiving party); (iv) is independently developed
by the receiving party and/or Affiliates (and such independent development
can be demonstrated by competent evidence by the receiving party); or (v)
is required by law, regulation, rule, act or order of any governmental
authority or agency to be disclosed by the receiving party, provided,
however, if reasonably possible, such receiving party gives the disclosing
party sufficient advance written notice to permit it to seek a protective
order or other similar order with respect to such Confidential Information
and, thereafter, the receiving party may disclose only the minimum
Confidential Information required to be disclosed in order to comply with
such and only to the government authority or agency or in the proceeding
which is the subject of such order.
3.2 PharmaBio on the one hand and Columbia on the other hand shall limit
disclosure of the other party's Confidential Information to only those of
their respective officers,
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representatives, agents and employees who are directly concerned with the
performance of this Agreement and have a legitimate need to know such
Confidential Information in the performance of their duties and shall
ensure that their respective officers, representatives, agents and
employees to whom Confidential Information is disclosed do not further
disclose such Confidential Information to any third party except as
otherwise permitted hereunder.
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3.3 All Columbia inventions, processes, know-how, patents, trade secrets,
copyrights, trade names, trademarks, service marks, marketing materials,
proprietary materials or other intellectual property of any kind, and all
improvements to any of the foregoing (collectively, "Columbia Property"),
disclosed, used, improved, modified or developed in connection with the
relationship contemplated by this Agreement shall remain the sole and
exclusive property of Columbia.
3.4 Columbia acknowledges that PharmaBio (and its Affiliates) possess certain
inventions, processes, know-how, trade secrets, improvements, other
intellectual properties and other assets, including but not limited to
analytical methods, procedures and techniques, computer technical expertise
and software, and business practices, which have been independently
developed by PharmaBio and/or its Affiliates (collectively "PharmaBio
Property"). Any PharmaBio Property or improvements thereto which are
disclosed, used, improved, modified or developed under or during the term
of this Agreement shall remain the sole and exclusive property of PharmaBio
or the respective Affiliate.
3.5 Neither PharmaBio nor Columbia or any of their Affiliates shall make any
public announcements regarding this Agreement or the terms and conditions
thereof without the prior written approval of the other party, which
approval shall not be unreasonably withheld or delayed, except to the
extent such disclosure is required by law.
4.0 Grant of Certain Preferred Rights by Columbia to PharmaBio
4.1 Columbia hereby grants to PharmaBio (which for purposes of this Section
shall mean and include its Affiliates), for a period of [***]years from the
date hereof, a preferred provider relationship whereby PharmaBio shall have
a first and preferred opportunity to negotiate for a period of [***]days
with Columbia (which for purposes of this Section shall mean and include
its Affiliates) to provide to Columbia any services which PharmaBio
provides to customers and which Columbia has decided to outsource or
otherwise engage a service provider to perform during the Royalty Term,
including without limitation clinical and pre-clinical development,
coordination and execution services, sales and marketing services,
commercialization services, and similar services. Columbia shall allow and
grant PharmaBio the right to provide such services if PharmaBio agrees to
provide such services on competitive terms and conditions.
4.2 If at any time during the Royalty Term, Columbia elects to outsource or
otherwise engage a service provider to perform sales and marketing
services, commercialization services, or similar services for its product
known as testosterone progressive hydration buccal, Columbia will not grant
a third party the right to provide such services without first offering and
giving PharmaBio and its Affiliates the opportunity to obtain such right
and attempting in good faith for a period of at least thirty (30) days to
reach an agreement between the parties for PharmaBio or an Affiliate to
obtain such right.
5.0 Independent Contractor Relationship.
For the purposes of this Agreement, Columbia and PharmaBio are independent
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contractors and nothing contained in this Agreement shall be construed to
place them in the relationship of partners, principal and agent, employer
and employee or joint venturers. Neither Columbia nor PharmaBio shall
have the power or right to bind or obligate the other party, nor shall
either party hold itself out as having such authority.
6.0 Termination.
6.1 Columbia may terminate this Agreement for material breach upon sixty (60)
days written notice specifying the nature of the breach, if such breach
(i) has not been substantially cured within the sixty (60) day period or
(ii) is not curable within such 60-day period and the breaching party has
not commenced and diligently continued during such 60-day period
reasonable actions to cure such breach. During the 60-day cure period for
termination due to breach, each party will continue to perform its
obligations under this Agreement. Any termination under this Section 5
shall be without prejudice to any claims for damages or other relief by
Columbia.
6.2 This Agreement shall terminate upon the payment by Columbia to PharmaBio
of the Maximum Royalty Commitment.
7.0 Indemnification and Liability Limits.
7.1 PharmaBio shall indemnify, defend and hold harmless Columbia, its
Affiliates and its and their respective directors, officers, employees
and agents from and against any and all losses, claims, actions, damages,
liabilities, penalties, costs and expenses (including reasonable
attorneys' fees and court costs) (collectively, "Losses"), resulting from
any: (i) breach by PharmaBio (or its employees) of its obligations
hereunder; (ii) willful misconduct or grossly negligent acts or omissions
of PharmaBio or its employees; and (iii) violation by PharmaBio or its
employees of any municipal, county, state or federal laws, rules or
regulations applicable to the performance of PharmaBio's obligations
under this Agreement; except, in each case, to the extent such Losses are
determined to have resulted from the gross negligence or willful
misconduct of Columbia or its employees.
7.2 Columbia shall indemnify, defend and hold harmless PharmaBio, its
Affiliates and its and their respective directors, officers, employees
and agents from and against any and all Losses resulting from any: (i)
third party claim arising from the manufacture, storage, handling,
packaging, labeling, production, transportation, distribution, marketing,
testing, use, sale or other disposition of the Products; (ii) breach by
Columbia (or its employees) of its obligations hereunder; (iii) willful
misconduct or grossly negligent acts or omissions of Columbia or its
employees; and (iv) violation by Columbia or its employees of any
municipal, county, state or federal laws, rules or regulations applicable
to the performance of Columbia' obligations under this Agreement, except,
in each case, to the extent such Losses are determined to have resulted
from the gross negligence or willful misconduct of PharmaBio or its
employees.
7.3 In the event of a third party claim or lawsuit, the party seeking
indemnification hereunder (the "Indemnified Party") shall give the party
obligated to indemnify (the "Indemnifying
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Party") prompt written notice of any claim or lawsuit (including a copy
thereof), provided that the failure of an Indemnified Party to notify the
Indemnifying Party on a timely basis will not relieve the Indemnifying
Party of any liability that it may have to the Indemnified Party unless
the Indemnifying Party demonstrates that the defense of such action is
materially prejudiced by the Indemnified Party's failure to give such
notice. The Indemnified Party and its employees shall fully cooperate
with Indemnifying Party and its legal representatives in the
investigation and defense of any matter the subject of indemnification,
which defense shall be managed by the Indemnifying Party in a manner,
including the selection of legal counsel, reasonably acceptable to the
Indemnified Party. The Indemnified Party shall not unreasonably withhold
its approval of the settlement of any such claim, liability, or action by
Indemnifying Party covered by this indemnification provision; provided
that such settlement does not include an admission or acknowledgement of
liability or fault of the Indemnified Party.
7.4 Neither PharmaBio nor Columbia, nor any of such party's Affiliates,
directors, officers, employees, subcontractors or agents shall have,
under any legal theory (including, but not limited to, contract,
negligence and tort liability), any liability to any other party hereto
for any loss of profits, opportunity or goodwill, or any type of special,
incidental, indirect or consequential damage or loss, in connection with
or arising out of this Agreement. For the avoidance of doubt, a claim by
PharmaBio for royalties on Net Sales payable by Columbia hereunder or a
claim by Columbia for payments pursuant to Section 2.1 shall not be
limited in any way pursuant to the provisions set forth in the preceding
sentence.
8.0 Notices.
Any notice required to be given by either party shall be in writing. All
notices shall be to the parties and addresses listed below, and shall be
deemed sufficiently given (i) when received, if delivered personally or
sent by facsimile transmission with confirmed receipt, or (ii) one
business day after the date mailed by first class mail or sent by an
internationally recognized overnight delivery service with charges
prepaid.
If to PharmaBio: PharmaBio Development Inc.
4709 Creekstone Drive
Suite 200, Riverbirch Building
Durham, NC 27703
Attention: President
Fax: 919-998-2090
With a copy to: PharmaBio Development Inc.
4709 Creekstone Drive
Suite 200, Riverbirch Building
Durham, NC 27703
Attention: General Counsel
Fax: 919-998-2090
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If to Columbia: Columbia Laboratories, Inc.
220 South Orange Avenue
Livingston, NJ 07039
Attention: President
Fax 973-994-3001
With a copy to: Columbia Laboratories, Inc.
220 South Orange Avenue
Livingston, NJ 07039
Attention: General Counsel
Fax 973-994-3001
9.0 Assignment.
No party may assign any of its rights or obligations under this
Agreement to any third party other than an Affiliate without the
written consent of the other party, except that Columbia may assign its
rights or obligations under this Agreement with respect to Advantage-S
or RepHresh to a bona fide third party that acquires all of Columbia's
business with respect to Advantage-S or RepHresh provided that such
party assumes all of Columbia's applicable rights and obligations under
this Agreement in form and substance reasonably satisfactory to
PharmaBio; provided, however, that Columbia may not in any event assign
its minimum payment obligations under Section 2.2 hereof. PharmaBio may
at any time assign or transfer any of its rights or obligations under
this Agreement to an Affiliate. Nothing in this Section 8.0 shall
preclude the transfer of a party's rights and obligations under this
Agreement in conjunction with a merger in which such party is not the
surviving entity. Any attempted assignment in violation of this Section
shall be null and void.
10.0 General Provisions.
10.1 Sections 2.1, 2.2, 2.5, 3.0, 7.0, 9.0, 10.0 and 11.0 shall survive the
termination of this Agreement for any reason.
10.2 This Agreement contains the entire understanding of the parties with
respect to the subject matter herein and cancels all previous
agreements (oral and written), negotiations and discussions dealing
with the same subject matter. The parties, from time to time during the
term of this Agreement, may modify any of the provisions hereof only by
an instrument in writing duly executed by the parties.
10.3 No failure or delay on the part of a party in either exercising or
enforcing any right under this Agreement will operate as a waiver of,
or impair, any such right. No single or partial exercise or enforcement
of any such right will preclude any other or further exercise or
enforcement thereof or the exercise or enforcement of any other right.
No waiver of any such right will have effect unless given in a signed
writing. No waiver of any such right will be deemed a waiver of any
other right. The rights and remedies set forth in this Agreement are
cumulative and not exclusive of any rights or remedies provided by law
or
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otherwise. Termination of this Agreement by a party shall not affect
any other rights or remedies which may be available to such party
against a defaulting party.
10.4 If any part or parts of this Agreement are held to be illegal, void or
ineffective, the remaining portions of this Agreement shall remain in
full force and effect. If any of the terms or provisions are in
conflict with any applicable statute or rule of law, then such term(s)
or provision(s) shall be deemed inoperative to the extent that they may
conflict therewith, and shall be deemed to be modified or conformed
with such statute or rule of law. In the event of any ambiguity
respecting any term or terms hereof, the parties agree to construe and
interpret such ambiguity in good faith in such a way as is appropriate
to ensure its enforceability and viability.
10.5 The headings contained in this Agreement are used only as a matter of
convenience, and in no way define, limit, construe or describe the
scope or intent of any section of this Agreement.
10.6 Each party represents and warrants to the other that the individual
signing below for such party is authorized and empowered to bind such
party to the terms of this Agreement.
10.7 Neither party shall be liable to the other for delay or failure in the
performance of the obligations on its part contained in this Agreement
(other than payment obligations) if and to the extent that such failure
or deal is due to circumstances beyond its control ("Force Majeure")
which it could not have avoided by the exercise of reasonable diligence
including but no limited to: act of God; war or insurrection; civil
commotion; destruction of essential facilities or materials by
earthquake, fire, flood or storm; labor disturbance (whether or not any
such labor disturbance is within the power of the affected party to
settle); epidemic; or other similar event; provided, however, that the
party so affected shall notify the other party promptly should such
circumstances arise, giving an indication of the likely extent and
duration thereof, and shall use all commercially reasonable efforts to
avoid, remove or alleviate such causes of non-performance and shall
resume performance of its obligations hereunder with the utmost
dispatch whenever such causes are removed. In the event of force
majeure lasting more than three (3) months, the parties agree to meet
and discuss how this Agreement can be justly and fairly implemented
under the circumstances.
11.0 Dispute Resolution:
11.1 Governing Law. This Agreement, including, without limitation, the
interpretation, performance, enforcement, breach or termination thereof
and any remedies relating thereto, shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of
America, as applied to agreements executed and performed entirely in
the State of Delaware, without regard to conflicts of law rules.
11.2 Internal Review. In the event that a dispute, difference, claim,
action, demand, request, investigation, controversy, threat, or request
for testimony or information or other question arises pertaining to any
matters which arise under, out of, in connection with, or
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in relation to this Agreement (a "Dispute") and either party so
requests in writing, prior to the initiation of any formal legal
action, the Dispute will be submitted to the Chief Executive Officers
of Columbia and PharmaBio. For all Disputes referred to the Chief
Executive Officers, the Chief Executive Officers shall use their good
faith efforts to meet at least two times in person and to resolve the
Dispute within ten (10) days after such referral.
11.3 Arbitration.
(a) If the parties are unable to resolve any Dispute under Section
10.2, then either party may by election within ten (10) days
after the end of the period set forth in Section 10.2, require
the matter to be settled by final and binding arbitration by
sending written notice of such election to the other party
clearly marked "Arbitration Demand". Thereupon such Dispute
shall be arbitrated in accordance with the terms and
conditions of this Section 10.3. Notwithstanding the
foregoing, either party may apply to a court of competent
jurisdiction for a temporary restraining order, a preliminary
injunction, or other equitable relief to preserve the status
quo or prevent irreparable harm.
(b) The arbitration panel will be composed of three arbitrators,
one of whom will be chosen by Columbia, one by PharmaBio, and
the third by the two so chosen. If both or either of Columbia
or PharmaBio fails to choose an arbitrator or arbitrators
within fourteen (14) days after receiving notice of
commencement of arbitration, or if the two arbitrators fail to
choose a third arbitrator within fourteen (14) days after
their appointment, the American Arbitration Association shall,
upon the request of both or either of the parties to the
arbitration, appoint the arbitrator or arbitrators required to
complete the panel. The arbitrators shall have reasonable
experience in the matter under dispute. The decision of the
arbitrators shall be final and binding on the parties, and
specific performance giving effect to the decision of the
arbitrators may be ordered by any court of competent
jurisdiction.
(c) Nothing contained herein shall operate to prevent either party
from asserting counterclaim(s) in any arbitration commenced in
accordance with this agreement, and any such party need not
comply with the procedural provisions of this Section 10.3 in
order to assert such counterclaim(s).
(d) The arbitration shall be filed with the office of the American
Arbitration Association ("AAA") located in Delaware or such
other AAA office as the parties may agree upon (without any
obligation to so agree). The arbitration shall be conducted
pursuant to the Commercial Arbitration Rules of AAA as in
effect at the time of the arbitration hearing, such
arbitration to be completed in a sixty (60) day period. In
addition, the following rules and procedures shall apply to
the arbitration:
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(i) The arbitrators shall have the sole authority to
decide whether or not any Dispute between the parties
is arbitrable and whether the party presenting the
issues to be arbitrated has satisfied the conditions
precedent to such party's right to commence
arbitration as required by this Section 10.3.
(ii) The decision of the arbitrators, which shall be in
writing and state the findings the facts and
conclusions of law upon which the decision is based,
shall be final and binding upon the parties, who
shall forthwith comply after receipt thereof.
Judgment upon the award rendered by the arbitrator
may be entered by any competent court. Each party
submits itself to the jurisdiction of any such court,
but only for the entry and enforcement to judgment
with respect to the decision of the arbitrators
hereunder.
(iii) The arbitrators shall have the power to grant all
legal and equitable remedies (including, without
limitation, specific performance) and award
compensatory damages provided by applicable law, but
shall not have the power or authority to award
punitive damages. No party shall seek punitive
damages in relation to any matter under, arising out
of, or in connection with or relating to this
Agreement in any other forum.
(iv) The parties shall bear their own costs in preparing
for and participating in the resolution of any
Dispute pursuant to this Section 10.3, and the costs
of the arbitrator(s) shall be equally divided between
the parties; provided, however, that each party shall
bear the costs incurred in connection with any
Dispute brought by such party that the arbitrators
determine to have been brought in bad faith.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto through their duly authorized officers as of the date first set forth
above.
PHARMABIO DEVELOPMENT INC. COLUMBIA LABORATORIES, INC.
By: /S/ Ronald J. Wooten By: /S/ Fred Wilkinson
---------------------------- ------------------------
Name: Ronald J. Wooten Name: Fred Wilkinson
---------------------------- ------------------------
Title: President Title: President & CEO
---------------------------- ------------------------
7/31/02 7/31/02
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