EXHIBIT 10.22
REPLENS PURCHASE AND LICENSE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of April, 2000,
by and between COLUMBIA LABORATORIES, INC., a Delaware corporation having its
principal place of business at 2875 N.E. 191 St., Suite 400, Aventura, Florida
33180 ("Seller"), and LIL' DRUG STORE PRODUCTS, INC., an Iowa corporation with
its principal place of business at 1201 Continental Place NE, Cedar Rapids, Iowa
("Buyer").
RECITALS
WHEREAS, Seller is the owner of certain Technology, Patents and
Trademarks (as hereinafter defined); and
WHEREAS, Seller desires to sell and license to Buyer, and Buyer desires
to purchase and license from Seller, certain Technology, Patents and Trademarks
for the Product (as hereinafter defined) in the Territory (as hereinafter
defined) on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms (except as
otherwise expressly provided or unless the context otherwise requires)
shall have the respective meanings set forth below (it being understood
that the terms defined in this Agreement shall include the singular
number in the plural and the plural number in the singular):
(a) "Affiliate" means any corporation or the business entity that
either directly or indirectly controls a party to this
Agreement, is controlled by such party, or is under common
control of such party. As used herein, the term "controlling"
means possession of the power to direct or cause the direction
of the management and policies of a corporation or other
entity, whether through the ownership of voting securities, by
contract or otherwise.
(b) "Buyer Transaction Documents" means this Agreement and all
other agreements or documents to be executed and delivered by
Buyer pursuant to the requirements of this Agreement.
(c) "cGMP" means current good manufacturing practice regulations
promulgated by the Federal Drug Administration ("FDA") and
other regulatory agencies.
(d) "Columbia Patents" means the bioadhesive composition and
method of treatment patent, U.S. Patent
No. 4,615,697 and the vaginal tissue moisturizing composition
and method patent, U.S. Patent No. 5,474,768, and any and all
patents issued pursuant thereto that are now used in
connection with the Product.
(e) "Deferred Revenue" means the aggregate amount, as of the
Closing Date (defined below), billed or received by Seller for
the sale of the Product, the delivery of which will occur on
or after the Closing Date.
(f) "Design Patents" means U.S. Design Patent Nos. 345,211 and
375,352, and any and all patents issued pursuant thereto that
are now used in connection with the Product.
(g) "Encumbrance" means any encumbrance, security interest,
mortgage, lien, pledge, claim, lease, right of first refusal,
option, restrictive covenant, charge or other restriction or
third party rights.
(h) "Field" means products that are promoted or marketed primarily
as a vaginal moisturizer or vaginal lubricant. The Field does
not include other products containing polycarbophil that are
promoted or marketed primarily for a purpose outside the
Field, but that may claim a side benefit of also being a
vaginal moisturizer or lubricant.
(i) "Governmental Body" means any United States or other national,
state, municipal or local government, domestic or foreign, any
subdivision, agency, entity, commission or authority thereof,
or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or
quasi-governmental authority.
(j) "Intellectual Property Rights" means trade secrets,
trademarks, trade names, logos, trade dress, graphics, designs
and copyrights.
(k) "Net Sales" means the aggregate equivalent of gross sales
received by Buyer, its Affiliates or sublicensees from or on
account of the sale of the Product to non-affiliated third
parties on which payments are due under this Agreement, less
(i) credits or allowances, if any, actually granted on account
of cash or trade discounts,
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recalls, rebates, rejection or return of the Product
previously sold, and (ii) excises, sales taxes, value added
taxes, consumptions taxes, duties or other taxes imposed upon
and paid with respect to such sales (excluding income or
franchise taxes of any kind). Net Sales shall not include any
transfer between Buyer and any of its Affiliates or
sublicensees for resale. No transfer of the Product for test
or development purposes or as free samples shall be considered
a sale hereunder for accounting and payment purposes. Net
Sales shall be determined in accordance with generally
accepted accounting principles ("GAAP").
(l) "Product" means the current formulation of Replens(R) brand
vaginal moisturizer or lubricant and any and all improvements,
reformulations or advances to such formulation in the Field.
(m) "Replens Patent" means the tissue moisturizing composition and
method patent, U.S. Patent No. 5,968,500, and any and all
patents issued pursuant thereto that are now used in
connection with the Product.
(n) "Seller Transaction Documents" means this Agreement and all
other agreements or documents to be executed by Seller
pursuant to the requirements of this Agreement.
(o) "Transaction Documents" means the Buyer Transaction Documents
and the Seller Transaction Documents, collectively.
(p) "Technology" means all pharmacological, toxicological,
preclinical, clinical, technical and other information, data
and analysis and know-how relating exclusively to the
registration, manufacture, packaging, use, marketing and sale
of the Product (including, without limitation, all words
copyrighted by Seller) and all proprietary rights relating
thereto owned by Seller or its Affiliates or to which Seller
or its Affiliates has rights so as to be able to license,
whether prior to or after the Closing Date, and relating or
pertaining exclusively to the Product. Technology shall also
include all improvements thereto from time to time developed
or otherwise acquired by Seller as to which Seller has rights
so as to be able to license such improvements.
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(q) "Territory" means the United States of America and its
territories.
(r) "Trademark" means the trademark "Replens" (Reg. No.
1,591,663).
(s) "Unit" means a single package of the Product, whether a three
count, eight count, tube or other configuration.
2. TRANSFERRED ASSETS. On the Closing Date (as hereinafter defined), Buyer
agrees to acquire from Seller and Seller agrees to convey, transfer and
deliver to Buyer, free and clear of all Encumbrances, the Technology
and Trademarks (the "Transferred Assets"), and fully paid, royalty
free, transferable, perpetual, non-exclusive licenses of the Columbia
Patents and the Design Patents in the Territory, with such licenses to
be exclusive as to the Field (the "CP License" and the "Design
License," respectively) to manufacture, produce, market, modify, sell,
license or otherwise distribute the Product. The Transferred Assets
include, but are not limited to:
(a) All tangible and intangible assets used by Seller exclusively
in
(i) research and development pertaining to the Product;
(ii) the design of the Product and of different versions
and packaging of the Product;
(iii) manufacture and reproduction of the Product and
packaging;
(iv) modification of the Product; and
(v) marketing and distribution of the Product,
including all customer lists, manufacturing and sales contracts and
quotations (including any open customer purchase orders), advertising
and marketing material, including all sales collateral, sampling list,
art work, web-sites, existing and under development, Product samples,
manufacturing molds, trade names, clinical studies, customer
support/inquiry material, historical production records, stability
records, formulation information, records and all other relevant
property.
(b) Ongoing support by Seller of Buyer's activities as discussed
further herein, including without limitation regarding the
following:
(i) assistance during transition after closing, pursuant
to Section 6(a) of this Agreement;
(ii) coordination and sourcing of production of the
Product, pursuant to Section 6(b) of this Agreement;
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(iii) potential cross-branding of the Product with Seller's
other products, pursuant to Section 6(d);
(iv) future Product line extensions, pursuant to Section
6(e);
(v) research and development for the Product line,
pursuant to Section 6(e); and
(vi) handling and advice regarding regulatory matters,
pursuant to Section 6(e).
This transaction also includes a transferable, non-exclusive license of
the Replens Patent, with such license to be exclusive as to the Field (the "RP
License") in the Territory to manufacture, produce, market, modify, sell,
license or otherwise distribute the Product, for which Buyer shall pay Seller
the License Fees described in Section 3 below.
It is agreed that except as set out expressly herein, Buyer is not
assuming and shall not be liable for any debt, liability or obligation of Seller
whatsoever, whether existing or contingent, direct or indirect, known or
unknown. Without in any way limiting the generality of the foregoing, Buyer
shall have no obligations with respect to any of the following liabilities:
(vii) Any liabilities of Seller occurring prior to the
Closing Date under contracts, permits or licenses;
(viii) Any liabilities and/or obligations of Seller with
respect to wages and salaries, bonuses, vacation pay,
commissions, overtime, benefits, entitlement to
severance whenever arising or occurring, with respect
to any employees of Seller;
(ix) Any liabilities with respect to injury to or death of
persons or damage to or destruction of property not
constituting part of the Transferred Assets,
including product liability claims and workers
compensation claims arising out of the conduct of
Seller prior to Closing, regardless of when said
liability is asserted, including any liability for
consequential or punitive damages in connection with
the foregoing;
(x) Any liabilities for taxes payable by Seller;
(xi) Any trade or accounts payable, notes payable, loans,
or other indebtedness or
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obligations to make payments relating to the
Transferred Assets.
3. CONSIDERATION. In consideration for the Transferred Assets and the
Design License, Seller's express obligations hereunder, including but
not limited to, Seller's obligations set out in Section 6 below, and
any other rights granted to Buyer hereunder, Buyer shall pay to Seller
the sum of $4,400,000 in cash at the Closing (as defined below), less
any Deferred Revenue. In addition, in consideration for the CP License,
Buyer shall pay to Seller the sum of $100,000 in cash at the Closing,
and shall pay Seller, as consideration for the RP License, 10% of the
Net Sales of the Product ("License Fees") from the Closing Date forward
until such time as Buyer has paid Seller a total amount (the cash
consideration paid at Closing and the License Fees paid) of $6,500,000
(calculated on a net present value basis assuming a 10% annual discount
rate). Buyer may, in its sole discretion, pay all or any portion of the
balance of the consideration described above at any time. Buyer shall
pay Seller the License Fees for the first two (2) months within thirty
(30) days after the end of the second month following the Closing, and
thereafter on a monthly basis within thirty (30) days after the close
of each month. Each payment of the percent of Net Sales shall be
accompanied by documentation evidencing the Net Sales for the previous
period. At such time as Buyer shall have paid Seller the full amount of
the consideration described above, Seller shall grant Buyer a
perpetual, fully paid, royalty free, transferrable, non-exclusive
license of the Replens Patents, with such license to be exclusive as to
the Field.
4. CLOSING.
(a) CLOSING DATE. The transaction which is the subject of this Agreement
shall be closed on or before May 5, 2000 ("Closing" and/or "Closing Date"), at
the offices of Bradley & Riley PC, 2007 1st Avenue SE, Cedar Rapids, Iowa 52402,
or at such time and place as the parties shall agree.
(b) DELIVERIES BY SELLER. At the Closing, Seller shall deliver the
Transferred Assets and the CP License to Buyer by a Bill of Sale in the form
acceptable to Seller and Buyer, appropriate assignment(s) of the Trademark, and
any other documents reasonably necessary to complete this transaction.
(c) DELIVERIES BY BUYER. At Closing, Buyer shall deliver to Seller the
cash consideration described in Section 3 above.
5. INVENTORY. In addition to the consideration set out in Section 3 above,
Buyer agrees to purchase from Seller up to $500,000 worth of usable
Product inventory (samples and Product prepared for sale, but excluding
Replens 3) on an as needed basis during the six (6) month period
beginning after the Closing Date. Buyer agrees to purchase from Seller
inventory of the Replens 3 Product on an as needed basis. The Product
inventory to be purchased by Buyer shall be selected by Buyer in its
sole discretion. Initially, Buyer intends to use Seller's current
outsource distribution partner, Redford Distributing, in Redford,
Michigan. Buyer shall be responsible for the distribution/shipping fees
for inventory shipped out of the Redford facility; provided,
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however, if, within ninety (90) days after the Closing Date, Buyer
elects to move the Product inventory to a Buyer designated warehouse
for fulfillment, Seller and Buyer each shall bear one-half (1/2) of the
costs of transportation of such Product inventory to such warehouse.
The parties agree to work together in connection with the distribution
and sale of such Inventory because the Inventory lists Seller as the
manufacturer and provides Seller's 800 number for customer support.
Buyer shall pay Seller for the Product inventory purchased within the
first two (2) months after the Closing within thirty (30) days after
the end of such second month following the Closing and thereafter on a
monthly basis within thirty (30) days after the close of each month in
which Buyer purchases Product inventory from Seller.
6. CONDUCT AFTER CLOSING.
(a) From and after the Closing Date, Seller will reasonably make
available to Buyer all staff necessary to support the
transition of the Product and the manufacturing and
distribution of same, with such staff to include, but not be
limited to, the Director of Sales, the Vice President of
Research and Development, the Corporate Controller, and the
Chairman and CEO. The parties anticipate the transition period
will last at least ninety (90) days, and both Buyer and Seller
agree to use their best efforts in the transition.
(b) Seller will continue to coordinate the production of the
Product and act as a centralized sourcing point for same to
insure Buyer does not face capacity restrictions in the
manufacturing of the Product. Seller will designate an
individual with Seller to work with Buyer on all supply
matters. Buyer shall reimburse Seller for its costs of the
Product (bill of materials multiplied by the amount of the
Product, plus necessary freight/transportation charges) in
U.S. dollars promptly upon Buyer's receipt and reasonable
inspection of the Product. Seller will promptly notify Buyer
of any increase in the cost of the Product or the
freight/transportation charges. Seller and Buyer agree to work
together to secure all necessary contracts to protect the
supply of the Product and will work together to explore and
qualify more cost effective methods of manufacture for
producing the Product. Seller will, at Buyer's request,
promote the manufacture of the Product in all facilities that
Seller qualifies for production of its other current and
future gel based products (Advantage S, Crinone, etc.). Seller
will reasonably conduct its remaining business in such a way
as not to interfere with the production of the Product by
Buyer.
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(c) Seller shall not sell or license for sale in the Territory any
product in the Field, nor invest in, consult with, or in any
manner assist any other person or entity to do same. Seller
represents that as of the date hereof, it has not entered into
any arrangement that would contravene the intentions of this
paragraph.
(d) As of the Closing, Seller will not use the Trademark in the
Territory on any exterior packaging or tubes or in any other
manner that cross-brands the Product with any other products;
provided, however, Seller may continue to market and sell the
March production run of 100,000 Advantage S boxes and tubes
that contain the Product name and the April production run of
Advantage S with the Product name on the tube only.
Notwithstanding the provisions hereof, at the expiration of
six (6) months from the Closing, Seller shall stop selling all
of its products that contain the Product name, whether on
exterior packaging or on the product itself. At Buyer's
request, Seller shall consider whether to cross-brand the
Product with Seller's other products, on terms reasonably
acceptable to both Buyer and Seller.
(e) Seller intends to work with Buyer on any future Product line
extension and all research and development efforts for the
Product line, at Buyer's request and at Buyer's cost, on terms
and conditions to be agreed upon prior to such efforts. Seller
shall also furnish such additional assistance as Buyer may
reasonably request in connection with any regulatory
compliance regarding the manufacture, marketing or sale of the
Product in the Territory. Seller shall, at Buyer's request and
at Buyer's cost, with respect to such regulatory matters, (i)
act as liaison with the FDA or other governmental authority;
(ii) prepare and make all submissions regarding the regulatory
matter; (iii) monitor all studies pertinent to the regulatory
matter; and (iv) obtain regulatory approvals as reasonably
deemed necessary by Seller and Buyer.
(f) Seller shall be responsible for any returns of the Product
sold and shipped by Seller prior to the Closing Date
("Returns"). Buyer shall be entitled to a credit against the
amount owed for License Fees pursuant to Section 3 above equal
to the gross margin (net wholesale price less cost of goods
sold) on such Returns, or equal to the amount of any refund
paid by Buyer for any returns of
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damaged Product. Damaged Product shall include, but is not
limited to, Product with a retailer's inventory or pricing
marking affixed. Notwithstanding the above, if Buyer sells any
damaged Product after receiving a credit for such damaged
Product, Buyer shall pay Seller of the Net Sales of such
damaged Product, less any out-of-pocket expenses incurred by
Buyer in such sale.
(g) To the extent Buyer, in its reasonable judgment, is required
to honor any documented customer commitment, Seller will
promptly reimburse Buyer for such commitment. Buyer shall
provide Seller with all necessary financial records to verify
such commitment. A documented customer commitment shall mean
any written documentation related to financial or
non-financial customer or broker commitments made by Seller
related to the Products. Commitments may include customer or
broker rebates, deductions, credits, allowances, promotional
guarantees, bill backs and SPIFFS. Such documented customer
commitments must clearly indicate that Seller and/or its
representatives agreed to such commitment. If a customer or
broker commitment is undocumented, Buyer and Seller agree to
review such alleged commitment and, subject to Seller's
approval, which approval shall not be unreasonably withheld,
Seller will promptly reimburse Buyer for any commitment Buyer
makes to honor such undocumented customer or broker
commitment.
7. SELLER REPRESENTATIONS AND WARRANTIES. Seller represents and warrants
to Buyer as follows:
(a) Seller is a corporation duly organized, existing and in good
standing under the laws of Bermuda, with full right, power and
authority to enter into and perform this Agreement and to
grant all of the rights, powers and authorities herein
granted.
(b) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which
Seller is a party, or Seller's articles of incorporation or
bylaws.
(c) All manufacturing, production, marketing and sales agreements
that are assigned hereby related to the Product are assignable
to Buyer.
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(d) This Agreement has been duly executed and delivered by Seller
and is a legal, valid and binding obligation enforceable
against Seller in accordance with its terms.
(e) Seller shall comply with all applicable laws, consent decrees
and regulations of any federal, state or other governmental
authority in performing this Agreement.
(f) Seller knows of no issued or pending patents, trademarks or
patent or trademark applications relating to the Product that
would prevent Buyer from using or selling the Product in the
Territory.
(g) As of the Effective Date, there are no outstanding, pending or
threatened violations, notice of noncompliance, warning
letters, orders, injunctions, judgments or decrees of any
court or government agency, investigations, claims, actions,
suits, demands, administrative or other proceedings that have
resulted or might result in the revocation, suspension or
modification of any regulatory approval for the Product in the
Territory.
(h) Seller ceased, as of March 13, 2000, all further sales of the
Products to Quality King.
(i) Seller has conducted the sales of the Product consistent with
its past practices and in the ordinary course of business from
January 1, 2000 through the Closing Date.
(j) Seller is the sole and exclusive legal and equitable owner of
the Transferred Assets, the Columbia Patents and the Replens
Patent (and has good title to the tangible Transferred Assets)
free and clear of any Encumbrances, other than certain royalty
or other payments due from Seller to third parties in
connection with the Columbia Patents and/or the Replens
Patent. At Closing, Buyer shall acquire all of Seller's right,
title and interest in the Transferred Assets, free and clear
of all Encumbrances. Except for ordinary wear and tear, the
Transferred Assets are in good operating condition and repair,
free of known defects affecting operation, and are adequate
and fit for the uses for which they are presently intended or
being used. Seller has the right to transfer or license the
Replens Patents, the Bioadhesive Patents and the Intellectual
Property and no consent on the part of any other person
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or entity is necessary to validate the transfer to Buyer of
the Transferred Assets or the license to Buyer of the CP
License or the RP License.
(k) All customer lists and all other information, reports and data
made available or provided to Buyer by Seller are, in all
material respects, true, correct and accurate as of the date
provided or made available, as of the date of this Agreement,
and as of the date of Closing. Seller has no knowledge of any
intent of any such customer to modify or terminate its account
or any of its outstanding orders.
(l) There is no action, suit, investigation, claim, arbitration or
litigation pending or, to Seller's knowledge, threatened,
against or involving the Transferred Assets or the propriety
of this Agreement or any of the transactions contemplated
hereby, at law or in equity, or before or by any court,
arbitrator or governmental authority, and Seller is not
operating under or subject to any order, judgment, decree,
license or injunction of any court, arbitrator or governmental
authority. No governmental agency or authority has at any time
challenged, questioned, or commenced or given notice of
intention to commence any investigation relating to, the legal
right of Seller to conduct the operations of its business as
it relates to the Product. Seller, and to Seller's knowledge
each of its contract manufacturers in connection with the
Product, has complied, and is in compliance, in all material
respects with all laws, ordinances, regulations, awards,
orders, judgments, decrees and injunctions applicable to the
Transferred Assets, including all federal, state and local
laws, ordinances, regulations and orders pertaining to
employment or labor, safety, health, environmental protection,
zoning and other matters. Seller has obtained and holds all
permits, licenses and approvals (none of which has been
modified or rescinded and all of which are in full force and
effect) from all governmental authorities as they relate to
the Product necessary in order to conduct its business and
operations as presently conducted as it relates to the Product
and to own, use and maintain the Transferred Assets, and has
paid all regulatory fees and assessments attributable to
Seller's business operations involving the Transferred Assets
that are due or accrue prior to the Closing Date.
(m) All historical sales, costs of goods sold and operating
expenses are substantially accurate and properly
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classified on Seller's financial statements and on any other
written information provided to Buyer by Seller in connection
with this transaction.
(n) Seller's inventory of the Product at its outsource
distribution partner's location in Redford, Michigan (other
than its supply of Replens tubes) is sufficient to handle
normal and customary sales of the Product after the Closing
and represents at least a normal and customary three (3) month
supply of the Product.
8. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to Seller as follows:
(a) Buyer is a corporation duly organized, existing and in good
standing under the laws of the State of Iowa, U.S.A., with
full right, power and authority to enter into and perform this
Agreement.
(b) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which
Buyer is a party, or Buyer's articles of organization or
bylaws.
(c) This Agreement has been duly executed and delivered by Buyer
and is a legal, valid and binding obligation enforceable
against Buyer in accordance with its terms.
(d) Buyer shall comply with all applicable laws, consent decrees
and regulations of any federal, state or other governmental
authority in performing this Agreement.
(e) Buyer will actively market and sell the Product in the
Territory, which may include use of samples, national media
marketing plans, co-op advertising, trade shows, etc. Buyer
will also timely provide quarterly sales and other marketing
information usable to Seller in monitoring sales progress.
Buyer will also maintain a qualified national force to
sell/promote the Product.
(f) Buyer has or shall take all corporate action to effectuate the
transactions contemplated by this Agreement and any other
agreement or document executed in connection with this
Agreement.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All obligations of Buyer
to proceed with the Closing are subject to the fulfillment or waiver of
each of the following conditions at or prior to Closing:
(a) Each and every representation and warranty of Seller shall be
true and correct in all material respects when made and at the
Closing.
(b) Seller shall have performed and complied in all material
respects with all covenants and conditions required by this
Agreement to be performed or complied with by it prior to or
at the Closing.
(c) Any and all Encumbrances against the Transferred Assets shall
have been released and any and all required consents shall
have been obtained.
(d) All items to be delivered by Seller pursuant to Section 4 have
been delivered.
If any of the conditions set forth in this Section 9 have not been fulfilled as
of the Closing, Buyer may, at its option, by written notice to Seller, render
its obligations hereunder null and void. By proceeding with the Closing, and
unless otherwise agreed in writing, Buyer shall be conclusively deemed to have
accepted or waived fulfillment of all of said conditions, but shall not be
deemed to have waived the requirement that the representations and warranties of
Seller shall survive the Closing.
10. COVENANTS AND AGREEMENTS OF SELLER.
(a) NEGATIVE COVENANTS. Seller further represents, covenants and
agrees that it will not do or agree to do any of the following
between the date of this Agreement and the Closing:
(i) Sell, assign, lease or otherwise transfer or dispose
of any of the Transferred Assets.
(ii) Create, incur or permit any Encumbrance of any kind
on the Transferred Assets now owned or hereafter
acquired.
(iii) Enter into, engage in, or become a party to, directly
or indirectly, any transaction with respect to the
Transferred Assets other than in the ordinary course
of business consistent with past practice.
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(iv) Perform or omit to perform any act, which act or
omission would cause Seller's warranties and
representations in this Agreement to be untrue.
(b) AFFIRMATIVE COVENANTS. Seller further represents, covenants
and agrees that between the date of this Agreement and the
Closing it will:
(i) Provide Buyer and its representatives with full
access during normal business hours to all of the
properties, contracts, records, books, and accounts
relating to the Transferred Assets and furnish Buyer
and its representatives with such information
relative to the Transferred Assets as Buyer or its
representatives shall at any time, or from time to
time, reasonably request.
(ii) Maintain its existing franchises and licenses
relating to the Product, use its best efforts to
preserve for Buyer relationships with suppliers,
customers and others having business relations with
Seller relating to the Product, and keep all
Transferred Assets in their present condition,
ordinary wear and tear excepted.
(iii) Maintain its books and records in the usual, regular
and ordinary manner on a basis consistent with prior
years, as they relate to the Product.
(iv) Subject to the terms and conditions of this
Agreement, carry on the businesses and activities as
they relate to the Product in the usual and ordinary
course of business consistent with the past business
practices.
(v) Maintain the validity of all permits and approvals
relating to the Product and comply in all respects
with all laws, rules, regulations and orders of any
Governmental Body relating to the Product.
(vi) Take all corporate action necessary to effectuate the
transactions contemplated by this Agreement and any
other agreement or document executed in connection
with this Agreement.
(vii) Upon receiving notice or otherwise
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becoming aware of any violation under any statutes,
rules, regulations or laws relating to the Product,
promptly notify Buyer and, at Seller's discretion and
expense, cure all such violations prior to the
Closing Date.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of Seller
to proceed with the Closing is subject to the fulfillment or waiver of
each of the following conditions at or prior to Closing:
(a) Each and every representation and warranty of Buyer contained
in the Buyer Transaction Documents shall be true and correct
in all respects when made and at the Closing.
(b) Buyer shall have performed and complied in all material
respects with all covenants and conditions required by this
Agreement to be performed or complied with by it prior to or
at Closing.
(c) No suit or action by any party or any investigation, inquiry
or proceeding by any governmental authority or any legal or
administrative proceeding that would have or be likely to have
a material adverse effect on any of the Transferred Assets or
on the business to be conducted by Buyer with the Transferred
Assets following the Closing shall have been instituted or
threatened on or before the Closing that:
(i) questions the validity or legality of this Agreement
or any transaction contemplated hereby; or
(ii) seeks to enjoin any transaction contemplated hereby;
or
(iii) seeks damages on account of the consummation of any
transaction contemplated hereby.
(d) All items to be delivered by Buyer pursuant to Section 4 have
been delivered.
If any of the conditions set forth in this Section 11 have not been
fulfilled as of the Closing, Seller may, at its option, by written notice to
Buyer, render its obligations hereunder null and void. By proceeding with the
Closing, and unless otherwise agreed in writing, Seller shall be conclusively
deemed to have accepted or waived fulfillment of all of said conditions.
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12. INDEMNIFICATION.
(a) Seller agrees to indemnify and hold harmless Buyer, its
Affiliates and sublicensees and their respective employees,
agents, officers and directors, successors and assigns, from
and against any claims, losses, liabilities, damages, costs
and expenses (including reasonable attorney fees) incurred by
Buyer, its Affiliates or sublicensees arising out of or in
connection with any (i) breach by Seller of any
representation, warranty, covenant or obligation hereunder,
(ii) act or omission on the part of Seller or any of its
employees or agents in the performance of this Agreement,
(iii) payments, commissions or fees of any kind due to
consultants or brokers retained by Seller relating to the
Product, and (iv) claim or demand of any kind for injury to a
person or property arising from Seller's or its contract
manufacturer's manufacturing, packaging or labeling of the
Product; provided, that this indemnification shall not apply
to the extent such claim or demand has resulted from changes
in such manufacturing, packaging or labeling conducted by or
at the direction of Buyer after Closing.
(b) Buyer agrees to indemnify and hold harmless Seller and its
Affiliates and their respective employees, agents, officers
and directors from and against any claims, losses,
liabilities, damages, costs and expenses (including reasonable
attorney fees) incurred by Seller or its Affiliates arising
out of or in connection with any (A) breach by Buyer of any
representation, warranty, covenant or obligation hereunder,
(B) claim or demand of any kind for injury to person or
property arising from Buyer's, its Affiliates' or
sublicensee's manufacture, marketing, distribution and sale of
the Product, provided, that this indemnification shall not
apply to the extent such claim or demand has resulted from any
negligent act or omission with respect to such Product by
Seller, its Affiliates, their employees, agents or contract
manufacturers, (C) act or omission on the part of Buyer or any
of its employees or agents in the performance of this
Agreement, (D) third party claims alleging infringement of
such third parties' Intellectual Property Rights as a result
of the advertisement, promotion or marketing materials created
by or at the direction of Buyer, its Affiliates or
sublicensees and used in connection with the sale of the
Product hereunder, and (E) payments, commissions or fees
16
of any kind due to consultants or brokers retained by Buyer
relating to the Product.
(c) A party seeking indemnification under this Section 12 (the
"Indemnified Party") must give prompt written notice thereof
to the other party (the "Indemnifying Party"). The
Indemnifying Party shall have the right to defend any such
claim or demand subject to the right of the Indemnified Party
to participate with counsel of its choice in such defense, but
the fees and expenses of such additional counsel shall be at
the expense of the Indemnified Party. The Indemnified Party
shall cooperate fully in all respects with the Indemnifying
Party in any such compromise, settlement or defense,
including, without limitation, by making available all
pertinent information and personnel under its control to the
Indemnifying Party. The Indemnifying Party will not compromise
or settle any claim or demand (other than, after consultation
with Indemnified Party, a claim or demand to be settled by the
payment of money damages and/or the granting of releases)
without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(d) Each party shall maintain and keep in force for the term of
this Agreement comprehensive general liability insurance
including Products/Completed Operations, Contractual and Broad
Form Property Damage covering its indemnification obligations
hereunder with a minimum limit of Ten Million Dollars
($10,000,000) per annum combined single limit for Bodily
Injury and Property Damage, to be increased as appropriate,
consistent with prudent business practices prevailing in the
business. Promptly after execution and delivery of this
Agreement, each party shall furnish a certificate of insurance
to the other party evidencing the foregoing endorsements,
coverage and limits, and providing that such insurance shall
not expire or be canceled or modified without at least thirty
(30) days prior notice to the other party.
(e) The representations and warranties of Seller and Buyer
hereunder and their indemnification obligations shall survive
the Closing.
13. RISK OF LOSS. The risk of loss or damage by fire or other casualty or
cause to the Product inventory and any tangible assets included as part
of the Transferred Assets until the Closing Date shall be upon Seller.
In the event of such loss or damage prior to the Closing Date, Seller
shall promptly restore, replace or repair the damaged Product inventory
and/or tangible assets included as part of the Transferred Assets to
their previous condition at Seller's sole cost and expense. If such
loss or damage shall not be restored, replaced or repaired as of the
Closing Date, Buyer shall, at its option, either:
17
(a) Proceed with the Closing and receive all insurance proceeds to
which Seller would be entitled as a result of such loss or
damage; provided, however, that if such proceeds do not equal
the loss, Seller shall pay the deficiency to Buyer; or
(b) Defer the Closing Date until such restorations, replacements
or repairs are made (provided that no such deferral shall
affect the rights of the parties hereto to terminate this
Agreement pursuant to the provisions of Section 14).
14. TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of the parties hereto; or
(b) any party hereto:
(i) upon a material breach of this Agreement by the other
party hereto;
(ii) if a court of competent jurisdiction or governmental
authority shall have issued an order, decree or
ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best
efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have
become final and nonappealable; or
(iii) if the Closing shall not have occurred on or before
May 15, 2000; provided, however, that the right to
terminate this Agreement shall not be available to
any party whose breach of this Agreement has been the
cause of, or resulted in, the failure of the
transactions contemplated herein to occur on or
before such date.
15. REMEDIES.
(a) DEFAULT BY BUYER. If Buyer shall default in the performance of
its obligations under this Agreement in any material respect
or if, as a result of Buyer's action or failure to act, the
conditions precedent to Seller's
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obligation to close specified in Section 11 are not satisfied,
and for such reason or reasons this Agreement is not
consummated, and provided that Seller shall not then be in
default in any material respect in the performance of Seller's
obligations hereunder, Seller shall be entitled, by written
notice to Buyer, to terminate this Agreement, and to pursue
any other remedies Seller has at law or in equity or
otherwise.
(b) DEFAULT BY SELLER. If Seller shall default in the performance
of its obligations under this Agreement in any material
respect, or if, as a result of Seller's action or failure to
act, the conditions precedent to Buyer's obligation to close
specified in Section 9 are not satisfied, and for such reason
or reasons this Agreement is not consummated, and provided
that Buyer shall not then be in default in any material
respect in the performance of Buyer's obligations hereunder,
Buyer shall be entitled by written notice to Seller, to
terminate this Agreement, and to pursue any other remedies
Buyer has at law or in equity or otherwise.
16. SPECIFIC PERFORMANCE. The parties acknowledge that the Transferred
Assets to be delivered pursuant to this Agreement are unique and that
no party hereto has an adequate remedy at law if the other party shall
fail to perform any of its obligations hereunder, and all parties
hereto therefore confirm and agree that the right of specific
performance is essential to protect the rights and interests.
Accordingly, in addition to any other remedies that any party hereto
may have hereunder or at law or in equity or otherwise, the parties
hereto hereby agree that Seller and Buyer shall each have the right to
have all obligations, undertakings, agreements and other provisions of
this Agreement specifically performed by the other and that each of
them shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States or of any state
or other political subdivision thereof.
17. BROKERS. Seller shall be solely responsible for any brokerage fees,
finders' fees, commissions or otherwise payable to any broker, finder
or agent engaged by Seller in connection with the transactions
contemplated by this Agreement. Buyer shall be solely responsible for
any brokerage fees, finders' fees, commissions or otherwise payable to,
any broker, finder or agent engaged by Buyer in connection with the
transactions contemplated by this Agreement. Seller agrees to indemnify
Buyer, and Buyer agrees to indemnify Seller, against any claims
asserted against the other party for any fees or commissions due such
person. Notwithstanding any other provision of this Agreement, this
provision shall survive the Closing without limitation.
18. ARBITRATION.
(a) ARBITRATION. With the exception of any action for
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specific performance pursuant to Section 16, in the event of
any dispute (a "Dispute") between the parties hereto
subsequent to Closing with respect to the breach,
interpretation or enforcement of this Agreement, such dispute
shall be resolved by binding arbitration in accordance with
the commercial arbitration rules of the American Arbitration
Association ("AAA"). Notwithstanding the foregoing, the
parties intend to depart from the AAA commercial arbitration
rules to the extent any of the following provisions conflict
with such rules.
(b) PANEL. Any arbitration shall take place before a panel of
three (3) arbitrators (the "Panel"). The Panel shall be
selected in accordance with the AAA's procedures for selecting
an arbitration Panel, provided, that the Panel shall include
one certified public accountant and one transactional lawyer,
each of whom shall have had at least ten (10) years experience
in his or her respective field, and at least three (3) years
of arbitration experience. If any arbitrator on the Panel
neglects or refuses to act or is or becomes incapable of
acting, or dies before the Panel shall have made its award,
and the parties fail to agree or concur in the appointment of
another arbitrator, either party may serve on the other a
notice in writing requiring him to agree and concur in the
appointment of another arbitrator, and if such appointment is
not made within twenty (20) days from the service of said
notice, then the remaining arbitrators shall have power on the
request in writing of either party to appoint another
arbitrator who shall have the like authority to act in the
arbitration and make an award and the like powers in all
respects as if he had been appointed by the parties.
(c) BINDING EFFECT. Each of the parties agrees that the decision
of the Panel shall be final and binding on the parties hereto
and, provided diversity or other federal jurisdiction exists,
the parties hereby consent to the entry of final judgment
thereon in the United States District Court for the Southern
District of New York, and to the issuance of execution on the
judgment. The award may be appealed only to the court in which
judgment on the award is required to be entered and only to
the extent the award contains material errors of applicable
law, is arbitrary or capricious, or was fraudulently obtained.
If the parties cannot meet the applicable requirements for
federal jurisdiction, the parties agree to the entry of
judgment in the State Court of New York, and to the issuance
of
20
execution on such judgment. The parties hereto hereby consent
to the jurisdiction of such court (i.e., such federal court,
or, in the event federal jurisdiction does not exist, such
state court) in reference to any matter arising out of the
arbitration or this Agreement including but not limited to
confirmation of any arbitration award and enforcement thereof
by entry of judgment thereon or by any other legal remedy. As
to any Dispute which under the terms hereof is made subject to
arbitration, no suit at law or in equity based on such Dispute
shall be instituted by either party hereto other than to
enforce the award of the Panel. If any controversy shall arise
after the award as to whether the award or any part thereof
has been complied with, such controversy shall be determined
by the same Panel.
(d) EVIDENCE. The Panel shall not be bound by strict rules of
evidence and may give such right to evidence as may seem right
and proper to it. The Panel shall schedule a pre-hearing
conference to resolve procedural matters, arrange for the
exchange of information, obtain stipulations, and narrow the
issues. The parties will submit proposed discovery schedules
to the Panel at the pre- hearing conference. The scope and
duration of discovery will be within the sole discretion of
the Panel. Unresolved discovery disputes may be brought to the
attention of the chair of the arbitration panel and may be
disposed of by the chair of the panel. The Panel shall have
the discretion to order a pre-hearing exchange of information
by the parties, including, without limitation, production of
requested documents, exchange of summaries of testimony of
proposed witnesses, and examination by deposition of parties
and third-party witnesses. This discretion shall be exercised
in favor of discovery reasonable under the circumstances. The
arbitration shall be conducted in New York, New York. Any
party may be represented by counsel or other authorized
representative. In rendering a decision(s), the Panel shall
determine the rights and obligations of the parties according
to the substantive and procedural laws of New York and the
terms and provisions of this Agreement. The Panel's decision
shall be based on the evidence introduced at the hearing,
including all logical and reasonable inferences therefrom. The
Arbitrator may make any determination, and/or grant any remedy
or relief that is just and equitable, subject to the express
provisions of this Agreement. The Panel shall have power to
award and direct that the parties or any of them shall execute
such releases, conveyances,
21
assurances, and do things as the Panel shall think fit and
such releases, conveyances, assurances and things shall be
executed and done accordingly. The Panel shall have the
authority to proceed ex parte in case of the nonattendance of
either of the parties or of their witnesses after thirty (30)
days prior notice in writing by the Panel given to the parties
respectively or their respective attorneys or agents notifying
the time and place of meeting to proceed with the reference.
Any provisional remedy that would be available from a court of
law shall be available from the arbitrator to the parties to
this Agreement pending arbitration.
(e) WAIVER OF CONSEQUENTIAL DAMAGES. The Panel shall have no
authority to award consequential damages, punitive damages,
and all other damages not measured by the prevailing party's
actual damages, and each party hereby waives all claims to
same. The Panel may not in any event make any ruling, finding
or award that does not conform to the terms and conditions of
the Agreement. Liabilities for Taxes are direct damages.
(f) DISCLOSURE. Except to the extent disclosure, filing, reporting
or announcement thereof is required by law, including by any
rules or regulations of any applicable governmental,
regulatory or stock exchange agency or authority, neither a
party nor an arbitrator may disclose the existence, content or
results of any arbitration hereunder without the prior written
consent of both parties, except to the extent that the
recordation of a final judgment causes such matters to become
public.
19. AUDITS. Until the full amount of the consideration set out in Section 3
above is paid to Seller, Buyer shall keep accurate records of all
Product sales and other relevant data concerning the Product, and Buyer
shall provide Seller reports thereof within thirty (30) days after the
end of each quarter. Such reports shall state the number of Units of
Product sold by Buyer, its Affiliates or sublicensees, if any, during
the applicable period, as well as the number of free samples of the
Product distributed and any Product returns made during such calendar
quarter, together with an accounting of Net Sales with respect to such
calendar quarter. Once a year, upon reasonable notice, at times
mutually agreed upon and during business hours, Seller, at Seller's
cost, may have the accounts of Buyer, its Affiliates or sublicensees
for the preceding two (2) calendar years relating to the Product
reviewed by an independent certified public accountant appointed by
Seller and reasonably approved by Buyer, solely in order to verify
amounts due under this Agreement. Seller and Buyer shall mutually
determine a general strategy for such auditing in advance of its
conduct. Such accountant shall not disclose to Seller any
22
information except that which should properly be contained in a report
required under this Agreement. Buyer shall promptly pay any
underpayment evidenced by such audit, and Seller shall promptly refund
any overpayment evidenced by such audit. If an audit evidences an
underpayment of more than five percent (5%) with respect to the amounts
actually paid, Buyer shall promptly pay such underpayment to Seller
with interest at the prime rate as set by Citibank, from the time when
such underpayment occurred, and shall reimburse Seller for the
reasonable costs and expenses (including fees) of such audit.
20. RIGHT OF FIRST REFUSAL. Seller hereby grants Buyer a right of first
refusal to purchase or license the Product for sale in other
territories as such territories become available if such purchase or
license requires only one total payment at the closing of such purchase
or license. In all other cases, Seller hereby grants Buyer a right of
first refusal to purchase or license the Product for sale in
territories within NAFTA subject to Buyer providing evidence reasonably
acceptable to Seller that Buyer can adequately market and sell the
Product in the applicable territory or territories.
21. MISCELLANEOUS.
(a) NOTICES FROM BUYER. Any notices from Buyer to Seller hereunder
shall be deemed sufficiently given upon delivery (with the
return receipt, the delivery receipt, or the affidavit of
messenger), refusal by addressee or notice to Buyer from the
Post Office that such notice is undeliverable, if such notice
has been mailed by United States registered or certified mail,
postage prepaid, delivered by overnight courier or transmitted
by facsimile transmission addressed to:
Columbia Laboratories, Inc.
William J. Bologna, Chairman
2875 N.E. 191 St., Suite 400
Aventura, Florida 33180
with a copy (which shall not be deemed notice) to:
Lyon & Lyon, LLP
Scott H. Blackman
1701 Pennsylvania Avenue NW, Suite 1040
Washington, DC 20006
or at such other address or addresses as Seller may from time to time specify by
notice in writing to Buyer, given in the manner provided in this Section.
(b) NOTICES FROM SELLER. Any notice from Seller to Buyer under
this Agreement shall be deemed sufficiently given upon
delivery (with the return receipt, the delivery receipt, or
the affidavit of messenger), refusal by addressee or notice to
Seller from the Post Office that such notice is
23
undeliverable, if such notice has been mailed by United States
registered or certified mail, postage prepaid, delivered by
overnight courier or transmitted by facsimile transmission
addressed to:
Lil' Drug Store Products, Inc.
Chris DeWolf
1201 Continental Place NE
Cedar Rapids, IA 52402
with a copy (which shall not be deemed notice) to:
Bradley & Riley PC
Bradley G. Hart
2007 1st Avenue SE
PO Box 2804
Cedar Rapids, IA 52406-2804
or at such other address or addresses as Buyer may from time to time specify by
notice in writing to Seller, giving in the manner provided in this Section.
(c) WAIVER; SEVERABILITY. No delay or failure on the part of any
party hereto in exercising any right, power or privilege under
any of the Transaction Documents or under any other instrument
or document given in connection with or pursuant thereto shall
impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single
or partial exercise of any such right, power or privilege
shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto
unless made in writing and signed by the party against whom
enforcement of such waiver is sought and then only to the
extent expressly specified therein. The unenforceability or
invalidity of any provision of any of the Transfer Documents
shall not affect the enforceability or validity of any other
provision.
(d) BENEFIT AND ASSIGNMENT. No party hereto shall assign this
Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of the other
party hereto, and any purported assignment contrary to the
terms hereof shall be null, void and of no force and effect.
(e) CONFIDENTIALITY. Except to the extent disclosure, filing,
reporting or announcement of this Agreement is
24
required by law, including by any rules or regulations of any
applicable governmental, regulatory or stock exchange agency
or authority, the existence and substance of this Agreement
shall remain confidential for a period of ten (10) days
following the date hereof. If the transaction that is the
subject of this Agreement is not consummated, Buyer agrees
that it will return to Seller, and Seller agrees that it will
return to Buyer, all records and other documents of the other
then in that party's possession and will not itself use, or
disclose, directly or indirectly, to any person any
Confidential information with respect to the other party or
the business learned by that party during the period between
the date hereof and termination of this Agreement. The term
"Confidential Information" as used herein means all
information of a business or technical nature, including, but
not limited to, all patents and technology, relevant to each
party's business that is not publically known. The foregoing
provisions shall survive the Closing or any termination of
this Agreement without limitation.
(f) ENTIRE AGREEMENT. Any schedules and exhibits attached to this
Agreement are incorporated herein by reference. This Agreement
sets forth the entire understanding of the parties with
respect to the subject matter hereto, supersedes all prior
oral or written agreements, instruments and understandings
with respect to such matters, and may be modified only by
instruments signed by Seller and Buyer.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and
the same instrument.
(h) EXPENSES. Seller and Buyer shall each pay its own legal and
accounting costs and other expenses incurred in negotiating
and preparing this Agreement and in closing and carrying out
the transactions contemplated by this Agreement.
(i) GOVERNING LAW. This Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating
hereto, shall be construed and governed in accordance with the
laws of the State of New York, excluding the choice of law
rules thereof.
(j) HEADINGS. The subject headings of Sections of this
25
Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of
its provisions.
(k) FURTHER ASSURANCES. Each party hereto shall cooperate, shall
take such further action and shall execute and deliver such
further documents at any time prior to at or after the Closing
as may be reasonably requested by any other party in order to
carry out the provisions and purposes of this Agreement,
including but not limited to the endorsement of checks
received after Closing in payment of the receivables being
purchased by Buyer.
(l) RELEASE OF INFORMATION. Neither party shall disclose any of
the terms of the transactions contemplated by this Agreement,
except as may be required by law, and the contents of any
press releases concerning the transactions contemplated by
this Agreement shall be determined by mutual agreement of the
parties. The foregoing provisions shall survive the Closing or
any termination of this Agreement without limitation.
(m) FACSIMILE SIGNATURES. For purposes of executing this
Agreement, a facsimile signature shall be deemed as effective
as an actual signature.
(n) REMEDIES CUMULATIVE. Except as specifically provided herein,
the remedies provided herein shall be cumulative and shall not
preclude the assertion by Seller or by Buyer of any other
rights or the seeking of any other remedies against the other
parties, or their successors or assigns.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement effective as of the date first above written.
COLUMBIA LABORATORIES, INC.
By:/S/ WILLIAM J. BOLOGNA
-------------------------------
William J. Bologna, Chairman of the Board
LIL' DRUG STORE PRODUCTS, INC.
By:/S/ DENNIS L. OLDORF
-------------------------------
Dennis L. Oldorf, Chairman of the Board
26