Document:

Exhibit
10.56

 

 

PREFERRED
STOCK PURCHASE AGREEMENT

dated
as of May 10, 2005

PREFERRED
STOCK PURCHASE AGREEMENT

This
PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), dated
as of May 10, 2005, is between Columbia Laboratories, Inc., a Delaware
corporation (the “Company”) and
the purchaser or purchasers specified on the signature page hereof (each, a
“Purchaser”).

WHEREAS,
the Company is offering up to 100,000 shares of Series E Convertible Preferred
Stock, par value $0.01 per share (the “Series
E Preferred Stock”), at a
price of $100 per share of Series E Preferred Stock (the “Purchase
Price Per Share”),
payable in cash, upon and subject to the terms and conditions of this Agreement;
and

WHEREAS,
Purchaser desires to purchase from the Company, and the Company desires to sell
to Purchaser, the number of shares of Series E Preferred Stock set forth on such
Purchaser’s signature page to this Agreement (the “Shares”).

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:

2

ARTICLE
I

DEFINITIONS

1.1  Definitions. As used
in this Agreement, the following terms have the meaning set forth
below:

“Accredited
Investor” means,
as defined under Regulation D promulgated under the Act, any Person who
comes within any of the following categories: (1) any bank as defined in
Section 3(a)(2) of the Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act, whether acting in
its individual or fiduciary capacity; any broker or dealer registered pursuant
to Section 15 of the Exchange Act; any insurance company as defined in
Section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that act; any Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its subdivisions for the benefit of its employees,
if such plan has total assets in excess of $5,000,000; any employee benefit plan
within the meaning of ERISA, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are Accredited Investors; (2) any private business development
company as defined in Section 202(a)(22) of the Investment Advisors Act of
1940; (3) any organization described in Section 501(c)(3) of the Code,
corporation, Massachusetts or similar business trust or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000; (4) any director or executive officer of the
Company; (5) any natural person whose individual net worth, or joint net
worth with that person’s spouse, at the time of that person’s purchase exceeds
$1,000,000; (6) any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with that
person’s spouse in excess of $300,000 in each of those years, and who has a
reasonable expectation of reaching the same income level in the current year;
(7) any trust with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D; and (8) any entity in which all of the equity owners are
Accredited Investors.

“Act” means
the Securities Act of 1933, as amended, or any successor statute.

“Affiliate” of any
Person means any Person which, directly or indirectly, controls, is controlled
by, or is under common control with, such Person. The term “control” (including,
with correlative meaning, the terms “controlled by” and “under common control
with”), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.

3

 

“Agreement” has the
meaning ascribed to such term in the introductory paragraph of this
Agreement.

“Certificate
of Designations” means
the Certificate of Designations of Series E Convertible Preferred Stock of the
Company.

“Charter
Documents” of any
Person means the certificate or articles of incorporation and by-laws of a
corporation, the agreement and certificate of limited partnership of a limited
partnership, the partnership agreement of a general partnership, the limited
liability company or operating agreement and certificate of formation of a
limited liability company, or similar organizational documents for any other
entity, as each may be amended from time to time.

“Closing” has the
meaning set forth in Section 2.2 of this Agreement.

“Closing
Date” has the
meaning set forth in Section 2.2 of this Agreement.

“Code” means
the Internal Revenue Code of 1986, as amended, together with the rules and
regulations promulgated thereunder, or any successor statute.

“Common
Stock” means
the shares of common stock, par value $0.01 per share, of the
Company.

“Conversion
Shares” means
the shares of Common Stock issuable upon conversion of the Series E Preferred
Stock.

“$” or
“Dollars” means
the currency of the United States of America.

“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended, or any
successor statute.

“Exchange
Act” means
the Securities Exchange Act of 1934, as amended, or any successor
statute.

“Knowledge
of the Company” means
the actual knowledge of G. Frederick Wilkinson, David Weinberg and Michael
McGrane.

“Perry
Purchaser” shall
mean Perry Corp. and/or one or more of its managed funds.

“Person” means
any individual, a partnership, joint venture, corporation, trust, limited
liability company, unincorporated organization or a government or any department
or agency thereof, or any other entity.

“Purchase
Price” means
$3,500,000, which is equal to the product of the Purchase Price Per Share and
35,000 (the total number of shares of Series E Preferred Stock being purchased
hereunder). If there is more than one Purchaser, the Purchase Price for each
Purchaser shall be as set forth on the signature page of such Purchaser
hereto.

4

 

“Purchase
Price Per Share” has the
meaning set forth in the recitals to this Agreement.

 

“Purchaser” has the
meaning set forth in the recitals to this Agreement. If there is more than one
purchaser of shares hereunder, “Purchaser” shall refer to each such
purchaser.

“SEC” means
the United States Securities and Exchange Commission.

“SEC
Filings” has the
meaning set forth in Section 3.3 of this Agreement.

“Series
E Preferred Stock” has the
meaning set forth in the recitals to this Agreement.

“Shares” has the
meaning set forth in the recitals to this Agreement. If there is more than one
Purchaser, the Shares for each Purchaser shall be the number of shares of Series
E Preferred Stock set forth on the signature page of such Purchaser
hereto.

“Shelf
Registration Statement” has the
meaning set forth in Section 5.1(b).

“Subsidiaries” means,
collectively, the Company’s direct or indirect majority-owned
subsidiaries.

ARTICLE
II

PURCHASE
AND SALE OF SERIES E PREFERRED STOCK

2.1 Purchase
and Sale of Shares. At the
Closing, the Company shall issue and sell to Purchaser, and Purchaser shall
purchase from the Company, the Shares for the Purchase Price. At the Closing,
Purchaser shall pay the Purchase Price for the Shares by wire transfer of
immediately available funds to the Company. Upon receipt of the Purchase Price,
the Company shall deliver to Purchaser a certificate representing the Shares
registered in the name of the Purchaser.

2.2 Closing. The
closing of the issuance and sale of the Shares hereunder (the “Closing”) shall
take place at the offices of Kaye Scholer LLP located at 425 Park Avenue, New
York, New York 10022 on the date first written above (the “Closing
Date”).

2.3 Deliveries.

(a)  Purchaser’s
Deliveries. At the
Closing, in consideration of Purchaser’s receipt from the Company of the Shares,
Purchaser shall deliver to the Company the Purchase Price in accordance with
Section 2.1 hereof.

(b)  The
Company’s Deliveries. At the
Closing, in consideration of the Company’s receipt of the Purchase Price from
Purchaser, the Company shall deliver to Purchaser a certificate representing the
Shares in accordance with Section 2.1 hereof.

5

 

ARTICLE
III

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

The
Company hereby represents and warrants to Purchaser that:

3.1 Organization,
Good Standing and Qualification. The
Company has been duly organized and is a validly existing corporation in good
standing under the laws of the State of Delaware with all requisite power and
authority to carry on its business as presently conducted. 

 

3.2 Authorization. The
Company has full power and corporate authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the other agreements and instruments
contemplated hereby, and the consummation of the transactions contemplated by
this Agreement, have been authorized by the Board of Directors of the Company,
and no other proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed by the Company and, subject as aforesaid,
constitutes a valid and binding agreement of the Company, enforceable in
accordance with its terms except as limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors’ rights generally.

3.3 SEC
Filings. The
Company has (a) made available to the Purchaser true and correct copies of the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 and the Company’s Amendment No. 1 to Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2004, and (b) provided on a
confidential basis a draft of the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2004, substantially in the form in which
the Company will file it with the SEC (the “March
2005 10-Q” and,
collectively, the “SEC
Filings”). As of
their respective dates, the SEC Filings complied in all material respects with
the laws, regulations and forms governing the SEC Filings; and the SEC Filings
did not contain, as of the respective dates on which they were filed with the
SEC (or as of the date hereof, in the case of the March 2005 10-Q), any untrue
statement of any material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

3.4 Valid
Issuance of Shares. The
Shares, when issued, sold and delivered to Purchaser in accordance with the
terms hereof for the consideration expressed herein, will be duly authorized and
validly issued, fully paid and nonassessable and, based in part on the
representations of Purchaser in this Agreement, will be issued in compliance
with the Act.

3.5 No
Brokers’ or Other Fees. No
broker, finder or investment banker is entitled to any brokerage, finder or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by the Company for which Purchaser shall
be liable or obligated.

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3.6 Non-Contravention. The
execution and delivery of this Agreement, the issuance and sale of the Shares to
be sold by the Company under this Agreement, the performance by the Company of
its obligations under this Agreement and the consummation of the transactions
contemplated hereby will not, in any material respect, (A) conflict with or
constitute a violation of, or default (with or without the giving of notice or
the passage of time or both) under, (i) any material bond, debenture, note
or other evidence of indebtedness, or under any material lease, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company is a party or by which it or its properties are
bound, (ii) the Charter Documents of the Company or any of its Subsidiaries
or (iii) any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority applicable to the
Company, any of its Subsidiaries or their respective properties, or
(B) result in the creation or imposition of any lien, encumbrance, claim,
security interest or restriction whatsoever upon any of the material properties
or assets of the Company or any of its Subsidiaries or an acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in any
material bond, debenture, note or any other evidence of indebtedness or any
material indenture, mortgage, deed of trust or any other agreement or instrument
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound or to which any of the property or
assets of the Company or any of its Subsidiaries is subject. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, self-regulatory
organization, stock exchange or market, or other governmental body in the United
States is required for the execution and delivery of this Agreement and the
valid issuance and sale of the Shares to be sold pursuant to this Agreement,
other than (i) such as have been made or obtained, (ii) any securities filings
required to be made under federal or state securities laws or by the rules of
the Nasdaq National Market and (iii) any consent, approval, authorization or
other order of, or registration, qualification or filing, the failure of which
to obtain or make would not have a material adverse effect on the condition
(financial or otherwise) of the business, operations or assets of the Company,
taken as a whole.

3.7 Legal
Proceedings. Except
as disclosed in the SEC Filings, there is no action, suit or proceeding before
any court, governmental agency or body, domestic or foreign, now pending or, to
the Knowledge of the Company, overtly threatened against the Company or its
Subsidiaries in writing wherein an unfavorable decision, ruling or finding could
reasonably be expected to adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, this
Agreement or have a material adverse effect on the condition (financial or
otherwise) of the business, operations or assets or of the Company, taken as a
whole.

3.8 No
Violations. Neither
the Company nor any of its Subsidiaries: (i) is in violation of its Charter
Documents, or in violation of any law, administrative regulation, ordinance or
order of any court or governmental agency, arbitration panel or authority
applicable to the Company or any of its Subsidiaries, which violation,
individually or in the aggregate, would be reasonably likely to have a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole,
(ii) is in default (and there exists no condition which, with or without the
passage of time or giving of notice or both, would constitute a default) in any
material respect in the performance of any bond, debenture, note or any other
evidence of indebtedness in any indenture, mortgage, deed of trust or any other
material agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound or by
which the properties of the Company are bound, which could be reasonably
expected to have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, or would prohibit or otherwise materially
interfere with the ability of the Company to perform any of its obligations
under this Agreement.

7

 

3.9 Governmental
Permits. The
Company and its Subsidiaries possess all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department or body that are currently
necessary for the operation of their respective businesses as currently
conducted, except where such failure to possess could not reasonably be expected
to have a material adverse effect on the business, assets, condition (financial
or otherwise) or results of operations of the Company and its Subsidiaries,
taken as a whole, or would not prohibit or otherwise materially interfere with
the ability of the Company to perform any of its obligations under this
Agreement in any material respect.

3.10 Property. The
Company and its Subsidiaries own or possess sufficient rights to use all real
property that is material to the conduct of their respective businesses as now
conducted except where the failure to own or possess would not have a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole. To
the Knowledge of the Company, the Company and its Subsidiaries own or possess
sufficient rights to use all patents, patent rights, trademarks, copyrights,
licenses, inventions, trade secrets, trade names and know-how that are material
to the conduct of their respective businesses as now conducted except where the
failure to own or possess would not have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole (the “Company
Intellectual Property”).
Except as set forth in the SEC Filings, to the Knowledge of the Company, (i)
neither the Company nor any of its Subsidiaries has received any written notice
of any infringement by the Company of intellectual property rights of any third
party that, individually or in the aggregate, could have a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole, and
(ii) neither the Company nor any of its Subsidiaries has received any
written notice of any infringement by a third party of any Company Intellectual
Property that, individually or in the aggregate, would have a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole.

3.11 Financial
Statements. The
consolidated financial statements of the Company and its Subsidiaries and the
related notes thereto included in the SEC Filings present fairly, in all
material respects, the financial position of the Company as of the dates
indicated and the results of its operations and cash flows for the periods
therein specified. Except as set forth in the SEC Filings, such financial
statements (including the related notes) have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, subject, in the case of interim
financial statements, to normal recurring year-end adjustments and the absence
of notes.

8

 

3.12 No
Material Adverse Change. Except
as disclosed in the SEC Filings, since December 31, 2004, there has not been any
material adverse change in the business, assets, condition (financial or
otherwise) or results of operations of the Company, taken as a
whole.

3.13 Nasdaq
Compliance. The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and is listed on the NASDAQ National Market (the “Nasdaq
Stock Market”), and
the Company has taken no action intended to, or which, to the Knowledge of the
Company, may have the effect of, terminating or suspending the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from the
Nasdaq Stock Market, nor, to Knowledge of the Company, has The NASDAQ Stock
Market, Inc. (“Nasdaq”)
provided the Company with written notice stating that the Nasdaq is currently
contemplating terminating or suspending such listing. To the Knowledge of the
Company, the Company has not received notice (written or oral) from Nasdaq to
the effect that the Company is not in compliance with the listing or maintenance
requirements of the Nasdaq Stock Market. The issuance of the Shares does not
require shareholder approval, including, without limitation, pursuant to Nasdaq
Marketplace Rule 4350(i).

3.14 Reporting
Status. The
Company has timely made all filings required under the Exchange Act during the
12 months preceding the date of this Agreement, and all of those filings
complied in all material respects with the SEC’s requirements as of their
respective filing dates.

3.15 No
Manipulation. Neither
the Company nor any of its Subsidiaries has taken any action in violation of
applicable law or any action designed to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares. 

3.16 Contracts. Except
for matters that are not reasonably likely to have a material adverse effect on
the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole, and those
contracts that are substantially or fully performed or expired by their terms,
the contracts listed as exhibits to or described in the SEC Filings that are
material to the Company and all material amendments thereto, are in full force
and effect on the date hereof, and neither the Company nor, to the Knowledge of
the Company, any other party to such contracts is in breach of or default under
any of such contracts in any material respect.

3.17 Taxes. The
Company and each of its Subsidiaries have timely filed all material federal,
state, local and foreign income and franchise and other material tax returns
required to be filed by any jurisdiction to which it is subject and has paid all
material taxes due in accordance therewith, and no tax deficiency has been
determined adversely to the Company or any of its Subsidiaries which has had
(nor, to the Knowledge of the Company, is there outstanding any tax deficiency
which, if determined adversely to the Company or any of its Subsidiaries, could
reasonably be expected to have) a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole.

9

 

3.18 Investment
Company. The
Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an investment company, within the
meaning of the Investment Company Act of 1940, as amended, and will not be
deemed an “investment company” within the meaning of such Act as currently in
effect as a result of the transactions contemplated by this
Agreement.

3.19 Insurance. The
Company maintains insurance of the types and in the amounts that is adequate for
its business, including, but not limited to, insurance covering real and
personal property owned or leased by the Company or any Subsidiary against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against by similarly situated companies, all of which insurance is in
full force and effect.

3.20 Offering
Prohibitions. Neither
the Company nor any person acting on its behalf or at its direction has in the
past or will in the future take any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would bring the offer or sale
of the Shares as contemplated by this Agreement within the provisions of Section
5 of the Securities Act.

3.21 Compliance
with Law. The
business of the Company and the Subsidiaries as presently conducted has been and
is presently being conducted in accordance with all applicable federal, state
and local governmental laws, rules, regulations and ordinances, except as set
forth in the SEC Filings or such that, individually or in the aggregate, the
noncompliance therewith could not reasonably be expected to have a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole, or
would prohibit or otherwise materially interfere with the ability of the Company
to perform any of its obligations under this Agreement in any material
respect.

3.22 Certificate
of Designations. The
Certificate of Designations has been filed with the Delaware Secretary of
State.

ARTICLE
IV 

REPRESENTATIONS
AND WARRANTIES OF PURCHASER

Purchaser
hereby represents and warrants to the Company that:

4.1 Organization
and Authorization.
Purchaser is either an individual or an entity of the type identified in the
signature page to this Agreement, duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation. The execution and
delivery of this Agreement and the other agreements and instruments contemplated
hereby have been, and the consummation of the transactions contemplated hereby
and thereby have been, duly and validly authorized by all necessary action of
Purchaser, and no other proceedings on the part of Purchaser are or will be
necessary to consummate the transactions contemplated hereby. Purchaser has the
right, power, legal capacity and authority to enter into, deliver and perform
this Agreement and any other agreements and instruments contemplated hereby and
to own the Shares, and this Agreement and all such other agreements are, or upon
the execution thereof will be, valid and legally binding upon Purchaser and
enforceable in accordance with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors’ rights
generally.

10

 

4.2 No
Brokers’ or Other Fees. No
broker, finder or investment banker is entitled to any brokerage, finder or
other fee or commission in connection with the transaction contemplated by this
Agreement based upon arrangements made by or on behalf of Purchaser or its
Affiliates for which the Company shall be liable or obligated.

4.3 Compliance
with Securities Laws.

(a) Purchaser
is an Accredited Investor. Purchaser is acquiring the Shares for its own account
and for the purpose of investment only and not with a view to or for sale in
connection with any distribution thereof. Purchaser has such knowledge and
experience in financial and business matters to evaluate the merits and risks of
an investment in the Company and has the capacity to protect its own interests
in connection therewith. Purchaser acknowledges that neither the Shares nor the
Conversion Shares have been registered under the Act or under applicable state
securities laws and, therefore, neither the Shares nor the Conversion Shares can
be transferred, sold or otherwise disposed of except pursuant to an effective
registration or pursuant to an exemption from the registration requirements of
the Act and applicable state securities laws. Purchaser has not been organized
or reorganized for the purpose of acquiring the Shares. 

(b) Purchaser
hereby acknowledges that copies of the SEC Filings have been provided (in the
case of the March 2005 10-Q, on a confidential basis) or made available to
Purchaser. Purchaser has been given, and has availed itself of, the opportunity
to obtain information from, and to ask questions and receive answers of, the
officers and representatives of the Company to the extent Purchaser deemed
necessary to evaluate the information contained therein. Notwithstanding the
foregoing, Purchaser acknowledges that there may be material information or
developments regarding the Company or its business or operations not reflected
or disclosed in the SEC Filings and that, in connection with Purchaser’s
purchase of the Shares, Purchaser is not relying on any representation or
warranty, oral or written, of any Person (including the Company or any
Affiliate, director, officer or representative thereof), except for the express
representations and warranties of the Company set forth in Article III
hereof.

(c)  Purchaser
acknowledges that upon initial issuance and thereafter until transferred
pursuant to an effective registration statement under the Act and qualified
under applicable state securities or blue sky laws, the certificate or
certificates representing any Shares shall bear a legend reading substantially
as follows:

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER.

11

 

4.4 No
Violations.
Purchaser is not: (i) in violation of its Charter Documents, or in violation of
any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to Purchaser,
which violation, individually or in the aggregate, would prohibit or otherwise
materially interfere with the ability of Purchaser to perform any of its
obligations under this Agreement, (ii) in default (and there exists no condition
which, with or without the passage of time or giving of notice or both, would
constitute a default) in any material respect in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
Purchaser is a party or by which Purchaser is bound or by which the properties
of Purchaser are bound, which would prohibit or otherwise materially interfere
with the ability of Purchaser to perform any of its obligations under this
Agreement.

4.5 Status.
Purchaser is not an “interested stockholder” (as such term is defined in Section
203 of the Delaware General Corporation Law) of the Company. 

ARTICLE
V

COVENANTS
OF THE COMPANY AND PURCHASER

5.1 Covenants
of the Company. The
Company covenants and agrees with Purchaser as follows:

(a) Reasonable
Best Efforts. Subject
to the terms and conditions of this Agreement, the Company shall use its
reasonable best efforts to take, or cause to be taken, all reasonable action,
and to do, or cause to be done, all reasonable things necessary, proper or
advisable under the applicable laws and regulations to cause the conditions
specified in Article VI to be satisfied and otherwise to consummate and
make effective the transactions contemplated by this Agreement.

(b) Registration.
(i) The
Company shall prepare and use its reasonable best efforts to file with the SEC a
registration statement within 30 days of the date hereof covering the issuance
of the Conversion Shares (the “Shelf
Registration Statement”), and
shall use its reasonable best efforts to have the Shelf Registration Statement
declared effective as promptly as practicable. The Shelf Registration Statement
and any form of prospectus included therein or prospectus supplement relating
thereto shall reflect such plan of distribution or method of sale as Purchaser
shall notify the Company. The Company shall use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for the period
beginning on the date on which the Shelf Registration Statement is declared
effective and ending on the first to occur of (a) the first date that all
such Conversion Shares have been sold (whether pursuant to the Shelf
Registration Statement, under Rule 144 promulgated under the Act or
otherwise) or (b) the delivery to the Company of a written opinion from
counsel to the Company reasonably acceptable to the Company and Purchaser to the
effect that the Conversion Shares covered by the Shelf Registration Statement
may be sold without registration under the Act or applicable state law and
without restriction as to the volume and timing of such sales. During the period
during which the Shelf Registration Statement must be kept effective, the
Company shall supplement or make amendments to the Shelf Registration Statement,
if required by the Act, or if reasonably requested by Purchaser, to reflect any
specific plan of distribution or method of sale, and shall use its reasonable
best efforts to have such supplements and amendments declared effective, if
required, as soon as practicable after filing thereof with the SEC. The Company
may require Purchaser to furnish such information regarding Purchaser and its
intended method of disposition of the Conversion Shares as it may from time to
time reasonably request in writing. If any such information is not furnished
within a reasonable period of time after receipt of such request, the Company’s
obligations under this Section 5.1(b) shall be suspended until such information
is provided by Purchaser. Purchaser agrees not to utilize any material other
than the applicable current preliminary prospectus or prospectus included in the
Shelf Registration Statement in connection with the offering of the Conversion
Shares.

12

 

(ii) Purchaser
agrees, if so requested by the Company, not to effect any sale of Conversion
Shares pursuant to the Shelf Registration Statement for any period deemed
necessary (A) by the Company or any underwriter in connection with the
offering of shares of Common Stock pursuant to an underwritten offering pursuant
to demand registration rights granted to any Person or the offering of shares of
Common Stock by the Company for its own account or (B) by the Company in
connection with any proposal or plan by the Company to engage in any financing
or material acquisition or disposition by the Company or any Subsidiary thereof
of capital stock or assets, any tender offer or any merger, consolidation,
corporate reorganization or restructuring or other similar transaction material
to the Company and its Subsidiaries taken as a whole. Any period within the
effective period of the Shelf Registration Statement during which the Company
fails to keep the Shelf Registration Statement effective and usable for resales
of Conversion Shares is hereafter referred to as a “Suspension
Period.” A
Suspension Period shall commence on and include the date on which the Company
provides notice to Purchaser that the Shelf Registration Statement is no longer
effective or that the prospectus included in the Shelf Registration Statement is
no longer usable for resales of Conversion Shares and shall end on the date when
Purchaser either receives the copies of the supplemented or amended prospectus
contemplated by Section 5.1(b)(iii) or is advised in writing by the Company
that use of the prospectus may be resumed. Suspension Periods shall not exceed
120 days in the aggregate within any 12-month period. 

(iii) In
connection with the Shelf Registration Statement, the Company will within the
time periods provided herein:

(A)  use its
reasonable best efforts to prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Shelf Registration
Statement effective and to comply with the provisions of the Act with respect to
the sale or other disposition of all securities covered by the Shelf
Registration Statement until the time specified in Section
5.1(b)(i);

(B)  furnish
to Purchaser such number of authorized copies of a prospectus, including copies
of a preliminary prospectus, in conformity with the require-ments of the Act,
and such other documents as Purchaser may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by
Purchaser;

13

 

(C)  use its
reasonable best efforts to (i) register or qualify the securities covered by the
Shelf Registration Statement under such securities or blue sky laws of such
jurisdictions as Purchaser shall request, and (ii) do any and all other acts and
things which may be necessary under such securities or blue sky laws to enable
Purchaser to consummate the public sale or other disposition in such
jurisdictions of the securities to be sold by Purchaser, except that the Company
shall not for any such purpose be required to qualify to do business in any
jurisdiction wherein it is not qualified or to file any general consent to
service of process in any such jurisdiction;

(D)  provide
and cause to be maintained a transfer agent and registrar for all Conversion
Shares covered by the Shelf Registration Statement from and after a date not
later than the effective date of the Shelf Registration Statement;

(E)  notify
Purchaser, at any time when a prospectus relating to the Shelf Registration
Statement is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in the Shelf Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and, at the request of Purchaser, use its reasonable best efforts
to properly prepare and furnish to Purchaser a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made;
provided, that
upon receipt of such notification by the Company, Purchaser will not offer or
sell Conversion Shares until the Company has notified Purchaser that it has
prepared a supplement or amendment to such prospectus and delivered copies of
such supplement or amendment to Purchaser; and 

(F)  use its
reasonable best efforts to list all Conversion Shares on the Nasdaq National
Market;

(iv) All
expenses incurred by the Company in effecting the registration provided for in
this Section 5.1, including without limitation all registration and filing
fees (including all expenses incident to filing with the Nasdaq Stock Market or
any securities exchange), printing expenses, fees and disbursements of counsel
for the Company, fees of the Company’s independent auditors and accountants,
expenses of any audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any jurisdictions,
shall be paid by the Company.

(c) Indemnification. The
Company will indemnify the Purchaser as provided in Exhibit
A hereto
against liability with respect to the Shelf Registration Statement (including,
without limitation, the prospectus included in the Shelf Registration Statement)
relating to the Shares that were sold by the Company to the Purchaser pursuant
to this Agreement. For purposes of said Exhibit
A,
capitalized terms used therein without definition shall have the same meanings
therein as are ascribed to said terms in this Agreement.

14

 

(d)  Certain
Approvals with Respect to Perry Purchaser. If the
Purchaser is a Perry Purchaser, the provisions of this Section 5.1(d) shall
apply.

(i)  
Reference is made to that certain (A) Rights Agreement, dated as of March 13,
2002, between the Company and First Union National Bank, as rights agent (the
“Rights
Agreement,” and
(B) Agreement (the “Standstill
Agreement”), dated
as of December 1, 2003, between the Company and Perry Corp. (the “Perry
Purchaser”).
Capitalized terms used but not defined in this Section 5.1(d) shall have the
meanings given to them in the Rights Agreement.

(ii)  The Perry
Purchaser hereby represents and warrants to the Company that, immediately prior
to the Closing, it, its Affiliates and Associates do not Beneficially Own more
than 19.9% of the outstanding shares of Common Stock.

(iii)  The
Company hereby waives, for purposes of the transactions contemplated by this
Agreement only, any restriction imposed on the Perry Purchaser under the
Standstill Agreement that would prohibit the Perry Purchaser from acquiring the
Shares hereunder.

(iv)  The
Company hereby represents and warrants and the Perry Purchaser acknowledges that
the board of directors of the Company has approved for purposes of clause (ii)
(A) of the first proviso of the definition of “Acquiring Person” in the Rights
Agreement, the Perry Purchaser, together with its Affiliates and Associates,
becoming the Beneficial Owner, in the aggregate, of up to, but no more than, an
aggregate of 24% of the
outstanding Voting Stock, subject to the Perry Purchaser and its Affiliates and
Associates, as of the date hereof, being eligible to report Beneficial Ownership
of all such stock on Schedule 13G under the Exchange Act and not, as of the date
hereof, being required to report such ownership on Schedule 13D under the
Exchange Act.

5.2 Covenants
of Purchaser.
Purchaser covenants and agrees with the Company as follows:

(a) Confidentiality. Subject
to the requirements of applicable law, Purchaser shall, and shall use all
reasonable efforts to cause its officers, employees and agents who obtain such
information to, hold in confidence all non-public information obtained from the
Company until such time as such information is otherwise available to Purchaser
without breach of an agreement with Purchaser or becomes publicly
available.

(b) Reasonable
Best Efforts. Subject
to the terms and conditions of this Agreement, Purchaser shall use its
reasonable best efforts to take, or cause to be taken, all reasonable actions,
and to do, or cause to be done, all reasonable things necessary, proper or
advisable under the applicable laws and regulations to cause the conditions
specified in Article VII to be satisfied and otherwise to consummate and
make effective the transactions contemplated by this Agreement.

15

 

(c) Furnish
Information.
Purchaser shall furnish to the Company such information regarding it, the
Conversion Shares held by it and the intended method of disposition of such
securities as the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company under this Agreement.

(d) Indemnification.
Purchaser will indemnify the Company as provided in Exhibit
A hereto
against liability with respect to the Shelf Registration Statement (including,
without limitation, the prospectus included in the Shelf Registration Statement)
relating to the Shares that were sold by the Company to the Purchaser pursuant
to this Agreement. 

ARTICLE
VI

CONDITIONS
OF PURCHASER’S OBLIGATIONS AT CLOSING

The
obligations of Purchaser set forth in Article II are subject to the
fulfillment or waiver by Purchaser on or before the Closing Date of each of the
following conditions:

6.1 Representations
and Warranties. The
representations and warranties of the Company contained in Article III
shall be true in all material respects on and as of the Closing Date with the
effect as though such representations and warranties had been made on and as of
the Closing Date.

6.2 Performance. The
Company shall have performed and complied in all material respects with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing
Date.

6.3 No
Litigation. There
shall not be any action, suit, proceeding, hearing or investigation or order,
decree or injunction of any nature or type threatened, pending or made by or
before any governmental body that questions or challenges the lawfulness of the
transactions contemplated by this Agreement under any law or regulation or seeks
to delay, restrain or prevent or obtain damages in respect of such transactions.

6.4 Concurrent
Closings.
Simultaneously with the Closing, the Company shall have sold shares of Series E
Preferred Stock to the Purchaser and other purchasers for an aggregate purchase
price of at least $5.9 million.

16

 

ARTICLE
VII

CONDITIONS
OF THE COMPANY’S OBLIGATIONS AT CLOSING

The
obligations of the Company set forth in Article II are subject to the
fulfillment or waiver by the Company on or before the Closing Date of each of
the following conditions:

7.1 Representations
and Warranties. The
representations and warranties of Purchaser contained in Article IV shall
be true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing
Date.

7.2 Purchase
Price.
Purchaser shall have delivered the Purchase Price to the Company.

7.3 Performance.
Purchaser shall have performed and complied in all material respects with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing
Date.

7.4 No
Litigation. There
shall not be any action, suit, proceeding, hearing or investigation or order,
decree or injunction of any nature or type threatened, pending or made by or
before any governmental body that questions or challenges the lawfulness of the
transactions contemplated by this Agreement under any law or regulation or seeks
to delay, restrain or prevent or obtain damages in respect of such
transactions.

7.5 Consents
and Waivers. Any and
all consents or waivers from other parties to any agreements or consents,
waivers or permits from other Persons that are required in connection with the
consummation by Purchaser or the Company of the transactions contemplated in
this Agreement shall have been obtained.

ARTICLE
VIII

MISCELLANEOUS

8.1 Successors
and Assigns; No Third Party Rights. The
Company may not assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of Purchaser. Purchaser may
assign the Shares and any of its rights and obligations under this Agreement
without the consent fo the Company. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

8.2 Governing
Law; Jurisdiction. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York as applied to agreements among New York residents entered into
and to be performed entirely within New York. 

17

 

8.3 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

8.4 Captions. The
captions used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

8.5 Notices. Any
notice, request, instruction or other document to be given hereunder by any
party hereto to another party hereto shall be in writing, shall be deemed to
have been duly given or delivered when delivered personally or telecopied
(receipt confirmed, with a copy sent by certified or registered mail as set
forth herein) or sent by certified or registered mail, postage prepaid, return
receipt requested, or by Federal Express or other overnight delivery service, to
the address of the party set forth below or to such address as the party to whom
notice is to be given may provide in a written notice to the Company, a copy of
which written notice shall be on file with the Secretary of the
Company:

(a) To the
Company:

Columbia
Laboratories, Inc.

354
Eisenhower Parkway

Livingston,
New Jersey 07039

Telecopier
No.: (973) 994-3001

Telephone
No.: (973) 994-3999

Attention:
General Counsel

With
copies to:

Kaye
Scholer LLP

425 Park
Avenue

New York,
New York 10022

Telecopier
No.: (212) 836-8689

Telephone
No.: (212) 836-8673

Attention:
Adam H. Golden, Esq.

(b) To
Purchaser:

To it at
the address set forth on the signature page hereto.

8.6 Expenses. Each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement.

8.7 Amendments
and Waivers. Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing executed, in the case of any
amendment, by each party to be bound thereby and, in the case of any waiver, by
the party waiving observance of the applicable term.

18

 

8.8 Severability. If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision(s) shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms to the fullest
extent permitted by law.

8.9 Publicity. The
Company and Purchaser shall consult with each other before issuing any press
releases or otherwise making any public statement with respect to this Agreement
and the transactions contemplated hereby, and they shall not issue any such
press release or make any such public statement prior to such consultation,
except as may, in the judgment of counsel, be required by law or by obligations
pursuant to any securities laws or listing agreement with any national
securities exchange, in which case the disclosing party shall use reasonable
efforts to provide a copy of any such press release or public statement to the
other prior to the filing or release thereof.

8.10 Further
Assurances. Each of
the parties shall, without further consideration, use reasonable efforts to
execute and deliver to the other such additional documents and take such other
action as the other may reasonably request to carry out the intent of this
Agreement and the transactions contemplated hereby.

8.11 Entire
Agreement. This
Agreement, including the exhibits hereto, the documents, schedules, and
certificates referred to herein embodies the entire agreement and understanding
of the parties hereto in respect of the transactions contemplated by such
agreements. There are no restrictions, promises, inducements, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior written or oral
agreements and understandings between the parties with respect to such
transactions.

8.12 Survival. The
representations, warranties and covenants of the Company set forth in Sections
3.1, 3.2, 3.4 and 5.1(d) of this Agreement, and the representations and
warranties of Purchaser set forth in Sections 4.1, 4.5 and 5.1(d) of this
Agreement, shall survive the Closing indefinitely. All other representations and
warranties of the parties contained in this Agreement shall survive until the
second anniversary of the Closing Date.

 

(signature
page follows) 

19

IN
WITNESS WHEREOF, Purchaser and the Company have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.

	 	 	 
	 	THE COMPANY:
	 	 
	 	COLUMBIA
      LABORATORIES, INC.
	 
 	 
 	 
 
		By:  	/s/ Fred Wilkinson
  
	 	
      

      Name: Fred Wilkinson
	 	Title : President and
      CEO

	 	 	 
	 	PURCHASERS:
	 	 
	 	PERRY PARTNERS,
  L.P.
	 
 	 
 	 
 
		By:  	
      PERRY
      CORP., its general partner

	 	

	 	 	 
		By:  	/s/ Randall Borkenstein 
	 	
      

      Name: Randall Borkenstein
	 	Title:  Managing
      Director and Chief Financial Officer

	 	 	 
	 	A Delaware limited
      partnership
	 	Type of Entity and Jurisdiction of
      Incorporation
	 	Address: 767 Fifth Avenue, 20th
      Floor
	 	
                  
      New York, New York 10153

	 	
	 	Telephone: (212)
      583-4000
	 	Telecopier: (212)
      583-4099
	 	Attention: General
      Counsel
	 	 
	 	Number of Shares: 9,464
	 	Purchase Price: $946,400

 

20

 

	 	 	 
	 	
      PERRY
      PARTNERS INTERNATIONAL, INC.

	 
 	 
 	 
 
		By:  	
      PERRY
      CORP., its investment manager

	 	

	 	 	 
	 	
	 
 	 
 	 
 
		By:  	/s/ Randall Borkenstein 
	 	
      

      Name: Randall Borkenstein
	 	Title: Managing
      Director and Chief Financial Officer

	 	 
	 	A British Virgin Islands
      corporation
	 	Type of Entity and Jurisdiction of
      Incorporation
	 	 
	 	Address: 767
      Fifth Avenue, 20th
      Floor
	 	               
       New York, New York 10153
	 	 
	 	Telephone: (212)
      583-4000
	 	Telecopier: (212)
      583-4099
	 	Attention: General
      Counsel
	 	 
	 	Number of Shares: 25,536
	 	Purchase Price: $2,553,600

 

21

EXHIBIT
A

Indemnification
Obligations

1. General
Indemnity.

(a) Indemnification
by the Company. The
Company will indemnify and hold harmless the Purchaser, each of its directors,
fund managers and officers, and each Person, if any, who controls the Purchaser
within the meaning of Section 15 of the Act, or Section 20(a) of the Exchange
Act, from and against any losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all reasonable
attorneys’ fees) to which the Purchaser, each of its directors, fund managers
and officers, and each Person, if any, who controls the Purchaser may become
subject, under the Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Shelf Registration
Statement relating to the Conversion Shares being sold to the Purchaser
(including any prospectus included therein or in any amendment or supplement
thereto), or (ii) the omission or alleged omission to state in that Shelf
Registration Statement or any document incorporated by reference in the Shelf
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that the
Company shall not be liable under this Section 1(a) to the extent that a court
of competent jurisdiction shall have determined by a final judgment (with no
appeals available) that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act, undertaken or omitted to be
taken by the Purchaser or such Person through its bad faith or willful
misconduct; and provided,
further that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Shelf Registration
Statement (including any prospectus included therein or in any amendment or
supplement thereto); and provided,
further, that
with respect to any amendment or supplement to any prospectus included in the
Shelf Registration Statement, the foregoing indemnity shall not inure to the
benefit of the Purchaser or any such Person from whom the Person asserting any
loss, claim, damage, liability or expense purchased Common Stock, if copies of
such amended or supplemented prospectus were timely delivered to the Purchaser
pursuant hereto and a copy of such prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the Purchaser or any such Person to such
Person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Conversion Shares to such Person, and if such
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.

22

 

The
Company will reimburse the Purchaser and each such controlling Person promptly
upon demand for any legal or other costs or expenses reasonably incurred by the
Purchaser or any controlling Person in investigating, defending against, or
preparing to defend against any such claim, action, suit or proceeding, except
that the Company will not be liable to the extent a claim or action which
results in a loss, claim, damage, liability or expense arises out of, or is
based upon, an untrue statement, alleged untrue statement, omission or alleged
omission, included in the Shelf Registration Statement or any prospectus
included therein (or any amendment or supplement thereto) in reliance upon, and
in conformity with, written information furnished by the Purchaser to the
Company for inclusion in the Shelf Registration Statement or any such prospectus
(or any amendment or supplement thereto).

(b) Indemnification
by the Purchaser. The
Purchaser will indemnify and hold harmless the Company, each of its directors
and officers, and each Person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act from and
against any losses, claims, damages, liabilities and expenses (including
reasonable costs of defense and investigation and all attorneys’ fees) to which
the Company and each director, officer and Person, if any, who controls the
Company may become subject, under the Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in the Shelf Registration Statement or any
prospectus (or any amendment or supplement thereto) or (ii) the omission or
alleged omission to state in the Shelf Registration Statement or any prospectus
(or any amendment or supplement thereto) a material fact required to be stated
therein or necessary to make the statements therein not misleading, to the
extent, but only to the extent, the untrue statement, alleged untrue statement,
omission or alleged omission was made in reliance upon, and in conformity with,
written information furnished by the Purchaser to the Company for inclusion in
the Shelf Registration Statement or the prospectus (or an amendment or
supplement thereto), and the Purchaser will reimburse the Company and each such
director, officer or controlling Person promptly upon demand for any legal or
other costs or expenses reasonably incurred by the Company or the other Person
in investigating, defending against, or preparing to defend against any such
claim, action, suit or proceeding. Notwithstanding anything to the contrary
contained herein, Purchaser shall be liable under this Section 1(b) for only
that amount as does not exceed the net proceeds received by such Purchaser as a
result of the sale of Conversion Shares pursuant to the Shelf Registration
Statement.

2. Indemnification
Procedures.
Promptly after a Person receives notice of a claim or the commencement of an
action for which the Person intends to seek indemnification under paragraph (a)
or (b) of Section 1, the Person will notify the indemnifying party in writing of
the claim or commencement of the action, suit or proceeding, but failure to
notify the indemnifying party will not relieve the indemnifying party from
liability under paragraph (a) or (b) of Section 1, except to the extent such
indemnifying party has been materially prejudiced by the failure to give notice.
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and the indemnifying party may (but will not be required to) assume the defense
against the claim, action, suit or proceeding with counsel satisfactory to it.
After an indemnifying party notifies an indemnified party that the indemnifying
party wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred
by the indemnified party in connection with the defense against the claim,
action, suit or proceeding except that if, in the opinion of counsel to the
indemnifying party, one or more of the indemnified parties should be separately
represented in connection with a claim, action, suit or proceeding, the
indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in paragraph (a) or (b) of Section 1, will
cooperate in all reasonable respects with the indemnifying party in the defense
of any action or claim as to which indemnification is sought. No indemnifying
party will be liable for any settlement of any action effected without its prior
written consent. No indemnifying party will, without the prior written consent
of the indemnified party, effect any settlement of a pending or threatened
action with respect to which an indemnified party is, or is informed that it may
be, made a party and for which it would be entitled to indemnification, unless
the settlement includes an unconditional release of the indemnified party from
all liability and claims which are the subject matter of the pending or
threatened action.

23

 

If for
any reason the indemnification provided for in this Agreement is not available
to, or is not sufficient to hold harmless, an indemnified party in respect of
any loss or liability referred to in paragraph (a) or (b) of Section 1, each
indemnifying party will, in lieu of indemnifying the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result of
the loss or liability, (i) in the proportion which is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and by the
indemnified party on the other from the sale of stock which is the subject of
the claim, action, suit or proceeding which resulted in the loss or liability or
(ii) if that allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits of the sale of
stock, but also the relative fault of the indemnifying party and the indemnified
party with respect to the statements or omissions which are the subject of the
claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.

 

24THIS  NOTE HAS  BEEN  ACQUIRED  FOR  INVESTMENT  PURPOSES  ONLY AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
OR UNDER ANY  APPLICABLE  STATE  SECURITIES  LAWS.  THIS NOTE MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED OR PLEDGED,  EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE  STATE SECURITIES LAWS, OR
UPON  RECEIPT  OF AN OPINION OF COUNSEL  SATISFACTORY  TO THE  COMPANY  THAT THE
PROPOSED TRANSFER MAY BE EFFECTED WITHOUT  REGISTRATION UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.

THIS NOTE IS  SUBJECT  TO THE  TERMS AND  PROVISIONS  OF A  SECURITIES  PURCHASE
AGREEMENT,  AS  AMENDED  FROM  TIME  TO  TIME,  AMONG  ROOMLINX,  INC.  AND  THE
SIGNATORIES THERETO AND IS ENTITLED TO THE BENEFITS THEREOF.

                                 ROOMLINX, INC.

                                    10% NOTE

                                                          Hackensack, New Jersey
                                                               ___________, 2004

$----------

      SECTION  1.General.   For  value  received,   RoomLinX,   Inc.,  a  Nevada
corporation  (the "Payor"),  hereby promises to pay [__________] or assigns (the
"Payee")  on the earlier of (x) one hundred and eighty days from the date hereof
or (ii) the date on which Payor's Board of Directors  determines  that Payor has
consummated a business  combination  pursuant to which ultimate control of Payor
has changed (the "Maturity Date"), the principal amount of ____________  Dollars
($_______).  The Payor shall pay interest on the unpaid balance of the principal
amount of this  Note at the rate of ten  percent  (10%) per annum  from the date
hereof, such interest to be payable as of the Maturity Date. Upon the occurrence
of an Event of Default,  the Payee may elect (with the consent of the  holder(s)
of a majority of the  aggregate  outstanding  principal  amount of the Notes) to
impose a default interest rate of eighteen percent (18%) per annum (the "Default
Interest Rate") by giving written notice of such election to the Payor,  and the
Default  Interest Rate shall continue to be the interest rate on this Note until
the Event of Default has been  remedied  or properly  waived by the Payee and no
other Event of Default is  continuing  unremedied  or unwaived and provided that
the Note has not been  accelerated.  The Interest Rate and the Default  Interest
Rate (as  applicable)]  shall be computed on the basis of a 360-day year and the
actual number of days elapsed.

<PAGE>

      The  principal  of, and  interest  on,  this Note shall be payable by wire
transfer  of  immediately  available  funds to the  account  of the  Payee or by
certified or official  bank check  payable to the Payee,  mailed to the Payee at
the  address of the Payee as set forth on the records of the Payor or such other
address as shall be designated  in writing by the Payee to the Payor.  This Note
is being  issued  pursuant  to the  Securities  Purchase  Agreement  dated as of
_______,  2004 (the "Purchase  Agreement"),  between the Payor and the Payee, as
amended  from time to time.  Capitalized  terms used and not  otherwise  defined
herein have the meanings ascribed thereto in the Purchase Agreement.

      SECTION 2. Prepayment.  This Note may be prepaid in whole or in part prior
to the Maturity Date.

      SECTION  3.  Defaults.  In case of the  happening  of any Event of Default
described in the Purchase  Agreement,  then the  indebtedness  evidenced by this
Note  shall  become  due and  payable to the  extent  provided  in the  Purchase
Agreement.

      SECTION 4.  Defenses.  The  Obligations of the Payor under this Note shall
not be subject  to  reduction,  limitation,  impairment,  termination,  defense,
set-off, counterclaim or recoupment for any reason.

      SECTION 5.  Extension of Maturity.  Should the principal of or interest on
this Note become due and payable on other than a business day, the Maturity Date
thereof shall be extended to the next succeeding  business day, and, in the case
of  principal,  interest  shall be payable  thereon at the rate per annum herein
specified during such extension. A "business day" shall mean any day that is not
a Saturday, Sunday, or legal holiday in the State of New Jersey.

      SECTION  6.  Waivers.  The Payor  hereby  waives  presentment,  demand for
payment, notice of dishonor,  notice of protest and all other notices or demands
in connection  with the  delivery,  acceptance,  performance  or default of this
Note. No delay by the Payee in  exercising  any power or right  hereunder  shall
operate  as a waiver  of any power or right,  nor  shall any  single or  partial
exercise of any power or right preclude other or further  exercise  thereof,  or
the exercise  thereof,  or the exercise of any other power or right hereunder or
otherwise; and no waiver whatsoever or modification of the terms hereof shall be
valid  unless  set forth in writing by the Payee and then only to the extent set
forth therein.

      SECTION 7. Amendments.  No provision of this Note may be amended or waived
except with the consent of the Payor and the Payee.

      SECTION 8. Governing Law. This Note is made and delivered in, and shall be
governed  by and  construed  in  accordance  with the laws of,  the State of New
Jersey (without giving effect to principles of conflicts of laws of the State of
New Jersey or any other state).

      SECTION 9. Notices.  The notice  provisions of the Purchase  Agreement are
expressly incorporated into this Note.

                                      -2-
<PAGE>

      IN WITNESS WHEREOF,  the Payor has caused this Note to be duly executed by
its duly authorized officer as of the date first written above.

                                 ROOMLINX, INC.

                                 By:
                                     --------------------------------
                                     Name:
                                     Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}]]