e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
.
Commission File Number: 001-33637
Cumberland Pharmaceuticals Inc.
(Exact name of registrant as specified in its charter)
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Tennessee
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62-1765329 |
(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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2525 West End Avenue, Suite 950, Nashville, Tennessee
(Address of principal executive offices)
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37203
(Zipcode) |
(615) 255-0068
(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files.) Yes o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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Class
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Outstanding at May 7, 2010 |
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Common stock, no par value
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20,437,176 |
CUMBERLAND PHARMACEUTICALS INC.
INDEX
PART I FINANCIAL INFORMATION
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Item 1: |
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Financial Statements |
CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
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March 31, |
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December 31, |
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2010 |
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2009 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
73,752,814 |
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$ |
78,701,682 |
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Accounts receivable, net of allowances |
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3,814,947 |
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6,176,585 |
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Inventories |
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7,406,402 |
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4,822,873 |
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Other current assets |
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3,369,809 |
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3,472,455 |
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Total current assets |
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88,343,972 |
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93,173,595 |
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Property and equipment, net |
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948,580 |
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918,412 |
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Intangible assets, net |
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7,818,394 |
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7,956,009 |
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Other assets |
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1,578,723 |
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1,676,304 |
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Total assets |
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$ |
98,689,669 |
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$ |
103,724,320 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
6,000,000 |
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$ |
9,061,973 |
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Current portion of other long-term obligations |
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88,739 |
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144,828 |
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Accounts payable |
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6,813,974 |
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5,632,796 |
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Other accrued liabilities |
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2,556,585 |
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3,784,777 |
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Total current liabilities |
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15,459,298 |
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18,624,374 |
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Revolving line of credit |
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1,825,951 |
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1,825,951 |
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Long-term debt, excluding current portion |
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7,438,027 |
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8,938,027 |
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Other long-term obligations, excluding current portion |
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181,455 |
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184,632 |
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Total liabilities |
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24,904,731 |
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29,572,984 |
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Commitments and contingencies |
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Redeemable common stock |
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100,000 |
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1,930,000 |
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Equity: |
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Shareholders equity: |
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Common stock no par value;
100,000,000 shares authorized;
20,413,605(1)
and
20,180,486(1)
shares issued and
outstanding
as of March 31, 2010 and
December 31, 2009,
respectively |
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68,861,850 |
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67,711,746 |
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Retained earnings |
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4,865,704 |
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4,542,126 |
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Total shareholders equity |
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73,727,554 |
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72,253,872 |
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Noncontrolling interests |
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(42,616 |
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(32,536 |
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Total equity |
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73,684,938 |
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72,221,336 |
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Total liabilities and equity |
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$ |
98,689,669 |
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$ |
103,724,320 |
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(1) |
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Number of shares issued and outstanding represent total shares of common stock
regardless of classification on the consolidated balance sheet. The number of shares of
redeemable common stock at March 31, 2010 and December 31, 2009 was 9,497 and 142,016,
respectively. |
See accompanying notes to unaudited condensed consolidated financial statements.
1
CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
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Three Months Ended March 31, |
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2010 |
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2009 |
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Net revenues |
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$ |
10,130,652 |
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$ |
9,404,599 |
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Costs and expenses: |
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Cost of products sold |
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859,288 |
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733,218 |
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Selling and marketing |
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5,607,512 |
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4,140,187 |
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Research and development |
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773,868 |
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770,117 |
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General and administrative |
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1,881,203 |
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1,444,863 |
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Amortization of product license right |
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171,726 |
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171,726 |
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Other |
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26,547 |
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27,463 |
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Total costs and expenses |
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9,320,144 |
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7,287,574 |
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Operating income |
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810,508 |
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2,117,025 |
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Interest income |
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60,679 |
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17,596 |
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Interest expense |
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(345,952 |
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(97,711 |
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Income before income tax expense |
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525,235 |
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2,036,910 |
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Income tax expense |
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(211,737 |
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(831,059 |
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Net income |
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313,498 |
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1,205,851 |
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Net loss attributable to noncontrolling interests |
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10,080 |
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12,239 |
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Net income attributable to common shareholders |
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$ |
323,578 |
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$ |
1,218,090 |
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Earnings per share attributable to common shareholders |
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- Basic |
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$ |
0.02 |
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$ |
0.12 |
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- Diluted |
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$ |
0.02 |
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$ |
0.08 |
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Weighted-average shares outstanding |
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- Basic |
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20,233,267 |
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10,321,175 |
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- Diluted |
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21,395,419 |
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16,127,240 |
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See accompanying notes to unaudited condensed consolidated financial statements.
2
CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Three Months Ended March 31, |
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2010 |
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2009 |
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Cash flows from operating activities: |
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Net income |
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$ |
313,498 |
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$ |
1,205,851 |
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Adjustments to reconcile net income to net cash flows from operating activities: |
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Depreciation and amortization expense |
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231,332 |
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196,059 |
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Nonemployee equity compensation |
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3,972 |
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37,760 |
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Stock-based compensation employee stock options |
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130,915 |
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143,902 |
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Excess tax benefit derived from exercise of stock options |
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(206,418 |
) |
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(2,842,825 |
) |
Noncash interest expense |
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67,380 |
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14,256 |
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Net changes in assets and liabilities affecting operating activities: |
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Accounts receivable |
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2,361,638 |
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(267,892 |
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Inventory |
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(2,583,529 |
) |
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415,948 |
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Other current assets and other assets |
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132,847 |
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955,169 |
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Accounts payable and other accrued liabilities |
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127,104 |
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(1,187,558 |
) |
Other long-term obligations |
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(59,266 |
) |
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(405,801 |
) |
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Net cash provided by (used in) operating activities |
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519,473 |
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(1,735,131 |
) |
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Cash flows from investing activities: |
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Additions to property and equipment |
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(64,085 |
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(15,601 |
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Additions to patents |
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(16,345 |
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Net cash used in investment activities |
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(64,085 |
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(31,946 |
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Cash flows from financing activities: |
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Costs of initial public offering |
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(114,428 |
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Principal payments on note payable |
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(4,561,973 |
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Costs of financing for long-term debt and credit facility |
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(27,500 |
) |
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(15,475 |
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Proceeds from exercise of stock options |
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807,496 |
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4,296 |
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Excess tax benefit derived from exercise of stock options |
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206,418 |
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2,842,825 |
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Payments made in connection with repurchase of common shares |
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(1,828,697 |
) |
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(2,707,419 |
) |
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Net cash (used in) provided by financing activities |
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(5,404,256 |
) |
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9,799 |
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Net decrease in cash and cash equivalents |
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(4,948,868 |
) |
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(1,757,278 |
) |
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Cash and cash equivalents at beginning of period |
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78,701,682 |
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11,829,551 |
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Cash and cash equivalents at end of period |
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$ |
73,752,814 |
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$ |
10,072,273 |
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Supplemental disclosure of cash flow information: |
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Cash paid during the year for: |
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Interest |
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$ |
276,288 |
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$ |
33,517 |
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Income taxes |
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12,376 |
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80,000 |
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Non-cash investing and financing activities: |
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Increase in accounts payable and accrued expenses of initial public offering |
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5,311 |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity and Comprehensive Income
(Unaudited)
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Non- |
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Common stock |
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Retained |
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controlling |
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Total |
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Shares |
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Amount |
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earnings |
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interests |
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equity |
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Balance, December 31, 2009 |
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20,180,486 |
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$ |
67,711,746 |
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$ |
4,542,126 |
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$ |
(32,536 |
) |
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$ |
72,221,336 |
|
Stock-based compensation -
nonemployees |
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3,972 |
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3,972 |
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Exercise of options and
related tax benefit, net
of mature shares
redeemed for the
exercise price |
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386,662 |
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|
1,013,914 |
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1,013,914 |
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Stock-based compensation -
employees |
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|
130,915 |
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130,915 |
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Repurchase of shares |
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(153,543 |
) |
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(1,828,697 |
) |
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(1,828,697 |
) |
Reclass of redeemable
common stock |
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1,830,000 |
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1,830,000 |
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Net and
comprehensive income |
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323,578 |
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(10,080 |
) |
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313,498 |
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Balance, March 31, 2010 |
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20,413,605 |
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$ |
68,861,850 |
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$ |
4,865,704 |
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$ |
(42,616 |
) |
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$ |
73,684,938 |
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|
See accompanying notes to unaudited condensed consolidated financial statements.
4
CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to condensed consolidated financial statements
(unaudited)
(1) |
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BASIS OF PRESENTATION |
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In the opinion of management, the accompanying unaudited condensed consolidated financial
statements (condensed consolidated financial statements) of Cumberland Pharmaceuticals Inc.
and its subsidiaries (collectively, the Company or Cumberland) have been prepared on a
basis consistent with the December 31, 2009 audited consolidated financial statements and
include all adjustments, consisting of only normal recurring adjustments, necessary to fairly
present the information set forth herein. All significant intercompany accounts and
transactions have been eliminated in consolidation. The condensed consolidated financial
statements have been prepared in accordance with the regulations of the Securities and Exchange
Commission, or SEC, and omit certain information and footnote disclosure necessary to present
the statements in accordance with U.S. generally accepted accounting principles. These
condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in our Annual Report on Form 10-K
for the year ended December 31, 2009. The results of operations for the first three months of
2010 are not necessarily indicative of the results to be expected for the entire fiscal year or
any future period. |
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Total comprehensive income was comprised solely of net income for the three months ended March
31, 2010 and 2009. |
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Accounting Policies: |
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In preparing the condensed consolidated financial statements in conformity with U.S. generally
accepted accounting principles, management must make decisions that impact the reported amounts
and the related disclosures. Such decisions include the selection of the appropriate accounting
principles to be applied and the assumptions on which to base accounting estimates. In reaching
such decisions, management applies judgments based on its understanding and analysis of the
relevant circumstances, historical experience, and other available information. Actual amounts
could differ from those estimated at the time the condensed consolidated financial statements
are prepared. |
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The Company has evaluated events occurring subsequent to March 31, 2010 for accounting and
disclosure implications. |
(2) |
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EARNINGS PER SHARE |
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The following table reconciles the numerator and denominator used to calculate diluted earnings
per share for the three months ended March 31, 2010 and 2009: |
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Three Months Ended March 31, |
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2010 |
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2009 |
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Numerator: |
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Net income attributable to common shareholders |
|
$ |
323,578 |
|
|
$ |
1,218,090 |
|
|
|
|
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Denominator: |
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Weighted-average shares outstanding basic |
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20,233,267 |
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|
10,321,175 |
|
Convertible preferred stock shares |
|
|
|
|
|
|
1,625,498 |
|
Dilutive effect of other securities |
|
|
1,162,152 |
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|
4,180,567 |
|
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|
Weighted-average shares outstanding diluted |
|
|
21,395,419 |
|
|
|
16,127,240 |
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010 and 2009, options to purchase 541,522 and 344,587 shares of common stock,
respectively, were outstanding but were not included in the computation of diluted EPS because
the effect would be antidilutive. |
5
CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Notes to condensed consolidated financial statements continued
(unaudited)
(3) |
|
SEGMENT REPORTING |
|
|
|
We operate in one segment, specialty pharmaceutical products. Management has chosen to organize
the Company based on the type of products sold. All of the Companys assets are located in the
United States. The Company had sales of less than $0.1 million to non-U.S. customers during the
three months ended March 31, 2010 and $0.7 million during the three month period ended March
31, 2009. |
|
|
|
The Companys net revenues consisted of the following for the three months ended March 31, 2010
and 2009: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
Products: |
|
|
|
|
|
|
|
|
Acetadote |
|
$ |
7,723,273 |
|
|
$ |
7,133,430 |
|
Kristalose |
|
|
2,309,982 |
|
|
|
2,228,615 |
|
Caldolor |
|
|
19,305 |
|
|
|
|
|
Other |
|
|
78,092 |
|
|
|
42,554 |
|
|
|
|
|
|
|
|
Total net revenues |
|
$ |
10,130,652 |
|
|
$ |
9,404,599 |
|
|
|
|
|
|
|
|
(4) |
|
SHAREHOLDERS EQUITY |
|
|
|
In February 2010, the Company repurchased 153,543 shares of common stock totaling $1.8 million
for the settlement of tax liabilities associated with the exercise of certain options in 2009. As
of December 31, 2009, this amount was included in redeemable common stock in the condensed
consolidated balance sheet. The repurchase amount was based on the fair-market value of common
stock on the date of settlement. |
|
|
|
During the first quarter of 2010, options to purchase 394,456 shares of common stock were
exercised. In connection with an exercise, 7,794 shares of mature stock was tendered as
consideration for the exercise price. The exercise of these options created a tax deduction of
approximately $3.6 million, of which approximately $0.5 million was used to offset the
estimated tax liability resulting from the results of operations for the three months ended
March 31, 2010. As of March 31, 2010, the Company has unrecognized tax deductions of
approximately $68.6 million that will be recognized when the deduction reduces income taxes
payable. |
(5) |
|
COLLABORATIVE AGREEMENTS |
|
|
|
The Company is a party to several collaborative arrangements with certain research institutions
to identify and pursue promising pre-clinical pharmaceutical product candidates. The Company
has determined these collaborative agreements do not meet the criteria for accounting under
Accounting Standards Codification 808, Collaborative Agreements. The agreements do not
specifically designate each partys rights and obligations to each other under the
collaborative arrangements. Except for patent defense costs, expenses incurred by one party are
not required to be reimbursed by the other party. The funding for these programs is generally
provided through private sector investments or federal Small Business (SBIR/STTR) grant
programs. Expenses incurred under these collaborative agreements are included in research and
development expenses in the condensed consolidated statements of income. Funding received from
private sector investments and grants are recorded as net revenues in the condensed
consolidated statements of income. |
(6) |
|
SUBSEQUENT EVENTS |
|
|
|
In May 2010, the Board of Directors authorized the repurchase of up to $10 million of common
stock. Repurchases will be made from time to time on the open market over a number of months
and will be funded through excess cash flow. |
6
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains certain forward-looking statements which reflect managements
current views of future events and operations. These statements involve certain risks and
uncertainties, and actual results may differ materially from them. Forward-looking statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. We caution you that our actual results may differ significantly from the results we discuss
in these forward looking statements. Some important factors which may cause results to differ from
expectations include: availability of additional debt and equity capital required to finance the
business model; market conditions at the time additional capital is required; significant leverage
and debt service requirements of the Company; our ability to continue to acquire branded products;
product sales; and management of our growth and integration of our acquisitions. Other important
factors that may cause actual results to differ materially from forward-looking statements are
discussed in Risk Factors on pages 20 through 32 and Special note regarding forward-looking
statements on page 32 of our Annual Report on Form 10-K for the year ended December 31, 2009. The
Company does not undertake to publicly update or revise any of its forward-looking statements, even
in the event that experience or future changes indicate that the anticipated results will not be
realized. The following presentation of managements discussion and analysis of financial condition
and results of operations should be read in conjunction with the Companys unaudited condensed
consolidated financial statements and related notes thereto included in this Form 10-Q.
OVERVIEW
Our Business
We are a profitable and growing specialty pharmaceutical company focused on the acquisition,
development and commercialization of branded prescription products. Our primary target markets are
hospital acute care and gastroenterology, which are characterized by relatively concentrated
physician bases that we believe can be penetrated effectively by relatively small, targeted sales
forces. Cumberland is dedicated to providing innovative products which improve quality of care for
patients.
Our product portfolio includes Acetadote® (acetylcysteine) Injection for the treatment
of acetaminophen poisoning, Caldolor® (ibuprofen) Injection, the first injectable
treatment for pain and fever available in the United States, and Kristalose® (lactulose)
for Oral Solution, a prescription laxative. We market and sell our products through our dedicated
hospital and gastroenterology sales forces in the United States, and are working with partners to
reach international markets.
We have both product development and commercialization capabilities, and believe we can leverage
our existing infrastructure to support our expected growth. Our management team consists of
pharmaceutical industry veterans experienced in business development, product development, sales
and marketing and finance and accounting. Our internal product development and regulatory
executives develop proprietary product formulations, design and manage our clinical trials, prepare
all regulatory submissions and manage our medical call center. Cumberlands operations and quality
affairs professionals play an active role in the manufacture of our products by our manufacturing
partners. All aspects of commercialization are handled by our sales and marketing professionals,
and we work closely with our distribution partner to make our products available across the United
States.
We have been profitable since 2004, and have generated sufficient cash flows to fund our
development and marketing programs. In 2009, we completed an initial public offering of our common
stock to help facilitate further growth. Our strategy includes maximizing the potential of our
existing products and continuing to build a portfolio of new, differentiated products. Our current
products are approved for sale in the United States, and we are working to bring them to select
international markets. We also look for opportunities to expand into additional patient populations
through new product indications, whether through our own resources or by supporting
investigator-initiated studies at research institutions. We actively pursue opportunities to
acquire additional late-stage development product candidates as well as marketed products in our
target medical specialties. Further, we are supplementing the aforementioned growth strategies
through the early-stage drug development activities of Cumberland Emerging Technologies (CET), our
majority-owned subsidiary. CET partners with university research centers to
7
identify and cost-effectively develop promising, early-stage product candidates that Cumberland
Pharmaceuticals has the opportunity to commercialize.
We were incorporated in 1999 and have been headquartered in Nashville, Tennessee since inception.
Our website address is www.cumberlandpharma.com. We make available through our website our annual
reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any
amendments, as well as other documents, as soon as reasonably practicable after their filing with
the SEC. These filings are also available to the public through the Internet of the SEC, at
www.sec.gov.
Recent Developments
Acetadote®
Supplemental New Drug Application
In March 2010, we submitted a supplemental new drug application (sNDA) to the U.S. Food and Drug
Administration (FDA) for the use of Acetadote in patients with non-acetaminophen acute liver
failure. The sNDA includes data from a clinical trial led by investigators at the University of
Texas Southwestern Medical Center indicating that acute liver failure patients treated with
Acetadote have a significantly improved chance of survival without a transplant. These patients can
also survive a significant number of days longer without transplant, providing patients requiring
transplant increased time for a donor organ to become available.
Acute liver failure is associated with a high mortality rate and frequent need for liver
transplantation. Approximately half of acute liver failure cases are caused by acetaminophen
poisoning while the other half result from a variety of causes including hepatitis and alcohol.
Currently, transplantation of the liver is the only treatment for patients with liver failure not
caused by acetaminophen overdose.
In May 2010, the FDA officially accepted the sNDA and granted a priority review. In addition to
expanded labeling for Acetadote, we have requested additional exclusivity for the product. If
approved, we expect to begin marketing Acetadote with the new indication in 2011.
Australian Regulatory Approval
In April 2010, the Therapeutic Goods Administration approved Acetadote for marketing in Australia.
We previously granted an exclusive license to Phebra Pty Ltd., an Australian-based specialty
pharmaceutical company, to commercialize Acetadote in Australia. Phebra is now preparing for the
Australian launch of the product, which it expects to commence this year.
Under our agreement, Phebra is responsible for ongoing regulatory requirements, marketing,
distribution and sales of Acetadote in Australia while we maintain responsibility for product
formulation, development and manufacturing. In exchange for the product license, Cumberland
receives upfront and milestone payments, a transfer price and royalties on future sales.
Caldolor®
License Agreement for Canada
In April 2010, we entered into an exclusive agreement with Alveda Pharmaceuticals Inc., a
Toronto-based specialty pharmaceutical company, for the commercialization of Caldolor in Canada.
Under the agreement, Alveda will seek Canadian regulatory approval for Caldolor and, upon approval,
will handle ongoing regulatory requirements as well as product marketing, distribution and sales
throughout Canada. Cumberland will maintain responsibility for product formulation, development and
manufacturing. In exchange for the license to the product, Cumberland will receive royalties on
future sales of Caldolor in addition to upfront and milestone payments as well as a transfer price.
8
Compassionate Use in Australia
In December 2009, we entered into an exclusive agreement with Phebra Pty Ltd. for distribution of
Caldolor in Australia and New Zealand. As of April 2010, Phebra has made the product available in
Australia on a limited, compassionate use basis. The Therapeutics Goods Administration (TGA), which
regulates drugs and medical devices in Australia, operates compassionate use programs that allow
patients with critical clinical need to access products not yet approved through their medical
practitioner. Phebra is also planning to submit an application to the TGA for regulatory approval
of Caldolor.
RECENT LEGISLATION
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act,
or PPACA. On March 30, 2010, the Health Care and Education Reconciliation Act of 2010, or HCERA,
was enacted into law, which modified the revenue provisions of the PPACA. The PPACA as amended by
the HCERA constitutes the healthcare reform legislation. The following highlights certain
provisions of the legislation that may affect us in the future.
Pharmaceutical Industry Fee
Beginning in calendar-year 2011, an annual fee will be imposed on pharmaceutical manufacturers and
importers that sell branded prescription drugs to specified government programs (e.g., Medicare
Part D, Medicare Part B, Medicaid, Department of Veterans Affairs programs, Department of Defense
programs and TRICARE). The annual fee will be allocated to companies based on their previous
calendar-year market share using sales data that the government agencies that purchase the
pharmaceuticals will provide to the Treasury Department. We participate in minimal governmental
programs that would subject us to this fee. The first $5.0 million of sales to government programs
is exempted from the fee. Our current sales volume to government programs is estimated to be less
than $5.0 million and, thus, we do not anticipate being impacted by this fee.
Medicaid Rebate Rate
We currently provide rebates for Kristalose sold to Medicaid beneficiaries. Effective January 1,
2010, the rebate increased from 11 percent to 13 percent of the average manufacturer price, or AMP.
We do not have a significant volume of Kristalose sales to Medicaid beneficiaries and, thus, the
impact on our results of operations for the three months ended March 31, 2010 was not material. We
do not expect this aspect of the legislation will have a material impact on our results of
operations in the future.
Therapeutic Discovery Project Credit
The legislation established a 50 percent nonrefundable investment tax credit for qualified
investments in qualifying therapeutic discovery projects. The provision allocates $1 billion
during the two-year period (2009-2010) for the program. The credit is available only to companies
with 250 or fewer employees. The qualified investment for any tax year is the aggregate amount of
the costs paid or incurred in that year for expenses necessary for and directly related to the
conduct of the qualifying therapeutic discovery project. We are currently evaluating our projects
to position ourselves to apply for these credits when the United States Treasury issues guidance on
how taxpayers may apply for the credits, which is expected to occur by May 21, 2010.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Please see a discussion of our critical accounting policies and significant judgments and estimates
on pages 39 through 42 in Managements discussion and analysis of our Annual Report on Form 10-K
for the year ended December 31, 2009.
9
Accounting Estimates and Judgments
The preparation of consolidated financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates, judgments and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the period. We
base our estimates on past experience and on other factors we deem reasonable given the
circumstances. Past results help form the basis of our judgments about the carrying value of assets
and liabilities that are not determined from other sources. Actual results could differ from these
estimates. These estimates, judgments and assumptions are most critical with respect to our
accounting for revenue recognition, provision for income taxes, stock-based compensation, research
and development accounting and intangible assets.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 2010, the Financial Accounting Standards Board, or FASB, issued guidance providing for the
recognition of revenue using the milestone method. Under this new guidance, an entity can
recognize revenue associated with milestones if the milestones are substantive and there is
substantive uncertainty about whether the milestone will be achieved. To meet the definition of a
substantive milestone, the consideration earned by achieving the milestone (1) would have to be
commensurate with either the level of effort required to achieve the milestone or the enhancement
in the value of the item delivered, (2) would have to relate solely to past performance and (3)
should be reasonable relative to all deliverables and payment terms in the arrangement. The new
guidance is effective for our third quarter ended September 30, 2010. Early adoption is permitted.
The adoption of this guidance is not expected to have a material impact on our consolidated
financial position or results of operations.
In October 2009, the FASB issued guidance setting forth requirements that must be met for an entity
to recognize revenue from the sale of a delivered item that is part of a multiple-element
arrangement when other items have not yet been delivered. The overall arrangement fee will be
allocated to each element based on their relative selling prices. If an entity does not have a
selling price for an element, then management must estimate the selling price. This guidance is
effective for us for all revenue arrangements entered into or materially modified after January 1,
2011. Early adoption is permitted. The future impact of adopting this standard will depend on the
nature and extent of transactions covered by this standard.
RESULTS OF OPERATIONS
Three months ended March 31, 2010 compared to the three months ended March 31, 2009
Net revenues. Net revenues for the three months ended March 31, 2010 totaled approximately $10.1
million, representing an increase of approximately $0.7 million, or 8%, over the same period in
2009, of which $0.6 million was attributable to Acetadote, with sales volume for Acetadote and
Kristalose remaining consistent for the three months ended March 31, 2010 as compared to the same
period in 2009. Also impacting our net revenues was an increase in our gross-to-net revenue
adjustments for Acetadote and Kristalose primarily due to additional fee-for-service agreements in
2010.
During the second quarter of 2009, we expanded our hospital sales force in connection with the
commercial launch of Caldolor. In addition to the expansion of our hospital sales force, we
realigned our field sales force to enable them to also promote Caldolor in the surgery-center
market. The sales forces have been working diligently in the continued launch of Caldolor while
maintaining a consistent level of focus on our existing products, which is evidenced by consistent
sales volume of Acetadote and Kristalose.
Cost of products sold. Cost of products sold as a percentage of net revenues increased slightly
from 7.8% for the three months ended March 31, 2009 to 8.5% for the same period in 2010. The
increase in cost of products sold as a percentage of net revenues was primarily due to (1) the
weakening of the U.S. dollar and (2) an increase in our gross-to-net revenue adjustments discussed
above.
10
Selling and marketing. Selling and marketing expense for the three months ended March 31, 2010
totaled approximately $5.6 million, representing an increase of approximately $1.5 million, or 35%,
over the same period in 2009. The increase was primarily due to the expansion of our hospital sales
force in the second quarter of 2009, and the resulting increases in payroll and related taxes,
travel, meals and promotional activities.
General and administrative. General and administrative expense for the three months ended March 31,
2010 totaled approximately $1.9 million, representing an increase of approximately $0.4 million, or
30%, over the same period in 2009. The increase is primarily due to additional expenses associated
with being an SEC registrant, including legal and accounting-related costs and insurance. In
addition, we incurred additional foreign currency expense associated with our products bought from
overseas suppliers.
Interest expense. Interest expense for the three months ended March 31, 2010 totaled approximately
$0.3 million, representing an increase of approximately $0.2 million as compared to the same period
in 2009. The increase is directly attributable to the increase in our term debt balance of $8.4
million as of March 31, 2010 as compared to March 31, 2009.
Income tax expense. Income tax expense for the three months ended March 31, 2010 totaled
approximately $0.2 million, representing a decrease of approximately $0.6 million, or 75%, over the
same period in 2009. As a percentage of income before income taxes, income tax expense decreased
slightly from 40.8% for the three months ended March 31, 2009 to 40.3% for the three months ended
March 31, 2010. The decrease, in dollars, was primarily due to lower earnings in the first quarter
of 2010 as compared to the same period in 2009.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Our primary sources of liquidity are cash flows provided by our operations, our borrowings and the
cash proceeds from our initial public offering of common stock that was completed in August 2009.
We believe that our internally generated cash flows, amounts available under our credit facilities
and cash on hand will be adequate to service existing debt, finance internal growth and fund
capital expenditures. As of March 31, 2010 and December 31, 2009, cash and cash equivalents was
$73.8 million and $78.7 million, respectively, working capital (current assets minus current
liabilities) was $72.9 million and $74.5 million, respectively, and our current ratio (current
assets to current liabilities) was 5.7x and 5.0x, respectively. As of March 31 2010, we had an
additional $2.2 million available to us on our line of credit.
The following table summarizes our net changes in cash and cash equivalents for the three months
ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
2009 |
|
|
|
(in thousands) |
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
519 |
|
|
$ |
(1,735 |
) |
Investing activities |
|
|
(64 |
) |
|
|
(32 |
) |
Financing activities |
|
|
(5,404 |
) |
|
|
10 |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents (1) |
|
$ |
(4,949 |
) |
|
$ |
(1,757 |
) |
|
|
|
|
|
|
|
|
|
|
(1) |
|
The sum of the individual amounts may not agree due to rounding. |
The net decrease in cash and cash equivalents of $4.9 million for the three months ended March 31,
2010 was primarily due to cash used in financing activities, which included (1) principal payments
on our term debt of approximately $4.6 million, (2) the repurchase of common stock of approximately
$1.8 million, (3) proceeds from the exercise of stock options of approximately $0.8 million and (4)
the excess tax benefit derived from the exercise of nonqualified options of approximately $0.2
million.
11
OFF-BALANCE SHEET ARRANGEMENTS
During the three months ended March 31, 2010, the Company did not engage in any off-balance sheet
arrangements.
Item 3: Quantitative and Qualitative Disclosure about Market Risk
Interest Rate Risk
We are exposed to market risk related to changes in interest rates on our revolving credit facility
and our term note payable. We do not utilize derivative financial instruments or other market
risk-sensitive instruments to manage exposure to interest rate changes. The main objective of our
cash investment activities is to preserve principal while maximizing interest income through
low-risk investments.
The interest rate related to borrowings under our revolving credit facility and term debt is a
variable rate of LIBOR plus an applicable margin, as defined in the debt agreement (5.75% at March
31, 2010). As of March 31, 2010, we had outstanding borrowings of approximately $15.3 million under
our revolving credit facility and term debt combined. If interest rates increased by 1.0%, our
annual interest expense on our borrowings would increase by approximately $0.2 million.
Exchange Rate Risk
While we operate primarily in the U.S., we are exposed to foreign currency risk. Acetadote is
manufactured by a supplier that denominates supply prices in Canadian dollars. One of our supply
agreements for Caldolor is denominated in Australian dollars. Additionally, some of our research
and development is performed abroad. As of March 31, 2010, our outstanding payables denominated in
a foreign currency totaled $1.1 million.
Currently, we do not utilize financial instruments to hedge exposure to foreign currency
fluctuations. We believe our exposure to foreign currency fluctuation is minimal as our purchases
in foreign currency have a maximum exposure of 90 days based on invoice terms, with much of the
exposure being limited to 30 days based on the due date of the invoice. Foreign currency exchange
gains and losses were not significant for the three months ended March 31, 2010. Neither a 10%
increase nor decrease from current exchange rates would have a significant effect on our operating
results or financial condition.
Item 4T: Controls and Procedures
The Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the design and operation of the Companys disclosure controls and procedures as of March 31,
2010. Based on that evaluation, they have concluded that the Companys disclosure controls and
procedures are effective to ensure that material information relating to the Company and the
Companys consolidated subsidiaries is made known to officers within these entities in order to
allow for timely decisions regarding required disclosure.
During the Companys first quarter of 2010, there have been no changes in the Companys internal
control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)).
PART II OTHER FINANCIAL INFORMATION
Item 1a: Risk Factors
Information regarding risk factors appears on pages 20 through 32 in our Annual Report on Form 10-K
for the year ended December 31, 2009 under the sections titled Risk Factors. There have been no
material changes from the risk factors previously discussed therein.
12
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Use of Proceeds
On August 10, 2009, our Registration Statement on Form S-1 (File No. 333-142535) for 5,000,000
shares of common stock was declared effective for the Companys initial public offering. As of
March 31, 2010, we have used approximately $4.2 million of the net proceeds to pay off the existing
term debt with Bank of America, approximately $5.5 million for the commercialization of Caldolor,
approximately $3.6 million for the expansion of our sales force and approximately $1.4 million for
ongoing clinical work, product development and other costs related to Caldolor. The remaining
proceeds have been invested in money market accounts. There have been no material changes in the
planned expected use of the net proceeds from the offering.
Purchases of Equity Securities
The following table summarizes the purchase of equity securities by the Company during the three
months ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Total Number |
|
|
Average |
|
|
|
of Shares (or |
|
|
Price Paid |
|
|
|
Units) |
|
|
per Share |
|
Period |
|
Purchased |
|
|
(or Unit) |
|
|
January 1 January 31 |
|
|
|
|
|
|
|
|
February 1 February 28 |
|
|
161,337 |
|
|
$ |
11.89 |
|
March 1 March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
161,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The purchase of 153,543 shares of common stock was made pursuant to a put right held by an
executive to provide for the settlement of the remaining tax liability associated with the exercise
of stock options in 2009. In addition, a shareholder tendered 7,794 existing shares held as
consideration for the exercise price of options exercised. The purchase price of these
transactions was the then-current fair market value of common stock on the date of the transaction.
Item 6: Exhibits
|
|
|
No. |
|
Description |
4.6.1#
|
|
Form of Incentive Stock Option Agreement under 2007 Long-Term Incentive Compensation Plan of
Cumberland Pharmaceuticals Inc. |
|
|
|
4.6.2#
|
|
Form of Nonstatutory Stock Option Agreement under 2007 Long-Term Incentive Compensation Plan
of Cumberland Pharmaceuticals Inc. |
|
|
|
4.7#
|
|
Form of Nonstatutory Stock Option Agreement under 2007 Directors Compensation Plan of
Cumberland Pharmaceuticals Inc. |
|
|
|
10.6.3
|
|
Fifth Amendment to Service Agreement, dated April 1, 2010, by and between Ventiv Commercial
Services, LLC and Cumberland Pharmaceuticals Inc., incorporated herein by reference from
Exhibit 10.1 of the Registrants Current Report on Form 8-K (File No. 001-33637) as filed with
the SEC on April 6, 2010 |
|
|
|
10.9.4
|
|
Fourth Amendment to Kristalose Agreement, effective January 1, 2010, by and between Inalco
S.p.A., Inalco Biochemicals, Inc., and Cumberland Pharmaceuticals Inc. |
|
|
|
10.11#
|
|
Employment Agreement effective as of January 1, 2010 by and between A.J. Kazimi and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit
to the Registrants Current Report of Form 8-K (File No. 001-33637) as filed with the SEC on
March 29, 2010. |
13
|
|
|
No. |
|
Description |
10.12#
|
|
Employment Agreement effective as of January 1, 2010 by and between Jean W. Marstiller and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit
to the Registrants Current Report of Form 8-K (File No. 001-33637) as filed with the SEC on
March 29, 2010. |
|
|
|
10.13#
|
|
Employment Agreement effective as of January 1, 2010 by and between Leo Pavliv and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit
to the Registrants Current Report of Form 8-K (File No. 001-33637) as filed with the SEC on
March 29, 2010. |
|
|
|
10.15#
|
|
Employment Agreement effective as of January 1, 2010 by and between David L. Lowrance and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit
to the Registrants Current Report of Form 8-K (File No. 001-33637) as filed with the SEC on
March 29, 2010. |
|
|
|
10.19#
|
|
2007 Directors Incentive Plan of Cumberland Pharmaceuticals Inc. |
|
|
|
10.21.2
|
|
Second Amendment to Office Lease Agreement, dated March 2, 2010, by and between 2525 West
End, LLC (successor in interest to Nashville Hines Development LLC) and Cumberland
Pharmaceuticals Inc. |
|
|
|
10.26#
|
|
Employment Agreement effective as of January 1, 2010 by and between Martin E. Cearnal and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit
to the Registrants Current Report of Form 8-K (File No. 001-33637) as filed with the SEC on
March 29, 2010. |
|
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31.1
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Certification of Chief Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2
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Certification of Chief Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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# |
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Indicates a management contract or compensatory plan. |
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Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the Quarterly Report
and submitted separately to the Securities and Exchange Commission. |
14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
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Cumberland Pharmaceuticals Inc.
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Dated: May 17, 2010 |
By: |
/s/ A. J. Kazimi |
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A. J. Kazimi |
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Chief Executive Officer |
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Dated: May 17, 2010 |
By: |
/s/
David L. Lowrance |
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David L. Lowrance |
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Vice President and
Chief Financial Officer |
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15
exv4w6w1
EXHIBIT 4.6.1
CUMBERLAND PHARMACEUTICALS INC.
2007 LONG-TERM INCENTIVE COMPENSATION PLAN
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Cumberland Pharmaceuticals Inc. (the Company), a Tennessee
corporation, hereby grants to the Participant an option (the Option) to purchase from the Company
up to the number of shares of common stock (the Shares) described in the attached Notice of Stock
Option Grant (the Notice). This grant is made subject to the terms of the Cumberland
Pharmaceuticals Inc. 2007 Long-Term Incentive Compensation Plan (the Plan) and the number of
shares granted is subject to adjustment as described in the Plan. Unless otherwise defined in this
Incentive Stock Option Agreement (the Option Agreement), capitalized terms used in this Option
Agreement shall have the same meaning as those capitalized terms in the Plan.
2. Exercise Price. If the Option is exercised, the purchase price per Share shall be
as shown in the attached Notice.
3. Method of Exercise. The Option granted under this Option Agreement shall be
exercisable from time to time, in whole or in part, by written notice as described in Section 9
hereof, accompanied by payment of the purchase price for the Shares which the Participant elects to
purchase by cash, check, or such other instrument as the Company may accept. The Company shall make
prompt delivery of such Shares, and in no event shall delivery of such shares be made more than 30
days after cash, check or other instrument is accepted by the Company in payment for the Shares,
except that if any law or regulation requires the Company to take any action with respect to the
Shares specified in such notice before issuance thereof, then the date of delivery of such Shares
shall be extended for the period necessary for the Company to take such action.
4. Vesting.
(a) The Option shall vest in accordance with the schedule set forth in the Notice. Employment
for only a portion of the vesting period, even if a substantial portion, will not entitle the
Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits
upon or following a termination of employment.
(b) Upon the Participants Employment Termination, the Option, to the extent unvested, shall
lapse and be cancelled, and be of no further force and effect, as of midnight of such date, unless
the Board resolves (under Section 4(b) of the Plan) to cancel or cause the forfeiture of the Option
at an earlier time.
(c) Upon an Acquisition Event and/or a Change in Control Event, the Option will vest to the
extent provided in the Plan.
5. Termination of Option; Restrictions on Exercise. Except as otherwise stated in this
Agreement, this Option, to the extent not previously exercised, shall expire on the expiration date
set forth in the attached Notice (the Expiration Date). The following additional provisions shall
apply to the exercise of this Option:
1
(a) Termination of Employment. Except as otherwise provided in this Option Agreement or in the
Plan, if Participants employment with the Company and its Related Entities is terminated by the
Participant or the Company, the right to exercise this Option (to the extent that it is vested in
accordance with the applicable provisions of Section 4 hereof) shall end on the earlier of
the following dates: (i) ninety (90) days after such termination or (ii) the expiration date of
this Option shown in the Notice. Except as expressly set forth otherwise herein, this Option shall
terminate in all other respects upon such termination of employment.
(b) Death of Participant. If the Participants employment with the Company is terminated due
to his/her death during the term of this Option, the Participants legal representative, or the
person so entitled under the Participants last will and testament, or under applicable intestate
laws, shall have the right to exercise this Option for the number of Shares vested under Section 4
hereof as of the time of Participants death, and such right shall expire and this Option shall
terminate on the Expiration Date.
6. Provisions of Plan. The terms and provisions of the Plan (including any written
amendments made to the Plan from time to time) are hereby incorporated herein by reference. In the
event of a conflict between the terms or provisions contained herein and the terms or provisions of
the Plan, the applicable terms and provisions of the Plan will govern and prevail; however, in the
event of a conflict regarding specific terms and provisions addressing the duration of this Option
after termination of employment, the terms and provisions of this Option will govern.
7. Tax Treatment of Option. The Participant is responsible for any federal, state,
local, or foreign tax, including income tax, social security tax, payroll tax, payment on account,
or other tax-related withholding with respect to this Option (including the grant, vesting and
exercise of the Option and the receipt of Shares and sale of Shares). The Company does not
guarantee any particular tax treatment or results in connection with the grant, vesting or exercise
of the Option.
8. Code Section 409A. This Option Agreement is intended to be exempt from
the requirements of Internal Revenue Code Section 409A (Section 409A) and regulations or other
authority under Section 409A, and not intended to provide for any deferral of compensation that
fails to satisfy the requirements of Section 409A. Notwithstanding any other provision of Option
Agreement to the contrary, it is intended that any payment or benefit provided for in this Option
Agreement that constitutes nonqualified deferred compensation, as that term is defined in Code
Section 409A, shall be provided and issued in a manner, and at such time and in such form, as
complies with the applicable requirements of Section 409A. Any provision in this Option Agreement
that would result in the imposition of excise taxes or any other taxes upon Participant under
Section 409A shall be void and without effect. To the extent permitted under Section 409A, the
parties shall reform the provision, provided such reformation shall not subject Participant to
additional tax or interest and shall not require the Company to incur any additional compensation
costs as a result of the reformation. In addition, any provision that is required to appear in this
Option Agreement for purposes of Section 409A compliance and that is not expressly set forth shall
be deemed to be set forth herein, and this Option Agreement shall be administered in all respects
as if such provision were expressly set forth. References in this
2
Option Agreement to Section 409A include rules, regulations, and guidance of general
application issued by the Department of the Treasury under Section 409A.
9. Notices. Any notice, request, instruction or other document given under this Option
Agreement shall be in writing and shall be addressed and delivered in the case of the Company, to
the Secretary of the Company at the principal office of the Company and, in the case of the
Participant, at the Participants address as set forth in the attached Notice or to such other
address as the Participant may provide in a written notice to the Company, a copy of which shall be
on file with the Secretary of the Company.
10. Governing Law. This Option Agreement shall be construed in accordance with and
governed by the law of the State of Tennessee, without giving effect to the conflict of law
provisions thereof.
11. Relation to Other Benefits. Unless otherwise provided, the benefits received by
the Participant under this Option Agreement will not be taken into account or treated as normal
salary or compensation in determining any benefits to which the Participant may be entitled under
any profit sharing, retirement, bonus, long service, or other benefit or compensation plan
maintained by the Company, including the amount of any life insurance coverage available to any
beneficiary of the Participant under any life insurance plan covering employees of the Company, or
as part of the calculation of any severance, resignation, termination, redundancy or end of service
payments.
12. Miscellaneous. The grant of this Option does not create any contractual or other
right to receive future grants of Options, or benefits in lieu of Options, even if the Participant
has a history of receiving Options or other stock awards.
13. Headings. The headings of the Sections hereof are provided for convenience only
and are not to serve as a basis for interpretation or construction, and shall not constitute a part
of this Option Agreement.
14. Signature. This Option Agreement shall be deemed executed by the Company and the
Participant upon execution by such parties of the attached Notice.
# # # #
3
FOR FUTURE USE
NOTICE OF EXERCISE
Cumberland Pharmaceuticals Inc.:
The undersigned hereby elects to exercise the purchase rights granted in the attached Option
Agreement # ___ and associated Notice of Stock Option Grant. In accordance with the terms thereof,
the undersigned elects to purchase shares of Common Stock of Cumberland Pharmaceuticals
Inc. and tenders herewith payment of the purchase price for such shares in full.
Please issue said shares of Common Stock in the name of the undersigned.
Date:
PARTICIPANT
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$
Payment Attached
exv4w6w2
EXHIBIT 4.6.2
CUMBERLAND PHARMACEUTICALS INC.
2007 LONG-TERM INCENTIVE COMPENSATION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
1. Grant of Option. Cumberland Pharmaceuticals Inc. (the Company), a Tennessee
corporation, hereby grants to the Participant an option (the Option) to purchase from the Company
up to the number of shares of common stock (the Shares) described in the attached Notice of Stock
Option Grant (the Notice). This grant is made subject to the terms of the Cumberland
Pharmaceuticals Inc. 2007 Long-Term Incentive Compensation Plan (the Plan) and the number of
shares granted is subject to adjustment as described in the Plan. Unless otherwise defined in this
Non-Statutory Stock Option Agreement (the Option Agreement), capitalized terms used in this
Option Agreement shall have the same meaning as those capitalized terms in the Plan. This Option is
not intended to qualify as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Exercise Price. If the Option is exercised, the purchase price per Share shall be
as shown in the attached Notice.
3. Method of Exercise. The Option granted under this Option Agreement shall be
exercisable from time to time, in whole or in part, by written notice as described in Section 9
hereof, accompanied by payment of the purchase price for the Shares which the Participant elects to
purchase by cash, check, or such other instrument as the Company may accept. The Company shall make
prompt delivery of such Shares, and in no event shall delivery of such shares be made more than 30
days after cash, check or other instrument is accepted by the Company in payment for the Shares,
except that if any law or regulation requires the Company to take any action with respect to the
Shares specified in such notice before issuance thereof, then the date of delivery of such Shares
shall be extended for the period necessary for the Company to take such action.
4. Vesting.
(a) The Option shall vest in accordance with the schedule set forth in the attached Notice.
Employment (or consulting) for only a portion of the vesting period, even if a substantial portion,
will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment (or consulting engagement).
(b) Upon the Participants Employment Termination (or termination of the consulting
engagement), the Option, to the extent unvested, shall lapse and be cancelled, and be of no further
force and effect, as of midnight of such date, unless the Board resolves (under Section 4(b) of the
Plan) to cancel or cause the forfeiture of the Option at an earlier time.
(c) Upon an Acquisition Event and/or a Change in Control Event, the Option will vest to the
extent provided in the Plan.
5. Termination of Option; Restrictions on Exercise. Except as otherwise stated in this
Agreement, this Option, to the extent not previously exercised, shall expire on the expiration date
1
set forth in the attached Notice (the Expiration Date). The following additional provisions
shall apply to the exercise of this Option:
(a) Termination of Employment (or Consulting Engagement). Except as otherwise provided in this
Option Agreement or in the Plan, if Participants employment with the Company and its Related
Entities is terminated by the Participant or the Company (or if the Participants consulting
engagement is terminated), the right to exercise this Option (to the extent that it is vested in
accordance with the applicable provisions of Section 4 hereof) shall end on the earlier of
the following dates: (i) ninety (90) days after such termination or (ii) the expiration date of
this Option shown in the attached Notice. Except as expressly set forth otherwise herein, this
Option shall terminate in all other respects upon such termination of employment (or consulting
engagement).
(b) Death of Participant. If the Participants employment (or consulting engagement) with the
Company is terminated due to his/her death during the term of this Option, the Participants legal
representative, or the person so entitled under the Participants last will and testament, or under
applicable intestate laws, shall have the right to exercise this Option for the number of Shares
vested under Section 4 hereof as of the time of Participants death, and such right shall expire
and this Option shall terminate on the Expiration Date.
6. Provisions of Plan. The terms and provisions of the Plan (including any written
amendments made to the Plan from time to time) are hereby incorporated herein by reference. In the
event of a conflict between the terms or provisions contained herein and the terms or provisions of
the Plan, the applicable terms and provisions of the Plan will govern and prevail; however, in the
event of a conflict regarding specific terms and provisions addressing the duration of this Option
after termination of employment (or consulting engagement), the terms and provisions of this Option
will govern.
7. Tax Treatment of Option. The Participant is responsible for any federal, state,
local, or foreign tax, including income tax, social security tax, payroll tax, payment on account,
or other tax-related withholding with respect to this Option (including the grant, vesting and
exercise of the Option and the receipt of Shares and sale of Shares). The Company does not
guarantee any particular tax treatment or results in connection with the grant, vesting or exercise
of the Option.
8. Code Section 409A. This Option Agreement is intended to be exempt from
the requirements of Internal Revenue Code Section 409A (Section 409A) and regulations or other
authority under Section 409A, and not intended to provide for any deferral of compensation that
fails to satisfy the requirements of Section 409A. Notwithstanding any other provision of Option
Agreement to the contrary, it is intended that any payment or benefit provided for in this Option
Agreement that constitutes nonqualified deferred compensation, as that term is defined in Code
Section 409A, shall be provided and issued in a manner, and at such time and in such form, as
complies with the applicable requirements of Section 409A. Any provision in this Option Agreement
that would result in the imposition of excise taxes or any other taxes upon Participant under
Section 409A shall be void and without effect. To the extent permitted under Section 409A, the
parties shall reform the provision, provided such reformation shall not subject Participant to
additional tax or interest and shall not require the Company to incur any additional compensation
costs as a result of the reformation. In addition, any provision that is required to
2
appear in this Option Agreement for purposes of Section 409A compliance and that is not
expressly set forth shall be deemed to be set forth herein, and this Option Agreement shall be
administered in all respects as if such provision were expressly set forth. References in this
Option Agreement to Section 409A include rules, regulations, and guidance of general application
issued by the Department of the Treasury under Section 409A.
9. Notices. Any notice, request, instruction or other document given under this Option
Agreement shall be in writing and shall be addressed and delivered in the case of the Company, to
the Secretary of the Company at the principal office of the Company and, in the case of the
Participant, at the Participants address as set forth in the attached Notice or to such other
address as the Participant may provide in a written notice to the Company, a copy of which shall be
on file with the Secretary of the Company.
10. Governing Law. This Option Agreement shall be construed in accordance with and
governed by the law of the State of Tennessee, without giving effect to the conflict of law
provisions thereof.
11. Relation to Other Benefits. Unless otherwise provided, the benefits received by
the Participant under this Option Agreement will not be taken into account or treated as normal
salary or compensation in determining any benefits to which the Participant may be entitled under
any profit sharing, retirement, bonus, long service, or other benefit or compensation plan
maintained by the Company, including the amount of any life insurance coverage available to any
beneficiary of the Participant under any life insurance plan covering employees of the Company, or
as part of the calculation of any severance, resignation, termination, redundancy or end of service
payments.
12. Miscellaneous. The grant of this Option does not create any contractual or other
right to receive future grants of Options, or benefits in lieu of Options, even if the Participant
has a history of receiving Options or other stock awards.
13. Headings. The headings of the Sections hereof are provided for convenience only
and are not to serve as a basis for interpretation or construction, and shall not constitute a part
of this Option Agreement.
14. Signature. This Option Agreement shall be deemed executed by the Company and the
Participant upon execution by such parties of the attached Notice.
# # # #
3
FOR FUTURE USE
NOTICE OF EXERCISE
Cumberland Pharmaceuticals Inc.:
The undersigned hereby elects to exercise the purchase rights granted in the attached Option
Agreement # ___ and associated Notice of Stock Option Grant (Non-Statutory Stock Option). In
accordance with the terms thereof, the undersigned elects to purchase shares of Common
Stock of Cumberland Pharmaceuticals Inc. and tenders herewith payment of the purchase price for
such shares in full.
Please issue said shares of Common Stock in the name of the undersigned.
Date:
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PARTICIPANT
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Signature: |
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exv4w7
EXHIBIT 4.7
CUMBERLAND PHARMACEUTICALS INC.
2007 DIRECTORS INCENTIVE PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
1. Grant of Option. Cumberland Pharmaceuticals Inc. (the Company), a Tennessee
corporation, hereby grants to the Participant an option (the Option) to purchase from the Company
up to the number of shares of common stock in the Company (the Shares) described in the attached
Notice of Stock Option Grant (the Notice). This grant is made subject to the terms of the
Cumberland Pharmaceuticals Inc. 2007 Directors Incentive Plan (the Plan) and the number of
shares granted is subject to adjustment as described in the Plan. Unless otherwise defined in this
Non-Statutory Stock Option Agreement (the Option Agreement), capitalized terms used in this
Option Agreement shall have the same meaning as those capitalized terms in the Plan. This Option is
not intended to qualify as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Exercise Price. If the Option is exercised, the purchase price per Share shall be
as shown in the attached Notice.
3. Method of Exercise. The Option shall be exercisable from time to time, in whole or
in part, by written notice as described in Section 9 hereof, accompanied by payment of the purchase
price for the Shares which the Participant elects to purchase by cash, check, or such other
instrument as the Company may accept under the terms of the Plan. The Company shall make prompt
delivery of such Shares, and in no event shall delivery of such shares be made more than 30 days
after cash, check or other instrument is accepted by the Company in payment for the Shares, except
that if any law or regulation requires the Company to take any action with respect to the Shares
specified in such notice before issuance thereof, then the date of delivery of such Shares shall be
extended for the period necessary for the Company to take such action.
4. Vesting.
(a) The Option shall vest in accordance with the schedule set forth in the Notice. Service as
a member of the Companys Board of Directors (a Director) for only a portion of the vesting
period, even if a substantial portion, will not entitle the Participant to any proportionate
vesting or avoid or mitigate a termination of rights and benefits upon or following a termination
of service as Director.
(b) Upon termination of Participants service as Director, the Option, to the extent unvested,
shall lapse and be cancelled, and be of no further force and effect, as of midnight of such date.
(c) Upon a Change of Control Event, the Option will vest to the extent provided in Section 9.2
of the Plan.
5. Termination of Option; Restrictions on Exercise. Except as otherwise stated in this
Agreement, this Option, to the extent not previously exercised, shall expire on the expiration
1
date set forth in the attached Notice (the Expiration Date). The following additional
provisions shall apply to the exercise of this Option:
(a) Termination of Service as Director. If Participants service as Director is terminated for
any reason, the right to exercise this Option (to the extent that it is vested in accordance with
the applicable provisions of Section 4 hereof) shall end on the earlier of the following
dates: (i) two (2) years after the date of such termination or (ii) the Expiration Date. Except as
expressly set forth otherwise herein, this Option shall terminate in all other respects upon such
termination of Participants service as Director.
(b) Death of Participant. If the Participants service as Director is terminated due to
his/her death during the term of this Option, the Participants legal representative, or the person
so entitled under the Participants last will and testament, or under applicable intestate laws,
shall have the right to exercise this Option for the number of Shares vested under Section 4 hereof
as of the time of Participants death, and such right shall expire and this Option shall terminate
on the Expiration Date.
6. Provisions of Plan. The terms and provisions of the Plan (including any written
amendments made to the Plan from time to time) are hereby incorporated herein by reference. In the
event of a conflict between the terms or provisions contained herein and the terms or provisions of
the Plan, the applicable terms and provisions of the Plan will govern and prevail; however, in the
event of a conflict regarding specific terms and provisions addressing the duration of this Option
after termination of Participants service as Director, the terms and provisions of this Option
will govern. Participant is advised to consult his or her tax adviser concerning tax issues
regarding the Option.
7. Tax Treatment of Option. The Participant is responsible for any federal, state,
local, or foreign tax, including income tax, social security tax, payroll tax, payment on account,
or other tax-related withholding with respect to this Option (including the grant, vesting and
exercise of the Option and the receipt of Shares and sale of Shares). The Company does not
guarantee any particular tax treatment or results in connection with the grant, vesting or exercise
of the Option.
8. Code Section 409A. This Option Agreement is intended to be exempt from the
requirements of Internal Revenue Code Section 409A (Section 409A) and regulations or other
authority under Section 409A, and not intended to provide for any deferral of compensation that
fails to satisfy the requirements of Section 409A. Notwithstanding any other provision of Option
Agreement to the contrary, it is intended that any payment or benefit provided for in this Option
Agreement that constitutes nonqualified deferred compensation, as that term is defined in Code
Section 409A, shall be provided and issued in a manner, and at such time and in such form, as
complies with the applicable requirements of Section 409A. Any provision in this Option Agreement
that would result in the imposition of excise taxes or any other taxes upon Participant under
Section 409A shall be void and without effect. To the extent permitted under Section 409A, the
parties shall reform the provision, provided such reformation shall not subject Participant to
additional tax or interest and shall not require the Company to incur any additional compensation
costs as a result of the reformation. In addition, any provision that is required to appear in this
Option Agreement for purposes of Section 409A compliance and that is not
2
expressly set forth shall be deemed to be set forth herein, and this Option Agreement shall be
administered in all respects as if such provision were expressly set forth. References in this
Option Agreement to Section 409A include rules, regulations, and guidance of general application
issued by the Department of the Treasury under Section 409A.
9. Notices. Any notice, request, instruction or other document given under this Option
Agreement shall be in writing and shall be addressed and delivered in the case of the Company, to
the Secretary of the Company at the principal office of the Company and, in the case of the
Participant, at the Participants address as set forth in the attached Notice or to such other
address as the Participant may provide in a written notice to the Company, a copy of which shall be
on file with the Secretary of the Company.
10. Governing Law. This Option Agreement shall be construed in accordance with and
governed by the law of the State of Tennessee, without giving effect to the conflict of law
provisions thereof.
11. Miscellaneous. The grant of this Option does not create any contractual or other
right to receive future grants of Options, or benefits in lieu of Options, even if the Participant
has a history of receiving Options or other stock awards. The granting of this Option and the
vesting schedule set forth in the Notice do not constitute a promise, either express or implied, of
continued engagement as a Director and shall not interfere with the Companys right or the
Participants right to terminate Participants directorship at any time, with or without cause.
12. Headings. The headings of the Sections hereof are provided for convenience only
and are not to serve as a basis for interpretation or construction, and shall not constitute a part
of this Option Agreement.
13. Signature. This Option Agreement shall be deemed executed by the Company and the
Participant upon execution by such parties of the attached Notice.
3
FOR FUTURE USE
NOTICE OF EXERCISE
Cumberland Pharmaceuticals Inc.:
The undersigned hereby elects to exercise the purchase rights granted in the attached Option
Agreement # ___ and associated Notice of Stock Option Grant. In accordance with the terms
thereof, the undersigned elects to purchase shares of common stock of Cumberland
Pharmaceuticals Inc. and tenders herewith payment of the purchase price for such shares in full.
Please issue said shares of common stock in the name of the undersigned.
Date:
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exv10w9w4
EXHIBIT 10.9.4
*Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment which has been filed separately with the SEC.
FOURTH AMENDMENT TO
KRISTALOSE AGREEMENT
This Fourth Amendment to Kristalose Agreement (the Fourth Amendment) is effective this
1st day of January, 2010 by and between Inalco S.P.A. (Inalco Italy), Inalco
Biochemicals, Inc. (Inalco U.S.) and Cumberland Pharmaceuticals Inc. (Cumberland). Inalco
Italy and Inalco U.S. are hereinafter collectively referred to as Inalco.
WHEREAS, Inalco and Cumberland entered into a certain Kristalose Agreement in April 2006 (the
Original Agreement) and subsequently entered into a certain Amendment to the Kristalose Agreement
on April 3, 2008 (First Amendment), a certain Second Amendment to the Kristalose Agreement on
July 1, 2008 (Second Amendment), and a certain Third Amendment to the Kristalose Agreement on
April 6, 2009 (Third Amendment) (The Original Agreement, First Amendment, Second Amendment, and
Third Amendment as amended hereby, are collectively referred to herein as the Kristalose
Agreement);
WHEREAS, Inalco and Cumberland desire to further amend the Kristalose Agreement in certain
respects as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements hereinafter
set forth, and for other good and valuable consideration, the parties hereto agree as follows:
1. Amendment of Section 4.3. Effective the date of this Amendment, Section 4.3
(Payment for Product) of the Kristalose Agreement is hereby further amended to reflect a one-time
price increase by deleting [***] and substituting in lieu thereof [***] and by deleting [***]
and substituting in lieu thereof [***].
2. Capitalized terms not defined in this Fourth Amendment shall have the meaning set forth in
the Kristalose Agreement.
3. It is mutually agreed that all covenants, conditions and agreements set forth in the
Kristalose Agreement (as amended hereby) shall remain binding upon the parties and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be executed by
their duly authorized representatives effective as of the day and year first written above.
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INALCO S.P.A
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By: |
/s/ Giovanni Cipolletti
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Name: |
Givanni Cipolletti |
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Its: Legal Representative |
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INALCO BIOCHEMICALS, INC.
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By: |
/s/ E. Lowe
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Name: |
E. Lowe |
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Its: |
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CUMBERLAND PHARMACEUTICALS INC.
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By: |
/s/ A.J. Kazimi
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Name: |
A.J. Kazimi |
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Its: Chief Executive Officer |
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2
exv10w19
EXHIBIT 10.19
2007 DIRECTORS INCENTIVE PLAN
CONFIDENTIAL
CUMBERLAND PHARMACEUTICALS INC.
2007 DIRECTORS INCENTIVE PLAN
Table of Contents
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1. Purpose of the Plan |
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1 |
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2. Definitions |
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1 |
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3. Shares of Stock Subject to the Plan |
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2 |
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4. Administration of the Plan |
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3 |
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5. Terms and Conditions of Options |
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3 |
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6. Terms and Conditions of Restricted Stock Grants |
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4 |
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7. Terms and Conditions of Stock Grant |
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5 |
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8. Adjustment Provisions |
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5 |
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9. Change of Control |
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5 |
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10. General Provisions |
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7 |
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11. Amendments, Discontinuance or Termination of the Plan |
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9 |
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12. Governing Law |
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9 |
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13. Additional Requirements |
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9 |
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14. Lockup Agreement |
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10 |
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15. Limitation of Liability |
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10 |
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16. Unfunded Status of Incentives |
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10 |
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17. Nonexclusivity of the Plan |
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10 |
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18. Successors and Assigns |
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10 |
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19. No Fractional Shares |
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11 |
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20. Severability |
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11 |
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21. Effective Date of Plan |
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11 |
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i
CUMBERLAND PHARMACEUTICALS INC.
2007 DIRECTORS INCENTIVE PLAN
1. Purpose of the Plan
The purpose of the Cumberland Pharmaceuticals Inc. 2007 Directors Incentive Plan is to
promote the interests of the Company and its shareholders by strengthening the Companys ability to
attract, motivate and retain Directors of experience and ability, and to encourage the highest
level of performance by providing Directors with a proprietary interest in the Companys financial
success and growth. The Plan supersedes and replaces all provisions pertaining to grants of stock
options to Directors contained in the Cumberland Pharmaceuticals Inc. 1999 Stock Option Plan (the
Original Incentive Plan) but does not impair the vesting or exercise of any option granted under
the Original Incentive Plan prior to the date that this Plan became effective.
2. Definitions
2.1 Affiliate shall have the meaning assigned to the term pursuant to Rule 12b-2 as
promulgated under the Exchange Act.
2.2 Award means an award under the Plan of Options, Restricted Stock , or a Stock Grant.
2.3 Board means the Board of Directors of the Company.
2.4 Committee means the Compensation Committee of the Board or a subcommittee thereof. The
Committee shall consist of not fewer than two members of the Board, each of whom shall (a) qualify
as a non-employee director under Rule 16b-3 promulgated under the Securities Exchange Act of
1934, or any successor rule, and (b) qualify as an outside director under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code), and the regulations promulgated thereunder
(collectively, Section 162(m)).
2.5 Company means Cumberland Pharmaceuticals Inc.
2.6 Director means a member of the Board who is not employed by the Company or any of its
Affiliates or a joint venture of the company or one of its Affiliates.
2.7 Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
2.8 Fair Market Value means: (i) if the Stock or other security is listed on an established
stock exchange or any automated quotation system that provides sale quotations, the closing sale
price for a share thereof on such exchange or quotation system on the applicable date, and if
shares are not traded on such day, on the next preceding trading date, (ii) if the Stock or other
security is not listed on any exchange or quotation system, but bid and asked prices are quoted and
published, the mean between the quoted bid and asked prices on the applicable date,
1
and if bid and asked prices are not available on such day, on the next preceding day on which
such prices were available, and (iii) if the Stock or other security is not regularly quoted, the
fair market value of a share thereof on the applicable date as established by the Committee in good
faith. For purposes of Awards effective as of the effective date of the Companys initial public
offering, Fair Market Value of the Stock shall be the price at which such stock is offered to the
public in the Companys initial public offering.
2.9 Option means a stock option that does not satisfy the requirements of Section 422 of
the Code to be an incentive stock option.
2.10 Participant means each Director (as defined in Section 2.6).
2.11 Plan means the Cumberland Pharmaceuticals Inc. 2007 Directors Incentive Plan as set
forth herein and as amended, restated, supplemented or otherwise modified from time to time.
2.12 Restriction Period means the period of time, established by the Committee in
connection with an award of Restricted Stock, during which the shares of Restricted Stock are
subject to a Risk of Forfeiture described in the applicable award agreement.
2.13 Risk of Forfeiture means a limitation on the right of the Participant to retain
Restricted Stock, including a right in the Company to reacquire shares of Restricted Stock at less
than their then Fair Market Value, arising because of the occurrence or non-occurrence of specified
events or conditions.
2.14 Restricted Stock shall mean Stock of the Company awarded to a Director under this Plan
from time to time in the sole discretion of the Committee subject to various restrictions, vesting
schedules and such other conditions on ownership as the Committee shall determine.
2.15 Stock shall mean common stock of the Company.
2.16 Stock Grant shall mean an award of Stock of the Company granted in full and
unrestricted ownership from time to time in the sole discretion of the Committee.
3. Shares of Stock Subject to the Plan
3.1 The Company may issue up to 125,000 shares of Stock, subject to the adjustment provisions
of Section 8, in Awards granted hereunder. Such shares may be either authorized but unissued
shares or shares issued and thereafter acquired by the Company.
3.2 To the extent any shares of Stock: (i) subject to an Option are not issued because the
Option is forfeited or cancelled or (ii) subject to a Restricted Stock Grant are redeemed,
forfeited, cancelled, repurchased or otherwise retained by the Company, such shares shall again be
available for grant pursuant to the Plan. If the exercise price of any Option granted under this
Plan is satisfied by tendering shares of Stock to the Company (by either actual delivery or by
attestation), only the number of shares of Stock issued net of the shares of Stock tendered shall
2
be deemed delivered for purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.
4. Administration of the Plan
4.1 The Plan shall be administered by the Committee, which shall have the power to interpret
the Plan and, subject to its provisions, to prescribe, amend and rescind Plan rules and to make all
other determinations necessary for the Plans administration.
4.2 All action taken by the Committee in the administration and interpretation of the Plan
shall be final and binding upon all parties. No member of the Committee will be liable for any
action or determination made in good faith by the Committee with respect to the Plan or any Option.
4.3 The Committee may grant Options or make Restricted Stock Grants or Stock Grants in its
sole discretion. No member of the Committee may vote on an Award to himself or herself.
5. Terms and Conditions of Options
5.1 Unless exercisability is accelerated as provided in Section 9.2 hereof, each Option shall
become exercisable on the date it vests.
5.2 Unless terminated earlier as provided in Section 5.5, the Options shall expire in up to
ten years following the date of grant.
5.3 The exercise price of each Option granted to Directors shall be equal to the Fair Market
Value, as defined herein, of a share of Stock on the date of grant.
5.4 The Committee shall determine the vesting period for Options granted under this Plan and
shall specify such vesting period in writing in making an award of an Option under this Plan.
However, should the Committee award Options under this Plan without specifying a vesting period,
then the vesting period shall be five years, with 20% of the Options to vest on each anniversary of
the date of grant until all Options granted hereunder are vested.
5.5 If a Director ceases to serve on the Board for any reason, the Options granted hereunder
must be exercised, to the extent otherwise exercisable at the time of termination of his or her
Board service, within two years from the date of termination of Board service. Any Options awarded
to a Director and not yet vested at the time of termination of his or her Board service shall, be
forfeited, automatically cancelled and of no further force and effect. Such forfeiture and
automatic cancellation shall take effect at midnight on the date that the Directors Board service
is terminated.
5.6 An Option may be exercised by giving written notice , specifying the number of shares of
Stock to be purchased. The procedure for exercise of each Option awarded under this
Plan will be set forth in the granting document for such Option. The Committee may, from time to
time, amend the exercise procedures, in which case Participants will be notified of such
3
revised procedures. The exercise notice shall be accompanied by tender of the full purchase price for such
shares, which may be paid or satisfied by (a) cash; (b) check; (c) delivery of shares of Stock,
which shares shall be valued for this purpose at the Fair Market Value on the business day
immediately preceding the date such Option is exercised and, unless otherwise determined by the
Committee, shall have been held by the optionee for at least six months; or (d) in such other
manner as may be authorized from time to time by the Committee. All such payments shall be made or
denominated in United States dollars. In the case of delivery of an uncertified check, no shares
shall be issued until the check has been paid in full. Prior to the issuance of shares of Stock
upon the exercise of an Option, a Participant shall have no rights as a shareholder with respect to
such Option.
5.7 Except for adjustments pursuant to Section 8 or actions permitted to be taken by the
Board under Section 9 in the event of a Change of Control, unless approved by the shareholders of
the Company, (a) the exercise price for any outstanding Option granted under this Plan may not be
decreased after the date of grant and (b) an outstanding Option that has been granted under this
Plan may not, as of any date that such Option has a per share exercise price that is less than the
then current Fair Market Value of a share of Stock, be surrendered to the Company as consideration
for the grant of a new Option with a lower exercise price or any payment of cash or Stock. No
Option or other Award made under this Plan may ever under any circumstances be backdated.
5.8 Upon approval of the Committee, the Company may repurchase all or a portion of a
previously granted Option from a Participant by mutual agreement before such option has been
exercised by payment to the Participant of cash or Stock or a combination thereof with a value
equal to the amount per share by which: (a) the Fair Market Value of the Stock subject to the
Option on the business day immediately preceding the date of purchase exceeds (b) the exercise
price.
5.9 Any person who receives a grant of Options under this Plan may be required, at the time
the Options are awarded, to sign a consent allowing the Board, in its discretion, to cancel the
Options if the Fair Market Value of the Stock decreases such that the exercise price of the Options
is significantly above the Fair Market Value of the Stock.
6. Terms and Conditions of Restricted Stock Grants
The Committee may award Restricted Stock to a Director. All shares of Restricted Stock
granted shall be subject to a Risk of Forfeiture as determined by the Committee, and shall
additionally be subject to the following terms and conditions and such other terms and conditions
as the Committee may prescribe.
6.1 Requirement of Board Service. A grantee of Restricted Stock must remain on the
Board during the Restriction Period in order to retain the shares of Restricted Stock. If the
Director leaves the Board prior to the end of the Restriction Period, the Restricted Stock award
shall terminate and the shares of Restricted Stock shall be returned immediately to the Company,
effective at midnight on the date the Directors Board service ends.
4
6.2 Restrictions on Transfer and Legend on Stock Certificates. During the
Restriction Period, the Director may not sell, assign, transfer, pledge, or otherwise dispose of
the shares of Restricted Stock except as expressly permitted in this Plan. Each certificate for
shares of Restricted Stock issued hereunder shall contain a legend giving appropriate notice of the
restrictions in the grant.
6.3 Escrow Agreement. The Committee may require the grantee to enter into an escrow
agreement providing that the certificates representing the Restricted Stock award will remain in
the physical custody of an escrow holder until all restrictions are removed or expire.
6.4 Lapse of Restrictions. In the document granting Restricted Stock, the Committee
will specify the Restriction Period. If no Restriction Period is specified in a document granting
Restricted Stock, then twenty percent (20%) of the Restricted Stock awarded under that granting
document will become free of restriction on each anniversary date of the grant for five (5) years.
All restrictions imposed on the Restricted Stock shall lapse upon the expiration of the Restriction
Period if the conditions of the grant have been met. The Director shall then be entitled to have
the legend removed from the certificates.
6.5 Dividends and Voting. Dividends declared on the Stock during the Restriction
Period will be accumulated by the Company and paid to the Director if he becomes owner of the such
stock without restriction. If the Restricted Stock reverts to the Company, then the Company will
become the owner of all dividends accumulated in accordance with the preceding sentence. The
Director will be entitled to vote all shares of Restricted Stock during the Restriction Period.
7. Terms and Conditions of Stock Grant
The Committee may make a Stock Grant to a Director under this Plan on such terms and
conditions as it sees fit, subject to the provisions of all applicable laws and regulations.
8. Adjustment Provisions
In the event of any recapitalization, reclassification, stock dividend, stock split,
combination of shares or other change in the Stock, the Committee shall equitably adjust all
limitations on numbers of shares of Stock provided in this Plan, and the number of shares subject
to outstanding Awards, with such adjustments made in proportion to the change in outstanding shares
of Stock. In addition, in the event of any such change in the Stock, the Committee shall make any
other adjustment that it determines to be equitable, including without limitation adjustments to
the exercise price of any Option in order to provide Participants with the same relative rights
before and after such adjustment.
9. Change of Control
9.1 Change of Control Event shall mean:
(a) any merger or consolidation that results in the voting securities of the Company
outstanding immediately prior thereto representing (either by remaining outstanding or
5
by being
converted into voting securities of the surviving or acquiring entity) less than 50% of the
combined voting power of the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; or
(b) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a Person) of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 51% or more of either (A) the then-outstanding shares of Stock
of the Company (the Outstanding Company Stock), or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in the election of
Directors (the Outstanding Company Voting Securities). However, for purposes of this subsection
(b), the following acquisitions shall not give rise to a Change of Control event: (A) any
acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the Company or an
Affiliate, or (D) any acquisition by any Person pursuant to a transaction that results in all or
substantially all of the individuals and entities who were the beneficial owners of 50 percent or
more of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior
to such transaction beneficially owning, directly or indirectly, more than 50% of the
then-outstanding shares of Stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, respectively, of the resulting
or acquiring Person in such transaction (which shall include, without limitation, a Person that as
a result of such transaction owns the Company or substantially all of the Companys assets either
directly or through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such transaction, of the Outstanding Company Stock and Outstanding
Company Voting Securities, respectively;
(c) any sale of all or substantially all of the assets of the Company; or
(d) the complete liquidation of the Company.
9.2 Effect on Options. Upon the occurrence of a Change in Control Event, each
outstanding Option shall vest in full and shall become immediately exercisable. Any agreement with
respect to a Change in Control Event must provide that all outstanding Options shall be assumed, or
equivalent options shall be substituted, by the acquiring or succeeding corporation (or an
Affiliate thereof), if applicable. For purposes of this section, an Option shall be considered to
be assumed if, following consummation of the Change in Control Event, the Option confers the right
to purchase, for each share of Stock subject to the Option immediately prior to the consummation of
the Change in Control Event, the consideration (whether cash, securities or other property)
received as a result of the Change in Control Event by holders of Stock for each share of Stock
held immediately prior to the consummation of the Change in Control Event (and if holders were
offered a choice of consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Stock). However, if the consideration received as a
result of the Change in Control Event is not solely Stock of the acquiring or succeeding
entity (or an Affiliate thereof), the Company may, with the consent of the acquiring or
succeedingentity, provide for the consideration to be received upon the exercise of Options to
consist solely of Stock of the acquiring or succeeding entity (or an Affiliate thereof) equivalent
in Fair Market
6
Value to the per share consideration received by holders of outstanding shares of
Stock as a result of the Change in Control Event. Notwithstanding the foregoing, if the acquiring
or succeeding entity (or an Affiliate thereof), does not agree to assume such Options, or
substitute equivalent options for such Options, then the Board shall, upon written notice to the
Option holders, provide that all then unexercised Options will become exercisable in full as of a
specified time prior to the Change in Control Event and will terminate immediately prior to the
consummation of such Change in Control Event, except to the extent exercised by the Option holders
before the consummation of such Change in Control Event. However, in the event of an Change in
Control Event under the terms of which holders of Stock will receive upon consummation thereof a
cash payment for each share of Stock surrendered pursuant to such Change in Control Event (the
Acquisition Price), then the Board may instead provide that all outstanding Options shall
terminate upon consummation of such Change in Control Event and that each Option holder
shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the
Acquisition Price multiplied by the number of shares of Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options.
9.3 Effect on Restricted Stock. Upon the occurrence of a Change in Control Event, all
restrictions and conditions on all Restricted Stock awards then outstanding shall automatically be
deemed terminated or satisfied and all such Restricted Stock shall be fully vested.
10. General Provisions
10.1 Nothing in the Plan or in any instrument executed pursuant to the Plan will confer upon
any Participant any right to continue as a Director.
10.2 No shares of Stock will be issued or transferred pursuant to an Option unless and until
all then-applicable requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon
which the Stock may be listed, have been fully met. As a condition precedent to the issuance of
shares pursuant to the exercise of an Option, the Company may require the Participant to take any
reasonable action to meet such requirements.
10.3 No Participant and no Person claiming under or through such Participant will have any
right, title or interest in or to any shares of Stock allocated or reserved under the Plan or
subject to any Option except as to such shares of Stock, if any, that have been issued or
transferred to such Participant.
10.4 No Options or Restricted Stock awards granted hereunder may be transferred, pledged,
assigned or otherwise encumbered by Director except:
(a) by will;
(b) by the laws of descent and distribution; or
7
(c) if permitted by the Committee and so provided in the stock option agreement or an
amendment thereto, (i) to Immediate Family Members (as defined below), (ii) to a partnership in
which the Participant and/or the Participants Immediate Family Members, or entities in which the
Participant and/or the Participants Immediate Family Members are the owners, members or
beneficiaries, as appropriate, are the sole partners, (iii) to a limited liability company in which
the Participant and/or the Participants Immediate Family Members, or entities in which the
Participant and/or the Participants Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the sole members, or (iv) to a trust for the benefit solely of
the Participant and/or the Participants Immediate Family Members. Immediate Family Members means
the spouses and natural or adopted children or grandchildren of the Participants, the spouses of
such children and grandchildren, and the siblings and parents of the Participants.
Any attempted assignment, transfer, pledge, hypothecation or other disposition of an Option or
Restricted Stock grant or levy of attachment, or similar process upon an Option or Restricted Stock
award not specifically permitted herein, shall be null and void and without effect.
10.5 Each Award made under this Plan will be set forth in a written agreement that includes
terms and conditions consistent with the Plan.
10.6 Anything in the Plan to the contrary notwithstanding: (a) the Company may, if it shall
determine it necessary or desirable for any reason, at the time of grant of any Award or the
issuance of any shares of Stock pursuant to any Option, require the recipient of the Award, as a
condition to the receipt thereof or to the receipt of shares of Stock issued pursuant thereto, to
deliver to the Company a written representation of present intention to acquire the Award or the
shares of Stock issued pursuant thereto for his or her own account for investment and not for
distribution; and (b) if at any time the Company further determines, in its sole discretion, that
the listing, registration or qualification (or any updating of any such document) of any Award or
the shares of Stock issuable pursuant thereto is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection with the grant of any
Award, the issuance of shares of Stock pursuant thereto, or the removal of any restrictions imposed
on such shares, such Award shall not be granted or such shares of Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Company.
10.7 Any definition set forth in this Plan of the singular form of a term shall also apply to
the plural form of that term, and any definition of the plural form of a term shall also apply to
the singular form of the term. Any reference in this Plan to one gender shall also include the
other gender.
8
11. Amendments, Discontinuance or Termination of the Plan
11.1 The Board may amend or discontinue the Plan at any time; provided, however, that no such
amendment may:
(a) without the approval of the shareholders, (i) increase, subject to adjustments permitted
herein, the maximum number of shares of Stock that may be issued through the Plan, (ii) materially
increase the benefits accruing to Participants under the Plan, (iii) materially expand the classes
of persons eligible to participate in the Plan, or (iv) amend Section 5.7 to permit repricing of
Options; or
(b) materially impair, without the consent of the recipient, an Option previously granted or a
Restricted Stock grant previously made, except that the Company retains all rights under Section 8
hereof.
11.2
The Plan shall automatically terminate on the earlier of the following dates:
(1) ten years from the date that the Plan becomes effective, or (2) at such time as no shares of
Stock remain available for issuance through the Plan. No termination of the Plan will affect the
terms of any outstanding Options or shares of Restricted Stock.
12. Governing Law
The provisions of this Plan and all awards made under this Plan shall be governed by and
interpreted in accordance with the law of the State of Tennessee, without regard to applicable
conflicts of law principles.
13. Additional Requirements
Anything in the Plan to the contrary notwithstanding: (a) the Company may, if it shall
determine it necessary or desirable for any reason, at the time of grant of any Incentive or the
issuance of any shares of Stock pursuant to any Option, require the recipient of the Incentive, as
a condition to the receipt thereof or to the receipt of shares of Stock issued pursuant thereto, to
deliver to the Company a written representation of present intention to acquire the Incentive or
the shares of Stock issued pursuant thereto for his or her own account for investment and not for
distribution; and (b) if at any time the Company further determines, in its sole discretion, that
the listing, registration or qualification (or any updating of any such document) of any Incentive
or the shares of Stock issuable pursuant thereto is necessary on any securities exchange or under
any federal or state securities or blue sky law, or that the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in connection with the
grant of any Incentive, the issuance of shares of Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be granted or such shares of Stock
shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in
part, unless such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
9
14. Lockup Agreement
The Committee may in its discretion require that upon request of the Company or the
underwriters managing any underwritten offering of the Companys securities, the Participant shall
agree in writing that for a period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company, the Participant will not sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any shares of Stock issued or
issuable pursuant to the exercise of such Incentive, without the prior written consent of the
Company or such underwriters, as the case may be.
15. Limitation of Liability
Each member of the Committee shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any officer or other employee of the Company or any
Affiliate, the Companys independent certified public accountants, or other professional retained
by the Company to assist in the administration of the Plan. No member of the Committee, nor any
officer, director or employee of the Company acting on behalf of the Committee, shall be personally
liable for any action, determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Committee and any officer, director or employee of the Company
acting on behalf of the Committee shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination, or interpretation.
16. Unfunded Status of Incentives
The Plan is intended to constitute an unfunded plan for incentive compensation. With
respect to any payments not yet made to a Participant pursuant to an Incentive, nothing contained
in the Plan or any Incentive shall give any such Participant any rights that are greater than those
of a general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the Companys obligations under
the Plan to deliver cash, shares of Stock, other Incentives, or other property pursuant to any
Incentive, which trusts or other arrangements shall be consistent with the unfunded status of the
Plan unless the Committee otherwise determines with the consent of each affected Participant.
17. Nonexclusivity of the Plan
Neither the adoption of the Plan by the Board nor its submission to the stockholders of the
Company for approval shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including, without limitation,
arrangements granting incentives otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.
18. Successors and Assigns
The Plan shall be binding on all successors and assigns of the Company and a Participant,
including, without limitation, the estate of such Participant and the executor, administrator or
10
trustee of such estate, and any receiver or trustee in bankruptcy or representative of the
Participants creditors.
19. No Fractional Shares
No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any
Incentive, including on account of any action under Section 6(d) of the Plan. In lieu of such
fractional shares, the Committee shall determine, in its discretion, whether cash, other
Incentives, scrip certificates (which shall be in a form and have such terms and conditions as the
Committee in its discretion shall prescribe) or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto shall be forfeited
or otherwise eliminated.
20. Severability
If any provision of the Plan is or becomes or is deemed invalid, illegal or unenforceable in
any jurisdiction, or would disqualify the Plan or any Incentive under any law deemed applicable by
the Committee, such provision shall be construed or deemed amended to conform to applicable laws or
if it cannot be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan
shall remain in full force and effect.
21. Effective Date of Plan
The Plan shall become effective upon adoption by the Board, subject to approval by the holders
of a majority of the shares of Stock and the Companys Series A Preferred Stock.
IN WITNESS WHEREOF, the undersigned Corporate Secretary of Cumberland Pharmaceuticals Inc.
hereby certifies that the foregoing Cumberland Pharmaceuticals Inc. 2007 Directors Incentive Plan
was (i) approved by the Board in a Unanimous Consent of Directors dated as of January 16, 2007, and
(ii) approved by majority of the holders of all of the Companys outstanding common and preferred
stock.
Dated: April 18, 2007 (Section 5.2 amended, effective March 22, 2010)
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/s/ Jean W. Marstiller
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Jean W. Marstiller |
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Senior Vice President, Administrative Services
and Corporate Secretary |
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11
exv10w21w2
EXHIBIT 10.21.2
*Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment which has been filed separately with the SEC.
SECOND AMENDMENT TO OFFICE LEASE AGREEMENT
THIS SECOND AMENDMENT TO OFFICE LEASE AGREEMENT (this Amendment) is entered into between
2525 WEST END, LLC, a Delaware limited liability company (Landlord), and CUMBERLAND
PHARMACEUTICALS INC., a Tennessee corporation (Tenant), with reference to the following:
A. Nashville Hines Development, LLC (predecessor-in-interest to Landlord) and Tenant entered
into that certain Office Lease Agreement dated September 10, 2005; Landlord and Tenant entered into
that certain First Amendment to Office Lease Agreement dated April 25, 2008 (as amended, the
Lease) currently covering approximately 9,291 RSF on the ninth (9th) floor (the Original
Premises) of 2525 West End Avenue, Nashville, Tennessee (the Building).
B. Landlord and Tenant now desire to further amend the Lease as set forth below. Unless
otherwise expressly provided in this Amendment, capitalized terms used in this Amendment shall have
the same meanings as in the Lease.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Expansion Space. Landlord leases to Tenant and Tenant leases from Landlord: (a) approximately
14,477 additional RSF located on the ninth (9th) floor of the Building (the Second Expansion
Space) as shown on the attached Exhibit A, which is incorporated into this Amendment for
all purposes, and (b) approximately 1,755 additional RSF located on the ninth (9th) floor of the
Building (the Third Expansion Space) as shown on the attached Exhibit A. The term
Premises as used in the Lease means and includes approximately 25,523 RSF, being the sum of the
RSF of the Original Premises (9,291 RSF), the Second Expansion Space and the Third Expansion Space.
The lease of the Second Expansion Space and Third Expansion Space is subject to all of the terms
and conditions of the Lease currently in effect, except as modified in this Amendment. Tenant
acknowledges that it has no further expansion or preferential rights or options under the Lease.
2. Second Extension Period. The Term of the Lease for the entire Premises shall be extended until
October 31, 2016. Tenant acknowledges that it has no further extension or renewal rights or options
under the Lease except as set forth in Rider 1 attached to this Amendment.
3. Base Rental.
(a) Commencing on April 1, 2010, and continuing through the Second Extension Period, Tenant
shall, at the time and place and in the manner provided in the Lease, pay to Landlord as Base
Rental for the Third Expansion Space the amounts set forth in the following rent schedule, plus any
applicable tax thereon:
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PERIOD |
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Rate |
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Monthly Base Rental |
April 1, 2010 through May 31, 2010
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$ [***]
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$ [***] |
June 1, 2010 through October 31, 2010
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$ [***]
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$ [***] |
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(b) |
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Notwithstanding anything in the Lease to the contrary, commencing on November 1, 2010, and
continuing through the Second Extension Period, Tenant shall, at the time and place and in the
manner provided in the Lease, pay to Landlord as Base Rental for the Original Premises, the Second
Expansion Space and the Third Expansion Space the amounts set forth in the following rent schedule,
plus any applicable tax thereon: |
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PERIOD |
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Rate |
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Monthly Base Rental |
November 1, 2010 through December 31, 2011
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$ [***]
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$ [***] |
January 1, 2012 through December 31, 2012
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$ [***]
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$ [***] |
January 1, 2013 through December 31, 2013
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$ [***]
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$ [***] |
January 1, 2014 through December 31, 2014
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$ [***]
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$ [***] |
January 1, 2015 through December 31, 2015
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$ [***]
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$ [***] |
January 1, 2016 through October 31, 2016
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$ [***]
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$ [***] |
4. Additional Rent. Commencing on April 1, 2010 and continuing through the Second Extension
Period, Tenants Additional Rental payable under Section 2.3 of the Lease shall be increased to
take the Third Expansion Space into account, and commencing November 1, 2010 and continuing through
the Second Extension Period, Tenants Additional Rental shall be increased to take the Second
Expansion Space into account. Commencing on November 1, 2010, the Expense Stop for the entire
Premises, refers to Landlord absorbing and being responsible for paying Operating Expenses (as
defined in the Lease) during any calendar year to the extent such Operating Expenses are less than
Nine and 45/100 Dollars ($9.45) per square foot of space in the Building leased to rent paying
tenants as such term is used in Section 2.3(c) of the Lease.
5. Condition of the Second Expansion Space and Third Expansion Space.
(a) Tenant accepts the Second Expansion Space in its as-is condition. Tenant acknowledges
that Landlord has not undertaken to perform any modification, alteration or improvement to the
Second Expansion Space. By taking possession of the Second Expansion Space, Tenant waives
(i) any claims due to defects in the Second Expansion Space; and (ii) all
express and implied warranties of suitability, habitability and fitness for any particular
purpose. Tenant waives the right to terminate the Lease due to the condition of the Second
Expansion Space.
(b) Tenant accepts the Third Expansion Space in its as-is condition. Tenant acknowledges
that Landlord has not undertaken to perform any modification, alteration or
improvement to the Third Expansion Space. By taking possession of the Third Expansion
Space, Tenant waives (i) any claims due to defects in the Third Expansion Space;
and (ii) all express and implied warranties of suitability, habitability and
fitness for any particular purpose. Tenant waives the right to terminate the Lease due to the
condition of the Third Expansion Space.
-2-
6. Parking. In connection with the Second Expansion Space, Landlord hereby agrees to make
available, or to cause the Garage Operator to make available, to Tenant (so long as Tenant shall
continue to lease the Second Expansion Space) up to 58 permits (Second Expansion Space Permits)
to park in the Kensington Parking Facility upon the terms and conditions set forth in Section 3.4
of the Lease. In connection with the Third Expansion Space, Landlord hereby agrees to make
available, or to cause the Garage Operator to make available, to Tenant (so long as Tenant shall
continue to lease the Third Expansion Space) up to 7 permits (Third Expansion Space Permits) to
park in the Kensington Parking Facility upon the terms and conditions set forth in Section 3.4 of
the Lease. Tenant shall pay as rental for the Second Expansion Space Permits and the Third
Expansion Space Permits at the rate charged from time to time by Landlord (or the Garage Operator),
in its sole and absolute discretion, plus any applicable taxes thereon. The current charge to
Tenant for each Second Expansion Space Permit and Third Expansion Space Permit is $45.00 per month,
plus any applicable taxes thereon.
7. Second Amendment Improvement Allowance. Tenant shall receive an improvement allowance in the
amount of $[***] per RSF in the Original Premises and the Second Expansion Space (i.e., $[***], the
Second Amendment Improvement Allowance) to be paid to Tenant within thirty (30) days after Tenant
pays to Landlord the monthly Base Rental payment for November 1, 2010, provided that Tenant is not
then in default under the Lease. The Second Amendment Improvement Allowance may be used for any
costs relating to the Premises. However, Tenant shall not install any improvements which are not
compatible with Landlords plans and specifications for the Building or which have not received
prior written approval by Landlord or Landlords architect. Tenant agrees to comply with the terms
of Section 5.1 of the Lease with respect to any Tenant work that is performed in the Premises.
8. Consent. This Amendment is subject to, and conditioned upon, any required consent or approval
being unconditionally granted by Landlords mortgagee(s). If any such consent shall be denied, or
granted subject to an unacceptable condition, this Amendment shall be null and void and the Lease
shall remain unchanged and in full force and effect.
9. No Broker. Tenant represents and warrants that it has not been represented by any broker or
agent in connection with the execution of this Amendment. Tenant shall indemnify and hold harmless
Landlord and its designated property management, construction and marketing firms, and their
respective partners, members, affiliates and subsidiaries, and all of their respective officers,
directors, shareholders, employees, servants, partners, members, representatives, insurers and
agents from and against all claims (including costs of defense and investigation) of any broker or
agent or similar party claiming by, through or under Tenant in connection with this Amendment.
10. Time of the Essence. Time is of the essence with respect to Tenants execution and delivery to
Landlord of this Amendment. If Tenant fails to execute and deliver a signed copy of
this Amendment to Landlord by 5:00 p.m. (in the city in which the Premises is located) on
, 2010, this Amendment shall be deemed null and void and shall have no force or effect,
unless otherwise agreed in writing by Landlord. Landlords acceptance, execution and return of
this Amendment shall constitute Landlords agreement to waive Tenants failure to meet such
deadline.
-3-
11. Miscellaneous. This Amendment shall become effective only upon full execution and delivery of
this Amendment by Landlord and Tenant. This Amendment contains the parties entire agreement
regarding the subject matter covered by this Amendment, and supersedes all prior correspondence,
negotiations, and agreements, if any, whether oral or written, between the parties concerning such
subject matter. There are no contemporaneous oral agreements, and there are no representations or
warranties between the parties not contained in this Amendment. Except as modified by this
Amendment, the terms and provisions of the Lease shall remain in full force and effect, and the
Lease, as modified by this Amendment, shall be binding upon and shall inure to the benefit of the
parties hereto, their successors and permitted assigns.
[Signatures to follow]
-4-
LANDLORD AND TENANT enter into this Amendment as of the Effective Date (below).
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LANDLORD: |
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2525 WEST END, LLC, a Delaware limited liability company |
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By: |
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Cash Flow Asset Management, L.P., |
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a Texas limited partnership, its sole manager |
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By: |
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CFAM GP, L.L.C., |
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a Texas limited liability company, its sole general partner |
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By:
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/s/ Daniel D. Dubrowski
Name: Daniel D. Dubrowski
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Title: Partner |
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Effective Date: March 2, 2010 |
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TENANT: |
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CUMBERLAND PHARMACEUTICALS INC., a Tennessee corporation |
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By: |
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/s/ A.J. Kazimi |
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Name: A.J. Kazimi |
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Title: Chief Executive Officer |
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-5-
EXHIBIT A
SECOND EXPANSION SPACE AND
THIRD EXPANSION SPACE
A-i
Rider One
OPTION TO EXTEND
1. Renewal Period. Tenant may, at its option, extend the Second Extension Period
(this Option to Extend) for one renewal period of six years (the Renewal Period) by written
notice to Landlord (the Renewal Notice) given no earlier than 18 months nor later than 12 months
prior to the expiration of the Second Extension Period, provided that at the time of such notice
and at the commencement of such Renewal Period, (i) Tenant remains in occupancy of the entire
Premises, and (ii) no uncured event of default exists under the Lease. The Base Rental payable
during the Renewal Period shall be the Market Rental Rate (defined below) for the Premises.
However, in no event shall the Base Rental for the Renewal Period be less than the Base Rental
during the last year of the Second Extension Period. Except as provided in this Rider One
all terms and conditions of the Lease shall continue to apply during the Renewal Period, except
that Tenant shall have no further option to extend the Term.
2. Acceptance. Within 30 days of the Renewal Notice, Landlord shall notify Tenant of
the Base Rental for such Renewal Period (the Rental Notice). Tenant may accept the terms set
forth in the Rental Notice by written notice (the Acceptance Notice) to Landlord given within 15
days after receipt of the Rental Notice. If Tenant timely delivers its Acceptance Notice, Tenant
shall, within 15 days after receipt, execute a lease amendment confirming the Base Rental and other
terms applicable during the Renewal Period. If Tenant fails timely to deliver its Acceptance
Notice, then this Option to Extend shall automatically expire and be of no further force or effect.
In addition, this Option to Extend is personal to Cumberland Pharmaceuticals Inc. and shall not be
assignable to any other person or entity. Any assignment of the Lease or the subletting by Tenant
of all or any portion of the Premises shall terminate this Option to Extend. Any assignment in
violation of this paragraph is void and of no force or effect. Furthermore, this Option to Extend
shall be voidable at Landlords election if (i) Tenant fails timely to execute and return the
required lease amendment, or (ii) an uncured event of default exists under the Lease or Tenant
fails to occupy the entire Premises at the commencement of the Renewal Period.
3. Market Rental Rate. The Market Rental Rate is the rate (or rates) a willing
tenant would pay and a willing landlord would accept for a comparable transaction (e.g., renewal,
expansion, relocation, etc., as applicable, in comparable space and in a comparable building) as of
the commencement date of the applicable term, neither being under any compulsion to lease and both
having reasonable knowledge of the relevant facts, considering the highest and most profitable use
if offered for lease in the open market with a reasonable period of time in which to consummate a
transaction. In calculating the Market Rental Rate, all relevant factors will be taken into
account, including the location and quality of the Building, lease term, amenities of the Building,
condition of the space and any concessions and allowances commonly being offered by Landlord for
comparable transactions in the Building. The parties agree that the best evidence of the Market
Rental Rate will be the rate then charged for comparable transactions in the Building.
R-1-i
exv31w1
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, A.J. Kazimi, certify that:
1. |
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I have reviewed this Form 10-Q of Cumberland Pharmaceuticals Inc.; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have: |
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(a) |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
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(b) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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(c) |
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Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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(a) |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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(b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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May 17, 2010 |
By: |
/s/ A.J. Kazimi
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A.J. Kazimi |
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Chief Executive Officer |
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exv31w2
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, David L. Lowrance, certify that:
1. |
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I have reviewed this Form 10-Q of Cumberland Pharmaceuticals Inc.; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have: |
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(a) |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
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(b) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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(c) |
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Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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(a) |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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(b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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May 17, 2010 |
By: |
/s/ David L. Lowrance
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David L. Lowrance |
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Vice President and Chief Financial Officer |
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exv32w1
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2009 of Cumberland Pharmaceuticals Inc. (the Company), as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, A.J. Kazimi, Chief Executive Officer, and David L.
Lowrance, Vice President and Chief Financial Officer, of the Company, certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), that:
1. |
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
2. |
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The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
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/s/ A.J. Kazimi
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A.J. Kazimi |
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Chief Executive Officer |
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May 17, 2010 |
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/s/ David L. Lowrance
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David L. Lowrance |
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Vice President and Chief Financial Officer |
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May 17, 2010 |
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