Settlement Agreement between OMP, Inc. and Senetek PLC



 Exhibit 10.4 
  
 LATHAM & WATKINS LLP 
 Steven M. Bauer (SBN 135067) 
 James L. Day (SBN 197158) 
 505 Montgomery Street, Suite 1900 
 San Francisco, California 94111 
 Telephone: (415) 391-0600 
 Facsimile: (415) 395-8095 
  
 David A. York (SBN 89941) 
 135 Commonwealth Drive 
 Menlo Park, California 94025 
 Telephone: (650) 328-4600 
 Facsimile: (650) 463-2600 
  
 Belinda S. Lee (SBN 199635) 
 633 West Fifth Street, Suite 4000 
 Los Angeles, California 90071-2007 
 Telephone: (213) 485-1234 
 Facsimile: (213) 891-8763 
  
 Kyra G. Busby (SBN 216035) 
 600 West Broadway, Suite 1800 
 San Diego, CA 92101-3375 
 Telephone: (619) 236-1234 
 Facsimile: (619) 696-7419 
  
 Attorneys for Plaintiff 
 SENETEK PLC 
  
 IN THE SUPERIOR
COURT OF THE STATE OF CALIFORNIA 
  
 FOR THE COUNTY OF LOS ANGELES

  

			
	 SENETEK PLC,
  
 Plaintiff,
  
 v.
  
 OMP, INC. (f/k/a Obagi Medical Products, Inc.), and DOES 1 through 10, inclusive,
  
 Defendants.
	 	 CASE NO. BC293829
  
 Assigned To: Hon. J. Stephen Czuleger (Dept. 50)
  
 CONFIDENTIAL SETTLEMENT
 AGREEMENT AND
MUTUAL RELEASE BETWEEN SENETEK PLC AND OMP, INC.

		
	 AND RELATED CROSS-ACTION.
	 	 








 Senetek PLC (“Senetek”) and OMP, Inc. (“OMP”), in full and final settlement of (a)
all claims which have been, or could have been, asserted against each other in the lawsuit captioned Senetek, PLC vs. OMP, Inc. and Does 1-10, Case No. BC293829, now pending in the Superior Court for the State of California, the County of Los
Angeles (the “Pending State Action”), (b) all claims which were, or could have been, asserted against each other in the litigation captioned OMP, Inc. v. Senetek PLC, C 03-4822 VRW (U.S.D.C. for the Northern District of California)
(the “OMP Federal Action”), and (c) all claims which have been, or could have been, asserted by Senetek against Rohto Pharmaceutical Co., Ltd. (“Rohto”) in the case captioned Senetek PLC v. Rohto Pharmaceutical Co., Ltd. C
03-5529 PJH (U.S.D.C. for the Northern District of California) (the “Rohto Action”), hereby enter into the following Settlement Agreement and Mutual Release (“Agreement”). 
  
 1. Within five business days of the execution of this Agreement by Senetek,
OMP shall wire transfer the amount of U.S. $1,500,000.00 to the following account of Senetek PLC: 
  
 WestAmerica Bank 
  
 Account Number 0508-759073 
  
 ABA Number 121140218 
  
 2. For all purposes of this Agreement the following are defined terms: 
  
 a. Territory means the country of Japan; 
  
 b. Authorized Channel of Trade means the sales and distribution channels in which Rohto is currently
distributing that certain product known as Obagi K+, specifically Drug Stores and Variety Stores, including such Drug Stores’ and Variety Stores’ mail-order and Internet sales activities. To be considered in the Territory, mail-order and
Internet sales must be made to “ship to” and billing addresses in the Territory. 
  
 c. Drug Stores are defined as stores specifically licensed to sell over-the counter drugs as more than 50% of their revenue. 

 
 d. Variety Stores are defined as stores that are not
licensed to sell prescription medicines or over-the-counter drugs but are otherwise similar to Drug Stores in terms of the type of products they carry and consumer demographics that they target for appeal. Variety Stores sell many kinds of goods
including cosmetics, accessories and other small household or personal items. Examples of Variety Stores include Loft and Sony Plaza. Variety Stores do not 







 include or encompass upscale “department” stores such as those operated by Matsuzakaya Co., The
Daimaru, Inc., Isetan Co. or Hankyu Department Stores Inc. 
  
 e. Product Unit is defined as a single unit of any skin care product that contains kinetin in a concentration of *** or below as measured by weight, including cosmetic lotions or creams, that (i) is sold by or for
Rohto or OMP in the Territory in the Authorized Channel of Trade, (ii) uses in any manner the name Obagi or any transliteration thereof or any name confusingly similar thereto, and (iii) is manufactured by OMP or Rohto in Japan, or by or for OMP
anywhere in the world. 
  
 3. Beginning with the calendar quarter
commencing April 1, 2004, OMP will make payments in U.S. dollars to the bank account described in paragraph 1, calculated and paid in the following manner: 
  
 a. For each calendar quarter, OMP shall accrue a $*** per Product Unit (as defined above) obligation to Senetek for each Product Unit
sold. 
  
 b. Within sixty days of the end of each
calendar quarter, OMP shall pay the total accrued obligation for the calendar quarter just ended. 
  
 c. When a total of U.S. $500,000.00 has been paid by OMP to Senetek pursuant to this paragraph 3, OMP’s obligation to accrue and make
payments to Senetek shall cease. 
  
 4. So long as OMP shall
remain obligated to make the payments required in paragraph 3 of this Agreement, OMP shall maintain accurate books and records sufficient to show what OMP in good faith believes to be the sales of Product Units in the Authorized Channel of
Distribution in the Territory that are subject to the obligations of OMP set forth above in paragraph 3. The parties agree that OMP’s maintenance of royalty reports from Rohto identifying such sales, on a basis consistent with OMP’s
records of sales by Rohto under that certain Know-How and Trademark License Agreement between OMP and Rohto dated September 13, 2002, shall be sufficient for this purpose. Senetek, upon reasonable notice and terms, shall have the right to audit
these records of OMP to ascertain compliance with paragraph 3 of this Agreement. In this respect, OMP agrees to make the results of any audit of Rohto conducted pursuant to Section 8.3 of that certain Know-How and Trademark License Agreement between
OMP and Rohto dated September 13, 2002 available to Senetek insofar as those results relate to the sales of Product Units. 
  
 5. In consideration of OMP’s payment obligations set forth in paragraphs 1 and 3 of this Agreement, Senetek hereby grants to OMP a non-exclusive
license (with the right to sublicense) to Senetek’s patent and other intellectual property rights to make, have made, import into, offer to sell and sell Product Units in the Authorized Channel of Trade in the Territory. The term of said
license shall be coextensive with the last to 


	***	Confidential treatment has been requested 








 expire of Senetek’s patent rights anywhere in the world (said patent rights to include all existing patents owned by
or assigned to Senetek and any continuations, reissues, or counterparts of those patents). Senetek covenants that it will not assert that OMP, Rohto, their manufacturers, licensees, or customers infringe any patent or other right of Senetek with
respect to OMP’s and Rohto’s manufacture, marketing, or sale of Product Units, including those Product Units sold after OMP’s obligation of accruing and making payments pursuant to paragraph 3 has been satisfied. 
  
 6. Senetek and OMP understand that this Agreement does not license or
authorize OMP or Rohto to manufacture, market or sell kinetin containing skin care products anywhere in the world except with respect to Product Units to be sold in the Authorized Channel of Distribution in the Territory. 
  
 7. Effective as of the full execution of this Agreement, Senetek and OMP, on
behalf of themselves and their predecessors, successors and permitted assigns, and all past and present officers, directors, employees, agents, servants, attorneys and other representatives of any of the foregoing (including persons or entities
controlling, controlled by or under common control with Senetek or OMP), fully, finally, unconditionally, irrevocably and forever release and discharge each other, and each other’s past and present officers, directors, employees, agents,
servants, attorneys, insurers, and other representatives, and all heirs, executors, administrators, predecessors, successors, and permitted assigns of any of the foregoing, from any and all claims, liabilities, causes of action, rights of action and
actions, demands, suits, proceedings, damages, costs, fees and expenses, and any and all claims, demands and liabilities whatsoever, of every name and nature, both at law and in equity, whether known or unknown, suspected or unsuspected
(collectively, “Claims”), which Senetek or OMP has asserted or could have asserted against each other in the Pending State Action and the OMP Federal Action. Notwithstanding anything to the contrary in the preceding sentence, nothing in
this Release shall release Senetek or OMP from any Claim which one party may subsequently have against the other for: (i) breach of this Settlement Agreement; or (ii) any Claim which either party may have for any wrong or breach arising out of any
conduct which occurs after the date of this Release. This release represents a compromise and settlement in full of all claims except those excepted above, whether or not now known, suspected or claimed, which any Party ever had, now has, or claims
to have against another Party, notwithstanding section 1542 of the California Civil Code, which section provides as follows: 
  
 “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” 
  
 8. Effective as of the full execution of this Agreement, Senetek, on behalf of itself and its predecessors, successors and permitted assigns, and all past
and present officers, directors, employees, agents, servants, attorneys and other representatives of any 







 of the foregoing (including persons or entities controlling, controlled by or under common control with Senetek), fully,
finally, unconditionally, irrevocably and forever releases and discharges Rohto, and its past and present officers, directors, employees, agents, servants, attorneys, insurers, and other representatives, and all heirs, executors, administrators,
predecessors, successors, and permitted assigns of any of the foregoing, from any and all claims, liabilities, causes of action, rights of action and actions, demands, suits, proceedings, damages, costs, fees and expenses, and any and all claims,
demands and liabilities whatsoever, of every name and nature, both at law and in equity, whether known or unknown, suspected or unsuspected (collectively, “Claims”), which Senetek has asserted or could have asserted in the Rohto Action.
Notwithstanding anything to the contrary in the preceding sentence, nothing in this Release shall release Rohto from any Claim which Senetek may subsequently have against Rohto for any Claim which Senetek may have for any wrong or breach arising out
of any conduct which occurs after the date of this Release. This release represents a compromise and settlement in full of all claims except those excepted above, whether or not now known, suspected or claimed, which any Party ever had, now has, or
claims to have against another Party, notwithstanding section 1542 of the California Civil Code, which section provides as follows: 
  
 “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” 
  
 9. Within five business days of the full execution of this Agreement: 
  
 a. Senetek and OMP will dismiss their claims, with prejudice, in the Pending State Action, each side to bear their own costs and fees; and

  
 b. Senetek will dismiss its claims, with
prejudice, in the Rohto Action. 
  
 10. The parties shall keep the
terms of this Agreement confidential, except that OMP may disclose the terms to Rohto (upon receiving assurances of confidentiality from Rohto), and except as required by law (including and disclosure obligations Senetek may have under U.S.
securities laws). Any public disclosure of the terms of this Agreement shall be approved by both parties, such approval not to be unreasonably withheld. The final decision with respect to a decision to disclose one or more terms of this Agreement
pursuant to U.S. securities laws shall be made by the party bearing the legal obligation of disclosure. 
  
 11. In the dismissal of the Pending State Action, Senetek and OMP shall request that the Court retain jurisdiction over the parties to enforce the
Agreement pursuant to Cal. Civil Proc. Code § 664.6. 







 Dated: March 26, 2004 
  

			
	 By:
	 	 /s/ WADE NICHOLS


	 	 	SENETEK, PLC, by its General Counsel and Executive Vice President, Wade Nichols


  
 Dated: March 26 2004 

 

			
	 By:
	 	 /s/ CURTIS CLUFF


	 	 	OMP, INC., by its Chief Financial Officer, Curtis Cluff


  
 Approved as to Form: 

 
 Dated: March 26, 2004 
  

			
	 LATHAM & WATKINS LLP

		
	 By
	 	 /s/ DAVID YORK


	 	 	 David A. York

	 	 	 Attorneys for Plaintiff SENETEK PLC



  
 Dated: March 26, 2004

  

			
	 DORSEY & WHITNEY LLP

		
	 By:
	 	 /s/ JUAN BASOMBRIO


	 	 	 Juan C. Basombrio

	 	 	 Attorneys for Defendant OMP, Inc.