exv10w8



 




[ * ] = Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended.




Exhibit 10.8




MUTUAL TERMINATION AGREEMENT




     Agreement made as of August 3, 2006 (the “Effective Date”) by and among ZARS, Inc., DBA ZARS
Pharma, having offices at 1142 West 2320 South, Salt Lake City, UT 84119 (“ZARS”), OrthoNeutrogena
Division of Ortho-McNeil Pharmaceuticals, Inc. (“ORTHO”), formerly Ortho Dermatological Division of
Ortho-McNeil Pharmaceuticals, having offices at 199 Grandview Road, Skillman, NJ 08558 (“ORTHO”)
and GPSG, a unit of Ortho-McNeil Pharmaceuticals, Inc. and an affiliate of ORTHO (“GPSG”). (ZARS,
ORTHO and GPSG are each referred to herein by name or as a “Party” or, collectively, as “Parties”.)



     WHEREAS, ZARS and ORTHO entered into a License Agreement effective November 10, 2000, as
amended in the First Amendment to the License Agreement effective October 19, 2005 (“License
Agreement”). The capitalized terms used herein shall have the same meaning as set forth in the
License Agreement;



     WHEREAS, pursuant to the License Agreement, ZARS licensed to ORTHO rights to the Licensed
Products;



     WHEREAS, ZARS now desires the return of such rights, and ORTHO is willing to terminate the
License Agreement in order to return such rights to ZARS;



     NOW THEREFORE, in consideration of these premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the
parties agree as follows:



     1. The Parties mutually agree to terminate the License Agreement effective
as of the Effective Date. All right, title and interest of ORTHO in and to the Licensed



 









 







Products is extinguished as of the Effective Date and all such right, title and interest shall
revert to ZARS.



     2. Pursuant to Section 7.3 of the License Agreement, GPSG shall supply to ZARS the Peel (as
defined in Exhibit A), and ZARS agrees to be supplied by GPSG in accordance with the
purchase order terms and conditions attached hereto as Exhibit B and incorporated herein by
reference and pursuant to the additional terms set forth on Exhibit C attached hereto and
incorporated herein by reference. The Parties agree to negotiate in good faith with the intent to
consummate a more formal supply agreement (“Supply Agreement”) no later than December 15, 2006 on
terms and conditions consistent with those set forth on Exhibit C. The Parties acknowledge
that ZARS will require GPSG to begin supplying the Peel product prior to or shortly after the
consummation of the Supply Agreement. Therefore, GPSG will supply the Peel product to ZARS in the
form and manner further described in Exhibits A, B and C in advance of the
consummation of the Supply Agreement upon receipt of a purchase order from ZARS setting forth the
specific quantities of the product, required delivery date and shipping instructions at least sixty
(60) days prior to the required delivery date. In addition, pursuant to Section 7.3 of the License
Agreement, ORTHO and GPSG shall use their commercially reasonable efforts to provide ZARS with
reasonable assistance to complete the transfer of the manufacturing process and test methods to one
(1) qualified manufacturing facility prior to December 31, 2008 (the “Supply Termination Date”);
provided that ZARS shall reimburse ORTHO for any pre-approved reasonable out of pocket expenses
incurred by ORTHO or GPSG in connection with providing such assistance. Notwithstanding anything to
the contrary contained herein, in no event shall GPSG’s obligation to supply ZARS with the Peel
extend beyond the Supply Termination Date. ORTHO and GPSG shall have no obligation to support any
ZARS’ regulatory filings inside or outside of the United States beyond the Supply Termination Date.
During the term of supply, ORTHO and GPSG shall provide documentation necessary to support
U.S. NDA 21-717. The Parties agree that ORTHO and GPSG shall have no obligation to support any
additional development work for the Peel product. The Parties



 









 







agree that the rights granted to ZARS in Section 7.3 of the License Agreement shall survive
termination of the License Agreement.



     3. In consideration for ORTHO’s agreement to terminate the License Agreement and the other
undertakings set forth herein, ZARS agrees to make to ORTHO certain lump sum payments in an
aggregate amount up to $20,000,000 upon the occurrence of the following events:




	 	(a)	 	Within the earlier of (i) five (5) months of the Effective
Date or (ii) January 15, 2007, the lump sum payment of [ * ];
	 
	 	(b)	 	Within thirty (30) days of the earlier of (i) the execution
of the Supply Agreement or (ii) December 31, 2008, the lump sum payment of [ *
];
	 
	 	(c)	 	Within thirty (30) days of the earlier of (i) the Launch of
the Peel by ZARS or a third party or (ii) January 1, 2008, the lump sum
payment of [ * ];
	 
	 	(d)	 	Within thirty (30) days of December 31st of the
first year in which worldwide annual sales of the Peel is at least [ * ], the
lump sum payment of [ * ];
	 
	 	(e)	 	Within thirty (30) days of December 31st of the
first year in which worldwide annual sales of the Peel is at least [ * ], the
lump sum payment of [ * ]; and
	 
	 	(f)	 	Within thirty (30) days of December 31st of the
first year in which worldwide annual sales of the Peel is at least [ * ], the
lump sum payment of [ * ].





     4. For and in consideration of the execution of this Agreement and the covenants, promises and
performances of this Agreement, and except for the obligations of this Agreement, the Parties, and
each of them, on behalf of themselves and on behalf of any and all other agents, successors,
attorneys, assigns, representatives, employees, officers, directors, insurers, subsidiaries and
affiliates, and others, do hereby release and forever acquit and discharge each other and any and
all other individuals and collective



 









 







past, present, and future officers, directors, parents, subsidiaries, shareholders,
affiliates, attorneys, agents, former employees, and all other persons or entities for whose
conduct any or all of the foregoing may be liable under any theory of law or equity, of and from
any and all liability, rights, claims, commissions or other compensation, demands, obligations,
damages, losses, injuries, costs, expenses, attorney’s fees, all actions, causes of action,
controversies of any kind or of any nature or description whatsoever, existing, or arising out of,
related to, or based upon the License Agreement. Notwithstanding any of the foregoing, this general
release is not intended to release any claims based upon the obligations of this Agreement or any
act, omission or matter which occurs after the date of execution of this Agreement.



     5. Except as set forth in this Agreement, the Parties mutually agree that no additional
payments are owed to either Party pursuant to the License Agreement nor will any additional
payments be due to either Party in the future pursuant to the License Agreement. Neither party is
currently in default of any outstanding obligations pursuant to the License Agreement, and, except
as specifically set forth herein and in those sections of the License Agreement that are specifically designated to survive such
termination, neither party has any future obligations to the other Party pursuant to the License
Agreement.



     6. ORTHO agrees that it will reasonably cooperate with ZARS to execute, and if necessary,
record or file any additional documents, instruments or assurances and to provide reasonable
assistance to ZARS, including, without limitation, cooperating with ZARS in the transition of any
relationships established by ORTHO with vendors and suppliers related to the Peel, which shall be
necessary to fully carry out the intent of this Agreement. Furthermore, ORTHO shall provide to ZARS
those documents listed on Exhibit D, attached hereto and incorporated herein by reference
relating to the Peel in ORTHO’s possession as ZARS shall reasonably request.



     7. This Agreement shall be governed by the laws of the State of New York, U.S.A., without
regard to its choice or conflict of law principles.



 









 





     8. Any controversy or claim arising out of or relating to this Agreement shall be governed by
Article 14 of the License Agreement.



     IN WITNESS WHEREOF, this document has been duly executed as of the day and year first WRITTEN
ABOVE.



	 	 	 	 	 	 	 	 	 	 	 
	ZARS, INC.	 	 	 	ORTHONEUTROGENA DIVISION OF

ORTHO-MCNEIL PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BY:

	 	/s/ Robert Lippert
	 	 	 	BY:
	 	/s/ Joe Willis (8/4/06)	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	NAME:

	 	Robert Lippert	 	 
	 	NAME:
	 	Joe Willis	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	TITLE:

	 	President and CEO	 	 
	 	TITLE:
	 	VP Sales & Marketing	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	GPSG, A UNIT OF ORTHO-MCNEIL

PHARMACEUTICALS, INC.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BY:

	 	/s/ James N. Rider (8/4/06)
 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	NAME:

	 	James N. Rider	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	TITLE:

	 	GM, Ext. Man/Tech Assessment	 	 	 	 	 	 	 	 







 









 








Exhibit A




Peel Specifications




[ * ]




 









 





Exhibit B




PURCHASE ORDER TERMS & CONDITIONS



Purchase orders (the “PO”) for the Peel product will be transmitted (via facsimile, e-mail or
other electronic means) to GPSG (“Supplier”) by ZARS, Inc or one of its affiliates identified in
the PO (“Buyer”). The terms and conditions detailed herein are applicable to the PO issued by Buyer
and by accepting the PO you agree that you have read, understand, and agree to be bound by these
terms and conditions.



Any communications transmitted electronically (e.g., via facsimile or via the Internet (including
but not limited to EDI, cXML, e-mail)) (i) shall be considered a “writing” or “in writing,” (ii)
shall be deemed “signed” if a signature is affixed that is valid in accordance with applicable law
(including a valid electronic signature) and (iii) will constitute an “original” when printed.
Communications introduced as evidence on paper will be admissible to the same extent and under the
same conditions as other business records originated and maintained in documentary form and
admissibility shall not be contested on the basis that the communication was not originated or
maintained in documentary form.





1. Notices. All communications from Supplier to Buyer relating to the PO and these terms and
conditions shall be addressed to the Buyer’s representative identified on the PO.




2. Supplier Responsibilities. Supplier shall use commercially reasonable efforts (i) to provide
to Buyer the goods and services ordered in accordance with the terms stipulated in the PO and the
applicable, if any, supply, service or other agreement pursuant to which the PO was issued; (ii)
to keep Buyer advised of the status of the PO; (iii) to permit duly authorized representatives of
Buyer to review and observe, from time to time upon reasonable notice, the delivery of the goods
and services; (iv) to provide Buyer with such reports as are appropriate to the nature of the
goods and services ordered and as may be reasonably requested by Buyer from time to time; and (v)
to keep, for orders requiring payment based on hours worked, cost of materials used and/or
expenses incurred, records of hours worked, cost of materials used, and reasonable out-of-pocket
expenses incurred in filling the PO, which records Buyer’s duly authorized representatives may
examine from time to time upon reasonable notice.




3. Acknowledgment. The shipment of any goods or the furnishing of any services (or delivery of
any deliverable arising therefrom), shall constitute acceptance by Supplier of the PO and each
and all of the terms and conditions stated herein. If Supplier objects to any of the terms and
conditions hereof, it shall notify Buyer in writing within ten days after issuance of the PO and
withhold acceptance of the PO until such objection is settled by written agreement.




4. Inspection. All goods and deliverables are subject to final review, inspection and acceptance
by Buyer notwithstanding any payment or initial inspection. Final inspection will be made by
Buyer within a reasonable time after receipt of goods or deliverables.




5. Rejections/Returns. Buyer reserves the right to refuse any goods or deliverables and to
cancel all or any part of a PO for goods or deliverables not conforming to applicable
specifications, drawings, samples or descriptions. Acceptance of any part of the PO shall not
bind Buyer to accept future shipments of non-conforming goods or deliverables, nor deprive it of
the right to return non-conforming goods or deliverables already accepted. Goods and
deliverables, if rejected, may be returned to Supplier at Supplier’s expense for transportation
both ways, and no replacement or substitution shall be made unless so authorized by Buyer.




6. Cancellation on Lateness. The delivery of goods, services and deliverables shall strictly
comply with the delivery date or delivery schedule, if any, specified by Buyer. If at any time it
appears Supplier will not meet such delivery date or schedule, Supplier shall promptly notify
Buyer in writing of reasons for, and the estimated duration of, the delay. If requested by Buyer,
Supplier will ship delayed goods by means to avoid or minimize delay to the maximum extent
possible, the added cost to be borne by Supplier. Buyer may exercise its other remedies, such as
cancellation of the PO after 30 days for non-compliance, cover and incidental and consequential
damages.




7. Invoice. Unless otherwise specified by Buyer, a separate invoice shall be issued for each
shipment and only after the goods are shipped or services and deliverables delivered. No payment
will be made prior to receipt of goods, services or deliverables and current invoice (if such
invoice is required by Buyer). Payment due dates, including discount periods, will be computed
from date of invoice to date Buyer’s check is mailed (or payment is otherwise transmitted by
Buyer). Any discount taken by Buyer will be taken on full amount of invoice; however, if Seller
has been approved to participate in Buyer’s “Pay on Receipt” process, any discount taken by Buyer
will be taken on the purchase order value of the goods received.




8. Payments. Unless otherwise specified by Buyer, payment terms will be net 45 days. Buyer may
withhold payment of any amounts to be paid to Supplier which are disputed in good faith by Buyer.




9. Warranty. In accepting this PO, Supplier unconditionally represents and warrants, any other
representation or agreement to the contrary notwithstanding, that the goods and deliverables
supplied pursuant to this PO are of merchantable quality, conform to the specifications as stated
on the PO and as otherwise provided by Buyer and are suitable for Buyer’s intended uses and
purposes in the ordinary course of its business. All warranties herein stated shall run to Buyer,
its customers and the users of the goods or deliverables or products into which such goods or
deliverables may be incorporated.




If this PO is for services then by in accepting this PO, Supplier also unconditionally represents
and warrants, any other representation or agreement to the contrary notwithstanding that: (i) its
performance of the services and the deliverables arising therefrom, or any portion or function
thereof, or the use of the deliverables or any portion thereof, will not violate or infringe any
third-party patent, trademark, copyright, trade secret or similar rights; (ii) the services will
be provided by qualified personnel reasonably skilled and trained in the performance of the
services and in a workmanlike and professional manner in accordance with general industry
standards; (iii) it is currently under no obligation to any third party, nor will it enter into
any obligation to a third party, that could interfere with its rendering to Buyer the services or
deliverables; (iv) any documentation provided to Buyer shall meet reasonable standards of clarity
and detail; and (v) all deliverables will be warranted to perform according to their
specifications.



 









 






10. Indemnification. Supplier agrees to indemnify and hold harmless Buyer, its affiliates (and
its and their respective directors, employees and agents) from any losses, liabilities, damages
and expenses (including without limitation reasonable counsel fees) arising, directly or
indirectly, from: (i) Supplier’s breach of any provision hereof, including without limitation the
confidentiality obligations and the warranties made herein; (ii) any negligent or wrongful act or
omission of Supplier, its employees, consultants or subcontractors; (iii) Supplier’s failure to
comply with applicable laws and regulations in filling the PO; (iv) any claim charging that
Buyer’s purchase of goods, services or deliverables under the PO constitutes misappropriation of
trade secrets, breach of a confidential relationship, or trademark, trade secret or copyright
infringement; and/or (v) any claim charging that any goods or deliverables acquired under the PO,
or the use of such goods or deliverables, infringe a third-party’s patent anywhere in the world.
If the goods or deliverables, or the use of such goods or deliverables, are held to constitute an
infringement and their sale or use is enjoined, Supplier shall, at its expense and option, either
procure for Buyer and its affiliates the right to continue to use such goods or deliverables, or
replace same with an equivalent non-infringing product, or modify same so it becomes an
equivalent non-infringing product. This Section will not be construed to limit or exclude any
other claims or remedies that Buyer or its affiliates (and its and their respective directors,
employees and agents) may assert.




11. Limitation of Liability. UNDER NO CIRCUMSTANCES WILL BUYER OR ITS AFFILIATES BE LIABLE FOR
CONSEQUENTIAL,
INDIRECT, SPECIAL, PUNITIVE, OR INCIDENTAL DAMAGES OR LOST PROFITS, WHETHER FORESEEABLE OR
UNFORESEEABLE, BASED ON CLAIMS OF SUPPLIER OR ANY OTHER PARTY ARISING OUT OF BREACH OR FAILURE OF
EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY
IN TORT, FAILURE OF ANY REMEDY TO ACHIEVE ITS ESSENTIAL PURPOSE, OR OTHERWISE. NOTWITHSTANDING
THE FORM (e.g., CONTRACT, TORT OR OTHERWISE) IN WHICH ANY LEGAL OR EQUITABLE ACTION MAY BE
BROUGHT, IN NO EVENT WILL BUYER OR ITS AFFILIATES BE LIABLE FOR DAMAGES OR LOSSES THAT EXCEED, IN
THE AGGREGATE, THE GREATER OF (i) THE AMOUNT OF FEES PAYED BY BUYER FOR THE GOODS OR SERVICES
THAT GAVE RISE TO SUCH DAMAGES OR LOSSES FOR EACH RESPECTIVE BREACH OR SERIES OF RELATED BREACHES
OR (ii) $1000. THIS SECTION WILL NOT APPLY ONLY WHEN AND TO THE EXTENT THAT APPLICABLE LAW
SPECIFICALLY REQUIRES LIABILITY DESPITE THE FOREGOING DISCLAIMER, EXCLUSION AND LIMITATION.




12. Insurance. Supplier shall, at its own expense, maintain with a reputable insurer (and
provide written certificate(s) of insurance to Buyer if and when requested) for a period of at
least 2 years after the fulfillment of the PO reasonable and customary insurance coverage,
including, but not limited to, (i) worker’s compensation statutory coverage as required by the
laws of the applicable jurisdiction, and (ii) commercial general liability insurance including
coverage for product liability in the minimum amount of $5 million in respect of claims for any
losses, costs and expenses arising out of or relating to Supplier furnishing the goods,
deliverables and/or services under the PO. The certificate(s) of insurance will, if requested by
Buyer, designate Buyer as “additional insured” under the commercial general liability policy and
will include the agreement for the insurer to give Buyer written notice at least 30 days prior to
the effective date of any cancellation, lapse or material change in the policy, and will contain
a waiver of subrogation in favor of Buyer.




13. Copyrights; Rights to Inventions. Buyer will be the exclusive owner of all deliverables
created by Supplier in connection with or during the performance of services provided pursuant to
a PO, any works based on or derived from such deliverables (“Derivatives”), and any ideas,
concepts, inventions or techniques that Supplier may conceive or first reduce to practice in
connection with developing the Deliverables (“Deliverable Concepts”) (the deliverables,
Derivatives, and Deliverable Concepts are collectively referred to as, “Buyer Materials”) and all
intellectual property rights therein, including patents, copyrights, trade secrets, trademarks,
moral rights, and similar rights of any type under the laws of any governmental authority
(collectively, “Intellectual Property Rights”). All copyrightable Buyer Materials shall be
prepared by Supplier as a “work made for hire” for Buyer, and Buyer shall be considered the
author of the Buyer Materials for purposes of copyright. To the extent that the Buyer does not
acquire ownership of such copyrights as a work made for hire, and with respect to all other
rights, Supplier hereby assigns and agrees to assign upon creation to Buyer all right, title and
interest in and to the Buyer Materials and all Intellectual Property Rights therein. To the
extent such assignment of rights and ownership is invalid or any of the foregoing rights,
including so-called “moral rights” or rights of “droit moral,” may be inalienable, Supplier
agrees to waive and agrees not to exercise such rights, and if such waiver and agreement are
deemed invalid, to grant to Buyer and its designees the exclusive, transferable, perpetual,
irrevocable, worldwide and royalty free right to make, use, market, modify, distribute, transmit,
copy, sell, practice, and offer for sale and import the Buyer Materials and any process,
technology, software, article, equipment, system, unit, product or component part covered by the
Deliverable Concepts or a claim of any patent in any part of the Deliverable Concepts. At Buyer’s
request, Supplier will obtain the execution of any instrument, including from any employee or
contractor, that may be appropriate to assign these rights under this paragraph to Buyer or
perfect these rights in Buyer’s name. Supplier agrees that any copyrightable material prepared
for Buyer shall carry on the face thereof in legible form a copyright notice identifying Buyer
and the year of publication.




14. Government Contracting. Supplier in accepting the PO represents that the price charged is
not in excess of the ceiling prices, if any, established by any government agency. If Supplier is
notified that the services or goods covered by the PO are ordered by Buyer under a United States
government contract, Supplier agrees that federal statutes and regulations applicable to Buyer as
a government contractor are accepted and binding on Supplier insofar as required by statute,
regulation or the provisions of the government contract.




15. Force Majeure. Supplier and Buyer, as the case may be, shall be excused for delays in
performance or failure of performance to the extent arising from causes beyond such party’s
reasonable control, including without limitation strikes, wars, fires, floods, earthquakes, acts
of terror or other acts of God. In the event of any such event or condition, the party whose
performance is excused hereunder shall notify the other promptly thereof and shall make diligent
efforts to perform at its earliest opportunity and the other party shall be permitted to suspend
its performance under the PO. If Supplier’s performance is excused hereunder, Buyer shall have
the right, and Supplier agrees to provide to Buyer the assistance and information necessary for
Buyer, to make, have made, or otherwise procure replacement goods and services.




16. Shipping Terms. Unless otherwise specified by Buyer, delivery of goods is to be F.O.B.
Buyer’s plant. If goods are to be shipped F.O.B. shipping point, and Buyer has not designated
routing, Supplier is required to ship via the most economical method that will meet delivery
date. Supplier shall provide a packing list to Buyer for all shipments referencing the
appropriate order number. Bills of lading, if any, shall also reference the appropriate order
number.




17. Transportation Liability. Supplier agrees that in any case where freight regulations
covering goods transported by common carrier establish a maximum limit on the carrier’s liability
for loss or damage suffered in transit, Supplier will be liable to Buyer for any loss or damage
in excess of such maximum limit up to the full price of the goods.



 









 






18. Confidentiality; No Publicity. Supplier shall keep in confidence and shall not, without
securing the prior written consent of Buyer, originate any publicity (including any news release
or public announcement) or disclose to any third party information relating to: the existence of
the relationship with Buyer; Buyer’s purchasing systems or practices (including, without
limitation, descriptions of purchased items, quantities purchased and prices paid); the nature of
the services performed and deliverables and goods delivered under the PO; and any proprietary or
confidential data, designs, or other information supplied by, or on behalf of, Buyer.
Notwithstanding the foregoing, Supplier may disclose such confidential information (i) to
Supplier’s employees having a need to know such information to process the PO or improve the
services provided by Supplier to Buyer or (ii) to comply with applicable laws, court orders, or
government regulations. If disclosure is permitted under clause (ii) above, Supplier shall
consult with Buyer in connection with any publicity in a reasonable time prior to its release to
allow Buyer to comment thereon, and to prevent its release if so permitted by law. Supplier
agrees that it will take appropriate action by instruction, agreement, or otherwise with its
employees and subcontractors who are permitted access to the aforementioned information to notify
them of Supplier’s obligations hereunder. Upon Buyer’s request any data, designs, or other
information furnished to Supplier (and copies thereof) shall be returned to Buyer.




19. Buyer’s Property. All tools, equipment and materials of every description furnished to
Supplier by, or specifically paid for by, Buyer, and any replacement thereof, and any materials
affixed or attached thereto, shall be and remain the personal property of Buyer, and shall be
safely stored separate and apart from Supplier’s property. Supplier shall not substitute any
property for Buyer’s property and shall not use such property except in filling Buyer’s purchase
orders. Such property while in Supplier’s custody or control shall be held at Supplier’s risk,
shall be kept insured by Supplier at Supplier’s expense in an amount equal to the replacement
cost with loss payable to Buyer and shall be subject to removal at Buyer’s written request, in
which event Supplier shall prepare such property for shipment and shall redeliver to Buyer in the
same condition as originally received by Supplier, reasonable wear and tear excepted.




20. Material Safety Data Sheets. An appropriate material safety data sheet (“MSDS”) and
labeling, as and if required by law, will precede or accompany each shipment of Supplier.
Further, Supplier shall send to Buyer updated MSDS’s and labeling as required by law.




21. Environmental, Safety and Industrial Hygiene Matters. Supplier agrees to use commercially
reasonable efforts to implement a policy of environmental responsibility concerning its products
and processes, including where applicable, pollution prevention and waste reduction programs.
With respect to all environmental, safety and industrial hygiene matters related to Supplier’s
activities in providing goods and/or services to Buyer, Supplier shall: (i) comply with all
applicable laws and regulations issued by federal, state and local authorities; (ii) inform Buyer
promptly of any significant adverse event (e.g., fires, explosions, accidental discharges) that
have the potential of affecting the quality of the goods and/or services to be delivered; (iii)
inform Buyer promptly of any allegations or findings of violations of applicable laws or
regulations that have the potential of affecting the quality of the goods and/or services to be
delivered; (iv) allow Buyer’s representatives to inspect Supplier’s facilities, such inspections
to be at reasonable times and upon reasonable notice; and (v) implement promptly any corrective
action which may be reasonably requested by Buyer, including (without limitation) adhering to
reasonable and significant elements of the environmental, safety and industrial hygiene program
adhered to by Buyer in its own operations. Supplier shall provide Buyer accurate information
concerning ozone depleting chemicals used in its products or processes when required by any
applicable regulations or laws.




22. Compliance with Laws. Supplier agrees to comply with the applicable provisions of any
federal, national, state or local law, and all orders, rules and regulations issued thereunder,
whether now or hereafter in force, and any provisions, representations or agreements required
thereby to be included in the contract resulting from acceptance of the PO are hereby
incorporated by reference, including, but not limited to, those prohibiting discrimination
against any employee or applicant for employment because of race, color, religion, sex or
national origin, or physical or mental handicap and those providing for the employment of
disabled veterans and veterans of the Vietnam era.




Supplier guarantees that no article shipped pursuant to this PO is adulterated or misbranded
within the meaning of the Federal Food, Drug and Cosmetic Act, or is an article which may not
under the provisions of §404 or §505 of that Act be introduced into interstate commerce.




Supplier guarantees that no article shipped pursuant to this PO is produced in violation of any
provisions of the Fair Labor Standards Act.




In the manufacture of the goods or delivery of the deliverables which are the subject of the PO,
Supplier shall employ young persons only as permitted by the Johnson & Johnson Policy on the
Employment of Young Persons and shall permit representatives of Buyer to enter Supplier’s
premises at any reasonable time to inspect relevant employment, health and safety records and to
observe the manufacturing process. Supplier shall maintain the records necessary to demonstrate
compliance with such Policy on the Employment of Young Persons and shall provide to Buyer a
written certification of such compliance, if requested. If Supplier shall fail to comply with
this provision, then Buyer shall have the right to rescind in whole or in part any PO without
penalty.




Supplier warrants that the goods sold or services rendered to Buyer shall conform to the
standards and/or regulations promulgated by the U.S. Department of Labor under the Federal
Occupational Safety and Health Act (“OSHA”). In the event the goods or services do not conform to
the OSHA standards and/or regulations, Buyer may return the goods or deliverables for correction
or, at Supplier’s option, replacement, in either case, at Supplier’s expense. Services or goods
which do not conform to the OSHA standards and/or regulations must be corrected by Supplier at
Supplier’s expense or may be corrected by Buyer at Supplier’s expense in the event Supplier fails
to make the appropriate correction within a reasonable time.




Pursuant to Public Law 95-507, the provision at 48 Code of Federal Regulations 52.219-9,
“Utilization of Small Business Concerns” is incorporated into any PO issued pursuant to an
agreement with Supplier in excess of $500,000. This clause is aimed at maximizing opportunities
for small and disadvantaged businesses where appropriate and is intended for suppliers who offer
further subcontracting opportunities. When these conditions exist, Supplier agrees to use best
efforts to carry out this policy in the award of subcontracts to the fullest extent consistent
with the efficient performance of the contract.




23. Dispute Resolution. (i) Governing Law. The laws of the State of New Jersey, without regard
to principles of conflict of laws or Buyer’s place of residence, will govern these terms and
conditions and the PO.




(ii) Arbitration. Any dispute that might arise between Supplier and Buyer relating to or
arising from use of the Site or from the PO or the terms and conditions thereof shall be settled
by binding arbitration in accordance with the then prevailing Commercial Arbitration Rules of the
American Arbitration



 









 







Association (“AAA”), except where those rules conflict with this provision, in which case this
provision controls. Arbitration shall be conducted before a single arbitrator selected from the
AAA’s National Roster of Arbitrators. The arbitration shall be held, and Supplier and Buyer
irrevocably consent to arbitrate, in New Brunswick, New Jersey unless they mutually agree upon an
alternative location. The arbitration shall be conducted in English. In rendering the award the
arbitrator must apply the substantive law of New Jersey (except where that law conflicts with
this clause), except that the interpretation and enforcement of this arbitration provision shall
be governed by the Federal Arbitration Act. Under no circumstances shall the arbitrator award
damages in excess of or inconsistent with the limitations contained in the “Limitation of
Liability” section of these terms and conditions. Any court with jurisdiction shall enforce this
clause and enter judgment on any award. Supplier and Buyer will agree upon, within 45 days after
arbitration is initiated or, if they fail to agree, the AAA will design, procedures that they
will follow to assure that the arbitration will be concluded and the award rendered within no
more than eight months from selection of the arbitrator. Supplier and Buyer each have the right
before or during the mediation or arbitration, if the arbitrator cannot hear the matter within an
acceptable period, to seek and obtain from the appropriate court provisional remedies such as
attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the
status quo or preserve the subject matter of the arbitration.




(iii) Mediation. Prior to initiation of arbitration, Supplier and Buyer must attempt to mediate,
within a period of 45 days after the request for mediation, the dispute using a professional
mediator from the AAA or like organization selected by agreement or, absent agreement, through
selection procedures administered by the AAA. In no event will mediation delay commencement of
the arbitration for more than 45 days or interfere with the availability of emergency relief.




(iv) No Publicity. The arbitration and mediation proceedings shall be confidential and Supplier
shall not publicize the nature of any dispute or the outcome of any mediation or arbitration
proceedings. The mediator or arbitrator, as the case may be, shall issue appropriate protective
orders to safeguard each party’s confidential information.




24. Complete Agreement. These terms and conditions and the other agreements (e.g., supply
agreements, service agreements, statements of work) if any, pursuant to which this PO was issued
contain the entire understanding of the parties with respect to the subject matter of the PO. In
the event of any conflict between the terms and conditions contained herein and those in any
other applicable written agreement relating to the subject matter of the PO and governing the
relationship between Buyer and Supplier, the conflicting terms and conditions in the other
agreement will govern. No modification, amendment or waiver of any term or condition hereof shall
be effective unless set forth in writing signed by Buyer and Supplier. Unless agreed to by Buyer
in a writing, Buyer will not be bound to any additional or different terms or conditions
hereafter transmitted by Supplier and Buyer will not be bound by its silence, course of dealing,
usage of the trade or its acceptance of the goods or services.




25. Assignment. The PO and Supplier’s rights and duties hereunder shall not be assignable by
Supplier without the prior written consent of Buyer, which consent may be withheld in its sole
discretion. Buyer may assign its rights and obligations hereunder to any one or more of its
affiliates. The PO and these terms and conditions shall inure to the benefit of and be binding
upon Buyer and Supplier and their respective successors and permitted assigns; nothing contained
herein shall give to any other person any benefit or any legal or equitable right, remedy or
claim.




26. Miscellaneous. Headings used herein are for convenience only and shall not be used for
interpretive purpose. A party’s failure to act with respect to another party’s breach of any
provision contained herein does not constitute a waiver. If any provision herein is held to be
invalid or unenforceable, such provision shall be narrowly construed, if possible, or otherwise
deemed ineffective and the remaining provisions shall not be affected. These terms and conditions
will survive the fulfillment of the PO.



	 	 	 	 	 
	 	By signing below, Company consents to the terms & conditions above.
	 	Company:
	 	 	 
	 	 

	 	 

	 
	 	Signature:
	 	 	 
	 	 

	 	 

	 
	 	Typed Name:
	 	 	 
	 	 

	 	 

	 
	 	Title:
	 	 	 
	 	 

	 	 

	 
	 	Date:
	 	 	 
	 	 

	 	 

	 






 









 





Exhibit C




Supply Agreement Key Terms




	 	 	 
	Product

	 	The term “Unit” shall mean the finished Peel product packaged in existing
sizes of tubes no more than 30-grams in size ready for commercial
distribution, which shall be inclusive of secondary packaging, any
necessary regulatory inserts (for example, physician and patient inserts)
manufactured in accordance with the Specifications set forth in Exhibit A,
and applicable product release testing as reasonably required and mutually
determined by GPSG and ZARS; provided
that such Specifications may not be modified unless mutually agreed by the
Parties in writing.
	 
	 	 
	Cost

	 	The supply price for the finished Peel product shall be: [ * ] per
30-gram Unit. The supply price for the 11.5-gram Unit will be negotiated
in good faith by ZARS and GPSG. ZARS shall be responsible for all shipping
charges.
	 
	 	 
	Payment Terms

	 	Net forty-five (45) days upon shipment of released Units and receipt of
invoice.
	 
	 	 
	Term

	 	The term of supply shall be through and not beyond Supply Termination Date.
	 
	 	 
	Termination

	 	ZARS may at its election terminate GPSG’s supply of the Peel at any time
prior to Supply Termination Date upon four (4) months prior written notice
to GPSG for any reason; provided that (i) in the event that ZARS accepts
supply from an alternate manufacturing site it will provide GPSG with such
notice as soon as practicable and (ii) ZARS will reimburse GPSG for all
out of pocket costs in connection with ordering raw materials and other
reasonable costs incurred by GPSG arising from such early termination.
ZARS will pay GPSG for all work
in progress and raw materials ordered and/or received based upon the firm
forecast.
	 
	 	 
	Forecasts /Purchase Orders

	 	ZARS shall provide a rolling twelve (12) month forecast with a firm four
(4) month forecast to GPSG in advance of requirements. ZARS shall submit
purchase orders setting forth specific quantities of Units, delivery date
and shipping instructions for each shipment at least sixty (60) days prior
to required delivery date and GPSG shall acknowledge receipt and confirm
said terms. GPSG will provide Units to ZARS’ distribution centers
consistent with ZARS’ purchase orders. ZARS will place all purchase orders
in full batch quantities.
	 
	 	 
	Launch Quantities

	 	GPSG shall provide launch quantities of the Units as defined by ZARS
within four (4) months of receiving the approved labeling artwork.
	 
	 	 
	Product Supply

	 	GPSG commits to fulfill all product orders submitted by ZARS. GPSG
agrees to reserve capacity in an excess of 15% of ZARS forecasts for the
quantities of Units defined in ZARS’ forecasts. GPSG agrees to maintain a






 









 






	 	 	 
	 

	 	stock of released raw materials, including API, intermediate components,
packaging components, and finished Units adequate to meet ZARS’
projected firm orders, subject to the proviso in “Termination” above.
	 
	 	 
	Quality Control

	 	GPSG shall include as part of the review and batch approval process,
provisions to ensure that ZARS has provided written authorization prior to
shipment of any manufactured batch. To facilitate ZARS’ batch record
review and approval, GPSG shall provide to ZARS a Certificate of
Conformance and Certificate of Analysis as well as complete facsimiles of
any exception document (i.e. deviations, out-of-trend reports,
out-of-specification reports, failure
investigation reports or similar reports) relevant to the Peel batch. Full
batch records would be made available during any audit, as set forth
below.
	 
	 	 
	Quality Standards

	 	GPSG will manufacture the Peel and the completed Units in accordance with
the manufacturing process and specifications in the approved NDA and in
accordance with all applicable laws and regulations including, but not
limited to, the FDA’s current Good Manufacturing Practices as promulgated
under the U.S. Food, Drug and Cosmetic Act, as amended. GPSG warrants that
all Peel
product and completed Units will not be adulterated or misbranded and will
conform to all specifications. GPSG will analyze each Unit lot for
compliance with the approved specifications and will retain all records
and documents necessary to fulfill the requirements established by all
applicable regulatory agencies. GPSG will perform marketed product
stability testing as committed to in the NDA. Except as specifically set
forth herein, GPSG and ORTHO make absolutely no other representations or
warranties regarding the Peel, including, without limitation any warranty
of fitness, merchantability or other warranties available to purchasers
under applicable law.
	 
	 	 
	Shipment Terms

	 	Ex Works ORTHO specified facility.
	 
	 	 
	Audit/Inspection 

Right

	 	ZARS or its representatives will have the right, at reasonable times
during normal business hours, to inspect or audit the facilities where the
Units are manufactured upon sufficient prior written notice to GPSG and
subject to an appropriate undertaking of confidentiality. ZARS will only
have the right to perform one (1) audit per year.
	 
	 	 
	Non-conforming 

Product

	 	ZARS may return Units that are non-conforming to specifications or have
not been manufactured in accordance with cGMPs for replacement by GPSG at
GPSG’s cost. Such right shall be ZARS’ sole and exclusive right with
respect to non-conforming product.
	 
	 	 
	Liability Limit

	 	The maximum liability of ORTHO, GPSG, their affiliates and any of their
respective officers, directors or employees shall be limited to an amount
equal to the total cost of Peels paid by ZARS to ORTHO or GPSG in
connection with their supply; except to the extent such liability resulted
from the gross
negligence or willful misconduct of ORTHO, GPSG, or their respective
affiliates, officers, directors and employees.






 









 






	 	 	 
	Indemnity

	 	ZARS agrees to hold harmless and indemnify ORTHO, GPSG, their affiliates
and their respective officers, directors and employees (the “ORTHO
Indemnified Parties”) for all claims, losses, liability or other causes of
action arising out of the distribution, storage, use or sale of the Peel,
except to the extent that any such claim, loss, liability or other cause
of action resulted
directly from the gross negligence or willful misconduct of the ORTHO
Indemnified Parties.


ORTHO and GPSG, jointly agree to hold harmless and indemnify ZARS, its
affiliates and its officers, directors and employees for all claims,
losses, liability or other causes of action arising out of the
distribution, storage, use or sale of the Peel to the extent that any such
claim, loss, liability or other cause of action resulted directly from the
gross negligence or willful misconduct of the ORTHO Indemnified Parties.






 









 





Exhibit D




Document Request



To the extent such documents are reasonably available to ORTHO, ORTHO shall provide to ZARS copies
of each of the following documents as they relate to the Peel. Such documents may be redacted to
delete information not relating to the Peel.





	1.	 	Manufacturing process validation report(s).
	 
	2.	 	Packaging validation report(s).
	 
	3.	 	Bulk hold study protocols, reports and data.
	 
	4.	 	Master batch records for manufacturing and packaging.
	 
	5.	 	Raw material and packaging component specifications.
	 
	6.	 	Stability protocols, test results, and reports.
	 
	7.	 	Process development reports.
	 
	8.	 	Analytical test methods, test results and validation reports.
	 
	9.	 	Deviations, nonconformance reports, and investigation reports related to the product.
	 
	10.	 	Any FDA Form 483 observations and Establishment Inspection Reports related to the Peel
or inspections conducted with regards to the Peel.
	 
	11.	 	Information regarding customer complaints.
	 
	12.	 	Cleaning Validation Reports.
	 
	13.	 	Temperature excursion/post dispensing study data.
	 
	14.	 	Copies of executed Batch Records.
	 
	15.	 	Freeze/Thaw Summary Memorandum.
	 
	16.	 	PAVE Particles Investigation and Report.
	 
	17.	 	“Impurity E” studies conducted on Moehs lidocaine.
	 
	18.	 	Shipping study data and reports.
	 
	19.	 	Audit reports of Peel component suppliers.




 









 






	20.	 	Qualitative and/or quantitative market research reports.
	 
	21.	 	Qualitative and/or quantitative pricing research reports.
	 
	22.	 	Draft or final business and/or sales and marketing plans.
	 
	23.	 	Minutes, transcripts, videotape and/or audiotape records from meetings with key opinion
leaders.
	 
	24.	 	Contact information for and copies of any reports from any advertising agency and/or medical
publication support agency.
	 
	25.	 	Publications of manuscripts, reviews or abstracts.
	 
	26.	 	Draft or final publication plan.
	 
	27.	 	Transcripts, video or summary documents of the scientific advisory board relating to the
Peel.
	 
	28.	 	Draft or final prospective customer lists for the Peel.
	 
	29.	 	Salesforce sizing and/or geographic salesforce distribution plans and/or research.
	 
	30.	 	Draft and/or final sales forecasts including key assumptions.
	 
	31.	 	Contact information for key opinion leaders.