Document:

Document

Exhibit 10.1

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and is the type of information that the registrant customarily and actually treats as private and confidential.

EXCLUSIVE DISTRIBUTION AGREEMENT

This Exclusive Distribution Agreement (the “Agreement”) is made as of this 8th day of February, 2021 (the “Effective Date”), between Arcutis Biotherapeutics, Inc. a corporation with an address of 3027 Townsgate Road, Suite 300, Westlake Village, CA 91361 (“Client”), and Cardinal Health 105, Inc., an Ohio corporation, with a place of business at 501 Mason Road, Suite 200, La Vergne, Tennessee, 37086 (“Cardinal Health”) each individually a (“Party”) and collectively (the “Parties”).

RECITALS

    A.    Client is, among other things, in the business of developing and marketing pharmaceutical products in the United States, its territories, possessions and commonwealths (“Territory”).

    B.    Cardinal Health is, among other things, in the business of distributing pharmaceutical products to wholesalers, specialty distributors, physicians, clinics, hospitals, pharmacies, and other health care providers in the Territory, and of providing information systems and other services that support its clients’ use of its distribution capabilities.

    C.    Client desires to engage Cardinal Health as its exclusive third-party logistics distribution agent for commercial sales of all pharmaceutical Products manufactured and/or marketed by Client in all formulations (collectively, “Product”), and to perform certain other services described in this Agreement, all upon the terms and conditions set forth in this Agreement.

    THEREFORE, in consideration of the mutual covenants, terms and conditions set forth below, the Parties agree as follows:

ARTICLE 1
Appointment/Authorization

1.1    Appointment. Subject to the terms and conditions set forth in this Agreement, during the term of this Agreement, Client appoints Cardinal Health as its exclusive third-party logistics distribution agent and as an authorized distributor of record of Product in the Territory to Client’s Customers, including, but not limited to, wholesalers, specialty distributors, physicians, clinics, hospitals, pharmacies and other health care providers in the Territory (collectively, “Customers”).

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1.2    Acceptance of Appointment. Subject to the terms and conditions set forth in this Agreement, Cardinal Health accepts the appointment to represent Client as its exclusive third- party logistics distribution agent and as an authorized distributor of record of Product to Customers in the Territory.

ARTICLE 2
Services
    
2.1    Services. Cardinal Health shall provide the services set forth in the Traditional 3PL Operating Guidelines (“OPG”), which include, without limitation, storage, distribution, returns, customer support, financial support, EDI and system access support (“Services”). The OPG shall be finalized and mutually agreed upon prior to the commercial launch of Product. Once finalized, a copy of the OPG shall be attached hereto as Exhibit A and incorporated by reference. 

2.2    Traditional 3PL Operating Guidelines. The OPG may be amended from time to time upon the mutual written agreement of the Parties; provided, however, that any change, modification or amendment to the OPG may result in an increase in the Fees (as defined in Article 5).

2.3    Compliance to Traditional 3PL Operating Guidelines. Cardinal Health's services shall comply with the OPG for up to [***] of Client’s Forecast (defined below). If (i) Client's shipments of Product to Cardinal Health or (ii) Client’s Customers’ Product orders exceed Client’s Forecast by more than [***] ([***]), Cardinal Health shall use commercially reasonable efforts to meet the requirements of the OPG, provided however, that Client acknowledges tha t Cardinal Health may not be able to meet all guidelines relating to response and shipping times.

2.4    Product Returns. All Product returns shall be processed and handled by Cardinal Health in accordance with the OPG; and any customization or additional return services requested by Client shall be performed at an additional fee as agreed by the Parties.

2.5    Product Recalls. Client is solely responsible for all Product recalls, provided however that Cardinal Health shall be responsible for Product recalls to the extent arising from Cardinal Health’s gross negligence or willful misconduct, subject to the terms of this Agreement. In the event Product is subject to recall, or Client, on its own initiative, recalls any Product, Cardinal Health shall provide assistance to Client as set forth in the OPG and as mutually agreed upon, provided that Client shall pay to Cardinal Health an amount equal to Cardinal Health's actual costs incurred with any such recall services. Such cost shall be in addition to the Fees described in Article 5 below.

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ARTICLE 3
Product Supply/Client Responsibilities

3.1    Facility. Client shall deliver Product to Cardinal Health at Cardinal Health's facility located at 15 Ingram Boulevard, La Vergne, Tennessee 37086 and/or 501 Mason Road, Suite 200,   La Vergne, Tennessee 37086, or to such other distribution facility as may be designated by Cardinal Health to Client in writing (“3PL Facility”).

3.2    Delivery and Title. Client shall be responsible for delivery of Product to and from the 3PL Facility, including all costs, expenses and risk of loss associated with such delivery. Title to Product shall remain with Client at all times, even when Product is stored or warehoused at the 3PL Facility. Client shall at all times insure the Product for damage, loss, destruction, theft or any such other property damage (“Loss”) as further set forth in Article 13 below. Except for Loss resulting solely from the gross negligence or willful misconduct of Cardinal Health, Client shall bear all risk of loss or damage with respect to the Product.

3.3Forecast and Price List.

A.      Forecast. Client shall provide Cardinal Health with a forecast of the volume of 
Product to be handled by Cardinal Health under this Agreement, not less often than semi-annually (“Forecast”). All forecasts, including the Forecast, are used for the express purpose of operational planning. In the event of a significant variance from the Forecast or a significant change in core business that could reasonably be expected to have a material effect upon the obligations of either Party hereunder, the Party so affected may notify the other Party that it wishes to negotiate an appropriate adjustment to the Fees. The Parties must meet within thirty (30) days of such notification to discuss the merits and implementation of any such adjustment and during such meeting, the Parties shall negotiate in good faith. If the Parties are unable to come to a resolution regarding any such adjustment, the Party originally proposing the adjustment may terminate this Agreement upon one hundred eighty days (180) prior written notice to the other Party.

    B.    Price List. Upon execution of this Agreement, Client shall deliver to Cardinal Health a customer list, which sets forth the Product prices (the “Customer Price List”). Client shall notify Cardinal Health of any change in the Customer Price List not less than seventy-two (72) hours prior to the effective date of any such change. Cardinal Health shall use commercially reasonably efforts to implement such price change in accordance with Client's instruction.

3.4Shipment Inspection. Cardinal Health shall visually inspect each shipment of Product for
external damage or loss in transit and notify Client of any such evident damage or loss as provided in the OPG.

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ARTICLE 4
Information System Access

4.1    Access. During the Term of this Agreement and subject to the terms herein, Client may use password(s) and identification number(s) provided by Cardinal Health to remotely access Client’s data maintained on Cardinal Health’s web enabled Operating System Base and certain support services associated therewith, as further set forth in the OPG (collectively, the “System”) provided that such access is used solely by Client’s employees and for Client’s own internal business purposes. Client shall use that access solely to access Client’s data and shall not access or attempt to access any other data, systems or software. Client shall be responsible for all use of the passwords and identification elements and shall ensure that they are used solely to effect the limited access authorized herein. The limited license to access the System granted herein does not include the right to copy, download or otherwise use any software or non-Client data maintained on the System.

4.2    Fees. The System shall be made available to Client at the fees set forth in the Fee Schedule. If Cardinal Health agrees to perform any custom enhancements to the System requested by Client, such customization services shall be billed separately based on an hourly rate set forth in the Fee Schedule (as defined in Article 5) and prior to such performance, Cardinal Health shall notify Client of any related increase in the periodic Fees hereunder relative to the ongoing support of the customizations. 

4.3    Security. During the term of this Agreement, Cardinal Health shall employ reasonable security measures and policies designed to safeguard the integrity, accessibility, and confidentiality of Client's data resident on the System and establish and maintain reasonable disaster and emergency recovery plans designed to minimize disruption from System operation interruptions. Such measures shall be no less secure than those utilized by Cardinal Health to protect its own confidential information.
4.4    Client Obligations. Client shall not reverse engineer, reverse assemble, decompile, create derivative works, modify, or otherwise attempt to derive the source code of any software on the System or copy, download, modify, or create derivative works of such software. Also, Client shall not permit access to the System or related documentation to any other person or entity. The System and all parts thereof, in all of their tangible and intangible manifestations, all existing or new enhancements, developments, derivative works, and other modifications to the System (or any part thereof), and all related proprietary rights, are and shall remain the exclusive property of Cardinal Health. 
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4.5     Disclaimer. THE SYSTEM, THE SOFTWARE THEREON AND ANY RESULTS OBTAINED THEREFROM ARE PROVIDED ON AN “AS IS” BASIS, WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. CARDINAL HEALTH MAKES NO REPRESENTATIONS OR WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, RELATING DIRECTLY OR INDIRECTLY TO THE SYSTEM OR ANY PART THEREOF INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. 

4.6    System Availability. Cardinal Health shall use reasonable efforts to make the System available for access twenty-four (24) hours a day, seven (7) days a week absent scheduled and emergency maintenance periods.

4.7    Suspension of Access. Notwithstanding anything to the contrary, in the event of a breach of any term of this Agreement or a threatened breach of the System, each as determined in good faith, Cardinal Health may revoke or suspend any or all passwords and identification numbers provided to Client hereunder. 

ARTICLE 5
PRICING AND PAYMENT TERMS

5.1    Fees. As compensation for the Services, Client shall pay to Cardinal Health the fees (“Fees”) set forth on Exhibit B (“Fee Schedule”) attached hereto and incorporated by reference.

5.2    Invoices. Cardinal Health shall issue an invoice to Client for the Services rendered under this Agreement or for any other amounts due on a monthly basis. Payment is due within thirty (30) days of the invoice date. If the invoice is not paid (except for amounts subject to a good faith dispute) within such thirty (30) day period, Cardinal Health may, at its option elect to (i) impose a service charge on unpaid amount (except for amounts subject to a good faith dispute) calculated at the rate of 1.5% per month (or the maximum rate permitted by law if such rate is less than 1.5% per month) until such amount is paid in full and/or (ii) suspend any further Services until such invoice is paid in full provided, however, that this provision shall not apply in the event any unpaid portion of the invoice is the subject of an unresolved good faith dispute.  In the event of any good faith dispute with regard to an invoice, Client shall notify Cardinal Health of such dispute within thirty (30) days of the invoice date, and any undisputed portion of the invoice shall be paid as provided herein.  The Parties will work together in good faith to resolve any dispute with respect to an invoice.  Any amounts owed to Cardinal Health shall be paid within ten (10) days of resolution of such dispute.

5.3    Fee Adjustment.

A.    The Fees shall be held firm for the first contract year. Thereafter, Cardinal Health will evaluate the fee schedule and may adjust the Fees not more often than once per contract year by no more than [***] ([***]).
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    B.    Notwithstanding the terms set forth above in Section 5.3(A), if Cardinal Health can reasonably demonstrate that the costs for providing the Services have materially increased, or are likely to materially increase in the coming year due to the adoption of any applicable law or regulation (or any material change in the interpretation or administration thereof), or due to unforeseen circumstances beyond Cardinal Health's reasonable control, then upon notice from Cardinal Health, the Parties agree to meet in good faith and negotiate a mutually acceptable adjustment to the Fees.

5.4    Taxes. Client shall pay when due all sales, use, gross receipts, excise and personal property taxes associated with the Product (excluding any personal property tax associated with Cardinal Health’s equipment used in connection with the Services), and other taxes now or hereafter imposed as a result of the transactions contemplated by this Agreement, none of which have been included in the fees payable to Cardinal Health under this Agreement; provided that the amounts payable by Client under this section shall not include taxes based on the net income of Cardinal Health. 

ARTICLE 6
Term and Termination

6.1     Term. The Initial Term of this Agreement shall begin on the Effective Date and shall continue for a period of three (3) years following the first shipment of FDA-approved Product to a commercial customer (“Initial Term”), unless terminated earlier pursuant to this Agreement. Thereafter, this Agreement shall automatically renew for additional terms of one (1) year each (each, a “Renewal Term,” and together with the Initial Term, the “Term”), unless written notice of termination is given by either Party at least ninety (90) days prior to the end of the Initial Term or any Renewal Term.

6.2    Termination 

A.    Client shall have the right to terminate this Agreement upon one hundred eighty (180) days’ notice to Cardinal Health, provided that, if Client terminates this Agreement during the Initial Term per the terms of this section 6.2(A), such termination shall be effective only upon payment to Cardinal Health of all undisputed outstanding amounts and (a) [***] ([***]) of all remaining Fixed Fees set forth on the Fee Schedule for the remainder of the Initial Term if the Client so terminates within the first year after the Effective Date; (b) [***] ([***]) of all remaining Fixed Fees set forth on the Fee Schedule for the remainder of the Initial Term if the Client so terminates after the first year after the Effective Date but prior to end of the second year after the Effective Date; or (c) [***] ([***]) of all remaining Fixed Fees set forth on the Fee Schedule for the remainder of the Initial Term if the Client so terminates after the second year after the Effective Date but prior to end of the third year after the Effective Date (the “Termination Fee”).  “Fixed Fees” shall mean the fees specified on the Fee Schedule to be paid monthly by Client to Cardinal Health that are not dependent on the quantity of Product handled by Cardinal Health.
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B.    Either Party shall have the right to immediately terminate this Agreement if:

(i)the other Party files a petition in bankruptcy, or enters into an agreement with its creditors, or applies for or consents to the appointment of a receiver or trustee, or makes an assignment for the benefit of creditors, or suffers or permits the entry of any order adjudicating it to be bankrupt or insolvent and such order is not discharged within thirty (30) days; or

(ii)the other Party materially breaches any of the provisions of this Agreement, and such breach is not cured within thirty (30) days after the giving of written notice; provided, however, that (i) in the case of a breach that cannot be cured within thirty (30) days, the Parties agree to meet in good faith and within thirty (30) days after the giving of written notice, formulate a mutually agreeable plan to cure such breach within a reasonable period of time, provided, however, if such breach is not cured within the agreed upon time, the non-breaching party may terminate immediately; and (ii) in the case of a failure of Client to make payments in accordance with the terms of this Agreement, Cardinal Health may terminate this Agreement if such payment breach is not cured within ten (10) days following Cardinal Health’s delivery of a written notice of non-payment to Client.

6.3    Effect of Termination. Expiration or termination of this Agreement shall be without prejudice to any rights or obligations that accrued to the benefit of either Party prior to such expiration or termination. Client shall pay Cardinal Health for all Services performed up to the date of termination plus any applicable Termination Fee as set forth in Section 6.2(A) above and shall reimburse Cardinal Health for all costs and expenses incurred, and all non-cancelable commitments made up to the date of termination, in the performance of Services. Upon termination or expiration of this Agreement, all Product shall be returned to Client or a designee of Client, at Client's sole cost and expense.

ARTICLE 7
REGULATORY

7.1    Audits. No more than [***] per calendar year, Client or its designee has the right during normal business hours [i.e., 8:00 a.m. to 5:00 p.m. local 3PL Facility time and not to exceed a total of eight (8) business hours], to conduct a complete quality audit upon [***] days prior written notice to Cardinal Health. If the timing of such audit falls during “quarter-end” or “year-end” then Cardinal Health will use best efforts to accommodate Client’s request. Client shall have the right to conduct for cause audits immediately if necessary, to ensure Product safety or if otherwise necessary to implement or support a Product recall. 

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7.2    Compliance with Laws. Each Party shall conduct its activities in connection with this Agreement in compliance with all applicable United States laws, rules, regulations and guidelines.

ARTICLE 8
Representations and Warranties

8.1    Cardinal Health. Cardinal Health represents and warrants to Client that, unless otherwise agreed to by the Parties, Cardinal Health shall perform Services in accordance with this Agreement, the OPG, and applicable United States laws, rules, regulations and guidelines.

8.2    Client. Client represents, warrants and covenants to Cardinal Health that: 

    A.    Product. The Product shall not be adulterated or misbranded as provided in the Food, Drug and Cosmetic Act, as amended from time to time; 

B.Promotion. Client’s activities relating to the promotion, sale and distribution of the Product shall comply with all applicable laws, rules, regulations and guidelines;  

    C.    No Infringement. It has all necessary authority and right, title and interest in and to any intellectual property related to each Product or that is otherwise provided by Client under this Agreement;

    D.    Safe Handling Instructions. It has provided all safe handling instruction, health and environmental information and material safety data sheets applicable to the Product or to any materials supplied by Client in writing in sufficient time for review and training by Cardinal Health prior to delivery; and

8.3    Mutual. Each Party represents and warrants to the other Party that: 

    A.    Existence and Power. Such Party (i) is duly organized, validly existing and in good standing under the laws of the state in which it is organized, (ii) has the power and authority and the legal right to own and operate its property and assets, and to carry on its business as it is now being conducted, and (iii) is in compliance with all requirements of applicable laws, except to the extent that any noncompliance would not materially adversely affect such Party's ability to perform its obligations under the Agreement;

    B.    Authorization and Enforcement of Obligations. Such Party (i) has the power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder;

C.    Execution and Delivery. This Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, binding obligation, enforceable against such Party in accordance with its terms;
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    D.    No Consents. All necessary consents, approvals and authorizations of all regulatory authorities and other persons required to be obtained by such Party in connection with the Agreement have been obtained; and

    E.    No Conflict. The execution and delivery of this Agreement and the performance of such Party's obligations hereunder (i) do not conflict with or violate any requirement of applicable laws; and (ii) do not materially conflict with or constitute a material default or require any consent under, any contractual obligation of such Party.

8.4    Limitations. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 8 ARE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY EACH PARTY TO THE OTHER AND NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE 9
Trademarks

Neither Party shall have the right to use the name of the other Party or any Affiliate of the other Party, or the other Party’s or such Affiliates’ trademarks, service marks, logos, or other similar marks in any manner except with the prior written approval of that Party; provided that the foregoing shall not prohibit Cardinal Health’s use of Client’s names or marks in connection with the performance of the Services in a manner consistent with this Agreement. “Affiliate,” as used in this Agreement, means any legal entity which, during the Term hereof, controls, is controlled by, or is under common control with, such Party. For purposes of this definition, an entity shall be deemed to control another entity if it owns or controls, directly or indirectly, at least fifty percent (50%) of the voting interest of all equity interests of the other entity (or other such comparable ownership interest for an entity other than a corporation).

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ARTICLE 10
Confidentiality AND NON-USE

10.1    Mutual Obligation. Cardinal Health and Client agree that they shall not use the other Party’s Confidential Information (defined below) except as necessary for the receiving Party to perform its obligations under this Agreement or disclose the other Party’s Confidential Information to any third party without the prior written consent of the other Party except as required by law, regulation or court or administrative order (including without limitation, as required by and/or in order to comply with the requirements of the Securities and Exchange Commission (SEC) or any other agency governing publicly traded companies, including in connection with Client’s public filings); provided, however, that prior to making any such legally required disclosure, the Party making such disclosure shall give the other Party as much prior notice of the requirement for and contents of such disclosure as is practicable under the circumstances. Notwithstanding the foregoing, each Party may disclose the other Party’s Confidential Information to any of its Affiliates that (A) need to know such Confidential Information for the purpose of performing under this Agreement, (B) are advised of the contents of this article, and (C) agree to be bound by the terms of this article.

10.2    Definition. As used in this Agreement, the term “Confidential Information” includes all such information furnished by Cardinal Health or Client, or any of their respective representatives or Affiliates, to the other or its representatives or Affiliates in connection with the services or performance of this Agreement, whether furnished before, on or after the date of this Agreement and furnished in any form, including but not limited to written, verbal, visual, electronic or in any other media or manner. Confidential Information includes all proprietary technologies, know-how, trade secrets, discoveries, inventions and any other intellectual property (whether or not patented), analyses, compilations, business or technical information and other materials prepared by either Party, or any of their respective representatives, containing or based in whole or in part on any such information furnished by the other Party or its representatives. Confidential Information also includes the existence of this Agreement and its terms.

10.3    Exclusions. Notwithstanding Section 10.2, Confidential Information does not include information that (A) is or becomes generally available to the public other than as a result of a breach of this Agreement, or (B) is already known by the receiving Party at the time of disclosure as evidenced by the receiving Party’s written records, or (C) becomes available to the receiving Party on a non-confidential basis from a source that is entitled to disclose it on a non-confidential basis, or (D) was or is independently developed by or for the receiving Party without reference to the Confidential Information, as evidenced by the receiving Party’s written records.
 
10.4    No Implied License. The receiving Party shall obtain no right of any kind or license under any patent application or patent by reason of this Agreement. All Confidential Information shall remain the sole property of the Party disclosing such information or data.

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10.5    Return of Confidential Information. Upon termination of this Agreement, the receiving Party shall, upon request, promptly return within thirty (30) days all such information, including any copies thereof, and cease its use or, at the request of the disclosing Party, shall promptly destroy the same and certify such destruction to the disclosing Party; except for a single copy thereof, which may be retained for the sole purpose of determining the scope of the obligations incurred under this Agreement.

10.6Survival. The Parties intend for this Article 10 to supersede that certain Confidentiality Agreement between the parties dated the 5th day of August, 2020. The obligations of this Article 10 shall terminate five (5) years from the expiration of this Agreement.

ARTICLE 11
Indemnification

11.1    Indemnification by Cardinal Health. Cardinal Health shall indemnify and hold harmless Client, its Affiliates, and their respective directors, officers, employees and agents (“Client Indemnitees”) from and against any and all suits, claims, losses, demands, liabilities, damages, costs and expenses (including reasonable attorney’ fees) in connection with any suit, demand or action by any third party (“Liabilities”) arising out of or resulting from (A) any breach of its representations, warranties or obligations set forth in this Agreement or (B) any negligence or willful misconduct by Cardinal Health, except to the extent that any of the foregoing arises out of or results from any Client Indemnitee’s negligence, willful misconduct or breach of this Agreement.

11.2    Indemnification by Client. Client shall indemnify and hold harmless Cardinal Health, its Affiliates, and their respective directors, officers, employees and agents (“Cardinal Health Indemnitees”) from and against all Liabilities arising out of or resulting from (A) any breach of its representations, warranties or obligations set forth in this Agreement; (B) any manufacture, sale, promotion, distribution, shipping, use of or exposure to the Product or any materials supplied by Client, including, without limitation, product liability or strict liability; (C) Client’s exercise of control over the Services to the extent that Client’s instructions or directions violate applicable law; (D) any actual or alleged infringement or violation of any patent, trade secret, copyright, trademark or other proprietary rights concerning the Product or provided by Client; or (E) any negligence or willful misconduct by Client, except to the extent that any of the foregoing arises out of or results from any Cardinal Health Indemnitee’s negligence, willful misconduct or breach of this Agreement.

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11.3    Indemnification Procedures. All indemnification obligations in this Agreement are conditioned upon the Party seeking indemnification: (A) promptly notifying the indemnifying Party of any claim or liability of which the Party seeking indemnification becomes aware (including a copy of any related complaint, summons, notice or other instrument); provided, however, that failure to provide such notice within a reasonable period of time shall not relieve the indemnifying Party of any of its obligations hereunder except to the extent the indemnifying Party is prejudiced by such failure; (B) reasonably cooperating with the indemnifying Party in the defense of any such claim or liability (at the indemnifying Party’s expense); and (C) not compromising or settling any claim or liability without prior written consent of the indemnifying Party.

ARTICLE 12
LimitationS of Liability

12.1    CARDINAL HEALTH’S TOTAL LIABILITY UNDER THIS AGREEMENT, WHETHER IN CONTRACT OR TORT, INCLUDING, WITHOUT LIMITATION, ANY OF CARDINAL HEALTH’S INDEMNITY OR OTHER FINANCIAL OBLIGATIONS UNDER ARTICLE 11, SHALL NOT EXCEED TWO TIMES (2X) THE TOTAL FEES PAID BY CLIENT TO CARDINAL HEALTH FOR THE SERVICES WHICH WERE INVOLVED IN CAUSING ANY CLAIMS, DAMAGES, LOSSES, COSTS OR EXPENSES.

12.2  NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF PERFORMANCE UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, LOSS OF REVENUES, PROFITS OR DATA, WHETHER IN CONTRACT OR TORT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

12.3 NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE LIMITATIONS IN THIS ARTICLE 12 SHALL NOT LIMIT CLIENT’S LIABILITY OR RESPONSIBILITY RELATING TO A BREACH OF ITS OBLIGATIONS UNDER ARTICLE 4 HEREIN.

ARTICLE 13
Insurance

13.1    Insurance Policies. During the term of this Agreement, Client shall obtain and maintain the following insurance with limits not less than those specified below:

A.    Products and Completed Operations Liability Insurance covering the Products included in this Agreement with a limit of not less than $[***] per occurrence;

B.    All-Risk Property Insurance, including transit coverage, in an amount equal to full replacement value covering Client’s property while it is at the 3PL Facility or in transit to or from the 3PL Facility. Client’s all-risk property insurance shall apply to all losses and be primary (with respect both to any insurance issued to Cardinal Health and to any deductible amount or 
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self-insured amount retained by Cardinal Health) except for losses resulting solely from the gross negligence or willful misconduct of Cardinal Health.

In the event that any of the required policies of insurance are written on a claims-made basis, then such policies shall be maintained during the entire term of this Agreement and for a period of not less than five (5) years following the termination or expiration of this Agreement.

13.2    Waiver. Client shall obtain a waiver from any insurance carrier with whom Client carries Property Insurance releasing its subrogation rights against Cardinal Health except for losses resulting solely from the gross negligence or willful misconduct of Cardinal Health. Client shall not seek reimbursement for any property claim, or portion thereof that is not fully recovered from Client’s property insurance except for losses resulting solely from the gross negligence or willful misconduct of Cardinal Health.

13.3    Additional Insured Status. Cardinal Health, Inc., and its Affiliates shall be named as additional insureds under the Products and Completed Operations Liability insurance policies as respects the Products and completed operations outlined in this Agreement. Such insurance shall be primary (with respect both to any insurance issued to Cardinal Health and to any self-insured amount retained by Cardinal Health) with regard to Cardinal Health’s liability for damage arising out of those products for which they have been added as additional insureds. Such additional insurance status shall continue during the term and, if the policies are written on a claims-made basis, shall continue for not less than five (5) years following termination or expiration of this Agreement.

13.4    Certificates. Client shall furnish certificates of insurance to Cardinal Health evidencing the required insurance and additional insured status as soon as practicable after the Effective Date and within thirty (30) days after renewal of such policies. Client will endeavor to provide thirty (30) days written notice of any cancellation prior to the policy(ies) expiration date(s). Each insurance policy that is required under this article shall be obtained from an insurance carrier with an A.M. Best rating of at least A-VII.

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ARTICLE 14
NOTICES

All notices and other communications hereunder shall be in writing and shall be deemed given:    (A) when delivered personally; (B) when delivered by facsimile transmission (receipt verified);   (C) when received or refused, if mailed by registered or certified mail (return receipt requested), postage prepaid; or (D) when delivered if sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof):

To Client:                Arcutis Biotherapeutics
                    3027 Townsgate Road, Suite 300
Westlake Village, CA 91361 
                    Attn: VP of Market Access
                    
With a copy to:            
Arcutis Biotherapeutics
                    3027 Townsgate Road, Suite 300
Westlake Village, CA 91361 
                    Attn: General Counsel

To Cardinal Health:            Cardinal Health 105, Inc.
                    Third-Party Logistics Services
                    501 Mason Road, Suite 200
                    La Vergne, TN  37086
                    Attn:  VP, Operations
        
With a copy to:            Cardinal Health, Inc.
                    7000 Cardinal Place
                    Dublin, Ohio 43017
                    Attn: Associate General Counsel
    Facsimile: [***]

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ARTICLE 15
Miscellaneous

15.1    Entire Agreement; Amendments. This Agreement, the attachments and any amendments thereto constitute the entire understanding between the Parties and supersede any contracts, agreements or understanding (oral or written) of the Parties with respect to the subject matter hereof. No term of this Agreement may be amended except upon written agreement of both Parties, unless otherwise provided in this Agreement.

15.2    Captions. The captions in this Agreement are for convenience only and are not to be interpreted or construed as a substantive part of this Agreement

15.3    Further Assurances. The Parties agree to execute, acknowledge and deliver such further instruments and to take all such other incidental acts as may be reasonably necessary or appropriate to carry out the purpose and intent of this Agreement.

15.4    No Waiver. Failure by either Party to insist upon strict compliance with any term of this Agreement in any one or more instances shall not be deemed to be a waiver of its rights to insist upon such strict compliance with respect to any subsequent failure.

15.5    Severability. If any term of this Agreement is declared invalid or unenforceable by a court or other body of competent jurisdiction, the remaining terms of this Agreement shall continue in full force and effect.

15.6    Independent Contractors. The relationship of the Parties is that of independent contractors, and neither Party shall incur any debts or make any commitments for the other Party except to the extent expressly provided in this Agreement. Nothing in this Agreement is intended to create or shall be construed as creating between the Parties the relationship of joint venturers, co-partners, employer/employee or principal and agent.

15.7    Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties, their successors and permitted assigns. Neither Party may assign this Agreement, in whole or in part, without the prior written consent of the other Party, except that either Party may, without the other Party's consent, assign this Agreement to an Affiliate or to a successor to substantially all of the business or assets of the assigning company to which this Agreement relates.

15.8    Governing Law. This Agreement shall be governed by and construed under the laws of the State of Tennessee, excluding its conflicts of law provisions. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

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15.9    Dispute Resolution. If any dispute, controversy or disagreement arises between the Parties (“Dispute”), such Dispute shall be presented to the respective presidents or senior executives of Cardinal Health and Client for their consideration and resolution. If such Parties cannot reach a resolution of the Dispute within sixty (60) days, either Party may submit the Dispute to a court of appropriate jurisdiction.

15.10    Prevailing Party. In any dispute resolution proceeding between the Parties in connection with this Agreement, the prevailing Party shall be entitled to its reasonable attorney's fees and costs in such proceeding.

15.11    Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Any photocopy, facsimile or electronic reproduction of the executed Agreement shall constitute an original.

15.12    Publicity. Neither Party shall make any press release or other public disclosure regarding this Agreement or the transactions contemplated hereby without the other Party's express prior written consent, except as required under applicable law or by any governmental agency (including without limitation, as required by and/or in order to comply with the requirements of the Securities and Exchange Commission (SEC) or any other agency governing publicly traded companies, including in connection with Client’s public filings), in which case the Party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other Party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or making the public disclosure.

15.13    Setoff. Without limiting Cardinal Health’s rights under law or in equity, Cardinal Health and its Affiliates, parent or related entities, collectively or individually, may exercise a right of set-off against any and all amounts due to Cardinal Health from Client that are at least thirty (30) days past due after providing Client with not less than fifteen (15) business days’ prior written notice (specifying the supporting details for such amount due). For purposes of this section, Cardinal Health, its Affiliates, parent or related entities shall be deemed to be a single creditor.

15.14    Survival. The rights and obligations of the Parties shall continue under Articles 10 (Confidentiality and Non-Use), to the extent expressly stated therein, 11 (Indemnification), 12 (Limitations of Liability), 13 (Insurance), to the extent expressly stated therein, 14 (Notice) and 15 (Miscellaneous) and Section 6.4 (Effect of Termination), notwithstanding expiration or termination of this Agreement.

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15.15    Force Majeure. Except as to payments required under this Agreement, neither Party shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in such Party’s performance hereunder if such default or delay is caused by events beyond such Party’s reasonable control including, but not limited to, acts of God, regulation or law or other action or failure to act of any government or agency thereof, war or insurrection, civil commotion, destruction of production facilities or materials by earthquake, fire, flood or storm, labor disturbances, epidemic, or failure of suppliers, public utilities or common carriers; provided however, that the Party seeking relief hereunder shall immediately notify the other Party of such cause(s) beyond such Party’s reasonable control. The Party that may invoke this section shall use all reasonable endeavors to reinstate its ongoing obligations to the other. If the cause(s) shall continue unabated for one hundred eighty (180) days, then both Parties shall meet to discuss and negotiate in good faith what modifications to this Agreement should result from this force majeure.

[Signature Page to Exclusive Distribution Agreement Follows]

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IN WITNESS WHEREOF, the undersigned have caused their duly authorized representative to execute this Agreement effective as of the date first written above. 

CARDINAL HEALTH 105, INC.            Arcutis Biotherapeutics, Inc.

By: __/s/ Joel Waymen_________________        By: _/s/ Frank Watanabe_____________

Joel Wayment                        Frank Watanabe
VP, Operations                    President and CEO

Date: __2/18/2021_____________________        Date: __2/18/2021__________________
    
                                

[Signature Page to Exclusive Distribution Agreement]
18Document

Exhibit 10.2

ARCUTIS BIOTHERAPEUTICS, INC. SEVERANCE & CHANGE IN CONTROL AGREEMENT

This Severance & Change in Control Agreement (the “Agreement”), is entered into by and between Scott L. Burrows (the “Executive”) and Arcutis Biotherapeutics, Inc., a Delaware company (the “Company”), and is effective as of the date that this Agreement is signed by both parties (the “Effective Date”). This Agreement supersedes the Severance & Change in Control Agreement previously entered into by and between the Executive and the Company which was effective as of the first date on which the registration statement on Form S-1 for the initial public offering of the Company’s Common Stock was declared effective by the United States Securities and Exchange Commission or, if later, the date that the prior agreement was signed.

1.TERM OF AGREEMENT.
This Agreement shall terminate on the earlier of (i) the date Executive’s employment with the Company terminates for a reason other than a Qualifying Termination, or (ii) the date the Company has met all of its obligations under this Agreement following a Qualifying Termination (the “Expiration Date”).

2.SEVERANCE BENEFIT.
Executive’s receipt of any payments or benefits under Section 2 is subject to (I) Executive’s continued compliance with any confidential information agreement or restrictive covenant agreement by and between Executive and the Company, including, without limitation that certain Employee Invention Assignment and Confidentiality Agreement by and between Executive and the Company and any restrictive covenants contained in any employment agreement or offer letter agreement by and between Executive and the Company, and (II) Executive’s delivery to the Company of a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Company or persons affiliated with the Company (the “Release”), and satisfaction of all conditions to make the Release effective, within sixty (60) days (or such shorter period required by the Company) (the “Release Period”) following Executive’s Qualifying Termination, notwithstanding any other provision of this Agreement. In no event will any payment or benefits under Section 2 be paid or provided until the Release becomes effective and irrevocable or in the event Executive violates any agreement set forth in subsection (I) in the foregoing sentence.

(a)Qualifying Termination Outside of a Change in Control Period. If the Executive is subject to a Qualifying Termination outside of a Change in Control Period, the Executive shall be entitled to the following:

(i)Severance Payments. The Company shall pay Executive nine (9) months of Executive’s base salary at the rate in effect immediately prior to the Qualifying Termination (the “Severance”). The Severance shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over the total number of months of Severance commencing the first payroll period more than 60 days after the Qualifying Termination, subject to the Release becoming effective prior to such time (with the first payment to include all amounts that otherwise would have been paid through such date). Solely for purposes of Section 409A of the Code, each installment payment is considered a separate payment.

(ii)Health Care Benefit. If the Executive elects to continue his or her health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following

the termination of Executive’s employment, then the Company shall pay, or reimburse, the Executive’s monthly premium for Executive and his or her covered dependents under COBRA until the earliest of (A) nine (9) months, (B) the date when the Executive receives similar coverage with a new employer or (C) the expiration of the Executive’s continuation coverage under COBRA; provided that on the first date such amounts become payable as described above, the Company shall pay to Executive a lump sum cash payment equal to the monthly premiums that would have been paid on behalf of Executive had such payments commenced on the date of the Qualifying Termination. Notwithstanding the foregoing, the Company may elect that, in lieu of paying or reimbursing the premiums, the Company shall instead provide Executive with a monthly cash payment equal to the amount the Company would have otherwise paid pursuant to this Section 2(a)(ii), less applicable tax withholdings.

(b)Qualifying Termination During a Change in Control Period. If Executive is subject to a Qualifying Termination during a Change in Control Period, Executive shall be entitled to the following:

i.Severance Payments. The Company shall pay Executive twelve (12) months of Executive’s base salary at the rate in effect immediately prior to the Qualifying Termination or the Change in Control, whichever is greater, and 1.0 times Executive’s annual bonus for the then-current fiscal year based on 100% of target performance of any applicable performance objectives (together, the “CIC Severance”). The CIC Severance shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over the total number of months of CIC Severance commencing the first payroll period more than 60 days after the Qualifying Termination, subject to the Release becoming effective prior to such time (with the first payment to include all amounts that otherwise would have been paid through such date). Solely for purposes of Section 409A of the Code, each installment payment is considered a separate payment.

ii.Health Care Benefit. If the Executive elects to continue his or her health insurance coverage under COBRA following the termination of Executive’s employment, then the Company shall pay, or reimburse, the Executive’s monthly premium for Executive and his or her covered dependents under COBRA until the earliest of (A) twelve (12) months, (B) the date when the Executive receives similar coverage with a new employer or (C) the expiration of the Executive’s continuation coverage under COBRA; provided that on the first date such amounts become payable as described above, the Company shall pay to Executive a lump sum cash payment equal to the monthly premiums that would have been paid on behalf of Executive had such payments commenced on the date of the Qualifying Termination. Notwithstanding the foregoing, the Company may elect that, in lieu of paying or reimbursing the premiums, the Company shall instead provide Executive with a monthly cash payment equal to the amount the Company would have otherwise paid pursuant to this Section 2(b)(ii), less applicable tax withholdings.

iii.Equity. Each of Executive’s then-outstanding unvested Equity Awards, other than Performance Awards (defined below), shall accelerate and become vested and exercisable or settleable with respect to 100% of the then-unvested shares subject to the Equity Awards. With respect to awards that would otherwise vest only upon satisfaction of performance criteria (“Performance Awards”), the grant agreement for the Performance Award may provide for alternative treatment upon a Qualifying Termination and, absent any such treatment in such grant agreement, the vesting acceleration provided for herein shall be deemed to have been met based on the achievement of the Performance Award at the greater of “at target” or, if determinable, actual performance. The accelerated vesting described above shall be effective as of the later of (x) the fifth (5th) business day following expiration of the Release Period, and (y) the closing of the Change in Control; provided, that if (1) the Company terminates Executive’s employment for any reason other than Cause before a Change in Control, or (2) Executive 

voluntarily resigns his or her employment for Good Reason before a Change in Control, then any unvested Equity Awards that would otherwise forfeit upon such termination shall remain outstanding and eligible to vest for three (3) months following such termination (provided that in no event will the Equity Awards remain outstanding beyond

the expiration of the Equity Award’s maximum term) to permit the acceleration described above. For the avoidance of doubt, upon such termination before a Change in Control, any unvested Equity Awards will not vest in the ordinary course and will only be eligible to vest in the event that a Change in Control is completed within such three (3) month period. In the event that a Change in Control is not completed during such three (3) month period, any unvested portion of the Equity Awards will be automatically and permanently forfeited without having vested effective three (3) months following such termination.

iv.Non-Assumption of Equity Awards. Notwithstanding anything to the contrary, if, in connection with a Change in Control, the successor or acquiring corporation (if any) of the Company refuses to assume, convert, replace, or substitute Executive’s unvested Equity Awards, then notwithstanding any other provision in this Agreement, or any Equity Award Agreement to the contrary, each of Executive’s then-outstanding and unvested Equity Awards, other than Performance Awards, that are not assumed, converted, replaced, or substituted in such Change in Control shall accelerate and become vested and exercisable as to 100% of the then-unvested shares subject to the Equity Awards effective immediately prior to the Change in Control and terminate to the extent not exercised (as applicable) upon the Change in Control. With respect to Performance Awards, the vesting for such Performance Awards will accelerate as set forth in the terms of the applicable performance-based Equity Award agreement; and, absent any such treatment in such grant agreement, the vesting acceleration provided for herein shall be deemed to have been met based on the achievement of the Performance Award at the greater of “at target” or, if determinable, actual performance.

(c)Accrued Compensation and Benefits. Notwithstanding anything to the contrary in Section 2 above, in connection with any termination of employment, the Company shall pay Executive’s earned but unpaid base salary and other vested but unpaid cash entitlements, including the amount of any bonus earned and payable from a prior year which remains unpaid by the Company as of the date of the termination of employment determined in accordance with customary practice or as required by applicable law and unreimbursed documented business expenses incurred by Executive through and including the date of termination (collectively “Accrued Compensation and Expenses”). Any Accrued Compensation and Expenses to which Executive is entitled shall be paid to Executive in cash as soon as administratively practicable, in accordance with the Company’s standard payroll schedule and procedures, after the termination, and, in any event, no later than two and one-half (2-1/2) months after the end of the taxable year of Executive in which the termination occurs or at such earlier time as may be required by applicable law.

3.COMPANY POLICIES. Executive will be bound by and comply fully with that certain Employee Invention Assignment and Confidentiality Agreement by and between the Company and Executive and the Company’s insider trading policy, code of conduct, and any other policies and programs adopted by the Company regulating the behavior of its employees, as such policies and programs may be amended from time to time to the extent the same are not inconsistent with this Agreement.

4.DEFINITIONS.
(a)“Board” means the Company’s Board of Directors.

(b)“Cause” means the occurrence of any of the following events, as determined by the Company and/or the Board in its and/or their sole and absolute discretion: (i) Executive engaging in any act of fraud, embezzlement or material act of dishonesty or misrepresentation with respect to the Company;
(ii)Executive’s violation of any federal or state law or regulation applicable to the business of the Company or its affiliates; (iii) Executive’s material breach of any confidentiality agreement or assignment agreement between Executive and the Company (or any affiliate of the Company); (iv) Executive’s conviction of or plea of nolo contendere to a felony involving moral turpitude; (v) Executive’s unauthorized use or disclosure of confidential information or trade secrets of the Company (or any parent, subsidiary or affiliate); (vi) any intentional misconduct by Executive adversely affecting the business or affairs of the Company (or any parent, subsidiary or affiliate) in any material manner; (vii) Executive has committed any breach of fiduciary or statutory duty that results in (or would reasonably be expected to result in) material harm to the Company; (viii) Executive has breached any material term or condition of this Agreement or any other material agreement with or material policy of the Company; (ix) Executive’s willful and repeated failure to perform in any material respect Executive’s duties hereunder after fifteen (15) days’ notice and an opportunity to cure such failure and a reasonable opportunity to present to the Board Executive’s position regarding any dispute relating to the existence of such failure (other than on account of disability); or (x) Executive’s failure to attempt in good faith to implement a clear and reasonable directive from the CEO or CFO (or the Board).

provided; however that the action or conduct described in clause (viii) above will constitute “Cause” only if such action or conduct continues after the Company has provided Executive with written notice thereof and ten (10) business days to cure the same if such action or conduct is curable. The determination as to the existence of grounds for Executive’s termination for Cause shall be made in good faith by the Company or the Board and shall be final and binding on Executive.

(c)“Code” means the Internal Revenue Code of 1986, as amended.

(d)“Change in Control” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities; (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(e)“Change in Control Period” means the period (i) within eighteen (18) months following the closing of a Change in Control, or (ii) within three (3) months preceding the closing of a Change in Control.

(f)“Equity Awards” means all awards for the Company common stock granted to Executive, including but not limited to options, stock bonus awards, restricted stock, restricted stock units, and stock appreciation rights.

(g)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(h)“Good Reason” means the occurrence of any of the following events or conditions, without Executive’s express written consent: (i) a material diminution of Executive’s base salary or target annual performance bonus; (ii) a material diminution in Executive’s authority, duties or responsibilities; or (iii) any requirement by the Company that Executive’s principal place of employment be relocated to a location more than fifty (50) miles from Executive’s principal place of employment prior to such change, which relocation materially increases Executive’s commuting distance.
A termination of employment for Good Reason shall be effectuated by giving the Company written notice (“Notice of Termination for Good Reason”), setting forth in reasonable detail, the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Notice on which Executive is

relying. Notice of Termination for Good Reason must be provided within ninety (90) days of the condition first arising. The Company will have an opportunity to cure such conduct constituting Good Reason within thirty (30) days of receiving such Notice of Termination for Good Reason. If the Company does not cure such conduct within such thirty (30) day period, a termination of employment for Good Reason shall be effective on the thirty-first (31st) day following the date when the Notice of Termination for Good Reason is received by the Company.

(h)“Qualifying Termination” means a Separation resulting from (x) the Company terminating Executive’s employment for any reason other than Cause or (y) Executive voluntarily resigning his or her employment for Good Reason.

(j)    “Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code, if required by Section 409A of the Code.

5.SUCCESSORS.
(a)Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, merger, consolidation, liquidation, or otherwise) to all or substantially all of the Company’s business and/or assets to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.

(b)Executive’s Successors. This Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.

6.GOLDEN PARACHUTE TAXES.
(a)Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement or otherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this subsection (a), be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“Excise Tax”), then, subject to the provisions of Section 6(b) hereof, such Payments shall be either (x) provided in full pursuant to the terms of this Agreement or any other applicable agreement, or (y) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local, and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of the greatest amount of payments and benefits 

provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent tax counsel designated by the Company and reasonably acceptable to Executive (“Independent Tax Counsel”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required under this Section 6(a), Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. The Company and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to make a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. In the event that Section 6(a)(ii)(B) above applies, then based on the information provided to Executive and the Company by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within thirty (30) days of the date on which Executive is provided with the information prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensation awards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent Tax Counsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the Reduced Amount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 6(b) hereof shall apply, and the enforcement of Section 6(b) shall be the exclusive remedy to the Company.

(b)Adjustments. If, notwithstanding any reduction described in Section 6(a) hereof (or in the absence of any such reduction), the IRS determines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or pay back to the Company, within one hundred twenty (120) days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” The Repayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company so that Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received by Executive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 6(b), Executive shall pay the Excise Tax.

7.MISCELLANEOUS PROVISIONS.
(ii)Section 409A. To the extent (i) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code, and (ii) Executive is deemed at the time of such termination of employment to be a “specified” employee under Section 409A of the Code, then such payment or payments shall not be made or commence until the earlier of (x) the expiration of the six (6)-month period measured from the date of Executive’s “separation from service” (as such term is at the time defined in regulations under Section 409A of the Code) with the Company; or (y) the date of Executive’s death following such separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Executive, including (without limitation) the additional twenty percent (20%) tax for which Executive would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made 

during that period (whether in a single sum or in installments) in the absence of this paragraph shall be paid to Executive or Executive’s beneficiary in one lump sum (without interest).

Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in kind benefits to be provided in any other calendar year, in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.

To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this Agreement (or referenced in this Agreement) are intended to constitute separate payments for purposes of Section 1.409A 2(b)(2) of the regulations under Section 409A.

(b)Other Severance and Acceleration Arrangements. Except as otherwise specified herein, this Agreement represents the entire agreement between Executive and the Company with respect to any and all severance arrangements, vesting acceleration arrangements, and post-termination stock option exercise period arrangements, and supersedes and replaces any and all prior verbal or written discussions, negotiations, and/or agreements between Executive and the Company relating to the subject matter hereof as may be set forth under, but not limited to, any and all prior agreements governing any Equity Award, any change in control and severance agreements, employment agreement, offer letter, or programs and plans which were previously offered by the Company to Executive, and Executive hereby waives Executive’s rights to any and all such other severance arrangements, vesting acceleration arrangements, and post-termination stock option exercise period arrangements, as applicable.

(c)Dispute Resolution. To ensure rapid and economical resolution of any and all disputes that might arise in connection with this Agreement, Executive and the Company agree that any and all disputes, claims, and causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation, will be resolved solely and exclusively by final, binding, and confidential arbitration, by a single arbitrator, in Los Angeles County, CA, and conducted by JAMs under its then-existing employment rules and procedures. The JAMS rules may be found and reviewed at http://www.jamsadr.com/rules-employment-arbitration. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based. The arbitration provisions of this Agreement shall be governed by and enforceable pursuant to the Federal Arbitration Act. In all other respects for provisions not governed by the Federal Arbitration Act, this Agreement shall be construed in accordance with the laws of the State of California, without reference to conflicts of law principles. Nothing in this section, however, is intended to prevent either party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Each party to an arbitration or litigation hereunder shall be responsible for the payment of its own attorneys’ fees.

(d)Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or deposited with an overnight courier, with shipping charges prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.

(e)Amendment; Waiver. This Agreement may not be amended or waived except by a writing signed by Executive and by a duly authorized representative of the Company other than Executive. No provision of this Agreement shall be modified, waived, superseded or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive) and, to the extent it supersedes this Agreement, that this Agreement is referred to by date. No waiver by either party of any breach of, or of compliance with, any

condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(f)Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law.

(g)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(h)No Retention Rights. Nothing in this Agreement shall confer upon Executive any right to continue in service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or any subsidiary of the Company or of Executive, which rights are hereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.

(i)Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California (other than their choice-of-law provisions).

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, each of the parties has executed this Severance & Change in Control Agreement, as of the day and year this Agreement has been signed by both parties.

									
	EXECUTIVE		ARCUTIS BIOTHERAPEUTICS, INC.
			
	By: /s/ Scott L. Burrows
		By: /s/ Todd Franklin Watanabe

	Name: Scott L. Burrows		Name: Todd Franklin Watanabe
	Title: Chief Financial Officer		Title: President and Chief Executive Officer
	Date: April 11, 2021		Date: April 10, 2021

[SIGNATURE PAGE TO THE SEVERANCE & CHANGE IN CONTROL AGREEMENT]

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