Document:

exv10w12

 

[ * ] = 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 10.12

DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (“Agreement”) dated as of February
26, 2007, is entered into between ZARS, Inc. having an address at 1142 West 2320 South, Salt Lake
City, Utah, 84119 (“ZARS”) and Galderma Pharma S.A. having an address at Avenue
Gratta-Paille 1, 100 Lausanne Switzerland (“Galderma”).

BACKGROUND

     A. ZARS has developed a product referred to as PliaglisTM, which is a topical, local,
anesthetic cream consisting of 7% Lidocaine and 7% Tetracaine, as approved by the United States
Food and Drug Administration on June 29, 2006;

     B. Galderma has experience in developing, marketing and distributing dermatology products;

     C. ZARS and Galderma wish to collaborate on the further development and commercialization of
the Product (as defined below) in the Galderma Territory (as defined below); and

     D. ZARS is willing to grant to Galderma, and Galderma desires to obtain, certain exclusive
rights and licenses with respect to the development and commercialization of the Product in the
Galderma Territory for use in the Field (as defined below), with ZARS retaining the right to
develop and commercialize the Product outside of the Galderma Territory, all on the terms and
conditions set forth herein.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1 “Affiliate” of a Party shall mean any person, corporation or other entity which,
directly or indirectly through one or more intermediaries, controls, is controlled by, or is under
common control with such Party, as the case may be. As used in this Section 1.1 and in Section
5.2(a), “control” shall mean: (a) to possess, directly or indirectly, the power to direct
the management and policies of such person, corporation or other entity, whether through ownership
of

 

 

voting securities or by contract relating to voting rights or corporate governance; or (b)
direct or indirect beneficial ownership of at least fifty percent (50%) of the voting share capital
in such person, corporation, or other entity. For the avoidance of doubt, neither L’Oréal S.A. nor
Nestlé S.A., nor any of their respective Affiliates (other than Galderma and its subsidiaries),
will be deemed an “Affiliate” of Galderma hereunder.

     1.2 “ANDA” shall mean an abbreviated NDA.

     1.3 Anesta Agreement shall mean the Royalty and Release Agreement dated February 14,
1997 by and among Anesta Corp., ZARS, Jie Zhang, and Hao Zhang, as may be hereinafter amended.

     1.4 “Competing Product” shall mean a topical local anesthetic approved for marketing
in the Galderma Territory that was developed, and is marketed and promoted, primarily for
anesthetizing human skin prior to a dermatological or aesthetic
procedure. [  *  ]

     1.5 “Control” (including any variations such as “Controlled” and
“Controlling”), in the context of intellectual property rights, shall mean rights to
intellectual property sufficient to grant the applicable license under this Agreement, without
violating the terms of an agreement with a Third Party.

     1.6 “Current Good Manufacturing Practices” or “cGMP” shall mean current good
manufacturing practices and standards as provided for (and as amended from time to time) in the
Current Good Manufacturing Practice Regulations of the United States Code of Federal Regulations 21
C.F.R. §§210 and 211, subject to any arrangements, additions, or clarifications agreed in writing
from time to time between the Parties.

     1.7 “Data” shall mean any and all research data, pharmacology data, preclinical data,
clinical data, manufacturing data and/or all regulatory documentation, information and submissions
pertaining to, or made in association with an IND or a Marketing Approval Application for, the
Product, in each case which are Controlled by a Party as of the Effective Date or during the term
of this Agreement.

     1.8 “DuraPeelTM” shall mean any technology or product owned or Controlled by ZARS as of
the Effective Date or during the term of the Agreement comprising two (2) solvents, at least one of
which is a Non-Volatile Solvent, which technology or product is the subject matter of the
intellectual property listed in Exhibit 1.8 hereto.

     1.9 “Effective Date” shall mean the later of (i) the date upon which ZARS has received
written notice from Galderma that the shareholders of Galderma have approved the Agreement as
provided in Section 18.4, and (ii) the HSR Clearance Date.

     1.10 “FDA” shall mean the United States Food and Drug Administration, or any successor
entity thereto performing similar functions.

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     1.11 “Field” shall mean use of the Product for the Indications.

     1.12 “Galderma COGS” shall mean: (i) if a Product is manufactured by one or more
Third Parties for Galderma, the actual per unit costs incurred and payable to such Third Party or
Third Parties by Galderma for manufacture, storage and/or in-bound freight costs and (ii) if a
Product is manufactured by Galderma, Galderma’s actual direct labor and materials costs of
manufacturing a Product, plus allocable manufacturing overhead costs (up to a maximum of [ * ] of
such actual direct labor and materials costs) and in-bound freight costs (for such purposes, direct
labor, direct materials and allocable manufacturing overhead shall be determined in accordance with
GAAP, in the same manner as applied by Galderma for its other products for financial reporting
purposes). In the case of clause (ii) above, the Parties shall agree from time to time on a
reasonable estimate of such costs, which shall be deemed Galderma COGS on a going forward basis,
until either Party requests that such estimate be revised to reflect changes in the actual costs.

     1.13 “Galderma Know-How” shall mean all scientific, medical, technical, regulatory and
other information relating to a Product (including the Data), which is owned or Controlled by
Galderma, as of the Effective Date, or that is generated by or on behalf of Galderma during the
Term of the Agreement, which is needed by or useful to ZARS in order for ZARS to exercise its
rights or perform its obligations under this Agreement, including models, inventions, practices,
methods, know-how, test data and marketing, pricing, distribution, sales and manufacturing data.

     1.14 “Galderma Territory” shall mean the United States and Canada and their
territories, possessions and commonwealths.

     1.15 “GPSG Agreement” shall mean the Supply Agreement by and between ZARS and the
Global Pharmaceutical Supply Group (“GPSG”), a unit of Ortho-McNeil Pharmaceuticals, Inc.
to be entered into as promptly as practicable after the date hereof and as may be thereafter
amended.

     1.16 “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

     1.17 “HSR Clearance Date” shall mean such time as (a) the Parties shall have complied
with all applicable requirements of the HSR Act; (b) the waiting period under the HSR Act shall
have expired or been earlier terminated; (c) no judicial or administrative proceeding opposing
consummation of all or any part of this Agreement shall be pending; (d) no injunction (whether
temporary, preliminary or permanent) prohibiting consummation of the transactions contemplated by
this Agreement or any material portion hereof shall be in effect; and (e) no requirements or
conditions shall have been formally requested or imposed by the FTC or DOJ in connection therewith
which are not reasonably and mutually satisfactory to the Parties.

     1.18 “Indications” shall mean the indication for a Product as documented in the
package insert as approved by the FDA on June 29, 2006 in the Initial Marketing Approval and
subsequent supplements thereto, and any additional indication obtained for a Product in the
Galderma Territory.

     1.19 “IND” shall mean an Investigational New Drug Application (including any
amendments thereto) filed with the FDA pursuant to 21 C.F.R. §312 before the commencement of

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clinical trials of a Product, or any comparable filings with any Regulatory Authority in any
other jurisdiction.

     1.20 “Initial IND” shall mean IND 59,801 for the Product.

     1.21 “Initial Marketing Approval” shall mean the complete New Drug Application 21-717
and all amendments and supplements thereto filed with the FDA as of the Effective Date, including
all documents, data, and other information concerning the Product, which are necessary for, or
included in, FDA approval to market such Product as a drug as more fully defined in 21 C.F.R. 314
et seq.

     1.22 “Launch” shall mean the date upon which a Product has been shipped to a drug
wholesaler and/or other customer and intended for commercial sale.

     1.23 “Marketing Approval” shall mean all approvals, licenses, registrations or
authorizations of the Regulatory Authority in a jurisdiction, necessary for the manufacture, use,
storage, import, marketing and sale of a Product in such jurisdiction. For jurisdictions where
governmental approval of pricing and/or reimbursement is required for marketing in such
jurisdiction, Marketing Approval shall not be deemed to occur until such pricing or reimbursement
approval is obtained. Notwithstanding the foregoing, Marketing Approval shall be deemed to have
occurred for a particular indication for a Product in a jurisdiction upon the first commercial sale
of a Product in such jurisdiction with labeling for such indication.

     1.24 “Marketing Approval Application” (or “MAA”) shall mean a New Drug
Application (or its equivalent) submitted to the FDA in the United States or a corresponding
application which will be submitted to a Regulatory Authority in Canada.

     1.25 “Mutual Termination Agreement” shall mean the Mutual Termination Agreement by and
among ZARS, OrthoNeutrogena Division of Ortho-McNeil Pharmaceuticals, Inc. and the Global
Pharmaceutical Supply Group (“GPSG”), dated August 4, 2006.

     1.26 “NDA” shall mean a New Drug Application.

     1.27 “Net Sales” shall mean the gross amounts invoiced or otherwise received for sales
of a Product by Galderma, its Affiliates and/or Sublicensees, (subject to Section 6.5) less
reasonable deductions for the following costs incurred on the sale to a customer:

          (a) trade, quantity, cash and other discounts actually granted to the customer;

          (b) credits, rebates and allowances to the customer actually granted on account of claims,
recalls, rejections or returns (including wholesaler and retailer returns) or on account of
retroactive price reductions affecting a Product;

          (c) freight, postage and duties actually paid;

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          (d) sales and excise taxes, other consumption taxes, customs duties and compulsory payments to
governmental authorities and any other governmental charges imposed upon the sale of a Product to
the customer actually paid and separately identified on the invoice.

     Sales between Galderma and its Affiliates or Sublicensees for resale shall be excluded from
the computation of Net Sales, but the subsequent resale of such Product shall be included within
the computation of Net Sales. If a Product is sold or transferred for consideration other than
cash, the Net Sales from such sale or transfer shall be calculated as the number of units
multiplied by the then current market value of such Product, it being understood that this sentence
does not apply to Product samples.

     1.28 “Non-Volatile Solvent” shall mean a solvent, (i) the primary function of which is
to generate the transdermal flux of a drug, and (ii) that has volatility that is less than the
volatility of water, where volatility is defined by reference to such solvent’s vapor pressure.

     1.29 “Party” shall mean ZARS or Galderma individually, and “Parties” shall
mean ZARS and Galderma collectively.

     1.30 “Permitted Lien” shall mean that certain Loan and Security Agreement by and
between ZARS and Silicon Valley Bank dated October 11, 2005.

     1.31 “Product” shall mean a topical anesthetic cream that consists of an emulsion
containing a eutectic mixture of lidocaine and tetracaine and wherein said formulation does not
contain a Non-Volatile Solvent. For the avoidance of doubt, any product comprising a drug
formulation attached to a backing that is placed on the skin to deliver a drug is not a cream and,
therefore, shall not be included under the definition of “Product” hereunder.

     1.32 “Product Trade Marks” shall mean: (a) the trade marks owned or Controlled by ZARS
and designated by ZARS for use with a Product, as reflected on Exhibit 1.32, and (b) any
other Product-specific trade marks used with a Product in a particular country within the Galderma
Territory during the term of this Agreement.

     1.33 “Regulatory Authority” shall mean the FDA, or a regulatory body with similar
regulatory authority in any other jurisdiction.

     1.34 “Sales Representative” shall mean a professional pharmaceutical sales
representative engaged or employed by either Party to conduct sales activities and other
promotional efforts with respect to a Product.

     1.35 “Sublicensee” shall mean a Third Party to whom Galderma has granted a right to
sell, market, distribute and/or promote a Product in the Galderma Territory and
“Sublicense” shall mean an agreement or arrangement between Galderma and a Sublicensee
granting such rights. As used in this Agreement, “Sublicensee” shall not include a wholesaler or
reseller of a Product who does not market or promote a Product.

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     1.36 “SyneraTM” shall mean that certain product known as SyneraTM (lidocaine 70 mg and
tetracaine 70 mg) topical patch as described in NDA 21-623 and any supplements and amendments
thereto.

     1.37 “Utah Agreement” shall mean the Royalty and Release Agreement dated September 29,
1997 by and among the University of Utah, ZARS, and Jie Zhang, as may be hereinafter amended.

     1.38 “ZARS Know-How” shall mean all scientific, medical, technical, regulatory and
other information relating to a Product (including the Data), which is owned or Controlled by ZARS,
as of the Effective Date, or that is generated by or on behalf of ZARS during the Term of the
Agreement, which is needed by or useful to Galderma in order for Galderma to exercise its rights or
perform its obligations under this Agreement in the Field in the Galderma Territory, including
models, inventions, practices, methods, know-how, test data and marketing, pricing, distribution,
sales and manufacturing data. For clarity, “ZARS Know-How” shall not include any scientific,
medical, technical, regulatory or other information (including Data) not primarily relating to a
Product, including, without limitation, any such information relating primarily to SyneraTM or
DuraPeelTM.

     1.39 “ZARS Patents” shall mean (i) all patents and patent applications in the
Territory owned or Controlled by ZARS as of the Effective date that are applicable to a Product,
including those listed on Exhibit 1.39, as well as any patents or patent applications owned or
Controlled by ZARS during the Term of the Agreement on inventions made in the course of developing,
using or manufacturing Products; (ii) any divisional, continuation, continuation-in-part, renewal
or substitute application which claims priority from any of the foregoing patent applications to
the extent they are applicable to a Product; and (iii) any reissues, reexaminations, extensions,
patents of additions, and patents of importation of any of the foregoing to the extent they are
applicable to a Product. For clarity, it is understood that the ZARS Patents do not include the
Patents directed to ZARS’ DuraPeelTM technology, or the Patents directed to SyneraTM listed on
Exhibit 1.8.

     1.40 “ZARS Territory” shall mean worldwide, except for the Galderma Territory.

     1.41 “Third Party” shall mean any person, corporation, joint venture or other entity,
other than ZARS, Galderma and their respective Affiliates.

     1.42 Additional Definitions. Each of the following terms shall have the meaning
described in the corresponding section of this Agreement indicated below:

	 	 	 	 	 	 	 
	Term	 	Section Defined	 	Term	 	Section Defined
	Adverse Development
	 	6.7	 	Lead Regulatory Party	 	4.2(c)
	Adverse Events
	 	4.2	 	Liabilities	 	16.1
	Agreement
	 	Introduction	 	Manufacturing Party	 	2.3(c)
	Agreement Year
	 	6.4(a)	 	Manufacturing Transition Date	 	9.1
	Annual Net Sales
	 	6.2(a)	 	Minimum Royalty	 	6.6(a)
	Asserting Party
	 	19.5	 	Minimum Royalty Units	 	6.6(a)

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	Term	 	Section Defined	 	Term	 	Section Defined
	Bankruptcy Code
	 	19.16	 	Operating Plan	 	5.5
	 
	 	 	 	Overlap Specialists	 	5.3(b)
	Baseline Sales
	 	5.6	 	Product Materials	 	14.6
	Calculated Royalty
	 	6.4	 	Promoting Party	 	5.5
	Clinical Supplies
	 	9.2(a)	 	Qualified Manufacturer	 	9.1
	Confidential Information
	 	10.1	 	Revenue Share	 	5.7
	Cooperation Committee/
Committee
	 	3.1(a)	 	Sales and Marketing Plan	 	5.2
	Co-Promote
	 	5.3(b)	 	Third Party Claim	 	16.1
	Co-Promoted Product
	 	5.3(b)	 	Subject Transaction	 	13.4
	Co-Promotion Option
	 	5.3(a)	 	Subject Product	 	13.4
	Co-Promotion Team
	 	5.4(a)	 	Wind-down Period	 	14.4(a)(ii)
	Development Costs
	 	4.2(d)	 	ZARS	 	Introduction
	Dispute
	 	17.1	 	ZARS Indemnitees	 	16.1
	Dispute Notice
	 	17.2(a)	 	ZARS Independent Trial	 	4.2(a)
	Exclusive Basis
	 	2.4	 	ZARS New Indication	 	4.2(a)
	Exclusivity Period
	 	2.4	 	ZARS Product Enhancement	 	4.2(a)
	Galderma
	 	Introduction	 	ZARS Sales	 	5.6
	Galderma Indemnitees
	 	16.2	 	ZARS Specialists	 	5.3(b)
	Galderma Specialists
	 	5.3(b)	 	 	 	 
	Generic Competition
	 	6.6(b)	 	 	 	 
	Generic Product
	 	6.6(b)	 	 	 	 
	Improvements
	 	11.1	 	 	 	 
	Improper Activities
	 	2.3(c)	 	 	 	 
	Indemnitee
	 	16.3	 	 	 	 
	Indemnitor
	 	16.3	 	 	 	 
	Infringing Product
	 	11.3	 	 	 	 
	JAMS
	 	17.3	 	 	 	 
	Knowledge
	 	15.2	 	 	 	 

ARTICLE II

GRANT OF LICENSE

     2.1 License. Subject to the terms and conditions of this Agreement, ZARS hereby
grants to Galderma and its Affiliates an exclusive license (even as to ZARS, except with respect to
Article 5) during the term of this Agreement under the ZARS Patents and ZARS Know-How solely to
use, develop, make, have made, import, sell, distribute, market, and promote Products for use in
the Field in the Galderma Territory with a right to grant sublicenses as contemplated by Section
2.2. The rights to sell, distribute, market and promote Products granted pursuant to this Section
2.1 shall be subject to the limitations set forth in Article 5.

     2.2 Subcontractors and Sublicensees.

          (a) Use of Subcontractors. Galderma shall have the right, in accordance with this
Section 2.2, to engage its Affiliates or third parties as sub-distributors or contract
manufacturers

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under this Agreement; provided, that (a) none of the rights of ZARS hereunder are diminished
or are otherwise adversely affected in any material respect as a result of such subcontracting and
(b) the subcontractor is bound by a written agreement containing provisions as protective of any
Product subject to such agreement and ZARS as this Agreement. In the event that Galderma engages
any such subcontractor, then Galderma shall at all times be responsible for the performance by such
subcontractor of Galderma’s obligations hereunder.

          (b) Sublicenses. If neither Galderma nor any of its Affiliates have direct operations
in a particular country within the Galderma Territory outside the United States, Galderma shall
have the right to engage a Third Party as a Sublicensee of a Product for such country. Galderma
may grant Sublicenses under Section 2.1 to such Third Parties solely to sell, market, distribute
and/or promote one or more Products in such country. Galderma may otherwise engage Sublicensees
and grant Sublicenses only upon the approval of ZARS, not to be unreasonably withheld. In any
event, Galderma shall use commercially reasonable efforts to ensure that (a) none of the rights of
ZARS hereunder are diminished or are otherwise adversely affected in any material respect as a
result of such Sublicense and (b) the Sublicensee is bound by a written agreement containing
provisions as protective of any Product subject to such agreement and ZARS as this Agreement. In
the event that Galderma sublicenses its rights hereunder to any such Sublicensee, then Galderma
shall at all times be responsible for the performance by such Sublicensee of Galderma’s obligations
hereunder. Promptly following the execution of each Sublicense, Galderma shall provide ZARS with
an executed copy of such Sublicense, provided that, Galderma may redact from such Sublicense any
terms that are commercially sensitive and not relevant to the terms of this Agreement, so long as
the terms that are relevant to the terms of this Agreement, including the terms related to
intellectual property and the royalties and other payments payable under this Agreement, remain
comprehensible.

     2.3 Activities Outside the Territory and the Field.

          (a) Neither Galderma nor any of its Affiliates shall, directly or indirectly, register,
market, sell, license, distribute and/or solicit customers for any Product outside the Field
(whether inside or outside the Galderma Territory) or outside the Galderma Territory (whether or
not within the Field). Galderma shall promptly notify ZARS in the event it has reason to believe
that any Product sold by, or under the authority of Galderma or any of its Affiliates, has been or
will be exported outside the Field (whether inside or outside the Galderma Territory) or outside
the Galderma Territory (whether or not within the Field). In addition, Galderma agrees that
neither it, nor any of its Affiliates, will sell or provide any Product to any Third Party (nor
will Galderma or any such Affiliate cooperate with, assist or authorize any Third Party to sell any
Product), if Galderma or any of its Affiliates knows, or has reason to know, that any Product sold
or provided to the Third Party may be sold or transferred, directly or indirectly, for use outside
the Field (whether inside or outside the Galderma Territory) or outside the Galderma Territory
(whether or not within the Field).

          (b) Except as otherwise provided in Sections 4.2 and 5.3 of this Agreement and the
Co-Promotion Agreement to be entered into by the Parties pursuant to Section 5.9, neither ZARS nor
any of its Affiliates shall, directly or indirectly, register, market, sell, license, distribute
and/or solicit customers for any Product in the Field in the Galderma Territory. ZARS shall
promptly

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notify Galderma in the event it has reason to believe that any Product sold by, or under the
authority of ZARS or any of its Affiliates, has been or will be sold in the Field in the Galderma
Territory. ZARS agrees that neither it, nor any of its Affiliates, will sell or provide any
Product to any Third Party (nor will ZARS or any such Affiliate cooperate with, assist or authorize
any Third Party to sell any Product), if ZARS or any of its Affiliates knows, or has reason to
know, that any Product sold or provided to such Third Party may be sold or transferred, directly or
indirectly, for use in the Field in the Galderma Territory.

          (c) Notwithstanding the foregoing, either party shall have the right to have Products
manufactured anywhere in the world provided that all Products so manufactured for Galderma are
shipped by any such manufacturer directly to the Galderma Territory, and all Products manufactured
for ZARS for use in the Field are shipped by any such manufacturer directly to a destination
outside the Galderma Territory. In the event that either Party has reason to believe any Product
manufactured by, or under the authority of such Party, or any of its Affiliates, (the
“Manufacturing Party”) in the other Party’s Territory is being sold or distributed in such
other Party’s Territory (other than sales outside the Field in the Territory by or under authority
of ZARS, the “Improper Activities”), the Manufacturing Party shall promptly notify the
non-Manufacturing Party and shall make commercially reasonable efforts to prevent such Improper
Activities.

     2.4 Partnering of Products in the ZARS Territory. For a period of [ * ] following the
Effective Date (the “Exclusivity Period”), the Parties shall discuss in good faith, on an
Exclusive Basis, a potential collaboration regarding the commercialization of Products in the ZARS
Territory. It is understood, however, that neither Galderma nor ZARS shall have any obligation to
collaborate or enter into an arrangement or agreement with respect to the development and/or
commercialization of Products in any country within the ZARS Territory, nor shall this Section 2.4
prevent ZARS from entering into any arrangement or agreement with a Third Party on any terms that
ZARS may determine upon expiration of the Exclusivity Period. For purposes of this Section 2.4,
“Exclusive Basis” shall mean that none of ZARS or any of its Affiliates, officers, directors,
employees or agents shall, directly or indirectly, solicit or encourage in any manner, or engage in
or continue, any discussions or negotiations with any other party (and shall affirmatively
terminate any existing discussions or negotiations) regarding a potential collaboration regarding
the commercialization of Products in the ZARS Territory.

     2.5 Non-Competition. During the term of this Agreement, none of ZARS or any of its
Affiliates, nor Galderma or any of its Affiliates, shall sell, offer to sell, import, license,
market, promote, or commercialize any Competing Product in the Galderma Territory.

     2.6 No Other Rights. Except for the rights and licenses expressly granted in this
Agreement, each Party retains all rights under its intellectual property, and no additional rights
shall be deemed granted to either Party by implication, estoppel or otherwise. The licenses and
rights granted in this Agreement shall not be construed to convey any licenses or rights under the
ZARS Patents and the ZARS Know-How with respect to any subject matter other than a Product,
including, without limitation, any rights to SyneraTM, DuraPeelTM, or any other product other than a
Product, or the use of any technology or intellectual property other than as a Product.

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ARTICLE III

GOVERNANCE

     3.1 Cooperation Committee.

          (a) Establishment. Within thirty (30) days following the Effective Date, ZARS and
Galderma may elect to establish a Cooperation Committee (“Cooperation Committee” or the
“Committee”) to oversee, review and coordinate the activities of the Parties under this
Agreement, including, the development of a Product for registration, and the marketing and
distribution of Products in the Field in the Galderma Territory, subject to the provisions of this
Article 3 and the coordination of such activities outside the Territory.

          (b) Duties. The Committee shall, subject to mutual agreement of the Parties:

               (i) Coordinate clinical development efforts, and manufacturing efforts, including,
manufacturing site transfer issues relating to Products;

               (ii) Exchange study protocols and pre-publication manuscripts; and

               (iii) Facilitate communication between the interested parties with respect to each Party’s
activities under this Agreement.

     3.2 Committee Membership. The Committee shall each be composed of an equal number of
representatives from each of Galderma and ZARS, selected by such Party. Subject to Galderma’s
approval, in addition to its own representatives, ZARS shall also have the right to include on the
Committee representatives of any ZARS partner for any Product outside the Galderma Territory.

     3.3 Committee Meetings. The Committee shall hold meetings at such times and places as
shall be mutually agreed by the committee members, and may conduct meetings in person or by
telephone conference.

     3.4 Disclosure of Information; Performance. The Parties agree that any Confidential
Information shared by a Party through the Committee, or its representatives, or in the case of ZARS
by any of its partner’s representative(s), shall not be used or disclosed by the party receiving
such information except in accordance with the provisions of Article 10 hereof. In addition, ZARS
shall have no obligation to disclose any confidential information of any ZARS partner for any
Product distributed outside the Galderma Territory.

ARTICLE IV

DEVELOPMENT AND REGULATORY ACTIVITIES

     4.1 Galderma Development. Except as set forth below, Galderma shall, at its expense,
use commercially reasonable efforts to carry out all clinical development, continuing non-clinical
studies and other activities required to obtain Marketing Approvals for Products in the Galderma
Territory. Galderma shall carry out all such activities in accordance with the provisions of this

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Agreement. For the avoidance of doubt, ZARS shall retain the right to conduct clinical
development, continuing non-clinical studies and other development activities in the Galderma
Territory to obtain Marketing Approvals for Products outside the Galderma Territory. As set forth
in Section 4.5(b), ZARS shall retain all rights in and to the Data in the Initial IND and Initial
Marketing Approval and shall retain the right to rely upon and utilize such Data to support any
pending or future INDs, Marketing Approvals, applications or submissions submitted to the FDA or
any other regulatory bodies, including foreign Regulatory Authorities in connection with its
development and commercialization activities hereunder. Galderma shall provide ZARS with the
necessary assistance in securing all such rights as set forth in Section 4.5(b).

     4.2 Independent Trials by ZARS.

          (a) General. Except as set forth below, ZARS shall have the right, at ZARS’ expense,
to conduct clinical development and other activities required or useful to obtain Marketing
Approval for any (i) Product in any new indication in the Galderma Territory (a “ZARS New
Indication”) and/or (ii) enhancements to any Product falling within the scope of the definition
of “Product” hereunder (i.e., an improvement) (a “ZARS Product Enhancement”). In the event
ZARS proposes to conduct a clinical trial for a ZARS New Indication or a ZARS Product Enhancement
in the Galderma Territory (each, a “ZARS Independent Trial”), ZARS shall provide to
Galderma a copy of the proposed protocol for such trial at least sixty (60) days prior to the
commencement of the ZARS Independent Trial. Notwithstanding the foregoing, ZARS shall not have the
right to conduct such ZARS Independent Trial if Galderma objects in writing within thirty (30) days
after receiving such protocol, on the basis that Galderma reasonably believes that such ZARS
Independent Trial is reasonably likely to have a material adverse effect on the safety profile or
marketability of the Product; provided, further, that, if ZARS disagrees with Galderma as to
whether such Independent Trial is reasonably likely to have a material adverse effect on the safety
profile or marketability of the Product, such dispute shall be resolved in accordance with Article
XVII below.

          (b) Regulatory Filings. ZARS shall be responsible for filing, in its own name and at
its own expense, any IND in connection with any ZARS Independent Trial and shall have the right to
access, reference and use all of Galderma’s, its Affiliates’ or Sublicensees’ Data, regulatory
filings and regulatory communications associated with any MAAs or other approvals for a Product in
the Galderma Territory in accordance with Section 4.5(b) and Section 4.8 in connection with any
such Trial. Upon ZARS’ request, Galderma shall be responsible for filing any MAA with any
Regulatory Authority in the Galderma Territory required to obtain Marketing Approval for any ZARS
New Indication or ZARS Product Enhancement, in an expeditious manner. ZARS shall retain ownership
of all the Data generated by ZARS in connection with any ZARS Independent Trial and shall have the
same rights of access and use to any MAA filed by Galderma in connection with this Section 4.2(b)
as with respect to the Initial MAA pursuant to Section 4.5(b).

          (c) Communications with FDA.

               (i) Interaction with the FDA. The Party responsible for a particular regulatory
filing pursuant to Section 4.2(b) above (i.e., ZARS, with respect to the filing of an IND and
Galderma, with respect to the filing of an MAA, if requested by ZARS) (the “Lead Regulatory
Party”) shall oversee, monitor and coordinate all regulatory actions, communications and
filings

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with, and submissions to, all applicable Regulatory Authorities in the Galderma Territory with
respect to the regulatory submission for which such Party is the Lead Regulatory Party.

               (ii) Coordination with non-Lead Regulatory Party. The Lead Regulatory Party shall
provide the non-Lead Regulatory Party with reasonable advanced notice (and in no event less than
five (5) business days advance notice) of meetings (and telephone or similar interactions) with the
FDA or any other Regulatory Authority within the Galderma Territory that are either scheduled or
initiated by or under the authority of the Lead Regulatory Party (and immediate notice of any
unscheduled interactions that are initiated by such a Regulatory Authority), and an opportunity to
have a reasonable number (but at least two (2)) representatives participate in all substantive
meetings and interactions with the FDA or any other Regulatory Authority in the Galderma Territory.
In addition, the Lead Regulatory Party shall provide the non-Lead Regulatory Party with a copy of
any material documents, information and correspondences submitted to the FDA or any other
Regulatory Authority within the Galderma Territory as soon as reasonably practicable. The non-Lead
regulatory Party shall have the opportunity to review and comment on all such documents,
information and correspondences prior to their submission to the relevant Regulatory Authority in
the Galderma Territory and the Lead Regulatory Party shall consider all such comments in good
faith.

          (d) Co-Promotion of Products in New ZARS Indications and/or ZARS Product Enhancements.
Upon receipt of Marketing Approval of any ZARS New Indication or ZARS Product Enhancement, such
Product shall be considered a Co-Promoted Product pursuant to Article 5 and the provisions
applicable to Co-Promoted Products shall apply to the promotion and sale of (i) such Product in
such New ZARS Indication, if the ZARS Independent Trial related to approval in a new indication for
an existing Product, or (ii) such ZARS Product Enhancement if the ZARS Independent Trial related to
approval of a ZARS Product Enhancement mutatis, mutandis. For the avoidance of
doubt, Sections 2.3 and 2.5 shall restrict the sale by ZARS and it Affiliates of any ZARS Product
Enhancement (i) to Overlap Specialists for all Indications in the Field relating to aesthetic
procedures and (ii) to Galderma Specialists for any Indication. The forgoing notwithstanding, in
the case of a ZARS Product Enhancement, if Galderma, its Affiliate or Sublicensee, wishes to
promote such ZARS Product Enhancement to Galderma Specialists in accordance with Section 5.3,
Galderma shall reimburse ZARS for [ * ] of its documented and reasonable Development Costs
associated with obtaining approval for such ZARS Product Enhancement. “Development Costs”
for purposes of this Section 4.2(d) shall mean the following costs incurred by ZARS or its
Affiliate in performing activities to obtain approval for a ZARS Product Enhancement: (i)
out-of-pocket costs paid to Third Parties (such as contract research organizations, testing labs,
imaging labs, quality assurance auditors or groups for trial sites or vendors, or other
contractors) for the performance of such activities or in connection with obtaining regulatory
approval thereof; (ii) out-of-pocket costs associated with purchasing quantities of Product for use
in performing such activities; and (iii) out-of-pocket costs incurred with respect to meetings of
investigators (single site, regional and global) and associated travel expenses.

          (e) Cooperation.

               (i) Manufacturing and Support for ZARS Product Enhancements. Galderma’s obligations
to manufacture clinical and commercial supplies of Product pursuant to

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Article 9, shall include the obligation to manufacture such supplies for ZARS Product
Enhancements. Galderma shall use commercially reasonable efforts to obtain all requisite approvals
to manufacture such ZARS Product Enhancements, either by itself or through a Third Party. In
addition, Galderma shall provide technical and customer support for such ZARS Product Enhancements,
consistent with the general level of effort and resources for such activities for a similar product
owned by Galderma.

               (ii) General Cooperation for ZARS Independent Trials. Galderma shall cooperate with
ZARS and use commercially reasonable efforts to assist ZARS in filing and obtaining Regulatory
Approvals for, and maximizing the sales of, any Product in a ZARS New Indication and/or any ZARS
Product Enhancement in the Galderma Territory. Such cooperation shall include, without limitation,
assistance in obtaining Regulatory Approvals (including all requisite manufacturing approvals),
preparation of promotional materials, provision of customer support and technical assistance and
ensuring adequate clinical and commercial supply requirements in accordance with Article 9.

          (f) Expenses. Except as otherwise provided in Section 4.2(d), ZARS shall reimburse
Galderma for any out-of-pocket, reasonable and documented costs incurred by Galderma in connection
with any ZARS New Indication or ZARS Product Enhancement.

     4.3 Conduct of Activities. Each Party shall conduct those activities allocated to
such Party under this Article 4 in compliance in all material respects with all applicable laws,
rules and regulations and in accordance with good scientific and clinical practices, applicable
under the laws and regulations of the country in which such activities are conducted.

     4.4 Regulatory Matters. Except as specified in Section 4.2 or elsewhere in this
Agreement, Galderma shall be responsible, at its expense, for filing, obtaining and maintaining
approvals for the development and commercialization of Products in the Galderma Territory,
including any IND, MAA or Marketing Approval, as well as pricing or reimbursement approvals in the
Galderma Territory. Galderma shall also obtain any export approvals required by any applicable
Regulatory Authority to import or export any Product to any country within the Galderma Territory.
All such filings will be in the name of Galderma, except where otherwise required by local law.

     4.5 Ownership of NDA and IND, Manufactured Product in the Galderma Territory.

          (a) Transfer. Within fifteen (15) business days after the payment by Galderma to ZARS
of the initial license fee set forth in Section 6.1 below, ZARS shall transfer all rights, title
and interest in the Initial Marketing Approval and Initial IND, to Galderma or its designated
Affiliate and shall transmit all necessary and appropriate letters to the FDA advising the FDA of
the transfer of ownership of the Initial Marketing Approval and Initial IND from ZARS to Galderma
or its designated Affiliate. Galderma shall simultaneously transmit to the FDA all necessary and
appropriate letters advising the FDA that it is the new owner of the Initial Marketing Approval and
Initial IND and that it accepts all rights and responsibilities thereunder. Notwithstanding the
transfer of the regulatory filings under this Section 4.5(a), Galderma may not use or reference
any such regulatory filings, or any Data contained therein, for the development and/or
commercialization of any product, other than a Product in the Field in the Galderma Territory.

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          (b) Retained Rights. For clarity, Section 4.5(a) above shall not be deemed to
transfer ownership of, and ZARS retains all rights, title and interest in and to, the Data
submitted in support of the Initial Marketing Approval and Initial IND, including but not limited
to, all safety and effectiveness data, and shall have the right (i) to rely upon and utilize such
Data to support any pending or future INDs, Marketing Approvals, applications or submissions
submitted to the FDA or any other regulatory bodies, including foreign Regulatory Authorities
(including, without limitation in connection with ZARS’ development activities pursuant to Sections
4.1 and 4.2), to the extent consistent with the terms of this Agreement, including Sections 2.1,
2.3 and 2.5, and (ii) to retain copies of the Initial Marketing Approval and Initial IND and
related documentation for its records. In addition, Galderma shall grant to ZARS and any ZARS
designee access and any and all rights of reference to and use of the Initial Marketing Approval
and Initial IND, and any supplements or amendments to such Approval or IND, necessary to support
approval of any such pending or future INDs, Marketing Approvals, applications or submissions to
the extent consistent with the terms of this Agreement, including Sections 2.1, 2.3, and 2.5, and
shall transmit all necessary and appropriate letters to the FDA advising the FDA and other
regulatory bodies, as appropriate, that such body may rely upon such Data and filings on behalf of
ZARS or its designee in such circumstances, provided that ZARS shall indemnify Galderma in
accordance with the provisions of Section 16.2 for losses incurred by Galderma relating to the
exercise by ZARS of such rights. It is understood that such rights and access pursuant to this
Section 4.5(b) shall extend to ZARS’ and its designees’ commercialization of products (including,
without limitation, a Product) outside the Galderma Territory.

          (c) Expenses. Upon transfer of ownership of the Initial Marketing Approval and
Initial IND to Galderma, Galderma shall assume the obligation to pay all FDA fees which become due
after the Effective Date and are required to maintain the Initial Marketing Approval, including
those for the FDA fiscal year ended 2007; provided, however, that the amount of such 2007 fees
payable by Galderma shall be prorated from the Effective Date. In the event that ZARS shall have
paid any of the above fees, Galderma shall reimburse ZARS for such payment within forty-five (45)
days of ZARS providing documentation with respect to its payment of such fees.

     4.6 Regulatory Cooperation. Galderma will promptly provide ZARS with copies of all
material documents, information and correspondence received from a Regulatory Authority in the
Galderma Territory (including a summary of any material oral communications) in the Galderma
Territory with respect to a Product and, upon reasonable request, with copies of any other
documents, reports and communications from or to any Regulatory Authority in the Galderma Territory
relating to any Product or activities under the Agreement in the Galderma Territory.

     4.7 Exchange of Data and Know-How.

          (a) By ZARS. Promptly after the Effective Date, ZARS will make available to Galderma
all ZARS Data relating to a Product that is necessary, or materially useful, for Galderma to
develop and/or commercialize a Product in the Field in the Galderma Territory, including all Data
from any and all clinical trials and preclinical studies for a Product in the Field in the Galderma
Territory that have been obtained by ZARS as of the Effective Date. For the avoidance of doubt,
neither this Section 4.7, nor any other provision of this Agreement, shall require ZARS to provide
to Galderma, or to grant to Galderma any right of access, reference or use of, any ZARS Data, or
any

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regulatory filings or communications containing such ZARS Data, to the extent such Data
relates solely to a ZARS Product Enhancement that Galderma does not elect to promote under Section
4.2(d).

          (b) By Either Party. During the term of this Agreement, each Party shall provide to
the other Party all such Party’s Know-How (i.e., in case of ZARS, ZARS Know-How, and in the case of
Galderma, all Galderma Know-How) that is Controlled by such Party and that has not previously been
provided hereunder, in each case promptly upon request by the other Party. The Party providing
such Party’s Know-How shall provide the same in electronic form to the extent the same exists in
electronic form, and shall provide copies or an opportunity to inspect (and copy) for all other
materials comprising such Know-How (including for example, original patient report forms and other
original source data). The Parties will cooperate and reasonably agree upon formats and procedures
to facilitate the orderly and efficient exchange of the ZARS Know-How and the Galderma Know-How.
Galderma hereby grants to ZARS during the term of this Agreement a non-exclusive, worldwide,
royalty-free license, with the right to sublicense, under any such Galderma Know-How solely to
make, have made, use, sell, offer for sale, import, practice and otherwise exploit a Product,
subject to the exclusive rights granted to Galderma under this Agreement with respect to a Product
in the Field in the Galderma Territory. The obligations under this Section 4.7(b) relate to
information sharing when and if a Party develops such Know-How, and it is understood and agreed
that, except as otherwise provided in this Agreement, neither Party shall be required to develop or
create any additional Know-How.

     4.8 Sharing of Regulatory Filings. Without limiting Section 4.6 or 4.7 above,
Galderma shall permit ZARS to access, and shall provide ZARS with sufficient rights to reference
and use in association with exercising its rights and performing its obligations under this
Agreement, all of Galderma’s, its Affiliates’ and Sublicensees’ Data, regulatory filings and
regulatory communications associated with any submissions of MAAs or other approvals for a Product
in the Galderma Territory.

     4.9 Regulatory Inspection Right; etc.

          (a) Each Party shall permit the other Party, and/or an authorized representative reasonably
acceptable to such permitting Party, to enter the relevant facilities of it and its Affiliates once
per calendar year during normal business hours and upon reasonable advance notice to inspect and
verify compliance with applicable regulatory and other requirements as well as with this Agreement.
Such inspection right shall include the right to examine any internal procedures or records of
such Party primarily relating to a Product. Each Party shall give the other Party or its
authorized representative, all necessary and reasonable assistance for a full and correct carrying
out of the inspection. Such inspection shall not relieve either Party of any of its obligations
under this Agreement.

          (b) Each Party shall use commercially reasonable efforts to secure for the other Party the
rights set forth in Section 4.9(a) from such Party’s Sublicensees, trial sites and other
contractors for a Product. In the event either Party is unable to secure such inspection rights
from any of its Sublicensees, trial sites or contractors, such Party agrees to use commercially
reasonable efforts to secure such rights for itself and, if requested by the other Party, shall
exercise such rights,

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at its own expense, on behalf of the other Party and fully report the results thereof to such
other Party.

     4.10 Reporting; Adverse Drug Reactions. Promptly following the Effective Date but in
no event later than six (6) months thereafter, Galderma and ZARS will develop and agree upon safety
data exchange procedures in a separate and detailed Safety Agreement. ZARS shall use commercially
reasonable efforts to have any relevant Affiliates and other licensees become a party to such
Safety Agreement. Such agreement will describe the coordination of collection, investigation,
reporting, and exchange of information concerning adverse events relating to Products (as defined
in the then current edition of ICH Guidelines and any other relevant regulations or regulatory
guidelines or any other safety problem of any significance, hereafter “Adverse Events”),
product quality and product complaints involving Adverse Events, sufficient to permit each party,
its Affiliates, Sublicensees or licensees to comply with its legal obligations, including to the
extent applicable, those obligations contained in ICH guidelines. The safety data exchange
procedures will be promptly updated if required by changes in legal requirements or by agreement
between the parties. In any event, each party shall inform the other party of any Adverse Event of
which it becomes aware in a timely manner commensurate with the seriousness of the Adverse Event.
Galderma will be responsible for reporting all Adverse Events to the appropriate regulatory
authorities in the countries in the Galderma Territory in accordance with the appropriate laws and
regulations of the relevant countries and authorities and ZARS or its other licensees will be
responsible for reporting all Adverse Events to the appropriate regulatory authorities in the ZARS
Territory. Galderma will ensure that its Affiliates and Sublicensees comply with all such
reporting obligations, and ZARS will ensure that its Affiliates and other licensees comply with all
such reporting obligations. In addition, Galderma shall be responsible for implementing and
maintaining a global safety database for the Products. Each party will designate a safety liaison
to be responsible for communicating with the other party regarding the reporting of Adverse Events.
ZARS shall reimburse Galderma for reasonable and documented out-of-pocket costs incurred solely in
connection with the performance of Galderma’s obligations under this Section 4.10 in respect of any
Product promoted by ZARS pursuant to Section 5.3, and such reimbursement shall not include, for the
avoidance of doubt, any costs or expenses relating to product liability claims.

ARTICLE V

COMMERCIALIZATION AND PROMOTION

     5.1 Galderma Commercialization. Except as provided below, Galderma shall be
responsible for commercialization, marketing and promotion of Products in the Field in the Galderma
Territory.

     5.2 Sales and Marketing Plan. Except as provided below, Galderma shall establish the
plans for marketing, promotion and commercialization (including sales forecasts) of each Product in
the Field in the Galderma Territory (each, a “Sales and Marketing Plan”), and shall provide
such Plan to ZARS. For the initial Product, Galderma shall provide such Sales and Marketing Plan
to ZARS within ninety (90) days after the Effective Date, and for any additional Product (i.e., an
improvement or line extension of the Product), Galderma shall provide such Sales and Marketing Plan
at least one hundred eighty (180) days prior to the Launch of such Product. After establishment

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of the initial Sales and Marketing Plan for a Product, Galderma shall update such Plan at
least annually and shall provide any such update to ZARS. Each Sales and Marketing Plan shall be
prepared in reasonable detail.

     5.3 Co-Promotion Option of ZARS.

          (a) Exercise of Co-Promotion Option. ZARS shall have an option to Co-Promote the
Product (“Co-Promotion Option”) in the United States in accordance with the terms and
conditions of this Article 5. ZARS’ Co-Promotion Option may be exercised, at any time at ZARS’
discretion, upon ninety (90) days written notice to Galderma. ZARS may terminate its Co-Promotion
of a particular Product in a particular country at any time upon sixty (60) days prior notice to
Galderma.

          (b) Scope of Co-Promotion. As used in this Agreement, “Co-Promote” shall mean
to jointly promote a Product in the Field in the Galderma Territory through Galderma’s and ZARS’
respective sales forces under a single trademark in a given country in the Galderma Territory,
including conducting details and other sales and promotional activities, with Galderma handling
distribution and collection. Upon exercise of its Co-Promotion Option, ZARS shall have exclusive
rights to promote (even as to Galderma) each Product with respect to which it has exercised its
Co-Promotion Option (each a “Co-Promoted Product”) (i) to specialists in the following
areas: neurology, pain management, rheumatology, orthopedic surgery, sports medicine,
anesthesiology and their associated hospital-based residency programs, as well as all managed care
and other institutions for use by such specialists, and (ii) to all other healthcare providers,
including managed care and other institutions, to which Galderma is not promoting the Product for
any Indication in the Field, in the case of this Section 5.3(b)(ii) only, subject to Galderma’s
approval, not to be unreasonably withheld (the “ZARS Specialists”). Galderma shall have
exclusive rights to promote to all other healthcare providers for use in the Field, other than to
the ZARS Specialists (the “Galderma Specialists”). The forgoing notwithstanding, with
respect to primary care and internal medicine specialists (the “Overlap Specialists”)
Galderma shall have the right to promote to such Overlap Specialists for all Indications in the
Field relating to aesthetic procedures and ZARS shall have the right to promote to such Overlap
Specialists for all other Indications in the Field. For the avoidance of doubt, the prevention of
pain associated with vascular access shall not be considered an aesthetic procedure. Galderma
shall use commercially reasonable efforts to effectuate all sales generated by ZARS’ promotional
efforts, including, without limitation, to managed care and institutional customers.

     5.4 Co-Promotion Team.

          (a) Establishment. Upon ZARS’ exercise of its Co-Promotion Option with respect to a
Product in accordance with Section 5.3, the Parties shall establish a working group (the
“Co-Promotion Team”) consisting of an equal number of representatives from each Party to
provide a forum to review and monitor the conduct and progress of the commercialization of
Co-Promoted Products in the Galderma Territory.

          (b) Responsibilities. The Co-Promotion Team shall review and comment on: (i) the
Operating Plan for each Co-Promoted Product for an approved indication in the Galderma

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Territory, (ii) the goals and strategy for the promotion of Co-Promoted Products in the Field
in the Galderma Territory; and (iii) performing such other functions as are specifically designated
for the Co-Promotion Team in this Agreement or otherwise as agreed by the Parties.

     5.5 Operating Plan. Each Party shall establish in good faith the operating plan (each
an “Operating Plan”) for its own Co-Promotion activities with respect to the Co-Promoted
Product setting forth in reasonable detail the activities to be conducted by such Party (the
“Promoting Party”). After establishment of an initial Operating Plan for a Co-Promoted
Product, the Co-Promotion Team shall review and comment on such Operating Plan. The Promoting
Party shall consider in good faith the comments of the Co-Promotion Team. After establishment of
the initial Operating Plan for a Co-Promoted Product to the Galderma Specialists, the ZARS
Specialists or the Overlap Specialists, as the case may be, the Co-Promotion Team shall review and
comment on such Operating Plan at least annually and prior to any material modification or addition
thereto, and in so doing shall consider the reasonable suggestions of the non-Promoting Party with
respect thereto. The foregoing notwithstanding, if ZARS is the Promoting Party and Galderma
reasonably believes ZARS’ proposed Operating Plan, or any material modification or addition
thereto, will have a material adverse effect on sales of a Product by Galderma or its Affiliates or
Sublicensees, if ZARS does not incorporate Galderma’s proposed changes to alleviate such material
adverse effect, or otherwise modify the Plan, or modification or amendment thereto, to Galderma’s
reasonable satisfaction, the dispute as to whether the ZARS proposed course of action pursuant to
such Plan, or modification or amendment thereto, will have a material adverse effect on a Product
shall be resolved in accordance with Article XVII.

     5.6 Revenue Share. Each Party shall bear its own costs in connection with the
promotion of any Product hereunder. With respect to Net Sales generated from sales to ZARS
Specialists or from sales to Overlap Specialists for Indications in the Field other than those
relating to aesthetic procedures, or from sales for use (or prescriptions by) the ZARS Specialists
or such Overlap Specialists (collectively defined as the “ZARS Sales”), Galderma or its
designated Affiliate shall collect amounts owed from sales to such ZARS Specialists or Overlap
Specialists on behalf of ZARS and shall pay over to ZARS [ * ], less (i) [ * ], (ii) [ * ], (iii) [
* ], (iv) [ * ] and (v) [ * ]; it being understood and agreed that no Galderma cost shall be
counted more than once in calculating the amount of the payments to be made to ZARS. [ * ]. The
Co-Promotion Agreement to be entered into pursuant to Section 5.9 hereof shall include mechanisms
for tracking sales of Products, including, without limitation tracking sales of Products to the
Overlap Specialists. If there are disagreements as to which Net Sales are to be allocated to ZARS
as ZARS Sales, such disputes will be resolved in accordance with Article XVII. For the avoidance
of doubt, all Baseline Sales shall be subject to the royalty provisions of Article 6.

     5.7 Reporting and Payment of Revenue Share. All revenue share amounts due pursuant to
Section 5.6 hereunder (the “Revenue Share”) shall be calculated and payable on a quarterly
basis, and shall be paid within forty five (45) days following the end of each calendar quarter,
simultaneously with the royalty payments and royalty payment reports set forth in Section 6.2(b).
Galderma shall provide to ZARS within forty five (45) days following the end of each calendar
quarter, a written report in a form to be agreed upon the Parties as part of the Co-Promotion
Agreement entered into in accordance with Section 5.9, indicating the amount of Net Sales derived
from ZARS Sales during such quarter (including quantity of Product sold), by country, and by party

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(i.e., Galderma and its Sublicensees and Affiliates), the gross amounts invoiced that
correspond to such Net Sales, and amounts deducted from such Net Sales in accordance with Section
5.6 in order to calculate the Revenue Share due.

     5.8 Promotional Materials. Galderma shall provide the promotional, advertising,
educational and communication materials for each Product in the Field in the Galderma Territory.
ZARS Sales Representatives may modify, change or alter the promotional, advertising, educational
and communication materials provided by Galderma in order to market the Product pursuant to its
co-promotion rights, subject to the prior written consent of Galderma, not to be unreasonably
withheld or delayed. ZARS Sales Representatives shall use such materials solely for the purpose of
exercising their rights and performing their obligations under this Agreement. ZARS shall ensure
that its Sales Representatives perform in compliance with all applicable laws, rules and
regulations.

     5.9 Additional Terms. As soon as reasonably practicable after the Effective Date, and
in no event more than nine (9) months after the Effective Date, the Parties shall enter into a
Co-Promotion Agreement setting forth such additional terms as the Parties may agree regarding the
Parties activities and responsibilities with respect to Co-Promoted Products. Such terms shall
include detailing efforts of the Parties, sales tracking mechanisms, training of Sales
Representatives, minimum qualifications for such Sales Representatives, processes for handling
medical complaints and inquires, processes for handling product recalls, record keeping and other
customary terms regarding confidentiality, indemnification and the like. It is understood that
ZARS right to Co-Promote a Product, and the remaining provisions of this Article 5, shall not be
conditioned or contingent upon entering into or completing such Co-Promotion Agreement. The
Parties shall negotiate such Co-Promotion Agreement in good faith, taking into account each Party’s
commercial, accounting and other objectives.

ARTICLE VI

PAYMENTS

     6.1 Initial License Fee. Galderma shall pay to ZARS an initial license fee in the
amount of Forty Million Dollars ($40,000,000) in accordance with the payment provisions of Article
7, Thirty Million Dollars ($30,000,000) of which shall be payable within five (5) business days
following the Effective Date (provided that, so long as the Effective Date shall have occurred,
Galderma shall make such payment no later than March 30, 2007, even if such date is earlier than
five (5) business days after the Effective Date), and Ten Million Dollars ($10,000,000) of which
shall be payable within ten (10) business days following the completion of production of and
issuance by GPSG of the Certificate of Compliance and the Certificate of Analysis for three
commercial batches of the Product. The initial license fee set forth in this Section 6.1 shall not
be refundable or creditable against any future royalties or other payments by Galderma to ZARS
under this Agreement.

     6.2 Royalty Payments.

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          (a) Royalty Rate. Subject to the terms and conditions of this Agreement, in further
consideration of the rights granted to Galderma under this Agreement, Galderma shall pay to ZARS
royalties at the rate set forth below on Net Sales of Products in the Galderma Territory:

	 	 	 
	Annual Net Sales of Product	 	Royalty Rate
	Portion of Annual Net Sales of Product up to and including [ * ]

	 	[ * ]
	 
	 	 
	Portion of Annual Net Sales of Product in excess of [ * ]

	 	[ * ]

As used herein, “Annual Net Sales” means the sum of the Net Sales of each Product by
Galderma and its Affiliates and Sublicensees in any given calendar year, excluding, for the
avoidance of doubt, any Net Sales with respect to which ZARS receives a Revenue Share under Section
5.6 in lieu of a royalty under this Section 6.2. It is understood and agreed that the royalty rate
corresponding to the applicable Net Sales amount as set forth above shall be due on the portion of
Net Sales in a specific royalty band during the applicable calendar year. By way of illustration
only, if Galderma and its Affiliates and Sublicensees have Annual Net Sales of a Product equal to [
* ] in a given calendar year, then the royalty payments to ZARS in such calendar year shall total [
* ]. For the avoidance of doubt, all Baseline Sales shall be subject to the royalty provisions of
this Article 6.

          (b) Reports and Royalty Payment. All royalties due hereunder shall be calculated and
payable on a quarterly basis, and shall be paid within forty-five (45) days following the end of
each calendar quarter. Galderma shall provide to ZARS within forty-five (45) days following the
end of each calendar quarter, a written report in substantially the form set forth in Exhibit
6.2(b) attached hereto, indicating the amount of Net Sales during such quarter (including
quantity of Product sold), by country, and by party (i.e., Galderma and its Sublicensees and
Affiliates), the gross amounts invoiced that correspond to such Net Sales, and a calculation of the
royalties due. Any amounts due under Section 6.2(a), after taking into account any adjustments set
forth in Sections 6.3, 6.4 or 6.5, for such calendar quarter shall accompany such statement.

     6.3 Adjustment to Net Sales for Excess COGS; Cooperation.

          (a) Subsidy. For each unit of Product purchased by Galderma, or its Affiliates or
Sublicensees pursuant to the GPSG Agreement at a per 30 gram unit price in excess of [ * ] prior to
[ * ], Galderma shall be permitted to deduct from royalties payable to ZARS hereunder in respect of
such unit the amount by which such price exceeds [ * ]. Galderma shall not adjust the 30 gram unit
size unless the Parties mutually agree upon a proportionate adjustment to the [ * ] price.

          (b) Cooperation. ZARS and Galderma agree that that they shall cooperate and use their
commercially reasonable efforts for a period of [ * ] following the Effective Date to lower the per
30g unit price of Product. Galderma shall be responsible, in its sole discretion, for identifying
and implementing improvements to the manufacturing process of the Product and related components,
including activities, as it may determine, related to increasing production capacity and/or
reducing manufacturing costs, such as the procurement of additional capital equipment,
manufacturing site transfers, etc. ZARS shall use its commercially reasonable efforts to assist
Galderma, as may be reasonably requested by Galderma, in identifying and implementing

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improvements to the manufacturing process. Each Party will bear its own costs in connection
with the foregoing activities, and ZARS shall use its commercially reasonable efforts to cooperate
with Galderma with respect thereto, upon reasonable request thereof from Galderma.

     6.4 Minimum Royalties.

          (a) Thresholds. Subject to sections 6.6, 6.7, 14.2 and 14.4(a)(ii), if Net Sales in
any successive calendar year beginning after the Launch (each such successive calendar year to be
deemed an “Agreement Year”) are insufficient to generate the minimum royalties set forth
below (prior to taking into account any adjustment to be made to such royalties under Section 6.3),
Galderma shall pay to ZARS an additional amount equal to the difference between (i) the minimum
royalties set forth below for the applicable Agreement Year and (ii) the royalties payable to ZARS
under Section 6.2 for such Agreement Year (prior to taking into account any adjustment to be made
to such royalties under Section 6.3):

	 	 	 
	Agreement Year	 	Minimum Royalties
	1

	 	[ * ]
	 
	 	 
	2

	 	[ * ]
	 
	 	 
	3

	 	[ * ]
	 
	 	 
	4

	 	[ * ]

          (b) Subsequent Years. The minimum royalties after the fourth (4th) Agreement Year
shall equal [ * ].

     6.5 Discounting. In the event that Galderma or its Affiliates sell a Product to a
Third Party who also purchases other products or services from Galderma or its Affiliates, and
Galderma or its Affiliates discount the purchase price of a Product to a greater degree than
Galderma or its Affiliate generally discounts the price of their other products or services to such
customer then, in such case, the Net Sales for the sale of a Product to such Third Party shall be
deemed to equal the price of the Product had such discount been applied on a proportionate basis to
the Product and such other products or services.

     6.6 Reduction for Generic Competition and Adverse Developments.

          (a) In the event of Generic Competition (as defined below) with respect to a Product within
the Field in a country in the Galderma Territory and thereafter for so long as such Generic
Competition persists, the royalties payable under Section 6.2 with respect to a Product sold in
such country shall be reduced to [ * ] of Net Sales and if such Generic Competition is in the
United States, the minimum royalty obligation under Section 6.4 shall not apply during such period;
and

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          (b) For purposes of this Section 6.6, “Generic Competition” with respect to a Product
in a country within the Galderma Territory shall be deemed to commence only: (i) one or more
Generic Product(s) are being marketed for an approved indication of a Product in such country; and
(ii) such Generic Product(s) represent a total unit volume of at least [ * ] of the combined unit
volume of a Product and such Generic Product(s) for all indications in the Field, in the aggregate,
in such country for the preceding calendar quarter, determined by the number of prescriptions given
for a Product and such Generic Product(s), in the aggregate, during such preceding calendar quarter
(as measured by a Scott Levin audit or other mechanism agreed upon by the Parties); and “Generic
Product” shall mean a generic product that: (A) is substantially similar to a Product; (B) obtained
Marketing Approval solely by means of an ANDA filing or a similar procedure for establishing
equivalence to a Product that does not involve additional clinical trials; and (C) is legally
marketed in such country in the Field by an entity other than Galderma, its Affiliates or its
Sublicensees.

     6.7 Reduction for Adverse Developments. In the event of an Adverse Development (as
defined below), the Parties shall discuss directly, or through the Committee, if the Committee is
in existence, to what extent the minimum royalty thresholds under Section 6.4 should be reduced to
appropriately reflect such Adverse Development. For purposes of this Section 6.7, “Adverse
Development” shall mean a development that (a) materially and adversely impacts the market for a
Product or Galderma’s ability to sell a Product, (b) is beyond Galderma’s control, and (c) makes
attainment of the minimum royalty thresholds under Section 6.4 not commercially reasonable.

ARTICLE VII

PAYMENTS; BOOKS AND RECORDS

     7.1 Payment Method. All payments under this Agreement shall be made by bank wire
transfer in immediately available funds to an account designated by the Party to which such
payments are due. Any payments or portions thereof due under this Agreement that are not paid
within five (5) business days of the date such payments are due under this Agreement shall bear
interest at a rate equal to the lower of (i) the prime rate as reported by the Chase Manhattan
Bank, New York, plus [ * ] per year, or (ii) the maximum rate permitted by law, calculated on the
number of days such payment is delinquent, compounded monthly and computed on the basis of a three
hundred sixty five (365) day year. This Section 7.1 shall in no way limit any other remedies
available to the Parties.

     7.2 Currency Conversion. Unless otherwise expressly stated in this Agreement, all
amounts specified in this Agreement are in United States Dollars, and all payments by one Party to
the other Party under this Agreement shall be paid in United States Dollars. If any currency
conversion shall be required in connection with the payment of the transfer price or royalties
under this Agreement, such conversion shall be calculated using the average exchange rate for the
conversion of foreign currency into United States Dollars, quoted for current transactions for both
buying and selling United States Dollars, as reported in the Wall Street Journal (U.S. Western
Edition) for each business day of the calendar quarter to which such payment pertains.

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     7.3 Taxes.

          (a) Withholding Taxes. If laws or regulations require withholding by Galderma of any
taxes imposed upon ZARS on account of any royalties, the Revenue Share or other payments paid under
this Agreement, such taxes shall be deducted by Galderma as required by law from such payment and
shall be paid by Galderma to the proper taxing authorities. Official receipts of payment of any
withholding tax shall be secured and sent to ZARS as evidence of such payment together with any
other appropriate evidence issued by the appropriate governmental authority sufficient to enable
ZARS to support a claim for income tax credit in respect of any sum so withheld. The Parties will
exercise their reasonable efforts to ensure that any withholding taxes imposed are reduced as far
as possible under the provisions of any applicable tax treaty, and shall cooperate in filing any
forms required for such reduction; in that regard, for example, if any documentation or
certification is required to eliminate withholding taxes on a payment due to ZARS hereunder, then
upon request by ZARS, Galderma will defer such payment until such documentation or certification is
obtained, or ZARS otherwise requests such payment be made, at which time such payment shall
promptly be made). If official receipts are not provided to ZARS, Galderma shall pay to ZARS the
withheld amount. All payments hereunder shall be made by a Party from an entity resident in
Switzerland or the United States from a bank located in such country.

          (b) Sales Taxes. Any sales taxes (including any consumption tax or value added tax),
use tax, transfer taxes, duties or similar governmental charges required to be paid in connection
with the initial license fee payable under Section 6.1, or any royalty, Revenue Share or other
payments hereunder, shall be paid by the Party that is legally responsible therefor, subject to the
right of collection by the other Party as permitted by applicable law.

     7.4 Records; Financial Inspection. Galderma shall keep, and require its Affiliates
and Sublicensees to keep, complete, true and accurate books of accounts and records for the purpose
of determining the amounts payable to ZARS pursuant to this Agreement. Such books and records
shall be kept for at least three (3) years following the end of the calendar quarter to which they
pertain. Such records will be open for inspection by an independent auditor chosen by ZARS and
reasonably acceptable to Galderma for the purpose of verifying the amounts payable by Galderma
hereunder. Such inspections may be made no more than once each calendar year, at reasonable times
and on reasonable prior written notice. Such records for any particular calendar quarter shall be
subject to no more than one inspection. The independent auditor shall be obligated to execute a
reasonable confidentiality agreement prior to commencing any such inspection. Inspections
conducted under this Section 7.4 shall be at the expense of ZARS, unless a variation or error
producing an underpayment in amounts payable exceeding [ * ] of the amount paid for a period
covered by the inspection is established, in which case all reasonable costs relating to the
inspection for such period and any unpaid amounts that are discovered shall be paid by Galderma,
together with interest on such unpaid amounts at the rate set forth in Section 7.1 above. The
Parties will endeavor in such inspection to minimize disruption of Galderma’s normal business
activities to the extent reasonably practicable.

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ARTICLE VIII

CERTAIN COVENANTS

     8.1 Commercially Reasonable Efforts of Galderma. The Parties shall use commercially
reasonable efforts to develop, achieve Marketing Approval and maximize the sales of Products in the
Galderma Territory in an expeditious manner. Without limiting the foregoing, the Parties’
commercially reasonable efforts shall include the following: (a) promoting Products in accordance
with Galderma’s standard business practices, and (b) applying reasonable, financial, personnel and
facilities resources in support of their commercialization efforts.

     8.2 Communications.

          (a) General. Each Party shall keep the other Party fully and promptly informed as to
its progress and activities relating to the development, commercialization, marketing and promotion
of Products in the Galderma Territory, including with respect to regulatory matters and meetings
with Regulatory Authorities, by way of updates to the other Party or through the Committee, if the
Committee is then in existence, or as otherwise specified in this Agreement, or as reasonably
requested by the other Party at any other time.

          (b) Progress Reports. Within thirty (30) calendar days of the end of each month for
the first twenty four (24) months after the Effective Date, and within thirty (30) calendar days of
the end of each quarter on a quarterly basis thereafter, Galderma shall provide ZARS with written
progress reports for each month, or quarter, as the case may be, regarding the sales of a Product
by Galderma in the Galderma Territory. Such reports shall include (i) the volume of all sales of
Product, (ii) the total revenue for all sales of Product, and (iii) the average selling price of
each unit of Product, including a list of major promotions and selling price reductions. Galderma
will provide ZARS with an annual evaluation of the current and expected market situations with
respect to Product in the Galderma Territory. This evaluation will be provided to ZARS in January
of each calendar year of this Agreement.

     8.3 Payment of Royalties. ZARS shall timely pay all royalties owing under the Utah
Agreement and the Anesta Agreement and shall otherwise comply in all material respects with the
provisions thereof.

ARTICLE IX

PRODUCT SUPPLY AND DISTRIBUTION

     9.1 Product Supply. ZARS shall supply, solely in accordance with, and solely pursuant
to its rights under, the GPSG Agreement and the Mutual Termination Agreement, Galderma with all of
Galderma’s, its Affiliates and Sublicensees requirements for the Product for the Galderma Territory
from the Effective Date until the earlier of (a) the date upon which ZARS rights with respect to
the Product in the Galderma Territory under the GPSG Agreement are assigned directly to Galderma,
(b) the date upon which the manufacturing process is transferred from GPSG to Galderma or to
another qualified manufacturing facility (a “Qualified Manufacturer”) and (c) the date upon

-24-

 

which the GPSG Agreement terminates or expires (the “Manufacturing Transition Date”).
Upon the Manufacturing Transition Date, ZARS shall have no further obligation to supply to Galderma
requirements of Galderma, its Affiliates or Sublicensess. Galderma shall have the right to review,
comment on and consent to the GPSG Agreement, such comments and consent not to be unreasonably
withheld or delayed. ZARS shall use commercially reasonable efforts to execute the GPSG Agreement
as promptly as practicable after the date hereof and assign its rights thereunder with respect to
the Product in the Galderma Territory to Galderma as promptly as practicable after the Effective
Date. As soon as commercially reasonable after the execution of this Agreement, Galderma shall
submit to ZARS the artwork, NDC number, forecasting projections and any other information required
under the Mutual Termination Agreement and/or the GPSG Agreement in order for GPSG to initiate
production of Product pursuant to such Agreement(s).

     9.2 Clinical and Research Supplies; Samples.

          (a) Clinical and Research Supplies. After such time as Galderma has established a
direct manufacturing arrangement with GSPG, or otherwise established its own source of supply of
Product, Galderma shall supply ZARS with such quantities of a Product as are reasonably requested
by ZARS in order for it to conduct clinical trials and other research and development activities
with respect to Products, including, without limitation, ZARS Independent Trials (“Clinical
Supplies”), and ZARS shall compensate Galderma for such quantities at a transfer price equal to
Galderma COGS. The Parties shall establish reasonable procedures for ZARS to forecast and submit
and Galderma to fill orders for a Product for such purposes, and shall compensate Galderma for such
Clinical Supplies at a transfer price equal to Galderma COGS, plus shipping costs.

          (b) Product Samples. Galderma shall supply ZARS with mutually agreed quantities of
Product sales samples upon request by ZARS, and shall compensate Galderma for such samples at a
transfer price equal to Galderma COGS, plus shipping costs.

ARTICLE X

CONFIDENTIALITY

     10.1 Confidential Information. Except as expressly provided in this Agreement, the
Parties agree that the receiving Party shall not publish or otherwise disclose and shall not use
for any purpose other than as permitted under this Agreement any information furnished to it by the
other Party hereto under this Agreement (collectively, “Confidential Information”).
Notwithstanding the foregoing, Confidential Information shall not include information that:

          (a) was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure or, as shown by written documentation, was developed by
the receiving Party independent of disclosure by the disclosing Party;

          (b) was available to the public or otherwise part of the public domain at the time of its
disclosure to the receiving Party; other than through any act or omission of the receiving Party in
breach of this Agreement;

-25-

 

          (c) was subsequently lawfully disclosed to the receiving Party by a person other than the
disclosing Party, and who did not directly or indirectly receive such information from disclosing
Party; or

          (d) is developed by the receiving Party without use of or reference to any information or
materials disclosed by the disclosing Party.

     10.2 Permitted Disclosures. Notwithstanding the provisions of Section 10.1 above and
subject to Sections 10.3 and 10.4 below, each Party hereto may use, and may disclose the other
Party’s Confidential Information to its Affiliates, licensees, permitted Sublicensees and any other
Third Parties, to the extent such use and disclosure is reasonably necessary in exercising the
rights granted to it, or reserved by it, under this Agreement, prosecuting or defending litigation,
complying with applicable governmental laws or regulations, submitting information to tax or other
governmental authorities or conducting clinical trials hereunder with respect to a Product. If a
Party is required by law or regulations to make any such disclosure of the other Party’s
Confidential Information, to the extent it may legally do so, it will give reasonable advance
notice to the latter Party of such disclosure and, save to the extent inappropriate in the case of
patent applications or otherwise, will use its good faith efforts to secure confidential treatment
of such Confidential Information prior to its disclosure (whether through protective orders or
otherwise). For any other disclosures of the other Party’s Confidential Information, including to
Affiliates, licensees, permitted Sublicensees, partners and other Third Parties, a Party shall
ensure that the recipient thereof is bound by a written confidentiality agreement as materially
protective of such Confidential Information as this Article 10.

     10.3 Confidential Terms. Each Party agrees not to disclose to any Third Party the
terms of this Agreement without the prior written consent of the other Party hereto, except each
Party may disclose the terms of this Agreement: (a) to advisors (including financial advisors,
attorneys and accountants), actual or potential acquisition partners or private investors, and
others on a need to know basis, in each case under the confidentiality provisions substantially
equivalent to those in this Agreement, or in the case of financial advisors, attorneys, accountants
and private investors, confidentiality provisions customary for that type of professional; or (b)
to the extent necessary to comply with applicable laws and court orders, including securities laws,
regulations or guidances; provided that in the case of paragraph (b) the disclosing Party shall
promptly notify the other Party and (other than in the case where such disclosure is necessary, in
the reasonable opinion of the disclosing Party’s legal counsel, to comply with securities laws,
regulations or guidances) allow the other Party a reasonable opportunity to oppose with the body
initiating the process and, to the extent allowable by law, to seek limitations on the portion of
the Agreement that is required to be disclosed. Notwithstanding the foregoing, the Parties shall
discuss whether a mutual press release to announce the execution of this Agreement should be
issued, together with a corresponding Question & Answer outline for use in responding to inquiries
about the Agreement; thereafter, each Party may each disclose to Third Parties the information
contained in any such press release and Question & Answer outline without the need for further
approval by the other Party.

     10.4 Prior Non-Disclosure Agreements. Upon execution of this Agreement, the terms of
this Article 10 shall supersede any prior non-disclosure, secrecy or confidentiality agreement

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between the Parties. Any information disclosed under such prior agreements shall be deemed
disclosed under this Agreement.

ARTICLE XI

PATENT PROSECUTION AND ENFORCEMENT

     11.1 Ownership of Inventions. Title to all inventions and other intellectual property
made solely by Galderma personnel in connection with this Agreement shall be owned by Galderma.
Title to all inventions and other intellectual property made solely by ZARS personnel in connection
with this Agreement shall be owned by ZARS. Title to all inventions and other intellectual
property made jointly by personnel of ZARS and Galderma in connection with this Agreement shall be
jointly owned by ZARS and Galderma. Prosecution of any patent with respect to such jointly-owned
inventions and intellectual property shall be solely as mutually agreed. Except as expressly
provided in this Agreement, it is understood that neither Party shall have any obligation to obtain
any approval of nor pay a share of the proceeds to the other Party to practice, enforce, license,
assign or otherwise exploit such jointly-owned inventions or intellectual property, and each Party
hereby waives any right it may have under the laws of any country to require such approval or
sharing. Galderma hereby grants to ZARS a non-exclusive, worldwide, irrevocable, royalty-free
license, with the right to sublicense, under any Improvements to make, have made, use, sell, offer
for sale, import, practice and otherwise exploit such Improvements, subject to the exclusive rights
granted to Galderma under this Agreement with respect to a Product in the Field in the Galderma
Territory. As used herein, “Improvements” means any patent or invention made by or under authority
of Galderma using, or in connection with development and/or commercialization, marketing and/or
promotion of, a Product, in each case, to the extent the same is owned or Controlled by Galderma or
its Affiliates.

     11.2 Prosecution and Maintenance of ZARS Patents. As between Galderma and ZARS, ZARS
shall, at its expense, have responsibility for the filing, prosecution and maintenance of all ZARS
Patents in the Galderma Territory. Galderma shall have the right to review pending patent
applications and make recommendations to ZARS concerning such patent applications, provided that,
in the event that delay would jeopardize any potential patent right, ZARS shall proceed without
awaiting Galderma’s comments on any patent application or correspondence. ZARS will consider in
good faith all reasonable suggestions of Galderma with respect thereto, it being agreed, however,
that all final decisions respecting conduct of the prosecution of said patent applications shall
rest solely in the discretion of ZARS. ZARS agrees to keep Galderma generally informed of the
course of patent prosecution or other proceedings with respect to the ZARS Patents within the
Galderma Territory and within the Field. Galderma shall provide the patent consultation to ZARS at
no cost to ZARS and any legal fees or expenses incurred by Galderma under this Section 11.2 shall
be the sole responsibility of Galderma. Each Party shall hold all information disclosed to it
under this Section as confidential.

     11.3 Enforcement. In the event that ZARS or Galderma becomes aware of actual or
threatened infringement or misappropriation of any ZARS Patent or ZARS Know-How in any country in
the Galderma Territory by a Competing Product or a product that is within the definition of Product
hereunder (“Infringing Product”), that Party shall promptly notify the other Party in
writing. ZARS shall have the first right, but not the obligation, to initiate proceedings or take
other

-27-

 

appropriate action, at its own expense, against any such Third Party. If ZARS does not
initiate proceedings or take other appropriate action within ninety (90) days of receipt of a
request by Galderma to initiate an enforcement proceeding, then Galderma shall be entitled to
initiate infringement proceedings or take other appropriate action against an Infringing Product at
its own expense and to include ZARS as a nominal party plaintiff. The Party conducting such action
shall have full control over its conduct, including settlement thereof; provided, however, that the
Party conducting such action may not settle any such action, or make any admissions or assert any
position in such action, in a manner that would materially adversely affect the rights or interests
of the other Party, without the prior written consent of the other Party, which shall not be
unreasonably withheld or delayed. In any event, the Parties shall assist one another and cooperate
in any such litigation at the other’s reasonable request.

     11.4 Recovery. ZARS and Galderma shall recover their respective actual out-of-pocket
expenses, or equitable proportions thereof, associated with any litigation against infringers
undertaken pursuant to Section 11.3 above or settlement thereof from any resulting recovery made by
either Party. Any excess amount of such a recovery shall be shared equally between Galderma and
ZARS, to the extent such recovery represents damages relative to sales of Infringing Product in the
Field in the Galderma Territory.

     11.5 Cooperation. The Parties shall keep one another informed of the status of their
respective activities regarding any litigation or settlement thereof concerning the ZARS Patents,
or the ZARS Know-How within the Field in the Galderma Territory and shall assist one another and
cooperate in any such litigation at the other’s reasonable request (including joining as a party
plaintiff to the extent necessary and requested by the other Party).

     11.6 Patent Marking. Galderma agrees to mark, and have its Affiliates and
Sublicensees mark, all patented Products they sell or distribute pursuant to this Agreement in
accordance with the applicable patent statutes or regulations in the country or countries of sale
thereof.

     11.7 Alleged Infringement of Third-Party Patents. In the event ZARS or Galderma
learns that the making, using or selling of a Product within the Galderma Territory will infringe
or is alleged by a third party to infringe a third-party patent, the party becoming aware of the
same shall promptly notify the other. ZARS and Galderma shall thereafter attempt to agree upon a
course of action which may include, without limitation: (a) modifying the Product or its use and
manufacture so as to be non-infringing; (b) obtaining a license or assignment from said third
party; (c) filing a declaratory judgment action against such third party; (d) continuing its
activities without change; (e) filing for re-examination or the like with respect to the
third-party patent; or (f) obtaining a competent opinion of counsel regarding non-infringement or
invalidity of the third-party patent. In no event shall either Party take any action, or make any
admissions or assert any position with respect to such potential or alleged infringement, in a
manner that would materially adversely affect the rights or interests of the other Party, without
the prior written consent of the other Party, which shall not be unreasonably withheld or delayed.

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ARTICLE XII

TRADEMARKS

     12.1 Display. All packaging materials, labels and promotional materials for a Product
shall display Product Trade Marks and no other product-specific trade marks or branding. In
addition, any such packaging materials, labels and promotional materials for use with a Co-Promoted
Product shall display the trade name of Galderma in reasonable size and prominence as nearly as
allowed by applicable local regulations. The trade marks of Galderma, trade dress, style of
packaging and the like with respect to a Product in the Galderma Territory may be determined by
Galderma in a manner that is consistent with Galderma’s standard trade dress and style. At such
time as ZARS exercises its Co-Promotion Option under Section 5.3, the Parties shall discuss in good
faith whether to add ZARS’ name to the packaging materials, labels and promotional materials for
Products.

     12.2 Grant of License; Grant of Option. Subject to the terms and conditions of this
Agreement, ZARS hereby grants to Galderma an exclusive (even as to ZARS), irrevocable (other than
pursuant to the terms of this Agreement), royalty-free license (with the right to sublicense in
accordance with the applicable provisions of Section 2.2(b)) to use the Product Trade Marks listed
on Exhibit 1.32 in each country of the Galderma Territory for the packaging, marketing, sale and
promotion of Products in accordance with this Agreement. So that ZARS may maintain “quality
control” for the purposes of its duties as a trademark licensor, Galderma agrees that any use of
the Product Trade Marks by Galderma shall be with Products at least of the quality formerly
associated with ZARS. The ownership and all goodwill from the use of such Product Trade Marks name
shall vest in and inure to the benefit of ZARS. In addition, in consideration of the mutual
covenants contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, effective as of the filing with the United States
Patent and Trademark Office by ZARS of an amendment to allege use under 15 U.S.C. §1051(c) or a
statement of use under 15 U.S.C. §1051(d) for the Product Trade Marks identified in Exhibit 1.32,
Galderma shall have an option, during the term of this Agreement, exercisable upon ten (10)
business days’ notice to ZARS, to acquire from ZARS all of its right, title and interest in and to
Product Trade Marks in each country of the Galderma Territory (the “Option”). If ZARS fails to
file any such amendment to allege use or statement of use within a reasonable period of time of
making “use in commerce” as defined under the Lanham Act, Galderma shall have the right to execute
and file the same as ZARS’ attorney-in-fact, and ZARS hereby irrevocably constitutes and appoints,
which appointment is coupled with an interest, Galderma as its true and lawful attorney-in-fact
only for the purpose of executing and filing such documents. After receipt of such notice, ZARS
shall make all reasonable efforts to execute all documents necessary to consummate such acquisition
and the release of any claims in connection with such Product Trade Marks.

     12.3 Registration of Trade Marks. Galderma agrees to file, register and maintain, for
the term of this Agreement, at Galderma’s expense, appropriate registrations for Product Trade
Marks, as mutually agreed by ZARS and Galderma, in each country of the Galderma Territory in which
a Product is or will be sold. The ownership and all goodwill from the use of Product Trade Marks
filed after the Effective Date or acquired upon exercise of the Option shall vest in and inure to
the benefit of Galderma.

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     12.4 Ownership. As between the Parties, ZARS shall own all right, title and
interest in and to Product Trade Marks filed prior to the Effective Date and not purchased upon
exercise of the Option, and Galderma shall own all right, title and interest in and to Product
Trade Marks in each country of the Galderma Territory filed after the Effective Date or purchased
upon exercise of the Option.

     12.5 Recordation of Licenses. In those countries where a trade mark license must be
recorded, ZARS will provide to Galderma, on Galderma’s written request, a separate trademark
license for Product Trade Marks, and Galderma will arrange for the recordation of such trade mark
license with the appropriate governmental agency, at Galderma’s expense, promptly following receipt
of such license from ZARS. Galderma shall cooperate in the preparation and execution of such
documents and the removal of any such recordals.

     12.6 Approval of Rights. To the extent necessary to preserve ZARS’ legal rights in
Product Trade Marks, Galderma shall submit representative Product samples, promotional materials,
packaging and Product displaying Product Trade Marks to ZARS for ZARS’ review and approval prior to
the first use of such promotional materials, packaging or Product and prior to any subsequent
change or addition to such promotional materials, packaging or Product; provided that if ZARS has
not responded within thirty (30) days after the submission of such promotional materials, packaging
or Product, ZARS’ approval will be deemed to have been received.

     12.7 Termination of Trade Mark Rights. Galderma’s right to use Product Trade Marks
licensed under or purchased pursuant to Section 12.2, and each Party’s right to use the other
Party’s trade name, shall terminate in each country of the Galderma Territory in which Galderma’s
rights to distribute a Product are terminated or expire pursuant to the terms of this Agreement.
Each Party shall take all such steps as the other Party may reasonably request to give effect to
the termination of rights pursuant to the preceding sentence and to execute and record any
documents that may be required to evidence or effect such termination, including expressly
abandoning applications and registrations for the Product Trade Marks or the assignment of the
Product Trade Marks back to ZARS.

ARTICLE XIII

TERM AND TERMINATION

     13.1 Term. Unless terminated earlier pursuant to Sections 13.2, 13.3, 13.4, 13.5 or
13.6 below, the term of this Agreement shall commence on the Effective Date and shall continue
until the twentieth (20th) anniversary thereof, and may be extended beyond such
anniversary upon mutual agreement of the Parties.

     13.2 Breach. Subject to Section 14.2, either Party to this Agreement may terminate
this Agreement in the event the other Party shall have materially breached or defaulted in the
performance of any of its material obligations hereunder, and such default shall have continued for
ninety (90) days after written notice thereof was provided to the breaching Party by the
non-breaching Party. Any such termination shall become effective at the end of such ninety (90)
day
period unless the breaching Party has cured any such breach or default prior to the expiration
of the

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ninety (90) day period. Notwithstanding the foregoing, in the event and to the extent that
any such breach is a breach of any of the payment provisions herein, the applicable notice and cure
period as provided above shall be sixty (60) days.

     13.3 Failure to Achieve Minimum Royalties. Subject to Section 14.3, either Party may
terminate this Agreement in its entirety upon thirty (30) days prior written notice to the other
Party following the [ * ] Agreement Year if Galderma does not achieve Net Sales sufficient to
generate the minimum royalties set forth in Section 6.4 (but is in compliance with the payment
provisions of Section 6.4) in any two consecutive Agreement Years following the [ * ] Agreement
Year.

     13.4 Termination upon Acquisition of or by Galderma. Notwithstanding Sections 2.3 and
2.5, in the event that Galderma is acquired by an entity that acquires all or substantially all of
its business or assets, whether by merger, acquisition or otherwise, or merges with or acquires an
entity (each a “Subject Transaction”) and either such entity or any of its Affiliate sells,
offers to sell, imports, licenses, markets, promotes, or commercializes in the Galderma Territory a
Competing Product, Galderma, or its successor corporation (including the ultimate parent company of
the acquiring entity), shall have a period of sixty (60) days to determine whether to divest such
Competing Product and shall notify ZARS in writing of such decision within such sixty (60) day
period. If Galderma, or its successor corporation, notifies ZARS it will not divest the Competing
Product, ZARS may terminate this Agreement upon thirty (30) days written notice to Galderma, or its
successor corporation. If Galderma notifies ZARS it will divest the Competing Product, Galderma
shall have a period of six (6) months to divest the Competing Product. If, within six (6) months
of the Subject Transaction, Galderma or its successor corporation does not divest the Competing
Product, ZARS may terminate this Agreement upon thirty (30) days written notice to Galderma, or its
successor corporation.

     13.5 Termination by Galderma. Galderma may terminate this Agreement in its entirety
upon one hundred and twenty (120) days prior written notice to ZARS (or upon thirty (30) days prior
written notice in the case of clause (a)(i) or (c) below), in the event (a) an adverse event occurs
or condition exists that (i) requires Galderma to terminate further clinical studies and/or sales
activities in order to avoid violating a reasonable standard of patient care or endangering or
potentially endangering patients; or (ii) materially diminishes the commercial potential for a
Product; provided that, such adverse event or condition does not result primarily from actions or
inactions by Galderma that Galderma should reasonably have known could cause such event, (b) GPSG
fails in any material respect to supply quantities ordered by Galderma in accordance with the
Mutual Termination Agreement or the GPSG Agreement, as applicable, and such failure remains uncured
for a period of sixty (60) days, or (c) Galderma is unable, using commercially reasonable efforts
and practices typically utilized in the pharmaceutical industry, to transition the manufacture of
the Product to Galderma or a Third Party prior to [ * ]. In the case of termination by Galderma
pursuant to clause (b) or (c) above only, ZARS shall pay to Galderma, within ten (10) business days
of the effective date of such termination, an amount equal to [ * ] of Net Sales in the twelve (12)
full months immediately prior to the delivery of notice of such termination, provided that, ZARS
shall only owe such amount if the notice of such termination is delivered prior to the earlier of
the (x) transition of manufacturing from GPSG to Galderma or a Third Party, or (y) two (2) years
from the execution of this Agreement. In addition, during any cure period under subsection (b)
above, Galderma shall be
relieved of its obligations to comply with the minimums set forth under Section 6.4(b),
provided

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however, that upon cure of the supply failure, the obligations to comply with such minimum
royalties shall be restored and shall be adjusted to account for the interruption in the supply for
the Agreement Year in which such supply failure occurred in a manner to be agreed upon by the
Parties.

     13.6 Termination by ZARS. To the extent permitted by applicable law, this Agreement
may be terminated by ZARS in the event that Galderma challenges any ZARS Patent.

ARTICLE XIV

EFFECT OF TERMINATION

     14.1 Accrued Obligations. The expiration or termination of this Agreement for any
reason shall not release either Party from any liability which, at the time of such expiration or
termination, has already accrued to the other Party or which is attributable to a period prior to
such expiration or termination, nor will any termination of this Agreement preclude either Party
from pursuing all rights and remedies it may have under this Agreement, or at law or in equity,
with respect to breach of this Agreement.

     14.2 Termination by Galderma for ZARS’ Breach. Upon Galderma’s termination pursuant
to Section 13.2, ZARS shall have the option, exercisable within ten (10) days of the expiration of
the applicable cure period under Section 13.2, to elect to make a payment to Galderma in an amount
equal to [ * ] of Net Sales in the twelve (12) full months immediately prior to the delivery of
notice of such termination, in which case the provisions of Article 14.4 shall apply, provided that
the Wind-Down Period shall be reduced to three (3) months. If ZARS does not make such election,
then, at Galderma’s option, the license grant to Galderma set forth in Section 2.1 and Galderma’s
other rights hereunder shall continue, subject to the restrictions set forth in Sections 2.2 and
2.3 and subject to the continued payment of Galderma of all applicable fees and royalties with
respect thereto as set forth in Article 6, provided that, (x) the royalties shall be reduced by [ *
], (y) the royalty minimums under Section 6.4 shall be eliminated, and (z) any committees
established hereunder shall be dissolved. If Galderma does not exercise such option within ten
(10) days of being notified that ZARS has elected not to make the payment contemplated above, this
Agreement shall immediately terminate and Section 14.4 shall apply, provided that the Wind-Down
Period shall be reduced to three (3) months. For the avoidance of doubt, this Agreement shall
remain in effect until the earlier of (A) delivery of notice by ZARS that it intends to exercise
its option to make the payment contemplated by the first sentence of this Section 14.2, (B)
delivery of notice by Galderma that it does not intend to exercise its option to continue the
Agreement as contemplated by the second sentence of this Section 14.2, and (C) expiration of the
ten (10) day period contemplated by the immediately preceding sentence, unless Galderma elects to
continue this Agreement as provided above within such ten (10) day period, in which case the
Agreement shall remain in effect until a subsequent termination or expiration pursuant to Article
XIII. Galderma’s remedies under this Section 14.2 are not exclusive and, whether or not
termination is effected, all other remedies will remain available to Galderma.

     14.3 Termination by either Party for Failure of Galderma to Achieve Net Sales Sufficient
to Generate Minimum Royalties.

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          (a) Termination by ZARS. Within ten (10) business days of the effective date of ZARS’
termination pursuant to Section 13.3, ZARS shall make a payment to Galderma in an amount equal to [
* ] of Net Sales in the twelve (12) full months immediately prior to the delivery of notice of such
termination, in which case the provisions of Article 14.4 shall apply, provided that the Wind-Down
Period shall be reduced to six (6) months.

          (b) Termination by Galderma. Upon Galderma’s termination pursuant to Section 13.3,
ZARS shall have the option, exercisable within ten (10) days after the expiration of the thirty
(30) day notice period under Section 13.3, to elect to make a payment to Galderma in an amount
equal to [ * ] of Net Sales in the twelve (12) full months immediately prior to the effective date
of Galderma’s termination, in which case the provisions of Article 14.4 shall apply. If ZARS does
not make such election, then, at Galderma’s option, the Agreement shall not terminate, and Galderma
shall have the right to assign its rights and obligations hereunder to a Third Party (provided such
Third Party has the financial and operational resources to meet the obligations of Galderma
hereunder), without ZARS’ consent, provided that Galderma and such Third Party comply with the
third and fifth sentences of Section 2.2(b) as though such Third Party were a Sublicensee. If
Galderma does not exercise such option within sixty (60) days of being notified that ZARS has
elected not to make the payment contemplated above, this Agreement shall terminate and Section 14.4
shall apply. For the avoidance of doubt, this Agreement shall remain in effect until the earlier
of (A) delivery of notice by ZARS that it intends to exercise its option to make the payment
contemplated by the first sentence of this Section 14.3(b), (B) delivery of notice by Galderma that
it does not intend to exercise its option to continue the Agreement as contemplated by the second
sentence of this Section 14.3(b), and (C) expiration of the sixty (60) day period contemplated by
the immediately preceding sentence, unless Galderma elects to continue this Agreement as provided
above within such sixty (60) day period, in which case the Agreement shall remain in effect until a
subsequent termination or expiration pursuant to Article XIII.

     14.4 ZARS Rights on Termination. This Section 14.4 shall apply upon the expiration or
any termination of Galderma’s rights under this Agreement, except as otherwise provided in Section
14.2 or Section 14.3, as applicable.

          (a) Wind-down Period.

               (i) Development. In the event there are any on-going clinical trials of a Product in
the Galderma Territory being conducted by Galderma, at ZARS’ request, following the date a notice
of termination has been issued, Galderma agrees: (A) to complete any such clinical trials or any
portion thereof; or (B) to the extent so requested by ZARS, to promptly transition to ZARS or its
designee such clinical trials or portions thereof; in each case, at Galderma’s expense. Galderma
shall continue to conduct any such clinical trials to be completed by Galderma pursuant to this
Section 14.4(a)(i) in accordance with the terms and conditions of this Agreement.

               (ii) Commercialization. Unless this Agreement expires by its terms or pursuant to
Section 13.4, Galderma, its Affiliates and its Sublicensees shall continue to market, promote,
distribute and otherwise commercialize Products in each country in the Galderma Territory for which
Marketing Approval therefor has been obtained, in accordance with the terms and conditions of this
Agreement, until three (3) months after the date on which ZARS notifies Galderma

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in writing that ZARS has secured an alternative distributor or licensee for such Product(s) in
such country, but in no event for more than nine (9) months after the effective date of any
termination of this Agreement (the “Wind-down Period”); provided that Galderma, its
Affiliates and its Sublicensees shall cease such activities, or any portion thereof, in a given
country upon sixty (60) days notice by ZARS requesting that such activities (or portion thereof) be
ceased. Notwithstanding any other provision of this Agreement, during the Wind-down Period, (A)
Galderma’s and its Affiliates’ and Sublicensees’ rights with respect to a Product in the Galderma
Territory shall be non-exclusive and, without limiting the foregoing, ZARS shall have the right to
engage one or more other distributor(s) and/or licensee(s) of a Product in all or part of the
Galderma Territory and (B) Galderma shall be relieved of its obligations under Section 6.4. Any
Product sold or disposed in the Galderma Territory during the Wind-down Period shall be subject to
the other applicable payment obligations under Article 5 and Article 6 above. Within thirty (30)
days of expiration of the Wind-down Period, Galderma shall notify ZARS of any quantity of Product
remaining in Galderma’s inventory and ZARS shall purchase from Galderma any such quantities of
Product having at least twelve (12) additional months of shelf life, at a price equal to the
Galderma COGS for such Products, up to maximum amount of such quantities equal to the
number of Products sold in the preceding six (6) months. ZARS shall have the right, but
not the obligation, to purchase any additional quantities of Product remaining in Galderma’s
inventory that do not meet the foregoing requirements, at a price equal to the Galderma COGS for
such Products. If any Product was manufactured by any Third Party for Galderma, or Galderma had
contracts with vendors which contracts are necessary or useful for ZARS to take over responsibility
for the Products in the Galderma Territory, then Galderma shall to the extent possible and as
requested in writing by ZARS, assign all of the relevant Third-Party contracts to ZARS. If
Galderma or its Affiliate manufactured any Product at the time of termination, then Galderma (or
its Affiliate) shall, to the extent practicable, continue to provide for manufacturing of such
Product for ZARS, from the date of notice of such termination until such time as ZARS is able,
using reasonable efforts to do so, to secure an acceptable alternative commercial manufacturing
source from which sufficient quantities of Product may be procured and legally sold in the Galderma
Territory (but in no event for longer than fifteen (15) months after notice of termination is
delivered), and ZARS shall compensate Galderma for such quantities at a transfer price equal to [ *
] of Galderma COGS.

          (b) Assignment of Regulatory Filings and Marketing Approvals. Galderma shall assign
or cause to be assigned to ZARS or its designee (or to the extent not so assignable, Galderma shall
take all reasonable actions to make available to ZARS or its designee the benefits of) all
regulatory filings and registrations (including INDs, MAAs and Marketing Approvals) for each
Product in the Galderma Territory, including any such regulatory filings and registrations made or
owned by its Affiliates and/or Sublicensees. In each case, unless otherwise required by any
applicable law or regulation, the foregoing assignment (or availability) shall be made within
thirty (30) days after the effective date of any termination of this Agreement. In addition,
Galderma shall promptly provide to ZARS a copy of all Data and Galderma Know-How pertaining to any
Product in the Galderma Territory to the extent not previously provided to ZARS and ZARS shall have
the right to use and disclose all Data and Galderma Know-How pertaining to any such Product.

          (c) Transition. Each Party shall use commercially reasonable efforts to cooperate
with the other Party to effect a smooth and orderly transition in the manufacturing, development,
sale and ongoing marketing, promotion and commercialization of Products in the Galderma

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Territory during the Wind-down Period. Without limiting the foregoing, the Parties shall use
commercially reasonable efforts to conduct in an expeditious manner any activities to be conducted
under this Section 14.4.

          (d) Licenses; Assigment.

               (i) Technology License. Effective as of the date of the notice of termination of this
Agreement, Galderma hereby grants to ZARS an exclusive, worldwide, royalty-free, perpetual license,
with the right to grant sublicenses, under any patent, patent applications and/or Know-How owned or
Controlled by Galderma on inventions made in the course of developing, using or manufacturing
Products, as the same may be modified by ZARS from time to time.

               (ii) Trademarks. Effective as of the date of expiration of the Wind-down Period,
Galderma hereby (A) assigns to ZARS all right, title and interest to any Product Trade Marks owned
by Galderma, together with the goodwill of the business symbolized by such Product Trade Marks and
all rights, claims and privileges pertaining thereto, including, without limitation, the right to
sue and recover damages for past, present and future infringement thereof, and the right to
prosecute and maintain trademark applications and the registrations for such Product Trade Marks,
and (B) agrees to reasonably assist ZARS, at ZARS’ expense, in every proper way to secure ZARS’
rights in such Product Trade Marks in the Galderma Territory, including execution of all
applications, specifications, oaths, assignments and other instruments that ZARS may deem necessary
in order to apply for and obtain such rights and in order to assign and convey to ZARS and its
successors, assigns and nominees the sole and exclusive right, title and interest in and to such
Product Trade Marks.

          (e) Data Disclosure. Galderma shall disclose to ZARS (to the extent Galderma has not
already disclosed to ZARS) all Data in Galderma’s or its Affiliates’ or Sublicensees’ possession
with respect to any Product. ZARS shall be free to use this Data in accordance with the licenses
under Section 14.4(d) above.

          (f) Sublicensees. Any contracts with Sublicensees of a Product in the Galderma
Territory engaged by Galderma other than Galderma’s Affiliates shall, at the request of ZARS in its
discretion, be assigned to ZARS to the furthest extent possible, provided that such assignment is
accepted by the Sublicensee(s) in any country or countries within the Galderma Territory. In the
event such assignment is not requested by ZARS or is not accepted by such Sublicensee(s), then the
rights of such Sublicensees with respect to such Product in a relevant country or countries within
the Galderma Territory shall terminate upon termination of Galderma’s rights with respect to the
Galderma Territory. Galderma shall use commercially reasonable efforts to ensure that its
Affiliates and such Sublicensees (if not assigned to ZARS pursuant to this Section 14.4(g)) shall
transition such Product back to ZARS in the manner set forth in this Section 14.4 as if such
Affiliate or Sublicensee were named herein.

          (g) Except as otherwise provided herein, ZARS shall reimburse Galderma for any out-of-pocket,
reasonable and documented costs incurred in connection with its activities under this Section 14.4.

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     14.5 No Renewal, Extension or Waiver. Acceptance of any order from, or sale or
license of, any Product to Galderma after the notice or effective date of termination of this
Agreement shall not be construed as a renewal or extension hereof, or as a waiver of termination of
this Agreement.

     14.6 Return of Materials. Within thirty (30) days after the end of the Wind-down
Period, or termination or expiration of this Agreement in the event there is no Wind-down Period,
each Party shall either return to the other Party or destroy all tangible items comprising, bearing
or containing trade marks, trade names, patents, copyrights, designs, drawings, formulas or other
Data, photographs, samples, literature, sales and promotional aids (“Product Materials”)
and Confidential Information of the other Party, that is in such Party’s possession, except to the
extent such Party has a continuing right to utilize such Product Materials under the terms of this
Agreement (including Sections 14.4 (b), (d) and (e) above). Effective upon the end of the
Wind-down Period, or termination or expiration of this Agreement, in the event there is no
Wind-down Period, each Party shall cease to use all trade marks and trade names of the other Party
in the Galderma Territory, and all rights granted hereunder with respect to Products in the
Galderma Territory shall terminate, except to the extent such Party has a continuing right with
respect to such Products under the terms of this Agreement.

     14.7 Survival. Upon the expiration or termination of this Agreement, all rights and
obligations of the Parties under this Agreement shall terminate except those contained in the
following sections: Sections 2.6, 4.5(b), 11.1, 15.4 and Articles 1, 7, 10, 14, 16, 17 and 19 and
Article 15 (provided that Article 15 shall survive for a period of only twelve (12) months from the
effective date of termination or expiration of this Agreement); and, in addition, during the Wind
Down Period defined in Section 14.4(a)(ii) above to the extent any Product is sold by Galderma
during such Wind Down Period, Sections 4.3, 4.6, 4.7, 4.9, 4.10, 5.5, 5.6, 5.7, 5.8, 6.2, 6.3, 6.5,
6.6, 8.2(b), 8.3, 9.1, and 9.2. In addition, Galderma’s obligations under any purchase orders
accepted by ZARS under the GPSG Agreement or the Mutual Termination Agreement, as applicable, prior
to the effective date of expiration or termination of this Agreement, and to purchase Product in
accordance with the binding portion of any forecast provided to ZARS pursuant to such applicable
agreement prior to such date, shall also survive.

ARTICLE XV

REPRESENTATIONS, WARRANTIES AND COVENANTS

     15.1 General Representations. Each Party hereby represents and warrants to the other
Party as of the date hereof and as of the Effective Date as follows:

          (a) Duly Organized. Such Party is a corporation duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its incorporation, is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction in which the conduct
of its business or the ownership of its properties requires such qualification and failure to have
such would prevent such Party from performing its obligations under this Agreement.

          (b) Due Execution; Binding Agreement. This Agreement is a legal and valid obligation
binding upon such Party and enforceable in accordance with its terms. Other than with

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respect to the Galderma Shareholder Approval, the execution, delivery and performance of this
Agreement by such Party have been duly authorized by all necessary corporate action and do not and
will not: (i) require any consent or approval of its stockholders; (ii) to such Party’s knowledge,
violate any law, rule, regulation, order, writ, judgment, decree, determination or award of any
court, governmental body or administrative or other agency having jurisdiction over such Party; nor
(iii) conflict with, or constitute a default under, any agreement, instrument or understanding,
oral or written, to which such Party is a party or by which it is bound.

     15.2 Representations and Warranties of ZARS. ZARS represents and warrants to Galderma
that, as of the date hereof and as of the Effective Date:

          (a) it has the full right and authority to grant the rights and licenses as provided herein;

          (b) it has not previously granted any right, license or interest in or to the ZARS Patents,
ZARS Know-How, Product Trade Marks, (collectively the “ZARS IP”) or any portion thereof,
that is in conflict with the rights or licenses granted to Galderma under this Agreement;

          (c) there are no actual, pending, alleged or, to its Knowledge, threatened actions (including
opposition proceedings), suits, claims, interferences or governmental investigations by or against
ZARS or any of its Affiliates or other licensees of ZARS or its Affiliates, in each case that (i)
involves the Product, the ZARS Patents, the ZARS Know-How or Product Trade Marks; and (ii) would
reasonably be expected to materially adversely affect the ability of ZARS to perform its
obligations hereunder;

          (d) to its Knowledge, the material ZARS IP does not violate or infringe any valid Third-Party
intellectual property rights;

          (e) all necessary consents, approvals and authorizations of all Regulatory Authorities, other
governmental authorities and other persons or entities required to be obtained by ZARS in order to
enter into this Agreement have been obtained, other than those described in Section 1.8;

          (f) to its Knowledge, there is no actual, pending, alleged or threatened infringement by a
Third Party of any of the material ZARS IP;

          (g) to its Knowledge, none of the issued ZARS Patents are invalid or unenforceable;

          (h) it owns all rights, title and interest in and to the material ZARS IP, and there are no
ZARS Patents, ZARS Know-How or Product Trade Marks that are licensed by ZARS from any Third Party;

          (i) except for the Anesta Agreement, the Utah Agreement and the Permitted Lien, it owns the
material ZARS IP free and clear of any options, guarantees, liens (whether written, oral or
implied), or any other encumbrances, including without limitation any claim of current or former
employees or contractors of ZARS or any of its Affiliates;

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          (j) all employees or contractors of ZARS who have created or developed any ZARS Patents, ZARS
Know-How, or Product Trade Marks have validly and irrevocably assigned to ZARS all of their rights
therein, including intellectual property rights, except in the case where failure to do so is not
likely to have a material adverse effect on Net Sales of the Product or Galderma’s rights
hereunder;

          (k) (i) it has complied with all applicable laws in connection with its development of the
Product; and (ii) it performed the related studies and clinical trials, the results of which are
embodied in the ZARS Know-How, in accordance with applicable law and good clinical practices,
except in each of subclauses (i) and (ii) if failure to do so is not likely to have a material
adverse effect on the Product or its development, manufacture or commercialization hereunder;

          (l) (i) none of the ZARS Patents or Product Trade Marks, in each case in the Galderma
Territory, has been cancelled, has expired or has been abandoned; and (ii) ZARS has taken security
measures that are customary in the biotechnology industry in which ZARS operates and as ZARS deems
appropriate to protect the confidentiality of the proprietary ZARS Know-How;

          (m) it has paid all required application fees, registration fees, maintenance fees and the
like with regard to the material ZARS Patents and the material Product Trade Marks; and (ii) it has
filed with the relevant intellectual property agency all required documents and certificates in
connection with the registration and maintenance of the ZARS Patents and Product Trade Marks;

          (n) neither this Agreement nor the transactions contemplated hereby shall result in ZARS’
granting to any third party any right with respect to any intellectual property licensed to
Galderma hereunder in conflict with the rights and licenses granted to Galderma hereunder;

          (o) the intellectual property licensed to Galderma hereunder constitutes all intellectual
property owned or Controlled by ZARS that is necessary for the use, development, manufacture,
importation, sale, distribution, marketing and promotion of the Product as it exists as of the
Effective Date; and

          (p) ZARS expressly warrants and represents that, as of the Effective Date, it has responded in
good faith to all of Galderma’s requests for materials and information in connection with
Galderma’s due diligence efforts with respect to this Agreement and that it has no Knowledge, of
any material omissions with respect to any response to any such request.

“Knowledge” for purposes of this Section 15.2 shall mean the knowledge of Robert Lippert,
CEO, Greg Ayers, CFO, Michael Ashburn, EVP Clinical and Regulatory Affairs, Jie Zhang, CSO, Wade
Hull, Vice President of Engineering, Patricia Richards, Vice President of Regulatory Affairs and
Andrew Crockett, Vice President of Business Development.

     15.3 Representations and Warranties of Galderma. Galderma represents and warrants to
ZARS that, as of the date hereof and as of the Effective Date:

          (a) it has the full right and authority to grant the rights granted herein; and

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          (b) all necessary consents, approvals and authorizations of all Regulatory Authorities, other
governmental authorities and other persons or entities required to be obtained by Galderma in order
to enter into this Agreement have been obtained, other than those described in Section 1.9.

     15.4 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT OR VALIDITY OF ANY PATENTS ISSUED OR PENDING.

ARTICLE XVI

INDEMNIFICATION; INSURANCE

     16.1 Indemnification of ZARS. Galderma shall indemnify and hold harmless each of
ZARS, its Affiliates and the directors, officers, shareholders and employees of such entities and
the successors and assigns of any of the foregoing (the “ZARS Indemnitees”), from and
against any and all liabilities, damages, penalties, fines, costs, expenses (including, reasonable
attorneys’ fees and other expenses of litigation) (“Liabilities”) and from any claims,
actions, suits or proceedings brought by a Third Party (a “Third Party Claim”) incurred by
or brought against any ZARS Indemnitee, arising from, or occurring as a result of: (a) the use,
manufacture, marketing, distribution, importation or sale of any Product by Galderma, its
Affiliates or Sublicensees in the Galderma Territory (including, without limitation any Claim based
on alleged or actual bodily injury or property damage); and (b) any breach of any representations,
warranties or covenants by Galderma in Article 15 or Article 18; except to the extent such
Liabilities or Third Party Claims fall within the scope of ZARS’ indemnification obligations set
forth in Section 16.2 below or result from an act or omission of a ZARS Indemnitee.

     16.2 Indemnification of Galderma. ZARS shall indemnify and hold harmless each of
Galderma, its Affiliates and Sublicensees and the directors, officers, shareholders and employees
of Galderma, its Affiliates and Sublicensees and the successors and assigns of any of the foregoing
(the “Galderma Indemnitees”), from and against any and all Liabilities and from any Third
Party Claims incurred by or brought against any Galderma Indemnitee, arising from, or occurring as
a result of: (a) the use, manufacture, marketing, distribution, importation or sale of any Product
by ZARS or its licensee outside the Galderma Territory; (b) the exercise by ZARS of its rights of
access and reference to the Initial Marketing Approval and Initial IND and any supplements or
amendments to such approval or IND or Galderma Indemnitee’s submission of letters to the FDA, in
each case as set forth in Section 4.5(b), and (c) any breach of any representations, warranties or
covenants by ZARS in Article 15 above, except to the extent such Liabilities or Third Party Claims
fall within the scope of Galderma’s indemnification obligations set forth in Section 16.1 above or
result from an act or omission of a Galderma Indemnitee.

     16.3 Procedure. A Party that intends to claim indemnification under this Article 16
(the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) in
writing of any Liability or Third Party Claim, in respect of which the Indemnitee intends to claim
such indemnification, and the

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Indemnitor shall have sole control of the defense and/or settlement thereof, provided that the
Indemnitee may participate in such defense and/or settlement at its own expense with counsel of its
own choosing. The indemnity arrangement in this Section 16.3 shall not apply to amounts paid in
settlement of any action with respect to a Third Party Claim, if such settlement is effected
without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably.
The failure to deliver written notice to the Indemnitor within a reasonable time after the
commencement of any action with respect to a Third Party Claim, if materially prejudicial to its
ability to defend such action, shall relieve such Indemnitor of any liability to the Indemnitee
under this Section 16.3 resulting from such prejudice, but the omission to so deliver written
notice to the Indemnitor shall not relieve the Indemnitor of any liability that it may have to any
Indemnitee otherwise than under this Section 16.3. The Indemnitee under this Section 16.3 shall
cooperate fully with the Indemnitor and its legal representatives in connection with any action
with respect to a Third Party Claim covered by this indemnification.

     16.4 Insurance. Each Party agrees to procure and maintain in full force and effect
during the term of this Agreement valid and collectible insurance policies in connection with its
activities hereunder as follows:

          (a) Coverage on a Commercial General Liability Occurrence Coverage Form (or equivalent) with
limits of not less than [ * ] for each occurrence, [ * ] products/completed operations aggregate,
[ * ] personal injury/advertising injury aggregate and [ * ] general aggregate; and

          (b) Umbrella Liability coverage with a limit of liability no less than [ * ] each occurrence,
[ * ] aggregate.

Each Party shall inform the other Party of any exclusions or amendments to the policy form that
would result in a direct impact to such other Party. Each Party’s policy shall be specifically
endorsed to include the other Party, its subsidiaries, and its directors, officers and employees,
as an “Additional Insured”. Each Party shall supply the other Party with proof of the above
insurance and a copy of the policy(ies) as promptly as practicable after the signing of this
Agreement, but a Party’s failure to demand such proof or forms shall not waive such Party’s rights
to such coverage as specified herein.

ARTICLE XVII

DISPUTE RESOLUTION

     17.1 Dispute Resolution. The Parties recognize that disputes as to certain matters
relating to this Agreement may from time to time arise during the Term. It is the objective of the
Parties to establish procedures to facilitate the resolution of disputes in an expedient manner by
mutual cooperation and without resort to litigation. The Parties agree that any dispute arising
with respect to the interpretation, enforcement, termination, or invalidity of this Agreement,
(each a “Dispute”), shall be resolved through the procedures set forth in this Article 17.

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     17.2 Dispute Resolution Procedures. Except as set forth in Section 17.3, if a Dispute
arises between the Parties and the Parties cannot resolve such Dispute within thirty (30) days of a
written request by either Party to the other Party, the Parties agree to refer the Dispute to
senior representatives of each Party for resolution. If, after an additional forty-five (45) days,
such representatives have not succeeded in negotiating a resolution of the Dispute, then the
Parties shall resolve such Dispute in accordance with Section 17.3 and as otherwise provided by
this Agreement.

     17.3 Arbitration.

          (a) Except as set forth in Section 17.3(g), if no resolution is reached as to a Dispute
pursuant to Section 17.2, the Dispute shall be resolved by final, binding arbitration in the manner
described in this Section 17.3. The arbitration shall be conducted (i) in English, provided that
either Party may submit testimony or documentary evidence in any language if it furnishes, upon the
request of the other Party, a translation into English of any such testimony or documentary
evidence, (ii) by a single arbitrator, and (iii) by the Judicial Arbitration and Mediation
Services, Inc. (“JAMS”) in accordance with the JAMS Streamlined Arbitration Rules & Procedures,
except where those procedures conflict with this Section 17.3, in which case this Section 17.3
shall control. The seat of the arbitration shall be New York City, New York, USA.

          (b) The arbitrator shall be selected within twenty (20) business days from commencement of the
arbitration pursuant to agreement of the Parties or through selection procedures set forth in Rule
12 of the JAMS Streamlined Arbitration Rules & Procedures, provided that, if the issues in dispute
involve scientific, technical or commercial matters, including, without limitation, matters
relating to inventorship, ownership or the validity or scope of any patent or trademark rights, any
arbitrator chosen hereunder shall have educational training and/or industry experience sufficient
to demonstrate a reasonable level of relevant scientific, technical, medical and industry
knowledge.

          (c) The arbitrator shall apply the substantive law of New York to the underlying dispute.
This agreement to arbitrate shall be governed by Title 9 (Arbitration) of the United States Code,
including without limitation Chapter Two thereof.

          (d) Any application to enforce this Section or to confirm, vacate or modify any award rendered
pursuant to this Section shall be brought only in the federal or state courts located in the County
of New York in the State of New York (the “Courts”). Any process related to enforcement of the
arbitration award may be served upon the designated agents in Section 19.7 by first class mail or
Federal Express. Both parties agree to waive any applicable objections based on personal
jurisdiction or service of process in any proceeding brought in accordance with this Section.

          (e) Emergency relief may be sought from the Courts only to avoid irreparable harm. The
arbitrator may take all measures necessary for the protection of trade secrets and confidential
information, including awarding interim equitable relief. All proceedings and any award shall be
confidential, and the Parties agree not to disclose or otherwise use any information obtained from
the other Party in connection with the arbitration except to the extent required by law or
regulation, or to a Party’s accountants, attorneys or agents or to enforce any award, or to the

-41-

 

extent the information has been lawfully obtained from third parties or is publicly available
through other sources.

          (f) The costs of any arbitration under this Section 17.3 (including reasonable attorneys’
fees) shall be borne by the losing Party.

ARTICLE XVIII

EFFECTIVENESS

     18.1 HSR Act Compliance. Notwithstanding anything to the contrary in this Agreement,
this Agreement shall be binding upon the Parties as of the date first written in the introduction
above; however, other than Articles 1, 16, 18 and 19, this Agreement shall not take effect and
commencement of the collaboration shall not occur until the Effective Date. For purposes of
clarity, obtaining approval of this Agreement by the shareholders of Galderma and achieving the HSR
Clearance Date shall be the sole conditions precedent to this entire Agreement coming into effect.
In the event that the conditions to the HSR Clearance Date, as listed in Section 1.17, are not met
within three (3) months of the date hereof, this Agreement shall be null and void.

     18.2 HSR Filing. Both Parties shall promptly file following execution of this
Agreement their respective notification and report forms with the Federal Trade Commission (“FTC”)
and the Department of Justice (“DOJ”) pursuant to the HSR Act, which forms shall specifically
request early termination of the initial HSR Act waiting period.

     18.3 Cooperation.

          (a) The Parties shall use their commercially reasonable efforts to obtain promptly clearance
required under the HSR Act for the consummation of this Agreement and the transactions contemplated
hereby and shall keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from, the FTC and the DOJ and shall comply
promptly with any such inquiry or request, provided, however, that neither Party shall be required
to consent to the divestiture or other disposition of any of its or its Affiliates’ assets or to
consent to any other structural or conduct remedy, and each Party and its Affiliates shall have no
obligation to contest, administratively or in court, any ruling, order or other action of the FTC
or DOJ or any Third Party respecting the transactions contemplated by this Agreement.

          (b) The Parties hereto commit to instruct their respective counsel to cooperate with each
other and use commercially reasonable efforts to facilitate and expedite the identification and
resolution of any such issues and, consequently, the expiration of the applicable HSR Act waiting
period. Said commercially reasonable efforts and cooperation include, but are not limited to, such
counsel’s undertaking (i) to keep each other appropriately informed of communications from and to
personnel of the reviewing antitrust authority and (ii) to confer with each other regarding
appropriate contacts with and response to personnel of the FTC or DOJ, as applicable. The Parties
shall share the filing fee in connection with the HSR Act filing relating to the transactions
contemplated in this Agreement.

-42-

 

     18.4 Galderma Shareholder Approval. Galderma shall use diligent efforts to obtain
shareholder approval (the “Galderma Shareholder Approval”) of this Agreement on, or prior
to, February 28, 2007. Upon receipt of such approval, Galderma shall notify ZARS immediately in
writing, which notice shall be deemed a representation and warranty by Galderma that such required
Galderma Shareholder Approval is valid and has been obtained. If ZARS does not receive such notice
of the Galderma Shareholder Approval on or prior to February 28, 2007, at ZARS’ option, this
Agreement shall be null and void.

ARTICLE XIX

GENERAL PROVISIONS

     19.1 Intervening Events. If the performance of any part of this Agreement by either
Party is prevented, restricted, interfered with or delayed by reason of any cause beyond the
reasonable control of such Party (including fire, flood, embargo, power shortage or failure, acts
of war, insurrection, riot, terrorism, strike, lockout or other labor disturbance, acts of God or
any acts, omissions or delays in acting of the other Party), the Party so affected shall, upon
giving prompt written notice to the other Party, be excused from such performance to the extent of
such prevention, restriction, interference or delay; provided that the affected Party shall use its
reasonable efforts to avoid or remove such causes of non-performance and shall continue performance
with the utmost dispatch whenever such causes are removed.

     19.2 Governing Law; Venue. This Agreement and all questions regarding its validity or
interpretation, or the breach or performance of this Agreement, shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, USA, without reference to
conflict of law principles that would require the application of the law of any other jurisdiction.
Subject to the exhaustion of the dispute resolution procedures set out in Article 17 above, and
except as set forth in Section 17.3(g), any proceeding arising out of or relating to this Agreement
shall be resolved through arbitration in accordance with Section 17.3.

     19.3 Waiver of Breach. The failure of either Party at any time or times to require
performance of any provision hereof shall in no manner affect its rights at a later time to enforce
the same. No waiver by either Party of any condition or term in any one or more instances shall be
construed as a further or continuing waiver of such condition or term or of another condition or
term.

     19.4 Modification. No amendment or modification of any provision of this Agreement
shall be effective unless in writing signed by both Parties hereto. No provision of this Agreement
shall be varied, contradicted or explained by any oral agreement, course of dealing or performance
or any other matter not set forth in an agreement in writing and signed by both Parties hereto.

     19.5 Severability. In the event any provision of this Agreement should be held
invalid, illegal, or unenforceable in any jurisdiction, the Parties shall negotiate in good faith a
valid, legal and enforceable substitute provision that most nearly reflects the original intent of
the Parties and all other provisions of this Agreement shall remain in full force and effect in
such jurisdiction. Such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction. In the event a Party seeks
to avoid a provision of this Agreement

-43-

 

by asserting that such provision is invalid, illegal or otherwise unenforceable (the
“Asserting Party”), the other Party shall have the right to terminate this Agreement upon
sixty (60) days’ prior written notice to the asserting Party, unless such assertion is eliminated
and the effect of such assertion cured within such sixty (60) day period. Any termination in
accordance with the foregoing shall be deemed a termination pursuant to Section 13.2 by reason of a
breach by the Asserting Party.

     19.6 Entire Agreement. This Agreement (including the Exhibits attached hereto)
constitutes the entire agreement between the Parties relating to the subject matter hereof and
supersedes all previous writings and understandings. No terms or provisions of this Agreement
shall be varied or modified by any prior or subsequent statement, conduct or act of either of the
Parties, except that the Parties may amend this Agreement by written instruments specifically
referring to and executed in the same manner as this Agreement.

     19.7 Notices. Unless otherwise agreed by the Parties or specified in this Agreement,
all communications between the Parties relating to, and all written documentation to be prepared
and provided under, this Agreement shall be in the English language. Any notice required or
permitted under this Agreement shall be in writing in the English language, delivered personally or
sent by air mail or express courier service providing evidence of receipt, postage pre-paid where
applicable, or by facsimile (receipt verified and a copy promptly delivered personally or sent by
air mail or express courier service providing evidence of receipt, post pre-paid where applicable),
to the following addresses of the Parties (or such other address for a Party as may be specified by
like notice):

	 	 	 
	To ZARS:	 	To Galderma:
	ZARS, Inc.

	 	GALDERMA PHARMA S.A
	1142 West 2320 South

	 	Avenue Gratta-Paille 1
	Salt Lake City, Utah 84119

	 	100 Lausanne Switzerland
	Telephone: +1 (801) 350-0202

	 	Telephone: +41-21-641-1151
	Facsimile: +1 (801) 350-0909

	 	Facsimile: +41-21-641-1161
	Attention: Chief Executive Officer

	 	Attention: Finance & Administration Manager

	 	 	 
	With a copy to:	 	With a copy to:
	Wilson, Sonsini, Goodrich & Rosati

	 	Debevoise & Plimpton LLP
	650 Page Mill Road

	 	919 Third Avenue
	Palo Alto, California 94304

	 	New York, NY 10022
	Telephone: +1 (650) 493-9300

	 	Telephone: +1 (212) 909-6696
	Facsimile: +1 (650) 493-6811

	 	Facsimile: +1 (212) 909-6836
	Attention: Kenneth A. Clark

	 	Attention: David H. Bernstein

     Any notice required or permitted to be given concerning this Agreement shall be effective upon
receipt by the Party to whom it is addressed or within seven (7) days of dispatch whichever is
earlier.

-44-

 

     19.8 Assignment. Subject to Section 14.3(b), this Agreement shall not be assignable
by either Party to any Third Party (directly or indirectly, including by way of merger or transfer
of a majority of outstanding equity securities) without the written consent of the other Party;
except either Party (subject to ZARS’ termination right pursuant to Section 13.4) may assign this
Agreement without the other Party’s consent to an entity that acquires substantially all of the
business or assets of the assigning Party, whether by merger, acquisition or otherwise, provided
that the acquiring party assumes this Agreement in writing or by operation of law. In addition,
either Party shall have the right to assign this Agreement (in whole or in part) to an Affiliate
(and, in the case of Galderma, to L’Oréal S.A. or Nestlé S.A. or any of their respective
Affiliates) upon written notice to the non-assigning Party; provided that the assigning Party
guarantees the performance of this Agreement by such Affiliate; and further provided that if the
non-assigning Party reasonably believes such assignment could result in material adverse tax
consequences to the non-assigning Party, such assignment shall not be made without the
non-assigning Party’s consent. Subject to the foregoing, this Agreement shall inure to the benefit
of each Party, its successors and permitted assigns. Any assignment of this Agreement in
contravention of this Section 19.8 shall be null and void.

     19.9 No Partnership or Joint Venture. Nothing in this Agreement is intended, or shall
be deemed, to establish a joint venture or partnership between Galderma and ZARS. Neither Party to
this Agreement shall have any express or implied right or authority to assume or create any
obligations on behalf of, or in the name of, the other Party, or to bind the other Party to any
contract, agreement or undertaking with any Third Party.

     19.10 Interpretation. The captions to the several Articles and Sections of this
Agreement are not a part of this Agreement, but are included for convenience of reference and shall
not affect its meaning or interpretation. In this Agreement: (a) the word “including” shall be
deemed to be followed by the phrase “without limitation” or like expression; (b) the singular shall
include the plural and vice versa; and (c) masculine, feminine and neuter pronouns and expressions
shall be interchangeable. Each accounting term used herein that is not specifically defined herein
shall have the meaning given to it under U.S. GAAP, or other generally accepted cost accounting
principles in the United States, but only to the extent consistent with its usage and the other
definitions in this Agreement.

     19.11 Export Laws. Notwithstanding anything to the contrary contained herein, all
obligations of ZARS and Galderma are subject to prior compliance with export regulations of the
United States, the European Union, Japan or any other relevant country and such other laws and
regulations in effect in the United States, the European Union, Japan or any other relevant
jurisdiction as may be applicable, and to obtaining all necessary approvals required by the
applicable agencies of the governments of the United States, the countries within the European
Union, Japan and any other relevant jurisdiction. ZARS and Galderma shall cooperate with each
other and shall provide assistance to the other as reasonably necessary to obtain any required
approvals.

     19.12 Counterparts. This Agreement may be executed in any number of counterparts
(including via facsimile or electronic copy), each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.

-45-

 

     19.13 Further Actions. Each Party agrees, to the extent reasonably requested by the
other Party, to execute, acknowledge and deliver such further instruments, and to do all such other
acts, as may be reasonably necessary or appropriate in order to carry out the express purposes and
express intent of this Agreement.

     19.14 Schedules and Exhibits. All Schedules and Exhibits referred to in this
Agreement are attached hereto and incorporated herein by reference.

     19.15 Advice of Counsel. Galderma and ZARS have each consulted counsel of their
choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be
deemed to have been drafted by one party or another and will be construed accordingly.

     19.16 Bankruptcy. All rights and licenses granted under or pursuant to this Agreement
by ZARS are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S.
code (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined
under Section 101(60) of the Bankruptcy Code. The Parties agree that Galderma shall retain and may
fully exercise all of its rights and elections under the Bankruptcy Code. ZARS agrees, during the
term of this Agreement, to create and maintain current copies or, if not amenable to copying,
detailed descriptions or other appropriate embodiments, of all such intellectual property. The
Parties further agree that in the event of the commencement of a bankruptcy proceeding by or
against ZARS under the Bankruptcy Code, Galderma shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property, and all embodiments of such
intellectual property, and same, if not already in its possession, shall promptly be delivered to
Galderma (a) upon such commencement of a bankruptcy proceeding upon written request therefor by
Galderma, unless ZARS elects to continue to perform all of its obligations under this Agreement, or
(b) if not delivered under (a) above, upon the rejection of this Agreement by or on behalf of ZARS
upon written request therefor by Galderma.

     19.17 Beneficiaries. Except as provided in Article XIV, nothing in this Agreement
shall confer any rights upon any person other than the Parties and their respective Affiliates,
successors and permitted assigns.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-46-

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth
above.

	 	 	 	 	 	 	 
	 	 	ZARS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	/s/ Robert Lippert	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	NAME:	 	Robert Lippert 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	TITLE:	 	President	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	GALDERMA PHARMA, S.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	/s/ Humberto C. Antunes	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	NAME:	 	Humberto C. Antunes 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	TITLE:	 	CEO 	 	 
	 

	 	 	 	 

	 	 

 

 

EXHIBIT 1.8

DuraPeel and SyneraTM patents

A. DURAPEEL

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

 

 

     [ * ]

     B. SYNERA

     [ * ]

     [ * ]

     [ * ]

     [ * ]

     [ * ]

     In addition to (i) any divisional, continuation, continuation-in-part, renewal or substitute
application which claims priority from any of the patents or patent applications listed in A or B;
(ii) any reissues, reexaminations, extensions, patents of additions, and patents of importation of
any of the foregoing to the extent they are applicable to A or B; and (iii) any and all foreign
patent applications and patents corresponding to any of the patent applications or patents within
(i) or (ii) above.

49

 

EXHIBIT 1.32

Product Trade Marks

     Pliaglis

50

 

EXHIBIT 1.39

ZARS Patents

	 	 	 
	(1)

	 	U.S. Patent No. [ * ]
	 
	 	 
	(2)

	 	U.S. Patent No. [ * ]
	 
	 	 
	(3)

	 	Canadian Patent No. [ * ]
	 
	 	 
	(4)

	 	Canadian Patent Application No. [ * ]

51

 

EXHIBIT 6.2 (b)

FORM OF ROYALTY REPORT

(All amounts are in U.S. Dollars)

Galderma Pharma S.A.

Royalty Calculation

	 	 	 
	For the Period Ended:

	 	(LIST PERIOD)
	Country:

	 	(LIST COUNTRY)
	Name of Party:

	 	(LIST PARTY)

	 	 	 	 	 
	Calculation of Net Sales	 	 	 	 
	Number of Units Sold:
	 	 	 	 
	Gross Sales:
	 	$	—	 
	 
	 	 	 	 
	Less:
	 	 	 	 
	Trade Discounts
	 	 	 	 
	Quantity Discounts
	 	 	 	 
	Cash Discounts
	 	 	 	 
	Other Discounts
	 	 	 	 
	Claims
	 	 	 	 
	Recalls
	 	 	 	 
	Rejections or Returns
	 	 	 	 
	Freight
	 	 	 	 
	Postage
	 	 	 	 
	Duties
	 	 	 	 
	Sales and Excise Tax
	 	 	 	 
	Other Taxes
	 	 	 	 
	Sales to Affiliates or Sublicensees
	 	 	—	 
	 
	 	 	 
	 
	 	 	 	 
	Net Sales
	 	 	—	 
	 
	 	 	 	 
	Royalty Rates
	 	 	 	 
	Royalty @ [ * ] up to [ * ]
	 	 	 	 
	Royalty @ [ * ] in excess of [ * ]
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Royalty Payment before COGS Adjustment
	 	 	 	 
	 
	 	 	 

COGS Adjustment (not applicable after December 31, 2008)

	 	 	 	 	 	 	 	 	 	 	 	 
	 	Number of units sold with a COGS in excess of [ * ]

	 	 	Per Unit

Purchase

Price
	 	 	Excess

over [ * ]
	 	 	Adjustment	 
	 

	 	 	 	 	 
	(INSERT ADDITIONAL LINES, IF NECESSARY)
	 	 	 	 
	Total COGS Adjustment
	 	 	 	 
	 
	 	 	 
	Royalty Payment with COGS Adjustment
	 	 	 	 
	 
	 	 	 

52exv10w18

 

Exhibit 10.18

LOAN AGREEMENT

Between

ZIONS FIRST NATIONAL BANK

Lender

and

ZARS, INC.

Borrower

Effective Date: June 28, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page
	1. Definitions
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	2. Loan Description
	 	 	5	 
	2.1 Amount of Loan
	 	 	5	 
	2.2 Nature and Duration of Loan
	 	 	5	 
	2.3 Promissory Notes
	 	 	5	 
	2.4 Loan Fee
	 	 	5	 
	2.5 Rights of Set Off
	 	 	5	 
	3. Security for Loan
	 	 	6	 
	3.1 Collateral
	 	 	6	 
	3.2 Release of Lender as Condition to Lien Termination
	 	 	6	 
	4. Conditions to Loan Disbursements
	 	 	6	 
	4.1 Conditions to Loan Disbursements
	 	 	6	 
	4.2 Additional Condition to Subsequent Loan Disbursements
	 	 	7	 
	4.3 No Default, Adverse Change, False or Misleading Statement
	 	 	7	 
	5. Representations and Warranties
	 	 	8	 
	5.1 Organization and Qualification
	 	 	8	 
	5.2 Authorization
	 	 	8	 
	5.3 No Governmental Approval Necessary
	 	 	8	 
	5.4 Accuracy of Financial Statements
	 	 	8	 
	5.5 No Pending or Threatened Litigation
	 	 	9	 
	5.6 Full and Accurate Disclosure
	 	 	9	 
	5.7 Compliance with ERISA
	 	 	9	 
	5.8 Compliance with USA Patriot Act
	 	 	10	 
	5.9 Compliance with All Other Applicable Law
	 	 	10	 
	5.10 Environmental Representations and Warranties
	 	 	10	 
	5.11 Operation of Business
	 	 	11	 
	5.12 Payment of Taxes
	 	 	11	 
	5.13 Absence of Negative Pledge
	 	 	11	 
	6. Borrower’s Covenants
	 	 	11	 

-i-

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	 	Page
	6.1 Use of Proceeds
	 	 	11	 
	6.2 Continued Compliance with ERISA
	 	 	11	 
	6.3 Compliance with USA Patriot Act
	 	 	12	 
	6.4 Continued Compliance with Applicable Law
	 	 	12	 
	6.5 Prior Consent for Amendment or Change
	 	 	12	 
	6.6 Payment of Taxes and Obligations
	 	 	12	 
	6.7 Financial Statements and Reports
	 	 	12	 
	6.8 Insurance
	 	 	13	 
	6.9 Inspection
	 	 	13	 
	6.10 Operation of Business
	 	 	14	 
	6.11 Maintenance of Records and Properties
	 	 	14	 
	6.12 Notice of Claims
	 	 	14	 
	6.13 Environmental Covenants
	 	 	14	 
	6.14 Financial Covenants
	 	 	15	 
	6.15 Negative Pledge
	 	 	15	 
	6.16 Restriction on Debt
	 	 	16	 
	6.17 Mergers, Consolidations, and Purchase and Sale of Assets
	 	 	16	 
	6.18 Dividends and Loans
	 	 	17	 
	7. Default
	 	 	17	 
	7.1 Events of Default
	 	 	17	 
	7.2 No Waiver of Event of Default
	 	 	18	 
	8. Remedies
	 	 	18	 
	8.1 Remedies upon Event of Default
	 	 	18	 
	8.2 Rights and Remedies Cumulative
	 	 	19	 
	8.3 No Waiver of Rights
	 	 	19	 
	9. General Provisions
	 	 	19	 
	9.1 Governing Agreement
	 	 	19	 
	9.2 Borrower’s Obligations Cumulative
	 	 	19	 
	9.3 Payment of Expenses and Attorney’s Fees
	 	 	19	 
	9.4 Right to Perform for Borrower
	 	 	20	 

-ii-

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	 	Page
	9.5 Assignability
	 	 	20	 
	9.6 Third Party Beneficiaries
	 	 	20	 
	9.7 Governing Law
	 	 	20	 
	9.8 Severability of Invalid Provisions
	 	 	20	 
	9.9 Interpretation of Loan Agreement
	 	 	20	 
	9.10 Survival and Binding Effect of Representations, Warranties, and Covenants
	 	 	21	 
	9.11 Indemnification
	 	 	21	 
	9.12 Environmental Indemnification
	 	 	21	 
	9.13 Interest on Expenses and Indemnification, Collateral, Order of Application
	 	 	22	 
	9.14 Limitation of Consequential Damages
	 	 	22	 
	9.15 Waiver and Release of Claims
	 	 	22	 
	9.16 Revival Clause
	 	 	22	 
	9.17 Arbitration
	 	 	23	 
	9.18 Consent to Utah Jurisdiction, Exclusive Jurisdiction of Utah Courts, and Jury Waiver
	 	 	25	 
	9.19 Notices 
	 	 	26	 
	9.20 Duplicate Originals; Counterpart Execution 
	 	 	26	 
	9.21 Disclosure of Financial and Other Information 
	 	 	27	 
	9.22 Confidentiality 
	 	 	27	 
	9.23
Integrated Agreement and Subsequent Amendment
	 	 	27	 

EXHIBITS

Exhibit A — Term Loan A Note

Exhibit B — Term Loan B Note

-iii-

 

LOAN AGREEMENT

     This Loan Agreement is made and entered into by and between Zions First National Bank and
ZARS, Inc.

     For good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

1. Definitions

     1.1 Definitions

     Terms defined in the singular shall have the same meaning when used in the plural and vice
versa. As used herein, the term:

     “Accounting Standards” means (i) in the case of financial statements and reports, conformity
with generally accepted accounting principles and fully and fairly representing the financial
condition as of the date thereof and the results of operations for the period or periods covered
thereby, consistent with other financial statements of that company previously delivered to Lender,
and (ii) in the case of calculations, definitions, and covenants, generally accepted accounting
principles consistent with those used in the preparation of financial statements of Borrower
previously delivered to Lender.

     “Banking Business Day” means any day not a Saturday, Sunday, legal holiday in the State of
Utah, or day on which national banks in the State of Utah are authorized to close.

     “Borrower” means ZARS, Inc., a corporation organized and existing under the laws of the State
of Utah, its successors, and, if permitted, assigns.

     “Capital Expenditures” means expenditures for fixed or capital assets as determined in
accordance with Accounting Standards.

     “Collateral” shall have the meaning set forth in Section 3.1 Collateral.

     “Effective Date” shall mean the date the parties intend this Loan Agreement to become binding
and enforceable, which is the date stated at the conclusion of this Loan Agreement.

     “Environmental Condition” shall mean any condition involving or relating to Hazardous
Materials and/or the environment affecting the Real Property, whether or not yet discovered, which
could or does result in any damage, loss, cost, expense, claim, demand, order, or liability to or
against Borrower or Lender by any third party (including, without limitation, any government
entity), including, without limitation, any condition resulting from the operation of Borrower’s
business and/or operations in the vicinity of the Real Property and/or any activity or operation
formerly conducted by any person or entity on or off the Real Property.

     “Environmental Health and Safety Law” shall mean any legal requirement that requires or
relates to:

1

 

     a. advising appropriate authorities, employees, or the public of intended or actual
releases of Hazardous Materials, violations of discharge limits or other prohibitions, and
of the commencement of activities, such as resource extraction or construction, that do or
could have significant impact on the environment;

     b. preventing or reducing to acceptable levels the release of Hazardous Materials;

     c. reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;

     d. assuring that products are designed, formulated, packaged, and used so that they do
not present unreasonable risks to human health or the environment when used or disposed of;

     e. protecting resources, species, or ecological amenities;

     f. use, storage, transportation, sale, or transfer of Hazardous Materials or other
potentially harmful substances;

     g. cleaning up Hazardous Materials that have been released, preventing the threat of
release, and/or paying the costs of such clean up or prevention; or

     h. making responsible parties pay for damages done to the health of others or the
environment or permitting self-appointed representatives of the public interest to recover
for injuries done to public assets.

     “Event of Default” shall have the meaning set forth in Section 7.1 Events of Default.

     “Hazardous Materials” means (i) “hazardous waste” as defined by the Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et. seq.),
including any future amendments thereto, and regulations promulgated thereunder, and as the term
may be defined by any contemporary state counterpart to such act; (ii) “hazardous substance” as
defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et. seq.), including any future amendments thereto, and regulations promulgated
thereunder, and as the term may be defined by any contemporary state counterpart of such act; (iii)
asbestos; (iv) polychlorinated biphenyls; (v) underground or above ground storage tanks, whether
empty or filled or partially filled with any substance; (vi) any substance the presence of which is
or becomes prohibited by any federal, state, or local law, ordinance, rule, or regulation; and
(vii) any substance which under any federal, state, or local law, ordinance, rule or regulation
requires special handling or notification in its collection, storage, treatment, transportation,
use or disposal.

     “Intellectual Property” means:

     a. All right, title and interest of Borrower in and to patent applications and patents,
including, without limitation, all proceeds thereof (such as, by way of example, license
royalties and proceeds of infringement suits), the right to sue for past, present and

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future infringements, all rights corresponding thereto throughout the world, and all
reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof;

     b. All right, title and interest of Borrower in and to trademark applications and
trademarks, including, without limitation, all renewals thereof, all proceeds thereof (such
as, by way of example, license royalties and proceeds of infringement suits), the right to
sue for past, present and future infringements, and all rights corresponding thereto
throughout the world (collectively, the “Trademarks”), and the good will of the business to
which each of the Trademarks relates;

     c. All copyrights of Borrower and all rights and interests of every kind of Borrower in
copyrights and works protectible by copyright, and all renewals and extensions thereof, and
in and to the copyrights and rights and interests of every kind or nature in and to all
works based upon, incorporated in, derived from, incorporating or relating to any of the
foregoing or from which any of the foregoing is derived, and all proceeds thereof (such as,
by way of example, license royalties and proceeds of infringement suits), the right to sue
for past, present and future infringements, and all rights corresponding thereto throughout
the world;

     d. All of Borrower’s trade secrets and other proprietary information, and all proceeds
thereof ;

     e. All right, title, and interest of Borrower in, to and under license agreements and
contracts concerning Patents, Trademarks, Copyrights, and Trade Secrets, all amendments,
modifications, and replacements thereof, all royalties and other amounts owing thereunder,
and all proceeds thereof; and

     f. All internet domain names and addresses of Borrower and all proceeds thereof.

     “Lender” means Zions First National Bank, its successors, and assigns.

     “Loan” means collectively, the Term Loan A and the Term Loan B.

     “Loan Agreement” means this agreement, together with any exhibits, amendments, addendums, and
modifications.

     “Loan Documents” means the Loan Agreement, Promissory Notes, Security Documents, all other
agreements and documents contemplated by any of the aforesaid documents, and all amendments,
modifications, addendums, and replacements, whether presently existing or created in the future.

     “Material Adverse Effect” means a material adverse effect on Borrower’s financial condition,
conduct of its business, or ability to perform its obligations under the Loan Documents.

     “Negative Pledge” means any agreement or covenant to not create, incur, assume or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, hypothecation,

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assignment, deposit arrangement, or other preferential arrangement, charge, or encumbrance
(including, without limitation, any conditional sale, other title retention agreement, or finance
lease) of any nature, upon or with respect to any of its properties or assets, now owned or
hereafter acquired, or sign or file, under the Uniform Commercial Code of any jurisdiction, a
financing statement under which Borrower appears as debtor, or sign any security agreement
authorizing any secured party thereunder to file such financing statement.

     “Organizational Documents” means, in the case of a corporation, its Articles of Incorporation
and By-Laws; in the case of a general partnership, its Articles of Partnership; in the case of a
limited partnership, its Articles of Limited Partnership; in the case of a limited liability
company, its Articles of Organization and Operating Agreement or Regulations, if any; in the case
of a limited liability partnership, its Articles of Limited Liability Partnership; and all
amendments, modifications, and changes to any of the foregoing which are currently in effect.

     “Promissory Notes” means the Term Loan A Note and the Term Loan B Note.

     “Real Property” means any and all real property or improvements thereon owned or leased by
Borrower or in which Borrower has any other interest of any nature whatsoever.

     “Security Documents” means all security agreements, assignments, pledges, financing
statements, deeds of trust, mortgages, and other documents which create or evidence any security
interest, assignment, lien or other encumbrance in favor of Lender to secure any or all of the
obligations created or contemplated by any of the Loan Documents, and all amendments,
modifications, addendums, and replacements, whether presently existing or created in the future.

     “Subordinated Debt” means debt (i) approved by Lender and (ii) where the holder’s right to
payment of such debt, the priority of any lien securing the same, and the rights of the holder
thereof to enforce remedies against Borrower following default have been made subordinate to the
liens of Lender and to the prior payment to Lender of the obligations secured by the Collateral,
pursuant to a written subordination agreement approved by Lender in its sole but reasonable
discretion.

     “Term Loan A means the amortizing term loan in the original principal amount of eight million
dollars ($8,000,000.00) to be made pursuant to Section 2 Loan Description.

     “Term Loan A Note” means the Promissory Note in the original principal amount of eight million
dollars ($8,000,000.00) to be executed by Borrower pursuant to Section 2.3 Promissory Notes
in the form of Exhibit A hereto, which is incorporated herein by reference, and any and all
renewals, extensions, modifications, and replacements thereof.

     “Term Loan B” means the amortizing term loan in the original principal amount of two million
five hundred thousand dollars ($2,500,000.00) to be made pursuant to Section 2 Loan
Description.

     “Term Loan B Note” means the Promissory Note in the original principal amount of two million
five hundred thousand dollars ($2,500,000.00) to be executed by Borrower pursuant to Section 2.3
Promissory Notes in the form of Exhibit B hereto, which is incorporated herein by
reference, and any and all renewals, extensions, modifications, and replacements thereof.

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     “Warrant to Purchase Stock” means that certain Warrant of even date herewith executed by
Borrower in favor of Lender granting Lender the right to purchase the stock of Borrower upon the
terms provided therein.

     “ZARS Pharma Merger” means the merger of Borrower into ZARS Pharma, Inc., a Delaware
corporation.

     In addition, terms defined in the Security Documents shall have the same meanings when used
herein.

2. Loan Description

     2.1 Amount of Loan

     Upon fulfillment of all conditions precedent set forth in this Loan Agreement, and so long as
no Event of Default exists, and no other breach has occurred under the Loan Documents, Lender
agrees to loan Borrower ten million five hundred thousand dollars ($10,500,000.00) consisting of
the Term Loan A in the amount of eight million dollars ($8,000,000.00) and the Term Loan B in the
amount of two million five hundred thousand dollars ($2,500,000.00).

     2.2 Nature and Duration of Loan

     a. Term Loan A: Term Loan A shall be an amortizing term loan payable in full
upon the date and upon the terms and conditions provided in the Term Loan A Note.

     b. Term Loan B: Term Loan B shall be an amortizing term loan payable in full
upon the date and upon the terms and conditions provided in the Term Loan B Note.

     2.3 Promissory Notes

     The Loan shall be evidenced by the Promissory Notes. The Promissory Notes shall be executed
and delivered to Lender upon execution and delivery of this Loan Agreement. Proceeds of the
Promissory Notes may be disbursed by Lender by wire transfer.

     2.4 Loan Fee

     Upon execution and delivery of this Loan Agreement, Borrower shall pay Lender a loan fee of
one hundred and five thousand dollars ($105,000.00). No portion of such fee shall be refunded in
the event of early termination of this Loan Agreement or any termination or reduction of the right
of Borrower to request advances under this Loan Agreement. Lender is authorized and directed, upon
execution of this Loan Agreement and fulfillment of all conditions precedent hereunder, to disburse
a sufficient amount of the Loan proceeds to pay the loan fee in full.

     2.5 Rights of Set Off

     So long as no Event of Default or event which, with the passage of time or the giving of
notice or both, would constitute an Event of Default, has occurred and is continuing, upon the

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completion of an initial public offering of Borrower that results in the net cash proceeds to
Borrower of at least fifty million dollars ($50,000,000.00) (“Qualified Public Offering”), Lender
shall waive all rights of set off of Borrower’s depository accounts with Lender against the Loan.

3. Security for Loan

     3.1 Collateral

     The Loan, Promissory Notes, and all obligations of Borrower under the Loan Documents shall be
secured by such collateral as is provided in the Security Documents (the “Collateral”), which shall
include, without limitation, all cash, receivables, inventories, equipment, leasehold improvements,
real and personal property, and other fixed assets.

     3.2 Release of Lender as Condition to Lien Termination

     In recognition of Lender’s right to have all its attorneys fees and expenses incurred in
connection with this Loan Agreement secured by the Collateral, notwithstanding payment in full of
the Loan and all other obligations secured by the Collateral, Lender shall not be required to
release, reconvey, or terminate any Security Document unless and until Borrower has executed and
delivered to Lender general releases in form and substance satisfactory to Lender.

4. Conditions to Loan Disbursements

     4.1 Conditions to Loan Disbursements

     Lender’s obligation to disburse any of the Loan is expressly subject to, and shall not arise
until all of the conditions set forth below have been satisfied. All of the documents referred to
below must be in a form and substance acceptable to Lender.

     a. All of the Loan Documents and all other documents contemplated to be delivered to
Lender prior to funding have been fully executed and delivered to Lender.

     b. All of the documents contemplated by the Loan Documents which require filing or
recording have been properly filed and recorded so that all of the liens and security
interests granted to Lender in connection with the Loan will be properly created and
perfected and will have a priority acceptable to Lender.

     c. All other conditions precedent provided in or contemplated by the Loan Documents or
any other agreement or document have been performed.

     d. As of the date of disbursement of all or any portion of the Loan, the following
shall be true and correct: (i) all representations and warranties made by Borrower in the
Loan Documents are true and correct in all material respects as of the date of such
disbursement; and (ii) no Event of Default has occurred and no conditions exist and no event
has occurred, which, with the passage of time or the giving of notice, or both, would
constitute an Event of Default.

     e. Execution and delivery of a the Warrant to Purchase Stock.

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     f. Execution and delivery of an Authorization to File UCC Financing Statement executed
by ZARS Pharma, Inc., a Delaware corporation, for the benefit of Lender.

     g. Borrower shall have provided evidence satisfactory to Lender that Borrower has
repaid and discharged all obligations owing to Silicon Valley Bank.

     All conditions precedent set forth in this Loan Agreement and any of the Loan Documents are
for the sole benefit of Lender and may be waived unilaterally by Lender.

     4.2 Additional Condition to Subsequent Loan Disbursements

     In addition to the foregoing conditions to loan disbursements:

     a. Not later than fourteen (14) days after the Effective Date, Borrower shall deliver
to Lender a fully executed Landlord waiver and consent in a form reasonably acceptable to
Lender from JL Ventures LLC, Harkonnen Acquisitions, L Metro LLC, and Bello LLC, all known
as MBP Co-Tenancy, with respect to the real property leased by Borrower located at 1455
West 2200 South, West Valley City, Utah 84119;

     b. Not later than fourteen (14) days after the Effective Date, Borrower shall deliver
to Lender a fully executed Landlord waiver and consent in a form reasonably acceptable to
Lender from First Industrial, L.P., with respect to the real property leased by Borrower
located at 1142 West 2320 South, Suite A, West Valley City, Utah 84119; and

     c. Not later than fourteen (14) days after the Effective Date, Borrower shall provide
evidence satisfactory to Lender that Silicon Valley Bank’s security interest in Borrower,
evidenced by that certain financing statement filed with the Utah Department of Commerce,
Division of Corporations and Commercial Code, on October 12, 2005, File No. 280510200528,
has been terminated.

     The foregoing conditions are for the sole benefit of Lender and may be waived unilaterally by
Lender.

     4.3 No Default, Adverse Change, False or Misleading Statement

     Lender’s obligation to advance any funds at any time pursuant to this Loan Agreement and the
Promissory Notes shall, at Lender’s sole discretion, terminate upon the occurrence of any Event of
Default, any event which could have a Material Adverse Effect, or upon the determination by Lender
that any of Borrower’s representations made in any of the Loan Documents were false or materially
misleading when made. Upon the exercise of such discretion, Lender shall be relieved of all
further obligations under the Loan Documents.

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5. Representations and Warranties

     5.1 Organization and Qualification

     Borrower represents and warrants that it is a corporation duly organized and existing in good
standing under the laws of the State of Utah. Lender acknowledges and agrees that Borrower intends
to complete the ZARS Pharma Merger as authorized herein.

     Borrower represents and warrants that it is duly qualified to do business in each jurisdiction
where the conduct of its business requires qualification.

     Borrower represents and warrants that it has the full power and authority to own its property
and to conduct the business in which it engages and to enter into and perform its obligations under
the Loan Documents.

     Borrower represents and warrants that it has delivered to Lender or Lender’s counsel accurate
and complete copies of Borrower’s Organizational Documents which are operative and in effect as of
the Effective Date.

     5.2 Authorization

     Borrower represents and warrants that the execution, delivery, and performance by Borrower of
the Loan Documents has been duly authorized by all necessary action on the part of Borrower and are
not inconsistent with Borrower’s Organizational Documents or any resolution of the board of
Directors of Borrower, do not and will not contravene any provision of, or constitute a default
under, any indenture, mortgage, contract, or other instrument to which Borrower is a party or by
which it is bound, and that upon execution and delivery thereof, the Loan Documents will constitute
legal, valid, and binding agreements and obligations of Borrower, enforceable in accordance with
their respective terms.

     5.3 No Governmental Approval Necessary

     Borrower represents and warrants that no consent by, approval of, giving of notice to,
registration with, or taking of any other action with respect to or by any federal, state, or local
governmental authority or organization is required for Borrower’s execution, delivery, or
performance of the Loan Documents.

     5.4 Accuracy of Financial Statements

     Borrower represents and warrants that all of its audited financial statements heretofore
delivered to Lender have been prepared in accordance with Accounting Standards.

     Borrower represents and warrants that all of its unaudited financial statements heretofore
delivered to Lender fully and fairly represent Borrower’s financial condition as of the date
thereof and the results of Borrower’s operations for the period or periods covered thereby and are
consistent with other financial statements previously delivered to Lender.

8

 

     Borrower represents and warrants that since the dates of the most recent audited and unaudited
financial statements delivered to Lender, there has been no event which would have a Material
Adverse Effect on its financial condition.

     Borrower represents and warrants that its most recent pro forma financial statements
heretofore delivered to Lender have been prepared consistently with Borrower’s actual financial
statements and fully and fairly represent Borrower’s anticipated financial condition and the
anticipated results of Borrower’s operation for the period or periods covered thereby.

     5.5 No Pending or Threatened Litigation

     Borrower represents and warrants that there are no actions, suits, or proceedings pending or,
to Borrower’s knowledge, threatened against or affecting Borrower in any court or before any
governmental commission, board, or authority which, if adversely determined, would have a Material
Adverse Effect.

     5.6 Full and Accurate Disclosure

     Borrower represents and warrants that this Loan Agreement, the financial statements referred
to herein, any loan application submitted to Lender, and all other statements furnished by Borrower
to Lender in connection herewith contain no untrue statement of a material fact and omit no
material fact necessary to make the statements contained therein or herein not misleading.
Borrower represents and warrants that it has not failed to disclose in writing to Lender any fact
that would have a Material Adverse Effect.

     5.7 Compliance with ERISA

     Borrower represents and warrants that Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as
amended, and the regulations and published interpretations thereunder. Neither a Reportable Event
as set forth in Section 4043 of ERISA or the regulations thereunder (“Reportable Event”) nor a
prohibited transaction as set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986, as amended, has occurred and is continuing with respect to any employee benefit plan
established, maintained, or to which contributions have been made by Borrower or any trade or
business (whether or not incorporated) which together with Borrower would be treated as a single
employer under Section 4001 of ERISA (“ERISA Affiliate”) for its employees which is covered by
Title I or Title IV of ERISA (“Plan”); no notice of intent to terminate a Plan has been filed nor
has any Plan been terminated which is subject to Title IV of ERISA; no circumstances exist that
constitute grounds under Section 4042 of ERISA entitling the Pension Benefit Guaranty Corporation
(“PBGC”) to institute proceedings to terminate, or appoint a trustee to administer a Plan, nor has
the PBGC instituted any such proceedings; neither Borrower nor any ERISA Affiliate has completely
or partially withdrawn under Section 4201 or 4204 of ERISA from any Plan described in Section
4001(a)(3) of ERISA which covers employees of Borrower or any ERISA Affiliate (“Multi-employer
Plan”); Borrower and each ERISA Affiliate has met its minimum funding requirements under ERISA with
respect to all of its Plans and the present fair market value of all Plan assets equals or exceeds
the present value of all vested benefits under or all claims reasonably anticipated against

9

 

each Plan, as determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA and the regulations thereunder and the applicable statements of the
Financial Accounting Standards Board (“FASB”) for calculating the potential liability of Borrower
or any ERISA Affiliate under any Plan; neither Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC (except payment of premiums, which is current) under ERISA.

     Borrower, each ERISA Affiliate and each group health plan (as defined in ERISA Section 733)
sponsored by Borrower and each ERISA Affiliate, or in which Borrower or any ERISA Affiliate is a
participating employer, are in compliance with, have satisfied and continue to satisfy (to the
extent applicable) all requirements for continuation of group health coverage under Section 4980B
of the Internal Revenue Code and Sections 601 et seq. of ERISA, and are in compliance with, have
satisfied and continue to satisfy Part 7 of ERISA and all corresponding and similar state laws
relating to portability, access and renewability of group health benefits and other requirements
included in Part 7.

     5.8 Compliance with USA Patriot Act

     Borrower represents and warrants that it is not subject to any law, regulation, or list of any
government agency (including, without limitation, the U.S. Office of Foreign Asset Control list)
that prohibits or limits Lender from making any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower.

     5.9 Compliance with All Other Applicable Law

     Borrower represents and warrants that it has complied in all material respects with all
applicable statutes, rules, regulations, orders, and restrictions of any domestic or foreign
government, or any instrumentality or agency thereof having jurisdiction over the conduct of
Borrower’s business or the ownership of its properties, which may have a Material Adverse Effect.

     5.10 Environmental Representations and Warranties

     Borrower represents and warrants that, except as Lender has been otherwise previously advised
by Borrower, to Borrower’s knowledge after due inquiry and investigation, no Hazardous Materials
are now located on, in, or under the Real Property, nor, to Borrower’s knowledge after due inquiry
and investigation, is there any Environmental Condition on, in, or under the Real Property and
neither Borrower nor, to Borrower’s knowledge, after due inquiry and investigation, any other
person has ever caused or permitted any Hazardous Materials to be placed, held, used, stored,
released, generated, located or disposed of on, in or under the Real Property, or any part thereof,
nor caused or allowed an Environmental Condition to exist on, in or under the Real Property, except
in the ordinary course of Borrower’s business under conditions that are generally recognized to be
appropriate and safe and that are in compliance with all applicable Environmental Health and Safety
Laws. Borrower further represents and warrants that, to Borrower’s knowledge after due inquiry and
investigation, no investigation, administrative order, consent order and agreement, litigation or
settlement with respect to

10

 

Hazardous Materials and/or an Environmental Condition is proposed, threatened, anticipated or
in existence with respect to the Real Property.

     5.11 Operation of Business

     Borrower represents and warrants that Borrower possesses all licenses, permits, franchises,
patents, copyrights, trademarks, and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and Borrower is not in
violation of any valid rights of others with respect to any of the foregoing.

     5.12 Payment of Taxes

     Borrower represents and warrants that Borrower has filed all tax returns (federal, state, and
local) required to be filed, or has filed a timely extension, and has paid all taxes, assessments,
and governmental charges and levies, including interest and penalties, on Borrower’s assets,
business and income, except such as are being contested in good faith by proper proceedings and as
to which adequate reserves are maintained.

     5.13 Absence of Negative Pledge

     Borrower represents and warrants that there is no Negative Pledge by Borrower which is
currently in force and effect, except as provided in the Loan Documents and except for
anti-assignment provisions included in any Account, Chattel Paper, General Intangible or promissory
note in which Borrower has any right, title or interest.

6. Borrower’s Covenants

     Borrower makes the following agreements and covenants, which shall continue so long as this
Loan Agreement is in effect and so long as Borrower is indebted to Lender for obligations arising
out of, identified in, or contemplated by this Loan Agreement.

     6.1 Use of Proceeds

     Borrower shall use the proceeds of the Loan solely for the purposes identified to Lender in
applying for the Loan.

     Borrower shall not, directly or indirectly, use any of the proceeds of the Loan for the
purpose of purchasing or carrying any margin stock within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, or to extend credit to any person or entity for the
purpose of purchasing or carrying any such margin stock or for any purpose which violates, or is
inconsistent with, Regulation X of said Board of Governors, or for any other purpose not permitted
by Section 7 of the Securities Exchange Act of 1934, as amended, or by any of the rules and
regulations respecting the extension of credit promulgated thereunder.

     6.2 Continued Compliance with ERISA

     Borrower covenants that, with respect to all Plans (as defined in Section 5.7 Compliance
with ERISA) which Borrower or any ERISA Affiliate currently maintains or to which Borrower

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or any ERISA Affiliate is a sponsoring or participating employer, fiduciary, party in interest
or disqualified person or which Borrower or any ERISA Affiliate may hereafter adopt, Borrower and
each ERISA Affiliate shall continue to comply with all applicable provisions of the Internal
Revenue Code and ERISA and with all representations made in Section 5.7 Compliance with
ERISA, including, without limitation, conformance with all notice and reporting requirements,
funding standards, prohibited transaction rules, multi-employer plan rules, necessary reserve
requirements, and health care continuation, coverage and portability requirements.

     6.3 Compliance with USA Patriot Act

     Borrower shall (a) not be or become subject at any time to any law, regulation, or list of any
government agency (including, without limitation, the U.S. Office of Foreign Asset Control list)
that prohibits or limits Lender from making any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower, and (b) provide documentary and other evidence of
Borrower’s identity as may be requested by Lender at any time to enable Lender to verify Borrower’s
identity or to comply with any applicable law or regulation, including, without limitation, Section
326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

     6.4 Continued Compliance with Applicable Law

     Borrower shall conduct its business in a lawful manner and in material compliance with all
applicable federal, state, and local laws, ordinances, rules, regulations, and orders; shall
maintain in good standing all licenses and organizational or other qualifications reasonably
necessary to its business and existence; and shall not engage in any business not authorized by and
not in accordance with its Organizational Documents and other governing documents.

     6.5 Prior Consent for Amendment or Change

     Except in connection with (i) the ZARS Pharma Merger as authorized herein, and (ii) the share
exchange described under the heading “Description of capital Stock—Preferred Stock” in the
Borrower’s Registration Statement on From S-1 filed on June 8, 2007, Borrower shall not modify,
amend, waive, or otherwise alter, or fail to enforce, its Organizational Documents or other
governing documents without Lender’s prior written consent.

     6.6 Payment of Taxes and Obligations

     Borrower shall pay when due all taxes, assessments, and governmental charges and levies on
Borrower’s assets, business, and income, and all material obligations of Borrower of whatever
nature, except such as are being contested in good faith by proper proceedings and as to which
adequate reserves are maintained.

     6.7 Financial Statements and Reports

     Borrower shall provide Lender with such financial statements and reports as Lender may
reasonably request. Audited financial statements and reports shall be prepared in accordance with
Accounting Standards. Unaudited financial statements and reports shall fully and fairly represent
Borrower’s financial condition as of the date thereof and the results of Borrower’s

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operations for the period or periods covered thereby and shall be consistent with other
financial statements previously delivered to Lender.

     Until requested otherwise by Lender, Borrower shall provide the following financial statements
and reports to Lender:

     a. Annual audited financial statements with an unqualified opinion for each fiscal year
of Borrower from an independent accounting firm and in a form acceptable to Lender, to be
delivered to Lender within one hundred twenty (120) days of the end of the fiscal year.
Borrower shall also submit to Lender copies of any management letters or other reports
submitted to Borrower by independent certified public accountants in connection with
examination of the financial statements of Borrower made by such accountants.

     b. Monthly financial statements for each calendar month in a form acceptable to Lender,
to be delivered to Lender within thirty (30) days of the end of the month. The monthly
financial statements shall include a certification by the chief financial officer or chief
executive of Borrower that the monthly financial statements fully and fairly represent
Borrower’s financial condition as of the date thereof and the results of operations for the
period covered thereby and are consistent with other financial statements previously
delivered to Lender. After a Qualified Public Offering, the foregoing interim financial
statements shall be delivered no later than forty-five (45) days after each fiscal quarter
and for the quarter-annual fiscal period then ended.

     c. Borrower shall submit to Lender with its annual and monthly financial statements (or
quarterly financial statements if a Qualified Public Offering has occurred) a compliance
certificate in a form acceptable to Lender certifying that Borrower is in compliance with
all terms and conditions of this Loan Agreement, including compliance with the financial
covenants provided in Section 6.14 Financial Covenants. The compliance certificate
shall include the data and calculations supporting all financial covenants, whether in
compliance or not, and shall be signed by the chief executive officer or chief financial
officer of Borrower

     6.8 Insurance

     Borrower shall maintain insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.

     6.9 Inspection

     Borrower shall at any reasonable time and from time to time permit Lender or any
representative of Lender to examine and make copies of and abstracts from the records and books of
account of, and visit and inspect the properties and assets of, Borrower, and to discuss the
affairs, finances, and accounts of Borrower with any of Borrower’s officers and directors and with
Borrower’s independent accountants.

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     6.10 Operation of Business

     Borrower shall maintain all licenses, permits, franchises, patents, copyrights, trademarks,
and trade names, or rights thereto, necessary or advisable to conduct its business and Borrower
shall not violate any valid rights of others with respect to any of the foregoing. Borrower shall
continue to engage in a business of the same general type as now conducted.

     6.11 Maintenance of Records and Properties

     Borrower shall keep adequate records and books of account in which complete entries will be
made in accordance with Accounting Standards. Borrower shall maintain, keep and preserve all of
its properties (tangible and intangible) necessary or useful in the proper conduct of its business
in good working order and condition, ordinary wear and tear excepted.

     6.12 Notice of Claims

     Borrower shall promptly notify Lender in writing of all actions, suits or proceedings filed or
threatened against or affecting Borrower in any court or before any governmental commission, board,
or authority which, if adversely determined, would have a Material Adverse Effect.

     6.13 Environmental Covenants

     Borrower covenants that it will:

     a. Not permit the presence, use, disposal, storage or release of any Hazardous
Materials on, in, or under the Real Property, except in the ordinary course of Borrower’s
business under conditions that are generally recognized to be appropriate and safe and that
are in compliance with all applicable Environmental Health and Safety Laws.

     b. Not permit any substance, activity or Environmental Condition on, in, under or
affecting the Real Property which is in violation of any Environmental Health and Safety
Laws.

     c. Comply in all material respects with the provisions of all Environmental Health and
Safety Laws.

     d. Notify Lender promptly of any discharge of Hazardous Materials, Environmental
Condition, or environmental complaint or notice received from any governmental agency or any
other party.

     e. Upon any discharge of Hazardous Materials or upon the occurrence of any
Environmental Condition, immediately contain and remediate the same in compliance with all
Environmental Health and Safety Laws, promptly pay any fine or penalty assessed in
connection therewith, and immediately notify Lender of such events.

     f. Permit Lender at any reasonable time and upon reasonable notice to inspect the Real
Property for Hazardous Materials and Environmental Conditions, to

14

 

conduct tests thereon, and to inspect all books, correspondence, and records pertaining
thereto.

     g. From time to time upon Lender’s request, and at Borrower’s expense, provide a report
(including all validated and unvalidated data generated for such reports) of a qualified
independent environmental engineer acceptable to Lender, satisfactory to Lender in scope,
form, and content, and provide to Lender such other and further assurances reasonably
satisfactory to Lender, that Borrower is in compliance with these covenants concerning
Hazardous Materials and Environmental Conditions, and that any past violation thereof has
been corrected in compliance with all applicable Environmental Health and Safety Laws.

     h. Immediately advise Lender of any additional, supplemental, new, or other information
concerning any Hazardous Materials or Environmental Conditions relating to the Real
Property.

     6.14 Financial Covenants

     Except as otherwise provided herein, each of the accounting terms used in this Section 6.14
shall have the meanings used in accordance with Accounting Standards.

     a. Maximum Capital Expenditures. Prior to a Qualified Public Offering,
Borrower will not make any Capital Expenditures if, after giving effect thereto, the
aggregate of all Capital Expenditures made by Borrower would exceed three million five
hundred thousand dollars ($3,500,000.00) in any year.

     b. Minimum Liquidity Position. Borrower will at all times maintain (i) cash on
hand or on deposit in banks, (ii) readily marketable securities issued by the United States,
(iii) readily marketable commercial paper rated “A-1” by Standard & Poor’s Corporation (or
similar rating by any similar organization which rates commercial paper), and (iv)
certificates of deposit or banker’s acceptances issued by commercial banks or recognized
standing operating in the United States, in the aggregate amount of not less than five
million dollars ($5,000,000.00).

     6.15 Negative Pledge

     a. Borrower will not create, incur, assume, or suffer to exist any Negative Pledge,
except (a) those contemplated by this Loan Agreement; (b) anti-assignment provisions
included in any Account, Chattel Paper, General Intangible or promissory note in which
Borrower has any right, title or interest.

     b. Borrower will not grant or agree to any Negative Pledge concerning Borrower’s
Intellectual Property, except to Lender as provided in the Loan Documents and the
anti-assignment provisions included in any Account, Chattel Paper, General Intangible or
promissory note in which Borrower has any right, title or interest.

15

 

     6.16 Restriction on Debt

     Borrower shall not create, incur, assume, or suffer to exist any debt except as permitted by
this Section 6.16. Debt means (i) indebtedness or liability for borrowed money; (ii) obligations
evidenced by bonds, debentures, notes, or other similar instruments; (iii) obligations for the
deferred purchase price of property or services (including trade obligations); (iv) obligations as
lessee under capital leases; (v) current liabilities in respect of unfunded vested benefits under
Plans covered by ERISA; (vi) obligations under letters of credit; (vii) obligations under
acceptance facilities; (viii) all guarantees, endorsements (other than for collection or deposit in
the ordinary course of business), and other contingent obligations to purchase, to provide funds
for payment, to supply funds to invest in any person or entity, or otherwise to assure a creditor
against loss; and (ix) obligations secured by any mortgage, deed of trust, lien, pledge, or
security interest or other charge or encumbrance on property, whether or not the obligations have
been assumed.

     Permitted exceptions to this covenant are: (i) debt contemplated by this Loan Agreement; (ii)
accounts payable to trade creditors for goods or services which are not aged more than ninety (90)
days from the billing date and current operating liabilities (other than for borrowed money) which
are not more than ninety (90) days past due, in each case incurred in the ordinary course of
business, as presently conducted, and paid within the specified time, unless contested in good
faith and by appropriate proceedings, (iii) Subordinated Debt; (iv) debt existing on the Effective
Date and set forth on Schedule 6.16 hereof; (v) debt secured by liens described in clause (f) of
the definition of Permitted Encumbrances; (vi) other unsecured debt not exceeding one hundred
thousand dollars ($100,000.00) in the aggregate outstanding at any time; provided, however,
that, at the time such debt is incurred, no Event of Default has occurred, is continuing or would
result from such debt; and (vii) extensions, refinancings, modifications, amendments and
restatements of any items of the foregoing clauses, provided that the principal amount thereof is
not increased and the terms thereof are not modified or impose more burdensome terms upon Borrower.

     6.17 Mergers, Consolidations, and Purchase and Sale of Assets

     Except as otherwise provided in this Section 6.17 and except in connection with Borrower’s out
licenses of Intellectual Property entered into in the ordinary course, Borrower shall not wind up,
liquidate, or dissolve itself, reorganize, merge, or consolidate with or into, or convey, sell,
assign, transfer, lease, or otherwise dispose of (whether in one transaction or a series of
transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to
any person or entity, or acquire all or substantially all of the assets or the business of any
person or entity provided that, Borrower may enter into any such transaction so long as: (i) the
entity that results from such transaction (the “Surviving Entity”) shall have executed and
delivered to Lender an agreement in form and substance reasonably satisfactory to Lender,
containing an assumption by the Surviving Entity of the due and punctual payment and performance of
all obligations secured by the Collateral and performance and observance of each covenant and
condition of Borrower in the Loan Documents; (ii) all such obligations of the Surviving Entity to
Lender shall be guaranteed by any entity that directly or indirectly owns or controls more than 50%
of the voting stock of the Surviving Entity; (iii) immediately after giving effect to such
transaction, no Event of Default or, event which with the lapse of time or giving of notice or
both, would result

16

 

in an Event of Default shall have occurred and be continuing; and (iv) such transaction, in
the sole discretion of Lender, is acceptable to Lender.

     Lender hereby consents and authorizes the ZARS Pharma Merger; provided that such merger occur
on or before July 31, 2007, and subject to the terms and conditions provided in the Warrant to
Purchase Stock.

     6.18 Dividends and Loans

     Except after a Qualified Public Offering, Borrower shall not (i) declare or pay any dividends,
(ii) purchase, redeem, retire or otherwise acquire for value any of its capital stock or equity
interests now or hereafter outstanding, (iii) make any distribution of assets to its stockholders,
investors, or equity holders, whether in cash, assets, or in obligations of Borrower, (iv) allocate
or otherwise set apart any sum for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of any shares of its capital stock or equity interests, or (v)
make any other distribution by reduction of capital or otherwise in respect of any shares of its
capital stock or equity interests.

     Borrower shall not make any loans or pay any advances of any nature whatsoever to any person
or entity, except (i) advances in the ordinary course of business to vendors, suppliers, and
contractors, and (ii) travel advances, employee relocation loans and other employee loans and
advances in the ordinary course of business not to exceed one hundred thousand dollars
($100,000.00) in the aggregate amount outstanding at any time.

7. Default

     7.1 Events of Default

     Time is of the essence of this Loan Agreement. The occurrence of any of the following events
shall constitute a default under this Loan Agreement and under the Loan Documents and shall be
termed an “Event of Default”:

     a. Borrower fails in the payment or performance of any obligation, covenant, agreement,
or liability created by any of the Loan Documents.

     b. Any representation, warranty, or financial statement made by or on behalf of
Borrower in any of the Loan Documents, or any document contemplated by the Loan Documents,
is materially false or materially misleading.

     c. Default occurs or Borrower fails to comply with (i) any term in any of this Loan
Agreement or (ii) any term in any of the Loan Documents, and such breach is not cured within
fourteen (14) days after the sooner to occur of Borrower’s receipt of notice of such breach
from Lender or the date on which such breach first becomes known to any officer of Borrower.

     d. Any indebtedness of Borrower under any note, indenture, contract, agreement, or
undertaking involving the borrowing of money, the purchase of property,

17

 

the advance of credit or any other monetary liability of any kind to any third party in
an amount in excess of one hundred thousand dollars ($100,000.00) is accelerated.

     e. Default or an event which, with the passage of time or the giving of notice or both,
would constitute a default beyond any applicable cure period, by Borrower, occurs on any
note, indenture, contract, agreement, or undertaking involving the borrowing of money, the
purchase of property, the advance of credit or any other monetary liability of any kind to
any third party in an amount in excess of one hundred thousand dollars ($100,000.00).

     f. Borrower is dissolved or substantially ceases business operations, except in
connection with the ZARS Pharma Merger as authorized herein.

     g. A receiver, trustee, or custodian is appointed for any part of Borrower’s property,
or any part of Borrower’s property is assigned for the benefit of creditors.

     h. Any proceeding is commenced or petition filed under any bankruptcy or insolvency law
by or against Borrower.

     i. Any judgment or regulatory fine is entered against Borrower which may materially
affect Borrower.

     j. Borrower becomes insolvent or fails to pay its debts as they mature.

     7.2 No Waiver of Event of Default

     No course of dealing or delay or failure to assert any Event of Default shall constitute a
waiver of that Event of Default or of any prior or subsequent Event of Default.

8. Remedies

     8.1 Remedies upon Event of Default

     Upon the occurrence of an Event of Default and during the continuance thereof, and at any time
thereafter, all or any portion of the obligations due or to become due from Borrower to Lender,
whether arising under this Loan Agreement, the Promissory Notes, the Security Documents or
otherwise, at the option of Lender and without notice to Borrower of the exercise of such option,
shall accelerate and become at once due and payable in full, and Lender shall have all rights and
remedies created by or arising from the Loan Documents, and all other rights and remedies existing
at law, in equity, or by statute.

     Additionally, subject to Section 2.5 Rights of Set Off, Lender shall have the right,
immediately and without prior notice or demand, to set off against Borrower’s obligations to
Lender, whether or not due, all money and other amounts owed by Lender in any capacity to Borrower,
including, without limitation, checking accounts, savings accounts, and other depository accounts,
and Lender shall be deemed to have exercised such right of setoff and to have made a charge against
any such money or amounts immediately upon occurrence of an Event of Default, even though such
charge is entered on Lender’s books subsequently thereto.

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     8.2 Rights and Remedies Cumulative

     The rights and remedies herein conferred are cumulative and not exclusive of any other rights
or remedies and shall be in addition to every other right, power, and remedy that Lender may have,
whether specifically granted herein or hereafter existing at law, in equity, or by statute. Any
and all such rights and remedies may be exercised from time to time and as often and in such order
as Lender may deem expedient.

     8.3 No Waiver of Rights

     No delay or omission in the exercise or pursuance by Lender of any right, power, or remedy
shall impair any such right, power, or remedy or shall be construed to be a waiver thereof.

9. General Provisions

     9.1 Governing Agreement

     In the event of conflict or inconsistency between this Loan Agreement and the other Loan
Documents, excluding the Promissory Notes, the terms, provisions and intent of this Loan Agreement
shall govern.

     9.2 Borrower’s Obligations Cumulative

     Every obligation, covenant, condition, provision, warranty, agreement, liability, and
undertaking of Borrower contained in the Loan Documents shall be deemed cumulative and not in
derogation or substitution of any of the other obligations, covenants, conditions, provisions,
warranties, agreements, liabilities, or undertakings of Borrower contained herein or therein.

     9.3 Payment of Expenses and Attorney’s Fees

     Borrower shall pay all reasonable expenses of Lender relating to the negotiation, drafting of
documents, documentation of the Loan, and administration and supervision of the Loan, including,
without limitation, appraisal fees, environmental inspection fees, field examination expenses,
title insurance, recording fees, filing fees, and reasonable attorneys fees and legal expenses,
whether incurred in making the Loan, in future amendments or modifications to the Loan Documents,
or in ongoing administration and supervision of the Loan.

     Upon the occurrence of an Event of Default and during the continuance thereof, Borrower agrees
to pay all costs, and expenses, including reasonable attorney fees and legal expenses, incurred by
Lender in enforcing, or exercising any remedies under, the Loan Documents, and any other rights and
remedies.

     Borrower agrees to pay all expenses, including reasonable attorney fees and legal expenses,
incurred by Lender in any bankruptcy proceedings of any type involving Borrower, the Loan
Documents, or the Collateral, including, without limitation, expenses incurred in modifying or
lifting the automatic stay, determining adequate protection, use of cash collateral or relating to
any plan of reorganization.

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     9.4 Right to Perform for Borrower

     Lender may, in its sole discretion and without any duty to do so, elect to discharge taxes,
tax liens, security interests, or any other encumbrance upon the Collateral or any other property
or asset of Borrower, to pay any filing, recording, or other charges payable by Borrower, or to
perform any other obligation of Borrower under this Loan Agreement or under the Security Documents.

     9.5 Assignability

     Except in connection with the ZARS Pharma Merger as authorized herein, Borrower may not assign
or transfer any of the Loan Documents and any such purported assignment or transfer is void.

     Lender may assign or transfer any of the Loan Documents. Funding of this Loan may be provided
by an affiliate of Lender.

     9.6 Third Party Beneficiaries

     The Loan Documents are made for the sole and exclusive benefit of Borrower and Lender and are
not intended to benefit any other third party. No third party may claim any right or benefit or
seek to enforce any term or provision of the Loan Documents.

     9.7 Governing Law

     The Loan Documents shall be governed by and construed in accordance with the laws of the State
of Utah, except to the extent that any such document expressly provides otherwise.

     9.8 Severability of Invalid Provisions

     Any provision of this Loan Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction only, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or thereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.

     9.9 Interpretation of Loan Agreement

     The article and section headings in this Loan Agreement are inserted for convenience only and
shall not be considered part of the Loan Agreement nor be used in its interpretation.

     All references in this Loan Agreement to the singular shall be deemed to include the plural
when the context so requires, and vice versa. References in the collective or conjunctive shall
also include the disjunctive unless the context otherwise clearly requires a different
interpretation.

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     9.10 Survival and Binding Effect of Representations, Warranties, and Covenants

     All agreements, representations, warranties, and covenants made herein by Borrower shall
survive the execution and delivery of this Loan Agreement and shall continue in effect so long as
any obligation to Lender contemplated by this Loan Agreement is outstanding and unpaid,
notwithstanding any termination of this Loan Agreement. All agreements, representations,
warranties, and covenants made herein by Borrower shall survive any bankruptcy proceedings
involving Borrower. All agreements, representations, warranties, and covenants in this Loan
Agreement shall bind the party making the same, its successors and, in Lender’s case, assigns, and
all rights and remedies in this Loan Agreement shall inure to the benefit of and be enforceable by
each party for whom made, their respective successors and, in Lender’s case, assigns.

     9.11 Indemnification

     Borrower shall indemnify Lender for any and all claims and liabilities, and for damages which
may be awarded or incurred by Lender, and for all reasonable attorney fees, legal expenses, and
other out-of-pocket expenses incurred in defending such claims, arising from or related in any
manner to the negotiation, execution, or performance by Lender of any of the Loan Documents, but
excluding any such claims based upon breach or default by Lender or gross negligence or willful
misconduct of Lender.

     Lender shall have the sole and complete control of the defense of any such claims. Lender is
hereby authorized to settle or otherwise compromise any such claims as Lender in good faith
determines shall be in its best interests.

     9.12 Environmental Indemnification

     Borrower shall indemnify Lender for any and all claims and liabilities, and for damages which
may be awarded or incurred by Lender, and for all reasonable attorney fees, legal expenses, and
other out-of-pocket expenses arising from or related in any manner, directly or indirectly, to (i)
Hazardous Materials located on, in, or under the Real Property; (ii) any Environmental Condition
on, in, or under the Real Property; (iii) violation of or non compliance with any Environmental
Health and Safety Law; (iv) any breach or violation of Section 5.10 Environmental
Representations and Warranties and/or Section 6.13 Environmental Covenants; and/or (v)
any activity or omission, whether occurring on or off the Real Property, whether prior to or during
the term of the loans secured hereby, and whether by Borrower or any other person or entity,
relating to Hazardous Materials or an Environmental Condition. The indemnification obligations of
Borrower under this Section shall survive any reconveyance, release, or foreclosure of the Real
Property, any transfer in lieu of foreclosure, and satisfaction of the obligations secured hereby.

     Lender shall have the sole and complete control of the defense of any such claims. Lender is
hereby authorized to settle or otherwise compromise any such claims as Lender in good faith
determines shall be in its best interests.

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     9.13 Interest on Expenses and Indemnification, Collateral, Order of Application

     All expenses, out-of-pocket costs, attorneys fees and legal expenses, amounts advanced in
performance of obligations of Borrower, and indemnification amounts owing by Borrower to Lender
under or pursuant to this Loan Agreement, the Promissory Notes, and/or any Security Documents shall
be due and payable upon demand. If not paid upon demand, all such obligations shall bear interest
at the default rate provided in the Promissory Notes from the date of disbursement until paid to
Lender, both before and after judgment. Lender is authorized to disburse funds under the
Promissory Notes for payment of all such obligations.

     Payment of all such obligations shall be secured by the Collateral and by the Security
Documents.

     All payments and recoveries shall be applied to payment of the foregoing obligations, the
Promissory Notes, and all other amounts owing to Lender by Borrower in such order and priority as
determined by Lender. Unless provided otherwise in the Promissory Notes, payments on the
Promissory Notes shall be applied first to accrued interest and the remainder, if any, to
principal.

     9.14 Limitation of Consequential Damages

     Lender and its officers, directors, employees, representatives, agents, and attorneys, shall
not be liable to Borrower for consequential damages arising from or relating to any breach of
contract, tort, or other wrong in connection with the negotiation, documentation, administration or
collection of the Loan.

     9.15 Waiver and Release of Claims

     Borrower (i) represents that it has no defenses to or setoffs against any indebtedness or
other obligations owing to Lender or its affiliates (the “Obligations”), nor claims against Lender
or its affiliates for any matter whatsoever, related or unrelated to the Obligations, and (ii)
releases Lender and its affiliates from all claims, causes of action, and costs, in law or equity,
existing as of the date of this Loan Agreement, which Borrower has or may have by reason of any
matter of any conceivable kind or character whatsoever, related or unrelated to the Obligations,
including the subject matter of this Loan Agreement. This provision shall not apply to claims for
performance of express contractual obligations owing to Borrower by Lender or its affiliates.

     9.16 Revival Clause

     If the incurring of any debt by Borrower or the payment of any money or transfer of property
to Lender by or on behalf of Borrower should for any reason subsequently be determined to be
“voidable” or “avoidable” in whole or in part within the meaning of any state or federal law
(collectively “voidable transfers”), including, without limitation, fraudulent conveyances or
preferential transfers under the United States Bankruptcy Code or any other federal or state law,
and Lender is required to repay or restore any voidable transfers or the amount or any portion
thereof, or upon the advice of Lender’s counsel is advised to do so, then, as to any such amount or
property repaid or restored, including all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower shall automatically be

22

 

revived, reinstated and restored and shall exist as though the voidable transfers had never
been made.

     9.17 Arbitration

ARBITRATION DISCLOSURES:

	 	1.	 	ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY VERY
LIMITED REVIEW BY A COURT.
	 
	 	2.	 	IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
	 
	 	3.	 	DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
	 
	 	4.	 	ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING IN
THEIR AWARDS. THE RIGHT TO APPEAL OR TO SEEK MODIFICATION OF ARBITRATORS’ RULINGS IS
VERY LIMITED.
	 
	 	5.	 	A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS AFFILIATED
WITH THE BANKING INDUSTRY.
	 
	 	6.	 	IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR THE AMERICAN
ARBITRATION ASSOCIATION.

     a. Any claim or controversy (“Dispute”) between or among the parties and their
employees, agents, affiliates, and assigns, including, but not limited to, Disputes arising
out of or relating to the Loan, the Collateral, the Loan Documents, Section 9.7
Governing Law, this arbitration provision (“arbitration clause”), or any related
agreements or instruments relating hereto or delivered in connection herewith (“Related
Agreements”), and including, but not limited to, a Dispute based on or arising from an
alleged tort, shall at the request of any party be resolved by binding arbitration in
accordance with the applicable arbitration rules of the American Arbitration Association
(the “Administrator”). The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of this Loan Agreement or Related Agreements. The
provisions of this arbitration clause shall supersede any prior arbitration agreement
between or among the parties.

     b. The arbitration proceedings shall be conducted in a city mutually agreed by the
parties. Absent such an agreement, arbitration will be conducted in Salt Lake City, Utah or
such other place as may be determined by the Administrator. The Administrator and the
arbitrator(s) shall have the authority to the extent practicable to take any action to
require the arbitration proceeding to be completed and the arbitrator(s)’ award issued
within one hundred fifty (150) days of the filing of the Dispute with the Administrator.
The arbitrator(s) shall have the authority to impose sanctions on any party that fails to
comply with time periods imposed by the Administrator or the arbitrator(s), including the

23

 

sanction of summarily dismissing any Dispute or defense with prejudice. The
arbitrator(s) shall have the authority to resolve any Dispute regarding the terms of this
Loan Agreement, this arbitration clause, or Related Agreements, including any claim or
controversy regarding the arbitrability of any Dispute. All limitations periods applicable
to any Dispute or defense, whether by statute or agreement, shall apply to any arbitration
proceeding hereunder and the arbitrator(s) shall have the authority to decide whether any
Dispute or defense is barred by a limitations period and, if so, to summarily enter an award
dismissing any Dispute or defense on that basis. The doctrines of compulsory counterclaim,
res judicata, and collateral estoppel shall apply to any arbitration proceeding hereunder so
that a party must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the subject matter of
the Dispute. The arbitrator(s) may in the arbitrator(s)’ discretion and at the request of
any party: (i) consolidate in a single arbitration proceeding any other claim arising out
of the same transaction involving another party that is substantially related to the Dispute
where that other party to that transaction that is bound by an arbitration clause with
Lender, such as borrowers, guarantors, sureties, and owners of collateral and (ii)
consolidate or administer multiple arbitration claims or controversies as a class action in
accordance with the provisions of Rule 23 of the Federal Rules of Civil Procedure.

     c. The arbitrator(s) shall be selected in accordance with the rules of the
Administrator from panels maintained by the Administrator. A single arbitrator shall have
expertise in the subject matter of the Dispute. Where three arbitrators conduct an
arbitration proceeding, the Dispute shall be decided by a majority vote of the three
arbitrators, at least one of whom must have expertise in the subject matter of the Dispute
and at least one of whom must be a practicing attorney. The arbitrator(s) shall award to
the prevailing party recovery of all costs and fees (including attorneys’ fees and costs,
arbitration administration fees and costs, and arbitrator(s)’ fees). The arbitrator(s),
either during the pendency of the arbitration proceeding or as part of the arbitration
award, also may grant provisional or ancillary remedies including but not limited to an
award of injunctive relief, foreclosure, sequestration, attachment, replevin, garnishment,
or the appointment of a receiver.

     d. Judgment upon an arbitration award may be entered in any court having jurisdiction,
subject to the following limitation: the arbitration award is binding upon the parties
only if the amount does not exceed four million dollars ($4,000,000.00); if the award
exceeds that limit, any party may demand the right to a court trial. Such a demand must be
filed with the Administrator within thirty (30) days following the date of the arbitration
award; if such a demand is not made within that time period, the amount of the arbitration
award shall be binding. The computation of the total amount of an arbitration award shall
include amounts awarded for attorneys’ fees and costs, arbitration administration fees and
costs, and arbitrator(s)’ fees.

     e. No provision of this arbitration clause, nor the exercise of any rights hereunder,
shall limit the right of any party to: (i) judicially or non-judicially foreclose against
any real or personal property collateral or other security; (ii) exercise self-help
remedies, including but not limited to repossession and setoff rights; or (iii) obtain from
a

24

 

court having jurisdiction thereover any provisional or ancillary remedies including but
not limited to injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver. Such rights can be exercised at any time,
before or after initiation of an arbitration proceeding, except to the extent such action is
contrary to the arbitration award. The exercise of such rights shall not constitute a
waiver of the right to submit any Dispute to arbitration, and any claim or controversy
related to the exercise of such rights shall be a Dispute to be resolved under the
provisions of this arbitration clause. Any party may initiate arbitration with the
Administrator. If any party desires to arbitrate a Dispute asserted against such party in a
complaint, counterclaim, cross-claim, or third-party complaint thereto, or in an answer or
other reply to any such pleading, such party must make an appropriate motion to the trial
court seeking to compel arbitration, which motion must be filed with the court within
forty-five days (45) days of service of the pleading, or amendment thereto, setting forth
such Dispute. If arbitration is compelled after commencement of litigation of a Dispute,
the party obtaining an order compelling arbitration shall commence arbitration and pay the
Administrator’s filing fees and costs within forty-five (45) days of entry of such order.

     f. Notwithstanding the applicability of any other law to this Loan Agreement, the
arbitration clause, or Related Agreements between or among the parties, the Federal
Arbitration Act, 9 U.S.C. § 1 et. seq., shall apply to the construction and interpretation
of this arbitration clause. If any provision of this arbitration clause should be
determined to be unenforceable, all other provisions of this arbitration clause shall remain
in full force and effect.

     9.18 Consent to Utah Jurisdiction, Exclusive Jurisdiction of Utah Courts, and Jury Waiver

     Borrower acknowledges that by execution and delivery of the Loan Documents Borrower has
transacted business in the State of Utah and Borrower voluntarily submits to, consents to, and
waives any defense to the jurisdiction of courts located in the State of Utah as to all matters
relating to or arising from the Loan Documents and/or the transactions contemplated thereby.
EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER AND EXCEPT AS PROVIDED IN THE ARBITRATION
PROVISIONS ABOVE, THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND
EXCLUSIVE JURISDICTION OF ANY AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR
RELATING TO THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED THEREBY. NO LAWSUIT,
PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THE LOAN DOCUMENTS AND/OR THE
TRANSACTIONS CONTEMPLATED THEREBY MAY BE COMMENCED OR PROSECUTED IN ANY OTHER FORUM EXCEPT AS
EXPRESSLY AGREED IN WRITING BY LENDER.

     BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR IN TORT AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY
WAY RELATED TO THE LOAN DOCUMENTS.

25

 

     9.19 Notices

     All notices or demands by any party to this Loan Agreement shall, except as otherwise provided
herein, be in writing and may be sent by certified mail, return receipt requested. Notices so
mailed shall be deemed received when deposited in a United States post office box, postage prepaid,
properly addressed to Borrower or Lender at the mailing addresses stated herein or to such other
addresses as Borrower or Lender may from time to time specify in writing. Any notice so addressed
and otherwise delivered shall be deemed to be given when actually received by the addressee.

     Mailing addresses:

     Lender:

Zions First National Bank

Corporate Banking Division

1 South Main, Suite 200

Salt Lake City, Utah 84111

Attention: Thomas C. Etzel, Senior Vice President

     With a copy to:

John A. Beckstead

Holland & Hart LLP

60 East South Temple, Suite 2000

Salt Lake City, Utah 84111

     Borrower:

ZARS, Inc.

1455 West 2200 South, suite 300

Salt Lake City, Utah 84119

Attention: Greg Ayers

     9.20 Duplicate Originals; Counterpart Execution

     Two or more duplicate originals of the Loan Documents may be signed by the parties, each
duplicate of which shall be an original but all of which together shall constitute one and the same
instrument. Any Loan Documents may be executed in several counterparts, without the requirement
that all parties sign each counterpart. Each of such counterparts shall be an original, but all
counterparts together shall constitute one and the same instrument.

26

 

     9.21 Disclosure of Financial and Other Information

     Borrower hereby consents to Lender disclosing to any other lender who may participate in the
Loan any and all information, knowledge, reports, and records, including, without limitation,
financial statements, relating in any manner whatsoever to the Loan and Borrower.

     9.22 Confidentiality

     Both parties agree to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Loan Agreement, except for (i) section 9.21, and (ii) as
required by law, regulations, rule or order, subpoena, judicial or other similar order provided
that Lender provides immediate prior written notice of Lender’s intent to make such disclosure (and
in any event, prior to actual disclosure) to Borrower and takes reasonable and lawful actions to
avoid and/or minimize the extent of such disclosure, including the provision of any reasonable
assistance requested by Borrower in opposing any disclosure so requested or ordered before the
disclosure occurs. Confidential information hereunder shall not include information that either
(i) is in the public domain or in the knowledge or possession of Lender when disclosed to Lender,
or becomes a part of the public domain after disclosure to Lender through no fault of Lender, or
(ii) is disclosed to Lender by a third party, provided Lender does not have actual knowledge that
such third party is prohibited from disclosing such information.

     9.23 Integrated Agreement and Subsequent Amendment

     The Loan Documents constitute the entire agreement between Lender and Borrower, and may not be
altered or amended except by written agreement signed by Lender and Borrower. PURSUANT TO UTAH
CODE SECTION 25-5-4, BORROWER IS NOTIFIED THAT THESE AGREEMENTS ARE A FINAL EXPRESSION OF THE
AGREEMENT BETWEEN LENDER AND BORROWER AND THESE AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF
ANY ALLEGED ORAL AGREEMENT.

     All prior and contemporaneous agreements, arrangements and understandings between the parties
hereto as to the subject matter hereof are, except as otherwise expressly provided herein,
rescinded.

[Signatures on Following Page]

27

 

Effective Date: June 28, 2007.

	 	 	 	 	 	 	 
	 	 	Lender:	 	 
	 
	 	 	 	 	 	 
	 	 	Zions First National Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas C. Etzel	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Thomas C. Etzel

Title: Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Borrower:	 	 
	 
	 	 	 	 	 	 
	 	 	ZARS, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Lippert	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Robert Lippert

Title: President	 	 

28

 

EXHIBIT A

Promissory Note

(Term Loan A)

June 28, 2007

Borrower: ZARS, Inc.

Lender: Zions First National Bank

Amount: $8,000,000.00

Maturity: June 28, 2010

     For value received, Borrower promises to pay to the order of Lender at Corporate Banking
Group, 1 South Main, Suite 200, Salt Lake City, Utah 84111, the sum of eight million dollars
($8,000,000.00) or such other principal balance as may be outstanding hereunder in lawful money of
the United States with interest thereon calculated and payable as provided herein.

Definitions

     Terms used in the singular shall have the same meaning when used in the plural and vice versa.
As used in this Promissory Note, the term:

     “Banking Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the State of Utah are authorized or required to close and, when used in
reference to an Interest Period, a day on which dealings in dollar deposits are also carried on in
the London Interbank market and banks are open for business in London.

     “Cash in Zions Money Market Account” means the lowest balance at any time during a calendar
quarter in Money Market Account No. 002406015 of Borrower maintained with Lender.

     “Dollars” and the sign “$” mean lawful money of the United States.

     “Event of Default” shall have the meaning set forth in the Loan Agreement

     “Interest Period” means the period during which interest will accrue based on the LIBOR Rate
or the LIBOR/Swap Rate, commencing on the date selected by Borrower and ending, as Borrower may
select, on the numerically corresponding day in the first calendar year thereafter for an Interest
Period based on the LIBOR Rate, or the second or third calendar year thereafter for an Interest
Period based on the LIBOR/Swap Rate, except that each such Interest Period that commences on the
last Banking Business Day of a calendar year (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar year) shall end on

 

 

the last Banking Business Day of the appropriate subsequent calendar year; provided that all
of the foregoing provisions relating to Interest Periods are subject to the following:

	 	a.	 	No Interest Period may extend beyond the termination of the Loan Agreement;
	 
	 	b.	 	No Interest Period may extend beyond the aforesaid Maturity Date or such later
date to which it is extended; and
	 
	 	c.	 	If an Interest Period would end on a day that is not a Banking Business Day,
such Interest Period shall be extended to the next Banking Business Day unless such
Banking Business Day would fall in the next calendar year, in which event such Interest
Period shall end on the immediately preceding Banking Business Day.

     “LIBOR Rate” applicable to any Interest Period equal to one calendar year means the rate per
annum quoted by Lender as its LIBOR Rate based upon quotes from the London Interbank Offered Rate
from the British Bankers Association Interest Settlement Rates as quoted for United States Dollars
by Bloomberg or other comparable services selected by Lender for the applicable Interest Period.
This definition of LIBOR Rate is to be strictly interpreted and is not intended to serve any
purpose other than providing an index to determine the interest rate used herein. The LIBOR Rate
of Lender may not necessarily be the same as the quoted offered side in the Eurodollar time deposit
market quoted by any particular institution or service applicable to any Interest Period. It is
not the lowest rate at which Lender may make loans to any of its customers, either now or in the
future.

     “LIBOR Rate Applicable Margin” means:

	 	 	 
	Cash in Zions Money Market Account	 	LIBOR Rate Applicable Margin
	Equal to or less than $5,000,000
	 	3.75%
	 
	Greater than $5,000,000, but equal to or less than $10,000,000
	 	3.00%
	 
	Greater than $10,000,000, but equal to or less than $15,000,000
	 	2.25%
	 
	Greater than $15,000,000
	 	1.75%

     “LIBOR/Swap Rate” applicable to any Interest Period equal to two or three calendar years means
the rate per annum quoted by Lender as Lender’s two year or three year LIBOR/Swap Rate based upon
the LIBOR/Swap rate as quoted for U.S. Dollars by Bloomberg or other comparable pricing services
selected by Lender. This definition of LIBOR/Swap Rate is to be strictly interpreted and is not
intended to serve any other purpose other than providing an index to determine the interest rate
used herein. Lender’s LIBOR/Swap Rate may not necessarily be the same as the quoted offer side in
the Eurodollar time deposit market by any particular institution or service applicable to any
interest period. It is not the lowest rate at which Lender may make loans to any of its customers,
either now or in the future.

 

 

     “Loan Agreement” means the Loan Agreement dated June 28, 2007, between Zions First National
Bank as Lender and ZARS, Inc., as Borrower, together with any exhibits, amendments, addenda, and
modifications.

     “Prime Rate” means an index which is determined daily by the published commercial loan
variable rate index held by any two of the following banks: J. P. Morgan Chase & Co., Wells Fargo
Bank, National Association, and Bank of America N.A. In the event no two of the above banks have
the same published rate, the bank having the median rate will establish the Prime Rate. If, for
any reason beyond the control of Lender, any of the aforementioned banks becomes unacceptable as a
reference for the purpose of determining the Prime Rate used herein, Lender may, five days after
posting notice in Lender’s bank offices, substitute another comparable bank for the one determined
unacceptable. As used in this paragraph, “comparable bank” shall mean one of the ten largest
commercial banks headquartered in the United States of America. This definition of Prime Rate is
to be strictly interpreted and is not intended to serve any purpose other than providing an index
to determine the variable interest rate used herein. It is not the lowest rate at which Lender may
make loans to any of its customers, either now or in the future.

     “Prime Rate Applicable Margin” means:

	 	 	 
	Cash in Zions Money Market Account	 	Prime Rate Applicable Margin
	Equal to or less than $5,000,000
	 	1.00%
	 
	Greater than $5,000,000, but equal to or less than $10,000,000
	 	0.25%
	 
	Greater than $10,000,000, but equal to or less than $15,000,000
	 	-0.50%
	 
	Greater than $15,000,000
	 	-1.00%

Payment Terms

     Interest shall be payable as follows: Interest accrued based on the Prime Rate, the LIBOR
Rate, or the LIBOR/Swap Rate is to be paid in arrears commencing August 1, 2007, and on the same
day of each month thereafter.

     Principal shall be payable in thirty (30) installments of two hundred sixty six thousand six
hundred sixty six dollars and sixty seven cents ($266,666.67) per month commencing January 1, 2008,
and on the same day of each month thereafter through June 1, 2010. All remaining principal and
unpaid interest shall be paid in full on June 1, 2010.

LIBOR Rate and LIBOR/Swap Rate Election

     This Promissory Note shall initially bear interest based on the Prime Rate.

 

 

     Provided no Event of Default has occurred, and is continuing, Borrower may elect from time to
time to convert or continue the interest rate to the LIBOR Rate or the LIBOR/Swap Rate by giving
Lender two (2) Banking Business Days written notice of such election specifying the Interest Period
selected. Such election shall apply to the entire outstanding principal balance. An elected
Interest Period may not be changed without consent of Lender until expiration of the elected
Interest Period.

Interest Based on Prime Rate

     Interest based on the Prime Rate shall be at a variable rate computed on the basis of a three
hundred sixty (360) day year as follows: The Prime Rate from time to time in effect, adjusted as
of the date of any change in the Prime Rate, plus or minus the Prime Rate Applicable Margin. The
Prime Rate Applicable Margin shall be adjusted as of the first day of each calendar quarter based
on the Cash in Zions Money Market Account for the preceding calendar quarter.

Interest Based on LIBOR Rate or LIBOR/Swap Rate

     Interest based on the LIBOR Rate and LIBOR/Swap Rate shall be calculated as follows:

	 	1.	 	Interest shall be at a rate computed on the basis of a three hundred sixty
(360) day year at a rate equal to the LIBOR Rate or LIBOR/Swap Rate, as applicable, for
the applicable Interest Period plus the LIBOR Rate Applicable Margin. The LIBOR Rate
Applicable Margin shall be adjusted as of the first day of each calendar quarter based
on the Cash in Zions Money Market Account for the preceding calendar quarter.
	 
	 	2.	 	Notwithstanding any other provision in this Promissory Note, if the adoption of
any applicable law, rule, or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central bank,
or comparable agency charged with the interpretation or administration thereof, or
compliance by Lender with any request or directive (whether or not having the force of
law) of any such authority, central bank, or comparable agency, shall make it unlawful
or impossible for Lender to maintain balances based on the LIBOR Rate or the LIBOR/Swap
Rate, then upon notice to Borrower by Lender the outstanding principal amount of the
balances based on the LIBOR Rate or the LIBOR/Swap Rate, together with interest accrued
thereon, shall be repaid immediately upon demand of Lender if such change or compliance
with such request, in the judgment of Lender, requires immediate repayment or, if such
repayment is not required, at the election of Borrower shall be converted to a balance
based on Prime Rate or repaid at the expiration of the last Interest Period to expire
before the effective date of any such change or request.
	 
	 	3.	 	Notwithstanding anything to the contrary herein, if Lender determines (which
determination shall be conclusive) that (a) quotations of interest rates are not being
provided for purposes of determining the LIBOR Rate or the LIBOR/Swap Rate, or (b) the
LIBOR Rate or the LIBOR/Swap Rate does not accurately cover the cost to Lender of
making or maintaining advances based on such rate, then

 

 

	 	 	 	Lender may give notice thereof to Borrower, whereupon until Lender notifies Borrower
that the circumstances giving rise to such suspension no longer exist, then (1) the
right of Borrower to request interest pricing based on the LIBOR Rate or the
LIBOR/Swap Rate shall be suspended; and (2) Borrower shall repay in full the then
outstanding principal amount based on LIBOR Rate or the LIBOR/Swap Rate together
with accrued interest thereon, on the last day of the then current Interest Period
applicable to such balance, or, at Borrower’ option, convert the outstanding
principal balances based on the LIBOR Rate or the LIBOR/Swap Rate to balances based
on Prime Rate on the last day of the then current Interest Period applicable to such
balances.

General

     Borrower may prepay all or any portion of all Prime Rate based balances at any time without
penalty. Borrower may not prepay in full or in part any LIBOR Rate or LIBOR/Swap Rate based
balances. Notwithstanding the foregoing, in the event of any voluntary or involuntary prepayment
of any LIBOR Rate or LIBOR/Swap Rate based balance, Borrower shall make Lender whole and Borrower
shall pay to Lender all costs incurred by Lender in connection with such prepayment and compensate
Lender for any loss and any breakage costs arising from the re-employment of funds at rates lower
than the rate provided by this Promissory Note, cost to Lender of such funds, any interest or fees
payable by Lender to lenders of funds obtained by them in order to make or maintain the loan
evidenced by this Promissory Note and any related costs.

     Any prepayment received by Lender after 2:00 p.m. Mountain Time shall be deemed received on
the following Banking Business Day.

     Any prepayments shall reduce or excuse the last installment payments owing. All scheduled
installment payments shall remain due and owing as scheduled until all outstanding principal has
been paid in full.

     Upon default in payment of any principal or interest when due, whether due at stated maturity,
by acceleration, or otherwise, and until such default is cured or waived, (i) all outstanding
principal shall bear interest at a default rate from the date when due until paid, both before and
after judgment, which default rate shall be three percent (3%) per annum above the foregoing rates
and (ii) upon maturity of the applicable Interest Period the balance bearing interest based on the
LIBOR Rate or the LIBOR/Swap Rate shall be converted to a balance bearing interest based on the
Prime Rate.

     This Promissory Note is made in accordance with the Loan Agreement and is secured by the
collateral identified in and contemplated by the Loan Agreement.

     If an Event of Default occurs and is continuing, time being the essence hereof, then the
entire unpaid balance, with interest as aforesaid, shall, at the election of the holder hereof and
without notice of such election, become immediately due and payable in full.

 

 

     If an Event of Default occurs and is continuing, Borrower agrees to pay to the holder hereof
all collection costs, including reasonable attorney fees and legal expenses, in addition to all
other sums due hereunder.

     This Promissory Note shall be governed by and construed in accordance with the laws of the
State of Utah.

     Borrower acknowledges that by execution and delivery of this Promissory Note Borrower has
transacted business in the State of Utah and Borrower voluntarily submits to, consents to, and
waives any defense to the jurisdiction of courts located in the State of Utah as to all matters
relating to or arising from this Promissory Note. EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER
AND EXCEPT AS PROVIDED IN THE ARBITRATION PROVISIONS IN THE LOAN AGREEMENT, THE STATE AND FEDERAL
COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL
CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THIS PROMISSORY NOTE. NO
LAWSUIT, PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THIS PROMISSORY NOTE MAY BE
COMMENCED OR PROSECUTED IN ANY OTHER FORUM EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER.

     Borrower and all endorsers, sureties and guarantors hereof hereby jointly and severally waive
presentment for payment, demand, protest, notice of protest, notice of protest and of non-payment
and of dishonor, and consent to extensions of time, renewal, waivers or modifications without
notice and further consent to the release of any collateral or any part thereof with or without
substitution.

	 	 	 	 	 	 	 
	 	 	Borrower:	 	 
	 
	 	 	 	 	 	 
	 	 	ZARS, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Lippert
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Robert Lippert

Title: President	 	 

 

 

EXHIBIT B

Promissory Note

(Term Loan B)

June 28, 2007

Borrower: ZARS, Inc.

Lender: Zions First National Bank

Amount: $2,500,000.00

Maturity: June 28, 2010

     For value received, Borrower promises to pay to the order of Lender at Corporate Banking
Group, 1 South Main, Suite 200, Salt Lake City, Utah 84111, the sum of two million five hundred
thousand dollars ($2,500,000.00) or such other principal balance as may be outstanding hereunder in
lawful money of the United States with interest thereon calculated and payable as provided herein.

Definitions

     Terms used in the singular shall have the same meaning when used in the plural and vice versa.
As used in this Promissory Note, the term:

     “Banking Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the State of Utah are authorized or required to close and, when used in
reference to an Interest Period, a day on which dealings in dollar deposits are also carried on in
the London Interbank market and banks are open for business in London.

     “Cash in Zions Money Market Account” means the lowest balance at any time during a calendar
quarter in Money Market Account No. 002406015 of Borrower maintained with Lender.

     “Dollars” and the sign “$” mean lawful money of the United States.

     “Event
 of Default” shall have the meaning set forth in the Loan Agreement

     “Interest Period” means the period during which interest will accrue based on the LIBOR Rate
or the LIBOR/Swap Rate, commencing on the date selected by Borrower and ending, as Borrower may
select, on the numerically corresponding day in the first calendar year thereafter for an Interest
Period based on the LIBOR Rate, or the second or third calendar year thereafter for an Interest
Period based on the LIBOR/Swap Rate, except that each such Interest Period that commences on the
last Banking Business Day of a calendar year (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar year) shall end on

 

 

the last Banking Business Day of the appropriate subsequent calendar year; provided that all
of the foregoing provisions relating to Interest Periods are subject to the following:

	 	a.	 	No Interest Period may extend beyond the termination of the Loan Agreement;
	 
	 	b.	 	No Interest Period may extend beyond the aforesaid Maturity Date or such later
date to which it is extended; and
	 
	 	c.	 	If an Interest Period would end on a day that is not a Banking Business Day,
such Interest Period shall be extended to the next Banking Business Day unless such
Banking Business Day would fall in the next calendar year, in which event such Interest
Period shall end on the immediately preceding Banking Business Day.

     “LIBOR Rate” applicable to any Interest Period equal to one calendar year means the rate per
annum quoted by Lender as its LIBOR Rate based upon quotes from the London Interbank Offered Rate
from the British Bankers Association Interest Settlement Rates as quoted for United States Dollars
by Bloomberg or other comparable services selected by Lender for the applicable Interest Period.
This definition of LIBOR Rate is to be strictly interpreted and is not intended to serve any
purpose other than providing an index to determine the interest rate used herein. The LIBOR Rate
of Lender may not necessarily be the same as the quoted offered side in the Eurodollar time deposit
market quoted by any particular institution or service applicable to any Interest Period. It is
not the lowest rate at which Lender may make loans to any of its customers, either now or in the
future.

     “LIBOR Rate Applicable Margin” means:

	 	 	 
	Cash in Zions Money Market Account	 	LIBOR Rate Applicable Margin
	Equal to or less than $5,000,000
	 	3.75%
	 
	Greater than $5,000,000, but equal to or less than $10,000,000
	 	3.00%
	 
	Greater than $10,000,000, but equal to or less than $15,000,000
	 	2.25%
	 
	Greater than $15,000,000
	 	1.75%

     “LIBOR/Swap Rate” applicable to any Interest Period equal to two or three calendar years means
the rate per annum quoted by Lender as Lender’s two year or three year LIBOR/Swap Rate based upon
the LIBOR/Swap rate as quoted for U.S. Dollars by Bloomberg or other comparable pricing services
selected by Lender. This definition of LIBOR/Swap Rate is to be strictly interpreted and is not
intended to serve any other purpose other than providing an index to determine the interest rate
used herein. Lender’s LIBOR/Swap Rate may not necessarily be the same as the quoted offer side in
the Eurodollar time deposit market by any particular institution or service applicable to any
interest period. It is not the lowest rate at which Lender may make loans to any of its customers,
either now or in the future.

 

 

     “Loan Agreement” means the Loan Agreement dated June 28, 2007, between Zions First National
Bank as Lender and ZARS, Inc., as Borrower, together with any exhibits, amendments, addenda, and
modifications.

     “Prime Rate” means an index which is determined daily by the published commercial loan
variable rate index held by any two of the following banks: J. P. Morgan Chase & Co., Wells Fargo
Bank, National Association, and Bank of America N.A. In the event no two of the above banks have
the same published rate, the bank having the median rate will establish the Prime Rate. If, for
any reason beyond the control of Lender, any of the aforementioned banks becomes unacceptable as a
reference for the purpose of determining the Prime Rate used herein, Lender may, five days after
posting notice in Lender’s bank offices, substitute another comparable bank for the one determined
unacceptable. As used in this paragraph, “comparable bank” shall mean one of the ten largest
commercial banks headquartered in the United States of America. This definition of Prime Rate is
to be strictly interpreted and is not intended to serve any purpose other than providing an index
to determine the variable interest rate used herein. It is not the lowest rate at which Lender may
make loans to any of its customers, either now or in the future.

     “Prime Rate Applicable Margin” means:

	 	 	 
	Cash in Zions Money Market Account	 	Prime Rate Applicable Margin
	Equal to or less than $5,000,000
	 	1.00%
	 
	Greater than $5,000,000, but equal to or less than $10,000,000
	 	0.25%
	 
	Greater than $10,000,000, but equal to or less than $15,000,000
	 	-0.50%
	 
	Greater than $15,000,000
	 	-1.00%

Payment Terms

     Interest shall be payable as follows: Interest accrued based on the Prime Rate, the LIBOR
Rate, or the LIBOR/Swap Rate is to be paid in arrears commencing August 1, 2007, and on the same
day of each month thereafter.

     Principal shall be payable in thirty (30) installments of eighty-three thousand three hundred
thirty-three dollars and thirty-three cents ($83,333.33) per month commencing January 1, 2008, and
on the same day of each month thereafter through June 1, 2010. All remaining principal and unpaid
interest shall be paid in full on June 1, 2010.

LIBOR Rate and LIBOR/Swap Rate Election

     This Promissory Note shall initially bear interest based on the Prime Rate.

 

 

     Provided no Event of Default has occurred, and is continuing, Borrower may elect from time to
time to convert or continue the interest rate to the LIBOR Rate or the LIBOR/Swap Rate by giving
Lender two (2) Banking Business Days written notice of such election specifying the Interest Period
selected. Such election shall apply to the entire outstanding principal balance. An elected
Interest Period may not be changed without consent of Lender until expiration of the elected
Interest Period.

Interest Based on Prime Rate

     Interest based on the Prime Rate shall be at a variable rate computed on the basis of a three
hundred sixty (360) day year as follows: The Prime Rate from time to time in effect, adjusted as
of the date of any change in the Prime Rate, plus or minus the Prime Rate Applicable Margin. The
Prime Rate Applicable Margin shall be adjusted as of the first day of each calendar quarter based
on the Cash in Zions Money Market Account for the preceding calendar quarter.

Interest Based on LIBOR Rate or LIBOR/Swap Rate

     Interest based on the LIBOR Rate and LIBOR/Swap Rate shall be calculated as follows:

	 	1.	 	Interest shall be at a rate computed on the basis of a three hundred sixty
(360) day year at a rate equal to the LIBOR Rate or LIBOR/Swap Rate, as applicable, for
the applicable Interest Period plus the LIBOR Rate Applicable Margin. The LIBOR Rate
Applicable Margin shall be adjusted as of the first day of each calendar quarter based
on the Cash in Zions Money Market Account for the preceding calendar quarter.
	 
	 	2.	 	Notwithstanding any other provision in this Promissory Note, if the adoption of
any applicable law, rule, or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central bank,
or comparable agency charged with the interpretation or administration thereof, or
compliance by Lender with any request or directive (whether or not having the force of
law) of any such authority, central bank, or comparable agency, shall make it unlawful
or impossible for Lender to maintain balances based on the LIBOR Rate or the LIBOR/Swap
Rate, then upon notice to Borrower by Lender the outstanding principal amount of the
balances based on the LIBOR Rate or the LIBOR/Swap Rate, together with interest accrued
thereon, shall be repaid immediately upon demand of Lender if such change or compliance
with such request, in the judgment of Lender, requires immediate repayment or, if such
repayment is not required, at the election of Borrower shall be converted to a balance
based on Prime Rate or repaid at the expiration of the last Interest Period to expire
before the effective date of any such change or request.
	 
	 	3.	 	Notwithstanding anything to the contrary herein, if Lender determines (which
determination shall be conclusive) that (a) quotations of interest rates are not being
provided for purposes of determining the LIBOR Rate or the LIBOR/Swap Rate, or (b) the
LIBOR Rate or the LIBOR/Swap Rate does not accurately cover the cost to Lender of
making or maintaining advances based on such rate, then

 

 

	 	 	 	Lender may give notice thereof to Borrower, whereupon until Lender notifies Borrower
that the circumstances giving rise to such suspension no longer exist, then (1) the
right of Borrower to request interest pricing based on the LIBOR Rate or the
LIBOR/Swap Rate shall be suspended; and (2) Borrower shall repay in full the then
outstanding principal amount based on LIBOR Rate or the LIBOR/Swap Rate together
with accrued interest thereon, on the last day of the then current Interest Period
applicable to such balance, or, at Borrower’ option, convert the outstanding
principal balances based on the LIBOR Rate or the LIBOR/Swap Rate to balances based
on Prime Rate on the last day of the then current Interest Period applicable to such
balances.

General

     Borrower may prepay all or any portion of all Prime Rate based balances at any time without
penalty. Borrower may not prepay in full or in part any LIBOR Rate or LIBOR/Swap Rate based
balances. Notwithstanding the foregoing, in the event of any voluntary or involuntary prepayment
of any LIBOR Rate or LIBOR/Swap Rate based balance, Borrower shall make Lender whole and Borrower
shall pay to Lender all costs incurred by Lender in connection with such prepayment and compensate
Lender for any loss and any breakage costs arising from the re-employment of funds at rates lower
than the rate provided by this Promissory Note, cost to Lender of such funds, any interest or fees
payable by Lender to lenders of funds obtained by them in order to make or maintain the loan
evidenced by this Promissory Note and any related costs.

     Any prepayment received by Lender after 2:00 p.m. Mountain Time shall be deemed received on
the following Banking Business Day.

     Any prepayments shall reduce or excuse the last installment payments owing. All scheduled
installment payments shall remain due and owing as scheduled until all outstanding principal has
been paid in full.

     Upon default in payment of any principal or interest when due, whether due at stated maturity,
by acceleration, or otherwise, and until such default is cured or waived, (i) all outstanding
principal shall bear interest at a default rate from the date when due until paid, both before and
after judgment, which default rate shall be three percent (3%) per annum above the foregoing rates
and (ii) upon maturity of the applicable Interest Period the balance bearing interest based on the
LIBOR Rate or the LIBOR/Swap Rate shall be converted to a balance bearing interest based on the
Prime Rate.

     This Promissory Note is made in accordance with the Loan Agreement and is secured by the
collateral identified in and contemplated by the Loan Agreement.

     If an Event of Default occurs and is continuing, time being the essence hereof, then the
entire unpaid balance, with interest as aforesaid, shall, at the election of the holder hereof and
without notice of such election, become immediately due and payable in full.

 

 

     If an Event of Default occurs and is continuing, Borrower agrees to pay to the holder hereof
all collection costs, including reasonable attorney fees and legal expenses, in addition to all
other sums due hereunder.

     This Promissory Note shall be governed by and construed in accordance with the laws of the
State of Utah.

     Borrower acknowledges that by execution and delivery of this Promissory Note Borrower has
transacted business in the State of Utah and Borrower voluntarily submits to, consents to, and
waives any defense to the jurisdiction of courts located in the State of Utah as to all matters
relating to or arising from this Promissory Note. EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER
AND EXCEPT AS PROVIDED IN THE ARBITRATION PROVISIONS IN THE LOAN AGREEMENT, THE STATE AND FEDERAL
COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL
CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THIS PROMISSORY NOTE. NO
LAWSUIT, PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THIS PROMISSORY NOTE MAY BE
COMMENCED OR PROSECUTED IN ANY OTHER FORUM EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER.

     Borrower and all endorsers, sureties and guarantors hereof hereby jointly and severally waive
presentment for payment, demand, protest, notice of protest, notice of protest and of non-payment
and of dishonor, and consent to extensions of time, renewal, waivers or modifications without
notice and further consent to the release of any collateral or any part thereof with or without
substitution.

	 	 	 	 	 	 	 
	 	 	Borrower:	 	 
	 
	 	 	 	 	 	 
	 	 	ZARS, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Lippert	 	 
	 

	 	 	 	 

	 	 
	 	 	Name: Robert Lippert

Title: President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00126-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00126-of-00352.parquet"}]]