Document:

Exhibit 10.17

 

MANAGEMENT SERVICES AGREEMENT

 

THIS
MANAGEMENT SERVICES AGREEMENT is made as of the 2nd day of December, 1997 by
and between OMP ACQUISITION CORPORATION, a California corporation (the “Company”)
and MANDARIN MANAGEMENT PARTNERS, INC., a Delaware corporation (“MMPI”).

 

RECITALS

 

The Company desires to obtain the benefits of the knowledge, experience
and. expertise of MMPI’s executive and managerial personnel by retaining MMPI
to provide management consulting and business advisory services with respect to
the conduct of the Company’s business and affairs.

 

MMPI desires to provide such services to the Company
on the terms and conditions set forth herein.

 

The parties believe it is in their best interests to make provision for
certain aspects of their relationship during and after the period in which MMPI
offers services to the Company.

 

NOW, THEREFORE, in consideration of the mutual
promises and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

 

AGREEMENT

 

1.                                      Definitions.  The following terms used in
this Agreement shall have the following meanings:

 

(a)                              “Adjusted Gross Sales” means gross revenues recognized (as determined under
generally accepted accounting principles consistently applied) by the Company
with respect to the Company’s sale or other transfer of its products to a
Person that is not an Affiliate of the Company, less any and all returns
and allowances (eg., samples).

 

(b)                             “Affiliate” means, in reference to the Company, a Person that directly
or indirectly, through one or more intermediaries, controls or is controlled
by, or is under common control with, the Company.  

 

(c)                       “Board of Directors” means the Board of Directors
of the Company.

 

(d)                             “Person” shall mean any individual, partnership, joint venture, limited
liability company, corporation, unincorporated organization or association,
trust or other entity.

 

 

2.                                   Consulting and Advisory Services.  MMPI
shall furnish management consultant and business advisory services concerning
such matters related to the business of the Company as may from time-to-time be
requested by the Company, which may include, without limitation:

 

(a)                             Advise and consult with the Board of Directors, the Company’s officers
and other executive personnel regarding business developments, expansion and
growth potentials, industry trends, marketing strategy and opportunities for
the Company generally.

 

(b)                            Review offers to acquire the Company or substantially all of its assets
and consult with the Board of Directors regarding such potential acquisitions.

 

(c)                             Advise and consult with the Company’s officers and other executive
personnel regarding the Company’s entry into other lines of business and the
marketing of the Company’s products in other geographic regions.

 

(d)                            Make recommendations to the Company’s officers and other executive
personnel regarding product development and research strategies.

 

(e)                             Advise and consult with the Board of Directors regarding the Company’s
working capital needs and maintenance of reserves.

 

(f)                                 Advise and consult with the Board of
Directors regarding the borrowing of funds by the Company and available equity
and debt financing structures.

 

(g)                              Make recommendations to the Company’s officers and other executive
personnel with respect to the Company’s engagement of consultants and other
professionals and review proposals related to such engagements.

 

(h)                              Advise and consult with the Company’s officers and other executive
personnel with respect to the Company’s dealings with suppliers, distributors
and vendors.

 

(i)                                  Review overall Company operations and make
recommendations to the Company’s officers and other executive personnel on
reducing operating expenses, improving efficiency and increasing Company
profitability.

 

3.                                       Commitment of Time and Personnel.  MMPI
shall devote such time and personnel, on a non-exclusive basis, to the affairs
of the Company as is reasonably necessary for MMPI to perform its services
hereunder. MMPI may represent, perform services for, and be retained by such
additional Persons as MMPI, in its sole discretion, deems advisable and the
Company specifically

 

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acknowledges
that MMPI provides similar services to other portfolio companies of Mandarin
Partners, LLC.

 

4.                                     Monthly Fee and Payments.  MMPI
shall be entitled to a “Monthly Fee” equal to two percent (2%) of the Company’s
Adjusted Gross Sales each month. The amount of the Monthly Fee payable to MMPI
hereunder shall be determined based on the Company’s internally prepared
monthly financial statements within 15 days of the end of each month and shall
be paid to MMPI within 5 days of such determination. At the end of each fiscal
year of the Company, and upon receipt of the Company’s annual audited financial
statements from the Company’s independent certified public accountant, a
reconciliation shall be performed to compare the Company’s aggregate Adjusted Gross
Sales during such fiscal year to the Adjusted Gross Sales determined with
reference to the monthly financial statements during such fiscal year. If such
annual reconciliation shows that insufficient Monthly Fees have been paid to
MMPI, the Company shall pay MMPI an amount equal to such underpayment within 30
days after the Company’s receipt of its annual audited financial statements. If
the annual reconciliation shows that excess Monthly Fees have been paid to
MMPI, MMPI shall reimburse the Company for such overpayment within 30 days of
receipt of written notice from the Company requesting such reimbursement.

 

5.                                     Financial Reports and Statements.  The
Company shall provide MMPI with monthly and annual financial statements. Such statements
shall clearly show and reflect all information necessary to determine the
Monthly Fees payable to MMPI pursuant to Section 4 hereof. In addition, MMPI
shall have the right to inspect and copy, during ordinary business hours and on
reasonable advance notice, any of the books and records of the Company to
determine the Company’s compliance with the terms and conditions of Section 4
hereof.

 

6.                                       Term.  The Company retains MMPI, and
MMPI shall perform management consulting and business advisory services for the
Company, until the earliest to occur of the following: (a) Mandarin Partners,
LLC has no investment in the Company, or (b) the Company has completed a public
offering of its common stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended.

 

7.                                  Independent Contractor Status.

 

(a)                                  Each party shall retain full control,
authority and discretion at all times, with regard to the hiring, firing and
working conditions of the parties’ respective employees or other personnel,
subject only to the provisions of this Agreement.

 

(b)                                 Each party shall remain solely responsible
and liable for compliance with all local, state and

 

3

 

federal
laws and regulations, and any contractual obligations related to the employment
of such parties’ respective employees or other personnel.

 

(c)                                  Each party shall remain solely responsible
and liable for the payment of all wages, fringe benefits, payroll related taxes
and premiums, and expense reimbursement related to the employment of such
parties’ respective employees or other personnel.

 

(d)                                 The parties hereto acknowledge that their relationship
shall be that of an independent contractor rather than that of employee, agent,
partnership, or a joint venture. Each party shall report payments hereunder to
all governmental agencies as that of an independent contractor with the Company
reporting amounts paid to MMPI on Form 1099-MISC (or any successor form
thereto).

 

8.                                       Expenses.
 MMPI shall pay all personnel and
operating expenses required to perform the management consulting and business advisory
services it has agreed to provide the Company under this Agreement. The Company
shall be obligated to pay any and all expenses related to the operation of its
business, including, but not limited to, legal, accounting and other professional
fees. Any other services provided to the Company by MMPI, including but not,
limited to management information services, shall be reimbursed by the Company.

 

9.                                      Limited Liability.  With
regard to the management consulting and business advisory services to be
performed by MMPI pursuant to this Agreement, MMPI shall not be liable to the Company,
or to anyone who may claim any right due to its relationship with the Company,
for any acts or omissions in the performance of services on the part of MMPI or
on the part of the officers, employees or agents of MMPI, unless the acts or
omissions of MMPI or its officers, employees or agents have been determined to
have been due to their willful misconduct or gross negligence. The Company
shall defend, indemnify and hold MMPI, its officers, employees and agents free
and harmless from any obligations, costs, claims, judgments, attorneys’  fees, attachments and all other liabilities whatsoever
arising from, growing out of or incurred in connection with the services
rendered to the Company pursuant to the terms of this Agreement, unless the
same shall have been determined to have arisen due to the willful misconduct or
gross negligence of MMPI or its officers, employees or agents.

 

10.                                 Remedies.  If any action at law or equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys’

 

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fees,
costs, and necessary disbursements in addition to any other relief to which
that party may be entitled.

 

11.                                 Notices.  Any and all notices, consents,
documents or communications provided for in this Agreement shall be given in
writing and shall be personally delivered, mailed by registered or certified
mail (return receipt requested) or sent by courier, confirmed by receipt, and
addressed as follows (or to such other address as the addressed party may have
substituted by notice pursuant to this Section 12):

 

(a)                                  If to the Company:

 

OMP
Acquisition Corporation

625
Alaska Avenue

Torrance,
California 90503

Attn:
 Peter P. Tong

 

(b)                                 If to MMPI:

 

Mandarin
Management Partners, Inc.

625
Alaska Avenue

Torrance,
California 90503

Attn:
 Ian Walker

 

Such
notice, consent, document or communication shall be deemed given upon personal
delivery or receipt at the address of the party stated above or at any other
address specified by such party to the other party in writing, except that if
delivery is refused or cannot be made for any reason, then such notice shall be
deemed given on the third day after it is sent.

 

12.                                 Delaware Law to Apply.  This
Agreement shall be construed under and in accordance with the laws of the State
of Delaware.

 

13.                                 Parties Bound.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.

 

14.                                 Legal Construction.  In
the event that any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision hereof, and this Agreement shall be construed as if the
invalid, illegal, or unenforceable provisions had never been contained herein. This
Agreement shall be construed without regard to the party or parties deemed
responsible for the drafting hereof.

 

15.                                 Entire Agreement.  This
Agreement contains the entire understanding and the full and complete agreement
of the

 

5

 

parties
and replaces any prior understandings and agreements among the parties, with
respect to the subject matter hereof.

 

16.                                 Amendment.  This Agreement may be altered,
amended or modified only in a writing signed by both of the parties hereto.

 

17.                                 Counterpart Execution.  This
Agreement may be executed in several counterparts and each so executed shall
constitute one agreement, binding on all of the parties hereto, notwithstanding
that all of the parties may not be signatories to the same counterpart, provided
that each party is a signatory to at least one counterpart.

 

18.                                 Facsimile Signature.  Any
signature page to this Agreement transmitted by facsimile machine shall be
treated in all manner and respects as an original agreement and the signature of
any party to this Agreement transmitted by facsimile machine shall for all
purposes be considered an original signature.

 

[signatures on next page]

 

6

 

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.

 

 

	
   

  	
  OMP ACQUISITION
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter P. Tong

  
	
   

  	
  Name:

  	
  Peter P. Tong

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANDARIN MANAGEMENT
  PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ian G. Walker

  
	
   

  	
  Name:

  	
  Ian G. Walker

  
	
   

  	
  Title:

  	
  Executive Vice President

  

 

7

 

FIRST AMENDMENT TO MANAGEMENT SERVICES AGREEMENT

 

THIS
FIRST AMENDMENT TO THE MANAGEMENT SERVICES AGREEMENT is made as of this 22nd
day of December, 2000 by and between Obagi Medical Products, Inc., a California
corporation (the “Company”) and MANDARIN MANAGEMENT PARTNERS, INC., a Delaware
corporation (“MMPI”).

 

RECITALS

 

The
Company and MMPI entered into that certain Management Services Agreement, dated
December 2, 1997, which provided for, among other things, that MMPI’s executive
and managerial personnel provide management consulting and business advisory
services to the Company.

 

The
Company and MMPI desire to amend the term of the contract to insure the Company
retains the services of MMPI until it has completed a public offering of its
common stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or has consummated a transaction resulting
in a Change of Control.

 

NOW,
THEREFORE, in consideration of the mutual promises and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

 

1.                                       Section 6 of the Management Services
Agreement is hereby amended in its entirety to read as follows:

 

Term.  The
Company retains MMPI, and MMPI shall perform management consulting and business
advisory services for the Company until the earliest to occur of the following:
(a) a Change of Control; (b) the Company has completed a public offering of its
common stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or (c) December 31, 2005. The term “Change
of Control” shall mean any of the following:

 

(i)             any
sale, transfer or other disposition of the shares of the Company’s common stock
(including any resulting from a merger, consolidation, share exchange or other
event involving the Company), in one or a series of transactions, which results
in ownership of 50% or more of such outstanding common shares of the Company
(or any successor the Company, by merger, consolidation or otherwise) on a
fully-diluted basis being acquired by any person or persons other than
affiliate; or

 

(ii)          any
sale, transfer or other disposition of all or substantially all of the assets
of the Company, in a single transaction or series of transactions, to any
person or persons other than an affiliate.

 

 

2.                                       As amended hereby, the Management Services
Agreement is hereby ratified and conformed, and remains in full force and
effect.

 

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.

 

	
   

  	
  OBAGI MEDICAL PRODUCTS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Phillip J. Rose 

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANDARIN MANAGEMENT
  PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Ian G. Walker

  
	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

2

 

ACCOUNT RECEIVABLE PURCHASE AGREEMENT

 

This
ACCOUNT RECEIVABLE PURCHASE AGREEMENT (this “Agreement”) is made and entered
into as of the 31st day of December, 2001, by and between Mandarin Management
Partners, Inc., a Delaware corporation (“Seller”), and Mandarin Partners LLC, a
Delaware limited liability company (“Buyer”).

 

RECITALS

 

WHEREAS, Seller is the owner of and wishes to sell an account receivable (the “Account
Receivable”), which is comprised of accrued but unpaid charges through December
31, 2001, and which Seller is entitled to receive from OMP, Inc. (“OMP”) for
consulting and business advisory services rendered pursuant to that certain
Management Services Agreement, dated as of December 2, 1997, by and between
Seller and OMP; and

 

WHEREAS, Buyer wishes to purchase the Account Receivable; and

 

WHEREAS, Seller and Buyer wish to enter into this Agreement setting forth the
terms and conditions of the purchase and sale of the Account Receivable.

 

NOW, THEREFORE, in consideration of the promises, covenants and conditions set forth
herein and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

AGREEMENT

 

1.                                       Agreement to Purchase and Sell Account
Receivable.  Subject to and in accordance with the terms
and conditions of this Agreement, Seller hereby sells, assigns, conveys and
transfers to Buyer, or its assigns, and Buyer hereby buys from Seller, on the
date of this Agreement, all of Seller’s right, title and interest in and to the
Account Receivable and any other amounts due and owing from OMP to Seller, including,
but not limited to, expense reimbursement and accrued but unpaid management
fees, for the purchase price of $350,000 (the “Purchase Price”). Buyer shall pay
Seller by the issuance of a check from Buyer payable to Seller in the amount of
$350,000 on or before December 31, 2001.

 

2.                                       Seller’s Representations and Warranties.  Seller
represents and warrants to Buyer that the following statements are true and
correct as of the date of this Agreement:

 

(a)                                  Seller is duly and legally authorized to
enter into this Agreement and has complied with all laws, rules, regulations,
charter provisions, articles, bylaws or agreements relating to this Agreement
to which it may be subject. The undersigned representative of Seller is duly
authorized to act on behalf of and to bind Seller to the terms of this
Agreement;

 

 

(b)                                 Seller is the owner and holder of the Account
Receivable and has authority to assign it to Buyer. Seller warrants that it has
not transferred or encumbered its interest in the Account Receivable prior to
the assignment to the Buyer; and

 

3.                                       Buyer’s Representations and Warranties.  Buyer
represents and warrants to Seller that the following statements are true and
correct, as of the date of this Agreement:

 

(a)                                  Buyer is a duly organized and validly existing
limited liability company in good standing under the laws of the State of
Delaware; and

 

(b)                                 Buyer is duly and legally authorized to enter
into this Agreement and has complied with all laws, rules, regulations, charter
provisions, articles, bylaws or agreements relating to this Agreement to which
it may be subject. The undersigned representative of Buyer is duly authorized
to act on behalf of and to bind Buyer to the terms of this Agreement.

 

4.                                       Governing Law.  The
parties agree that this Agreement shall be construed, and the rights and
obligations of these parties under the Agreement shall be determined, in
accordance with the laws of the State of California.

 

5.                                       Successors and Assigns.  This
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.

 

6.                                       Entire Agreement; Amendments.  This
Agreement, including any attachments, exhibits and schedules referred to herein
and attached hereto, constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes any and all prior agreements,
representations and understandings of the parties, written or oral. The terms
of this Agreement shall not be modified or amended except by subsequent written
agreement of the parties.

 

7.                                       Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same instrument.

 

8.                                       Further Assurances.  The
parties shall execute, acknowledge and deliver to one another any further
documents and instruments that may be reasonably required to give full force and
effect to the provisions of this Agreement or the transfers or assignments of
Seller’s interest in the Account Receivable; provided, however, that no
party shall be required to deliver any other document or instrument which
expands its duties, obligations or representations and warranties, or which
diminishes its rights under this Agreement.

 

9.                                       Construction; Headings.  The
headings used in this Agreement have been inserted for convenience of reference
only and do not define or limit the provisions hereof.

 

[Signature
Page Follows]

 

 

2

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as
of the day and year first written above.

 

 

	
   

  	
  MANDARIN MANAGEMENT
  PARTNERS, INC.,

  
	
   

  	
  SELLER

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ I. Walker

  
	
   

  	
  Name:

  	
  I. WALKER

  
	
   

  	
  Title:

  	
  EVP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MANDARIN PARTNERS LLC,
  BUYER

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter P. Tong

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

3

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS
ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made as of the 31ST
day of December, 2001 (the “Effective Date”), by and among Mandarin Management
Partners, Inc., a Delaware corporation (“Assignor”), Lighthouse Venture Group,
LLC, a Delaware limited liability company (“Assignee”), and OMP, Inc., a
Delaware corporation and successor to Obagi Medical Products, Inc. (“Contracting
Party”).

 

RECITALS

 

WHEREAS, Assignor and Contracting Party entered into that certain Management
Services Agreement, dated as of December 2, 1997, as amended by the First
Amendment to Management Services Agreement, dated as of December 22, 2000 (the “Management
Services Agreement”), whereby Assignor’s executive and management personnel
provide management consulting and business advisory services to Contracting
Party;

 

WHEREAS, Assignor is the owner of an account receivable (the “Account Receivable”)
due from Contracting Party, which is comprised of accrued but unpaid charges
for management services for the period of October 1, 2000 through December 31,
2001, for consulting and business advisory services rendered pursuant to the
Management Services Agreement;

 

WHEREAS, Assignor has assigned, transferred and conveyed the Account Receivable
to Mandarin Partners LLC, a Delaware limited liability company;

 

WHEREAS,
Assignor desires to assign, convey and transfer to Assignee and Assignee
desires to assume all rights, interests, duties, obligations and liabilities of
the Assignor under the Management Services Agreement except for the right to
receive payment of the Account Receivable;

 

WHEREAS, Contracting Party desires to consent to the assignment by Assignor and
assumption by Assignee of the Management Services Agreement; and

 

WHEREAS, as a majority shareholder of OMP, Stonington will derive good and
valuable consideration from the assignment and assumption of the Management
Services Agreement and is willing to consent and approve of the transactions
contemplated herein.

 

NOW, THEREFORE, in consideration of the promises, covenants and conditions set forth
herein and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

AGREEMENT

 

1.                                       Assignment.  Subject to and in accordance
with the terms and conditions of this Agreement, Assignor hereby assigns,
conveys and transfers to Assignee all of Assignor’s rights, interests, duties,
obligations and liabilities, except for the rights and interests in the Account
Receivable, in and to the Management Services Agreement effective as of the
Effective Date.

 

 

2.                                       Acceptance and Assumption.  Assignee
hereby accepts the foregoing assignment of the rights, interests, duties,
obligations and liabilities, except for the right to receive payment of the
Account Receivable, in and to the Management Services Agreement effective as of
the Effective Date. Assignee assumes and agrees to perform and discharge the
obligations under the Management Services Agreement that are to be performed
and discharged on and after the Effective Date.

 

3.                                       Contracting Party’s Consent.  Contracting Party hereby consents to the
foregoing assignment by Assignor and the assumption by Assignee of the rights,
interests, duties, obligations and liabilities (except for the rights and
interests of the Assignor in the Account Receivable) in and to the Management
Services Agreement effective as of the Effective Date.

 

4.                                       Governing Law.  The
parties agree that this Agreement shall be construed, and the rights and
obligations of these parties under the Agreement shall be determined, in
accordance with the laws of the State of California.

 

5.                                       Successors and Assigns.  This
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.

 

6.                                       Entire Agreement; Amendments.  This
Agreement, including any attachments, exhibits and schedules referred to herein
and attached hereto, constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes any and all prior agreements,
representations and understandings of the parties, written or oral. The terms
of this Agreement shall not be modified or amended except by subsequent written
agreement of the parties.

 

7.                                       Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
instrument.

 

8.                                       Further Assurances.  The
parties shall execute, acknowledge and deliver to one another any further
documents and instruments that may be reasonably required to give full force and
effect to the provisions of this Agreement or the transfers or assignments of
Seller’s interest in the Account Receivable; provided, however, that no
party shall be required to deliver any other document or instrument which
expands its duties, obligations or representations and warranties, or which
diminishes its rights under this Agreement.

 

9.                                       Construction; Headings.  The
headings used in this Agreement have been inserted for convenience of reference
only and do not define or limit the provisions hereof.

 

[Signature Page Follows]

 

2

 

IN WITNESS
WHEREOF,
the parties hereto have
caused this Agreement to be executed by their duly authorized officers, members
or managers as of the day and year first above written.

 

 

	
  Approved as of the date
  first above written:

  	
   

  	
  MANDARIN MANAGEMENT
  PARTNERS, INC., ASSIGNOR

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STONINGTON PARTNERS, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Robert F. End

  	
   

  	
  By:

  	
  /s/ Peter P. Tong

  
	
   

  	
  Robert F. End

  	
   

  	
  Name:

  	
   

  
	
   

  	
  Partner

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  LIGHTHOUSE PARTNERS LLC,
  ASSIGNEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Austin McNamara

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Austin McNamara

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chairman, CEO, PRES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  OMP, INC., CONTRACTING
  PARTY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Austin McNamara

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Austin McNamara

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chairman, CEO, PRES

  

 

3Confidential
Treatment Requested

 

Exhibit 10.19

 

PRODUCT SUPPLY AGREEMENT

 

This PRODUCT SUPPLY AGREEMENT (the “Agreement”),
dated as of December 8, 2005 (the “Effective Date”), between Triax
Pharmaceuticals, LLC, a Delaware corporation, having its principal place of
business at 20 Commerce, Cranford, NJ 07016 (“Triax”), and OMP, a Delaware
corporation having its principal place of business at 310 Golden Shore, Long
Beach, California (“OMP”) (OMP and Triax, each a “Party,” and collectively, the
“Parties”).

 

RECITALS

 

WHEREAS, Triax
develops, manufactures, markets and sells certain topical products containing
Tretinoin;

 

WHEREAS, OMP has
successfully marketed and sold such products in the physician-dispensed
channel; and

 

WHEREAS, OMP and
Triax deem it to be in their mutual best interests to enter into an agreement
whereby the Parties shall collaborate to incorporate “Obagi” branding and
volume-based incentives to aid OMP in its Tretinoin product sales efforts.

 

NOW THEREFORE, in
consideration of the terms, conditions and mutual covenants contained herein,
the Parties hereto agree as follows:

 

1.                         PRODUCTS;
PURCHASE ORDERS

 

1.1                    Products;
Specifications. Triax shall manufacture the following products on behalf of
OMP and sell such products to OMP: 20mL Tretinoin in 0.1%, 0.05% and 0.025%
concentrations (collectively, the “Products”). Triax shall manufacture the
Products according to the specifications described in Exhibit A (the “Specifications”),
which is hereby incorporated into this Agreement.

 

1.2                    Purchase
Orders. Triax shall agree to manufacture, sell and deliver Products to OMP
in accordance with the terms and conditions of this Agreement. From time to
time and pursuant to Sections 1.4, 1.5, and 1.6. OMP shall place purchase
orders (“Purchase Order(s)”) with Triax for the manufacture, sale and delivery
of specific quantities of Products. This Agreement is not a Purchase Order. OMP
shall have no obligation to purchase any Products hereunder until OMP has
placed a Purchase Order, and then only for the quantity of the Products stated
in such Purchase Orders and delivered according to this Agreement. OMP shall
use commercially reasonable efforts to forecast Product demand and Triax shall
use commercially reasonable efforts to provide Product quantities forecasted by
OMP as per Section 1.4, unless (and to the extent) Triax notifies OMP of an
inability to provide such quantities due to circumstances outside of Triax’s
commercially reasonable control. Such notification must be given within 15 days
of receipt of such forecast from OMP, and/or within 48 hours of Triax becoming
aware of such circumstances.

 

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1.3                    Exclusivity.
OMP shall have exclusive rights to sell the Products in the physician-dispensed
channel in the United States (including all territories of the United States)
(the “Channel”) for the first 12 months of this Agreement from the Effective
Date. Thereafter, OMP shall only maintain exclusivity in the Channel, if OMP
places Purchase Orders for at least [***] units of Products (in any
combination) in each calendar year covered by the term of this Agreement. If
such minimum volumes are not maintained, all other rights and obligations of
this Agreement will continue on a non-exclusive basis, beginning on January 1
of the calendar year following the calendar year in which OMP did not purchase
the minimum Purchase Order volume.

 

1.4                    Twelve
-Month Rolling Forecasts and Purchase Order Placement. Thirty days prior to
the first day of the first month of each quarter (which quarters shall begin on
January 1, April 1, July 1 and October 1 of each year) during the term of this
Agreement, OMP will provide Triax with an estimated forecast of Product orders
for the coming 12 months, including firm Purchase Orders for the second quarter
of each forecast period. OMP will place additional Purchase Orders as needed
throughout each quarter in advance of the required delivery date thereof
allowing for the Lead Time(s) (as such term is defined below). Triax shall
secure adequate supply and maintain Product materials and components to the
extent such materials and components are not typically provided by OMP, and
shall accept and fulfill Purchase Orders placed by OMP in conformance with the
terms of this Agreement. Triax shall accept Purchase Order(s) and confirm
shipment dates to OMP in writing within 5 business days of receipt of a
Purchase Order(s). As warranted, OMP shall update its forecast on a monthly
basis or as required.

 

1.5                    Quantity
Increases; Shipment. At the time that purchase forecasts are placed at the
beginning of each quarter in accordance with Section 1.4, the Parties shall
negotiate in good faith to establish: (i) a maximum quantity by which OMP may
increase the quantity of Products specified in the forecast, and the period of
time from the date of the Purchase Orders within which OMP may order any such
increased quantity; and (ii) a maximum period of time for which OMP may defer
the shipment date specified in the Purchase Orders for all or part of the
Products covered by the Purchase Orders and the period of time from the date of
the Purchase Orders within which OMP may elect any such deferral.

 

1.6                    Other
Modifications Of Purchase Order. Each Purchase Order shall constitute a
binding agreement between Triax and OMP, and the Parties may not modify a
Purchase Order except in writing and upon obtaining the signature of an
authorized representative of each Party. If any modification of a Purchase
Order causes a decrease or reasonably-supported increase in Triax’s
manufacturing cost, Triax promptly shall notify OMP prior to enacting such change
and the change, which shall be noted in writing on the Purchase Order, shall
become effective immediately upon the date of such notification.

 

1.7                    GMP Quality
standards. All Products that Triax sells and delivers to OMP under this
Agreement shall be manufactured, stored, and handled in compliance with all
applicable federal, state, and local laws, regulations, ordinances, and any
other legal requirements, including, without limitation, the Federal Food,
Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et.

 

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seq. Triax shall document
the reliability and quality of its manufacturing and delivery processes as it
relates to the Products. At the request of OMP, Triax shall deliver in writing
to OMP personnel documentation (consistent with that which would be required by
regulatory agencies to which Triax is subject) which demonstrates the
implementation of these policies in the design, analysis, test and manufacture
of the Products, each in accordance with GMP and FDA standards to the extent
they are applicable.

 

1.8                    Triax’s
Additional Obligations. Triax shall immediately notify OMP within 24 hours
of any adverse or unexpected results or any actual or potential notice of
government action regarding a Product. Triax agrees to immediately notify OMP
of any recall of any Product and to administer and pay all costs associated
with any recall, retrieval and/or replacement of any Product.

 

1.9                    OMP
Marketing. OMP shall throughout the term of this Agreement promote, market,
and sell the Products in all of OMP’s active accounts throughout the United
States. Such activity shall include the development of sales collateral, and
incorporation of the Products into appropriate educational seminars and
physician training. OMP shall submit all sales collateral and printed material
referencing the Products to Triax for its review.

 

2.                         PRODUCT
PRICES

 

2.1                    Price List.
The prices for Products purchased hereunder shall be as specified in Exhibit
B (the “Prices”) which is hereby incorporated into this Agreement. All
Prices are fixed through the term of this Agreement in United States dollars,
except changes agreed to in a mutual, signed writing. Triax may also increase
Prices, provided such increases occur no more than once per 12 month period,
and are based on increases in costs demonstrated to OMP’s reasonable
satisfaction are the sole result of incremental increases in packaging and
labeling design costs and the integration of custom-labeled Product tubes into
the manufacturing process. Prices are exclusive of delivery charges set forth
in Section 3.2 and inclusive of (i) all applicable local, state and federal
taxes, and (ii) any other costs (including, without limitation, set-up, testing
and tooling costs and non-recurring engineering expenses) incurred by Triax in
connection with the manufacture, sale and delivery of Products.

 

OMP shall also be
entitled to volume discounts to the base pricing listed on Exhibit B, for
product purchased in excess of [***] units per year, and to the extent such
product is sold through to OMP’s customer’s within 90 days of OMP’s receipt of
such product. Volume discounts will be based on calendar year performance and
applied to cumulative quarterly purchases in excess of [***] units per quarter,
such that annualized volumes over[***] units will be sold by Triax to OMP at a [***]
discount to Prices up to [***] units; volumes over [***] shall be sold Triax to
OMP at a [***] discounts to Prices, up to [***] units; and volumes in excess of
[***] shall be sold by Triax to OMP at a [***] discount to Prices as follows;

 

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3.                         LEAD
TIME, SHIPMENT AND DELIVERY

 

3.1                    Lead Time
For Products. It is understood and agreed between the Parties that Products
with OMP-branded packaging must be manufactured in quantities of at least [***]
units per SKU. OMP shall agree to purchase quantity in its entirety within 12
months of expiration date, provided such smaller quantity as may be desired by
OMP cannot be accommodated as part of a larger production run of similar Triax
product, and only so long as such Product has a minimum 2 year expiration date
from the date of manufacture. In any event, OMP shall provide at least a 120
day lead time from the date of submission of Purchase Orders, and Triax shall
deliver all Products to OMP, and in compliance with the terms of this
Agreement, within 30 days of Triax’s receipt of such Purchase Orders (“Lead
Time”), unless otherwise mutually agreed to by the Parties in writing.

 

3.2                    Shipment.
Triax shall ship all Products purchased under this Agreement F.O.B. shipping
point, to the location specified by OMP in each Purchase Order, so as to be
received by OMP, allowing for normal transit times, in accordance with the
quantities and delivery schedule specified on the corresponding Purchase Order.
If any shipment is late due to Triax’s fault, Triax shall ship the effected
Product by such mode of expedited shipment specified by OMP, at Triax’s sole
expense. Triax shall cause the delivery of all Products to OMP’s receiving
department during normal business hours, unless otherwise directed by OMP.

 

3.3                    Mode Of
Shipment. The mode of shipment shall in each instance be ground
transportation, unless otherwise specified by OMP on the Purchase Order or
pursuant to late delivery provisions of Section 3.2. In the absence of specific
instructions by OMP, Triax will select the best carrier for shipment.

 

3.4                    Risk Of
Loss/ Insurance. Risk of loss and damage shall pass from Triax to OMP upon
delivery by Triax or the common carrier to OMP’s representative at the F.O.B.
shipping point described in Section 3.2 above.

 

3.5                    Packaging.
Product shall be packaged under Triax’s standard label, branding and package
design except that OMP shall have the right, at OMP’s own expense to develop
OMP branded packaging, label design and label copy (“Packaging Specifications”),
and to have Product manufactured with such “Packaging Specifications”. Triax
shall take commercially reasonable efforts to integrate “Packaging
Specifications” into Triax’s manufacturing processes. OMP shall submit such
Packaging design to Triax for approval as to compliance with regulatory

 

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requirements. Such
approval will not be unreasonably withheld. All OMP branded Products will use
the same packing tubes as currently utilized by Triax in its Tretinoin
production.

 

Packaging
Specifications shall include the phrase “Manufactured and distributed under
authority of Triax Pharmaceuticals, Inc.” and shall otherwise comply with all
applicable Food and Drug Administration (“FDA”) labeling requirements.

 

3.6                    Use of
Intellectual Property. Triax shall use any trademarks, trade names, logos,
products names, or labels of OMP, and any derivatives thereof or intellectual
property rights related thereto, solely for purposes of performing under this
Agreement and only in accordance with this Agreement and the instructions of
OMP. This Agreement is not intended to, and shall not be construed, to result
in any transfer or any such intellectual property rights or related interests,
registered or not, domestic or foreign, to Triax.

 

3.7                    Payment
Terms. The terms of payment for all Products purchased under this Agreement
shall be net 30 days from the date of OMP’s receipt of Products. Triax shall
submit all invoices to OMP’s corporate offices, Attn: Accounts Payable, unless
otherwise instructed by OMP.

 

3.8                    Delinquent
Accounts. All amounts due and owing to Triax hereunder, but not paid by OMP
within 10 days of the due date thereof, shall bear interest in U.S. dollars at
the rate of the lesser of; (i) one per cent (1%) per annum above the then
applicable prime interest rate announced by the Wall Street Journal for 90-day
U.S. dollar loans to prime commercial customers in the United States; or (ii)
the maximum lawful interest rate permitted under applicable California law.
Such interest shall accrue on the balance of unpaid amounts from time to time
outstanding from the date on which portions of such amounts become due and
owing until payment thereof in full.

 

3.9                    Billing
Disputes.

 

(a)                      In the event
that a billing dispute occurs concerning any charges billed to OMP by Triax,
OMP must submit documentation regarding the disputed amount. Documentation must
be submitted to Triax within 120 days of OMP’s receipt of billing invoice for
the Products.

 

(b)                     If the
dispute is resolved in favor of OMP and OMP has withheld the disputed amount,
no interest credits or penalties will apply. If the dispute is resolved in
favor of OMP and OMP has paid the disputed amount, OMP will be credited with
interest on such amount by Triax at the rate of one percent (1%) per month,
from the date Triax received payment up to and including the date of refund. If
the dispute is resolved in favor of Triax and OMP has paid the disputed amount
on or before the payment due date, no interest credit or penalties will apply.

 

(c)                      If the
dispute is resolved in favor of Triax and OMP has withheld the disputed amount,
any payments withheld pending settlement of the disputed amount shall

 

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bear interest at the rate
of one percent (1%) per month, from the payment Due Date up to and including
the date of payment.

 

(d)                     If any
continuing dispute between the Parties is not resolved within one hundred
twenty (120) days of the due date, after reasonable attempts by OMP and Triax,
the dispute will be referred to the respective executive responsible for each
Party’s respective obligations under this Agreement. The executives will
negotiate in good faith to resolve the dispute informally. During this course
of such negotiations, all reasonable requests made by one Party to the other
for information will be honored by the Parties. Both Parties shall continue
performing their respective obligations under this Agreement while the dispute
is being resolved, except to the extent that such obligations are in dispute,
unless and until this Agreement expires or is terminated in accordance with its
terms. If the Parties are unable to resolve such dispute within the process
above then either Party may exercise any remedies, in law or equity, available
to it.

 

4.                         PRODUCT
INSPECTION AND ACCEPTANCE

 

4.1                    Acceptance
Inspection and Testing. OMP shall have the right, at its sole discretion,
to perform acceptance testing and inspection of any shipment of Products (“Acceptance
Testing”) for conformance with OMP’s specifications (the “Specifications”).
Such Acceptance Testing shall take place, at OMP’s election, either on Triax’s
premises (during normal business hours and upon reasonable notice to Triax),
OMP’s premises, or at a location selected by OMP (including the premises of any
customer of OMP). OMP shall have 60 days from receipt of a shipment of Products
to perform such Acceptance Testing (“Initial Acceptance Testing Period”).

 

4.2                    Non-Conforming
Products. If OMP reasonably determines within the Initial Acceptance
Testing Period that all or any portion of a shipment of Products are
non-conforming with the Specifications, OMP shall provide Triax a notice of
non-conformance and appropriate supporting documentation, and Triax shall
promptly correct the defects identified by OMP or supply new Products within 30
days after receipt of OMP’s notice of non-conformance. All costs and expenses
associated with any such correction or replacement, including, without
limitation, transportation charges for return to Triax and subsequent return to
OMP, shall be borne solely by Triax. Upon receipt by OMP of corrected or
replaced Products, OMP shall have an additional 60 day period to conduct
Acceptance Testing (“Additional Acceptance Testing Period”). If during such
Additional Acceptance Testing Period, OMP determines that any of the Products
are still non-conforming with the Specifications, Triax shall provide new
replacement Products for all non-conforming Products at Triax’s sole cost and
expense and OMP shall have a second Additional Acceptance Testing Period for
such replacement Products.

 

4.3                    No Waiver
Of Warranty. In no event shall OMP’s inspection and acceptance of any
Product pursuant to this Section 4, or the payment for such Product by OMP, in
any way impair or reduce OMP’s rights under the warranty provisions of Section
8 of this Agreement.

 

4.4                    Facilities
Surveys. Following reasonable notice to Triax, OMP reserves the right as
necessary to review (or have its agents review), during regular business hours,
Triax’s

 

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manufacturing facilities
and Triax’s quality control procedures, both prior to first Product deliveries
and periodically thereafter, in order to assure compliance with the Specifications
and other standard industry practices and procedures. Triax’s failure to
correct any deficiency within these time periods shall entitle OMP to terminate
this Agreement and cancel all then-outstanding Purchase Orders for Products
which have not met acceptance, without liability or consequence to OMP.

 

5.                         SPECIFICATION
AND OTHER CHANGES

 

5.1                    Changes In Specifications. All Products shipped by Triax to OMP shall
conform to the existing Specifications. The Specifications may be amended or
otherwise changed from time to time only by written agreement of Triax and OMP.

 

5.2                    OMP Changes. OMP may propose changes to the Specifications, and Triax shall
consider the feasibility of any such proposal. Triax shall, within 30 days of
receipt of OMP’s proposal, furnish to OMP in writing its comments regarding the
proposed changes, including an expression of its willingness to implement the
same, the price implications, if any, of the change, and the time schedule
required for implementation.

 

5.3                    Change In Source Of Parts. Triax promptly shall notify OMP in writing
of, including the reason for, any change in the source (including the addition
of new vendors) of purchased components (including, without limitation, active
or inactive ingredients) for any Products. Upon request, Triax shall provide
OMP with copies of raw ingredient certificates of analysis.

 

5.4                    Notification Of Updates. Triax shall send all Updates provided to OMP
pursuant to this Section 5, unless otherwise instructed by OMP, to: OMP
Corporation, 310 Golden Shore Road, Attn: Klaus Wholand, Director of
Operations, Long Beach, California                               .

 

5.5                    Change Documentation. Triax shall, at its expense, provide OMP
with copies of all change in Specifications documentation or similar documentation
issued by it during the term of this Agreement that affects any Product. Such
copies shall be provided to OMP as soon as practicable, but in no event later
than 10 days after issuance by Triax.

 

6.                         CONFIDENTIALITY/ PROPRIETARY
INFORMATION

 

6.1                    Definitions. For purposes of this Agreement, “Trade Secrets” means information
which: (a) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use; and (b)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. “Confidential Information” means information, other than
Trade Secrets, that is of value to its owner and is treated as confidential. “Proprietary
Information” means Trade Secrets and Confidential Information of OMP.

 

6.2                    Proprietary Information. The Parties agree that any and all
Proprietary Information exchanged prior to this Agreement have been subject to
the terms and conditions of those certain Confidentiality Agreements as signed
between the parties from time to time.

 

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Further,
the Parties acknowledge and agree that any and all Proprietary Information
exchanged in the past and that which may be exchanged from time to time under
this Agreement, shall be under an obligation by the receiving party to maintain
the confidentiality of such information.

 

6.3                    Nondisclosure Requirements. Each party shall hold Proprietary Information
of the other party in strictest confidence and not to copy, reproduce,
distribute, manufacture, duplicate, reveal, report, publish, disclose, cause to
be disclosed, or otherwise transfer the Proprietary Information to any third
party, or utilize the Proprietary Information for any purpose whatsoever other
than as expressly contemplated by this Agreement or as otherwise mutually
agreed to in writing. Proprietary Information shall only be disclose to
employees, representatives and consultants of the parties who are under a
written obligation to comply with the nondisclosure obligations set forth
herein. Each party shall cause such employees, representatives and consultants
to comply with the nondisclosure obligations set forth herein. Each party shall
immediately notify the other party in writing of any suspected or known breach
of the obligations or restrictions set forth in this Section 6. Each party
shall cooperate with the other party to prevent, cure and mitigate any harmful
or potentially harmful effects of any suspected or known breach.
Notwithstanding the foregoing, any previously executed Confidentiality
Agreements between the Parties shall continue in full force and effect,
provided that to the extent of any inconsistency or ambiguity between such
agreements and this Agreement, this Agreement shall control and govern in all
respects.

 

6.4                    Exceptions. The obligations of Section 6.3 shall not apply if and to the extent
that: (i) the Proprietary Information communicated was already known without
obligation to keep such information confidential, at the time of receipt; (ii)
the Proprietary Information communicated was received in good faith from a
third party lawfully in possession thereof and having no obligation to keep
such information confidential; or (iii) the receiving Party establishes that
the Proprietary Information communicated was publicly known at the time of
receipt or has become publicly known other than by a breach of this Agreement.
If the receiving Party is required to disclose all or part of the Proprietary
Information pursuant to any legal requirement of any country which may have
jurisdiction over such Party, such Party shall immediately upon becoming aware
that such disclosure is required, give the other Party notice of the
circumstances in which the disclosure is required and obtain agreement from the
other Party on the extent and timing of such disclosure, and provide assistance
in obtaining any injunction on such disclosure, if applicable.

 

6.5                    Publicity. Each Party shall not, without the prior written consent of the other
Party, issue any news releases, advertisements or other promotional materials
that refer to, or otherwise disclose any information relating to, such other
Party, this Agreement, such other Party’s business affairs or the performance
of any Purchase Order.

 

6.6                    Proprietary Information. Any OMP Proprietary Information that is or
has been provided to Triax in connection with this Agreement or the negotiation
of any Purchase Order, whether in written form or otherwise, shall remain the
sole and exclusive property of OMP and may not, without the prior written
consent of OMP, be used by Triax for any other purpose,

 

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including,
without limitation, the development, marketing or sale of any product or part
to any other customer or any prospective customer of Triax.

 

Any Triax Proprietary Information that is or has been provided to OMP in
connection with this Agreement or the negotiation of any Purchase Order,
whether in written form or otherwise, shall remain the sole and exclusive
property of Triax and may not, without the prior written consent of Triax, be
used by OMP for any other purpose, including, without limitation, the
development, marketing or sale of any product or part to any other customer or
any prospective customer of OMP.

 

6.7                    Injunctive Relief. The obligations of the Parties under this
Section 6 shall survive the
expiration or termination of this Agreement. OMP and Triax acknowledge and
agree that the extent of damages in the event of a breach of this Section 6 of the Agreement would be difficult or
impossible to ascertain and that there will be available no adequate remedy at
law in the event of any such breach. Both Parties therefore agree that in the
event either Party breaches any provision of this Section 6, the non-breaching
Party shall be entitled to specific performance and injunctive or other
equitable relief, in addition to any other relief to which it may be entitled
at law or in equity.

 

7.                         TERM AND TERMINATION

 

7.1                    Term. This Agreement shall commence as of the date hereof and remain in full
force and effect for an initial term of 5 years (the “Initial Term”).
Thereafter, this Agreement shall be renewed automatically for a successive 5
year term, unless written notice is provided by either party at least 120 days
before the end of the then-current term, in which event this Agreement shall
end on the last day of such term. The Initial Term and any renewals shall be
constitute the “Term.”

 

7.2                    Termination For Breach. Either Party may terminate this Agreement
upon 30 days’ prior written notice to the other Party in the event that the
other Party breaches or fails to fulfill any of its material obligations under
this Agreement (including, without limitation, making deliveries of Products
within the deadlines specified on any Purchase Order, or providing Products
that do not meet the Specifications). However, if during such 30 day notice
period the other Party shall have remedied such failure, this Agreement shall
continue in full force and effect as if such failure had not occurred.

 

7.3                    Termination For Other Reasons. This Agreement shall terminate forthwith, at
the option of either Party by written notice to the other Party, if the other
Party ceases to carry on its business or becomes the subject of any proceeding
under state or federal law for the relief of debtors or otherwise becomes
insolvent, bankrupt or makes an assignment for the benefit of creditors, or
upon the appointment of a receiver for the other Party or the reorganization of
the other Party for the benefit of creditors.

 

7.4                    Rights After Termination. Termination of this Agreement by either
Party shall not prejudice the right of it or the other Party to recover any
monies or require performance of any obligations due at the time of such
termination. In the event of termination of this

 

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Agreement Triax shall, at
OMP’s sole discretion and option, pass title and deliver to OMP completed
Products in its possession meeting the Specifications, provided that OMP pays a
reasonable price not to exceed the price that would have applied if Triax had
delivered such Products according to the terms of the applicable Purchase
Orders.

 

8.                         OMP
WARRANTY AND INDEMNITY

 

8.1                    Warranties.
OMP represents and warrants to Triax that: (a) OMP has full authority to
execute and perform this Agreement; (b) this Agreement has been duly executed
and delivered by OMP and constitutes the legal, enforceable and binding
obligation of OMP; (c) OMP’s execution and performance of this Agreement will
not conflict with the terms or conditions of any other agreement or contract to
which OMP is a party or is otherwise bound; (d) no approval, action or
authorization by any governmental authority or agency is required for OMP’s
execution and performance hereof which has not already been obtained; and (e)
OMP will notify Triax within twenty-four (24) hours of receiving any notice or
upon discovery of any adverse event arising from the sale or use of the
Products.

 

8.2                    OMP
Indemnification. OMP shall defend, indemnify and hold harmless Triax and
its officers, directors, employees, and agents against any claims, complaints
or investigations to the extent arising from the negligence or willful
misconduct of OMP, its employees, agents, or contractors (other than Triax) in
the performance of its obligations under this Agreement. OMP will pay all
resulting costs, including, without limitation, all damages, penalties, court
costs and attorneys’ fees finally awarded, provided Triax promptly notifies OMP
in writing of any such claim. OMP retains sole and exclusive control of the
defense and all related settlement negotiations, and Triax shall provide OMP
with such assistance, cooperation and all related information for such defense
as OMP may reasonably request.

 

OMP shall defend,
indemnify and hold harmless Triax and its officers, directors, employees, and
agents from any claims, complaints or investigations that the Products, OMP
technical and sales literature or the OMP marks infringe a patent, trademark or
copyright of a third party (a “Claim”), and pay resulting court costs, damages
and legal fees incurred in connection with such actions relating to such claim,
provided (i) Triax notified OMP promptly in writing of any such action and any
and all related claims and (ii) Triax gives OMP sole control of the defense of
same and all negotiations for its settlement or compromise. Should any Products
become, or in OMP’s opinion be likely to become, the subject of a claim of
infringement, Triax shall permit OMP, at OMP’s option and expense, to (a)
procure for Triax the right to continue manufacturing the Products, (b) replace
or modify the Products to become non-infringing, or (c) if neither procurement
or replacement are commercially reasonable, terminate this Agreement
immediately with no further obligation or liability to Triax. Notwithstanding
the foregoing, OMP shall have no liability for any claim of infringement to the
extent based upon any modification of the Products, OMP technical and sales literature
and the OMP marks are not made by OMP or its authorized representatives. THE
FOREGOING STATES THE ENTIRE LIABILITY OF OMP WITH RESPECT TO INFRINGEMENT OF
ANY PROPERTY RIGHT OF A THIRD PARTY BY THE PRODUCTS, OMP TECHNICAL AND SALES
LITERATURE AND THE OMP MARKS. Notwithstanding the provisions of this Section 9,

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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this Agreement shall not
limit the liability of OMP for personal injury, including death, arising from
(i) the gross negligence of OMP or its employees acting in the course of their
employment or (ii) defects in the design or manufacture, including without
limitation, defects in packaging, labeling or instructions, of the Products.

 

8.3                    Survival.
The provisions of this Section 8 shall survive the term and any termination of
this Agreement regardless of the cause.

 

9.                         TRIAX
WARRANTY AND INDEMNITY

 

9.1                    Warranties.
Triax represents and warrants to OMP that: (a) Triax has full authority to
execute and perform this Agreement; (b) this Agreement has been duly executed
and delivered by Triax and constitutes the legal, enforceable and binding
obligation of Triax; (c) Triax’s execution and performance of this Agreement
will not conflict with the terms or conditions of any other agreement or
contract to which Triax is a party or is otherwise bound; and (d) no approval,
action or authorization by any governmental authority or agency is required for
Triax’s execution and performance hereof which has not already been obtained.
Triax further represents and warrants that all Products delivered to OMP shall
conform in all respects to and shall have been manufactured, assembled,
labeled, packaged, stored, transported, handled and disposed of in accordance
with the terms and conditions of this Agreement and that such Triax activities
fully comply with all applicable government regulations including, without
limitation, Good Manufacturing Practices of the Food and Drug Administration.

 

9.2                    Triax
Indemnification.

 

Triax shall
defend, indemnify and hold harmless OMP and its officers, directors, employees,
contractors, and agents against any claims, costs (including reasonable
attorney fees) complaints or investigations to the extent arising from the
negligence or willful misconduct of Triax, its employees, agents, or
contractors in the performance of its obligations under this Agreement. Triax
will pay resulting costs, damages, court costs, penalties and attorneys’ fees
finally awarded, provided OMP promptly notifies Triax in writing of any such
claim. Furthermore, Triax indemnifies, defends and holds harmless OMP, its
directors, officers, employees, agents and contractors, from and against all
liabilities, claims, suits, damages, losses, causes of action, and expenses
(including reasonable attorneys’ fees and court costs), and all costs and
administrative fees associated with any recall of any Product. Triax retains
sole and exclusive control of the defense and all related settlement
negotiations, provided Triax shall not settle any claim without the prior
written consent of OMP. OMP shall provide Triax with such assistance,
cooperation and all related information for such defense as Triax may
reasonably request.

 

9.3                    Warranty
Notwithstanding Acceptance. Triax’s warranty obligations pursuant to this
Section 9 shall remain in full force and effect with respect to all Products,
notwithstanding the Products meeting acceptance by OMP.

 

9.4                    Product
Liability Indemnification. Triax agrees to defend, protect, indemnify and
hold harmless OMP and each of its officers, directors, employees and agents
from and against all

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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Product liability and
regulatory liability, including, without limitation, environmental liabilities,
and attorney fees resulting from any claims by third parties for loss, damage
or injury (including death) allegedly caused by any Product purchased under
this Agreement. OMP agrees to promptly notify Triax of all such claims, and to
permit Triax to control, at its expense, any negotiation, arbitration or
litigation concerning such claims; provided Triax shall not settle any claim
without the prior written consent of OMP.

 

9.5                    Survival.
The provisions of this Section 9 shall survive the term and any termination of
this Agreement regardless of the cause.

 

10.                  LIMITATION OF
LIABILITY

 

10.1              IN NO EVENT WILL
EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR CONSEQUENTIAL (INCLUDING WITHOUT
LIMITATION ANY LOSS OF PROFITS OR BUSINESS OPPORTUNITIES), EXEMPLARY,
INCIDENTAL OR INDIRECT OR PUNITIVE DAMAGES OR COSTS (INCLUDING LEGAL FEES AND
EXPENSES) OR LOSS OF GOODWILL OR PROFIT IN CONNECTION WITH THE SUPPLY, USE OR
PERFORMANCE OF THE PRODUCTS PROVIDED HEREUNDER, OR IN CONNECTION WITH ANY CLAIM
ARISING FROM OR RELATED TO THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES OR COSTS OR IF THE EXCLUSIVE REMEDIES STATED
HEREIN FAIL OF THEIR ESSENTIAL PURPOSE.

 

Notwithstanding
the provisions of this Section 110, this Agreement shall not limit the
liability of either Party for personal injury, including death, arising from
the gross negligence or willful misconduct of such Party or its employees
acting in the scope of their employment.

 

11.                  MISCELLANEOUS
PROVISIONS

 

11.1              Relationship Of
Parties. Neither this Agreement nor any Purchase Order executed pursuant to
this Agreement shall be deemed to create or constitute a partnership, joint
venture or business organization of any kind or nature whatsoever between Triax
and OMP.

 

11.2              Order Of
Precedence. In the event of a dispute between the Parties with respect to
the terms and conditions of any Purchase Order, the order of precedence in
interpreting any such terms and conditions shall be as follows: (i) information
(other than the Terms and Conditions) printed on the Purchase Order; (ii) the
terms of this Agreement; and (iii) the Specifications. In the event of any
conflict between the Terms and Conditions printed on a Purchase Order and the
provisions of this Agreement, the terms of this Agreement shall prevail.

 

11.3              Entire Agreement.
This Agreement (including the exhibits hereto) together with any
Confidentiality Agreements sets forth the entire agreement between the Parties
and supersedes any prior agreements or understanding, written or oral, relating
to the subject matter of this Agreement. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Parties to this
Agreement and to their respective successors and assigns.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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11.4              Remedies; Waiver.
The remedies provided herein shall be cumulative and in addition to any other
remedies available at law or in equity. Any waiver or delay in the exercise by
either Party of any of its rights under this Agreement shall not be deemed to
prejudice such Party’s right of termination or enforcement for any further,
continuing or other breach by the other Party.

 

11.5              Force Majeure.
Neither Party shall be liable for delay or failure to perform, in whole or in
part, by reason of contingencies beyond the reasonable control of the Party
affected, whether herein specifically enumerated or not, including among
others, acts of God, war, acts of war, revolution, civil commotion, riots, acts
of public enemies, blockage or embargo, delays of carriers, car shortage, fire,
explosion, breakdown of equipment, strike, lockout, labor dispute, casualty or
accident, earthquake, epidemic, flood, cyclone, tornado, hurricane or other
windstorm, delays of vendors or other contingencies interfering with production
or with customary or usual means of transportation, or by reason of any law,
order, proclamation, regulation, ordinance, demand, requisition or requirement
or any other act of any governmental authority, local, state or federal,
including court orders, judgments or decrees, or any other cause whatsoever,
whether similar or dissimilar to those above affected; provided, however,
that the Party so affected shall promptly give notice to the other Party
whenever such contingency or other act becomes reasonably foreseeable and shall
use its reasonable best efforts to overcome the effects of the contingency as
promptly as possible.

 

11.6              Severability.
If any term or provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable, to any extent, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and enforced to the fullest extent permitted by
law.

 

11.7              Dispute
Resolution. Any claim, controversy or dispute which arises between the
Parties, their agents, employees, officers, directors or affiliates (“Dispute”)
which the Parties are unable to settle through consultation and negotiation may
be mediated under the Commercial Mediation Rules of the American Arbitration
Association (“AAA”) by a mutually acceptable mediator. Any Dispute which cannot
be resolved through negotiation or mediation shall be resolved by binding
arbitration as provided in this Section 11.7. The arbitrability of claims shall
be determined under the Federal Arbitration Act, 9 USC Secs. 1-16.
Notwithstanding the foregoing, the Parties may cancel or terminate this
Agreement in accordance with its terms and conditions without being required to
follow the procedures set forth in this Section 11.7.

 

A single
arbitrator engaged in the practice of law, who is knowledgeable about the
subject matter of this Agreement and the matter in Dispute, shall conduct the
arbitration under the rules of the AAA then in effect, except as otherwise
provided herein. The arbitrator shall be selected in accordance with AAA
procedures from a list of qualified people maintained by the AAA. The
arbitration shall be conducted in New York, New York and all expedited
procedures prescribed by the AAA rules shall apply. The laws of New York shall
govern the construction and interpretation of this Agreement. The arbitrator’s
decision and award shall be final,

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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conclusive and binding,
and judgment may be entered upon it in accordance with applicable law in any
court having jurisdiction thereof.

 

Either Party may
request from the arbitrator injunctive relief to maintain the status quo until
such time as the arbitration award is rendered or the Dispute is otherwise
resolved. The arbitrator shall not have authority to award punitive damages.
Each Party shall bear its own costs and attorneys’ fees, and the Parties shall
share equally the fees and expenses of the mediator and arbitrator.

 

If any Party files
a judicial or administrative action asserting claims subject to arbitration, as
prescribed herein, and another Party successfully stays such action and/or
compels arbitration of said claims, the Party filing said action shall pay the
other Party’s costs and expenses incurred in seeking such stay and/or
compelling arbitration, including reasonable attorneys’ fees.

 

Triax agrees that
in the event of any Dispute between the Parties, it will continue to provide
Products without interruption. OMP agrees that in the event of any Dispute
between the Parties, it will continue to pay for Products delivered by Triax
under this Agreement.

 

11.8              Toxic Materials.
Nothing used in the manufacture of the Products and components thereof covered
by this Agreement shall contain any materials or chemicals not approved for the
intended use of the Products. Triax warrants that all packaging material
furnished under this Agreement (including any Purchase Order) and all packaging
associated with material furnished under this Agreement were not manufactured
using and do not contain chlorofluorocarbons, including polystyrene foam
manufactured through a process using any of the following blowing agents:
CFC-11, CFC-12, CFC-113, CFC-114 or CFC-115. Triax shall defend, indemnify and
hold OMP and its officers, directors, employees, contractors, and agents
harmless from any liability, fine, penalty, or costs (including, without
limitation, reasonable attorney fees) incurred by OMP or any of its directors,
officers, employees, contractors, or agents to any third party or governmental
agency arising out of OMP’s good faith reliance upon said warranty.

 

11.9              Notices. All
notices, demands, approvals, requests or other communications which may be or
are required to be given, served or sent by either Party to the other, shall be
in writing and shall be delivered personally, by certified mail, return receipt
requested, or by telegraphic, telex, facsimile or cable communication at the
address set forth below, or, as to each Party, at such other address as shall
be designated by such Party in a written notice to the other Party:

 

If to Triax, to:

 

	
   

  	
  TRIAX PHARM

  	
   

  
	
   

  	
  20 COMMERCE DR. 

  	
   

  
	
   

  	
  CRANFORD, NJ 07016

  	
   

  

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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If to OMP, to:

 

	
   

  	
  OMP

  
	
   

  	
  310 Golden Shore, Ste. 100

  
	
   

  	
  Long Beach, CA 90802

  
	
   

  	
  Attn: Curtis Cluff

  

 

11.10        Assignment. Neither
Party shall, without the written consent of the other not to be unreasonably
withheld, assign or transfer this Agreement or any rights or obligations
hereunder.

 

11.11        Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the Parties and delivered to the
other Party, it being understood that all Parties need not sign the same
counterpart.

 

11.12        Further Assurances.
Each party hereto agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts as may be necessary or appropriate
in order to carry out the purposes and intent of this Agreement.

 

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed by their respective authorized representatives as of the date
first above written.

 

 

	
  OMP

  	
   

  	
  Triax
  Pharmaceuticals, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNATURE:

  	
  /s/
  Curtis Cluff

  	
   

  	
  SIGNATURE:

  	
  /s/
  Leonard L Mazur

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NAME:

  	
  Curtis
  Cluff

  	
   

  	
  NAME:

  	
  Leonard
  L Mazur

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TITLE:

  	
  E.V.P.
  Corp. Dev. & Operations

  	
   

  	
  TITLE:

  	
  C.O.O.

  
							

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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