Document:

exv10w20

 

Exhibit 10.20

March 16, 2007

Michael A. Ashburn, MD MBA

Executive Vice President

ZARS, Inc.

1142 West 2320 South

Salt Lake City, UT 84119

Dear Michael:

ZARS, Inc. (the “Company”) is very pleased to offer you continued employment with the
Company as its Medical Director commencing on April 2, 2007. Except as expressly
provided herein, this offer letter (“Agreement”) supersedes and replaces all prior
agreements and understandings related to the terms of your employment with the Company,
whether oral or written, including, but not limited to, that certain Offer Letter dated
December 23, 2002 and that certain Employment Agreement dated May 8, 2003. For avoidance
of doubt, the Employment Agreement shall be effectively terminated as of the date of
this Agreement. If you agree to these terms and conditions, please initial the bottom of
each page and sign at the end of this letter in the spaces indicated.

     1. Duties. As Medical Director, you will report to the President and CEO, who
will be primarily responsible for evaluating your performance. You will work
primarily from our Salt Lake City, Utah facility and from time to time at such
other locations as is necessary to perform the duties of your position. Effective
March 25, 2007, you will no longer be an officer of the Company. Your job duties
will include, but not be limited to, the areas of responsibility set forth
in Exhibit A. Of course, the Company may change your position, title and duties
from time to time as it deems necessary. As we discussed, commencing on September
1, 2007, you will work as a part time employee of the Company and you will be
expected to provide services within a time commitment averaging approximately
twenty to thirty percent (20-30%) of that of a full-time professional employee. The
Company has agreed that while you are providing part time employment to the
Company, you may also commence employment with the University of Pennsylvania in
the position of Professor within the Department of Anesthesiology and
Critical Care. You agree, however, that during your employment with the Company,
you shall not engage in any other employment, consulting or other business activity
that will conflict with your responsibilities to the Company as a part
time-employee or that would create a conflict of interest with the Company and you
shall not assist any person or entity in competing with the Company or in preparing
to compete with the Company. Lastly, other than the medical malpractice case
you are already involved in and have disclosed to the Company, you will not
participate as a consultant or expert witness in any pending or contemplated legal
proceedings.

     2. Compensation. So long as you remain employed with the Company pursuant
to Section 1 and 6, your base salary through August 31, 2007 will be $18,750 per
month. Commencing on September 1, 2007, you will transition to a part time role
with the Company and

 

 

your base salary will commensurately be reduced to $9,375 per month. Salaries are paid on a
biweekly schedule. Your employment with ZARS is expected to end on January 23, 2008 (“End Date”).

     3. Stock Options. The Company previously granted you options (“Options) to purchase
shares of common stock of the Company pursuant to the Company’s 1997 Stock Option Plan
(“Plan”). For so long as you remain an employee of the Company pursuant to the terms
and conditions set forth in Paragraph 1 above, the options shall continue to vest and to be
subject to the terms and conditions set forth in the Plan, the stock option agreements and
stock option grant notices previously provided to you. In accordance with the Plan, and
subject to applicable tax withholdings, you may exercise all or any portion of your vested
option until ninety (90) days following the termination of your employment with the Company
which will take place on January 23, 2008.

     4. Policies and Procedures. You agree that you continue to be subject to and
will continue to comply with the policies and procedures of the Company, as such policies
and procedures may be modified, added to or eliminated from time to time at the sole
discretion of the Company, except to the extent any such policy or procedure specifically
conflicts with the express terms of this Agreement. You further agree and acknowledge that
any written or oral policies and procedures of the Company do not constitute contracts
between the Company and you

     5. Other Benefits. While employed by the Company as provided herein:

          (a) Employee Benefits. For so long as you remain a full time employee of the Company,
you shall be entitled to all benefits to which other employees of the Company are entitled,
on terms comparable thereto, including, without limitation, participation in pension
and profit sharing plans, 401(k) plan, group insurance policies and plans, medical, health,
vision, and disability insurance policies and plans, and the like, which may be maintained by
the Company for the benefit of its employees, provided however, you will not be eligible to
participate in any Company bonus opportunities. The Company reserves the right to alter and
amend the benefits received by you from time to time at the Company’s sole discretion.
Commencing with your transition to part time in September, you will not be eligible to accrue
any additional PTO and will not be eligible to participate in the Company’s benefits
programs, except as required by law.

          (b) Expense Reimbursement. You shall continue to receive, against presentation of
proper receipts and vouchers, reimbursement for direct and reasonable out-of- pocket expenses
incurred by you in connection with the performance of your duties hereunder, according to the
policies of the Company.

     6. At-Will Employment. Your employment with the Company continues to be “at- will.” This
means that either you or the Company may terminate your employment at any time, with or
without cause, with or without notice, and for any reason or no reason. Any
contrary representations or agreements, which may have been made to you, are superseded by
this offer. The “at will” nature of your employment described in this offer letter shall
constitute the entire agreement between you and the Company concerning the nature and
duration of your

 

 

employment.
In addition, the fact that the rate of your salary or other compensation is
stated in units of years or months and that your vacation and sick leave accrue annually or
monthly does not alter the at-will nature of the employment, and does not mean and should not be
interpreted to mean that you are guaranteed employment to the end of any period of time or for any
period time. The “at will” term of your employment with the Company can only be changed in a
writing signed by you and the CEO and the Chairman of the Board of Directors.

     7. Proprietary Information Obligations. You hereby acknowledge that your obligations
under your Confidentiality, Non-Disclosure and Non-Competition Agreement remains in full
force and effect. A copy of your Proprietary. Information Agreement is attached hereto as
Exhibit B.

     8. Confidentiality. The provisions of this Agreement shall be held in
strictest confidence by you and the Company and shall not be publicized or disclosed in any
manner whatsoever; provided, however, that: (a) you may disclose this Agreement to your
immediate family; (b) the parties may disclose this Agreement in confidence to their
respective attorneys, accountants, auditors, tax preparers, and financial advisors; (c) the
Company may disclose this Agreement as necessary to fulfill standard or legally required
corporate reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as otherwise
required by law.

     9. General Release. In exchange for the consideration provided to you that you are not
otherwise entitled to receive, you hereby generally and completely release the Company
and its past and present directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates,
and assigns from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or omissions occurring
prior to you signing this general release. This general release includes, but is not limited
to: a) all claims arising out of or in any way related to your employment with the Company up
to the date of this Agreement; b) all claims related to your compensation or benefits from
the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership interests in the
Company up to the date of this Agreement; c) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing; d) all tort
claims, including claims for fraud, defamation, emotional distress, and discharge in
violation of public policy; and e) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising
under the federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, and the Utah Civil Rights Act (as amended). Excluded from
this general release are any claims that may arise under the terms of this Agreement,
including but not limited to any claims related to the terms of compensation, benefits,
Separation Benefits, stock options and indemnification obligations.

     10. Miscellaneous. This Agreement, including Exhibits A and B, constitutes
the complete, final and exclusive embodiment of the entire agreement between you and the

 

 

Company with regard to this subject matter. It is entered into without reliance on any
promise or representation, written or oral, other than those expressly contained herein, and it
supersedes any other such promises, warranties or representations. This Agreement may not be
modified or amended except in a writing signed by both you and a duly authorized officer of the
Company. This Agreement shall bind the heirs, personal representatives, successors and assigns of
both you and the Company, and inure to the benefit of both you and the Company, their heirs,
successors and assigns. If any provision of this Agreement is determined to be invalid or
unenforceable, in whole or in part, this determination will not affect any other provision of this
Agreement and the provision in question shall be modified by the court so as to be rendered
enforceable. This Agreement shall be deemed to have been entered into and shall be construed and
enforced in accordance with the laws of the State of Utah as applied to contracts made and to be
performed entirely within Utah.

     If you wish to accept this offer of continued employment under the terms and conditions
described above please sign and date this letter and return them to me by March 17, 2007. If you
have any questions about the terms of this offer, please do not hesitate to call me to discuss our
offer at your earliest convenience.

	 	 	 	 	 
	 

	 	Sincerely,	 	 
	 

	 	ZARS, Inc.	 	 
	 
	 	 	 	 
	 

	 	/s/ Robert Lippert
 

	 	 

Exhibit A
— Potential Job Duties

Exhibit B
— Proprietary Information Agreement

	 	 	 	 	 
	 

	 	Agreed:	 	 
	 
	 	 	 	 
	 

	 	/s/ Michael A. Ashburn
 

Michael A. Ashburn
	 	 

 

 

EXHIBIT A

POTENTIAL JOB DUTIES FOR MICHAEL A. ASHBURN

Clinical Trial Programs

ThermoProfen

	 	•	 	Medical Monitor/consultant on all ThermoProfen studies, which would
include:

	 	o	 	evaluate pertinent study decisions on protocols (design changes, waivers,
etc.)
	 
	 	o	 	respond to FDA comments if needed
	 
	 	o	 	respond to IRB concerns/safety issues
	 
	 	o	 	respond to PIs if needed
	 
	 	o	 	present scientific/product data at the web cast investigator meetings
	 
	 	o	 	review initial data (i.e., temperature study results prior to PK studies, PK
results prior to starting phase 3)
	 
	 	o	 	discuss protocols and clinical program with bankers, thought leaders, etc.
	 
	 	o	 	review CSRs on completed studies
	 
	 	o	 	review SAPs

Titragesia

	 	•	 	Medical monitor/consultant on all
fentanyl studies

	 	o	 	Review SAPS
	 
	 	o	 	Review clinical study report summaries
	 
	 	o	 	Review IND submission (which will include all
safety information, narratives, etc) prior to program close

	 	•	 	Assign AEs as SAEs

Pliaglis

	 	•	 	Medical Monitor for ongoing clinical studies
	 
	 	•	 	Review and revise draft Pliaglis MAA

Synera

	 	•	 	Medical monitor for ongoing clinical trials
	 
	 	•	 	Assist in the identification and recruitment of clinical PK trial sites

 

 

	 	•	 	Review and revise draft CSR for PK trial and immunization trials

Ropivacaine DuraPeel

	 	•	 	Review and revise draft IND
	 
	 	•	 	Review and revise phase 1 clinical trials
	 
	 	•	 	Assist in the development of the clinical trial program through POC

Alprazolam Patch

	 	•	 	Medical monitor for ongoing clinical trials
	 
	 	•	 	Provide DEA researcher registration for ZARS’ management of CTM
	 
	 	•	 	Review and revise draft CSR for 2 PK trials to be completed in 2007

Business Development

	 	•	 	Assist business development in the process of reviewing product opportunities
and
negotiating licensing agreements
	 
	 	•	 	Introduce the business development team to pain researchers and thought
leaders to
facilitate exploration of business opportunities

G & A

	 	•	 	Continue to review draft S-1 and support documents as necessary
	 
	 	•	 	Provide informational support for product and development program information
in
support of IPO process

 

 

EXHIBIT Bexv10w21

 

Exhibit 10.21

March 21, 2007

Charlie H. McLeskey, M.D.

800 Edgehill Rd.

Salt Lake City, Utah 84103

Dear Charlie:

     This letter sets forth the substance of the Separation Agreement (the “Agreement”)
that ZARS, Inc. (the “Company”) is offering to you to aid in your employment transition.

     1. Separation. Your last day of work and employment with the
Company shall be April 14, 2007 (the “Separation Date).

     2. Accrued Salary. On the Separation Date, the Company will pay
you all accrued salary earned through the Separation Date, subject to standard payroll
deductions and withholdings. You are entitled to these payments regardless of whether or
not you sign this Agreement.

     3. Severance Payments. Although the Company has no obligation to
do so, if you timely sign, date, and return this Agreement, the Company will pay you, as
severance, the equivalent of six (6) months of your base salary in effect as of the
Separation Date, subject to standard payroll deductions and withholdings (“Severance
Payments”). These payments will be made on the Company’s regular payroll cycle beginning
on the first regularly-scheduled payroll date following the Effective Date of this
Agreement as set forth in Section 14.

     4. Health Insurance. To the extent permitted by the federal COBRA
law and by the Company’s current group health insurance policies, you will be eligible to
continue your health insurance benefits at your own expense and, later, to convert to an
individual policy if you wish. On or after the Separation Date, you will be provided with
a separate notice more specifically describing your rights and obligations to continuing
health insurance coverage under applicable state insurance laws. Although the Company is
not otherwise obligated to do so, if you timely sign, date, and return this Agreement,
and you timely elect continued coverage under COBRA, the Company agrees to pay your COBRA
premiums for the equivalent of six (6) months of premiums sufficient to continue your
level of group health insurance coverage currently in effect (including dependent
coverage, if applicable) (the “COBRA Payment”).

     5. Stock Options. Pursuant to your stock option grant(s)
and the plan(s) governing those grant(s) (the “Plan”), vesting of your stock
options will cease on your Separation Date. As of the Separation Date, you will
have the following vested shares:

January 2007 grant- 0 shares vested

February 2006 grant-17,500 shares vested

December 2006 grant- 0 shares vested

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Any right to exercise any vested shares or of the Company to repurchase any previously
exercised, but unvested shares, if any, will be as set forth in your stock option grant notice,
the stock option agreement, and the Plan, provided that the parties shall use commercially
reasonable efforts to amend your February 2006 option to avoid adverse consequences pursuant to
Section 409A of the Internal Revenue Code of 1986, as amended, including, if applicable and
appropriate, the implementation of a 6-month delay in your ability to exercise such option.
Notwithstanding the foregoing, the Company shall be under no obligation to provide you addition
benefits under, or with respect to, such option.

     6. Other Compensation or Benefits. You acknowledge that, except as
expressly provided in this Agreement, you have not earned and will not receive any additional pay
or salary, incentive compensation, severance, equity interests or options, or benefits after the
Separation Date, with the exception of any vested right you may have under the express terms of a
written ERISA-qualified benefit plan (e.g., 401(k) account). In particular, but without
limitation, you agree that you are not owed any bonus, incentive compensation, or commissions.

     7. Expense Reimbursements. You agree that, within ten (10) days of
the Separation Date, you will submit your final documented expense reimbursement statement
reflecting all business expenses you incurred through the Separation Date, if any, for which
you seek reimbursement. The Company will reimburse you for these expenses pursuant to its
regular business practice.

     8. Return Of Company Property. By the close of business on the Separation Date, you
agree to return to the Company all Company documents (and all copies thereof, in
whole or in part) and other Company property which you have in your possession or control,
including, but not limited to, Company files, notes, drawings, records, plans, forecasts,
reports, studies, analyses, proposals, agreements, engineering information, test data and
materials, financial information, research and development information, sales and marketing
information, customer information and databases, contact information, operational and personnel
information, specifications, code, software, databases, computer-recorded information, tangible
property and equipment (including, but not limited to, computers, facsimile machines, mobile
telephones, servers), credit cards, entry cards, identification badges and keys; and any
materials of any kind which contain or embody any proprietary or confidential information of the
Company (and all reproductions thereof in whole or in part). You agree that you will make a
diligent search to locate any such documents, property and information within the timeframe
referenced above. If you have used any personally owned computer, server, or e-mail system to
receive, store, review, prepare or transmit any Company confidential or proprietary data,
materials or information, you agree to provide the Company with a computer-useable copy of such
information and then permanently delete and expunge such Company confidential or proprietary
information from those systems within five (5) business days after the Separation Date; and you
agree to provide the Company access to your system as requested to verify that the necessary
copying and/or deletion is done. You agree that, after the Separation Date, you will neither use
nor possess Company property. Your timely compliance with this paragraph is a condition precedent
to your receipt of the severance benefits described in paragraph 3 above.

     9. Proprietary Information Obligations. You acknowledge and reaffirm your
continuing obligations under your Confidentiality and Non-Competition Agreement survive

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the conclusion of your employment. A copy of your Confidentiality and Non-Competition
Agreement is attached hereto as Exhibit A.

     10. Confidentiality. The provisions of this Agreement shall be held in
strictest confidence by you and the Company and shall not be publicized or disclosed in any manner
whatsoever; provided, however, that: (a) you may disclose this Agreement to your immediate family;
(b) the parties may disclose this Agreement in confidence to their respective attorneys,
accountants, auditors, tax preparers, and financial advisors; (c) the Company may disclose this
Agreement as necessary to fulfill standard or legally required corporate reporting or disclosure
requirements; and (d) the parties may disclose this Agreement insofar as such disclosure may be
necessary to enforce its terms or as otherwise required by law. In particular, and without
limitation, you agree not to disclose the existence or terms of this Agreement to any current or
former Company employees, consultants, or independent contractors.

     11. Non-disparagement. Both you and the Company agree not to disparage the
other party, and the other party’s officers, directors, employees, shareholders and agents, in any
manner likely to be harmful to them or their business, business reputation or personal reputation;
provided that both you and the Company shall respond accurately and fully to any question, inquiry
or request for information when required by legal process.

     12. No Admissions. You understand and agree that the promises and
payments in consideration of this Agreement shall not be construed to be an admission of any
liability or obligation by the Company to you or to any other person, and that the Company makes no
such admission.

     13. Release of Claims. In exchange for the payments and other consideration
under this Agreement to which you would not otherwise be entitled, you hereby release, acquit and
forever discharge the Company, and its officers, directors, agents, servants, employees, attorneys,
shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising out of or in any way related to agreements, events,
acts or conduct at any time prior to and including the date you sign this Agreement, including but
not limited to: (a) any and all such claims and demands directly or indirectly arising out of or in
any way connected with your employment with the Company or the conclusion of that employment; (b)
all claims or demands related to salary, bonuses, commissions, incentive payments, stock, stock
options, or any ownership or equity interests in the Company, including vacation pay, personal time
off, fringe benefits, severance benefits, or any other form of compensation; (c) all claims
pursuant to any federal, any state or any local law, statute, common law or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as amended, attorney’s fees
under Title VII of the federal Civil Rights Act of 1964, as amended, or any other statute,
agreement or source of law, the federal Americans with Disabilities Act of 1990, the Family and
Medical Leave Act, the Employee Retirement Income Security Act, the Age Discrimination in
Employment Act, as amended, the Utah anti discrimination statute, any other state labor code, and
the Equal Pay Act, of 1963, as amended; (d) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing; (e) all tort
claims, including claims for fraud, defamation, emotional

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distress, and discharge in violation of public policy. You represent that you have no lawsuits,
claims or actions pending in your name or on behalf of any other person or entity, against the
Company or any other person or entity subject to the release granted in this paragraph. You
further agree that in the event you bring a claim or charge covered by this release, or do not
dismiss and withdraw any claim covered by this release, in which you seek damages against the
Company, this Agreement shall serve as a complete defense to such claims or charges. Excluded
from this release are any claims that cannot be waived by law. You are waiving, however, your
right to any monetary recovery should any agency, such as the EEOC or the Department of Labor,
pursue any claims on your behalf.

     14. ADEA Waiver and Release. You acknowledge that you are knowingly and
voluntarily waiving and releasing any rights you may have under the ADEA. You also acknowledge
that (i) the consideration given for the waiver and release in the preceding paragraph hereof is
in addition to anything of value to which you were already entitled, and (ii) that you have been
paid for all time worked, have received all the leave and leave protections for which you are
eligible, pursuant to the Family and Medical Leave Act or otherwise and have not suffered any
on-the-job injury for which you have not already filed a claim. You further acknowledge that you
have been advised by this writing, as required by the ADEA, that: (a) your waiver and release do
not apply to any rights or claims that may arise after the execution date of this Agreement; (b)
you have been advised hereby that you have the right to consult with an attorney prior to
executing this Agreement; (c) you have twenty-one (21) days to consider this Agreement (although
you may choose to voluntarily execute this Agreement earlier); (d) you have seven (7) days
following the execution of this Agreement by the parties to revoke the Agreement; and (e) this
Agreement will not be effective until the date upon which the revocation period has expired,
which will be the eighth day after this Agreement is executed by you, provided that the Company
has also executed this Agreement by that date (“Effective Date”).

     15. Remedy. You agree that, if you bring any kind of legal claim against
the Company that you have given up by signing this Agreement, then you will be
violating this Agreement and you must pay all legal fees, other costs and expenses incurred by
the Company in defending against your claim.

     16. Miscellaneous. This Agreement, including Exhibit A, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and the Company
with regard to this subject matter. It is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein, and it supersedes
any other such promises, warranties or representations. This Agreement may not be modified or
amended except in a writing signed by both you and a duly authorized officer of the Company.
This Agreement shall bind the heirs, personal representatives, successors and assigns of both
you and the Company, and inure to the benefit of both you and the Company, their heirs,
successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination will not affect any other provision of this Agreement and the
provision in question shall be modified by the court so as to be rendered enforceable. This
Agreement shall be deemed to have been entered into and shall be construed and enforced in
accordance with the laws of the State of Utah as applied to contracts made and to be performed
entirely within Utah.

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     17. If this Agreement is acceptable to you, please sign below and return the original to
me. I wish you every success in your future endeavors.

	 	 	 	 	 	 	 
	 

	 	 	 	Sincerely,	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	ZARS,
Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Lippert	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Robert Lippert 

President and CEO	 	 
	 
	 	 	 	 	 	 
	I
have read, understand and agree fully to the foregoing Agreement:
	 
	 	 	 	 	 	 
	 

	 	 	 	Agreed:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Charles McLeskey	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Charles McLeskey	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	27 March 2007	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Date	 	 

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EXHIBIT A

Confidentiality and Non-Competition Agreement

6

 

Confidentiality

and

Non-Competition Agreement 

     THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT (this
“Agreement”) is made and entered into effective April 1, 2006 (the “Effective Date” by and
between ZARS, INC., a Utah corporation (“Company”), and Charles McLeskey, the undersigned
individual (“Promisor”).

Recitals

     A. Company is in the business of developing and commercializing patented and proprietary
technology for the administration of drugs and related products (collectively “Company Products”)
and engaging in other related business activities (all such foregoing activities collectively
referred to as “Company Business”).

     B. In the course of conducting the Company Business, certain trade and business information
proprietary to Company, and which Company considers confidential, may be provided to
Promisor.

     C. Company and Promisor now desire to enter into this Agreement in order to protect such
proprietary confidential information of Company, and to protect the Company Business.

     NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties
hereby agree as follows:

Agreement

     1. Confidentiality. Promisor understands and acknowledges that during Promisor’s
employment with Company, Promisor has had and will have access to and has learned and will learn
(i) information proprietary to Company and its affiliates (collectively, “Company”) that concerns
the operation and methodology of the Company Business as the same is now and hereafter conducted by
Company or (ii) other information proprietary to Company, including, without limitation, trade
secrets, know-how, processes, patents and trademarks and applications therefor, price, customer and
supply lists and data, formulae, pricing and marketing plans, policies and strategies, details of
customer and supplier relationships, operations methods, sales techniques, business acquisition
plans, new personnel acquisition plans, web-site, Internet addresses, e-mail addresses and domain
names, including all software, information and processes necessary to operate Company’s web-site,
and all other confidential information with respect to Company Business (collectively, “Proprietary
Information”). Promisor agrees that, from and after the Effective Date, Promisor will keep
confidential and will not disclose directly or indirectly any such Proprietary Information to any
third party, except

 

 

as required to fulfill Promisor’s duties as an employee of Company, and will not misuse,
misappropriate or exploit such Proprietary Information in any way. The restrictions contained
herein shall not apply to any information that (a) was already available to the public at the time
of disclosure, or subsequently becomes available to the public otherwise than by breach of this
Agreement, or (b) was disclosed due to a requirement of law, provided that Promisor shall have
given prompt notice of such requirement to Company to enable Company to seek an appropriate
protective order with respect to such disclosure.

     2. Agreement Not to Compete and Not to Solicit.

          a. During the time of Promisor’s employment relationship with Company and for a period
of two (2) years after the termination or expiration thereof (the “Non-Compete Period”), Promisor
shall not, directly or indirectly (whether as a principal, agent, independent contractor, employee,
partner, member, owner or in any other similar capacity), own, manage, operate, control,
participate in, perform services for, or otherwise carry on, a business similar to or competitive
with the Company Business anywhere in or outside the United States. Notwithstanding the
foregoing, Promisor shall not be prohibited from owning not more than 1% of the voting stock of any
publicly traded entity.

          b. During the Non-Compete Period, Promisor shall not, directly or indirectly, solicit, induce
or influence (or seek to induce or influence) any person who is employed by, or acts as a
consultant for, Company to terminate or alter his or her employment or consultant relationship with
Company.

          c. Except as permitted by Company or as is otherwise necessary to carry out Promisor’s duties,
during the Non-Compete Period, Promisor shall not, directly or indirectly, call on or solicit any
person, firm, corporation, business or other entity who or which is, or had been within the prior
two (2) years, a customer or potential customer, or supplier or potential supplier, of Company with
respect to the Company Business or any business similar to or competitive with the Company Business
as of the termination or expiration of Promisor’s employment relationship with Company, as the case
may be.

     3. Return of Materials. Promisor agrees that, upon the termination or expiration
of Promisor’s employment relationship with Company, Promisor shall immediately return to
Company all property of Company in Promisor’s possession, use or control, including all originals
and any and all copies of any files, lab books, documents, computer disks, works and other
materials containing any Proprietary Information of Company or any third party. Promisor shall
not remove, or cause or permit the removal, from Company’s facilities, or any unauthorized
destruction of, any originals or copies of any files, documents, works and other materials
containing any Proprietary Information of Company or any third party.

     4. Ownership of Inventions. Promisor hereby assigns and transfers to Company any
and all inventions and innovations (whether deemed patentable or not),

2

 

made by Promisor (or jointly with others) during the term of Promisor’s employment by Company
(whether made during or after normal business hours, or at or away from Company’s facilities)
relating to or useful in Company Business, including all rights and interests with respect to any
application, method, process, technique, formula, apparatus, treatment or product. Promisor agrees
to promptly disclose to Company all such inventions and innovations. Promisor agrees to execute
any reasonable document prepared by Company that is necessary or appropriate to document, perfect
or give effect to the intent of this Section 4 or to secure any patent, copyright registration or
other protection thereof.

     5. Prior Agreements. Promisor represents and warrants that Promisor’s employment by
Company does not violate or breach any confidential relationship between Promisor and any other
party. Promisor further agrees that Promisor will not use for Company’s benefit or disclose to
Company any Proprietary Information of any third party that Promisor is prohibited (by agreement or
otherwise) from so using or disclosing. Promisor also represents that Promisor has disclosed to
Company any such confidential relationships and relevant agreements and prohibitions. Promisor
further agrees to indemnify and hold Company harmless from all damages, expenses, costs (including
reasonable attorneys’ fees) and liabilities incurred in connection with, or resulting from, breach
of this Section 5.

     6. Interpretation and Acknowledgment.

          a. It is the intention of the parties that the non-competition and non-solicitation covenants
contained in Section 2 of this Agreement be enforced to the greatest extent (but to no greater
extent) in time, area and degree of participation as is permitted by applicable law. To this end,
the parties agree that such covenants shall be construed to extend in time and territory and with
respect to degree of participation only so far as they may be enforced, and that such covenants are
to that end hereby declared divisible and severable since it is a purpose of this Agreement to
govern competition by Promisor anywhere in and outside the United States.

          b. Promisor acknowledges that Promisor’s covenants and agreements in Section 2 of this
Agreement are reasonable and necessary to protect Company’s legitimate interest in its Proprietary
Information. Promisor acknowledges that Section 2 of this Agreement is not so broad as to prevent
Promisor from earning a livelihood or practicing Promisor’s chosen profession after
termination or expiration of this Agreement. The parties understand and agree that the
consideration provided for in Section 7 of this Agreement is in substantial part in consideration
for Promisor’s covenants in Section 2 hereof.

     7. Consideration. Promisor’s covenants and promises set forth in this Agreement
are in return for the opportunity for Promisor to participate in certain employee incentive
programs that are currently or may be in the future implemented by Company, and Promisor hereby
acknowledges the sufficiency and adequacy of such consideration.

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     8. At-Will Employment Relationship. Promisor acknowledges and agrees that Promisor’s
employment relationship with Company is “at will” and may be terminated at any time for any reason
or for no reason whatsoever.

     9. Enforcement. For any breach of the provisions of this Agreement, Promisor
agrees that Company shall be entitled to such remedies as are provided under Utah law.

     10. Miscellaneous. This Agreement is binding upon and for the benefit of the
parties, their respective officers, directors, employees, partners, principals, successors and
assigns. The right to receive Proprietary Information may not be assigned. Failure to enforce
any provision of this Agreement shall not constitute a waiver of any term hereof. This Agreement
shall be governed by the laws of the State of Utah, without giving effect to any choice or conflict
of law provision or rule (whether in the State of Utah or any other jurisdiction) that would cause
the application of the laws of any jurisdictions other than the State of Utah. If legal action is
commenced by the parties hereto with respect to the subject matter hereof, the parties agree that
the jurisdiction and venue of such action shall be in the state or federal Utah court of competent
jurisdiction. The parties hereby accept such State’s jurisdiction and agree to accept service of
process as if they were personally present and served within such jurisdiction. The prevailing
party in any action or proceeding to enforce this Agreement shall be entitled to its reasonable
attorneys fees and costs incurred in connection therewith.

	 	 	 	 	 
	 	COMPANY:

ZARS, INC.

 	 
	 	By:  	/s/ Robert Lippert
 	 
	 	 	 	 
	 	Its: President and CEO 	 
	 
	 	PROMISOR:

 	 
	 	/s/ Charles McLeskey
 	 
	 	Charles McLeskey 	 
	 	 	 
	 

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