DEVELOPMENT AND LICENSE AGREEMENT

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406.

1.

DEFINITIONS

1.1

“ Affiliate ” means, with reference to any Person, any other Person directly or indirectly controlling, controlled by/or under common control with such Person, and “control” means the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

1.2

“ Applicable Laws ” means all laws, treaties, ordinances, judgments, directives, injunctions, orders of any court, arbitrator or governmental agency or authority, rules, regulations, interpretations and authorizations of any international, national, regional, local or other governmental body, agency, authority, court or Person having jurisdiction over or related to the development, registration, manufacture and sale of the Licensed Product, as may be in effect from time to time.

1.3

“ Development Plan ” means the work plan for continued development and testing of the Licensed Product attached hereto as Appendix A , which may be amended from time to time upon mutual written agreement of the Parties.

1.4

“ FDA ” means the United States Food and Drug Administration or any successor entity.

1.5

“ Field ” means the topical treatment of all human dermatological conditions.

1.6

“ Force Majeure Event ” means any action or inaction which is not reasonably within the control of the Party claiming the benefit of force majeure, including, without limitation, acts of God, terrorism, unanticipated government regulations, labor disputes, floods, fires, civil commotion, embargoes, quotas, any manufacturing or supply delays by a third party beyond a Party’s reasonable control or any delays or detention by customs, health or other government authorities.

1.7

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis.

1.8

“ INDA ” means an Investigational New Drug Application submitted to the FDA.

1.9

“ Launch Date ” means the date of the first commercial sale of the Licensed Product by SKINMEDICA.

1.10

“ Licensed Know-How ” means, except to the extent published or otherwise known, all proprietary know-how, trade secrets, unpatented inventions, technical data, manufacturing processes and knowledge concerning appropriate manufacturing equipment, formulations, technology and technical information which are as of the Effective Date or thereafter during the Term owned or controlled by DOW relative to the Licensed Product in the Field, but excluding Work Product.

1.11

“ Licensed Patent ” means United States Patent No. 6,387,383 titled, ‘Topical low- viscosity gel composition” issued May 14, 2002 and any extensions or reissues thereof and any patent in the Territory claiming priority to the originally filed application from which the ‘383 patent issued or to the progeny of such application, with the exception of United States Patent No. 6,517,847, which shall not constitute a Licensed Patent.

1.12

“ Licensed Product ” means all forms of a topical aqueous gel product containing desonide as the sole active ingredient.

1.13

“ NDA ” means a New Drug Application or application for approval to market submitted to the FDA.

1.14

“ Net Sales ” means the gross amount invoiced by SKINMEDICA for the sale or other disposition of the Licensed Product, less the following: (a) customary quantity, trade, and/or cash discounts, allowances, chargebacks, rebates and price adjustments or reductions allowed or given as consistently applied by SKINMEDICA; (b) actual credits, rebates, or refunds for Licensed Products that are rejected, returned or destroyed by customers; (c) freight, postage and shipping expenses to the extent

included in the gross invoiced amount and separately itemized on the invoice; and (d) sales and other excise taxes and duties directly related to the sale, to the extent included in the gross invoiced amount and separately itemized on the invoice, all applied in accordance with GAAP. For purposes of clarity, any Licensed Product delivered to a third party without charge (e.g., “free goods”) or any Licensed Product used in any new clinical or marketing-initiated trial supported by SKINMEDICA without charge to the user shall not be included in Net Sales.

1.15

“ Party ” or “ Parties ” means, individually, SKINMEDICA or DOW, as the context so requires, and collectively, SKINMEDICA and DOW.

1.16

“ Person ” means any individual, partnership, limited liability company, association, joint venture or corporation.

1.17

“ SKINMEDICA Trademark(s) ” means any of the trademarks, service marks or trade names used by SKINMEDICA.

1.18

“ Territory ” means the United States, its territories and possessions.

1.19

“ Valid Claim ” means a claim of an issued and unexpired Licensed Patent which has not: (a) expired or been canceled, (b) been declared invalid by an unreversed and unappealable or unreversed and unappealed decision of a court of competent jurisdiction; or (c) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.

1.20

“ Work Product ” means any and all work product created, gathered or generated by or on behalf of DOW in its performance under the Development Plan including, without limitation, clinical data, toxicology data, analytical data, professional opinions, statistical analysis, clinical results, and analysis of any and all of the foregoing data.

2.

RIGHTS AND RESTRICTIONS

2.1

Subject to the terms and conditions of this Agreement, DOW hereby grants to SKINMEDICA an exclusive right and license: (i) under the Licensed Patent, to make or have made, use, and sell the Licensed Product in the Field in the Territory; and (ii) to utilize the Licensed Know-How to make or have made, use, and sell the Licensed Product in the Field in the Territory (sometimes collectively the “ SKINMEDICA Licenses ”). The foregoing shall not be construed to limit DOW’s rights to use or practice under the Licensed Know-How or the Licensed Patent (a) outside the scope of the SKINMEDICA Licenses or (b) for the purposes of performing its responsibilities under this Agreement, including the Development Plan.

2.2

SKINMEDICA shall not have the right to grant sublicenses under this Agreement, nor to enter into any agreement with a third party for distribution or promotion of the Licensed Product in the absence of prior written approval from DOW, which approval shall not be unreasonably withheld.

2.3

During the Term, neither Party shall undertake clinical or product development or seek regulatory approval from the FDA with regard to the Licensed Product in the Field in the Territory prior to FDA approval except pursuant to the Development Plan or by mutual agreement of the Parties. In the event SKINMEDICA pursues any such activities, after FDA approval, SKINMEDICA shall keep DOW reasonably informed of such activities.

2.4

Covenant Not to Assert . During the Term, DOW agrees not to assert United States Patent No. 6,517,847 against SKINMEDICA for SKINMEDICA’s exercise of any rights or its performance of any obligations with regard to the Licensed Product under this Agreement. This provision shall not be construed in such a way as to imply any expansion of the SKINMEDICA Licenses.

2.5

Non-Compete . During the Term, neither Party shall develop, manufacture, test, market, sell, or otherwise commercialize any topical product containing desonide in the Field in the Territory except as provided herein with regard to Licensed Product; provided, however, SKINMEDICA may, through an asset or equity purchase, acquire a line of products from a third party that includes a commercially-marketed desonide product provided that the asset value of such desonide product constitutes no more than twenty-five percent (25%) of the asset value of the entire line of products so acquired.

3.

DEVELOPMENT AND COMMERCIALIZATION

3.1

Project Coordination . SKINMEDICA and DOW each shall appoint a project coordinator (each a “ Project Coordinator ”) to coordinate such Party’s efforts under this Agreement. Each Party shall have the right to replace its Project Coordinator at any time upon written notice to the other Party. The DOW Project Coordinator will administer the Development Plan (and any amendments to the Development Plan as jointly agreed to by the Parties) and will keep the SKINMEDICA Project Coordinator informed of material developments. DOW will promptly respond to any reasonable requests by the SKINMEDICA Project Coordinator for information concerning any matters related to the development of the Licensed Product.

3.2

Meetings . The Project Coordinators (and other management and scientific personnel of the Parties as desired) will meet at a minimum on a quarterly basis for review of DOW’s progress under the Development Plan and any other issues deemed useful by the Parties. Such meetings will be held at DOW’s principal place of business or telephonically or at such other locations as the Parties may agree from time to time.

3.3

Resolution of Issues . Either of the Parties may at any time submit by written notice to the chief executive officers of the Parties any issue pertaining to the Development Plan, including, without limitation, any proposed modification to the Development Plan involving an increase or decrease in the Development Fee (defined below) pursuant to Section 4.2(c) below. Within *** after receipt of such notice, the chief executive officers of both Parties shall meet and enter into good faith negotiations to resolve the issue(s) that were the subject of such notice. During such negotiations, the Parties shall, to the extent reasonably possible consistent with prudent business

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practices, continue to perform their respective obligations under this Agreement, subject to the provisions of Section 3.4. In the event the Parties are unable to resolve such issue(s) within *** following written submission to the chief executive officers, either Party may submit the issue to the dispute resolution process set forth in Section 12 below.

3.4

Responsibilities of DOW . In addition to DOW’s other responsibilities under this Agreement, DOW shall use reasonable commercial efforts to diligently (i) undertake clinical development, product development, and other responsibilities set forth in the Development Plan and this Agreement; (ii) seek regulatory approval of the Licensed Product from the FDA as set forth in the Development Plan, it being the intent of the Parties that a key objective of the Development Plan is the expeditious clinical development, product development and regulatory approval of the Licensed Product in the Field in the Territory; and (iii) evaluate in good faith SKINMEDICA’s suggested changes to the Development Plan and use reasonable commercial efforts to minimize costs, if any, associated with any changes to the Development Plan implemented in accordance with the provisions of this Agreement. Notwithstanding any other provision of this Agreement, DOW shall be entitled in its discretion to suspend performance under the Development Plan at any time when any payment due to DOW hereunder is more than *** past due.

3.5

Responsibilities of SKINMEDICA . In addition to its other responsibilities under this Agreement, SKINMEDICA agrees to conduct or have conducted and to pay all costs relative to any photocarcinogenicity study required by the FDA with regard to the Licensed Product. With the exception of the photocarcinogenicity study, SKINMEDICA shall not be required to conduct, have conducted or to pay the costs of any material additional expanded studies, data or data analysis required by the FDA beyond those included in the Development Plan ( “Additional FDA Studies ”) that it reasonably determines are commercially over burdensome or impracticable. In the event SKINMEDICA elects not to conduct, have conducted, or pay the costs of any Additional FDA Studies, SKINMEDICA shall so notify DOW in writing (a “No-Go Notice”) within *** after notice from the FDA that such Additional FDA Studies are required, and this Agreement shall thereupon terminate automatically. In the event that SKINMEDICA does not give a No-Go Notice within ***: (i) the Additional FDA Studies to be performed prior to NDA approval will be added to the Development Plan and the Development Fee owed to DOW by SKINMEDICA will be increased appropriately in accordance with the procedures set out in Section 3.3; and (ii) SKINMEDICA shall be required to conduct or have conducted and to pay all costs relative to all Additional FDA Studies to be performed after NDA approval, and DOW will provide such assistance to SKINMEDICA with regard to such post-NDA-approval Additional FDA Studies as the Parties may mutually agree in writing.

3.6

Commercialization .

(a)

SKINMEDICA shall use reasonable commercial efforts to diligently undertake market development, launch, and sales and marketing activities for the Licensed Product in the Territory and shall promptly notify DOW in writing of the

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Launch Date. In the event SKINMEDICA does not launch the Licensed Product in the Territory within *** after FDA approval of the Licensed Product: (i) SKINMEDICA shall provide DOW notice of delay and the reasons for the delay; and (ii) SKINMEDICA shall, upon notice to DOW, have the option of extending the Launch Date by a period of not more than *** beyond such *** post-FDA-approval period (the “ Extended Period ”).

(b)

If, at the end of the Extended Period, the Launch Date has still not occurred, DOW shall have the right to terminate this Agreement pursuant to Section 6.2, provided , however , that if such delay is due to a Force Majeure Event the provisions of Section 13.4 shall apply. In the event DOW terminates this Agreement after the conclusion of the Extended Period due to SKINMEDICA’s failure to launch the Licensed Product and successfully licenses a third party to commercialize the Licensed Product under the Licensed Patent in the Field in the Territory, DOW shall pay SKINMEDICA *** of any license fees and royalty revenue based on sales of the Licensed Product in the Field in the Territory that are received by DOW under such third-party license until the aggregate of such payments to SKINMEDICA totals *** of Development Fees paid to DOW by SKINMEDICA.

3.7

Use of Subcontractors by DOW . Subject to SKINMEDICA’s approval, not to be unreasonably withheld, the Parties understand and agree that DOW shall have the right to use the services of subcontractors to perform any of its obligations under the Development Plan.

3.8

Manufacture . SKINMEDICA shall be responsible for the selection of the entity that will manufacture the Licensed Product, after consultation with DOW. SKINMEDICA shall use its commercially reasonable efforts to make such selection, by notice in writing to DOW, as soon as reasonably possible after the Effective Date of this Agreement. SKINMEDICA understands that any delay in the selection of the manufacturer may delay the filing of the NDA for the Licensed Product. DOW shall, at no additional expense to SKINMEDICA, provide such third party manufacturer and SKINMEDICA all reasonable assistance in enabling the manufacturer to manufacture and supply the Licensed Product.

3.9

Inspection Rights . During the Term, SKINMEDICA and its authorized representatives shall have the right, during normal business hours and no more often than twice each calendar year, to inspect DOW’s facilities and review the testing process and quality control procedures used with regard to activities under the Development Plan, upon reasonable notice which, in any event, shall be not less than one (1) week. All such inspections shall be limited to the portions of such facilities which are being utilized in the performance of this Agreement or the Development Plan.

3.10

Exchange of Information . Each Party will immediately report to the other any information acquired by such Party concerning any side effect, injury, toxicity or

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sensitivity reaction, or any unexpected incidence, and the severity thereof, associated with any use of the Licensed Product pursuant to the Development Plan.

4.

PAYMENT TERMS . Subject to the terms and conditions of this Agreement, SKINMEDICA shall make the following payments:

4.1

License Fee . Within five (5) business days following the Effective Date, SKINMEDICA shall pay DOW *** (the “ License Fee” ), which shall be non-refundable.

4.2

Development Fees .

(a)

SKINMEDICA shall pay DOW *** (the “ Initial Development Fee ”) in installments as follows:

(b)

SKINMEDICA shall pay DOW an additional development fee in the amount specified by the FDA as a user fee, estimated to be approximately Six Hundred Thousand Dollars ($600,000) (the “ FDA Development Fee” ), due and payable at least *** prior to the scheduled submission of the NDA. Provided that SKINMEDICA has paid the FDA Development Fee to DOW, DOW shall be responsible for payment of the user fee to the FDA at the time of FDA submission.

(c)

As the development process is by its nature unpredictable, the Development Fees set out above represent the Parties’ good-faith estimate of applicable development costs and will be modified in the event of changed circumstances, which shall include, but not be limited to, significant cost under or overruns

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(i.e., greater than *** in any six-month period), and, subject to the provisions of Section 3.5, any Additional FDA Studies included in the Development Plan.

(d)

DOW shall provide sufficient information to SKINMEDICA regarding the actual expenditures related to the Development Plan in order for SKINMEDICA to determine if cost under or overruns under the Development Plan and to determine whether, in its opinion, any Development Fees should be adjusted upwards or downwards in accordance with the procedure set forth in Section 3.3.

(e)

In the event any payments hereunder are due on a United States federal holiday or weekend, such payments shall be due on the immediately following business day.

4.3

Milestone Payments . SKINMEDICA shall pay DOW, within *** following SKINMEDICA’s receipt of written notice from DOW certifying that the applicable milestone has occurred, the following non-refundable milestone payments:

(a)

Filing of an NDA – ***.

(b)

Approval of the NDA by the FDA – ***.

4.4

Royalties to DOW .

(a)

SKINMEDICA shall pay to DOW royalties equal to *** of all Net Sales of the Licensed Product. Payment of such royalties shall be made on a quarterly basis by the 15th day of May, August, November, and February each year on Net Sales occurring during the immediately preceding calendar quarter. For example, payment of royalties will be due by the 15 ^th day of May on Net Sales occurring during the first calendar quarter (January through March) of the same year.

(b)

On February 15 ^th of each year after the calendar year in which date occurs which is *** after NDA approval of the Licensed Product (such calendar year being hereinafter referred to as the “first royalty year”), SKINMEDICA Shall pay DOW a minimum annual royalty of *** (“ Minimum Annual Royalty” ). The first Minimum Annual Royalty payment shall be prorated based on the number of the days remaining in the first royalty year after the date which is, *** after NDA approval of the Licensed Product. In the event the royalties payable by SKINMEDICA to DOW based on Net Sales occurring in any calendar year is less than the Minimum Annual Royalty (as prorated for the first royalty year), SKINMEDICA shall pay the difference between the royalties

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payable to DOW and the Minimum Annual Royalty on February 15 ^th of the following calendar year. In the event the royalties payable by SKINMEDICA to DOW based on Net Sales occurring in any calendar year is more than the Minimum Annual Royalty (as prorated for the first royalty year), SKINMEDICA shall owe no additional payment for that calendar year pursuant to the Minimum Annual Royalty.

4.5

Reporting Obligations . With respect to all royalty payments due to DOW under this Agreement, SKINMEDICA shall provide, with each such royalty payment, a quarterly report setting forth the following information:

(a)

the total gross amount invoiced by SKINMEDICA for the sale or other disposition of the Licensed Product during the applicable calendar quarter;

(b)

the type and amount of adjustments from gross invoiced amounts to Net Sales of the Licensed Product during the applicable calendar quarter;

(c)

the total Net Sales of the Licensed Product during the applicable calendar quarter;

(d)

the calculation of royalties payable, with sufficient detail to enable DOW to determine whether such calculation is in compliance with the provisions of this Agreement; and

(e)

the total royalties due.

4.6

Financial Audit Rights .

(a)

SKINMEDICA shall keep and maintain at its principal executive offices records of all payments and proceeds which provide evidence supporting the calculation of royalties due to DOW under this Agreement (the “ SKINMEDICA Records ”). SKINMEDICA Records shall be open to inspection by an independent certified public accountant selected by DOW and reasonably acceptable to SKINMEDICA at a mutually agreeable time during normal business hours within three (3) years after the termination of the calendar year to which such SKINMEDICA Records relate. This audit right shall be exercised only once during any calendar year.

(b)

DOW shall keep and maintain at its principal executive office records relating to costs under the Development Plan ( “DOW Records ”). DOW Records shall be open to inspection by an independent certified public accountant, selected by SKINMEDICA and reasonably acceptable to DOW, at a mutually agreeable time during normal business hours within three (3) years after the termination of the calendar year to which such DOW Records relate. This audit right shall be exercised only once during any calendar year.

(c)

The Party conducting the audit shall bear the expense of any such audit unless the audit reveals that errors have resulted which in the aggregate require payment by the audited Party in an amount equal to *** or more of the total amount due in any calendar year. In such event, the audited Party shall bear the reasonable costs of the audit and shall, not later than *** following delivery of a demand for payment from the other Party, pay any such amounts due.

(d)

The terms of this Section 4.6 shall survive the expiration or termination of this Agreement for any reason.

4.7

Taxes . All payments due hereunder shall be paid in full, without deduction of taxes or other fees which may be imposed by any government.

4.8

Currency . All payments to be made hereunder shall be computed and made in United States Dollars.

4.9

Interest. Any amount owed by SKINMEDICA under this Agreement that is not received by DOW on or before the date due shall bear interest at the rate of *** per month for each month or partial month after payment is due until payment is made.

5.

REPRESENTATIONS, WARRANTIES AND OTHER COVENANTS

5.1

Representations, Warranties and Other Covenants of Each Party . Each of the Parties represents, warrants and covenants to the other that:

(a)

it is not debarred, nor will it use in any capacity in performing its obligations under this Agreement, the services of any Person debarred;

(b)

it is validly existing and in good standing under the laws of the state of its incorporation;

(c)

the execution of this Agreement has been duly authorized by all necessary corporate action in accordance with all Applicable Laws;

(d)

it has the power and authority to execute and deliver this Agreement and perform its covenants, duties and obligations described in this Agreement; and

(e)

this Agreement is a valid, legal and binding obligation upon such Party.

5.2

Representations, Warranties and Other Covenants of DOW . DOW represents, warrants and covenants to SKINMEDICA that:

(a)

DOW has the right, power and authority to grant the SKINMEDICA Licenses in accordance with the terms and conditions of this Agreement;

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(b)

prior to the Effective Date, DOW has not granted to any third party any rights or licenses and has not otherwise taken any action that conflicts with or materially and adversely affects the rights granted to SKINMEDICA under this Agreement and will not grant any such rights