Exhibit 10.1

 
INTERNATIONAL DISTRIBUTION AGREEMENT
 
This International Distribution Agreement (the “Agreement”) is effective as of
the 13th day of September, 2012 (the “Effective Date”) by and between Naqu Area
pioneer Pharma co., ltd., with its principal place of business at No.1000,
Wangqiao Road, Pudong Area, Shanghai, P.R.C. (“Pioneer”) and NovaBay
Pharmaceuticals, Inc., a Delaware corporation with its principal place of
business at 5980 Horton Street, Suite 550, Emeryville, CA 94608 (“NBY”), for the
purpose of defining the rights and duties of the parties in connection with the
distribution and potential development by Pioneer of NBY’s certain proprietary
drug product.
 
WITNESSETH:
 
WHEREAS, NBY is engaged in the business of developing and commercializing
certain therapeutic products, including the Product (as defined in the
Agreement);
 
WHEREAS, Pioneer and its Holding Companies (as defined in the Agreement) have
considerable experience in the marketing, sale and servicing of medical
supplies, medical devices and pharmaceutical products;
 
WHEREAS, Pioneer wishes to obtain from NBY, and NBY wishes to grant to Pioneer,
the right to distribute the Product in the Territory (as defined in the
Agreement) subject to the terms and conditions set forth in this Agreement.
 
NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereby agree as follows:
 
1.           Definitions.  As used in this Agreement, the terms defined below
when capitalized shall have the following meanings:
 
1.1           “Applicable Laws” means all laws, ordinances, rules and
regulations of any governmental entity or Regulatory Authority that apply to the
Distribution, development and commercialization of Product in the Territory and
the activities contemplated under this Agreement.
 
1.2           “Contract Year” means: (i) with respect to the first Contract
Year, the period beginning on the Effective Date of this Agreement until
December 31, 2013, and (ii) with respect to each subsequent Contract Year, any
12-month period beginning on the end of the first Contract Year or an
anniversary thereof.
 
1.3           “Customer” means any customer for the Product solicited by
Pioneer, its Holding Companies and third party subdistributors within the
Territory.
 
 
 

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1.4           “Distribute” means to sell, distribute, market, promote, solicit
orders for and provide services in connection with the Product.  “Distributed”
and “Distribution” have correlative meanings.
 
1.5           “Holding Company” means any entity controlled by Pioneer.  For the
purpose of this definition, control means: (i) direct or indirect ownership of
fifty percent (50%) or more (or, if less than fifty percent (50%), the maximum
ownership interest permitted by applicable law) of the stock or shares having
the right to vote for the election of directors of such corporate entity or (ii)
the possession, directly or indirectly, of the power to direct, or cause the
direction of, the management or policies of such entity, whether through the
ownership of voting securities, by contract or otherwise.
 
1.6           “MAA Approval” means approval of the required MAA filed with any
Regulatory Authority in any country of the Territory.
 
1.7           “Marketing Approval Application” or “MAA” means an application
filed with any relevant Regulatory Authority in any country of the Territory to
obtain permission to commence marketing and sales of the Product in the
Territory (excluding any pricing or reimbursement approval). As of Effective
Date, the Product has received 510(k) clearances from the US FDA and is
regulated as a medical device.
 
1.8           “Order” means a written description of the Product Pioneer desires
to purchase that conforms to the requirements of this Agreement and is sent to
NBY by mail, email, facsimile or similar means.
 
1.9           “Product” means NBY’s proprietary pharmaceutical product
incorporating the compound internally referred to as NVC-101 as an active
ingredient as currently developed for commercial sale under the name
NeutroPhase® outside the Territory and as may be modified by mutual agreement of
the Parties for approval by any Regulatory Authority, in the finished form
(including the spray pump).  An initial draft of the specifications for the
Product as currently developed for commercial sale outside the Territory is
attached as Exhibit A and the Parties shall mutually agree from time to time to
update such specifications as necessary for approval by any Regulatory
Authority.
 
1.10           “Regulatory Approvals” means any and all approvals, applications,
registrations, licenses, certifications and other requirements imposed by the
relevant Regulatory Authority (defined below).
 
1.11           “Regulatory Authorities” means, in relation to a country in the
Territory, the regulatory agency, department, bureau or other governmental
entity involved in regulating any aspect of the conduct, development,
manufacture, market approval, sale, distribution, packaging or use of the
Products.
 
 
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1.12           “Territory” means Hong Kong, Macau, Taiwan, Singapore, Malaysia,
Indonesia, Myanmar, Philippines, Thailand, Vietnam, Brunei, Cambodia and Laos.
 
2.           Appointment and Acceptance.
 
2.1           Grant of Distribution Rights.  Subject to the terms and conditions
of this Agreement, NBY grants to Pioneer, and Pioneer accepts, an exclusive
right to Distribute the Product directly to Customers in the Territory for
indications approved by the US FDA or by the Regulatory Authority in the
Territory, for the Product.  Pioneer may appoint any of its Holding Companies in
the Territory, solely for so long as such entity remains a Holding Company, to
Distribute Product in the Territory in accordance with the terms and conditions
hereunder.  In the event Pioneer wants to appoint any other third party (other
than a Holding Company) to Distribute Product in the Territory, Pioneer shall
enter into a written agreement (a “Subdistribution Agreement”) with such third
party containing terms and conditions that are consistent with the terms and
conditions of this Agreement and including provisions as materially protective
of the Product and NBY as this Agreement. Pioneer shall, in addition to the
quarterly report provided for under Section 6.6, provide NBY with a complete and
updated list of third party subdistributors appointed by Pioneer for the
Distribution of Product at the end of each quarter and otherwise upon NBY’s
reasonable request.  Upon NBY’s request, Pioneer shall also provide NBY with a
copy of the Subdistribution Agreement (with an English translation) with any
such third party subdistributor (which copy may be redacted for information not
relevant to the Distribution of Product). Pioneer shall take into reasonable
consideration any concerns or issues raised by NBY with respect to any such
third party subdistributors and the parties agree to discuss in good faith to
resolve any such concerns or issues.  In any event, Pioneer shall remain
responsible to NBY for all activities of its Holding Companies and/or third
party appointees (including subdistributors and other subcontractors) to the
same extent as if such activities had been undertaken by Pioneer itself.
 
2.2           No Distribution Outside Territory; Grey Market
Activities.  Notwithstanding the rights granted to Pioneer to Distribute the
Product in Section 2.1 above, to the extent permitted by Applicable Law, Pioneer
shall not Distribute the Product outside the Territory and Pioneer shall not
Distribute Product in the Territory for any indication unless and until the
Product has received the required MAA Approval for such indications.  Pioneer
shall use commercially reasonable efforts to prevent any Product that has been
Distributed hereunder from being further sold, distributed or otherwise
transported for use outside the Territory or for indications that the Product
has not received MAA Approval, and Pioneer shall refer to NBY any inquiries and
leads that Pioneer may receive for the purchase of Product for such purposes.
 
 
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2.3           No Conflicts.  Pioneer represents and warrants to NBY that except
for the Product and the list of products set forth in Exhibit B attached hereto,
it does not currently Distribute any products that directly compete with the
Product (“Competing Products”).  Pioneer agrees that, during the Term (as
defined in Section 15.1) and to the extent permitted under Applicable Law, it
will not Distribute any Competing Product in the Territory without NBY’s prior
written approval.  If Pioneer Distributes products in the Territory that are
deemed in NBY’s judgment to constitute Competing Products, such Distribution
will be considered a breach of this Agreement and NBY shall have the right, at
its sole discretion, to either (i) terminate this Agreement in accordance with
Section 15.2(a), or (ii) convert the appointment in Section 2.1 above to a
non-exclusive arrangement, in each case without prejudice to any rights or
remedies available to NBY under Applicable Law.
 
3.           Annual Minimums, Ordering, Forecasts, Delivery, and Acceptance.
 
3.1           Annual Minimums.  During the Initial Term (as defined below in
Section 15.1), Pioneer shall purchase from NBY (as provided in this Article 3)
for Distribution under this Agreement, not less than the minimum quantities set
forth on Exhibit C (“Annual Minimums”).  Prior to the end of the third Contract
Year and every other Contract Year thereafter, the parties will negotiate and
establish the Annual Minimums for the two upcoming Contract Years, provided that
such Annual Minimums will not be less than the Annual Minimum of the
then-current Contract Year.  In the event that Pioneer fails to purchase
sufficient quantities to meet the Annual Minimums, NBY shall have the right, at
its sole discretion, to either (i) terminate this Agreement in accordance with
Section 15.2(a), or (ii) convert the appointment in Section 2.1 above to a
non-exclusive arrangement, in each case without prejudice to any rights or
remedies available to NBY under Applicable Law.
 
3.2           Forecasts.  By the 15th day of each month starting October 15,
2012, Pioneer shall provide NBY with its best, good-faith rolling forecast of
the Product that Pioneer expects to order from NBY under this Agreement in the
immediately succeeding three (3) month period (each, a “Forecast”).  Each
Forecast shall be provided in writing, in such form as NBY reasonably
requires.  Pioneer shall use commercially reasonable efforts to ensure that its
Forecasts are as accurate as possible and its Orders do not significantly
deviate from the Forecasts.
 
3.3           Orders.  Orders for Product by Pioneer shall be placed with NBY at
least ninety (90) days prior to the requested date of receipt of such
Product.  All Orders must, at a minimum, include the Product description,
quantity of Product ordered, the applicable Price (as defined below in Section
4.2), requested delivery date(s), any export/import information as well as such
other information NBY may reasonably request from time to time to enable NBY to
fill the Order.  For Contract Years 1 and 2, Pioneer shall order, at a minimum,
[***] Units (as defined in Exhibit A) of the Product under each Order; and [***]
Units for Contract Year 3 and beyond..
 
 
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3.3.1           Acceptance, Suspension and Cancellation.  No Orders are binding
upon NBY unless accepted by NBY in writing.  NBY may accept or reject any Order,
in whole or in part, in its sole discretion.  Once accepted by NBY, Pioneer may
cancel or reschedule Orders for Product only with NBY’s prior written approval.
 
3.3.2           Order Terms.  Pioneer may use its standard purchase order form
to order Product; however, the terms and conditions of this Agreement shall
supersede any different, conflicting, or additional terms on Pioneer’s Orders,
acknowledgment or other document related to the purchase and sale of Products
and NBY hereby expressly rejects any terms in any order that are different from,
in conflict with or in addition to the terms and conditions hereof.  It is the
intention of both parties hereto that the acceptance, even in writing, of any
such purchase or sales document does not constitute a modification or amendment
of, or addition to, the terms of this Agreement unless accompanied by a written
amendment in the form required by Section 20.1.
 
3.4           Delivery.  All Product delivered pursuant to this Agreement shall
be suitably packed for shipment in NBY’s standard shipping cartons, marked for
shipment, and delivered to a common carrier and shipped FCA(if shipment by air)
or FOB (if shipment by sea) (Incoterms 2012) point of shipment (e.g. airport of
dispatch) in the United States as identified by NovaBay, at which time title to
the Product and risk of loss and damage shall pass to Pioneer.  Each Order may
be delivered in installments. Unless Pioneer instructs NBY in writing to select
the carrier, Pioneer shall select the carrier.  Pioneer shall, at its own cost
and expenses, be responsible for the carriage and insurance of Products from the
country of manufacture to the point of entry of the Territory. Pioneer shall
also bear all applicable taxes, duties and similar charges that may be assessed
against the Product after delivery to the point of entry of the
Territory.  Notwithstanding the passage of title under this Section 3.4, NBY
retains and Pioneer grants a purchase-money security interest in the Product and
in any proceeds from Pioneer’s resale of the Product, until the full invoice
amount for such Product has been paid in full to NBY.
 
3.5           Return Authorizations.   All Products shall be deemed irrevocably
accepted by Pioneer upon receipt.  Notwithstanding the foregoing, Pioneer may
submit a warranty claim for any Product that do not conform to the limited
warranty granted to Pioneer in accordance with Section 9.1 by requesting a
return authorization for any Product from NBY by mail, e-mail or telefax with a
proper explanation of the alleged defect.  Within ten (10) days of Pioneer’s
receipt of such a return authorization, the Product should be returned to NBY
with freight prepaid by Pioneer.  The party shipping Product pursuant to this
Section 3.5 shall bear the entire risk of loss for Product during
shipment.   NBY shall reimburse Pioneer for any costs of transportation incurred
by Pioneer in connection with the proper return to NBY of non-conforming
Product.  In the case of improperly returned Product, Pioneer shall pay
transportation charges in both directions.  Except as provided in this
Section 3.5, all Product delivered under this Agreement are non-returnable.
 
 
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3.6           Inventory.  Pioneer shall stock and maintain an adequate inventory
of all Products to satisfy commercially reasonable demand for such Product, as
to avoid any backorder to the Customer.
 
4.           Prices and Payment Terms.
 
4.1           Technology Access Fees.  In consideration for the exclusive rights
granted under the Agreement, Pioneer will pay NBY the following amounts as set
forth below:
 
4.1.1           Pioneer shall pay NBY a technology access fee in the total
amount of US$500,000, which will paid as follows,
 
                    4.1.1.1 US$250,000 is payable immediately upon the execution
of this Agreement;
 
                    4.1.1.2  US$250,000 shall be due and payable on or before
December 15, 2012.
 
4.1.2           Within thirty (30) days of the submission of the first Marketing
Approval Application for the Product to a relevant Regulatory Authority in any
country in the Territory except Singapore, Hong Kong or Malaysia, Pioneer shall
pay NBY a technology access fee in the amount of US$100,000; and
 
4.1.3           Within thirty (30) days of the receipt of the first MAA Approval
of the Product from a Regulatory Authority of any country in the Territory
except Singapore, Hong Kong or Malaysia, Pioneer shall pay NBY a technology
access fee in the amount of US$100,000.
 
4.2           Product Payments.  Pioneer shall pay NBY the prices for the
Product under this Agreement (the “Prices”) as set forth in Exhibit D, subject
to a total cumulative credit not to exceed U.S. $[***].  Such credit may be
payable by NBY unregistered common stock (“NBY Stock”) and such NBY Stock may be
issued in accordance with the schedule set forth in Exhibit D. The NBY stock
will be issued to Pioneer Pharma (Singapore) Pte Ltd., a   Holding Company of
Pioneer.   Prior to each shipment of Products, NBY will submit an invoice to
Pioneer and Pioneer shall pay by wire transfer [***]% of the invoiced amount
upon shipment of the Products to the Territory and pay the rest of the
balance  by wire transfer ([***]% of the invoiced amount) within one hundred
twenty (120) days from the Bill of Lading date.  The difference in the Price
paid by Pioneer hereunder and the selling price charged by Pioneer to Customers
shall be Pioneer’s sole remuneration hereunder.
 
4.3           Payment Terms.  All payments shall be made in U.S. Dollars in
immediately available funds.  A monthly interest rate of [***] percent ([***]%),
or the maximum rate permitted by Applicable Law, whichever is lower, shall be
applied to all outstanding balances not paid.  All payments shall be net of bank
charges and exchange commission, which shall be borne by Pioneer.
 
 
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4.4           Taxes.  Prices are exclusive of all applicable taxes.  Pioneer
agrees to pay all taxes or other charges associated with the Distribution and
delivery of the Product ordered, including, but not limited to, sales, use,
excise, value-added and similar taxes and all customs duties, tariffs or
governmental impositions, provided these are incurred in the Territory, but
excluding United States federal, state and local taxes on NBY’s net income.  In
the event NBY is required to pay any taxes or charges incurred in the Territory
in connection with the delivery or distribution of Products under this
Agreement, Pioneer shall reimburse NBY for such taxes or charges paid by NBY.
 
5.           Marketing and Promotion.
 
5.1           Marketing and Sales Efforts.  Pioneer shall keep NBY reasonably
informed of its marketing strategy and plans for the Product within the
Territory (including meeting with NBY at least twice a year in person or by
teleconference to discuss such matters) and shall incorporate NBY’s reasonable
comments and suggestions with respect thereto.  Pioneer shall use its best
efforts to promote and sell the Product in each province within the Territory as
soon as possible after MAA Approval is obtained by or on behalf of NBY,
including, without limitation, [***].  Any and all costs associated with
advertising, sales, marketing, promotion, workshops, seminars, conventions,
exhibits or other selling costs shall be the responsibility of Pioneer.
 
5.2           Materials.  Pioneer may use such advertising and promotional
materials as NBY may provide from time to time.  In addition, Pioneer may create
advertising and promotional materials for Product (including translations of
such materials into the native languages of the Territory), provided that
Pioneer shall submit all such materials to NBY (including the English
translation thereof as applicable) for approval at least thirty (30) days prior
to the use or distribution of such materials.  Pioneer agrees to amend any such
materials if and as requested by NBY, prior to any use thereof.
 
6.           Regulatory and Quality Assurance.

6.1           MAA Approval.  Pioneer will file and register all MAAs and/or
required registrations and seek all MAA and all necessary registration and
government and Regulatory Approvals in the Territory.   NBY shall furnish
Pioneer with such assistance and cooperation as may be reasonably necessary in
connection with securing of such government or Regulatory Approval.  Pioneer
will keep NBY reasonably informed with respect to such matters (including
meeting at least twice a year in person or by teleconference to discuss such
matters).     NBY will reimburse Pioneer with the actual registration cost,
provided, however such amount shall not exceed $[***] and such reimbursement
shall be in the form of a credit towards Pioneer’s future purchase of the
Product.  NBY will provide reasonable amount of Products, free of change, for
the purpose of sample testing and MAA approval if required by local authorities
and regulations. After Pioneer’s receipt of MAA Approvals in the Territory, if
there is any material change(s) to NBY’s marketing approvals in U.S., NBY will
promptly inform Pioneer of such change(s) and Pioneer, in its reasonable
judgment, may file any additional Regulatory Approval Applications with
Regulatory Authorities in the Territory.
 
 
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6.2           Permits.  To the extent permitted under Applicable Law, Pioneer,
at its own cost, shall be responsible for obtaining all government and other
approvals beyond MAA or Regulatory Approval, including permits, registrations,
licenses, exemptions, exceptions and other permissions, etc., necessary and
useful to the lawful Distribution and use of the Product in the Territory,
including without limitation any pricing or reimbursement approvals, import and
export licenses and permits (collectively, “Permits”), unless otherwise agreed
in writing by the parties.  Pioneer shall confer with NBY as to the type of
Permits which Pioneer may apply and keep NBY informed with respect to any Permit
acquisitions.   In the event of termination or expiration of this Agreement,
Pioneer agrees to execute such documents, render such assistance, and take such
other action as NBY may reasonably request, at NBY’s expense, to apply for,
register, perfect, confirm, and protect NBY’s rights in the Permits including
(without limitation) an assignment of all such Permit applications or Permits to
NBY or such other third party as NBY may designate in writing.
 
6.3           Regulatory.  Pioneer shall comply fully with any and all
Applicable Laws of the Territory.  Pioneer acknowledges that its obligation to
comply with all Applicable Laws of the Territory shall include, without
limitation, the following requirements: (i) prior to placing the first Order
under Section 3.3 for resale to a Customer, Pioneer shall hold valid Permits
required for lawful Distribution of the Product; (ii) Pioneer shall maintain
adequate written procedures for warehouse control and Distribution of Product in
accordance with Applicable Laws and in such a form as to enable NBY and
Regulatory Authorities to trace the location of the Product; (iii) Pioneer shall
comply with Applicable Laws with regard to timely reporting of adverse events,
and shall immediately (and in any event within 24 hours) notify NBY of any such
adverse events.  Pioneer shall refer all written and oral complaints of any kind
concerning the Product to NBY as promptly as possible (and in any event within
48 hours).  Pioneer shall keep a record of all Customer complaints.
 
6.4           Quality Assurance.  Pioneer will maintain a characterized quality
system in its organization and in particular will ensure that: (i) Pioneer will
be able to proceed to recall specific Product if NBY so instructs; (ii) Pioneer
keeps a file of the locations and conditions of all Product including any
relevant batch and/or lot numbers in its Territory; and (iii) Pioneer personnel
performing under this Agreement have appropriate technical skills, training,
experience and expertise with respect to the Product to enable Pioneer to
perform its responsibilities set forth herein.
 
 
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6.5           Recalls.  Pioneer agrees that, if Pioneer discovers or becomes
aware of any fact, condition, circumstance or event (whether actual or
potential) concerning or related to any Product which may reasonably require a
recall, market withdrawal, safety alert, and/or field correction under
Applicable Law (each, a “Recall”) for such Product, Pioneer shall promptly
communicate such fact, condition, circumstance or event to NBY within
twenty-four (24) hours.  In the event (i) any Regulatory Authority requests a
Recall for any Product, (ii) a court or other government agency of competent
jurisdiction orders a Recall, or (iii) NBY determines, in its sole discretion,
that a Recall of any Product should be conducted, Pioneer shall promptly
implement any such Recall, but in any event not later than forty-eight (48)
hours following receipt of notice from NBY.  NBY shall be solely responsible for
all Recall determinations and shall control all aspects of the Recall process,
including communicating with the applicable Regulatory Authorities or other
third parties concerning the Recall.  Pioneer may not initiate or conduct a
Recall of any Product without prior written approval by NBY.  NBY, at its own
expense, shall replace any Product under Recall ordered by Pioneer (whether sold
to a Customer or in inventory) or provide a full refund to Pioneer for any such
Product.
 
6.6           Records and Reports.  Pioneer shall provide NBY with quarterly
sales tracing reports that include Customer address, Product and any relevant
serial, batch or lot numbers in such form and by such means as NBY reasonably
requires.
 
6.7           Packaging.  Unless otherwise approved by NBY in writing, Pioneer
shall not repackage or otherwise alter or modify the Product, and shall only
resell the Product in the same packaging as originally received from NBY.  In
addition, except for the addition of information required by Applicable Law,
Pioneer shall not re-label Product supplied to Pioneer by NBY hereunder without
the prior written consent of NBY.
 
7.           Audit, Books and Records.  NBY reserves the right for it or its
representatives to audit Pioneer and to inspect Pioneer’s facilities to confirm
compliance with the obligations of this Agreement once a year, or at a frequency
which is reasonably needed by NBY to comply with Applicable Laws.
 
8.           Intellectual Property.
 
8.1           Product.  Pioneer acknowledges that the Product and any
accompanying documentation and/or promotional or training materials are covered
by intellectual property rights owned or licensed by NBY; and other than as
expressly set forth in this Agreement, no license or other rights in such
intellectual property are granted to the Pioneer, and all such rights are hereby
expressly reserved by NBY.  Accordingly, Pioneer shall not (i) modify any
Product or documentation NBY provides to Pioneer without the prior written
approval of NBY or (ii) reverse engineer any Product, or otherwise attempt to
discern the trade secret information of the Products, nor encourage or assist
any third party in doing so.
 
 
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8.2           Trademarks.  During the Term, Pioneer shall have the right to
indicate to the public that it is an authorized distributor of the Product and
to advertise within the Territory the Product under the trademarks, marks, and
trade names that NBY may adopt from time to time, including “NeutroPhase” and
the NeutroPhase trademark in local language in the Territory”  (collectively,
“NBY’s Trademarks”).  NBY’s Trademarks shall at all times remain the exclusive
property of NBY and all use of NBY’s Trademarks shall inure to the exclusive
benefit of NBY.
 
8.3           Trademark Restrictions.  All representations of NBY’s Trademarks
that Pioneer intends to use shall be exact copies of those used by NBY or shall
first be submitted to NBY for approval (which shall not be unreasonably
withheld) of design, color and other details.  Pioneer shall not engage in any
activity, which would adversely affect the name, reputation or goodwill of NBY
or the Product.  In addition, Pioneer shall fully comply with all reasonable
guidelines, if any, communicated by NBY concerning the use of NBY’s
Trademarks.  In no event may Pioneer use or authorize any use of any of NBY’s
Trademarks in any domain name whether registered, owned, or operated by or on
behalf of Pioneer.  Pioneer shall not challenge or assist others to challenge
NBY’s Trademarks (except to the extent such restriction is expressly prohibited
by Applicable Law) or the registration thereof or attempt to register any
trademarks, marks or trade names confusingly similar to those of NBY.  Any
violation of the foregoing shall be deemed a material breach of this Agreement
that is incapable of cure, entitling NBY to terminate this Agreement immediately
upon notice to Pioneer.  Except as set forth in this Article 8, nothing
contained in this Agreement shall grant or shall be deemed to grant to Pioneer
any right, title or interest in or to NBY’s Trademarks.  Upon termination of
this Agreement, except as provided in Section 15.3.1, Pioneer shall immediately
cease to use any and all of NBY’s Trademarks.
 
9.           Warranty and Disclaimers.
 
9.1           Limited Product Warranty.  To the extent permitted under
Applicable Law, NBY warrants to Pioneer (and not to Customers) that NBY will
manufacture the Product in accordance with then-current good manufacturing
practices (GMP) promulgated by the applicable Regulatory Authority and other
applicable laws, rules and regulations and all Products supplied to Pioneer
hereunder conform to the specifications therefor for the period of the shelf
life as set forth in the packaging thereof.  To the extent permitted under
Applicable Law, NBY provides no warranties of any kind, whether express or
implied, to Customer and Pioneer shall be responsible for providing a warranty
to Customers and handling Customer warranty claims and returns for allegedly
non-conforming Product.  Any warranty made by Pioneer to its Customers with
respect to the Product shall not obligate NBY in any way and Pioneer shall
retain full responsibility for the performance of any warranties extended to the
Customer.  All Pioneer warranty claims shall be made in accordance with Section
3.5 above.  Subject to the foregoing and to Section 9.2 below, upon NBY’s
confirmation of a failure of any Product to conform to the limited warranty
provided hereunder, NBY will, in its sole discretion, either replace the
non-conforming Product or credit Pioneer’s account for the non-conforming
Product purchase price paid therefor.
 
 
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9.2           Warranty Limitations.  NBY shall not be liable for misbranding
with respect to any Product labeling or package insert text provided or used by
Pioneer, or any translation thereof and NBY shall not be liable for any Product
adulteration or failure to meet the Product specifications due to shipping,
handling, storage, use or packaging of the Product by Pioneer, its Holding
Companies, its third party contractors or their respective personnel.
 
9.3           Pioneer Warranties.  Pioneer warrants that its entry into this
Agreement is rightful and does not violate any other Agreement to which it is a
party, and its conduct in performing its obligations under this Agreement shall
conform to all Applicable Laws, general and local industry and medical standards
and good commercial practices, and that it has obtained, or will have obtained
prior to the obligation of NBY to pay any amount of the credit that may become
payable pursuant to Section 4.2 hereof, any and all approvals that may be
required by it or Pioneer Pharma (Singapore) Pte Ltd. to have been obtained
under Applicable Laws, including the laws of the Peoples Republic of China, for
NBY to issue the NBY common stock to Pioneer Pharma (Singapore) Pte Ltd. that it
may issue pursuant to the terms of Section 4.2 and Exhibit D hereof.
 
9.4           Disclaimer.  SUBJECT TO NBY’S WARRANTIES TO PIONEER AS DESCRIBED
IN SECTION 9.1, AND TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PRODUCT
ARE PROVIDED TO PIONEER ON AN “AS IS” BASIS AND WITHOUT WARRANTY OF ANY
KIND.  EXCEPT AS EXPRESSLY SET FORTH IN SECTION 9.1, NBY DOES NOT MAKE ANY OTHER
WARRANTY TO PIONEER, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH
RESPECT TO PRODUCT, SPECIFICATIONS, SUPPORT, SERVICE OR ANY OTHER MATERIALS AND
NBY SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT, AND FITNESS FOR A PARTICULAR PURPOSE.
 
9.5           Limitation of Liability.  TO THE EXTENT PERMITTED BY APPLICABLE
LAW, IN NO EVENT SHALL NBY BE LIABLE TO PIONEER FOR ANY INCIDENTAL, SPECIAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, COST OF PROCUREMENT
OF SUBSTITUTE GOODS, OR ANY INDIRECT DAMAGES EVEN IF NBY HAS BEEN INFORMED OF
THE POSSIBILITY THEREOF AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF
ANY LIMITED REMEDY STATED HEREIN.  WITHOUT LIMITING THE FOREGOING, NBY’S
AGGREGATE LIABILITY ARISING OUT OF THIS AGREEMENT SHALL BE LIMITED TO THE TOTAL
AMOUNT PAID BY PIONEER TO NBY FOR THE PRODUCT IN THE [***] MONTH PERIOD
IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH LIABILITY.
 
 
11

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10.           Training and Support.  Upon Pioneer’s reasonable request, NBY will
use reasonable efforts to provide training to Pioneer personnel, at Pioneer’s
expenses and at times and location mutually acceptable to both parties.  Pioneer
shall provide all support on the Product to Customers.  NBY shall use reasonable
efforts to provide technical support to Pioneer if Pioneer is unable to resolve
a technical issue with respect to the Product.  Nothing under this Section 10
shall obligate NBY to furnish any assistance, information or documentation
directly to any Customer.
 
11.           Insurance.  Each party shall maintain insurance with a reputable
insurance company in an amount reasonably sufficient to cover all of its
obligations under this Agreement.  Upon each party’s request, the other party
shall furnish to the first party a certificate of insurance evidencing that such
insurance is in effect.  Each party shall notify the other party within thirty
(30) days of any cancellation or material change in its insurance policy.  If
either party’s insurance policy required hereunder is cancelled or expires, such
party shall furnish the other party a new certificate evidencing that
replacement coverage is in effect.
 
12.           Confidential Information.
 
12.1           Obligation.  Except for the purposes of performing its
obligations and exercising its rights under this Agreement, during the Term (as
defined in Section 15.1) hereof and for five (5) years thereafter, each party
shall hold in confidence and not use or disclose to any third party any product,
technical, marketing, financial, business or other proprietary information
(“Proprietary Information”) disclosed to such party by the other.  Without
limiting the foregoing, the terms of this Agreement shall be considered
Proprietary Information of both parties; provided that each party may disclose
the term of this Agreement in communication with existing and potential
investors, partners, acquirers, licensees, consultants, advisors (including
financial advisors, lawyers and accountants) on a need to know basis, in each
case under appropriate confidentiality provisions substantially equivalent to
those of this Agreement.
 
12.2           Limitation.  Notwithstanding the foregoing, Proprietary
Information shall not include information that: (i) was publicly known or made
generally available without a duty of confidentiality prior to the time of
disclosure by the disclosing party to the receiving party; (ii) becomes publicly
known or made generally available without a duty of confidentiality after
disclosure by the disclosing party to the receiving party; (iii) is in the
rightful possession of the receiving party without confidentiality obligations
at the time of disclosure by the disclosing party to the receiving party as
shown by the receiving party’s then-contemporaneous written files and records
kept in the ordinary course of business; or (iv) is obtained by the receiving
party from a third party without an accompanying duty of confidentiality without
a breach of such third party’s obligations of confidentiality.  In the event the
receiving party is legally compelled to disclose Proprietary Information of the
disclosing party, the receiving party shall provide notice as soon as is
reasonably practicable to the disclosing party, if legally permissible, and
shall provide reasonable assistance to the disclosing party to obtain a
protective order or otherwise prevent public disclosure of such Proprietary
Information.  If the disclosing party fails to obtain a protective order or
other appropriate remedy, the receiving party will furnish only that portion of
the Proprietary Information that is legally required to be disclosed.  Nothing
in this Section shall impair either Party’s compliance with any requirements of
the Securities and Exchange Commission or the stock market on which such Party’s
securities are traded.
 
 
12

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12.3           Prior Agreement.  This Agreement supersedes the Confidentiality
Agreement between the Parties dated April 4, 2011 (the “Prior Agreement”) with
respect to information disclosed thereunder.  All information exchanged between
the Parties under the Prior Agreement shall be deemed Confidential Information
of the disclosing Party and shall be subject to the terms of this Article 12.
 
13.           Indemnity.
 
13.1           By NBY.  Subject to Section 13.3, NBY shall indemnify, defend or
settle and hold Pioneer and its affiliates harmless from and against any and all
liabilities, damages or expenses (including reasonable legal expenses and
attorneys’ fees) (collectively, “Losses”) resulting from any suit, claim, action
or demand brought by a third party (each, a “Third Party Claim”) arising out of:
(a) any breach of any of NBY’s representations and warranties under Article 9,
or (b) the gross negligence or intentional misconduct of NBY or any of its
agents, directors, officers and employees; in each case except to the extent
such Third Party Claim is covered by Pioneer’s indemnification obligations
below.
 
13.2           By Pioneer.  Subject to Section 13.3, Pioneer shall indemnify,
defend or settle and hold NBY and its affiliates harmless from and against any
and all Losses resulting from any Third Party Claim arising out of: (a) any
breach by Pioneer of its obligations, duties or responsibilities under this
Agreement, including but not limited to any non-compliance by Pioneer or its
affiliates with applicable laws of the Peoples Republic of China, or the failure
of Pioneer to obtain any required permits, consents or approvals for NBY to
issue the NBY common stock to Pioneer Pharma (Singapore) Pte Ltd. that it may
issue pursuant to the terms of Section 4.2 and Exhibit D hereof; (b) the gross
negligence or intentional misconduct of Pioneer or any of its agents, directors,
officers and employees, (c) any acts or omissions of Pioneer or its personnel in
Distributing or developing the Product; in each case except to the extent such
Third Party Claim is covered by NBY’s indemnification obligations above.
 
13.3           Indemnification Procedure.  To be eligible to be indemnified
hereunder, the indemnified party shall provide the indemnifying party with
prompt notice of the Third-Party Claim giving rise to the indemnification
obligation pursuant to this Article 13 and the right to control the defense
(with the reasonable cooperation of the indemnified party) and settlement of any
such claim; provided, however, that the indemnifying party shall not enter into
any settlement that admits fault, wrongdoing or damages without the indemnified
party’s written consent, such consent not to be unreasonably withheld or
delayed. The indemnified party shall have the right to participate, at its own
expense and with counsel of its choice, in the defense of any claim or suit that
has been assumed by the indemnifying party; provided that the indemnifying party
shall have no obligations with respect to any Losses resulting from the
indemnified party’s admission, settlement or other communication without the
prior written consent of the indemnifying party.
 
 
13

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14.           Non-Assignment.  Pioneer shall not have the right to assign,
delegate, subdivide or otherwise transfer any obligations or rights under this
Agreement without the prior written consent of NBY, which consent shall not be
unreasonably withheld.  NBY may freely assign this Agreement.  Any attempted
assignment in violation of this Article 14 shall be null and void.
 
15.           Term and Termination.
 
15.1           Term.  The term of this Agreement shall commence on the Effective
Date and shall continue in full force and effect until the end of the fifth
Contract Year (the “Initial Term”), unless earlier terminated in accordance with
the terms and conditions of this Agreement.  Thereafter, the parties may
mutually agree in writing to renew this Agreement for additional five (5) year
terms (each a “Renewal Term,” and collectively with the Initial Term, the
“Term”); subject to the parties’ agreement to review and establish, prior to the
initiation of the Renewal Term and every second Contract Year thereafter during
the Renewal Term, the transfer price and Annual Minimums in good faith based on
material changes in the costs of manufacture and market demand.
 
15.2           Termination.  Either party may terminate this Agreement prior to
its expiration and upon thirty (30) days prior written notice if: (a) a party
breaches any material term (including any payment terms) of this Agreement and
the breaching party has not cured the breach within such thirty (30) day period;
(b) a party is the subject of a liquidation or insolvency, or the filing of
bankruptcy, or similar proceeding(s) (provided that in the case of involuntary
proceedings, such proceedings are not dismissed within sixty (60) days of
filing); or (c) the other party ceases to actively engage in the business to
which this Agreement relates.
 
15.3           Effect of Termination.
 
15.3.1           Upon expiration or notification of termination of this
Agreement, Pioneer shall submit to NBY within thirty (30) days a list of all
Products in Pioneer’s inventory as of the effective date of expiration or
termination.  Unless otherwise mutually agreed by the parties, Pioneer shall
have sixty (60) days following the expiration or termination of this Agreement
to continue to Distribute any Product in Pioneer’s inventory as of the effective
date of expiration or termination.  NBY may also elect to repurchase unused
(brand new) Product in Pioneer’s inventory as of termination or of expiration of
this Agreement at the Price paid by Pioneer less a [***]% restocking
fee.  Pioneer shall also provide a list of the names, addresses, telephone
numbers and purchase history of Customers upon termination or expiration of this
Agreement. Except as otherwise permitted in this Section 15.3.1, all rights and
licenses of Pioneer hereunder with respect to NVC-101 and the Product shall
automatically terminate and all Permits held by Pioneer shall revert to NBY.
 
 
14

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15.3.2           Each party shall, within thirty (30) days of the effective date
of termination or expiration, either (a) return to the other party all of the
other party’s Proprietary Information then in a party’s possession, custody or
control or (b) certify to the other party in writing that all copies of such
Proprietary Information have been destroyed.
 
15.3.3           To the extent permitted under Applicable Law, upon the
termination of this Agreement in accordance with its terms, except for
obligations incurred prior to the effective date of termination, neither party
shall have any obligation to the other party, or to any employee, agent or
representative of a party, for compensation or for damages of any kind, whether
on account of loss by a party, or by such employee, agent or representative of
present or prospective sales, investments, compensation or goodwill; provided,
however, that nothing in this Section 15.3.3 shall relieve either Party of any
liability for willful misconduct, gross negligence, or breach of contract.
 
15.3.4           If proper notice of termination is given for any reason,
notwithstanding any credit terms made available to Pioneer prior to that time,
any shipments during the period prior to termination shall be paid for by bank
transfer or by certified or cashier’s check prior to such shipment.
 
15.3.5           To the extent permitted under Applicable Law, Pioneer’s ability
to pursue selling its remaining inventory of Product during the sixty (60) days
after expiration or termination of this Agreement pursuant to Section 15.3.1,
or, to extent otherwise expressly permitted in this Agreement, Pioneer’s right
to sell such inventory if not so repurchased by NBY, shall constitute Pioneer’s
sole remedy for the expiration or termination of this Agreement.
 
15.4           Survival.  The provisions of Sections 6.3, 6.4, 6.5, 9.1 (with
respect to Product under warranty), 9.2 (with respect to Product under
warranty), 9.4, 9.5, 15.2, 15.4 and 15.5, and Articles 1, 1.12 (with respect to
Product which were in Pioneer’s inventory at the time of termination of the
Agreement), 7, 8, 11, 12, 13, 14, 19 and 20 shall survive termination or
expiration of this Agreement.  All other provisions of this Agreement shall
terminate upon any termination or expiration of this Agreement.
 
15.5           Accrued Obligations.  Expiration or termination of this Agreement
for any reason shall not release either party hereto from any obligation
(including payment obligations) or liability which, at the time of such
expiration or termination, has already accrued to the other party or which is
attributable to a period prior to such expiration or termination, nor preclude
either party from pursuing all rights or remedies it may have hereunder or at
law or in equity with respect to any breach of this Agreement.
 
 
15

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16.           Events Beyond Control.  Neither party shall be liable for any
failure to fulfill any term or condition of this Agreement (other than the
obligation to pay) if fulfillment has been delayed, hindered or prevented by an
event of force majeure including, but not limited to, any strike, lockout or
other industrial dispute, acts of the elements, compliance with requirements of
any governmental port or international authority, plant breakdown or failure of
equipment, inability to obtain equipment, fuel, power, materials or
transportation, or by any circumstances whatsoever beyond its reasonable
control, including, but not limited to, demand for Product in excess of NBY’s
ability to produce Product and alleged or demonstrated infringement by the
Product or their use of any proprietary right of a third party.  In the event of
excess demand for Product, NBY may allocate the supply of Product among its
customers in the manner it deems most appropriate. In any case, NBY will use
commercially reasonable efforts to supply confirmed Orders to Pioneer.
 
17.           U.S. Foreign Corrupt Practices Act.  Pioneer warrants that in the
performance of its obligations under this Agreement, Pioneer will not act in any
fashion or take any action which will render NBY liable for a violation of the
U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits the offering,
giving or promising to offer or give, directly or indirectly, money or anything
of value to any official of a government, political party or instrumentality
thereof in order to assist Pioneer or NBY in obtaining or retaining
business.  NBY shall have the right to immediately terminate this Agreement
should Pioneer make any payment which would violate the U.S. FCPA.  Pioneer
shall indemnify and hold NBY harmless, and hereby forever releases and
discharges NBY, from and against all losses, liabilities, damages and expenses
(including reasonable attorneys’ fees and costs) resulting from Pioneer’s breach
of this Article 17.
 
18.           Independent Contractors.  The relationship of the parties
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to create any other relationship
between the parties.  Neither party shall have any right, power, or authority to
assume, create or incur any expense, liability, or obligation, express or
implied, on behalf of the other.
 
19.           Notice.  All notices issued or served under this Agreement shall
be in writing and shall be deemed to have been sufficiently given if transmitted
by facsimile (receipt verified), email (receipt verified) or by express courier
service (signature required) or seven (7) days after it was sent by registered
letter.   All notices shall be sent to the following, except as otherwise
specified by either party in writing:
 
 
16

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NBY:
Pioneer:
NovaBay Pharmaceuticals, Inc.
Naqu Area Pioneer Pharma Co. Ltd.
5980 Horton Street, Suite 550,
Emeryville, CA 94608
 
United States
No.1000, Wangqiao Road, Pudong Area, Shanghai, P.R.C.
201200
   
Attention:  Roy Wu
Phone:   (510) 899-8815
Attention: Jing Lin
Phone: ____________
Fax:   (510) 743-0788
Email: rwu@novabaypharma.com
Fax:  + 86-21-50498986
Email:
l_jingpioneer@126.com
 
With a copy to:
 
 
With a copy to:
 
Leo Liu
NovaBay Pharmaceuticals, Inc.
Pioneer Pharma Co. Ltd.
5980 Horton Street, Suite 550,
Emeryville, CA 94608, USA
 
        No.1000, Wangqiao Road,
        Pudong   Area,
        Shanghai, P.R.C. 201200
   
Attention: Legal Department Phone: 
Phone: (510) 899-8870
Email:  tgranados@novabaypharma.com
Phone:+86-21-50498982
 
Mp: + 86-21-50498986
 
 
Fax: : 86-21-55971121
Email:l_xfpioneer@126.com

 
20.           Miscellaneous.
 
20.1           Waiver; Amendment.  The failure of either party to enforce its
rights under this Agreement at any time for any period shall not be construed as
a waiver of such rights unless evidenced in writing and signed for on behalf of
both parties.  Any modification or amendment of, or addition to, the terms of
this Agreement shall not be effective unless in a writing conspicuously entitled
“Amendment of Agreement” which begins with a proposal to amend this Agreement
and specifies exactly each change to be made and which is signed by an
authorized officer of both parties.
 
20.2           Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of Hong Kong without regard to the conflicts of laws
provisions and excluding the 1980 U.N. Convention on Contracts for the
International Sale of Goods.
 
 
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20.3           Severability.  The provisions of this Agreement under which the
liability of NBY is excluded or limited shall not apply to the extent that such
exclusions or limitations are declared illegal or void under Applicable Laws in
the Territory, unless the illegality or invalidity is cured under the Applicable
Laws of the Territory by the fact that the law of Hong Kong governs this
Agreement.  Subject to the foregoing, if any provision of this Agreement is held
to be void, invalid or unenforceable, the same shall be reformed to give the
fullest effect to the intention of the parties when executing this Agreement
while complying with Applicable Law or stricken if not so conformable, so as not
to affect the validity or enforceability of the remainder of this Agreement.
 
20.4           Dispute Resolution.  In the event of any dispute, controversy or
claim between the parties hereto arising out of this Agreement, the parties
agree to attempt to resolve such dispute in good faith through direct
negotiations for a period of thirty (30) days.  Any dispute, controversy or
claim between the parties hereto arising out of or relating to this Agreement
which cannot be resolved through direct negotiations shall be settled by binding
arbitration in accordance with and subject to the then applicable rules
(“Rules”) of the International Chamber of Commerce (“ICC”) and such arbitration
shall be administered by ICC with a single arbitrator selected from a list of
arbitrators proposed by ICC in accordance with the Rules.  The arbitrator shall
allow such discovery as is appropriate and consistent with the purposes of
arbitration in accomplishing fair, speedy and cost-effective resolution of
disputes.  The costs of the arbitration including the arbitrators’ fees shall be
shared equally by the parties. Each party shall bear its own costs, including
attorney’s and witness’ fees, incurred in connection with the arbitration.
Judgment upon the award rendered in any such arbitration may be entered in any
court of competent jurisdiction, or application may be made to such court for a
judicial acceptance of the award and enforcement, as the law of such
jurisdiction may require or allow.  Unless otherwise mutually agreed to by the
parties, in the event NBY initiates such arbitration, such arbitration shall
take place in Hong Kong, China, and in the event Pioneer initiates such
arbitration, such arbitration shall take place in San Francisco,
California.  Any arbitration under this Agreement shall be conducted in English,
regardless of the location for such arbitration.
 
20.5           Language.  This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions hereof in any
other language shall not be binding on the parties hereto.  All communications
and notices to be made or given pursuant to this Agreement shall be in the
English language.
 
20.6           Currency.  All amounts specified in this Agreement are in United
States Dollars, and all payments by one party to the other party under this
Agreement shall be paid in United States Dollars.
 
20.7           Headings.  Headings herein are for convenience of reference only
and shall in no way affect interpretation of this Agreement.
 
 
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20.8           Registrations.  If this Agreement is required to be registered
with any governmental authority in the Territory, Pioneer shall cause such
registration to be made and shall bear any expense or tax payable in respect
thereof.
 
20.9           Compliance with Applicable Law.  The parties shall each comply
with all Applicable Laws in performing its duties hereunder.
 
20.10         Entire Agreement.  This Agreement, and all exhibits attached
hereto, constitute the entire understanding and contract between the parties and
supersedes any and all prior and contemporaneous, oral or written
representations, communications, understandings, and agreements between the
parties with respect to the subject matter hereof.  Notwithstanding the
foregoing, to the extent the terms and conditions of this Agreement conflict
with the terms and conditions of any exhibit, the terms and conditions of this
Agreement shall govern.  The parties acknowledge and agree that neither of the
parties is entering into this Agreement on the basis of any representations or
promises not expressly contained herein.
 
[The remainder of this page intentionally left blank; the signature page
follows.]
 
 
 
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THE TERMS AND CONDITIONS OF THIS AGREEMENT ARE AGREED TO AND ACCEPTED BY:
 

Naqu Area Pioneer Pharma Co. Ltd.
NovaBay Pharmaceuticals, Inc.
    Name: XinZhou Li                                                  Name:
Ramin (Ron) Najafi, Ph.D.     Title: President and CEO                       
              Title: Chairman & CEO            
Signature:                                                               
Signature:                                                  
                                                                                   
    Date:                                                              
             Date:                                                           
                  

 
 
 
COMPANY SEAL:
 

 
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EXHIBIT A
 
PRODUCT SPECIFICATIONS  (INITIAL DRAFT)
 
Each unit of the Product consists of one 40 mL vial of formulated NVC-101 and
one spray pump packed in a cardboard box with label (each, a “Unit”).
 

  Product: NeutroPhase, [***]         Composition: [***]         Fill Weight: 40
gr.         Container: Borosilicate amber glass bottle (40 mL)         Closure:
White polypropylene cap with PTFE liner         Storage Condition: Ambient
temperature 50-85 oF

                       
 
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EXHIBIT B
 
COMPETING PRODUCTS
 
 
 
 
 
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EXHIBIT C
 
ANNUAL MINIMUMS
 
 
 
 
·
First Contract Year:
[***] Units

 
 
·
Second Contract Year:
[***] Units

 
 
·
Third Contract Year:
[***] Units

 
 
·
Fourth Contract Year:
[***] Units**

 
 
·
Fifth Contract Year:
[***] Units**

 
 
**The annual minimums for the 4th and 5th Contract Years are non-binding
proposals from Pioneer.  Prior to the end of the Third Contract Year and every
other Contract Year thereafter, the parties will negotiate and establish the
Annual Minimums for the upcoming two Contract Years, provided that such Annual
Minimums will not be less than the Annual Minimum proposed by Pioneer above e.g.
[***] and [***] Units for the 4th and 5th Contract Year.
 
 
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EXHIBIT D
 
PRICES AND CREDIT SCHEDULE
 
Transfer Price:  $[***] per Unit.  Each Unit will consist of one (1) 40ml vial
of formulated NVC-101, labeled and packaged with a spray pump in a cardboard
carton with a paper packaging insert.
 
Credit Schedule:
 
Pioneer will be entitled to $[***]/Unit rebate from the transfer price of the
Product until the maximum total cumulative credit is consumed. The NBY stock
will be issued to Pioneer Pharma (Singapore) Pte Ltd.., a   Holding Company of
Pioneer. The maximum total cumulative credit is equal to US$[***] plus any
registration costs incurred by Pioneer not exceeding $[***].  Any unused credit
at the end of the Initial term shall expire. The credit due Pioneer may be
payable in unregistered NBY common stock (“Shares”), at NBY’s election.  The
number of Shares awarded under this Distribution Agreement shall be determined
by the dollar amount of the credit due to Pioneer divided by the [***]-day
volume weighted average price (“VWAP) of NBY’s common stock prior to the date of
the purchase order.  The date of the purchase order shall be the last day of
each calendar quarter (e.g. March 31, June 30, September 30 and December 31) and
the number of Shares shall be calculated by dividing the amount of credit due
for the quarter by the [***]-day VWAP of NBY’s common stock prior to the end of
the calendar quarter provided that the credit for FY 2012 shall be calculated
only on December 31, 2012.  In the event that the closing price is less than
$[***] per share, the value for purposes of calculating the number of shares to
be issued will be the $[***] per share minimum value.  Stock certificate
representing Pioneer’s investment shall be issued no later than the 15th day of
the month following the end of the calendar quarter. Investments or purchases by
Pioneer of NBY common stock under this Distribution Agreement shall be subject
to NBY Board’s approval and Pioneer’s representations and warranties set forth
on Attachment A.
 
For example, if Pioneer incurred US$[***] registration cost, the maximum total
cumulative credit will be $[***], then NBY, subject to Board approval will issue
the Shares per the table below:
Date of Purchase
Number of Units
Purchased
Credit in USD (Units
 Purchased*$[***])
 
VWAP [***] days
prior to end of the
 Quarter
Number of Shares
 issuable to Pioneer
 
September 2012
[***]
$[***]
   
 
Q4- 2012
[***]
$[***]
$1.25 (example)
[***]* shares
 
Q1-2013
[***]
$[***]
$1.50 (example)
[***] shares
 
Q2 - 2013
[***]
$[***]
$2.00 (example)
[***] shares
 
Q3-2013
[***]
$[***]
$2.25 (example)
[***] shares
 
Q4-2014
[***]
$[***]**
$4.00 (example)
[***] shares

 
*Representing credits for September 2012 and Q4 2012
 
**Only [***] credit is granted and not $[***] because the maximum credit balance
at start of Q4 2013 was only $[***].
 
 
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The Shares, when issued and delivered, will be unregistered. The certificates
representing the Shares, when issued, will bear a restrictive legend in
substantially the following form:
 
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF THE COMPANY’S
CAPITAL STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT
REGISTRATION PURSUANT TO REGULATION D AND/OR REGULATION S OF THE SECURITIES ACT
OF 1933, AS AMENDED (“THE ACT”), AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS
EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES
IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 144."
 
NBY will not issue any stop transfer order or other order impeding the sale,
resale or delivery of any of the Shares following such date as the Shares may be
sold pursuant to Rule 144, except as may be required by any applicable federal
or state securities laws and unless contemporaneous notice of such instruction
is given to Pioneer.
 
Once the conditions for sale without restriction under Rule 144 have been met,
NBY agrees to have the Shares reissued without the restrictive legend referred
to above and delivered within fifteen (15) business days.
 
 
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ATTACHMENT A
 

By execution of the Agreement, Pioneer makes the following representations and
warranties as of the date of this Agreement, and as of each date of issuance,
unless subsequent to the execution of this Agreement, Pioneer notifies the
Company in writing that the representations and warranties are no longer true
and correct.
 
Investment Representations.  Pioneer understands that the Shares have not been
registered under the Securities Act. Pioneer also understands that the Shares
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act of 1933, as amended (the “Securities Act”) based in part
upon Pioneer’s representations contained in the Agreement.  Pioneer hereby
represents and warrants as follows:
 
(a)           Pioneer Bears Economic Risk.  Pioneer has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests.  Pioneer must bear the economic risk of this investment
indefinitely unless the Shares are registered pursuant to the Securities Act, or
an exemption from registration is available.  Pioneer understands that the
Company has no present intention of registering the Shares.  Pioneer also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Pioneer to transfer all or any portion of the Shares
under the circumstances, in the amounts or at the times Pioneer might propose.
 
(b)           Investment Intent.  Pioneer understands that the Shares are
“restricted securities” and have not been registered under the Securities Act,
or any applicable state securities law.  Pioneer is acquiring the Shares as
principal for its own account and not with a view to, or for distributing or
reselling such Shares or any part thereof in violation of the Securities Act or
any applicable state securities laws.  Pioneer does not presently have any
agreement, plan or understanding with any Person to distribute or effect any
distribution of any of the Shares (or any securities which are derivatives
thereof) to or through any person; Pioneer is not a registered broker-dealer
under Section 15 of the Securities Exchange Act of 1934 or an entity engaged in
a business that would require it to be so registered as a broker-dealer.
 
(c)           Pioneer Status. At the time Pioneer was offered the Shares, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act.
 
(d)           General Solicitation. Pioneer is not purchasing the Shares as a
result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
advertisement.
 
 
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(e)           Experience of Pioneer. Pioneer, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Shares, and has so evaluated the merits and
risks of such investment. Pioneer is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to afford a complete
loss of such investment.
 
(f)           Pioneer Can Protect Its Interest.  Pioneer represents that by
reason of its, or of its management’s, business or financial experience, Pioneer
has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement.  Further, Pioneer is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement.
 
(g)           Brokers and Finders. No person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or Pioneer for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of Pioneer.
 
(h)           Company Information.  Pioneer has had an opportunity to discuss
the Company’s business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company’s operations and facilities.  Pioneer has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
 
(i)           Rule 144.  Pioneer acknowledges and agrees that the Shares are
“restricted securities” as defined in Rule 144 promulgated under the Securities
Act as in effect from time to time and must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available.  Pioneer has been advised or is aware of the
provisions of Rule 144, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things:  the availability of certain current public information
about the Company, the resale occurring following the required holding period
under Rule 144 and the number of shares being sold during any three-month period
not exceeding specified limitations.
 
(j)           Residence.  The office or offices of Pioneer in which its
investment decision was made is located at the address or addresses of Pioneer
in Peoples Republic of China.
 
 
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(k)           Regulation S.  Pioneer acknowledges and represents that at the
time of issuance of the Shares, it is not a U.S. Person (as defined below), and
further provides represents and warrants:
 
(i)           the Shares are being acquired for investment for Pioneer’s own
account, not as a nominee or agent, and not for the account or benefit of, a
U.S. Person, and not with a view to the resale or distribution of any part
thereof in the United States or to a U.S. Person, and that Pioneer has no
present intention of selling, granting any participation in, or otherwise
distributing the same.  Pioneer does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person in the United States or to
a U.S. Person, or any hedging transaction with any third person in the United
States or to a United States resident, with respect to any of the
Shares.  Pioneer further acknowledges and understands that the certificate
evidencing the Shares issued to Pioneer shall bear a restrictive legend in
substantially the form set forth in Exhibit D. covenants with the Company, that
Pioneer will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares received hereunder except in
compliance with the Securities Act, applicable blue sky laws, and the rules and
regulations promulgated thereunder.  Pioneer hereby agrees to resell such Shares
only in accordance with the provisions of Regulation S under the Securities Act
(“Regulation S”), pursuant to registration under the Securities Act, or pursuant
to an exemption from registration.  Pioneer further agrees not to engage in
hedging transactions with regard to the Shares unless in compliance with the
Securities Act.  Pioneer agrees that Pioneer will not effect any disposition of
the Shares that would constitute a sale within the meaning of the Securities
Act, except: (x) pursuant to the provisions of Regulation S; or (y) in a
transaction exempt from registration under the Securities Act, in which case
Pioneer shall, prior to effecting such disposition, submit to Company an opinion
of counsel in form and substance reasonably satisfactory to Company to the
effect that the proposed transaction is in compliance with the Securities Act;
 
 
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(ii)            “U.S. Person” means (a) any natural person resident in the
United States, (b) any partnership or corporation organized or incorporated
under the laws of the United States (c) any estate of which any executor or
administrator is a U.S. person, (d) any trust of which any trustee is a U.S.
person, (e) any agency or branch of a foreign entity located in the United
States, (f) any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. person, (g) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated,
or (if an individual) resident in the United States, and any partnership or
corporation if: (i) organized or incorporated under the laws of any foreign
jurisdiction; and  (ii) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in §230.501(a)) who
are not natural persons, estates or trusts, provided, however, the following are
not “U.S. persons”: (u) any discretionary account or similar account (other than
an estate or trust) held for the benefit or account of a non-U.S. person by a
dealer or other professional fiduciary organized, incorporated, or (if an
individual) resident in the United States, (v) any estate of which any
professional fiduciary acting as executor or administrator is a U.S. person if:
(1) an executor or administrator of the estate who is not a U.S. person has sole
or shared investment discretion with respect to the assets of the estate; and
(2) the estate is governed by foreign law, (w) any trust of which any
professional fiduciary acting as trustee is a U.S. person, if a trustee who is
not a U.S. person has sole or shared investment discretion with respect to the
trust assets, and no beneficiary of the trust (and no settler if the trust is
revocable) is a U.S. person, (x) an employee benefit plan established and
administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country, (y) any agency
or branch of a U.S. person located outside the United States if: (1) the agency
or branch operates for valid business reasons; and (2) the agency or branch is
engaged in the business of insurance or banking and is subject to substantive
insurance or banking regulation, respectively, in the jurisdiction where
located; and (z) the International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans.
 
(l)           Company Undertaking.  The Company hereby undertakes, for the
benefit of Pioneer, that it will not register any transfer of the Shares not
made in accordance with the provisions of Regulation S, pursuant to a
registration statement under the Securities Act, or pursuant to an available
exemption from registration.
 

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