CONFIDENTIAL
TREATMENT REQUESTED BY NOVABAY PHARMACEUTICALS, INC.
 CONFIDENTIAL
   
  COLLABORATION
AND LICENSE AGREEMENT
  by and
between
  NOVABAY
PHARMACEUTICALS, INC.
  and
  GALDERMA
S.A.
  dated as
of March 20, 2009
  
  
  
  
  
  
 
  
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 
 CONFIDENTIAL
  
  TABLE
OF CONTENTS
  
 
 Article I
      DEFINITIONS
              1Article II
      GOVERNANCE; COORDINATION
              182.1
      Coordination Committee
              182.1.1 Establishment
              182.1.2 Responsibilities
              182.1.3 Membership
              182.1.4 Meetings
              192.1.5 Decision
      Making
              192.2   Day-to-Day
      Responsibilities
              192.2.1 General
              192.2.2 Project
      Teams
              202.3           Information
      Sharing
              202.4           Coordination
              202.4.1 General
              202.4.2 Minimization
      of Substitutability
              212.4.3 Japan
              21Article III
      DEVELOPMENT PROGRAM
              213.1           General
              213.2           During
      the Initial Period
              223.2.1 Acne
              223.2.2 Impetigo
              22
 
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treatment requested pursuant to a request for confidential treatment filed with
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separately with the Commission.
 -i-
 TABLE OF CONTENTS
 (Continued)
 3.3           During
      the Continuation Period
              223.4           Diligence
              223.5           Development
      Proposals
              223.5.1 General
              223.5.2 First
      Negotiation
              233.5.3 PPOC
      Notice
              233.5.4 Preset
      Terms
              233.5.5 Inability
      to Agree on Terms
              243.5.6 Failure
      to Respond
              243.5.7 Excluded
      Indications
              253.5.8 Conflicts
              253.5.9 Expenses
              253.6           Development
      Plans
              263.6.1 Establishment
              263.6.2 Contents
              263.7           Disclosure
      of Formulation Technology
              263.8           Subcontractors
              27Article IV
      COMMERCIALIZATION OF COLLABORATION PRODUCTS
              274.1           Commercialization
              274.2           Commercialization
      Plan
              274.3           Galderma
      Marketing Partners
              284.3.1 General
              284.3.2 Conditions
              28
 
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treatment requested pursuant to a request for confidential treatment filed with
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 -ii-
 TABLE OF CONTENTS (Continued)    4.4           NovaBay’s
      Right to Co-promote to Healthcare Institutions in North
      America
                  284.4.2 Exercise
                  294.5           Cooperation
      and Consultation
                  304.6           Galderma
      First Right of Negotiation
                  30Article V
      DEVELOPMENT AND COMMERCIALIZATION IN JAPAN
                  315.1           Development
      in Japan
                  315.1.1 Japan
      Election Notice
                  315.1.2 Pre-Pivotal
      Development
                  315.1.3 Pre-Pivotal
      Japan Report
                  315.1.4 Pivotal
      Trials
                  325.2           Commercialization
      in Japan
                  325.2.1 Both
      Parties Fund
                  325.2.2 One
      Party Funds
                  335.2.3 Royalties
      to Galderma on Japan Sales
                  34Article VI
      MANUFACTURING AND SUPPLY, REGULATORY &OTHER
    MATTERS
                  346.1           Manufacturing
      and Supply
                  346.1.1 Collaboration
      Compounds
                  346.1.2 Collaboration
      Products
                  356.1.3 Supply
      by Galderma
                  356.1.4 Transfer
      Price
                  356.1.5 Supply
      Agreement
                  356.1.6 Coordination
                  366.2           Regulatory
      Matters
                  366.2.1 Filings
                  366.2.2 Clinical
      Safety Reporting; Pharmacovigilance
                  366.2.3 Cooperation
                  376.2.4 Regulatory
      Inspection/Audit Rights
                  376.3           Transfer
      of Data and Regulatory Filings
                  386.4           [***]
                  396.4.1 [***]
                  396.4.2 [***]
                  396.4.3 [***]
                  39Article VII
      LICENSES
                  397.1           License
      Grants
                  397.1.1 To
      Galderma
                  397.1.2 To
      NovaBay
                  407.1.3 No
      Other Active Ingredients
                  40
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the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -iii-
 TABLE
OF CONTENTS (Continued)   7.2           No
      Other Rights
                    407.3           Use
      of NovaBay Technology
                    407.4           Use
      of Galderma Technology
                    417.5           Conflicts
      of Interest
                    417.6           Medical
      Devices
                    417.6.1 Exclusivity
                    417.6.2 Discussions
                    41Article VIII
      PAYMENTS
                    418.1           Certain
      Fees
                    418.1.1 Upfront
      Fee
                    418.1.2 Monthly
      Fee
                    428.1.3 Completion
      of Formulation Feasibility Studies
                    428.2           Continuation
                    428.2.1 Continuation
      Fee
                    428.2.2 Certain
      Reimbursements
                    428.3           Galderma
      Funding During the Continuation Period
                    428.3.1 FTE
      Funding
                    428.3.2 Non-FTE
      Costs
                    438.4           Development
      Milestone Payments
                    438.4.1 Certain
      Terms
                    448.4.2 Milestone
      Payment Timing
                    458.5           Royalty
      Payments to NovaBay
                    458.5.1 Acne
      Products
                    458.5.2 Anti-Bacterial
      Products
                    458.5.3 Anti-Fungal
      Products
                    458.5.4 Anti-Viral
      Products
                    458.5.5 Other
      Products
                    468.5.6 Certain
      Terms
                    468.5.7 Sales
      Supported by NovaBay
                    468.5.8 Certain
      Royalty Conditions
                    478.5.9 Term
      of NovaBay Royalties
                    47
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the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -iv-
 TABLE
OF CONTENTS (Continued)   8.6           Royalty
      Payments to Galderma
                      488.6.1 For
      Collaboration Products in Japan
                      488.6.2 Royalty-Bearing
      NovaBay Products
                      488.7           Material
      Adverse Events
                      498.8           Royalty
      Reports
                      498.9           Payment
      Method
                      498.10           Taxes
                      508.11           Records
                      508.12           Inspection
      of Records
                      508.13           Late
      Payment
                      518.14           Currency
      Conversion
                      51Article IX
      INTELLECTUAL PROPERTY
                      519.1           Ownership
      of Inventions
                      519.1.1 General
                      519.1.2 Compound
      Improvements
                      529.1.3 Agreements
      with Affiliates and Third Parties
                      529.2           Patent
      Prosecution
                      529.2.1 General
                      529.2.2 Projected
      Patent Filings
                      529.2.3 NovaBay
      Patents
                      529.2.4 Galderma
      Patents
                      539.2.5 Joint
      Patents
                      539.3           Defense
      of Third Party Infringement Claims
                      539.4           Enforcement
                      549.4.1 Initiating
      Enforcement Actions
                      549.4.2 Recoveries
                      549.5           Third
      Party Technologies
                      559.5.1 By
      NovaBay after the Effective Date
                      559.5.2 By
      Galderma after the Effective Date
                      559.5.3 Other
      Conditions
                      56
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treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -v-
  TABLE OF CONTENTS (Continued)   9.6           Patent
      Marking
                        569.7           Trademarks
                        569.7.1 Galderma
      Product Marks
                        579.7.2 NovaBay
      Product Marks
                        579.7.3 NovaBay
      Logo
                        579.7.4 Co-Promotion
                        589.7.5 World-wide
      Branding Strategies
                        58Article X
      CONFIDENTIALITY
                        5810.1           Confidentiality;
      Exceptions
                        5810.2           Authorized
      Use and Disclosure
                        5910.3           Publications
                        5910.4           Publicity
                        6010.4.1 Confidential
      Terms
                        6010.4.2 Publicity
      Review
                        6010.5           Prior
      Agreements
                        61Article XI
      REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION
                        6111.1           General
      Representations and Warranties
                        6111.2           NovaBay’s
      Warranties
                        6111.3           Covenant
                        6311.4           Disclaimer
      of Warranties
                        6311.5           Indemnification
                        6311.5.1 Indemnification
      by NovaBay
                        6311.5.2 Indemnification
      by Galderma
                        6411.5.3 Procedure
                        6411.6           Insurance
                        64Article XII
      TERM AND TERMINATION
                        6512.1           Term
                        6512.2           Termination
      by Galderma
                        6512.2.1 Failure
      of Formulation Feasibility
                        6512.2.2 Prior
      to Continuation Period
                        6512.2.3 During
      the Continuation Period
                        6512.2.4 For
      Safety Reasons
                        6512.2.5 [***]
                        6612.3           Termination
      for Breach
                        6612.3.1 General
                        6612.3.2 Termination
      of the Licenses in 7.1.2(c)
                        66
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treatment requested pursuant to a request for confidential treatment filed with
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separately with the Commission.
 -vi- .
  TABLE OF CONTENTS (Continued)    12.4           Termination
      for Failure to Pay the Continuation Fee
                          6612.5           General
      Effects of Expiration or Termination
                          6612.5.1 Accrued
      Obligations
                          6612.5.2 Non-Exclusive
      Remedy
                          6612.5.3 No
      Milestone Payment
                          6612.5.4 Return
      of Materials
                          6712.5.5 General
      Survival
                          6712.6           Effects
      of Certain Terminations
                          6712.6.1 Transition
      Assistance
                          6712.6.2 Ongoing
      Trials
                          6812.6.3 Commercialization
                          6812.6.4 Regulatory
      Filings/Data
                          6912.6.5 Technology
      Licenses
                          6912.6.6 Trademarks
                          7012.6.7 Marketing
      Partners
                          7012.6.8 Governance
                          7112.6.9 Suspension
      of Activities
                          7112.7           Termination
      With Respect to Collaboration Products
                          7112.8           Termination
      for [***]
                          7112.8.1 Termination
      of Certain Provisions
                          7112.8.2 Section 8.5.8
                          7112.8.3 Field
                          7112.8.4 In-Process
      Collaboration Products
                          7112.8.5 Data
                          7212.9           Termination
      Pursuant to Section 12.3.2
                          7212.10 Termination
      Press Releases
                          72
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treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -vii-
 TABLE
OF CONTENTS (Continued)   Article XIII
      DISPUTE RESOLUTION
                            7313.1           Dispute
      Resolution
                            7313.2           Pre-Arbitration
      Dispute Resolution
                            7313.3           Arbitration
                            7313.3.1 Arbitrator
                            7313.3.2 Substantive
      Law
                            7313.3.3 Enforcement/Service
                            7413.3.4 Confidentiality
      of Proceedings
                            7413.3.5 Costs
                            7413.4           Provisional
      Remedies
                            74Article XIV
      MISCELLANEOUS
                            7414.1           Governing
      Law
                            7414.2           Assignment
                            7414.3           Notices
                            7514.4           Waiver
                            7614.5           Severability
                            7614.6           Entire
      Agreement/Modification
                            7614.7           Relationship
      of the Parties
                            7714.8           Force
      Majeure
                            7714.9           Compliance
      with Laws
                            7714.10 Counterparts
                            77
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confidential treatment filed with the Securities and Exchange Commission.
Omitted portions have been filed separately with the Commission
 -viii-
  COLLABORATION
AND LICENSE AGREEMENT
  This
COLLABORATION AND LICENSE AGREEMENT (this “Agreement”) is entered into as
of the 20th day of March, 2009 (the “Effective Date”) by and
between NovaBay Pharmaceuticals, Inc., a California corporation, having its
principal place of business at 5980 Horton Street, Suite 550, Emeryville,
California 94608 (“NovaBay”), and Galderma S.A.,
a Swiss corporation, having its principal place of business at Zugerstrasse 8,
Cham CH-6330, Switzerland (“Galderma”).  NovaBay
and Galderma are each referred to herein by name or, individually, as a “Party” or, collectively, as
“Parties.”
  BACKGROUND
  A.           NovaBay
has developed certain proprietary technologies and compounds related to or
comprising Aganocide Compounds (as defined below).
  B.           Galderma
is a leader in the discovery, development, and commercialization of
pharmaceutical products and medical devices for the prevention and treatment of
skin diseases.
  C.           NovaBay
and Galderma wish to collaborate to develop and obtain regulatory approval for,
and commercialize, pharmaceutical products incorporating Collaboration Compounds
(as defined below) in the Field (as defined below).
  D.           Galderma
will be responsible for developing, marketing and selling such products in the
Galderma Territory (as defined below) and NovaBay will have the right with
respect thereto in the NovaBay Territory (as defined below), all on the terms
and conditions set forth herein below.
  NOW,
THEREFORE, in consideration of the mutual covenants and agreements provided
herein below and in consideration of the receipt and sufficiency of which is
hereby acknowledged, NovaBay and Galderma hereby agree as follows:
  ARTICLE I
  
  DEFINITIONS
  The
following capitalized terms shall have the meanings given in this Article I
when used in this Agreement:
  1.1  “Accounting Standards” shall
mean then-current applicable (i) generally accepted accounting principles
in the United States (“GAAP”) as established by the
Financial Accounting Standards Board or any successor entity thereto or other
entity generally recognized as having the right to establish such principles, or
(ii) International Financial Reporting Standards (“IFRS”) as established by the
International Accounting Standards Board or any successor entity thereto or
other entity generally recognized as having the right to establish such
standards, in each case consistently applied by the applicable
Person.
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treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -1-
 1.2  “Adverse Drug Reaction” shall
have the meaning as defined in the then-current guidelines and regulations
promulgated by the ICH (International Conference on Harmonization of Technical
Requirements for Registration of Pharmaceuticals for Human Use) and shall
include any “Adverse Drug Experience” as defined in the then-current 21 CFR
Section 314.80.
  1.3  “Acne Plan” shall mean the
then-current comprehensive plan (including timelines) for the following:
(i) during the Initial Period, (A) appropriate study(ies) to determine
the feasibility of one or more formulations for an Acne Product (the “Formulation Feasibility
Studies”) and (B) the Development of such an Acne Product for the
Galderma Territory through the completion of the first Phase II Clinical
Trial with respect thereto (the “Acne POC”), and
(ii) during the Continuation Period, further Development of Acne Products
in the Field for the Galderma Territory through to Marketing Approval
therefor.
  1.4  “Acne Product” shall mean any
Collaboration Product that is labeled for (or Developed for) the treatment or
prevention of acne in humans.
  1.5  “Affiliate” shall mean, with
respect to the subject Person, another Person that controls, is controlled by or
is under common control with such subject Person, for so long as such control
exists.  For purposes of this definition only, “control” shall mean
beneficial ownership (direct or indirect) of more than fifty percent (50%) of
the shares of a Person that is a corporation entitled to vote in the election of
directors (or, in the case of a Person that is not a corporation, in the
election of the corresponding managing authority).  For the avoidance
of doubt, neither L’Oréal S.A. nor Nestlé S.A., nor any of their respective
Affiliates (other than Galderma and its subsidiaries), will be deemed an
“Affiliate” of Galderma hereunder.
  1.6  “Aganocide Compound” shall mean
any chemical entity (i) having bactericidal, antibacterial, anti-infective,
antimicrobial, antifungal, anti-parasitic, sporicidal, antiviral,
immunomodulatory or anti-inflammatory activity, and [***].
  1.7  “Aganocide Product” shall mean
any pharmaceutical product incorporating an Aganocide Compound as an
ingredient.
  1.8  “Capture Period” shall mean the
period of time starting upon the Effective Date and expiring three (3) years
after the date on which Galderma ceases to fund at least five (5) NovaBay FTEs
per year pursuant to Section 8.3.1.
  1.9  “Collaboration” shall mean all
activities performed by or on behalf of each Party with respect to the Field
under this Agreement, including all activities of each Party under any
Plan.
  1.10  “Collaboration Compound” shall
mean [***].
  1.11  “Collaboration Product” shall
mean each pharmaceutical product (i) incorporating a Collaboration Compound
as one of its ingredients, and (ii) which requires approval by the FDA of a
new drug application, as more fully defined in 21 C.F.R. §314.50 et. seq.,
in order to initiate marketing and sales of such pharmaceutical product in the
United States or approval by the applicable Regulatory Authority of a similar
application or submission in order to initiate marketing and sales of such
pharmaceutical product in another Major Market, in each case whether sold as
prescription only medication (POM), pharmacy only medication (P), over the
counter or general sale license (GSL).  For clarity, Collaboration
Product shall include any formulation, delivery device, dispensing device or
packaging required for effective use of such pharmaceutical
product.
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the Securities and Exchange Commission. Omitted portions have been filed
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 -2-
 1.12  “Combination Product” shall
mean any Collaboration Product that incorporates at least one pharmaceutically
active ingredient (each, an “Other API”) in addition to one
or more Collaboration Compound(s), which Other API has independent biologic or
chemical activity in the Field when present alone, and where the Collaboration
Compound(s) and Other API(s) are sold as a single dosage form or in a single
package or kit or where the labeling for the Collaboration Product requires use
of such Collaboration Compound(s) with such Other API(s) and the Collaboration
Compound(s) and Active Component(s) are sold at a combined price.  For
clarity, all references to “Collaboration Product” in this Agreement shall be
deemed to include Combination Product.
  1.13  “Commercialization” shall mean,
with respect to a particular Collaboration Product in the Field, the conduct of
any and all processes and activities to establish and maintain sales for such
Collaboration Product (including with respect to reimbursement and patient
access), including offering for sale, selling (including launch), marketing
(including education and advertising activities), promoting, storing,
transporting, distributing, and importing such Collaboration Product, in each
case with respect to the Field.  “Commercialize” and “Commercializing” shall have
their correlative meanings.
  1.14  “Commercially Reasonable
Efforts” shall mean, with respect to a Person, use by or on behalf of
such Person of sustained, continued and active efforts and the level of
resources and urgency applied by such Person to a certain activity or activities
that is consistent in each case with such Person’s practices for its other
pharmaceutical products of a similar stage of product life, safety, efficacy and
commercial potential.  Without limiting the foregoing, Commercially
Reasonable Efforts shall require the applicable Person to: (i) promptly
assign responsibilities for activities for which it is responsible to specific
employee(s) who are held accountable for the progress, monitoring and completion
of such activities, (ii) set and consistently seek to achieve meaningful
objectives for carrying out such activities, and (iii) make and implement
decisions and allocate resources necessary or appropriate to advance progress
with respect to and complete such activities.
  1.15  “Continuation Period” shall
mean the period beginning upon NovaBay’s receipt of the Continuation Fee and
continuing thereafter through the Agreement Term.
  1.16  “Control” shall mean, with
respect to particular Know-How or a particular Patent, possession by the Party
granting the applicable right, license or sublicense to the other Party as
provided herein of the power and authority, whether arising by ownership,
license, or other authorization, to disclose and deliver the particular Know-How
to the other Party, and to grant and authorize under such Know-How or Patent the
right, license or sublicense, as applicable, of the scope granted to such other
Party in this Agreement without giving rise to a violation of the terms of any
written agreement with any Third Party.  “Controlled” and “Controlling” shall have their
correlative meanings.
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the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -3-
 1.17  “Cover” shall mean, with
respect to any subject matter, the manufacture, use, sale, offer for sale,
importation, exportation or other exploitation of such subject matter would
infringe a Valid Claim at the time thereof.  For clarity with respect
to a Valid Claim of a patent application, “Cover” includes infringing
such claim as if it were issued as then prosecuted.  “Covered” and “Covering” shall have their
correlative meanings.
  1.18  “Data” shall mean any and all
research and development data, including preclinical data, pharmacology data,
chemistry data (including analytical, product characterization, manufacturing,
and stability data), toxicology data, clinical data (including investigator
reports (both preliminary and final), statistical analyses, expert opinions and
reports, safety and other electronic databases) and all supporting data for each
of the foregoing, in each case specifically directed to, or used in the
Development of, a Collaboration Product and Controlled by a Party during the
Agreement Term.
  1.19  “Development” shall mean, with
respect to any Collaboration Product in the Field, any and all processes and
activities conducted to prepare and file for, obtain and maintain any Marketing
Approval for such Collaboration Product, which may include scale-up,
non-clinical and preclinical testing, ADME (absorption, distribution, metabolism
and excretion) and toxicology studies, clinical trials (including trials for
additional indications in the Field for a Collaboration Product for which a
Marketing Approval has been obtained), quality of life assessments,
pharmacoeconomics, mandatory post-marketing studies, label expansion studies,
regulatory affairs (including CMC (chemistry, manufacturing and controls) and
Regulatory Filings), and further activities related to development of such
Collaboration Product.  For clarity, Development shall exclude all
Manufacturing and Commercialization processes and activities.  “Develop” and “Developing” shall have their
correlative meanings.
  1.20  “Development Plan” shall mean,
on an indication-by-indication basis, the Acne Plan, the Impetigo Plan and each
Accepted Indication Plan, if any.
  1.21  “Development Program” shall
mean all activities conducted by or on behalf of the Parties in accordance with
the Development Plans.
  1.22  “Excluded Field” shall mean
(i) any and all applications related to the genito-urinary,
gastrointestinal, ophthalmological (including the eye) or otolaryngological
(including the ear or nasal passages) systems or any other mucosal surfaces,
(ii) any and all applications related to wound care, (iii) any and all
applications related to the prevention or disinfection of pre-, peri- or
post-surgical infections (it being understood that the reference to
“post-surgical infections” shall not limit the license grant under
Section 7.1.1(c)), and (iv) any and all cosmetic applications (it
being understood that the reference to “cosmetic applications” shall not limit
the license grant under Section 7.1.1(c)).
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the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -4-
 1.23  “FDA” shall mean the United
States Food and Drug Administration or any successor entity.
  1.24  “Field” shall mean the
prevention or treatment of any and all dermatological diseases and disorders in
humans (i.e.,
diseases or disorders of the skin or nails, but excluding onychomycosis,
diseases and disorders of the hair and any and all Rare Diseases, collectively,
the “Dermatology
Field”), but shall exclude all Excluded Indications.  For
clarity, the Field excludes the Excluded Field.  For purposes of the
foregoing, “Rare
Diseases” shall mean any disease or condition that meets the criteria for
an orphan or rare disease or condition in a Major Market, including, for example
in the United States, in §526(a)(2)(1) of the Federal Drug and Cosmetic Act
(U.S. Orphan Drug Act (1983)); in Europe, in the Orphan Drug
Regulation 141/2000; and in Japan, in the Orphan Drug Amendment
(1993).
  1.25  “Formulation Technology” shall
mean technologies, materials or New Inventions used in the formulation of any
Collaboration Compound hereunder to provide or to enhance properties thereof,
including efficacy, durability, safety, ease of handling, compatibility,
stability, bioavailability, solubility, delivery route or the like, together
with any and all formulations comprising a Collaboration Compound with such
technologies, materials or inventions.  For clarity, Formulation
Technology shall exclude for all purposes any and all active pharmaceutical
ingredients themselves.
  1.26  “FTE” shall mean a full time
equivalent year (consisting of a total of 1,880 person hours per year) of
research or development work on or related to the Development
Program.  Research and development work on or related to the
Development Program shall include those tasks and activities described in the
Development Plans, as applicable, together with related managerial and
preparation activities.
  1.27  “FTE Rate” shall mean [***]
U.S. Dollars ($[***]) per year per FTE, subject to adjustment as set forth in
Section 8.3.1
  1.28  “Galderma Formulation
Technology” shall mean any and all Formulation Technology Controlled by
Galderma during the Agreement Term.
  1.29  “Galderma Know-How” shall mean
any and all Know-How Controlled by Galderma during the Agreement Term that is
(i) used in the Development, Manufacture or Commercialization of a
Collaboration Product in the Field, or (ii) otherwise made available to
NovaBay hereunder.
  1.30  “Galderma Patents” shall mean
any and all Patents Controlled by Galderma during the Agreement Term
(i) claiming (A) any Galderma Formulation Technology, (B) the
composition or method of manufacture or use of any Collaboration Product, or
(C) any New Invention, or (ii) that are otherwise necessary or useful
for the development, manufacture or commercialization of any Aganocide
Product.
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treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -5-
 1.31  “Galderma Technology” shall
mean the Galderma Formulation Technology, Galderma Know-How and Galderma
Patents.
  1.32  “Galderma Territory” shall mean
all jurisdictions in the world other than those within the NovaBay
Territory.
  1.33  “Generic Product” shall mean,
with respect to a Collaboration Product or Royalty-Bearing NovaBay Product in a
particular country, a pharmaceutical product that is registered as a generic
product pursuant to applicable Law in such country (e.g., the Abbreviated
New Drug Application (ANDA) process as described in the U.S. Drug Price
Competition and Patent Term Restoration Act of 1984 in the United States) and
marketed for the same indication as such Collaboration Product or
Royalty–Bearing NovaBay Product, as applicable, in such country, which
pharmaceutical product has been granted appropriate approvals by the applicable
Regulatory Authority to allow marketing thereof in such country.
  1.34  “GLP” shall mean the
then-current good laboratory practice (or similar standards) for the performance
of laboratory activities for pharmaceutical products as are required by any
Regulatory Authority in the applicable jurisdiction.
  1.35  “GMP” shall mean the
then-current good manufacturing practice (or similar standards) for the
manufacture, handling and storage of pharmaceutical products applicable to a
Collaboration Product as required by the Regulatory Filings and approvals for
such Collaboration Product in the applicable jurisdiction, including any IND,
MAA or Marketing Approval.
  1.36  “Impetigo Plan” shall mean the
then-current comprehensive plan (including timelines) for the following:
(i) during the Initial Period, the Development of an Impetigo Product for
the Galderma Territory through the completion of the first Phase II
Clinical Trial with respect thereto including appropriate toxicology studies
(the “Impetigo POC”),
and (ii) during the Continuation Period, further Development of Impetigo
Products in the Field for the Galderma Territory through to Marketing Approval
therefor.
  1.37  “Impetigo Product” shall mean
any Collaboration Product that is labeled for (or Developed for) the treatment
or prevention of impetigo in humans.
  1.38  “IND” shall mean an
investigational new drug application filed with the FDA, as more fully defined
in 21 C.F.R. §312.3 or similar application (i.e., a filing that
must be made prior to commencing clinical testing in humans) filed with a
Regulatory Authority in another jurisdiction (e.g., clinical trial
authorization (CTA)).
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -6-
 1.39  “Initial Period” shall mean the
period commencing on the Effective Date and expiring upon NovaBay’s receipt of
the Continuation Fee.
  1.40  “Japanese Partner” shall mean a
Third Party to which NovaBay has granted rights to: (i) market and sell a
Collaboration Product in the Field on such Third Party’s own behalf in Japan, or
(ii) promote, co-promote or otherwise offer to sell a Collaboration Product
on such Third Party’s own behalf in Japan.  For clarity, Japanese
Partner shall exclude distributors, wholesalers and resellers of Collaboration
Products appointed by NovaBay that do not engage in any marketing of the
Collaboration Products in Japan.
  1.41  “Know-How” shall mean any and
all information, tangible materials and New Inventions comprising
(i) ideas, discoveries, inventions, improvements or trade secrets,
(ii) techniques, methods, formulas, processes and Data, and
(iii) compositions of matter, including Collaboration
Compounds.  Know-How shall exclude any Patent rights with respect
thereto.
  1.42  “Law” shall mean, individually
and collectively, any and all laws, ordinances, orders, rules, rulings,
directives and regulations of any kind whatsoever of any governmental or
regulatory authority within the applicable jurisdiction.
  1.43  “Major Market” shall mean any
of the following: France, Germany, Italy, Spain, United Kingdom or the United
States.
  1.44  “Manufacturing” shall mean,
with respect to Collaboration Products, any and all processes and activities
conducted for the GLP or GMP manufacture of such Collaboration Products in final
dosage form (but not the Collaboration Compound (i.e., the active
pharmaceutical ingredient) therein in bulk or other form) for Development or
Commercialization thereof, including formulating a Collaboration Compound into
the final dosage form of the Collaboration Product incorporating such
Collaboration Compound, packaging, labeling and other finishing activities,
quality control and assurance testing, formulation development and other
activities performed in support of the CMC (chemistry, manufacturing and
controls, or equivalent) section of a Regulatory Filing, in each case with
respect to such Collaboration Product.  For clarity, Manufacturing
shall exclude all Development and Commercialization processes and activities, as
well as process and activities directed to the manufacture of Collaboration
Compounds alone (i.e., not as part of
a Collaboration Product).  “Manufacture” shall have the
correlative meaning.
  1.45  “Marketing Approval” shall
mean, with respect to a Collaboration Product for an indication within the Field
in a particular jurisdiction, approval by the applicable Regulatory Authority of
(i) an MAA for such Collaboration Product for such indication, together
with pricing approval in jurisdictions where pricing is established by the
Regulatory Authority or other governmental agency, and (ii) any marketing
authorization for any device required for use of the Collaboration Product (as
indicated on the label of the Collaboration Product), in each case required for
Commercialization in such jurisdiction.  Notwithstanding the
foregoing, if approval of such MAA is not required in accordance with applicable
Law to market the Collaboration Product in such jurisdiction, Marketing Approval
shall be deemed to have occurred for a particular indication for a Collaboration
Product in such jurisdiction upon the first commercial sale of such
Collaboration Product in such jurisdiction with labeling for such
indication.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -7-
 1.46  “Marketing Approval
Application” or “MAA” shall mean a New Drug
Application (as defined in 21 C.F.R. §314.50 et. seq.) or similar filing,
or a comparable filing for authorization to initiate marketing activities in a
jurisdiction other than the United States, in each case with respect to a
Collaboration Product.
  1.47  “Marketing Partner” shall mean
a Third Party to which Galderma has granted rights to: (i) market and sell
a Collaboration Product in the Field on such Third Party’s own behalf, or
(ii) promote, co-promote or otherwise offer to sell a Collaboration Product
in the Field on such Third Party’s own behalf, in each case in the Galderma
Territory.  For clarity, Marketing Partner shall exclude distributors,
wholesalers and resellers of Collaboration Products appointed by Galderma that
do not engage in any marketing of the Collaboration Products.
  1.48  “Multiple-Field Compound” shall
mean a Collaboration Compound for which NovaBay (itself or through one or more
Third Parties) has initiated clinical development or commercialization for
applications outside of the Field.
  1.49  “Net Sales” shall mean the
gross amounts invoiced for (i) Collaboration Products sold by Galderma, its
Affiliates or Marketing Partners in the Galderma Territory or NovaBay, its
Affiliates or Japanese Partners in Japan, or (ii) Royalty-Bearing NovaBay
Products sold by NovaBay, its Affiliates or sublicensees (such Person selling
such product, the “Selling
Party”), in each case to independent, unaffiliated Third Parties and
recognized in the accounting records of the Selling Party as gross sales,
(A) less the following deductions to the extent related to such gross
amounts: (I) normal and customary trade, cash, formulary discounts and
other quantity discounts and allowances actually allowed and taken,
(II) credits or allowances actually granted to the customer for damaged
goods, returns, recalls, rebates or rejections of Collaboration Products or
Royalty-Bearing NovaBay Products, (III) import, export, sales, use, excise
and other consumption taxes and custom duties or tariffs, or ad valorem taxes
(to the extent borne by Selling Party and separately stated on the invoice and
included in the gross amounts), (IV) Third Party cash rebates and
chargebacks related to sales of Collaboration Products or Royalty-Bearing
NovaBay Products, to the extent allowed and taken by such Third Party,
(V) freight, insurance and other transportation and handling fees,
(VI) retroactive price reductions that are actually allowed or granted to
and taken by Third Parties, (VII) compulsory payments and rebates directly
related to the sale of Collaboration Products or Royalty-Bearing NovaBay
Products, accrued, paid, or deducted pursuant to written agreements with Third
Parties (including managed care agreements) or government regulations,
(VIII) royalties or other similar fees paid for Third-Party intellectual
property based on the sales of the applicable Collaboration Products or
Royalty-Bearing NovaBay Products, (IX) bad debts computed and allocated in
accordance with the applicable Accounting Standards, and (X) any other
specifically identifiable costs or charges included in the gross amounts
invoiced for such Collaboration Products or Royalty-Bearing NovaBay Products, as
applicable, substantially equivalent to those listed in clauses (I) – (IX)
above, and (B) with respect to (y) sales of Collaboration Products by
Galderma to any Marketing Partner or by NovaBay to a Japanese Partner or
(z) sales of Royalty-Bearing NovaBay Products by NovaBay to a sublicensee,
plus in either case an additional amount reasonably determined by Galderma or
NovaBay, as applicable, in good faith to gross up the actual amount invoiced for
sale of the Collaboration Product or Royalty-Bearing NovaBay Product by Galderma
or NovaBay, as applicable, in order to adjust such sales up to an amount
corresponding to the gross amounts Galderma or NovaBay, as applicable, would
have invoiced had Galderma or NovaBay, as applicable, made such sales directly
to the end customer.  In the event that a Selling Party makes any
adjustment to deductions described in clause (A) above after the associated
Net Sales have been reported pursuant to this Agreement, the adjustments and
payment of any amounts due shall be reported with the next quarterly report due
hereunder.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -8-
 1.49.1  A
Collaboration Product or Royalty-Bearing NovaBay Product shall not be deemed
sold if the Collaboration Product or Royalty-Bearing NovaBay Products, as
applicable, is provided free of charge to a Third Party as a sample consistent
with Selling Party’s normal promotional and sample practices and applicable Law
in direct support of the promotion, marketing or other Commercialization of the
Collaboration Product.
  1.49.2  If a
sale, transfer or other disposition of a Collaboration Product or
Royalty-Bearing NovaBay Product, as applicable involves consideration other than
cash or is not at arm’s length, then the Net Sales from such sale, transfer or
other disposition shall be calculated from the average selling price for such
Collaboration Product or Royalty-Bearing NovaBay Product during the calendar
quarter in the country where such sale, transfer or disposition took
place.
  1.49.3  In the
event a Selling Party sells any Collaboration Product as a Combination Product,
Net Sales of such Combination Product shall be calculated by multiplying the Net
Sales (as described above) of the Combination Product by the fraction A divided
by (A+B), in which A is the Gross Selling Prices of Collaboration Compound(s)
contained in the Combination Product sold separately in commercial quantities in
arm’s-length transactions during the previous calendar quarter in the country
where such Collaboration Product is sold, and B is the sum of the Gross Selling
Prices of Other API(s) contained in the Combination Product sold separately in
commercial quantities in arm’s-length transactions made during the previous
calendar quarter in the country where such Collaboration Product is
sold.  In the event that no separate sales of either Collaboration
Compound(s) or any Other API(s) contained in the Combination Product were made
during the applicable calendar quarter in such country or if the Gross Selling
Price cannot otherwise be determined, Net Sales allocable to the Collaboration
Compound(s) and Other API(s) contained in the Combination Product shall be
determined in good faith by the Parties.  If such determination cannot
be made, either Party may refer the issue to arbitration pursuant to
Section 13.1.  For purposes of the foregoing, “Gross Selling Price” means the
weighted average gross price at which a product is sold to a Third Party, before
discounts, deductions, credits, taxes or allowances; Gross Selling Price shall
not take into consideration the price for any product sold or used for
development purposes (including for clinical trials) or as samples or free goods
(including product transferred in connection with patient assistance programs or
other charitable purposes).
  1.49.4  In the
event that any Royalty-Bearing NovaBay Product is sold as a combination product,
then the Net Sales of such Royalty-Bearing NovaBay Product shall be apportioned
between the Collaboration Compound(s) therein and other active pharmaceutical
ingredient(s) on a similar basis as described in
Section 1.49.3.
  1.50  “North America” shall mean
Canada, Mexico and the United States and their territories and
protectorates.
  1.51  “NovaBay Formulation
Technology” shall mean any and all Formulation Technology Controlled by
NovaBay during the Agreement Term.
  1.52  “NovaBay Know-How” shall mean
any and all Know-How Controlled by NovaBay during the Agreement Term that is
(i) used in for the Development, Manufacture or Commercialization of a
Collaboration Product in the Field or (ii) otherwise made available to
Galderma hereunder.
  1.53  “NovaBay Patents” shall mean
any and all Patents Controlled by NovaBay during the Agreement Term
(i) claiming (A) the composition or method of manufacture or use of a
Collaboration Compound, or (B) any New Invention, or (ii) that are
otherwise necessary or useful for the Development, Manufacture or
Commercialization of Collaboration Products, in each case within the
Field.
  1.54  “NovaBay Technology” shall mean
the NovaBay Formulation Technology, NovaBay Know-How and NovaBay
Patents.
  1.55  “NovaBay Territory” shall mean
those countries listed on Exhibit1.55.
  1.56  “NVC-[***] shall mean
[***].
  1.57  “Patent” shall mean any of the
following, whether existing as of the Effective Date or during the Agreement
Term anywhere in the world: (i) any issued patent, including inventor’s
certificates, extensions, reissues, re-examination, renewal or any like
governmental grant for protection of inventions, and (ii) any pending
application for any of the foregoing, including any continuation, divisional,
substitution, continuations-in-part, provisional and converted provisional
applications.
  1.58  “Person” shall mean any
individual, corporation, partnership, association, joint-stock company, trust,
unincorporated organization or government or political subdivision
thereof.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -9-
 1.59  “Phase II Clinical Trial”
shall mean any human clinical trial where a principal purpose is to determine
preliminary evidence of efficacy and safety or to establish a dose or dose range
for Phase III Clinical Trials of a Collaboration Product in a patient
population that has the indication being studied (including any human clinical
trial described in 21 C.F.R. §312.21(b) or, with respect to a jurisdiction
other than the United States, a similar clinical trial).  For clarity,
Phase II Clinical Trial shall include any Phase IIa clinical
trial.
  1.60  “Phase III Clinical Trial”
shall mean any human clinical trial that is intended to be a pivotal trial for
seeking or obtaining a Marketing Approval or to otherwise establish safety and
efficacy in patients with the indication being studied for purposes of filing an
MAA (including any human clinical trial described in 21 C.F.R. §312.21(c),
or, with respect to a jurisdiction other than the United States, a similar
clinical trial).
  1.61  “Pivotal Trial” shall mean with
respect to a Collaboration Product in the Field, any clinical trial that, if the
end point(s) therefor as set forth in the applicable protocol are met, is
intended to support the filing of an MAA for such Collaboration Product in
Japan.  For clarity, a non-Phase III bridging study or a
Phase III Clinical Trial can be a Pivotal Trial.
  1.62  “Primary Indications” shall
mean, collectively and individually, (i) acne and
(ii) impetigo.
  1.63  “Regulatory Authority” shall
mean any federal, national, multinational, state, provincial or local regulatory
agency, department, bureau or other governmental entity with authority over the
Development, Manufacture, Commercialization or other use (including the granting
of Marketing Approvals) of any Collaboration Product in any jurisdiction,
including the FDA, European Medicines Agency, any pertinent national European
agency, and the Ministry of Health, Labor and Welfare or Pharmaceuticals and
Medical Devices Agency in Japan.
  1.64  “Regulatory Filing” shall mean
any filing or application with any Regulatory Authority, including INDs and MAAs
and authorizations, approvals or clearances arising from the foregoing,
including Marketing Approvals, and all correspondence with such Regulatory
Authority, as well as minutes of any material meetings, telephone conferences or
discussions with such Regulatory Authority, in each case with respect to a
Collaboration Product in the Field.
  1.65  “Royalty-Bearing NovaBay
Products” shall mean (i) any Collaboration Product sold in a country
in the Galderma Territory in the Dermatology Field (but outside the Field)
(A) for which the Marketing Approval Application for such Collaboration
Product in such country includes material Data (other than Data related to
safety) generated by or on behalf of Galderma, or (B) which is Covered by a
Galderma Patent in such country (each, an “In-Territory Product”),
(ii) any Collaboration Product sold in a country in the NovaBay Territory
in the Field (A) for which the Marketing Approval Application for such
Collaboration Product in such country includes material Data (other than Data
related to safety) generated by or on behalf of Galderma, or (B) which is
Covered by a Galderma Patent in such country (each, an “Ex-Territory Product”), or
(iii) an Aganocide Product sold in any country outside the Field and
Covered by a Galderma Patent in such country (each, an “Ex-Field
Product”).
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -10-
 1.66  “Third Party” shall mean any
Person other than a Party or an Affiliate of a Party.
  1.67  “Valid Claim” shall mean a
claim of an issued and unexpired patent or a claim of a pending patent
application that has not been held invalid or unenforceable by a court or other
government agency of competent jurisdiction; provided, however, that if the
holding of such court or agency is later reversed by a court or agency with
overriding authority, the claim shall be reinstated as a Valid Claim with
respect to Net Sales made after the date of such reversal.
  1.68  Definitions.  Each
of the following terms shall have the meanings defined in the corresponding
Section of this Agreement indicated below:
 
 Definitions
                SectionAcceptance
                8.4.1(a)(i)Accepted
      Indication
                3.5.2
      and 3.5.3Accounting
      Standards
                1.1[***]
                [***]Acne
      Plan
                1.3Acne
      POC
                1.3Acne
      Product
                1.4Actual
      Labor
      Cost
                Exhibit
      6.1.4Actual
      Materials
      Cost
                Exhibit
      6.1.4Adverse
      Drug
      Reaction
                1.2Affiliate
                1.5Aganocide
      Compound
                1.6Aganocide
      Product
                1.7Agreement
                PreambleAgreement
      Term
                12.1Agreement
      Wind-Down
      Period
                12.6.1Alcon
      Agreement
                11.2.14Allocable
      Overhead
                Exhibit
      6.1.4Annual
      Net
      Sales
                8.5.6(a)Anti-Bacterial
      Products
                8.5.6(b)Anti-Fungal
      Products
                8.5.6(c)Anti-Viral
      Products
                8.5.6(d)Base
      Patent
                1.10Board
                6.4.2Capture
      Period
                1.8[***]
                [***]Co-Chair
                2.1.3
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -11-
   Definitions
              Section
 Collaboration
                  1.9Collaboration
      Compound
                  1.10Collaboration
      Product
                  1.11Combination
      Product
                  1.12Commercialization
                  1.13Commercialization
      Plan
                  4.2Commercialize
                  1.13Commercializing
                  1.13Commercially
      Reasonable
      Efforts
                  1.14[***]
                  [***][***]
                  [***][***]
                  [***]Compound
      Improvement
                  9.1.2Confidential
      Information
                  10.1Constraints
                  3.5.6Continuation
      Fee
                  8.2.1Continuation
      Period
                  1.15Control
                  1.16Controlled
                  1.16Controlling
                  1.16Cooperating
      Party
                  10.4.2Coordination
      Committee
                  2.1.1Co-Chair
                  2.1.3Co-Promote
                  4.4.1Co-Promotion
      Plan
                  4.4.2(a)(i)Cover
                  1.17Covered
                  1.17Covering
                  1.17Data
                  1.18Dermatology
      Field
                  1.24Develop
                  1.19Developing
                  1.19Development
                  1.19Development
      Plan
                  1.20Development
      Program
                  1.21Development
      Proposal
                  3.5.1[***]
                  [***]Dispute
                  13.1Effective
      Date
                  PreambleEnabling
      Party
                  6.2.3Enforcement
      Action
                  9.4Excluded
      Field
                  1.22
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treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -12-
   Definitions
                Section Excluded
      Indication
                  3.5.7Ex-Field
      Product
                  1.65Existing
      Patent
      Rights
                  11.2.1Ex-Territory
      Product
                  1.65FDA
                  1.23Field
                  1.24Filing
      Party
                  6.2.3First
      Negotiation
      Period
                  3.5.2Formulation
      Feasibility
      Studies
                  1.3Formulation
      Technology
                  1.25FTE
                  1.26FTE
      Rate
                  1.27GAAP
                  1.1Galderma
                  PreambleGalderma
      Formulation
      Technology
                  1.28Galderma
      Indemnitees
                  11.5.1Galderma
      Know-How
                  1.29Galderma
      Patents
                  1.30Galderma
      Product
      Marks
                  9.7.1Galderma
      Technology
                  1.31Galderma
      Territory
                  1.32Galderma
      Third Party
      Technology
                  9.5.2Generic
      Competition
                  8.5.9(b)Generic
      Product
                  1.33GLP
                  1.34GMP
                  1.35Gross
      Selling
      Price
                  1.49.3Healthcare
      Institutions
                  4.4IFRS
                  1.1Impetigo
      Plan
                  1.36Impetigo
      POC
                  1.36Impetigo
      Product
                  1.37Impetigo
      Reimbursement
      Amount
                  8.2.2IND
                  1.38Indemnify
                  11.5.1Infringing
      Product
                  9.4Initial
      Period
                  1.39initiation
                  8.4.1(a)(ii)In-Process
      Collaboration
      Products
                  12.6.5(b)In-Territory
      Product
                  1.65
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -13-
  Definitions
                Section  IP
      Subcommittee
                  2.1.2JAMS
                  13.3Japan
      Election
      Notice
                  5.1.1Japanese
      Development
      Plan
                  5.1.1Japanese
      Election
      Notice
                  5.1.3Japanese
      Lead
      Party
                  5.1.1Japanese
      Partner
                  1.40Joint
      Patent
                  9.2.5Know-How
                  1.41Law
                  1.42[***]
                  [***]Losses
                  11.5.1MAA
                  1.46Major
      Market
                  1.43Manufacture
                  1.44Manufacturing
                  1.44Manufacturing
      Cost
                  Exhibit
      6.1.4Marketing
      Approval
                  1.45Marketing
      Approval
      Application
                  1.46Marketing
      Partner
                  1.47Material
      Adverse
      Event
                  8.7Milestone
      Event
                  8.4Milestone
      Payment
                  8.4Multiple-Field
      Compound
                  1.48Multiple-Field/Territory
      Product
      Substitution
                  2.4.2Net
      Sales
                  1.49New
      Invention
                  9.1.1North
      America
                  1.50Notice
      of
      Interest
                  3.5.6NovaBay
                  PreambleNovaBay
      Formulation
      Technology
                  1.51NovaBay
      Indemnitees
                  11.5.2NovaBay
      Know-How
                  1.52NovaBay
      Logos
                  9.7.3NovaBay
      Patents
                  1.53NovaBay
      Product
      Marks
                  9.7.2NovaBay
      Technology
                  1.54NovaBay
      Territory
                  1.55NovaBay
      Third Party
      Technology
                  9.5.1NVC-[***]
                  [***]Offer
      Notice
                  4.6
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treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -14-
   Definitions
                Section
 
 Ordering
      Party
                  Exhibit
      6.1.5Other
      API
                  1.12Other
      Products
                  8.5.6(e)Parties
                  PreambleParty
                  PreamblePatent
                  1.57Payee
                  8.9Payor
                  8.9Person
                  1.58Phase II
      Clinical
      Trial
                  1.59Phase III
      Clinical
      Trial
                  1.60Pivotal
      Trial
                  1.61Plan
                  2.2.1PPOC
                  3.5.3PPOC
      Notice
                  3.5.3Pre-Pivotal
      Development
                  5.1.2Pre-Pivotal
      Development
      Costs
                  5.1.3Pre-Pivotal
      Japan
      Report
                  5.1.3Primary
      Indications
                  1.62prior
                  8.4.1(c)Product
                  Exhibit
      6.1.5Project
      Team
                  2.2.2Proposed
      Collaboration
      Products
                  12.6.5(b)Proposed
      Indication
                  3.5.1Prosecute
      and
      Maintain
                  0Prosecution
      and
      Maintenance
                  0Quality
      Agreement
                  Exhibit
      6.1.5Rare
      Diseases
                  1.24Regulatory
      Authority
                  1.63Regulatory
      Filing
                  1.64Requesting
      Party
                  10.4.2Royalty-Bearing
      NovaBay
      Products
                  1.65Scale-up
      Costs
                  6.1.1Second
      Negotiation
      Period
                  3.5.3Selecting
      Party
                  3.7Selling
      Party
                  1.49Specification
                  Exhibit
      6.1.5[***]
                  [***]Submitting
      Party
                  3.5.1subsequent
                  8.4.1(c)successful
      completion
                  8.4.1(a)(iii)
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -15-
    Definitions
                Section
  Supply
      Agreement
                  6.1.5Supplying
      Party
                  Exhibit
      6.1.5Terminated
      Product
                  12.7Third
      Party
                  1.66Third-Party
      Claim
                  11.5.1Third
      Party
      Technology
                  9.5.3Valid
      Claim
                  1.67
  1.69  Interpretation.  The
captions and headings in this Agreement are for convenience only, and are to be
of no force or effect in construing or interpreting any of the provisions of
this Agreement.  Unless specified to the contrary, references to
Articles, Sections or Exhibits mean the particular Articles, Sections and
Exhibits to this Agreement and references to this Agreement include all Exhibits
hereto.  Unless context otherwise clearly requires, whenever used in
this Agreement: (i) the words “include” or “including” shall be construed
as incorporating, also, “but not limited to” or “without limitation,”
(ii) the word “day” or “year” shall mean a calendar day or year unless
otherwise specified, (iii) the word “notice” shall mean notice in writing
(whether or not specifically stated) and shall include notices, consents,
approvals and other written communications contemplated under this Agreement,
(iv) the words “hereof,” “herein,” “hereby” and derivative or similar words
refer to this Agreement (including any Exhibits), (v) the word “or” shall
be construed as the inclusive meaning identified with the phrase
“and/or,”(vi) provisions that require that a Party, the Parties or a
committee hereunder “agree,” “consent” or “approve” or the like shall require
that such agreement, consent or approval be specific and in writing, whether by
written agreement, letter, approved minutes or otherwise, (vii) words of
either gender include the other gender, (viii) words using the singular or
plural number also include the plural or singular number, respectively, and
(ix) references to any specific Law or article, section or other division
thereof, shall be deemed to include the then-current amendments thereto or any
replacement thereof.  For purposes of this Agreement, neither Party
will be deemed to be acting “under authority of” the other Party; however, with
respect to Galderma, its Affiliates, Marketing Partners and Third Party
contractors shall be deemed to be acting “under authority of” Galderma, and with
respect to NovaBay, its Affiliates, Japanese Partners, sublicensees (other than
Galderma) and Third Party contractors shall be deemed to be acting “under
authority of” NovaBay.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -16-
 ARTICLE II
  
  GOVERNANCE;
COORDINATION
  2.1  Coordination
Committee
  2.1.1  Establishment
  Promptly after the Effective Date, Galderma and NovaBay shall establish a
coordination committee (the “Coordination Committee”) to
review and coordinate the activities of the Parties hereunder, including the
performance of the Development Program and the Development, Manufacture and
Commercialization of Collaboration Products in the Field.
  2.1.2  Responsibilities
  The
Coordination Committee shall be responsible for: (i) reviewing and
approving all Development Plans (including applicable budgets therefor), subject
to Section 2.1.5, (ii) reviewing and accepting or rejecting
Development Proposals, (iii) providing strategic direction to the Parties’
activities under the Collaboration, (iv) reviewing and monitoring
activities under the Development Plans and the progress thereof,
(v) managing the integration and coordination of the Development Program
(including the manufacture of Collaboration Compounds and Collaboration
Products) and Commercialization of the Collaboration Products in the Field,
(vi) facilitating access to and the exchange of information between the
Parties related to the Collaboration Compounds and Collaboration Products in the
Field, (vii) ensuring that the Development of the Collaboration Products in
the Field for the Galderma Territory proceed in a coordinated and expeditious
manner, (viii) establishing subcommittees as it deems appropriate to manage
specific activities under the Collaboration (including subcommittee(s) for
proposing, reviewing and coordinating strategies for Patent and other
intellectual property matters consistent with Article IX (the “IP Subcommittee”)) and
resolving disputes, disagreements and deadlocks of such subcommittees, and
(ix) undertaking or approving such other matters as are specifically
provided for the Coordination Committee under this Agreement.
  2.1.3  Membership
  The Coordination Committee shall be comprised of an equal number of
representatives from each of NovaBay and Galderma.  The exact number
of such representatives shall be three (3) for each of Galderma and NovaBay, or
such other number as the Parties may agree.  Either Party may replace
its respective Coordination Committee representatives at any time with prior
notice to the other Party, provided that such
replacement is of comparable authority and scope of functional responsibility
within that Party’s organization as the individual he or she is
replacing.  Without limiting the foregoing, each Party shall appoint
one of its members to the Coordination Committee to co-chair the meetings of the
Coordination Committee (each, a “Co-Chair”).  Each
Co-Chair, working together, shall (i) coordinate and prepare the agenda and
ensure the orderly conduct of the Coordination Committee’s meetings,
(ii) attend (subject to below) each meeting of the Coordination Committee,
and (iii) prepare and issue minutes of each meeting within ten (10)
business days thereafter accurately reflecting the discussions and decisions of
the Coordination Committee at such meeting.  Such minutes from each
Coordination Committee meeting shall not be finalized until the Co-Chair from
each Party has reviewed and confirmed the accuracy of such minutes in
writing.  The Co-Chairs shall solicit agenda items from the other
Coordination Committee members and provide an agenda along with appropriate
information for such agenda reasonably in advance (to the extent possible) of
any meeting.  In the event the Co-Chair or another member of the
Coordination Committee from either Party is unable to attend or participate in
any meeting of the Coordination Committee, the Party who designated such
Co-Chair or member may designate a substitute Co-Chair or other representative
for the meeting.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -17-
 2.1.4  Meetings
  Unless
otherwise agreed by the Parties, the Coordination Committee will meet
telephonically or in person at least once every four (4) months for so long as
any Development of Collaboration Products with respect to any Major Market is
ongoing, and semi-annually thereafter during the Agreement Term. The location of
such meetings shall alternate between NovaBay’s headquarters and Galderma’s
headquarters with the first meeting to be held as agreed to by the
Parties.  Each Party shall be responsible for its own expenses
relating to such meetings.  As appropriate, other employee
representatives of the Parties may attend Coordination Committee meetings as
nonvoting observers, but no Third Party personnel may attend unless otherwise
agreed by the Parties.  Each Party may also call for special meetings
to resolve particular matters requested by such Party.
  2.1.5  Decision
Making
  Decisions
of the Coordination Committee shall be made by consensus of the members
participating in any meeting, with at least one (1) representative from each
Party participating in such vote; provided that
(i) during the Initial Period, Galderma shall have the final say as to all
aspects of the Formulation Feasibility Studies and otherwise as to the
development and implementation of the Acne Plan and NovaBay shall have the final
say as to the development and implementation of the Impetigo
Plan,  without limiting the second sentence of Section 3.2.2,
(ii) during the Continuation Period, Galderma shall have the final say as
to the implementation of the Development and Commercialization of the
Collaboration Products in the Field for the Galderma Territory, except that
(A) the Japanese Lead Party, with respect to a particular Collaboration
Product, shall have final say as to the implementation of the Development of
such Collaboration Product in the Field for Japan, and (B) the
Commercialization of Collaboration Product in Japan shall be determined as set
forth in Section 5.2, and (iii) NovaBay shall have the final say as to
all matters likely to affect the Development or Commercialization of
Multiple-Field Compounds outside of the Field.  For clarity, in the
event that the Coordination Committee is unable to reach consensus with respect
to a matter not subject to either Party’s final say, then either Party may, by
written notice to the other Party, refer such matter for dispute resolution in
accordance with Article XIII.  Notwithstanding anything herein to
the contrary, the Coordination Committee shall not have any authority to amend,
modify or waive compliance with any express term or condition of this
Agreement.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -18-
 2.2  Day-to-Day
Responsibilities
  2.2.1  General
  Each Party shall: (i) be responsible for day-to-day implementation and
operations of the Development, Manufacturing and Commercialization activities
with respect to Collaboration Compounds and Collaboration Products in the Field
for which it has or is otherwise assigned responsibility under the applicable
Plan or this Agreement, and (ii) keep the other Party reasonably informed
as to the progress of such activities, as reasonably requested by the other
Party.  For purposes of this Agreement, “Plan” shall mean any of the
Acne Plan, Impetigo Plan, Accepted Indication Plan or the Commercialization
Plan, in each case then-currently in effect.
  2.2.2  Project
Teams
  During the Initial Period and thereafter as the Parties may agree, NovaBay and
Galderma shall establish project teams and subteams (with equal representation)
composed as the Parties may agree (including teams for the Acne Plan and
Impetigo Plan, respectively, each, a “Project Team”) to coordinate
and oversee the day-to-day operations of the Parties on a Collaboration
Product-by-Collaboration Product and indication-by-indication basis or as
otherwise agreed by the Parties.  Each Project Team shall have
telephonic or physical meetings at least once per month (or as otherwise agreed
by the Parties) with the operational management team from each Party responsible
for the oversight and management of the activities within the purview of such
Project Team.  One goal of such meetings shall be to ensure that the
expertise and resources of both Parties is brought to bear upon the performance
of such activities.  At each such meeting, each Party will provide an
update of the status of the activities under the applicable Plan (including
activities that are completed, under way or scheduled).  Each Party
shall be responsible for its own expenses relating to such
meetings.  Without limiting the foregoing, each Party shall designate
a member of its internal project team and such members will coordinate
periodically regarding the activities under the Acne Plan and Impetigo
Plans.
  2.3  Information
Sharing
  Without limiting the other provisions of this Agreement, each Party will keep
the other reasonably informed on a timely basis as to the plans for and results
of the activities of the Collaboration carried out by or under authority of such
Party through the Coordination Committee and Project Teams.  In
addition, NovaBay will keep Galderma informed on a timely basis with respect to
plans for and results of activities for Multiple-Field Compounds outside of the
Field carried out by or under authority of NovaBay through the Coordination
Committee and Project Teams.
  2.4  Coordination
   2.4.1  General
  The
Parties acknowledge and agree that NovaBay (itself or through its designees)
shall have, subject to the terms and conditions of this Agreement (including
Section 3.5) and the licenses granted herein, the right to perform
activities with respect to Aganocide Compounds, and development, manufacture and
commercialization activities with respect to Aganocide Compounds and Aganocide
Products (including Collaboration Products) for applications outside of the
Field at NovaBay’s expense.  Accordingly, the Parties, through the
Coordination Committee, shall use good faith efforts to coordinate the
development of Collaboration Compounds for use in the Field hereunder with such
activities of NovaBay (and its designees) outside the Field, so as to minimize
the duplication of efforts and maximize quality and effectiveness of such
activities, and avoid conflicts with Development Programs and activities outside
the Field.  Without limiting the foregoing and in order to facilitate
coordination of the development of Collaboration Compounds outside the Field,
NovaBay shall keep Galderma informed on a timely basis with respect to
development plans for Collaboration Compounds to be conducted by or under
authority of NovaBay, including proposed clinical plans and protocols, and give
Galderma a reasonable opportunity to review and comment upon such proposed plans
and protocols.  In addition, NovaBay agrees to keep Galderma, through
the Coordination Committee, reasonably informed of its planned discovery
activities and development activities outside of the Field with respect to
products incorporating Collaboration Compounds to allow for such
coordination.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -19-
 2.4.2  Minimization of
Substitutability
  In
order to reduce the chances that quantities of Collaboration Products sold by
Galderma or its Affiliates, or their distributors in the Field will be used for
any application outside the Field in the Galderma Territory, and similarly that
products incorporating Multiple-Field Compounds sold outside of the Field (and
without limiting the Parties’ obligations, with respect to products
incorporating Multiple-Field Compounds for wound-healing applications) will be
used in the Field in the Galderma Territory, including via parallel importation
(any, a “Multiple-Field/Territory Product
Substitution”), the Parties shall work together in good faith, through
the Coordination Committee to develop unique packaging, trademarks and names,
and, to the extent practicable, formulations, for Collaboration Products in the
Field in the Galderma Territory and products incorporating Multiple-Field
Compounds outside of the Field, with the goal of reducing the risk of
Multiple-Field/Territory Product Substitutions.  In the event that a
Party believes that a Multiple-Field/Territory Product Substitution has
adversely affected the Commercialization of a Collaboration Product by such
Party in accordance with this Agreement, then it may notify the other Party and
provide reasonable evidence of such Multiple-Field/Territory Product
Substitution.  Promptly after receipt of such notice, the Parties
shall negotiate in good faith an appropriate adjustment, if any, to the economic
terms of this Agreement to address such Multiple-Field/Territory Product
Substitution.
  2.4.3  Japan
  NovaBay acknowledges and agrees that Galderma shall not be required to make
changes to any of the Development Plans for any Collaboration Product unless and
until Galderma is the Japanese Lead Party for such Collaboration Product in
order to meet the requirements of applicable Law of Japan in connection with the
Japanese Development Plan.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -20-
 ARTICLE III
  
  DEVELOPMENT
PROGRAM
  3.1  General
  NovaBay shall have primary responsibility for (i) all chemistry discovery
and optimization activities with respect to Aganocide Compounds, and
(ii) the conduct of the Impetigo POC; and Galderma shall have primary
responsibility for all other activities with respect to the Development of the
Collaboration Products in the Field for the Galderma Territory, including any
formulation activities with respect thereto.  Without limiting the
foregoing, each Party shall (A) communicate with, seek advice from, and
keep the other Party reasonably informed on a regular basis with respect to
activities for which it has primary responsibility pursuant to the prior
sentence, and (B) use the expertise of the other Party in connection
therewith.  Upon either Party’s reasonable request, the other Party
agrees to make available appropriate employees and personnel to discuss any
reasonable questions or comments of such Party with respect to the other Party’s
Development of such Collaboration Products, provided that doing
so will not materially interfere with the conduct of such other Party’s business
or require such other Party to incur any material expenses.
  3.2  During the Initial
Period
   3.2.1  Acne
  Galderma shall, at its own expense, use Commercially Reasonable Efforts to
complete the activities assigned to it under the Acne Plan within the time
frames set forth therein.
  3.2.2  Impetigo
  NovaBay shall, at its own expense (except as provided in Section 8.2.2),
use Commercially Reasonable Efforts to complete the activities assigned to it
under the Impetigo Plan within the time frames set forth therein.  The
Parties acknowledge that during the Continuation Period Galderma may consider
and use (if it so elects) a different formulation of the Impetigo Product for
the Galderma Territory than the one used by NovaBay in the conduct of the
Impetigo POC.
  3.3  During the Continuation
Period
  During the Continuation Period, for each Primary Indication and Accepted
Indication, Galderma shall, at its expense, take the lead and be responsible for
conducting such Development activities, including clinical trials, as may be
reasonably necessary to obtain Marketing Approvals for Collaboration Products
for each Primary Indication and Accepted Indication throughout the Galderma
Territory (except for Japan, which shall be in accordance with
Section 5.1), all in accordance, in all material respects, with the
applicable Development Plan therefor (including the applicable timelines for
specific activities).
  3.4  Diligence
  Each Party shall conduct its responsibilities under the Development Program as
assigned to it under the Development Plans, in accordance with good scientific
and clinical practices, and in compliance in all material respects with all
applicable Law and regulatory standards, and shall use Commercially Reasonable
Efforts to achieve the objectives and timelines within the Development
Plans.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -21-
 3.5  Development
Proposals
   3.5.1  General
  . 
Either NovaBay or Galderma (the “Submitting Party”) may submit
to the other Party a proposal to develop Collaboration Product(s) for one or
more specific indications in addition to the Primary Indications in the Field
(each, a “Development
Proposal”); provided that a
Development Proposal for such indication(s) have not been previously submitted
under this Section 3.5.  Each Development Proposal shall set
forth (i) the specific indication(s) (each, a “Proposed Indication”),
(ii) proposed labeling for such Proposed Indication(s), (iii) market
and economic return potential for such Proposed Indication(s), (iv) any
intellectual property, medical or clinical, or market considerations, in each
case specific to the Proposed Indication(s), (v) a general plan for
Development of the Collaboration Products for such Proposed Indication(s) in the
Major Markets, and (vi) such other existing documentation, data and
information, in each case in the Control of the Submitting Party, useful, as
reasonably determined by the Submitting Party, to the other Party in determining
its interest in the Proposed Indication.
  3.5.2  First
Negotiation
  If
Galderma is the Submitting Party or if NovaBay is the Submitting Party and
Galderma notifies NovaBay that it is interested in Developing a Collaboration
Product for the Proposed Indication(s) within the Field within [***] days of the
applicable Development Proposal, then the Parties shall negotiate for a period
of [***] days (the “First
Negotiation Period”) the terms and conditions for such Development
hereunder, including appropriate economic terms; provided that if
proposed by Galderma in writing, NovaBay shall be required to agree to the
economic terms set forth in Section 3.5.4.  If Galderma proposes
the economic terms set forth in Section 3.5.4 for such Proposed
Indication(s) or the Parties otherwise agree on different terms and conditions
for the Proposed Indication(s), the Parties shall execute an amendment to this
Agreement setting forth such terms and conditions (including the Accepted
Indication plan for such Proposed Indication(s) (the “Accepted Indication Plan”))
and each such Proposed Indication shall be deemed an “Accepted Indication” for
purposes of this Agreement.
  3.5.3  PPOC
Notice
  If
any Proposed Indication has not become an Accepted Indication under
Section 3.5.2 and NovaBay is the Submitting Party of a Development Proposal
prior to the achievement of PPOC for such Proposed Indication, then upon
achievement of PPOC for a Collaboration Product for such Proposed Indication,
NovaBay shall promptly notify Galderma and provide Galderma a copy of the PPOC
results and other existing information relevant thereto, including
pharmacodynamic, pharmacokinetic, toxicology and other pharmaceutical data
Controlled by NovaBay (the “PPOC Notice”).  If
Galderma notifies NovaBay that it is interested in Developing a Collaboration
Product for the Proposed Indication(s) within the Field within [***] days of
such PPOC Notice, then the Parties shall negotiate for a period of [***] days
(the “Second Negotiation
Period”) the terms and conditions for such Development hereunder,
including appropriate economic terms; provided that if
proposed by Galderma in writing, NovaBay shall be required to agree to the
economic terms set forth in Section 3.5.4.]  If Galderma proposes
the economic terms set forth in Section 3.5.4 for such Proposed
Indication(s) or the Parties otherwise agree on different terms and conditions
for the Proposed Indication(s), the Parties shall execute an amendment to this
Agreement setting forth such terms and conditions (including the Accepted
Indication Plan for such Proposed Indication(s)) and each such Proposed
Indication shall be deemed an “Accepted Indication” for
purposes of this Agreement.  For purposes of the foregoing, “PPOC” (Preliminary Proof of
Concept) shall mean a positive signal for the Proposed Indication from a
pre-clinical study commonly accepted for the Proposed Indication.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -22-
 3.5.4  Preset
Terms
  If
Galderma proposes the following economic terms for the Proposed Indication(s)
under either Section 3.5.2 or Section 3.5.3, NovaBay shall agree
thereto and such Proposed Indication(s) shall be deemed Accepted
Indication(s):
  (a)  milestone
payments consistent with those set forth in Section 8.4 for the Impetigo
Product based on the potential market size for such Proposed Indication(s) in
comparison to the market size for the Impetigo Product, but no more than one
hundred fifty percent (150%) or less than sixty-six percent (66%) of the
Milestone Payments for the Impetigo Product;
  (b)  a payment
payable upon the later of (i) acceptance of the Development Proposal, and
(ii) payment of the Continuation Fee, equal to (A) twenty-five percent
(25%) of the cumulative milestones established in accordance with
Section 3.5.4(a) above for the each such Development Proposal accepted by
Galderma, and (B) an amount equal to NovaBay’s reasonable and documented
costs incurred in Developing a Collaboration Product for such Proposed
Indication(s) prior to the payment of the Continuation Fee, provided that such
costs were incurred in accordance with a budget approved by the Coordination
Committee as set forth herein and calculated based on the FTE Rate;
  (c)  a maximum
credit amount for purposes of Section 8.5.8(b) of one hundred twenty-five
percent (125%) of the cumulative milestones established in accordance with
Section 3.5.4(a) for such Development Proposal; and
  (d)  royalties
based on the particular category of Collaboration Product (i.e., Acne Product,
Anti-Bacterial Product, Anti-Fungal Product, Anti-Viral Product or Other
Product) as set forth in Section 8.5.2 through 8.5.5, as
applicable.
  3.5.5  Inability to Agree on
Terms
  Without limiting Galderma’s right under Section 3.5.4 to require NovaBay’s
agreement of a Development Proposal and the corresponding Proposed Indication(s)
as Accepted Indication(s), if the Parties are unable to agree
on  terms and conditions for any reason prior to the expiration of the
First Negotiation Period, if Galderma is the Submitting Party, or prior to the
expiration of the Second Negotiation Period, if NovaBay is the Submitting Party,
then NovaBay (itself or through one or more Third Parties) may Develop and
Commercialize Collaboration Products for such Proposed Indication(s) in the
Galderma Territory subject to the provisions of this Agreement, including
Section 2.4.2 and Section 7.1.2 and provided that NovaBay
does not offer such Development Proposal to a Third Party on terms and
conditions, when taken as a whole, that are less favorable to NovaBay than those
last offered to or by Galderma, as applicable, with respect to such Development
Proposal.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -23-
 3.5.6  Failure to
Respond
  If
NovaBay is the Submitting Party and Galderma does not notify NovaBay of its
interest in the Proposed Indication(s) within [***] of NovaBay’s submission of
the applicable PPOC Notice, then NovaBay (itself or through one or more Third
Parties) may Develop and Commercialize Collaboration Products for such Proposed
Indication(s) in the Galderma Territory without further obligation to Galderma
subject to the provisions of this Agreement, including Section 2.4.2 and
Section 7.1.2; provided that
notwithstanding anything herein to the contrary Galderma shall be under no
obligation to consider any Development Proposal and NovaBay shall not have such
right to Develop and Commercialize if with respect to a particular calendar year
(i) Galderma has accepted [***] Development Proposals (including
Development Proposals relating to the Primary Indications) in such calendar year
or (ii) NovaBay has presented Galderma with [***] Development Proposals in
such calendar year.  Further and without limiting the previous
sentence, if Galderma notifies NovaBay that is interested in pursuing the
Development of a Collaboration Product for a Proposed Indication within [***]
days of NovaBay’s submission of the applicable PPOC Notice (a “Notice of Interest”), and
(A) at the time thereof, has [***] or more separate ongoing programs for
the Development of Collaboration Products (including programs for the
Development of Collaboration Products for the Primary Indications) and
(B) notifies in the Notice of Interest that it has financial or capacity
constraints as Galderma has determined in good faith that prevent it from
undertaking additional programs for the Development of another Collaboration
Product (collectively, “Constraints”), then the
Coordination Committee shall promptly meet to identify approaches to address
such Constraints (by way of example, but not limited to, seek Third Party
financing (whether from traditional financing or other sources) or engage a
contract developer) so as to allow a Collaboration Product for such Proposed
Indication to be Developed for the Field for the Galderma Territory in a timely
fashion.  For clarity, Galderma shall have the final decision on
whether to adopt any particular method of addressing the
Constraints.  If after [***] months from the Notice of Interest, such
Proposed Indication is not an Accepted Indication, then NovaBay shall have the
right to Develop and Commercialize Collaboration Products for such Proposed
Indication in the Galderma Territory, subject to Section 3.5.8 and the
other provisions of this Agreement.
  3.5.7  Excluded
Indications
  Each Proposed Indication that does not become an Accepted Indication pursuant to
this Section 3.5 shall be deemed an “Excluded Indication” for
purposes of this Agreement.
  3.5.8  Conflicts
  If
Galderma believes that NovaBay’s Development or Commercialization of a
Collaboration Product for a Proposed Indication is likely to have a material
adverse impact on the Development or Commercialization of Collaboration Products
in the Galderma Territory for either Primary Indication or any Accepted
Indication, then Galderma shall notify NovaBay thereof within thirty (30) days
of expiration of the Second Negotiation Period (or if Galderma is not interested
in the Proposed Indication, then within fifteen (15) days of submission of the
applicable Development Proposal) setting forth in writing the reasonable basis
for such belief.  In such case, NovaBay shall not proceed with the
Development and Commercialization of a Collaboration Product for such Proposed
Indication in the Galderma Territory, unless the Parties can agree upon
appropriate protective measures to be taken to minimize the chances of such
impact, including by taking the actions required by
Section 2.4.2.  If NovaBay disagrees with Galderma’s assessment,
then NovaBay may initiate an arbitration pursuant to Section 13.3 with
respect thereto.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -24-
 3.5.9  Expenses
  Except as otherwise agreed by the Parties or as provided in Section 3.5.4
or Section 8.3.1, any activities of NovaBay under this Section 3.5
shall be at the expense of NovaBay.
  3.6  Development
Plans
   3.6.1  Establishment
  A
proposed initial Acne Plan and Impetigo Plan for the Initial Period shall be
provided by Galderma and NovaBay, respectively, to the Coordination Committee
within thirty (30) days of the Effective Date and, subject to the approval
thereof by Coordination Committee, shall be attached to this
Agreement.  Accordingly, the Coordination Committee shall meet within
thirty (30) days of the provision of such Development Plans to the Coordination
Committee to discuss and approve such Development Plans.  If the
Coordination Committee is unable to reach consensus with respect to a
Development Plan during such thirty (30) day period, then the applicable Party
shall have the right to exercise its final say with respect thereto in
accordance with Section 2.1.5 and the Development Plan as determined by
such Party shall then be attached to this Agreement.  Beginning with
the first year of the Continuation Period, Galderma shall prepare a full
Development Plan for each Primary Indication and Accepted Indication and submit
such plan to the Coordination Committee for its review and approval and the
Coordination Committee shall meet and approve such Development Plans following
the same procedures as described above with respect to the initial
plans.  Galderma shall update such Development Plan at least annually
on or before each October 31st and submit such updated plan to the
Coordination Committee for its review and approval following the same
procedures.  For clarity, any material modification to any such
Development Plan(s) shall be subject to the review and approval of the
Coordination Committee following the same procedures.  Notwithstanding
anything herein to the contrary, each Development Plan shall be aimed at
fulfilling each Party’s obligations to use Commercially Reasonable Efforts
hereunder.
  3.6.2  Contents
  The Development Plans described in Section 3.6.1 above shall contain
information with a level of detail consistent with Galderma’s practice or, in
the case of the Impetigo Plan for the Initial Period, Novabay’s practice in
preparing development plans for products similar to the Collaboration
Products.  In addition, Galderma shall provide NovaBay through the
Coordination Committee with copies of proposed clinical trial protocols,
investigator brochures, clinical trial analyses and reports, and material
correspondence (including all Regulatory Filings) with Regulatory Authorities
with respect to each Collaboration Product.  In any event, and without
limiting the foregoing, Galderma shall provide the Coordination Committee with a
copy of the clinical plan and protocols for each proposed clinical trial for a
Collaboration Product reasonably in advance of the initiation of such activities
for review and comment by the Coordination Committee; provided, however, Galderma
will have the final say in the design and conduct of such clinical plan and
clinical trials for Collaboration Products in the Field for the Galderma
Territory.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -25-
 3.7  Disclosure of Formulation
Technology
  Each Party shall disclose to the other Party any Formulation Technology used in
the Development of Collaboration Products hereunder, together with all
obligations (including payments) owed to any Third Party associated
therewith.  Subject to the terms and conditions of this Agreement,
Galderma shall have the right to select the appropriate Formulation Technology
for use in the Development (except for the Impetigo POC) and Commercialization
of Collaboration Products in the Field for the Galderma Territory and NovaBay
shall have the right to select the appropriate Formulation Technology for use in
the Development and Commercialization of Collaboration Products for the NovaBay
Territory and outside the Field for the Galderma Territory.  In the
event a Party selects a Formulation Technology for use with a Collaboration
Product in accordance with the previous sentence (the “Selecting Party”) and such use
of the Formulation Technology hereunder is subject to payment obligations to a
Third Party by the other Party (which were previously disclosed), then the
Selecting Party shall reimburse the other Party such amounts payable to such
Third Party arising from the use of such Formulation Technology in accordance
with Section 8.9.  Upon request of either Party, the Parties
shall enter into a separate agreement documenting the terms and conditions of
the Selecting Party’s rights and obligations under a specific Formulation
Technology, including the payments with respect thereto.  If the
agreement with a Third Party pursuant to which the applicable Party first
obtained rights to such Formulation Technology requires that a particular
provision be incorporated in a sublicense granted thereunder, such provision
shall be deemed incorporated by reference herein only to the extent so required
and with respect to the subject matter of such agreement.
  3.8  Subcontractors
  Either Party may perform some or all of its obligations under the Development
Program through one or more subcontractors or Affiliates; provided that
(i) none of the rights of the other Party hereunder are diminished or
otherwise adversely affected as a result of such subcontracting or use of
Affiliates, and (ii) the subcontractor or Affiliate has entered into a
written agreement with the Party binding such Person to the obligations the
responsible Party has to the other Party, including obligations of intellectual
property assignment and confidentiality and non-use, and containing any other
provisions normal and customary for similar types of agreements; and further
provided that,
the responsible Party shall at all times be responsible for the satisfactory
accomplishment of its obligations in accordance with, and the Third Party’s or
Affiliate’s compliance with, the terms and conditions of this
Agreement.
  ARTICLE IV
  
  COMMERCIALIZATION
OF COLLABORATION PRODUCTS
  4.1  Commercialization
  Subject to the terms and conditions of this Agreement, as between the Parties,
Galderma shall have the exclusive (except as provided in Section 4.4) right
to Commercialize Collaboration Products in the Field in the Galderma
Territory.  Without limiting the foregoing, Galderma agrees to use
Commercially Reasonable Efforts to launch Collaboration Products in the Field as
soon as practicable in each Major Market, and thereafter to use Commercially
Reasonable Efforts to Commercialize such Collaboration Products in the Field in
the Galderma Territory.  It is understood and agreed that, except as
otherwise expressly provided herein, all Commercialization efforts for the
Collaboration Products in the Field in the Galderma Territory shall be at the
sole expense of Galderma.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -26-
 4.2  Commercialization
Plan
  At
least eighteen (18) months in advance of the launch of each Collaboration
Product in the Field in the Galderma Territory, Galderma shall propose an
initial plan for the Commercialization of such Collaboration Product in the
Field in the Galderma Territory (each, a “Commercialization
Plan”).  The Commercialization Plan shall be updated at least
annually by Galderma.  Galderma shall provide each such
Commercialization Plan and any material modification or addition thereto to
NovaBay for its review and comment.  The Parties acknowledge that the
comments from NovaBay with respect to any Commercialization Plan are solely
advisory in nature and that Galderma shall have the final say relative to the
Commercialization Plan; nonetheless, Galderma shall consider in good faith the
comments of NovaBay with respect thereto.
  4.3  Galderma Marketing
Partners
  4.3.1  General
  Subject to the terms and conditions of this Agreement, including
Section 4.3.2, Galderma shall have the right, at any time with respect to
countries other than the Major Markets, and with respect to the Major Markets,
beginning [***] years after the first commercial sale of such Collaboration
Product in the Field within such Major Market, to grant sublicenses under its
license set forth in Section 7.1.1 to one or more Marketing
Partners.  Galderma may grant such sublicenses to Marketing Partners
in Major Markets earlier than [***] years after such first commercial sale if
Galderma obtains NovaBay’s prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned.
  4.3.2  Conditions
  Galderma shall only have the right to grant such sublicenses to Marketing
Partners in accordance with Section 4.3.1 pursuant to a written agreement
that is consistent with the terms hereof and Galderma shall be responsible for
the compliance of such Third Party with the applicable terms of such agreement
and of this Agreement.
  4.4  NovaBay’s Right to
Co-promote to Healthcare Institutions in North America
  Subject to the terms and conditions of this Agreement and without limiting
NovaBay’s other rights hereunder, NovaBay shall have the right to Co-Promote
each Collaboration Product to Healthcare Institutions in the Field in North
America through its own sales force, except as otherwise provided in this
Section 4.4.  For purposes of this Agreement, “Healthcare Institutions” shall
mean all hospitals, nursing homes, long-term care facilities, dialysis centers,
home health care organizations and similar facilities, centers and
institutions.  Healthcare Institutions shall also include surgicenters
and acute care centers on a Collaboration Product-by-Collaboration Product basis
to the extent that at the time NovaBay exercises its right to Co-Promote such
Collaboration Product Galderma does not have a plan to market or sell products
to such particular surgicenters or acute care centers.  For the
avoidance of doubt, Galderma shall be permitted to make sales calls and
presentations at dermatology residency programs, teaching or academic hospitals
and similar facilities, centers and institutions.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -27-
 4.4.1  Co-Promote
  “Co-Promote” shall mean
to jointly promote a Collaboration Product through Galderma and NovaBay’s
respective sales forces under a single trademark in a given country, including
conducting details and other sales and promotional activities, with Galderma
taking the lead in managing such activities and booking sales of the
Collaboration Product and handling the distribution of the Collaboration
Product. “Co-Promotion”
shall have the correlative meaning.
  4.4.2  Exercise
  To
exercise its right to Co-Promote a particular Collaboration Product to
Healthcare Institutions in North America, NovaBay shall notify Galderma within
ninety (90) days of receipt of the Commercialization Plan with respect to such
Collaboration Product for North America pursuant to Section 4.2 and provide
Galderma a plan to Co-Promote such Collaboration Product to Healthcare
Institutions in North America.  In the event NovaBay exercises the
Co-Promotion Option with respect to a particular Collaboration Product, the
provisions of this Section 4.4 shall apply with respect
thereto.
  (a)  Upon
NovaBay’s exercise of the Co-Promotion Option with respect to a Collaboration
Product:
  (i)  The
Parties shall cooperate to coordinate the Co-Promotion activities under this
Section 4.4, and shall promptly agree upon a sales and marketing plan for
such Collaboration Product for Healthcare Institutions in North America
consistent with the Commercialization Plan to be provided by Galderma under
Section 4.2 and the plan provided by NovaBay for promotion to the
Healthcare Institutions in North America under Section 4.4.2 for such
Collaboration Product  (the “Co-Promotion Plan”), which
shall include detailed plans and budgets for performance of activities for such
Collaboration Product with respect to specific institutions, and provide at all
times for NovaBay sales personnel to conduct material activities in such
regards.
  (ii)  NovaBay
shall be responsible for the hiring of its sales personnel performing
Co-Promotion activities for such Collaboration Product to the Healthcare
Institutions hereunder, and may subcontract its Co-Promotion obligations to a
Third Party, subject to Galderma’s approval not to be unreasonably withheld,
delayed or conditioned; provided that NovaBay
shall remain ultimately responsible for the performance thereof.  In
all events, NovaBay’s Co-Promotion activities shall be conducted in accordance
with the Co-Promotion Plan for the applicable Collaboration
Product.  Galderma (or its Marketing Partner) shall provide to
NovaBay’s sales personnel, at Galderma’s expense, such Collaboration
Product-specific training and promotional materials (including samples) as are
reasonably necessary to effectively promote the particular Collaboration Product
consistent with the Co-Promotion Plan and consistent with the training and
materials provided to Galderma’s (or its Marketing Partner’s) sales personnel
promoting the Collaboration Product in North America in the Field to Healthcare
Institutions.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -28-
 (iii)  If
NovaBay exercises its option to Co-Promote a Collaboration Product, Galderma and
NovaBay shall enter into good faith negotiations to conclude a definitive
agreement, within sixty (60) days of NovaBay’s notice thereof, which will
outline in more detail the overall framework for the Co-Promotion activities of
the Parties with respect thereto, including roles and responsibilities of each
Party, consistent with the provisions of this Section 4.4 and incorporating
terms and conditions standard and customary in the pharmaceutical industry for
such arrangements.  Galderma shall pay NovaBay the royalties as set
forth in Section 8.5.7 in consideration for its activities under the
Co-Promotion Plan(s).
  (b)  If
NovaBay desires to terminate its Co-Promotion of any Collaboration Product, and
its obligations under this Section 4.4 with respect to such Collaboration
Product, on a Collaboration Product-by-Collaboration Product basis it shall
notify Galderma and the Parties shall negotiate a plan for such termination and
transition with the goal of ensuring that the Healthcare Institutions will
continue to receive such Collaboration Product and such termination and
transition occur as expeditiously as practicable under the
circumstances.  NovaBay shall reimburse Galderma for any and all
reasonable and documented expenses that Galderma incurs in connection with such
termination.  From and after the effective date of such termination by
NovaBay: (i) NovaBay shall have no further right to payment by Galderma
under Section 8.5.7 with respect to the terminated Collaboration Product,
other than for Net Sales thereof prior to the effective date of termination, and
(ii) NovaBay shall have no further right to exercise its right to
Co-Promote such Collaboration Product hereunder.
  4.5  Cooperation and
Consultation
  Each Party agrees to cooperate and consult with the other Party in good faith,
at such other Party’s request, with respect to the activities contemplated in
Section 4.1 or Section 4.4, as applicable.
  4.6  Galderma First Right of
Negotiation
  Without limiting NovaBay’s exclusive right to Commercialize the Collaboration
Products in the Field in the NovaBay Territory, if NovaBay elects to engage one
or more Third Parties to Commercialize a Collaboration Product in the Field in
any country within the NovaBay Territory marked by an asterisk (*) on Exhibit1.55, then prior to
negotiating with any Third Party with respect thereto, NovaBay shall provide
written notice to Galderma of its interest in engaging a Third Party to
Commercialize a Collaboration Product in the Field and referencing this
Section 4.6 and specifying the Product and the specific country(ies) (the
“Offer
Notice”).  If Galderma notifies NovaBay within forty-five (45)
days of the date of the Offer Notice that it desires to negotiate with NovaBay
for it to Commercialize such Collaboration Product in the Field in such country,
the Parties shall negotiate for a period of sixty (60) days.  If
(i) upon the expiration of such negotiation period, the Parties have not
entered into a definitive agreement, (ii) Galderma notifies NovaBay that it
does not so desire to negotiate, or (iii) Galderma fails to notify NovaBay
within the forty-five (45) days of the date of the Offer Notice, in each case
with respect to the Commercialization such Collaboration Product in the Field in
such country(ies), NovaBay shall have the right to offer the Commercialization
of such Collaboration Product in the Field in such country(ies) to Third Parties
without further obligation to Galderma hereunder.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -29-
 ARTICLE V
  DEVELOPMENT
AND COMMERCIALIZATION IN JAPAN
  5.1  Development in
Japan
   5.1.1  Japan Election
Notice
  During the Continuation Period, on or before the initiation of first-in-man
clinical trials for a particular Collaboration Product, Galderma shall provide
NovaBay notice of whether it intends to proceed with Development of such
Collaboration Product through to completion of a clinical trial able to support
initiation of a Pivotal Trial for such Collaboration Product in the Field with
respect to Japan (the “Japan
Election Notice”).  If Galderma so elects to proceed, then
together with such Japan Election Notice, Galderma shall provide the
Coordination Committee a plan for such Development for such Collaboration
Product consistent with the requirements for Development Plans for Collaboration
Products in the Field otherwise in the Galderma Territory for approval
consistent with Section 2.1.5 and Section 3.6 (each, a “Japanese Development Plan”)
and Galderma shall be the “Japanese Lead
Party.”  If Galderma fails to so elect (including by failure to
provide the Japan Election Notice in a timely manner), then NovaBay (itself or
through a Japanese Partner) may proceed with such Development, in which case
NovaBay shall provide the Coordination Committee the Japanese Development Plan
for approval consistent with Section 2.1.5 and Section 3.6 and shall
be the Japanese Lead Party, subject to the provisions of this
Section 5.1.
  5.1.2  Pre-Pivotal
Development
  The Japanese Lead Party shall, at its expense, take the lead and be responsible
for conducting such Development activities, including appropriate chronic
toxicology and clinical trials, as are reasonably necessary to support
initiation of a Pivotal Trial (the “Pre-Pivotal Development”) for
such Collaboration Product in the Field with respect to Japan, all in
accordance, in all material respects, with the Japanese Development Plan
therefor (including the applicable timelines for specific
activities).  The Japanese Lead Party for such Collaboration Product
shall update the Japanese Development Plan therefor at least annually on or
before each October 31st.  The Japanese Lead Party shall keep the
other Party through the Coordination Committee reasonably informed as to the
progress of the Pre-Pivotal Development.
  5.1.3  Pre-Pivotal Japan
Report
  Upon completion of the Pre-Pivotal Development, the Japanese Lead Party shall
provide the other Party a report including the Data from such Development and
designating whether it elects to proceed with Pivotal Trials for such
Collaboration Product in the Field with respect to Japan (the “Pre-Pivotal Japan
Report”).  If NovaBay is the Japanese Lead Party, such
Pre-Pivotal Japan Report shall also include a summary of the reasonable and
documented costs incurred by or under authority of NovaBay in completing such
Pre-Pivotal Development (the “Pre-Pivotal Development
Costs”).  Within sixty (60) days of receipt of the Pre-Pivotal
Japan Report for a Collaboration Product, the other Party shall notify the
Japanese Lead Party as to whether the other Party (itself or through its
designee) intends to be jointly responsible and fund [***] percent ([***]%) of
the Pivotal Trials (if the Japanese Lead Party elects to proceed with Pivotal
Trials for such Collaboration Product) or to take full responsibility and fund
[***] percent ([***]%) of the Pivotal Trials (if the Japanese Lead Party elects
not to proceed with Pivotal Trials for such Collaboration Product), in each case
for such Collaboration Product in the Field with respect to Japan (each, a
“Japanese Election
Notice”).  If Galderma is not the Japanese Lead Party and it so
elects to participate in the Pivotal Trials, it shall together with such
Japanese Election Notice, pay NovaBay an amount equal to [***] percent ([***]%)
of the Pre-Pivotal Development Costs.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -30-
 5.1.4  Pivotal
Trials
  In
the case where both Parties elect to fund and be responsible for the Pivotal
Trials for a Collaboration Product in the Field with respect to Japan, then the
Parties shall cooperate in good faith in consultation with each other, with
Galderma (i) acting as the Japanese Lead Party, and (ii) taking the
lead (and having the final say with respect thereto) in preparing a Development
Plan for the conduct of such Pivotal Trials for submission to the Coordination
Committee for review and approval in accordance with Section 3.6 and the
Parties each funding fifty percent (50%) thereof.  If only one Party
elects to fund and be responsible for the Pivotal Trials for a Collaboration
Product in the Field with respect to Japan, then such Party shall prepare a
Development Plan for the conduct of such Pivotal Trials, at its expense, for
submission to the Coordination Committee for approval in accordance with
Section 3.6 (with such Party having the final say).
  5.2  Commercialization in
Japan
   5.2.1  Both Parties
Fund
  If
both Parties fund the conduct of the Pivotal Trials for a Collaboration Product,
then Galderma shall have the co-exclusive right to Commercialize (i.e., co-market) such
Collaboration Product (itself or through a Marketing Partner, subject to
Section 4.3) under its or its Marketing Partners’ trademarks and, subject
to this Section 5.2.1, NovaBay shall have a co-exclusive right to co-market
such Collaboration Product for use in the Field in Japan, itself or through one
or more Japanese Partners under its or its Japanese Partners’
trademarks.
  (a)  Without
limiting Section 4.2, if both Parties fund the conduct of the Pivotal
Trials for a Collaboration Product, then at least eighteen (18) months in
advance of NovaBay or its Japanese Partner’s launch of each such Collaboration
Product for use in the Field in Japan, NovaBay shall propose the initial
Commercialization Plan for NovaBay’s or its Japanese Partner’s Commercialization
of such Collaboration Product in the Field in Japan, which shall be updated at
least annually.  NovaBay shall provide each such Commercialization
Plan and any material modification or addition thereto to Galderma for its
review and comment.  The Parties acknowledge that the comments from
Galderma with respect to any such Commercialization Plan are solely advisory in
nature and that NovaBay shall have the final say relative to such
Commercialization Plan; nonetheless, NovaBay shall consider in good faith the
comments of Galderma with respect thereto.  Without limiting the
foregoing, NovaBay shall provide Galderma together with the reports to be
provided under Section 8.8 an update of its activities with respect to
NovaBay or its Japanese Partner’s Commercialization of such Collaboration
Products for use in the Field in Japan.  Upon Galderma’s reasonable
request, NovaBay agrees to make available appropriate employees and personnel to
meet and discuss any questions or comments of Galderma with respect to NovaBay’s
Commercialization of Collaboration Products for use in the Field in
Japan.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -31-
 (b)  NovaBay
shall, unless otherwise agreed by the Parties, only have the right to appoint a
Japanese Partner pursuant to this Section 5.2 if each of the following
conditions is satisfied:
  (i)  Any such
appointment of a Japanese Partner shall be pursuant to a written agreement that
is consistent with the terms hereof, and NovaBay shall be responsible for the
compliance of such Japanese Partner with the applicable terms of such agreement
and of this Agreement;
  (ii)  Each
Japanese Partner will have the right to Commercialize Collaboration Products
under its own and NovaBay Product Marks but not Galderma Product Marks in
Japan;
  (iii)  NovaBay’s
agreement with each such Japanese Partner will ensure consistency and
coordination of the Japanese Partner’s marketing efforts and messages with
respect to Collaboration Products in Japan with that of Galderma (or its allowed
designee) in Japan; and
  (iv)  The
Japanese Partner shall be subject to approval by Galderma, with such approval
not to be unreasonably conditioned or delayed and may only be withheld if
Galderma reasonably believes that NovaBay’s appointment of such Third Party is
likely to put Galderma at a material commercial disadvantage and provides
NovaBay with reasonable written explanation of the basis for such belief within
ten (10) business days of NovaBay notifying Galderma that it is contemplating
such Third Party as a Japanese Partner under this Section 5.2.
  (c)  Without
limiting the provisions of Section 6.2, each such Japanese Partner shall
have the right to use or cross-reference Galderma’s Regulatory Filings for such
Collaboration Products with respect to Japan;
  (d)  If the
Parties co-market a Collaboration Product in Japan, Galderma shall supply to
NovaBay’s and its Japanese Partner’s requirements of formulated and packaged
(labeled or unlabeled, at Galderma’s discretion) Collaboration Product in
accordance with Section 6.1.3.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -32-
 5.2.2  One Party
Funds
  If
one Party funds the conduct of the Pivotal Trials for a Collaboration Product,
then such Party shall have the exclusive right to Commercialize such
Collaboration Product (itself or through a Marketing Partner or Japanese
Partner, as applicable).  Such Party shall be responsible for
preparing and updating Development Plans for such Collaboration Product for
review and approval by the Coordination Committee (with such Party having final
say) consistent with Section 3.6 and preparing the Commercialization Plan
for such Collaboration Product and providing to the other Party for its review
and comment consistent with Section 4.2 (the terms of which shall apply
mutatis mutandisto a
Commercialization Plan prepared by NovaBay).
  5.2.3  Royalties to Galderma on
Japan Sales
  If
NovaBay (itself or through a Japanese Partner) Commercializes Collaboration
Products in Japan, it shall pay the applicable percentage of Net Sales thereof
by NovaBay or its Japanese Partner as set forth in the table below:
 
 Percentage
      of Net Sales of Collaboration Products in Japan by NovaBay or its Japan
      Partners
              If
      Galderma was the Japanese Lead Party for such Collaboration
      Product
              If
      Galderma was not the Japanese Lead Party for
                  such
      Collaboration ProductIf
      Galderma funds [***]% of the Pivotal Trials for such Collaboration
      Product
              [***]%
              [***]%If
      Galderma does not fund [***]% of the Pivotal Trials for such Collaboration
      Product
              [***]%
              [***]%
  ARTICLE VI
  
  MANUFACTURING
AND SUPPLY, REGULATORY & OTHER MATTERS
  6.1  Manufacturing and
Supply
   6.1.1  Collaboration
Compounds
  Unless otherwise agreed by the Parties, NovaBay shall have the right and
responsibility (itself or through one or more Third Parties) for manufacturing
and supplying Collaboration Compounds in bulk active pharmaceutical ingredient
form to Galderma for use in all Development and Commercialization activities for
each Collaboration Product in the Field hereunder.  In addition to the
transfer price for Collaboration Compounds so supplied by NovaBay, Galderma
shall reimburse NovaBay for fifty percent (50%) of the reasonable and documented
costs incurred in accordance with a budget proposed by NovaBay and approved by
Galderma (which approval shall not be unreasonably withheld, delayed or
conditioned) with respect to process development, scale-up, quality assurance
and quality control testing and monitoring, stability studies, qualification,
validation and other similar activities with respect to the manufacture of each
Collaboration Compound (collectively “Scale-up
Costs”).  Notwithstanding the foregoing, Galderma shall only
reimburse NovaBay for thirty-three (33%) of Scale-up Costs associated with
NVC-[***].  Galderma shall have the right to verify, at its expense,
all Scale-up Costs by audit using an independent certified public accountant
(subject to obligations of confidentiality to NovaBay or its subcontractor)
appointed by Galderma and reasonably acceptable to NovaBay; provided that in the
event such Scale-up Costs are audited and the audit reveals that such costs were
overstated by more than five percent (5%), then the audit expenses shall be paid
by NovaBay.  Without limiting the foregoing, in the event that such an
audit shows any error in the Scale-up Costs, the payment with respect thereto
shall be appropriately adjusted.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -33-
 6.1.2  Collaboration
Products
  In
all events, Galderma shall have a right and the responsibility to Manufacture
(itself or through one or more Third Parties) any Collaboration Product (i.e., formulate or
compound the Collaboration Compound and otherwise produce the final dosage forms
thereof) for use in the Development and Commercialization activities in the
Field under this Agreement.
  6.1.3  Supply by
Galderma
  Galderma shall be responsible for Manufacturing or having Manufactured
Collaboration Products for the Development and Commercialization thereof in the
Field for the Galderma Territory.  Upon NovaBay’s written request,
Galderma shall Manufacture and supply Collaboration Products to NovaBay for its
(and its Japanese Partner’s) use and sale as set forth in this Agreement,
including for applications outside of the Field and outside of the Galderma
Territory; provided that
(i) Galderma shall have no obligation to Manufacture or supply any
formulation not then being Manufactured by Galderma for its or its Marketing
Partners’ use or sale hereunder and (ii) the Manufacture of the
Collaboration Products for NovaBay shall not materially and adversely affect
Galderma’s Commercialization of Collaboration Products under this
Agreement.
  6.1.4  Transfer
Price
   (a)  The
transfer price of Collaboration Compounds supplied by NovaBay pursuant to
Section 6.1.1 will be equal to NovaBay’s Manufacturing Costs therefor plus
[***].
  (b)  The
transfer price of Collaboration Products supplied by Galderma to NovaBay
pursuant to Section 6.1.3 will be equal to Galderma’s Manufacturing Cost
therefor plus [***], provided that such
[***] markup shall not apply to the [***] markup for Collaboration Compounds
paid pursuant to Section 6.1.4(a).
  For
purposes of this Agreement, “Manufacturing Cost” has the
meaning as set forth in Exhibit6.1.4.
  (c)  Each
Party agrees that in connection with its manufacture and supply of Collaboration
Compounds or Collaboration Products, as applicable, it will use commercially
reasonable efforts to implement applicable cost-reducing measures and cooperate
with the other Party in doing so.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -34-
 6.1.5  Supply
Agreement
  Upon request by either Party, the Parties shall use good faith efforts to
promptly negotiate and execute a definitive supply agreement setting forth the
specific terms and conditions of any supply arrangement between the Parties
pursuant to this Section 6.1 (each, a “Supply
Agreement”).  Each Supply Agreement shall (i) contain
reasonable and customary supply terms (e.g., specifications,
forecasts, lead times, purchase obligations and the like), (ii) be
consistent with the terms hereof, and (iii) include the other applicable
terms and conditions set forth in Exhibit6.1.5.
  6.1.6  Coordination
  Each Party agrees to reasonably cooperate with the other with regard to the
manufacture and supply of Collaboration Compounds and the Manufacture of
Collaboration Products hereunder so as to minimize costs associated therewith,
including when approaching Third Parties regarding potentially acting as a
contract manufacturer for one or more Collaboration Compounds or Collaboration
Products.  Upon either Party’s reasonable request, the Parties shall
discuss and cooperate in good faith to provide for alternate or additional Third
Party contract manufacturers to support the fulfillment of its supply
obligations hereunder.
  6.2  Regulatory
Matters
   6.2.1  Filings
  (a)  As
between the Parties, Galderma shall take the lead and be responsible for, at its
expense, filing, obtaining and maintaining approvals for Development,
Manufacturing and Commercialization of Collaboration Products in the Field for
the Galderma Territory, including any IND, MAA or Marketing Approval therefor;
provided that
NovaBay shall be responsible for filing, obtaining and maintaining permits and
approvals with respect to its supply of Collaboration Compounds in active
pharmaceutical ingredient form pursuant to Section 6.1.1, and Galderma
shall be responsible for filing, obtaining and maintaining permits and approvals
with respect to its Manufacture and supply of Collaboration Products pursuant to
Section 6.1.2 and Section 6.1.3.  Notwithstanding the
foregoing, the Japanese Lead Party with respect to a Collaboration Product shall
be responsible for filing and obtaining the IND, MAA and Marketing Approval for
such Collaboration Product in Japan.  Each Party shall provide the
other Party with copies of all material correspondence with any Regulatory
Authority related to the Collaboration Products, including any Regulatory
Filings in support of the foregoing.  Each Party shall afford
representatives of the other Party a reasonable opportunity but no event less
than five (5) business days to comment on Regulatory Filings and other material
correspondence for such Collaboration Product in the Field, and shall reasonably
consider such comments.
  (b)  To the
extent not prohibited by applicable Law, each Party shall own all Regulatory
Filings filed by or under authority of such Party for Collaboration Products in
the Field made in accordance with this Agreement.  Each Party shall
promptly provide the other Party with reasonable advance notice (to the extent
practicable) of meetings with any Regulatory Authority that pertain to
Collaboration Products in the Field and to the extent feasible allow the other
Party to attend any such meetings.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -35-
 6.2.2  Clinical Safety Reporting;
Pharmacovigilance
  With respect to any Adverse Drug Reaction, IND safety report or similar
obligation to report to any Regulatory Authority relating to any safety issue
with respect to Collaboration Products in the Field, Galderma shall be
responsible for and shall establish operating procedures to report to the
appropriate Regulatory Authority(ies) in the Galderma Territory and NovaBay
shall be responsible for and shall establish operating procedures to report to
the appropriate Regulatory Authority(ies) in the NovaBay Territory, in each case
all in accordance with applicable Law and in close coordination with the other
Party.  Such operating procedures shall include any measures necessary
for each Party to fully comply with such Laws and establish Galderma as
responsible for establishing and maintaining the world-wide database for
reporting for Collaboration Products in the Field.  Such operating
procedures and any material revisions to them shall be provided to the
Coordination Committee for review and comment.  The Parties agree to
implement prior to the initiation of the first clinical trial for a
Collaboration Product in the Field, a separate agreement setting forth the
responsibilities and procedures for clinical safety information exchange and
reporting.  In addition, the Parties agree to implement prior to the
first commercial sale of a Collaboration Product in the Field in the Galderma
Territory or NovaBay Territory, a separate agreement setting forth the
pharmacovigilance responsibilities and procedures for safety information
exchange and reporting.  Such agreements shall include provisions
requiring each Party promptly communicate to the other Party any correspondence
related to the safety of Collaboration Products in the Field to or from any
Regulatory Authority.  Such agreements shall also include coordination
of reporting and correspondence related to safety matters with respect to
products incorporating Multiple-Field Compounds for applications outside of the
Field.  Without limiting the foregoing, the strategy and content of
all responses to any questions from any such Regulatory Authority related to
such matters received by either Party shall be subject to review and comment by
the Coordination Committee (to the extent practical given the time-frames
involved).
  6.2.3  Cooperation
  Each
Party agrees to make its personnel reasonably available, upon reasonable notice
to the other Party, at their respective places of employment to consult with the
other Party on issues arising related to the activities conducted in accordance
with this Section 6.2 or otherwise relating to regulatory matters involving
the Collaboration Products in the Field, including any request from any
Regulatory Authority, including regulatory, scientific, technical and clinical
testing issues, or otherwise, throughout the Agreement Term.  Without
limiting the foregoing or Section 6.3, each Party (the “Enabling Party”) agrees to
cooperate with the other Party (the “Filing Party”), at its
request, to comply with specific requests of any Regulatory Authority (such as
requests to inspect clinical trial sites), with respect to Data supplied or to
be supplied by the Enabling Party to the Filing Party for filing with such
Regulatory Authority, or with respect to Collaboration Compounds or
Collaboration Products, respectively, supplied by the Enabling
Party.  The Enabling Party shall ensure that its contractors likewise
comply with this Section 6.2.3.  In this regard, the Enabling
Party agrees to provide to applicable Regulatory Authorities, or provide
reference rights to the Filing Party, manufacturing data (including such
information as is required for the CMC section of any IND or NDA, or a drug
master file) specifically requested by the Filing Party, which is reasonably
necessary for the Filing Party to file, prosecute, obtain, or maintain
regulatory approvals for the Collaboration Products.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -36-
 6.2.4  Regulatory Inspection/Audit
Rights
   (a)  Each
Party shall permit the other Party, and/or an authorized representative
reasonably acceptable to such permitting Party, to enter the relevant facilities
of it and its Affiliates once per calendar year (provided that, if any
issue is discovered during an inspection pursuant to the terms of this
Section 6.2.4, an additional inspection may be made pursuant to the terms
of this Section 6.2.4 to confirm resolution of such issue) during normal
business hours and upon reasonable advance notice to inspect and verify
compliance with applicable regulatory and other requirements as well as with
this Agreement.  Such inspection right shall include the right to
examine any internal procedures or records of such Party primarily relating to
the Collaboration Compound or Collaboration Product, as
applicable.  Each Party shall give the other Party or its authorized
representative all necessary and reasonable assistance for a full and correct
carrying out of the inspection.  Such inspection shall not relieve
either Party of any of its obligations under this Agreement.
  (b)  Each
Party shall use commercially reasonable efforts to secure for the other Party
the rights set forth in Section 6.2.4(a) from such Party’s sublicensees,
trial sites and other subcontractors for the Collaboration Compound and
Collaboration Product, as applicable.  In the event either Party is
unable to secure such inspection rights from any of its sublicensees, trial
sites or subcontractors, such Party agrees to use commercially reasonable
efforts to secure such rights for itself and, if requested by the other Party,
shall exercise such rights, at its own expense, on behalf of the other Party and
fully report the results thereof to such other Party.
  6.3  Transfer of Data and
Regulatory Filings
  From time to time, or upon reasonable request of the other Party, each Party
shall transfer to the other Party all previously undisclosed Data and Regulatory
Filings relating to the Collaboration Products that are Controlled by it, provided that NovaBay
and Galderma shall have the right to redact any proprietary information that is
not NovaBay Technology or Galderma Technology, respectively,
therefrom.  Without limiting the foregoing, each Party shall have the
right to (and authorize permitted Third Parties to) access, use and reference
the other Party’s Data and reference the other Party’s Regulatory Filings and
right to file such items with Regulatory Authorities for Collaboration Compounds
or Collaboration Products for purposes of performing activities in accordance
with this Agreement, and with respect to NovaBay, for purposes of NovaBay
performing activities outside the Field with respect to the Galderma Territory
and all purposes with respect to the NovaBay Territory.  For the
avoidance of doubt, Galderma shall have the right to reference Regulatory
Filings Controlled by NovaBay that are related to Collaboration Compounds for
purposes of this Agreement; and similarly, NovaBay shall have the right to
reference Regulatory Filings Controlled by Galderma that are related to
Collaboration Compounds for purposes of this Agreement.  Each Party
shall provide the other with such assistance as the other Party reasonably
requests from time to time, at such other Party’s cost, to enable such other
Party to fully understand and implement the Data and Regulatory Filings
transferred under this Section 6.3.  Notwithstanding anything
herein to the contrary, (i) in all agreements with Third Parties or
Affiliates involving creation or use of Data, NovaBay and Galderma,
respectively, shall require that such Third Parties and Affiliates provide the
other Party access to all such Data hereunder, and (ii) NovaBay shall not
provide access to any Data generated by or on behalf of Galderma to a Third
Party for Developing Collaboration Products for the Dermatology Field, except
for safety and other Data to the extent necessary for purposes of filings with
Regulatory Authorities related to the safety of such Collaboration Product(s)
(e.g., ICH E2F
filings) and then solely for such purpose.  For clarity, the
restriction described in clause (ii) of the previous sentence shall not
apply to the Development of Collaboration Products outside of the Dermatology
Field.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -37-
 6.4  [***].
  6.4.1  [***].
   6.4.2  [***].
   6.4.3  [***].
   ARTICLE VII
   LICENSES
  7.1  License
Grants
   7.1.1  To
Galderma
  Subject to the terms and conditions of this Agreement, including
Section 6.1, NovaBay hereby grants to Galderma:
  (a)  a
non-exclusive, fully-paid, world-wide license under the NovaBay Technology to
carry out those Development activities for which it is responsible
hereunder;
  (b)  an
exclusive (except as otherwise provided in and subject to Section 4.4 and
Section 5.2) license under the NovaBay Technology to Commercialize
Collaboration Products in the Field in the Galderma Territory during the
Continuation Period;
  (c)  a
non-exclusive license under the NovaBay Technology to Commercialize
Collaboration Products to aesthetic and corrective dermatologists (including
cosmetic surgeons) in their office settings, but not in Healthcare Institution
settings, for use in their practices, including in connection with post-surgical
treatments; and
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -38-
 (d)  a
non-exclusive, world-wide license under the NovaBay Technology to Manufacture
Collaboration Products.
  The
licenses granted under this Section 7.1.1 shall not include the right to
sublicense (except to a Marketing Partner as provided in Section 4.3 or to
an Affiliate); provided, however, that the use
by Galderma of subcontractors shall not be construed as a
sublicense.
  7.1.2  To
NovaBay
  Subject to the terms and conditions of this Agreement, Galderma hereby grants to
NovaBay:
  (a)  a
non-exclusive, fully-paid license to make, use and otherwise exploit the
Galderma Technology to the extent necessary to (i) conduct the activities
assigned to NovaBay under the Development Program, and (ii) cooperate with
Galderma hereunder (including manufacture and supply of Collaboration Compounds
pursuant to Section 6.1.1).  The license granted under this
Section 7.1.2(a) shall not include the right to sublicense; provided, however, that the use
by NovaBay of subcontractors or delegation of responsibilities to an Affiliate
shall not be construed as a sublicense;
  (b)  a
non-exclusive license under the Galderma Technology to Develop and Commercialize
Collaboration Products in the Field in Japan in accordance with and subject to
Article V, including through a Japanese Partner; and
  (c)  a
non-exclusive license under the Galderma Technology to make, use, sell, offer
for sale, import and otherwise exploit Aganocide Products (i) outside the
Field anywhere in the world, and (ii) within the Field solely in the
NovaBay Territory.  Notwithstanding the foregoing, NovaBay shall not
have the right to exercise the licenses granted pursuant to this
Section 7.1.2(c) with respect to Galderma Technology in a manner that can
reasonably be expected to (A) create a risk of Multiple-Field/Territory
Product Substitution as described in Section 2.4.2, or (B) otherwise
compete with Galderma products in the Dermatology Field in the Galderma
Territory.
  7.1.3  No Other Active
Ingredients
  For clarity, it is understood that (i) the licenses granted to Galderma
under Section 7.1.1 shall only apply to Collaboration Products
incorporating Collaboration Compound(s) alone or in combination with one or more
active ingredients (which are not Collaboration Compounds), provided that such
license shall not include any license to such other active ingredients
themselves, and (ii) the licenses granted to NovaBay under
Section 7.1.2(c) and Section 12.6.5 shall not include any license to
any active ingredients themselves, but shall include licenses to Aganocide
Compounds in combination with one or more active ingredients (which are not
Aganocide Compounds).
  7.2  No Other
Rights
  Each Party acknowledges that the rights and licenses granted under this
Article VII and elsewhere in this Agreement are limited to the scope
expressly granted.  Accordingly, except for the rights expressly
granted under this Agreement, no right, title, or interest of any nature
whatsoever is granted whether by implication, estoppel, reliance, or otherwise,
by either Party to the other Party.  All rights with respect to
Know-How, Patent or other intellectual property rights that are not specifically
granted herein are reserved to the owner thereof.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -39-
 7.3  Use of NovaBay
Technology
  Galderma agrees not to use any NovaBay Technology except as expressly provided
in this Agreement.
  7.4  Use of Galderma
Technology
  Similarly, NovaBay agrees not to use any Galderma Technology except as expressly
provided in this Agreement.
  7.5  Conflicts of
Interest
  In
carrying out its rights and responsibilities under the Collaboration, each Party
agrees to act in the best interests of the Collaboration
Products.  Without limiting the foregoing, if Galderma or its
Affiliate or Marketing Partner sells a Collaboration Product to a Third Party to
which it also provides other products or services, Galderma or such Affiliate or
Marketing Partner (as applicable) shall not price, discount or otherwise offer
(including bundling or rebating) the Collaboration Product in any way that
benefits such other products or services at the expense of such Collaboration
Product or otherwise disadvantage the Collaboration
Products.  Similarly, if NovaBay or its Affiliate or Japanese Partner
sells a Collaboration Product to a Third Party in Japan to which it also
provides other products or services, NovaBay or such Affiliate or Japanese
Partner shall not price, discount or otherwise offer (including bundling or
rebating) the Collaboration Product in any way that benefits such other products
or services at the expense of such Collaboration Product or otherwise
disadvantage the Collaboration Products in Japan.  In all events,
Galderma and its Affiliates and Marketing Partners and NovaBay and its
Affiliates and any Japanese Partners shall price and offer Collaboration
Products sold by it hereunder in a manner consistent with standard practices in
the pharmaceutical industry and applicable Law.
  7.6  Medical
Devices
   7.6.1  Exclusivity
  Notwithstanding anything herein to the contrary, NovaBay agrees during the
Agreement Term not to develop, market, sell, offer for sale or otherwise
commercialize, directly or through any Affiliate of NovaBay, either alone or
with any Third Party, any medical device comprising or incorporating any
Aganocide Compound, in each case for use in the Field in the Galderma
Territory.
  7.6.2  Discussions
  Upon the request of either Party, the Parties agree to discuss in good faith
terms and conditions for the development, marketing, sale, offer for sale or
other commercialization of a medical device comprising or incorporating any
Aganocide Compound for use in the Field in the Galderma Territory; provided that neither
Party shall have any obligation to agree to any such terms or
conditions.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -40-
  ARTICLE VIII
  PAYMENTS
  8.1  Certain
Fees
  Galderma shall pay to NovaBay the following fees:
  8.1.1  Upfront
Fee
  On
the Effective Date, One Million Dollars ($1,000,000);
  8.1.2  Monthly
Fee
  On
or before the 25th of each of the six (6) calendar months after the Effective
Date, Two Hundred Thousand Dollars ($200,000) for a total not to exceed One
Million Two Hundred Thousand Dollars ($1,200,000); and
  8.1.3  Completion of Formulation
Feasibility Studies
  Within fifteen (15) days of the completion of the Formulation Feasibility
Studies to Galderma’s satisfaction, but no later than nine (9) months after the
Effective Date, Two Million Dollars ($2,000,000).
  The fees
set forth in this Section 8.1 shall be non-refundable, and shall not be
creditable against any other amount due hereunder.
  8.2  Continuation
  If
Galderma elects to continue the Collaboration beyond the Initial Period,
Galderma shall pay NovaBay the following:
  8.2.1  Continuation
Fee
  A
non-refundable, non-creditable “Continuation Fee” in the
applicable amount set forth in the table below based on the timing of such
payment:
 
 Timing
              Amount
      of the Continuation FeeIf
      paid on or before March 31,
      2010
              $[***]If
      paid after March 31, 2010 but on or before July 1,
      2010
              $[***]If
      paid after July 1, 2010 but on or before October 1,
      2010
              $[***]If
      paid after October 1,
      2010
              $[***]
  8.2.2  Certain
Reimbursements
  Upon the later of (i) payment of the Continuation Fee, or (ii) thirty
(30) days of NovaBay providing to Galderma an accounting of reasonable and
documented amounts (including receipts for amounts paid to Third Parties)
incurred by NovaBay in performing activities in accordance with the Impetigo
Plan with respect to the Impetigo POC (the “Impetigo Reimbursement
Amount”), (A) an amount equal to the lesser of the Impetigo
Reimbursement Amount and [***] Dollars ($[***]), and (B) an additional
amount equal to the reimbursement for any NovaBay FTEs at the FTE Rate incurred
in accordance with the budget approved by the Coordination Committee therefor
prior to the payment of the Continuation Fee, provided that such
NovaBay FTEs have not been funded pursuant to Section 8.3.1.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -41-
 8.3  Galderma Funding During the
Continuation Period
  8.3.1  FTE
Funding
   (a)  Galderma
shall fund such number of NovaBay FTEs with respect to the research and
development of Collaboration Products in the Field as Galderma may propose and
the Coordination Committee shall agree from time to time (with neither Party
having the final say with respect thereto, provided that Galderma shall agree to
fund and the Coordination Committee shall agree to an average of [***] NovaBay
FTEs during each of the first [***] years of the Continuation
Period,  for a minimum of [***] NovaBay FTEs during such [***] year
period), and the allocation of such NovaBay FTEs shall be determined by the
Coordination Committee; provided that unless
otherwise agreed, (i) [***] of such funding shall be directed to activities
under the Development Program and [***] directed to activities related to
research activities outside of the Development Program, and (ii) the
activities of any NovaBay FTEs funded pursuant to this Section 8.3.1(a)
shall be integrated into the Development Plans.  For clarity, Galderma
shall have no obligation to propose any NovaBay FTEs for any particular
period.  Effective beginning with the calendar year 2010, the FTE Rate
shall increase no more than once annually on January 1 of each year by the
percentage increase, if any, in (A) salaries as reported for the current
fiscal year by Radford SurveysTM Quarterly Salary Increase Trend Survey
(QSIT)--Biotechnology Edition Base Salary Increase Analysis for Exempt Employees
(Current Fiscal Year Actual (Undiluted) Overall Increases Combined), or
(B) the Consumer Price Index, for All Urban Consumers for the San Francisco
Bay Area, as published by the U.S. Department of Labor, Bureau of Labor
Statistics, in each case whichever increase is higher since the last such
increase under this Section 8.3.1(a) (or in the case of the first such
increase, the Effective Date) and such increase shall be effective on a
going-forward basis for the then current and all subsequent Development Plans
hereunder until further modified under this
Section 8.3.1(a).  Notwithstanding anything herein to the
contrary and except for those activities of NovaBay pursuant to the Impetigo
Plan for the Impetigo POC, NovaBay shall not have any obligation to perform any
Development activities under this Agreement or incur any expenses with respect
thereto if such activities are not funded by Galderma under this
Section 8.3.1.  Notwithstanding the foregoing, Galderma may fund
additional NovaBay FTEs as set forth in this Section 8.3.1 upon the mutual
agreement of the Parties; and NovaBay may incur additional FTE costs and other
resources in support of activities with respect to the Field.
  (b)  The
payment of FTE funding shall be made in advance on a monthly
basis.  Unless otherwise specified, FTEs budgeted over a particular
period will be deemed budgeted equally over such period.
  8.3.2  Non-FTE
Costs
  If
any Development Plan (other than the Impetigo Plan for Impetigo POC) includes,
and NovaBay conducts and funds any activity using Third Party resources or
acquires any capital equipment, Galderma shall reimburse NovaBay for the actual
amounts paid by NovaBay for such Third Party activities or capital equipment
(provided such equipment will be transferred to Galderma at the end of the
Agreement Term) subject to production of receipts or other evidence of payment,
all as approved by Galderma in the Development Plans.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -42-
 8.4  Development Milestone
Payments
  Subject to Section 8.4.1 and Section 8.4.2, Galderma shall pay to
NovaBay the amounts set forth in the following table (each, a “Milestone Payment”) upon the
first achievement of the corresponding milestone event for the applicable
Collaboration Product (each, a “Milestone
Event”):
 
 Milestone
      Event
              Acne
      Product
              Impetigo
      Product1.      Acceptance
      of an
      IND
              [***]
              [***]2.      First
      successful completion of a Phase II Clinical Trial
              [***]
              [***]3.      First
      initiation of any Phase III Clinical Trial
              [***]
              [***]4.      First
      filing of an MAA in a Major
      Market
              [***]
              [***]5.      First
      receipt of a Marketing Approval in a Major Market
              [***]
              [***]
  8.4.1  Certain
Terms
    (a)  For
purposes of this Section 8.4:
  (i)  “Acceptance” with respect to an
IND shall be deemed to occur upon (A) the issuance, acceptance or
notification of the IND by the applicable Regulatory Authority or
(B) expiration of the period when the applicable Regulatory Authority may
reject the IND and no such rejection has occurred, as applicable.
  (ii)  The
“initiation” of a
clinical trial shall be deemed to occur upon the first dosing of the first
subject in such trial.
  (iii)  The
“successful completion”
of a Phase II Clinical Trial, with respect to a Collaboration Product,
shall be deemed to occur upon finalization of the final report for such clinical
trial wherein any primary endpoint has been met, but no later than a decision to
proceed with a Phase III Clinical Trial for such Collaboration
Product.
  (b)  It is
understood that the Milestone Payments reflected under any column in the table
above shall be payable whether or not Milestone Events have been paid for such
Collaboration Product with respect to another column in such
table.    For clarity, each Milestone Payment reflected in
such table shall be due only once and no further payment shall be due no matter
how many additional times such Milestone Event may be achieved with respect to
additional Acne Products or Impetigo Products.  Accordingly, the
maximum amount payable by Galderma to NovaBay pursuant to this Section 8.4
for Acne Products is $30,000,000 and for Impetigo Products is
$12,750,000.
  (c)  If a
subsequent Milestone Event with respect to the applicable Collaboration Product
is achieved before a prior Milestone Event with respect to such Collaboration
Product (“prior” and
“subsequent” referring
to a lower or higher, respectively, number corresponding to such milestone in
the table above, for example, Milestone Event 2 is “prior” to Milestone
Event 3), then all such prior Milestone Events with respect to such
Collaboration Product shall be deemed achieved upon achievement of the
subsequent Milestone Event with respect to such Collaboration Product and become
payable (if not previously paid) in accordance with this
Section 8.4.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -43-
 8.4.2  Milestone Payment
Timing
  The payments set forth in this Section 8.4 shall each be due and payable to
NovaBay upon the later of (i) payment of the Continuation Fee, and
(ii) thirty (30) days of the achievement (or deemed achievement) of the
corresponding Milestone Event set forth above.  Galderma agrees to
promptly notify NovaBay of its achievement of each Milestone Event.
  8.5  Royalty Payments to
NovaBay
  Galderma shall pay to NovaBay a royalty on Net Sales as follows (sample
calculations of which are attached as Exhibit8.5):
  8.5.1  Acne
Products
  Galderma shall pay to NovaBay the applicable royalty rate on Annual Net Sales of
Acne Products as set forth in the table below:
 
 Annual
      Net Sales
              Royalty
      RateA.  Portion
      ≤ $
      [***]
              [***]B.  Portion
      >$ [***] and ≤ $
      [***]
              [***]C.  Portion
      >$ [***] and ≤ $
      [***]
              [***]D.  Portion
      >$
      [***]
              [***]
  8.5.2  Anti-Bacterial
Products
  Galderma shall pay to NovaBay the applicable royalty rate on Annual Net Sales of
Anti-Bacterial Products as set forth in the table below:
 
 Annual
      Net Sales
              Royalty
      RateA.  Portion
      ≤ $
      [***]
              [***]B.  Portion
      >$ [***] and ≤ $
      [***]
              [***]C.  Portion
      >$ [***] and ≤ $
      [***]
              [***]D.  Portion
      >$ [***] and ≤ $
      [***]
              [***]E.  Portion
      >$
      [***]
              [***]
  8.5.3  Anti-Fungal
Products
  Galderma shall pay to NovaBay the applicable royalty rate on Annual Net Sales of
Anti-Fungal Products as set forth in the table below:
 
 Annual
      Net Sales
              Royalty
      RateA.  Portion
      ≤ $
      [***]
              [***]B.  Portion
      >$ [***] and ≤ $
      [***]
              [***]C.  Portion
      >$ [***] and ≤ $
      [***]
              [***]D.  Portion
      >$ [***] and ≤ $
      [***]
              [***]E.  Portion
      >$
      [***]
              [***]
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -44-
 8.5.4  Anti-Viral
Products
  Galderma shall pay to NovaBay the applicable royalty rate on Annual Net Sales of
Anti-Viral Products as set forth in the table below:
 
 Annual
      Net Sales
              Royalty
      RateA.  Portion
      ≤ $
      [***]
              [***]B.  Portion
      >$ [***] and ≤ $
      [***]
              [***]C.  Portion
      >$ [***] and ≤ $
      [***]
              [***]D.  Portion
      >$ [***] and ≤ $
      [***]
              [***]E.  Portion
      >$
      [***]
              [***]
  8.5.5  Other
Products
  Galderma shall pay to NovaBay the applicable royalty rate on Annual Net Sales of
Other Products as set forth in the table below:
 
 Annual
      Net Sales
              Royalty
      RateA.  Portion
      ≤ $
      [***]
              [***]B.  Portion
      >$ [***] and ≤ $
      [***]
              [***]C.  Portion
      >$ [***] and ≤ $
      [***]
              [***]D.  Portion
      >$ [***] and ≤ $
      [***]
              [***]E.  Portion
      >$
      [***]
              [***]
  8.5.6  Certain
Terms
  For purposes of the foregoing,
  (a)  “Annual Net Sales” shall mean,
with respect to a particular calendar year, all Net Sales in the Galderma
Territory by or on behalf of Galderma, its Affiliates and Marketing Partners
during such calendar year.
  (b)  “Anti-Bacterial Products” shall
mean, collectively, all Collaboration Products (other than any Acne Product)
labeled (i) for the prophylaxis or treatment of any indication a primary
cause of which is an infection of one or more types of bacteria, including all
Impetigo Products, or (ii) as anti-bacterial, bactericidal or
bacteriastatic.
  (c)  “Anti-Fungal Products” shall
mean, collectively, all Collaboration Products labeled (i) for the
prophylaxis or treatment of any indication a primary cause of which is an
infection of one or more types of fungi, or (ii) as anti-fungal, fungicidal
or fungistatic.
  (d)  “Anti-Viral Products” shall
mean, collectively, all Collaboration Products labeled (i) for the
prophylaxis or treatment of any indication a primary cause of which is an
infection of one or more viruses, or (ii) as anti-viral, virucidal or
viralstatic.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -45-
 (e)  “Other Products” shall mean,
collectively, all Collaboration Products which are not an Acne Product, an
Anti-Bacterial Product, an Anti-Fungal Product or an Anti-Viral
Product.
  8.5.7  Sales Supported by
NovaBay
  In
the event that NovaBay exercises its right to Co-Promote a Collaboration Product
pursuant to Section 4.4, Galderma shall pay to NovaBay a royalty of [***]
of Net Sales of Collaboration Products sold to Healthcare Institutions in North
America.  For the avoidance of doubt, no additional royalty shall be
due under either Section 8.5.1 through 8.5.5 with respect to Collaboration
Products for which the royalty under this Section 8.5.7 is
paid.
  8.5.8  Certain Royalty
Conditions
   (a)  Notwithstanding
the foregoing, if a Collaboration Product is labeled for multiple indications or
is otherwise subject to multiple royalty rates hereunder only one royalty shall
be due at the applicable highest royalty rate.
  (b)  Notwithstanding
anything in this Article VIII to the contrary, all Milestone Payments made
under Section 8.4 with respect to Acne Products and [***] of all amounts
incurred by Galderma in the Development of such Acne Products shall be
creditable against [***] of each royalty payment made to NovaBay on Net Sales of
Acne Products pursuant to tiers B, C and D in the table set forth in
Section 8.5.1 until a maximum of [***] have been so
credited.  Similarly, all Milestone Payments made under
Section 8.4 with respect to Impetigo Products and [***] of all amounts
incurred by Galderma with respect to the Development of Impetigo Products (other
than those reimbursed to NovaBay pursuant to Section 8.2.2) shall be
creditable against thirty percent (30%) of each royalty payment due to NovaBay
on Net Sales of Impetigo Products pursuant to tiers B, C, D and E in the table
set forth in Section 8.5.2 until a maximum of [***] have been so
credited.  For Collaboration Products that are not Acne Products or
Impetigo Products, all milestone payments established for such Collaboration
Products in accordance with Section 3.5.4 and [***] of all amounts incurred
by Galderma with respect to the Development of such Collaboration Products
(other than those reimbursed to NovaBay pursuant to Section 8.2.2) shall be
creditable against [***] of each royalty payment due to NovaBay on Net Sales of
such Collaboration Products pursuant to tiers C, D and E in the applicable table
set forth in Sections 8.5.2 through 8.5.5 until the maximum amount
established for such Collaboration Products in accordance with
Section 3.5.4 have been so credited.
  8.5.9  Term of NovaBay
Royalties
  NovaBay’s right to receive royalties under this Section 8.5 shall continue
on a Collaboration Product-by-Collaboration Product and country-by-country basis
for so long as Galderma, any of its Affiliate or Marketing Partner is
Commercializing such Collaboration Product in such country; provided that from
and after Generic Competition in a particular country with respect to a
Collaboration Product, the applicable royalty rates for such Collaboration
Product set forth in Sections 8.5.1 through 8.5.5 shall be reduced by
[***].
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -46-
 (a)  If there
are Net Sales of Collaboration Products within a particular category (i.e., Acne Product,
Anti-Bacterial Product, Anti-Fungal Product, Anti-Viral Product or Other
Product) that are subject to the applicable full royalty rate and subject to
[***] royalty rate as a result of Generic Competition, then for purposes of
calculating the applicable royalty rate tier(s) the Annual Net Sales shall be
allocated to each tier on a weighted average basis between Collaboration
Products at the full royalty rate and [***] royalty rate (an example of such
allocation is attached as Exhibit8.5.9).
  (b)  For
purposes of this Agreement, “Generic Competition” shall
mean, with respect to a particular Collaboration Product or Royalty-Bearing
NovaBay Product, as applicable, (i) in the United States, the first
calendar quarter during which sales by unit volume of all Generic Products in
the United States are at least [***] of the sales of the applicable
Collaboration Product or Royalty-Bearing NovaBay Product in the United States,
(ii) in any Major Market (other than the United States), the first calendar
quarter during which sales by unit volume of all Generic Products in such Major
Market are at least [***] of the sales of the applicable Collaboration Product
or Royalty-Bearing NovaBay Product in such Major Market, and (iii) in all
other countries, first launch of any Generic Product.  Such
percentages shall be determined by reference to applicable IMS (IMS Health
Incorporated, Norwalk, CT) data or such other similar mutually agreed
data.
  8.6  Royalty Payments to
Galderma
  NovaBay shall pay Galderma the following royalties:
  8.6.1  For Collaboration Products
in Japan
  The applicable percentage of Net Sales of Collaboration Products by NovaBay, its
Affiliates and Japanese Partners in Japan as set forth in Section 5.2.3,
which royalty shall be payable for so long as NovaBay is Commercializing such
Collaboration Product in Japan; provided that from
and after Generic Competition in Japan with respect to a Collaboration Product,
the applicable royalty rates for such Collaboration Product set forth in
Section 5.2.3 shall be reduced by [***]; and
  8.6.2  Royalty-Bearing NovaBay
Products
  (i) [***] of Net Sales of each Ex-Territory Product sold by NovaBay, its
Affiliates or sublicensees, (ii) [***] of Net Sales of In-Territory
Products sold by NovaBay, its Affiliates or sublicensees, and (iii) [***]
of Net Sales of Ex-Field Products sold by NovaBay, its Affiliates or
sublicensees, which royalties shall be payable on a Royalty-Bearing NovaBay
Product-by-product and country-by-country basis for so long as NovaBay, any of
its Affiliate or sublicensees is selling such Royalty-Bearing NovaBay Product in
such country; provided that from
and after Generic Competition in a particular country with respect to a
Royalty-Bearing NovaBay Product, the applicable royalty rates for such
Royalty-Bearing NovaBay Product set forth in this Sections 8.6.2 shall be
reduced by [***].  Notwithstanding anything herein to the contrary, if
any Generic Product with respect to a Royalty-Bearing NovaBay Product is
launched by Galderma or a licensee of Galderma in a country, then the royalties
payable to Galderma under this Section 8.6.2 with respect to such
Royalty-Bearing NovaBay Product in such country shall expire
immediately.  Accordingly, upon any such expiration, the license under
Section 7.1.2(c) with respect to such Royalty-Bearing NovaBay Product in
such country shall become fully-paid and irrevocable.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -47-
 8.7  Material Adverse
Events
  If
a Material Adverse Event with respect to one or more Collaboration Products or
Royalty-Bearing NovaBay Products developed or commercialized by a Party occurs
after the Effective Date, then upon the request of such Party, the Parties shall
negotiate in good faith an appropriate adjustment, if any, to the royalties
payable by such Party with respect to such Collaboration Product(s) or
Royalty-Bearing NovaBay Product(s).  For purposes of this
Section 8.7, “Material
Adverse Event” shall mean a state of facts, event, change or effect that
has had, has, or could reasonably be expected to have a material adverse effect
on the market opportunity for a Collaboration Product or Royalty-Bearing NovaBay
Product or either Party’s ability to commercialize (including Commercialize)
such Collaboration Product or Royalty-Bearing NovaBay Products, whether taken
alone or together with other facts, events, changes or effect, but shall exclude
any such fact, event, change or effect over which the effected Party had
reasonable control; provided that [***]
shall not be deemed to be a Material Adverse Event.
  8.8  Royalty
Reports
  Within sixty (60) days of the end of each calendar quarter, Galderma shall
deliver a report to NovaBay specifying on a Collaboration
Product-by-Collaboration Product basis: (i) gross amounts invoiced on sales
of Collaboration Products by Galderma and its Affiliates and Marketing Partners
(and if NovaBay exercises its Co-Promotion right, broken out by gross amounts
invoiced on sale of Collaboration Products to Healthcare Institutions in North
America and all other such gross amounts invoiced), (ii) calculation of Net
Sales (including broken down by Healthcare Institutions in North America and
otherwise, if applicable), and (iii) total royalties payable to NovaBay
pursuant to Section 8.5.  Likewise, within sixty (60) days of the
end of each calendar quarter, NovaBay shall deliver a report to Galderma
specifying for Collaboration Products sold by NovaBay, its Affiliates and
Japanese Partners in Japan pursuant to Section 5.2 and on a Royalty-Bearing
NovaBay Product-by-product basis: (i) gross amounts invoiced on sales of
Collaboration Products sold by NovaBay, its Affiliates and Japanese Partners and
Royalty-Bearing NovaBay Products by NovaBay, its Affiliates and sublicensees,
(ii) calculation of Net Sales with respect thereto, and (iii) total
royalties payable to Galderma pursuant to
Section 8.6.  Notwithstanding the foregoing, if the Party
receiving the royalty payment is required by Laws applicable to such Party to
report revenue or other information prior to or within fifteen (15) days of the
date the reports to be provided pursuant to this Section 8.8 are due, then
the Party providing the report shall cooperate in good faith with the other
Party to provide such information to permit the other Party to comply with such
Laws on a timely basis.
  8.9  Payment
Method
  All payments due under this Agreement by a Party (the “Payor”) shall be made by bank
wire transfer in immediately available funds to an account designated by the
other Party (the “Payee”).  All
payments hereunder shall be made in the legal currency of the United States of
America, and all references to “$” or “Dollars” shall refer to United States
dollars (i.e.,
the legal currency of the United States).  Except as otherwise
provided herein, all payments due to a Payee hereunder shall be due and payable
within thirty (30) days of an invoice submitted to Payor, except royalty
payments in accordance with reports made pursuant to Section 8.8 shall be
payable within five (5) business days of invoice therefor.  For
clarity and notwithstanding anything herein to the contrary, in no event shall
any expense be accounted for or billed more than once hereunder.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -48-
 8.10  Taxes
  All amounts referenced hereunder are exclusive of any withholding, or similar
taxes and payments hereunder shall be made without deduction for such
taxes.  Accordingly, if any withholding or similar tax is due with
respect to such a payment, such tax shall be payable by Payor to the applicable
taxing authority in addition to the amounts set out under this Agreement and
Payor shall furnish to Payee appropriate evidence of payment of any tax or other
amount required by applicable Law to be deducted from any royalty payment,
including any tax or withholding levied by a foreign taxing authority in respect
of the payment or accrual of any royalty.  Notwithstanding the
foregoing, to the extent the Payee obtains a tax credit as a result of the
payment of such withholding or similar tax, Payee shall reimburse Payor the
value of such tax credit.
  8.11  Records
  Each Party shall keep, and shall cause each other Selling Party acting under its
authority to keep, proper books of records and accounts in which full, true and
correct entries (in conformity with Accounting Standards), which shall be made
for the purpose of determining Net Sales and the amounts payable or owed under
this Agreement, and compliance with the other terms and conditions of this
Agreement.  Such books and records shall be maintained for a period of
three (3) years following the end of the calendar year to which they pertain and
kept reasonably accessible, and shall be made available for inspection, upon
thirty (30) days’ written notice throughout such three (3) year period by an
independent Third Party auditor selected by or under authority of the Payee for
such purposes, in accordance with Section 8.12.  Once an
inspection of a given calendar year is complete and any related issues resolved
between the Parties, such calendar year will be closed for audit and shall not
be subject to further inspection pursuant to Section 8.12.
  8.12  Inspection of
Records
  Each Party shall, and shall cause each other Selling Party acting under its
authority to permit, independent certified auditors (subject to customary
obligations of confidentiality to such Party or other Selling Party) appointed
by the other Party and reasonably acceptable to such first Party or other
Selling Party, to visit and inspect, during regular business hours and under the
guidance of officers of the Person being inspected, and to examine the books or
records and accounts of such Party or other Selling Party to the extent relating
to this Agreement and discuss the affairs, finances and accounts of such Party
or other Selling Party to the extent relating to this Agreement.  Such
Party or other Selling Party shall permit the independent certified public
accountant to inspect the books and records described in Section 8.11;
provided that
such inspection shall not occur more often than once per calendar year, unless a
material error is discovered in such inspection, in which case the other Party
shall have the right to conduct an additional audit for such
period.  Any inspection conducted under this Section 8.12 shall
be at the expense of the Party conducting such audit, unless such inspection
reveals any underpayment of the amount due hereunder by at least five percent
(5%) for the applicable period, in which case the full out-of-pocket costs of
such inspection shall be borne by the Party or other Selling Party acting under
its authority being inspected.  Any undisputed underpayment shall be
paid by Payor to Payee within fifteen (15) business days with interest on the
underpayment at the rate specified in Section 8.13 from the date such
payment was originally due; and any undisputed overpayment may be credited
against future payments hereunder without interest or if there will be no future
payments by Payor, then reimbursed within fifteen (15) business
days.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -49-
 8.13  Late
Payment
  Any payments or portions thereof due hereunder which are not paid when due shall
bear interest, to the extent permitted by applicable Law, from the date due
until paid at a rate equal to the thirty (30) day London Inter-Bank Offering
Rate (LIBOR) for U.S. Dollars, as quoted in The Wall Street
Journal (Internet edition at www.wsj.com) effective for the date on which
the payment was due, plus an additional two percent (2%).  This
Section 8.13 shall in no way limit any other remedies available to either
Party.
  8.14  Currency
Conversion
  In
those cases where the amount due in United States Dollars is calculated based
upon one or more currencies other than United States Dollars, such amounts shall
be converted to United States Dollars using methods that are in compliance with
Accounting Standards and consistent with the financial statements of the
Payor.
  ARTICLE IX
  
  INTELLECTUAL
PROPERTY
  9.1  Ownership of
Inventions
   9.1.1  General
  As
between the Parties and subject to the terms and conditions of this Agreement,
all right, title and interest to all inventions and other subject matter
conceived, created or first reduced to practice (together with all intellectual
property rights arising therefrom) in the course of performing the Collaboration
hereunder (each, a “New
Invention”) (i) solely by the personnel of Galderma, its Affiliates
and Third Parties acting on their behalf shall be owned solely by Galderma,
(ii) solely by the personnel of NovaBay, its Affiliates and Third Parties
acting on their behalf shall be owned solely by NovaBay, and (iii) jointly
by personnel of Galderma and NovaBay or their Affiliates or Third Parties acting
on their behalf shall be jointly owned by Galderma and NovaBay.  For
purposes of this Agreement, subject matter shall be deemed to be (a) solely
conceived, created or first reduced to practice by or on behalf of a Party if
such subject matter were patentable then no personnel from the other Party, its
Affiliate or Third Parties acting on their behalf would have to be named on a
Patent claiming such subject matter in order for such Patent to be valid under
U.S. Law, and (b) jointly conceived, created or first reduced to practice
by or on behalf of a Party if such subject matter were patentable then personnel
from both Parties or their Affiliate or Third Parties acting on their behalf
would have to be named on a Patent claiming such subject matter in order for
such Patent to be valid under U.S. Law, in each case regardless as to whether
such subject matter is in fact patentable.  Except as expressly
provided in this Agreement, it is understood that neither Party shall have any
obligation to account to the other Party for profits, or to obtain any approval
of the other Party to license, assign or otherwise exploit any such jointly
owned inventions or intellectual property, by reason of joint ownership thereof,
and each Party hereby waives any right it may have under the Laws of any
jurisdiction to require any such approval or
accounting.  Notwithstanding anything to the contrary in this
Agreement, neither Party is obligated to assign any title or interest in
inventions and other subject matter (together with all intellectual property
rights therein) conceived or created or first reduced to practice before the
Effective Date.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -50-
 9.1.2  Compound
Improvements
  Each Party agrees to promptly disclose to the other Party all Compound
Improvements made by or under authority of such Party and disclosed to
it.  Notwithstanding Section 9.1.1, as between the Parties, all
right, title and interest to all Compound Improvements conceived, created or
first reduced to practice by the personnel of either Party, its Affiliates or
Third Parties acting on its behalf, whether solely or jointly with others, shall
be solely owned by, and are hereby assigned to, NovaBay.  As used
herein, “Compound
Improvement” shall mean any New Invention comprising (i) the
chemical structure of any Aganocide Compound, whether alone or chemically bonded
with other active pharmaceutical ingredients, (ii) any method of
manufacture of any composition described in clause (i), or (iii) the method
of use or administration of any composition described in clause (i),
wherein such method of use or administration is outside the Dermatology
Field.
  9.1.3  Agreements with Affiliates
and Third Parties
  Each Party in its agreements with its Affiliates and Third Parties involving
creation of intellectual property in connection with the Collaboration shall
include provisions implementing the provisions of this Section 9.1
above.
  9.2  Patent
Prosecution
   9.2.1  General
  Except to the extent expressly specified to the contrary in this Agreement, as
between the Parties, each Party shall retain the right to control the
Prosecution and Maintenance of all intellectual property rights Controlled by
such Party at such Party’s expense.
  9.2.2  Projected Patent
Filings
  Each Party agrees to promptly disclose to the IP Subcommittee all applications
for Patents claiming New Inventions. The IP Subcommittee will validate the
ownership of the subject matter thereof in accordance with
Section 9.1.
  9.2.3  NovaBay
Patents
  As
between the Parties, NovaBay (itself or through one or more designees) shall
have the right, at its expense, to control the Prosecution and Maintenance of
the NovaBay Patents using counsel of its choice.  NovaBay agrees to:
(i) keep Galderma reasonably informed with respect to such activities and
give Galderma at least ten (10) business days to review all filings and
correspondence with any patent office anywhere in the world with respect thereto
and consider in good faith any comments that Galderma may provide with respect
thereto, and (ii) consult in good faith with Galderma regarding such
matters, including the abandonment of any claims thereof Covering the
Collaboration Products in the Field in the Galderma Territory.  If
NovaBay determines to abandon any claims of a NovaBay Patent Covering the
Collaboration Products in the Field anywhere in the Galderma Territory, then
NovaBay shall provide Galderma with notice at least sixty (60) days prior to the
date such abandonment would become effective.  In such event, Galderma
shall have the right, at its option, to control the Prosecution and Maintenance
of such claims, at its own expense, in NovaBay’s name; provided that
Galderma may offset the cost of such Prosecution and Maintenance against any
royalties payable to NovaBay hereunder with respect to Collaboration Products
Covered by such claims.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -51-
 9.2.4  Galderma
Patents
  As
between the Parties, Galderma (itself or through one or more designees) shall
have the right, at its expense, to control the Prosecution and Maintenance of
the Galderma Patents using counsel of its choice.  Galderma agrees to:
(i) keep NovaBay reasonably informed with respect to such activities and
give NovaBay at least ten (10) business days to review all filings and
correspondence with any patent office anywhere in the world with respect
thereto, and consider in good faith any comments that NovaBay may provide with
respect thereto, and (ii) consult in good faith with NovaBay regarding such
matters, including the abandonment of any claims thereof.  If Galderma
determines to abandon any claims of any such Patent, then Galderma shall provide
NovaBay with notice at least sixty (60) days prior to the date such abandonment
would become effective.  In such event, NovaBay shall have the right,
at its option, to control the Prosecution and Maintenance of such claims at its
own expense in Galderma’s name; provided that NovaBay
may offset the cost of such Prosecution and Maintenance against any royalties
payable to Galderma hereunder with respect to products Covered by such
claims.
  9.2.5  Joint
Patents
  With respect to Patents claiming New Inventions jointly owned by the Parties
(each, a “Joint
Patent”), the IP Subcommittee shall establish a strategy for the
Prosecution and Maintenance of such Joint Patents based on the degree of each
Party’s contribution to such invention, and each Party agrees to take all
reasonable action to cooperate fully in this regard.  Each Party shall
bear one half (1⁄2) of the cost and expenses in connection with such activities as
they are incurred, provided that if
either Party provides the other Party with sixty (60) days’ written notice
specifying that it desires no longer to bear such costs and expenses with
respect to a particular Joint Patent, then upon the other Party’s receipt of
such notice, such notifying Party shall not be responsible for any further costs
or expenses under this Section 9.2.5 related to any such Joint Patent;
provided, however, that such
notifying Party shall be responsible for any costs and expenses incurred up to
and as of the date the other Party receives such notice, and all right, title
and interest in and to such Joint Patent (together with any Patents issuing
thereon or therefrom) shall be and is hereby assigned, without further
consideration, to the other Party (subject to the licenses granted under
Article VII, as applicable).
  9.2.6  Prosecution and
Maintenance
  “Prosecution and
Maintenance” shall mean, with respect to a Patent, the preparing, filing,
prosecuting and maintenance of such Patent, as well as re-examinations,
reissues, requests for Patent term extensions and the like with respect to such
Patent, together with the conduct of interferences, the defense of oppositions
and other similar proceedings with respect to the particular Patent; and “Prosecute and Maintain” shall
have the correlative meaning.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -52-
 9.3  Defense of Third Party
Infringement Claims
  If
any Collaboration Product manufactured, used, sold, offered for sale or imported
by Galderma or its Affiliates or Marketing Partners in the Field in the Galderma
Territory becomes the subject of a Third Party’s claim or assertion of
infringement of a Patent relating to the manufacture, use, sale, offer for sale
or importation thereof, the Party first having notice of the claim or assertion
shall promptly notify the other Party, and the Parties shall promptly confer to
consider the claim or assertion and the appropriate course of
action.  Unless the Parties otherwise agree in writing, each Party
shall have the right to defend itself against a suit that names it as a
defendant.  Neither Party shall enter into any settlement of any claim
described in this Section 9.3 that adversely affects the other Party’s
rights or interests without such other Party’s written consent, which consent
shall not be unreasonably conditioned, withheld or delayed.  In any
event, the Parties shall reasonably assist one another and cooperate in any such
litigation at the other Party’s request and expense.
  9.4  Enforcement
  Subject to the provisions of this Section 9.4, in the event that Galderma
reasonably believes that any NovaBay Patent is being infringed by a Third Party
or is subject to a declaratory judgment action arising from such infringement,
in each case with respect to the manufacture, use, sale, offer for sale or
importation in the Galderma Territory of a product incorporating any
Collaboration Compound in the Field (each, an “Infringing Product”), Galderma
shall promptly notify NovaBay.  In such event, NovaBay shall have the
initial right (but not the obligation) to enforce such NovaBay Patents with
respect to such infringement, or to defend any declaratory judgment action with
respect thereto (for purposes of this Section 9.4, an “Enforcement
Action”).
  9.4.1  Initiating Enforcement
Actions
  In
the event that NovaBay fails to initiate an Enforcement Action to enforce such
NovaBay Patent against a commercially significant infringement by a Third Party
in a country in the Galderma Territory, which infringement consists of the
manufacture, use, sale, offer for sale or importation of an Infringing Product
in the Field in such country, within fifteen (15) days of a request by Galderma
to initiate such Enforcement Action with respect to Paragraph IV filings in the
United States under the Drug Price Competition and Patent Term Restoration Act
of 1984 or similar Laws in other jurisdictions and thirty (30) days in other
circumstances, Galderma may initiate an Enforcement Action against such
infringement at its own expense.  In such case, NovaBay shall
cooperate with Galderma in such Enforcement Action at Galderma’s
expense.  The Party initiating or defending any such Enforcement
Action shall keep the other Party reasonably informed of the progress of any
such Enforcement Action, and such other Party shall have the right to
participate with counsel of its own choice.
 9.4.2  Recoveries
  With respect to Enforcement Actions initiated by NovaBay in a country in the
Galderma Territory, Galderma may pay fifty percent (50%) of the costs and
expenses (including attorneys’ and professional fees) incurred by NovaBay in
such Enforcement Action.  Any recovery received as a result of any
Enforcement Action to enforce Patent rights pursuant to this Section 9.4
shall be used first to reimburse the Parties for the costs and expenses
(including attorneys’ and professional fees) incurred in connection with such
Enforcement Action, and the remainder of the recovery shall be shared (to the
extent the same represents damages from sales of Infringing Products in the
Field in the Galderma Territory) in proportion to the respective Losses suffered
by each Party; provided, however, that if
NovaBay initiates the Enforcement Action and Galderma does not pay fifty percent
(50%) of the costs and expenses incurred by NovaBay therein, Galderma shall be
entitled to only twenty-five percent (25%) of its proportionate share; and if
Galderma initiates the Enforcement Action at its own expense in accordance with
this Section 9.4, any recovery received shall be used first to reimburse
Galderma for the costs and expenses (including attorneys’ and professional fees)
incurred in connection with such Enforcement Action, and NovaBay shall be
entitled to only twenty-five percent (25%) of its proportionate
share.  It is understood that any recovery from an Enforcement Action,
whether brought by NovaBay or Galderma, which represents damages from sales of
Infringing Products outside the Field or outside the Galderma Territory, shall
(after reimbursement of both Parties for their costs and expenses (including
attorneys’ and professional fees) incurred in connection with such Enforcement
Action) inure solely and be paid over to NovaBay.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -53-
 9.5  Third Party
Technologies
  9.5.1  By NovaBay after the
Effective Date
  If
after the Effective Date, NovaBay acquires or licenses from a Third Party
subject matter within the NovaBay Technology other than Formulation Technology
(“NovaBay Third Party
Technology”) that is subject to payment obligations to the Third Party,
then NovaBay shall so notify Galderma and the rights granted to Galderma
hereunder with respect to such NovaBay Third Party Technology shall be subject
to Galderma promptly reimbursing NovaBay for the amounts that become owing to
such Third Party by reason of the grant to or exercise by or under authority of
Galderma of such rights to such NovaBay Third Party Technology and Galderma
shall reimburse NovaBay for a reasonable portion of any upfront fee or other
similar amounts paid to acquire such NovaBay Third Party Technology that is
allocable to the rights granted to Galderma with respect to such NovaBay Third
Party Technology hereunder.  Upon request by Galderma, NovaBay shall
disclose to Galderma a written description of such payment
obligations.  Galderma may exclude NovaBay Third Party Technology from
the NovaBay Technology by providing notice to NovaBay thereof, provided that such
notice is provided prior to the exercise of any rights to such NovaBay Third
Party Technology by or under authority of Galderma; in such event, such NovaBay
Third Party Technology shall be deemed excluded from the NovaBay Technology for
all purposes of this Agreement.
 
 9.5.2  By Galderma after the
Effective Date
  If
after the Effective Date, Galderma or its Affiliates acquires or licenses from a
Third Party any Galderma Technology other than Formulation Technology (“Galderma Third Party
Technology”), then Galderma shall use reasonable efforts to notify
NovaBay and the rights granted to NovaBay hereunder with respect to such
Galderma Third Party Technology shall be subject to NovaBay promptly reimbursing
Galderma for the amounts that become owing to such Third Party by reason of the
grant to or exercise by or under authority of NovaBay of such rights to such
Galderma Third Party Technology and NovaBay shall reimburse Galderma for a
reasonable portion of any upfront fee or other similar amounts paid to acquire
such Galderma Third Party Technology that is allocable to the rights granted to
NovaBay with respect to such Galderma Third Party Technology
hereunder.  Upon request by NovaBay, Galderma shall disclose to
NovaBay a written description of such payment obligations.  NovaBay
may exclude Galderma Third Party Technology from the Galderma Technology by
providing notice to Galderma thereof, provided that such
notice is provided prior to the exercise of any rights to such Galderma Third
Party Technology by or under authority of NovaBay; in such event, such Galderma
Third Party Technology shall be deemed excluded from the Galderma Technology for
all purposes of this Agreement.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -54-
 9.5.3.
Other Conditions.  Upon request by either Party, the Parties shall enter
into a separate agreement documenting the license grant under any NovaBay Third
Party Technology or Galderma Third Party Technology, as applicable, (either,
“Third Party
Technology”) and the payment and other terms associated with such Third
Party Technology.  The obligations of NovaBay and the rights of
Galderma under this Agreement shall be subject to, and limited by, any
agreements pursuant to which NovaBay acquired or licensed any NovaBay Technology
and if any such agreement requires that a particular provision be incorporated
in a sublicense granted thereunder, such provision shall be deemed incorporated
by reference herein only the extent so required and with respect to the subject
matter of such agreement.  Similarly, the obligations of Galderma and
the rights of NovaBay under this Agreement shall be subject to, and limited by,
any agreements pursuant to which Galderma acquired or licensed any Galderma
Technology and if any such agreement requires that a particular provision be
incorporated in a sublicense granted thereunder, such provision shall be deemed
incorporated by reference herein only the extent so required and with respect to
the subject matter of such agreement.  Notwithstanding anything herein
to the contrary, with respect to the Prosecution and Maintenance, and
enforcement, of NovaBay Patents licensed by NovaBay from a Third Party, to the
extent NovaBay has the right to do so, NovaBay shall cooperate with Galderma to
Prosecute and Maintain and enforce such NovaBay Patents in the same manner as
set forth in Section 9.2 and Section 9.4.  As between
NovaBay and Galderma, any recoveries from enforcement of such NovaBay Patents
licensed from a Third Party (including any amounts that NovaBay receives from
the Third Party licensor as a result of such enforcement) shall be shared in
accordance with Section 9.4.2, after deducting from such recoveries any
amounts owed to the Third Party licensor for such enforcement; provided that any
Enforcement Actions initiated by the Third Party licensor shall be deemed
initiated by NovaBay for purposes of Section 9.4.2, and the costs and
expenses incurred by NovaBay in such Enforcement Action shall include the costs
and expenses reimbursed or required to be reimbursed by NovaBay to the Third
Party licensor in such Enforcement Action.
 
 9.6  Patent
Marking
 Galderma shall mark (or caused to be marked) all Collaboration Products marketed
and sold by or under authority of Galderma hereunder with appropriate NovaBay
Patent numbers or indicia at NovaBay’s request to the extent permitted by Law,
in those countries in which such notices impact recoveries of damages or
remedies available with respect to infringements of
Patents.  Likewise, NovaBay shall mark (or caused to be marked) all
Royalty-Bearing NovaBay Products marketed and sold by or under authority of
NovaBay hereunder with appropriate Galderma Patent numbers or indicia at
Galderma’s request to the extent permitted by Law, in those countries in which
such notices impact recoveries of damages or remedies available with respect to
infringements of Patents.
 
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -55-
 9.7  Trademarks
 
 9.7.1  Galderma Product
Marks
  Without limiting the provisions of Section 2.4.2 and subject to the
provisions of Section 9.7.3, Galderma shall have the sole right to
determine the trademarks, trade dress, style of packaging, labeling and the like
with respect to the Commercialization of Collaboration Products in the Field in
the Galderma Territory (such trademarks used or intended for use by Galderma
with the Collaboration Products, including representations thereof in any
language, the “Galderma Product
Marks”).  For clarity, the Galderma Product Marks shall exclude
the “Galderma” trade name or any variation thereof, or any successor name of
Galderma, or the name of any successor or acquiring entity of
Galderma.  Unless otherwise agreed, Galderma shall have the sole right
(but not the obligation) to register and enforce (and retain all recoveries
therefrom) the Galderma Product Marks, at its own expense.
 
 9.7.2  NovaBay Product
Marks
  Without limiting the provisions of Section 2.4.2, NovaBay shall have the
sole right to determine the trademarks, trade dress, style of packaging,
labeling and the like with respect to the Commercialization of Collaboration
Products in the Field in the NovaBay Territory or outside of the Field (such
trademarks used or intended for use by NovaBay with the Collaboration Products,
including representations thereof in any language, the “NovaBay Product
Marks”).  For clarity, the NovaBay Product Marks shall exclude
the “NovaBay” trade name or any variation thereof, or any successor name of
NovaBay, or the name of any successor or acquiring entity of
NovaBay.  Unless otherwise agreed, NovaBay shall have the sole right
(but not the obligation) to register and enforce (and retain all recoveries
therefrom) the NovaBay Product Marks, at its own expense.
 
 9.7.3  NovaBay
Logo
 Galderma hereby agrees to the extent allowable under applicable Law to include
on all labels of and package inserts and marketing materials for Collaboration
Product(s) sold by or under authority of Galderma to include NovaBay’s trade
name and logo, collectively, the “NovaBay Logos”), provided that NovaBay
shall pay for any and all reasonable and documented incremental expenses that
Galderma incurs in connection with performing its obligations under this
Section 9.7.3.  It is understood that the size and placement of
the NovaBay Marks shall be consistent with Galderma’s practices with respect
thereto, or, if Galderma is not then including Third Party logos, current
pharmaceutical industry practices for similarly situated Third Party
logos.  Unless otherwise agreed, NovaBay shall have the sole right
(but not the obligation) to register and enforce the NovaBay Logos, at its own
expense.  Accordingly, NovaBay hereby grants to Galderma a
non-exclusive, royalty-free license to use the NovaBay Logos solely in
connection with the marketing, promotion and sale of the Collaboration
Product(s) in the Field in the Galderma Territory, and to have any of the
foregoing done on Galderma’s behalf by its Affiliates and Marketing
Partners.  Galderma shall ensure that use of the NovaBay Logos is
consistent with high levels of business professionalism, product standards and
Galderma’s use of its own trademarks.  All ownership and goodwill
arising out of the use of the NovaBay Logos shall vest in and inure solely to
the benefit of NovaBay.  Notwithstanding anything herein to the
contrary, upon NovaBay’s written request, Galderma, its Affiliates and Marketing
Partners agree to cease the use of the NovaBay Logos; provided that
(i) Galderma, its Affiliates and Marketing Partners may continue to use any
labels, package inserts and marketing materials in existence or on order as of
the receipt of such notice and (ii) in such case, Galderma’s obligation to
include the NovaBay Logos on labels, package inserts and marketing materials for
Collaboration Product(s) shall terminate.  In those countries within
the Galderma Territory where a trademark license must be recorded, NovaBay
shall, at its expense, provide and record a separate trademark license for the
NovaBay Logos, and Galderma shall cooperate in the preparation and execution of
documents as required to effect such recordation.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -56-
 9.7.4  Co-Promotion
  If
NovaBay elects to Co-Promote under Section 4.4, Galderma hereby grants to
NovaBay a non-exclusive, royalty-free license to use the Galderma Product Marks
in connection with the Co-Promotion activities performed in accordance with the
terms of this Agreement.  NovaBay shall ensure that use of the
Galderma Product Marks is consistent with high levels of business
professionalism, product standards and written guidelines provided from time to
time by Galderma to NovaBay.  All ownership and goodwill arising out
of the use of the Galderma Product Marks shall vest in and inure solely to the
benefit of Galderma.  In those countries within North America where a
trademark license must be recorded, Galderma shall, at NovaBay’s expense,
provide and record a separate trademark license for the Galderma Product Marks,
and NovaBay shall, at NovaBay’s expense, cooperate in the preparation and
execution of documents as required to effect such recordation.
  9.7.5  World-wide Branding
Strategies
  Upon the request of either Party, the Parties agree to discuss terms and
conditions for Galderma to use the applicable NovaBay Product Marks in
connection with the Commercialization of Collaboration Products in the Galderma
Territory or for NovaBay to use the applicable Galderma Product Marks in
connection with the Commercialization of Collaboration Products in the NovaBay
Territory, in either such case to allow the applicable Party to implement a
world-wide branding strategy; provided that neither
Party shall have any obligation to agree to any such terms or
conditions.
  ARTICLE X
   CONFIDENTIALITY
  10.1  Confidentiality;
Exceptions
  Except to the extent expressly authorized by this Agreement or otherwise agreed
by the Parties in writing, the Parties agree that the receiving Party shall keep
confidential and shall not publish or otherwise disclose or use for any purpose
other than as provided for in this Agreement any confidential or proprietary
information or materials furnished to it by the other Party pursuant to or in
anticipation of this Agreement, whether before or after the date hereof
(collectively, “Confidential
Information”).  Notwithstanding the foregoing, Confidential
Information shall not include information or materials to the extent that it can
be established by written documentation that such information or
material:
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -57-
 (a)  was
already known to or possessed by the receiving Party, other than under an
obligation of confidentiality (except to the extent such obligation has expired
or an exception is applicable under the relevant agreement pursuant to which
such obligation was established), at the time of disclosure;
  (b)  was
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the receiving Party;
  (c)  became
generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the receiving Party
in breach of this Agreement;
  (d)  was
independently developed by the receiving Party as demonstrated by documented
evidence prepared contemporaneously with such independent development;
or
  (e)  was
disclosed to the receiving Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the disclosing Party
not to disclose such information to others.
  10.2  Authorized Use and
Disclosure
  Each Party may use and disclose Confidential Information of the other Party as
follows: (i) under appropriate confidentiality provisions substantially
equivalent to those in this Agreement, in connection with the performance of its
obligations or exercise of rights granted or reserved to such Party in this
Agreement, (ii) to the extent such disclosure is reasonably necessary in
filing for, prosecuting, maintaining or enforcing Patents, copyrights and
trademarks (including applications therefor) in accordance with this Agreement,
complying with the terms of agreements with Third Parties, prosecuting or
defending litigation, complying with applicable governmental regulations, filing
for, conducting pre-clinical studies or clinical trials, obtaining and
maintaining regulatory approvals (including Marketing Approvals), marketing
Collaboration Products, or otherwise required by applicable Law, provided, however, that if a
Party is required by Law to make any such disclosure of the other Party’s
Confidential Information it will, except where impracticable for necessary
disclosures (e.g., in the event of
medical emergency), give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed,
(iii) in communication with existing and potential investors, consultants
and 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, (iv) with respect to
the Confidential Information of NovaBay, by Galderma to L’Oréal S.A. and Nestlé
S.A. consistent with Galderma’s past practice of disclosure of proprietary
information of Third Parties and provided that
Galderma shall use its reasonable efforts to secure confidential treatment of
such Confidential Information so disclosed, or (v) to the extent mutually
agreed to by the Parties.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -58-
 10.3  Publications
  Each Party shall submit to the other Party any proposed publication or public
disclosure containing clinical or scientific results for the Collaboration
Products in the Field at least thirty (30) days in advance of the proposed date
of submission for publication, so as to allow that Party to review such proposed
publication or disclosure.  The reviewing Party will promptly review
such proposed publication or disclosure and make any objections or comments that
it may have thereto, and the Parties shall discuss the advantages and
disadvantages of publishing or disclosing such results.  Any proposed
publication or public disclosure of Galderma Technology must be approved in
advance by Galderma in writing; and likewise, any proposed publication or public
disclosure of NovaBay Technology must be approved in advance by NovaBay in
writing.  If the Parties are unable to agree on whether to publish or
disclose the same, subject to Section 10.4, the matter shall be referred to
the Coordination Committee for resolution.  This Section 10.3
shall not be deemed to limit the Parties’ obligations under
Section 10.1.
  10.4  Publicity
   10.4.1  Confidential
Terms
  Each of the Parties agrees not to disclose to any Third Party the terms and
conditions of this Agreement without the prior approval of the other Party,
except to advisors (including financial advisors, attorneys and accountants),
potential and existing investors, and others (including in the case of NovaBay,
potential and actual licensees under the NovaBay Technology and Galderma,
potential and actual licensees under the Galderma Technology) on a need to know
basis, in each case under circumstances that reasonably protect the
confidentiality thereof, or to the extent necessary to comply with the terms of
agreements with Third Parties, or to the extent required by applicable
Law.  Notwithstanding the foregoing, the Parties agree upon a joint
press release to announce the execution of this Agreement, which is attached
hereto as Exhibit10.4.1; thereafter,
NovaBay and Galderma may each disclose to Third Parties the information
contained in such press release without the need for further approval by the
other Party.
  10.4.2  Publicity
Review
  The Parties acknowledge the importance of supporting each other’s efforts to
publicly disclose results and significant developments regarding Collaboration
Products in the Field and other activities in connection with this Agreement
beyond what may be strictly required by applicable Law, and each Party may make
such disclosures from time to time with the approval of the other Party, which
approval shall not be unreasonably withheld, conditioned or
delayed.  Such disclosures may include achievement of significant
events in the Development (including regulatory process and occurrence of
Milestone Events) or Commercialization of Collaboration Products in the Field
hereunder or receipt of payments hereunder.  When a Party (the “Requesting Party”) elects to
make any such public disclosure under this Section 10.4.2, it will give the
other Party (the “Cooperating
Party”) reasonable notice to review and comment on such statement, it
being understood that if the Cooperating Party does not notify the Requesting
Party in writing within a five (5) business day period or such shorter period if
required by applicable Law of any reasonable objections, as contemplated in this
Section 10.4.2, such disclosure shall be deemed approved, and in any event
the Cooperating Party shall work diligently and reasonably to agree on the text
of any proposed disclosure in an expeditious manner.  The principles
to be observed in such disclosures shall be accuracy, compliance with applicable
Laws and regulatory guidance documents, reasonable sensitivity to potential
negative reactions of applicable Regulatory Authorities (including the FDA), the
potential loss of competitive advantage by publishing confidential information
regarding the status of development efforts or commercialization plans
prematurely, and the need to keep investors and others informed regarding the
Requesting Party’s business.  Accordingly, the Cooperating Party shall
not withhold, condition or delay its approval of a proposed disclosure that
complies with such principles.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -59-
 10.5  Prior
Agreements
  This Agreement supersedes that certain Non-Disclosure Agreement between the
Parties dated December 7, 2006 with respect to information subject thereto
(including information disclosed pursuant to that certain expired Material
Transfer Agreement between the Parties, dated April 12, 2007).
   ARTICLE XI
  REPRESENTATIONS,
WARRANTIES AND COVENANTS; INDEMNIFICATION
  11.1  General Representations and
Warranties
  Each Party represents and warrants to the other Party as of the Effective Date
that:
  11.1.1  it is
duly organized and validly existing under the Laws of its state of incorporation
or registration, and has full corporate or partnership power and authority to
enter into this Agreement and to carry out the provisions hereof;
  11.1.2  it is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder, and the individual or individuals executing this
Agreement on its behalf has/have  been duly authorized to do so by all
requisite corporate or partnership action;
  11.1.3  this
Agreement is legally binding upon it and enforceable in accordance with its
terms.  The execution, delivery and performance of this Agreement by
it does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a party or by which it may be bound, nor violate any
material Law or regulation of any court, governmental body or administrative or
other agency having jurisdiction over it;
  11.1.4  it has
not granted any right to any Third Party which would conflict with the rights
granted to the other Party hereunder; and
  ***Confidential
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the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -60-
 11.1.5  it is not
aware of any action, suit or inquiry or investigation instituted by any Person
which questions or threatens the validity of this Agreement.
  11.2  NovaBay’s
Warranties
  NovaBay represents and warrants to Galderma as of the Effective
Date:
  11.2.1  NovaBay
owns all right, title and interest in and to or has a license with the right to
grant a sublicense to Galderma on the terms hereunder in respect of all of the
intellectual property used by NovaBay in the Development of Collaboration
Compounds prior to the Effective Date which intellectual property would be
necessary for Galderma to carry out the Development, Manufacture and
Commercialization of Collaboration Compounds in accordance with this Agreement,
including U.S. Patent 7,462,361 (previously Patent Application N° 2005/0065115)
and equivalent Patents or patent applications from WO05020896 (the “Existing Patent
Rights”);
  11.2.2  NovaBay
has not granted rights to any Third Party under the NovaBay Technology
(including the Existing Patent Rights), or any portion thereof, that conflict
with the rights granted to Galderma hereunder;
  11.2.3  there are
no actual, pending, alleged or, to its knowledge, threatened actions, suits,
claims, re-examinations, oppositions, interferences or governmental
investigations by or against NovaBay or any of its Affiliates or other licensees
of NovaBay or its Affiliates, in each case that (i) involve the
Collaboration Compounds, Existing Patent Rights or intellectual property
otherwise Controlled by NovaBay related to the subject matter of this Agreement,
and (ii) would reasonably be expected to materially adversely affect the
ability of NovaBay to perform its obligations hereunder;
  11.2.4  to its
knowledge, the manufacture, use, sale or importation of the Collaboration
Compounds as of the Effective Date as contemplated by this Agreement does not
infringe or otherwise violate any Third Party intellectual
property;
  11.2.5  there is
no actual, pending, alleged or, to its knowledge, threatened infringement by a
Third Party of any of the Existing Patent Rights or intellectual property
otherwise Controlled by NovaBay related to the subject matter of this
Agreement;
  11.2.6  to its
knowledge, none of the issued NovaBay Patents are invalid or
unenforceable;
  11.2.7  all
employees or contractors of NovaBay or its Affiliates who have created or
developed intellectual property used by NovaBay in the Development of
Collaboration Compounds prior to the Effective Date, including any subject
matter claimed in the Existing Patent Rights have validly and irrevocably
assigned to NovaBay all of their rights therein, including intellectual property
rights;
  ***Confidential
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the Securities and Exchange Commission. Omitted portions have been filed
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 -61-
 11.2.8  (i) NovaBay
has complied with all applicable Laws in connection with its development of the
Collaboration Compounds, and (ii) it and, to its knowledge, Third Parties
performed the related studies and clinical trials, the results of which are
embodied in the NovaBay Know How, in accordance with applicable Law and good
clinical practices;
  11.2.9  (i) it
has paid all required application fees, registration fees, maintenance fees and
the like with regard to the NovaBay Patents owned by NovaBay, and (ii) it
has filed with the relevant intellectual property agency all required documents
and certificates in connection with application,  registration and
maintenance of the NovaBay Patents owned by NovaBay;
  11.2.10  neither
this Agreement nor the transactions contemplated hereby shall result in NovaBay
granting to any Third Party any right with respect to any intellectual property
licensed to Galderma hereunder in conflict with the rights and licenses granted
to Galderma hereunder;
  11.2.11  the
intellectual property licensed to Galderma hereunder constitutes all
intellectual property Controlled by NovaBay that is necessary in connection with
the use, development, Manufacture, importation, sale, distribution, marketing
and promotion of the Collaboration Products in accordance with this
Agreement;
  11.2.12  (i) none
of the Existing Patent Rights has been cancelled, has expired or has been
abandoned, and (ii) NovaBay has taken security measures that are customary
in the biotechnology industry in which NovaBay operates and as NovaBay deems
appropriate to protect the confidentiality of its Confidential Information that
it desires to keep confidential;
  11.2.13  NovaBay
has responded in good faith to all of Galderma’s requests for materials and
information in connection with Galderma’s due diligence efforts with respect to
this Agreement and it has no knowledge of any material omissions with respect to
any response to any such request; and
  11.2.14  NovaBay
has the right to disclose to Galderma pursuant to NovaBay’s Collaboration and
License Agreement, dated August 29, 2006, with Alcon Manufacturing, Ltd.
(the “Alcon Agreement”)
the Data (as defined in and developed under the Alcon Agreement) as contemplated
and for the purposes as set forth in this Agreement.
  11.3  Covenant
  Each Party hereby covenants that it will not grant during the Agreement Term any
right to any Third Party which would conflict with the rights granted to the
other Party hereunder.
  11.4  Disclaimer of
Warranties
  EXCEPT AS SET FORTH IN THIS Article XI, NOVABAY AND GALDERMA EXPRESSLY
DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT (INCLUDING THE NOVABAY
TECHNOLOGY AND THE GALDERMA TECHNOLOGY), INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -62-
 11.5  Indemnification
   11.5.1  Indemnification by
NovaBay.  NovaBay hereby agrees to defend, hold harmless and
indemnify (collectively, “Indemnify”) Galderma and its
Affiliates, and its and their agents, directors, officers and employees (the
“Galderma Indemnitees”)
from and against any liability or expense (including reasonable legal expenses
and attorneys’ fees) (collectively “Losses”) resulting from suits,
claims, actions and demands, in each case brought by a Third Party (each, a
“Third-Party Claim”)
arising out of: (i) a breach of any of NovaBay’s representations and
warranties under Section 11.1 or Section 11.2, (ii) the acts or
omissions of the NovaBay Indemnitees, (iii) any exploitation of
Collaboration Compounds or Collaboration Products or other exercise of the
licenses granted hereunder by or under authority of NovaBay, including the use,
manufacture, marketing, distribution, importation or sale of any Collaboration
Compound by NovaBay, its Affiliates or their respective licensees, or
(iv) the use by any Galderma Indemnitee of the NovaBay Logo pursuant to
Section 9.7.3.  NovaBay’s obligation to Indemnify the Galderma
Indemnitees pursuant to this Section 11.5.1 shall not apply to the extent
that any such Losses (A) arise from the negligence or intentional
misconduct of any Galderma Indemnitee, (B) arise from any breach by
Galderma of this Agreement, or (C) are Losses for which Galderma is
obligated to Indemnify the NovaBay Indemnitees pursuant to
Section 11.5.2.
  11.5.2  Indemnification by
Galderma
  Galderma hereby agrees to Indemnify NovaBay and its Affiliates, and its and
their agents, directors, officers and employees (the “NovaBay Indemnitees”) from and
against any and all Losses resulting from Third-Party Claims arising out of:
(i) a breach of any of Galderma’s representations and warranties under
Section 11.1, (ii) the acts or omissions of the Galderma Indemnitees,
or (iii) the exploitation of Collaboration Compounds or Collaboration
Products or other exercise of the licenses granted hereunder by or under
authority of Galderma, including the use, manufacture, marketing, distribution,
importation or sale of any Collaboration Product by Galderma, its Affiliates or
its Marketing Partners or (iv) the use by any NovaBay Indemnitee of the
Galderma Product Marks pursuant to Section 9.7.4.  Galderma’s
obligation to Indemnify the NovaBay Indemnitees pursuant to this
Section 11.5.2 shall not apply to the extent that any such Losses
(A) arise from the negligence or intentional misconduct of any NovaBay
Indemnitee, (B) arise from any breach by NovaBay of this Agreement, or
(C) are Losses for which NovaBay is obligated to Indemnify the Galderma
Indemnitees pursuant to Section 11.5.1.
  11.5.3  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 Section 11.5 and the
exclusive ability to defend (with the reasonable cooperation of the indemnified
Party) or settle 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.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -63-
 11.6  Insurance
  Each Party shall obtain and maintain, during the term of this Agreement and for
six (6) years thereafter, five million dollars ($5,000,000) combined single
limit for comprehensive general liability insurance, including products
liability insurance and coverage for clinical trials, with reputable and
financially secure insurance carriers or captive insurer in a form and at levels
consistent with industry standards based upon such Party’s activities hereunder
and indemnification obligations hereunder, with the other Party named as an
additional insured.  Such liability insurance or self-insurance
through a captive insurer shall be maintained on an occurrence basis to provide
such protection after expiration or termination of the policy itself or this
Agreement or claims made basis with purchased tail coverage for six (6)
years.  Each Party shall furnish to the other Party on request a
certificate of insurance issued by the insurance company or captive insurer
setting forth the amount of the liability insurance and a provision that the
other Party hereto shall receive thirty (30) days’ written notice prior to
termination or material reduction to the level of coverage.
  ARTICLE XII
  TERM
AND TERMINATION
  12.1  Term
  This Agreement shall become effective as of the Effective Date and, unless
earlier terminated pursuant to the other provisions of this Article XII,
shall continue in full force and effect until all royalty obligations on behalf
of each Party have expired (the “Agreement Term”).
  12.2  Termination by
Galderma
  Galderma shall have the right to terminate this Agreement:
  12.2.1  Failure of Formulation
Feasibility
  Any time prior to the nine (9) month anniversary of the Effective Date, upon
thirty (30) days’ written notice to NovaBay referencing this
Section 12.2.1, if Galderma reasonably determines that the Formulation
Feasibility Studies have been unsuccessful, which notice shall include the
rational and results from the Formulation Feasibility Studies upon which such
determination was made.  During such thirty (30) day period, Galderma
shall meet with NovaBay, at NovaBay’s request, to discuss Galderma’s
determination and notwithstanding anything to the contrary, Galderma shall pay
NovaBay the amount of [***];
  12.2.2  Prior to Continuation
Period
  After the completion of the Acne POC but prior to the payment of the
Continuation Fee upon thirty (30) days’ written notice to NovaBay referencing
this Section 12.2.2, if Galderma reasonably determines that the results of
the Acne POC do not warrant further Development of an Acne Product, which notice
shall include the rational and results from the Acne POC upon which such
determination was made.  During such thirty (30) day period, Galderma
shall meet with NovaBay, at NovaBay’s request, to discuss Galderma’s
determination;
  ***Confidential
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the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -64-
 12.2.3  During the Continuation
Period
  Any time after the commencement of the Continuation Period upon six (6) months’
written notice to NovaBay referencing this Section 12.2.3, provided that during
the first month of such six (6)- month period, Galderma shall meet with NovaBay,
at NovaBay’s request, to discuss Galderma’s reasoning for
termination;
  12.2.4  For Safety
Reasons
  . 
At any time upon sixty (60) days’ written notice to NovaBay referencing this
Section 12.2.4 on a Collaboration Product-by-Collaboration Product basis,
if Galderma reasonably determines that there are safety issues relating to such
product which are not addressable using Commercially Reasonable Efforts, which
notice shall include the basis and results upon which such determination was
made.  During such sixty (60) day period, Galderma shall meet with
NovaBay, at NovaBay’s request, to discuss Galderma’s determination and
notwithstanding anything to the contrary, Galderma shall pay NovaBay the amount
of [***]; and
  12.2.5  [***].
  12.3  Termination for
Breach
  12.3.1  General
  Either Party may terminate this Agreement in the event the other Party
materially breaches this Agreement, and such breach continues for sixty (60)
days after notice thereof referencing this Section 12.3.1 was provided to
the breaching Party by the non-breaching Party.  Any such termination
shall become effective at the end of such sixty (60) day period unless the
breaching Party has cured any such breach prior to the expiration of the sixty
(60) day period.
  12.3.2  Termination of the Licenses
in 7.1.2(c)
  Without limiting Galderma’s rights under Section 12.3.1, Galderma may
terminate the licenses granted to NovaBay pursuant to Section 7.1.2(c) in
the event NovaBay fails to pay any undisputed royalty under Section 8.6.2,
and such failure continues for sixty (60) days after notice thereof referencing
this Section 12.3.2 was provided to NovaBay.  Any such
termination shall become effective at the end of such sixty (60) day period
unless NovaBay has cured any such failure prior to the expiration of the sixty
(60) day period.
  12.4  Termination for Failure to
Pay the Continuation Fee
  If
Galderma has not paid the Continuation Fee on or before March 31, 2011,
then NovaBay may terminate this Agreement on notice to Galderma referencing this
Section 12.4.
  12.5  General Effects of
Expiration or Termination
  12.5.1  Accrued
Obligations
  Expiration or termination of this Agreement for any reason shall not release
either Party from any obligation 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.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -65-
 12.5.2  Non-Exclusive
Remedy
  Notwithstanding anything herein to the contrary, termination by a Party pursuant
to this Article XII shall be without prejudice to other remedies such Party
may have at Law or equity.
  12.5.3  No Milestone
Payment
  Upon any termination of this Agreement in its entirety pursuant to the terms
hereof, Galderma shall not be obligated to pay any Milestone Payment with
respect to a Milestone Event that occurs between the notice of termination and
the effective date of such termination notwithstanding any other terms of this
Agreement.  For clarity, the foregoing shall not (i) limit
Galderma’s obligation to pay any Milestone Payment with respect to Milestone
Event that occurs prior to such a notice of termination or (ii) apply to
termination of this Agreement (A) with respect to one or more Collaboration
Products pursuant to Section 12.2.4, (B) with respect to future
Development Proposals pursuant to Section 12.2.5 or (C) pursuant to
Section 12.3.2.
  12.5.4  Return of
Materials
  Except to the extent it has the right to use such Confidential Information in
accordance with the express terms hereof, within forty-five (45) days after the
effective date of termination of this Agreement in its entirety (or if longer,
end of the Agreement Wind-Down Period), each Party shall destroy all tangible
items comprising, bearing or containing any Confidential Information of the
other Party that are in its or its Affiliates’ possession or control, and
provide written certification of such destruction, or prepare such tangible
items of Confidential Information for shipment to such other Party, as such
other Party may direct, at such other Party’s expense; provided that each
Party may retain one (1) copy of such Confidential Information for its legal
archives.  For clarity, a Party shall have the right to retain and use
Confidential Information of the other Party in connection with rights and
licenses granted or retained in accordance with this
Article XII.
  12.5.5  General
Survival
  Article I, XII, XIII and XIV and Sections 7.2, 8.8 – 8.14 (in the case
of Sections 8.8 – 8.14, solely with respect to activities prior to the
effective date of the applicable expiration or termination and without limiting
the other provisions of this Article XII and if a specific period is set
forth therein only for such period), 9.1.1, the second sentence of 9.1.2, 9.2.5,
9.2.6, 10.1, 10.2, 10.4.1, 10.5, 11.1, 11.2, 11.4, 11.5, 11.6 (for the period
set forth therein) shall survive expiration or termination of this Agreement for
any reason.  Except as otherwise provided in this Article XII,
all rights and obligations of the Parties under this Agreement shall terminate
upon expiration or termination of this Agreement in its entirety for any
reason.
  12.6  Effects of Certain
Terminations
  If
(i) Galderma terminates this Agreement in its entirety pursuant to
Section 12.2, or (ii) NovaBay terminates this Agreement pursuant to
Section 12.3 or Section 12.4, then at NovaBay’s election:
  12.6.1  Transition
Assistance
  Each Party agrees, at its own expense, to use commercially reasonable efforts to
cooperate with the other Party to facilitate a smooth, orderly transition of the
Development and Commercialization of Collaboration Products in the Field in the
Galderma Territory to NovaBay or its designee(s) as soon as reasonably
practicable under the circumstances, but in any event within one (1) year of the
effective date of such termination (the “Agreement Wind-Down
Period”).  Upon request by NovaBay, Galderma shall transfer to
NovaBay some or all quantities of Collaboration Products in its or its
Affiliates’ possession (as requested by NovaBay), within thirty (30) days after
the end of the Agreement Wind-Down Period; provided, however, that NovaBay
shall reimburse Galderma for the Manufacturing Costs plus [***] for the
quantities so provided to NovaBay.  If any Collaboration Product was
Manufactured by any Third Party for Galderma, or Galderma had contracts with
vendors which contracts are necessary or useful for NovaBay to take over
responsibility for the Collaboration Products in the Territory, then Galderma
shall to the extent possible and requested in writing by NovaBay, assign all of
the relevant Third-Party contracts to NovaBay, and in any case, Galderma agrees
to use Commercially Reasonable Efforts to cooperate with NovaBay to ensure
uninterrupted supply of Collaboration Products.  If Galderma or its
Affiliate Manufactured any Collaboration Product at the time of termination,
then Galderma (or its Affiliate) shall continue to provide for Manufacturing of
such Collaboration Product for NovaBay, at the rate set forth in
Section 6.1.4, from the date of notice of such termination until such time
as NovaBay is able, using commercially reasonable efforts to do so, to secure an
acceptable alternative commercial manufacturing source from which sufficient
quantities of Collaboration Product may be procured and legally sold in the
Galderma Territory, but in no event later than two (2) years from the effective
date of such termination.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -66-
 12.6.2  Ongoing
Trials
  Provided that
the termination of this Agreement is not a termination by Galderma pursuant to
Section 12.2.4, if there are any ongoing clinical trials with respect to
Collaboration Products being conducted by or under authority of Galderma at the
time of notice of termination, Galderma agrees, at NovaBay’s request, to
(i) promptly transition to NovaBay or its designee some or all of such
clinical trials and the activities related to or supporting such trials at
Galderma’s expense, (ii) continue to conduct such clinical trials for a
period requested by NovaBay up to a maximum of six (6) months after the
effective date of such termination, for which NovaBay would reimburse Galderma
for its out-of-pocket expenses incurred with respect thereto, or
(iii) terminate such clinical trials; in each case as requested by NovaBay,
but without limiting Section 12.6.9, in no event shall Galderma be required
to continue clinical trials if it reasonably believes such continuation might
adversely affect the health of patients participating in the clinical
trials.
  12.6.3  Commercialization
  Provided that
the termination of this Agreement is not a termination by Galderma pursuant to
Section 12.2.4, if requested by NovaBay, Galderma and its Affiliates and
Marketing Partners shall continue to distribute and sell Collaboration Products
in the Field in each country of the Galderma Territory for which Marketing
Approval therefor has been obtained, in accordance with the terms and conditions
of this Agreement, for a period requested by NovaBay not to exceed two (2)
years  from the effective date of such expiration or termination (for
purposes of this Section 12.6.3, the Agreement Wind-Down Period); provided that NovaBay
may terminate the Agreement Wind-Down Period upon sixty (60) days’ notice to
Galderma.  Notwithstanding any other provision of this Agreement,
during the Agreement Wind-Down Period, Galderma’s, its Affiliates’ and its
Marketing Partners’ rights with respect to Collaboration Products (including the
licenses granted under Section 7.1.1) shall be non-exclusive and NovaBay
shall have the right to engage one or more other partner(s) or distributor(s) of
Collaboration Products in the Field in all or part of the Galderma
Territory.  Any Collaboration Products sold or disposed by Galderma or
its Affiliates or Marketing Partners during the Agreement Wind-Down Period shall
be subject to the applicable royalties under Section 8.5.  After
the Agreement Wind-Down Period, Galderma and its Affiliates and Marketing
Partners shall not make any representation regarding their status as a licensee
of or distributor for NovaBay for any Collaboration Product.  In
addition, Galderma shall promptly provide NovaBay copies of customer lists and
other customer information relating to Collaboration Products reasonably
necessary in Galderma’s reasonable opinion for NovaBay to continue to
Commercialize such Collaboration Products, which NovaBay shall have the right to
use and disclose for any purpose during the Agreement Wind-Down Period and
thereafter.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -67-
 12.6.4  Regulatory
Filings/Data
  Galderma shall, at NovaBay’s expense, promptly assign and transfer to NovaBay
all Regulatory Filings for Collaboration Products that are held or controlled by
or under authority of Galderma or its Affiliates or Marketing Partners, and
shall take such actions and execute such other instruments, assignments and
documents as may be necessary to effect the transfer of rights under the
Regulatory Filings to NovaBay.  Upon such termination, Galderma shall
cause each of its Affiliates and Marketing Partners to transfer any such
Regulatory Filings to NovaBay at NovaBay’s expense.  If applicable Law
prevents or delays the transfer of ownership of any Regulatory Filing to
NovaBay, Galderma shall grant to NovaBay a permanent, exclusive and irrevocable
right of access and reference to such Regulatory Filing for Collaboration
Products, and shall cooperate fully to make the benefits of such Regulatory
Filings available to NovaBay or its designee(s).  Within sixty (60)
days after notice of such termination, Galderma shall provide to NovaBay copies
of all such Regulatory Filings, and of all Data relating to the Collaboration
Products.  NovaBay shall be free to use and disclose such Regulatory
Filings and Data in connection with the exercise of its rights hereunder with
respect to Collaboration Products and Aganocide Products, including exercise of
the licenses under Section 12.6.5.
  12.6.5  Technology
Licenses
  (a)  Galderma
hereby grants NovaBay effective upon the notice of termination of the Agreement
in its entirety under Section 12.2, or the effective date of such
termination by NovaBay under Section 12.3, a non-exclusive, worldwide,
perpetual, license, under the Galderma Technology to Develop and Commercialize
In-Process Collaboration Products and Proposed Collaboration Products in the
Field in the Galderma Territory.
  (b)  For
purposes of this Agreement, “In-Process Collaboration
Products” shall mean any and all Collaboration Products for which a
Development Plan has been approved by the Coordination Committee prior to the
notice of termination, together with all (A) alternative dosage forms,
(B) label expansions and (C) line extensions (related formulations of
the same Collaboration Compound(s)); and “Proposed Collaboration
Products” shall mean any and all Collaboration Products for a Proposed
Indication for which a Development Proposal has been submitted by NovaBay
pursuant to Section 3.5 but has not become an Accepted
Indication.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -68-
 (c)  In
consideration of the licenses granted pursuant to this Section 12.6.5(a),
NovaBay shall pay Galderma a royalty equal to: (i) with respect to Impetigo
Products, [***], and with respect to other In-Process Collaboration Products,
[***] of the applicable Net Sales in the Field in the Galderma Territory by or
under authority of NovaBay, in either case for which a Phase II Clinical
Trial was successfully completed for the Galderma Territory by or under
authority Galderma during the Agreement Term (but no Phase III Clinical
Trial was successfully completed), (ii) with respect to Impetigo Products,
[***], and with respect to other In-Process Collaboration Products, [***] of the
applicable Net Sales in the Field in the Galderma Territory by or under
authority of NovaBay, in either case for which a Phase III Clinical Trial
was successfully completed for the Galderma Territory by or under authority
Galderma during the Agreement Term (but no commercial sales were initiated),
(iii) with respect to Impetigo Products, [***], and with respect to other
In-Process Collaboration Products, [***] of the applicable Net Sales in the
Field in the Galderma Territory by or under authority of NovaBay, in either case
for which commercial sales were initiated by or under authority of Galderma, and
(iv) with respect to Proposed Collaboration Products and any In-Process
Collaboration Products not addressed by clauses (i) through (iii) above, a
royalty rate to be negotiated and established mutually by the Parties in good
faith within sixty (60) days of the effective date of such license but not to
exceed [***], in the case of any Proposed Collaboration Product or In-Process
Collaboration Product Covered by a Patent, or [***], in the case of any such
product not Covered by a Patent, of the applicable Net Sales in the Field in the
Galderma Territory by or under authority of NovaBay, in each case which
royalties shall be payable on a Collaboration Product-by-Collaboration Product
and country-by-country basis.  For clarity, except as provided in this
Section 12.6.5(c), the license granted to NovaBay in this
Section 12.6.5 shall be fully-paid.  The provisions of
Section 8.6.2 starting with the proviso in the first sentence shall apply
to this Section 12.6.5(c) mutatis
mutandis.
  (d)  The
licenses granted to NovaBay in Section 7.1.2(c) shall survive any such
termination without the limitation set forth in the second sentence of
Section 7.1.2(c).  In consideration of the survival of such
license, NovaBay shall continue to pay to Galderma the royalties set forth in
Section 8.6.2, all on the terms and subject to the provisions of
Sections 8.7 through 8.14.
  (e)  In
addition to any royalty payable pursuant to Section 12.6.5(c), NovaBay
shall continue to pay all amounts required by and bound by the applicable terms
of (i) the last two sentences of Section 3.7 and
(ii) Sections 9.5.2 and 9.5.3.
  (f)  Galderma
may terminate the licenses granted to or retained by NovaBay pursuant to this
Section 12.6.5 in the event NovaBay fails to pay any undisputed royalty
under this Section 12.6.5, and such failure continues for sixty (60) days
after notice thereof referencing this Section 12.6.5 was provided to
NovaBay.  Any such termination shall become effective at the end of
such sixty (60) day period unless NovaBay has cured any such failure prior to
the expiration of the sixty (60) day period.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -69-
 12.6.6  Trademarks
  Galderma shall, at NovaBay’s expense, assign, and does hereby assign, to NovaBay
all worldwide rights in and to the Galderma Product Marks together with the
associated goodwill.
  12.6.7  Marketing
Partners
  Galderma’s Marketing Partners shall, at the request of NovaBay, be assigned to
NovaBay to the extent practicable with respect to Collaboration Products
hereunder.  In the event NovaBay does not request assignment of such
Marketing Partners, then the rights of such Marketing Partners with respect to
Collaboration Products shall terminate upon termination of Galderma’s rights
with respect to Collaboration Products.
  12.6.8  Governance
  Any activities undertaken by NovaBay or a Third Party designee with respect to
the Collaboration Products during the Agreement Wind-Down Period shall not be
subject to the authority of the Coordination Committee or any of the provisions
of Article II or Sections 3.1 – 3.6, 3.7 or 4.6.
  12.6.9  Suspension of
Activities
  Notwithstanding anything herein to the contrary, in the event of a termination
of this Agreement by Galderma pursuant to Section 12.2.4, Galderma shall
have the right to suspend all Development and Commercialization activities with
respect to Collaboration Products immediately, subject to any requirements of
applicable Law.
  12.7  Termination With Respect to
Collaboration Products
  If
Galderma electively terminates this Agreement as a one or more Collaboration
Products pursuant to Section 12.2.4 (each, a “Terminated Product”), then at
NovaBay’s election the terms and condition of Section 12.6 shall apply to
such Terminated Product but not other Collaboration Products.
  12.8  Termination for
[***]
  If
Galderma electively terminates this Agreement as to future Development Proposals
pursuant to Section 12.2.5, then the following shall apply from the
effective date of such termination:
  12.8.1  Termination of Certain
Provisions
  Notwithstanding anything herein to the contrary, the provisions of
Sections 2.1, 2.2, 2.3, 2.4.1, 3.1, 3.5, 3.6, 3.7 (first sentence only),
4.2, 5.1 (only with respect to Collaboration Products for which a first-in-man
clinical trial has not been initiated as of the effective date of such
termination) and 6.3 (only with respect to Data generated and Regulatory Filings
filed after the effective date of such termination and without limiting either
Party’s obligations under Sections 6.2.2, 6.2.3 or 6.2.4) shall
terminate.  For clarity, all the other provisions of this Agreement
shall survive and continue to apply as modified pursuant to this
Section 12.8, including the provisions of and each Party’s rights under
Sections 12.2, 12.3 and 12.4 and the associated provisions of this
Article XII;
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -70-
 12.8.2  Section8.5.8
  From and after the effective date of such termination, the terms and conditions
of Section 8.5.8 shall apply only to Acne Products and Impetigo Products,
but no other Collaboration Product;
  12.8.3  Field
  The Field shall be limited to the Primary Indications and all Accepted
Indications, if any, as of the effective date of such termination;
  12.8.4  In-Process Collaboration
Products
  The
words “Collaboration Products” shall be replaced in each instance in
Sections 7.1.1(b), 7.1.1(c), 7.1.1(d) and 7.1.2(b) with the words
“In-Process Collaboration Products.”  Similarly, Section 7.1.2(c)
shall be replaced in its entirety with the following:
  “a
non-exclusive license under the Galderma Technology to make, use, sell, offer
for sale, import and otherwise exploit (i) Aganocide Products outside the
Dermatology Field anywhere in the world, and (ii) In-Process Collaboration
Products within the Dermatology Field solely in the NovaBay
Territory.  Notwithstanding the foregoing, NovaBay shall not have the
right to exercise the licenses granted pursuant to this Section 7.1.2(c)
with respect to Galderma Technology in a manner that can reasonably be expected
to (A) create a risk of Multiple-Field/Territory Product Substitution as
described in Section 2.4.2, or (B) otherwise compete with Galderma
products in the Dermatology Field in the Galderma Territory;” and
  12.8.5  Data
  Notwithstanding anything herein to the contrary, neither Party (or its
designees) shall have the right to access or use any Data  generated
by or under authority of the other Party from and after the effective date of
such termination, except each Party shall have access and the right to use and
file with Regulatory Authorities in connection with the exercise of its ongoing
licenses in Sections 7.1 (as modified pursuant to Section 12.8.4)
safety and other Data to the extent necessary for purposes of filings with
Regulatory Authorities related thereto and then solely for such
purpose).
  12.9  Termination Pursuant to
Section12.3.2
  If
Galderma terminates NovaBay’s licenses under Section 7.1.2(c) pursuant to
Section 12.3.2, then the remainder of the terms and conditions of this
Agreement shall remain in full force and effect.  For clarity, the
Agreement shall remain subject to termination as set forth in and subject to the
provisions of this Article XII.
  12.10  Termination Press
Releases
  In
the event of termination of this Agreement for any reason, the Parties shall
cooperate in good faith to coordinate public disclosure of such termination and
the reasons therefor, and shall not, except to the extent required by applicable
Law, disclose such information without the prior approval of the other Party,
such approval not to be unreasonably withheld, conditioned or
delayed.  To the extent possible under the situation, the terminating
Party shall provide the non-terminating Party with a draft of any such public
disclosure it intends to issue five (5) business days in advance and with the
opportunity to review and comment on such statement, it being understood that if
the non-terminating Party does not notify the terminating Party in writing
within such five (5) business day period (or such shorter period if required by
applicable Law and as notified to the non-terminating Party in writing) of any
reasonable objections, such disclosure shall be deemed approved, and in any
event the Parties shall work diligently and reasonably to agree on the text of
any such proposed disclosure in an expeditious manner.  The principles
to be observed in such disclosures shall be accuracy, compliance with applicable
Law and regulatory guidance documents, reasonable sensitivity to potential
negative reactions to such news and the need to keep investors and others
informed regarding the Parties’ business and other
activities.  Accordingly in such situation, the non-terminating Party
shall not withhold, condition or delay its approval of a proposed disclosure
that complies with such principles.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -71-
 ARTICLE XIII
  
  DISPUTE
RESOLUTION
  13.1  Dispute
Resolution
  The Parties recognize that from time to time during the Agreement Term disputes,
controversies or claims as to matters arising from or relating to this Agreement
may arise including with respect to subsequent amendments, or the validity,
enforceability, construction, performance or breach hereof (and including the
applicability of this Article XIII to any such dispute, controversy or
claim) (each a “Dispute”).  It is
the objective of the Parties to establish procedures to facilitate the
resolution of Disputes in an expedient manner by mutual cooperation and without
resort to litigation.  Accordingly, the Parties agree that any Dispute
shall be resolved by the Parties as follows:
  13.2  Pre-Arbitration Dispute
Resolution
  No
Dispute under this Agreement shall be referred to arbitration proceedings under
Section 13.3 until the following procedures in this Section 13.2 have
been satisfied.  The Chief Executive Officers of NovaBay and Galderma
(or their respective direct report designee) shall meet as soon as practicable,
as reasonably requested by either Party to attempt to resolve such
Dispute.  If the Dispute is not resolved by the Chief Executive
Officers (or their designees) by mutual agreement within thirty (30) days after
a meeting to discuss the Dispute, either Party may at any time thereafter
provide the other Party notice of its decision to commence arbitration
proceedings in accordance with the procedures set forth in
Section 13.3.
  13.3  Arbitration
  The arbitration shall be conducted (i) in English, provided that either
Party may submit testimony or documentary evidence in any language if it
furnishes, upon the request of the other Party, a translation into English of
any such testimony or documentary evidence, (ii) by a single arbitrator,
and (iii) by the Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in accordance with the
JAMS Streamlined Arbitration Rules & Procedures, except where those
procedures conflict with this Article XIII, in which case this
Article XIII shall control.  The location of the arbitration
shall be New York City, New York, USA.
  13.3.1  Arbitrator
  The arbitrator shall be selected within twenty (20) business days from
commencement of the arbitration pursuant to agreement of the Parties or through
selection procedures set forth in Rule 12 of the JAMS Streamlined
Arbitration Rules & Procedures, provided that, if the
issues in dispute involve scientific, technical or commercial matters, including
matters relating to inventorship, ownership or the validity or scope of any
Patent or trademark rights, then the arbitrator shall retain an independent
expert with substantial experience with respect to the area of dispute to assist
the arbitrator in understanding and assessing such matters.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -72-
 13.3.2  Substantive
Law
  The arbitrator shall apply the substantive law of New York to the underlying
dispute.  This agreement to arbitrate shall be governed by
Title 9 (Arbitration) of the United States Code, including without
limitation Chapter Two thereof.
  13.3.3  Enforcement/Service
  Any application to enforce this Section 13.3 or to confirm, vacate or
modify any award rendered pursuant to this Section 13.3 shall be brought
only in the federal or state courts located in the County of New York in the
State of New York.  Any process related to enforcement of the
arbitration award may be served by notice in accordance with
Section 14.3.  Both Parties agree to waive any applicable
objections based on personal jurisdiction or service of process in any
proceeding brought in accordance with this Section 13.3.
  13.3.4  Confidentiality of
Proceedings
  The arbitrator shall take necessary measures for the protection of trade secrets
and Confidential Information hereunder.  Further, the arbitrator shall
be authorized to award interim equitable relief in respect
thereto.  All proceedings and any award shall be confidential, and the
Parties agree not to disclose or otherwise use any information obtained from the
other Party in connection with any arbitration except to the extent required by
Law, or to a Party’s accountants, attorneys or agents or to enforce any award,
or to the extent the information has been lawfully obtained from Third Parties
or is publicly available through other sources.
  13.3.5  Costs
  The Parties shall bear equally the costs of the administrative costs of
arbitration including the costs of JAMS, filing costs, hearing fees, the
arbitrator, any independent expert and similar costs.  Each Party
shall bear its own costs and attorneys’ and witness fees and associated costs
and expenses.  Notwithstanding the foregoing provisions of this
Section 13.3.5, if the arbitrator determines it warranted he/she may shift
any or all of the costs of an arbitration under this Section 13.3 to the
losing Party, if one is designated.
  13.4  Provisional
Remedies
  Nothing in this Agreement shall limit the right of either Party to seek to
obtain in any court of competent jurisdiction any equitable or interim relief or
provisional remedy, including injunctive relief.  Seeking or obtaining
such equitable or interim relief or provisional remedy in a court shall not be
deemed a waiver of this Agreement to arbitrate.  For clarity, any such
equitable remedies shall be cumulative and not exclusive and are in addition to
any other remedies that either Party may have under this Agreement or applicable
Law.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -73-
 ARTICLE XIV
 MISCELLANEOUS
 14.1  Governing
Law
  This
Agreement and any Dispute shall be governed by and construed and enforced in
accordance with the Laws of the State of New York, without reference to
conflicts of laws principles.
  14.2  Assignment
  This Agreement shall not be assignable by either Party to any Third Party
without the written consent of the other Party, not to be unreasonably withheld,
conditioned or delayed.  Notwithstanding the foregoing, either Party
may assign this Agreement, without the written consent of the other Party, to an
entity that acquires all or substantially all of the business or assets of such
Party to which this Agreement pertains (whether by merger, reorganization,
acquisition, sale or otherwise), and agrees in writing to be bound by the terms
and conditions of this Agreement.  If any permitted assignment would
result in withholding or other similar taxes becoming due on payments to the
other Party under this Agreement, such payments shall be subject to such
withholding tax Laws as may be applicable and, if such Laws require a
withholding to be made from such payments, the payments net of withholding taxes
shall constitute full compliance with this Agreement.  No assignment
or transfer of this Agreement to any Third Party shall be valid and effective
unless and until the assignee/transferee agrees in writing to be bound by the
provisions of this Agreement.  The terms and conditions of this
Agreement shall be binding on and inure to the benefit of the permitted
successors and assigns of the Parties.  Except as expressly provided
in this Section 14.2, any attempted assignment or transfer of this
Agreement to any Third Party shall be null and void.
 14.3  Notices
 Any
notice, request, delivery, approval or consent required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given if delivered in person, transmitted by facsimile (receipt
verified), transmitted by email (receipt verified and followed by copy either by
express courier or registered letter), or by express courier service (signature
required) or five (5) days after it was sent by registered letter, return
receipt requested (or its equivalent), provided that no
postal strike or other disruption is then in effect or comes into effect within
two (2) days after such mailing, to the Party to which it is directed at its
address, facsimile number, email address shown below or such other address or
facsimile number as such Party will have last given by notice to the other
Party.
  If
      to NovaBay, addressed to:
              NovaBay
      Pharmaceuticals, Inc.
 5980
Horton Street, Suite 550
 Emeryville,
California 94608
 Attention:  Chief
Executive Officer
 Telephone:  (510)
595-1100
 Facsimile:  (415)
329-2034
 Email:  rnajafi@novabaypharma.com
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -74-
 With
      a copy to:
              Wilson
      Sonsini Goodrich & Rosati
 Professional
Corporation
 650 Page
Mill Road
 Palo
Alto, CA  94304-1050
 Attention:  Ian
B. Edvalson, Esq.
 Telephone:  (650)
493-9300
 Facsimile:  (650)
493-6811
 Email:  iedvalson@wsgr.com
  If to
Galderma, addressed
to:              Galderma
International
 Tour Europlazza
 La Defense 4-20
 Avenue Andre Prothin F
92927
 LA DEFENSE CEDEX
 France
 Attention:  General
      Counsel
 Telephone:  +41-21-641-1151
 Facsimile:  +41-21-641-1161
 Email:  lydie.frere@galderma.com
  With
      a copy to:
              Debevoise &
      Plimpton LLP
 919 Third
Avenue
 New York,
NY  10022
 Attention:  Kevin
A. Rinker, Esq.
 Telephone:  (212)
909-6569
 Facsimile:  (212)
521-7569
 Email:  karinker@debevoise.com
 14.4  Waiver
  Neither Party may waive or release any of its rights or interests in this
Agreement except in writing.  The failure of either Party to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition.  No waiver
by either Party of any condition or term in any one or more instances shall be
construed as a continuing waiver of such condition or term or of another
condition or term.
  14.5  Severability
  If
any provision hereof should be held invalid, illegal or unenforceable in any
jurisdiction, the Parties shall negotiate in good faith a valid, legal and
enforceable substitute provision that most nearly reflects the original intent
of the Parties and all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the Parties as nearly as may be possible.  Such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other
jurisdiction.  If a Party seeks to avoid a provision of this Agreement
by asserting that such provision is invalid, illegal or otherwise unenforceable,
the other Party shall have the right to terminate this Agreement upon sixty (60)
days’ prior written notice to the asserting Party, unless such assertion is
eliminated and cured within such sixty (60) day period.  If such
termination is by NovaBay, it shall be deemed a termination under
Section 12.3 by reason of a breach by Galderma, and if such termination is
by Galderma, it shall be deemed a termination under Section 12.3 by reason
of a breach by NovaBay.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -75-
 14.6  Entire
Agreement/Modification
  This Agreement, including its Exhibits, sets forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the Parties and supersedes and terminates all prior agreements and
understandings between the Parties.  No subsequent alteration,
amendment, change or addition to this Agreement shall be binding upon the
Parties unless reduced to writing and signed by the respective authorized
officers of the Parties.
  14.7  Relationship of the
Parties
  The Parties agree that the relationship of NovaBay and Galderma established by
this Agreement is that of independent contractors.  Furthermore, the
Parties agree that this Agreement does not, is not intended to, and shall not be
construed to, establish an employment, agency or any other
relationship.  Except as may be specifically provided herein, neither
Party shall have any right, power or authority, nor shall they represent
themselves as having any authority to assume, create or incur any expense,
liability or obligation, express or implied, on behalf of the other Party, or
otherwise act as an agent for the other Party for any purpose.
  14.8  Force
Majeure
  Except with respect to payment of money, neither Party shall be liable to the
other for failure or delay in the performance of any of its obligations under
this Agreement for the time and to the extent such failure or delay is caused by
earthquake, riot, civil commotion, war, terrorist act, strike, flood, or
governmental acts or restriction, or other cause that is beyond the reasonable
control of the respective Party.  The Party affected by such force
majeure will provide the other Party with full particulars thereof as soon as it
becomes aware of the same (including its best estimate of the likely extent and
duration of the interference with its activities), and will use commercially
reasonable efforts to overcome the difficulties created thereby and to resume
performance of its obligations as soon as practicable.  If the
performance of any such obligation under this Agreement is delayed owing to such
a force majeure for any continuous period of more than one hundred eighty (180)
days, the Parties will consult with respect to an equitable solution, including
the possibility of the mutual termination of this Agreement.
  14.9  Compliance with
Laws
  Notwithstanding anything to the contrary contained herein, all rights and
obligations of NovaBay and Galderma are subject to prior compliance with, and
each Party shall comply with, all United States and foreign export and import
Laws, and such other United States and foreign Laws as may be applicable,
including obtaining all necessary approvals required by the applicable agencies
of the governments of the United States and foreign jurisdictions.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -76-
 14.10  Counterparts
  This
Agreement may be executed in two counterparts (including via facsimile or
otherwise electronically), each of which shall be deemed an original, and all of
which together, shall constitute one and the same instrument.
  [The
remainder of this page intentionally left blank; the signature page
follows.]
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 -77-
   IN WITNESS WHEREOF, the
Parties have executed this Agreement in duplicate originals by their duly
authorized representatives as of the Effective Date.
  NOVABAY
PHARMACEUTICALS,
INC.                                                                                                 GALDERMA
S.A.
  By:                                                                       By:
  Name:
Ron Najafi,
PhD                                                                    Name: Humberto C.
Antunes
  Title:
Chairman and
CEO                                                                    Title:  CEO
  
  List of Exhibits:
  Exhibit1.6:  Aganocide
Compound
 Exhibit1.55:  NovaBay
Territory
 Exhibit6.1.4:  Manufacturing
Cost
 Exhibit6.1.5:  Supply
Agreement Terms and Conditions
 Exhibit8.5:  Example
of Royalties
 Exhibit8.5.9:  Example
of Net Sales Allocation for Royalties
 Exhibit10.4.1:  Press
Release
   EXHIBIT
1.6
  AGANOCIDE
COMPOUND
  For
purposes of this Agreement and for purposes of providing specific examples but
without limiting the definition in Section 1.6, Aganocide Compounds shall
include compounds with the following chemical formula:
  [***]
  Examples
of which include but are not limited to the following:
 
  [***]
  
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
  EXHIBIT
1.55
  NOVABAY
TERRITORY
 AfghanistanBahrainBangladeshBhutanBruneiCambodiaChina,
      The People’s Republic (including Hong Kong and Macao)Cook
      IslandsEast
      TimorFijiIndiaIndonesiaIranIraqIsrael*Jordan*KazakhstanKiribatiKuwait*KyrgyzLaosLebanon*MalaysiaMaldivesMarshall
      IslandsMicronesiaMongoliaMyanmarNauruNepalNiueNorth
      KoreaOmanPakistanPalauPalestine*Papua
      New GuineaPhilippinesQatarSamoaSaudi
      Arabia*SingaporeSolomon
      IslandsSouth
      KoreaSri
      LankaSyria*Taiwan
      (Republic of China)TajikistanThailandTongaTurkey*TurkmenistanTuvaluUnited
      Arab Emirates*UzbekistanVanuatuViet
      NamYemen
 *
indicates this country is subject to the provisions of
Section 4.6
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 EXHIBIT
6.1.4
  MANUFACTURING
COST
  “Manufacturing Cost”1 means, with respect to a
Collaboration Compound supplied by NovaBay or a Collaboration Product supplied
by Galderma hereunder, amounts incurred or accounted for by NovaBay or Galderma,
as applicable, for the sum of (i) Actual Materials Cost, (ii) Actual
Labor Cost, and (iii) Allocable Overhead, in each case calculated in
accordance with Accounting Standards; provided, however with respect
to Collaboration Compound (or component thereof) acquired or licensed by NovaBay
from a Third Party or a Collaboration Product (or component thereof) acquired or
licensed by Galderma from a Third Party, the Manufacturing Costs for such
Collaboration Compound or Collaboration Product, as applicable, (or component
thereof) shall be deemed to be the amount paid therefor to such Third Party,
plus Actual Materials Cost, Actual Labor Cost, Allocable Overhead incurred or
accounted for by NovaBay or Galderma, and licensing fees (if any) paid to Third
Parties, as applicable for the quality control, storage, handling, processing,
preparation and transfer of such purchased Collaboration Compound or
Collaboration Product.  Upon prior request, a Party will provide the
other Party with documentation evidencing the other Party’s accounting of the
items identified in the foregoing subclauses (i) through
(iii).
  (A)           “Actual Materials Cost” means
the actual unit cost of all raw materials multiplied by the actual number of
units of such raw materials consumed in the manufacture of Collaboration
Compound or the Manufacture of Collaboration Product, as applicable, including
any yield variances and any write-offs caused by obsolescence, accident and
book-to-physical differences, in each case occurring in the normal course of the
manufacturing process.
  (B)           “Actual Labor Cost” means
actual employee costs allocable to the manufacture Collaboration Compound or
Manufacture of Collaboration Product, as applicable, which are as follows:
salaries, payroll taxes, employee benefits, holiday, sickness, overtime pay and
bonuses with respect to such employees.  For clarity, Actual Labor
Costs shall exclude any employee costs associated with equity incentive
plans.
  (C)           “Allocable Overhead” means:
(i) depreciation of or rent/lease expenses for property, plant or
equipment, (ii) plant management (e.g., supervisors,
human resources and purchasing), (iii) plant services (e.g., engineering,
and production planning), (iv) plant utilities, (v) plant maintenance,
(vi) freight and storage costs (at any stage in manufacturing),
(vii) cost accounting, data processing and information systems services,
(viii) non-reimbursable taxes and duties (excluding income tax),
(ix) expenses related to environmental protection, (x) costs of
security and surveillance, and (xi) costs of plant fire insurance
protection, in each case allocable to or used in the manufacture of
Collaboration Compound or Manufacture of Collaboration Product, as
applicable.  For clarity, Allocable Overhead excludes (a) all
costs and charges related to or occasioned by or for idle or excess
manufacturing capacity, (b) the manufacture of other products (other than
Collaboration Compound or Collaboration Product), and (c) depreciation of
or rent/lease expenses for property, plant or equipment not related to
manufacturing of Collaboration Compound or Manufacturing of Collaboration
Product, as applicable.
 
 1      Manufacturing
Costs will be subject to annual review.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
  EXHIBIT
6.1.5
  SUPPLY
AGREEMENT TERMS AND CONDITIONS
  The
Supply Agreements shall include and be consistent with the following terms and
conditions, unless otherwise agreed to by the Parties:
  Product
Supply: NovaBay will have the right and obligation to supply (or have
supplied), to the extent provided in Section 5.1 of the Agreement,
Collaboration Compounds meeting the applicable Specification that are forecasted
and ordered by Galderma, its Affiliates and Marketing
Partners.  Similarly, Galderma will have the right and obligation to
supply (or have supplied), to the extent provided in Section 5.1 of the
Agreement, Collaboration Products meeting the applicable Specifications that are
forecasted and ordered by NovaBay, its Affiliates, Japanese Partners and
sublicensees.  Each such particular Collaboration Compound or
Collaboration Product, referred to for purposes of this Exhibit6.1.5 as a “Product.”  “Specification” will be defined
in more detail in the Quality Agreement (as described below) to meet the
mutually agreed upon analytical and quality specifications (including GMP) for
the Product, as applicable, necessary to meet the requirement of the applicable
Marketing Approvals or otherwise mutually agreed by the Parties, including, as
applicable, packaging and shipping specifications.
  Forecast:
The Party so ordering the Product (the “Ordering Party”) will provide
the other Party (the “Supplying
Party”) with a twelve (12) month rolling forecast, the first three (3)
months of which shall be binding for the requirements for
Product.  The requirements and responsibilities of both Parties shall
be finalized in the Supply Agreement.
  Orders:
Orders will be made pursuant to a mutually agreed form of purchase
order.  Any additional or inconsistent terms or conditions of any
purchase order, acknowledgment or similar standardized form given or received
shall have no effect and such terms and conditions will be
excluded.
  Invoicing:
The Supplying Party will invoice the Ordering Party for Product at the time of
shipment.  All payments will be made net 30 days from date of
invoice.
  Shipping:
Delivery of Product shall be FOB (U.C.C.) for shipments within the United States
and FCA (Incoterms 2000) for other shipments, in either case from the final
place of manufacture.  The Supplying Party shall load all Product onto
Ordering Party’s designated carrier at Supplying Party’s facilities, and title
and risk of loss shall thereof pass to Ordering Party when the Product is
loaded.
  Quality:
The process for release of each Product, and the responsibilities for GMP
compliance and regulatory activities will be detailed in a “Quality
Agreement.”  The Quality Agreement will be negotiated between
Supplying Party and Ordering Party in good faith and include standard and
customary terms and conditions and be incorporated into the Supply Agreement by
reference and executed prior to manufacture of process validation
lots.  In the event that Supplying Party and Ordering Party are unable
to agree on whether a certain lot of Product is defective, retained samples of
the lot in question shall be submitted to a mutually agreed independent
reference lab to be described in more detail in the Quality
Agreement.  The results of the independent lab testing shall be
binding.  The cost of testing shall be borne by Supplying Party if
such lab determines that the Product is found to be defective or by Ordering
Party if such lab determines that the Product is in conformance with the
Specifications.  In the event of a determination that the Product is
not defective, Ordering Party shall promptly pay Supplying Party for all such
Product, including any allegedly defective Product shipped to Ordering
Party.  In the event of a determination that the Product is defective,
the order for such Product will be canceled and Ordering Party will make a
separate order therefor after discussions with Supplying Party.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 Supply
Failure: If Supplying Party materially fails to supply, or have supplied,
quantities of Product that it is required to supply, except as a result of a
default by Ordering Party or force majeure event, Supplying Party will, at
Ordering Party’s written request, provide Ordering Party (including any Third
Party contract manufacturer designated by the Supplying Party) with access to
and the right to use, without charge (other than the administrative costs of
transfer), all Supplying Party manufacturing intellectual property (including
Patents, Know-How, and related information and materials) necessary or
reasonably useful to manufacture such Product, except that Ordering Party shall
not exercise such rights (i) through a competitor of Supplying Party, or
(ii) in any country that does not adhere to and respect internationally
recognized intellectual property and trade regulations.  The Supply
Agreement will include mechanisms for the transfer of such intellectual property
to Ordering Party in the event of such failure to supply.  If Ordering
Party elects to exercise such rights to manufacture or have manufactured
Product, then, at such time as Supplying Party or its contract manufacturer can
reasonably demonstrate its ability to again supply Product in accordance with
the Supply Agreement, such manufacturing rights of Ordering Party shall cease
and Supplying Party shall have the right to supply Product.
  Second
Source of Supply: Upon Galderma’s request, NovaBay shall develop a plan
and budget for a qualified second source of supply capable of supplying the
Collaboration Compounds for Galderma’s approval.  The second source
supplier shall be under the control of NovaBay and may be an alternative
manufacturing facility owned by NovaBay or consist of one or more subcontractor
relationships with Third Parties established by NovaBay.  Galderma
shall be responsible for all reasonable and documented costs and expenses
incurred by NovaBay in establishing and maintaining the second source
supplier.
  Term:
The term of the Supply Agreement will be coextensive with the Agreement and will
be subject to termination on the same terms as the Agreement.
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
  EXHIBIT
8.5
 
 EXAMPLE
OF ROYALTIES
  Section8.5.1Royalties for Acne
Products.
  Example: If Annual Net Sales
of Acne Products in the Galderma Territory are [***] in a
particular calendar year, the royalties payable to NovaBay shall be calculated
as follows:
  ·
              [***]
  ·
              [***]
  ·
              [***]
  ·
              [***]
  Total
Royalties = [***]
  
  Sections8.5.2to8.5.5Royalties for Collaboration
Products other than Acne Products
  Example: If Annual Net Sales
of Anti-Bacterial Products in the Galderma Territory are [***] and of
Other Products in the Galderma Territory are [***] in a
particular calendar year, the royalties payable to NovaBay shall be calculated
as follows:
  ·
              [***]
  ·
              [***]
  ·
              [***]
  Total Royalties =[***]
    2 Net
Sales of all Collaboration Products other than Acne Products allocable to tier
A.
   3 Net
Sales of all Collaboration Products other than Acne Products allocable to tier
B.
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
   EXHIBIT
8.5.9
 
 EXAMPLE
OF NET SALES ALLOCATION FOR ROYALTIES
  Example: If Annual Net Sales
of Acne Products in the Galderma Territory are [***] ([***] in
countries where no Generic Competition is present and [***] in
counties where there is Generic Competition) in a particular calendar year, the
royalties payable to NovaBay shall be calculated as follows:
  ·
              [***]
  ·
              [***]
  ·
              [***]
  Total
Royalties = [***]
  
    
   
   4 Portion
of the [***] of tier A allocable to countries where no Generic Competition is
present (i.e.,
[***]).
   5 Portion
of the [***] of tier A allocable to countries where Generic Competition is
present (i.e.,
[***]).
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
   EXHIBIT 10.4.1
  PRESS
RELEASE
  [See
attached]
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
   NovaBay
and Galderma Enter into Global Agreement to Develop and Commercialize NovaBay’s
Novel Aganocide Drugs for Major Dermatological Conditions
  --
Up To $50 Million Potential Milestones plus Double Digit Royalties On Future
Sales --
  --
Company to Host Conference Call at 10:30 a.m. ET Today --
  EMERYVILLE, Calif. – March 25,
2009 – NovaBay Pharmaceuticals, Inc. (NYSE Alternext: NBY), a mid-stage
biopharmaceutical company developing first-in-class anti-infective products for
the treatment and prevention of a wide range of infections without causing
resistance, today announced that it has entered into an agreement with Galderma
S.A. to develop and commercialize NovaBay’s novel proprietary Aganocide®
compounds. The exclusive agreement is worldwide in scope, with the exception of
certain Asian markets, and covers all major dermatological conditions, excluding
onychomycosis (nail fungus) and orphan drug indications.
  Under the
terms of the agreement, NovaBay expects to receive from Galderma up to $50
million upon achievement of certain development and regulatory milestones
related to the acne and impetigo indications and future royalties on net sales
of products. The agreement also envisages further cooperation for additional
dermatological products and indications. Under the agreement, NovaBay will also
receive escalating double-digit royalties on net sales of products.
  Galderma
will be responsible for the development costs of the acne and other indications,
except in Japan, and for the ongoing development program for impetigo, upon the
achievement of a specified milestone. Galderma will also reimburse NovaBay for
the use of its personnel in support of the collaboration. NovaBay retains the
right to co-market products resulting from the agreement in Japan. In addition,
NovaBay has retained all rights in other Asian markets outside Japan, and has
exclusive rights to promote the products developed under the agreement in
the hospital and other healthcare institutions in North
America.
  “This
agreement highlights Galderma’s commitment to the future of dermatology.
Aganocide compounds have the potential to bring about significant progress in
the treatment of skin diseases which affect millions of patients, without adding
to the growing problem of antibiotic resistance,” said Humberto C. Antunes,
Chief Executive Officer of Galderma. “Galderma is glad to be working with
NovaBay in this important and very promising endeavor.”
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 “We are
very pleased to have entered into this collaboration with Galderma, the
world-leader in dermatology. We believe that Galderma’s demonstrated
development, regulatory and marketing capabilities, backed by its unrivaled
reputation and track record of success, will enable NovaBay to benefit from
accelerated development timelines and global commercial expertise,” said Dr. Ron
Najafi, Chairman and Chief Executive Officer of NovaBay. “Like our alliance with
Alcon in the ophthalmic, otic and sinus fields, this agreement represents
another major validation of the potential for our novel Aganocide products in
treating infections caused by a wide range of bacteria, viruses and
fungi.”
  Our
collaborations with Alcon and Galderma provide significant future
revenue-generating potential for NovaBay, with favorable economic-sharing for
the company’s unique, differentiated products that address large, global
dermatological and ophthalmic markets. Conference Call
  NovaBay
will hold a conference call today, March 25, 2009 at 10:30 a.m. ET, to discuss
its Galderma collaboration.  The conference call will be simultaneously web
cast on NovaBay’s web site.
 Conference
call details:
 Date:    Wednesday,
March 25, 2009
 Time:    10:30
a.m. ET
 Dial-in
(U.S.):   888-396-2384
 Dial-in
(International): 617-847-8711
 Web
cast:   http://www.novabaypharma.com
 Passcode:   48544871
 To access
audio replay:
 Access #
(U.S.):  888-286-8010
 Access #
(International): 617-801-6888
 Replay
Passcode:  94169247
  About
Aganocide Compounds
 The
Aganocide compounds are novel, proprietary, synthetic N-chlorinated antimicrobial
molecules specifically designed by NovaBay to mimic the body’s natural defense
against infection.  These compounds may deliver the same or better efficacy
as currently used antibiotics without contributing to the growing rise of
bacterial resistance.  This new class of highly differentiated compounds is
ideally suited to meet numerous unmet needs in dermatology and other
applications, while currently available therapies do not provide adequate
treatment and often cause unwanted side effects.  The Aganocide compounds
have shown in preclinical trials to date to be highly effective against the
bacteria, viruses and fungi associated with a wide range of dermatological and
other conditions.  They have also been demonstrated to be effective against
bacteria in biofilm, which render most antibiotics ineffective.  The
combined anti-bacterial and anti-fungal properties and activity of these
compounds make them uniquely able to address the multi-factorial causes of many
skin and other disorders.  These compounds have a potentially broad
therapeutic index providing a high degree of potency, good tolerability and
dosing versatility and flexibility.
  About
Acne
 Acne is
the most common skin disease that affects people of all races and age-groups,
but it is most common in teenagers and young adults.  An estimated 80
percent of all people between the ages of 11 and 30 suffer from outbreaks of
acne at some point, and some people in their forties and fifties are also
affected. There is a clear need for more effective antimicrobial treatments than
the currently available antibiotics.
  ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
 About Impetigo
 Impetigo,
a contagious skin infection that usually produces blisters or sores on the face,
neck, hands, and diaper area, is one of the most common skin infections among
children.  It also occurs in adults. Impetigo is contagious and can be
spread from one person to another through close contact or by sharing towels,
sheets, clothing, toys, or other items.  Scratching can also spread
the sores to other parts of the body.
  Impetigo
is caused by one of two types of bacteria - strep (streptococcus) or staph
(staphylococcus).  Often
these bacteria enter the body when the skin has already been irritated or
injured due to other skin problems such as eczema, poison ivy, insect bites,
chickenpox, burns, or cuts.  Children may develop impetigo
after having a cold or allergies that have caused the skin under the nose
to become raw.  However, impetigo can also develop in completely
healthy skin.
  About
Galderma
 Galderma,
created in 1981 as a joint venture between Nestlé and L'Oréal, is a global
leading pharmaceutical company dedicated exclusively to the field of
dermatology. The company is present in 65 countries with over 1000 sales
representatives and is committed to improving the health of skin with an
extensive line of innovative medical, corrective and aesthetic solutions to
treat a range of dermatological conditions including: acne, rosacea, fungal nail
infections, psoriasis & other steroid-responsive dermatoses, pigmentary
disorders, skin cancer and medical solutions for skin senescence. Galderma has
research and development facilities located in Sophia Antipolis (France),
Princeton, New Jersey (USA), and Tokyo (Japan). Leading worldwide dermatology
brands include Differin®,
Epiduo®,
Oracea®,
MetroGel® 1%,
Rozex®,
Clobex®,
Tri-Luma®,
Loceryl® and
Cetaphil®. For
more information on Galderma, visit www.galderma.com.
  About
NovaBay Pharmaceuticals, Inc.
  NovaBay
Pharmaceuticals is a mid-stage biopharmaceutical company focused on developing
its proprietary and patented Aganocide compounds, first-in-class, novel,
synthetic anti-infective product candidates that are bioequivalent to the active
antimicrobial molecules generated within white blood cells to treat and prevent
a wide range of infections without causing resistance.  NovaBay has
internal development programs aimed at addressing hospital and respiratory
infections.  The company has a licensing and research collaboration
agreement with Alcon, Inc. for use of its Aganocides in the eye, ear and sinus,
and in contact lens solutions.  NovaBay has entered into an agreement
with Galderma S.A. to develop and commercialize Aganocides in acne, impetigo and
other dermatological indications.  NovaBay® and
Aganocide® are
trademarks of NovaBay Pharmaceuticals, Inc.  For more information on
NovaBay, visit www. novabaypharma.com.
 
 ***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
  Cautionary
Information Regarding Forward-Looking Statements
  This
press release includes forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, that are subject to risks,
uncertainties and other factors, including the risk that Galderma and NovaBay
may be unable to advance the development of NovaBay’s Aganocide®
compounds for various dermatological indications such as acne, impetigo and
other major conditions.  Examples of such statements include, but are not
limited to, any statements relating to the timing, scope or expected outcome of
the NovaBay's or Galderma’s clinical development of its drug candidates, the
potential benefits of the Company's drug candidates and the size of the
potential market for the Company's products. Such statements are based on
management's current expectations, but actual results may differ materially due
to various factors.  These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in these forward-looking statements. These risks and uncertainties
include, among others, the risk that results obtained in animal models may not
be obtained in humans, and the risk of unexpected delays in the regulatory
process may delay the commencement or completion of clinical trials.  Other
risks relating to NovaBay and Aganocide®
compounds, including risks that could cause actual results to differ materially
from those projected in the forward-looking statements in this press release,
are detailed in NovaBay’s Quarterly Report on Form 10-Q/A for the period ended
September 30, 2008, under the caption "Risk Factors" in Item 1A of Part II of
that report, which was filed with the Securities and Exchange Commission on
November 14, 2008.
  For more
information
  NovaBay
  NovaBay
Pharmaceuticals, Inc.
 Chief
Financial Officer:
 Tom
Paulson, 510-899-8809
 tpaulson@novabaypharma.com
  Invigorate
Communications
 Investor
Relations:
 Gregory
Gin, 908-376-7737
 ggin@invigoratepr.com
  Media
Relations:
 Mariesa
Kemble, 608-850-4745
 mkemble@invigoratepr.com
  Galderma
  Vice
President HR & Communication
 Alain
Kirsch, 33 1 58 86 43 23
 alain.kirsch@galderma.com


***Confidential
treatment requested pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.