Unassociated Document


    Exhibit 10.1

    
 

    EXCLUSIVE
SALES AND DISTRIBUTION AGREEMENT

     

    This Exclusive Sales and Distribution
Agreement is made and entered into as of the latest date set forth on the
signature lines below (the “Effective Date”) by and between Oculus Innovative
Sciences, Inc., a Delaware corporation having a place of business at 1129 North
McDowell Boulevard, Petaluma, California, USA 94954 (“Oculus”); and Quinnova
Pharmaceuticals, Inc., a Delaware corporation having a place of business at 411
South State Street, Newtown, Pennsylvania 18940 (“Quinnova”).

    


    WHEREAS
Oculus has developed proprietary technology and know-how (“Oculus Technology”)
which Oculus distributes and sells in the form of certain liquid and gel
products (“Product”) in the dermatology and podiatry market; and

     

    WHEREAS
Quinnova has a robust sales force in the focused on dermatology customer call
points and will be operating as a sales agent for Oculus, handling certain sales
and marketing function for Oculus in dermatology; and

     

    NOW
THEREFORE in consideration of the mutual promises and undertakings of the
parties hereto, the parties agree as follows:

     

    1.           Definitions.

     

    1.1.1          “Confidential
Information” means information of a party, which information is conspicuously
marked with “Confidential”, or “Proprietary” or other similar
legend.  If Confidential Information is orally disclosed or it is
observed, it shall be identified as such at the time of disclosure or
observation and a brief written description and confirmation of the confidential
nature of the information shall be sent to the recipient within thirty (30) days
after the disclosure. The Product, the Quinnova products, quantities, schedules
and pricing, projections and business plans shall be considered Confidential
Information hereunder whether disclosed orally or in writing, or whether or not
marked “Confidential” or “Proprietary”.

     

    1.2           
 Calendar Year means each twelve (12) month period beginning on January
1st
and ending on December 31st.

     

    1.3           
 “Contract Year” means each twelve (12) month period following and having
as its anniversary on the Effective Date during the term of the
Agreement.

     

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

     

    1.5             “Field
of Use” means the sale or distribution of the Products in the prescription
dermatology market.

     

    1.6             Financial
terms are defined as follows:

     

    (a)             
“GAAP” means U.S. generally accepted accounting principles.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    (b)
“Gross Sales” means the total amount of revenue recognized for the Products on a
GAAP basis by Oculus.   It is calculated by multiplying the
number of units sold times the price per unit.

     

    (c) “Net
Sales” is the Gross Sales minus the typical GAAP deductions including normal and
customary trade discounts, cash and quantity discounts, sales returns
allowances, charge backs, rebates, wholesale distributor charges and bad
debts.

     

    (d) “Cost
of Goods Sold” means Oculus’ manufacturing unit cost shown on Exhibit A
multiplied by the number of units sold.

     

    (e)
“Gross Margins” means Net Sales minus Cost of Goods Sold.

     

    (f)  “Oculus
Gross Profit” is Gross Margins times [   ]*%.

     

    1.7           
 “Future Device Products” means all future products in the Field of Use in
the Territory approved or cleared by the US FDA as a 510K medical
device.

     

    1.8          
   “Intellectual Property Rights” means all intellectual property
rights worldwide arising under statutory or common law or by contract and
whether or not perfected, now existing or hereafter filed, issued, or acquired,
including all (a) patent rights; (b) rights associated with works of authorship
including copyrights and mask work rights; (c) trademarks, service marks, trade
dress and trade names; (d) rights relating to the protection of trade secrets
and confidential information; and (e) any right analogous to those set forth
herein and any other proprietary rights relating to intangible
property.

     

    1.9         
   “Kit” means the combination of a certain Oculus product with
an OTC Drug Monograph products combined into one package to be used as a one
step, two step product (example: impetigo kit which will contain an Oculus
HydroGel plus and OTC Drug Monograph triple action antibiotic), but shall
specifically exclude any combination product granted to [   ]*
pursuant to the terms of that certain Co-Packaging, Revenue Sharing Distribution
Agreement dated November 2, 2010 by and between Oculus and [  
]*.

     

    1.10           “Label,”
“Labeled” or “Labeling” shall mean all labels and other written, printed or
graphic matter upon (i) the Product or any contained or wrapper utilized with
the Product, and/or (ii) any written material accompanying the Product,
including, without limitation, package inserts.

     

    1.11          
“Minimum Sales Performance for Exclusivity” means the minimum number of
units of Product that Quinnova must purchase from Oculus each Calendar Year as
specified on Exhibit B to maintain the exclusive status of the
Agreement.  If Quinnova fails to achieve unit sales of the Product in
any Calendar Year that are equal or greater than the Minimum Sales Performance
for such Calendar Year, then Quinnova shall have the right and option to pay to
Oculus within [   ]* days of the end of such Calendar Year an amount
equal to the difference between the Oculus Gross Profit and Cost of Goods Sold
that would have been generated by the Minimum Sales Performance and the actual
Oculus Gross Profit and Cost of Goods Sold payments for such Calendar Year
(“Sales Performance Payment”), provided, however that Quinnova may remedy the
Cost of Goods shortfall by purchasing additional inventory in the amount of such
shortfall within thirty (30) days of the close of the Calendar Year. For the
first Calendar Year (2011), the Minimum Sales Performance shall be prorated from
the date of launch (first commercial sale to an unrelated third party) through
the end of such Calendar Year.

     

    * Confidential material redacted and separately filed with the
Commission.

     

    
      
         


      

      
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    1.12           “Minimum
Units for Termination” means the minimum number of units of Product that
Quinnova must purchase from Oculus each Calendar Year as specified in Exhibit B
which if Quinnova fails to achieve Oculus shall have the right and option to
terminate this Agreement pursuant to section 9.2(b) subject to the limitations
outlined in section 9.2(b)(ii). For the first Calendar Year (2011), the Minimum
Units for Termination shall be prorated from the date of launch (first
commercial sale to an unrelated third party) through the end of such Calendar
Year.

     

    1.13           “Packaging”
means all primary containers, including tubes, cartons, shipping cases or any
other like matter used in packaging or accompanying the Product.

     

    1.14           “Products”
means the products listed on Exhibit A.

     

    1.15           “Regulatory
Approvals” means any and all approvals, applications, registrations, licenses,
certifications and other requirements imposed by any governmental agency or
other entity exercising any regulatory or other governmental or
quasi-governmental authority.

     

    1.16           “Territory”
shall mean the United States of America, its territories and possessions, and
Canada.

     

    2            Purchases and
Product.

     

    2.1       
     General.  This
Agreement establishes the terms and conditions on which Oculus will sell to
Quinnova the Products, Future Device Products and  Kits, and the terms
and conditions on which Quinnova shall have the right to sell the Products,
Future Device Products and Kits.  This Agreement shall not be
modified, supplemented or interpreted by any trade usage or prior course of
dealing not made a part of this Agreement by its express terms.

     

    2.2         
   Exclusivity.  Subject
to all the terms and conditions of this Agreement, Oculus hereby appoints
Quinnova for the Term of this Agreement as an exclusive distributor of the
Products, only within the Field of Use and only within the Territory. Quinnova
may distribute the Products only to persons and entities located and taking
delivery within the Territory.  In order to maintain exclusivity of
this Agreement, Quinnova must attain the Minimum Sales Performance for
Exclusivity set forth on Exhibit B for the applicable Calendar
Year.  If Quinnova fails to achieve the Minimum Sales Performance for
Exclusivity in any Calendar Year, then Quinnova shall have the right and option
to pay to Oculus within [   ]* days the Sales Performance Payment, in
which event the exclusive nature of the Agreement shall continue for an
additional Calendar Year.  For each additional Future Device Product
or Kit, Quinnova will develop a sales and marketing plan, which will minimally
contain a forecast.  Once Quinnova and Oculus mutually agree on the
minimums of the forecasted sales units during the Term for each Future Device
Product and/or Kit to be determined within three (3) months after Oculus’
receipt of FDA clearance, each new Future Device Product and/or Kit will be
added to this Agreement under the same terms and conditions.

     

    * confidential material redacted and separately filed with the
commission

     

    
      
         


      

      
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    2.3          Forecast.  On
a quarterly basis, Quinnova shall provide a non-binding, rolling forecast of
purchases of the Products for the next six (6) months.

     

    2.4         
Purchase
Orders. All purchase orders to be fulfilled by Oculus shall contain
pricing, requested shipment schedule, delivery address, requested carrier and
quantity terms.  Oculus will be receiving purchase orders, fulfilling
and shipping orders from Petaluma, California.  Quinnova’s orders
shall be filled on a first priority basis.  When acknowledgement of
receipt and acceptance of a purchase order or a requested delivery schedule is
made by Oculus (either by written notice or by shipment of the ordered Product),
the purchase order or delivery schedule shall be deemed a commitment to purchase
and sell the Product pursuant to the terms of this Agreement.

     

    2.5          Manufacturing.

     

    (a)              Oculus
will manufacture the Products and samples and provide such Products and samples
in sufficient quantities and on the agreed upon timeline, in accordance with
Good Manufacturing Practices and in compliance with all applicable state and
federal laws and regulations.  All Product supplied by Oculus to
Quinnova under this Agreement shall conform to the specifications for the
Product;

     

    (b)              The
Parties will enter into a quality agreement to address additional regulatory,
operational and quality obligations and responsibilities (the “Quality
Agreement”) in form and substance mutually acceptable to the
parties.  If there is any conflict or inconsistency between the terms
of the quality Agreement and the terms of this Agreement, then the terms of this
Agreement shall control;

     

    (c)              All
Product that Oculus delivers to Quinnova shall be accompanied by a customary
certificate of compliance.  Each such certificate of compliance shall
provide statements of manufacture under cGMP conditions and completed review and
approval of all manufacturing records by Oculus quality assurance and shall
include all appropriate references to batch numbers.

     

    2.6          Packaging and
Labeling.  Oculus and Quinnova shall jointly work to develop
the Labeling for each Product.  Oculus shall provide Labeling and
shall be responsible for ensuring the accuracy of all information contained on
all artwork for Labels, Labeling and advertising and promotional material for
each Product and for the compliance of all such Labels, Labeling and advertising
and promotional material with all Applicable Laws and the Regulatory
Approvals.  All Labeling shall only include Quinnova as the
distributor of Product.  All Labels, Labeling and Packaging shall be
subject to Quinnova’s reasonable review and approval.  Quinnova shall
provide Oculus with Quinnova’s requirements for Packaging, which shall conform
with all Applicable Laws and the Regulatory Approval for the
Products.  Should Quinnova desire or be required to make any change in
any such Label, Labeling, or Packaging, Quinnova shall be responsible for the
updating of all artwork and text associated with such change and providing such
changes to Oculus at Quinnova’s sole cost and expense.  Nothing in
this Section is intended, nor shall it be construed, to relieve Oculus of
responsibility for any damage or other defect arising from Oculus’ affixation of
the Label, Labeling or Packaging to the Product, to the extent caused by Oculus’
negligent acts or omissions or breach of any duty under this
Agreement.


    
      
         


      

      
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    2.7         Invoicing. Quinnova
will invoice customers for sales of Products, collect the receivables from the
customers and assume the credit risk.

     

    2.8         Shipping and
Inventory.  Oculus will ship Products to Quinnova, or directly
to the customers and retain title to inventories until shipped to Quinnova or
the customers.

     

    2.9         Pricing.  Quinnova
will recommend prices of Products, Future Device Products and Kits to Oculus,
Oculus will review and approve, with such approval not to be unreasonably
withheld.

     

    2.10       Payment. Payments and
terms to Oculus or Quinnova are as follows:

     

    2.10.1   Within
four (4) business days of the execution of this Agreement, Quinnova will pay
Oculus Five Hundred Thousand ($500,000) Dollars as an advanced payment for the
first Five Hundred Thousand ($500,000) Dollars worth of Product purchased by
Quinnova, calculated at Oculus’  Cost of Goods Sold.

     

    2.10.2   In
addition, for each and every Future Device Product that Oculus receives in the
Field of Use in the Territory, Quinnova will pay a one-time non-refundable
upfront payment of [   ]* Dollars with five (5) business days of
receipt of the FDA clearance for the right to exclusively market and sell the
Future Device Product during the Term.

     

    2.10.3   Quinnova
will further pay to Oculus the following:

     

    (a)    the
Oculus Gross Profit, which shall be payable within forty five (45) days after
the end of the month.

     

    (b)    the
Cost of Goods sold for Product and samples, which shall be payable within thirty
(30) days of invoicing. The advanced payment referenced in section 1.9.1 shall
be credited against the first $500,000 as a payment against the cost of goods
sold for the Products.

     

    (c)     Quinnova
will provide monthly sales reports to Oculus,  indicating the Sales
price and number of units for each SKU  by the fifth (5th) day after
the end of the month.

     

    2.11       Branding of
Product.  Quinnova shall have the right to market and brand the
Products in the Territory in the Field of Use under a trademark filed by
Quinnova, which shall be owned by Quinnova, provided, however, if Quinnova
selects a trademark owned by Oculus (but not currently used by Oculus with
respect to any product), Oculus shall license such trademark exclusively to
Quinnova for use in connection with the marketing and sale of the Product in the
Field.

     

    3       
    Delivery and
Acceptance.

     

    3.1         Delivery of
Product.  Cost of transportation from Oculus to Quinnova’s
designated warehouse will be borne by Quinnova.

       

    
      * Confidential material redacted and separately filed with the
Commission.

    

     

    
      
         


      

      
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    3.2         Packaging.  Oculus
shall package the Products for shipment to Quinnova in packaging sizes to be
mutually agreed upon by Oculus and Quinnova unless Quinnova requires different
packaging specifications, in which case any such different packaging shall be at
Quinnova’s expense.

     

    3.3         Risk of Loss or
Damage.  Title and risk of loss shall be borne by Quinnova
after shipment from Oculus’ facility.

     

    3.4         Cancellation;
Rescheduling.  Quinnova may not cancel any shipment under a
purchase order once the purchase order is accepted by Oculus. Quinnova may
reschedule such shipment as long as notice is provided fifteen (15) days prior
to the scheduled manufacturing of the batch.  Such rescheduling shall
be for no longer than sixty (60) days.

     

    3.5         Force Majeure.
Neither party shall be liable for nonperformance or delay in performance (other
than of obligations regarding payment of money or confidentiality) caused by any
event reasonably beyond the control of such party including, but not limited to
wars, hostilities, revolutions, riots, civil commotion, national emergency,
strikes, lockouts, epidemics, fire, flood, earthquake, force of nature,
explosion, embargo, or any other Act of God, or any law, proclamation,
regulation, ordinance, or other act or order of any court, government or
governmental agency. Notwithstanding the foregoing, if such event causes a delay
in performance of more than thirty (30) days, the unaffected party shall have
the right to terminate this Agreement without penalty upon written notice at any
time prior to the affected party’s resumption of performance.

     

    4         
  Certain
Obligations.

     

    4.1         Quinnova
Efforts.  Quinnova shall be responsible for all sales,
marketing and clinical activity associated with the Products, Future Device
Products and Kits, including trade efforts, wholesalers, managed care
activities, marketing support, sales activity, clinical support,
etc.  Quinnova shall use reasonable efforts to successfully market the
Products, Future Device Products and Kits in the Field of Use in the Territory
on a continuing basis and to comply with good business practices and all laws
and regulations relevant to this Agreement or the subject matter
hereof.

     

    4.2         Oculus’
Efforts.  Oculus shall: (a) maintain all appropriate regulatory
filings to support the marketing and distribution of the Products, (b) conduct
initial Product training with the Quinnova marketing and sales training teams
consistent with Oculus’s quality system manual, (c) provide all current Products
sales materials and marketing literature for use by Quinnova in developing
promotional material, (d) provide final approval on any and all new promotional
materials or portions of materials specific to the Products developed by
Quinnova, (e) manufacture or shall ensure the manufacture of the Products in
compliance and accordance with current Good Manufacturing Practices, and (f)
notify Quinnova and/or provide any information, including but not limited to any
regulatory, out of specification (OOS) results or good manufacturing practices
(GMP) issues, that in commercially reasonable judgment may impact, impair, or
have material effect on Quinnova’s ability to sell the Products within three (3)
business days of discovering such information.


    
      
         


      

      
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    4.3         Management and
Governance.  Each party shall appoint one representative as its
respective alliance manager for the relationship (“Alliance Manager”).
The Alliance Managers shall oversee the manufacturing and commercialization
activities and facilitate resolution of disputes.

     

    4.4         Compliance with
Laws.  Both parties shall conduct their respective businesses
in accordance with all laws and regulations including, without limitation,
manufacturing in accordance and compliance with current GMP.  Without
limiting the foregoing, Quinnova shall not market or sell the Product except in
compliance with the Regulatory Approvals and all applicable laws and
regulations.

     

    4.5         Support.  Subject
to Oculus scheduling and personnel constraints, Oculus will provide to Quinnova
reasonable engineering, research and development support and access to its
personnel as needed for the marketing of its Products and in the
Markets.

     

    4.6         Audit Rights.
 Each party to this Agreement shall keep complete, true and accurate books
of account and records reasonably sufficient to determine and establish the
amounts payable pursuant to this Agreement, including documentation of all costs
and expenses incurred or paid in connection with this Agreement.  All
such books and records shall be maintained until the later to occur of:
(a) two (2) years following the relevant calendar year to which such
records pertain; or (b) the expiration of the period required by applicable
laws and regulations.  Not more than once each Contract Year, each
party to this Agreement shall permit the other party to engage an independent
certified public accounting firm reasonably acceptable to the party to examine,
at their own expense, during normal business hours such books and records for
the sole purpose of verifying the accuracy of invoices, expenses, reports and
payments. The auditor shall be required to enter into a nondisclosure
agreement with the party to be audited covering all information learned or
derived during such audit, and shall not be permitted to disclose to the party
requesting the audit any such information other than its determination of any
underpayment by the party subject of the audit.

     

    4.7         Product Recall. 
Oculus shall have the right and authority to order a recall of the Products in
response to FDA action or other event or incident.  Each party agrees
to notify the other immediately of any pending or threatened event which may
lead to a recall or other removal or withdrawal of the Products or any of its
components from the Field of Use in the Territory, including:  (a)
actual or threatened regulatory action by the FDA or any other governmental
entity; or (b) safety concerns relating to the Products or
components.  Should Oculus determine that a recall of the Products are
required, Oculus shall be responsible for and bear all direct costs associated
with such recall, removal, or withdrawal.

     

    5          
 IP
Ownership.

     

    5.1         Intellectual
Property.  Each party shall be the sole and exclusive owner or
authorized licensee of all Intellectual Property Rights in and to their
respective products.  Oculus shall provide to Quinnova, in association
with this Agreement, any non-exclusive license for all Product Intellectual
Property Rights required for Quinnova to sell and market the Products and
perform under this agreement.  Such license shall expire
simultaneously with the Agreement.


    
      
         


      

      
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    5.2         Intellectual Property
Warranty.  Each party represents, warrants and covenants to the
other party that upon the execution of this Agreement and continuing during the
term of this Agreement that such party:  (a) has full right, power and
authority to enter into this Agreement and to grant the rights and licenses
granted to the other party under this Agreement; (b) is the legal and beneficial
owner of all right, title and interest in and to the Intellectual Property in
such party’s products that are the subject of this Agreement, having good title
hereto, free and clear of any and all mortgages, liens, security interest and
charges; (c) such party’s Intellectual Property that is the subject of this
Agreement is subsisting and is not invalid or unenforceable, in whole or in
part; (d) such party has not previously assigned, transferred, conveyed or
otherwise encumbered any right, title or interest in such party’s Intellectual
Property that is the subject of this Agreement and has not granted to any third
party any license to use, sell or distribute such party’s Intellectual Property
or products in any manner inconsistent with or in conflict with any provisions
of this Agreement; (e) neither such party’s Intellectual Property nor its
products that are the subject of this Agreement nor the disclosing, copying,
making, using or selling of such Intellectual Property or products, or services
embodying such Intellectual Property or products, violates, infringes or
otherwise conflicts or interferes with any copyright, trade secret, trademark,
service mark, patent or any other intellectual property or proprietary right of
any third party; (f) there are no claims, judgments or settlements to be paid by
such party relating to such party’s Intellectual Property or its products that
are the subject of this Agreement, and no claim has been brought by any person
or entity alleging that such party’s Intellectual Property or the products that
are the subject of this Agreement or the disclosing, copying, making, using,
distributing or selling of such Intellectual Property or products or services
embodying such Intellectual Property or products, violates, infringes or
otherwise conflicts or interferes with any copyright, trade secret, trademark,
service mark, patent or any other intellectual property or proprietary right of
any third party; and (g) does not know of any infringement by third parties of
such party’s Intellectual Property that is the subject of this
Agreement.

     

    6      
     Representation and
Warranties.

     

    6.1         Oculus’
Representations.  Oculus hereby represents and warrants the
following to Quinnova:

     

    (a)           Oculus is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation;

     

    (b)           Oculus
has the legal power and authority to enter into and be bound by the terms and
conditions of this Agreement and to perform its obligations under this
Agreement;

     

    (c)           Oculus
has taken all necessary action on its part to authorize the execution and
delivery of this Agreement.  This Agreement has been duly executed and
delivered on behalf of Oculus and constitutes a legal, valid, binding
obligation, enforceable against Oculus in accordance with its
terms.

     

    (d)           Oculus
is not object to any legal, contractual or other restrictions, limitations or
conditions which conflict with its rights and obligations under this Agreement
or which might affect adversely its ability to perform under this
Agreement;


    
      
         


      

      
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    (e)           Oculus
currently has the manufacturing capacity to provide Quinnova with Product(s) in
sufficient quantity to satisfy the first annual forecast;

     

    (f)           To
the best of Oculus’ knowledge, there are no investigations, adverse Third Party
allegations, claims or actions against Oculus, including any proceedings or any
pending or threatened action against Oculus by or before FDA or any other
governmental authority, relating to (1) the Products or (2) Oculus’ Intellectual
Property to the extent that is necessary for the manufacture of the
Products;

     

    (g)           To
the best of Oculus’ knowledge, Oculus has not and will not use, in any capacity
associated with or related to the manufacture of the Products the services of
any persons who have been, or are in the process of being, debarred under the
Generic Drug Enforcement Act of 1992, amending the food, Drug and Cosmetic Act
at 21 U.S.C. §335(a) or any comparable Law.  Neither Oculus nor any of
its officers, employees, or consultants has been convicted of an offense under
(a) either a federal or state law that is cited in 21 U.S.C. §335(a) as a ground
for debarment, denial of approval, or suspension, or (b) any other law cited in
any comparable Regulatory Act as a ground for debarment, denial of approval, or
suspension.

     

    6.2     
    Quinnova
Representations.  Quinnova hereby represents and warrants the
following to Oculus:

     

    (a)           Quinnova
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation;

     

    (b)           Quinnova
has the legal power and authority to enter into and be bound by the terms and
conditions of this Agreement and to perform its obligations under this
Agreement;

     

    (c)           Quinnova
has taken all necessary action on its part to authorize the execution and
delivery of this Agreement.  This Agreement has been duly executed and
delivered on behalf of Quinnova and constitutes a legal, valid, binding
obligation, enforceable against Quinnova in accordance with its
terms;

     

    (d)           Quinnova
is not subject to any legal, contractual or other restrictions, limitations or
conditions which conflict with its rights and obligations under this Agreement
or which might affect adversely its ability to perform under this Agreement;
and

     

    (e)           To
the best of Quinnova’s knowledge, Quinnova has not and will not use, in any
capacity associated with or related to the marketing and sale of the Products,
the services of any persons who have been, or are in the process of being,
debarred under the Generic Drug Enforcement Act of 1992, amending the Food, Drug
and Cosmetic Act at 21 U.S.C. §335(a) or any comparable Law.  Neither
Quinnova nor any of its officers, employees, or consultants has been convicted
of an offense under (a) either a federal or state law that is cited in 21 U.S.C.
§335(a) as a ground for debarment, denial of approval, or suspension, or (b) any
other law cited in any comparable Regulatory Act as a ground for debarment,
denial of approval, or suspension.


    
      
         


      

      
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    7      
     Limitation On Liability And
Remedies.

     

    7.1    
    Oculus’s Limited Warranty;
Limitation of Remedies.

     

    7.1.1     Oculus
warrants that each of the Products delivered will, under normal use and
conditions, substantially conform to the applicable Product specifications for a
period in conformity with the various products label claims regarding shelf-life
and that the Product has been manufactured in accordance and compliance with
current Good Manufacturing Practices and all applicable laws and
regulations.  This limited warranty does not cover the results of
accident, abuse, misapplication, vandalism, acts of God, use contrary to
specifications or instructions, or modification by anyone other than
Oculus.

     

    7.1.2     Oculus’s
entire liability and Quinnova’s exclusive remedy, except for the indemnity
obligations as set forth in Section 8.2, which
are in addition to the remedies set forth in this Section 7.1, shall be
replacement of the non-conforming Product at no additional cost to
Quinnova.  Quinnova may reject and return such non-conforming Product
for modification or replacement by Oculus provided that Quinnova must first
obtain a Return Material Authorization from Oculus. Oculus shall issue a Return
Material Authorization (“RMA”) within two (2) business days after Quinnova’s
request. Any additional terms of the RMA procedure shall be mutually agreed to
between the parties. Quinnova shall include the RMA number with all
returns.  Quinnova shall return all such non-conforming Product to
Oculus within thirty (30) days of Quinnova’s discovery of non-conformance. For
purposes of clarity, non-conforming Product means Product that does not meet the
specifications, as cleared by FDA, for manufacturing, labeling and packaging of
the Product.

     

    7.1.3     Oculus
is liable for all transit costs associated with replacement of non-conforming
Product.  If Oculus intends to destroy any non-conforming Product,
such costs are the responsibility of Oculus.

     

    7.1.4     If
modification or replacement is not reasonably possible, which shall be
determined within 15 days of the discovery and communication of Product
non-conformance then Oculus may elect to refund to Quinnova an amount equal to
the purchase price for the non-conforming Product, and such refund shall be
Quinnova’s entire remedy.  Any replacement Product will be warranted
for the remainder of the original warranty period.  Oculus shall not
be responsible for any labor costs or other costs Quinnova incurs incident to
the replacement of any non-conforming Product.

     

    7.1.5     If
Oculus determines that any returned Product conformed to the warranty, Oculus
will return the Product to Quinnova at Quinnova’s expense, freight collect,
along with a written statement setting forth Oculus’s conclusion that the
returned Product was not defective, and Quinnova agrees to pay Oculus’s
reasonable cost of handling and testing the returned Product.

     

    7.1.6     EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, AND EXCEPT AS THE INDEMNITY
OBLIGATIONS SET FORTH IN SECTION 8.2, THE PRODUCT IS PROVIDED “AS-IS” WITHOUT
WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    7.1.7     EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, AND EXCEPT AS THE INDEMNITY
OBLIGATIONS SET FORTH IN SECTION 8.1, QUINNOVA MAKES NO WARRANTIES, EITHER
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

     

    7.1.8     Consequential Damages
Waiver.  IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER
PARTY OR ITS CUSTOMERS FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE OR
INDIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO ANY LOST PROFITS OR LOST SAVINGS
ARISING OUT OF THE USE OR INABILITY TO USE THE PRODUCT OR OTHERWISE ARISING OUT
OF OR RELATED TO THIS AGREEMENT.

     

    8       
    Indemnification.

     

    8.1           Quinnova’s
Indemnity.  Quinnova agrees that it will, at its own expense,
defend all third party suits or proceedings instituted against Oculus arising
out of any off label marketing, sale or use of the Products by
Quinnova.  For purposes of clarity, Quinnova is not liable under this
Section 8.1 for (a) any product liability or other claims related to the actions
of Oculus or (b) any claims covered by Oculus’s indemnity obligations under
Section 8.2.

     

    8.2           Oculus’s Indemnity.
Oculus agrees that it will, at its own expense, defend all third party suits or
proceedings instituted against Quinnova arising out of any on-label use of the
Product in the Markets in the Field of Use.  For purposes of clarity,
Oculus is not liable for any product liability or other claims related solely to
the actions of the Quinnova or (b) any claims covered by Quinnova’s indemnity
obligations under Section 8.1.

     

    8.3           Procedure.  A
party seeking indemnification under this Section 8 shall provide the
indemnifying party with prompt written notice of any such claim. The
indemnifying party shall have sole control and authority with respect to the
defense and settlement of any such claim. The indemnified party shall cooperate
fully with the indemnifying party, at the indemnifying party’s sole cost and
expense, in the defense of any such claim. The indemnifying party shall not
agree to any settlement of any such claim that does not include a complete
release of the indemnified party from all liability with respect thereto or that
imposes any liability, obligation or restriction on the indemnified party with
the prior written consent of the indemnified party.  The indemnified
party may participate in the defense of any claim through its own counsel, and
at its own expense.


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    8.4         Insurance.  Each
party agrees to maintain (a) workers’ compensation insurance for all of its
employees, the limits of which shall be in statutory compliance with the
applicable compensation laws, and employer’s liability of not less than
$1,000,000 per accident, (b) commercial general liability, including product
liability and automobile insurance with limits of not less than $5,000,000 per
occurrence for bodily injury and property damage for commercial general
liability, including product liability and $1,000,000 per occurrence, combined
single limit for bodily injury and property damage for automobile insurance,
coverage extends to owned, hired, and non-owned vehicles.  If either
party terminates its product liability insurance policy during the term of this
Agreement, it shall obtain and maintain the maximum available Extended Discovery
Period insurance if applicable; each party shall include the other party as
“Additional Insureds” under its product liability insurance policy and shall
further provide, within thirty (30) days of the other party’s request,
Certificates of Insurance verifying insurance limits agreed upon as well as a
thirty (30) day Notice of Cancellation, Non-Renewal or material change
thereto.  All such insurance information shall be kept in confidence
in the same manner as any other confidential information disclosed by one party
to the other.  Neither party’s liability under this Agreement shall be
limited by the amount of insurance that it maintains.

     

    9     
      Confidential
Information

     

    9.1         Ownership of Confidential
Information.  Both parties are and shall remain the owner of
its Confidential Information.  Nothing contained in this Agreement
shall be construed as granting any rights by license or otherwise to such
Confidential Information.

     

    9.2         Agreement to Maintain
Confidentiality.  Both parties shall take all reasonable steps
to ensure that it and its agents maintain the confidentiality of the
Confidential Information of the other party.

     

    9.3         Agreement Not to Use or
Disclose.  Except as provided in this Agreement, neither party
shall disclose to any other person or entity Confidential Information of the
disclosing party or use such Confidential Information for any purpose other than
the purposes expressly authorized under this Agreement.

     

    9.4         Specific
Performance.  The parties recognize and agree that any breach
by the receiving party of its obligations contained in this Article VIII
would cause irreparable harm to the disclosing party such that the disclosing
party could not be compensated for the harm by money damages
alone.  Therefore, the parties agree that the provisions of this
Article VIII shall be enforceable by specific performance, including
injunctive relief.

     

    10           Term and
Termination.

     

    10.1       Term.  This
Agreement shall be effective and in full force from the Effective Date for a
period of five (5) years and shall automatically renew for successive one (1)
year terms, unless terminated earlier pursuant to one hundred and twenty (120)
days written notice prior to the end of the then current term.  Should
Quinnova achieve the Automatic Renewal Target defined in Exhibit C, Quinnova
shall be guaranteed the option to renew for an additional twelve (12) months at
its sole discretion.

     

    10.2       Termination.

     

    (a)           For
Cause.  Either party will have the right to terminate this
Agreement for cause upon sixty (60) days’ prior written notice to the other
party (a) as a result of a material breach of this Agreement by the other party
that remains uncured during such sixty (60) day period, (b) upon the institution
by or against either party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of either party's debts,
(c) upon either party making an assignment for the benefit of creditors, (d)
upon either party's dissolution or ceasing to do business, or (e) upon written
notice to the other party pursuant to a termination in accordance with Section
3.5 hereof.


    
      
         


      

      
        12

        
          

        

      

      
         


      

    

     

    (b)           Termination for Failure to
Meet Minimum Units for Termination per Calendar Year.

     

    (i)           Subject
to Section 10.2(b)(ii), if Quinnova fails to make sales of the Products in an
amount which is equal to or greater than Minimum Units for Termination per
Calendar Year, then Oculus shall have the option of terminating this Agreement
upon thirty (30) days written notice to Quinnova. Oculus right to terminate this
Agreement pursuant to this Section 10.2(b)(i) shall be Oculus’ sole and
exclusive remedy for any failure of Quinnova to achieve the Minimum Units for
Termination during the term of this Agreement.

     

     (ii)           Upon
receipt of a written termination notice from Oculus, if Quinnova fails to
achieve sales of the Product in any Calendar Year that are equal or greater than
the Minimum Units for Termination per Calendar Year for such Calendar Year, then
Quinnova shall have the right and option to pay to Oculus within sixty (60) days
of the end of such Contract Year an amount equal to the difference between the
Oculus Gross Profits and Cost of Goods Sold that would have been generated by
the  Minimum Units for Termination  and the actual Oculus
Gross Profit and Cost of Goods Sold payments for such Calendar Year
(“Termination Prevention Payment”), provided, however that Quinnova may remedy
the Cost of Goods shortfall by purchasing additional inventory in the amount of
such shortfall within thirty (30) days of the close of the Calendar Year and,
upon Quinnova’s payment of the Termination Prevention Payment and/or the
purchase of additional inventory, as the case may be, Oculus shall have no right
to terminate this Agreement pursuant to Section 10.2(b)(ii) for such failure to
achieve the Minimum Units for Termination for such Contract Year.

     

    10.3   
   Effect of
Termination.

     

    10.3.1      Upon
the termination of this Agreement for any reason, each party shall retain
ownership of its respective Confidential Information and shall return to the
other party all of the Confidential Information received from the other party up
to the time of termination.

     

    10.3.2      Upon
termination of this Agreement, Quinnova may elect to (i) pay to Oculus any
amounts due under this Agreement or (ii) return to Oculus any unpaid for
Product.

     

    10.3.3      If
either party terminates this Agreement for cause, then, the other party may
elect to (i) continue to supply, or require Oculus to continue to supply Product
to Quinnova under Purchase Orders that Oculus accepted prior to the effective
date of termination and Quinnova agrees to pay Oculus the purchase price for
such Product or (ii) cancel all such Purchase Orders and neither party will have
liability for such cancellation.

     

    10.3.4      Neither
party shall be liable to the other for compensation, reimbursement or damages
for the loss of prospective profits, anticipated sales or goodwill as a result
of the termination of this Agreement in accordance with the terms of Section 9.2
or Section 9.3.


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    10.3.5      Survival.  Upon
the expiration, or the termination for any reason, of this Agreement, the rights
and obligations of the parties under Section 9.4, and Articles 1 (Definitions),
5 (Ownership), 6 (Limitation On Liability And Remedies), 7 (Indemnification) and
8 (Confidential Information) shall survive and remain in effect.

     

    11          Miscellaneous.

     

    11.1         Notices.  All
notices shall be deemed given by fax, and addressed as set forth at the
signature line below or to such other address as the party to receive the notice
or request so designates by written notice to the other.

     

    11.2         Assignment and
Subcontracting.  This Agreement and all rights and obligations
hereunder are personal to the parties hereto and shall not be assigned by either
party to any third party without the prior written consent thereto by the other
party. This Agreement shall benefit and be binding upon the parties to this
Agreement and their respective permitted successors and assigns.

     

    11.3         Waiver.  No
term or condition of this Agreement shall be deemed waived unless such waiver is
in a writing executed by the party against whom the waiver is sought to be
enforced.  Failure or delay in the exercise of any right, power or
privilege hereunder shall not operate as a waiver thereof or of any subsequent
failure or delay.

     

    11.4         Governing Law, Jurisdiction,
Venue.  The Agreement will be governed by and construed under
the laws of the State of New York without regard to conflicts of laws
principles.

     

    11.5         Severability.  If
any of the provisions of this Agreement in any way violate or contravene any
laws applicable to this Agreement, such provision shall be deemed not to be a
part of this Agreement and the remainder of this Agreement shall remain in full
force and effect.  In such event, the parties agree to negotiate in
good faith to substitute legal and enforceable provisions that most nearly
effect the original intent of the severed provision.

     

    11.6         Subject
Headings.  The captions and headings used herein are intended
for convenience only, and shall not affect the construction or interpretation of
any section or provision of this Agreement.

     

    11.7         Entire Agreement;
Amendments.  This Agreement, including exhibits attached
hereto, constitutes the entire understanding and agreement of the parties
related to the subject matter hereof, and supersedes any and all prior or
contemporaneous offers, negotiations, agreements and/or understandings, written
or oral, as to such subject matter.  Except as provided herein, no
amendment, revision or modification of this Agreement shall be effective or
binding unless made in writing and signed by the party against whom enforcement
is sought.


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date transcribed below.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                OCULUS
      INNOVATIVE SCIENCES, INC.

                              	 
      	
                                QUINNOVA
      PHARAMCEUTICALS, INC.

                              
	 
      	 
      	 
      	 
      
	
                                BY:

                              	/s/
      Hojabr Alimi	 
      	
                                BY:

                              	/s/
      Jeffrey S. Day	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                                TITLE:

                              	President,
      CEO	 
      	
                                TITLE:

                              	President,
      CEO	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                                DATE:

                              	February
      14, 2011	 
      	
                                DATE:

                              	February
      14, 2011	 
      
	 
      	 
      	 
      	 
      
	
                                ADDRESS:

                              	 
      	
                                ADDRESS:

                              	 
      
	 
      	 
      	 
      	 
      
	
                                1129
      No. McDowell Boulevard

                              	 
      	
                                411
      South State Street

                              	 
      
	
                                Petaluma,
      CA 94954

                              	 
      	
                                Newtown,
      PA 18940

                              	 
      
	 
      	 
      	 
      	 
      
	
                                PHONE:
      (707) 283-0550

                              	 
      	
                                PHONE:
      (215) 860-6263

                              	 
      
	
                                FAX:
      (707) 283-0551

                              	 
      	
                                FAX:
      (215) 860-6265

                              	 
      


                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    Exhibit
A

     

    Products, Cost of
Goods

     

    
      
        
          
            
              	
                      1.

                    	
                      8
      ounce w/finger spray

                    	 	$	[       
      ]*	 
	
                      2.

                    	
                      4
      ounce with finger pump

                    	 	$	  	 
	
                      3.

                    	
                      1.5
      ounce hydrogel

                    	 	$	[       
      ]*	 
	
                      4.

                    	
                      4
      ounce hydrogel

                    	 	$	[       
      ]*	 
	
                      5.

                    	
                      Atopic
      Dermititas hydrogel

                    	 	
                      [       
      ]*

                    	 
	 
      	
                      (sizes
      to be determined)

                    	 	 	 	 


            

          

        

      

    

     

    In
addition to the foregoing, Quinnova shall propose such additional packaging
configurations, and Oculus and Quinnova shall mutually agree upon the Cost of
Goods for such configuration.

    
    

    
      * Confidential material redacted and separately filed with the
Commission.


    

    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    Exhibit
B

     

    Minimum
Sales Performance

     

    Minimum Units –
Termination

     

    
      
        
          
            
              	
                      Atopic Dermititas -
    Dermatology

                    	 	
                      CY 20111

                    	 	 	
                      CY 2012

                    	 	 	
                      CY 2013

                    	 	 	
                      CY 2014

                    	 	 	
                      CY 2015

                    	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                      Forecasted
      Target Units

                    	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                      Minimum
      Sales Performance for Exclusivity

                    	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 
	
                      %
      of Target Units

                    	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                      Minimum
      Units for Termination

                    	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 	 	 	
                      [       
      ]*

                    	 
	
                      %
      of Target Units

                    	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%	 	 	
                      [       
      ]*

                    	%


            

          

        

      

    

     

    1 For CY 2011 – the amounts
shall be prorated for the period commencing on the launch date of the
Products.

       

    
      * Confidential material redacted and separately filed with the
Commission.

       

    

    
      
         


      

      
        17