ex10_2.htm

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		1
Article II GOVERNANCE; COORDINATION		18
2.1 Coordination Committee		18
	2.1.1 Establishment	18
	2.1.2 Responsibilities	18
	2.1.3 Membership	18
	2.1.4 Meetings	19
	2.1.5 Decision Making	19
2.2 Day-to-Day Responsibilities		19
	2.2.1 General	19
	2.2.2 Project Teams	20
	2.3 Information Sharing	20
	2.4 Coordination	20
	2.4.1 General	20
	2.4.2 Minimization of Substitutability	21
	2.4.3 Japan	21
Article III DEVELOPMENT PROGRAM		21
3.1 General		21
3.2 During the Initial Period		22
	3.2.1 Acne	22
	3.2.2 Impetigo	22

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(Continued)

3.3 During the Continuation Period		22
3.4 Diligence		22
3.5 Development Proposals		22
	3.5.1 General	22
	3.5.2 First Negotiation	23
	3.5.3 PPOC Notice	23
	3.5.4 Preset Terms	23
	3.5.5 Inability to Agree on Terms	24
	3.5.6 Failure to Respond	24
	3.5.7 Excluded Indications	25
	3.5.8 Conflicts	25
	3.5.9 Expenses	25
3.6 Development Plans		26
	3.6.1 Establishment	26
	3.6.2 Contents	26
3.7 Disclosure of Formulation Technology		26
3.8 Subcontractors		27
Article IV COMMERCIALIZATION OF COLLABORATION PRODUCTS		27
4.1 Commercialization		27
4.2 Commercialization Plan		27
4.3 Galderma Marketing Partners		28
	4.3.1 General	28
	4.3.2 Conditions	28

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(Continued)

4.4 NovaBay’s Right to Co-promote to Healthcare Institutions in North America		28
4.4.2 Exercise	29
4.5 Cooperation and Consultation		30
4.6 Galderma First Right of Negotiation		30
Article V DEVELOPMENT AND COMMERCIALIZATION IN JAPAN		31
5.1 Development in Japan		31
5.1.1 Japan Election Notice	31
5.1.2 Pre-Pivotal Development	31
5.1.3 Pre-Pivotal Japan Report	31
5.1.4 Pivotal Trials	32
5.2 Commercialization in Japan		32
5.2.1 Both Parties Fund	32
5.2.2 One Party Funds	33
5.2.3 Royalties to Galderma on Japan Sales	34
Article VI MANUFACTURING AND SUPPLY, REGULATORY &OTHER MATTERS		34
6.1 Manufacturing and Supply		34
6.1.1 Collaboration Compounds	34
6.1.2 Collaboration Products	35
6.1.3 Supply by Galderma	35
6.1.4 Transfer Price	35
6.1.5 Supply Agreement	35
6.1.6 Coordination	36
6.2 Regulatory Matters		36
6.2.1 Filings	36
6.2.2 Clinical Safety Reporting; Pharmacovigilance	36
6.2.3 Cooperation	37
6.2.4 Regulatory Inspection/Audit Rights	37
6.3 Transfer of Data and Regulatory Filings		38
6.4 [***]		39
6.4.1 [***]	39
6.4.2 [***]	39
6.4.3 [***]	39
Article VII LICENSES		39
7.1 License Grants		39
7.1.1 To Galderma	39
7.1.2 To NovaBay	40
7.1.3 No Other Active Ingredients	40

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(Continued)

7.2 No Other Rights		40
7.3 Use of NovaBay Technology		40
7.4 Use of Galderma Technology		41
7.5 Conflicts of Interest		41
7.6 Medical Devices		41
	7.6.1 Exclusivity	41
	7.6.2 Discussions	41
Article VIII PAYMENTS		41
8.1 Certain Fees		41
	8.1.1 Upfront Fee	41
	8.1.2 Monthly Fee	42
	8.1.3 Completion of Formulation Feasibility Studies	42
8.2 Continuation		42
	8.2.1 Continuation Fee	42
	8.2.2 Certain Reimbursements	42
8.3 Galderma Funding During the Continuation Period		42
	8.3.1 FTE Funding	42
	8.3.2 Non-FTE Costs	43
8.4 Development Milestone Payments		43
	8.4.1 Certain Terms	44
	8.4.2 Milestone Payment Timing	45
8.5 Royalty Payments to NovaBay		45
	8.5.1 Acne Products	45
	8.5.2 Anti-Bacterial Products	45
	8.5.3 Anti-Fungal Products	45
	8.5.4 Anti-Viral Products	45
	8.5.5 Other Products	46
	8.5.6 Certain Terms	46
	8.5.7 Sales Supported by NovaBay	46
	8.5.8 Certain Royalty Conditions	47
	8.5.9 Term of NovaBay Royalties	47

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(Continued)

8.6 Royalty Payments to Galderma		48
	8.6.1 For Collaboration Products in Japan	48
	8.6.2 Royalty-Bearing NovaBay Products	48
8.7 Material Adverse Events		49
8.8 Royalty Reports		49
8.9 Payment Method		49
8.10 Taxes		50
8.11 Records		50
8.12 Inspection of Records		50
8.13 Late Payment		51
8.14 Currency Conversion		51
Article IX INTELLECTUAL PROPERTY		51
9.1 Ownership of Inventions		51
	9.1.1 General	51
	9.1.2 Compound Improvements	52
	9.1.3 Agreements with Affiliates and Third Parties	52
9.2 Patent Prosecution		52
	9.2.1 General	52
	9.2.2 Projected Patent Filings	52
	9.2.3 NovaBay Patents	52
	9.2.4 Galderma Patents	53
	9.2.5 Joint Patents	53
9.3 Defense of Third Party Infringement Claims		53
9.4 Enforcement		54
	9.4.1 Initiating Enforcement Actions	54
	9.4.2 Recoveries	54
9.5 Third Party Technologies		55
	9.5.1 By NovaBay after the Effective Date	55
	9.5.2 By Galderma after the Effective Date	55
	9.5.3 Other Conditions	56

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(Continued)

9.6 Patent Marking		56
9.7 Trademarks		56
	9.7.1 Galderma Product Marks	57
	9.7.2 NovaBay Product Marks	57
	9.7.3 NovaBay Logo	57
	9.7.4 Co-Promotion	58
	9.7.5 World-wide Branding Strategies	58
Article X CONFIDENTIALITY		58
10.1 Confidentiality; Exceptions		58
10.2 Authorized Use and Disclosure		59
10.3 Publications		59
10.4 Publicity		60
	10.4.1 Confidential Terms	60
	10.4.2 Publicity Review	60
10.5 Prior Agreements		61
Article XI REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION		61
11.1 General Representations and Warranties		61
11.2 NovaBay’s Warranties		61
11.3 Covenant		63
11.4 Disclaimer of Warranties		63
11.5 Indemnification		63
	11.5.1 Indemnification by NovaBay	63
	11.5.2 Indemnification by Galderma	64
	11.5.3 Procedure	64
11.6 Insurance		64
Article XII TERM AND TERMINATION		65
12.1 Term		65
12.2 Termination by Galderma		65
	12.2.1 Failure of Formulation Feasibility	65
	12.2.2 Prior to Continuation Period	65
	12.2.3 During the Continuation Period	65
	12.2.4 For Safety Reasons	65
	12.2.5 Competitive Change of Control	66
12.3 Termination for Breach		66
	12.3.1 General	66
	12.3.2 Termination of the Licenses in 7.1.2(c)	66

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(Continued)

12.4 Termination for Failure to Pay the Continuation Fee		66
12.5 General Effects of Expiration or Termination		66
	12.5.1 Accrued Obligations	66
	12.5.2 Non-Exclusive Remedy	66
	12.5.3 No Milestone Payment	66
	12.5.4 Return of Materials	67
	12.5.5 General Survival	67
12.6 Effects of Certain Terminations		67
	12.6.1 Transition Assistance	67
	12.6.2 Ongoing Trials	68
	12.6.3 Commercialization	68
	12.6.4 Regulatory Filings/Data	69
	12.6.5 Technology Licenses	69
	12.6.6 Trademarks	70
	12.6.7 Marketing Partners	70
	12.6.8 Governance	71
	12.6.9 Suspension of Activities	71
12.7 Termination With Respect to Collaboration Products		71
12.8 Termination for Competitive Change of Control		71
	12.8.1 Termination of Certain Provisions	71
	12.8.2 Section 8.5.8	71
	12.8.3 Field	71
	12.8.4 In-Process Collaboration Products	71
	12.8.5 Data	72
	12.9 Termination Pursuant to Section 12.3.2	72
	12.10 Termination Press Releases	72

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(Continued)

Article XIII DISPUTE RESOLUTION		73
13.1 Dispute Resolution		73
13.2 Pre-Arbitration Dispute Resolution		73
13.3 Arbitration		73
	13.3.1 Arbitrator	73
	13.3.2 Substantive Law	73
	13.3.3 Enforcement/Service	74
	13.3.4 Confidentiality of Proceedings	74
	13.3.5 Costs	74
13.4 Provisional Remedies		74
Article XIV MISCELLANEOUS		74
14.1 Governing Law		74
14.2 Assignment		74
14.3 Notices		75
14.4 Waiver		76
14.5 Severability		76
14.6 Entire Agreement/Modification		76
14.7 Relationship of the Parties		77
14.8 Force Majeure		77
14.9 Compliance with Laws		77
14.10 Counterparts		77

***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

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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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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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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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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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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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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)).

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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.

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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.

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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 Exhibit 1.55.

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.

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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”).

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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	Section
Acceptance	8.4.1(a)(i)
Accepted Indication	3.5.2 and 3.5.3
Accounting Standards	1.1
[***]	[***]
Acne Plan	1.3
Acne POC	1.3
Acne Product	1.4
Actual Labor Cost	Exhibit 6.1.4
Actual Materials Cost	Exhibit 6.1.4
Adverse Drug Reaction	1.2
Affiliate	1.5
Aganocide Compound	1.6
Aganocide Product	1.7
Agreement	Preamble
Agreement Term	12.1
Agreement Wind-Down Period	12.6.1
Alcon Agreement	11.2.14
Allocable Overhead	Exhibit 6.1.4
Annual 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	1.10
Board	6.4.2
Capture Period	1.8
[***]	[***]
Co-Chair	2.1.3

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Definitions

Section

Collaboration	1.9
Collaboration Compound	1.10
Collaboration Product	1.11
Combination Product	1.12
Commercialization	1.13
Commercialization Plan	4.2
Commercialize	1.13
Commercializing	1.13
Commercially Reasonable Efforts	1.14
[***]	[***]
[***]	[***]
[***]	[***]
Compound Improvement	9.1.2
Confidential Information	10.1
Constraints	3.5.6
Continuation Fee	8.2.1
Continuation Period	1.15
Control	1.16
Controlled	1.16
Controlling	1.16
Cooperating Party	10.4.2
Coordination Committee	2.1.1
Co-Chair	2.1.3
Co-Promote	4.4.1
Co-Promotion Plan	4.4.2(a)(i)
Cover	1.17
Covered	1.17
Covering	1.17
Data	1.18
Dermatology Field	1.24
Develop	1.19
Developing	1.19
Development	1.19
Development Plan	1.20
Development Program	1.21
Development Proposal	3.5.1
[***]	[***]
Dispute	13.1
Effective Date	Preamble
Enabling Party	6.2.3
Enforcement Action	9.4
Excluded Field	1.22

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Definitions

Section

Excluded Indication	3.5.7
Ex-Field Product	1.65
Existing Patent Rights	11.2.1
Ex-Territory Product	1.65
FDA	1.23
Field	1.24
Filing Party	6.2.3
First Negotiation Period	3.5.2
Formulation Feasibility Studies	1.3
Formulation Technology	1.25
FTE	1.26
FTE Rate	1.27
GAAP	1.1
Galderma	Preamble
Galderma Formulation Technology	1.28
Galderma Indemnitees	11.5.1
Galderma Know-How	1.29
Galderma Patents	1.30
Galderma Product Marks	9.7.1
Galderma Technology	1.31
Galderma Territory	1.32
Galderma Third Party Technology	9.5.2
Generic Competition	8.5.9(b)
Generic Product	1.33
GLP	1.34
GMP	1.35
Gross Selling Price	1.49.3
Healthcare Institutions	4.4
IFRS	1.1
Impetigo Plan	1.36
Impetigo POC	1.36
Impetigo Product	1.37
Impetigo Reimbursement Amount	8.2.2
IND	1.38
Indemnify	11.5.1
Infringing Product	9.4
Initial Period	1.39
initiation	8.4.1(a)(ii)
In-Process Collaboration Products	12.6.5(b)
In-Territory Product	1.65

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Definitions

Section

IP Subcommittee	2.1.2
JAMS	13.3
Japan Election Notice	5.1.1
Japanese Development Plan	5.1.1
Japanese Election Notice	5.1.3
Japanese Lead Party	5.1.1
Japanese Partner	1.40
Joint Patent	9.2.5
Know-How	1.41
Law	1.42
[***]	[***]
Losses	11.5.1
MAA	1.46
Major Market	1.43
Manufacture	1.44
Manufacturing	1.44
Manufacturing Cost	Exhibit 6.1.4
Marketing Approval	1.45
Marketing Approval Application	1.46
Marketing Partner	1.47
Material Adverse Event	8.7
Milestone Event	8.4
Milestone Payment	8.4
Multiple-Field Compound	1.48
Multiple-Field/Territory Product Substitution	2.4.2
Net Sales	1.49
New Invention	9.1.1
North America	1.50
Notice of Interest	3.5.6
NovaBay	Preamble
NovaBay Formulation Technology	1.51
NovaBay Indemnitees	11.5.2
NovaBay Know-How	1.52
NovaBay Logos	9.7.3
NovaBay Patents	1.53
NovaBay Product Marks	9.7.2
NovaBay Technology	1.54
NovaBay Territory	1.55
NovaBay Third Party Technology	9.5.1
NVC-[***]	[***]
Offer Notice	4.6

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Definitions

Section

Ordering Party	Exhibit 6.1.5
Other API	1.12
Other Products	8.5.6(e)
Parties	Preamble
Party	Preamble
Patent	1.57
Payee	8.9
Payor	8.9
Person	1.58
Phase II Clinical Trial	1.59
Phase III Clinical Trial	1.60
Pivotal Trial	1.61
Plan	2.2.1
PPOC	3.5.3
PPOC Notice	3.5.3
Pre-Pivotal Development	5.1.2
Pre-Pivotal Development Costs	5.1.3
Pre-Pivotal Japan Report	5.1.3
Primary Indications	1.62
prior	8.4.1(c)
Product	Exhibit 6.1.5
Project Team	2.2.2
Proposed Collaboration Products	12.6.5(b)
Proposed Indication	3.5.1
Prosecute and Maintain	0
Prosecution and Maintenance	0
Quality Agreement	Exhibit 6.1.5
Rare Diseases	1.24
Regulatory Authority	1.63
Regulatory Filing	1.64
Requesting Party	10.4.2
Royalty-Bearing NovaBay Products	1.65
Scale-up Costs	6.1.1
Second Negotiation Period	3.5.3
Selecting Party	3.7
Selling Party	1.49
Specification	Exhibit 6.1.5
[***]	[***]
Submitting Party	3.5.1
subsequent	8.4.1(c)
successful completion	8.4.1(a)(iii)

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Definitions

Section

Supply Agreement	6.1.5
Supplying Party	Exhibit 6.1.5
Terminated Product	12.7
Third Party	1.66
Third-Party Claim	11.5.1
Third Party Technology	9.5.3
Valid 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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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(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 Exhibit 1.55, 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.

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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.

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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.

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(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.

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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 mutandis to 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 Product
If 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.

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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 Exhibit 6.1.4.

(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.

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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 Exhibit 6.1.5.

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.

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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.

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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.

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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

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(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.

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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.

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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 Fee
If 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.

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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 Surveys™ 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.

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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 Product
1. 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.

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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 Exhibit 8.5):

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 Rate
A. 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 Rate
A. 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 Rate
A. Portion ≤ $ [***]	[***]
B. Portion >$ [*] and ≤ $ [*]	[***]
C. Portion >$ [*] and ≤ $ [*]	[***]
D. Portion >$ [*] and ≤ $ [*]	[***]
E. Portion >$ [***]	[***]

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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 Rate
A. 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 Rate
A. 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.

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(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 [***].

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(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 Exhibit 8.5.9).

(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.

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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.

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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.

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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.

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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.

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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 (½) 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.

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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.

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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.

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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.

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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.

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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:

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(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.

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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 Exhibit 10.4.1; 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.

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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

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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;

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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.

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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.

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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;

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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 Competitive Change of Control . At any time upon sixty (60) days’ written notice to NovaBay referencing this Section 12.2.5 given within thirty (30) days of a Competitor Acquisition Notice and stating whether such termination is with respect to this Agreement in its entirety (in which case the applicable provisions of Section 12.6 shall apply) or only for future Development Proposals (in which case the provisions of Section 12.8 shall apply). Accordingly, in the event a Competitive Change of Control has been publicly disclosed, NovaBay shall provide Galderma written notice thereof (the “Competitor Acquisition Notice”) no later than two (2) business days thereafter. For purposes of the foregoing, “Competitive Change of Control” shall mean, with respect to NovaBay, any of the following events: (i) a Competitor of Galderma becomes the “beneficial owner” (as such term is used in sections 12(d) and 13(d) of the Securities Exchange Act of 1934, as amended), of a majority of the total voting power represented by all classes of capital stock then outstanding of NovaBay entitled to vote in elections of directors of NovaBay; (ii) NovaBay consolidates with or merges into a Competitor of Galderma, or a Competitor of Galderma consolidates with or merges into NovaBay; or (iii) NovaBay conveys, transfers or leases a substantial portion of its assets related to this Agreement to a Competitor of Galderma in one or more related transactions and assigns this Agreement to such Competitor of Galderma pursuant to Section 14.2; and “Competitor of Galderma” shall mean any of the top thirty (30) dermatology companies by worldwide revenues as determined by the then current IMS (IMS Health Incorporated, Norwalk, CT) D-Class rankings. Notwithstanding the foregoing, if NovaBay provides written notice to Galderma of its intent to enter into a Competitive Change of Control transaction in which it identifies the Competitor of Galderma, Galderma shall notify NovaBay within thirty (30) days of such notice as to whether it intends to exercise its right to terminate this Agreement, and if so, whether it will do so with respect to the entire Agreement or as to future Development Proposals. Such notice shall be binding upon Galderma provided that the applicable Competitive Change of Control transaction closes within six (6) months of Galderma’s notice. If Galderma fails to so notify NovaBay it shall be deemed to have elected not to terminate the Agreement pursuant to this Section 12.2.5.