NovaBay Pharmaceuticals, Inc. (Form: 8-K, Received: 01/06/2016 17:25:59)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of earliest event reported: December 30, 2015

NovaBay Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware

001-33678

68-0454536

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(I.R.S. Employer

Identification No.)

5980 Horton Street, Suite 550, Emeryville, CA 94608

(Address of Principal Executive Offices) (Zip Code)

(510) 899-8800

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01—Entry into a Material Definitive Agreement.

Beginning on December 30, 2015, NovaBay Pharmaceuticals, Inc. (the “ Company ”) entered into a series of agreements pursuant to a loan (the “ Loan ”) facilitated by China Kington Asset Management Co. Ltd. (“ China Kington ”). In connection with the Loan, the Company issued or will soon issue five (5) promissory notes (the “ Notes ”) payable to Mr. Mark Sieczkarek, the Gail J. Maderis Revocable Trust, Dr. T. Alex McPherson, Mr. Jian Ping Fu, and Pioneer Pharma (Singapore) Pte. Ltd. (“ Pioneer ”) (collectively, the “ Lenders ”), loaning the Company an aggregate of $3,020,000. Specifically, Mr. Sieczkarek, Chairman of the Board of the Company (the “ Board ”) and Interim President and Chief Executive Officer of the Company, loaned the Company $199,000; the Gail J. Maderis Revocable Trust, on behalf of Ms. Maderis, a Director of the Company, loaned the Company $71,000; Dr. McPherson, a Director of the Company, loaned the Company $20,000; Pioneer loaned the Company $1,365,000; and Mr. Fu has promised to loan the Company $1,365,000. All Notes were issued on December 30, 2015 except the Note payable to Mr. Fu, which will be issued in January 2016 upon receipt of such funds.

The proceeds from the Notes are to be used for general corporate purposes. Minimum quarterly payments of principal and interest will begin on March 31, 2016 and continue on the last day of each June, September, December and March thereafter. The entire principal sum and any and all accrued and unpaid interest is payable in full upon the Company’s next financing, but in no event shall the term of the Loan extend beyond December 30, 2018, except for the loan by Mr. Fu, the term of which shall extend three (3) years from the date of issuance of the Note payable to Mr. Fu. The Notes will pay interest at a rate of six percent (6%) per annum and may be prepaid in whole or in part at any time without premium or penalty.

In connection with the Notes, China Kington has agreed to act as collateral agent for the benefit of the Lenders, in accordance with the terms of a collateral agency and intercreditor agreement (the “ Collateral Agency Agreement ”), which was entered into on December 30, 2015 between China Kington and the Lenders. To secure the Notes, China Kington shall have a perfected security interest in all tangible and intangible assets of the Company, pursuant to a security agreement (the “ Security Agreement ”) between the Company and China Kington, which was entered into on December 30, 2015.

As consideration to China Kington for facilitating the Loan, the Company agreed to the following: (1) the grant of a first right of refusal for China Kington (or its designee that shall be acceptable to the Company in its reasonable discretion) to lead financings for the Company for a period that is the shorter of two (2) years or the day that the Company’s cash flow has been equal to or greater than $0 in each month for three (3) consecutive months, subject to certain limitations; (2) the participation of Mr. Sieczkarek as a Lender in this financing; (3) the participation of the Company’s Board, management and investors that the Board and management provide, to contribute an aggregate nine percent (9%) of funds in the Company’s next financing; (4) the appointment of two new members to the Company’s Board to be named in the future by China Kington; and (5) the Company’s agreement to reasonably cooperate with reasonable requests made by an auditor engaged, and paid for, by China Kington, subject to certain limitations.

The foregoing descriptions are qualified in their entirety by reference to the Notes payable to the order of Mr. Sieczkarek, the Gail J. Maderis Revocable Trust, Dr. McPherson, and Pioneer; the Collateral Agency Agreement; and the Security Agreement, copies of which are filed as Exhibit 10.1 , Exhibit 10.2 , Exhibit 10.3 , Exhibit 10.4 , Exhibit 10.5, and Exhibit 10.6 , respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 2.03—Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

(a) The information set forth in Item 1.01 of the Current Report of Form 8-K is incorporated by reference into this Item 2.03.

Item 7.01—Regulation FD Disclosure

On January 7, 2016, the Company will issue a press release announcing an approximately $3 million bridge loan managed by China Kington. The Company’s planned press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information contained in this Item 7.01 of this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “ Securities Act ”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The furnishing of the information in this Item 7.01 of this Current Report on Form 8-K is not intended to, and does not, constitute a representation that such furnishing is required by Regulation FD or that the information contained in this Current Report on Form 8-K constitutes material investor information that is not otherwise publicly available.

The Securities and Exchange Commission encourages registrants to disclose forward-looking information so that investors can better understand the future prospects of a registrant and make informed investment decisions. This Item 7.01 of Current Report on Form 8-K and Exhibit 99.1 may contain these types of statements, which are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and which involve risks, uncertainties and reflect the Company’s judgment as of the date of this Current Report on Form 8-K. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this Current Report on Form 8-K. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented within.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits .

Exhibit No. _____________	Description ________________________________________________________
10.1	Promissory Note Payable to Mr. Mark Sieczkarek, dated December 30, 2015
10.2	Promissory Note Payable to the Gail J. Maderis Revocable Trust, dated December 30, 2015
10.3	Promissory Note Payable to Dr. T. Alex McPherson, dated December 30, 2015
10.4	Promissory Note Payable to Pioneer Pharma (Singapore) Pte. Ltd., dated December 30, 2015
10.5	Collateral Agency Agreement, dated December 30, 2015
10.6	Security Agreement, dated December 30, 2015
99.1	Press Release, dated January 7, 2016

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NovaBay Pharmaceuticals, Inc.


	By:	/s/ Thomas J. Paulson
		Thomas J. Paulson
		Chief Financial Officer and Treasurer


Dated: January 6, 2016

Exhibit 10.1

THIS SECURED PROMISSORY NOTE has NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (" SECURITIES ACT "), OR ANY STATE SECURITIES LAWS OR "BLUE SKY" LAWS (COLLECTIVELY, THE "ACTS"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE LENDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACTS OR RECEIPT OF A NO-ACTION LETTER FROM THE U.S. SECURITIES AND EXCHANGE COMMISSION.

PROMISSORY NOTE

$199,000

December 30, 2015

FOR VALUE RECEIVED, the undersigned, NOVABAY PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), promises to pay Mark Sieczkarek ( together with his heirs, executors, administrators, personal representatives and assigns, the “Lender”), [at the address most recently on the books and records of the Company] or at such other address as the Lender may from time to time designate in writing, on or before the Maturity Date (as defined below), the principal sum of One Hundred Ninety-Nine Thousand US DOLLARS (US$199,000), together with interest on the unpaid principal balance outstanding from time to time at the rate of six percent (6.00%) per annum from the date hereof until paid in full (computed upon the basis of a 365-day year, for that actual number of days elapsed in any interest computation period), payable quarterly in arrears beginning on March 31, 2016 and on the last day of each June, September, December and March thereafter and on the Maturity Date. The entire principal sum and any and all accrued and unpaid interest shall be payable on or before December 30, 2018 (the “Maturity Date”). This Note is one of a series of Promissory Notes containing substantially identical terms and conditions in a principal amount of approximately $3.0 million in the aggregate.

The Company may prepay this Note, in whole or in part, at any time without premium or penalty as set forth in Section 6.01 hereof.

The Company agrees that all principal advanced by the Lender, together with accrued interest and other amounts, if any, owing in respect of the loan evidenced hereby (the “Loan”) and payments received hereunder, will be evidenced by appropriate entries endorsed on this Note by the Lender or by appropriate entries by the Lender in the Lender’s books and records (which may, at the Lender’s option, take the form of entries into the Lender’s electronic data processing system), or both. Each such entry on this Note or in such books and records maintained by the Lender shall be presumptive evidence of the data entered; provided that such entries shall not be a condition to the Company’s obligation to pay hereon.

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ARTICLE ONE

COLLATERAL; PRO RATA PAYMENTS

1.01 Collateral . This Note and certain other promissory notes made by the Company on the date hereof and on terms similar to this Note (each an “Other Note” and collectively, the “Other Notes”) are secured by a security interest in all of the assets of the Company, including the Company’s rights to, and patents for, Aganocide and derivative compounds such as auriclosene (NVC-422), which may have an application as a treatment for UCBE; Neutrox, including the Company’s three branded Neutrox products Avenova, NeutroPhase and CelleRx; and intelliCase, pursuant to a Security Agreement of even date herewith (as amended, modified, supplemented or restated from time to time, the “Security Agreement”) between the Company and China Kington Asset Management Co Ltd. (“China Kington”), in its capacity as Collateral Agent for the Lender and certain other Secured Creditors (as defined in the Security Agreement).

1.02 Pro Rata Payments . The Company and the Lender agree that payments of interest on, and principal of, this Note and each Other Note shall be made on a pro rata basis, determined based on the total principal balances of this Note and all Other Notes at such time.

ARTICLE TWO

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company makes the following representations and warranties to the Lender as of the date hereof:

2.01 Organization, Good Standing and Qualification . The Company is a corporation duly organized, validly existing, and in good standing under the laws of its state of incorporation. The Company has all requisite power and authority to own and operate its properties and assets; to execute, deliver, and perform this Note and the other documents and instruments contemplated hereby or thereby or otherwise made or delivered in connection herewith or therewith to which it is a party; to issue, sell, and deliver this Note; and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified, authorized to do business, and in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and properties makes such qualification necessary.

2.02 Authorization; Binding Obligations . All corporate action on the part of the Company and its directors necessary for the authorization, execution, and delivery of this Note; and, the performance of all obligations of the Company hereunder and thereunder, has been taken. This Note and the other documents delivered in connection herewith or therewith to which it is a party, when executed and delivered, shall be valid and binding obligations of the Company enforceable against it in accordance with their respective terms.

2.03 No Conflicts . This Note (a) will not violate any law applicable to the Company, (b) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Company or the assets of the Company, or give rise to a right thereunder to require any payment to be made by the Company, and (c) will not result in the creation or imposition of any lien on any asset of the Company, except liens created pursuant to the Security Agreement.

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2.04 Litigation . No actions, suits or proceedings by or before any arbitrator or governmental authority are pending or, to the knowledge of the Company, threatened against or affecting the Company (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a material adverse effect on the Company or (ii) that involve this Note or the loan made hereunder.

2.05 Use of Proceeds . The proceeds of the loan made hereunder will be used for general corporate purposes, including continuing business operations.

ARTICLE THREE

COVENANTS OF THE COMPANY

The Company agrees and covenants that until such time as this Note has been paid in full, it shall comply with the following covenants in this Article Three.

3.01 Existence . The Company shall do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its existence, rights and franchise as a Delaware corporation and its qualification to transact business as a foreign corporation in California and in each other state in which the failure so to qualify could have a material adverse effect on the Company, its property or its ability to enforce accounts or other intangible property.

3.02 Payment of Taxes and Other Claims . The Company shall file, pay or discharge or cause to be filed, paid or discharged, before the same shall become delinquent, (i) all returns and reports required to be filed by any governmental authority, (ii) all taxes, assessments and governmental charges levied or imposed upon it or upon its income, profits or property and (iii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon its property; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings so long as the exercise of remedies by such governmental authority is effectively stayed.

3.03 Maintenance of Properties . The Company shall cause all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times.

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3.04 Consolidation, Merger, Conveyance or Transfer . The Company shall not consolidate with or merge into or with any other entity, liquidate or transfer any of its properties and assets, without prior written approval of the Lender; provided that the Company may license or otherwise transfer interests in its intellectual property or other general intangibles that is no longer used or useful in the operation of the Company’s business.

3.05 Compliance with Laws . The Company shall comply with all federal, state, local, provincial and foreign laws and regulation of the United States applicable to it, including ERISA and labor matters, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Company.

3.06 Notices . The Company shall give written notice to the Lender, as soon as possible and in any event within five (5) business days after the Company has knowledge of any proceedings or investigations being instituted by or against the Company in any federal, state or foreign court or before any commission or other regulatory body. The Company shall immediately notify the Lender of any Event of Default.

3.07 Use of Proceeds . The Company shall use the proceeds of the Loan for general corporate purposes, including continuing business operations.

3.08 Right of First Refusal . The Company shall give China Kington, or its designee that shall be acceptable to the Company in its reasonable discretion, the right of first refusal to lead financings for the Company for the period that is the shorter of two (2) years from the date hereof or the day that the Company’s cash flow has been equal to or greater than zero dollars ($0) in each month for three (3) consecutive months; provided however, that such right does not extend to a transaction that is the sale of the Company or all or substantially all of its assets, and such right is subject to the following: (i) commercially reasonable terms for such offering(s) being negotiated and agreed upon with the Company; (ii) China Kington’s or its designee’s compliance with federal and state broker/dealer laws and FINRA regulations (including the general ability to serve as an underwriter and/or placement agent within the United States); and (iii) China Kington or its designee having a sufficient number and variety of institutional and other investors in the U.S. (y) so as to not create a control position in any one or few investors as a result of offerings to a limited number of investors and (z) that is consistent with competitor U.S. investment banks. Such financings must be formal solicitations by the Company and may be in the form of debt or equity issuances; for the avoidance of doubt, such financings would not include, among others, unintended issuances such as debt incurred from lines of credit from lending sources or any debt incurred in the ordinary course of business.

3.09 Financing Approvals . In connection with a capital raise transaction, the Company agrees that it shall receive the approval of all of its members of its Board of Directors prior to completing any such transaction, which agreement shall continue until the earliest to occur of the following: (i) two (2) years from the date hereof; (ii) the day that the Company’s cash flow has been equal to or greater than zero dollars ($0) in each month for three (3) consecutive months; or (iii) the amounts payable under this Note have been paid.

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3.10 Next Financing . The Company agrees that it will pay the outstanding principal and interest of this Note with the proceeds of its next financing, without any premium or charge pursuant to Section 6.01 hereof. Further, members of the Company’s Board of Directors, management and investors that the Board and management provide, will contribute an aggregate 9% of such financing as lenders, investors or in a similar capacity, subject to underwriter or placement agent cutback due to demand. Such financing must be a formal solicitation by the Company and may be in the form of a debt or equity issuance; for the avoidance of doubt, such financing would not include, among others, an unintended issuance such as debt incurred from lines of credit from lending sources or any debt incurred in the ordinary course of business. Notwithstanding the foregoing, a member of the Board or management shall not be required to participate in such financing if the member of the Board or management ceases to be an officer, employee and director of the Company prior to such financing.

3.11 Audit Review . The Company agrees to reasonably cooperate with reasonable requests made by an auditor engaged by, and paid for by, China Kington (the “Outside Auditor”); provided, however, that (i) the Outside Auditor shall be a registered public accounting firm with The Public Company Accounting Oversight Board and be reasonably acceptable to the Company, (ii) such requests shall be in a manner that do not interfere with the normal business operations of the Company, the completion of its accounting review or audit process, or completion of its audit, and (iii) such requests shall not contravene or interfere with the efforts of the Company’s registered public accounting firm. The Company shall receive a copy of any report or correspondence of the Outside Auditor as relates to the Company. Further, such Outside Auditor shall enter into a commercially reasonable non-disclosure agreement that shall protect the confidentiality of the Company’s information disclosed to the Outside Auditor until such time as the information becomes public through no action of the Outside Auditor.

ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE LENDER

4.01 All action on the part of the Lender necessary for the authorization of the Lender to execute and deliver this Note has been taken. No consent, approval, authorization, order, filing, registration or qualification of or with any court, governmental authority or third person is required to be obtained by the Lender in connection with the execution and delivery of this Note by the Lender.

4.02 This Note has been duly executed by the Lender and constitutes the legal, valid and binding obligation of the Lender, enforceable against Lender in accordance with its terms, subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally.

4.03 It is the present intention of the Lender to acquire this Note for the Lender's own account and that this Note is being or will be acquired by the Lender for the purpose of making the loan and not with a view to distribution. This Note is not transferrable by the Lender.

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4.04 The Lender understands that the information provided by the Lender in connection with this Note is being relied upon by the Company for an exemption under federal and state securities laws. All information the Lender has provided to the Company is correct and complete as of the date set forth on the signature page hereof and if there should be any adverse change in such information, the Lender shall immediately provide the Company with such updated information.

4.05 The Lender is an "accredited investor" as defined in the regulations of the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Securities Act. No "Bad Actor" disqualifying event described in Rule 506(d)(l)(i) to (viii) of the Securities Act is applicable to the Lender.

4.06 The Lender acknowledges that he has received and reviewed the business and financial information that he has deemed necessary to make this loan to the Company. Specifically, the Lender acknowledges that he is aware of, and has reviewed, the Company’s risk factors as outlined in the Company’s publicly-available filings with the SEC via Forms 10-Q and Form 10-K under the heading “Risk Factors.”

4.07 The Lender has sought such accounting, legal and tax advice as the Lender has considered necessary to make an informed decision with respect to the making of the loan, and the Lender has taken all the steps it deems necessary to evaluate the merits and risks of making the loan to the Company.

4.08 The Lender is not making the loan to the Company as a result of any advertisement, article, notice or other communication regarding the Company published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general advertisement or general solicitation.

4.09 The Lender acknowledges that no representations or warranties have been made to the Lender by the Company, or any officer, employee, agent, affiliate or subsidiary of the Company other than the representations contained in this Note, and in making the loan to the Company hereunder, the Lender is not relying upon any representations.

4.10 The Lender has the financial ability to bear the economic risk of the loan, including but not limited to a total loss of the principal loaned to the Company and lack of transferability of the Note, and the Lender has adequate means for providing for the Lender's current needs and personal contingencies and the Lender has no need for liquidity with respect to the loan made to the Company.

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4.11 The Lender acknowledges that currently the Company’s cash and cash equivalents are not sufficient to fund its immediately planned operations and in order to fund its operations and meet its ongoing obligations, the Company will continue with its historical financing strategy to raise additional capital. Repayment of this Note will be based on the Company’s ability to continue such additional capital raising efforts, as well as the Company’s ability to successfully commercialize its prescription Avenova Lid and Lash Cleanser, among other matters. The Lender further understands that (i) his loan to the Company involves a high degree of risk, (ii) no representation is being made as to the business or prospects of the Company, (iii) no representation is being made as to any projections or estimates delivered to or made available to the Lender (or any of the Lender's affiliates or representatives) of the Company’s future assets, liabilities, stockholders' equity, regulatory capital ratios, net interest income, net income or any component of any of the foregoing or any ratios derived therefrom and (iv) the Company has a history of losses and there is no assurance that the Company will be able to continue operating as a going concern.

4.12 The Lender has carefully considered and has, to the extent the Lender believes such discussion necessary, discussed with the Lender's professional legal, tax and financial advisers the suitability of making a loan to the Company and believes that making the loan is suitable for the Lender's particular financial situation.

4.13 The Lender understands that a sale or transfer of this Note is restricted by applicable federal and state securities laws and the provisions of this Note.

4.14 The Lender acknowledges that he, his affiliates and representatives are aware that the United States securities laws prohibit any person who has received from the Company material, non-public information concerning the matters which are the subject of an investment in the Note from purchasing or selling securities of the Company or from communicating such information to any other person or entity under circumstances in which it is reasonably foreseeable that such person or entity is likely to purchase or sell such securities. The Lender shall comply with such laws as they relate to the Company confidential information and its securities. The Lender is not aware of any violations of United States securities laws relating purchases and sales of the Company securities by the Lender.

4.15 The foregoing representations and warranties shall survive the execution and delivery of this Note.

4.16 The Lender agrees that, in the Company’s next financing and pursuant to Section 3.09 hereto, he shall, along with the rest of the members of the Company’s Board of Directors, management and investors that the Board and management provide, contribute an aggregate 9% of such financing as lenders, investors or in a similar capacity, subject to underwriter or placement agent cutback due to demand. Such financing must be a formal solicitation by the Company and may be in the form of a debt or equity issuance; for the avoidance of doubt, such financing would not include, among others, an unintended issuance such as debt incurred from lines of credit from lending sources or any debt incurred in the ordinary course of business. Notwithstanding the foregoing, the Lender shall not be required to participate in such financing if the Lender ceases to be an officer, employee and director of the Company prior to such financing.

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ARTICLE FIVE

REMEDIES

5.01 Events of Default . An “Event of Default”, wherever used herein shall mean any one of the following events or conditions (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) the Company shall fail to pay when due the principal of the Loan; or

(b) the Company shall fail to pay when due any interest, fees or other amounts on the Loan and such failure shall continue for ten (10) business days; or

(c) any representation or warranty of the Company shall prove to have been materially incorrect when made or deemed made; or

(d) the default in the performance or breach of any other covenant of the Company in the Security Agreement or this Note, and such failure shall continue unremedied for a period of thirty (30) calendar days after the earlier of the Company’s knowledge of such breach or written notice thereof from the Lender; or

(e) the entry of a final judgment or judgments for the payment of money in excess of US$100,000 in the aggregate at any time are outstanding against the Company, and the same are not stayed or bonded within thirty (30) calendar days after the entry thereof; or

(f) the default by the Company in the payment on (i) any indebtedness (other than the Loan) secured by the Security Agreement or (ii) any indebtedness (other than the Loan) in an amount in excess of US$100,000, after giving effect to any notice requirement or grace period applicable thereto; or

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of its assets; or

(h) the Company shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (f) of this Section 5.01, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; or

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(i) this Note or the Security Document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of this Note or the Security Document,

then and in each and every case, the entire principal balance of this Note, together with all accrued and unpaid interest, shall, without any action by the Lender or any other party, become automatically and immediately due and payable in full, without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived; and the Lender thereupon may proceed to enforce payment of the indebtedness and performance of the covenants of this Note (including, without limitation, as applicable, by specific enforcement), any and right or remedy the Lender may have under the Security Agreement, and any other legal or equitable right or remedy available to the Lender.

5.02 Amendments and Waivers . No course of dealing between the Company and the Lender and no delay or omission on the part of the Lender in exercising any rights, privileges or remedies under this Note shall operate as a waiver of the rights, privileges or remedies of the Lender. No covenant or other provision of this Note nor any default or Event of Default in connection therewith may be waived otherwise than by a written instrument signed by the Lender expressly so waiving such covenant or other provision or default or Event of Default. Any provision of this Note to the contrary notwithstanding, changes in or additions to this Note may be made, and compliance with any term, covenant, condition or provision set forth in this Note or the Security Agreement may be omitted or waived (either generally or in a particular instance and either retroactively or prospectively), and any default or Event of Default and the consequences thereof may be waived, by a consent or consents in writing signed by the Lender. Under no circumstances shall an effective waiver of any right, privilege or remedy on any one occasion constitute or be construed as a bar to the exercise of or waiver of such right, privilege or remedy on any future occasion.

5.03 Cost and Expense of Collection . The Company covenants and agrees that if default be made in any payment of principal of, or interest on, this Note, it shall, to the extent permitted under applicable law, pay to the Lender such further amount as shall be sufficient to cover the cost of expense of collection and other enforcement, including reasonable compensation and expenses to the attorneys of the Lender, for all services rendered in that connection.

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ARTICLE SIX

MISCELLANEOUS

6.01 Voluntary Prepayment . The Company shall have the right to prepay any or all of the outstanding principal or interest of this Note at any time without premium or charge.

6.02 Mandatory Prepayment . The Company shall prepay all of the outstanding principal and accrued interest of this Note upon the occurrence of any of the following events:

(a) the merger or consolidation of the Company into or with another corporation (except one in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the capital stock of the surviving corporation);

(b) the sale of all or substantially all of the assets of the Company;

(c) other transactions pursuant to or as a result of which a single person (or group of affiliated persons) acquires or holds capital stock of the Company representing a majority of the Company’s outstanding voting power; or

(d) a sale or exclusive license of all or substantially all of the Company’s intellectual property.

6.03 Benefits . This Note shall be binding upon the Company and its permitted successors and assigns and shall inure to the benefit of the Lender and its permitted successors and assigns. This Note is not transferrable by the Lender.

6.04 Amendment . This Note may not be amended, changed, modified or terminated except by a written document executed by the Lender and the Company.

6.05 Addresses of Parties . All communications provided for herein or with reference to this Note shall be deemed to have been sufficiently given or served for all purposes if sent by overnight courier service, by hand or by facsimile or email, with a confirmation of transmission by the transmitting equipment, to the following addresses:

if to the Company, at:	NOVABAY PHARMACEUTICALS, INC.
	5980 Horton Street, Suite 550
	Emeryville, CA 94608
	Attention: Justin Hall
	Email: jhall@novabay.com

Page 10 of 12 Pages

and if to the Lender, at:	China Kington Asset Management Co. Ltd.
	Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao
	South Road, Pu Dong New District, Shanghai, P.R. China
	Attention: Bob Wu
	Email: bob.wu@kingtonasset.com

	And

	Mark Sieczkarek
	[At the address and contact information most
	recently on the books and records of the Company.]

to such other address as from time to time the Company or to the Lender may subsequently duly specify in writing to the other.

6.06 Severability . If any one or more of the provisions of this Note shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Note shall not be affected thereby. To the extent permitted by applicable law, the Lender and the Company waive any provision of law which renders any provision of this Note invalid, illegal or unenforceable in any respect.

6.07 GOVERNING LAW . THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND FULLY TO BE PERFORMED THEREIN BY RESIDENTS THEREOF, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OR LAW PROVISION OR RULE THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY .

6.08 Section Headings . The descriptive section headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof.

6.09 WAIVER OF JURY TRIAL . THE COMPANY AND THE LENDER HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, THE SECURITY AGREEMENT OR OTHER RELATED AGREEMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS NOTE, THE SECURITY AGREEMENT OR OTHER RELATED AGREEMENTS AND THE RELATIONSHIPS THEREBY ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS NOTE. In the event of litigation, this provision may be filed as a written consent to a trial by the court.

Page 11 of 12 Pages

IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its General Counsel and dated the day and year first above written.

	NOVABAY PHARMACEUTICALS, INC.



	By:	/s/ Justin Hall
		Justin Hall, General Counsel

Page 12 of 12 Pages

Exhibit 10.2

PROMISSORY NOTE

$71,000

December 30, 2015

FOR VALUE RECEIVED, the undersigned, NOVABAY PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), promises to pay the Gail J. Maderis Revocable Trust ( together with its heirs, executors, administrators, personal representatives and assigns, the “Lender”), [at the address most recently on the books and records of the Company] or at such other address as the Lender may from time to time designate in writing, on or before the Maturity Date (as defined below), the principal sum of Seventy-One Thousand US DOLLARS (US $71,000), together with interest on the unpaid principal balance outstanding from time to time at the rate of six percent (6.00%) per annum from the date hereof until paid in full (computed upon the basis of a 365-day year, for that actual number of days elapsed in any interest computation period), payable quarterly in arrears beginning on March 31, 2016 and on the last day of each June, September, December and March thereafter and on the Maturity Date. The entire principal sum and any and all accrued and unpaid interest shall be payable on or before December 30, 2018 (the “Maturity Date”). This Note is one of a series of Promissory Notes containing substantially identical terms and conditions in a principal amount of approximately $3.0 million in the aggregate.

The Company may prepay this Note, in whole or in part, at any time without premium or penalty as set forth in Section 6.01 hereof.

Page 1 of 12 Pages

ARTICLE ONE

COLLATERAL; PRO RATA PAYMENTS

ARTICLE TWO

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company makes the following representations and warranties to the Lender as of the date hereof:

Page 2 of 12 Pages

2.05 Use of Proceeds . The proceeds of the loan made hereunder will be used for general corporate purposes, including continuing business operations.

ARTICLE THREE

COVENANTS OF THE COMPANY

The Company agrees and covenants that until such time as this Note has been paid in full, it shall comply with the following covenants in this Article Three.

Page 3 of 12 Pages

3.07 Use of Proceeds . The Company shall use the proceeds of the Loan for general corporate purposes, including continuing business operations.

Page 4 of 12 Pages

ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE LENDER

Page 5 of 12 Pages

Page 6 of 12 Pages

4.13 The Lender understands that a sale or transfer of this Note is restricted by applicable federal and state securities laws and the provisions of this Note.

4.15 The foregoing representations and warranties shall survive the execution and delivery of this Note.

4.16 The Lender agrees that, in the Company’s next financing and pursuant to Section 3.09 hereto, it shall, along with the rest of the members of the Company’s Board of Directors, management and investors that the Board and management provide, contribute an aggregate 9% of such financing as lenders, investors or in a similar capacity, subject to underwriter or placement agent cutback due to demand. Such financing must be a formal solicitation by the Company and may be in the form of a debt or equity issuance; for the avoidance of doubt, such financing would not include, among others, an unintended issuance such as debt incurred from lines of credit from lending sources or any debt incurred in the ordinary course of business. Notwithstanding the foregoing, the Lender shall not be required to participate in such financing if Ms. Maderis ceases to be an officer, employee and director of the Company prior to such financing.

Page 7 of 12 Pages

ARTICLE FIVE

REMEDIES

(a) the Company shall fail to pay when due the principal of the Loan; or

(b) the Company shall fail to pay when due any interest, fees or other amounts on the Loan and such failure shall continue for ten (10) business days; or

(c) any representation or warranty of the Company shall prove to have been materially incorrect when made or deemed made; or

Page 8 of 12 Pages

Page 9 of 12 Pages

ARTICLE SIX

MISCELLANEOUS

6.01 Voluntary Prepayment . The Company shall have the right to prepay any or all of the outstanding principal or interest of this Note at any time without premium or charge.

6.02 Mandatory Prepayment . The Company shall prepay all of the outstanding principal and accrued interest of this Note upon the occurrence of any of the following events:

(b) the sale of all or substantially all of the assets of the Company;

(d) a sale or exclusive license of all or substantially all of the Company’s intellectual property.

6.04 Amendment . This Note may not be amended, changed, modified or terminated except by a written document executed by the Lender and the Company.

if to the Company, at:	NOVABAY PHARMACEUTICALS, INC.
	5980 Horton Street, Suite 550
	Emeryville, CA 94608
	Attention: Justin Hall
	Email: jhall@novabay.com

Page 10 of 12 Pages

and if to the Lender, at:	China Kington Asset Management Co Ltd.
	Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao
	South Road, Pu Dong New District, Shanghai, P.R. China
	Attention: Bob Wu
	Email: bob.wu@kingtonasset.com

	and

	Gail J. Maderis Revocable Trust
	[At the address and contact information most
	recently on the books and records of the Company.]

or to such other address as from time to time the Company or to the Lender may subsequently duly specify in writing to the other.

6.08 Section Headings . The descriptive section headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof.

Page 11 of 12 Pages

IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its General Counsel and dated the day and year first above written.

	NOVABAY PHARMACEUTICALS, INC.



	By:	/s/ Justin Hall
		Justin Hall, General Counsel

Page 12 of 12 Pages

Exhibit 10.3

PROMISSORY NOTE

$20,000

December 30, 2015

FOR VALUE RECEIVED, the undersigned, NOVABAY PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), promises to pay T. Alex McPherson ( together with his heirs, executors, administrators, personal representatives and assigns, the “Lender”), [at the address most recently on the books and records of the Company] or at such other address as the Lender may from time to time designate in writing, on or before the Maturity Date (as defined below), the principal sum of Twenty Thousand US DOLLARS (US $20,000), together with interest on the unpaid principal balance outstanding from time to time at the rate of six percent (6.00%) per annum from the date hereof until paid in full (computed upon the basis of a 365-day year, for that actual number of days elapsed in any interest computation period), payable quarterly in arrears beginning on March 31, 2016 and on the last day of each June, September, December and March thereafter and on the Maturity Date. The entire principal sum and any and all accrued and unpaid interest shall be payable on or before December 30, 2018 (the “Maturity Date”). This Note is one of a series of Promissory Notes containing substantially identical terms and conditions in a principal amount of approximately $3.0 million in the aggregate.

The Company may prepay this Note, in whole or in part, at any time without premium or penalty as set forth in Section 6.01 hereof.

Page 1 of 12 Pages

ARTICLE ONE

COLLATERAL; PRO RATA PAYMENTS

ARTICLE TWO

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company makes the following representations and warranties to the Lender as of the date hereof:

Page 2 of 12 Pages

2.05 Use of Proceeds . The proceeds of the loan made hereunder will be used for general corporate purposes, including continuing business operations.

ARTICLE THREE

COVENANTS OF THE COMPANY

The Company agrees and covenants that until such time as this Note has been paid in full, it shall comply with the following covenants in this Article Three.

Page 3 of 12 Pages

3.07 Use of Proceeds . The Company shall use the proceeds of the Loan for general corporate purposes, including continuing business operations.

Page 4 of 12 Pages

ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE LENDER

Page 5 of 12 Pages

Page 6 of 12 Pages

4.13 The Lender understands that a sale or transfer of this Note is restricted by applicable federal and state securities laws and the provisions of this Note.

4.15 The foregoing representations and warranties shall survive the execution and delivery of this Note.

Page 7 of 12 Pages

ARTICLE FIVE

REMEDIES

(a) the Company shall fail to pay when due the principal of the Loan; or

(b) the Company shall fail to pay when due any interest, fees or other amounts on the Loan and such failure shall continue for ten (10) business days; or

(c) any representation or warranty of the Company shall prove to have been materially incorrect when made or deemed made; or

Page 8 of 12 Pages

Page 9 of 12 Pages

ARTICLE SIX

MISCELLANEOUS

6.01 Voluntary Prepayment . The Company shall have the right to prepay any or all of the outstanding principal or interest of this Note at any time without premium or charge.

6.02 Mandatory Prepayment . The Company shall prepay all of the outstanding principal and accrued interest of this Note upon the occurrence of any of the following events:

(b) the sale of all or substantially all of the assets of the Company;

(d) a sale or exclusive license of all or substantially all of the Company’s intellectual property.

6.04 Amendment . This Note may not be amended, changed, modified or terminated except by a written document executed by the Lender and the Company.

if to the Company, at:	NOVABAY PHARMACEUTICALS, INC.
	5980 Horton Street, Suite 550
	Emeryville, CA 94608
	Attention: Justin Hall
	Email: jhall@novabay.com

Page 10 of 12 Pages

and if to the Lender, at:	China Kington Asset Management Co Ltd.
	Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao
	South Road, Pu Dong New District, Shanghai, P.R. China
	Attention: Bob Wu
	Email: bob.wu@kingtonasset.com

	and

	T. Alex McPherson
	[At the address and contact information most
	recently on the books and records of the Company.]

or to such other address as from time to time the Company or to the Lender may subsequently duly specify in writing to the other.

6.08 Section Headings . The descriptive section headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof.

Page 11 of 12 Pages

IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its General Counsel and dated the day and year first above written.

	NOVABAY PHARMACEUTICALS, INC.



	By:	/s/ Justin Hall

		Justin Hall, General Counsel

Page 12 of 12 Pages

Exhibit 10.4

PROMISSORY NOTE

$1,365,000

December 30, 2015

FOR VALUE RECEIVED, the undersigned, NOVABAY PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), promises to pay to the order of Pioneer Pharma (Singapore) Pte. Ltd. ( together with its heirs, executors, administrators, personal representatives and assigns, the “Lender”) on or before the Maturity Date (as defined below), the principal sum of One Million Three Hundred Sixty-Five Thousand US DOLLARS (US $1,365,000), together with interest on the unpaid principal balance outstanding from time to time at the rate of six percent (6.00%) per annum from the date hereof until paid in full (computed upon the basis of a 365-day year, for that actual number of days elapsed in any interest computation period), payable quarterly in arrears beginning on March 31, 2016 and on the last day of each June, September, December and March thereafter and on the Maturity Date. The entire principal sum and any and all accrued and unpaid interest shall be payable on or before December 30, 2018 (the “Maturity Date”). This Note is one of a series of Promissory Notes containing substantially identical terms and conditions in a principal amount of approximately $3.0 million in the aggregate.

The Company may prepay this Note, in whole or in part, at any time without premium or penalty as set forth in Section 6.01 hereof.

Page 1 of 12 Pages

ARTICLE ONE

COLLATERAL; PRO RATA PAYMENTS

ARTICLE TWO

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company makes the following representations and warranties to the Lender as of the date hereof:

Page 2 of 12 Pages

2.05 Use of Proceeds . The proceeds of the loan made hereunder will be used for general corporate purposes, including continuing business operations.

ARTICLE THREE

COVENANTS OF THE COMPANY

The Company agrees and covenants that until such time as this Note has been paid in full, it shall comply with the following covenants in this Article Three.

Page 3 of 12 Pages

3.07 Use of Proceeds . The Company shall use the proceeds of the Loan for general corporate purposes, including continuing business operations.

Page 4 of 12 Pages

ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES OF THE LENDER

Page 5 of 12 Pages

Page 6 of 12 Pages

4.13 The Lender understands that a sale or transfer of this Note is restricted by applicable federal and state securities laws and the provisions of this Note.

4.15 The foregoing representations and warranties shall survive the execution and delivery of this Note.

Page 7 of 12 Pages

ARTICLE FIVE

REMEDIES

(a) the Company shall fail to pay when due the principal of the Loan; or

(b) the Company shall fail to pay when due any interest, fees or other amounts on the Loan and such failure shall continue for ten (10) business days; or

(c) any representation or warranty of the Company shall prove to have been materially incorrect when made or deemed made; or

Page 8 of 12 Pages

Page 9 of 12 Pages

ARTICLE SIX

MISCELLANEOUS

6.01 Voluntary Prepayment . The Company shall have the right to prepay any or all of the outstanding principal or interest of this Note at any time without premium or charge.

6.02 Mandatory Prepayment . The Company shall prepay all of the outstanding principal and accrued interest of this Note upon the occurrence of any of the following events:

(b) the sale of all or substantially all of the assets of the Company;

(d) a sale or exclusive license of all or substantially all of the Company’s intellectual property.

6.04 Amendment . This Note may not be amended, changed, modified or terminated except by a written document executed by the Lender and the Company.

if to the Company, at:	NOVABAY PHARMACEUTICALS, INC.
	5980 Horton Street, Suite 550
	Emeryville, CA 94608
	Attention: Justin Hall
	Email: jhall@novabay.com

Page 10 of 12 Pages

and if to the Lender, at:	Pioneer Pharma (Singapore) Pte. Ltd., as a Noteholder:
	33A Chander Road, Singapore 219539
	Attention: Paul Li
	Email: paul.li@pioneer-pharma.com

	and

	China Kington Asset Management Co Ltd.
	Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao South Road, Pu Dong New District, Shanghai, P.R. China
	Attention: Bob Wu
	Email: bob.wu@kingtonasset.com

or to such other address as from time to time the Company or to the Lender may subsequently duly specify in writing to the other.

6.08 Section Headings . The descriptive section headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof.

[The remainder of this page is intentionally left blank.]

Page 11 of 12 Pages

IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its General Counsel and dated the day and year first above written.

	NOVABAY PHARMACEUTICALS, INC.



	By:	/s/ Justin Hall
		Justin Hall – General Counsel

Exhibit 10.5

COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT

This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT (this “ Agreement ”), dated as of December 30, 2015, is entered into among Mark Sieczkarek, a resident of the United States (“ Sieczkarek ”); The Gail J. Maderis Revocable Trust, a trust of the United States (" Maderis "); Jian Ping Fu, a resident of the Republic of China (“ Fu ”); Pioneer Pharma (Singapore) Pte. Ltd, a corporation based in Singapore (“ Pioneer ”); and T. Alex McPherson, a resident of Canada (" McPherson "), (collectively, the “ Noteholders ”), together with China Kington Asset Management Co. Ltd., in its capacity as collateral agent for the Noteholders (the “ Collateral Agent ”).

PRELIMINARY STATEMENTS:

(1) Certain terms are defined in Section 1 hereof.

(2) Reference is hereby made to that certain (i) Promissory Note, dated as of December 30, 2015, made by NovaBay Pharmaceuticals, Inc., a Delaware corporation, as Borrower (the “ Borrower ”) and payable to Sieczkarek in the original principal amount of $199,000 (the “ First Note ”), (ii) Promissory Note, dated as of December 30, 2015, made by the Borrower and payable to Maderis in the original principal amount of $71,000 (the “ Second Note ”); (iii) Promissory Note, to be dated as of 2016, made by the Borrower and payable to Fu in the original principal amount of $1,365,000 (the “ Third Note ”); (iv) Promissory Note, dated as of December 30, 2015, made by the Borrower and payable to Pioneer Pharma (Singapore) Pte. Ltd in the original principal amount of $1,365,000 (the " Fourth Note "); (v) Promissory Note, dated as of December 30, 2015, made by the Borrower and payable to McPherson in the original principal amount of $20,000 (the " Fifth Note ", collectively with the First Note, Second Note, Third Note and Fourth Note, the “ Notes ”).

(3) In connection with the Notes, the Borrower and the Collateral Agent for the benefit of the Secured Creditors (as defined below), entered into that certain Security Agreement, dated as of the date hereof (as amended, modified, or supplemented from time to time, the “ Security Agreement ”).

(4) This Agreement is made for the benefit of the Collateral Agent, and each of the holders of the Notes (any or all of the foregoing, individually a “ Secured Creditor ” and collectively, the “ Secured Creditors ”).

(5) The Secured Creditors wish to set forth their understandings and agreements regarding their respective rights and priorities with respect to amounts recovered through the exercise of any right of set off, payments received after a Triggering Event (as defined in Section 2.1 below) and proceeds of the Collateral, and, accordingly, desire to execute this Agreement.

NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and the mutual covenants and promises set forth herein, each of the parties to this Agreement agrees as follows:

1.	DEFINITIONS AND TERMS.

1.1 Defined Terms. The following terms shall have the meanings herein specified unless the context otherwise requires:

“ Agreement” shall mean this Collateral Agency and Intercreditor Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms.

“ Bankruptcy Event” shall mean any of the following shall occur:

(i) the Borrower shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto (the “ Bankruptcy Code ”); or

(ii) an involuntary case is commenced against the Borrower under the Bankruptcy Code and the petition is not controverted within 20 Business Days, or is not dismissed within 60 Business Days, after commencement of the case; or

(iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower; or

(iv) the Borrower commences (including by way of applying for or consenting to the appointment of, or the taking of possession by, a rehabilitator, receiver, custodian, trustee, conservator or liquidator (collectively, a “ conservator ”) of itself or all or any substantial portion of its property) any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower; or

(v) any such proceeding is commenced against the Borrower to the extent such proceeding is consented by such person or remains undismissed for a period of 60 Business Days; or

(vi) the Borrower is adjudicated insolvent or bankrupt; or

(vii) any order of relief or other order approving any such case or proceeding is entered by a court of competent jurisdiction; or

(viii) the Borrower suffers any appointment of any conservator or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 Business Days; or

(ix) the Borrower makes a general assignment for the benefit of creditors; or

(x) any corporate (or similar organizational) action is taken by the Borrower for the purpose of effecting any of the foregoing.

“ Business Day” means any day excluding Saturday, Sunday and any legal holiday or a day on which national banking institutions in the United States are authorized by law to close.

“ Collateral” shall mean and include any and all “Collateral,” as such term is defined in the Security Agreement.

“ Collateral Agent” shall have the meaning specified in the first paragraph of this Agreement.

“ Collateral Documents” shall mean and include the Security Agreement.

-2-

“ Collateral Proceeds” shall mean any and all Proceeds of the Collateral.

“ Credit Documents” shall mean and include this Agreement, the Notes and the Collateral Documents.

“ Credit Document Obligations” shall mean and include:

(i) the principal of and interest on the Notes issued by, and the loans made to, the Borrower under the Notes, and

(ii) all other obligations and liabilities owing by the Borrower to the Collateral Agent or any of the Noteholders under any of the Credit Documents to which the Borrower is now or may hereafter become a party (including, without limitation, indemnities, fees and other amounts payable thereunder), whether primary, secondary, direct, contingent, fixed or otherwise,

in all cases whether now existing, or hereafter incurred or arising, including any such interest or other amounts incurred or arising during the pendency of any bankruptcy, insolvency, reorganization, receivership or similar proceeding, regardless of whether allowed or allowable in such proceeding or subject to an automatic stay under section 362(a) of the Bankruptcy Code.

“ Event of Default” shall mean any default in the payment of principal, interest or fees, under any Credit Document, or any Bankruptcy Event.

“ Noteholders” shall have the meaning provided in the Preliminary Statements of this Agreement.

“ Notes” shall have the meaning provided in the Preliminary Statements of this Agreement.

“ Proceeds” shall mean (i) any “proceeds”, as such term is now or hereafter defined in the UCC; and (ii) without limitation of the foregoing, in any event, shall include, but not be limited to, (1) whatever is acquired upon the sale, lease, license, exchange, or other disposition of any Collateral, (2) whatever is collected on, or distributed on account of, any Collateral, (3) rights arising out of any Collateral, (4) claims arising out of the loss or nonconformity of, defects in, or damage to any Collateral, (5) claims and rights to any proceeds of any insurance, indemnity, warranty or guaranty payable to a Noteholder (or the Collateral Agent, as assignee, loss payee or an additional insured) with respect to any of the Collateral, (6) claims and rights to payments (in any form whatsoever) made or due and payable to a Noteholder from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority), (7) all cash, money, checks and negotiable instruments received or held on behalf of the Collateral Agent pursuant to any lockbox or similar arrangement relating to the payment of accounts receivable or other Collateral, and (8) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

“ Secured Creditors” shall have the meaning provided in the Preliminary Statements of this Agreement.

-3-

“ Secured Obligations” shall mean and include

(i) the Borrower’s obligations in respect of all Credit Document Obligations as to which it is an obligor;

(ii) any and all sums advanced by the Collateral Agent in compliance with the provisions of this Agreement or any of the other Credit Documents in order to preserve the Collateral or to preserve or protect its Security Interest in such Collateral, including, without limitation, sums advanced to pay or discharge insurance premiums, taxes, liens and claims; and

(iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i) and (ii) above, after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder in respect or its Collateral, together with reasonable attorneys’ fees and court costs.

“ Security Agreement” shall have the meaning provided in the Preliminary Statements of this Agreement.

“ UCC” shall mean the Uniform Commercial Code, as at any time adopted and in effect in any jurisdiction, specifically including and taking into account all amendments, supplements, revisions and other modifications of the Uniform Commercial Code which hereafter are adopted or otherwise take effect.

1.2 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any person shall be construed to include such person’s successors and assigns, where permitted, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (d) unless otherwise specified, all references herein to sections, Annexes and Exhibits shall be construed to refer to sections of, and Annexes and Exhibits to, this Agreement.

2.	SHARING.

2.1 Triggering Event. The liens of the Collateral Agent relating to the Collateral shall be held by the Collateral Agent for the benefit of the Noteholders, and, any proceeds realized in respect thereof shall be shared by the Noteholders and distributed in accordance with the rights and priorities set forth in this Agreement. Any Collateral Proceeds, Triggering Event Balances, Triggering Event Payments or Setoff Proceeds (as such terms are defined in Section 2.2) shall be shared by the Secured Creditors and distributed in accordance with the rights and priorities set forth in this Agreement. As used herein, the term “ Triggering Event ” means (a) the occurrence and continuation of a Bankruptcy Event with respect to the Borrower, (b) the Collateral Agent’s receipt of a written notice that the unpaid principal amount of any of the Secured Obligations has been declared to be then due and payable by the holder or holders thereof prior to the due date as a result of an event of default, or (c) any exercise of any right of setoff or banker’s lien by any Secured Creditor.

-4-

2.2 Cash Collateral Account; Application of Proceeds. The Collateral Agent shall establish an interest-bearing demand deposit cash collateral account subject to the lien and security interest created by the Collateral Documents (the “ Cash Collateral Account ”) in the name of the Collateral Agent into which the proceeds, payments and amounts described in subsections (a)(i), (a)(ii), (a)(iii) and (a)(iv) below shall be deposited and from which only the Collateral Agent may effect withdrawals. Such amounts shall be held by the Collateral Agent in the Cash Collateral Account and shall be distributed from time to time by the Collateral Agent in accordance with Section 2.2(b) below.

(a) The following proceeds, payments and amounts shall be deposited and held by the Collateral Agent in the Cash Collateral Account and shall be distributed from time to time by the Collateral Agent in accordance with Section 2.2(b) below:

(i) any proceeds of any collection, recovery, receipt, appropriation, realization or sale of any or all of the Collateral or the enforcement of the Collateral Documents (the “ Collateral Proceeds ”) received by the Collateral Agent or any Secured Creditor;

(ii) any amounts held in the Cash Collateral Account at the time a Triggering Event occurs (the “ Triggering Event Balances ”);

(iii) any payments received or otherwise realized by any Secured Creditor in respect of any Secured Obligations on or after the date on which a Triggering Event has occurred (the “ Triggering Event Payments ”); and

(iv) any amounts received or recovered by any Secured Creditor through any exercise of any right of setoff or banker’s lien at any time on or after the occurrence of a Triggering Event (whether by law, contract or otherwise) (the “ Setoff Proceeds ”).

Each Secured Creditor agrees to deliver any Collateral Proceeds, any Triggering Event Balances, any Triggering Event Payments and any Setoff Proceeds to the Collateral Agent within two (2) Business Days after receipt (other than pursuant to subsection (c) below) of such Collateral Proceeds, Triggering Event Balances, Triggering Event Payments or Setoff Proceeds.

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(b) The Collateral Agent shall distribute the proceeds described in subsections (a)(i), (a)(ii), (a)(iii) and (a)(iv) above which are held in the Cash Collateral Account to the Collateral Agent and the Secured Creditors in accordance with the following priorities:

first , to the reasonable costs and expenses of the Collateral Agent incurred in connection with the maintenance of the Cash Collateral Account and any collection, recovery, receipt, appropriation, legal proceeding (whether by or against any such party), realization or sale of any or all of the Collateral or the enforcement of the Collateral Documents;

secon d, after payment in full of all amounts set forth in item first , to the Secured Creditors in payment of any and all amounts owed to the Secured Creditors for reimbursement of amounts paid by them to the Collateral Agent in accordance with Section 4.1 pro rata in proportion to such amounts owed to such Secured Creditors;

third , after payment in full of all amounts set forth in item second , to the payment and permanent reduction of the principal amount of the outstanding Secured Obligations, pro rata , based on the proportion that the principal amount of such outstanding Secured Obligations held by each Secured Creditor at such time bears to the sum of the principal amount of all such Secured Obligations;

fourth , after payment in full of all amounts set forth in item third , to the payment and permanent reduction of the amount of the outstanding Secured Obligations representing interest, pro rata , based on the proportion that such outstanding Secured Obligations representing interest held by each Secured Creditor at such time bears to the sum of all such Secured Obligations representing interest;

fifth , after payment in full of all amounts set forth in item fourth , to the payment and permanent reduction of all other outstanding Secured Obligations not representing principal or interest, pro rata , based on the proportion that such outstanding Obligations not representing principal or interest held by each Secured Creditor at such time bears to the sum of all such Secured Obligations not representing principal or interest; and

sixth , after payment in full of all amounts set forth in item fifth , to or at the direction of the Borrower or as a court of competent jurisdiction may otherwise direct.

The Collateral Agent shall make such distributions promptly after the deposit of any Collateral Proceeds, Triggering Event Balances, Triggering Event Payments or Setoff Proceeds into the Cash Collateral Account.

2.3 Payment of Obligations; Distributions Recovered. The Borrower agrees that any amounts received by a Secured Creditor and delivered by such Secured Creditor to the Collateral Agent pursuant to the terms of this Agreement will not be deemed to be a payment in respect of any Secured Obligations owing to such Secured Creditor until such Secured Creditor receives its pro rata share of such amount from the Collateral Agent and then only to the extent of the actual payment and receipt of such pro rata share. Notwithstanding anything to the contrary contained in this Agreement, in each case in which any proceeds (or the value thereof) or payments are recovered as a preferential or otherwise voidable payment (whether by a trustee in bankruptcy or otherwise) from the party (the “ Distributor ”) which distributed those proceeds to another party or parties under this Agreement, each party (a “ Distributee ”) to whom any of those proceeds were ultimately distributed shall, upon the Distributor’s notice of the recovery to the Distributee, return to the Distributor an amount equal to the Distributee’s ratable share of the amount recovered, together with a ratable share of interest thereon to the extent the Distributor is required to pay interest thereon computed on the amount to be returned from the date of the recovery. For purposes of this Agreement, “ proceeds ” means any payment (whether made voluntarily or involuntary) from any source, including, without limitation, any offset of any deposit or other indebtedness, any security (including, without limitation, any guaranty or any collateral) or otherwise.

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3.	The Collateral Agent.

3.1 Appointment of Collateral Agent. By execution and delivery hereof, each Secured Creditor hereby appoints China Kington Asset Management Co. Ltd. (together with its successors and assigns) as Collateral Agent and its representative hereunder and under the Credit Documents, and to act as Collateral Agent hereunder, thereunder, and on behalf of each such Secured Creditor. The Collateral Agent agrees to act as such upon the express conditions contained in this Agreement. In performing its functions and duties under this Agreement and the Credit Documents, the Collateral Agent shall act solely as agent of the Secured Creditors to the extent, but only to the extent, provided in this Agreement, and does not assume, and shall not be deemed to have assumed, any obligation towards or relationship of agency, fiduciary or trust with or for any other Person, other than as set forth in the Credit Documents.

3.2 Directions to Collateral Agent. The Collateral Agent shall take any action with respect to the Collateral and/or the Credit Documents only as directed in accordance with Section 4.1 hereof; provided that the Collateral Agent shall not be obligated to follow any directions given in accordance with Section 4.1 hereof to the extent that the Collateral Agent has received a written opinion from its counsel to the effect that such directions are in conflict with any provisions of law, this Agreement, the Credit Documents, or any order of any court or administrative agency; provided further that the Collateral Agent shall not, under any circumstances, be liable to any Secured Creditor or any other person for following the written directions received in accordance with Section 4.1 hereof. Any directions given pursuant to Section 4.1 hereof may be withdrawn or modified by the party or parties who originally gave such directions by delivering written notice of withdrawal or modification to the Collateral Agent prior to the time when the Collateral Agent takes any action pursuant to such directions.

3.3 Duties and Responsibilities of Collateral Agent. Each Secured Creditor authorizes the Collateral Agent to take such action on such Secured Creditor’s behalf and to exercise such powers hereunder as are specifically delegated to the Collateral Agent by the terms hereof and the terms of the Credit Documents, together with such powers as are reasonably incidental thereto. The Collateral Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the Credit Documents, and it may perform such duties by or through its agents or employees. Nothing in this Agreement or the Credit Documents, express or implied, is intended to or shall be construed as imposing upon the Collateral Agent any obligations in respect of this Agreement or such Credit Documents, except as expressly set forth herein or therein. The Collateral Agent shall not be responsible to any Secured Creditor for the execution, effectiveness, genuineness, validity, perfection, enforceability, collectibility, value or sufficiency of the Collateral or the Credit Documents or for any representations, warranties, recitals or statements made in any document executed in connection with the Secured Obligations or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by or on behalf of the Borrower or any subsidiary of either of the Borrower to any Secured Creditor or be required to ascertain or inquire as to the performance or observance by the Borrower or any of its subsidiaries or any other pledgor or guarantor of any of the terms, conditions, provisions, covenants or agreements contained in any document executed in connection with the Secured Obligations or of the existence or possible existence of any Triggering Event.

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3.4 Liabilities of Collateral Agent. The Collateral Agent shall not be liable to any Secured Creditor for any action taken or omitted hereunder, under the Credit Documents, or in connection herewith or therewith except to the extent caused by the Collateral Agent’s gross negligence or willful misconduct. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any written statement, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons and, except as otherwise specifically provided in this Agreement, shall be entitled to rely upon the written direction of the Required Creditors (as defined in Section 4.1) certifying that the persons signing such direction constitute the “ Required Creditors ,” and shall be entitled to rely and shall be fully protected in relying on opinions and judgments of counsel, accountants, experts and other professional advisors selected by it in good faith and with due care. The Collateral Agent shall be entitled to refrain from exercising any power, discretion or authority vested in it under this Agreement or the Credit Documents, unless and until it has obtained the directions in accordance with Section 4.1 hereof with respect to the matters covered thereby. The Collateral Agent shall be entitled to request from each Secured Creditor a certificate setting out the amount of the respective Secured Obligations held by it for purposes of calculating distributions pursuant to Section 2.3.

3.5 No Action by Secured Creditors. Each Secured Creditor agrees not to take any action whatsoever to enforce any term or provision of the Credit Documents or to enforce any of its rights in respect of the Collateral, in each case except through the Collateral Agent acting in accordance with this Agreement.

3.6 Indemnification of Collateral Agent. Each of the Borrower, by its execution of the signature page of this Agreement, agrees to pay and save the Collateral Agent harmless from liability for payment of all costs and expenses of the Collateral Agent in connection with this Agreement or the Credit Documents, other than liabilities, costs and expenses resulting from the Collateral Agent’s gross negligence or willful misconduct. Each Secured Creditor severally agrees to indemnify the Collateral Agent, pro rata (to the extent set forth in the penultimate sentence of this Section 3.6), to the extent the Collateral Agent shall not have been reimbursed by or on behalf of the Borrower or from proceeds of the Collateral or otherwise, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses (including, without limitation, reasonable counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or under the Credit Documents, in its capacity as the Collateral Agent in any way relating to or arising out of this Agreement, the Credit Documents and/or the Collateral; provided that no Secured Creditor shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Collateral Agent’s gross negligence, willful misconduct or breach of the express terms of this Agreement. For purposes of this Section 3.6 any pro rata calculation shall be on the basis of the outstanding principal amount of the Secured Obligations held by or for each Secured Creditor at the time of the act, omission or transaction giving rise to the reimbursement or indemnity required by this Section 3.6. The provisions of this Section 3.6 shall survive the payment in full of all the Secured Obligations and the termination of this Agreement and all other documents executed in connection with the Secured Obligations.

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3.7 Resignation and Replacement of Collateral Agent. The Collateral Agent may resign at any time by giving thirty (30) calendar days’ prior written notice thereof to the Secured Creditors and the Borrower, subject to the acceptance of its appointment by a successor Collateral Agent simultaneously with or prior to any resignation of the Collateral Agent. Upon any such notice of resignation, the Required Creditors (as defined in Section 4.1 below) shall have the right to appoint a successor Collateral Agent. The Collateral Agent may be removed at any time with or without cause, by an instrument in writing delivered to the Collateral Agent, the Borrower and the other Secured Creditors by the Required Creditors (as defined in Section 4.1 below). Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent, and the retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement and the Credit Documents; provided, however, that the retiring or removed Collateral Agent will continue to remain liable for all acts of, or the omission to act by, such retiring or removed Collateral Agent which occurred prior to such retirement or removal. If no successor Collateral Agent shall have been so appointed and shall have accepted such appointment within thirty (30) calendar days after the retiring Collateral Agent’s giving of notice of resignation, then the retiring Collateral Agent may, upon prior written notice to the Borrower and the Secured Creditors and on behalf of the Secured Creditors, appoint a successor Collateral Agent. After any retiring or removed Collateral Agent’s resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Collateral Agent under this Agreement and the Credit Documents.

3.7 Other Collateral Agency Provisions. The Collateral Agent shall not be liable for or by reason of (i) any failure or defect in the registration, filing or recording of any of the Credit Documents, or any notice, caveat or financing statement with respect to the foregoing, or (ii) any failure to do any act necessary to constitute, perfect and maintain the priority of the security interest created by the Credit Documents. Notwithstanding anything to the contrary contained in this Agreement or any document executed in connection with any of the Secured Obligations, the Collateral Agent, unless it shall have actual knowledge thereof, shall not be deemed to have any knowledge of any Triggering Event unless and until it shall have received written notice from either of the Borrower or any Secured Creditor describing such Triggering Event in reasonable detail (including, to the extent known, the date of occurrence of the same). Upon receipt by the Collateral Agent of any direction by the Required Creditors, all of the Secured Creditors will be bound by such direction.

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4.	Collateral agent’s actions Relating to Defaults and Remedies.

4.1 Actions after any Triggering Event . The Required Creditors may, after any Triggering Event (other than an involuntary bankruptcy proceeding) has occurred and by giving the Collateral Agent written notice of such election, instruct and cause the Collateral Agent to exercise its rights and remedies under the Credit Documents. The Collateral Agent shall follow the instructions of the Required Creditors with respect to the enforcement action to be taken. For purposes of this Agreement, the term “ Required Creditors ” shall mean, at any time, the Secured Creditors holding, in the aggregate, more than 50% of the sum of the then currently outstanding principal amount of the Secured Obligations. Notwithstanding anything to the contrary contained in this Agreement, the Collateral Agent shall not commence or otherwise take any action or proceeding to enforce any Collateral Document or to realize upon any or all of the Collateral unless and until the Collateral Agent has received instructions in accordance with this Section 4.1. Upon receipt by the Collateral Agent of any such instructions, the Collateral Agent shall seek to enforce the Credit Documents and to realize upon the Collateral in accordance with such instructions; provided that the Collateral Agent shall not be obligated to follow any such directions as to which the Collateral Agent has received a written opinion of its counsel to the effect that such directions are in conflict with any provisions of law, this Agreement, the Credit Documents, or any order of any court or administrative agency, and the Collateral Agent shall not, under any circumstances, be liable to any Secured Creditor or any other Person for following the written directions received in accordance with this Section 4.1.

4.2 Duties and Responsibilities. The duties and responsibilities of the Collateral Agent hereunder shall consist of and be limited to (i) selling, releasing, surrendering, realizing upon or otherwise dealing with, in any manner and in any order, all or any portion of the Collateral, (ii) exercising or refraining from exercising any rights, remedies or powers of the Collateral Agent under this Agreement or the Credit Documents or under applicable law in respect of all or any portion of the Collateral, (iii) making any demands or giving any notices under the Credit Documents, (iv) effecting amendments to and granting waivers under the Credit Documents in accordance with the terms hereof, and (v) maintaining any cash collateral account under its exclusive dominion and control for the benefit of the Secured Creditors and making deposits therein and withdrawals therefrom as necessary to effect the provisions of this Agreement.

4.3 Actions Against the Collateral. In the event that the Collateral Agent proceeds to foreclose upon, collect, sell or otherwise dispose of or take any other action with respect to any or all of the Collateral or to enforce any provisions of the Credit Documents or takes any other action pursuant to this Agreement or any provision of the Credit Documents or requests directions from the Required Creditors as provided herein, upon the request of the Collateral Agent or any Secured Creditor, each of the Secured Creditors agrees that such Secured Creditor (or any agent of or representative for such Secured Creditor) shall promptly notify the Collateral Agent in writing, as of any time that the Collateral Agent may specify in such request, (i) of the aggregate amount of the respective Secured Obligations then owing to such Secured Creditor as of such date and (ii) such other information as the Collateral Agent may reasonably request.

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4.4 Notice of Triggering Event. Promptly after the Collateral Agent receives written notice of the occurrence of any Triggering Event pursuant to Section 2.1, it shall promptly send copies of such notice to each of the Secured Creditors.

4.5. No Use of Collateral Agent’s Funds. The Collateral Agent shall not be obliged to expend its own funds in performing its obligations under this Agreement and shall be entitled to require that the Secured Creditors provide it with sufficient funds prior to taking any action required under this Agreement.

5.	Third Party Beneficiaries.

This Agreement is solely for the benefit of the parties hereto and their respective permitted successors and assigns, and neither of the Borrower nor any other person or entity, are intended to be third party beneficiaries hereunder or to have any right, benefit, priority or interest under, or shall have any right to enforce this Agreement.

6.	Relation of Creditors.

This Agreement is entered into solely for the purposes set forth herein, and no Secured Creditor assumes any responsibility to any other party hereto to advise such other party of information known to such other party regarding the financial condition of the Borrower or any of their Subsidiaries or of any other circumstances bearing upon the risk of nonpayment of any obligation. Each Secured Creditor specifically acknowledges and agrees that nothing contained in this agreement is or is intended to be for the benefit of the Borrower or any of their Subsidiaries and nothing contained herein shall limit or in any way modify any of the obligations of the Borrower to the Secured Creditors.

7.	Notice of Certain Events.

Each Secured Creditor agrees that upon the occurrence of a Triggering Event, it shall promptly notify the Collateral Agent of the occurrence of such Triggering Event. In addition, each Secured Creditor agrees to provide to the Collateral Agent the amount and currency of its Secured Obligations at such reasonable times as may be necessary to determine such Secured Creditor’s pro rata share of the outstanding principal amount of the Secured Obligations.

8.	MISCELLANEOUS.

8.1 Notices. All notices and other communications provided for herein (including, without limitation, any modifications of, or waivers or consents under this Agreement), shall be sent (i) by facsimile or email, with a confirmation of transmission by the transmitting equipment or (ii) by registered or certified mail with return receipt requested (postage prepaid), or (iii) by a recognized overnight delivery service (with charges prepaid) to the intended recipient at the address for notices specified beneath the signature of such party hereto; or as to any party at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communication shall be deemed to have been duly given when actually received.

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8.2 Amendments, Waivers, Consents. All amendments, waivers or consents of any provision of this Agreement shall be effective only if the same shall be in writing and signed by all of the Secured Creditors.

8.3 Releases of Collateral. The parties hereto agree that the Collateral Agent shall release all or any portion of the Collateral (other than in connection with the exercise of its rights and remedies pursuant to Section 4) only upon the receipt by the Collateral Agent of a written approval from the Required Creditors or confirmation that the Credit Document Obligations have been paid in full. Upon the receipt of such written approval, the Collateral Agent shall, at the Borrower’s expense, execute and deliver such releases of its security interest in such Collateral to be released, and provide a copy of such releases to each of the Secured Creditors. In connection therewith, the Secured Creditors hereby irrevocably authorize the Collateral Agent from time to time to release such Collateral or consent to such release in accordance with the terms of this Agreement.

8.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted respective successors and assigns.

8.5 Captions. The captions and Section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

8.6 Conflicts. In the event of a conflict between the terms of this Agreement and the terms of any of the Credit Documents, the terms of this Agreement shall control.

8.7 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together will constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart.

8.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF DELAWARE.

8.9 Merger. This Agreement and the Credit Documents supersede all prior agreements, written or oral, among the parties with respect to the subject matter of such agreements.

8.10 Independent Investigation. None of the Collateral Agent or any of the Secured Creditors, nor any of their respective directors, officers, agents or employees, shall be responsible to any of the others for the solvency or financial condition of the Borrower or the ability of the Borrower to repay any of the Secured Obligations, or for the value, sufficiency, existence or ownership of any of the Collateral, or the statements of the Borrower, oral or written, or for the validity, sufficiency or enforceability of any of the Secured Obligations or any document or agreement executed or delivered in connection with or pursuant to any of the foregoing. Each Secured Creditor has entered into its respective financial agreements with the Borrower based upon its own independent investigation, and makes no warranty or representation to the other, nor does it rely upon any representation by any of the others, with respect to the matters identified or referred to in this Section.

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8.11 Severability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

8.12 Effect of Bankruptcy or Insolvency. This Agreement shall continue in effect notwithstanding the bankruptcy or insolvency of any party hereto or the Borrower or any of its Subsidiaries.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date first set forth above.

CHINA KINGTON ASSET MANAGEMENT CO. LTD. , as the Collateral Agent

By: /s/ Eric Wu

Name: Eric Wu

Title: Partner, Senior Vice President

Address for Notices : Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao

South Road, Pu Dong New District, Shanghai, P.R. China

Attention: Bob Wu

Email: wubing98@gmail.com

Tel: 86 21 2028 0208 Facsimile: 86 21 5020 3616

Mark Sieczkarek, as a Noteholder

/s/ Mark Sieczkarek

Address for Notices: [At the address and contact information most recently

on the books and records of the company.]

Jian Ping Fu, as a Noteholder

/s/ Jian Ping Fu

Address for Notices: Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao

South Road, Pu Dong New District, Shanghai, P.R. China

Attention: Bob Wu

Email: wubing98@gmail.com

Tel: 86 21 2028 0208 Facsimile: 86 21 5020 3616

S-1

Pioneer Pharma (Singapore) Pte. Ltd., as a Noteholder

/s/ Xinzhou Li (Paul Li)

Address for Notices: 33A Chander Road, Singapore 219539

Tel: +65 98116356

Attention: Xinzhou Li (Paul Li)

Email: paul.li@pioneer-pharma.com

Gail J. Maderis Revocable Trust, as a Noteholder:

/s/ Gail J. Maderis

Address for Notices: [At the address and contact information most recently

on the books and records of the company.]

T. Alex McPherson, as a Noteholder:

/s/ T. Alex McPherson

Address for Notices: [At the address and contact information most recently

on the books and records of the company.]

S-2

THE UNDERSIGNED HEREBY ACKNOWLEDGES AND CONSENTS TO THE FOREGOING.

BORROWER:

NOVABAY PHARMACEUTICALS, INC.

By: /s/ Justin Hall

Name: Justin Hall

Title: General Counsel

Address for Notices :

5980 Horton Street, Suite 550

Emeryville, CA 94608
Facsimile: (510) 225-0371

Email: jhall@novabay.com

A-1

Exhibit 10.6

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) dated as of December 30, 2015, between NOVABAY PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and CHINA KINGTON ASSET MANAGEMENT CO. LTD., in its capacity as Collateral Agent for the benefit of the Secured Parties (together with its successors and assigns in such capacity, the “Collateral Agent”).

W I T N E S S E T H :

WHEREAS , the Company, as maker, has executed and delivered or will soon execute and deliver to each of Mark Sieczkarek, a resident of the United States (“Sieczkarek”); The Gail J. Maderis Revocable Trust, a trust of the United States (“Maderis”); T. Alex McPherson, a resident of Canada ("McPherson"); Jian Ping Fu, a resident of the Republic of China (“Fu”) and Pioneer Pharma (Singapore) Pte. Ltd., a corporation based in Singapore (“Pioneer”), (each a “Secured Party” and collectively, the “Secured Parties”), as payee, certain promissory notes, that have an aggregate principal amount of $3,020,000 (as hereinafter modified from time to time, each a “Note” and collectively, the “Notes”);

WHEREAS , each Note evidences a loan to be advanced by the applicable Secured Party to the Company (each a “Loan” and collectively, the “Loans”); and

WHEREAS , it is a condition precedent to each Secured Party’s advance of its respective Loan that the Company shall have executed and delivered this Security Agreement to the Collateral Agent.

NOW THEREFORE , in consideration for the foregoing premises, the agreements and covenants contained herein and other valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND REFERENCES

Section 1.1. General Definitions . As used herein, the terms “Company,” “Secured Party,” “Note” and “Loan” shall have the meanings ascribed to such terms above, and the following terms shall have the following meanings:

“ Code ” means the Uniform Commercial Code currently in effect in the State of Delaware; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority or exercise of remedies of the Collateral Agent’s security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Delaware, the term “Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection, priority or exercise of remedies and for purposes of definitions related to such provisions.

“ Collateral ” means all property of whatever type, in which the Collateral Agent, for the benefit of the Secured Parties, at any time has a security interest pursuant to Section 2.1 hereof.

“ Event of Default ” has the meaning specified in Section 5.1 hereof.

“ Person ” means an individual, corporation, association, general or limited partnership, limited liability company, joint stock company, joint venture, trust or trustee thereof, estate or executor thereof, unincorporated organization or joint venture, court or governmental unit or any agency or subdivision thereof, or any legally recognizable entity of whatever kind or type.

“ Secured Obligations ” means the payment by the Company, as and when due and payable, of amounts from time to time owing by it under or with respect to the Notes and all indebtedness and other obligations owing by the Company under this Agreement or any of the other loan documents executed in connection therewith or herewith.

Section 1.2. References . All terms used in this Agreement which are defined in Article 9 of the Code and not otherwise defined herein shall have the same meanings herein as set forth therein, except where the context otherwise requires.

Section 1.3. Exhibits and Schedules . All exhibits and schedules attached to this Agreement are a part hereof for all purposes.

Section 1.4. Renewals, Extensions, Amendments, Modifications, Supplements and Restatements . Unless the context otherwise requires or unless otherwise provided herein, references in this Agreement to a particular agreement, instrument or document (including, without limitation, references in Section 2.1) also refer to and include all renewals, extensions, amendments, modifications, supplements or restatements of any such agreement, instrument or document, provided that nothing contained in this Section 1.4 shall be construed to authorize any Person to execute or enter into any such renewal, extension, amendment, modification, supplement or restatement.

Section 1.5. Headings . Titles and headings appearing at the beginning of any subdivision are for convenience only and do not constitute any part of any such subdivision and shall be disregarded in construing the language contained in this Agreement.

Section 1.6. References and Titles . All references in this Agreement to Exhibits, Schedules, Articles, Sections, Subsections, and other subdivisions refer to the Exhibits, Schedules, Articles, Sections, Subsections and other subdivisions of this Agreement unless expressly provided otherwise. The words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases “this Section” and “this Subsection” and similar phrases refer only to the Sections or Subsections hereof in which the phrase occurs. The word “or” is not exclusive. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender. Words in the singular form shall be construed to include the plural and words in the plural form shall be construed to include the singular, unless the context otherwise requires.

ARTICLE II

SECURITY INTEREST

Section 2.1. Grant of Security Interest . As security for the Secured Obligations, the Company hereby grants to the Collateral Agent for the benefit of the Secured Parties a security interest in all of the Company’s right, title and interest in and to all tangible and intangible assets, whether now existing or owned or hereafter arising or acquired, and wheresoever situated, including but not limited to all accounts, contract rights and other general intangibles (including payment intangibles and patents, trademarks, copyrights and applications therefor), inventory, equipment, fixtures, deposit accounts, investment property, commercial tort claims, letters of credit and letter of credit rights, and products and proceeds (as each and all of the foregoing types of Collateral is defined in the Code) of all of the foregoing owned by the Company or in which the Company otherwise has any rights. For the avoidance of doubt, such security interest also includes but is not limited to, the Company’s rights to, and patents for, Aganocide and derivative compounds such as auriclosene (NVC-422), which may have an application as a treatment for UCBE; Neutrox, including the Company’s three branded Neutrox products Avenova, NeutroPhase and CelleRx; and intelliCase.

Section 2.2. Obligations Secured . The security interest created hereby in the Collateral constitutes a continuing security interest for the payment by the Company, as and when due and payable, of all amounts from time to time owing by it under or with respect to the Note. The obligations secured by this Agreement include all renewals, extensions, amendments, modifications, supplements or restatements of or substitutions for any of the foregoing.

Section 2.3. Nature of Obligations . The security interests created by this Agreement in the Collateral are to be a first priority interest in the Collateral superior to all other security interests in the Collateral, except as expressly permitted hereunder or under the Notes. Notwithstanding the foregoing, the Company may execute additional promissory notes on terms substantially similar to the Notes, and the obligations under such additional promissory notes may be secured by security interests that are pari passu with the security interests granted hereunder.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 3.1. Representations and Warranties . The Company represents and warrants to the Collateral Agent for the benefit of the Secured Parties as of the date hereof as follows:

(a) Location of the Company and Records . The Company’s chief executive office and principal place of business and the office where the records concerning the Collateral are kept or will be kept is set forth on Schedule 3.1 hereto. Schedule 3.1 also sets forth each and every other location at which Collateral is stored or maintained.

(b) Ownership . The Company is the legal and beneficial owner of the Collateral free and clear of any liens, except for (i) the security interests created by this Agreement, (ii) liens imposed by law for taxes that are not yet due or are being contested, (iii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like liens imposed by law and arising in the ordinary course of business, (iv) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance, social insurance and other social security laws or regulations, (v) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business, (vi) judgment liens in respect of judgments that do not constitute an Event of Default under Notes, (vii) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company, (viii) liens upon tangible personal property securing loans to the Company or deferred payments by the Company for the purchase of such tangible personal property, (ix) pari passu liens as described in Section 2.3 and (x) other liens consented to in writing by the Collateral Agent (collectively, “Permitted Liens”). Except with respect to Permitted Liens, no effective financing statement or other document similar in effect covering all or any part of the Collateral is on file in any recording office.

(c) Validity . This Agreement creates a valid security interest in the Collateral, securing the payment of the Secured Obligations.

(d) No Conflict, Violation or Breach . The execution, delivery and performance by the Company of this Agreement do not and will not (a) conflict with the Company’s organizational documents; (b) violate any provision of any law, rule or regulation; (c) result in breach of or constitute a default (after the passage of time or the giving of notice or both) under any loan or credit agreement or any other agreement, lease or instrument to which the Company is a party or by which it or its properties may be bound or affected; or (d) require the consent or approval of any third party or governmental entities, except, in the case of clauses (b), (c) and (d) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect. As used in this Section, “Material Adverse Effect” shall mean any event, act, condition or occurrence having a material adverse effect on the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole or on the performance by the Company of its obligations under this Agreement.

Section 3.2. Affirmative Covenants . Unless the holders of a majority of the Secured Obligations then outstanding shall otherwise consent in writing, the Company shall at all times comply with the covenants and agreements contained in this Section 3.2 from the date hereof and so long as any part of the Secured Obligations are outstanding:

(a) Ownership and Liens . The Company shall maintain good and marketable title to all Collateral free and clear of all liens, security interests, adverse claims and other charges or encumbrances except with respect to Permitted Liens. The Company shall use commercially reasonable efforts to resolve any dispute, right of set off, counterclaim or defense with respect to all or any part of the Collateral. The Company shall cause to be terminated any financing statement or other security instrument with respect to the Collateral, except such as may exist or as may have been filed in favor of the Collateral Agent or pursuant to a Permitted Lien.

(b) Inspection; Verification . The Company shall make the Collateral available for inspection by the Collateral Agent or any Secured Party. The Company shall not permit the Collateral or any part thereof to be affixed to or otherwise become a part of any real or personal property, without first making arrangements satisfactory to the Collateral Agent to protect the Collateral Agent’s security interest therein. During regular business hours and after reasonable notice to the Company, the Collateral Agent or any Secured Party (by any of its officers, employees, agents, representatives, or designees) shall have the right to inspect the Collateral and to inspect and audit, all books, records, journals, orders, receipts, or other correspondence related thereto or to the Company’s business (and to make extracts or copies thereof as the Collateral Agent or such Secured Party may desire), to inspect the premises upon which any of the Collateral is located, and to verify accounts with the Company’s customers and other account debtors for the purpose of verifying the amount, quality, quantity, value, and condition of, or any other matter relating to, the Collateral, including, without limitation, the conduct of the Company’s business and its compliance with the terms and conditions of this Agreement and the Notes. Each of the Collateral Agent and each Secured Party agrees to maintain the confidentiality of information obtained pursuant to any such inspection, except that such information may be disclosed (i) to its directors, officers, employees, agents, advisors and other representatives (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it or him, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) in connection with the exercise of any remedies hereunder or under any other loan document executed in connection herewith or any action or proceeding relating to this Agreement or any other such loan document or the enforcement of rights hereunder or thereunder, (v) with the consent of the Company or (vi) to the extent such information (A) becomes publicly available other than as a result of a breach of this section or (B) becomes available to the Collateral Agent or any Secured Party on a nonconfidential basis from a source other than the Company.

(c) Further Assurances . The Company shall, at its expense and at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Collateral Agent or any Secured Party may reasonably request in order (i) to perfect and protect the security interest created hereby; (ii) to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to the Collateral; or (iii) to otherwise effect the purposes of this Agreement, including, without limitation (A) executing and filing such financing or continuation statements, or amendments thereto, as may be necessary or desirable or that the Collateral Agent may request in order to perfect and preserve the security interest created hereby, (B) executing and delivering, and causing depositaries and security intermediaries to execute and deliver, control agreements in respect of deposit accounts and investment property, and (C) furnishing to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

(d) Information . The Company shall furnish to the Collateral Agent any information that the Collateral Agent or any Secured Party may from time to time reasonably request concerning any covenant, provision or representation contained herein or any other matter in connection with the Collateral. The Company shall advise the Collateral Agent promptly upon the Company’s acquiring or otherwise having an interest in any commercial tort claim.

(e) Payment of Taxes, etc. The Company shall (i) timely pay all property and other taxes, assessments and governmental charges or levies imposed upon the Collateral or any part thereof, (ii) timely pay all lawful claims which, if unpaid, might become a lien or charge upon the Collateral or any part thereof, and (iii) maintain appropriate accruals and reserves for all such liabilities in a timely fashion in accordance with generally accepted accounting principles. The Company may, however, delay paying or discharging any such taxes, assessments, charges, claims or liabilities so long as the validity thereof is contested in good faith by proper proceedings and adequate reserves therefor have been set aside on its books.

(f) Changes . Without limitation of any other covenant herein, the Company shall provide thirty (30) days’ written notice to the Collateral Agent prior to causing or permitting any change to be made in its name or identity, or any change to be made to the locations, as set forth on Schedule 3.1, of (i) any Collateral, (ii) any records concerning any Collateral, or (iii) the Company’s chief executive office or principal place of business.

Section 3.3. Negative Covenants . Unless a majority of the holders of the Secured Obligations then outstanding otherwise consents in writing, the Company shall at all times comply with the covenants contained in this Section 3.3 from the date hereof and so long as any part of the Secured Obligations are outstanding.

(a) Transfer or Encumbrance . The Company shall not (i) sell, assign (by operation of law or otherwise), transfer, exchange, lease or otherwise dispose of any of its properties or assets, including any of the Collateral, other than in the ordinary course of the Company’s business (the “Business”) and other than personal property that is replaced by equivalent property or consumed in the normal operation of the Business or is otherwise no longer used or useful in the operation thereof, (ii) grant a lien on or security interest in or execute, file or record any financing statement or other security instrument with respect to the Collateral other than those in favor of the Collateral Agent or Permitted Liens, or (iii) deliver actual or constructive possession of the Collateral to any other Person. Notwithstanding the foregoing, the Company may license or otherwise transfer interests in its intellectual property or other general intangibles that is no longer used or useful in the operation of the Business.

(b) Impairment of Security Interest . The Company shall not take or fail to take any action outside the ordinary course of Business that would in any manner materially impair the value or enforceability of the Collateral Agent’s security interest in any Collateral.

ARTICLE IV

POWERS AND AUTHORIZATIONS

Section 4.1. Additional Financing Statement Filings . The Company hereby authorizes the Collateral Agent to file, without the signature of the Company where permitted by law, one or more financing or continuation statements, and amendments thereto, relating to the Collateral. The Company further agrees that a carbon, photographic or other reproduction of this Agreement or any financing statement describing any Collateral is sufficient as a financing statement and may be filed in any jurisdiction that the Collateral Agent may deem appropriate.

Section 4.2. Power of Attorney . The Company hereby irrevocably appoints the Collateral Agent as the Company’s attorney-in-fact and proxy, with full authority upon the occurrence and during the continuance of an Event of Default in the place and stead of the Company and in the name of the Company or otherwise, in the Collateral Agent’s discretion, at any time upon the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation (i) to obtain and adjust insurance required to be paid to the Collateral Agent for the benefit of the Secured Parties, (ii) to ask, demand, collect, sue for, recover, compound, receive, compromise, settle, and give acquittance and receipts for moneys due and to become due under or with respect to any of the Collateral, and take control, in any manner, of any item of payment or proceeds relating to any Collateral, to endorse the name of the Company upon any of the items of payment or proceeds relating to any Collateral and deposit the same to the account of the Collateral Agent on account of the Secured Obligations and endorse the name of the Company upon any chattel paper, document, instrument, invoice, freight bill, bill of lading, or similar document or agreement relating to the accounts, inventory and any other Collateral, (iii) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) or clause (ii) above, (iv) to file any claims and proofs of claim or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Collateral, and (v) to execute and file one or more financing or continuation statements, and amendments thereto, relating to the Collateral. Such appointment is coupled with an interest and shall be irrevocable from the date hereof and so long as any part of the Secured Obligations are outstanding, but may only be exercised upon the occurrence and during the continuance of an Event of Default.

Section 4.3. Performance by the Collateral Agent . If the Company fails to perform any material agreement or obligation contained herein within thirty (30) days after notice from the Collateral Agent, the Collateral Agent may itself, at its option and in its sole discretion, perform, or cause performance of, such agreement or obligation, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Company on demand; provided, however, that nothing herein shall impose any obligation of any kind whatsoever on the Collateral Agent to perform any obligation or agreement of the Company.

ARTICLE V

EVENTS OF DEFAULT AND REMEDIES

Section 5.1. Events of Default . The occurrence of any of the following events shall constitute an “Event of Default” hereunder:

(a) the Company shall fail to make any payment, including without limitation, for principal, interest, fees or other expenses, under any Note; or

(b) an Event of Default, as defined in the Notes, shall occur; or

(c) any representation, warranty or statement made by the Company herein shall prove to have been incorrect or untrue in any material respect on or as of the date made or deemed made; or

(d) the Company shall fail to observe or perform in all material respects any term, indemnity, covenant or agreement contained herein.

Section 5.2. Remedies . Upon the occurrence of any Event of Default, or at any time thereafter, in addition to all other rights, powers and remedies herein conferred, conferred in the Notes or conferred by operation of law, the Collateral Agent may, and upon receipt of written instructions from the holders of a majority of the Secured Obligations then outstanding shall, declare the Secured Obligations immediately due, payable and performable; and from time to time in its reasonable discretion, without limitation and without notice except as expressly provided below, the Collateral Agent may:

(a) exercise with respect to the Collateral all the rights and remedies of a secured party on default under the Code (whether or not the Code applies to the affected Collateral);

(b) require the Company to, and the Company hereby agrees that it shall at its expense and upon the reasonable request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent;

(c) reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure;

(d) dispose of, at its office, on the premises of the Company or elsewhere, all or any part of the Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that the sale of any part of the Collateral shall not exhaust the Collateral Agent’s power of sale, but sales may be made from time to time, and at any time, until all of the Collateral has been sold or until the Secured Obligations have been paid and performed in full), and at any such sale it shall not be necessary to exhibit any of the Collateral;

(e) apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and the Company hereby consents to any such appointment; and

(f) at its discretion, retain an amount of the Collateral in satisfaction of the Secured Obligations whenever the circumstances are such that the Collateral Agent is entitled to do so under the Code or otherwise.

The Company agrees that, to the extent notice of sale shall be required by law, ten (10) calendar days’ notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

Section 5.3. Application of Proceeds . Upon the occurrence of any Event of Default, or at any time thereafter, the Collateral Agent may in its discretion apply any cash held by the Collateral Agent as Collateral, and any cash proceeds received by the Collateral Agent with respect to any sale of, collection from, or other realization upon all or any part of, the Collateral, to any or all of the following in such order as the Collateral Agent may elect:

(a) to the repayment of the reasonable out-of-pocket costs and expenses up to an aggregate of $20,000, including attorneys’ fees and legal expenses up to an aggregate of $10,000, incurred by the Collateral Agent in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or the Secured Parties hereunder; or (iv) the failure of the Company to perform or observe any of the provisions hereof;

(b) to the payment or other satisfaction of any liens and other encumbrances upon any of the Collateral;

(d) by holding the same as Collateral;

(e) to the payment of any other amounts required by applicable law; and

(f) by delivery to the Company or to any other party who shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.

Section 5.4. Deficiency . In the event that the proceeds of any sale, collection or realization of or upon the Collateral by the Collateral Agent or any Secured Party are insufficient to pay all amounts to which the Collateral Agent and the Secured Parties are legally entitled, the Company shall be liable for the deficiency, together with interest thereon as provided herein and in the Notes, or, if no interest is so provided, at such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees and expenses of any attorneys (up to $10,000) employed by the Collateral Agent to collect such deficiency.

Section 5.5. Other Resources . The Company waives any right to require the Collateral Agent to proceed against any other Person, exhaust any Collateral or other security for the Secured Obligations, or pursue any other remedy in the Collateral Agent’s power. The Company further waives any and all notice of acceptance of this Agreement. Until all of the Secured Obligations shall have been paid in full, the Company shall have no right to subrogation and the Company waives the right to enforce any remedy which the Collateral Agent has or may hereafter have against any other party liable for the Secured Obligations, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by the Collateral Agent. No action which the Collateral Agent may take or omit to take in connection with this Agreement or the Notes or any of the Secured Obligations shall release or diminish the Company’s obligations, liabilities, duties or agreements hereunder, including without limitation, from time to time: (a) taking or holding any other property of any type from any other Person as security for the Secured Obligations, and exchanging, enforcing, waiving and releasing any or all of such other property, and (b) applying the Collateral or such other property and directing the order or manner of sale thereof as the Collateral Agent may in its reasonable discretion determine.

Section 5.7. Remedies Not Exclusive . All rights, powers and remedies herein conferred are cumulative, and not exclusive, of (i) any and all other rights and remedies herein conferred or provided for, (ii) any and all other rights, powers and remedies conferred or provided for in the Notes, and (iii) any and all rights, powers and remedies conferred, provided for or existing at law or in equity, and the Collateral Agent shall, in addition to the rights, powers and remedies herein conferred or provided for, be entitled to avail itself of all such other rights, powers and remedies as may now or hereafter exist at law or in equity for the collection of and enforcement of the Secured Obligations and the enforcement of the warranties, representations, covenants, indemnities and other agreements contained in this Agreement and the Notes. Each and every such right, power and remedy may be exercised from time to time and as often and in such order as may be deemed expedient by the Collateral Agent and the exercise of any such right, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter, any other right to exercise, at the same time or thereafter, any other right, power or remedy. No delay or omission by the Collateral Agent or other person in the exercise of any right, power or remedy will impair any such right, power or remedy or operate as a waiver thereof or of any other right, power or remedy then or thereafter existing.

ARTICLE VI

MISCELLANEOUS

Section 6.1. Notices . All notices and other required communications hereunder shall be in writing, addressed as follows:

If to the Collateral Agent:

China Kington Asset Management Co Ltd.

Suite 6C, Building 3, You You Century Plaza, No. 428 Yang Gao

South Road, Pu Dong New District, Shanghai, P.R. China

Attention: Bob Wu

Email: bob.wu@kingtonasset.com

If to the Company then to:

NovaBay Pharmaceuticals, Inc.

5980 Horton Street, Suite 550

Emeryville, CA 94608

Attention: Justin Hall, General Counsel

Email: jhall@novabay.com

Notices shall be given (a) by personal delivery to the other party, (b) by facsimile or email, with a confirmation of transmission by the transmitting equipment, or (c) by registered or certified mail, return receipt requested. All notices shall be effective and deemed delivered (i) if by personal delivery, on the date of delivery if during business hours, otherwise next business day, (ii) if by facsimile or email, on the date the facsimile or email is received if received during business hours in the time zone of the recipient, otherwise next business day, and (iii) if solely by mail, upon receipt by the addressee. A party may change its address by notice to the other party.

Section 6.2. Entire Agreement . This Agreement (including the Schedules and Exhibits hereto) constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all negotiations, prior discussions and prior agreements and understandings relating to such subject matter.

Section 6.3. Costs and Expenses . The Company shall upon demand pay to the Collateral Agent the amount of any and all reasonable costs and expenses up to $20,000, including the reasonable fees and disbursements of the Collateral Agent’s counsel and of any experts and agents up to $10,000, which the Collateral Agent may incur in connection with (i) the perfection and preservation of the security interest created under this Agreement, (ii) the administration of this Agreement, (iii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral, (iv) the exercise or enforcement of any of the rights of the Collateral Agent or the Secured Parties hereunder, or (v) the failure by the Company to perform or observe any of the provisions hereof.

Section 6.4. Amendments . No amendment of any provision of this Agreement shall be effective unless it is in writing and signed by the Company and the Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure by the Company therefrom, shall be effective unless it is in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given and to the extent specified in such writing.

Section 6.5. Preservation of Rights . No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. Neither the execution nor the delivery of this Agreement shall in any manner impair or affect any other security for the Secured Obligations.

Section 6.6. Unenforceability . All rights, powers and remedies hereunder conferred shall be exercisable by the Collateral Agent only to the extent not prohibited by applicable law; and all waivers or relinquishments of rights and similar matters shall only be effective to the extent such waivers or relinquishments are not prohibited by applicable law. If any provision of this Agreement is invalid or unenforceable in any jurisdiction, such provision shall be fully severable from this Agreement, and the other provisions hereof shall remain in full force and effect in such jurisdiction and the remaining provisions hereof shall be liberally constructed in favor of the Collateral Agent in order to carry out the provisions and intent hereof. The invalidity of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of any such provision in any other jurisdiction.

Section 6.7. Survival of Agreements . All representations and warranties of the Company herein, and all covenants and agreements herein, including the confidentiality covenant within Section 3.2(b) herein, shall survive the execution and delivery of this Agreement, and the creation of the Secured Obligations.

Section 6.8. Binding Effect and Assignment . This Agreement creates a continuing security interest in the Collateral and shall be binding on the Company and shall inure to the benefit of the Collateral Agent for the benefit of the Secured Parties. Neither the Company nor the Collateral Agent may assign or otherwise transfer its rights under this Agreement to any other person or entity without the prior written consent of the other party. Upon any such consent to transfer, such other person or entity shall become vested with all of the duties, obligations and benefits with respect thereto granted to the Company or the Collateral Agent, as the case may be, herein or otherwise.

Section 6.9. Termination . Upon the satisfaction in full of the Secured Obligations, the security interest created by this Agreement shall terminate and all rights to the Collateral shall revert to the Company. Upon such event, the Collateral Agent shall, upon the Company’s request and at the Company’s expense (a) return to the Company such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and (b) execute and deliver to the Company such documents as the Company shall reasonably request to evidence such termination. The termination of the security interest created by this Agreement, shall not terminate or otherwise affect the Collateral Agent’s right or ability to exercise any right, power or remedy on account of any claim for breach of warranty or representation, for failure to perform any covenant or other agreement, under any indemnity or for fraud, deceit or other misrepresentation or omission.

Section 6.10. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such state, except as required by mandatory provisions of law and except to the extent that the perfection and the effect of perfection or non-perfection of the security interest created hereby, with respect to any particular collateral, are governed by the laws of a jurisdiction other than the State of Delaware.

Section 6.11. Jurisdiction . The Company agrees to submit to personal jurisdiction in the State of Delaware in any action or proceeding arising out of this Agreement and, in furtherance of such agreement, the Company hereby agrees and consents that without limiting other methods of obtaining jurisdiction, personal jurisdiction over the Company in any such action or proceeding may be obtained within or without the jurisdiction of any court located in Delaware and that any process or notice of motion or other application to any such court in connection with any such action or proceeding may be served upon the Company by registered or certified mail to or by personal service at the address set forth in Section 6.1 (unless such address is changed pursuant to the notice provision set forth in Section 6.1) whether such address be within or without the jurisdiction of any such court.

Section 6.12. Waiver of Jury Trial . THE COMPANY AND THE COLLATERAL AGENT HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY NOTE, THIS AGREEMENT OR OTHER RELATED AGREEMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE NOTES, THIS AGREEMENT OR OTHER RELATED AGREEMENTS AND THE RELATIONSHIPS THEREBY ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT. In the event of litigation, this provision may be filed as a written consent to a trial by the court.

Section 6.13. Specific Performance . The Collateral Agent, for itself and on behalf of the Secured Parties, acknowledges and agrees that compliance with the confidentiality provisions set forth in Section 3.2(b) is essential, and that Company will suffer immediate and irreparable injury and have no adequate remedy at law, if the Collateral Agent or any Secured Party, through acts or omissions, fails to comply with such provisions. Accordingly, in addition to all other rights and remedies of the Company hereunder, the Company shall have the right to seek specific performance of the Collateral Agent’s and the Secured Parties’ obligations under such provisions, and any other equitable relief as the Company may deem necessary or appropriate, and the Collateral Agent, for itself and on behalf of the Secured Parties, waives any requirement for the posting of a bond in connection with such equitable relief.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF , the parties have executed and delivered this Agreement as of the date first above written.

	NOVABAY PHARMACEUTICALS, INC.



	By:	/s/ Justin Hall
		Name: Justin Hall
		Title: General Counsel




	CHINA KINGTON ASSET MANAGEMENT CO. LTD.



	By:	/s/ Eric Wu
		Name: Eric Wu
		Title: Partner

SCHEDULE 3.1

Chief Executive Office and Other Locations of Collateral

	Chief Executive Office :

	NOVABAY PHARMACEUTICALS, INC. 5980 Horton Street, Suite 550 Emeryville, CA 94608



	Other Locations of Collateral :

	None

Exhibit 99.1

NovaBay Pharmaceuticals Secures $3 Million Bridge Loan

Backers Include NovaBay Board Members, China Pioneer Pharma and China Kington Asset Management Co. Ltd.

EMERYVILLE, Calif. (January 7, 2016) – NovaBay ^® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical company focusing on commercializing its Avenova ^® Lid and Lash Cleanser for the domestic eye care market, announces that it has secured a $3 million bridge loan. NovaBay has already received approximately $1.66 million, with the remaining approximate $1.37 million to be funded later this month. The loan has a three-year term with no pre-payment penalty.

The loan, managed by China Kington Asset Management Co. Ltd., is funded by five investors including NovaBay’s Chairman and interim CEO Mark Sieczkarek, NovaBay Board members Gail Maderis and Dr. Alex McPherson, as well as China Pioneer Pharma, NovaBay’s largest shareholder. In May 2015, China Kington Investment Co. Ltd., an affiliated entity, acted as the sole placement agent for a $6.863 million “at market” private placement of NovaBay common stock and warrants to purchase common stock.

“This loan provides NovaBay and our shareholders with non-dilutive funds as we focus on growing Avenova sales and achieving our target of positive cash flow from operations by the end of 2016,” said Mr. Sieczkarek .

“My decision to participate in the loan reflects my optimism with NovaBay’s new business model, and I’m delighted that China Kington and China Pioneer Pharma are demonstrating their ongoing confidence in NovaBay,” stated Ms. Maderis.

“With new record high sales every quarter since launched last year, we are encouraged by the early market traction for Avenova, and we are enthusiastic about the future prospects for NovaBay,” said Eric Wu, Partner and Senior Vice President of China Kington Asset Management Co. Ltd. “We are affirming our intention to be a long-term financial partner to the company.”

In connection with the loan, NovaBay will increase its Board of Directors to eight with the addition of two members to be named by China Kington Asset Management. It is anticipated that the two new directors will join NovaBay’s Board in January 2016, after the appropriate protocols have been completed by the Board’s Nominating & Corporate Governance Committee.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state.

About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics

NovaBay Pharmaceuticals is a biopharmaceutical company focusing on the commercialization of prescription Avenova ^® Lid and Lash Cleanser for the eye care market. Avenova is formulated with Neutrox™, which is cleared by the U.S. Food and Drug Administration (FDA) as a 510(k) medical device. Neutrox is NovaBay’s pure hypochlorous acid. Laboratory tests show that hypochlorous acid has potent antimicrobial activity in solution yet is non-toxic to mammalian cells and it also neutralizes bacterial toxins. Avenova is marketed to optometrists and ophthalmologists throughout the U.S. by NovaBay’s direct medical salesforce. It is accessible from more than 90% of retail pharmacies in the U.S. through agreements with McKesson Corporation, Cardinal Health and AmeriSource Bergen.

Forward-Looking Statements

This release contains forward-looking statements, which are based upon management's current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding the anticipated market acceptance of our products, future sales of our products, the ability to raise capital, and the company’s expected future financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to difficulties or delays in manufacturing, distributing, and selling the company's products, unexpected adverse side effects or inadequate therapeutic efficacy of our product, the uncertainty of patent protection for the company's intellectual property, and the company's ability to obtain additional financing as necessary. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay's latest Form 10-K and Form 10-Q filings with the Securities and Exchange Commission, especially under the heading " Risk Factors ." The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

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NovaBay Contacts

For NovaBay Avenova purchasing information, please contact:

Email us

Call us: 1-800-890-0329

www.Avenova.com

From the Company	Investor Contact
Thomas J. Paulson	LHA
Chief Financial Officer	Jody Cain
510-899-8809	310-691-7100
Contact Tom	Jcain@lhai.com