Exhibit 10.3

  

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between
Frederick Sandford (the “Executive”), and Sonoma Pharmaceuticals, Inc., a
Delaware corporation (the “Corporation”), as of December 11, 2018 (the
“Effective Date”).

 

1. Employment and Duties.

 

1.1 Position. On the terms and subject to the conditions set forth herein, the
Corporation agrees to employ Executive as its President and Chief Executive
Officer and interim Chief Financial Officer until such time as the employment
relationship ends or is terminated by either Party pursuant to Section 2.
Executive does hereby accept and agree to such employment, on the terms and
conditions expressly set forth in this Agreement. Executive shall, if requested,
also serve as a member of the Board of Directors of the Corporation (the
“Board”) and may be required to serve as an officer or director of any affiliate
of the Corporation for no additional compensation.

 

1.2 Duties. During the Term of Employment (as defined in Section 2), Executive
shall serve the Corporation as its President and Chief Executive Officer and
interim Chief Financial Officer. Executive shall, without limitation and without
limiting Executive’s other duties to the Corporation, and without limiting the
authority of the Corporation’s Board of Directors, be responsible for the
general supervision, direction and control of the business and affairs of the
Corporation and have such other duties and responsibilities as the Board shall
designate that are consistent with Executive’s position as President and Chief
Executive Officer and interim Chief Financial Officer of the Corporation.
Executive shall perform all of such duties and responsibilities in accordance
with the legal directives of the Board and in accordance with the practices and
policies of the Corporation as in effect from time to time throughout the Term
of Employment (including, without limitation, the Corporation’s insider trading
and ethics policies, as they may change from time to time). While employed as
President and Chief Executive Officer and interim Chief Financial Officer of the
Corporation, Executive shall report exclusively to the Board. Throughout the
Term of Employment, Executive shall not serve on the boards of directors or
advisory boards of any other entity, except for any wholly or majority owned
subsidiaries of the Corporation, unless such service is expressly approved by
the Board.

 

1.3 No Other Employment; Minimum Time Commitment. Throughout the Term of
Employment, Executive shall both (i) devote substantially all of Executive’s
business time, energy and skill to the performance of the Executive’s duties for
the Corporation, and (ii) hold no other job. Executive agrees that any
investment or direct involvement in, or any appointment to or continuing service
on the board of directors or similar body of, any corporation or other entity,
other than wholly or majority owned subsidiaries of the Corporation, must be
first approved in writing by the Corporation. The foregoing provisions of this
Section 1.3 shall not prevent Executive from investing in non-competitive,
publicly-traded securities to the extent permitted by Section 6(b).

 

1.4 No Breach of Contract. Executive hereby represents to the Corporation that:
(i) the execution and delivery of this Agreement by the Executive and the
Corporation and the performance by the Executive of the Executive’s duties
hereunder shall not constitute a breach of, or otherwise contravene, the terms
of any other agreement or policy to which the Executive is a party or otherwise
bound; (ii) the Executive has no information (including, without limitation,
confidential information and trade secrets) of any other person or entity which
the Executive is not legally and contractually free to disclose to the
Corporation; and (iii) the Executive is not bound by any confidentiality, trade
secret or similar agreement (other than this Agreement) with any other person or
entity.

 

1.5 Place of Performance. The principal place of Executive’s employment shall be
the Corporation’s principal executive offices, currently located in Petaluma,
California, though such principal place of employment of the Executive may be
moved from time to time upon mutual agreement by the Executive and the
Corporation. The Executive agrees that the Executive will be regularly present
at the Corporation’s principal executive offices, or such other location as the
parties may designate, and that the Executive may be required to travel from
time to time in the course of performing the Executive’s duties for the
Corporation. The Corporation acknowledges that Executive’s principal place of
residence is and will remain during the Term of Employment, Boston, MA.

 

2. At-Will Employment, Term of Employment. The “Term of Employment” shall
commence on the Effective Date, and shall continue in full force and effect
until the earlier of completion of nine months from the Effective Date or the
Termination Date pursuant to Section 5.4, and may be extended by another three
months by mutual agreement of both Parties. The Parties agree that Executive’s
employment with the Company will be “at-will” employment and may be terminated
at any time with or without cause or notice. This Agreement shall govern the
terms of Executive’s employment hereunder on and after the Effective Date.

 

 

 

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3. Compensation.

 

3.1 Base Salary. As of the Effective Date and during the Term of Employment, the
Corporation shall pay to the Executive a base salary at the rate of $350,000 per
year, subject to increase (but not decrease) by the Board (the “Base Salary”).
The Executive’s Base Salary shall be paid in accordance with the Corporation’s
regular payroll practices in effect from time to time, but no less frequently
than monthly.

 

3.2 One-Time Bonus. Executive shall be eligible for a one-time lump-sum bonus of
no more than $210,000 payable in accordance with the parameters determined by
the Corporation’s Board of Directors in a separate bonus plan. The Board shall
act in good faith with respect to its considerations and determinations required
by this Section 3.2.

 

3.3 Equity Grant. Executive shall receive an inducement grant of options to
purchase up to 450,000 of the Company’s common stock which will be as soon as
possible after the Effective Date of this Agreement. Such grant will be, subject
to a six-months vesting period and the exercise price will be the closing price
of the Company’s common stock on the day of the grant.

 

3.4 Indemnification. (a) In the event that the Executive is made a party or
threatened to be made a party to any action, suit, or proceeding, whether civil,
criminal, administrative or investigative (a “Proceeding”), other than any
Proceeding initiated by the Executive or the Corporation related to any contest
or dispute between the Executive and the Corporation or any of its affiliates
with respect to this Agreement or the Executive’s employment hereunder, by
reason of the fact that the Executive is or was a director or officer of the
Corporation, or any affiliate of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, member, employee or agent of
another corporation or a partnership, joint venture, trust or other enterprise,
the Executive shall be indemnified and held harmless by the Corporation to the
maximum extent permitted under applicable law and the Corporation’s articles and
bylaws, as may be amended from time to time, from and against any liabilities,
costs, claims and expenses, including all costs and expenses incurred in defense
of any Proceeding (including attorneys’ fees).

 

(b) During the Term of Employment and for a period of six (6) years thereafter,
the Corporation or any successor to the Corporation shall purchase and maintain,
at its own expense, directors’ and officers’ liability insurance providing
coverage to the Executive on terms that are no less favorable than the coverage
provided to other directors and similarly situated executives of the
Corporation.

 

3.5 Clawback Provisions. Any incentive-based compensation, or any other
compensation, paid to the Executive pursuant to this Agreement or any other
agreement or arrangement with the Corporation which is subject to recovery under
any law, government regulation or stock exchange listing requirement, will be
subject to such deductions and clawback as may be required to be made pursuant
to such law, government regulation or stock exchange listing requirement (or any
policy adopted by the Corporation pursuant to any such law, government
regulation or stock exchange listing requirement). The Corporation will make any
determination for clawback or recovery in accordance with any applicable law or
regulation.

 

4. Benefits.

 

4.1 Health and Welfare. During the Term of Employment, the Executive shall be
entitled to participate in all employee pension and welfare benefit plans and
programs made available by the Corporation to the Corporation’s senior-level
employees generally, as such plans or programs may be in effect from time to
time.

 

4.2 Reimbursement of Business Expenses. The Executive is authorized to incur
reasonable expenses in carrying out the Executive’s duties for the Corporation
under this Agreement and entitled to reimbursement for all such expenses the
Executive incurs during the Term of Employment in connection with carrying out
the Executive’s duties for the Corporation up to a maximum amount of $15,000 per
month, subject to the Corporation’s reasonable expense reimbursement policies in
effect from time to time. Such expenses may include but are not limited to
travel, lodging and meals. The Corporation shall reimburse the Executive to the
extent required by the preceding sentence.

 

4.3 Vacation and Other Leave. During the Term of Employment, the Executive shall
accrue and be entitled to take paid vacation of 4 weeks per annum pro-rated in
accordance with the Corporation’s standard vacation policies in effect from time
to time, including the Corporation’s policies regarding vacation accruals. The
Executive shall also be entitled to all other holiday and leave pay generally
available to all other employees of the Corporation.

 

 

 

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5. Termination.

 

The Term of Employment and Executive’s employment hereunder may be terminated by
either the Corporation or Executive at any time and for any reason, for or
without cause, for or without good reason, or upon Death or Disability; provided
that, unless otherwise provided herein, either party shall be required to give
the other party advance written notice of any termination of the Executive’s
employment in accordance with Sections 5.3 and 5.4. Upon termination of
Executive’s employment during the Term of Employment, Executive (or the
Executive’s estate and/or beneficiaries, as the case may be) shall be entitled
to the Accrued Amounts and shall have no further rights to any compensation or
any other benefits from the Company or any of its affiliates. All outstanding
equity awards shall remain exercisable for the period of one (1) year from the
Termination Date. Notwithstanding any other provision contained herein, all
payments made in connection with Executive’s Disability shall be provided in a
manner which is consistent with federal and state law. The Corporation may
deduct, from all payments made hereunder, all applicable taxes and other
appropriate deductions.

 

 5.1 Definitions. For purposes of this Agreement:

 

(a) “Accrued Amounts” shall mean:

 

(i)     any accrued but unpaid Base Salary and accrued but unused vacation which
shall be paid in the next regularly scheduled payroll following one (1) week
after the Termination Date (as defined below);

 

(ii)   any accrued but unpaid bonus pursuant to Section 3.2 which shall be paid
in the next regularly scheduled payroll following one (1) week after the
Termination Date (as defined below); and

 

(iii)  reimbursement for unreimbursed business expenses properly incurred by the
Executive, which shall be subject to and paid in accordance with the
Corporation’s expense reimbursement policy.

 

 

(b) “Disability” shall mean the Executive’s inability, due to physical or mental
incapacity, to substantially perform his duties and responsibilities under this
Agreement, with or without reasonable accommodation, for 90 calendar days out of
any three hundred sixty-five (365) calendar day period, but only if the
Executive is considered disabled within the meaning of Treasury Regulation
section 1.409A-3(i)(4). Without limiting the circumstances in which the
Executive may be determined to be disabled as defined in Treasury Regulation
section 1.409A-3(i)(4), the Executive will be presumed to be disabled if
determined to be totally disabled by the Social Security Administration or if
determined to be disabled in accordance with a disability insurance program,
provided the definition of disability applied under such disability insurance
program complies with the requirements of Treasury Regulation section
1.409A-3(i)(4). Any question as to the existence of the Executive’s Disability
as to which the Executive and the Corporation cannot agree shall be determined
in writing by a qualified independent physician mutually acceptable to the
Executive and the Corporation. If the Executive and the Corporation cannot agree
as to a qualified independent physician, each shall appoint such a physician and
those two physicians shall select a third who shall make such determination in
writing. The determination of Disability made in writing to the Corporation and
the Executive shall be final and conclusive for all purposes of this Agreement.

 

5.2 Release; Exclusive Remedy.

 

(a) The Executive agrees that the payments contemplated by Section 5 shall
constitute the exclusive and sole remedy for any termination of his employment
and the Executive covenants not to assert or to pursue any other remedies, at
law or in equity, with respect to any termination of employment. The Corporation
and Executive acknowledge and agree that there is no duty of the Executive to
mitigate damages under this Agreement. All amounts paid to the Executive
pursuant to Section 5 shall be paid without regard to whether the Executive has
taken or takes actions to mitigate damages.

 

(b) As used herein, “Release” shall mean a written release, discharge and
covenant not to sue entered into by the Executive in favor of the Corporation in
the form as in Exhibit A hereto.

 

 

 

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5.3 Notice of Termination. Any termination of the Executive’s employment
hereunder by the Company or by the Executive during the Term of Employment
(other than termination on account of the Executive’s death) shall be
communicated by written notice of termination (the “Notice of Termination”) to
the other party hereto in accordance with Section 14(j). Such Notice of
Termination shall be given by the Company no later than 30 calendar days prior
to the termination and by Executive no later than 60 calendar days prior to the
termination. The Notice of Termination shall specify:

 

(a)The termination provision of this Agreement relied upon;

(b)To the extent applicable, the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provisions so
indicated; and

(c)The applicable Termination Date.

 

5.4 Termination Date. The Executive’s Termination Date shall be:

 

(a)If the Executive’s employment hereunder terminates on account of the
Executive’s death, the date of the Executive’s death;

(b)If the Executive’s employment hereunder is terminated on account of the
Executive’s Disability, the date that it is determined that the Executive has a
Disability; or

(c)If the Corporation terminates the Executive’s employment hereunder for any
other reason, the date specified in the Notice of Termination which shall be no
less than 10 calendar days following the date on which the Notice of Termination
is delivered.

 

Notwithstanding anything contained herein, the Termination Date shall not occur
until the date on which the Executive incurs a Separation from Service within
the meaning of Section 409A.

 

5.5 Resignation From Boards and Committees. After expiration of six months
following any termination of Executive’s employment as Chief Executive Officer
with the Corporation, Executive agrees to resign, as of the date of such
termination, from (i) each and every board of directors (or similar body, as the
case may be) of the Corporation and each of its affiliates on which Executive
may then serve, including, but not limited to, the Board (and any committees
thereof), and (ii) each and every office of the Corporation and each of its
affiliates that the Executive may then hold, and all positions that he may have
previously held with the Corporation and any of its affiliates.

 

5.6 Section 409A of the Internal Revenue Code.

 

(a) This Agreement is intended to comply with Section 409A of the Internal
Revenue Code of 1986 (“Section 409A”) and shall be construed and interpreted
consistent with that intent. In the event that any payment or benefit payable
under Section 5 of this Agreement is not compliant with Section 409A and any
taxes, penalties or interest are imposed on the Executive under Section 409A as
a result of such noncompliance (the “Section 409A Penalties”), the Corporation
shall put the Executive in an after-tax economic position equivalent to the
position the Executive would have been in without the imposition of such Section
409A Penalties. Executive shall notify the Corporation in writing of any claim
by the Internal Revenue Service or state tax authorities that, if successful,
would require the payment of any such Section 409A Penalties or related state
tax statutes. Executive’s right to be put in an equivalent after tax economic
position is subject to the Executive providing such notification no later than
ten (10) business days after Executive is informed in writing of such claim. If
the Corporation desires to contest such claim, Executive shall (i) cooperate
with the Corporation in good faith in order to effectively contest such claim
and (ii) permit the Corporation to participate in any proceedings relating to
such claim. The Corporation shall control all proceedings taken in connection
with such contest; provided, however, that the Corporation shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest. This section shall also apply to any
taxes, penalties, or interest imposed by any state that are calculated in a
manner similar to taxes, penalties, or interest imposed by Section
409A(a)(1)(B), including those amounts imposed by the California Revenue and
Taxation Code (R&TC) Sections 17501 and 24601.

 

(b) If and to the extent that any payment or benefit under this Agreement, or
any plan or arrangement of the Corporation, is determined by the Corporation to
constitute “non-qualified deferred compensation” subject to Section 409A and is
payable to the Executive by reason of the Executive’s termination of employment,
then (a) such payment or benefit shall be made or provided to the Executive only
upon a “separation from service” as defined for purposes of Section 409A under
applicable regulations (a “Separation from Service”) and (b) if the Executive is
a “specified employee” (within the meaning of Section 409A and as determined by
the Corporation), such payment or benefit shall not be made or provided before
the date that is six (6) months after the date of the Executive’s Separation
from Service (or the Executive’s earlier death). For the purposes of clarity,
the first payment thereof will include a catch-up payment covering the amount
that would have otherwise been paid to the Executive during the period between
the termination of Executive’s employment and the first payment date but for the
application of this provision, and the balance of the installments (if any) will
be payable in accordance with their original schedule.

 

 

 

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(c) To the extent any expense reimbursement or in-kind benefit is determined to
be subject to Section 409A, the amount of any such expenses eligible for
reimbursement or in-kind benefits provided in one taxable year shall not affect
the expenses eligible for reimbursement or in-kind benefits provided in any
other taxable year (except under any lifetime limit applicable to expenses for
medical care), in no event shall any expenses be reimbursed after the last day
of the calendar year following the calendar year in which the Executive incurred
such expenses, and in no event shall any right to reimbursement or in-kind
benefits be subject to liquidation or exchange for another benefit.

 

(d) To the extent that any provision of this Agreement is ambiguous as to its
compliance with Section 409A, the provision will be read in such a manner so
that all payments hereunder comply with Section 409A. To the extent any payment
under this Agreement may be classified as a “short-term deferral” within the
meaning of Section 409A, such payment shall be deemed a short-term deferral,
even if it may also qualify for an exemption from Section 409A under another
provision of Section 409A. Payments pursuant to this section are intended to
constitute separate payments for purposes of Section 1.409A-2(b)(2) of the
Treasury Regulations.

 

6. Non-Competition.

 

Executive acknowledges and recognizes the highly competitive nature of the
businesses of the Corporation, the amount of sensitive and confidential
information involved in the discharge of Executive’s position with the
Corporation, and the harm to the Corporation that would result if such knowledge
or expertise was disclosed or made available to a competitor. Based on that
understanding, Executive hereby expressly agrees as follows:

 

(a) As a result of the particular nature of Executive’s relationship with the
Corporation, in the capacities identified earlier in this Agreement, for the
Term of Employment, Executive hereby agrees that he will not, directly or
indirectly, (i) engage in any business for the Executive’s own account or
otherwise derive any personal benefit from any business that competes with the
business of the Corporation or any of its affiliates (the Corporation and its
affiliates are referred to, collectively, as the “Company Group”), (ii) enter
the employ of, or render any services to, any person engaged in any business
that competes with the business of any entity within the Company Group, (iii)
acquire a financial interest in any person engaged in any business that competes
with the business of any entity within the Company Group, directly or
indirectly, as an individual, partner, member, shareholder, officer, director,
principal, agent, trustee or consultant, or (iv) interfere with business
relationships (whether formed before or after the Effective Date) between the
Corporation, any of its respective affiliates or subsidiaries, and any
customers, suppliers, officers, employees, partners, members or investors of any
entity within the Company Group. For purposes of this Agreement, businesses in
competition with the Company Group shall include, without limitation, businesses
which any entity within the Company Group may conduct operations, and any
businesses which any entity within the Company Group has specific plans to
conduct operations in the future and as to which the Executive is aware of such
planning, whether or not such businesses have or have not as of that date
commenced operations.

 

(b) Notwithstanding anything to the contrary in this Agreement, Executive may,
directly or indirectly, own, solely as an investment, securities of any Person,
other than a business that competes with the business of the Company Group,
which are publicly traded on a national or regional stock exchange or on the
over-the-counter market if the Executive (i) is not a controlling Person of, or
a member of a group that controls, such Person, and (ii) does not, directly or
indirectly, beneficially own one percent (1%) or more of any class of securities
of such Person. Executive may indirectly, through a mutual or exchange traded
fund, own, solely as an investment, securities of a business that competes with
the business of the Company Group, which are publicly traded on a national or
regional stock exchange or on the over-the-counter market if the Executive (i)
is not a controlling Person of, or a member of a group that controls, such
Person, and (ii) does not, directly or indirectly, beneficially own one percent
(1%) or more of any class of securities of such business. For purposes of this
Section 6(b), “Person” shall have the meaning ascribed to such terms in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as described in Section 13(d) thereof.

 

7. Confidential Information.

 

As a material part of the consideration for the Corporation’s commitment to the
terms of this Agreement, Executive hereby agrees that Executive will not at any
time (whether during or after Executive’s employment with the Corporation),
other than in the course of Executive’s duties hereunder, or unless compelled by
lawful process after written notice to the Corporation of such notice along with
sufficient time for the Corporation to try and overturn such lawful process,
disclose or use for Executive’s own benefit or purposes or the benefit or
purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise, any trade
secrets, or other confidential data or information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financing methods, or plans of any entity
within the Company Group; provided, however, that the foregoing shall not apply
to information which is generally known to the industry or the public, other
than as a result of the Executive’s breach of this covenant. Executive further
agrees that Executive will not retain or use for his own account, at any time,
any trade names, trademark or other proprietary business designation used or
owned in connection with the business of any entity within the Company Group.

 

 

 

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8. Proprietary Rights.

 

(a) Inventions. All inventions, policies, systems, developments or improvements
conceived, designed, implemented and/or made by Executive, either alone or in
conjunction with others, at any time or at any place during the Term of
Employment, whether or not reduced to writing or practice during such Term of
Employment, which directly or indirectly relate to the business of any entity
within the Company Group, or which were developed or made in whole or in part
using the facilities and/or capital of any entity within the Company Group,
shall be the sole and exclusive property of the Company Group. Executive shall
promptly give notice to the Corporation of any such invention, development,
patent or improvement, and shall at the same time, without the need for any
request by any person or entity within the Company Group, assign all of
Executive’s rights to such invention, development, patent and/or improvement to
the Company Group. Executive shall sign all instruments necessary for the filing
and prosecution of any applications for, or extensions or renewals of, letters
patent of the United States or any foreign country that any entity in the
Company Group desires to file.

 

(b) Work Product. Executive acknowledges and agrees that all writings, works of
authorship, technology, inventions, discoveries, ideas and other work product of
any nature whatsoever, that are created, prepared, produced, authored, edited,
amended, conceived or reduced to practice by the Executive individually or
jointly with others during the Term of Employment by the Corporation and
relating in any way to the business or contemplated business, research or
development of the Corporation (regardless of when or where the Work Product is
prepared or whose equipment or other resources is used in preparing the same)
and all printed, physical and electronic copies, all improvements, rights and
claims related to the foregoing, and other tangible embodiments thereof
(collectively, “Work Product”), as well as any and all rights in and to
copyrights, trade secrets, trademarks (and related goodwill), patents and other
intellectual property rights therein arising in any jurisdiction throughout the
world and all related rights of priority under international conventions with
respect thereto, including all pending and future applications and registrations
therefor, and continuations, divisions, continuations-in-part, reissues,
extensions and renewals thereof (collectively, “Intellectual Property Rights”),
shall be the sole and exclusive property of the Corporation.

 

For purposes of this Agreement, Work Product includes, but is not limited to,
Company Group information, including plans, publications, research, strategies,
techniques, agreements, documents, contracts, terms of agreements, negotiations,
know-how, computer programs, computer applications, software design, web design,
work in process, databases, manuals, results, developments, reports, graphics,
drawings, sketches, market studies, formulae, notes, communications, algorithms,
product plans, product designs, styles, models, audiovisual programs,
inventions, unpublished patent applications, original works of authorship,
discoveries, experimental processes, experimental results, specifications,
customer information, client information, customer lists, client lists,
manufacturing information, marketing information, advertising information, and
sales information.

 

(c) Work Made for Hire; Assignment. All copyrightable work by Executive during
the Term of Employment that relates to the business of any entity in the Company
Group is intended to be “work made for hire” as defined in Section 101 of the
Copyright Act of 1976, and shall be the property of the Company Group. If the
copyright to any such copyrightable work is not the property of the Company
Group by operation of the law, Executive will, without further consideration,
assign to the Company Group all right, title and interest in such copyrightable
work and will assist the entities in the Company Group and their nominees in
every way, at the Company Group’s expense, to secure, maintain and defend for
the Company Group’s benefit, copyrights and any extensions and renewals thereof
on any and all such work including translations thereof in any and all
countries, such work to be and to remain the property of the Company Group
whether copyrighted or not.

 

(d) Further Assurances; Power of Attorney. During and after the Term of
Employment, Executive agrees to reasonably cooperate with the Corporation to (i)
apply for, obtain, perfect and transfer to the Company Group the Work Product as
well as an Intellectual Property Right in the Work Product in any jurisdiction
in the world; and (ii) maintain, protect and enforce the same, including,
without limitation, executing and delivering to the Corporation any and all
applications, oaths, declarations, affidavits, waivers, assignments and other
documents and instruments as shall be requested by the Corporation. Executive
hereby irrevocably grants the Corporation power of attorney to execute and
deliver any such documents on Executive’s behalf in the Executive’s name and to
do all other lawfully permitted acts to transfer the Work Product to the
Corporation and further the transfer, issuance, prosecution and maintenance of
all Intellectual Property Rights therein, to the full extent permitted by law,
if Executive does not promptly cooperate with the Corporation’s request (without
limiting the rights the Corporation shall have in such circumstances by
operation of law). The power of attorney is coupled with an interest and shall
not be affected by Executive’s subsequent incapacity.

 

 

 

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(e) No License. Executive understands that this Agreement does not, and shall
not be construed to, grant the Executive any license or right of any nature with
respect to any Work Product or Intellectual Property Rights or any Confidential
Information, materials, software or other tools made available to the Executive
by the Corporation.

 

9. Anti-Solicitation.

 

In light of the amount of sensitive and confidential information involved in the
discharge of Executive’s duties, and the harm to the Corporation that would
result if such knowledge or expertise were disclosed or made available to a
competitor, and as a reasonable step to help protect the confidentiality of such
information, Executive promises and agrees that during the Term of Employment
and for a period of two (2) years thereafter, Executive will not use the
Company’s confidential information to, directly or indirectly, individually or
as a consultant to, or as an employee, officer, shareholder, director or other
owner or participant in any business, influence or attempt to influence the
customers, vendors, suppliers, joint venturers, associates, consultants, agents,
or partners of any entity within the Company Group, either directly or
indirectly, to divert their business away from the Company Group, to any
individual, partnership, firm, corporation or other entity then in competition
with the business of any entity within the Company Group, and he will not
otherwise materially interfere with any business relationship of any entity
within the Company Group.

 

10. Non-Solicitation of Employees.

 

In light of the amount of sensitive and confidential information involved in the
discharge of Executive’s duties, and the harm to the Corporation that would
result if such knowledge or expertise were disclosed or made available to a
competitor, and as a reasonable step to help protect the confidentiality of such
information, Executive promises and agrees that during the Term of Employment
and for a period of one (1) year thereafter, Executive will not, directly or
indirectly, individually or as a consultant to, or as an employee, officer,
shareholder, director, or other owner of or participant in any business, solicit
(or assist in soliciting) any person who is then, or at any time within six (6)
months prior thereto was, an employee of an entity within the Company Group, who
earned annually $25,000 or more as an employee of such entity during the last
six (6) months of his or her own employment to work for (as an employee,
consultant or otherwise) any business, individual, partnership, firm,
corporation, or other entity whether or not engaged in competitive business with
any entity in the Company Group.

 

11. Return of Property.

 

Executive agrees to truthfully and faithfully account for and deliver to the
Corporation all property belonging to the Corporation, any other entity in the
Company Group, or any of their respective affiliates, which Executive may
receive from or on account of the Corporation, any other entity in the Company
Group, or any of their respective affiliates, and upon the termination of the
Term of Employment, or the Corporation’s demand, Executive shall immediately
deliver to the Corporation all such property belonging to the Corporation, any
other entity in the Company Group, or any of their respective affiliates.

 

12. Withholding Taxes.

 

Notwithstanding anything else herein to the contrary, the Corporation may
withhold (or cause there to be withheld, as the case may be) from any amounts
otherwise due or payable under or pursuant to this Agreement such federal, state
and local income, employment, or other taxes as may be required to be withheld
pursuant to any applicable law or regulation.

 

13. Cooperation in Litigation.

 

Executive agrees that, during the Term of Employment or after the termination of
Executive’s employment, he will reasonably cooperate with the Corporation,
subject to his reasonable personal and business schedules, in any litigation
which arises out of events occurring prior to the termination of his employment,
including but not limited to, serving as a witness or consultant and producing
documents and information relevant to the case or helpful to the Corporation.
The Corporation agrees to reimburse Executive for all reasonable costs and
expenses he incurs in connection with his obligations under this Section 13 and,
in addition, to reasonably compensate Executive for time actually spent in
connection therewith following the termination of his employment with the
Corporation.

 

 

 

 7 

 

 

14. Miscellaneous.

 

(a) Assignment. This Agreement is personal in its nature and neither of the
parties hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that in the
event of a merger, consolidation, or transfer or sale of all or substantially
all of the assets of the Corporation with or to any other individual(s) or
entity, this Agreement shall, subject to the provisions hereof, be binding upon
and inure to the benefit of such successor and such successor shall discharge
and perform all the promises, covenants, duties, and obligations of the
Corporation hereunder.

 

(b) Number and Gender. Where the context requires, the singular shall include
the plural, the plural shall include the singular, and any gender shall include
all other genders.

 

(c) Section Headings. The section headings of, and titles of paragraphs and
subparagraphs contained in, this Agreement are for the purposes of convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation thereof.

 

(d) Governing Law. This Agreement, and all questions relating to its validity,
interpretation, performance and enforcement, as well as the legal relations
hereby created between the parties hereto, shall be governed by and construed
under, and interpreted and enforced in accordance with, the laws of the State of
California, notwithstanding any California or other conflict of law provision to
the contrary. This Agreement is intended to comply with Section 409A of the
Internal Revenue Code of 1986 and the regulations promulgated thereunder. Any
action or proceeding by either of the parties to enforce this Agreement shall be
brought only in a state or federal court located in the state of California,
Sonoma county. The parties hereby irrevocably submit to the exclusive
jurisdiction of such courts and waive the defense of inconvenient forum to the
maintenance of any such action or proceeding in such venue.

 

(e) Severability. If any provision of this Agreement or the application thereof
is held invalid, the invalidity shall not affect other provisions or
applications of this Agreement which can be given effect without the invalid
provisions or applications and to this end the provisions of this Agreement are
declared to be severable.

 

(f) Entire Agreement. This Agreement embodies the entire agreement of the
parties hereto respecting the matters within its scope. Any prior negotiations,
correspondence, agreements, proposals or understandings relating to the subject
matter hereof shall be deemed to have been merged into this Agreement, and to
the extent inconsistent herewith, such negotiations, correspondence, agreements,
proposals, or understandings shall be deemed to be of no force or effect. There
are no representations, warranties, or agreements, whether express or implied,
or oral or written, with respect to the subject matter hereof, except as
expressly set forth herein.

 

(g) Modifications. This Agreement may not be amended, modified or changed (in
whole or in part), except by a formal definitive written agreement expressly
referring to this Agreement, which agreement is executed by both of the parties
hereto.

 

(h) Waiver. Neither the failure nor any delay on the part of a party to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or of any
right, remedy, power or privilege, nor shall any waiver of any right, remedy,
power or privilege with respect to any occurrence be construed as a waiver of
such right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.

 

(i) Resolution of Disputes.

 

(i)   Any controversy arising out of or relating to Executive’s employment
(whether or not before or after the expiration of the Term of Employment), any
termination of Executive’s employment, this Agreement or the enforcement or
interpretation of this Agreement, or because of an alleged breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
including (without limitation) any state or federal statutory claims, shall be
submitted to arbitration in Santa Rosa, California, before a sole arbitrator
(the “Arbitrator”) selected from the American Arbitration Association (“AAA”),
and shall be conducted in accordance with the provisions of California Code of
Civil Procedure §§ 1280 et seq. as the exclusive remedy of such dispute;
provided, however, that provisional injunctive relief may, but need not, be
sought in a court of law while arbitration proceedings are pending, and any
provisional injunctive relief granted by such court shall remain effective until
the matter is finally determined by the Arbitrator. Final resolution of any
dispute through arbitration may include any remedy or relief that the Arbitrator
deems just and equitable, including any and all remedies provided by applicable
state or federal statutes. At the conclusion of the arbitration, the Arbitrator
shall issue a written decision that sets forth the essential findings and
conclusions upon which the Arbitrator’s award or decision is based. Any award or
relief granted by the Arbitrator hereunder shall be final and binding on the
parties hereto and may be enforced by any court of competent jurisdiction.

 

 

 

 8 

 

 

(ii)   The parties acknowledge and agree that they are hereby waiving any rights
to trial by jury in any action, proceeding or counterclaim brought by either of
the parties against the other in connection with any matter whatsoever arising
out of or in any way connected with any of the matters referenced in the first
sentence of Section 14(i)(i).

 

(iii)  The parties agree that the Corporation shall be responsible for payment
of the forum costs of any arbitration hereunder, including the Arbitrator’s fee.
The parties further agree that in any proceeding with respect to such matters,
the prevailing party will be entitled to recover its reasonable attorney’s fees
and costs from the non-prevailing party (other than forum costs associated with
the arbitration which in any event shall be paid by the Corporation).

 

(iv)  Without limiting the remedies available to the parties and notwithstanding
the foregoing provisions of this Section 14, the Executive and the Corporation
acknowledge that any breach of any of the covenants or provisions contained in
Sections 5.9, and Sections 6 through 11 could result in irreparable injury to
either of the parties hereto for which there might be no adequate remedy at law,
and that, in the event of such a breach or threat thereof, the non-breaching
party shall be entitled to obtain a temporary restraining order and/or a
preliminary injunction and a permanent injunction restraining the other party
hereto from engaging in any activities prohibited by any covenant or provision
in Sections 5.9, and Sections 6 through 11 or such other equitable relief as may
be required to enforce specifically any of the covenants or provisions of
Sections 5.9, and Sections 6 through 11.

 

(j) Publicity.

 

Executive hereby irrevocably consents during the term of this Agreement to any
and all uses and displays, by the Company Group and its agents, representatives
and licensees, of Executive’s name, voice, likeness, image, appearance and
biographical information in, on or in connection with any pictures, photographs,
audio and video recordings, digital images, websites, television programs and
advertising, other advertising and publicity, sales and marketing brochures,
books, magazines, other publications, CDs, DVDs, tapes and all other printed and
electronic forms and media throughout the world, at any time during or after the
period of his employment by the Company, for all legitimate commercial and
business purposes of the Company Group (”Permitted Uses”) without further
consent from or royalty, payment or other compensation to the Executive. The
Executive hereby forever waives and releases the Company Group and its
directors, officers, employees and agents from any and all claims, actions,
damages, losses, costs, expenses and liability of any kind, arising under any
legal or equitable theory whatsoever at any time during or after the period of
his employment by the Company, arising directly or indirectly from the Company
Group’s and its agents’, representatives’ and licensees’ exercise of their
rights in connection with any Permitted Uses. At the end of the term of this
Agreement, the Company shall have no obligation to remove any
previously-published displays described in this paragraph.

 

(k) Notices.

 

(i) All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly received if (i) delivered by hand or by courier, effective upon
delivery, (ii) given by facsimile or electronic version, when transmitted if
transmitted on a business day and during normal business hours of the recipient,
and otherwise delivered on the next business day following transmission, or
(iii) sent by registered or certified mail, postage prepaid, return receipt
requested, 5 business days after being deposited in the U.S. postal mail. Any
notice shall be duly addressed to the parties as follows:

 

(i) If to the Corporation:

 

Sonoma Pharmaceuticals, Inc.

Lead Independent Director of the Board or any Independent Director
1129 North McDowell Boulevard
Petaluma, California 94954
Fax: +1 (707) 283-0551

 

 

 

 9 

 

 

(ii) If to the Executive:

 

Frederick Sandford
At the address on file with the Corporation

 

(ii) Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 24 for the giving of notice.

 

(l) Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally
binding contract and acknowledges and agrees that they have had the opportunity
to consult with legal counsel of their choice. Each party has cooperated in the
drafting, negotiation and preparation of this Agreement. Hence, in any
construction to be made of this Agreement, the same shall not be construed
against either party on the basis of that party being the drafter of such
language.

 

(m) Provisions that Survive Termination. The provisions of Sections 3.4, 3.5, 5
through 13, and this Section 14 shall survive any termination of the Term of
Employment.

 

(n) Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original as against any party whose signature
appears thereon, and all of which together shall constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories. Photographic copies of such signed
counterparts may be used in lieu of the originals for any purpose.

 

(o) Tolling. Should the Executive violate any of the terms of the restrictive
covenant obligations articulated herein, the obligation at issue will run from
the first date on which the Executive ceases to be in violation of such
obligation.

 

[Signature Page Follows]

 

 

 10 

 

 

IN WITNESS WHEREOF, the Corporation and Executive have executed this Employment
Agreement as of the Effective Date.

  

  CORPORATION       Sonoma Pharmaceuticals, Inc.,   a Delaware corporation      
By: /s/ Jerry McLaughlin  

Name:

Title:

Jerry McLaughlin
Lead Independent Director of     Sonoma Pharmaceuticals, Inc.              
EXECUTIVE         By: /s/ Frederick Sandford   Name: Frederick Sandford

 

 

 

 

 

 

 11 

 

EXHIBIT A — RELEASE

 

1. Definitions. I intend all words used in this Release to have their plain
meanings in ordinary English. Technical legal words are not needed to describe
what I mean. Specific terms I use in this Release have the following meanings:

 

A. “I,” “me,” and “my” include me, Frederick Sandford, and anyone who has or
obtains any legal rights or claims through me, including my heirs and estate,
and each of my descendants, dependents, executors, administrators, assigns and
successors.

 

B. “Employer,” as used in this Release, shall at all times mean Sonoma
Pharmaceuticals, Inc. and “Released Party” or “Released Parties”, individual and
collectively, means the Employer and the Employer’s parent, past or present
subsidiaries, affiliates, each of any present or former officers, directors,
shareholders, employees, agents or attorneys, trustees, insurers, successors,
predecessors, assigns, or personal representatives.

 

C. “My Claims” mean actions or causes of action, suits, claims, charges,
complaints, contracts (whether oral or written, express or implied from any
source), and promises, whatsoever, in law or equity, that I ever had, may now
have or hereafter can, shall or may have against the Employer or other Released
Party as of the date of the execution of this Release, including all unknown,
undisclosed and unanticipated losses, wrongs, injuries, debts, claims or damages
to me for, upon, or by reason of any matter, cause or thing whatsoever, that are
in any way related to my employment with or separation (termination of
employment) from the Employer.

 

By signing this Release, I am agreeing to release any actual and potential
claim, known or unknown, I have or may potentially have, in law or in equity,
either as an individual or standing in the shoes of the government, under any
federal, state or local law, administrative regulation or legal principle
(except as provided in Paragraph 4 of this Release). The following listing of
laws and types of claims is not meant to, and shall not be interpreted to,
exclude any particular law or type of claim, law, regulation or legal principle
not listed. I understand I am releasing all my Claims, including, but not
limited to, claims for invasion of privacy; breach of written or oral, express
or implied, contract; fraud or misrepresentation; and any claim under Section
1981 of the Civil Rights Act of 1866, Title VII of the Civil Rights Act of 1964,
Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 626, as
amended, the Older Workers Benefit Protection Act of 1990 (“OWBPA”), 29 U.S.C.
626(f), Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. §
2000e, et seq., the Americans with Disabilities Act Amendments Act (“ADAAA”), 29
U.S.C. § 2101, et seq., the Family and Medical Leave Act (“FMLA”), 29 U.S.C. §
2601 et seq., the Employee Retirement Income Security Act of 1974 (“ERISA”), as
amended, 29 U.S.C. §§ 1001, et seq., Equal Pay Act (“EPA”), 29 U.S.C. § 206(d),
the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. § 2101
et seq., the False Claims Act, 31 U.S.C. § 3729 et seq., the California Fair
Employment and Housing Act, the California Family Rights Act, any other state
human rights or fair employment practices act, and any other federal, state, or
local statute, law, rule, regulation, ordinance or order. This includes, but is
not limited to, claims for violation of any civil rights laws based on protected
class status; claims for assault, battery, defamation, intentional or negligent
infliction of emotional distress, breach of the covenant of good faith and fair
dealing, promissory estoppel, negligence, negligent hiring, retention or
supervision, retaliation, constructive discharge, violation of whistleblower
protection laws, unjust enrichment, payment of any kind, including any other
claim for severance pay, bonus or incentive pay, sick leave, holiday pay,
vacation pay, life insurance, health or medical insurance or any other fringe
benefit, medical expenses, or disability, violation of public policy, and all
other claims for unlawful employment practices, and all other common law or
statutory claims. To the maximum extent permitted by law, I agree that I will
not seek and waive any right to accept any relief or award from any charge or
action against the Employer before any federal, state, or local administrative
agency or federal state or local court whether filed by me or on my behalf with
respect to any claim or right covered by this Release.

 

2. Agreement to Release My Claims. Except as stated in Paragraph 4, I agree to
give up all My Claims, waive any rights thereunder, and forever discharge the
Employer and all Released Parties of and from any and all liability to me for
actions or causes of action, suits, or Claims. To the maximum extent permitted
by law, I agree that I will not seek and I waive any right to accept any relief
or award from any charge or action against the Employer or other Released Party
before any federal, state, or local administrative agency or federal state or
local court whether filed by me or on my behalf with respect to any claim or
right covered by this Release. I also agree to withdraw any and all of my
charges and lawsuits against Employer or other Released Party, except that I
may, but am not required to, withdraw or dismiss, or attempt to withdraw or
dismiss, any charges that I may have pending against the Employer or other
Released Party with the EEOC or other civil rights enforcement agency.

 

I represent and warrant that I have not transferred or otherwise assigned my
Claims, or parts thereof, to any person or entity, other than the Employer. I
will defend, indemnify and hold harmless the Employer from and against any claim
(including the payment of attorneys’ fees and costs actually incurred whether or
not litigation is commenced) that is directly or indirectly based on or in
connection with or arising out of any such assignment or transfer made,
purported or claimed.

 

 

 

 12 

 

 

In exchange for my agreement to release my Claims, I am receiving satisfactory
Consideration (compensation) from the Employer to which I am not otherwise
entitled by law, contract, or under any Employer policy. The consideration I am
receiving is a full and fair payment for the release of all my Claims. The
Employer and the Released Parties do not owe me anything in addition to what I
will be receiving.

 

3. Older Workers Benefit Protection Act. [This section may be revised if
Executive terminates employment as part of a “group” termination.] The Older
Workers Benefit Protection Act (“OWBPA”) applies to individuals age 40 and older
and sets forth certain criteria for such individuals to waive their rights under
the Age Discrimination in Employment Act (“ADEA”) in connection with an exit
incentive program or other employment termination program. I understand and have
been advised that this Release of My Claims is subject to the terms of the
OWBPA. The OWBPA provides that an individual cannot waive a right or claim under
the ADEA unless the waiver is knowing and voluntary. I have been advised of this
law, and I agree that I am signing this Release voluntarily, and with full
knowledge of its consequences. I understand that the Employer is giving me at
least twenty-one (21) calendar days from the date I received a copy of this
Release to decide whether I want to sign it. I acknowledge that I have been
advised to use this time to consult with an attorney about the effect of this
Release. If I sign this Release before the end of the twenty-one (21) day period
it will be my personal, voluntary decision to do so, and will be done with full
knowledge of my legal rights. I agree that material and/or immaterial changes to
the Separation Agreement or this Release will not restart the running of this
consideration period.

 

4. Exclusions from Release. My Claims do not include my rights, if any, to claim
the following: payments required to be made under the Employment Agreement
between Executive and the Corporation dated as of December 11, 2018;
unemployment insurance or workers compensation benefits; claims for my vested
post-termination benefits under any 401(k) or similar tax-qualified retirement
benefit plan; my COBRA rights; and my rights to enforce the terms of this
Release.

 

A. Nothing in this Release interferes with my right to file a charge with the
Equal Employment Opportunity Commission (“EEOC”) or other local civil rights
enforcement agency, or participate in any manner in an EEOC investigation or
proceeding under Title VII, the ADA, the ADEA, or the EPA. I, however,
understand that I am waiving my right to recover individual relief including,
but not limited to, back pay, front pay, reinstatement, attorneys’ fees, and/or
punitive damages, in any administrative or legal action whether brought by the
EEOC or other civil rights enforcement agency, me or any other party.

 

B. Nothing in this Release interferes with my right to challenge the knowing and
voluntary nature of this Release under the ADEA and/or OWBPA, if I have rights
under such laws.

 

C. I agree that the Employer and the Released Parties reserve any and all
defenses, which any of them has or might have against any claims brought by me.
This includes, but is not limited to, the Employer’s or other Released Party’s
right to seek available costs and attorneys’ fees, and to have any monetary
award granted to me, if any, reduced by the amount of money that I received in
consideration for this Release.

 

D. Nothing in this Release releases any claims for indemnification by Executive
pursuant to any indemnification agreement, statute or otherwise or claims for
coverage under any D&O or other similar insurance policy.

 

5. Effective Date; Right to Rescind or Revoke. I understand that insofar as this
Release relates to my rights under the Age Discrimination in Employment Act
(“ADEA”), it shall not become effective or enforceable until seven (7) calendar
days after I sign it. I also have the right to rescind (or revoke) this Release
insofar as it extends to potential claims under the ADEA by written notice to
Employer within seven (7) calendar days following my signing this Release (the
“Rescission Period”). Any such rescission (or revocation) must be in writing and
hand-delivered to Employer or, if sent by mail, postmarked within the applicable
time period, sent by certified mail, return receipt requested, and addressed as
follows:

 

A. post-marked within the seven (7) calendar day Rescission Period;

 

B. properly addressed to

 

[INSERT NAME AND ADDRESS]; and

 

C. sent by certified mail, return receipt requested.

 

 

 

 13 

 

 

6. I Understand the Terms of this Release. I have had the opportunity to read
this Release carefully and understand all its terms. I have had the opportunity
to review this Release with my own attorney. In agreeing to sign this Release, I
have not relied on any statements or explanations made by the Employer or its
attorneys. I understand and agree that this Release and the attached Agreement
contain all the agreements between the Employer (and any other Released Party)
and me. We have no other written or oral agreements. I understand this Release
is a very important legal document and I agree to be bound by the terms of this
Release.

 

 

        Dated: ____________, 20__ _______________________________     Frederick
Sandford      

 

 

 

 

 

 

 

 

 

 

 14