EXHIBIT 10.14
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
Effective January 1, 2010
 
 1.            Purpose.  The purpose of NovaBay Pharmaceuticals, Inc.
(hereinafter referred to as “NovaBay” or the “Company) Non-Employee Director
Compensation Plan (the “Plan”) is to advance the interests of NovaBay and its
shareholders by closely aligning the interests of the Non-Employee Directors
with the Company and its shareholders.  This Plan requires the payment of the
annually established compensation payable to Non-Employee Directors for their
service to be in cash and options to purchase the Company’s Common Stock
(“Options).  Options issuable under this Plan shall be from the shareholder
approved 2007 Omnibus Incentive Plan.

 2.            Administration. The Compensation Committee of the Board (the
“Committee”) shall administer the Plan. The Committee shall, subject to the
provisions of the Plan, have the power to construe the Plan, to determine all
questions arising thereunder, and to adopt and amend such rules and regulations
for the administration of the Plan, as it may deem desirable. Any decisions of
the Committee in the administration of the Plan, as described herein, shall be
final and conclusive. The Committee may authorize any one or more of its members
or any officer of the Company to execute and deliver documents on behalf of the
Committee. No member of the Committee shall be liable for anything done or
omitted to be done by him or her or by any other member of the Board in
connection with the Plan, except for his or her own willful misconduct or as
expressly provided by statute.
   
3.            Participation; Amount of Non-Employee Director Compensation. The
Committee shall annually approve the amount of compensation payable for services
to be performed by Company Non-Employee Directors.  Effective January 1, 2010
such fees shall be payable in cash and Options as follows:

Cash Compensation

Status
Cash Payment
Comment
Non-Employee Director
$30,000 per year
Paid Quarterly
Chairman of the Compensation Committee
$10,000 per year additional
Paid Quarterly
Lead Director
$12,000 per year additional
Paid Quarterly
Chairman of the Audit Committee
12,000 per year additional
Paid Quarterly
Chairman of the Nominating and Corporate Governance Committee
$8,000 per year additional
Paid Quarterly
Non-Chairman Member of the Audit Committee
$6,000 per year additional
Paid Quarterly
Non-Chairman Member of the Compensation and/or Nominating and Corporate
Governance Committee
$5,000 for each committee per year additional
Paid Quarterly

 
 
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Equity Compensation:  Equity compensation to Non-Employee Director is in the
form of early exercisable, non-statutory stock option grants made under the
shareholder approved 2007 Omnibus Incentive Plan (the "Plan").  These options
will be subject to the standard form of non-qualified stock option agreement
and, as applicable, early exercise stock purchase agreement, approved for use
with the Plan.

Initial Equity Grant  -
30,000 options (4-year vest, ¼ after one year and quarterly thereafter in equal
quarterly installments)

 
Annual Equity Grant - 
15,000 options (1-year vest in equal monthly installments)

 
4.            Payment of Non-Employee Director Compensation. Each Non-Employee
Director shall be issued the Options determined pursuant to Section 3 above on
the first day of the year of the grant on which the NYSE Amex is open for
trading, or in the case of a new director, the Options shall be granted on the
day the new director becomes a member of the Board.  The exercise price for the
Options is equivalent to the Fair Market Value of the NovaBay common stock on
the date of the grant. The Fair Market Value shall be the closing price of one
share of NovaBay common stock as reported on the NYSE Amex on the date of grant,
or, if the NYSE Amex is not open for trading on such date, on the most recent
preceding date when it is open for trading.   Each Non-Employee Director shall
be paid the cash compensation payable to such Non-Employee Director as
determined pursuant to Section 3 above on the first business day of the calendar
quarter for such quarter.

Prior to the beginning of each calendar year or, in the case of a new director,
within 30 days from the day the new director becomes a member of NovaBay’s Board
of Directors, each director can irrevocably elect in writing (request addressed
to the CFO) to take 25%, 50%, 75% or 100% of his or her annual retainer for
service as a non-employee director (i.e. not for Committee or lead director
service), or, in the case of a new director, his or her pro rata retainer for
service as a non-employee director (but only for quarterly payments to be paid
in quarters subsequent to the quarter in which the new director becomes a new
director and, only for quarterly payments to be paid subsequent to the date of
such irrevocable election), in the form of a stock option.  The number of shares
subject to such stock option shall be the number of shares of NovaBay stock as
shall cause the fair value of the stock option calculated using the
Black-Scholes model using the same methodology NovaBay has most recently used
for financial reporting purposes, computed at the time the stock option is
granted, to equal the amount of annual cash compensation foregone. An example is
attached as Schedule “1”.  The options shall be granted on the first day of the
year of the grant on which the NYSE Amex is open for trading, or in the case of
a new director, the Options shall be granted on the day the first cash payment
is due for which the election is made in lieu of all or a portion of such cash
payment.  The options are 10-year options with an exercise price equal to the
closing price of NovaBay’s common stock on the grant date as reported by the
NYSE Amex or, if the NYSE Amex is not open for trading on such date, on the most
recent preceding date when such market is open for trading.  Such stock option
shall vest in equal monthly installments over one year.

 
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5.           Miscellaneous Provisions.

          (a) Neither the Plan nor any action taken hereunder shall be construed
as giving any Non-Employee Director any right to be elected or re-elected as a
director of the Company.

          (b) A participant’s rights and interest under the Plan may not be
assigned or transferred, hypothecated, or encumbered in whole or in part either
directly or by operation of law or otherwise (except in the event of a
participant’s death, by will, or the laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy, or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation or
liability of such participant.

          (c) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of the Non-Employee Director’s compensation.

          (d) The provisions of this Plan shall be governed by and construed in
accordance with the laws of the State of California.

          (e) Headings are given to the sections of this Plan solely as a
convenience to facilitate reference. Such headings, numbering, and paragraphing
shall not in any case be deemed in any way material or relevant to the
construction of this Plan or any provisions thereof. The use of the singular
shall also include within its meaning the plural, where appropriate, and vice
versa.

6.           Termination. This Plan shall terminate upon the earlier of the
following dates or events to occur:

 
(a)
upon the adoption of a resolution of the Committee and approved by the Board
terminating the Plan; or

 
(b)
December 31, 2011.

No termination of the Plan shall materially and adversely affect any of the
rights or obligations of any person without his or her consent with respect to
any shares of Common Stock theretofore issuable under the Plan.
 
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