Exhibit 10.20

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EXECUTIVE EMPLOYMENT AGREEMENT
 
THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of March 26,
2012 by and between NovaBay Pharmaceuticals, Inc. (“Company”) and Thomas  J.
Paulson (“Executive”).
 
RECITAL

The Company and Executive desire to formalize and reflect Executive’s employment
under the terms and conditions of this Agreement.
 
NOW, THEREFORE, in consideration of the foregoing recital, the mutual covenants
herein contained and for other good and valuable consideration, the parties
hereto hereby agree as follows:
 
I.           EMPLOYMENT.
 
A.           Position and Responsibilities.  The Company hereby employs the
Executive as its Chief Financial Officer (“CFO”).  Executive shall do and
perform all such services and acts as necessary or advisable to fulfill the
duties and obligations of said position and/or such other and/or additional
responsibilities as reasonably delegated to Executive by Executive’s superior
and/or the Company’s Board of Directors (the “Board”) typically performed by a
CFO consistent with the Company’s Bylaws.
 
B.           Term.  Executive’s employment with the Company is at-will and shall
be governed by the terms of this Agreement, commencing on March __, 2012 and
continuing to and including December 31, 2015, unless this Agreement is
terminated at some earlier time in accordance with the terms of this Agreement.
 
C.           Devotion.  Except as heretofore or hereafter excepted by the
Company in writing, during the term of this Agreement, Executive (i) shall
devote full time and attention to the foregoing responsibilities, (ii) shall not
engage in any other business or other activity which may materially interfere
with Executive’s performance of said responsibilities, and (iii) except as to
any investment made in a publicly traded entity not amounting to more than 1% of
its outstanding equity, shall not, directly or indirectly, as an employee,
consultant, partner, principal, director or in any other capacity, engage or
participate in any business that is in competition with the Company.
 
 
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D.           Services’ Uniqueness.  It is agreed that Executive’s services to be
performed under this Agreement are special, unique and extraordinary and give
rise to peculiar value, the loss of which may not be reasonably or adequately
compensated by a damages award, in any legal action.  Accordingly, in addition
to any other rights or remedies available to the Company, the Company shall be
entitled to injunctive and other equitable relief to prevent or remedy a breach
of the terms of this Agreement by Executive.
 
II.           PROPRIETARY RIGHTS, CONFIDENTIAL INFORMATION, NONSOLICITATION,
ETC.
 
Executive has executed an agreement relating to the treatment of (and
Executive’s obligations as to) proprietary rights, confidential information, and
certain non-solicitation and other matters.  It is further understood and agreed
that said agreement is deemed to continue in full force and effect, binding and
not affected, in any manner, by the terms in this Agreement.
 
III.           COMPENSATION AND BENEFITS.
 
Executive’s compensation and bonus rights are as follows:
 
A.           Salary.  Executive shall be entitled to an annual salary of
$257,313 (the “Base Salary”), subject to such deductions, withholding and other
charges as required by law, payable in accordance with the Company’s standard
payroll schedule.  Executive’s salary shall be subject to at least an annual
review by the Company and may be adjusted by action of the Board, based on your
performance, the financial performance of the Company and the compensation paid
to a CFO (in comparable positions).  Such adjustment shall not reduce your then
current annual base salary unless you provide written consent.
 
B.           Bonus. The Executive shall be eligible for any bonus plan that is
deemed appropriate by the Board of Directors of the Company.
 
1.           Annual Bonus.  Executive shall be entitled to such amount of bonus
payment, if any, as considered and approved by the Board annually (for each year
of services) during the term of this Agreement, which bonus amount shall be
determined by all factors deemed relevant for that purpose by Board and shall
include (i) the fulfillment, during the relevant year, of specific milestones
and tasks delegated, for such year, to Executive as set by Executive and the
Company’s President and/or the Board, before the end of the first calendar
Quarter  (ii) the evaluation of Executive by the Company’s President and/or the
Board, (iii) the Company’s financial, product and expected progress and (iv)
other pertinent matters relating to the Company’s business and valuation.  The
amount of any annual bonus determined with respect to performance during a
calendar year or the Company’s fiscal year, as the case may be, will be paid in
full on or before the date that is 2½ months following the end of the year for
which the bonus was earned.
 
C.           Other Benefits.  Executive shall be entitled to five (5) weeks of
said vacation for each calendar year to be taken pursuant to the Company’s
vacation benefits policy.  Executive is also entitled to other benefits as (i)
are generally available to the Company’s other similar, high level, executives,
consisting of such medical, retirement and similar benefits as are so available
and (ii) are deemed special to Executive and approved by the Board.
 
 
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IV.           TERMINATION.
 
A.           At-Will Employment.  It is understood and agreed by the Company and
Executive that this Agreement does not contain any promise or representation
concerning the duration of Executive's employment with the Company. Executive
specifically acknowledges that his employment with the Company is at-will and
may be altered or terminated by either Executive or the Company at any time,
with or without cause and with or without notice.  In addition, that the rate of
salary, any bonuses, paid time off, other compensation, or vesting schedules are
stated in units of years or months or weeks does not alter the at-will nature of
the employment, and does not mean and should not be interpreted to mean that
Executive is guaranteed employment to the end of any period of time or for any
period of time. In the event of conflict between this disclaimer and any other
statement, oral or written, present or future, concerning terms and conditions
of employment, the at-will relationship confirmed by this disclaimer shall
control. This at-will status cannot be altered except in a writing signed by
Executive and approved by the Board.
 
B.           Termination of Employment.  Although Executive’s employment
hereunder shall be deemed “at will,” any termination shall be subject to the
following terms:
 
1.           For Cause.  In the event that Executive is terminated for cause (as
hereinafter defined) after at least 12 months of employment with the Company ,
Executive shall be entitled to Executive’s earned wages through the date his
employment with the Company is terminated, his accrued but unused vacation,
reimbursements of his outstanding expenses incurred and submitted in compliance
with Company policies and any other portion of his compensation earned through
the termination date.
 
2.           Without Cause.  In the event that Executive is terminated without
cause, as hereinafter defined, Executive shall be entitled to an amount equal to
the Executive’s annualized Base Salary in effect on the date of termination or
separation from service plus the amount of the bonus (if any) payable to
Executive relative to services performed by Executive during the previous
calendar year.  In the event that Executive has less than four years of service
with the Company, then the amount shall be divided by four and multiplied by the
number of years of service by Executive with the Company.  The limitation
contained in the previous sentence shall not apply to payments made as a result
of Executive’s termination of employment due to death.  Amounts payable under
this Section IV.B.2 shall be paid in two equal installments, the first 50% of
which shall be paid on the date of termination of the Executive and the
remaining 50% on the 180th day after the date of termination.  The amounts
payable under this Section IV.B.2 shall be in addition to Executive’s earned
wages through the date his employment is terminated from the Company, his
accrued but unused vacation, reimbursements of his outstanding expenses incurred
and submitted in compliance with Company policies and any other portion of his
compensation earned through the termination date.

Moreover, any options held by Executive will become fully vested on the date of
termination without cause and shall expire on the termination date as provided
in the Stock Option Agreements between the Executive and the Company.

 
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3.  Management Transition Plan.  In the event the Executive voluntarily
terminates his employment upon reaching the age of 65 or subsequent thereto, the
Executive shall be entitled to an amount equal to the Executive’s annualized
Base Salary in effect on the date of separation from service.  The Board, on its
own, shall have the reasonable discretion to pay the aforementioned annualized
Base Salary in cash or a combination of stock and cash, provided that in no case
shall the cash component be less than 25%.  Cash payable under this Section
shall be paid in two equal installments, the first 50% of which shall be paid on
the date of termination or separation from service and the remaining 50% on the
180th day after the date of termination or separation from service. The amounts
payable under this Section shall be in addition to Executive’s earned wages
through the date of the termination or separation from service, his accrued but
unused vacation, reimbursements of his outstanding expenses incurred and
submitted in compliance with Company policies and any other portion of his
compensation earned through the termination date or separation from service.
 
Any options held by Executive will become fully vested on the date of separation
from service and shall expire on the earlier of three (3) years from the date of
termination or separation from service or the termination date as provided in
the Stock Option Agreements between the Executive and the Company.
 
The number of shares of common stock awarded under this Section IV.B.3 shall be
determined by the dollar amount equivalent to the remaining annualized Base
Salary not paid in cash , divided by the closing price for a share of the
Company’s common stock on the grant date, as reported by the American Stock
Exchange. 

C.           Related Provisions.  The following terms, conditions and
definitions shall apply to the termination of Executive:
 
1.           “Termination Without Cause.”  For purposes of Section IV.B above, a
termination without cause shall be deemed to constitute any termination of
Executive’s employment hereunder by the Company, or by Executive, other than a
termination for cause as defined below.  Notwithstanding any contrary provision
herein, it is understood that a termination without cause also shall include a
termination which either:
 
(a)           occurs due to the death of Executive or to any physical or mental
Long-Term Disability that would prevent the performance of Executive’s duties
under this Agreement.  For the purposes of this Agreement, a “Long-Term
Disability” shall mean a long-term disability that after consideration and
implementation of reasonable accommodations (provided that no accommodation that
imposes undue hardship on the Company will be required), renders or will render
Executive unable to perform his essential job functions for a period longer than
four consecutive months.  The determination of Executive’s Long-Term Disability
shall be made by Executive’s attending physician unless the Board disagrees with
such determination, in which case Executive’s Long-Term Disability shall be
determined by a majority of three physicians qualified to practice medicine in
the State of the Executive’s residence, one to be selected by each of the
Executive (or his authorized representative) and the Board and the third to be
selected by such two designated physicians;
 
 
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(b)           occurs without cause by the Company or for Constructive
Termination by Executive, within ninety (90) days prior to a Change of Control
or one (1) year following a Change of Control ; or
 
(c)           is a Constructive Termination (as defined below) initiated by
Executive.
 
A "Change in Control" means the occurrence of any of the following events:  (i)
any sale or exchange of the capital stock by the shareholders of the Company in
one transaction or series of related transactions where more than 50% of the
outstanding voting power of the Company is acquired by a person or entity or
group of related persons or entities; or (ii) any reorganization, consolidation
or merger of the Company where the outstanding voting securities of the Company
immediately before the transaction represent or are converted into less than
fifty percent 50% of the outstanding voting power of the surviving entity (or
its parent corporation) immediately after the transaction; or (iii) the
consummation of any transaction or series of related transactions that results
in the sale of all or substantially all of the assets of the Company; or (iv)
reverse merger; or (v) any "person" or "group" (as defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) becoming the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly
of securities representing more than fifty percent (50%) of the voting power of
the Company then outstanding; or (vi) less than a majority of the current Board
of Directors are persons who were either nominated for election by the current
Board of Directors or were elected by the current Board of Directors.

"Constructive Termination" shall mean (i) the assignment or partial assignment
of any duties or responsibilities inconsistent in any respect with those
customarily associated with the position or those actually provided this
agreement (including status, offices, titles and reporting requirements) to be
held by you during your employment period, or any other action by the Company
that results in a diminution or other reduction or any adverse change in your
position, title, authority, duties or responsibilities; (ii) any failure by the
Company to comply with any provision of this agreement; (iii) a relocation of
your principal place of employment more than thirty-five (35) miles from its
current location; (iv) any reduction in your base salary or bonus opportunity;
(v) a reduction in the kind or level of your benefits to which you were entitled
immediately prior to such reduction; (vi) a material reduction of the facilities
and perquisites (including office space and location) or secretarial and
administrative support available to you immediately prior to such reduction;
(vii) the assignment of duties that are substantially inconsistent with your
training, education, professional experience and the job for which you were
initially hired hereunder; or (viii) the failure of any successor-in-interest to
assume all of the obligations of the Company under this agreement.
 
 
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2.           “Termination For Cause.”  Subject to the notice requirement as
provided in paragraph E below, for purposes of Section IV.B.2 (and Section
IV.C.1) above, a termination for cause shall be a termination of Executive’s
employment hereunder made:
 
(a)           by the Company, if Executive:
 
(i)           materially breaches any material terms of this Agreement which has
caused demonstrable injury to the Company
 
(ii)           commits willful gross acts of dishonesty, fraud,
misrepresentation, or other acts of moral turpitude taken by Executive in
connection with Executive responsibilities as an employee and intended to result
in substantial personal enrichment ; or
 
(iii)           is convicted of any felony or any crime involving moral
turpitude resulting in either case in significant and demonstrable economic harm
to the Company, provided that no act or failure to act shall be considered
"willful" under this definition unless you acted, or failed to act, with an
absence of good faith and without a reasonable belief that your action, or
failure to act, was in the best interest of the Company;
 
(iv)  fails to achieve milestones and tasks, referred to in Section III.B.2
above, including but not limited to failure to perform, or continuing to neglect
the performance of duties assigned to Executive, which failure or neglect will
significantly and adversely affect the Company’s business or business prospects
and which failure is due to circumstances within Executive’s reasonable control.
 
 (b)           by Executive, unless such termination by Executive is for
Constructive Termination.
 
D.           Company Actions.  All relevant determinations to be made by the
Company under paragraph C.2(a) above shall be made in the reasonable discretion
of the Board (or, if so delegated by said Board, by a committee of the Board),
acting in good faith, and, except as otherwise specified herein, shall be
conclusive and binding, but shall be subject to arbitration in accordance with
Section V below.  This Agreement is intended to comply with the requirements of
Internal Revenue Code Section 409A (“Section 409A”) and the Board and the Board
committee will interpret its provisions accordingly.  Executive understands and
agrees that the Company makes no assurances with respect to the tax consequences
arising as a result of this Agreement and the payment of any tax liabilities or
related penalties arising out of this Agreement is solely and exclusively the
responsibility of Executive, without any expectation or understanding that the
Company will pay or reimburse Executive for such taxes or other
items.  Concerning any Section 409A taxes or related penalties the Company will
use its best efforts in good faith to reduce or eliminate such tax liabilities
or penalties including but not limited to a delay of such payments the minimum
time necessary to avoid tax liabilities or penalties.  If any payment is delayed
pursuant to this paragraph on the date of payment the Company shall pay in a
lump sum all payments that otherwise would have been paid during the period of
the delayed payments.
 
 
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E.           Notice and Remedy.  In the event that any reason for termination by
the Company under paragraph C.2(a) above, or by Executive under paragraph C.2(b)
above, may be cured by Executive, or the Company, as the case may be, then the
Company, or Executive, shall first give a written notice to the other (by mail,
or by email, or by fax, to the last known address of the recipient; said notice
being deemed given, if by mail, as of the earlier of four days after mailing or
as of the date when actually received, or, if by email or fax, when sent),
specifying the reason for termination and providing a period of 30 days to cure
the fault or reason specified.  Lacking such cure within said 30 days, or if the
notified party earlier refuses to effect the cure, the termination shall then be
deemed effective.  If such cure is so made, the termination shall not then be
deemed effective, but any later conduct of a similar nature constituting a
reason for termination shall allow the Company, or Executive, as the case may
be, the right to cause the termination effectiveness without need for any
further period of time to cure.  All communications shall be sent to the address
as set forth on the signature page hereof, or to such other address as a party
may designate by ten days’ advance written notice to the other party hereto.
 
V.           ARBITRATION.
 
A.           Arbitration.  Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, or any of the rights, benefits or
obligations resulting from its terms, shall be settled by arbitration in San
Francisco, California. Except for the right of the Company and Executive to seek
injunctive relief in court, any controversy, claim or dispute of any type
arising out of or relating to Executive’s employment or the provisions of this
Agreement shall be resolved in accordance with this Section V of the Agreement,
regarding resolution of disputes, which will be the sole and exclusive procedure
for the resolution of any such disputes.  This Agreement shall be enforced in
accordance with the Federal Arbitration Act, the enforcement provisions of which
are incorporated by this reference.  Matters subject to these provisions
include, without limitation, claims or disputes based on statute, contract,
common law and tort and will include, for example, matters pertaining to
termination, discrimination, harassment, compensation and benefits.  Matters to
be resolved under these procedures also include claims and disputes arising out
of statutes such as the Fair Labor Standards Act, Title VII of the Civil Rights
Act, the Age Discrimination in Employment Act, the California labor code, and
the California Fair Employment and Housing Act.  Nothing in this provision is
intended to restrict Executive from submitting any matter to an administrative
agency with jurisdiction over such matter.
 
The Executive and the Company agree that any disputes related to or arising out
of the Executive’s employment with the Company will be determined by arbitration
in accordance with the then-current JAMS employment arbitration rules and
procedures, except as modified herein.  The arbitration will be conducted by a
sole neutral arbitrator who has had both training and experience as an
arbitrator of general employment and commercial matters and who is, and for at
least ten (10) years has been, a partner, a shareholder, or a member in a law
firm.  If the Company and Executive cannot agree on an arbitrator, then the
arbitrator will be selected by JAMS in accordance with Rule 12 of the JAMS
employment arbitration rules and procedures.  Reasonable discovery will be
permitted by both parties and the arbitrator may decide any issue as to
discovery.  The arbitrator may decide any issue as to whether or as to the
extent to which any dispute is subject to arbitration in this Section V and the
arbitrator may award any relief permitted by law.  The arbitrator must render
the award in writing, including an explanation of the reasons for the
award.  Judgment upon the award may be entered by any court having jurisdiction
of the matter, and the decision of the arbitrator will be final and
binding.  The parties hereto hereby waive to the fullest extent permitted by law
any rights to appeal or to review of such award by any court.  The statute of
limitations applicable to the commencement of a lawsuit will apply to the
commencement of arbitration under Section V of this Agreement.  At the request
of any party, the arbitrator, attorneys, parties to the arbitration, witnesses,
experts, court reporters or other persons present at the arbitration shall agree
in writing to maintain the strict confidentiality of the arbitration
proceedings.  The arbitrator’s fees and cost of the Arbitration will be paid in
full by the Company, unless Executive agrees in writing to pay some or all of
such fees.
 
 
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B.           Fees.  Unless otherwise agreed, the prevailing party (if a
prevailing party is determined to exist by the arbitrator or judge) will be
entitled to its costs and attorneys’ fees, expert fees incurred in any
arbitration or other proceeding relating to the interpretation or enforcement of
this Agreement, but not including the arbitrator’s fees and JAMS cost paid by
the Company under Paragraph A.
 
C.           Acknowledgement.  EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION
V, WHICH DISCUSSES ARBITRATION.  EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS
AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR
IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO ARBITRATION, AND
THAT THE PROVISIONS SET FORTH IN THIS SECTION V CONSTITUTE A WAIVER OF
EXECUTIVE’S RIGHT TO A JURY TRIAL.
 
D.           No Duty to Mitigate.  Executive is under no contractual or legal
obligation to mitigate Executive’s damages in order to receive the severance
benefits provided in this Agreement.
 
VI.           LEGAL ADVICE.
 
Executive acknowledges that an opportunity has been afforded to Executive to
consult with legal counsel with respect to this Agreement and that no individual
representing the Company has given legal advice with respect to this Agreement.
 
VII.           MISCELLANEOUS AND CONSTRUCTION.
 
Except as otherwise specifically provided herein, this Agreement:

A.           and any benefits or obligations herein may not be assigned or
delegated by Executive (but may be so assigned or delegated by the Company);
 
 
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B.           contains the entire understandings of the parties as to its subject
matter, and replaces and supersedes any existing employment agreement and any
and all contrary prior understandings or agreements;

C.           may be amended or modified only by a written amendment or
modification signed by the Company and Executive;

D.           is made in, and shall be construed under the laws of, the State of
California;

E.           inures to the benefit of, and is binding upon, the permitted
successors, assigns, distributees, personal representatives, heirs and other
successors-in-interest to and of the parties hereto;

F.           shall not be interpreted by reference to any of the captions or
headings of the paragraphs herein, which captions or headings have been inserted
for convenience purposes only;

G.           shall be fully effectuated in accordance with its tenor, effect and
purposes by each of the parties hereto by executing such further documents or
taking such other actions as may be reasonably requested by the other party
hereto; and

H.           shall be interpreted, as to its remaining provisions, to be fully
lawful and operative, to the extent reasonably required to fulfill its principal
tenor, effect and purposes, in the event that any provision either is found by
any court of competent jurisdiction to be unlawful or inoperative or violates
any statutory or legal requirement, and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

I.           may be executed in more than one counterpart, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 
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IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of
the day and year first above written.
 

 
COMPANY:
           
NOVABAY PHARMACEUTICALS, INC.
                 
 
By:
 /s/ Ramin Najafi     Name: Ramin (Ron) Najafi, Ph.D.     Title: Chairman and
CEO     Address: 5980 Horton Street, Suite 550      
Emeryville, CA 94608
    Fax No.: (510) 740-3629     E-mail: rnajafi@novabaypharma.com              
     
EXECUTIVE:
               /s/ Thomas J. Paulson      
THOMAS J. PAULSON
            Address: 557 Creedon Circle       Alameda, CA 94502     Telephone
No.
(510) 543-5601
    E-mail: tpaulson@novabaypharma.com  

            
 
 
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