2007 Omnibus Incentive Plan



 Exhibit 10.3 
  

 NOVABAY PHARMACEUTICALS, INC. 
 2007 OMNIBUS INCENTIVE PLAN 
  










 Table of Contents 
  


					
	 Section 1.
	  	 Purpose
	  	1
			
	 Section 2.
	  	 Definitions
	  	1
			
	 Section 3.
	  	 Administration
	  	4
	 (a)
	  	 Power and Authority of the Committee
	  	4
	 (b)
	  	Power and Authority of the Board	  	5
			
	 Section 4.
	  	 Shares Available for Awards
	  	5
	 (a)
	  	Shares Available	  	5
	 (b)
	  	Accounting for Awards	  	5
	 (c)
	  	Adjustments	  	5
	 (d)
	  	Section 162(m) Award Limitations Under the Plan	  	6
			
	 Section 5.
	  	 Eligibility
	  	6
			
	 Section 6.
	  	 Awards
	  	6
	 (a)
	  	Options	  	6
	 (b)
	  	Stock Appreciation Rights	  	8
	 (c)
	  	Restricted Stock and Restricted Stock Units	  	8
	 (d)
	  	Performance Awards	  	9
	 (e)
	  	Dividend Equivalents	  	9
	 (f)
	  	Other Stock Grants	  	9
	 (g)
	  	Other Stock-Based Awards	  	9
	 (h)
	  	General	  	10
			
	 Section 7.
	  	 Amendment and Termination; Adjustments
	  	12
	 (a)
	  	Amendments to the Plan	  	12
	 (b)
	  	Amendments to Awards	  	12
	 (c)
	  	Correction of Defects, Omissions and Inconsistencies	  	13
			
	 Section 8.
	  	 Income Tax Withholding
	  	13
			
	 Section 9.
	  	 General Provisions
	  	13
	 (a)
	  	No Rights to Awards	  	13
	 (b)
	  	Award Agreements	  	13
	 (c)
	  	Plan Provisions Control	  	13
	 (d)
	  	No Rights of Shareholders	  	13
	 (e)
	  	No Limit on Other Compensation Arrangements	  	14
	 (f)
	  	No Right to Employment	  	14
	 (g)
	  	Governing Law	  	14
	 (h)
	  	Severability	  	14
	 (i)
	  	No Trust or Fund Created	  	14

  

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	 (j)
	  	Other Benefits	  	15
	 (k)
	  	No Fractional Shares	  	15
	 (l)
	  	Headings	  	15
	 (m)
	  	Section 16 Compliance; Section 162(m) Administration	  	15
	 (n)
	  	Conditions Precedent to Issuance of Shares	  	15
			
	 Section 10.
	  	 Effective Date of the Plan
	  	15
			
	 Section 11.
	  	 Term of the Plan
	  	16

  

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 NOVABAY PHARMACEUTICALS, INC. 
 2007 OMNIBUS INCENTIVE PLAN 
 Section 1.    Purpose 
 The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees,
officers, consultants, independent contractors and directors capable of assuring the future success of the Company, to offer such persons incentives to continue in the Company’s employ or service and to afford such persons an opportunity to
acquire a proprietary interest, or otherwise increase their proprietary interest, in the Company. 
 Section 2.    Definitions

 As used in the Plan, the following terms shall have the meanings set forth below: 
 (a) “Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the
Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee. 
 (b)
“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, Other Stock Grant or Other Stock-Based Award granted under the Plan. 
 (c) “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing an Award granted under the
Plan. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee. 
 (d) “Board” shall mean the Board of Directors of the Company. 
 (e) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.

 (f) “Committee” shall mean a committee of Directors designated by the Board to administer the Plan, which shall initially
be the Company’s compensation committee. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3 and Section 162(m) of the
Code, and each member of the Committee shall be a “Non-Employee Director” and an “Outside Director.” 
 (g)
“Company” shall mean NovaBay Pharmaceuticals, Inc., a California corporation, and any successor corporation. 
 (h)
“Director” shall mean a member of the Board, including any Non-Employee Director. 









 (i) “Dividend Equivalent” shall mean any right granted under Section 6(e) of the
Plan. 
 (j) “Eligible Person” shall mean any employee, officer, consultant, independent contractor or director providing
services to the Company or any Affiliate who the Committee determines to be an Eligible Person. An Eligible Person must be a natural person. 
 (k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
 (l) “Fair Market
Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by
the Committee. Notwithstanding the foregoing and unless otherwise determined by the Committee, the Fair Market Value of a Share as of a given date shall be, if the Shares are then listed on the American Stock Exchange, the closing price of one
Share as reported on the American Stock Exchange on such date or, if the American Stock Exchange is not open for trading on such date, on the most recent preceding date when it is open for trading. 
 (m) “Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to qualify as an
“incentive stock option” in accordance with the terms of Section 422 of the Code or any successor provision. 
 (n)
“Insider” shall mean (i) an insider (as defined in Section 1 of the Securities Act (Ontario)), except that a person who falls within that definition solely by virtue of being a director or senior officer of a subsidiary or
an affiliate (as defined in Sections 1(2) and 1(4), respectively, of the Securities Act (Ontario)) of the Company shall not be an insider for purposes hereof, unless such director or senior officer: (1) in the ordinary course receives or has
access to information as to material facts or material changes concerning the Company before the material facts or material changes are generally disclosed, (2) is a director or senior officer of a major subsidiary (as defined in National
Instrument 55-101 - Insider Reporting Exemptions) or (3) is an insider of the Company in a capacity other than as a director or senior officer of the subsidiary or affiliate of the Company; and (ii) an associate (as defined in
Section 1(1) of the Securities Act (Ontario)) or affiliate of any person who is an insider by virtue of the preceding clause (i). 
 (o)
“Non-Employee Director” shall mean any Director who is not also an employee of the Company or an Affiliate within the meaning of Rule 16b-3 (which term “Non-Employee Director” is defined in this paragraph for purposes
of the definition of “Committee” only and is not intended to define such term as used elsewhere in the Plan). 
 (p)
“Non-Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not an Incentive Stock Option. 
 (q) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option. 
 (r)
“Other Stock Grant” shall mean any right granted under Section 6(f) of the Plan. 
  

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 (s) “Other Stock-Based Award” shall mean any right granted under Section 6(g) of
the Plan. 
 (t) “Outside Director” shall mean any Director who is an “outside director” within the meaning of
Section 162(m) of the Code. 
 (u) “Participant” shall mean an Eligible Person designated to be granted an Award under
the Plan. 
 (v) “Performance Award” shall mean any right granted under Section 6(d) of the Plan. 
 (w) “Performance Goal” shall mean one or more of the following performance goals, either individually, alternatively or in any
combination, applied on a corporate, subsidiary or business unit basis: revenue, cash flow, gross profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization and net earnings, earnings per share,
margins (including one or more of gross, operating and net income margins), returns (including one or more of return on assets, equity, investment, capital and revenue and total shareholder return), stock price, economic value added, working
capital, market share, cost reductions, workforce satisfaction and diversity goals, employee retention, customer satisfaction, completion of key projects and strategic plan development and implementation. Such goals may reflect absolute entity or
business unit performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria. Pursuant to rules and conditions adopted by the Committee on or before the 90th day of
the applicable performance period for which Performance Goals are established, the Committee may appropriately adjust any evaluation of performance under such goals to exclude the effect of certain events, including any of the following events:
asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain
business activities; and gains or losses from the disposition of businesses or assets or from the early extinguishment of debt. 
 (x)
“Permanent Disability” shall mean the inability of Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or has
lasted or can be expected to last for a continuous period of twelve months or more. 
 (y) “Person” shall mean any
individual or entity, including a corporation, partnership, limited liability company, association, joint venture or trust. 
 (z)
“Plan” shall mean the NovaBay Pharmaceuticals, Inc. 2007 Omnibus Incentive Plan, as amended from time to time, the provisions of which are set forth herein. 
 (aa) “Qualified Performance Based Award” shall have the meaning set forth in Section 6(d) of the Plan. 
 (bb) “Restricted Stock” shall mean any Share granted under Section 6(c) of the Plan. 
  

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 (cc) “Restricted Stock Unit” shall mean any unit granted under Section 6(c) of the
Plan evidencing the right to receive a Share (or evidencing the right to receive a cash payment equal to the Fair Market Value of a Share if explicitly so provided in the Award Agreement) at some future date. 
 (dd) “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, or any
successor rule or regulation. 
 (ee) “Section 162(m)” shall mean Section 162(m) of the Code and the applicable
Treasury Regulations promulgated thereunder. 
 (ff) “Securities Act” shall mean the Securities Act of 1933, as amended.

 (gg) “Service” shall mean the Participant’s performance of services for the Company (or any Affiliate) in the
capacity of an employee, officer, consultant, independent contractor or director. 
 (hh) “Share” or
“Shares” shall mean a share or shares of common stock, $0.01 par value per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the
Plan. 
 (ii) “Stock Appreciation Right” shall mean any right granted under Section 6(b) of the Plan. 
 Section 3.    Administration 
 (a)
Power and Authority of the Committee. The Plan shall be administered by the Committee. Any Awards made to members of the Committee, however, should be authorized by a disinterested majority of the Board. Subject to the express provisions of
the Plan and to applicable law and other applicable stock exchange rules, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under
the Plan; (iii) determine the number of Shares to be covered by (or the method by which payments or other rights are to be determined in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement;
(v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of any Option or waive any restrictions relating to any Award; (vi) determine whether, to what extent and under what circumstances Awards
may be exercised in cash, Shares, promissory notes (provided, however, that the par value of any Shares to be issued pursuant to such exercise shall be paid in the form of cash, services rendered, personal property, real property or a combination
thereof and the acceptance of such promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) interpret and
administer the Plan and any instrument or agreement, including an Award Agreement, relating to the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other 

  

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decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and
shall be final, conclusive and binding upon any Eligible Person and any holder or beneficiary of any Award. 
 (b) Power and Authority of
the Board. Notwithstanding anything to the contrary contained herein, the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, but only to the
extent it would not cause a loss of any benefits under Section 162(m). 
 Section 4.    Shares Available for Awards

 (a) Shares Available. Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that
may be issued under the Plan shall be 4,000,000. Any Shares that are used by a Participant as full or partial payment to the Company of the purchase price relating to an Award, or in connection with the satisfaction of tax obligations relating to an
Award, shall again be available for granting Awards (other than Incentive Stock Options) under the Plan. In addition, if any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise
terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available
for granting Awards under the Plan. Notwithstanding the foregoing, (i) the number of Shares available for granting Incentive Stock Options under the Plan shall not exceed 4,000,000, subject to adjustment as provided in Section 4(c) of the
Plan and subject to the provisions of Section 422 or 424 of the Code or any successor provision and (ii) the number of Shares available for granting Restricted Stock and Restricted Stock Units shall not exceed 4,000,000, subject to
adjustment as provided in Section 4(c) of the Plan. 
 (b) Accounting for Awards. For purposes of this Section 4, if an
Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan. Any Shares that are used by a Participant as full or partial payment to the Company of the purchase price relating to an Award or in connection with the satisfaction of tax obligations relating to an Award, shall
again be available for granting Awards under the Plan. In addition, if any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the
number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. 
 (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution
or enlargement of the 

  

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benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards,
(iii) the purchase price or exercise price with respect to any Award and (iv) the limitations contained in Section 4(d) of the Plan; provided, however, that the number of Shares covered by any Award or to which such
Award relates shall always be a whole number. Notwithstanding the forgoing, any adjustments made pursuant to this Section 4(c) shall be subject to any prior approvals as may be required of any relevant stock exchanges on which the
Company’s securities are then traded or any other applicable regulatory authorities. 
 (d) Section 162(m) Award Limitations
Under the Plan. No Eligible Person may be granted any Award or Awards under the Plan which is intended to represent “qualified performance based compensation” with the meaning of Section 162(m) of the Code, for more than 2,000,000
Shares (subject to adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any taxable year. 
 Section
5.    Eligibility 
 Any Eligible Person shall be eligible to be designated a Participant. In determining which
Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company
or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which term as used herein includes, without limitation,
officers and directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of
Section 424(f) of the Code or any successor provision. 
 Section 6.    Awards 
 (a) Options. The Committee is hereby authorized to grant Options to Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: 
 (i)
Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the
date of grant of such Option. 
 (ii) Option Term. The term of each Option shall be fixed by the Committee at the time
of grant, but shall not be longer than 10 years from the date of grant. 
 (iii) Time and Method of Exercise. The
Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, 

  

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promissory notes (provided, however, that the par value of any Shares to be issued pursuant to such exercise shall be paid in the form of cash,
services rendered, personal property, real property or a combination thereof and the acceptance of such promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other Awards or other property, or
any combination thereof, having a Fair Market Value on the exercise date equal to the applicable exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. The Committee shall have the
discretion to grant Options that are exercisable for unvested Shares. Should the Participant’s Service cease while the Shares issued upon the early exercise of the Participant’s Options are still unvested, the Company shall have the right
to repurchase any or all of those unvested Shares at a price per share determined by the Committee. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule
for the purchased shares) shall be established by the Committee and set forth in the Award Agreement. Any repurchases must be made in compliance with the relevant provisions of California law. 
 (iv) Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply
to the grant of stock options which are intended to qualify as Incentive Stock Options: 
 (A) The Committee will not grant
Incentive Stock Options in which the aggregate Fair Market Value (determined as of the time the option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar
year (under this Plan and all other plans of the Company and its Affiliates) shall exceed $100,000. 
 (B) All Incentive Stock
Options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board or the date this Plan was approved by the shareholders of the Company. 
 (C) Unless sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than 10 years after the date
of grant; provided, however, that in the case of a grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of its Affiliate, such Incentive Stock Option shall expire and no longer be exercisable no later than 5 years from the date of grant. 
 (D) The purchase price per Share for an Incentive Stock Option shall be not less than 100% of the Fair Market Value of a Share on the date
of grant of the Incentive Stock Option; provided, however, that, in the case of the grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code)
stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or 

  

 7 








 
of its Affiliate, the purchase price per Share purchasable under an Incentive Stock Option shall be not less than 110% of the Fair Market Value of a Share on
the date of grant of the Inventive Stock Option. 
 (E) Any Incentive Stock Option authorized under the Plan shall contain
such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain all provisions required in order to qualify the Option as an Incentive Stock Option. 
 (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons subject to the terms of
the Plan and any applicable Award Agreement. Each Stock Appreciation Right granted under the Plan shall confer on the holder upon exercise the right to receive[, as determined by the Committee, cash or] a number of Shares equal to the excess of
(a) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (b) the grant price of the Stock Appreciation Right
as determined by the Committee, which grant price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions (including conditions or restrictions on the exercise thereof) of any Stock Appreciation Right shall be as determined by the Committee. 
 (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Restricted Stock and Restricted Stock Units to
Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: 
 (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, a restriction on or prohibition against the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in
such installments or otherwise as the Committee may deem appropriate. 
 (ii) Issuance of Shares. Any Restricted Stock
granted under the Plan may be evidenced in such manner as the Board may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such
certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. 
 (iii) Forfeiture. Except as otherwise determined by the Committee, upon a Participant’s termination of employment or
resignation or removal as a director, as the case may be (all as determined under criteria established by the Committee), during the applicable restriction period, all Shares of Restricted Stock and Restricted Stock Units at such time subject to
restriction shall be forfeited and reacquired by the Company; 
  

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 provided, however, that the Committee may, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. 
 (d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Eligible Persons subject to the terms of the Plan. A Performance Award granted under the Plan (i) may be
denominated or payable in cash, Shares (including, without limitation, Restricted Stock and Restricted Stock Units), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in
whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the performance goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee.
From time to time, the Committee may designate an Award granted pursuant to the Plan as an award of “qualified performance-based compensation” within the meaning of Section 162(m) of the Code (a “Qualified Performance Based
Award”). Qualified Performance Based Awards shall, to the extent required by Section 162(m), be conditioned solely on the achievement of one or more objective Performance Goals, and such Performance Goals shall be established by the
Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). The Committee shall also certify in writing that such Performance Goals have been met prior to payment of the Qualified
Performance Based Awards to the extent required by Section 162(m). 
 (e) Dividend Equivalents. The Committee is hereby
authorized to grant Dividend Equivalents to Eligible Persons under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee)
equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan, such Dividend Equivalents may have such terms and conditions as the
Committee shall determine. 
 (f) Other Stock Grants. The Committee is hereby authorized, subject to the terms of the Plan, to grant
to Eligible Persons Shares without restrictions thereon as are deemed by the Committee to be consistent with the purpose of the Plan. Subject to the terms of the Plan and any applicable Award Agreement, such Other Stock Grant may have such terms and
conditions as the Committee shall determine. 
 (g) Other Stock-Based Awards. The Committee is hereby authorized to grant to Eligible
Persons, subject to the terms of the Plan, such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into
Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(g) shall be purchased for such consideration, which may be
paid by such method or methods and in such form or forms (including, without limitation, cash, Shares, promissory notes promissory notes (provided, 

  

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however, that the par value of any Shares to be issued pursuant to such exercise shall be paid in the form of cash, services rendered, personal
property, real property or a combination thereof and the acceptance such promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other Awards or other property or any combination thereof), as
the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. 
 (h) General. 
 (i)
Consideration for Awards. Awards may be granted for no cash consideration or for any cash or other consideration as determined by the Committee and required by applicable law and any applicable stock exchange rules. 
 (ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted
under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. 
 (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers
to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, promissory notes (provided,
however, that the acceptance of such promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other Awards or other property or any combination thereof), and may be made in a single payment
or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of Dividend Equivalents with respect to installment or deferred payments. 
 (iv) Limits on Transfer of Awards. No Award (other than Other Stock Grants) and no right under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution
and the Company shall not be required to recognize any attempted assignment of such rights by any Participant; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant; provided, further, that, if so determined by the
Committee, a Participant may, at any time that such Participant holds such Option, transfer a Non-Qualified Stock Option to any “Family Member” (as such term is defined in the General Instructions to Form S-8 (or any successor to
such Instructions or such Form) under the 

  

 10 








 
Securities Act), provided that the Participant may not receive any consideration for such transfer, the Family Member may not make any subsequent
transfers other than by will or by the laws of descent and distribution and the Company receives written notice of such transfer. Except as otherwise determined by the Committee, each Award (other than an Incentive Stock Option) or right under any
such Award shall be exercisable during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative. Except as otherwise determined by the Committee, no
Award (other than an Incentive Stock Option) or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or other encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate. 
 (v) Black-Out Periods. Except for Incentive Stock Options issued pursuant to
Section 6(a)(iv), if an Award expires during, or within five business days after, a trading black-out period imposed by the Company to restrict trades in the Company’s securities, then, notwithstanding any other provision of the Plan, the
Award shall expire ten business days after the trading black-out period is lifted by the Company. 
 (vi) Term of
Awards. Subject to Sections 6(a)(iv)(C) and 6(h)(v), the term of each Award shall be fixed by the Committee at the time of grant, but shall not be longer than 10 years from the date of grant. 
 (vii) Restrictions; Securities Exchange Listing. All Shares or other securities delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities laws and regulatory requirements, and the Committee may direct
appropriate stop transfer orders and cause other legends to be placed on the certificates for such Shares or other securities to reflect such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not
be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been and continue to be admitted for trading on such securities exchange. No Shares or other assets shall be issued or
delivered pursuant to the Plan unless and until there shall have been compliance with all applicable requirements of applicable securities laws, including the filing and effectiveness of the Form S-8 registration statement for the Shares issuable
pursuant to the Plan, and all applicable listing requirements of any stock exchange or trading system on which Common Stock is then traded, including the American Stock Exchange and the Toronto Stock Exchange. No Shares shall be issued or delivered
pursuant to the Plan if doing so would violate any internal policies of the Company. 
 (viii) Prohibition on
Repricing. Except as provided in Section 4(c) of the Plan, no Option or Stock Appreciation Right may be amended to reduce its initial exercise or grant price and no Option or Stock Appreciation Right shall be canceled and replaced with
Options or Stock Appreciation Rights having a lower exercise or grant price, without the approval of the shareholders of the Company. 
  

 11 








 Section 7.    Amendment and Termination; Adjustments 
 (a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan at any time; provided, however,
that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the shareholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such
approval: 
 (i) violates the rules or regulations of the National Association of Securities Dealers, Inc. or any other
securities exchange that are applicable to the Company; 
 (ii) causes the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan; 
 (iii) increases the number of shares authorized under the Plan as specified in
Section 4(a); 
 (iv) permits the award of Options or Stock Appreciation Rights at a price less than 100% of the Fair
Market Value of a Share on the date of grant of such Option or Stock Appreciation Right, as prohibited by Sections 6(a)(i) and 6(b) of the Plan or the repricing of Options or Stock Appreciation Rights, as prohibited by Section 6(h)(vii) of the
Plan; 
 (v) would prevent the grant of Options or Stock Appreciation Rights that would qualify under Section 162(m) of
the Code; or 
 (vi) increase the aggregate number of Common Shares in respect of which Awards have been granted and remain
outstanding so as to result in: (A) the number of Common Shares reserved for issuance to Insiders pursuant to Awards exceeding 10% of the issued and outstanding Common Shares or (B) the issuance to Insiders pursuant to Awards, within a
one-year period, of a number of Common Shares exceeding 10% of the issued and outstanding Common Shares. 
 (b) Amendments to Awards.
The Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. Except as otherwise provided herein or in an Award Agreement, the Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, if such action would adversely affect the rights of the holder of such Award, without the consent of the Participant or holder or beneficiary thereof. Notwithstanding the foregoing,
the Committee shall not waive any conditions or rights of the Company, or otherwise amend or alter any outstanding Qualified Performance Based Award in such a manner as to cause such Award not to constitute “qualified performance based
compensation” within the meaning of Section 162(m) of the Code. Notwithstanding the forgoing, no amendments shall be made to any granted Awards to (i) reduce the exercise price of Option, or cancel and reissue any Options so as to in
effect reduce the exercise price of Options, for the benefit of Insiders or (ii) extend the termination date beyond the original expiration date for the benefit of Insiders without first obtaining approval of the shareholders in accordance with
the requirements of applicable stock exchange rules; and no 

  

 12 








 
action shall be taken with respect to granted Options without the consent of the optionee, unless the Board determines that such action does not materially
alter or impair such Option. 
 (c) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan. 
 Section 8.    Income Tax Withholding 
 In order to comply with all applicable federal, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or local payroll, withholding, income or
other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal, state and local taxes to be withheld or
collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such
taxes (but only to the extent of the minimum amount required to be withheld under applicable laws or regulations) or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions
relating to) such Award with a Fair Market Value equal to the amount of such taxes (but only to the extent of the minimum amount required to be withheld under applicable laws or regulations). The election, if any, must be made on or before the date
that the amount of tax to be withheld is determined. 
 Section 9.    General Provisions 
 (a) No Rights to Awards. No Eligible Person or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment of Eligible Persons or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. 
 (b) Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have
been duly executed on behalf of the Company and, if requested by the Company, signed by the Participant. 
 (c) Plan Provisions
Control. In the event that any provision of an Award Agreement conflicts with or is inconsistent in any respect with the terms of the Plan as set forth herein or subsequently amended, the terms of the Plan shall control. 
 (d) No Rights of Shareholders. Except with respect to Shares of Restricted Stock as to which the Participant has been granted the right to vote,
neither a Participant nor the Participant’s legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company with respect to any Shares issuable to such Participant upon the 

  

 13 








 
exercise or payment of any Award, in whole or in part, unless and until such Shares have been issued in the name of such Participant or such
Participant’s legal representative without restrictions thereto. 
 (e) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

 (f) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the
employ, or as giving a director of the Company or an Affiliate the right to continue as a director or an Affiliate of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate a
Participant’s employment or service at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, or terminate the term of a director of the Company or an Affiliate, free
from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement. Nothing in this Plan shall confer on any person any legal or equitable right against the Company or any
Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or an Affiliate. The Awards granted hereunder shall not form any part of the wages or salary of any Eligible Person for purposes of
severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any
right or benefit under the Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By
participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby. 
 (g) Governing Law. The validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any
Award, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of California. 
 (h)
Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. 
 (i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and an
Eligible Person or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate. 
  

 14 








 (j) Other Benefits. No compensation or benefit awarded to or realized by any Participant under the
Plan shall be included for the purpose of computing such Participant’s compensation under any compensation-based retirement, disability, or similar plan of the Company unless required by law or otherwise provided by such other plan. 

(k) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. 
 (l) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. 
 (m)
Section 16 Compliance; Section 162(m) Administration. The Plan is intended to comply in all respects with Rule 16b-3 or any successor provision, as in effect from time to time, and in all events the Plan shall be construed in
accordance with the requirements of Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as hereafter amended or interpreted, the provision shall be deemed inoperative. The Board of Directors, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan with respect to persons who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the
Plan with respect to other Eligible Persons. With respect to Options and Stock Appreciation Rights, the Company intends to have the Plan administered in accordance with the requirements for the award of “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code. 
 (n) Conditions Precedent to Issuance of Shares. Shares
shall not be issued pursuant to the exercise or payment of the purchase price relating to an Award unless such exercise or payment and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, applicable Canadian securities laws, the requirements of any applicable stock exchange and the California General Corporation Law.
As a condition to the exercise or payment of the purchase price relating to such Award, the Company may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation and warranty is required by law. 
 Section 10.    Effective Date of the Plan 
 The Plan shall be effective upon
the effective date of the Company’s registration statement on Form S-1 in connection with the Company’s initial public offering of its common stock. 
  

 15 








 Section 11.    Term of the Plan 
 No Award shall be granted under the Plan after (a) the tenth anniversary of the earlier of (i) the date on which this Plan was adopted by the
Board or (ii) the date this Plan was approved by the shareholders of the Company, or (b) any earlier date of discontinuation or termination established pursuant to Section 7(a) of the Plan. However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend
the Plan, shall extend beyond the termination of the Plan. 
  

 16 








 NOVABAY PHARMACEUTICALS, INC. 
 INCENTIVE STOCK OPTION AGREEMENT 
 This INCENTIVE STOCK OPTION AGREEMENT (the
“Agreement”) is made this              day of             ,
            , by and between NovaBay Pharmaceuticals, Inc., a California corporation (the “Company”), and
            , an individual resident of             ,
             (“Optionee”). 
 1. Grant of Option.
The Company hereby grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of              shares (the “Shares”) of
common stock, $0.01 par value (“Common Stock”), of the Company at the exercise price of $             per share according to the terms and conditions set forth in
this Agreement and in the NovaBay Pharmaceuticals, Inc. 2007 Omnibus Incentive Plan (the “Plan”). The Option will be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee. 
 The Option shall terminate at the close of business ten (10) years from the date hereof; provided, however, that if Optionee owns
(within the meaning of Section 422 of the Code) as of the date hereof stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its Affiliates, the Option shall terminate at the close of
business five (5) years from the date hereof. 
 2. Vesting of Option Rights. 
 (a) Except as otherwise provided in this Agreement, the Option may be exercised by Optionee in accordance with the following schedule: 
  

			
	 On or after each of
 the following dates
	  	Number of Shares
with respect to which the Option is exercisable
		  	
		  	
		  	
		  	
		  	

 (b) During the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall
not be assignable or transferable by Optionee, other than by will or the laws of descent and distribution. 
 (c) Optionee understands that
to the extent that the aggregate fair market value (determined at the time the option was granted) of the shares of Common Stock of the Company with respect to which all options that are incentive stock options within the meaning of Section 422
of the Code are exercisable for the first time by Optionee during any calendar year exceed $100,000, in accordance with Section 422(d) of the Code, such options shall be treated as options that do not qualify as incentive stock options.










 3. Exercise of Option after Death or Termination of Employment or Service. The Option shall
terminate and may no longer be exercised if Optionee ceases to be employed by or provide Service to the Company or its Affiliates, except that: 
 (a) If Optionee’s employment or Service shall be terminated for any reason, voluntary or involuntary, other than for “Misconduct” (as defined in Section 3(e)) or Optionee’s death or
Permanent Disability (as defined in the Plan and within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), Optionee may at any time within a period of three (3) months after such termination exercise the
Option to the extent the Option was exercisable by Optionee on the date of the termination of Optionee’s employment or Service. 
 (b) If Optionee’s employment or Service is terminated for Misconduct, the Option shall be terminated as of the date of the act giving rise to such termination. 
 (c) If Optionee shall die while the Option is still exercisable according to its terms, or if employment or Service is terminated because
of Optionee’s Permanent Disability while in the employ of the Company, and Optionee shall not have fully exercised the Option, such Option may be exercised, at any time within twelve (12) months after Optionee’s death or date of
termination of employment or Service for Permanent Disability, by Optionee, personal representatives or administrators or guardians of Optionee, as applicable, or by any person or persons to whom the Option is transferred by will or the applicable
laws of descent and distribution, to the extent of the full number of Shares Optionee was entitled to purchase under the Option on (i) the earlier of the date of death or termination of employment or Service or (ii) the date of termination
for such Permanent Disability, as applicable. 
 (d) Notwithstanding the above, in no case may the Option be exercised to any
extent by anyone after the termination date of the Option. 
 (e) “Misconduct” shall mean (i) the
commission of any act of fraud, embezzlement or dishonesty by Optionee, (ii) any unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or of any Affiliate), or (iii) any other
intentional misconduct by such person adversely affecting the business or affairs of the Company (or any Affiliate) in a material manner. However, if the term or concept has been defined in an employment agreement between the Company and Optionee,
then Misconduct shall have the definition set forth in such employment agreement. The foregoing definition shall not in any way preclude or restrict the right of the Company (or any Affiliate) to discharge or dismiss any Optionee or other person in
the Service of the Company (or any Affiliate) for any other acts or omissions but such other acts or omissions shall not be deemed, for purposes of the Agreement, to constitute grounds for termination for Misconduct. 
 4. Method of Exercise of Option. Subject to the foregoing, the Option may be exercised in whole or in part from time to time by serving written
notice of exercise on the Company at its principal office within the Option period. The notice shall state the number of Shares as to which the Option is being exercised and shall be accompanied by payment of the 

  

 2 








 
exercise price. Payment of the exercise price shall be made (i) in cash (including bank check, personal check or money order payable to the Company),
(ii) with the approval of the Company (which may be given in its sole discretion), by delivering to the Company for cancellation shares of the Company’s Common Stock already owned by Optionee having a Fair Market Value equal to the full
exercise price of the Shares being acquired, (iii) with the approval of the Company (which may be given in its sole discretion) and subject to Section 402 of the Sarbanes-Oxley Act of 2002, by delivering to the Company the full exercise
price of the Shares being acquired in a combination of cash and Optionee’s full recourse liability promissory note with a principal amount not to exceed eighty percent (80%) of the exercise price and a term not to exceed five
(5) years, which promissory note shall provide for interest on the unpaid balance thereof which at all times is not less than the minimum rate required to avoid the imputation of income, original issue discount or a below-market rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions thereto, (iv) subject to Section 402 of the Sarbanes-Oxley Act of 2002, to the extent this Option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which Optionee shall concurrently provide irrevocable instructions (1) to Optionee’s brokerage firm to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and
(2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale, or (v) with the approval of the Company (which may be given in its sole discretion) and subject to
Section 402 of the Sarbanes-Oxley Act of 2002, by delivering to the Company a combination of any of the forms of payment described above. This Option may be exercised only with respect to full shares and no fractional share of stock shall be
issued. 
 5. Change in Control. 
 (a) If this Option is assumed in connection with a Change in Control or otherwise continued in effect, then this Option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number
and class of securities which would have been issuable to Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control, and appropriate adjustments shall also be made to the exercise
price, provided the aggregate exercise price shall remain the same. To the extent that the actual holders of the Company’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in
Control, the successor corporation may, in connection with the assumption of this Option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such
Change in Control. 
 (b) This Agreement shall not in any way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
  

 3 








 (c) For purposes of this Agreement, “Change in Control” shall mean a
change in ownership or control of the Company effected through any of the following transactions: 
 (i) a merger, consolidation or other
reorganization unless securities representing more than 50% of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets; or
(iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the
Company’s shareholders. 
 6. Capital Adjustments and Reorganization. Should any change be made to the Common Stock by reason of
any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, appropriate
adjustments shall be made to (a) the number and/or class of securities subject to this Option and (b) the exercise price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 
 7. Miscellaneous. 
 (a) Entire
Agreement; Plan Provisions Control. This Agreement (and any addendum hereto) and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter hereof. In the event that any provision of the Agreement
conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be and binding on
all persons having an interest in this Option. All capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meaning assigned to them in the Plan. 
 (b) No Rights of Shareholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option shall have any of
the rights and privileges of a shareholder of the Company with respect to the Shares, unless and until such Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable, without
restrictions thereto. 
 (c) No Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be
retained in the employ of, or if Optionee is a director of the Company or an Affiliate as giving the Optionee the right to continue as a director of, the Company or an Affiliate, nor will it affect in any way the right of the Company or an Affiliate
to terminate such employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Optionee from employment, or terminate the term of a director of the Company or an Affiliate, free from any
liability or any claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any 

  

 4 








 
cause of action at law or in equity against the Company or an Affiliate. The Option granted hereunder shall not form any part of the wages or salary of
Optionee for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any
compensation for any loss of any right or benefit under the Agreement or Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair
dismissal, breach of contract or otherwise. By participating in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted by the Committee
and shall be fully bound thereby. 
 (d) Governing Law. The validity, construction and effect of the Plan and the Agreement, and any
rules and regulations relating to the Plan and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of California. 
 (e) Severability. If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of
the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect. 

(f) No Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company or any Affiliate and Optionee or any other person. 
 (g) Headings. Headings are given to
the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.

 (h) Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be addressed to
the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be addressed to Optionee at the address indicated below Optionee’s signature line at the end of this Agreement or at such other
address as Optionee may designate by ten (10) days’ advance written notice to the Company. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon the third
(3rd) day following deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice. 
 (i) Conditions Precedent to Issuance of Shares. Shares shall not be issued pursuant to the exercise of the Option unless such exercise and the issuance and delivery of the applicable Shares pursuant thereto
shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the 

  

 5 








 
rules and regulations promulgated thereunder, state blue sky laws, the requirements of any applicable stock exchange and the California General Corporation
Law. As a condition to the exercise of the purchase price relating to the Option, the Company may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation and warranty is required by law. 
 (j) Withholding. If Optionee shall dispose of any of the shares of Common Stock acquired upon exercise of the Option within two (2) years from the date the Option was granted or within one (1) year
after the date of exercise of the Option, then, in order to provide the Company with the opportunity to claim the benefit of any income tax deduction, Optionee shall promptly notify the Company of the dates of acquisition and disposition of such
shares, the number of shares so disposed of, and the consideration, if any, received for such shares. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to
assure (i) notice to the Company of any disposition of the shares of the Company within the time periods described above, and (ii) that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld
or collected from Optionee. 
 (k) Consultation With Professional Tax and Investment Advisors. Optionee acknowledges that the grant,
exercise and vesting with respect to this Option, and the sale or other taxable disposition of the Shares, may have tax consequences pursuant to the Code or under local, state or international tax laws. Optionee further acknowledges that Optionee is
relying solely and exclusively on Optionee’s own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Optionee
understands and agrees that any and all tax consequences resulting from the Option and its grant, exercise and vesting, and the sale or other taxable disposition of the Shares, is solely and exclusively the responsibility of Optionee without any
expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Optionee for such taxes or other items. 
 [SIGNATURE PAGE FOLLOWS] 
  

 6 








 IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement on the date set forth in
the first paragraph. 
  

			
	NOVABAY PHARMACEUTICALS, INC.
		
	By:	 	  



			
	Name: 	 	  



			
	Title: 	 	  
	
	OPTIONEE:
		
	By:	 	  



			
	Name: 	 	  



			
	Address: 	 	  
	
	  
	Facsimile: 	 	  


  

 7 








 NOVABAY PHARMACEUTICALS, INC. 
 NON-INCENTIVE STOCK OPTION AGREEMENT 
 This NON-INCENTIVE STOCK OPTION AGREEMENT
(the “Agreement”) is made this              day of             ,
            , by and between NovaBay Pharmaceuticals, Inc., a California corporation (the “Company”), and
            , an individual resident of             ,
             (“Optionee”). 
 1. Grant of Option.
The Company hereby grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of              shares (the “Shares”) of
common stock, $0.01 par value (“Common Stock”), of the Company at the exercise price of $             per share according to the terms and conditions set forth in
this Agreement and in the NovaBay Pharmaceuticals, Inc. 2007 Omnibus Incentive Plan (the “Plan”). The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee. 
 The Option shall terminate at the close of business ten (10) years from the date hereof. 
 2. Vesting of Option Rights. 
 (a)
Except as otherwise provided in this Agreement, the Option may be exercised by Optionee in accordance with the following schedule: 
  

			
	 On or after each of
 the following dates
	  	 Number of Shares
 with respect to which
 the Option is
exercisable

		  	
		  	
		  	
		  	
		  	

 (b) During the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall
not be assignable or transferable by Optionee, other than by will or the laws of descent and distribution. Notwithstanding the foregoing, Optionee may transfer the Option to any Family Member (as such term is defined in the General Instructions to
Form S-8 (or successor to such Instructions or such Form)); provided, however, that (i) Optionee may not receive any consideration for such transfer, (ii) the Family Member must agree in writing not to make any subsequent
transfers of the Option other than by will or the laws of the descent and distribution and (iii) the Company receives prior written notice of such transfer. 









 3. Exercise of Option after Death or Termination of Employment or Service. The Option shall
terminate and may no longer be exercised if Optionee ceases to be employed by or provide Service to the Company or its Affiliates, except that: 
 (a) If Optionee’s employment or Service shall be terminated for any reason, voluntary or involuntary, other than for “Misconduct” (as defined in Section 3(e)) or Optionee’s death or
Permanent Disability, Optionee may at any time within a period of three (3) months after such termination exercise the Option to the extent the Option was exercisable by Optionee on the date of the termination of Optionee’s employment or
Service. 
 (b) If Optionee’s employment or Service is terminated for Misconduct, the Option shall be terminated as of
the date of the act giving rise to such termination. 
 (c) If Optionee shall die while the Option is still exercisable
according to its terms, or if employment or Service is terminated because of Optionee’s Permanent Disability while in the employ of the Company, and Optionee shall not have fully exercised the Option, such Option may be exercised, at any time
within twelve (12) months after Optionee’s death or date of termination of employment or Service for Permanent Disability, by Optionee, personal representatives or administrators or guardians of Optionee, as applicable, or by any person or
persons to whom the Option is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of Shares Optionee was entitled to purchase under the Option on (i) the earlier of the date of death or
termination of employment or Service or (ii) the date of termination for such Permanent Disability, as applicable. 
 (d)
Notwithstanding the above, in no case may the Option be exercised to any extent by anyone after the termination date of the Option. 
 (e) “Misconduct” shall mean (i) the commission of any act of fraud, embezzlement or dishonesty by Optionee, (ii) any unauthorized use or disclosure by such person of confidential information or trade secrets of
the Company (or of any Affiliate), or (iii) any other intentional misconduct by such person adversely affecting the business or affairs of the Company (or any Affiliate) in a material manner. However, if the term or concept has been defined in
an employment agreement between the Company and Optionee, then Misconduct shall have the definition set forth in such employment agreement. The foregoing definition shall not in any way preclude or restrict the right of the Company (or any
Affiliate) to discharge or dismiss any Optionee or other person in the Service of the Company (or any Affiliate) for any other acts or omissions but such other acts or omissions shall not be deemed, for purposes of the Agreement, to constitute
grounds for termination for Misconduct. 
 4. Method of Exercise of Option. Subject to the foregoing, the Option may be exercised in
whole or in part from time to time by serving written notice of exercise on the Company at its principal office within the Option period. The notice shall state the number of Shares as to which the Option is being exercised and shall be accompanied
by payment of the exercise price. Payment of the exercise price shall be made (i) in cash (including bank check, personal check or money order payable to the Company), (ii) with the approval of the Company (which may be given in its sole
discretion), by delivering to the Company for cancellation shares of the Company’s Common Stock already owned by Optionee having a Fair Market Value equal to the full exercise price of the Shares being acquired, (iii) with the approval of
the Company 

  

 2 








 
(which may be given in its sole discretion) and subject to Section 402 of the Sarbanes-Oxley Act of 2002, by delivering to the Company the full exercise
price of the Shares being acquired in a combination of cash and Optionee’s full recourse liability promissory note with a principal amount not to exceed eighty percent (80%) of the exercise price and a term not to exceed five
(5) years, which promissory note shall provide for interest on the unpaid balance thereof which at all times is not less than the minimum rate required to avoid the imputation of income, original issue discount or a below-market rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions thereto, (iv) subject to Section 402 of the Sarbanes-Oxley Act of 2002, to the extent this Option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which Optionee shall concurrently provide irrevocable instructions (1) to Optionee’s brokerage firm to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and
(2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale, or (v) with the approval of the Company (which may be given in its sole discretion) and subject to
Section 402 of the Sarbanes-Oxley Act of 2002, by delivering to the Company a combination of any of the forms of payment described above. This Option may be exercised only with respect to full shares and no fractional share of stock shall be
issued. 
 5. Change in Control. 
 (a) If this Option is assumed in connection with a Change in Control or otherwise continued in effect, then this Option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number
and class of securities which would have been issuable to Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control, and appropriate adjustments shall also be made to the exercise
price, provided the aggregate exercise price shall remain the same. To the extent that the actual holders of the Company’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in
Control, the successor corporation may, in connection with the assumption of this Option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such
Change in Control. 
 (b) This Agreement shall not in any way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
 (c) For purposes of this Agreement, “Change in Control” shall mean a change in ownership or control of the Company
effected through any of the following transactions: (i) a merger, consolidation or other reorganization unless securities representing more than 50% of the total combined voting power of the voting securities of the successor corporation are
immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; (ii) the
sale, transfer 

  

 3 








 
or other disposition of all or substantially all of the Company’s assets; or (iii) the acquisition, directly or indirectly by any person or related
group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders. 
 6. Capital Adjustments and Reorganization. Should any change be made to the Common Stock by reason of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, appropriate adjustments shall be made to (a) the number
and/or class of securities subject to this Option and (b) the exercise price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 
 7. Miscellaneous. 
 (a) Entire
Agreement; Plan Provisions Control. This Agreement (and any addendum hereto) and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter hereof. In the event that any provision of the Agreement
conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be and binding on
all persons having an interest in this Option. All capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meaning assigned to them in the Plan. 
 (b) No Rights of Shareholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option shall have any of
the rights and privileges of a shareholder of the Company with respect to the Shares, unless and until such Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable, without
restrictions thereto. 
 (c) No Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be
retained in the employ of, or if Optionee is a director of the Company or an Affiliate as giving the Optionee the right to continue as a director of, the Company or an Affiliate, nor will it affect in any way the right of the Company or an Affiliate
to terminate such employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Optionee from employment, or terminate the term of a director of the Company or an Affiliate, free from any
liability or any claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in
equity against the Company or an Affiliate. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment.
Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan 

  

 4 








 
which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or
unfair dismissal, breach of contract or otherwise. By participating in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted by the
Committee and shall be fully bound thereby. 
 (d) Governing Law. The validity, construction and effect of the Plan and the Agreement,
and any rules and regulations relating to the Plan and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of California. 
 (e) Severability. If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of
the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect. 

(f) No Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company or any Affiliate and Optionee or any other person. 
 (g) Headings. Headings are given to
the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.

 (h) Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be addressed to
the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be addressed to Optionee at the address indicated below Optionee’s signature line at the end of this Agreement or at such other
address as Optionee may designate by ten (10) days’ advance written notice to the Company. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon the third
(3rd) day following deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice. 
 (i) Conditions Precedent to Issuance of Shares. Shares shall not be issued pursuant to the exercise of the Option unless such exercise and the issuance and delivery of the applicable Shares pursuant thereto
shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, state blue sky laws, the requirements of
any applicable stock exchange and the California General Corporation Law. As a condition to the exercise of the purchase price relating to the Option, the Company may require that the person exercising or paying the purchase price represent and
warrant that the Shares are being purchased 

  

 5 








 
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation
and warranty is required by law. 
 (j) Withholding. In order to provide the Company with the opportunity to claim the benefit of any
income tax deduction which may be available to it upon the exercise of the Option and in order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to insure that, if
necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Optionee. 
 (k)
Consultation With Professional Tax and Investment Advisors. Optionee acknowledges that the grant, exercise and vesting with respect to this Option, and the sale or other taxable disposition of the Shares, may have tax consequences pursuant to
the Code or under local, state or international tax laws. Optionee further acknowledges that Optionee is relying solely and exclusively on Optionee’s own professional tax and investment advisors with respect to any and all such matters (and is
not relying, in any manner, on the Company or any of its employees or representatives). Optionee understands and agrees that any and all tax consequences resulting from the Option and its grant, exercise and vesting, and the sale or other taxable
disposition of the Shares, is solely and exclusively the responsibility of Optionee without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Optionee for such taxes or other items.

 [SIGNATURE PAGE FOLLOWS] 
  

 6 








 IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement on the date set forth in
the first paragraph. 
  

			
	NOVABAY PHARMACEUTICALS, INC.
		
	By:	 	  



			
	Name: 	 	  



			
	Title: 	 	  
	
	OPTIONEE:
		
	By:	 	  



			
	Name: 	 	  



			
	Address: 	 	  



			
	
	  
	Facsimile: 	 	  


  

 7 








 NOVABAY PHARMACEUTICALS, INC. 
 STOCK UNIT AWARD AGREEMENT 
 This STOCK UNIT AWARD AGREEMENT (this
“Agreement”), dated as of                         ,
             (the “Effective Date”), is between NovaBay Pharmaceuticals, Inc., a California corporation (the “Company”), and
                        , an individual resident of
                         (“Participant”). This Stock Award is granted under the NovaBay Pharmaceuticals,
Inc. 2007 Omnibus Incentive Plan (the “Plan”) and is subject to the terms of that Plan. This Agreement represents the Company’s unfunded and unsecured promise to issue common stock of the Company, $0.01 par value
(“Common Stock”), at a future date, subject to the terms of this Agreement and the Plan. 
 1. Award. The Company
hereby grants Participant, subject to the terms and conditions of this Agreement and the Plan, a stock award (the “Stock Award”) with respect to              shares
(the “Shares”) of Common Stock. The Stock Award represents the right to receive the Shares only when, and with respect to the number of Shares to which, the Stock Award has vested (the “Vested Shares”). The Stock
Award is subject to the terms and conditions set forth in this Agreement and in the Plan. A copy of the Plan will be furnished upon request of Participant. 
 2. Vesting. Subject to the terms and conditions of this Agreement and the Plan, the Stock Award shall vest and be converted into an equivalent number of shares that will be distributed to the Participant as
follows: 
  

			
	On or after Each of the Following Dates	  	Percentage of Shares that Vest
		  	
		  	
		  	
		  	
		  	

 3. Termination of Stock Award. 
 (a) Except as provided in subsections (b) below, a Participant’s rights under this Agreement with respect to the Stock Award
shall terminate at the earlier of (i) the time such Stock Awards are converted into Vested Shares, or (ii) the termination of Participant’s employment with or Service to the Company. Upon termination of this Agreement in accordance
with clause (ii) above, the Participant’s rights to all of the Shares subject to the Stock Award not vested on the date that Participant ceases to be an employee or to provide Service shall be immediately and irrevocably forfeited and the
Participant will retain no rights with respect to the forfeited Shares. 
 (b) Notwithstanding the provisions of clause
(ii) of Section 3(a) above, in the event of termination of Participant’s employment with or Service to the Company as a result of Participant’s death or Permanent Disability (as defined below) while in the employ or service of
the Company, the next vesting date for the Stock Award, as set out 










 
in Section 2 above, shall accelerate by twelve (12) months as of such date of termination. The Participant’s rights in any unvested shares
subject to this Stock Award shall terminate at the time Participant ceases to be an employee or provide Service. 
 4. Additional
Restrictions on Transfer of Stock Award. During the lifetime of Participant, this Stock Award cannot be sold, assigned, transferred, gifted, pledged, hypothecated or in any manner encumbered or disposed of at any time prior to delivery of the
Vested Shares, other than by will or the laws of descent and distribution. 
 5. Conversion of Stock Award to Shares; Responsibility for
Taxes. 
 (a) Provided Participant has satisfied the requirements of Section 5(b) below, after the vesting of the Stock Award with
respect to Vested Shares, the Vested Shares will be distributed to Participant or, in the event of Participant’s death, to Participant’s legal representative, as soon as practicable. The distribution to the Participant, or in the case of
the Participant’s death, to the Participant’s legal representative, of Vested Shares shall be evidenced by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other
appropriate means as determined by the Company. No fractional share of stock shall be issued. 
 (b) By signing this Agreement, Participant
agrees that the Company may withhold from the Vested Shares to be distributed to Participant in accordance with Section 5(a), and cancel and not issue such withheld Vested Shares in satisfaction of all income tax (including federal, state and
local taxes), social insurance, payroll tax or other tax-related withholding (“Tax Related Items”), a number of Vested Shares as is equal to the quotient of (i) the Fair Market Value of the Shares on the date of vesting,
(i) divided by the amount of Tax Related Items; provided that the Company shall withhold only the amount of Vested Shares necessary to satisfy the minimum withholding amount. To the extent that the Company determines that it is not feasible, or
not permissible under applicable law, to withhold in Shares, then prior to the issuance of Vested Shares as provided in Section 5(a) above, Participant shall pay, or make adequate arrangements satisfactory to the Company or to the
Participant’s actual employer (in their sole discretion) to satisfy all withholding obligations of the Company and/or the Participant’s actual employer. In this regard, Participant authorizes the Company or the Participant’s actual
employer to withhold all applicable Tax Related Items legally payable by Participant from Participant’s wages or other cash compensation payable to Participant by the Company or the Participant’s actual employer. Participant shall pay to
the Company or to the Participant’s actual employer any amount of Tax Related Items that the Company or the Participant’s actual employer may be required to withhold as a result of Participant’s receipt of the Stock Award, the vesting
of the Stock Award, or the conversion of vested Stock Award to Shares that cannot be satisfied by the means previously described. The Company may refuse to deliver Vested Shares to Participant if Participant fails to comply with Participant’s
obligation in connection with the Tax Related Items as described herein. 
 Regardless of any action the Company or the subsidiary of the
Company that is Participant’s actual employer takes with respect to any or all Tax Related Items, Participant acknowledges that the ultimate liability for all Tax Related Items legally due by Participant is and remains Participant’s
responsibility and that the Company and/or the Participant’s actual 

  

 2 








 
employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the Stock Award,
including the grant of the Stock Award, the vesting of Stock Award with respect to Shares, the conversion of the Stock Award into Shares, the subsequent sale of any Shares acquired at vesting and the receipt of any dividends; and (ii) do not
commit to structure the terms of the grant or any aspect of the Stock Award to reduce or eliminate the Participant’s liability for Tax Related Items. 
 6. Change in Control. 
 (a) If this Stock Award is assumed or otherwise continued in effect in
connection with a Change in Control, then this Stock Award shall be appropriately adjusted, upon such Change in Control, to apply to the number and class of securities which would have been issuable to Participant in consummation of such Change in
Control had this Stock Award been vested immediately prior to such Change in Control. To the extent that the holders of Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor
corporation (or its parent) may, in connection with the assumption of this Stock Award, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change
in Control. 
 (b) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
 (c) For purposes of this Agreement, “Change in Control” shall mean a change in ownership or control of the Company effected through any of the following transactions: (i) a merger, consolidation or other reorganization
unless securities representing more than 50% of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by
the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets; or (iii) the
acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s
shareholders. 
 7. Capital Adjustments and Reorganization. Should any change be made to the Common Stock by reason of any stock
split, reverse stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, appropriate adjustments
shall be made to the number and/or class of securities subject to this Stock Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 
 8. Miscellaneous. 
 (a) Entire Agreement; Plan Provisions Control. This Agreement (and any addendum hereto) and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter hereof. In the
event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control. All 

  

 3 








 
decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be and binding on all persons having an
interest in this Stock Award. All capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meaning assigned to them in the Plan. 
 (b) Rights of Shareholders. Prior to the vesting of the Stock Award, and prior to the receipt by the Participant, Participant’s legal
representative, or a permissible assignee, of the Vested Shares as provided in this Agreement, neither Participant, Participant’s legal representative nor a permissible assignee of the Stock Award shall be or have any of the rights and
privileges of a shareholder of the Company with respect to the Shares issuable to Participant pursuant to the terms of this Agreement. Participant shall not be entitled to receive dividend equivalents on the Stock Award. 
 (c) No Right to Employment. The grant of this Stock Award shall not be construed as giving Participant the right to be retained in the employ of,
or if Participant is a director of the Company or an Affiliate as giving the Participant the right to continue as a director of, the Company or an Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such
employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Participant from employment, or terminate the term of a director of the Company or an Affiliate, free from any liability or
any claim under the Plan or this Agreement. Nothing in this Agreement shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity
against the Company or an Affiliate. This Stock Award shall not form any part of the wages or salary of Participant for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no
circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under this Agreement or the Plan which such employee might otherwise have enjoyed but for
termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Participant shall be deemed to have accepted all the terms and
conditions of the Plan and this Agreement and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby. 
 (d) Governing Law. The validity, construction and effect of the Plan and this Agreement, and any rules and regulations relating to the Plan and this Agreement, shall be determined in accordance with the
internal laws, and not the law of conflicts, of the State of California. 
 (e) Severability. If any provision of the Agreement is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and
the remainder of the Agreement shall remain in full force and effect. 
 (f) No Trust or Fund Created. Neither the Plan nor this
Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the 

  

 4 








 
Company or any Affiliate and Participant or any other person. To the extent that any Person acquires a right to receive payments from the Company or any
Affiliate pursuant to a Stock Award, such right shall be no greater than the right of any unsecured creditor of the Company or any Affiliate. 
 (g) Headings. Headings are given to the Sections and subsections of this Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or
interpretation of this Agreement or any provision thereof. 
 (h) Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Participant shall be addressed to Participant at the address indicated below Participant’s
signature line at the end of this Agreement or at such other address as Participant may designate by ten (10) days’ advance written notice to the Company. Any notice required to be given under this Agreement shall be in writing and shall
be deemed effective upon personal delivery or upon the third (3rd) day following deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice. 
 (i) Conditions Precedent to Issuance of Vested Shares. Vested Shares shall not be issued pursuant to the Stock Award unless such issuance and
delivery of the applicable Vested Shares pursuant hereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, state blue sky laws, the requirements of any applicable stock exchange and the California General Corporation Law. As a condition to the issuance of the Vested Shares, the Company may require that the person receiving such
Vested Shares represent and warrant that the Vested Shares are being acquired only for investment and without any present intention to sell or distribute such Vested Shares if, in the opinion of counsel for the Company, such a representation and
warranty is required by law. 
 (j) Withholding. In order to provide the Company with the opportunity to claim the benefit of any
income tax deduction which may be available to it in connection with the Stock Award, and in order to comply with all applicable federal or state tax laws or regulations, the Company may take such action as it deems appropriate to insure that, if
necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Participant. 
 (k)
Consultation With Professional Tax and Investment Advisors. Participant acknowledges that the grant and vesting with respect to this Stock Award, and the sale or other taxable disposition of the Vested Shares, may have tax consequences
pursuant to the Internal Revenue Code of 1986, as amended, or under local, state or international tax laws. Participant further acknowledges that Participant is relying solely and exclusively on Participant’s own professional tax and investment
advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant understands and agrees that any and all tax consequences resulting from the Stock Award and
its grant and vesting, and the sale or other taxable disposition of the Vested Shares, is solely and 

  

 5 








 
exclusively the responsibility of Participant without any expectation or understanding that the Company or any of its employees or representatives will pay
or reimburse Participant for such taxes or other items. 
 [SIGNATURE PAGE FOLLOWS] 
  

 6 








 IN WITNESS WHEREOF, the Company and Participant have executed this Agreement on the date set forth
in the first paragraph. 
  

			
	NOVABAY PHARMACEUTICALS, INC.
		
	By: 	 	  



			
	Name: 	 	  



			
	Title: 	 	  
	
	PARTICIPANT:
		
	By: 	 	  



			
	Name: 	 	  



			
	Address: 	 	  



			
	
	  



			
	Facsimile: 	 	  


  

 7 








 NOVABAY PHARMACEUTICALS, INC. 
 RESTRICTED STOCK AWARD AGREEMENT 
 This RESTRICTED STOCK AWARD AGREEMENT (the
“Agreement”) is made this              day of             ,
            , by and between NovaBay Pharmaceuticals, Inc., a California corporation (the “Company”), and
            , an individual resident of             ,
             (“Participant”). 
 1. Award. The
Company hereby grants to Participant a restricted stock award of                      shares (the “Shares”) of common stock,
par value $0.01 (“Common Stock”), of the Company according to the terms and conditions set forth herein and in the NovaBay Pharmaceuticals, Inc. 2007 Omnibus Incentive Plan (the “Plan”). The Shares are Restricted
Stock granted under Section 6(c) of the Plan. A copy of the Plan will be furnished upon request of Participant. With respect to the Shares, Participant shall be entitled at all times on and after the date of issuance of the Shares to exercise
the rights of a shareholder of Common Stock of the Company, including the right to vote the Shares and the right to receive dividends, if any, declared on the Shares. 
 2. Vesting. Except as otherwise provided in this Agreement, the Shares shall vest in accordance with the following schedule: 
  

			
	On each of the following dates	  	Number of Shares Vested
		  	
		  	
		  	
		  	
		  	
		  	

 3. Restrictions on Transfer. Until the Shares vest pursuant to Sections 2 or 4 hereof, none
of the Shares may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company, and no attempt to transfer the Shares, whether voluntary
or involuntary, by operation of law or otherwise, shall vest the purported transferee with any interest or right in or with respect to the Shares. 
 4. Forfeiture; Early Vesting. If Participant ceases to be an employee of or provide Service to the Company or any Affiliate prior to vesting of the Shares pursuant to Sections 2 or 4 hereof, all of Participant’s rights to all of
the unvested Shares shall be immediately and irrevocably forfeited, except that if Participant ceases to be an employee or provide Service by reason of death or Permanent Disability prior to the vesting of Shares under Sections 2 or 4 hereof, the
next vesting date for the Shares, as set out in Section 2 above, shall accelerate by twelve (12) months as of such date of termination. Upon forfeiture, Participant will no longer 










 
have any rights relating to the unvested Shares, including the right to vote the Shares and the right to receive dividends, if any, declared on the Shares.

 5. Distributions and Adjustments. 
 (a) If any Shares vest subsequent to any change in the number or character of the Common Stock of the Company (through any stock dividend or other distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, or otherwise), Participant shall receive upon such vesting the number and type of securities or other consideration which Participant would
have received if such Shares had vested prior to the event changing the number or character of the outstanding Common Stock. 
 (b) Any
additional shares of Common Stock of the Company, any other securities of the Company and any other property (except for regular cash dividends or other cash distributions) distributed with respect to the Shares prior to the date or dates the Shares
vest shall be subject to the same restrictions, terms and conditions as the Shares to which they relate and shall be promptly deposited with the Secretary of the Company or a custodian designated by the Secretary. 
 6. Change in Control. 
 (a) If this
Agreement is assumed or otherwise continued in effect in connection with a Change in Control, then this Agreement shall be appropriately adjusted, upon such Change in Control, to apply to the number and class of securities which would have been
issuable to Participant in consummation of such Change in Control had the Shares been vested immediately prior to such Change in Control. To the extent that the holders of Common Stock receive cash consideration for their Common Stock in
consummation of the Change in Control, the successor corporation (or its parent) may, in connection with the assumption of this Agreement, substitute one or more shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control. 
 (b) This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
 (c) For purposes of this Agreement, “Change in Control” shall mean a change in ownership or control of the Company effected through any
of the following transactions: (i) a merger, consolidation or other reorganization unless securities representing more than 50% of the total combined voting power of the voting securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; (ii) the sale, transfer or other
disposition of all or substantially all of the Company’s assets; or (iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more 

  

 2 








 
than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the
Company’s shareholders. 
 7. Miscellaneous. 
 (a) Issuance of Shares. The Company shall cause the Shares to be issued in the name of Participant, either by book-entry registration or issuance of a stock certificate or certificates evidencing the Shares,
which certificate or certificates shall be held by the Secretary of the Company or the stock transfer agent or brokerage service selected by the Secretary of the Company to provide such services for the Plan. The Shares shall be restricted from
transfer and shall be subject to an appropriate stop-transfer order. If any certificate is used, the certificate shall bear an appropriate legend referring to the restrictions applicable to the Shares. Participant hereby agrees to the retention by
the Company of the Shares and, if a stock certificate is used, agrees to execute and deliver to the Company a blank stock power with respect to the Shares as a condition to the receipt of this award of Shares. After any Shares vest pursuant to
Sections 2 or 4 hereof, and following payment of the applicable withholding taxes pursuant to Section 7(b) of this Agreement, the Company shall promptly cause to be issued a certificate or certificates, registered in the name of Participant or
in the name of Participant’s legal representatives, beneficiaries or heirs, as the case may be, evidencing such vested whole Shares (less any shares withheld to pay withholding taxes) and shall cause such certificate or certificates to be
delivered to Participant or Participant’s legal representatives, beneficiaries or heirs, as the case may be, free of the legend or the stop-transfer order referenced above. No fractional share of stock shall be issued. 
 (b) Income Tax Matters. 
 (i) In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes,
which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. 
 (ii) In
accordance with the terms of the Plan, and such rules as may be adopted by the Committee under the Plan, Participant may elect to satisfy Participant’s federal and state income tax withholding obligations arising from the receipt of, or the
lapse of restrictions relating to, the Shares, by (i) delivering cash, check (bank check, certified check or personal check) or money order payable to the Company, (ii) having the Company withhold a portion of the Shares otherwise to be
delivered having a Fair Market Value equal to the amount of such taxes, or (iii) delivering to the Company shares of Common Stock already owned by Participant having a Fair Market Value equal to the amount of such taxes. Any shares already
owned by Participant for no less than six months prior to the date delivered to the Company if such shares were acquired upon the exercise of an option or upon the vesting of restricted stock units or other restricted stock. The Company will not
deliver any fractional Shares but will pay, in lieu thereof, the Fair Market Value of such fractional Shares. Participant’s election must be made on or before the date that the amount of tax to be withheld is determined. 
 (c) Entire Agreement; Plan Provisions Control. This Agreement (and any addendum hereto) and the Plan constitute the entire agreement between the
parties hereto with regard to the subject matter hereof. In the event that any provision of the Agreement conflicts with or is 

  

 3 








 
inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control. All decisions of the Committee with respect to any question or
issue arising under the Plan or this Agreement shall be and binding on all persons having an interest in the Shares. All capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meaning assigned to them in
the Plan. 
 (d) No Right to Employment. The issuance of the Shares shall not be construed as giving Participant the right to be
retained in the employ of, or if Participant is a director of the Company or an Affiliate as giving the Participant the right to continue as a director of, the Company or an Affiliate, nor will it affect in any way the right of the Company or an
Affiliate to terminate such employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Participant from employment, or terminate the term of a director of the Company or an Affiliate,
free from any liability or any claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action
at law or in equity against the Company or an Affiliate. The Shares shall not form any part of the wages or salary of Participant for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment.
Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan which such employee might otherwise have enjoyed but
for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Participant shall be deemed to have accepted all the conditions of
the Plan and the Agreement and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby. 
 (e) Governing Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the Agreement, shall be determined in accordance with the internal laws, and not the law
of conflicts, of the State of California. 
 (f) Severability. If any provision of the Agreement is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the
Agreement shall remain in full force and effect. 
 (g) No Trust or Fund Created. Neither the Plan nor the Agreement shall create or
be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and Participant or any other person. 
 (h) Headings. Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Agreement or any provision thereof. 
  

 4 








 (i) Notices. Any notice required to be given or delivered to the Company under the terms of this
Agreement shall be addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Participant shall be addressed to Participant at the address indicated below Participant’s signature line at the end
of this Agreement or at such other address as Participant may designate by ten (10) days’ advance written notice to the Company. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon
personal delivery or upon the third (3rd) day following deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice. 
 (j) Conditions Precedent to Issuance of Shares. Shares shall not be issued pursuant to this Agreement unless such issuance and delivery of the
Shares pursuant hereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, state blue sky
laws, the requirements of any applicable stock exchange and the California General Corporation Law. As a condition to the issuance of the Shares, the Company may require that the person receiving such Shares represent and warrant that the Shares are
being acquired only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation and warranty is required by law. 
 (k) Consultation With Professional Tax and Investment Advisors. Participant acknowledges that the grant and vesting with respect to the Shares,
and the sale or other taxable disposition of the vested Shares, may have tax consequences pursuant to the Internal Revenue Code of 1986, as amended, or under local, state or international tax laws. Participant further acknowledges that Participant
is relying solely and exclusively on Participant’s own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant
understands and agrees that any and all tax consequences resulting from the grant and vesting of the Shares, and the sale or other taxable disposition of the vested Shares, is solely and exclusively the responsibility of Participant without any
expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Participant for such taxes or other items. 
 [SIGNATURE PAGE FOLLOWS] 
  

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 IN WITNESS WHEREOF, the Company and Participant have executed this Restricted Stock Award
Agreement on the date set forth in the first paragraph. 

			
	NOVABAY PHARMACEUTICALS, INC.
		
	By:	 	  



			
	Name:	 	  



			
	Title:	 	  
	
	PARTICIPANT:
		
	By:	 	  



			
	Name:	 	  



			
	Address:	 	  



			
	  



			
	Facsimile:	 	  











 NOVABAY PHARMACEUTICALS, INC. 
 STOCK APPRECIATION RIGHTS AGREEMENT 
 (STOCK SETTLED) 
 This STOCK APPRECIATION RIGHTS AGREEMENT (this “Agreement”), dated as of
                    ,              (the “Effective Date”),
is between NovaBay Pharmaceuticals, Inc., a California corporation (the “Company”), and             , an individual resident of
                     (“Participant”). This Agreement is granted under the NovaBay Pharmaceuticals, Inc. 2007 Omnibus
Incentive Plan (the “Plan”) and is subject to the terms of that Plan. This Agreement represents the Company’s unfunded and unsecured promise to issue common stock of the Company, $0.01 par value (“Shares”) at a
future date based on appreciation in the market value of such Shares from the date of this Agreement, subject to the terms of this Agreement and the Plan. 
 1. Award. The Company hereby grants Participant stock appreciation rights (the “SAR”) with respect to              shares of
Common Stock (the “Award”). The initial value of the SAR is $             per share (the “Grant Price”). The Award represents the right to receive
the Shares only when, and with respect to the number of Shares to which, the Award has vested (the “Vested Shares”). The Award is subject to the terms and conditions set forth in this Agreement and in the Plan. A copy of the Plan
will be furnished upon request of Participant. The SAR shall terminate at the close of business ten (10) years from the Effective Date. 
 2. Vesting. Subject to the terms and conditions of this Agreement and the Plan, the SAR awarded to Participant pursuant to this Agreement shall vest and may be exercised by Participant with respect to the number of Vested Shares set
forth in the following schedule: 
  

			
	On or after Each of the Following Dates	  	 Percentage of Shares with
 Respect to Which the SAR Is Exercisable

		  	
		  	
		  	
		  	
		  	

 3. Exercise of SAR after Death or Termination of Employment or Service. The SAR shall
terminate and may no longer be exercised if Participant ceases to be employed by or provide Service to the Company or its Affiliates, except that: 
 (a) If Participant’s employment or Service shall be terminated for any reason, voluntary or involuntary, other than for “Misconduct” (as defined in Section 3(e)) or Participant’s death
or Permanent Disability, Participant may at any time within a period of three (3) months after such termination exercise the SAR to the extent the SAR was exercisable by Participant on the date of the termination of Participant’s
employment or Service. 









 (b) If Participant’s employment is terminated for Misconduct, the SAR shall be
terminated as of the date of the act giving rise to such termination. 
 (c) If Participant shall die while the SAR is still
exercisable according to its terms, or if employment or Service is terminated because of Participant’s Permanent Disability while in the employ or Service of the Company and Participant shall not have fully exercised the SAR, such SAR may be
exercised at any time within twelve (12) months after Participant’s death or date of termination of employment or Service for such Permanent Disability by Participant, personal representatives, administrators or guardians of Participant,
as applicable, or by any person or persons to whom the SAR is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of Vested Shares Participant was entitled to purchase under the SAR on
(i) the earlier of the date of death or termination of employment or Service or (ii) the date of termination for such Permanent Disability, as applicable. 
 (d) Notwithstanding the above, in no case may the SAR be exercised to any extent by anyone after the termination date of the SAR.

 (e) “Misconduct” shall mean (i) the commission of any act of fraud, embezzlement or dishonesty by
Participant, (ii) any unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or of any Affiliate), or (iii) any other intentional misconduct by such person adversely affecting the
business or affairs of the Company (or any Affiliate) in a material manner. However, if the term or concept has been defined in an employment agreement between the Company and Participant, then Misconduct shall have the definition set forth in such
employment agreement. The foregoing definition shall not in any way preclude or restrict the right of the Company (or any Affiliate) to discharge or dismiss any Participant or other person in the Service of the Company (or any Affiliate) for any
other acts or omissions but such other acts or omissions shall not be deemed, for purposes of the Agreement, to constitute grounds for termination for Misconduct. 
 4. Method of Exercise of SAR. 
 (a) SARs may be exercised with respect to Vested Shares by delivery
to the Company of a written notice which shall state that Participant elects to exercise the SAR as to the number of Vested Shares specified in the notice as of the date specified in the notice. 
 (b) Subject to deduction as described in Section 4(c) for withholding, upon exercise of the SAR, the Participant shall be entitled to receive a
number of Shares (“Issued Shares”) for each Vested Share with respect to which the SAR is exercised that is equal to (i) the excess of the Fair Market Value of one Share on the date of exercise, over the Grant Price, divided by
(ii) the Fair Market Value of one Share on the date of exercise. The distribution to the Participant, or in the case of the Participant’s death, to the Participant’s legal representative, of Issued Shares shall be evidenced by a stock
certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other appropriate means as determined by the Company. This SAR may be exercised only with respect to full shares and no fractional
share of stock shall be issued. 
  

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 (c) By signing this Agreement, Participant agrees that the Company may withhold from Issued Shares due
upon exercise of the SAR, or at its election from the Participant’s wages or other cash compensation, all income tax (including federal, state and local taxes), social insurance, payroll tax or other tax-related withholding (“Tax
Related Items”) due from the Company or the subsidiary that is the Participant’s actual employer. To the extent that the Company determines that it is not feasible, or not permissible under applicable law, to withhold in Shares, then
prior to the issuance of Issued Shares as provided in Section 4(b) above, Participant shall pay, or make adequate arrangements satisfactory to the Company or to the Participant’s actual employer (in their sole discretion) to satisfy all
withholding obligations of the Company and/or the Participant’s actual employer. In this regard, Participant authorizes the Company or the Participant’s actual employer to withhold all applicable Tax Related Items legally payable by
Participant from Participant’s wages or other cash compensation payable to Participant by the Company or the Participant’s actual employer. Participant shall pay to the Company or to the Participant’s actual employer any amount of Tax
Related Items that the Company or the Participant’s actual employer may be required to withhold as a result of Participant’s receipt of the Award, the vesting of the Award, or exercise of the Award that cannot be satisfied by the means
previously described. The Company may refuse to deliver Issued Shares to Participant if Participant fails to comply with Participant’s obligation in connection with the Tax Related Items as described herein. 
 Regardless of any action the Company or the subsidiary of the Company that is Participant’s actual employer takes with respect to any or all Tax
Related Items, Participant acknowledges that the ultimate liability for all Tax Related Items legally due by Participant is and remains Participant’s responsibility and that the Company and/or the Participant’s actual employer
(i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the Award, including the grant of the Award, the vesting of Award, or the exercise of the Award; and (ii) do not
commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax Related Items. 
 5. Additional Restrictions on Transfer of SAR. During the lifetime of Participant, the SAR shall be exercisable only by Participant and shall not be sold, assigned, transferred, gifted, pledged, hypothecated,
or in any manner encumbered or disposed of at any time prior to delivery of the Issued Shares in accordance with Section 4, other than by will or the laws of descent and distribution. 
 6. Change in Control. 
 (a) If this
SAR is assumed or otherwise continued in effect in connection with a Change in Control, then this SAR shall be appropriately adjusted, upon such Change in Control, to apply to the number and class of securities which would have been issuable to
Participant in consummation of such Change in Control had this SAR been exercised immediately prior to such Change in Control, and appropriate adjustments shall also be made to the Grant Price, provided the aggregate Grant Price shall remain the
same. To the extent that the holders of Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation (or its parent) may, in connection with the assumption of this 

  

 3 








 
SAR, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in
such Change in Control. 
 (b) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
 (c) For purposes of this Agreement, “Change in Control” shall mean a change in ownership or control of the Company effected through any of the following transactions: (i) a merger, consolidation
or other reorganization unless securities representing more than 50% of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially
the same proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s
assets; or (iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly
to the Company’s shareholders. 
 7. Capital Adjustments and Reorganization. Should any change be made to the Common Stock by
reason of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration,
appropriate adjustments shall be made to (a) the number and/or class of securities subject to this SAR and (b) the Grant Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

 8. Miscellaneous. 
 (a) Entire Agreement; Plan Provisions Control. This Agreement (and any addendum hereto) and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter hereof. In the event that any provision
of the Agreement conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be
and binding on all persons having an interest in this SAR. All capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meaning assigned to them in the Plan. 
 (b) Rights of Shareholders. Prior to the exercise of the SAR and prior to receipt by the Participant, Participant’s legal representative, or
a permissible assignee, of Issued Shares as provided in this Agreement, neither Participant, Participant’s legal representative nor a permissible assignee shall be or have any of the rights and privileges of a shareholder of the Company with
respect to this Agreement or the Shares subject to the Award referenced in this Agreement. 
  

 4 








 (c) No Right to Employment. The grant of the SAR shall not be construed as giving Participant the
right to be retained in the employ of, or if Participant is a director of the Company or an Affiliate as giving the Participant the right to continue as a director of, the Company or an Affiliate, nor will it affect in any way the right of the
Company or an Affiliate to terminate such employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Participant from employment, or terminate the term of a director of the Company or
an Affiliate, free from any liability or any claim under the Plan or this Agreement. Nothing in this Agreement shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any
cause of action at law or in equity against the Company or an Affiliate. The SAR granted under this Agreement shall not form any part of the wages or salary of Participant for purposes of severance pay or termination indemnities, irrespective of the
reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under this Agreement or the Plan which such
employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Participant shall be
deemed to have accepted all the terms and conditions of the Plan and this Agreement and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby. 
 (d) Governing Law. The validity, construction and effect of the Plan and this Agreement, and any rules and regulations relating to the Plan and
this Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of California. 
 (e)
Severability. If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall
be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect. 
 (f) No
Trust or Fund Created. Neither the Plan nor this Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and Participant or any other person. To the
extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured creditor of the Company or any Affiliate. 
 (g) Headings. Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof. 
 (h)
Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be addressed to the Company at its principal corporate offices. 

  

 5 








 
Any notice required to be given or delivered to Participant shall be addressed to Participant at the address indicated below Participant’s signature
line at the end of this Agreement or at such other address as Participant may designate by ten (10) days’ advance written notice to the Company. Any notice required to be given under this Agreement shall be in writing and shall be deemed
effective upon personal delivery or upon the third (3rd) day following deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice. 
 (i) Conditions Precedent to Issuance of Issued Shares. Issued Shares shall not be issued pursuant to the exercise of the SAR unless such exercise
and the issuance and delivery of the applicable Issued Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, state blue sky laws, the requirements of any applicable stock exchange and the California General Corporation Law. As a condition to the exercise of the purchase price relating to the SAR, the Company may
require that the person exercising or paying the purchase price represent and warrant that the Issued Shares are being purchased only for investment and without any present intention to sell or distribute such Issued Shares if, in the opinion of
counsel for the Company, such a representation and warranty is required by law. 
 (j) Withholding. In order to provide the Company
with the opportunity to claim the benefit of any income tax deduction which may be available to it in connection with the Award, and in order to comply with all applicable federal or state tax laws or regulations, the Company may take such action as
it deems appropriate to insure that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Participant. 
 (k) Consultation With Professional Tax and Investment Advisors. Participant acknowledges that the grant, exercise and vesting with respect to this SAR, and the sale or other taxable disposition of the Issued
Shares, may have tax consequences pursuant to the Internal Revenue Code of 1986, as amended, or under local, state or international tax laws. Participant further acknowledges that Participant is relying solely and exclusively on Participant’s
own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant understands and agrees that any and all tax
consequences resulting from the SAR and its grant, exercise and vesting, and the sale or other taxable disposition of the Issued Shares, is solely and exclusively the responsibility of Participant without any expectation or understanding that the
Company or any of its employees or representatives will pay or reimburse Participant for such taxes or other items. 
 [SIGNATURE PAGE
FOLLOWS] 
  

 6 








 IN WITNESS WHEREOF, the Company and Participant have executed this Agreement on the date set forth
in the first paragraph. 

			
	NOVABAY PHARMACEUTICALS, INC.
		
	By:	 	  



			
	Name:	 	  



			
	Title:	 	  
	
	PARTICIPANT:
		
	By:	 	  



			
	Name:	 	  



			
	Address:	 	  



			
	  



			
	Facsimile:	 	  


  

 7