Document:

ex_170899.htm

Exhibit 10.1

 

LSI INDUSTRIES INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

(Amended and Restated as of December 30, 2019)

 

PREAMBLE

 

LSI Industries Inc. and each Employer hereby amend and restate the Plan effective as of December 30, 2019 as set forth herein. The Plan was originally effective as of September 15, 1996. The Plan was amended and restated as of July 1, 1998, July 1, 2002, April 27, 2004, September 9, 2005, November 1, 2006, December 31, 2008, November 19, 2009, November 18, 2010 and November 20, 2014. This Plan is an unfunded deferred compensation arrangement for a select group of management or highly compensated employees who render services to an Employer. Amounts credited to a Participant’s Deferred Compensation Account are deemed to be invested in Common Stock of LSI Industries Inc (the “Shares”) and distributions to Plan Participants are made in Shares.

 

ARTICLE I. DEFINITIONS

 

	
			1.1

				
			“Beneficiary” shall mean the person or persons entitled to receive the distributions, if any, payable under the Plan upon or after a Participant’s death, to such person or persons as such Participant’s Beneficiary. Each Participant may designate a Beneficiary by filing the proper form with the Committee. A Participant may designate one or more contingent Beneficiaries to receive any distributions after the death of a prior Beneficiary. A designation shall be effective upon said filing, provided that it is so filed during such Participant’s lifetime and may be changed from time to time by the Participant.

			

 

	
			1.2

				
			“Change in Control” shall mean the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of LSI Industries Inc., as defined under Section 409A of the Code.

			

 

	
			1.3

				
			“Code” shall mean the Internal Revenue Code of 1986 as amended.

			

 

	
			1.4

				
			“Committee” shall mean the Compensation Committee of the Board of Directors of LSI Industries Inc., or its designee, which is responsible for the administration of this Plan in accordance with the provisions of the Plan as set forth in this document.

			

 

	
			1.5

				
			“Compensation” shall mean the total amount of earnings (including bonuses) paid by an Employer to an Executive or which would otherwise be paid but for a deferral election hereunder or a salary reduction election under any Code Section 401(k) plan or Code Section 125 plan.

			

 

	
			1.6

				
			“Deferred Compensation Account” shall mean the account to be established by an Employer as a book reserve to reflect the amounts deferred by a Participant, the amounts credited by the Employer, and the earnings adjustment under Article VII. A Participant’s Deferred Compensation Account shall be reduced by distributions under Article VIII and Article IX.

			

 

 

 

 

	
			1.7

				
			“Employer” shall mean LSI Industries Inc. and any affiliate of LSI Industries Inc. (whether or not incorporated) which has adopted the Plan with the consent of LSI Industries Inc., or any successor or assignee of any of them.

			

 

	
			1.8

				
			“Executive” shall mean any employee designated by the Committee (in conjunction with senior management of LSI Industries Inc.) as a member of the select group of management or highly compensated employees eligible for participation in this Plan.

			

 

	
			1.9

				
			“Participant” shall mean any Executive who has a right to a benefit under the Plan and a person who was such at the time of the Executive’s death or Separation from Service and who retains, or whose Beneficiary retains, a benefit under the Plan which has not been distributed.

			

 

	
			1.10

				
			“Plan” shall mean the LSI Industries Inc. Nonqualified Deferred Compensation Plan as described in this instrument, amended and restated, and, as may be amended thereafter.

			

 

	
			1.11

				
			“Plan Year” shall mean the 12-consecutive month period beginning on July 1.

			

 

	
			1.12

				
			“Separation from Service” shall mean a “separation from service” within the meaning of Code Section 409A and the rules and regulations promulgated thereunder.

			

 

	
			1.13

				
			“Shares” is defined in the Preamble.

			

 

	
			1.14

				
			“Subsequent Election” is defined in Section 8.2(b).

			

 

 

ARTICLE II.  PARTICIPANT’S ELECTION TO DEFER

 

	
			2.1

				
			Each Executive may elect to have up to 40% of the Executive’s Compensation (in whole percentages) for a Plan Year deferred and credited with earnings in accordance with the terms and conditions of the Plan. The Committee may allow separate elections with respect to base salary and bonuses. Deferrals are credited to a Participant’s Deferred Compensation Account and deemed to be invested in Shares.

			

 

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			2.2

				
			An Executive desiring to exercise an election under Paragraph 2.1 shall notify the Committee of his/her deferral election. Such notice must be in writing on a form provided by the Committee, or in a manner otherwise satisfactory to the Committee, and provided to the Committee by such date as the Committee shall specify, but in all events no later than the end of the calendar year preceding the first day of the Plan Year to which such election is to apply. Notwithstanding the foregoing, the following special rules shall apply:

			

 

	 	
			(a)

				
			Base Salary. The deferral election with respect to base salary earned for periods commencing after December 31, 2019 (and that is not otherwise subject to an irrevocable deferral election) must be filed with the Committee by, and shall become irrevocable as of, December 31 (or such earlier date as specified by the Committee on the deferral election) of the calendar year next preceding the calendar year for which such base salary would otherwise be earned. For purposes of illustration only, an election for deferral of base salary to be earned in calendar year 2020 for the fiscal 2020 Plan Year must be made by December 31, 2019.

			

 

	 	
			(b)

				
			Annual Bonus.

			

 

(1) Subject to Section 2.2 (b)(2) of the Plan, the deferral election with respect to annual bonuses commencing with the 2021 Plan Year that are “fiscal year compensation” as defined under Code Section 409A must be filed with the Committee by, and shall become irrevocable as of, the close of the Plan Year (or such earlier date as specified by the Committee on the deferral election) next preceding the first day of the Plan Year for which such annual bonus would otherwise be earned. For purposes of illustration only, an election for deferral of a bonus which is “fiscal year compensation” to be earned in Plan Year 2021 and if earned, payable in August 2021, shall be made by June 30, 2020; and

 

(2) An Executive’s election relating to Compensation from a performance-based bonus payment based on services over a period of at least 12 months must be made no later than 6 months before the end of the service period, provided the Executive performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date an election is made under this Paragraph 2.2, and provided further that in no event may an election to defer Compensation from a performance-based bonus payment be made after such Compensation has become readily ascertainable. For purposes of illustration only, an election for deferral of a bonus to be earned in Plan Year 2020 and if earned, payable in August 2020, shall be made by December 31, 2019.

 

	 	
			(c)

				
			New Participants. An Executive’s election for deferrals must be provided no later than 30 days following the date the Executive first becomes eligible, and such election will only be effective with regard to Compensation earned following the election; otherwise the Executive must wait until the next enrollment period.

			

 

	
			2.3

				
			A deferral election shall be effective with respect to the entire Plan Year or calendar year to which it relates and may not be modified or terminated for that Plan Year or calendar year; provided, however, in the event of an unforeseeable emergency (as defined in Paragraph 8.4), a Participant’s deferral election shall be terminated for the remainder of the respective Plan Year or calendar year, as applicable.

			

 

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			2.4

				
			The Compensation otherwise payable to the Executive during the Plan Year or calendar year shall be reduced pursuant to the Executive’s election under this Article II. Such amounts shall be credited to the Executive’s Deferred Compensation Account.

			

 

 

ARTICLE III.  EMPLOYER MAKE-UP ALLOCATIONS

 

	
			3.1

				
			If because of an election under Article II, a Participant receives a smaller allocation of Employer contributions and/or forfeitures under the LSI Industries Inc. Retirement Plan for a Plan Year of that plan than the Participant would have received had no such election been made, then there shall be credited to the Participant’s Deferred Compensation Account an amount equal to the amount which bears the same relationship to the amounts deferred under Article II and credited to the Participant’s Deferred Compensation Account during the Plan Year as the Participant’s allocations (of Employer contributions and/or forfeitures) under the LSI Industries Inc. Retirement Plan bear to the Participant’s compensation taken into account under that plan. Such amount shall be credited to the Participant’s Deferred Compensation Account at such time as the Committee shall determine.

			

 

	
			3.2

				
			(a)     If, by reason of the application of the compensation limitation imposed by Code Section 401(a)(17) (or any corresponding successor provision), including any provision in the LSI Industries Inc. Retirement Plan providing such limitation, a Participant receives a smaller allocation of Employer contributions and/or forfeitures under the LSI Industries Inc. Retirement Plan for any plan year of that plan than he would have received had no such limitation been in effect, then there shall be credited to his Deferred Compensation Account the amount determined under (b) below. Such amount shall be credited to the Participant’s Deferred Compensation Account at such time as the Committee shall determine.

			

 

	 	
			(b)

				
			The amount hereunder shall be equal to the amount which is the same percentage of the Participant’s compensation (as defined in the LSI Industries Inc. Retirement Plan) in excess of the compensation limitation referred to in (a) above as the percentage allocated under the LSI Industries Inc. Retirement Plan on compensation in excess of the Social Security taxable wage base (but not in excess of the limitation referred to in (a) above).

			

 

 

ARTICLE IV.  LSI INCENTIVE ALLOCATIONS

 

	
			4.1

				
			Each Participant shall be eligible for an Employer incentive allocation for a Plan Year, to be determined in accordance with Paragraph 4.2, if the Participant satisfies both of the following requirements:

			

 

	 	
			(a)

				
			The Participant must have elected to make Compensation deferrals under the Plan for the Plan Year of the LSI incentive allocation; and

			

 

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			(b)

				
			The Participant must be employed by an Employer at the time the Committee makes the allocation.

			

 

	
			4.2

				
			Participants eligible for an Employer incentive allocation under Paragraph 4.1 above shall receive such an allocation determined by the Committee as follows:

			

 

	 	
			(a)

				
			The Employer shall match 100% the amount deferred by the Participant; provided that the Employer shall not in a Plan Year make matches that in the aggregate exceed 40% of the Participant’s Compensation; and

			

 

	 	
			(b)

				
			The Committee shall make the match at the same time the Participant deferral is made or at such time as is reasonably administratively practical for the Employer. The match shall be deemed to be made in Shares.

			

 

ARTICLE V.  ADDITIONAL LSI ALLOCATIONS

 

The Employer may make additional discretionary allocations to certain Participants. Such additional discretionary allocations must be approved by the Committee and shall be credited to the Participants’ Deferred Compensation Accounts at such time as the Committee shall determine.

 

ARTICLE VI.  PARTICIPANT’S INTEREST

 

Neither a Participant nor a Participant’s designated Beneficiary shall acquire any property interest in the Participant’s Deferred Compensation Account or any other assets of the Employer, their rights being limited to receiving from the Employer a deferred payment as set forth in this Plan, and these rights are conditioned upon continued compliance with the terms and conditions of this Plan. To the extent that any Participant or Beneficiary acquires a right to receive benefits under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer.

 

ARTICLE VII.  CREDITING OF EARNINGS

 

	
			7.1

				
			General. There shall be credited to the Deferred Compensation Account of each Participant an additional amount of earnings (or losses) determined under this Article VII.

			

 

	
			7.2

				
			Investment of Compensation Deferrals in Shares. All Compensation deferrals shall be credited with earnings (or losses) as though invested in Shares without reference to dividends paid on Shares.

			

 

	
			7.3

				
			Employer Allocations. Employer allocations under Article III and Article IV shall be credited with earnings (or losses) as if it were invested in Shares without reference to the payment of dividends. The Participant shall have no right to elect that alternative investments be used.

			

 

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			7.4

				
			Valuation of Deferred Amounts and Employer Matching Contribution. Executive deferrals shall be valued at the closing price of Shares on the NASDAQ on the date the deferral is made, and the Employer matching contribution shall be likewise valued. The Committee shall determine the valuation of any Employer discretionary contribution.

			

 

	
			7.5

				
			Valuation of Account. For each Plan Year quarter or other period, the Participant’s Deferred Compensation Account shall be increased or decreased as if it had been invested in Shares on the date of the valuation using the NASDAQ closing price for the Shares om such date.

			

 

ARTICLE VIII.      PLAN BENEFITS

 

	
			8.1

				
			Vesting. A Participant’s rights to the Participant’s Deferred Compensation Account (as adjusted for earnings and losses) shall be fully vested and nonforfeitable at all times.

			

 

	
			8.2

				
			Distribution of Benefit.

			

 

	 	
			(a)

				
			At the time an Executive makes the first deferral election under Article II, the Executive shall also elect to have the amounts represented by the Executive’s Deferred Compensation Account paid in one of the following two forms commencing as soon as administratively feasible upon the Executive’s Separation from Service but in all events within 90 days following the date of such Separation from Service:

			

 

	 	
			(1)

				
			a single lump sum payment, or

			

 

	 	
			(2)

				
			approximately equal annual installments to last not more than 10 years.

			

 

If installment payments are in effect, the Participant’s Deferred Compensation Account shall continue to be credited with earnings (or losses) under Article VII until payment of the final installment.

 

(b)         A Participant may change the election referred to in (a) above only in accordance with this Paragraph 8.2(b). A Participant may make a one-time election on a form provided by the Employer to change the form of payment of his Deferred Compensation Account to a form otherwise permitted under Section 8.2(a) of the Plan (a “Subsequent Payment Election”).  The Subsequent Payment Election shall become irrevocable upon acceptance by the Employer and shall be made in accordance with the following rules: 

 

(1)      The Subsequent Payment Election may not take effect until at least 12 months after the date on which it is accepted by the Employer.

 

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(2)      Except in the event of the death or unforeseeable emergency (within the meaning of Section 8.4 hereof) of the Participant, the payment of such Deferred Compensation Account will be delayed until the 5th anniversary of the date that the Deferred Compensation Account would otherwise have been paid under the Plan if such Subsequent Payment Election had not been made (or, in the case of installment payments, which are treated as a single payment for purposes of this Section, on the 5th anniversary of the date that the first installment payment was scheduled to be made).

 

	 	
			(c)

				
			If a Participant has no election concerning the form of benefit payment under this Paragraph 8.2 in effect at the time of the Participant’s Separation from Service, payment shall be made in a single lump sum payment.

			

 

	 	
			(d)

				
			Elections shall be made in writing, on a form provided by the Committee, and shall be made in accordance with the rules established by the Committee.

			

 

	 	
			(e)

				
			Notwithstanding the Participant’s payment election under this Paragraph 8.2 for a Participant who is a “specified employee” as defined in Code Section 409A and the rules and regulations promulgated thereunder, a distribution may not be made before the date which is 6 months after the date of the Participant’s Separation from Service (or if earlier, the date of death of the Participant).

			

 

	
			8.3

				
			Distribution of Shares. Participants shall receive benefit payments in the form of whole shares of Shares. Any fractional shares shall be paid in cash. Any expenses attributable to such payment may be deducted from the Participant’s Deferred Compensation Account. The issuance of Shares under the Plan must be pursuant to a Shareholder approved plan.

			

 

	
			8.4

				
			Hardship Distribution. Subject to the approval of the Committee, a Participant may withdraw all or a portion of the Participant’s Deferred Compensation Account in the event of a hardship. The distribution shall be made in the form of whole Shares. Any fractional shares shall be paid in cash. A hardship distribution shall only be made in the event of an unforeseeable emergency that would result in severe financial hardship to the Participant if hardship distributions were not permitted. Withdrawals of amounts because of an unforeseeable emergency shall only be permitted to the extent reasonably needed to satisfy the emergency need. An unforeseeable emergency is defined as severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B)), loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent such hardship is or may be relieved (1) through reimbursement or compensation by insurance or otherwise (2) liquidation of the Participant’s assets (to the extent the liquidation of such assets would not cause severe financial hardship, or (3) by cessation of deferrals under the Plan. In the event of an unforeseeable emergency (regardless of whether a hardship distribution is made), a Participant’s deferral election under Paragraph 2.1 shall terminate and no further deferrals shall be made for such Participant for the remainder of the Plan Year or calendar year.

			

 

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			8.5

				
			Change in Control. For deferrals of Compensation related to deferral elections that first become irrevocable on or after December 31, 2019, notwithstanding any payment election or Plan provision to the contrary, upon the occurrence of a Change in Control, the remaining amount of the Participant’s Deferred Compensation Account attributable to such deferrals shall be paid to the Participant or his Beneficiary in a single lump sum within 30 days following such Change in Control, or such later date as may be required under Section 8.2(e) hereof.

			

 

 

ARTICLE IX.  DEATH

 

Upon the death of a Participant prior to commencement of payment under Article VIII, the amounts represented by the Participant’s Deferred Compensation Account, increased by any amounts due to be credited but not yet credited under Article II, Article III or Article IV shall be payable to the Participant’s Beneficiary as soon as administratively feasible following the date of the Participant’s death but in all events within 90 days following such date in the form of distribution elected by the Participant pursuant to Paragraph 8.2(a). If the Participant has already commenced receiving the amounts represented by the Participant’s Deferred Compensation Account in the installment payment form, the installment payments shall continue to be paid to the Participant’s Beneficiary. The Beneficiary shall receive any benefit payments in the form of whole shares of Shares.

 

 

ARTICLE X.  NON-ASSIGNABLE/NON-ATTACHMENT

 

Except as required by law, no right of the Participant or designated Beneficiary to receive payments under this Plan shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law and any attempt, voluntary or involuntary, to effect any such action shall be null and void and of no effect. An Employer may not assign its obligations hereunder.

 

ARTICLE XI.  CONSTRUCTION

 

This Plan shall be construed under the laws of the Code and to the extent not preempted by federal law, according to the laws of the State of Ohio. Article headings are for convenience only and shall not be considered as part of the terms and provisions of the Plan. The Committee shall have full power and authority to interpret, construe and administer this Plan.

 

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ARTICLE XII.  AMENDMENT OR TERMINATION OF PLAN

 

The Plan may be terminated at any time or amended in whole or in part from time to time by LSI Industries Inc. provided that no such termination or amendment may directly or indirectly reduce a Participant’s Deferred Compensation Account (other than through a distribution thereof to the Participant (or his Beneficiary in the event of his death)); and any such amendment shall be binding on each Employer, Participant and designated Beneficiary.

 

ARTICLE XIII.  MISCELLANEOUS

 

	
			13.1

				
			Neither this Plan, nor any action of LSI Industries Inc., an Employer or the Committee, nor any election to defer Compensation hereunder shall be held or construed to confer on any person any legal right to be continued as an employee of LSI Industries Inc. or any Employer.

			

 

	
			13.2

				
			LSI Industries Inc. and the Participant’s Employer shall have the right to deduct from all payments and amounts credited hereunder any taxes required by law to be withheld with respect to any benefits under this Plan.

			

 

 

 

IN WITNESS WHEREOF, LSI Industries Inc. and each Employer, with the consent of LSI Industries Inc., have caused this amended and restated Plan to be executed as of this 30th day of December 2019

 

	 	
			LSI INDUSTRIES INC.

			 

			 

			 

			 

			By: /s/ James A. Clark, Chief Executive Officer

			

 

 

- 9 -ex_171553.htm

Exhibit 10.1

 

 

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of January 31, 2020 by and between NovaBay Pharmaceuticals, Inc. (“Company”) and Justin M. Hall (“Executive”).

 

RECITAL

 

The Company and Executive desire to formalize and reflect Executive’s employment under the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing recital, the mutual covenants herein contained and for other good and valuable consideration, the parties hereto hereby agree as follows:

 

	
			I.

				
			EMPLOYMENT.

			

 

A.     Position and Responsibilities. The Company continues to employ the Executive as its Chief Executive Officer and General Counsel (“CEO”). Executive shall do and perform all such services and acts as necessary or advisable to fulfill the duties and obligations of said position and/or such other and/or additional responsibilities as reasonably delegated to Executive by Executive’s superior and/or the Company’s Board of Directors (the “Board”) typically performed by a General Counsel consistent with the Company’s Bylaws.

 

B.     Term. Executive’s employment with the Company is at-will and shall be governed by the terms of this Agreement, commencing on January 31, 2020 and continuing to and including December 31, 2021, unless this Agreement is terminated at some earlier time in accordance with the terms of this Agreement.

 

C.     Devotion. Except as heretofore or hereafter excepted by the Company in writing, during the term of this Agreement, Executive (i) shall devote full time and attention to the foregoing responsibilities, (ii) shall not engage in any other business or other activity which may materially interfere with Executive’s performance of said responsibilities, and (iii) except as to any investment made in a publicly traded entity not amounting to more than 1% of its outstanding equity, shall not, directly or indirectly, as an employee, consultant, partner, principal, director or in any other capacity, engage or participate in any business that is in competition with the Company.

 

D.     Services’ Uniqueness. It is agreed that Executive’s services to be performed under this Agreement are special, unique and extraordinary and give rise to peculiar value, the loss of which may not be reasonably or adequately compensated by a damages award, in any legal action. Accordingly, in addition to any other rights or remedies available to the Company, the Company shall be entitled to injunctive and other equitable relief to prevent or remedy a breach of the terms of this Agreement by Executive.

 

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			II.

				
			PROPRIETARY RIGHTS, CONFIDENTIAL INFORMATION, NONSOLICITATION, ETC. 

			

 

Executive has executed an agreement relating to the treatment of (and Executive’s obligations as to) proprietary rights, confidential information, and certain non-solicitation and other matters. It is further understood and agreed that said agreement is deemed to continue in full force and effect, binding and not affected, in any manner, by the terms in this Agreement.

 

	
			III.

				
			COMPENSATION AND BENEFITS.

			

 

Executive’s compensation and bonus rights are as follows:

 

A.     Salary. Executive shall be entitled to an annual salary of $286,000 (the “Base Salary”), subject to such deductions, withholding and other charges as required by law, payable in accordance with the Company’s standard payroll schedule. Executive’s salary shall be subject to at least an annual review by the Company and may be adjusted by action of the Board, based on Executive’s performance, the financial performance of the Company and the compensation paid to a CEO (in comparable positions). Such adjustment shall not reduce your then current annual base salary unless you provide written consent.

 

B.     Bonus. The Executive shall be eligible for any bonus plan that is deemed appropriate by the Board of Directors of the Company.

 

 1.     Annual Bonus. Executive shall be entitled to such amount of bonus payment, if any, as considered and approved by the Board in its sole discretion annually (for each year of services) during the term of this Agreement, which bonus amount shall be determined by all factors deemed relevant for that purpose by Board and shall include (i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to Executive as set by Executive and the Company’s President and/or the Board, before the end of the first calendar Quarter (ii) the evaluation of Executive by the Company’s President and/or the Board, (iii) the Company’s financial, product and expected progress and (iv) other pertinent matters relating to the Company’s business and valuation. The amount of any annual bonus determined with respect to performance during a calendar year or the Company’s fiscal year, as the case may be, will be paid in full on or before the date that is 21⁄2 months following the end of the year for which the bonus was earned. The Compensation Committee of the Board of Directors shall have the sole discretion to pay any or all of the Annual Bonus in the form of equity compensation. Any such equity compensation shall be issued from the Company’s Omnibus Incentive Plan, and shall be fully vested upon payment.

 

C.     Other Benefits. Executive shall be entitled to seven (7) weeks of paid vacation for each calendar year to be taken pursuant to the Company’s vacation benefits policy. Executive is also entitled to other benefits as (i) are generally available to the Company’s other similar, high level executives, consisting of such medical, retirement and similar benefits as are so available and (ii) are deemed special to Executive and approved by the Board.

 

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			IV.

				
			TERMINATION.

			

 

A.     At-Will Employment. It is understood and agreed by the Company and Executive that this Agreement does not contain any promise or representation concerning the duration of Executive's employment with the Company. Executive specifically acknowledges that his employment with the Company is at-will and may be altered or terminated by either Executive or the Company at any time, with or without cause and with or without notice. In addition, that the rate of salary, any bonuses, paid time off, other compensation, or vesting schedules are stated in units of years or months or weeks does not alter the at-will nature of the employment, and does not mean and should not be interpreted to mean that Executive is guaranteed employment to the end of any period of time or for any period of time. In the event of conflict between this disclaimer and any other statement, oral or written, present or future, concerning terms and conditions of employment, the at-will relationship confirmed by this disclaimer shall control. This at-will status cannot be altered except in a writing signed by Executive and approved by the Board.

 

B.     Termination of Employment. Although Executive’s employment hereunder shall be deemed “at will,” any termination shall be subject to the following terms:

 

  1.     For Cause. In the event that Executive is terminated for cause (as hereinafter defined), Executive shall be entitled to Executive’s earned wages through the date his employment with the Company is terminated, his accrued but unused vacation, reimbursements of his outstanding expenses incurred and submitted in compliance with Company policies and any other portion of his compensation earned through the termination date.

 

  2.     Without Cause. In the event that Executive is terminated without cause, as hereinafter defined, and provided such termination constitutes a “separation from service” as such term is defined in Section 409A of the Internal Revenue Code (the “Code”), and further subject to the Executive's compliance with his obligations under the agreement referenced in Section II herein, and his execution of a release of claims in favor of the Company in a form acceptable to the Company in the Company’s sole discretion (the "Release"), Executive shall be entitled to an amount equal to the Executive’s annualized Base Salary in effect on the date of termination or separation from service plus the full target Annual Bonus percentage for the then current fiscal year (the “Severance Amount”). The Severance Amount will be paid in twelve (12) equal consecutive monthly installments at the monthly Base Salary rate in effect at the time of Executive’s termination, with such installments commencing within sixty (60) days following Executive’s separation from service, provided that (i) the Release is executed, delivered to the Company and not revoked by Executive during the applicable revocation period, and (ii) if such sixty (60) day period begins in one calendar year and ends in the next calendar year, Executive shall not designate, nor have the right to designate, the calendar year in which such installment payments commence. The amounts payable under this Section IV.B.2 shall be in addition to Executive’s earned wages through the date his employment is terminated from the Company, his accrued but unused vacation, reimbursements of his outstanding expenses incurred and submitted in compliance with Company policies and any other portion of his compensation earned through the termination date.

 

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  In the event that Executive is terminated in connection with a Change of Control (as hereinafter below), the Executive shall be entitled to a Change of Control Severance (“CoC Severance”) in place of the standard Severance Amount described above. In exchange for Executive signing and not revoking a general release of claims in a form acceptable to the Company, Executive shall be entitled to (i) an amount equal to twice Executive’s Base Salary and (ii) an amount equal to the cash portion of Executive's target Annual Bonus for the fiscal year in which the termination occurs (with it deemed that all performance goals have been met at one hundred percent (100%) of budget or plan) multiplied by one hundred fifty percent (150%). For a period of eighteen (18) months, Executive may elect coverage for, and the Company shall reimburse Executive for, the amount of his premium payments for group health coverage, if any, elected by Executive pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"); provided, however, that Executive shall be solely responsible for all matters relating to his continuation of coverage pursuant to COBRA, including (without limitation) his election of such coverage and his timely payment of premiums.

 

 All outstanding equity awards held by Executive will be subject to full accelerated vesting on the date of termination without cause, in both the standard Severance Amount and the CoC Severance. The exercise period shall also be extended to three (3) years from the date of termination.

 

C.     Related Provisions. The following terms, conditions and definitions shall apply to the termination of Executive:

 

 1.     “Termination Without Cause.” For purposes of Section IV.B above, a termination without cause shall be deemed to constitute any termination of Executive’s employment hereunder by the Company, or by Executive, other than a termination for cause as defined below. Notwithstanding any contrary provision herein, it is understood that a termination without cause also shall include a termination which:

 

 (a)     occurs due to the death of Executive or to any physical or mental Long-Term Disability that would prevent the performance of Executive’s duties under this Agreement. For the purposes of this Agreement, a “Long-Term Disability” shall mean a long-term disability that after consideration and implementation of reasonable accommodations (provided that no accommodation that imposes undue hardship on the Company will be required), renders or will render Executive unable to perform his essential job functions for one hundred eighty (180) days out of any three hundred sixty-five (365) -day period or for four consecutive months. The determination of Executive’s Long-Term Disability shall be made by Executive’s attending physician unless the Board disagrees with such determination, in which case Executive’s Long-Term Disability shall be determined by a majority of three physicians qualified to practice medicine in the State of the Executive’s residence, one to be selected by each of the Executive (or his authorized representative) and the Board and the third to be selected by such two designated physicians; or

 

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 (b)     is a Constructive Termination (as defined below) initiated by Executive. "Constructive Termination" shall mean (i) the assignment or partial assignment of any duties or responsibilities inconsistent in any respect with those customarily associated with the position or those actually provided this agreement (including status, offices, titles and reporting requirements) to be held by you during your employment period, or any other action by the Company that results in a diminution or other reduction or any adverse change in your position, title, authority, duties or responsibilities; (ii) any failure by the Company to comply with any provision of this agreement; (iii) a relocation of your principal place of employment more than thirty-five (35) miles from its current location; (iv) any reduction in your base salary or bonus opportunity; (v) a reduction in the kind or level of your benefits to which you were entitled immediately prior to such reduction; (vi) a material reduction of the facilities and perquisites (including office space and location) or secretarial and administrative support available to you immediately prior to such reduction; (vii) the assignment of duties that are substantially inconsistent with your training, education, professional experience and the job for which you were initially hired hereunder; or (viii) the failure of any successor-in-interest to assume all of the obligations of the Company under this agreement.

 

 (c)     occurs due to a Change of Control. A "Change of Control" means the occurrence of any of the following events: (i) any sale or exchange of the capital stock by the shareholders of the Company in one transaction or series of related transactions where more than fifty percent (50%) of the outstanding voting power of the Company is acquired by a person or entity or group of related persons or entities; or (ii) any reorganization, consolidation or merger of the Company where the outstanding voting securities of the Company immediately before the transaction represent or are converted into less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent corporation) immediately after the transaction; or (iii) the consummation of any transaction or series of related transactions that results in the sale of all or substantially all of the assets of the Company; or (iv) a reverse merger; or (v) any "person" or "group" (as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becoming the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities representing more than fifty percent (50%) of the voting power of the Company then outstanding; or (vi) less than a majority of the current Board of Directors are persons who were either nominated for election by the current Board of Directors or were elected by the current Board of Directors

 

5

 

 

 2.     “Termination For Cause.” Subject to the notice requirement as provided in paragraph E below, for purposes of Section IV.B.2 (and Section IV.C.1) above, a termination for cause shall be a termination of Executive’s employment hereunder made:

 

 (a)     by the Company, if Executive:

 

(i)     materially breaches any material terms of this Agreement which has caused demonstrable injury to the Company;

 

(ii)     commits willful gross acts of dishonesty, fraud, misrepresentation, or other acts of moral turpitude taken by Executive in connection with Executive responsibilities as an employee provided that no act or failure to act shall be considered "willful" under this definition unless Executive acted, or failed to act, with an absence of good faith and without a reasonable belief that his action, or failure to act, was in the best interest of the Company;

 

(iii)     is convicted of any felony or any crime involving moral turpitude resulting in either case in significant and demonstrable harm to the Company; or

 

(iv) fails to achieve the stated milestones and tasks as requested in writing by the Board of Directors, including but not limited to failure to perform, or continuing to neglect the performance of duties assigned to Executive, which failure or neglect will significantly and adversely affect the Company’s business or business prospects and which failure is due to circumstances within Executive’s reasonable control.

 

 (b)     by Executive, unless such termination by Executive is for Constructive Termination.

 

D.     Company Actions. All relevant determinations to be made by the Company under paragraph C.2(a) above shall be made in the reasonable discretion of the Board (or, if so delegated by said Board, by a committee of the Board), acting in good faith, and, except as otherwise specified herein, shall be conclusive and binding, but shall be subject to arbitration in accordance with Section V below. This Agreement is intended to comply with the requirements of Internal Revenue Code Section 409A (“Section 409A”) and the Board and the Board committee will interpret its provisions accordingly. If, at the time of Executive’s termination, any stock of the Company is publicly-traded and the Company determines that Executive is a “specified employee” within the meaning of Section 409A of the Code at such time, then (i) the salary continuation payments specified herein (to the extent that they are subject to Section 409A of the Code) will commence on the earlier of (A) the first business day following expiration of the six-month period measured from your separation or (B) the date of your death and (ii) the installments that otherwise would have been paid prior to such date will be paid in a lump sum when the salary continuation payments commence. Executive understands and agrees that the Company makes no assurances with respect to the tax consequences arising as a result of this Agreement and the payment of any tax liabilities or related penalties arising out of this Agreement is solely and exclusively the responsibility of Executive, without any expectation or understanding that the Company will pay or reimburse Executive for such taxes or other items. Concerning any Section 409A taxes or related penalties the Company will use its best efforts in good faith to reduce or eliminate such tax liabilities or penalties including but not limited to a delay of such payments the minimum time necessary to avoid tax liabilities or penalties. If any payment is delayed pursuant to this paragraph on the date of payment the Company shall pay in a lump sum all payments that otherwise would have been paid during the period of the delayed payments.

 

6

 

 

E.     Notice and Remedy. In the event that any reason for termination by the Company under paragraph C.2(a) above, or by Executive in the case of a Constructive Termination, may be cured by Executive, or the Company, as the case may be, then the Company, or Executive, shall first give a written notice to the other (by mail, or by email, or by fax, to the last known address of the recipient; said notice being deemed given, if by mail, as of the earlier of four days after mailing or as of the date when actually received, or, if by email or fax, when sent), specifying the reason for termination and providing a period of 30 days to cure the fault or reason specified. Lacking such cure within said 30 days, or if the notified party earlier refuses to effect the cure, the termination shall then be deemed effective. If such cure is so made, the termination shall not then be deemed effective, but any later conduct of a similar nature constituting a reason for termination shall allow the Company, or Executive, as the case may be, the right to cause the termination effectiveness without need for any further period of time to cure. All communications shall be sent to the address as set forth on the signature page hereof, or to such other address as a party may designate by ten days’ advance written notice to the other party hereto.

 

	
			V.

				
			ARBITRATION.

			

 

A.     Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, or any of the rights, benefits or obligations resulting from its terms, shall be settled by arbitration in San Francisco, California. Except for the right of the Company and Executive to seek injunctive relief in court, any controversy, claim or dispute of any type arising out of or relating to Executive’s employment or the provisions of this Agreement shall be resolved in accordance with this Section V of the Agreement, regarding resolution of disputes, which will be the sole and exclusive procedure for the resolution of any such disputes. This Agreement shall be enforced in accordance with the Federal Arbitration Act, the enforcement provisions of which are incorporated by this reference. Matters subject to these provisions include, without limitation, claims or disputes based on statute, contract, common law and tort and will include, for example, matters pertaining to termination, discrimination, harassment, compensation and benefits. Matters to be resolved under these procedures also include claims and disputes arising out of statutes such as the Fair Labor Standards Act, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the California Labor code, and the California Fair Employment and Housing Act. Nothing in this provision is intended to restrict Executive from submitting any matter to an administrative agency with jurisdiction over such matter.

 

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The Executive and the Company agree that any disputes related to or arising out of the Executive’s employment with the Company will be determined by arbitration in accordance with the then-current JAMS employment arbitration rules and procedures, except as modified herein. The arbitration will be conducted by a sole neutral arbitrator. If the Company and Executive cannot agree on an arbitrator, then the arbitrator will be selected by JAMS in accordance with Rule 12 of the JAMS employment arbitration rules and procedures. Reasonable discovery will be permitted by both parties and the arbitrator may decide any issue as to discovery. The arbitrator may decide any issue as to whether or as to the extent to which any dispute is subject to arbitration in this Section V and may award any relief permitted by law. The arbitrator must render the award in writing, including an explanation of the reasons for the award. Judgment upon the award may be entered by any court having jurisdiction of the matter, and the decision of the arbitrator will be final and binding. The parties hereto hereby waive to the fullest extent permitted by law any rights to appeal or to review of such award by any court. The statute of limitations applicable to the commencement of a lawsuit will apply to the commencement of arbitration under Section V of this Agreement. At the request of any party, the arbitrator, attorneys, parties to the arbitration, witnesses, experts, court reporters or other persons present at the arbitration shall agree in writing to maintain the strict confidentiality of the arbitration proceedings. The arbitrator’s fees and cost of the Arbitration will be paid in full by the Company.

 

B.     Acknowledgement. EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION V, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO ARBITRATION, AND THAT THE PROVISIONS SET FORTH IN THIS SECTION V CONSTITUTE A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL.

 

C.     No Duty to Mitigate. Executive is under no contractual or legal obligation to mitigate Executive’s damages in order to receive the severance benefits provided in this Agreement.

 

	
			VI.

				
			LEGAL ADVICE.

			

 

Executive acknowledges that an opportunity has been afforded to Executive to consult with legal counsel with respect to this Agreement and that no individual representing the Company has given legal advice with respect to this Agreement.

 

	
			VII.

				
			MISCELLANEOUS AND CONSTRUCTION.

			

 

Except as otherwise specifically provided herein, this Agreement:

 

A.     and any benefits or obligations herein may not be assigned or delegated by Executive (but may be so assigned or delegated by the Company;

 

B.     contains the entire understandings of the parties as to its subject matter, and replaces and supersedes any existing employment agreement and any and all contrary prior understandings or agreements;

 

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

 

8

 

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

 

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

 

	 	COMPANY:	 
	 	 	 
	
			 

				
			NOVABAY PHARMACEUTICALS, INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Paul Freiman

				
			 

			
	
			 

				
			Name:

				
			Paul Freiman

				
			 

			
	
			 

				
			Title:

				
			Chairman

				
			 

			
	 	 	 	 
	 	EXECUTIVE:	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Justin M. Hall	 
	 	Name:	Justin M. Hall, Esq.	 
	 	 	 	 
	 	Address:	[Redacted.]	 
	 	 	 	 
	 	Telephone No.	[Redacted.]	 
	 	 	 	 
	 	E-mail:	[Redacted.]	 

 

 

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