Document:

EX-10.1

 Exhibit 10.1 
  

 
 July 13, 2017 
 Charles
W. Scharf 
 Dear Charlie: 
 We are pleased to offer you
employment with The Bank of New York Mellon (the “Bank”), a wholly owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon” or the “Company”). You will be appointed by the Board of
Directors of the Company (the “Board”) as Chief Executive Officer (“CEO”) of the Bank and the Company, as of July 17, 2017 (the “Effective Date”), provided you commence active employment with
the Bank on the Effective Date, and you will serve as CEO of the Bank and the Company while employed by the Bank. As CEO, you will have the full range of duties, responsibilities and authority associated and commensurate with that position and you
will report directly to the Board. You will perform your duties at the Company’s headquarters in New York City with such business travel as is reasonably required to perform your duties. As of the Effective Date, you will also be appointed as a
member of the Board and as Chair of the Company’s Executive Committee (the “Executive Committee”). Consistent with the planned transition schedule of the Company’s current Chairman and CEO, you will also be appointed as
Chairman of the Board as of January 1, 2018. 
 The details of your offer are below. 

Compensation 
 Base Salary 

You will receive a Base Salary at an annual rate equal to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (as may be amended from time to time, the
“Base Salary”), less applicable tax and payroll deductions. Your Base Salary shall be reviewed annually by the Human Resources and Compensation Committee of the Board (the “HRCC”). 

Initial Performance-Based Award 
 Upon the Effective Date,
you will receive an award of the Company’s Performance Share Units (“PSUs”) equaling Eleven Million Four Hundred Thirty Seven Thousand Five Hundred Dollars ($11,437,500) in value (the “Initial PSU Award”). The
Initial PSU Award includes PSUs equal in value to Three Million Eight Hundred Twelve Thousand Five Hundred Dollars ($3,812,500), the value of which shall be deducted from the total value of the 2017 Long

 Charles W. Scharf 

July 13, 2017 
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Term Component (as defined below) (the “Additional Component of the Initial PSU Award”). You shall be entitled to receive the Initial PSU Award provided that, as of the
Effective Date, you are employed by the Bank. The Initial PSU Award will be earned based on the performance criteria previously established by the HRCC for the 2017 to 2019 plan year with respect to the PSUs granted to Executive Committee members in
February 2017. 
 2017 Incentive Opportunity and Structure 

For the calendar year ending December 31, 2017, your annual target incentive award opportunity, a portion of which shall be prorated as described below,
shall equal Fifteen Million Two Hundred Fifty Thousand Dollars ($15,250,000), comprised of (i) a cash component, (ii) a long term incentive component; and (iii) a restricted stock unit award (collectively, the “2017 Target
Incentive Opportunity”). 
 2017 Cash Component 

The cash component of your 2017 Target Incentive Opportunity (the “2017 Cash Component”) shall account for twenty-five percent (25%) of
the overall target, i.e., Three Million Eight Hundred Twelve Thousand Five Hundred Dollars ($3,812,500) and shall be prorated based on the number of days you are actively employed with the Company during 2017 calendar year. If you commence active
employment on the Effective Date, such prorated target amount shall equal One Million Seven Hundred Fifty-Four Thousand Dollars ($1,754,000). The actual amount of your prorated 2017 Cash Component shall be determined based on the level of
achievement of corporate and individual performance goals and criteria as established and approved by the HRCC, and shall be paid less applicable tax and payroll deductions, at the same time all other 2017 cash incentive compensation is paid to
Executive Committee members and in no event later than March 15, 2018. The HRCC will consult with you in establishing the individual performance goals and criteria for the 2017 Cash Component. 

2017 Long Term Incentive Component 

The long term incentive component of your 2017 Target Incentive Opportunity shall account for fifty percent (50%) of the overall target, i.e., Seven
Million Six Hundred Twenty Five Thousand Dollars ($7,625,000) (the “2017 Long Term Component”), less the value of the Additional Component of the Initial PSU Award, i.e., Three Million Eight Hundred Twelve Thousand Five Hundred
Dollars ($3,812,500), the balance of which (i.e., Three Million Eight Hundred Twelve Thousand Five Hundred Dollars ($3,812,500)) shall be awarded to you in form of PSUs which will be granted in February 2018 when PSU awards are granted to other
Executive Committee members and will be earned based on the achievement of performance goals and criteria established by the HRCC at the time of grant, in consultation with you. 

2017 Restricted Stock Unit Award Component 

The restricted stock unit award component of your 2017 Target Incentive Opportunity shall account for twenty-five percent (25%) of the overall target, in
this case, Three Million Eight Hundred Twelve Thousand Five Hundred Dollars ($3,812,500), prorated based on the number of days you are actively employed with the Company during 2017 calendar year, 

 Charles W. Scharf 

July 13, 2017 
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and shall be awarded to you in the form of the Company’s restricted stock units (“RSUs”). If you commence active employment on the Effective Date, such prorated target
amount shall equal One Million Seven Hundred Fifty-Four Thousand Dollars ($1,754,000). The number of RSUs awarded to you hereunder and the number of PSUs subject to the Initial PSU Award shall be determined by dividing the applicable target amount
by $47.74, which is the value of BNY Mellon’s average closing share prices over the 25 trading days from May 12, 2017 to June 16, 2017 and shall be granted to you on the Effective Date, provided that as of such date, you are employed
by the Bank. The RSUs will vest in three equal installments on the first, second and third anniversaries, respectively, of February 15, 2018. 

2018 Incentive Opportunity 
 For the calendar year ending
December 31, 2018, your annual target incentive award opportunity shall equal Fifteen Million Two Hundred Fifty Thousand Dollars ($15,250,000). The actual amount of your 2018 incentive award, including the form of incentive, shall be determined
by the HRCC based on the achievement of performance goals and criteria. The HRCC will consult with you in establishing the individual and corporate performance goals and criteria for your 2018 incentive award. Beginning with the calendar year ending
December 31, 2019, your annual target incentive award opportunity shall be reviewed annually by the HRCC. 
 Incentive Award Terms and Conditions

 Incentive awards are granted pursuant to the Company’s Executive Incentive Compensation Plan, which incorporates the BNY Mellon Incentive Plans
General Terms and Conditions (together with any successor plan, the “EICP”) and BNY Mellon’s Long Term Incentive Plan (the “LTIP”). Any awards paid to you shall also be subject to appropriate tax withholding.
The PSU and RSU awards will be subject to the terms of this letter agreement and the applicable award agreements and the LTIP applicable at the time such award is granted, which collectively include, among other things, the requirements you must
meet in order for the award to vest. 
 You should read the EICP, the LTIP and the BNY Mellon Incentive Plans General Terms and Conditions carefully as they
contain, among other things, the requirements you must meet to become eligible to receive incentive and equity awards, as applicable, in addition to the timing and form of payment as well as information regarding the Bank’s right to defer all
or a part of a cash award. 
 In the event of a conflict between the terms and conditions of this letter agreement and the EICP, LTIP, the BNY Mellon
Incentive Plans General Terms and Conditions, or the award agreements for the PSU and RSU awards, as applicable, the terms and conditions of this letter agreement shall govern, notwithstanding anything to the contrary in the EICP, the LTIP, the BNY
Mellon Incentive Plans General Terms and Conditions or any such award agreement. 

 Charles W. Scharf 

July 13, 2017 
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 Benefits 

Enclosed is a summary of benefit coverage for which you are currently eligible. During your employment with the Bank, you will be eligible to participate in
the benefit and perquisite plans and programs provided to similarly situated Executive Committee members of the Bank from time to time. For purposes of eligibility to participate in the Company’s post-employment healthcare benefits, you will be
credited with three additional years of service effective as of the third anniversary of the Effective Date. 
 You will be entitled to use the
Company’s corporate aircraft for business and personal use in accordance with the terms of the Company’s Use of Corporate Aircraft Policy as in effect on the Effective Date, and as may be amended by the Company from time to time. 

In addition, you will be provided with a driver (who may be an individual selected by you and hired pursuant to the Company’s customary hiring
practices), and a car for business and personal use, provided that you will be required to reimburse the Bank for expenses reasonably attributable to your personal use in accordance with the Bank’s policy applicable to similarly situated
Executive Committee members of the Bank from time to time. 
 Severance 

The Company maintains an Executive Severance Plan (together with its amendments and successor plans, the “Severance Plan”) for members of the
Executive Committee. You will be appointed as a participant in the Severance Plan by the HRCC, which appointment shall become effective upon your commencement of active employment with the Bank on the Effective Date. A copy of the Severance Plan is
attached. In the event of your resignation from employment with the Bank for Good Reason1 due to the occurrence of an event described in footnote one giving rise to Good Reason during the period
commencing on and including the Effective Date and ending on and including January 1, 2018 (the “Protected Period”) : (i) you shall be entitled to receive the benefits available to you under Section 3(a) of the
Severance Plan, as then in effect, as if your employment was terminated by the Company other than for Cause (as defined in the Severance Plan); and (ii) your resignation shall be treated as a termination providing transition/separation pay for
purposes of Section 3.2(c) of the award agreement governing each equity award granted to you. In addition, if you experience a Qualifying Termination (as defined under the Severance Plan) prior to your attainment of age 55, or a resignation for
Good Reason (as defined in this paragraph) due to the occurrence of an event described in footnote one giving rise to Good Reason during the Protected Period, any PSUs awarded to you pursuant to the Initial PSU Award, shall be treated as if you have
attained the age of 55 in accordance with Section 3.2(c)(ii) of the Initial PSU Award agreement for vesting purposes. 
  

	1 	For purposes of this offer letter only, the term “Good Reason” shall mean the occurrence during the Protected Period of: (i) a material breach by the Company of the terms of this offer letter;
(ii) your involuntary removal as a member of the Board (other than in connection with the termination of your employment by the Bank for “Cause” (as defined in the Severance Plan)); or (iii) provided you remain employed with the
Bank on January 1, 2018, the failure by the Company to appoint you on January 1, 2018 as Chairman of the Board. The notice and cure provisions set forth in Section 2(k) of the Severance Plan shall apply to provisions (i) and
(iii) of the preceding sentence. 

 Charles W. Scharf 

July 13, 2017 
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 Stock Ownership and Retention Guidelines Applicable to Executive Committee Members 

As a member of the Executive Committee, you also will be covered under the Company’s stock ownership and retention guidelines. The stock ownership
guidelines generally require that you own an amount of stock valued at six (6) times your base salary (plus, for administrative purposes, an additional amount of stock equal to your base salary). You will have five years to attain your stock
ownership guideline and will be prohibited from selling or transferring Company stock to a third party until you do so. The stock retention guideline includes the requirement that you retain 50% of the net after-tax shares from Company equity awards
until you attain the age of 60. Our Human Resources Department will provide you with additional information about the stock ownership and retention guidelines after you commence employment. 

Potential Impact of Legal/Regulatory Requirements 
 If any
payment or other obligation under this letter agreement or any agreement or applicable benefit or incentive or commission plan is in conflict with any applicable legal or regulatory requirement, the Company may reduce, revoke, cancel, clawback or
impose different terms and conditions to the extent the Company deems necessary or appropriate, in its sole discretion, to effect such compliance, provided that the Company shall use good faith efforts to preserve in all material respects the total
economic value of the compensation opportunities and other rights provided to you in this letter agreement. Further, each of the Incentive Plans Terms and Conditions, and the individual equity award agreements(s) contain clawback and forfeiture
provisions that give the Company the right to cancel and/or require the repayment of the awards under specified circumstances.
 Covered Employees

 The Federal Reserve Board (“FRB”) has issued “Guidance on Sound Incentive Compensation Policies” to help ensure incentive
compensation policies of regulated institutions do not encourage imprudent risk-taking and are consistent with the safety and soundness of the institution. Your position will be considered that of a “Covered Employee” under the
FRB’s Guidance. The forfeiture, clawback, risk adjustment or other similar provisions of your awards will be consistent with those applicable to other similarly situated Covered Employees of the Bank. Our Human Resources Department will
provide you with additional information about the FRB’s Guidance after you commence employment. 
 Section 16 Employees 

You will be designated by the Company’s Board as an “executive officer” subject to Section 16 of the Securities Exchange Act of 1934 and
Regulation O of the Federal Reserve Act. You will be subject to the entirety of the Company’s Policy on Trading in Company Securities by Corporate Insiders as well as our policy concerning Regulation O officers (see attached policies). Our
Corporate Secretary’s Office will provide you with further information regarding this designation after you commence employment. 

 Charles W. Scharf 

July 13, 2017 
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 Section 409A 

The provisions of this letter are intended to comply with or be exempt from, the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended (“Section 409A”) and shall be interpreted and administered consistently with such intent. All reimbursements under this letter agreement that constitute nonqualified deferred compensation within the meaning of
Section 409A will be made or provided in accordance with the requirements of Section 409A, including, without limitation, that (1) in no event will any reimbursement payments be made later than the end of the calendar year next
following the calendar year in which the applicable expenses were incurred; (2) the amount of reimbursement payments that Bank is obligated to pay in any given calendar year shall not affect the amount of reimbursement payments that the Bank is
obligated to pay in any other calendar year; and (3) your right to have the Bank pay such reimbursements may not be liquidated or exchanged for any other benefit. If you are considered a “specified employee” for purposes of
Section 409A, any payment or benefit that constitutes nonqualified deferred compensation within the meaning of Section 409A that is otherwise due to you under this letter agreement during the six-month period immediately following your
separation from service (as determined in accordance with Section 409A) on account of your separation from service shall be paid or provided (or will commence being paid or provided, as applicable) to you on the earlier of the date that is six
(6) months after your separation from service, to the extent necessary to avoid penalty taxes or accelerated taxation pursuant to Section 409A, and your death. Any payments that qualify for the “short-term deferral” exception or
another exception under Section 409A shall be paid under the applicable exception. For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under this letter agreement shall be
treated as a separate payment of compensation. To the extent required to avoid taxes and penalties under Section 409A, all payments to be made upon a termination of employment under this letter agreement shall be made upon a “separation
from service” under Section 409A. 
 Pre-Employment Actions 

Please be advised of the following requirements and obligations related to your accepting this offer of employment with the Bank: 

Non-Solicitation Obligations 
 You will be required to
execute the enclosed Confidentiality, Notice and Non-Solicitation Obligations Agreement (“Non-Solicitation Agreement”). We recommend that you review this agreement with an attorney. Please sign and return the original on or before
the Effective Date. 
 BNY Mellon Personal Securities Trading Policy 

Enclosed is a copy of the BNY Mellon Personal Securities Trading Policy. When reviewing this policy, please be aware that your position is classified as
an “Insider Risk Employee.” Further, all U.S. based employees are required to maintain brokerage accounts only at specific broker-dealers that have been approved by the Company. This includes accounts owned by you both directly and
indirectly. A current list of approved broker-dealers is enclosed; however, the Company shall work with you to seek approvals where necessary 

 Charles W. Scharf 

July 13, 2017 
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so that you may maintain all accounts owned by you directly or indirectly as of the Effective Date, provided that such arrangement is permissible under applicable law and regulation. 

The Volcker Rule and Covered Funds 
 The Volcker Rule
places restrictions on BNY Mellon and its employees, including their immediate family members (see definition of immediate family member below) from investing or retaining ownership in Covered Funds that BNY Mellon sponsors, unless the employee
directly provided qualified services to the Covered Fund at the time of investment. Generally, Covered Funds under the Volcker Rule fall into three categories: 
  

	 	•	 	Hedge Funds, Private Equity Funds and the Venture Capital Funds—these are funds that avoid mutual fund registration under Section 3(c)(1) or 3(c)(7) of the U.S. Investment Company Act because they are offered
privately (i.e. not registered) and either owned by qualified investors or by 100 or fewer accredited investors 

  

	 	•	 	Foreign Equivalent Funds—these are funds organized and offered outside of the U.S. that would be the foreign equivalent of the above funds (i.e. not registered or publicly offered). 

 

	 	•	 	Commodity Pools—these are funds unregistered and exempt under Commodity Futures Trading Commission regulation. 

As an employee of the Company if you did not provide qualified services to a Covered Fund that BNY Mellon sponsors at the time of investment, you will be
required to liquidate the investment (both of the employee and any immediate family members). Qualified services mean those who provide investment advice or investment management services to the fund or who provide services that enable the provision
of investment advice or investment management, such as oversight and risk management, deal origination, due diligence, administrative or other support services. 

The phrase “immediate family members” includes an applicant’s spouse, domestic partner and un-emancipated children (including stepchildren,
foster children, sons-in-law or daughters-in-law), whether or not they live in the same household as the employee. In addition, “immediate family members” also includes the following relatives who are living within the same household as
the applicant: children (including stepchildren, foster children, sons-in-law and daughters-in-law), grandchildren, parents (including step-parents, mothers-in-law and fathers-in-law), grandparents and siblings (including brothers-in-law,
sisters-in-law and stepbrothers and stepsisters). You should also be aware that other holdings of Covered Funds over which you have indirect ownership or control will generally be attributed to them. 

Starting at BNY Mellon 
 According to federal law, you
must be prepared to produce documents on your first day of employment to prove your identity and employment eligibility in the United States. A list of acceptable documents is enclosed. If you are unable to produce the required documentation within
three (3) business days of your start date, your employment cannot continue. 

 Charles W. Scharf 

July 13, 2017 
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 Additional Information 

New York State law requires that additional information regarding your pay be given to you as part of your offer of employment. Please review the enclosed
materials carefully. 
 While we have every expectation that you will have a successful career with us, your employment with the Bank, its subsidiaries,
affiliates, successors, related companies and assigns is “at will,” and the employment relationship may be terminated at any time by you or the Bank with or without cause. Accordingly, nothing in this offer letter should be construed
as creating a contract of employment for a specified period of time. Except as set forth herein, all compensation, benefits, and other terms of employment are subject to change from time to time as the Bank or the Company may determine in its
sole discretion. Please note that this offer letter supersedes any and all prior or contemporaneous offers, agreements, discussions and understandings, whether written or oral, relating to the subject matter of this letter agreement or your
employment with the Bank. 
 This offer is contingent upon your eligibility to work in the United States. This offer is also contingent upon the
representation that you are not subject or party to any agreement, understanding or undertaking, including with any prior employer, that would prevent or restrict you from performing your duties with the Bank and the Company or working with or on
behalf of any Bank or Company customers; or would constitute a conflict of interest or be in violation of the BNY Mellon Code of Conduct. Finally, this offer is contingent upon your execution and return of the Non-Solicitation Agreement on or
prior to your first day of employment with the Bank. 
 This letter agreement is governed by the laws of the State of New York, without regard to its
conflict of law provisions. This letter agreement shall be binding on all successors and assigns of the Company. 

 Charles W. Scharf 

July 13, 2017 
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 To accept this offer, please sign and date this letter agreement and return it to Monique Herena, our Chief
Human Resources Officer, at 225 Liberty Street, New York, NY 10286 on or before 5:00 pm EDT on Sunday, July 16, 2017.
 Charlie, we look forward to
your leadership. 
  

					
	Sincerely yours,	 		 	
			
	/s/ Joseph J. Echevarria	 		 	/s/ Edward P. Garden
	 Joseph J. Echevarria
 Lead Independent
Director
 Chair, Audit Committee
	 		 	 Edward P. Garden
 Chair, Human Resources
and
 Compensation Committee

 Charles W. Scharf 

July 13, 2017 
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10
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	AGREED TO AND ACCEPTED:
	
	/s/ Charles W. Scharf
	Charles W. Scharf

 Date: July 13, 2017ex10-1.htm

Exhibit 10.1

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (the “Agreement”) entered into between Mawae Rex Morton (“Executive”), and Cyanotech Corporation (the “Company”), will be effective upon execution by both parties. 

 

	
			1. 

				
			Position; Commencement Date.

			

 

Executive will be employed by the Company under this Agreement in the position of President. Executive will commence employment on July 14, 2017 (the “Commencement Date”). 

 

	
			2. 

				
			Duties.

			

 

As the Company’s President, the Executive shall perform such duties and functions as are determined from time to time by the Company’s CEO or Board of Directors. In the performance of his duties with the Company, Executive shall at all times comply with the written policies of the Company and be subject to the reasonable direction of the CEO or Board. 

 

	
			3. 

				
			Term of Employment.

			

 

The Company shall continue to employ Executive for a period of up to thirty-six (36) months, commencing on the Commencement Date and ending on July 14, 2020 (the “Contract Term”), subject to earlier termination as set forth in Section 16 (“Termination of Employment”). After the initial thirty-six month period, this Agreement shall continue for successive one-year periods thereafter, subject to the provisions of Paragraph 16 below, and upon the same terms and conditions, except as they may be modified by the parties in writing from time to time, and unless and until written Notice shall be given by either party forty-five (45) days in advance of the end of the initial term or any successive one-year period of the intention not to continue this Agreement (the “Notice Period”) followed by the continued performance of this Agreement for the Notice Period by both parties. The Contract Term of this Agreement shall include all such extensions. 

 

	
			4. 

				
			Base Salary.

			

 

Executive’s annual base salary will be $250,000.00 (Two Hundred Fifty Thousand Dollars and No Cents), and shall be paid in accordance with the regular payroll practices of the Company, subject to withholdings required by law or authorized by Executive. Executive’s salary will be subject to review annually by the Compensation Committee, provided, however, that the Executive’s base salary shall not be reduced except in circumstances where the Company is making proportional reductions in the salaries of all of its executives. 

 

	
			5. 

				
			Signing Bonus.

			

 

The Company shall pay Executive a signing bonus in the gross amount of $37,500.00 (Thirty Seven Thousand Five Hundred Dollars and No Cents), payable in equal monthly installments of $7,500.00 over five (5) months, which shall be subject to standard tax withholdings. The first installment of the signing bonus will be payable upon Executive’s completion of the first payroll cycle and will be issued along with his regular base pay. The Company may accelerate payment of the Signing Bonus at the sole discretion of the Compensation Committee.

 

 

 

 

	
			6. 

				
			Executive Bonus Program.

			

 

For each full fiscal year during which Executive remains employed under this Agreement, Executive will have an opportunity to earn a fiscal year-end bonus based upon performance and earnings targets and other standards to be established by the Board or the Compensation Committee for each such year and based upon the Compensation Committee’s and the Board’s evaluations of Executive’s fiscal year results. Bonuses will be determined and awarded in the Board’s discretion following completion of the Company’s annual audit by independent auditors.

 

	
			7. 

				
			Stock Option Grants.

			

 

The Board will grant Executive 75,000 (Seventy Five Thousand) stock options exercisable for shares of common stock of the Company under the Company’s 2016 Equity Incentive Plan (the “Plan”). The exercise price for the initial stock option award will be the closing market price on the date of grant. All stock option grants hereunder will be evidenced by and subject to the terms of the Plan and a Stock Option Grant Notice and Option Agreement. The vesting schedule and terms for the stock options will be set forth in the Stock Option Grant Notice and Option Agreement.

 

	
			8. 

				
			Employee Benefit Programs.

			

 

Executive will be eligible to participate in, and be covered by, the Company’s employee benefit programs, subject to any preconditions in those programs, upon Executive’s Commencement Date. Specific programs currently in place include: health (physician, prescription, dental, vision) insurance for Executive and his family; a short term and long term disability insurance plan; and group or individual life insurance in the amount of two times Executive’s annual salary. In addition, Executive will be entitled to four weeks of paid personal time off (“PTO”) for each 12 months Executive is employed by the Company. 

 

	
			9. 

				
			Company Automobile and Housing.

			

 

From the Commencement Date until the Executive permanently relocates to the island of Hawaii: (a) the Company shall provide Executive for his use, at its expense, a suitable company vehicle. The Company shall be responsible for paying the insurance, maintenance, and operation costs for this automobile; and (b) the Company will pay or reimburse Executive for suitable apartment housing and related costs on the island of Hawaii. This housing benefit may be amended or changed from time to time in the sole discretion of the Compensation Committee. The Company will offer Executive an appropriate relocation package to cover Executive’s reasonable out-of-pocket costs and expenses in connection with Executive’s relocation of his permanent residence to the island of Hawaii.

 

2

 

 

	
			10. 

				
			Reimbursements.

			

 

Executive will be reimbursed on a regular basis for reasonable, necessary and properly documented business and travel expenses (including travel to and from Kona) incurred for the purpose of conducting the Company’s business, subject to periodic review and approval of such expenditures by the Compensation Committee.

 

	
			11. 

				
			Conflicting Employment.

			

 

Executive shall devote his entire business time, attention and energies exclusively to the business interests of the Company while employed by the Company except as otherwise specifically approved in writing by the Board of Directors. Executive may nonetheless accept speaking or presentation engagements in exchange for honoraria and may serve on boards of directors and advisory boards of charitable organizations as long as such service does not adversely affect the performance of his duties under this Agreement. 

 

	
			12. 

				
			Noncompetition.

			

 

Executive agrees that while he is employed by the Company and for a 6-month period following the Contract Term, Executive will not within the State of Hawaii directly or indirectly compete with the Company by accepting employment or consulting contracts or performing activities for Executive’s own benefit or with or without compensation for the benefit of another (a) with respect to any business which competes with that of the Company and (b) where the activities performed by Executive are substantially similar to those performed by Executive for the Company under this Agreement.

 

	
			13. 

				
			Non-Disparagement.

			

 

Executive agrees and covenants that, while he is employed by the Company and for a five (5) year period following the Contract Term, he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company, any products, services, or operations of the Company, or any of the former, current, or future officers, directors, or employees of the Company. This Section does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. The Executive shall promptly provide written notice of any such order to the CEO.

 

	
			14. 

				
			Confidential Information.

			

 

(a)     Confidentiality. Except as herein provided, Executive agrees that during and after termination of his employment with the Company, he (i) shall keep Confidential Information (as defined below) confidential and shall not directly or indirectly, use, divulge, publish or otherwise disclose or allow to be disclosed any aspect of Confidential Information without the prior written consent of the Board except in the performance of Executive’s duties for Company; (ii) shall refrain from any action or conduct which might reasonably or foreseeably be expected to compromise the confidentiality or proprietary nature of the Confidential Information; and (iii) shall follow the written directives made by the Board of Directors from time to time regarding Confidential Information. 

 

3

 

 

For purposes of this Agreement “Confidential Information” includes but is not limited to trade secrets, confidential information, knowledge or data of the Company, or any of its clients, customers, consultants, shareholders, licensees, licensors, vendors or affiliates, that Executive may produce, obtain or otherwise acquire or have access to during the course of his employment by the Company (whether before or after the date of this Agreement), including but not limited to: business plans, records, customer files and lists; sales practices; strategies and plans; sources of supply and vendors; special business relationships with vendors, agents, and brokers; promotional materials and information; financial matters; mergers; acquisitions; confidential personnel matters; inventions; developments; product specifications; procedures; pricing information; intellectual property; technical data; software programs; finances; operations and production costs; ideas; plans technology; proposals; market analysis; technical services; customer needs; customer purchasing patterns; customer renewal or expiration data; customer concerns; Company pricing, rental or lease rates, and profit margins; Company’s commissions and/or fees; insurer information unique to or tailored to Company; and other information which Company has developed at significant expenditure of time, effort and/or expense. All Confidential Information and all tangible materials containing Confidential Information are and shall remain the sole property of the Company.

 

(b)     Limitation. Executive shall have no obligation under this Agreement to maintain in confidence any information that: (i) is in the public domain at the time of disclosure; (ii) though originally Confidential Information, subsequently enters the public domain other than by breach of Executive’s obligations hereunder or by breach of another person’s or entity’s confidentiality obligations; or (iii) is shown by documentary evidence to have been known by Executive prior to disclosure to Executive by the Company. Executive is also advised that the misappropriation of trade secrets (a form of Confidential Information, as defined herein) is a violation of law, just like the theft of any property. In addition to state law remedies, the Defend Trade Secrets Act of 2016 (the “DTSA”) enables a trade secret owner to bring a trade secret misappropriation case in federal court. The DTSA generally provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law in the following circumstances: (A) where the individual discloses trade secrets in confidence to a federal, state or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; or (B) where the disclosure is made in a sealed filing in a lawsuit or other proceeding. In addition, the DTSA generally permits an individual to disclose trade secrets to the individual’s attorney in the course of pursuing a lawsuit where the person alleges retaliation for reporting a suspected violation of the law (or uses the trade secret information in such lawsuit, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order). The foregoing is a very generalized summary of the immunity provisions of the DTSA intended to satisfy the notification requirements of the DTSA. The DTSA does not preclude the trade secret owner from seeking breach of contract remedies, however. Executive agrees to seek legal counsel before disclosing any trade secrets if Executive intends to seek immunity under the DTSA.

 

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(c)     Third Party Information. Executive recognizes that the Company may have received, and in the future may receive, from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Executive agrees that Executive owes the Company and such third parties, during Executive’s employment by the Company and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person or firm and to use it in a manner consistent with, and for the limited purposes permitted by, the Company’s agreement with such third party. Notwithstanding the foregoing, Executive may disclose information following receipt of a Court Order requiring disclosure, but only if he first provides the Company with the prompt notice of the Court Order so that it can object and seek to prevent such disclosure.

 

(d)     Return of Confidential Material. In the event of Executive’s termination of employment with Company for any reason whatsoever, Executive agrees promptly to destroy or surrender and deliver to Company all records, notes, materials, equipment, drawings, documents and data of any nature pertaining to any Confidential Information or to his employment, and Executive will not retain or take with him any tangible materials containing or pertaining to any Confidential Information that Executive may produce, acquire or obtain access to during the course of his employment except for copies of Executive’s own employment records. At the Company’s request, Executive will certify in writing that Executive has destroyed or returned, as applicable, all Confidential Information in Executive’s possession.

 

	
			15. 

				
			Intellectual Property. 

			

 

Executive agrees that all inventions, innovations, improvements, technical information, trade secrets, systems, software developments, ideas, results, methods, designs, artwork, analyses, drawings, reports, copyrights, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) which relate to the Company’s or any of its subsidiaries’ or affiliates’ businesses, research and development or existing or future products or services and which are conceived, developed or made by Executive during his employment with the Company, together with all intellectual property rights therein, including, without limitation, any patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing (collectively referred to herein as “Work Product”), shall be the sole and exclusive property of the Company. 

 

For the avoidance of doubt and without limiting the foregoing, (a) the Company shall be the sole owner of all right, title and interest in such Work Product, including all intellectual property rights relating to such Work Product, without Executive retaining any license or other residual right whatsoever, and (b) any rights to any new or existing Work Product are automatically conveyed, assigned and transferred to the Company pursuant to this agreement. Executive hereby waives and renounces all moral rights related, directly or indirectly, to any such existing or new Work Product. Executive will take reasonable steps to promptly disclose such Work Product to the Company’s CEO and perform all actions reasonably requested by the Company (whether during or after the employment) to establish and confirm such ownership (including the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. Executive agrees that any such copyrightable work is work made for hire by Executive for the Company. To the extent that the immediately preceding sentence does not apply to any Work Product, Executive hereby irrevocably assigns to the Company, for no additional consideration, Executive’s entire right, title and interest in and to all Work Product and rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Executive agrees that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to the Work Product or any Confidential Information, materials, software or other tools made available to Executive by the Company.

 

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			16. 

				
			Termination of Employment.

			

 

(a)     By Company without Cause. The Company may terminate Executive’s employment at any time, with or without cause or advance notice. However, if the Company terminates Executive’s employment without Cause, as that term is defined in Section 16(b) below, or if Executive resigns his employment for Good Reason, as that term is defined in Section 16(c) below, Executive will receive an amount equal to his base salary for six (6) months or for the remainder of the Contract Term, whichever is less, together with (a) any other earned but unpaid amounts due under the terms of this Agreement and (b) employee benefits for the applicable severance benefit period (the “Severance Benefits”). To be eligible for Severance Benefits, Executive will be required to sign and not revoke a General Release in a form provided by the Company, on or within 52 days after his final date of employment, as a condition of receiving Severance Benefits. Severance Benefits will be paid in equal installment payments payable in accordance with the Company’s normal payroll practices, but no less frequently than monthly, commencing within 60 days following the termination date subject to the potential delay due to the application of Section 16(f) . To the extent that any severance payments are deferred compensation under Internal Revenue Code Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the release spans two calendar years, the payment of severance will not be made or begin until the later calendar year.

 

(b)     By Company for Cause. For purposes of this Agreement, “Cause” will mean (i) Executive’s willful failure or refusal to perform a lawful directive of the CEO or Board of Directors that is consistent with Executive’s duties and responsibilities, provided the Company provides Executive with written notice of such failure or refusal and such failure or refusal is not cured within 14 days of receipt of such notice, provided that if it is not possible to cure such failure or refusal within the 14-day period the Executive shall have a reasonable period (not to exceed 60 days) within which to cure the failure or refusal; (ii) Executive’s material misconduct or material violation of his fiduciary obligations or other duties owed to the Company; (iii) Executive’s performance of his duties in a grossly negligent manner, or violation of any law or regulation that may affect Executive’s ability to perform his duties or that is likely to harm the Company’s reputation; (iv) Executive’s conviction of or plea of no contest to any felony or commission of any act, whether or not a felony, that has a material adverse effect on his ability to perform his duties; (v) Executive’s material breach of this Agreement, or Company Policies that apply to him subject to notice and right to cure as in clause (i) above. If Executive’s employment is terminated for Cause, he shall not be entitled to Severance Benefits or payment of any outstanding Bonus, and shall receive only unpaid base salary for services rendered through the date of termination and payment for accrued and unused vacation. Such payment shall be made in a single lump-sum payment on the date of Executive’s termination.

 

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(c)     Executive’s Resignation for Good Reason. For purposes of this Agreement, “Good Reason” will mean that Executive resigns his employment within the Contract Term as result of: (i) a material diminution in the Executive’s base compensation; (ii) a material diminution in the Executive’s authority, duties, or responsibilities; (iii) a change in geographic location at which the Executive must perform the services to any location outside the Hawaiian Islands; or (iv) any other action or inaction that constitutes a material breach of the terms of this Agreement. Notwithstanding the foregoing, in no event shall such resignation constitute “Good Reason” unless and until Executive provides written notice to the chairman of the Board of Directors of the existence of the good reason condition, which notice must be within 90 days of its initial existence, and Executive provides the Company with at least 30 days to remedy the good reason condition. If the condition is not remedied, the Executive must terminate his employment within sixty (60) days following the expiration of such remedy period for the termination to be on account of a “Good Reason.”

 

If Executive resigns for Good Reason, he will receive the Severance Benefits, subject to the requirements provided in Section 16(a).

 

(d)     Death. Executive’s employment and the Company’s obligations under this Agreement shall terminate automatically, effective immediately and without any notice being necessary, upon Executive’s death. Executive’s legal representative shall receive unpaid compensation for Executive’s services rendered through the date of termination and payment for accrued and unused vacation, which shall be paid in a single lump-sum payment on or before 30 days after Executive’s death. 

 

(e)     Disability. In the event of Executive’s Disability, as defined below, Company shall have the right to terminate Executive’s employment consistent with federal and state laws relating to the rights of persons with disabilities.

 

For purposes of this Agreement, “Disability” will mean the Executive has been unable by reason of any mental or physical impairment to perform the essential functions of his position for 120 days (whether or not consecutive) during any period of 360 days. A determination of disability shall be made by the Company in consultation with a physician satisfactory to the Executive and the Company, and Executive shall cooperate with the efforts to make such determination. Any such determination shall be conclusive and binding on the parties for the purpose of this Agreement. Any determination of Disability under this Section 16(e) is not intended to alter any benefits Executive may be entitled to receive under any long-term disability insurance policy carried by either the Company or Executive, which benefits shall be governed solely by the terms of any such insurance policy.

 

(f)     Section 409A. Although the Company does not have a duty to design its compensation policies in a manner that minimizes Executive’s tax liabilities, the payment of any Severance Benefits under this Section 16 is intended to comply with the requirements of Internal Revenue Code Section 409A and final Treasury regulations promulgated thereunder. In no event shall the Executive have the ability to affect the timing of the payment of Severance Benefits by acceleration, deferral, or otherwise. If the payment of any Severance Benefits is not exempt under Section 409A and applicable regulations, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A, and incorporates by reference all required definitions and payment terms. In the event any of the payments to be made to Executive upon the termination of employment are “deferred compensation” within the meaning of Section 409A, such payment shall be delayed for six months and one day if Executive is a “specified person” for such 409A purposes. No interest shall be due on any amounts deferred pursuant to this Section 16(f).

 

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			17. 

				
			Successors and Assigns.

			

 

This Agreement shall be binding upon the parties hereto and their respective heirs, executors, legal representatives, successors and assigns. This Agreement is specific to Executive and may not be assigned.

 

	
			18. 

				
			Waiver and Amendment.

			

 

No modification, waiver or amendment of this Agreement will be effective unless in writing signed by the Executive and by the Company. No waiver by either party of any condition or provision of this Agreement shall be considered a waiver of any other condition or provision or a waiver of the same condition or provision at another time.

 

	
			19. 

				
			Entire Agreement.

			

 

This Agreement sets forth the entire Agreement and understanding between the Company and Executive relating to the subject matters herein and supersedes all prior or contemporaneous discussions and Agreements between the parties, whether oral or written.

 

	
			20. 

				
			Governing Law.

			

 

This Agreement shall be governed by the laws of the State of Hawaii.

 

	
			21. 

				
			Severability.

			

 

The invalidity or unenforceability of one or more provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect to the maximum extent of the law.

 

	
			22. 

				
			Arbitration.

			

 

Any and all claims, controversies or disputes arising out of or relating to this Agreement, or the breach thereof, which remain unresolved after direct negotiations between Executive and the Company, shall first be submitted to confidential Mediation in Honolulu in accordance with the Rules, Procedures and Protocols for Mediation of Disputes of Dispute Prevention & Resolution, Inc. (“DPRI”), then in effect. If any issues, claims or disputes remain unresolved after mediation concludes, Executive and the Company agree to submit any such issues to binding arbitration in Honolulu before one arbitrator in accordance with the Rules, Procedures and Protocols for Arbitration of Disputes of DPRI, then in effect. However, Executive and the Company agree that the foregoing shall not preclude either of them from seeking any injunctive or equitable relief from a court of competent jurisdiction pursuant to any provision of this Agreement. Executive and the Company each further agree that, subject to Chapter 658A, Hawaii Revised Statutes, as the same may hereafter be amended or recodified, the award of the arbitrator(s) shall be binding upon each of them and that judgment upon the award rendered may be entered in any court of competent jurisdiction. 

 

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			23.

				
			Counterparts.

			

 

This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

 

[Signature page follows]

 

9

 

 

The directors of Cyanotech Corporation, as well as its Compensation Committee, which have approved the terms of this Agreement, are very pleased that you have agreed to join the Company and are enthusiastic about the prospects for the Company under your leadership. Please acknowledge your agreement with, and acceptance of, the foregoing terms by signing below where indicated. A copy of this Agreement will be filed with the Securities and Exchange Commission as a public document.

 

 

 

	
			Cyanotech Corporation

			 

			By:/s/ Gerry Cysewski                    

			 

			Name: Gerry Cysewski                  

			 

			Title:Chief Executive Officer         

			 

			Date:July 14, 2017                         

				
			Executive

			 

			/s/ Mawae Rex Morton                      

			Mawae Rex Morton

			 

			Date:July 14, 2017

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