NovaBay Pharmaceuticals Inc

Unless otherwise indicated, all per share numbers have been retroactively adjusted to account for the 1-for-35 Reverse Stock Split, effective November 15, 2022.

Summary Executive Compensation Table

The following table shows information regarding the compensation earned during the fiscal years ended December 31, 2023 and December 31, 2022 by (1) our Chief Executive Officer, General Counsel and Chief Compliance Officer, (2) our Interim Chief Financial Officer (who was appointed February 16, 2023), (3) our former Chief Financial Officer (who served in such role until his resignation on February 15, 2023 and has served as a consultant since such date), and (4) our former Chief Product Officer (who served until her resignation effective on November 5, 2023) (collectively, the “NEOs”).

2023 and 2022 Base Salaries and Target Bonus Amounts

The Compensation Committee did not recommend any increases to executive salaries or target bonus amounts for 2023 or 2022; they remained the same as 2021. For Mr. Hall, this was a 2023 base salary of $350,000 and a target bonus percentage of base salary of 50%. For Mr. Law, this was a 2023 base salary of $170,000 and a target bonus percentage of base salary of 25%. Prior to their respective resignations, the 2023 base salary for Mr. Jones and Dr. Kunin was $300,000 and $200,000, respectively, and a target bonus percentage of base salary of 35% and up to 100%%, respectively.

2023 and 2022 Cash Bonuses

The Board, upon the recommendation of the Compensation Committee, determined not to award any bonuses to its NEOs excluding Tommy Law for fiscal year 2023 performance or fiscal year 2022 performance. Tommy Law received a bonus of $42,500 for fiscal year 2023 performance.

2023 and 2022 Equity Awards

The Board, upon the recommendation of the Compensation Committee, determined not to grant any equity awards for the 2023 fiscal year or 2022 fiscal year to any of its NEOs.

Federal Income Tax Law

Federal income tax law prohibits publicly-held companies, such as the Company, from deducting compensation paid to a NEO that exceeds $1 million during the tax year. Prior to the adoption of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), to the extent that compensation was based upon the attainment of performance goals set by the Compensation Committee pursuant to plans approved by the stockholders, the compensation was exempted from the $1 million deduction limit. The Tax Act repealed this exemption, and now compensation paid to NEOs in excess of $1 million is no longer deductible, even if performance-based. The Compensation Committee intends to continue to use performance metrics in compensation when it is in the best interests of the Company and its stockholders even if such compensation is not deductible for tax purposes.

Outstanding Equity Awards at Fiscal Year End

The following table presents the outstanding equity awards held by each of our NEOs as of December 31, 2023. Stock options were granted pursuant to our 2007 Plan thereafter until its expiration in March 2017, and all awards since then have been pursuant to our 2017 Plan. The options granted under our 2007 Plan and 2017 Plan are not exercisable until they have vested.

Employment-Related Agreements and Potential Payments upon Termination or Change in Control

On January 31, 2020, the Company entered into an employment agreement with Mr. Hall. Mr. Hall’s employment agreement was subsequently amended effective December 31, 2021 and December 7, 2023. Mr. Jones and Dr. Kunin were each party to an employment agreement, dated May 4, 2020 and November 5, 2021, respectively, prior to their resignations from the Company on February 15, 2023 and November 5, 2023, respectively. In connection with Mr. Jones’ resignation, the Company entered into a consulting agreement with Mr. Jones.

The principal terms of our NEOs’ employment agreements (including the employment agreements of Mr. Jones and Dr. Kunin that were effective until their respective resignations) are summarized below. Mr. Law is not currently party to an employment agreement with the Company.

Justin Hall

Mr. Hall’s employment agreement, as amended, provides for at-will employment and a term commencing on January 31, 2020 and ending on December 31, 2024 unless earlier terminated. Mr. Hall’s employment agreement originally provided for an annual base salary of two hundred eighty-six thousand dollars ($286,000), subject to annual review and increases determined by the Compensation Committee and/or Board (such amount, the “Hall Base Salary”).

In addition, Mr. Hall shall be eligible for any bonus plan that is deemed appropriate by the Board. The bonus amount shall be determined by the Board, in its sole discretion, based upon factors, including: (i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to the executive as set by the executive and the Company’s Board, before the end of the first calendar quarter; (ii) the evaluation of the executive by the Company’s Board; (iii) the Company’s financial, product and expected progress; and (iv) other pertinent matters relating to the Company’s business and valuation. Any bonus will be payable within two and a half (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 equity incentive plan, and shall be fully vested upon issuance.

In the event the Company terminates Mr. Hall for cause (as defined in the employment agreement), he shall be entitled to any earned but unpaid wages or other compensation (including reimbursements of his outstanding expenses and unused vacation) earned through the termination date.

In the event the Company terminates Mr. Hall without cause (including death, disability or for constructive termination) (each as defined in the employment agreement) which is not in connection with a change of control, provided such termination constitutes a “separation from service” as such term is defined in Section 409A of the Code and, subject to his execution of a release of claims in favor of the Company, he shall be entitled to an amount equal to the Hall Base Salary in effect on the date of separation from service plus the full target annual bonus percentage for the current fiscal year (the “Hall Severance Amount”). The Hall Severance Amount will be paid in twelve (12) equal consecutive monthly installments at the monthly equivalent of the Hall Base Salary rate in effect at the time of his termination, with such installments commencing within sixty (60) days following the executive’s separation from service. The Hall Severance Amount shall be in addition to Mr. Hall’s earned wages and other compensation (including reimbursements of his outstanding expenses and unused vacation) through the date his employment is terminated from the Company.

In the event the Company terminates Mr. Hall without cause in connection with a change of control (as defined in the employment agreement), he shall be entitled to a Change of Control Severance (the “Hall CoC Severance Amount”) in place of the Hall Severance Amount described above. The Hall CoC Severance Amount shall be: (i) an amount equal to twice the Hall Base Salary and (ii) an amount equal to the cash portion of his 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, Mr. Hall may elect coverage for, and the Company shall reimburse him for, the amount of his premium payments for group health coverage, if any, elected by the executive pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”); provided, however, that Mr. Hall 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.

Moreover, all outstanding equity awards held by Mr. Hall will be subject to full accelerated vesting on the date of termination without cause, in both the standard Hall Severance Amount and the Hall CoC Severance Amount, and the exercise period shall be extended to three (3) years from the date of termination. In order to terminate Mr. Hall for cause (or for Mr. Hall to resign for constructive termination), the acting party shall give notice to the other party specifying the reason for termination and providing a period of thirty (30) days to cure the reason specified. If there is no cure within thirty (30) days or the notified party earlier refuses to effect the cure, the termination shall then be deemed effective.

Andrew Jones

As a result of Mr. Jones’ resignation, effective February 15, 2023, his employment agreement terminated on the same day. Due to Mr. Jones’ resignation being voluntary, he was not entitled to either the Jones Severance Amount or the Jones CoC Severance Amount (each as described below). Subsequent to his resignation, Mr. Jones has served as a consultant to the Company.

Consulting Agreement. Pursuant to Mr. Jones’ consulting agreement, Mr. Jones currently acts as a consultant to the Company in support of its transition to a new Chief Financial Officer by assisting the finance department with accounting and control practices, SEC reporting, Sarbanes Oxley compliance and external audits. The term of the consulting agreement was initially for six (6) months, but has been further extended on a month by month basis. As consideration for such services, the Company pays Mr. Jones $190 per hour with Mr. Jones responsible for any expenses incurred unless the Company has specifically approved a reimbursement in advance.

Historic Employment Agreement. Mr. Jones’ prior employment agreement provided for at-will employment and a term commencing on May 4, 2020. The employment agreement included an original annual base salary of two hundred seventy-five thousand dollars ($275,000), subject to annual review and increases determined by the Compensation Committee (such amount, the “Jones Base Salary”), as well as an initial equity grant of 4,572 restricted stock units and an initial stock option award of 8,572 shares, as further described above.

In addition, Mr. Jones had the opportunity to earn an annual performance bonus in an amount up to thirty percent (30%) of the Jones Base Salary, with such maximum amount subject to increases determined by the Compensation Committee and/or Board (the “Annual Bonus”). The Annual Bonus amount was to be determined by the Board, in its sole discretion, based upon the following factors: (i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to Mr. Jones as set by Mr. Jones and the Company’s CEO and/or the Board, before the end of the first calendar quarter (or the first three months of his employment, as appropriate); (ii) the evaluation of Mr. Jones by the Company’s CEO 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. Any bonus would have been payable within two and a half (2 ½) months following the end of the year for which the bonus was earned. The Committee had the sole discretion to pay any or all of the Annual Bonus in the form of equity compensation, except to the extent that the Annual Bonus was paid in connection with a Jones Severance Amount (as defined below) or a Jones CoC Severance Amount (as defined below). Any such equity compensation would have been issued from the Company’s equity incentive plan, and would have been fully vested upon payment.

In the event the Company terminated Mr. Jones for cause (as defined in the employment agreement), he would have been entitled to any earned but unpaid wages or other compensation (including reimbursements of his outstanding expenses and unused vacation) earned through the termination date. In the event the Company terminated Mr. Jones without cause (including death, disability, or for constructive termination) (each as defined in the employment agreement), which is not in connection with a change of control, he would have been, subject to his execution of a release of claims in favor of the Company, entitled to an amount equal to the Jones Base Salary in effect on the date of separation from service plus the full target Annual Bonus percentage of the then current fiscal year (with it deemed that all performance goals have been met at 100% of budget or plan) (the “Jones Severance Amount”), which would have paid in twelve (12) equal consecutive monthly installments. The Jones Severance Amount would have been in addition to Mr. Jones’ earned wages and other compensation (including reimbursements of his outstanding expenses and unused vacation) through the termination date.

In the event the Company terminated Mr. Jones without cause in connection with a change of control (as defined in the employment agreement), he would have been entitled to a Change of Control Severance (the “Jones CoC Severance Amount”) in place of the Jones Severance Amount described above. The Jones CoC Severance Amount would have been: (i) an amount equal to twice the Jones Base Salary in effect on the date of separation from service and (ii) an amount equal to the cash portion of Mr. Jones’ target Annual Bonus for the fiscal year in which the termination occurred (with it deemed that all performance goals had 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, Mr. Jones would have had the option to elect coverage for, and the Company would have reimbursed Mr. Jones for, the amount of his premium payments for group health coverage, if any, elected by Mr. Jones pursuant to COBRA; provided, however, that Mr. Jones would 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.

Moreover, in the event of either a termination without cause or a termination in connection with a change of control, all outstanding equity awards held by Mr. Jones would have been subject to full accelerated vesting on the date of termination, and the exercise period extended to three (3) years from the date of termination. In order for Mr. Jones to resign for constructive termination, Mr. Jones would have had to give notice to the Company within thirty (30) days of the initial existence of such grounds for constructive termination and provided a period of thirty (30) days to cure the reason specified.

Dr. Audrey Kunin

In connection with Dr. Kunin’s resignation, effective November 5, 2023, her employment agreement naturally expired on the same day. Due to Dr. Kunin’s resignation being voluntary, she was not entitled to the Kunin Severance Amount (as described below).

Dr. Kunin’s employment agreement provided for at-will employment and a two-year term commencing on November 5, 2021. Her employment agreement provided for an annual base salary of $200,000 (“Kunin Base Salary”). Additionally, Dr. Kunin’s employment agreement included an equity grant of 8,572 performance restricted stock units and a stock option award of 150,000 shares.

Dr. Kunin’s employment agreement also provided her with the opportunity to earn an annual performance bonus (“Kunin Annual Bonus”) in an amount up to one hundred percent (100%) of the Kunin Base Salary. For the Kunin Annual Bonus, sixty percent (60%) of the total amount of the Kunin Annual Bonus was to be determined by the Board in its sole discretion, based upon the following factors: (i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to Dr. Kunin as set by Dr. Kunin and the Company and/or its authorized representative; (ii) the evaluation of Dr. Kunin by the Company and/or its authorized representative; (iii) DERMAdoctor’s financial, product and expected progress; and (iv) other pertinent matters relating to DERMAdoctor’s business and valuation. Dr. Kunin was also entitled to the remaining portion of the Kunin Annual Bonus of up to forty percent (40%) of the Kunin Base Salary, as considered and approved by the Board in its sole discretion, upon meeting certain performance metrics related to the Membership Unit Purchase Agreement entered into in connection with the DERMAdoctor Acquisition. Any bonus to Dr. Kunin was payable within seventy-four (74) days following the end of the year for which such bonus was earned. Upon the mutual agreement of Dr. Kunin and the Board, any or all of the Kunin Annual Bonus could be paid in the form of equity compensation issued from the Company’s equity incentive plan, and fully vested upon payment.

In the event that Dr. Kunin was terminated for cause (as defined in her employment agreement) or such employment was terminated due to her death or disability, she was entitled to any earned but unpaid wages or other compensation (including reimbursements of her outstanding expenses and unused vacation) earned through the termination date. In the event that Dr. Kunin was terminated without cause (as defined in her employment agreement), she was required to execute a release of claims in favor of the Company, entitled to an amount equal to the Kunin Base Salary in effect on the date of separation from service plus the full target Annual Bonus percentage of the then current fiscal year (with it deemed that all performance goals have been met at 100% of budget or plan) (the “Kunin Severance Amount”), which was to be paid in twelve (12) equal consecutive monthly installments. The Kunin Severance Amount was to be in addition to Dr. Kunin’s earned wages and other compensation (including reimbursements of her outstanding expenses and unused vacation) through the date her employment was terminated. Further, in the event that Dr. Kunin was terminated for cause, she and the other applicable parties would no longer be entitled to the earn out payments provided for in the Membership Unit Purchase Agreement entered into in connection with the DERMAdoctor Acquisition; however, if Dr. Kunin was terminated without cause or terminated as a result of death or disability, she and the other applicable parties would remain entitled to the earn out payments.

Moreover, in the event of either a termination without cause, and subject to her execution of a release, all outstanding equity awards then held by Dr. Kunin would have been subject to full accelerated vesting on the date of termination, and the exercise period extended to three (3) years from the date of termination.

Director Compensation

The compensation and benefits for service as non-employee members of our Board is determined by the Board. Directors employed by the Company, such as Mr. Hall and Dr. Kunin (during her service on the Board until June 9, 2023), are not compensated for service on the Board or any committee of the Board; however, the Company reimburses all directors for any out-of-pocket expenses incurred in connection with attending meetings of the Board and committees of the Board.

The Board, upon the recommendation of the Compensation Committee, approved the Non-Employee Director Compensation Program, effective January 1, 2023 (the “2023 Non-Employee Director Compensation Plan”). Under the 2023 Non-Employee Director Compensation Plan, each director receives his or her annual retainer compensation in cash and an annual grant of 858 restricted stock units. All cash compensation is payable quarterly on the first (1 st) business day of the quarter.

Approved non-employee director compensation for 2023 was as follows:

Non-employee directors also may be granted additional awards under our equity incentive plans at the discretion of our Board.

The compensation received during 2023 by each non-employee director is set forth below: