EMPLOYMENT AGREEMENT
This employment agreement (the “Agreement”) is effective as of August 12, 2015 between Entia Biosciences, Inc, a Nevada corporation (“ERGO”), and Carl Johnson, an individual resident of Arizona (“Executive”).
RECITALS
Whereas, Executive has acquired special skills and abilities and an extensive background in and knowledge of ERGO’s business and the industry in which it is engaged.
Whereas, ERGO desires the continued association and services of Executive in order to retain his or her experience, skills, abilities, background, and knowledge, and is therefore willing to engage his services on the terms and conditions set forth below.
Whereas, Executive desires to be employed by ERGO and is willing to provide services on the terms and conditions detailed herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and of the mutual promises and conditions in this Agreement, the parties agree as follows:
| 1. | ENGAGEMENT. (A) Executive shall serve as the President & Chief Executive Officer, and other such Executive Positions & Titles as determined by the Board of Directors, and member of the Board of Directors of ERGO, with such duties and responsibilities as are commensurate with such positions, reporting directly to the Board, and (B) the Executive' s principal location of employment shall be in Scottsdale, Arizona except that as necessary and proper at the principal headquarters of the Company; (C) in the event Executive is required to relocate from his residence in Arizona to Oregon or another State in the United States, or elsewhere, ERGO shall pay Executive’s reasonably incurred moving and relocation expenses; Executive’s mortgage rate and term differential, if higher, shall be added to his base pay and grossed up; and an additional salary adjustment, grossed up, shall be made to provide for Executive maintaining a residence of comparable size and value to the assessed valuation of his then current residence, subject to the average of 3 appraisals paid for by ERGO. |
| 2. | REPORTING; RESPONSIBILITY. Executive shall be the Chief Executive Officer, with full power and authority to hire and fire all employees of Employer other than the officers and to manage and conduct all of the business of Employer subject to expenditure policies set by the board of directors. The Executive shall serve at the discretion of the Board of Directors and may be assigned other titles and duties as long as the financial terms of this Agreement are not altered. Executive shall not, however, take any of the following action on behalf of Employer without the approval of the board: |
| (a) | Borrowing or obtaining credit in an amount in excess of $50,000 or executing any guaranty to obligate Employee in excess of $50,000; |
| (b) | Expending funds for capital equipment in excess of budgeted expenditures for any calendar month; |
| (c) | Selling or transferring capital assets exceeding $50,000 in market value in any single transaction or exceeding $200,000 in market value in any one fiscal year; |
| (d) | Executing any contract making any commitment for the purchase or sale of Employer's products in an amount exceeding $250,000; |
| (e) | Executing any lease of real or personal property providing for an aggregate rent in excess of $50,000; |
| (f) | Executing any sale, license or sub-license of patents without approval of the Board of Directors. |
| (g) | Executing any transactions with affiliates or family members without approval from the Board of Directors. |
| (h) | Exercising any discretionary authority or control over the management of any employee welfare or pension benefit plan or over the disposition of the assets of any such plan. |
| 3. | During his employment, Executive shall devote such time, interest, and effort to the performance of this Agreement as may be fairly and reasonably necessary. |
| 4. | OFFICE LOCATIONS. Unless the parties agree otherwise in writing, during the employment term Executive shall perform the services he is required to perform under this Agreement in Scottsdale, Arizona. When economically feasible as determined by the Board of Directors, and such determination not to be unreasonably withheld, a formal business office for Marketing, Sales & General Administrative purposes will be established within the Phoenix, Arizona metropolitan area. Executive will from time to time, at reasonable time intervals, temporarily locate to and work at Employer’s offices, provided, however, that Employer may from time to time require Executive to travel temporarily to other locations on Employer’s business. |
| 5. | NON-COMPETITION AND NON-SOLICITATION. During the Term (as defined below), Executive shall not, (i) directly or indirectly, whether as a partner, employee, creditor, shareholder, or otherwise, promote, participate, or engage in any activity or other business competitive with ERGO’s business (the “Business”), or (ii) in any manner whatsoever, (x) induce, request, solicit, encourage or assist any employee, officer or director of ERGO to terminate their relationship with ERGO; or (y) in any manner whatsoever induce, request, solicit, encourage or assist past or present customers of the ERGO to seek services or products from any competitive Business, or, any person seeking to divert any customers or potential customers away from ERGO or attempt to do any of the foregoing, provided that the foregoing is not intended to restrict any advertisement or other general solicitation for employment that is not specifically directed to any such individual, and/or any solicitation of any such individual if such individual is not, at the time of the solicitation, and has not been within 120 days prior to the solicitation, an employee of ERGO. In addition, during the Term (as defined below) Executive shall not take any action without ERGO’s prior written consent to establish, form, become employed by a competing business or engage in related discussion, negotiation or preparation in connection therewith, provided, however, nothing herein shall bar Executive from taking such actions twelve months (12) post-termination of his employment with ERGO. |
| 6. | TERM. Subject to earlier termination as provided elsewhere in this Agreement, Executive shall be employed pursuant to this Agreement for a term commencing upon the date hereof and ending on the later of December 31st of the year following the year in which this agreement is signed or if signed on December 31 then December 31st of the next year, unless earlier terminated pursuant to Section 10 of this Agreement (the “Term”). The Term shall be renewed for successive one-year periods, beginning on January 1st, (each a “Renewal Term”) unless either party to this Agreement delivers a written notice to the other party at least thirty (30) days in advance of such renewal indicating that the Term shall not be extended for an additional one-year period. |
| 7. | COMPENSATION OF EMPLOYEE – SALARY DRAW AND BONUS. |
| (a) | Effective upon execution of a close, or any part thereof, of the current efforts to raise capital, Executive’s initial Base Salary shall be $150,000 per year (as adjusted pursuant to this Agreement, from time to time, the “Base Salary”), payable in accordance with the customary payroll practices of ERGO, as in effect from time to time, but in no event less frequently than bi-weekly. |
| (b) | Effective January 1 of each Renewal Term, The basic salary payable to Executive under this section (the base salary) shall be subject to increase by an annual inflation adjustment as set forth in this section, not to exceed Two (2%) percent except by Board approval, based on the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index. |
| (c) | Executive shall be eligible to earn a cash bonus equal to Ninety percent (90 %) up to One Hundred and Fifty percent (150%) of the current year Base Salary(“Bonus”) for each calendar year of his employment during which he is employed for at least twelve (12) months. Determination of Executive’s entitlement to Bonus and amounts shall be determined exclusively by the Board of Directors of ERGO, or designated committee thereof, and based upon the following milestones: |
| v. | Market introduction of Medical Foods upon completion of clinical studies. |
| 8. | RESTRICTED SHARES AND STOCK OPTIONS. |
| (a) | Within 30 days of the execution of this Agreement, and in recognition of Executive’s past contributions during a period of consultancy, ERGO’s Board will grant Executive Restricted Common Shares in the amount of Three Hundred Thousand (300,000) shares of ERGO common stock (the initial grant), vesting immediately. |
| (b) | Executive shall be eligible to earn Restricted Shares or Stock Options, as determined by the Board of Directors, or designated committee thereof, equal to Ninety percent (90%) to One Hundred and Fifty percent (150%) of the current year base salary, and based upon the previously mentioned milestones for each calendar year of his employment during which he is employed for at least twelve (12) months. Determination of Executive’s entitlement to Bonus and amounts shall be determined exclusively by the Board of Directors of ERGO, or designated committee thereof. |
| (c) | Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable by Executive at any time after the grant of Options and under such conditions as determined by the Board, including performance criteria with respect to the Company or the Optionee, and as shall be permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. |
| 9. | EXPENSES. ERGO shall reimburse the Executive for all reasonable business expenses incurred during the Term of this Agreement in accordance with applicable policies and procedures of ERGO then in force, including, without limitation, cell phone and related data services, travel (including mileage for services-related travel using Executive’s personal vehicle), lodging, and other expenses incurred by Executive, and all other expenses contemplated by this Agreement, provided such expenses are evidenced by reasonably documented proof. |
| 10. | EMPLOYEE COMPENSATION UPON TERMINATION. |
| (a) | DISABILITY. During any period during the Term that the Executive fails to perform his duties hereunder as a result of a Disability (as defined below), ERGO will have the option to terminate Executive's employment by giving a notice of termination to Executive. The notice of termination shall specify the Date of Termination, which date shall not be earlier than thirty (30) days after the notice of termination is given. For purposes of this Agreement, “Disability” shall mean a physical or mental impairment that, as reasonably determined by the Board, renders the Executive unable to perform the essential functions of his employment with the Company, even with reasonable accommodation that does not impose an undue hardship on the Company, for more than 90 days in any 180-day period, unless a longer period is required by federal or state law, in which case that longer period would apply. If terminated due to Disability, in addition to the amounts set forth in subsection 7(a), ERGO shall (i) pay the Executive Base Salary for a period of six (6) months after the Date of Termination, (ii) continue to cover Executive under applicable Benefit Plans through the end of the Term or Renewal Term. This provision does not become effective until Ninety (90) days after first signing by ERGO. |
| (b) | DEATH. In addition to the amounts set forth in subsection 7(a), if the Executive’s employment hereunder is terminated as a result of death, ERGO shall pay the Executive’s estate or designated beneficiary, as soon a practicable after the Date of Termination an additional amount of one (1) month’s Base Salary. |
| (c) | EMPLOYER’S TERMINATION FOR CAUSE. If the Executive’s employment hereunder is terminated by ERGO for Cause (as defined below), other than the amounts set forth in subsection 7(a), Executive shall be entitled to no further compensation. |
| (d) | EMPLOYER’S TERMINATION FOR ANY REASON OTHER THAN CAUSE, DISABILITY OR DEATH. If the Executive’s employment hereunder is terminated by ERGO for any reason other than Cause, Disability or Death (as addressed elsewhere herein), ERGO shall continue to pay the Executive Base Salary for a period of twelve (12) months after the Date of Termination. This provision does not become effective until Ninety (90) days after the first signing of this contract by ERGO. |
| (e) | TERMINATION BY EXECUTIVE FOR CAUSE. If the Executive’s employment is terminated by Executive for Cause (as defined below), ERGO shall pay the Executive Base Salary for a period of twelve (12) months after the Date of Termination. |
| (f) | DETERMINATION OF CAUSE AND RELATED DATE OF TERMINATION - EMPLOYER. ERGO may terminate the Executive’s employment hereunder for “Cause,” which means: |
| (i) | Upon the Executive’s conviction for the commission of a felony (or a plea of nolo contendre thereto); |
| (ii) | A material breach by Executive of any of the representations or warranties or terms of this Agreement; and |
| (iii) | Willful failure by the Executive to materially perform his duties pursuant to the terms and conditions of this Agreement (other than any such failure resulting from the Executive’s incapacity due to Disability). |
| (iv) | For purposes hereof, no act or failure to act by the Executive shall be considered ‘willful’ unless done or omitted to be done by him in bad faith. The Date of Termination for termination of Executive by ERGO for Cause shall be no earlier than the thirtieth day after the effective date of notice during which period Executive shall be entitled to cure any condition specified in the Notice of Termination. |
| 11. | CAUSE - EMPLOYEE. The Executive may terminate his employment hereunder for Cause, provided that the Executive shall have delivered a Notice of Termination (as described herein) within sixty (60) days after the occurrence of the event giving rise to such termination for Cause. Executive’s termination of his employment for Cause shall mean the occurrence of one or more of the following circumstances, without the Executive’s express written consent, which are not remedied by ERGO within thirty (30) days of the effective date of the Notice of Termination. |
| (i) | an assignment to the Executive of any duties materially inconsistent with his positions, duties, responsibilities and status with ERGO hereunder or any material limitation of the powers of the Executive, in each instance not consistent with the powers of the Executive contemplated by Section 1 hereof; |
| (ii) | any removal of the Executive from, or any failure to re-elect the Executive to, the positions specified in the Agreement; |
| (iii) | a reduction in the Executive’s Base Salary as in effect from time to time; |
| (iv) | the failure of the Company to continue in effect any Benefit Plan that was in effect on the date hereof or may be implemented at a time when Executive serves in a capacity contemplated in this agreement and does not provide the Executive with materially equivalent benefits; |
| (v) | any other material breach by the Company of this Agreement. |
12. TERMINATION BY EMPLOYER WITHOUT CAUSE FOLLOWING A CHANGE IN CONTROL. If following a Change of Control, Executive’s employment is terminated by the Employer without cause or by Executive for good reason, ERGO will:
(i) Make the payments and provide to Executive the benefits under Section 14; and
(ii) Pay to Executive a lump sum payment on or prior to the 30th day following the termination date of Executive’s employment hereunder in an amount equal to two hundred percent (200%) of the sum of (a) Executive’s base salary in effect for the fiscal year in which the change of control occurs, plus (b) the average of the annual incentive bonuses paid to Executive for the last two (2) fiscal years immediately preceding the fiscal year in which the change of control occurs (or if less than two (2), the amount of his single annual incentive bonus, if any), or, if neither is applicable, a bonus equivalent to one-half of Executive’s base salary in effect for the fiscal year in which the change of control occurs. Notwithstanding the foregoing, if (i) Executive is a “specified employee” (as defined in Code Section 409A), and (ii) the definition of cause in Section 10(f) above does not qualify as an “involuntary” separation from service pursuant to guidance issued under Section 409A (or the Employer determines that no other exceptions to Code Section 409A applies), the above payment will be paid to Executive in one lump sum on the first day of the seventh (7th) month following his separation from service. If Executive dies before he receives the above payment, the Company will distribute the benefits to Executive’s estate or beneficiaries as soon as is administratively feasible following the date of Executive’s death.
(iii) “Change of Control” shall mean and will be deemed to have occurred if:
(a) After the date of this Agreement, any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provision thereto) shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or any successor provision thereto) directly or indirectly of securities of ERGO representing 15% or more of the combined voting power of ERGO’s then outstanding securities ordinarily having the right to vote at an election of directors; provided, however, that for purposes of this subparagraph, “person” shall exclude ERGO, its subsidiaries, any person acquiring such securities directly from ERGO, any employee benefit plan sponsored by ERGO or from ERGO or any stockholder owning 50% or more of the combined voting power of the ERGO’s outstanding securities as of the date of this Agreement; or
(b) Any stockholder of ERGO owning 50% or more of the combined voting power of the ERGO’s outstanding securities as of the date of this Agreement shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) directly or indirectly of securities of ERGO (other than through the acquisition of securities directly from ERGO or from Executive) representing 20% or more of the combined voting power of ERGO’s then outstanding securities ordinarily having the right to vote at an election of directors; or
(c) Approval by the stockholders of ERGO and consummation of a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of ERGO, in each case, with or to a corporation or other person or entity of which persons who were the stockholders of ERGO immediately prior to such transaction do not, immediately thereafter, own more than 80% of the combined voting power of the outstanding voting securities entitled to vote generally in the election of Directors of the reorganized, merged, consolidated or purchasing corporation (or in the case of a non-corporate person or entity, functionally equivalent voting power) and 80% of the members of the board of which corporation (or functional equivalent in the case of a non-corporate person or entity) were not members of the incumbent board at the time of the execution of the initial agreement providing for such reorganization, merger, consolidation, or sale.
| 13. | COMPLIANCE WITH SECTION 409A. The parties to this Agreement intend that the Agreement complies with Section 409A of the Code, where applicable, and this Agreement will be interpreted in a manner consistent with that intention. Notwithstanding any other provisions of this Agreement to the contrary, and solely to the extent necessary for compliance with Section 409A of the Code, if as of the date of Executive’s “separation from service” (within the meaning of Section 409A of the Code and the applicable regulations) from ERGO, (i) Executive is deemed to be a “specified employee” (within the meaning of Section 409A of the Code), and (ii) ERGO or any member of a controlled group including ERGO is publicly traded on an established securities market or otherwise, no payment or other distribution required to be made to Executive hereunder (including any payment of cash, any transfer of property and any provision of taxable benefits) solely as a result of Executive’s separation from service will be made earlier than the first day of the seventh month following the date on which the Executive separates from service with ERGO, or if earlier within thirty (30) days of the Executive’s date of death following the date of such separation. Notwithstanding the foregoing, this provision will not apply to (a) all payments on separation from service that satisfy the short-term deferral rule of Treas. Reg. §1.409A-1(b)(4), (b) to the portion of the payments on separation from service that satisfy the requirements for separation pay due to an involuntary separation from service under Treas. Reg. §1.409A-1(b)(9)(iii), and (c) to any payments that are otherwise exempt from the six month delay requirement of the Treasury Regulations under Code Section 409A. Notwithstanding anything to the contrary herein, a termination of employment will not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A of the Code and, for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment,” or like terms will mean a separation from service. For purposes of Section 409A of the Code, each payment made under this Agreement will be designated as a “separate payment” within the meaning of the Section 409A of the Code. Notwithstanding anything to the contrary herein, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to this Agreement does not constitute a “deferral of compensation” within the meaning of Section 409A of the Code: (x) the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive in any other calendar year, (y) the reimbursements for expenses for which Executive is entitled to be reimbursed will be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (z) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit. |
| 14. | BENEFITS. In addition to the Base Salary, Executive shall receive the following benefits: |
| (a) | During the period for which Executive is employed by ERGO, Executive shall be entitled to: |
i. Accrue four (4) weeks of paid vacation each calendar year;
| ii. | Ten additional holidays customarily observed by companies similar to ERGO; and |
iii. Additional customary benefits available to executives
iv. During such vacation and holiday time, Executive’s compensation shall be paid in full; provided, however, that if Executive does not take all or a portion of the vacation time to which he or she is entitled hereunder, such unused vacation shall carry forward into the next calendar year as required by law, including payment for accrued vacation as of the Date of Termination.
| (b) | Executive shall be entitled to participate in all health, medical, accident, and/or dental insurance, life insurance, pension, profit sharing and similar plans of ERGO (the “Benefit Plans”), based on terms and conditions of such plans as applied consistently by ERGO. |
| 15. | SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable by the Executive. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, devisees and legatees. Upon the Executive’s death, all amounts to which he is entitled hereunder shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designees or, if there be no such designee, to the Executive’s estate. The Agreement shall be binding upon and inure to the benefit of the successors-in-interest, assigns and personal representatives of ERGO. |
