CHROMADEX CORP.
10-Ks and 10-Qs
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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment
No. )
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Filed
by the Registrant [X]
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Filed
by a Party other than the Registrant [
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Check
the appropriate box:
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[
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Preliminary
Proxy Statement
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[
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[
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Definitive
Additional Materials
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[
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Soliciting
Material under §240.14a-12
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CHROMADEX
CORPORATION
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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[X]
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No
fee required.
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[
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[
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Fee
paid previously with preliminary materials.
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[
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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ChromaDex Corporation
10005 Muirlands Blvd, Suite G
Irvine, CA 92618
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 2017
May
1, 2017
To
the stockholders of ChromaDex Corporation:
You
are cordially invited to attend the 2017 Annual Meeting of
Stockholders (the “Annual Meeting”) of ChromaDex
Corporation, a Delaware corporation (the “Company”)
will be held on June 20, 2017, at 11:00 am local time, at the
Company’s offices located at 10005 Muirlands Blvd, Suite G,
Irvine, CA 92618 for the following purposes, as more fully
described in the accompanying proxy statement (the “Proxy
Statement”):
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(1)
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To
elect seven directors;
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(2)
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To
approve the ChromaDex Corporation 2017 Equity Incentive
Plan;
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(3)
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To
ratify the appointment of Marcum LLP as the Company's independent
registered public accounting firm for the year ending December 30,
2017; and
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(4)
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To
transact other business that may properly come before the meeting
and any postponement(s) or adjournment(s) thereof.
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Pursuant
to the bylaws of the Company, the Board of Directors has fixed the
close of business on April 24, 2017 as the record date (the
“Record Date”) for determination of stockholders
entitled to notice and to vote at the Annual Meeting and any
adjournment thereof. Holders of the Company’s Common Stock
are entitled to vote at the Annual Meeting.
In
accordance with rules and regulations adopted by the U.S.
Securities and Exchange Commission (the “SEC”), we have
elected to provide our beneficial owners and stockholders of record
access to our proxy materials over the Internet. Beneficial owners
are stockholders whose shares are held in the name of a broker,
bank or other agent (i.e., in “street name”).
Accordingly, a Notice of Internet Availability of Proxy Materials
(the “Notice”) will be mailed on or about May 3, 2017
to our beneficial owners and stockholders of record who owned our
Common Stock at the close of business on April 24, 2017. Beneficial
owners and stockholders of record will have the ability to access
the proxy materials on a website referred to in the Notice or
request a printed set of the proxy materials be sent to them by
following the instructions in the Notice. Beneficial owners and
stockholders of record who have previously requested to receive
paper copies of our proxy materials will receive paper copies of
the proxy materials instead of a Notice.
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BY
ORDER OF THE BOARD OF DIRECTORS
/s/ Stephen Allen
Chairman
of the Board
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You
are cordially invited to attend the meeting in person. Whether or
not you expect to attend the meeting, please complete, date, sign
and return the proxy mailed to you, or vote over the telephone or
the internet as instructed in these materials, as promptly as
possible in order to ensure your representation at the meeting. A
return envelope (which is postage prepaid if mailed in the United
States) has been provided for your convenience. Even if you have
voted by proxy, you may still vote in person if you attend the
meeting. Please note, however, that if your shares are held of
record by a broker, bank or other nominee and you wish to vote at
the meeting, you must obtain a proxy issued in your name from that
record holder.
ChromaDex Corporation
10005 Muirlands Blvd, Suite G
Irvine, CA 92618
PROXY STATEMENT
FOR
2017 ANNUAL MEETING OF STOCKHOLDERS
JUNE 20, 2017
The
enclosed proxy is solicited by the board of directors (“Board
of Directors”) of ChromaDex Corporation (the
“Company”), in connection with the 2017 Annual Meeting
of Stockholders (the “Annual Meeting”) of the Company,
to be held on June 20, 2017, at 11:00 am local time, at 10005
Muirlands Blvd, Suite G, Irvine, CA 92618.
At
the Annual Meeting, you will be asked to consider and vote upon the
following matters:
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(1)
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To
elect seven directors;
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(2)
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To
approve the ChromaDex Corporation 2017 Equity Incentive
Plan;
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(3)
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To
ratify the appointment of Marcum LLP as the Company's independent
registered public accounting firm for the year ending December 30,
2017; and
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(4)
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To
transact other business that may properly come before the meeting
and any postponement(s) or adjournment(s) thereof.
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The
Board of Directors has fixed the close of business on April 24,
2017 as the record date (the “Record Date”) for
determining stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof.
In
accordance with rules and regulations adopted by the U.S.
Securities and Exchange Commission (the “SEC”), we have
elected to provide our beneficial owners and stockholders of record
access to our proxy materials over the Internet. Beneficial owners
are stockholders whose shares are held in the name of a broker,
bank or other agent (i.e., in “street name”).
Accordingly, a Notice of Internet Availability of Proxy Materials
(the “Notice”) will be mailed on or about May 3, 2017
to our beneficial owners and stockholders of record who owned our
Common Stock at the close of business on April 24, 2017. Beneficial
owners and stockholders of record will have the ability to access
the proxy materials on a website referred to in the Notice or
request a printed set of the proxy materials be sent to them by
following the instructions in the Notice. Beneficial owners and
stockholders of record who have previously requested to receive
paper copies of our proxy materials will receive paper copies of
the proxy materials instead of a Notice.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING TO BE HELD ON JUNE 20, 2017: THE NOTICE, PROXY STATEMENT,
PROXY CARD AND THE ANNUAL REPORT ARE AVAILABLE AT
WWW.CHROMADEX.COM
, INVESTOR
RELATIONS SECTION.
-1-
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND
VOTING
Why did I receive in the mail a Notice of Internet Availability of
Proxy Materials this year instead of a full set of Proxy
Materials?
We are pleased to take advantage of the SEC rule that allows
companies to furnish their proxy materials over the Internet.
Accordingly, we have sent to our beneficial owners and stockholders
of record a Notice of Internet Availability of Proxy Materials.
Instructions on how to access the proxy materials over the Internet
or to request a paper copy may be found in the Notice. Our
stockholders may request to receive proxy materials in printed form
by mail or electronically on an ongoing basis. A
stockholder’s election to receive proxy materials by mail or
electronically by email will remain in effect until the stockholder
terminates its election.
We
intend to mail the Notice on or about May 3, 2017 to all
stockholders of record entitled to vote at the annual
meeting.
How
do I attend the annual meeting?
The meeting will be
held on
Tuesday, June 20, 2017
at
11:00 a.m.
local time at the
Company’s offices located at 10005 Muirlands Blvd, Suite G,
Irvine, CA 92618
.
Directions to the annual meeting may be found at
www.chromadex.com
.
Information on how to vote in
person at the annual meeting is discussed below.
Who
can vote at the annual meeting?
Only
stockholders of record at the close of business on
April 24, 2017
will be entitled to vote at
the annual meeting. On this record date, there were
38,442,051
shares of
common stock outstanding and entitled to
vote.
Stockholders of Record: Shares Registered in Your Name
If on
April 24, 2017
your shares were
registered directly in your name with
the Company
’s transfer agent,
Equity Stock Transfer, LLC
,
then you are a stockholder of record. As a
stockholder
of record, you may vote in person at the meeting or vote by proxy.
Whether or not you plan to attend the meeting, we urge you to fill
out and return the enclosed proxy card to ensure your vote is
counted.
Beneficial Owner: Shares Registered in the Name of a Broker or
Bank
If on
April 24, 2017 your shares were held, not in your name, but rather
in an account at a brokerage firm, bank, dealer or other similar
organization, then you are the beneficial owner of shares held in
“street name” and the Notice is being forwarded to you
by that organization. The organization holding your account is
considered to be the stockholder of record for purposes of voting
at the annual meeting. As a beneficial owner, you have the right to
direct your broker or other agent regarding how to vote the shares
in your account. You are also invited to attend the annual meeting.
However, since you are not the stockholder of record, you may not
vote your shares in person at the meeting unless you request and
obtain
a
valid proxy from your broker or other agent.
What
am I voting on?
There
are three matters scheduled for a vote:
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To elect seven directors
;
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To approve the ChromaDex Corporation 2017 Equity
Incentive Plan
;
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To ratify the appointment of Marcum LLP as the
Company's independent registered public accounting firm for the
year ending December 30, 2017
.
What
if another matter is properly brought before the
meeting?
The
Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the
persons named in the accompanying proxy to vote on those matters in
accordance with their best judgment.
-2-
Who May Attend the Meeting?
Record
holders and beneficial owners may attend the Annual
Meeting. If your shares are held in street name, you
will need to bring a copy of a brokerage statement or other
documentation reflecting your stock ownership as of the Record
Date.
How Do I Vote?
You may
either vote “For” all the nominees to the Board of
Directors or you may “Withhold” your vote for any
nominee you specify. For each of the other matters to be voted on,
you may vote “For” or “Against” or abstain
from voting.
The
procedures for voting are fairly simple:
Stockholder of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote in person at the annual
meeting, vote by proxy over the telephone, vote by proxy through
the internet or vote by proxy using a proxy card that you may
request or that we may elect to deliver at a later time. Whether or
not you plan to attend the meeting, we urge you to vote by proxy to
ensure your vote is counted. You may still attend the meeting and
vote in person even if you have already voted by
proxy.
●
To vote in person,
come to the annual meeting and we will give you a ballot when you
arrive.
●
To vote using the
proxy card, simply complete, sign and date the proxy card that may
be delivered
and return
it promptly in the envelope provided. If you return your signed
proxy card to us before the annual meeting, we will vote your
shares as you direct.
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To vote over the
telephone, dial toll-free
1-855-557-4647
using a touch-tone phone and
follow the recorded instructions. You will be asked to provide the
company number and control number from the Notice. Your telephone
vote must be received by 6:00
p.m.
,
Eastern
Time
on
June 19, 2017
to
be counted.
To vote
through the internet, go to
http://www.equitystock.com
to complete an electronic proxy
card. You will be asked to provide the company number and control
number from the Notice. Your internet vote must be received by
6:00 p.m.
,
Eastern Time
on
June 19, 2017
to be counted.
Beneficial Owner: Shares Registered in the Name of Broker or
Bank
If you
are a beneficial owner of shares registered in the name of your
broker, bank, or other agent, you should have received a Notice
containing voting instructions from that organization rather than
from
the Company
. Simply follow
the voting instructions in the Notice to ensure that your vote is
counted. To vote in person at the annual meeting, you must obtain a
valid proxy from your broker, bank or other agent. Follow the
instructions from your broker or bank
included with these proxy materials, or contact your broker or bank
to request a proxy form.
How
many votes do I have?
On each
matter to be voted upon, you have one vote for each share of common
stock you own as of
April 24,
2017
.
What
happens if I do not vote?
Stockholder of Record: Shares Registered in Your Name
If you
are a stockholder of record and do not vote by completing your
proxy card, by telephone, through the internet
or in person at the annual
meeting, your shares will not be voted.
Beneficial Owner: Shares Registered in the Name of Broker or
Bank
If you
are a beneficial owner and do not instruct your broker, bank, or
other agent how to vote your shares, the question of whether your
broker or nominee will still be able to vote your shares depends on
whether the New York Stock Exchange (“NYSE”) deems the
particular proposal to be a “routine” matter. Brokers
and nominees can use their discretion to vote
“uninstructed” shares with respect to matters that are
considered to be “routine,” but not with respect to
“non-routine” matters. Under the rules and
interpretations of the NYSE, “non-routine” matters are
matters that may substantially affect the rights or privileges of
stockholders, such as mergers, stockholder proposals, elections of
directors (even if not contested), executive compensation
(including any advisory stockholder votes on executive compensation
and on the frequency of stockholder votes on executive
compensation), and certain corporate governance proposals, even if
management-supported. Accordingly, your broker or nominee may not
vote your shares on Proposals 1, 2, or 4 without your instructions,
but may vote your shares on Proposal 3 even in the absence of your
instruction.
-3-
What
if I return a proxy card or otherwise vote but do not make specific
choices?
If you
return a signed and dated proxy card or otherwise vote without
marking voting selections, your shares will be voted, as
applicable, “For” the election of all
seven
nominees for director,
and “For” the proposals to approve the
ChromaDex Corporation 2017 Equity Incentive Plan and to ratify the
appointment of Marcum LLP as the Company's independent registered
public accounting firm for the year ending December 30,
2017.
If any other matter is properly presented at the
meeting, your proxyholder (one of the individuals named on your
proxy card) will vote your shares using his or her best
judgment.
Who
is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these
proxy materials, our directors and employees may also solicit
proxies in person, by telephone, or by other means of
communication. Directors and employees will not be paid any
additional compensation for soliciting proxies.
We
may
also reimburse brokerage firms, banks
and other agents for the cost of forwarding proxy materials to
beneficial owners.
What
does it mean if I receive more than one Notice?
If you
receive more than one Notice, your shares may be registered in more
than one name or in different accounts. Please follow the voting
instructions on the Notices to ensure that all of your shares are
voted.
Can
I change my vote after submitting my proxy?
Stockholder of Record: Shares Registered in Your Name
Yes.
You can revoke your proxy at any time before the final vote at the
meeting. If you are the record holder of your shares, you may
revoke your proxy in any one of the following ways:
●
You may submit
another properly completed proxy card with a later
date.
●
You may send a
timely written notice that you are revoking your proxy to
e
Secretary 10005 Muirlands
Blvd, Suite G, Irvine, CA 92618.
●
You may attend the
annual meeting and vote in person. Simply attending the meeting
will not, by itself, revoke your proxy.
Your
most current proxy card or telephone or internet proxy is the one
that is counted.
Beneficial Owner: Shares Registered in the Name of Broker or
Bank
If your
shares are held by your broker or bank as a nominee or agent, you
should follow the instructions provided by your broker or
bank.
When
are stockholder proposals and director nominations due for next
year’s Annual Meeting?
To be
considered for inclusion in the Company’s proxy materials for
next year’s annual meeting, your proposal must be submitted
in writing by January 1, 2018, to ChromaDex Corporation, Attn:
Secretary, at 10005 Muirlands Blvd, Suite G, Irvine, CA 92618. If
you wish to submit a proposal (including a director nomination) at
the annual meeting that is not to be included in the
Company’s proxy materials for next year’s annual
meeting, such proposal must be received no earlier than the close
of business on March 22, 2018 nor later than the close of business
on April 21, 2018. You are also advised to review the
Company’s Bylaws, which contain additional requirements
relating to advance notice of stockholder proposals and director
nominations.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the
meeting, who will separately count, for the proposal to elect
directors, votes “For,” “Withhold” and
broker non-votes; with respect to the proposal regarding frequency
of stockholder advisory votes to approve executive compensation,
votes for frequencies of one year, two years or three years,
abstentions
and broker
non-votes; and, with respect to other proposals, votes
“For” and “Against,” abstentions and, if
applicable, broker non-votes.
Abstentions will be counted towards the vote total
for each of Proposals 2 and 3 and will have the same effect as
“Against” votes.
Broker non-votes have no effect
and will not be counted towards the vote total for any
proposal.
What
are “broker non-votes”?
As
discussed above, when a beneficial owner of shares held in
“street name” does not give instructions to the broker
or nominee holding the shares as to how to vote on matters deemed
by the NYSE to be “non-routine,” the broker or nominee
cannot vote the shares. These unvoted shares are counted as
“broker non-votes.”
-4-
How Many Votes Are Needed for Each Proposal to Pass?
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Proposal
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Vote Required for Approval
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Effect of Abstention
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Effect of Broker Non-Vote
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Election
of seven (7) members to our Board of
Directors
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Plurality
of the votes cast (the seven directors receiving the most
“For” votes)
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None.
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None.
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Approval
of the ChromaDex Corporation 2017 Equity Incentive
Plan
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A
majority of the votes cast
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Against.
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None.
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Ratification
of the Appointment of Marcum LLP as our Independent Registered
Public Accounting Firm for our Fiscal Year Ending December 30,
2017
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A
majority of the votes cast
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Against.
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None.
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What
Constitutes a Quorum?
To
carry on business at the Annual Meeting, we must have a
quorum. A quorum is present when a majority of the
shares entitled to vote, as of the Record Date, are represented in
person or by proxy. Thus, holders representing at
least 19,221,026 votes must be represented in person or by proxy to
have a quorum. Your shares will be counted towards the
quorum only if you submit a valid proxy (or one is submitted on
your behalf by your broker, bank or other nominee) or if you vote
in person at the Annual Meeting. Abstentions and broker
non-votes will be counted towards the quorum
requirement. Shares owned by us are not considered
outstanding or considered to be present at the Annual
Meeting. If there is not a quorum at the Annual Meeting,
our stockholders may adjourn the meeting.
How can I find out the Results of the Voting at the Annual
Meeting?
Preliminary
voting results will be announced at the Annual Meeting. Final
voting results will be published in a Current Report on
Form 8-K, which we will file within four business days of the
meeting.
-5-
PROPOSAL 1:
ELECTION OF DIRECTORS
Each director to be elected at the Annual Meeting
will serve until the next annual meeting of stockholders
and
until his or her successor is elected, or, if sooner, until such
director’s death, resignation or removal
. Unless otherwise instructed, the persons named
in the accompanying proxy intend to vote the shares represented by
the Proxy for the election of the seven nominees listed below.
Although it is not contemplated that any nominee will decline or be
unable to serve as a director, in such event, proxies will be voted
by the proxy holder for such other persons as may be designated by
the Board of Directors, unless the Board of Directors reduces the
number of Directors to be elected. Election of a Board of Directors
requires a plurality of the votes cast at the Annual
Meeting.
The
current Board of Directors consists of Frank Jaksch, Jr., Stephen
Block, Stephen Allen, Jeff Baxter, Robert Fried, Kurt Gustafson and
Steven Rubin. The Board of Directors has determined that a majority
of its members, being Stephen Allen, Stephen Block, Jeff Baxter,
Kurt Gustafson and Steven Rubin are independent directors within
the meaning of the applicable NASDAQ rules.
The
following table sets forth the director nominees. It also provides
certain information about the nominees as of the Record
Date.
Nominees for Election to Board of Directors
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Director
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Name
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Age
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Since
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Frank
Jaksch, Jr.
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48
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2000
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Stephen
A. Block
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72
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2007
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Stephen
Allen
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67
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2014
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Jeff
Baxter
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55
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2015
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Robert
Fried
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57
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2015
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Kurt
Gustafson
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49
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2016
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Steven
Rubin
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56
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2017
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Frank L. Jaksch
Jr.
, 48, is a co-founder of the
Company and has served as a member of Board since February 2000.
Mr. Jaksch served as Chairman of the Board from May 2010 to October
2011 and was its Co-Chairman from February 2000 to May 2010. Mr.
Jaksch currently serves as our Chief Executive Officer. Mr. Jaksch
brought the Company public in June 2008, listed the Company on
NASDAQ in April 2016. Under his leadership, ChromaDex has focused
on developing a comprehensive natural products chemistry business,
expanded into international markets and built an impressive roster
of Fortune 500 customers. Prior to founding ChromaDex, Mr. Jaksch
served as the International Subsidiaries Manager of Phenomenex, an
analytical chemistry consumables company, where he managed the
company’s international subsidiary and international business
development divisions. While at Phenomenex, Mr. Jaksch established
strategic business offices in Australia, England, Germany and New
Zealand. His broad expertise includes analytical chemistry,
biochemistry, processes and product development for natural
products, legal and regulatory practices, agriculture and botany.
Additionally, he has more than 20 years of management, sales,
marketing and business development experience. Mr. Jaksch holds a
Bachelor of Science degree in Chemistry and Biology from Valparaiso
University in Valparaiso, Indiana. He is a member of the American
Chemistry Society, the American Herbal Products Association, the
American Botanical Council and the NSF Joint Committee for Dietary
Supplements. He also serves on the board of directors for the
Natural Products Association (NPA), where he also serves as the
Treasurer. Mr. Jaksch was the co-editor of Current Opinion in
Biotechnology: Analytical Biotechnology in February 2014, which
highlighted new technologies for quantitative analysis of natural
products. He also co-authored “The Handbook of Analytical
Methods for Dietary Supplements” with Drs. Mark Roman and
Mingfu Wang, which was published by the American Pharmacists
Association in June 2005. The Nominating and Corporate Governance
Committee believes that Mr. Jaksch’s years of experience
working in chemistry-related industries, his extensive sales and
marketing background, and his knowledge of international business
bring an understanding of the industries in which the Company
operates as well as scientific expertise to the
Board.
-6-
Stephen A.
Block
, 72, has been a director
of the Company since October 2007 and Chair of the Compensation
Committee and a member of the Audit Committee since October 2007.
From May 2010 to October 2011, Mr. Block served as Lead Independent
Director to the Board. Mr. Block is also a director and chair of
the nominating and corporate governance committee and a member of
the audit committee of Senomyx, Inc. (NASDAQ:SNMX). He has served
on the board of directors of Senomyx, Inc. since 2005. Until
December 2011, he also served as the chairman of the board of
directors of Blue Pacific Flavors and Fragrances, Inc., and, until
March 2012, as a director of Allylix, Inc. He served on the boards
of directors of these privately held companies since 2008, and
2007, respectively. He currently serves as a director of the
privately held companies myLAB Box, Inc. and Kitterly, Inc. Mr.
Block retired as senior vice president, general counsel and
secretary of International Flavors and Fragrances Inc., a leading
creator, manufacturer and seller of flavors and fragrances (IFF) in
December 2003, having been IFF’s chief legal officer since
1992. During his eleven years at IFF he also led the
company’s Regulatory Affairs Department. Prior to 1992, Mr.
Block served as senior vice president, general counsel, secretary
and director of GAF Corporation, a company specializing in
specialty chemicals and building materials, and its publicly traded
subsidiary International Specialty Products Inc., held various
management positions with Celanese Corporation, a company
specializing in synthetic fibers, chemicals and plastics, and
practiced law with the New York firm of Stroock & Stroock &
Lavan. Mr. Block currently serves as an industry consultant and as
a Venture Partner of K5 Venture Partners, LLC, an Orange County
early stage venture firm, and a member of the executive committee
of the Orange County network of Tech Coast Angels, a leading
investing group. Mr. Block received his B.A. cum laude in Russian
Studies from Yale University and his law degree from Harvard Law
School. The Nominating and Corporate Governance Committee believes
that Mr. Block’s experience as the chief legal officer of one
of the world’s leading flavor and fragrance companies
contributes to the Board’s understanding of the flavor
industry, including the Board’s perspective on the strategic
interests of potential collaborators, the regulation of the
industry, and the viability of various commercial strategies. In
addition, Mr. Block’s experience in the area of corporate
governance and public company financial reporting is especially
valuable to the Board in his capacity as a member of both the Audit
Committee and the Compensation Committee.
Stephen R.
Allen
, 67, has served as
Chairman of the Board since February 2015, and as a director of the
Board, Chair of the Nominating and Corporate Governance Committee
and member of the Compensation Committee since January 2014. Until
2009, Mr. Allen worked for Nestlé, at which point he retired
from a 30 year career where he served in various sales, marketing
and management roles, including 7 years serving in
Nestlé’s Mergers and Acquisitions department. Until
2012, Mr. Allen served on the Advisory Board of Vitamin Angels, an
organization focused on eliminating childhood malnutrition in
Africa and the Middle East. Currently, Mr. Allen serves as the
non-executive Vice Chairman of 6 Pacific group, a Los Angeles based
boutique advisory and investment firm. Mr. Allen also serves as the
Managing Partner of California Agricultural Orchards LLC and
California Nut Orchards LLC which, along with growing almonds and
grapes, manages the assets of high net-worth individuals. Mr. Allen
also serves as the President of the Board of the North American
Foundation for the University of Leeds where Mr. Allen plays a key
role in fundraising efforts. Mr. Allen received his B.Sc. with
honors from the University of Leeds and his M.Sc. at the University
of London, School of Hygiene & Tropical Medicine. The
Nominating and Corporate Governance Committee believes that Mr.
Allen’s past experience in the nutritional industry bring
financial expertise, industry knowledge, and merger and acquisition
experience to the Board.
Jeff Baxter,
55, has served as a director of the
Company since April 2015 and has served as a member of the Audit
Committee and the Nominating and Corporate Governance Committee
since April 2015. Mr. Baxter has served as President and CEO and a
Director of VBI Vaccines, Inc. (NASDAQ:VBIV) since 2009.
Previously, he was managing partner for the venture capital firm,
The Column Group, where he played a pivotal role in the creation of
several biotech companies including Immune Design Corp., a vaccine
company based on the Lentiviral vector platform and TLR adjuvant
technologies. Until July of 2006, Mr. Baxter was SVP, R&D
Finance and Operations, of GlaxoSmithKline (GSK). In his 19 years
of pharma experience at GSK, he has held line management roles in
R&D, commercial, manufacturing, Finance and The Office of the
CEO. His most recent position in the global R&D organization
included responsibility for finance, pipeline resource planning and
allocation, business development deal structuring and SROne (GSK's
in-house $125 million venture capital fund). He also chaired GSK's
R&D Operating Board. Prior to GSK, he worked at Unilever and
British American Tobacco. Mr. Baxter was educated at Thames Valley
University and is a Fellow of the Chartered Institute of Management
Accountants (FCMA). The Nominating and Corporate Governance
Committee believes that Mr. Baxter’s past experience in the
pharmaceutical industry bring financial expertise, industry
knowledge, and research and development experience to the
Board.
Robert Fried
, 57, has served as a
director of the Company since July 2015 and has served as a member
of the Nominating and Corporate Governance Committee from July 2015
to March 2017. In March 2017, Mr. Fried was appointed as President
and Chief Strategy Officer of the Company. Mr. Fried served as
Chairman of the Board of Directors of IDI, Inc. (formerly Tiger
Media, Inc.), an information solutions provider focused on the data
fusion market and formerly a Chinese advertising company prior to
its merger with the parent company of Interactive Data, LLC, from
2011 until June 2015. From 2007 through 2009, he was the president,
Chief Executive Officer and a director of Ideation Acquisition
Corporation, a special purpose acquisition company. Mr. Fried is
the founder and Chief Executive Officer of Feeln, a subscription
streaming video service, which was acquired by Hallmark Cards Inc.
in 2012. Since then, Mr. Fried manages digital businesses for
Hallmark including Feeln, Hallmark e-cards, and Hallmark Print on
Demand. Mr. Fried is also an Academy Award winning motion picture
producer whose credits include Rudy, Collateral, Boondock Saints,
So I Married an Axe Murderer, Godzilla, and numerous others. From
December 1994 until June 1996, he was President and Chief Executive
Officer of Savoy Pictures, a unit of Savoy Pictures Entertainment,
Inc., which was sold in 1996 to Silver King Communications, which
is now a part of InterActive Corp. Mr. Fried has also held several
executive positions including Executive Vice President in charge of
Production for Columbia Pictures, Director of Film Finance and
Special Projects for Columbia Pictures, and Director of Business
Development at Twentieth Century Fox. Mr. Fried holds an M.S. from
Cornell University and an M.B.A. from the Columbia University
Graduate School of Business. The Nominating and Corporate
Governance Committee believes that Mr. Fried’s past
experience as Chairman of the Board of Directors of another public
company bring financial expertise and industry knowledge to the
Board.
-7-
Kurt A. Gustafson
, 49, has been a
director of the Company since October 2016 and Chair of the Audit
Committee since October 2016. Mr. Gustafson has more than 25 years
of diverse experience in corporate finance. He currently serves as
chief financial officer, principal accounting officer and executive
vice president of Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI).
From 2009 to 2013, he served as the chief financial officer of
Halozyme Therapeutics, Inc. (NASDAQ: HALO) From 1991 to 2009, Mr.
Gustafson worked at Amgen (NASDAQ: AMGN), holding various financial
roles as vice president finance, chief financial officer of Amgen
International and treasurer. Prior to joining Amgen, he worked in
public accounting as staff auditor at Laventhol & Horwath in
Chicago. Mr. Gustafson is currently a member of the Board of
Directors of Xencor, Inc. (NASDAQ: XNCR), a clinical-stage
biopharmaceutical company focused on discovering and developing
engineered monoclonal antibodies to treat severe and
life-threatening diseases with unmet medical needs. Mr. Gustafson
serves as Chair of Xencor’s Audit Committee and is a Member
of its Compensation Committee. Mr. Gustafson holds a Bachelors of
Arts degree in Accounting from North Park University in Chicago and
a Masters in Business Administration from University of California,
Los Angeles.
The Nominating and
Corporate Governance Committee believes that Mr. Gustafson’s
past experience as chief financial officer of a public company and
his extensive experience pharmaceutical industry qualify him to
chair the Audit Committee and that Mr. Gustafson brings financial,
merger and acquisition experience, and a background working with
public marketplaces to the Board.
Steven D. Rubin
, 56, has been a
director of the Company and a member of the Nominating and
Corporate Governance Committee since March 2017. Mr. Rubin has
served as OPKO Health, Inc.’s (NASDAQ: OPK) Executive Vice
President – Administration since May 2007 and as a director
of since February 2007. Mr. Rubin is a member of The Frost Group,
LLC, a private investment firm. He has extensive experience as a
practicing lawyer, and as general counsel and board member to
multiple public companies. Mr. Rubin currently serves on the
board of directors for the following companies: VBI Vaccines Inc.
(NASDAQ:VBIV), a commercial-stage biopharmaceutical company
developing a next generation of vaccines; Cognit, Inc.
(NASDAQ:COGT), a data and analytics company providing cloud-based
mission-critical information and performance marketing solutions;
Kidville, Inc. (OTCBB:KVIL), an operator of large, upscale
facilities, catering to newborns through five-year-old children and
their families and offers a wide range of developmental classes for
newborns to five-year-olds; Non-Invasive Monitoring Systems, Inc.
(OTCBB:NIMU), a medical device company; BioCardia, Inc., , a
clinical-stage regenerative medicine company developing novel
therapeutics for cardiovascular diseases; Cocrystal Pharma, Inc.
(OTCBB:COCP), a biotechnology company developing new treatments for
viral diseases; Sevion Therapeutics, Inc. (OTCBB:SVON), a clinical
stage company which discovers and develops next-generation
biologics for the treatment of cancer and immunological diseases;
Castle Brands, Inc. (NYSE:ROX), a developer and marketer of premium
brand spirits; and, Neovasc, Inc. (NASDAQ:NVCN), a company
developing and marketing medical specialty vascular devices. Mr.
Rubin previously served as the Senior Vice President, General
Counsel and Secretary of IVAX from August 2001 until September
2006. Mr. Rubin previously served as a director of the following
companies: Dreams, Inc. (NYSE MKT: DRJ), a vertically integrated
sports licensing and products company; Safestitch Medical, Inc.
prior to its merger with TransEnterix, Inc.; and, PROLOR Biotech,
Inc., prior to its acquisition by the Company in August 2013.
The Nominating and Corporate
Governance Committee believes that Mr. Rubin’s past
experience as general counsel and board member of multiple public
companies bring financial expertise, industry knowledge, and a
background working with public marketplaces to the
Board.
Family Relationships
There
are no family relationships between any of our directors, executive
officers or directors.
Involvement in Certain Legal Proceedings
During
the past ten years, none of our officers, directors, promoters or
control persons have been involved in any legal proceedings as
described in Item 401(f) of Regulation S-K.
VOTE REQUIRED
Under
applicable Delaware law, the election of each nominee requires the
affirmative vote by a plurality of the voting power of the shares
present and entitled to vote on the election of directors at the
Annual Meeting at which a quorum is present.
THE
BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
ABOVE AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE
VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE
ON THE PROXY.
-8-
MANAGEMENT
AND CORPORATE GOVERNANCE
Executive Officers
The
names of our executive officers and their ages, positions, and
biographies as of April 24, 2017 are set forth below. Mr.
Jaksch’s and Mr. Fried's backgrounds are discussed under the
section Nominees for Election to Board of Directors.
|
Name
|
|
Age
|
|
Position
|
|
Frank
Jaksch, Jr.
|
|
48
|
|
Chief
Executive Officer and Director
|
|
Robert Fried
(1)
|
|
57
|
|
President,
Chief Strategy Officer and Director
|
|
Thomas
Varvaro
|
|
47
|
|
Chief
Financial Officer
|
|
Troy
Rhonemus
|
|
44
|
|
Chief
Operating Officer
|
|
|
|
|
|
|
(1) Mr. Fried was
hired as our President, Chief Strategy Officer and Director on
March 12, 2017.
Thomas C.
Varvaro
, 47, has served as the
Company’s Chief Financial Officer since January 2004 and
Secretary since March 2006. He also served as a director from March
2006 until May 2010. Mr. Varvaro is responsible for overseeing all
of Company’s operations including all aspects of accounting,
information technology, inventory, distribution, and human
resources management. Since April 2015, Mr. Varvaro has served on
the board of directors of MabVax Therapeutics Holdings, Inc.
(OTCQB:MBVX), which he is a member of the audit, compensation and
Nominating and Corporate Governance Committees. Mr. Varvaro has
extensive process mapping and business process improvement skills,
along with a solid information technology background that includes
management and implementation experiences ranging from custom
application design to enterprise wide system deployment. Mr.
Varvaro also has hands-on experience in integrating acquisitions
and in new facility startups. In working with manufacturing
organizations Mr. Varvaro has overseen plant automation, reporting
and bar code tracking implementations. Mr. Varvaro also has broad
legal experience in intellectual property (IP), contract and
employment law. From 1998 to 2004, Mr. Varvaro was employed by Fast
Heat Inc., a Chicago, Illinois based global supplier to the
plastics, HVAC, packaging, and food processing industries, where he
began as controller and was promoted to chief information officer
and then chief financial officer during his tenure. During his time
there Mr. Varvaro was responsible for all financial matters
including accounting, risk management and human resources. From
1993 to 1998, Mr. Varvaro was employed by Maple Leaf Bakery, Inc.,
Chicago, Illinois, during its rise to becoming a leader in
specialty bakery products. During his tenure Mr. Varvaro served in
information technology and accounting roles while helping to
shepherd the company from a single facility to national leader in
specialty bakery products. Mr. Varvaro has a B.S. in Accounting
from University of Illinois, Urbana-Champaign and has been
certified as a Certified Public Accountant.
Troy
Rhonemus
, 44, has served as the
Company’s Chief Operating Officer since March 2014 and a
Director of New Technology and Supply Chain from January 2013 to
February 2014. Mr. Rhonemus is responsible for overseeing all of
Company’s operations including all aspects of sales,
marketing, supply chain management, distribution, and new
technology development. Mr. Rhonemus also consults with customers
to improve the supply chain management of raw materials to meet
government regulations, which includes developing supply chain
strategies, auditing manufacturers and developing an understanding
of how to manage supplies from countries outside the Unites States.
Mr. Rhonemus has extensive experience in managing operations and
supply chain, business strategies, and the roll-out of new
processes, technologies and products. From 2006 to 2012, Mr.
Rhonemus held several positions at Cargill, Inc. As Truvia®
Business Process Manager, he served as the product line lead for
managing the operations and supply chain of the Truvia®
enterprise from leaf to consumer products. As Technology Manger,
Mr. Rhonemus served as technical lead for process and product
development for Truvia® consumer products and ingredient
business. From 2004 to 2006, Mr. Rhonemus served as Principal
Research Scientist at E&J Gallo Winery, where he developed
experimental designs to ensure that all project work was
statistically valid in the lab, pilot and production wineries. From
1998 to 2004, Mr. Rhonemus served as Senior Research Scientist and
as Process Technology Manager at Cargill, Inc. In these positions,
Mr. Rhonemus solved technical problems and implemented new
technologies into production. He identified potential tolling
facilities, coordinated tolling efforts, directly supervised and
developed new processes and solved technical issues in existing
business units in Cargill. Mr. Rhonemus has earned a M.A. in
Chemistry and a B.S. in Chemistry from Ball State
University.
Code of Business Conduct and Ethics
The
Board has established a corporate Code of Business Conduct and
Ethics that applies to all officers, directors and employees and
which is intended to qualify as a “code of ethics” as
defined by Item 406 of Regulation S-K of the Exchange Act. The Code
of Business Conduct and Ethics is available on the Company’s
website at www.chromadex.com. If the Company makes any substantive
amendments to the Code of Business Conduct and Ethics or grants any
waiver from a provision of the Code to any executive officer or
director, the Company will promptly disclose the nature of the
amendment or waiver on its website.
-9-
Public Availability of Corporate Governance Documents
Our
key corporate governance documents, including our Code of Conduct
and the charters of our Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee are:
●
available on our corporate website at www.chromadex.com;
and
●
available in print to any stockholder who requests them from our
corporate secretary.
Director Attendance
The
Board held 11 meetings during 2016. Each director attended at least
75% of Board meetings and meetings of the committees on which he
served.
Board Qualification and Selection Process
The
Nominating and Corporate Governance Committee does not have a
specific written policy or process regarding the nominations of
directors, nor does it maintain minimum standards for director
nominees or consider diversity in identifying nominees for
director. However, the Nominating and Corporate Governance
Committee does consider the knowledge, experience, integrity and
judgment of potential candidates for nominations to the
Board. The Nominating and Corporate Governance Committee
will consider persons recommended by stockholders for nomination
for election as directors. The Nominating and Corporate Governance
Committee will consider and evaluate a director candidate
recommended by a stockholder in the same manner as a
committee-recommended nominee. Stockholders wishing to recommend
director candidates must follow the prior notice requirements as
described herein.
Board Leadership Structure and Risk Oversight
The leadership of the Board of Directors is
structured so that it is led by a non-executive Chairman, Stephen
Allen,
who has authority, among other things, to call and
preside over meetings of the Board of Directors, including meetings
of the independent directors, to set meeting agendas and to
determine materials to be distributed to the Board of
Directors
. The Company
believes that separation of the positions of Chairman of the Board
of Directors and Chief Executive Officer reinforces the
independence of the Board in its oversight of the business and
affairs of the Company. In addition, the Company believes that
having an independent Chairman of the Board of Directors creates an
environment that is more conducive to objective evaluation and
oversight of management’s performance, increasing management
accountability and improving the ability of the Board of Directors
to monitor whether management’s actions are in the best
interests of the Company and its stockholders. As a result, the
Company believes that having an independent chair of the Board of
Directors can enhance the effectiveness of the Board of Directors
as a whole. The Nominating and Corporate Governance Committee
believes it is in the best interest of the Company to have an
independent director as Chairman of the Board in Mr. Allen, who has
an extensive business and management expertise in food and
nutrition industry.
The
entire Board of Directors, as well as through various committees,
is responsible for oversight of our Company’s risk management
process. Management furnishes information regarding risk
to the Board of Directors as requested. The Audit
Committee discusses risk management with the Company’s
management and independent public accountants as set forth in the
Audit Committee’s charter. The Compensation
Committee reviews the compensation programs of the Company to make
sure economic incentives are tied to the long-term interests of the
stockholders. The Company believes that innovation and
the building of long-term stockholder value are impossible without
taking risks. We recognize that imprudent acceptance of risk and
the failure to identify risks could be a detriment to stockholder
value. The executive officers of the Company are
responsible for assessing these risks on a day-to-day basis and for
how to best identify, manage and mitigate significant risks that
the Company may face.
Board Committees
The Board has established an Audit Committee, a
Compensation Committee and a Nominating and Corporate Governance
Committee. Other committees may be established by the Board from
time to time. The following table provides current membership and
meeting information for
fiscal year ended December 31, 2016
for each of our Board
committees:
|
Name
|
|
Audit
|
|
Compensation
|
|
Nominating and Corporate Governance
|
|
Stephen
Allen
|
|
|
|
X
|
|
X(1)
|
|
Jeff
Baxter
|
|
X
|
|
|
|
X
|
|
Stephen
A. Block
|
|
X
|
|
X(1)
|
|
|
|
Kurt
Gustafson
|
|
X(1)
|
|
X
|
|
|
|
Steven
Rubin
|
|
|
|
|
|
X
|
|
Hugh
Dunkerley (2)
|
|
|
|
X
|
|
|
|
Reid Dabney
(3)
|
|
X
|
|
|
|
|
|
Total
meetings in fiscal year ended December 31, 2016
|
|
4
|
|
2
|
|
0
|
|
(1)
Committee Chairperson
|
|
|
|
|
|
|
|
(2) Mr.
Dunkerley resigned from the Board of Directors on May 13,
2016.
|
||||||
|
(3) Mr.
Dabney resigned from the Board of Directors on August 19,
2016.
|
||||||
-10-
The
following is a description of each of the committees and their
composition:
Audit Committee
The
Audit Committee of the Board of Directors was established by the
Board of Directors in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), to oversee the Company’s corporate accounting
and financial reporting processes and audits of its financial
statements. For this purpose, the Audit Committee performs several
functions, including, among other things:
●
evaluates
the performance of and assesses the qualifications of the
independent auditors;
●
determines
and approves the engagement of the independent
auditors;
●
determines
whether to retain or terminate the existing independent auditors or
to appoint and engage new independent auditors;
●
reviews
and approves the retention of the independent auditors to perform
any proposed permissible non-audit services;
●
monitors
the rotation of partners of the independent auditors on the
Company’s audit engagement team as required by
law;
●
reviews
and approves or rejects transactions between the company and any
related persons;
●
confers
with management and the independent auditors regarding the
effectiveness of internal control over financial
reporting;
●
establishes
procedures, as required under applicable law, for the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing
matters and the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters;
and
●
meets
to review the Company’s annual audited financial statements
and quarterly financial statements with management and the
independent auditor, including a review of the Company’s
disclosures under “Management’s Discussion and Analysis
of Financial Condition and Results of
Operations.”
Our Audit Committee currently consists of three
directors: Messrs. Kurt Gustafson (chairman), Stephen Block and
Jeff Baxter.
The Audit
Committee met four times during the fiscal year. The Board of
Directors has adopted a written Audit Committee charter that is
available to
stockholders
on the Company’s
website at www.chromadex.com. The information on our website is not
incorporated by reference into this Proxy Statement or our Annual
Report for fiscal year 2016.
The
Board of Directors reviews the NASDAQ listing standards definition
of independence for Audit Committee members on an annual basis and
has determined that all members of the Audit Committee are
independent (as independence is currently defined in Rule
5605(c)(2)(A) of the NASDAQ listing standards and Rule 10A-3 of the
Exchange Act).
The
Board of Directors has also determined that Mr. Gustafson also
qualifies as an “audit committee financial expert,” as
defined in applicable SEC rules. The Board made a qualitative
assessment of Mr. Gustafson’s level of knowledge and
experience based on a number of factors, including his formal
education and experience as a chief financial officer for public
reporting companies.
Report
of the Audit Committee of the Board of Directors
This report of the audit committee is required by the SEC and, in
accordance with the SEC's rules, will not be deemed to be part of
or incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent
that we specifically incorporate this information by reference, and
will not otherwise be deemed "soliciting material" or "filed" under
either the Securities Act or the Exchange Act.
The Audit Committee has reviewed and discussed the
audited financial statements for the fiscal year ended December 31,
2016 with management of the Company. The Audit Committee has
discussed with the Company’s independent registered public
accounting firm the matters required to be discussed by Auditing
Standard No. 1301,
Communications with Audit
Committees
, as adopted by the
Public Company Accounting Oversight Board (“PCAOB”).
The Audit Committee has also received the written disclosures and
the letter from the independent registered public accounting firm
required by applicable requirements of the PCAOB regarding the
independent accountants’ communications with the audit
committee concerning independence, and has discussed with the
independent registered public accounting firm the accounting
firm’s independence. Based on the foregoing, the Audit
Committee has recommended to the Board of Directors that the
audited financial statements be included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2016.
Submitted by:
The Audit Committee Of
The Board of Directors
Kurt Gustafson (Chairman)
Stephen Block
Jeff Baxter
-11-
Compensation Committee
Our Compensation Committee currently consists of
three directors: Messrs. Stephen Block (chairman), Stephen Allen
and Kurt Gustafson. All members of the Compensation
Committee are independent (as independence is currently defined in
Rule 5605(d)(2) of the NASDAQ listing standards. The Compensation
Committee met two times during the fiscal year. The Board has
adopted a written Compensation Committee charter that is available
to stockholders on the Company’s website at
www.chromadex.com.
The
information on our website is not incorporated by reference into
this Proxy Statement or our Annual Report for fiscal year
2016.
The
Compensation Committee acts on behalf of the Board to review,
modify (as needed) and approve the Company’s compensation
strategy, policies, plans and programs. For this purpose, the
Compensation Committee performs several functions, including, among
other things:
●
establishment
of corporate and individual performance objectives relevant to the
compensation of the Company’s executive officers and
evaluation of performance in light of these stated
objectives;
●
review
and approval of the compensation and other terms of employment or
service, including severance and change-in-control arrangements, of
the Company’s Chief Executive Officer, other executive
officers and non-employee directors; and
●
administration
of the Company’s equity compensation plans, pension and
profit-sharing plans, deferred compensation plans and other similar
plan and programs.
Each
year, the Compensation Committee reviews with management the
Company’s Compensation Discussion and Analysis and considers
whether to recommend that it be included in proxy statements and
other filings.
The
Compensation Committee has the sole authority to retain, in its
sole discretion, compensation consultants to assist in its
evaluation of executive and director compensation, including the
authority to approve the consultant’s reasonable fees and
other retention terms. During the past fiscal year, the
Compensation Committee retained a consulting firm directly,
although in carrying out assignments, the consulting firm also
interacted with Company management when necessary and appropriate
in order to obtain compensation and performance data for the
executives and the Company. In addition, the consultant may, in its
discretion, seek input and feedback from management regarding its
consulting work product prior to presentation to the Compensation
Committee in order to confirm alignment with the Company’s
business strategy and/or identify data questions or other similar
issues.
Our
Compensation Committee generally does not have a specific target
amount of compensation for individual executive officers relative
to a peer group of companies, but it considers peer data for
purposes of assessing the competitiveness of the executive
compensation program. An individual executive officer may earn more
or less than the market median depending on factors described
below, including the individual’s experience and background,
role, and past and future performance.
With
respect to 2016, the compensation program for our executive
officers, both overall and on an individual basis, was below the
10th percentile for total direct compensation compared to a
peer group of similar companies. The Company plans to
pay cash bonuses to its executive officers in 2017 for 2016
performance based upon achievements of certain goals. For
additional information regarding the performance bonus amounts, see
“Executive Compensation.” In 2016, the Company paid 50%
of the bonus amounts earned by its executive officers for 2015
performance bonuses. We plan to pay the remaining 50% in 2017. The
Compensation Committee retained Barney and Barney, a Marsh McLennan
Agency, in 2016 as compensation consultants and considers their
recommendations in evaluating the timing and mix of the
Company’s cash and equity compensation.
Compensation
Committee Interlocks and Insider Participation
None of
the members of our Compensation Committee is an officer or employee
of our Company. None of our executive officers currently serves, or
in the past year has served, as a member of the board of directors
or compensation committee of any entity that has one or more
executive officers serving on our Board or Compensation
Committee.
Compensation
Committee Report
This
report of the Compensation Committee is required by the SEC and, in
accordance with the SEC's rules, will not be deemed to be part of
or incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the
Securities Act of 1933, as amended (“Securities Act”),
or under the Exchange Act, except to the extent that we
specifically incorporate this information by reference, and will
not otherwise be deemed "soliciting material" or "filed" under
either the Securities Act or the Exchange Act.
The Compensation Committee has reviewed and
discussed the Compensation Discussion and Analysis contained in
this proxy statement with management. Based on this review and
discussion, the Compensation Committee recommended to the Board of
Directors that the Compensation Discussion and Analysis be included
in this proxy statement
and
incorporated into the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2016.
-12-
Submitted by the Compensation Committee
Stephen
A. Block, Chairman
Stephen
Allen
Kurt
Gustafson
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee
currently consists of three directors: Messrs. Stephen Allen
(chairman), Jeff Baxter and Steven Rubin. All members of the
Nominating and Corporate Governance Committee are independent (as
independence is currently defined in Rule 5605(a)(2) of the NASDAQ
listing standards. The Nominating and Corporate Governance
Committee did not meet during our last fiscal year. The Board has
adopted a written Nominating and Corporate Governance Committee
charter that is available to stockholders on the Company’s
website at www.chromadex.com.
The information on our website is not incorporated
by reference into this Proxy Statement or our Annual Report for
fiscal year 2016.
The
Nominating and Corporate Governance Committee is responsible for
identifying, reviewing and evaluating candidates to serve as
directors of the Company consistent with criteria approved by the
Board of Directors, reviewing and evaluating incumbent directors,
selecting or recommending to the Board of Directors for selection
candidates for election to the Board of Directors, making
recommendations to the Board of Directors regarding the membership
of the committees of the Board of Directors, assessing the
performance of the Board of Directors, and developing a set of
corporate governance principles for the Company.
The
Nominating and Corporate Governance Committee believes that
candidates for director should have certain minimum qualifications,
including the ability to read and understand basic financial
statements and having the highest personal integrity and ethics.
The Nominating and Corporate Governance Committee also intends to
consider such factors as possessing relevant expertise upon which
to be able to offer advice and guidance to management, having
sufficient time to devote to the affairs of the Company,
demonstrated excellence in his or her field, having the ability to
exercise sound business judgment and having the commitment to
rigorously represent the long-term interests of the Company’s
stockholders. However, the Nominating and Corporate Governance
Committee retains the right to modify these qualifications from
time to time. Candidates for director nominees are reviewed in the
context of the current composition of the Board of Directors, the
operating requirements of the Company and the long-term interests
of stockholders. In conducting this assessment, the Nominating and
Corporate Governance Committee typically considers diversity, age,
skills and such other factors as it deems appropriate, given the
current needs of the Board of Directors and the Company, to
maintain a balance of knowledge, experience and
capability.
In
the case of incumbent directors whose terms of office are set to
expire, the Nominating and Corporate Governance Committee reviews
these directors’ overall service to the Company during their
terms, including the number of meetings attended, level of
participation, quality of performance and any other relationships
and transactions that might impair the directors’
independence. In the case of new director candidates, the
Nominating and Corporate Governance Committee also determines
whether the nominee is independent for NASDAQ purposes, which
determination is based upon applicable NASDAQ listing standards,
applicable SEC rules and regulations and the advice of counsel, if
necessary. The Nominating and Corporate Governance Committee then
uses its network of contacts to compile a list of potential
candidates, but may also engage, if it deems appropriate, a
professional search firm. The Nominating and Corporate Governance
Committee conducts any appropriate and necessary inquiries into the
backgrounds and qualifications of possible candidates after
considering the function and needs of the Board of Directors. The
Nominating and Corporate Governance Committee meets to discuss and
consider the candidates’ qualifications and then selects a
nominee by majority vote which we expect will typically be
recommended to the full Board.
The Nominating and Corporate Governance Committee
will consider director candidates recommended by stockholders. The
Nominating and Corporate Governance Committee does not intend to
alter the manner in which it evaluates candidates, including the
minimum criteria set forth above, based on whether or not the
candidate was recommended by a stockholder. Stockholders who wish
to recommend individuals for consideration by the Nominating and
Corporate Governance Committee to become nominees for election to
the Board of Directors may do so by delivering a written
recommendation to the Nominating and Corporate Governance Committee
at the following address:
ChromaDex Corporation, Attn:
Secretary, at 10005 Muirlands Blvd, Suite G, Irvine, CA
92618
, no later than the close of
business on the 60th day nor earlier than the close of business on
the 90th day prior to the first anniversary of the preceding
year’s annual meeting. Submissions must include the name and
address of the Company stockholder on whose behalf the submission
is made; the number of Company shares that are owned beneficially
by such stockholder as of the date of the submission; the full name
of the proposed candidate; a description of the proposed
candidate’s business experience for at least the previous
five years; complete biographical information for the proposed
candidate; and a description of the proposed
Stockholder Communication
Any
stockholder may communicate in writing by mail at any time with the
entire Board of Directors or any individual director (addressed to
“Board of Directors” or to a named director), c/o
ChromaDex Corporation, ATTN: Secretary, 10005 Muirlands Blvd, Suite
G, Irvine, CA 92618. All communications will be compiled by the
Secretary of the Company and promptly submitted to the Board of
Directors or the individual directors on a periodic
basis.
-13-
Policy Regarding Attendance at Annual Meetings of
Stockholders
The
Company does not have a policy with regard to Board members’
attendance at annual meetings. Six directors attended the
Company’s most recent annual meeting of stockholders held on
June 2, 2016.
Director Independence
As
required under the NASDAQ Stock Market listing standards, a
majority of the members of a listed company’s board of
directors must qualify as “independent,” as
affirmatively determined by the Board of Directors. The Board of
Directors consults with the Company’s counsel to ensure that
its determinations are consistent with relevant securities and
other laws and regulations regarding the definition of
“independent,” including those set forth in pertinent
listing standards of NASDAQ, as in effect from time to
time.
Consistent with these considerations, after review
of all relevant identified transactions or relationships between
each director, or any of his or her family members, and the
Company, its senior management and its independent auditors, the
Board of Directors has affirmatively determined that the following
directors are independent directors within the meaning of the
applicable NASDAQ listing standards: Stephen Allen, Stephen Block,
Jeff Baxter, Kurt Gustafson and Steven Rubin. Frank L. Jaksch Jr.
and Robert Fried do not meet the independence standards because Mr.
Jaksch is the Chief Executive Officer and Mr. Fried is the
President and Chief Strategy Officer of our
Company
.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements
of our named executive officers for 2016 should be read together
with the compensation tables and related disclosures set forth
below.
We
believe our success depends on the continued contributions of our
named executive officers. Personal relationships and experience are
very important in our industry. Our named executive officers are
primarily responsible for many of our critical business development
relationships. The maintenance of these relationships is critical
to ensuring our future success as is experience in managing these
relationships. Therefore, it is important to our success that we
retain the services of these individuals.
General Philosophy
Our
overall compensation philosophy is to provide an executive
compensation package that enables us to attract, retain and
motivate executive officers to achieve our short-term and long-term
business goals. The goals of our compensation program are to align
remuneration with business objectives and performance, and to
enable us to retain and competitively reward executive officers who
contribute to the long-term success of the Company. We attempt to
pay our executive officers competitively in order that we will be
able to retain the most capable people in the industry. In making
executive compensation and other employment compensation decisions,
the Compensation Committee considers achievement of certain
criteria, some of which relate to our performance and others of
which relate to the performance of the individual employee. Awards
to executive officers are based on achievement of Company and
individual performance criteria.
The
Compensation Committee will evaluate our compensation policies on
an ongoing basis to determine whether they enable us to attract,
retain and motivate key personnel. To meet these objectives, the
Compensation Committee may from time to time increase salaries,
award additional stock grants or provide other short and long-term
incentive compensation to executive officers and other
employees.
Results
of Most Recent Stockholder Advisory Vote on Executive
Compensation
Over
96% of the votes cast in the stockholder advisory vote on the
compensation of our named executive officers in 2015 approved our
executive compensation and recommended a three-year frequency with
which the Company should conduct future stockholder advisory votes
on named executive officer compensation, as described in our 2015
proxy statement. The Compensation Committee considered the result
of the stockholder advisory vote as an endorsement of its
compensation policies, practices and philosophy for our named
executive officers. Accordingly, the Compensation Committee
determined not to make any significant changes as a result of the
vote. In addition, in part based on the support shown by the vote,
the Compensation Committee has maintained a consistent approach in
making compensation decisions.
The
Compensation Committee considers the results of the say-on-pay vote
on our executive compensation program as part of its annual
executive compensation review. Our Board of Directors values the
opinions of our stockholders, and the Compensation Committee will
continue to consider the outcome of future say-on-pay votes, as
well as any feedback received, when making compensation decisions
for the named executive officers. The next say-on-pay vote on the
compensation of the named executive officers will take place at the
annual meeting in 2018.
-14-
Compensation Program and Forms of Compensation
We
provide our executive officers with a compensation package
consisting of base salary, bonus, equity incentives and
participation in benefit plans generally available to other
employees. In setting total compensation, the Compensation
Committee considers individual and company performance, as well as
market information regarding compensation paid by other companies
in our industry. All executive officers have employment
agreements that establish their initial base salaries and set
pre-approved goals -- and minimum and maximum opportunities -- for
the bonuses and equity incentive awards. Both the Compensation
Committee and the Board have approved these
agreements.
Base
Salary.
Salaries for our
executive officers are initially set based on negotiation with
individual executive officers at the time of recruitment and with
reference to salaries for comparable positions in the industry for
individuals of similar education and background to the executive
officers being recruited. We also consider the individual’s
experience, reputation in his or her industry and expected
contributions to the Company. Base salary is regularly evaluated by
competitive pay and individual job performance. In each case, we
take into account the results achieved by the executive, his or her
future potential, scope of responsibilities and experience, and
competitive salary practices. In some circumstances our executive
officers have elected to take less than market
salaries. These salaries may be increased in the future
to market conditions with a competitive base salary that is in line
with his or her role and responsibilities when compared to peer
companies of comparable size in similar
locations.
Bonuses
.
We design our bonus programs to be
both affordable and competitive in relation to the market. Our
bonus program is designed to motivate employees to achieve overall
corporate goals. Our programs are designed to avoid entitlements,
to align actual payouts with the actual results achieved and to be
easy to understand and administer. The Compensation
Committee and the executive officer, with input from the other
executive officers, work together to identify targets and goals for
the executive officer; however, the targets and goals themselves
are established after deliberation by the Compensation Committee
alone. Upon completion of the fiscal year, the Compensation
Committee assesses the executive officer’s performance and,
with input from management and the Board, determines the
achievement of the bonus targets and the amount to be awarded
within the parameters of the executive officer’s agreement
with us subject to the impact paying such bonuses will have on the
Company’s financial position.
In
2016, we paid bonuses of $27,500, $18,000 and $11,400, respectively
to our executive officers Frank L. Jaksch Jr., Thomas C. Varvaro
and Troy A. Rhonemus for services performed during 2015. These
amounts are 50% of the earned bonus amounts as Mr. Jaksch, Mr.
Varvaro and Mr. Rhonemus was entitled to receive $55,000, $36,000
and $22,800, respectively for services performed during 2015. The
Company plans to pay the remaining 50% in 2017. The 2015 bonus
amounts were calculated based upon the Company's overall
performance, including achievement of sales and profitability
targets for the fiscal year 2015, and were determined on a
discretionary basis by our Compensation Committee. The bonus pay
out percentage was determined as 20%, 16% and 12% of base salary
for Mr. Jaksch, Mr. Varvaro and Mr. Rhonemus, respectively. These
amounts represent payouts of 40% of the total bonus opportunity for
each executive. When determining the bonus pay out percentage, our
Compensation Committee considered numerous factors including the
following milestones that the Company achieved during 2015: (i)
first year to achieve net sales of $20 million or more; (ii) our
top selling ingredient, nicotinamide riboside ("NR") was recognized
by the FDA as a "New Dietary Ingredient." NR was also "Generally
Recognized As Safe" by an independent panel of expert
toxicologists; (iii) successful launch of "Quality Seal
Verification" program, which brought a revenue of $400,000; and
(iv) entering into joint development agreement with The Procter
& Gamble Company ("P&G") for use of our proprietary
ingredient in P&G branded products, for which P&G will make
payments based on achievement of various milestones.
In
2017, we plan to pay bonuses of $122,562, $79,500 and $46,706,
respectively to Mr. Jaksch, Mr. Varvaro and Mr. Rhonemus for
services performed during 2016. These bonus amounts were calculated
based upon achievements of four goals, (i) the Company’s
Earnings Before Interest, Taxes, Depreciation, Amortization and
Share-based compensation (“EBITDAS’) targets for 2016;
(ii) Net Income for 2016; (iii) Investigational New Drug
(“IND”) and EU regulatory filings for NR; and (iv) Net
sales of $30 Million. Tables below illustrate how the bonus amounts
were calculated for Mr. Jaksch, Mr. Varvaro and Mr.
Rhonemus
Bonus calculation for Mr. Jaksch – for fiscal year 2016, to
be paid in 2017
|
Metric
|
Floor
(in
1,000s)
|
Target
(in
1,000s)
|
Actual
(in
1,000’s)
|
Achievement
% from Floor to Target (1)
|
Target
Bonus
%
(2)
|
Payout
Bonus
%
(3)
|
Base
Salary
|
Bonus
Payment
(4)
|
|
EBITDAS
|
N/A
|
0
|
$
(945
)
|
50
%
|
6.25
%
|
3.125
%
|
$
370,000
|
$
11,563
|
|
Net
Income
|
Positive
|
Positive
|
$
(2,928
)
|
0
%
|
3.50
%
|
0
%
|
$
370,000
|
$
0
|
|
IND & EU
Filings
|
N/A
|
N/A
|
N/A
|
50
%
|
15.25
%
|
7.625
%
|
$
370,000
|
$
28,212
|
|
Net
Sales
|
0
|
$
30,000
|
$
26,811
|
89.5
%
|
25.00
%
|
22.375
%
|
$
370,000
|
$
82,787
|
|
|
|
|
|
|
|
|
Total
|
$
122,562
|
-15-
Bonus calculation for Mr. Varvaro – for fiscal year 2016, to
be paid in 2017
|
Metric
|
Floor
(in
1,000s)
|
Target
(in
1,000s)
|
Actual
(in
1,000’s)
|
Achievement
% from Floor to Target (1)
|
Target
Bonus
%
(2)
|
Payout
Bonus
%
(3)
|
Base
Salary
|
Bonus
Payment
(4)
|
|
EBITDAS
|
N/A
|
0
|
$
(945
)
|
50
%
|
5.00
%
|
2.50
%
|
$
300,000
|
$
7,500
|
|
Net
Income
|
Positive
|
Positive
|
$
(2,928
)
|
0
%
|
2.80
%
|
0
%
|
$
300,000
|
$
0
|
|
IND & EU
Filings
|
N/A
|
N/A
|
N/A
|
50
%
|
12.20
%
|
6.10
%
|
$
300,000
|
$
18,300
|
|
Net
Sales
|
0
|
$
30,000
|
$
26,811
|
89.5
%
|
20.00
%
|
17.90
%
|
$
300,000
|
$
53,700
|
|
|
|
|
|
|
|
|
Total
|
$
79,500
|
Bonus calculation for Mr. Rhonemus – for fiscal year 2016, to
be paid in 2017
|
Metric
|
Floor
(in
1,000s)
|
Target
(in
1,000s)
|
Actual
(in
1,000’s)
|
Achievement
% from Floor to Target (1)
|
Target
Bonus
%
(2)
|
Payout
Bonus
%
(3)
|
Base
Salary
|
Bonus
Payment
(4)
|
|
EBITDAS
|
N/A
|
0
|
$
(945
)
|
50
%
|
3.75
%
|
1.875
%
|
$
235,000
|
$
4,406
|
|
Net
Income
|
Positive
|
Positive
|
$
(2,928
)
|
0
%
|
2.10
%
|
0
%
|
$
235,000
|
$
0
|
|
IND & EU
Filings
|
N/A
|
N/A
|
N/A
|
50
%
|
9.15
%
|
4.575
%
|
$
235,000
|
$
10,751
|
|
Net
Sales
|
0
|
$
30,000
|
$
26,811
|
89.5
%
|
15.00
%
|
13.425
%
|
$
235,000
|
$
31,549
|
|
|
|
|
|
|
|
|
Total
|
$
46,706
|
(1)
The Compensation
Committee subjectively determined the achievement % for EBITDAS and
IND & EU Filings goals based on numerous factors.
(2)
Per employment
agreement, Mr. Jaksch, Mr. Varvaro and Mr. Rhonemus are entitled to
receive a bonus up to 50%, 40% and 30% of base salary,
respectively. The allocation of the total bonus % to each goal was
determined by the Board.
(3)
Payout bonus % is
calculated by multiplying achievement % to target bonus
%.
(4)
Bonus payment is
calculated by multiplying payout bonus % to base
salary.
Equity-Based Rewards
We
design our equity programs to be both affordable and competitive in
relation to the market. We monitor the market and applicable
accounting, corporate, securities and tax laws and regulations and
adjust our equity programs as needed. Stock options and other forms
of equity compensation are designed to reflect and reward a high
level of sustained individual performance over time. We design our
equity programs to align employees’ interests with those of
our stockholders. The Compensation Committee and the executive
officer, with input from the other executive officers, work
together to identify targets and goals for the executive officer;
however, the targets and goals themselves are established after
deliberation by the Compensation Committee alone. Upon completion
of the fiscal year, the Compensation Committee assesses the
executive officer’s performance and, with input from
management and the Board, determines the achievement of the vesting
targets and the amount to be awarded within the parameters of the
executive officer’s agreement with us.
On
June 6, 2012, Frank L. Jaksch Jr. and Thomas C. Varvaro were each
awarded 250,000 shares of restricted stock. In addition, on January
2, 2014, Mr. Jaksch and Mr. Varvaro were each awarded 250,000
shares each of restricted stock. These shares were to originally
vest upon the earlier to occur of the following: (i) the market
price of the Company’s stock exceeds a certain price, or (ii)
one of other certain triggering events, including the termination
of the officers and members of the board of directors without cause
for any reason. These awarded shares were not vested as of December
31, 2016. On March 7, 2016, the Company and each of the executives
amended the restricted stock awards to provide that the awards
shall vest on upon (i) the Company experiencing a change in control
transaction; (ii) the Company engaging in a merger or other
reorganization in which it is not the surviving corporation; (iii)
the Company selling all or substantially all of its assets; or (iv)
the individual's service being terminated for any reason. On March
12, 2017, Robert Fried was awarded 166,667 shares of restricted
stock, subject to annual vesting over a three-year
period.
-16-
Timing of Equity Awards
Only
the Board may approve stock option grants to our executive
officers, which grants are recommended to it by the Compensation
Committee. Stock options to employees, including our executive
officers, are generally granted once a year at predetermined
meetings of the Board. The compensation committee and the Board
take the material non-public information into account when
determining the timing of awards and generally grant stock options
when material non-public information is least present. On limited
occasions, grants may occur upon unanimous written consent of the
Board, which occurs primarily for the purpose of approving a
compensation package for a newly hired or promoted executive under
an employment agreement with the executive. The exercise price of a
newly granted option is the market price of our Common Stock on the
date of grant.
Benefits Programs
We
design our benefits programs to be both affordable and competitive
in relation to the market while conforming to local laws and
practices. We monitor the market, local laws and practices and
adjust our benefits programs as needed. We design our benefits
programs to provide an element of core benefits, and to the extent
possible, offer options for additional benefits, be tax-effective
for employees in each country and balance costs and cost sharing
between us and our employees. One of the benefits programs we offer
is a broad-based 401(k) plan to which we make contributions in
cash. The Company matches 50% of employee contributions for the
first 6% of salary than an employee contributes.
Performance-Based Compensation and Financial
Restatement
We
have implemented a policy regarding retroactive adjustments to any
cash or equity-based incentive compensation paid to our executives
where such payments were predicated upon the achievement of certain
financial results that were subsequently the subject of a financial
restatement and have included this policy in the employment
contracts with our executives.
Tax and Accounting Considerations
In
the review and establishment of our compensation programs, we
consider the anticipated accounting and tax implications to us and
our executives. Section 162(m) of the Code imposes a limit on
the amount of compensation that we may deduct in any one year with
respect to our chief executive officer and each of our next three
most highly compensated executive officers (excluding our Chief
Financial Officer), unless certain specific and detailed criteria
are satisfied. Performance-based compensation, as defined in the
Code, is fully deductible if the programs are approved by
stockholders and meet other requirements. We believe that grants of
equity awards under our Second Amended and Restated 2007 Equity
Incentive Plan, or the 2007 Plan, may qualify as performance-based
for purposes of satisfying the conditions of Section 162(m),
thereby permitting us to receive a federal income tax deduction, if
applicable, in connection with such awards. In general, we have
determined that we will not seek to limit executive compensation so
that it is deductible under Section 162(m). From time to time,
however, we monitor whether it might be in our interests to
structure our compensation programs to satisfy the requirements of
Section 162(m). We seek to maintain flexibility in
compensating our executives in a manner designed to promote our
corporate goals and therefore our compensation committee has not
adopted a policy requiring all compensation to be deductible. Our
compensation committee will continue to assess the impact of
Section 162(m) on our compensation practices and determine
what further action, if any, is appropriate.
Severance and Change in Control Arrangements
Several
of our executives have employment and other agreements that provide
for severance payment arrangements and/or acceleration of stock
option vesting in the event of an acquisition or other change in
control of our company. See “Employment and Consulting
Agreements” below for a description of the severance and
change in control arrangements for our named executive
officers.
Role of Executives in Executive Compensation Decisions
The Board and our Compensation Committee generally
seek input from our executive officers when discussing the
performance of, and compensation levels for, executives. The
Compensation Committee also works with our Chief Executive Officer
and our Chief Financial Officer to evaluate the financial,
accounting, tax and retention implications of our various
compensation programs. None of our other executives participates in
deliberations relating to his or her
compensation
.
Summary
Compensation Table
The
following table sets forth information concerning the annual and
long-term compensation earned by our Chief Executive Officer (the
principal executive officer), our Chief Financial Officer (the
principal financial officer) and our Chief Operating Officer, each
of whom served during the year ended December 31, 2016 as our
executive officers. Robert Fried was appointed as President and
Chief Strategy Officer on March 12, 2017.
-17-
|
Name
|
|
Year
|
Salary
|
Bonus
|
Stock Awards
(1)
|
Option Awards(2)
|
All Other Compensation
(3)
|
Total($)
|
|
Frank
L. Jaksch Jr.
|
|
2016
|
$
344,231
|
$
27,500
|
-
|
$
216,980
(4)
|
$
7,258
|
$
595,969
|
|
|
|
2015
|
$
275,000
|
$
85,890
|
-
|
$
114,857
(5)
|
$
8,642
|
$
484,389
|
|
|
|
2014
|
$
275,000
|
$
30,000
|
$
352,500
(6)
|
$
138,518
(7)
|
$
7,748
|
$
803,766
|
|
Thomas
C. Varvaro
|
|
2016
|
$
278,846
|
$
18,000
|
-
|
$
178,689
(8)
|
$
7,463
|
$
482,998
|
|
|
|
2015
|
$
225,000
|
$
56,219
|
-
|
$
96,229
(9)
|
$
8,437
|
$
385,885
|
|
|
|
2014
|
$
225,000
|
$
24,200
|
$
352,500
(10)
|
$
115,807
(11)
|
$
6,816
|
$
724,323
|
|
Troy
A. Rhonemus
|
|
2016
|
$
222,692
|
$
11,400
|
-
|
$
127,635
(12)
|
$
7,023
|
$
368,750
|
|
|
|
2015
|
$
186,962
|
$
33,731
|
-
|
$
76,091
(13)
|
$
6,642
|
$
303,426
|
|
|
|
2014
|
$
179,039
|
-
|
-
|
$
358,723
(14)
|
$
5,371
|
$
543,133
|
(1)
The
amounts in the column titled “Stock Awards” above
reflect the aggregate award date fair value of restricted stock
awards. These restricted stock awards originally had following
vesting conditions: the earlier to occur of (A) the average closing
market price of the Company’s common stock exceeds $7.50 per
share over any six month period, (B) the Company experiences a
change in control, (C) the Company’s common stock or assets
are acquired by, or the Company merges with, another entity or
engages in another form of reorganization as a result of which it
is not the surviving corporation, (D) service is terminated without
cause for any reason, or (E) the Company’s stock is listed on
a national securities exchange. The fair values of these restricted
stock awards were based on the trading price of the Company’s
common stock on the date of grant. On March 7, 2016 the Company and
each of the executives amended the restricted stock awards to
provide that the awards shall not vest upon the market price of the
Company’s common stock exceeding $7.50 per share or listing
of the Company’s stock on a national securities
exchange.
(2)
The
amounts in the column titled “Option Awards” above
reflect the aggregate grant date fair value of stock option awards
for the fiscal years ended December 31, 2016, January 2, 2016 and
January 3, 2015. See Note 10 of the ChromaDex Corporation
Consolidated Financial Report included in the Form 10-K for the
year ended December 31, 2016, filed with the SEC on March 16, 2017,
for a description of certain assumptions in the calculation of the
fair value of the Company’s stock options.
(3)
The
amounts in this column titled “All Other Compensation”
above reflect matching 401(k) contributions.
(4)
On
August 15, 2016, Frank L. Jaksch Jr. was granted options to
purchase 85,000 shares of ChromaDex common stock at an exercise
price of $4.04. These options expire on August 15, 2026 and 25% of
the options vest on August 15, 2017 and the remaining 75% vest
2.083% monthly thereafter.
(5)
On
July 6, 2015, Frank L. Jaksch Jr. was granted options to purchase
50,000 shares of ChromaDex common stock at an exercise price of
$3.66. These options expire on July 6, 2025 and 25% of the options
vested on July 6, 2016 and the remaining 75% vest 2.083% monthly
thereafter.
(6)
On
January 2, 2014, Frank L. Jaksch Jr. was awarded 83,334 shares of
restricted stock. As of December 31, 2016, these shares have not
vested.
(7)
On
June 18, 2014, Frank L. Jaksch Jr. was granted options to purchase
50,000 shares of ChromaDex common stock at an exercise price of
$3.75. These options expire on June 18, 2024 and 25% of the options
vested on June 18, 2015 and the remaining 75% vest 2.083% monthly
thereafter.
(8)
On
August 15, 2016, Thomas C. Varvaro was granted options to purchase
70,000 shares of ChromaDex common stock at an exercise price of
$4.04. These options expire on August 15, 2026 and 25% of the
options vest on August 15, 2017 and the remaining 75% vest 2.083%
monthly thereafter.
(9)
On
July 6, 2015, Thomas C. Varvaro was granted options to purchase
41,667 shares of ChromaDex common stock at an exercise price of
$3.66. These options expire on July 6, 2025 and 25% of the options
vest on July 6, 2016 and the remaining 75% vest 2.083% monthly
thereafter.
(10)
On
January 2, 2014, Thomas C. Varvaro was awarded 83,334 shares of
restricted stock. As of December 31, 2016, these shares have not
vested.
(11)
On
June 18, 2014, Thomas C. Varvaro was granted options to purchase
41,667 shares of ChromaDex common stock at an exercise price of
$3.75. These options expire on June 18, 2024 and 25% of the options
vested on June 18, 2015 and the remaining 75% vest 2.083% monthly
thereafter.
-18-
(12)
On
August 15, 2016, Troy A. Rhonemus was granted options to purchase
50,000 shares of ChromaDex common stock at an exercise price of
$4.04. These options expire on August 15, 2026 and 25% of the
options vest on August 15, 2017 and the remaining 75% vest 2.083%
monthly thereafter.
(13)
On
July 6, 2015, Troy A. Rhonemus was granted options to purchase
33,334 shares of ChromaDex common stock at an exercise price of
$3.66. These options expire on July 6, 2025 and 25% of the options
vest on July 6, 2016 and the remaining 75% vest 2.083% monthly
thereafter.
(14)
On
February 21, 2014, Troy A. Rhonemus was granted options to purchase
83,334 shares of ChromaDex common stock at an exercise price of
$5.25. These options expire on February 21, 2024 and 33% of the
options vested on February 21, 2015 and the remaining 67% vest
2.778% monthly thereafter. In addition, on June 18, 2014, Troy A.
Rhonemus was granted options to purchase 25,000 shares of ChromaDex
common stock at an exercise price of $3.75. These options expire on
June 18, 2024 and 25% of the options vested on June 18, 2015 and
the remaining 75% vest 2.083% monthly thereafter.
Employment and Consulting Agreements
The
material terms of employment agreements with the named executive
officers previously entered into by the Company are described
below.
Employment Agreement with Frank L. Jaksch Jr.
On
April 19, 2010, the Company entered into an Amended and Restated
Employment Agreement (the “Amended Jaksch Agreement”)
with Frank L. Jaksch Jr. The Amended Jaksch Agreement has a three
year term, beginning on the date of the Agreement, that
automatically renews unless the Amended Jaksch Agreement is
terminated in accordance with its terms. The Amended Jaksch
Agreement provides for a base salary of $225,000 (subject to an
increase of $50,000 in the event the Company’s common stock
is listed on a stock exchange), and provides for an annual cash
bonus (based on performance targets) of up to 40% of his base
salary, and two option grants of 266,667 shares of Common Stock in
aggregate. The option grants were awarded on May 20,
2010.
On
January 2, 2014, the Board approved the recommendations of the
Company’s Compensation Committee raising the annual base
salary of Mr. Jaksch to $275,000 per year and raising the annual
cash bonus target for Mr. Jaksch up to 50% of his base salary. On
March 14, 2016, the Board increased the base salary of Mr. Jaksch
to $320,000. On April 25, 2016, Mr. Jaksch’s base salary
increased to $375,000 as the Company’s common stock was
listed on the NASDAQ Stock Market.
The
severance terms of the Amended Jaksch Agreement provide that in the
event Mr. Jaksch’s employment with the Company is terminated
voluntarily by Mr. Jaksch, he will be entitled to any accrued but
unpaid base salary, any stock vested through the date of his
termination and a pro-rated portion of 50% of his salary (50% of
his salary being the “Maximum Annual Bonus”) for the
year of termination. In addition, if Mr. Jaksch leaves the Company
for “Good Reason” he will also be entitled to severance
equal to the Maximum Annual Bonus, and he will be deemed to have
been employed for the entirety of such year. “Good
Reason” means any of the following: (A) the assignment of
duties materially inconsistent with those of other employees in
similar employment positions, and Mr. Jaksch provides written
notice to the Company within 60 days of such assignment that such
duties are materially inconsistent with those duties of such
similarly-situated employees and the Company fails to release Mr.
Jaksch from his obligation to perform such inconsistent duties and
to re-assign Mr. Jaksch to his customary duties within 20 business
days after the Company’s receipt of such notice; or (B) if,
without the consent of Mr. Jaksch, Mr. Jaksch’s normal place
of work is or becomes situated more than 50 linear miles from Mr.
Jaksch’s personal residence as of the effective date of the
Amended Jaksch Agreement, or (C) a failure by the Company to comply
with any other material provision of the Amended Jaksch Agreement
which has not been cured within 60 days after notice of such
noncompliance has been given by Mr. Jaksch to the Company, or if
such failure is not capable of being cured in such time, a cure
shall not have been diligently pursued by the Company within such
60 day period.
In
the event Mr. Jaksch’s employment terminates as a result of
his death or disability, he, or his estate, as the case may be,
will be entitled to his accrued but unpaid base salary, stock
vested through the date of his termination and, notwithstanding any
policy of the Company to the contrary, any annual bonus that would
be due to him for the fiscal year in which termination pursuant to
death or disability took place in an amount no less than the
prorated portion of his Maximum Annual Bonus. At the option of the
Board, Mr. Jaksch’s bonus will be either prorated or paid in
full to him, or his estate, as the case may be, at the time he
would have received such bonus had he remained an employee of the
Company.
In the event that Mr. Jaksch is terminated by the
Company for “Cause” (as defined in the Amended Jaksch
Agreement), he will only be entitled to his accrued but unpaid base
salary, and any stock
accrued but unpaid welfare and
retirement benefits
.
In the event that Mr. Jaksch is terminated due to
“Cessation of Business” (as defined in the Amended
Jaksch Agreement), Mr. Jaksch will be entitled to a lump sum
payment of base salary until the earlier of the last to occur of
the
expiration of the term or renewal term of the agreement
or the expiration of the 12 month period commencing on the date of
termination, and an amount equal to the Maximum Annual
Bonus.
-19-
In the event the Company terminates Mr.
Jaksch’s employment without “Cause”, Mr. Jaksch
will be entitled to severance in the form of any stock vested
through the date of his termination
severance equal to two
weeks of base salary for each full year of service to a maximum of
eight weeks of the base salary
, or, if
Mr. Jaksch enters into a standard separation
waiver, and
release agreement of all claims against the Company
, Mr. Jaksch will receive continuation of base
salary and health
care continuation coverage
payments
, together with applicable
fringe benefits as provided to other executive employees until the
last to occur of the expiration of the term or renewal term then in
effect or 24 months from the date of termination (the
“Severance Period”), and he will receive his Maximum
Annual Bonus if the Severance Period is equal to 24 months or a pro
rata portion thereof if less, as well as the full vesting of any
otherwise unvested stock.
Employment Agreement with Robert Fried
On
March 12, 2017, the Company entered into an Employment Agreement
(the "Fried Agreement") with Robert Fried. Pursuant to the Fried
Agreement, Mr. Fried is entitled to: (i) an annual base salary of
$300,000; (ii) an annual cash bonus equal to (a) 1% of net
direct-to-consumer sales of products with nicotinamide riboside as
a lead ingredient by the Company plus (b) 2% of direct to consumer
net sales of products with nicotinamide riboside as a lead
ingredient for the portion of such sales that exceeded prior year
sales plus (c) 1% of the gross profit derived from nicotinamide
riboside ingredient sales to dietary supplement producers; (iii) an
option to purchase up to 500,000 shares of Common Stock under the
ChromaDex Second Amended and Restated 2007 Equity Incentive Plan or
any subsequent equity plan, subject to monthly vesting over a
three-year period; and (iv) 166,667 shares of restricted Common
Stock, subject to annual vesting over a three-year
period.
Subject
to requisite stockholder approval and Mr. Fried’s continuous
service through such date, Mr. Fried is also eligible to receive
(i) on March 12, 2018, 166,667 shares of restricted Common Stock,
subject to annual vesting over a two-year period, (ii) on March 12,
2019, 166,666 shares of restricted Common Stock that vest in full
on the one year anniversary of the grant date and (iii) up to
500,000 shares of fully-vested restricted Common Stock that will be
granted upon the achievement of certain performance goals. Any
unvested options or shares of restricted stock will vest in full
upon (a) a change in control of the Company, (b) Mr. Fried’s
death, (c) Mr. Fried’s disability, (d) termination by the
Company of Mr. Fried’s employment without cause or (e) Mr.
Fried’s resignation for good reason, subject in each case to
Mr. Fried’s continuous service as an employee or consultant
of the Company or any of its subsidiaries though such
event.
The
severance terms of the Fried Agreement provide that
if (i) Mr. Fried’s employment is terminated
by the Company without cause, for death or disability, or Mr. Fried
resigns for good reason, or (ii) (a) a change in control of the
Company occurs and (b) within one month prior to the date of such
change in control or twelve months after the date of such change in
control R. Fried’s employment is terminated by the Company
other than for cause, then, subject to executing a release, Mr.
Fried will receive (w) continuation of his base salary for 12
months, (x)
health care continuation coverage payments
premiums for 12 months, (y) a prorated
annual cash bonus
earned for the fiscal year in which such
termination or resignation occurs,
and
(z) an extended exercise period for his
options.
Mr.
Fried is a party to the Company’s form of indemnity agreement
for directors and officers. Mr. Fried will receive no additional
compensation for his service on the Board.
Employment Agreement with Thomas C. Varvaro
On April 19, 2010, the Company entered into an
Amended and Restated Employment Agreement (the “Amended
Varvaro Agreement”) with Thomas C. Varvaro. The Amended
Varvaro Agreement has a three year term beginning on the date of
the agreement that automatically renews unless the Amended Varvaro
Agreement is terminated in accordance with its terms. The Amended
Varvaro Agreement provides for a base salary of $175,000 (subject
to an increase of $50,000 in the event the Company’s common
stock is listed on a stock exchange), and provides for an annual
cash bonus (based on performance targets) of up to 30% of his base
salary.
The Amended Varvaro Agreement
provides for two option grants of 133,334 shares
of Common Stock in aggregate. The option grants were awarded on May
20, 2010.
On
January 2, 2014, the Board approved the recommendations of the
Company’s Compensation Committee raising the annual base
salary of Mr. Varvaro to $225,000 per year and raising the annual
cash bonus target for Mr. Varvaro up to 40% of his base salary. On
March 14, 2016, the Board increased the base salary of Mr. Varvaro
to $250,000. On April 25, 2016, Mr. Varvaro’s base salary
increased to $300,000 as the Company’s common stock was
listed on the NASDAQ Stock Market.
The
severance terms of the Amended Varvaro Agreement provide that in
the event Mr. Varvaro’s employment with us is terminated
voluntarily by Mr. Varvaro he will be entitled to any accrued but
unpaid base salary, any stock vested through the date of his
termination and a pro-rated portion of 40% of his salary (40% of
this salary being the “Maximum Annual Bonus”) for the
year of termination. In addition, if Mr. Varvaro leaves the Company
for Good Reason he will also be entitled to severance equal to the
Maximum Annual Bonus, and he shall be deemed to have been employed
for the entirety of such year. “Good Reason” means any
of the following: (A) the assignment of duties materially
inconsistent with those of other employees in similar employment
positions, and Mr. Varvaro provides written notice to the Company
within 60 days of such assignment that such duties are materially
inconsistent with those duties of such similarly-situated employees
and the Company fails to release Mr. Varvaro from his obligation to
perform such inconsistent duties and to re-assign Mr. Varvaro to
his customary duties within 20 business days after the
Company’s receipt of such notice; or (B) the termination of
Frank Jaksch as the Company’s Chief Executive Officer either
by the Company without “Cause” or by the Mr. Jaksch for
“Good Reason,” and Mr. Varvaro provides written notice
within 60 days of such termination, or (C) a failure by the Company
to comply with any other material provision of the Amended Varvaro
Agreement which has not been cured within 60 days after notice of
such noncompliance has been given by Mr. Varvaro to the Company, or
if such failure is not capable of being cured in such time, a cure
will not have been diligently pursued by the Company within such 60
day period.
-20-
In
the event Mr. Varvaro is terminated as a result of his death or
disability he will be entitled to his accrued but unpaid base
salary, stock vested through the date of his termination and,
notwithstanding any policy of the Company to the contrary, any
annual bonus that would be due to him for the fiscal year in which
termination pursuant to death or disability took place in an amount
no less than the prorated portion of his Maximum Annual Bonus. Mr.
Varvaro’s bonus will be either prorated or paid in full to
him, or his estate, as the case may be, at the time he would have
received such bonus had he remained an employee of the
Company.
In the event that Mr. Varvaro is terminated by the
Company for “Cause” (as defined in the Amended Varvaro
Agreement), he will only be entitled to his accrued but unpaid base
salary, and
accrued but unpaid welfare and retirement
benefits
.
In the event that Mr. Varvaro is terminated due to
a “Cessation of Business” (as defined in the Amended
Varvaro Agreement), Mr. Varvaro will be entitled to a lump sum
payment of base salary until the last to occur of the term or
renewal term of the agreement or
the expiration of the 12
month period from the date of termination, and an amount equal to
the Maximum Annual Bonus
.
In the event the Company terminates Mr.
Varvaro’s employment “without Cause,” Mr. Varvaro
will be entitled to severance in the form of any stock vested
through the date of his termination and
severance equal to
two weeks of base salary for each full year of service to a maximum
of eight weeks of the base salary
, or,
if Mr. Varvaro enters into a standard separation
waiver, and
release agreement of all claims against the Company
, Mr. Varvaro will receive continuation of base
salary and health
care continuation coverage
payments
, together with applicable
fringe benefits as provided to other executive employees until the
last to occur of the expiration of the term or renewal term then in
effect or 24 months from the date of termination (the
“Severance Period”), and he will receive his Maximum
Annual Bonus if the Severance Period is equal to 24 months or a pro
rata portion thereof if less, as well as the full vesting of any
otherwise unvested stock.
Employment Agreement with Troy Rhonemus
On
March 6, 2014, the Company entered into an Employment Agreement
(the “Rhonemus Agreement”) with Troy Rhonemus. The
Rhonemus Agreement has a one year term beginning on the date of the
agreement that automatically renews unless the Rhonemus Agreement
is terminated in accordance with its terms. The Rhonemus Agreement
provides for a base salary of $180,000, and provides for an annual
cash bonus (based on performance targets) of up to 30% of his base
salary (30% of this salary being the “Maximum Annual
Bonus”), and provides for option grants of 83,334 shares of
Common Stock. The option grants were awarded on February 21,
2014.
On
March 17, 2015, the Board increased the base salary of Mr. Rhonemus
to $190,000. In addition, on April 16, 2015, the Board approved
increasing the base salary of Mr. Rhonemus to $215,000, effective
upon the listing of the Company’s common stock on a national
securities exchange. On March 14, 2016, the Board increased the
base salary of Mr. Rhonemus to $210,000. On April 25, 2016, Mr.
Rhonemus’ base salary increased to $235,000 as the
Company’s common stock was listed on the NASDAQ Stock
Market.
The severance terms of the Rhonemus Agreement
provide that in the event Mr. Rhonemus’ employment with the
Company is terminated voluntarily by Mr. Rhonemus,
or the
Company terminates Mr. Rhonemus’ employment without
“Cause” (as defined in the Rhonemus Agreement), Mr.
Rhonemus will be entitled to severance equal to two weeks of base
salary for each full year of service to a maximum of eight weeks of
the base salary. If Mr. Rhonemus enters into a standard separation,
waiver and release agreement of all claims against the Company, Mr.
Rhonemus will receive continuation of base salary and health
benefits, together with applicable fringe benefits as provided
until the expiration of 12 months from the date of
termination.
“Good
Reason” means a failure by the Company to comply with any
other material provision of the Rhonemus Agreement which has not
been cured within 60 days after notice of such failure has been
given by Mr. Rhonemus to the Company,
which notice has been
given by Mr. Rhonemus to the Company no later than 60 days after
the initial existence of such failure,
or if such failure is not capable of being cured
in such time, a cure will not have been diligently pursued by the
Company within such 60 day period.
In
the event that Mr. Rhonemus is terminated by the Company for
“Cause,” he will only be entitled to his accrued but
unpaid base salary, and any accrued but unpaid welfare and
retirement benefits.
In
the event that Mr. Rhonemus is terminated due to a “Cessation
of Business” (as defined in the Rhonemus Agreement), Mr.
Rhonemus will be entitled to a lump sum payment of (i) base salary
until the last to occur of (A) the expiration of the remaining
portion of the initial term or the then applicable renewal term, as
the case may be, or (B) the expiration of the 12-month period
commencing on the date Mr. Rhonemus is terminated, and (ii) the
Maximum Annual Bonus.
2016 Director Compensation
On
November 8, 2016, the Company adopted a Non-Employee Director
Compensation Policy, effective July 3, 2016, after evaluating the
recommendations from the retained compensation consultant, Barney
and Barney, a Marsh McLennan Agency. Pursuant to this policy,
non-employee directors receive cash compensation and grant of
options to buy our common stock. In 2016, the options were granted
under the Second Amended and Restated 2007 Equity Incentive Plan of
the Company, or the 2007 Plan.
-21-
Amended and Restated Director Compensation Policy
Under
our Non-Employee Director Compensation Policy, each of our current
non-employee directors is eligible to receive an annual retainer of
$30,000 for serving on the Board and, if applicable, an additional
annual retainer of $30,000 for serving as the Chairman of the
Board. The chairpersons of the Audit Committee, the Compensation
Committee, and the Nominating and Corporate Governance Committee
receive an additional $20,000, $15,000, and $10,000, respectively,
per year for service as chairperson for such committee. Members of
the Audit Committee, the Compensation Committee, and the Nominating
and Corporate Governance Committee each receive an additional
$10,000, $7,500 and $5,000, respectively, per year for service on
such committee.
Any
non-employee director who is first elected to the Board will be
granted an option to purchase 40,000 shares of our common stock on
the date of his or her initial election to the Board. In addition,
on the date of each annual meeting, each person who continues to
serve as a non-employee member of the Board following such annual
meeting will be granted a stock option to purchase 20,000 shares of
our common stock. All option grants will have an exercise price per
share equal to the fair market value of our common stock on the
date of grant. Each initial grant for a non-employee director will
vest over a three year period, and each annual grant for a
non-employee director will vest over a one year period, in each
case subject to the director’s continuing service on our
Board.
-22-
The
following table provides information concerning compensation of our
non-employee directors who were directors during the fiscal year
ended December 31, 2016. The compensation reported is for services
as directors for the fiscal year ended December 31,
2016.
Director Compensation Table
|
Name
|
Fees
Earned or
Paid in
Cash ($)
|
Stock Awards($)
|
Option Awards ($)(1)
|
Non-Equity Incentive Plan Compensation ($)
|
Non-Qualified Deferred Compensation Earnings ($)
|
All Other Compensation($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Stephen
Allen (2)
|
38,750
|
-
|
33,116
|
-
|
-
|
-
|
71,886
|
|
Stephen
Block(3)
|
27,500
|
-
|
33,116
|
-
|
-
|
-
|
60,616
|
|
Jeff
Baxter(4)
|
22,500
|
-
|
33,116
|
-
|
-
|
-
|
55,616
|
|
Robert
Fried(5)
|
17,500
|
-
|
33,116
|
-
|
-
|
-
|
50,616
|
|
Kurt
Gustafson(6)
|
8,333
|
-
|
74,587
|
-
|
-
|
-
|
82,920
|
|
Hugh
Dunkerley(7)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Reid
Dabney(8)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
The
amounts in the column titled “Option Awards” above
reflect the aggregate grant date fair value of stock option awards
for the fiscal year ended December 31, 2016. See Note 10 of the
ChromaDex Corporation Consolidated Financial Report included in the
Form 10-K for the year ended December 31, 2016, filed with the SEC
on March 16, 2017, for a description of certain assumptions in the
calculation of the fair value of the Company’s stock options.
Except as stated below with respect to options awarded to Mr.
Gustafson, the options have an exercise price of $2.605 and vest
100% on November 16, 2017.
(2)
On
November 16, 2016, Stephen Allen was awarded the option to purchase
20,000 shares of the Company’s common stock.
(3)
On
November 16, 2016, Stephen Block was awarded the option to purchase
20,000 shares of the Company’s common stock.
(4)
On
November 16, 2016, Jeff Baxter was awarded the option to purchase
20,000 shares of the Company’s common stock.
(5)
On
November 16, 2016, Robert Fried was awarded the option to purchase
20,000 shares of the Company’s common stock. Mr. Fried was a
non-employee director during the year ended December 31,
2016.
(6)
On
November 14, 2016, Kurt Gustafson was awarded the option to
purchase 40,000 shares of the Company’s common stock. The
option has an exercise price of $2.88 and vest 34% on November 14,
2017, 33% on November 14, 2018 and 33% on November 14,
2019.
(7)
Hugh
Dunkerley resigned from the Board of Directors on May 13,
2016.
(8)
Reid
Dabney resigned from the Board of Directors on August 19,
2016.
Grants of Plan-Based Awards
The
following table summarizes the stock option awards granted to our
named executive officers during the year ended
December
31, 2016:
|
Name
|
|
Grant
Date
|
All
Other Option Awards: Number of Securities Underlying
Options
|
Exercise
or Base Price of Option Awards ($/Share)(1)
|
Grant
Date Fair Value of Stock and Option Awards($)(2)
|
|
Frank
L. Jaksch Jr.
|
|
8/15/2016
|
85,000
|
$
4.04
|
$
216,980
|
|
Thomas
C. Varvaro
|
|
8/15/2016
|
70,000
|
$
4.04
|
$
178,689
|
|
Troy
A. Rhonemus
|
|
8/15/2016
|
50,000
|
$
4.04
|
$
127,635
|
-23-
(1)
The exercise price of the stock options awarded
was determined in accordance with
our Second Amended and
Restated 2007 Equity Incentive Plan, which provides that the
exercise price for an option granted be the average of the highest
and lowest trading prices of our common stock on the date of
grant.
(2)
Based upon the aggregate grant date fair value of
stock option awards. See
Note 10
of the ChromaDex Corporation Consolidated
Financial Report included in the Form 10-K for the year ended
December 31, 2016, filed with the SEC on March 16, 2017, for a
description of certain assumptions in the calculation of the fair
value of the Company’s stock options.
Option Exercises and Stock Vested
The
following table summarizes, with respect to our named executive
officers, all options that were exercised and restricted
stock
vested during the year ended December 31, 2016. Our named executive
officers did not exercise any options and restricted
stock
awarded to executive officers were not vested:
|
|
Option
Awards
|
Restricted
Stock
|
||
|
Name
|
Number
of Shares Acquired on Exercise(#)
|
Value
Realized
on
Exercise ($)
|
Number
of Shares Vested (#)
|
Value
Realized
on
Vesting ($)
|
|
Frank L. Jaksch
Jr.
|
-
|
$
-
|
-
|
$
-
|
|
Thomas C.
Varvaro
|
-
|
$
-
|
-
|
$
-
|
|
Troy A.
Rhonemus
|
-
|
$
-
|
-
|
$
-
|
Outstanding Equity Awards at Fiscal Year End
The
following table sets forth certain information regarding stock
options and restricted stock granted to our named executive
officers outstanding as of December 31, 2016.
-24-
Outstanding Stock Options at 2016 Fiscal Year-End
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
|
Equity
Incentive
Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
|
Option
Exercise
Price($)
|
Option
Expiration Date
|
|
Frank L. Jaksch
Jr.
|
233,334
|
—
|
|
—
|
4.50
|
4/21/2018
|
|
|
50,000
|
—
|
|
—
|
4.50
|
4/21/2018
|
|
|
33,334
|
—
|
|
—
|
1.50
|
5/13/2019
|
|
|
33,334
|
—
|
|
—
|
5.10
|
5/20/2020
|
|
|
41,667
|
—
|
|
—
|
4.62
|
5/10/2021
|
|
|
83,334
|
—
|
|
—
|
1.92
|
8/28/2022
|
|
|
633,810
|
—
|
|
—
|
2.835
|
9/15/2022
|
|
|
31,254
|
18,746
|
(1
)
|
—
|
3.75
|
6/18/2024
|
|
|
17,709
|
32,292
|
(2
)
|
—
|
3.66
|
7/6/2025
|
|
|
—
|
85,000
|
(3
)
|
—
|
4.04
|
8/15/2026
|
|
Thomas C.
Varvaro
|
33,334
|
—
|
|
—
|
4.50
|
4/21/2018
|
|
|
25,000
|
—
|
|
—
|
1.50
|
5/13/2019
|
|
|
137,236
|
—
|
|
—
|
4.635
|
5/20/2020
|
|
|
1,430
|
—
|
|
—
|
4.62
|
5/10/2021
|
|
|
66,668
|
—
|
|
—
|
0.64
|
8/28/2022
|
|
|
287,840
|
—
|
|
—
|
2.835
|
9/15/2022
|
|
|
26,043
|
15,624
|
(4
)
|
—
|
3.75
|
6/18/2024
|
|
|
14,758
|
24,909
|
(5
)
|
—
|
3.66
|
7/6/2025
|
|
|
—
|
70,000
|
(6
)
|
—
|
4.04
|
8/15/2026
|
|
Troy A.
Rhonemus
|
130,559
|
2,776
|
(7
)
|
—
|
1.89
|
1/25/2023
|
|
|
78,705
|
4,629
|
(8
)
|
—
|
5.25
|
2/21/2024
|
|
|
15,627
|
9,374
|
(9
)
|
—
|
3.75
|
6/18/2024
|
|
|
11,806
|
21,528
|
(10
)
|
—
|
3.66
|
7/6/2025
|
|
|
—
|
50,000
|
(11
)
|
—
|
4.04
|
8/15/2026
|
(1)
1,042 of Mr. Jaksch’s options vest on
18
th
of every month through June 18,
2018.
(2)
1,042 of Mr. Jaksch’s options vest on
6
th
of every month through July 6,
2019.
(3)
21,250 of Mr. Jaksch’s options vest on
August 15, 2017 and 1,771 of his options vest on 15
th
of every month through August
15, 2020.
(4)
868 of Mr. Varvaro’s options vest on
18
th
of every month through June 18,
2018.
(5)
868 of Mr. Varvaro’s options vest on
6
th
of every month through July 6,
2019.
(6)
17,500 of Mr. Varvaro’s options vest
on August 15, 2017 and 1,458 of his options vest on 15
th
of every month through August
15, 2020.
(7)
2,776 of Mr. Rhonemus’ options vested on January 25,
2017.
(8)
2,315 of Mr. Rhonemus’ options vest on
21
st
of every month through February
21, 2017.
(9)
521 of Mr. Rhonemus’ options vest on
18
th
of every month through June 18,
2018.
(10)
694 of Mr. Rhonemus’ options vest on
6
th
of every month through July 6,
2019.
(11)
12,500 of Mr. Rhonemus’ options vest
on August 15, 2017 and 1,042 of his options vest on 15
th
of every month through August
15, 2020.
-25-
Outstanding Restricted Stock at 2016 Fiscal Year-End
|
Name
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares of Units of Stock That Have Not Vested
($)
|
Equity incentive plan awards: Number of unearned shares, units or
other rights that have no vested (#) (1)
|
Equity incentive plan awards: Market or payout value of unearned
shares, units or other rights that have not vested ($)
(2)
|
|
Frank L. Jaksch
Jr.
|
—
|
—
|
166,668
|
$
551,671
|
|
Thomas C.
Varvaro
|
—
|
—
|
166,668
|
$
551,671
|
|
Troy A.
Rhonemus
|
—
|
—
|
—
|
$
—
|
|
(1)
|
On
June 6, 2012, Frank L. Jaksch Jr. and Thomas C. Varvaro were each
awarded 83,334 shares of restricted stock. In addition, on January
2, 2014, Mr. Jaksch and Mr. Varvaro were each awarded 83,334 shares
each of restricted stock. These shares were to originally vest upon
the earlier to occur of the following: (i) the market price of the
Company’s stock exceeds a certain price, or (ii) one of other
certain triggering events, including the termination of the
officers and members of the board of directors without cause for
any reason. On March 7, 2016, the Company and each of the
executives amended the restricted stock awards to provide that the
awards shall not vest upon the market price of the Company’s
stock exceeding a certain price or listing of the Company’s
stock on a national securities exchange.
|
|
(2)
|
The
amounts in the column titled “Equity incentive plan awards:
Market or payout value of unearned shares, units or other rights
that have not vested” above reflect the aggregate market
value based on the closing market price of the Company’s
stock on December 31, 2016.
|
Equity Compensation Plan Information
The
following table provides information about our equity compensation
plans as of December 31, 2016:
|
|
A
|
B
|
C
|
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(A))
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders
|
5,210,334
|
$
3.47
|
993,305
(1)
|
|
|
|
|
|
|
Equity compensation
plans not approved by security holders
|
-
|
-
|
-
|
|
|
|
|
|
|
Total
|
5,210,334
|
$
3.47
|
993,305
(1)
|
|
(1)
|
Pursuant
to our Second Amended and Restated 2007 Equity Incentive Plan, we
are authorized to issue shares under this plan that total no more
than 20% of our shares of Common Stock issued and outstanding, as
determined on a fully diluted basis.
|
-26-
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than 10% of a registered class
of our equity securities to file initial reports of ownership and
reports of changes in ownership with the SEC and to furnish us with
copies of such reports. To our knowledge, and based solely on our
review of the copies of such forms furnished to us and written
representations that no other reports were required, we believe
that all Section 16(a) filing requirements applicable to our
executive officers, directors and 10% stockholders were met during
the year ended December 31, 2016.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
On
August 28, 2015, the Company entered into an Exclusive Supply
Agreement (the “Supply Agreement”) with Healthspan
Research, LLC (“Healthspan”). Under the terms of the
Supply Agreement, Healthspan agreed to purchase NIAGEN® from
the Company and the Company granted to Healthspan worldwide rights
for resale of specific dietary supplements containing NIAGEN®
in certain direct response channels.
Pursuant to the
terms of the Supply Agreement, in exchange for a 4% equity interest
in Healthspan, the Company agreed to initially supply NIAGEN®
to Healthspan up to a certain amount, and in exchange for an
additional 5% equity interest in Healthspan, the Company will grant
to Healthspan certain exclusive rights to resell NIAGEN®.
Healthspan will pay the Company royalties on the cumulative
worldwide net sales of its finished products containing
NIAGEN®. The exclusivity rights will remain for so long as
Healthspan meets certain minimum purchase requirements. In the
event that, during the initial term, the Company terminates the
exclusivity rights due to failure to meet the minimum purchase
requirements or for any reason other than a material breach of the
Supply Agreement by Healthspan, then the 5% equity interest shall
be automatically redeemed for a purchase price of $1.00 effective
upon the date of termination of the exclusivity
rights.
In
connection with the foregoing, also on August 28, 2015, the Company
and Healthspan entered into an interest purchase agreement and
limited liability company agreement pursuant to which the Company
was issued 9% of the outstanding equity interests of Healthspan.
Rob Fried, a director of the Company, is the manager of Healthspan
and owns 91% of the outstanding equity interests of Healthspan. The
Supply Agreement, interest purchase agreement and limited liability
company agreement were unanimously approved by the independent
directors of the Company.
During
the year ended December 31, 2016, the Company shipped NIAGEN®
to Healthspan to satisfy part of our obligation to supply a certain
amount of NIAGEN® in exchange for the 4% equity interest in
Healthspan, which our cost was approximately $20,000. This was
recorded as a long-term investment at our cost.
The
Company accounted for its ownership interest under the cost method
of accounting as the Company did not have an ability to exercise
significant influence on Healthspan.
On March 12, 2017,
the Company acquired all of the outstanding equity interests of
Healthspan pursuant to a Membership Interest Purchase Agreement
(the “Purchase Agreement”) by and among (i) Robert
Fried, Jeffrey Allen and Dr. Charles Brenner (the
“Sellers”) and (ii) the Company (the
“Acquisition”). Pursuant to the Purchase Agreement, the
Company purchased all of the outstanding membership interests from
the Sellers. Upon the closing of, and as consideration for, the
Acquisition, the Company issued an aggregate of 367,648
unregistered shares of the Company’s common stock to the
Sellers (the “Stock Consideration”) and, in
cancellation of a loan owed by Healthspan to Mr. Fried, paid
$32,500 to Mr. Fried and will also pay Mr. Fried $100,000 on March
12, 2018. The issuance of the Stock Consideration was not
registered under the Securities Act of 1933, as amended, and
therefore may not be offered or sold in the United States absent
registration or an applicable exemption from registration
requirements. Also on March 12, 2017, the Board of Directors
appointed Robert Fried as President and Chief Strategy Officer,
effective immediately. A description of Mr. Fried’s
employment agreement can be found above in the section titled
“
Employment Agreement with
Robert Fried
.”
On June
3, 2016, the Company entered into securities purchase agreements
with Barry Honig, a beneficial owner of over 5% of our common
stock, to raise $5,250,000 in a registered direct offering.
Pursuant to the SPAs, the Company sold a total of 1,117,022 shares
of the Company’s common stock at a purchase price of $4.70
per share. The offering was made pursuant to a prospectus
supplement dated June 3, 2016 and an accompanying prospectus dated
May 8, 2015 pursuant to the Company’s shelf registration
statement on Form S-3 that was filed with the Securities and
Exchange Commission on May 8, 2015 and became effective on June 5,
2015 (File No. 333-203204). The prospectus supplement registered
the shares of common stock issued in the offering.
On
November 4, 2015, the Company entered into securities purchase
agreements with Barry Honig, Michael Brauser and Frost Gamma
Investments Trust, each beneficial owners of over 5% of our common
stock, to raise an aggregate of $2,000,000 in a registered direct
offering. Pursuant to the purchase agreements, the Company sold a
total of 200,000 Units at a purchase price of $10.00 per Unit, with
each Unit consisting of 2.667 shares of the Company’s common
stock and a warrant to purchase 1.333 shares of common stock at an
exercise price of $4.50 and a term of 3 years. The offering was
made pursuant to a prospectus supplement dated November 4, 2015 and
an accompanying prospectus dated May 8, 2015 pursuant to the
Company’s shelf registration statement on Form S-3 that was
filed with the Securities and Exchange Commission on May 8, 2015
and became effective on June 5, 2015 (File No. 333-203204). The
prospectus supplement registered the shares of common stock issued
in the offering and the common stock underlying the
warrants.
-27-
Review,
approval or ratification of transactions with related
persons.
On an ongoing basis, the Audit Committee reviews
all “related party transactions” (those transactions
that are required to be disclosed in this Annual Report on Form
10-K by SEC Regulation S-K, Item 404 and under NASDAQ rules), if
any, for potential conflicts of interest and all such transactions
must be approved by the Audit Committee
. In November 2016,
the Company adopted a written Related-Person Transactions Policy
that sets forth the Company’s policies and procedures
regarding the identification, review, consideration and approval or
ratification of “related-persons transactions.” For
purposes of the Company’s policy only, a
“related-person transaction” is a transaction,
arrangement or relationship (or any series of similar transactions,
arrangements or relationships) in which the Company and any
“related person” are participants involving an amount
that exceeds $120,000. Transactions involving compensation for
services provided to the Company as an employee, director,
consultant or similar capacity by a related person are not covered
by this policy. A related person is any executive officer,
director, or more than 5% stockholder of the Company, including any
of their immediate family members, and any entity owned or
controlled by such persons. Under the policy, where a transaction
has been identified as a related-person transaction, management
must present information regarding the proposed related-person
transaction to the Audit Committee (or, where Audit Committee
approval would be inappropriate, to another independent body of the
Board of Directors) for consideration and approval or
ratification.
-28-
PROPOSAL 2:
APPROVAL OF THE CHROMADEX CORPORATION 2017 EQUITY INCENTIVE
PLAN
Summary of the Proposal
At the annual meeting, our stockholders will be
requested to consider and
approve the ChromaDex Corporation
2017 Equity Incentive Plan, or the 2017 Plan. The 2017 Plan was
approved by our Board of Directors, or Board, on April
6, 2017, subject to approval by our stockholders. The 2017
Plan is intended to be the successor to the ChromaDex Corporation
Second Amended and Restated 2007 Equity Incentive Plan, or the 2007
Plan.
Approval of the
2017 Plan by our stockholders will allow us to grant stock options,
restricted stock unit awards and other awards at levels determined
appropriate by our Board or Compensation Committee. The 2017 Plan
will also allow us to utilize a broad array of equity incentives
and performance cash incentives in order to secure and retain the
services of our employees, directors and consultants, and to
provide long-term incentives that align the interests of our
employees, directors and consultants with the interests of our
stockholders. Stockholders are urged to read the actual text of the
2017 Plan in its entirety, which is appended to this Proxy
Statement as Appendix A.
Requested
Shares
Subject
to adjustment for certain changes in our capitalization, the
aggregate number of shares of our common stock that may be issued
under the 2017 Plan will not exceed the sum of (i) 3,000,000 new
shares, (ii) the number of unallocated shares remaining
available for the grant of new awards under the 2007 Plan as of the
effective date of the 2017 Plan (which is equal to 387,313 shares
as of April 18, 2017), and (iii) any Prior Plans’
Returning Shares (as defined below in “Description of the
2017 Equity Incentive Plan—Shares Available for
Awards”), as such shares become available from time to time.
Based on historic grant practices, our Board has estimated that
such aggregate number of shares should be sufficient to cover
awards for the next three years.
Key
Plan Features
The
2017 Plan includes provisions that are designed to protect our
stockholders’ interests and to reflect corporate governance
best practices including:
●
No single trigger accelerated vesting upon
change in control
. The 2017 Plan does not provide for
automatic vesting of awards upon a change in control.
●
Awards subject to forfeiture/clawback
.
Awards granted under the 2017 Plan will be subject to recoupment in
accordance with any clawback policy that we are required to adopt
pursuant to the listing standards of any national securities
exchange or association on which our securities are listed or as is
otherwise required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act or other applicable law. In addition, we
may impose other clawback, recovery or recoupment provisions in an
award agreement, including a reacquisition right in respect of
previously acquired shares or other cash or property upon the
occurrence of cause.
●
Repricing is not allowed
. The 2017 Plan
prohibits the repricing of outstanding stock options and stock
appreciation rights and the cancellation of any outstanding stock
options or stock appreciation rights that have an exercise or
strike price greater than the then-current fair market value of our
common stock in exchange for cash or other stock awards under the
2017 Plan without prior stockholder approval.
●
No liberal change in control
definition
. The change in control definition in the 2017
Plan is not a “liberal” definition. A change in control
transaction must actually occur in order for the change in control
provisions in the 2017 Plan to be triggered.
●
No discounted stock options or stock
appreciation rights
. All stock options and stock
appreciation rights granted under the 2017 Plan must have an
exercise or strike price equal to or greater than the fair market
value of our common stock on the date the stock option or stock
appreciation right is granted.
●
Administration by independent
committee
. The 2017 Plan will be administered by the members
of our Compensation Committee, all of whom are “non-employee
directors” within the meaning of Rule 16b-3 under the
Exchange Act and “independent” within the meaning of
the NASDAQ listing standards. In addition, all of the members of
our Compensation Committee, which has been delegated certain
authorities with respect to awards that are intended to qualify as
“performance-based compensation” under
Section 162(m) of the Code, are “outside
directors” within the meaning of Section 162(m) of the
Code.
-29-
●
Material amendments require stockholder
approval
. Consistent with NASDAQ rules, the 2017 Plan
requires stockholder approval of any material revisions to the 2017
Plan. In addition, certain other amendments to the 2017 Plan
require stockholder approval.
●
Limit on non-employee director awards and
other awards
. The maximum number of shares subject to stock
awards granted under the 2017 Plan or otherwise during any calendar
year to any of our non-employee directors, taken together with any
cash fees paid by the Company to such non-employee director during
such calendar year for service on the Board, may not exceed
$600,000 in total value (calculating the value of any such stock
awards based on the grant date fair value of such stock awards for
financial reporting purposes), or with respect to the calendar year
in which a non-employee director is first appointed or elected to
the Board, $900,000. The 2017 Plan also contains other annual
per-participant limits on stock options, stock appreciation rights
and performance-based stock and cash awards.
Performance-Based
Awards
Approval of the
2017 Plan by our stockholders will also constitute approval of
terms and conditions set forth therein that will permit us to grant
stock options, stock appreciation rights and performance-based
stock and cash awards under the 2017 Plan that may qualify as
“performance-based compensation” within the meaning of
Section 162(m) of the Code. Section 162(m) of the Code
disallows a deduction to any publicly held corporation and its
affiliates for certain compensation paid to “covered
employees” in a taxable year to the extent that compensation
to a covered employee exceeds $1 million. However, some kinds of
compensation, including qualified “performance-based
compensation,” are not subject to this deduction limitation.
For compensation awarded under a plan to qualify as
“performance-based compensation” under
Section 162(m) of the Code, among other things, the following
terms must be disclosed to and approved by the stockholders before
the compensation is paid: (i) a description of the employees
eligible to receive such awards; (ii) a per-person limit on
the number of shares subject to stock options, stock appreciation
rights and performance-based stock awards, and the amount of cash
subject to performance-based cash awards, that may be granted to
any employee under the plan in any year; and (iii) a
description of the business criteria upon which the performance
goals for performance-based awards may be granted (or become vested
or exercisable). Accordingly, we are requesting that our
stockholders approve the 2017 Plan, which includes terms and
conditions regarding eligibility for awards, annual per-person
limits on awards and the business criteria for performance-based
awards granted under the 2017 Plan (as described in the summary
below).
We
believe it is in the best interests of our company and our
stockholders to preserve the ability to grant
“performance-based compensation” under
Section 162(m) of the Code. However, in certain circumstances,
we may determine to grant compensation to covered employees that is
not intended to qualify as “performance-based
compensation” for purposes of Section 162(m) of the
Code. Moreover, even if we grant compensation that is intended to
qualify as “performance-based compensation” for
purposes of Section 162(m) of the Code, we cannot guarantee
that such compensation ultimately will be deductible by
us.
Stockholder
Approval
If this
Proposal 2 is approved by our stockholders, the 2017 Plan will
become effective as of the date of the annual meeting. Regardless
of such approval, no additional awards may be granted under the
2007 Plan or the
ChromaDex, Inc. 2000
Non-Qualified Incentive Stock Option Plan
, (the 2000 Plan
and collectively with the 2007 Plan, the Prior Plans) because such
Prior Plans have already terminated; however, all outstanding
awards granted under such Prior Plans will continue to be subject
to the terms and conditions as set forth in the agreements
evidencing such awards and the terms of the Prior Plans. In the
event that our stockholders do not approve this Proposal 2, the
2017 Plan will not become effective and the Company will not have
an omnibus equity compensation plan under which it may grant
awards.
Overhang
The
following table provides certain additional information regarding
our equity incentive program.
|
|
As of April
18, 2017
|
|
Total number of
shares of common stock subject to outstanding stock
options
|
5,793,960
|
|
Weighted-average
exercise price of outstanding stock options
|
$
3.40
|
|
Weighted-average
remaining term of outstanding stock options
|
6.3
years
|
|
Total number of
shares of common stock subject to outstanding full value
awards
|
542,003
|
|
Total number of
shares of common stock available for grant under the 2007
Plan
|
387,313
|
|
Total number of
shares of common stock available for grant under other equity
incentive plans
|
387,313
|
|
|
As
of Record Date
|
|
Total number of
shares of common stock outstanding
|
38,442,051
|
|
Per-share closing
price of common stock as reported on the NASDAQ Stock
Market
|
$
2.33
|
-30-
Burn
Rate
The
following table provides detailed information regarding the
activity related to our equity incentive plans for fiscal year
2016.
|
|
Fiscal Year 2016
|
|
Total number of
shares of common stock subject to stock options
granted
|
5,210,334
|
|
Total number of
shares of common stock subject to full value awards
granted
|
360,003
|
|
Weighted-average
number of shares of common stock outstanding
|
37,294,321
|
|
Burn
Rate
|
14.9
%
|
Description
of the 2017 Equity Incentive Plan
The
material features of the 2017 Plan are described below. The
following description of the 2017 Plan is a summary only and is
qualified in its entirety by reference to the complete text of the
2017 Plan. Stockholders are urged to read the actual text of the
2017 Plan in its entirety, which is attached to this proxy
statement as Exhibit A.
Purpose
The
2017 Plan is designed to secure and retain the services of our
employees, directors and consultants, provide incentives for our
employees, directors and consultants to exert maximum efforts for
the success of our company and our affiliates, and provide a means
by which our employees, directors and consultants may be given an
opportunity to benefit from increases in the value of our common
stock.
Successor to 2007 Plan
The
2017 Plan is the successor to the 2007 Plan. The 2007 Plan expired
and no additional awards can be granted under the 2007
Plan.
Types of Awards
The
terms of the 2017 Plan provide for the grant of incentive stock
options, nonstatutory stock options, stock appreciation rights,
restricted stock awards, restricted stock unit awards, other stock
awards, and performance awards that may be settled in cash, stock,
or other property.
Shares Available for Awards
Subject
to adjustment for certain changes in our capitalization, the Share
Reserve will not exceed 8,793,960 shares, which is the sum of
(i) 3,000,000 shares, plus (ii) the number of unallocated
shares remaining available for the grant of new awards under the
2007 Plan as of the effective date of the 2017 Plan and
(ii) any Prior Plans’ Returning Shares (as defined
below), as such shares become available from time to
time.
The
term “Prior Plans’ Returning Shares” refer to the
following shares of our common stock subject to any outstanding
stock award granted under the Prior Plans: (i) any shares
subject to such stock award that are not issued because such stock
award expires or otherwise terminates without all of the shares
covered by such stock award having been issued; (ii) any
shares subject to such stock award that are not issued because such
stock award is settled in cash; (iii) any shares issued
pursuant to such stock award that are forfeited back to or
repurchased by us because of the failure to meet a contingency or
condition required for the vesting of such shares; and (iv) any
shares that are reacquired, withheld (or not issued) to satisfy a
tax withholding obligation in connection with an award or to
satisfy the purchase price or exercise price of a stock
award.
The
following shares of our common stock will become available again
for issuance under the 2017 Plan: (i) any shares subject to a
stock award that are not issued because such stock award expires or
otherwise terminates without all of the shares covered by such
stock award having been issued; (ii) any shares subject to a
stock award that are not issued because such stock award is settled
in cash; (iii) any shares issued pursuant to a stock award
that are forfeited back to or repurchased by us because of the
failure to meet a contingency or condition required for the vesting
of such shares; and any shares reacquired by the Company in
satisfaction of tax withholding obligations on a stock award or as
consideration for the exercise or purchase price of a stock
award.
Eligibility
All of
our (including our affiliates’) approximately 93 employees, 5
non-employee directors and 4 consultants as of April 18, 2017
are eligible to participate in the 2017 Plan and may receive all
types of awards other than incentive stock options. Incentive stock
options may be granted under the 2017 Plan only to our employees
(including officers) and employees of our affiliates.
-31-
Section 162(m) Limits
Under
the 2017 Plan, subject to adjustment for certain changes in our
capitalization, no participant will be eligible to be granted
performance-based compensation during any calendar year more than:
(i) a maximum of 2,000,000 shares of our common stock subject
to stock options and stock appreciation rights whose value is
determined by reference to an increase over an exercise or strike
price of at least 100% of the fair market value of our common stock
on the date of grant; (ii) a maximum of 2,000,000 shares of
our common stock subject to performance stock awards; and
(iii) a maximum of $5,000,000 subject to performance cash
awards. These limits are designed to allow us to grant awards that
are intended to be exempt from the $1 million limitation on the
income tax deductibility of compensation paid per covered employee
imposed by Section 162(m) of the Code, and will not apply to
awards that the Board determines will not be treated as
performance-based compensation.
Non-Employee Director Compensation Limit
Under
the 2017 Plan, the maximum number of shares of our common stock
subject to stock awards granted under the 2017 Plan or otherwise
during any one calendar year to any of our non-employee directors,
taken together with any cash fees paid by the Company to such
non-employee director during such calendar year for services on the
Board, will not exceed $
600,000
in total
value (calculating the value of any such stock awards based on the
grant date fair value of such stock awards for financial reporting
purposes), or, with respect to the calendar year in which a
non-employee director is first appointed or elected to the Board,
$
900,000
.
Administration
The
2017 Plan will be administered by our Board, which may in turn
delegate authority to administer the 2017 Plan to a committee. Our
Board has delegated concurrent authority to administer the 2017
Plan to our Compensation Committee, but may, at any time, revest in
itself some or all of the power delegated to our Compensation
Committee. The Board and the Compensation Committee are each
considered to be a Plan Administrator for purposes of this Proposal
2. Subject to the terms of the 2017 Plan, the Plan Administrator
may determine the recipients, the types of awards to be granted,
the number of shares of our common subject to or the cash value of
awards, and the terms and conditions of awards granted under the
2017 Plan, including the period of their exercisability and
vesting. The Plan Administrator also has the authority to provide
for accelerated exercisability and vesting of awards. Subject to
the limitations set forth below, the Plan Administrator also
determines the fair market value applicable to a stock award and
the exercise or strike price of stock options and stock
appreciation rights granted under the 2017 Plan.
The
Plan Administrator may also delegate to one or more officers the
authority to designate employees who are not officers to be
recipients of certain stock awards and the number of shares of our
common stock subject to such stock awards. Under any such
delegation, the Plan Administrator will specify the total number of
shares of our common stock that may be subject to the stock awards
granted by such officer. The officer may not grant a stock award to
himself or herself.
Repricing; Cancellation and Re-Grant of Stock Awards
Under
the 2017 Plan, the Plan Administrator does not have the authority
to reprice any outstanding stock option or stock appreciation right
by reducing the exercise or strike price of the stock option or
stock appreciation right or to cancel any outstanding stock option
or stock appreciation right that has an exercise or strike price
greater than the then-current fair market value of our common stock
in exchange for cash or other stock awards without obtaining the
approval of our stockholders. Such approval must be obtained within
12 months prior to such an event.
Stock Options
Stock
options may be granted under the 2017 Plan pursuant to stock option
agreements. The 2017 Plan permits the grant of stock options that
are intended to qualify as incentive stock options, or ISOs, and
nonstatutory stock options, or NSOs.
The
exercise price of a stock option granted under the 2017 Plan may
not be less than 100% of the fair market value of the common stock
subject to the stock option on the date of grant and, in some cases
(see “Limitations on Incentive Stock Options” below),
may not be less than 110% of such fair market value.
The
term of stock options granted under the 2017 Plan may not exceed
ten years and, in some cases (see “Limitations on Incentive
Stock Options” below), may not exceed five years. Except as
otherwise provided in a participant’s stock option agreement
or other written agreement with us or one of our affiliates, if a
participant’s service relationship with us or any of our
affiliates (referred to in this Proposal 2 as “continuous
service”) terminates (other than for cause and other than
upon the participant’s death or disability), the participant
may exercise any vested stock options for up to three months
following the participant’s termination of continuous
service. Except as otherwise provided in a participant’s
stock option agreement or other written agreement with us or one of
our affiliates, if a participant’s continuous service
terminates due to the participant’s disability or death (or
the participant dies within a specified period, if any, following
termination of continuous service), the participant, or his or her
beneficiary, as applicable, may exercise any vested stock options
for up to 12 months following the participant’s
termination due to the participant’s disability or for up to
18 months following the participant’s death. Except as
explicitly provided otherwise in a participant’s stock option
agreement or other written agreement with us or one of our
affiliates, if a participant’s continuous service is
terminated for cause (as defined in the 2017 Plan), all stock
options held by the participant will terminate upon the
participant’s termination of continuous service and the
participant will be prohibited from exercising any stock option
from and after such termination date. Except as otherwise provided
in a participant’s stock option agreement or other written
agreement with us or one of our affiliates, the term of a stock
option may be extended if the exercise of the stock option
following the participant’s termination of continuous service
(other than for cause and other than upon the participant’s
death or disability) would be prohibited by applicable securities
laws or if the sale of any common stock received upon exercise of
the stock option following the participant’s termination of
continuous service (other than for cause) would violate our insider
trading policy. In no event, however, may a stock option be
exercised after its original expiration date.
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Acceptable forms of
consideration for the purchase of our common stock pursuant to the
exercise of a stock option under the 2017 Plan will be determined
by the Plan Administrator and may include payment: (i) by
cash, check, bank draft or money order payable to us;
(ii) pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board; (iii) by delivery to
us of shares of our common stock (either by actual delivery or
attestation); (iv) by a net exercise arrangement (for NSOs
only); or (v) in other legal consideration approved by the
Plan Administrator.
Stock
options granted under the 2017 Plan may become exercisable in
cumulative increments, or “vest,” as determined by the
Plan Administrator at the rate specified in the stock option
agreement. Shares covered by different stock options granted under
the 2017 Plan may be subject to different vesting schedules as the
Plan Administrator may determine.
The
Plan Administrator may impose limitations on the transferability of
stock options granted under the 2017 Plan in its discretion.
Generally, a participant may not transfer a stock option granted
under the 2017 Plan other than by will or the laws of descent and
distribution or, subject to approval by the Plan Administrator,
pursuant to a domestic relations order or an official marital
settlement agreement. However, the Plan Administrator may permit
transfer of a stock option in a manner that is not prohibited by
applicable tax and securities laws. In addition, subject to
approval by the Plan Administrator, a participant may designate a
beneficiary who may exercise the stock option following the
participant’s death.
Limitations on Incentive Stock Options
The
aggregate fair market value, determined at the time of grant, of
shares of our common stock with respect to ISOs that are
exercisable for the first time by a participant during any calendar
year under all of our stock plans may not exceed $100,000. The
stock options or portions of stock options that exceed this limit
or otherwise fail to qualify as ISOs are treated as NSOs. No ISO
may be granted to any person who, at the time of grant, owns or is
deemed to own stock possessing more than 10% of our total combined
voting power or that of any affiliate unless the following
conditions are satisfied:
●
the exercise price
of the ISO must be at least 110% of the fair market value of the
common stock subject to the ISO on the date of grant;
and
●
the term of the ISO
must not exceed five years from the date of grant.
Subject
to adjustment for certain changes in our capitalization, the
aggregate maximum number of shares of our common stock that may be
issued pursuant to the exercise of ISOs under the 2017 Plan is
17,587,920 shares.
Stock Appreciation Rights
Stock
appreciation rights may be granted under the 2017 Plan pursuant to
stock appreciation right agreements. Each stock appreciation right
is denominated in common stock share equivalents. The strike price
of each stock appreciation right will be determined by the Plan
Administrator, but will in no event be less than 100% of the fair
market value of the common stock subject to the stock appreciation
right on the date of grant. The Plan Administrator may also impose
restrictions or conditions upon the vesting of stock appreciation
rights that it deems appropriate. The appreciation distribution
payable upon exercise of a stock appreciation right may be paid in
shares of our common stock, in cash, in a combination of cash and
stock, or in any other form of consideration determined by the Plan
Administrator and set forth in the stock appreciation right
agreement. Stock appreciation rights will be subject to the same
conditions upon termination of continuous service and restrictions
on transfer as stock options under the 2017 Plan.
Restricted Stock Awards
Restricted stock
awards may be granted under the 2017 Plan pursuant to restricted
stock award agreements. A restricted stock award may be granted in
consideration for cash, check, bank draft or money order payable to
us, the participant’s services performed for us or any of our
affiliates, or any other form of legal consideration acceptable to
the Plan Administrator. Shares of our common stock acquired under a
restricted stock award may be subject to forfeiture to or
repurchase by us in accordance with a vesting schedule to be
determined by the Plan Administrator. Rights to acquire shares of
our common stock under a restricted stock award may be transferred
only upon such terms and conditions as are set forth in the
restricted stock award agreement. A restricted stock award
agreement may provide that any dividends paid on restricted stock
will be subject to the same vesting conditions as apply to the
shares subject to the restricted stock award. Upon a
participant’s termination of continuous service for any
reason, any shares subject to restricted stock awards held by the
participant that have not vested as of such termination date may be
forfeited to or repurchased by us.
Restricted Stock Unit Awards
Restricted stock
unit awards may be granted under the 2017 Plan pursuant to
restricted stock unit award agreements. Payment of any purchase
price may be made in any form of legal consideration acceptable to
the Plan Administrator. A restricted stock unit award may be
settled by the delivery of shares of our common stock, in cash, in
a combination of cash and stock, or in any other form of
consideration determined by the Plan Administrator and set forth in
the restricted stock unit award agreement. Restricted stock unit
awards may be subject to vesting in accordance with a vesting
schedule to be determined by the Plan Administrator. Dividend
equivalents may be credited in respect of shares of our common
stock covered by a restricted stock unit award, provided that any
additional shares credited by reason of such dividend equivalents
will be subject to all of the same terms and conditions of the
underlying restricted stock unit award. Except as otherwise
provided in a participant’s restricted stock unit award
agreement or other written agreement with us or one of our
affiliates, restricted stock units that have not vested will be
forfeited upon the participant’s termination of continuous
service for any reason.
-33-
Performance Awards
The
2017 Plan allows us to grant performance stock and cash awards,
including such awards that may qualify as performance-based
compensation that is not subject to the $1 million limitation on
the income tax deductibility of compensation paid per covered
employee imposed by Section 162(m) of the Code.
A
performance stock award is a stock award that is payable (including
that may be granted, may vest, or may be exercised) contingent upon
the attainment of pre-determined performance goals during a
performance period. A performance stock award may require the
completion of a specified period of continuous service. The length
of any performance period, the performance goals to be achieved
during the performance period, and the measure of whether and to
what degree such performance goals have been attained will be
determined by our performance subcommittee, except that the Plan
Administrator also may make any such determinations to the extent
that the award is not intended to qualify as performance-based
compensation under Section 162(m) of the Code. In addition, to
the extent permitted by applicable law and the performance stock
award agreement, the Plan Administrator may determine that cash may
be used in payment of performance stock awards.
A
performance cash award is a cash award that is payable contingent
upon the attainment of pre-determined performance goals during a
performance period. A performance cash award may require the
completion of a specified period of continuous service. The length
of any performance period, the performance goals to be achieved
during the performance period, and the measure of whether and to
what degree such performance goals have been attained will be
determined by our Compensation Committee, except that the Plan
Administrator also may make any such determinations to the extent
that the award is not intended to qualify as performance-based
compensation under Section 162(m) of the Code. The Plan
Administrator may specify the form of payment of performance cash
awards, which may be cash or other property, or may provide for a
participant to have the option for his or her performance cash
award to be paid in cash or other property.
In
granting a performance stock or cash award intended to qualify as
“performance-based compensation” under
Section 162(m) of the Code, our Compensation Committee will
set a period of time, or a performance period, over which the
attainment of one or more goals, or performance goals, will be
measured. Within the time period prescribed by Section 162(m)
of the Code (no later than the earlier of the 90th day of a
performance period and the date on which 25% of the performance
period has elapsed, and in any event at a time when the achievement
of the performance goals remains substantially uncertain), our
Compensation Committee will establish the performance goals, based
upon one or more criteria, or performance criteria, enumerated in
the 2017 Plan and described below. As soon as administratively
practicable following the end of the performance period, our
Compensation Committee will certify in writing whether the
performance goals have been satisfied.
Performance goals
under the 2017 Plan will be based on any one or more of the
following performance criteria (i) cash flow; (ii) earnings
(including gross margin, earnings before interest and taxes,
earnings before taxes, earnings before interest, taxes,
depreciation, amortization and charges for stock-based
compensation, earnings before interest, taxes, depreciation and
amortization, earnings before interest, taxes and depreciation and
net earnings); (iii) earnings per share; (iv) growth in earnings or
earnings per share; (v) stock price; (vi) return on equity or
average stockholder equity; (vii) total stockholder return or
growth in total stockholder return either directly or in relation
to a comparative group; (viii) return on capital; (ix) return on
assets or net assets; (x) revenue, growth in revenue or return on
sales; (xi) income or net income; (xii) operating income, (xiii)
net operating income or net operating income after tax; (xiv)
operating profit or net operating profit; (xv) operating margin;
(xvi) return on operating revenue or return on operating profit;
(xvii) regulatory filings; (xviii) regulatory approvals, litigation
or regulatory resolution goals; (xix) other operational, regulatory
or departmental objectives; (xx) budget comparisons; (xxi) growth
in stockholder value relative to established indexes, or another
peer group or peer group index; (xxiii) development and
implementation of strategic plans and/or organizational
restructuring goals; (xxiv) development and implementation of risk
and crisis management programs; (xxv) improvement in workforce
diversity; (xxvi) compliance requirements and compliance relief;
(xxvii) safety goals; (xxviii) productivity goals; (xxix) workforce
management and succession planning goals; (xxx) economic value
added (including typical adjustments consistently applied from
generally accepted accounting principles required to determine
economic value added performance measures); (xxxi) measures of
customer satisfaction, employee satisfaction or staff development;
(xxxii) development or marketing collaborations, formations of
joint ventures or partnerships or the completion of other similar
transactions intended to enhance the Company’s revenue or
profitability or enhance its customer base; (xxxiii) merger and
acquisitions; (xxxiv) implementation or completion of projects or
processes (including, without limitation, clinical trial
initiation, clinical trial enrollment and dates, clinical trial
results, regulatory filing submissions, regulatory filing
acceptances, regulatory or advisory committee interactions,
regulatory approvals, new and supplemental indications for existing
products, and product supply); (xxxv) initiation of phases of
clinical trials and/or studies by specific dates; (xxxvi)
acquisition of new customers, including institutional accounts;
(xxxvii) customer retention and/or repeat order rate; (xxxviii)
number of institutional customer accounts (xxxix) budget
management; (xl) improvements in sample and test processing times;
(xli) regulatory milestones; (xlii) progress of internal research
or clinical programs; (xliii) progress of partnered programs;
(xliv) partner satisfaction; (xlv) milestones related to samples
received and/or tests run; (xlvi) expansion of sales in additional
geographies or markets; (xlvii) research progress, including the
development of programs; (xlviii) submission to, or approval by, a
regulatory body (including, but not limited to the U.S. Food and
Drug Administration) of an applicable filing or a product; (xlix)
timely completion of clinical trials; (l) milestones related to
samples received and/or tests or panels run; (li) expansion of
sales in additional geographies or markets; (lii) research
progress, including the development of programs; (liii) patient
samples processed and billed; (liv) sample processing operating
metrics (including, without limitation, failure rate maximums and
reduction of repeat rates); (lv) strategic partnerships or
transactions (including in-licensing and out-licensing of
intellectual property; (lvi) and other similar criteria consistent
with the foregoing; and (lvii) to the extent that an Award is not
intended to comply with Section 162(m) of the Code, other measures
of performance selected by the Board.
-34-
Performance goals
may be based on a company-wide basis, with respect to one or more
business units, divisions, affiliates or business segments, and in
either absolute terms or relative to the performance of one or more
comparable companies or the performance of one or more relevant
indices. Our Compensation Committee (or, to the extent that an
award is not intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Plan
Administrator) is authorized to make appropriate adjustments in the
method of calculating the attainment of performance goals for a
performance period as follows;
provided, however
, that to the extent
that an award is intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, any such
adjustment may be made only if such adjustment is objectively
determinable and specified in the award agreement at the time the
award is granted or in such other document setting forth the
performance goals for the award at the time the performance goals
are established: (1) to exclude restructuring and/or other
nonrecurring charges; (2) to exclude exchange rate effects; (3) to
exclude the effects of changes to generally accepted accounting
principles; (4) to exclude the effects of any statutory adjustments
to corporate tax rates; (5) to exclude the effects of items that
are unusual in nature or occur infrequently as determined under
generally accepted accounting principles; (6) to exclude the
dilutive effects of acquisitions or joint ventures; (7) to assume
that any business divested by the Company achieved performance
objectives at targeted levels during the balance of a Performance
Period following such divestiture; (8) to exclude the effect of any
change in the outstanding shares of common stock of the Company by
reason of any stock dividend or split, stock repurchase,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other similar corporate
change, or any distributions to common stockholders other than
regular cash dividends; (9) to exclude the effects of stock based
compensation and the award of bonuses under the Company’s
bonus plans; (10) to exclude costs incurred in connection with
potential acquisitions or divestitures that are required to be
expensed under generally accepted accounting principles; (11) to
exclude the goodwill and intangible asset impairment charges that
are required to be recorded under generally accepted accounting
principles; and (12) to exclude the effects of the timing of
acceptance for review and/or approval of submissions to the FDA or
any other regulatory body.
In
addition, our Compensation Committee (or, to the extent that an
award is not intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Plan
Administrator) retains the discretion to reduce or eliminate the
compensation or economic benefit due upon the attainment of any
performance goals and to define the manner of calculating the
performance criteria it selects to use for a performance
period.
Other Stock Awards
Other
forms of stock awards valued in whole or in part by reference to,
or otherwise based on, our common stock may be granted either alone
or in addition to other stock awards under the 2017 Plan. The Plan
Administrator will have sole and complete authority to determine
the persons to whom and the time or times at which such other stock
awards will be granted, the number of shares of our common stock to
be granted and all other terms and conditions of such other stock
awards.
Clawback Policy
Awards
granted under the 2017 Plan will be subject to recoupment in
accordance with any clawback policy that we are required to adopt
pursuant to the listing standards of any national securities
exchange or association on which our securities are listed or as is
otherwise required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act or other applicable law. In addition, the
Plan Administrator may impose other clawback, recovery or
recoupment provisions in an award agreement as the Plan
Administrator determines necessary or appropriate, including a
reacquisition right in respect of previously acquired shares of our
common stock or other cash or property upon the occurrence of
cause.
Changes to Capital Structure
In the
event of certain capitalization adjustments, the Plan Administrator
will appropriately adjust: (i) the class(es) and maximum
number of securities subject to the 2017 Plan; (ii) the class(es)
and maximum number of securities that may be issued pursuant to the
exercise of ISOs; (iii) the class(es) and maximum number of
securities that may be awarded to any participant pursuant to
Section 162(m) limits; (iv) the class and maximum number of
shares that may be awarded to any non-employee director; and
(v) the class(es) and number of securities and price per share
of stock subject to outstanding stock awards.
Corporate Transaction
In the
event of a corporate transaction (as defined in the 2017 Plan and
described below), the Plan Administrator may take one or more of
the following actions with respect to stock awards, contingent upon
the closing or consummation of the corporate transaction, unless
otherwise provided in the instrument evidencing the stock award, in
any other written agreement between us or one of our affiliates and
the participant or in our director compensation policy, or unless
otherwise provided by the Plan Administrator at the time of grant
of the stock award:
●
arrange for the
surviving or acquiring corporation (or its parent company) to
assume or continue the stock award or to substitute a similar stock
award for the stock award (including an award to acquire the same
consideration paid to our stockholders pursuant to the corporate
transaction);
-35-
●
arrange for the
assignment of any reacquisition or repurchase rights held by us in
respect of our common stock issued pursuant to the stock award to
the surviving or acquiring corporation (or its parent
company);
●
accelerate the
vesting (and, if applicable, the exercisability) of the stock award
to a date prior to the effective time of the corporate transaction
as determined by the Plan Administrator (or, if the Plan
Administrator does not determine such a date, to the date that is
five days prior to the effective date of the corporate
transaction), with the stock award terminating if not exercised (if
applicable) at or prior to the effective time of the corporate
transaction;
provided,
however
, that the Plan Administrator may require
participants to complete and deliver to us a notice of exercise
before the effective date of a corporate transaction, which is
contingent upon the effectiveness of the corporate
transaction;
●
arrange for the
lapse of any reacquisition or repurchase rights held by us with
respect to the stock award;
●
cancel or arrange
for the cancellation of the stock award, to the extent not vested
or not exercised prior to the effective time of the corporate
transaction, and pay such cash consideration (including no
consideration) as the Plan Administrator may consider appropriate;
and
●
cancel or arrange
for the cancellation of the stock award, to the extent not vested
or not exercised prior to the effective time of the corporate
transaction, in exchange for a payment, in such form as may be
determined by the Board equal to the excess, if any, of
(A) the per share amount payable to holders of common stock in
connection with the corporate transaction, over (B) the per
share exercise price under the applicable award. For clarity, this
payment may be zero ($0) if the value of the property is equal to
or less than the exercise price. In addition, any escrow, holdback,
earnout or similar provisions in the definitive agreement for the
corporate transaction may apply to such payment to the same extent
and in the same manner as such provisions apply to the holders of
common stock.
The
Plan Administrator is not required to take the same action with
respect to all stock awards or portions of stock awards or with
respect to all participants. The Plan Administrator may take
different actions with respect to the vested and unvested portions
of a stock award.
In the
event of a corporate transaction, unless otherwise provided in the
instrument evidencing a performance cash award or any other written
agreement between us or one of our affiliates and the participant,
or unless otherwise provided by the Plan Administrator, all
performance cash awards will terminate prior to the effective time
of the corporate transaction.
For
purposes of the 2017 Plan, a corporate transaction generally will
be deemed to occur in the event of the consummation of: (i) a
sale or other disposition of all or substantially all of our
consolidated assets; (ii) a sale or other disposition of more
than 50% of our outstanding securities; (iii) a merger,
consolidation or similar transaction following which we are not the
surviving corporation; or (iv) a merger, consolidation or
similar transaction following which we are the surviving
corporation but the shares of our common stock outstanding
immediately prior to the transaction are converted or exchanged
into other property by virtue of the transaction.
Change in Control
Under
the 2017 Plan, a stock award may be subject to additional
acceleration of vesting and exercisability upon or after a change
in control (as defined in the 2017 Plan and described below) as may
be provided in the participant’s stock award agreement, in
any other written agreement with us or one of our affiliates or in
our director compensation policy, but in the absence of such
provision, no such acceleration will occur.
For
purposes of the 2017 Plan, a change in control generally will be
deemed to occur in the event: (i) a person, entity or group
acquires, directly or indirectly, our securities representing more
than 50% of the combined voting power of our then outstanding
securities, other than by virtue of a merger, consolidation, or
similar transaction; (ii) there is consummated a merger,
consolidation, or similar transaction and, immediately after the
consummation of such transaction, our stockholders immediately
prior thereto do not own, directly or indirectly, more than 50% of
the combined outstanding voting power of the surviving entity or
the parent of the surviving entity in substantially the same
proportions as their ownership of our outstanding voting securities
immediately prior to such transaction; (iii) there is
consummated a sale or other disposition of all or substantially all
of our consolidated assets, other than a sale or other disposition
to an entity in which more than 50% of the entity’s combined
voting power is owned by our stockholders in substantially the same
proportions as their ownership of our outstanding voting securities
immediately prior to such sale or other disposition; or (iv) a
majority of our Board becomes comprised of individuals whose
nomination, appointment, or election was not approved by a majority
of the Board members or their approved successors.
Plan Amendments and Termination
The
Plan Administrator will have the authority to amend or terminate
the 2017 Plan at any time. However, except as otherwise provided in
the 2017 Plan or an award agreement, no amendment or termination of
the 2017 Plan may materially impair a participant’s rights
under his or her outstanding awards without the participant’s
consent.
-36-
We will
obtain stockholder approval of any amendment to the 2017 Plan as
required by applicable law and listing requirements. No incentive
stock options may be granted under the 2017 Plan after the tenth
anniversary of the date the 2017 Plan was adopted by our
Board.
U.S.
Federal Income Tax Consequences
The
following is a summary of the principal United States federal
income tax consequences to participants and us with respect to
participation in the 2017 Plan. This summary is not intended to be
exhaustive and does not discuss the income tax laws of any local,
state or foreign jurisdiction in which a participant may reside.
The information is based upon current federal income tax rules and
therefore is subject to change when those rules change. Because the
tax consequences to any participant may depend on his or her
particular situation, each participant should consult the
participant’s tax adviser regarding the federal, state, local
and other tax consequences of the grant or exercise of an award or
the disposition of stock acquired the 2017 Plan. The 2017 Plan is
not qualified under the provisions of Section 401(a) of the
Code and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974. Our ability to realize the
benefit of any tax deductions described below depends on our
generation of taxable income as well as the requirement of
reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of our tax reporting obligations.
Nonstatutory Stock Options
Generally, there is
no taxation upon the grant of an NSO if the stock option is granted
with an exercise price equal to the fair market value of the
underlying stock on the grant date. Upon exercise, a participant
will recognize ordinary income equal to the excess, if any, of the
fair market value of the underlying stock on the date of exercise
of the stock option over the exercise price. If the participant is
employed by us or one of our affiliates, that income will be
subject to withholding taxes. The participant’s tax basis in
those shares will be equal to their fair market value on the date
of exercise of the stock option, and the participant’s
capital gain holding period for those shares will begin on that
date.
Subject
to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax
deduction equal to the taxable ordinary income realized by the
participant.
Incentive Stock Options
The
2017 Plan provides for the grant of stock options that are intended
to qualify as “incentive stock options,” as defined in
Section 422 of the Code. Under the Code, a participant
generally is not subject to ordinary income tax upon the grant or
exercise of an ISO. If the participant holds a share received upon
exercise of an ISO for more than two years from the date the stock
option was granted and more than one year from the date the stock
option was exercised, which is referred to as the required holding
period, the difference, if any, between the amount realized on a
sale or other taxable disposition of that share and the
participant’s tax basis in that share will be long-term
capital gain or loss.
If,
however, a participant disposes of a share acquired upon exercise
of an ISO before the end of the required holding period, which is
referred to as a disqualifying disposition, the participant
generally will recognize ordinary income in the year of the
disqualifying disposition equal to the excess, if any, of the fair
market value of the share on the date of exercise of the stock
option over the exercise price. However, if the sales proceeds are
less than the fair market value of the share on the date of
exercise of the stock option, the amount of ordinary income
recognized by the participant will not exceed the gain, if any,
realized on the sale. If the amount realized on a disqualifying
disposition exceeds the fair market value of the share on the date
of exercise of the stock option, that excess will be short-term or
long-term capital gain, depending on whether the holding period for
the share exceeds one year.
For
purposes of the alternative minimum tax, the amount by which the
fair market value of a share of stock acquired upon exercise of an
ISO exceeds the exercise price of the stock option generally will
be an adjustment included in the participant’s alternative
minimum taxable income for the year in which the stock option is
exercised. If, however, there is a disqualifying disposition of the
share in the year in which the stock option is exercised, there
will be no adjustment for alternative minimum tax purposes with
respect to that share. In computing alternative minimum taxable
income, the tax basis of a share acquired upon exercise of an ISO
is increased by the amount of the adjustment taken into account
with respect to that share for alternative minimum tax purposes in
the year the stock option is exercised.
We are
not allowed a tax deduction with respect to the grant or exercise
of an ISO or the disposition of a share acquired upon exercise of
an ISO after the required holding period. If there is a
disqualifying disposition of a share, however, we will generally be
entitled to a tax deduction equal to the taxable ordinary income
realized by the participant, subject to the requirement of
reasonableness and the provisions of Section 162(m) of the
Code, and provided that either the employee includes that amount in
income or we timely satisfy our reporting requirements with respect
to that amount.
-37-
Restricted Stock Awards
Generally, the
recipient of a restricted stock award will recognize ordinary
income at the time the stock is received equal to the excess, if
any, of the fair market value of the stock received over any amount
paid by the recipient in exchange for the stock. If, however, the
stock is not vested when it is received (for example, if the
employee is required to work for a period of time in order to have
the right to sell the stock), the recipient generally will not
recognize income until the stock becomes vested, at which time the
recipient will recognize ordinary income equal to the excess, if
any, of the fair market value of the stock on the date it becomes
vested over any amount paid by the recipient in exchange for the
stock. A recipient may, however, file an election with the Internal
Revenue Service, within 30 days following his or her receipt
of the stock award, to recognize ordinary income, as of the date
the recipient receives the award, equal to the excess, if any, of
the fair market value of the stock on the date the award is granted
over any amount paid by the recipient for the stock.
The
recipient’s basis for the determination of gain or loss upon
the subsequent disposition of shares acquired from a restricted
stock award will be the amount paid for such shares plus any
ordinary income recognized either when the stock is received or
when the stock becomes vested.
Subject
to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax
deduction equal to the taxable ordinary income realized by the
recipient of the restricted stock award.
Restricted Stock Unit Awards
Generally, the
recipient of a restricted stock unit award structured to comply
with the requirements of Section 409A of the Code or an
exception to Section 409A of the Code will recognize ordinary
income at the time the stock is delivered equal to the excess, if
any, of the fair market value of the stock received over any amount
paid by the recipient in exchange for the stock. To comply with the
requirements of Section 409A of the Code, the stock subject to
a restricted stock unit award may generally only be delivered upon
one of the following events: a fixed calendar date (or dates),
separation from service, death, disability or a change in control.
If delivery occurs on another date, unless the restricted stock
unit award otherwise complies with or qualifies for an exception to
the requirements of Section 409A of the Code (including
delivery upon achievement of a performance goal), in addition to
the tax treatment described above, the recipient will owe an
additional 20% federal tax and interest on any taxes
owed.
The
recipient’s basis for the determination of gain or loss upon
the subsequent disposition of shares acquired from a restricted
stock unit award will be the amount paid for such shares plus any
ordinary income recognized when the stock is
delivered.
Subject
to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax
deduction equal to the taxable ordinary income realized by the
recipient of the restricted stock unit award.
Stock Appreciation Rights
Generally, if a
stock appreciation right is granted with an exercise price equal to
the fair market value of the underlying stock on the grant date,
the recipient will recognize ordinary income equal to the fair
market value of the stock or cash received upon such exercise.
Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code, and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax
deduction equal to the taxable ordinary income realized by the
recipient of the stock appreciation right.
-38-
New Plan Benefits
|
2017 Equity Incentive Plan
|
||
|
Name and position
|
Dollar value
|
Number of
stock options
|
|
Frank L. Jaksch,
Jr., Chief Executive Officer
|
(1
)
|
(1
)
|
|
|
|
|
|
Robert Fried,
President and Chief Strategy Officer
|
(1
)
|
(1
)
|
|
|
|
|
|
Thomas C. Varvaro,
Chief Financial Officer
|
(1
)
|
(1
)
|
|
|
|
|
|
|
|
|
|
Troy Rhonemus,
Chief Operating Officer
|
(1
)
|
(1
)
|
|
All current
executive officers as a group
|
(1
)
|
(1
)
|
|
|
|
|
|
Steven D. Rubin,
Non-executive director
|
$
66,744
(2)
|
40,000
|
|
All other current
directors who are not executive officers as a group
|
(3
)
|
(3
)
|
|
All employees,
including all current officers who are not executive officers, as a
group
|
(1
)
|
(1
)
|
(1)
Awards granted
under the 2017 Plan to our executive officers and other employees
are discretionary and are not subject to set benefits or amounts
under the terms of the 2017 Plan. Our Board and our Compensation
Committee have only granted 40,000 stock options to Steven Rubin,
our non-executive director, under the 2017 Plan subject to
stockholder approval of this Proposal 2. Accordingly, the benefits
or amounts that will be received by or allocated to our executive
officers and other employees under the 2017 Plan, as well as the
benefits or amounts which would have been received by or allocated
to our executive officers and other employees for fiscal year 2007
if the 2017 Plan had been in effect, are not
determinable.
(2)
The fair value was estimated at the date of grant
using the Black-Scholes based option valuation model. Following
assumptions were used: (i) expected term 6.0 years; (ii) expected
volatility 72.4%; (iii) expected dividends 0%; and (iv) risk-free
rate 2.0%.
(3)
Awards granted
under the 2017 Plan to our non-employee directors are discretionary
and are not subject to set benefits or amounts under the terms of
the 2017 Plan. However, pursuant to our compensation policy for
non-employee directors, each of our current non-employee directors
is eligible to receive an annual retainer of $30,000 for serving on
the Board and, if applicable, an additional annual retainer of
$30,000 for serving as the Chairman of the Board. The chairpersons
of the Audit Committee, the Compensation Committee, and the
Nominating and Corporate Governance Committee receive an additional
$20,000, $15,000, and $10,000, respectively, per year for service
as chairperson for such committee. Members of the Audit Committee,
the Compensation Committee, and the Nominating and Corporate
Governance Committee each receive an additional $10,000, $7,500 and
$5,000, respectively, per year for service on such committee. Any
non-employee director who is first elected to the Board will be
granted an option to purchase 40,000 shares of our common stock on
the date of his or her initial election to the Board. In addition,
on the date of each annual meeting, each person who continues to
serve as a non-employee member of the Board following such annual
meeting will be granted a stock option to purchase 20,000 shares of
our common stock. All option grants will have an exercise price per
share equal to the fair market value of our common stock on the
date of grant. Each initial grant for a non-employee director will
vest over a three year period, and each annual grant for a
non-employee director will vest over a one year period, in each
case subject to the director’s continuing service on our
Board. After the date of the annual meeting, any such awards will
be granted under the 2017 Plan if this Proposal 2 is approved by
our stockholders. For additional information regarding our
compensation policy for non-employee directors, see “Director
Compensation.”
Required
Vote and Board of Directors Recommendation
Approval of this
Proposal 2 requires the affirmative vote of the holders of a
majority of the shares represented and entitled to vote at the
annual meeting either in person or by proxy. Abstentions will be
counted toward the tabulation of votes cast on proposals presented
to the stockholders and will have the same effect as negative
votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been
approved.
THE
BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE CHROMADEX
CORPORATION 2017 EQUITY INCENTIVE PLAN, AND PROXIES SOLICITED BY
THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS
INDICATED OTHERWISE ON THE PROXY.
-39-
PROPOSAL 3:
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Marcum LLP
(“Marcum”), to serve as our independent registered
public accounting firm for the fiscal year ending December 30,
2017
and our Board of Directors has further directed that
management submit the selection of its independent registered
public accountant firm for ratification by the stockholders at the
Annual Meeting. Marcum has audited the Company’s financial
statements since 2013. Representatives of Marcum are not expected
to be present at the annual meeting.
Stockholder
ratification of the selection of Marcum as the Company’s
independent registered public accountants is not required by
Delaware law, the Company’s certificate of incorporation, or
the Company’s bylaws. However, the Audit Committee is
submitting the selection of Marcum to the stockholders for
ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee will
reconsider whether to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may direct the
appointment of different independent registered public accountants
at any time during the year if the Audit Committee determines that
such a change would be in the best interests of the Company and its
stockholders.
The
affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the
annual meeting will be required to ratify the selection of Marcum.
Abstentions will be counted toward the tabulation of votes cast on
Proposal 3 and will have the same effect as negative votes. Broker
non-votes will be counted towards a quorum, but will not be counted
for any purpose in determining whether Proposal 3 has been
approved.
Audit Fees
The
following table sets forth aggregate fees billed to us by Marcum
LLP, our independent registered public accounting firm during the
fiscal years ended December 31, 2016 and January 2,
2016.
|
|
Fiscal Year Ended
|
|
|
Marcum, LLP
|
December 31, 2016
|
January 2, 2016
|
|
Audit
Fees (1)
|
$
331,000
|
$
234,000
|
|
Audit-Related
Fees
|
$
—
|
$
—
|
|
Tax
Fees
|
$
—
|
$
—
|
|
All
Other Fees
|
$
—
|
$
—
|
(1)
Audit
fees consist of fees billed for professional services rendered by
Marcum in connection with the audit of the Company’s annual
financial statements and internal control over financial reporting
and quarterly review of financial statements included in the
Company’s Quarterly Reports on Form 10-Q, review of our
registration statements and related services that are normally
provided in connection with statutory and regulatory filings or
engagements.
All
fees described above were pre-approved by the Audit Committee. In
connection with the audit of the financial statements for the
fiscal year ended December 31, 2016, the Company entered into an
engagement agreement with Marcum that sets forth the terms by which
Marcum will perform audit services for the Company. That agreement
is subject to alternative dispute resolution procedures and an
exclusion of punitive damages.
Policy for Pre-Approval of Independent Auditor
Services
The
Audit Committee’s policy is to pre-approve all audit and
permissible non-audit services provided by Marcum. These services
may include audit services, audit-related services, tax services
and other services. Pre-approval is generally provided for up to
one year and any pre-approval is detailed as to the specific
service or category of service and is generally subject to a
specific budget. The independent auditor and management are
required to periodically communicate to the Audit Committee
regarding the extent of services provided by the independent
auditor in accordance with this pre-approval, and the fees for the
services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case
basis.
THE
BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
MARCUM LLP AS INDEPENDENT PUBLIC ACCOUNTANT, AND PROXIES SOLICITED
BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER
HAS INDICATED OTHERWISE ON THE PROXY.
-40-
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As
of April 24, 2017, there were approximately 38,442,051 shares of
our Common Stock outstanding. The following table
sets forth certain information regarding the ownership of our
Common Stock as of April 24, 2017, by: each person known to us to
beneficially own more than 5% of our Common Stock; each director;
each of our named executive officers; and all directors and
executive officers as a group. We calculated beneficial
ownership according to Rule 13d-3 of the Exchange Act as of that
date. Shares issuable upon exercise of options or
warrants that are exercisable or convertible within 60 days after
April 24, 2017 are included as beneficially owned by the
holder. Beneficial ownership generally includes voting
and dispositive power with respect to securities. Unless
otherwise indicated below, the persons and entities named in the
table have sole voting and sole dispositive power with respect to
all shares beneficially owned. This table is based upon information
supplied by officers, directors and principal stockholders and
Schedules 13D and 13G filed with the SEC.
|
Name of Beneficial Owner (1)
|
Shares of Common Stock Beneficially Owned (2)
|
Aggregate Percentage Ownership
|
|
|
|
|
|
Dr.
Phillip Frost (3)
|
3,558,410
|
9.24
%
|
|
Michael
Brauser (4)
|
3,055,467
|
7.92
%
|
|
Barry
Honig (5)
|
2,409,312
|
6.27
%
|
|
Black
Sheep, FLP (6)
|
2,075,052
|
5.40
%
|
|
Directors
|
|
|
|
Stephen
Allen (7)
|
130,334
|
*
|
|
Stephen
Block (8)
|
219,996
|
*
|
|
Jeff
Baxter (9)
|
89,167
|
*
|
|
Kurt
Gustafson
|
-
|
*
|
|
Steven
Rubin
|
-
|
*
|
|
Frank
L. Jaksch Jr. (10)
|
3,446,880
|
8.70
%
|
|
Robert
Fried (11)
|
694,318
|
1.80
%
|
|
Named Executive Officers
|
|
|
|
Frank
L. Jaksch Jr., Chief Executive Officer
|
(See above)
|
|
|
Robert
Fried, President and Chief Strategy Officer
|
(See above)
|
|
|
Thomas
C. Varvaro, Chief Financial Officer (12)
|
771,726
|
1.98
%
|
|
Troy
Rhonemus, Chief Operating Officer (13)
|
264,193
|
*
|
|
All directors and executive officers as a group
|
|
|
|
(7 Directors plus Chief Financial Officer
|
|
|
|
and Chief Operating
Officer)
(14)
|
5,616,614
|
13.70
%
|
*
Represents less than 1%.
(1)
Addresses
for the beneficial owners listed are: Dr. Phillip Frost, 4400
Biscayne Blvd., Suite 1500, Miami, FL 33137; Michael Brauser, 4400
Biscayne Blvd., Suite 850, Miami, FL 33137; Barry Honig, 555 South
Federal Highway, #450, Boca Raton, FL 33432; and Black Sheep, FLP 6
Palm Hill Drive, San Juan Capistrano, CA 92675.
(2)
Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting or dispositive power with respect to shares
beneficially owned. Unless otherwise specified, reported ownership
refers to both voting and dispositive power. Shares of Common Stock
issuable upon the conversion of stock options or the exercise of
warrants within the next 60 days are deemed to be converted and
beneficially owned by the individual or group identified in the
Aggregate Percentage Ownership column.
(3)
Based
on beneficial ownership reported on form Schedule 13D filed with
SEC on September 14, 2016. Includes 1,354,479 shares of common
stock and 88,889 warrants to purchase common stock held by Frost
Gamma Investments Trust of which Dr. Phillip Frost is the trustee.
Frost Gamma Limited Partnership is the sole and exclusive
beneficiary of Frost Gamma Investments Trust. Dr. Frost is one of
two limited partners of Frost Gamma Limited Partnership. The
general partner of Frost Gamma Limited Partnership is Frost Gamma,
Inc. and the sole
stockholder
of Frost Gamma, Inc. is Frost-Nevada
Corporation. Dr. Frost is also the sole stockholder of Frost-Nevada
Corporation. Includes 2,115,042 shares held by Phillip and Patricia
Frost Philanthropic Foundation, Inc. of which Dr. Phillip Frost is
President.
-41-
(4)
Based
on beneficial ownership reported on form Schedule 13G filed with
SEC on October 16, 2015 and common stock and warrants issued in a
registered direct offering on November 9, 2015. Includes 403,033
shares directly held by Michael Brauser; 1,208,810 shares held by
Michael & Betsy Brauser TBE, 290,424 shares of common stock and
40,000 warrants held by Grander Holdings, Inc. 401K Profit Sharing
Plan of which Mr. Brauser is a trustee; 114,286 shares held by the
Brauser 2010 GRAT of which Mr. Brauser is a trustee; 114,286 shares
held by Birchtree Capital, LLC of which Mr. Brauser is the manager;
564,286 shares held by BMB Holdings, LLLP of which Mr. Brauser is
the manager of its general partner and 238,095 shares held by Betsy
Brauser Third Amended Trust Agreement beneficially owned by Mr.
Brauser’s spouse which are disclaimed by him. Includes 82,247
stock options exercisable within 60 days.
(5)
Based
on beneficial ownership reported on form Schedule 13G filed with
SEC on February 10, 2017. Includes (i) 1,800,418 shares of common
stock held by Barry Honig and (ii) 608,894 shares of common stock
held by Renee 401K. Excludes (i) 68,888 shares of common stock
underlying warrants held by GRQ Consultants, Inc. 401K
(“401K”) and (ii) 68,889 shares of common stock
underlying warrants held by GRQ Consultants, Inc. Roth 401K FBO
Barry Honig (“Roth 401K”), both of which contain a
4.99% beneficial ownership blocker. Barry Honig is the trustee of
both 401K and Roth 401K and in such capacity has voting and
dispositive power over the securities held by such
entities.
(6)
Black
Sheep, FLP is a family limited partnership the co-general partners
of which are Frank L. Jaksch, Jr. and Tricia Jaksch and the sole
limited partners of which are Frank L. Jaksch, Jr., Tricia Jaksch
and the Jaksch Family Trust.
(7)
Includes
128,334 stock options exercisable within 60 days.
(8)
Includes
203,329 stock options exercisable within 60 days.
(9)
Includes
89,167 stock options exercisable within 60 days.
(10)
Includes
2,075,052 shares owned by Black Sheep, FLP beneficially owned by
Mr. Jaksch because he has shared voting power and shared
dispositive power for such shares. Includes 201,557 shares directly
owned by Mr. Jaksch. Includes 1,170,271 stock options exercisable
within 60 days.
(11)
Direct ownership of
573,241 shares of common stock. Indirect ownership through 6,744
shares held by Jeremy Fried and 6,000 shares held by Benjamin
Fried, who are both sons of Robert Fried. Includes 108,333 stock
options exercisable within 60 days.
(12)
Includes 602,724 stock options exercisable within 60
days.
(13)
Direct
ownership of 6,667 shares of common stock. Indirect ownership
through Toni Rhonemus IRA of 6,134 shares beneficially owned by
Toni Rhonemus who is Mr. Rhonemus’ wife. Includes 251,392
stock options exercisable within 60 days.
(14)
Includes the shares and stock options included above in
footnotes (7) through (13).
On
April 26, 2017, we entered into a Securities Purchase Agreement
(the “Purchase Agreement”) with the purchasers
identified below (the “Purchasers”), pursuant to which
we agreed to sell and issue up to $25.0 million of our Common Stock
at a purchase price of $2.60 per share in three tranches of
approximately $3.5 million, $16.4 million and $5.1 million,
respectively. The first tranche closed on April 27, 2017, pursuant
to which we issued 1,346,154 shares of Common Stock. The second
tranche is expected to occur within 30 days of the closing of the
first tranche, pursuant to which we agreed to issue 6,303,814
shares of Common Stock. The third tranche is expected to occur
following a related stockholder approval to be solicited as soon as
possible after completion of the second tranche. The Purchasers are
Champion River Ventures Limited, which invested $2.1 million in
cash in the first tranche, and Pioneer Step Holdings Limited, which
invested $1.4 million in cash in the first tranche. In addition,
subject to completion of the second tranche, the Purchase Agreement
requires that our Board of Directors increase the number of
authorized directors so as to create two vacant seats on our Board
of Directors, which vacancies shall be filled by nominees selected
by the Purchasers on a date following the Annual Meeting. The above
table does not include any of the shares issued or that may be
issued pursuant to the Purchase Agreement.
The
foregoing description of the Purchase Agreement and related
transaction is not complete and is qualified in its entirety by
reference to the full text of the Purchase Agreement, a copy of
which is attached as Exhibit 99.1 to our Current Report on Form 8-K
filed on April 27, 2017.
-42-
OTHER BUSINESS
As
of the date of this Proxy Statement, the management of the Company
has no knowledge of any business that may be presented for
consideration at the Annual Meeting, other than that described
above. As to other business, if any, that may properly come before
the Annual Meeting, or any adjournment thereof, it is intended that
the Proxy hereby solicited will be voted in respect of such
business in accordance with the judgment of the Proxy
holders.
|
|
BY
ORDER OF THE BOARD OF DIRECTORS
/s/ Stephen Allen
Chairman
of the Board
May
1, 2017
|
-43-
Appendix A
ChromaDex Corporation
2017 Equity Incentive Plan
Adopted by the Board of Directors: April 6, 2017
1.
General.
(a)
Successor
to and Continuation of Prior Plan.
The Plan is intended as the successor to and
continuation of the ChromaDex Corporation Second Amended and
Restated 2007 Equity Incentive Plan, (the
“
2007
Plan
”). Following the
Effective Date, no additional awards may be granted under the 2007
Plan. In addition, from and after 12:01 a.m.
Pacific Time
on the Effective Date, all outstanding
awards granted under the 2007 Plan and the ChromaDex, Inc. 2000
Non-Qualified Incentive Stock Option Plan (the
“
2000
Plan
” and together with
the 2007 Plan, the “
Prior
Plans
”) will remain
subject to the terms of the 2007 Plan or 2000 Plan, as
applicable;
provided,
however
, that the following
shares of Common Stock subject to
any outstanding stock award granted under the
Prior Plans (collectively, the “
Prior
Plans’
Returning
Shares
”) will immediately
be added to the Share Reserve (as defined in Section 3(a)) as and
when such shares become Prior Plans’ Returning Shares and
become available for issuance pursuant to Awards granted under this
Plan:
(i) any shares subject to such stock award that are
not issued because such stock award or any portion thereof expires
or otherwise terminates without all of the shares covered by such
stock award having been issued; (ii) any shares subject to such
stock award that are not issued because such stock award or any
portion thereof is settled in cash; (iii) any shares issued
pursuant to such stock award that are forfeited back to or
repurchased by the Company because of the failure to meet a
contingency or condition required for the vesting of such shares;
and (iv) any shares that are reacquired, withheld (or not issued)
to satisfy a tax withholding obligation in connection with an award
or to satisfy the purchase price or exercise price of a stock
award
. All Awards granted on or after
12:01 a.m.
Pacific Time
on the
Effective Date will be subject to the terms of this
Plan.
(b)
Eligible
Award Recipients.
Employees,
Directors and Consultants are eligible to receive
Awards.
(c)
Available
Awards.
The Plan provides for
the grant of the following types of Awards: (i) Incentive Stock
Options; (ii) Nonstatutory Stock Options; (iii) Stock Appreciation
Rights; (iv) Restricted Stock Awards; (v) Restricted Stock Unit
Awards; (vi) Performance Stock Awards; (vii) Performance Cash
Awards; and (viii) Other Stock Awards.
(d)
Purpose.
The Plan, through the granting
of Awards, is intended to help the Company secure and retain the
services of eligible award recipients, provide incentives for such
persons to exert maximum efforts for the success of the Company and
any Affiliate and provide a means by which the eligible recipients
may benefit from increases in value of the Common
Stock.
2.
Administration.
(a)
Administration by Board.
The Board will
administer the Plan. The Board may delegate administration of the
Plan to a Committee or Committees, as provided in Section
2(c).
(b)
Powers of Board.
The Board will have the
power, subject to, and within the limitations of, the express
provisions of the Plan:
(i)
To determine: (A)
who will be granted Awards; (B) when and how each Award will be
granted; (C) what type of Award will be granted; (D) the provisions
of each Award (which need not be identical), including when a
Participant will be permitted to exercise or otherwise receive cash
or Common Stock under the Award; (E) the number of shares of Common
Stock subject to, or the cash value of, an Award; and (F) the Fair
Market Value applicable to a Stock Award.
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(ii)
To
construe and interpret the Plan and Awards granted under it, and to
establish, amend and revoke rules and regulations for
administration of the Plan and Awards. The Board, in the exercise
of these powers, may correct any defect, omission or inconsistency
in the Plan or in any Award Agreement or in the written terms of a
Performance Cash Award, in a manner and to the extent it will deem
necessary or expedient to make the Plan or Award fully
effective.
(iii)
To
settle all controversies regarding the Plan and Awards granted
under it.
(iv)
To
accelerate, in whole or in part, the time at which an Award may be
exercised or vest (or at which cash or shares of Common Stock may
be issued).
(v)
To suspend or
terminate the Plan at any time. Except as otherwise provided in the
Plan (including Section 2(b)(viii)) or an Award Agreement,
suspension or termination of the Plan will not materially impair a
Participant’s rights under an outstanding Award without his
or her written consent.
(vi)
To amend the Plan
in any respect the Board deems necessary or advisable, including,
without limitation, by adopting amendments relating to Incentive
Stock Options and certain nonqualified deferred compensation under
Section 409A of the Code and/or to make the Plan or Awards granted
under the Plan compliant with the requirements for Incentive Stock
Options or exempt from or compliant with the requirements for
nonqualified deferred compensation under Section 409A of the Code,
subject to the limitations, if any, of applicable law. If required
by applicable law or listing requirements, and except as provided
in Section 9(a) relating to Capitalization Adjustments, the
Company will seek stockholder approval of any amendment of the Plan
that (A) materially increases the number of shares of Common
Stock available for issuance under the Plan, (B) materially
expands the class of individuals eligible to receive Awards under
the Plan, (C) materially increases the benefits accruing to
Participants under the Plan, (D) materially reduces the price at
which shares of Common Stock may be issued or purchased under the
Plan, (E) materially extends the term of the Plan, or
(F) materially expands the types of Awards available for
issuance under the Plan. Except as otherwise provided in the Plan
(including Section 2(b)(viii)) or an Award Agreement, no amendment
of the Plan will materially impair a Participant’s rights
under an outstanding Award without his or her written
consent.
(vii)
To
submit any amendment to the Plan for stockholder approval,
including, but not limited to, amendments to the Plan intended to
satisfy the requirements of (A) Section 162(m) of the Code
regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to Covered
Employees, (B) Section 422 of the Code regarding incentive stock
options or (C) Rule 16b-3.
(viii)
To
approve forms of Award Agreements for use under the Plan and to
amend the terms of any one or more outstanding Awards, including,
but not limited to, amendments to provide terms more favorable to
the Participant than previously provided in the Award Agreement,
subject to any specified limits in the Plan that are not subject to
Board discretion;
provided,
however,
that except as otherwise provided in the Plan
(including this Section 2(b)(viii)) or an Award Agreement, the
Board may not amend the terms of an outstanding Award if the Board,
in its sole discretion, determines that the amendment, taken as a
whole, will materially impair the Participant’s rights under
such Award without his or her written consent.
Notwithstanding the
foregoing or anything in the Plan to the contrary, unless
prohibited by applicable law, the Board may amend the terms of any
outstanding Award or the Plan, or may suspend or terminate the
Plan, without the affected Participant’s consent, (A) to
maintain the qualified status of the Award as an Incentive Stock
Option under Section 422 of the Code, (B) to change the terms of an
Incentive Stock Option, if such change results in impairment of the
Award solely because it impairs the qualified status of the Award
as an Incentive Stock Option under Section 422 of the Code,
(C) to clarify the manner of exemption from, or to bring the
Award or the Plan into compliance with, Section 409A of the Code,
or (D) to comply with other applicable laws or listing
requirements.
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(ix)
Generally,
to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company
and that are not in conflict with the provisions of the Plan or
Awards.
(x)
To adopt such
procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees, Directors or Consultants
who are foreign nationals or employed outside the United States
(provided that Board approval will not be necessary for immaterial
modifications to the Plan or any Award Agreement that are required
for compliance with the laws of the relevant foreign
jurisdiction).
(i)
General.
The Board may delegate some or all of
the administration of the Plan to a Committee or Committees. If
administration of the Plan is delegated to a Committee, the
Committee will have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a
subcommittee of the Committee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to
the Board will thereafter be to the Committee or subcommittee, as
applicable). Any delegation of administrative powers will be
reflected in resolutions, not inconsistent with the provisions of
the Plan, adopted from time to time by the Board or Committee (as
applicable). The Committee may, at any time, abolish the
subcommittee and/or revest in the Committee any powers delegated to
the subcommittee. The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any
time, revest in the Board some or all of the powers previously
delegated.
(ii)
Section
162(m) and Rule 16b-3 Compliance.
The Committee may consist solely of two (2) or
more Outside Directors, in accordance with Section 162(m) of the
Code, or solely of two (2) or more Non-Employee Directors, in
accordance with Rule 16b-3.
(d)
Delegation to an Officer.
The Board may
delegate to one (1) or more Officers the authority to do one or
both of the following: (i) designate Employees who are not Officers
to be recipients of Options and SARs (and, to the extent permitted
by applicable law, other Stock Awards) and, to the extent permitted
by applicable law, the terms of such Awards; and (ii) determine the
number of shares of Common Stock to be subject to such Stock Awards
granted to such Employees;
provided, however
, that the Board
resolutions regarding such delegation will specify the total number
of shares of Common Stock that may be subject to the Stock Awards
granted by such Officer and that such Officer may not grant a Stock
Award to himself or herself. Any such Stock Awards will be granted
on the form of Award Agreement most recently approved for use by
the Committee or the Board, unless otherwise provided in the
resolutions approving the delegation of authority. The Board may
not delegate authority to an Officer who is acting solely in the
capacity of an Officer (and not also as a Director) to determine
the Fair Market Value pursuant to Section 13(y)(iii).
(e)
Effect of Board’s Decision.
All
determinations, interpretations and constructions made by the Board
in good faith will not be subject to review by any person and will
be final, binding and conclusive on all persons.
(f)
Cancellation and Re-Grant of Stock
Awards.
Neither the Board nor any Committee will have the
authority to (i) reduce the exercise or strike price of any
outstanding Option or SAR under the Plan or (ii) cancel any
outstanding Option or SAR that has an exercise or strike price
greater than the then-current Fair Market Value of the Common Stock
in exchange for cash or other Stock Awards under the Plan, unless
the stockholders of the Company have approved such an action within
twelve (12) months prior to such an event.
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3.
Shares
Subject to the Plan.
(i)
Subject to Section
9(a) relating to Capitalization Adjustments, the aggregate number
of shares of Common Stock that may be issued pursuant to Stock
Awards from and after the Effective Date will not exceed 8,793,960
shares, which is the sum of (A) 3,000,000 new shares, plus (B) the
Prior Plans’ Returning Shares, if any, which become available
for grant under this Plan from time to time (such aggregate number
of shares described in (A) and (B) above, the “
Share
Reserve
”).
(ii)
For
clarity, the Share Reserve in this Section 3(a) is a limitation on
the number of shares of Common Stock that may be issued pursuant to
the Plan. Accordingly, this Section 3(a) does not limit the
granting of Stock Awards except as provided in Section 7(a). Shares
may be issued in connection with a merger or acquisition as
permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE
Listed Company Manual Section 303A.08, AMEX Company Guide Section
711 or other applicable rule, and such issuance will not reduce the
number of shares available for issuance under the
Plan.
(b)
Reversion of Shares to the Share
Reserve.
If a Stock Award or any portion thereof (i) expires
or otherwise terminates without all of the shares covered by such
Stock Award having been issued or (ii) is settled in cash (i.e.,
the Participant receives cash rather than stock), such expiration,
termination or settlement will not reduce (or otherwise offset) the
number of shares of Common Stock that may be available for issuance
under the Plan. If any shares of Common Stock issued pursuant to a
Stock Award are forfeited back to or repurchased by the Company
because of the failure to meet a contingency or condition required
to vest such shares in the Participant, then the shares that are
forfeited or repurchased will revert to and again become available
for issuance under the Plan. Any shares reacquired by the Company
in satisfaction of tax withholding obligations on a Stock Award or
as consideration for the exercise or purchase price of a Stock
Award will again become available for issuance under the
Plan.
(c)
Incentive Stock Option Limit.
Subject to
the Share Reserve and Section 9(a) relating to Capitalization
Adjustments, the aggregate maximum number of shares of Common Stock
that may be issued pursuant to the exercise of Incentive Stock
Options will be 17,587,920 shares of Common Stock.
(d)
Section 162(m) Limitations.
Subject to
the Share Reserve and Section 9(a) relating to Capitalization
Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, the following
limitations will apply;
provided,
however,
that if any additional Awards are granted to any
Participant during any calendar year in excess of the limits below,
compensation attributable to such additional Awards will not
satisfy the requirements to be considered “qualified
performance-based compensation” under Section 162(m) of the
Code unless such additional Award is approved by the
Company’s stockholders.
(i)
A maximum of two
million (2,000,000)
shares of Common Stock subject to
Options and SARs whose value is determined by reference to an
increase over an exercise or strike price of at least one hundred
percent (100%) of the Fair Market Value on the date any such
Option or SAR is granted may be granted to any one Participant
during any one calendar year.
(ii)
A
maximum of two million (2,000,000)
shares of Common Stock subject to
Performance Stock Awards may be granted to any one Participant
during any one calendar year (whether the grant, vesting or
exercise is contingent upon the attainment during the Performance
Period of the Performance Goals).
(iii)
A
maximum of five million dollars ($5,000,000) subject to Performance
Cash Awards may be granted to any one Participant during any one
calendar year.
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For
purposes of this Section 3(d): (1) if a Performance Stock Award is
in the form of an Option or SAR, it will count only against the
Performance Stock Award limit set forth in Section 3(d)(ii); (2) if
a Performance Stock Award may be paid in the form of cash, it will
count only against the Performance Stock Award limit set forth in
Section 3(d)(ii); and (3) if a Performance Cash Award may be paid
in the form of Common Stock, it will count only against the
Performance Cash Award limit set forth in Section
3(d)(iii).
(e)
Limits on Grants to Non-Employee
Directors.
The maximum number of
shares of Common Stock subject to Stock Awards granted under the
Plan or otherwise during any one calendar year to any Non-Employee
Director, taken together with any cash fees paid by the Company to
such Non-Employee Director during such calendar year for service on
the Board, will not exceed six hundred thousand dollars ($600,000)
in total value (calculating the value of any such Stock Awards
based on the grant date fair value of such Stock Awards for
financial reporting purposes), or, with respect to the calendar
year in which a Non-Employee Director is first appointed or elected
to the Board, nine hundred thousand dollars
($900,000).
(f)
Source of Shares.
The stock issuable
under the Plan will be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the
Company on the open market or otherwise.
4.
Eligibility.
(a)
Eligibility for Specific Stock Awards.
Incentive Stock Options may be granted only to employees of the
Company or a “parent corporation” or “subsidiary
corporation” thereof (as such terms are defined in Sections
424(e) and 424(f) of the Code). Stock Awards other than Incentive
Stock Options may be granted to Employees, Directors and
Consultants;
provided,
however
, that Stock Awards may not be granted to Employees,
Directors and Consultants who are providing Continuous Service only
to any “parent” of the Company, as such term is defined
in Rule 405, unless (i) the stock underlying such Stock Awards is
treated as “service recipient stock” under Section 409A
of the Code (for example, because the Stock Awards are granted
pursuant to a corporate transaction such as a spin off transaction)
or (ii) the Company, in consultation with its legal counsel, has
determined that such Stock Awards are otherwise exempt from or
alternatively comply with Section 409A of the Code.
(b)
Ten Percent Stockholders.
A Ten Percent
Stockholder will not be granted an Incentive Stock Option unless
the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value on the date of grant and
the Option is not exercisable after the expiration of five (5)
years from the date of grant.
Each
Option or SAR Agreement will be in such form and will contain such
terms and conditions as the Board deems appropriate. All Options
will be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of
each type of Option. If an Option is not specifically designated as
an Incentive Stock Option, or if an Option is designated as an
Incentive Stock Option but some portion or all of the Option fails
to qualify as an Incentive Stock Option under the applicable rules,
then the Option (or portion thereof) will be a Nonstatutory Stock
Option. The terms and conditions of separate Option or SAR
Agreements need not be identical;
provided, however
, that each Award
Agreement will conform to (through incorporation of the provisions
hereof by reference in the applicable Award Agreement or otherwise)
the substance of each of the following provisions:
(a)
Term.
Subject to the provisions of
Section 4(b) regarding Ten Percent Stockholders, no Option or SAR
will be exercisable after the expiration of ten (10) years from the
date of its grant or such shorter period specified in the Award
Agreement.
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(b)
Exercise
Price.
Subject to the provisions of Section 4(b) regarding
Ten Percent Stockholders, the exercise or strike price of each
Option or SAR will be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option or
SAR on the date the Award is granted. Notwithstanding the
foregoing, an Option or SAR may be granted with an exercise or
strike price lower than one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Award if such Award
is granted pursuant to an assumption of or substitution for another
option or stock appreciation right pursuant to a Corporate
Transaction and in a manner consistent with the provisions of
Section 409A of the Code and, if applicable, Section 424(a) of the
Code.
Each SAR will be denominated in
shares of Common Stock equivalents.
(c)
Purchase Price for Options.
The purchase
price of Common Stock acquired pursuant to the exercise of an
Option may be paid, to the extent permitted by applicable law and
as determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below. The Board
will have the authority to grant Options that do not permit all of
the following methods of payment (or that otherwise restrict the
ability to use certain methods) and to grant Options that require
the consent of the Company to use a particular method of payment.
The permitted methods of payment are as follows:
(i)
by cash (including
electronic funds transfers), check, bank draft or money order
payable to the Company;
(ii)
pursuant
to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of the stock
subject to the Option, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales
proceeds;
(iii)
by
delivery to the Company (either by actual delivery or attestation)
of shares of Common Stock;
(iv)
if
an Option is a Nonstatutory Stock Option, by a “net
exercise” arrangement pursuant to which the Company will
reduce the number of shares of Common Stock issuable upon exercise
by the largest whole number of shares with a Fair Market Value that
does not exceed the aggregate exercise price;
provided, however
, that the Company
will accept a cash or other payment from the Participant to the
extent of any remaining balance of the aggregate exercise price not
satisfied by such reduction in the number of whole shares to be
issued. Shares of Common Stock will no longer be subject to an
Option and will not be exercisable thereafter to the extent that
(A) shares issuable upon exercise are used to pay the exercise
price pursuant to the “net exercise,” (B) shares are
delivered to the Participant as a result of such exercise, and (C)
shares are withheld to satisfy tax withholding obligations;
or
(v)
in any other form
of legal consideration that may be acceptable to the Board and
specified in the applicable Award Agreement.
(d)
Exercise and Payment of a SAR.
To
exercise any outstanding SAR, the Participant must provide written
notice of exercise to the Company in compliance with the provisions
of the Award Agreement evidencing such SAR. The appreciation
distribution payable on the exercise of a SAR will be not greater
than an amount equal to the excess of (A) the aggregate Fair
Market Value (on the date of the exercise of the SAR) of a number
of shares of Common Stock equal to the number of Common Stock
equivalents in which the Participant is vested under such SAR, and
with respect to which the Participant is exercising the SAR on such
date, over (B) the aggregate strike price of the number of Common
Stock equivalents with respect to which the Participant is
exercising the SAR on such date. The appreciation distribution may
be paid in Common Stock, in cash, in any combination of the two or
in any other form of consideration, as determined by the Board and
contained in the Award Agreement evidencing such SAR.
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(e)
Transferability of Options and SARs.
The
Board may, in its sole discretion, impose such limitations on the
transferability of Options and SARs as the Board will determine. In
the absence of such a determination by the Board to the contrary,
the following restrictions on the transferability of Options and
SARs will apply:
(i)
Restrictions on Transfer.
An Option or
SAR will not be transferable, except by will or by the laws of
descent and distribution (or pursuant to Sections 5(e)(ii) and
5(e)(iii)), and will be exercisable during the lifetime of the
Participant only by the Participant. The Board may permit transfer
of the Option or SAR in a manner that is not prohibited by
applicable tax and securities laws. Except as explicitly provided
in the Plan, neither an Option nor a SAR may be transferred for
consideration.
(ii)
Domestic
Relations Orders.
Subject to the approval of the Board or a
duly authorized Officer, an Option or SAR may be transferred
pursuant to the terms of a domestic relations order, official
marital settlement agreement or other divorce or separation
instrument as permitted by Treasury Regulations Section
1.421-1(b)(2). If an Option is an Incentive Stock Option, such
Option may be deemed to be a Nonstatutory Stock Option as a result
of such transfer.
(iii)
Beneficiary
Designation.
Subject to the approval of the Board or a duly
authorized Officer, a Participant may, by delivering written notice
to the Company, in a form approved by the Company (or the
designated broker), designate a third party who, upon the death of
the Participant, will thereafter be entitled to exercise the Option
or SAR and receive the Common Stock or other consideration
resulting from such exercise. In the absence of such a designation,
upon the death of the Participant, the executor or administrator of
the Participant’s estate will be entitled to exercise the
Option or SAR and receive the Common Stock or other consideration
resulting from such exercise. However, the Company may prohibit
designation of a beneficiary at any time, including due to any
conclusion by the Company that such designation would be
inconsistent with the provisions of applicable laws.
(f)
Vesting Generally.
The total number of
shares of Common Stock subject to an Option or SAR may vest and
become exercisable in periodic installments that may or may not be
equal. The Option or SAR may be subject to such other terms and
conditions on the time or times when it may or may not be exercised
(which may be based on the satisfaction of Performance Goals or
other criteria) as the Board may deem appropriate. The vesting
provisions of individual Options or SARs may vary. The provisions
of this Section 5(f) are subject to any Option or SAR provisions
governing the minimum number of shares of Common Stock as to which
an Option or SAR may be exercised.
(g)
Termination
of Continuous Service.
Except
as otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate, if a Participant’s Continuous Service terminates
(other than for Cause and other than upon the Participant’s
death or Disability), the Participant may exercise his or her
Option or SAR (to the extent that the Participant was entitled to
exercise such Option or SAR as of the date of termination of
Continuous Service), but only within such period of time ending on
the earlier of (i) the date that is three (3) months following such
termination of Continuous Service (or such longer or shorter period
specified in the Award Agreement), and (ii) the expiration of the
term of the Option or SAR as set forth in the Award Agreement. If,
after such termination of Continuous Service, the Participant does
not exercise his or her Option or SAR (as applicable) within the
applicable time frame, the Option or SAR (as applicable) will
terminate.
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(h)
Extension
of Termination Date.
Except as
otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate,
if the exercise of an Option or SAR following the
termination of a Participant’s Continuous Service (other than
for Cause and other than upon the Participant’s death or
Disability) would be prohibited at any time solely because the
issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option or SAR will
terminate on the earlier of (i) the expiration of a total period of
time (that need not be consecutive) equal to the applicable
post-termination exercise period after the termination of the
Participant’s Continuous Service during which the exercise of
the Option or SAR would not be in violation of such registration
requirements, or (ii) the expiration of the term of the Option or
SAR as set forth in the applicable Award Agreement. In addition,
except as otherwise provided in the applicable Award Agreement or
other written agreement between a Participant and the Company or an
Affiliate, if the sale of any Common Stock received upon exercise
of an Option or SAR following the termination of a
Participant’s Continuous Service (other than for Cause) would
violate the Company’s insider trading policy, then the Option
or SAR will terminate on the earlier of (i) the expiration of a
total period of time (that need not be consecutive) equal to the
applicable post-termination exercise period after the termination
of the Participant’s Continuous Service during which the sale
of the Common Stock received upon exercise of the Option or SAR
would not be in violation of the Company’s insider trading
policy, or (ii) the expiration of the term of the Option or SAR as
set forth in the applicable Award Agreement.
(i)
Disability
of Participant.
Except as
otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate, if a Participant’s Continuous Service terminates
as a result of the Participant’s Disability, the Participant
may exercise his or her Option or SAR (to the extent that the
Participant was entitled to exercise such Option or SAR as of the
date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date that is twelve
(12) months following such termination of Continuous Service (or
such longer or shorter period specified in the Award
Agreement
), and (ii) the
expiration of the term of the Option or SAR as set forth in the
Award Agreement. If, after such termination of Continuous Service,
the Participant does not exercise his or her Option or SAR (as
applicable) within the applicable time frame, the Option or SAR (as
applicable) will terminate.
(j)
Death
of Participant.
Except
as otherwise provided in the applicable Award Agreement or other
written agreement between a Participant and the Company or an
Affiliate, if (i) a Participant’s Continuous Service
terminates as a result of the Participant’s death, or (ii) a
Participant dies within the period (if any) specified in the Award
Agreement for exercisability after the termination of the
Participant’s Continuous Service (for a reason other than
death), then the Participant’s Option or SAR may be exercised
(to the extent that the Participant was entitled to exercise such
Option or SAR as of the date of death) by the Participant’s
estate, by a person who acquired the right to exercise the Option
or SAR by bequest or inheritance, or by a person designated to
exercise the Option or SAR upon the Participant’s death, but
only within such period of time ending on the earlier of (i) the
date that is eighteen (18) months following the date of death (or
such longer or shorter period specified in the Award Agreement),
and (ii) the expiration of the term of the Option or SAR as set
forth in the Award Agreement. If, after the Participant’s
death, the Option or SAR (as applicable) is not exercised within
the applicable time frame, the Option or SAR (as applicable) will
terminate.
(k)
Termination
for Cause.
Except as explicitly
provided otherwise in the applicable Award Agreement or other
individual written agreement between a Participant and the Company
or an Affiliate, if a Participant’s Continuous Service is
terminated for Cause, the Participant’s Option or SAR will
terminate immediately upon such termination of Continuous Service,
and the Participant will be prohibited from exercising his or her
Option or SAR from and after the time of such termination of
Continuous Service.
A-8
(l)
Non-Exempt Employees.
If an Option or
SAR is granted to an Employee who is a non-exempt employee for
purposes of the Fair Labor Standards Act of 1938, as amended, the
Option or SAR will not be first exercisable for any shares of
Common Stock until at least six (6) months following the date
of grant of the Option or SAR (although the Award may vest prior to
such date). Consistent with the provisions of the Worker Economic
Opportunity Act, (i) if such non-exempt employee dies or suffers a
Disability, (ii) upon a Corporate Transaction in which such Option
or SAR is not assumed, continued or substituted, (iii) upon a
Change in Control, or (iv) upon the Participant’s retirement
(as such term may be defined in the Participant’s Award
Agreement, in another written agreement between the Participant and
the Company or an Affiliate, or, if no such definition, in
accordance with the Company’s then current employment
policies and guidelines), the vested portion of any Options and
SARs may be exercised earlier than six (6) months following
the date of grant. The foregoing provision is intended to operate
so that any income derived by a non-exempt employee in connection
with the exercise or vesting of an Option or SAR will be exempt
from his or her regular rate of pay. To the extent permitted and/or
required for compliance with the Worker Economic Opportunity Act to
ensure that any income derived by a non-exempt employee in
connection with the exercise, vesting or issuance of any shares
under any other Stock Award will be exempt from the
employee’s regular rate of pay, the provisions of this
Section 5(l) will apply to all Stock Awards and are hereby
incorporated by reference into such Stock Award
Agreements.
(a)
Restricted Stock Awards.
Each Restricted
Stock Award Agreement will be in such form and will contain such
terms and conditions as the Board deems appropriate.
To the extent consistent with the Company’s
bylaws, at
the Board’s election, shares of Common
Stock underlying a Restricted Stock Award may be (i) held in book
entry form subject to the Company’s instructions until any
restrictions relating to the Restricted Stock Award lapse, or
(ii) evidenced by a certificate, which certificate will be
held in such form and manner as determined by the Board. The terms
and conditions of separate Restricted Stock Award Agreements need
not be identical;
provided,
however
, that each Restricted Stock Award Agreement will
conform to (through incorporation of the provisions hereof by
reference in the applicable Award Agreement or otherwise) the
substance of each of the following provisions:
(i)
Consideration.
A Restricted Stock Award
may be awarded in consideration for (A) cash (including electronic
funds transfers), check, bank draft or money order payable to the
Company, (B) past services to the Company or an Affiliate, or (C)
any other form of legal consideration (including future services)
that may be acceptable to the Board, in its sole discretion, and
permissible under applicable law.
(ii)
Vesting.
Shares of Common Stock awarded under a Restricted Stock Award
Agreement may be subject to forfeiture to or repurchase by the
Company in accordance with a vesting schedule to be determined by
the Board.
(iii)
Termination
of Continuous Service.
If a Participant’s Continuous
Service terminates, the Company may receive through a forfeiture
condition or a repurchase right any or all of the shares of Common
Stock held by the Participant that have not vested as of the date
of such termination under the terms of the Participant’s
Restricted Stock Award Agreement.
(iv)
Transferability.
Rights to acquire shares of Common Stock under a Restricted Stock
Award Agreement will be transferable by the Participant only upon
such terms and conditions as are set forth in the Restricted Stock
Award Agreement, as the Board will determine in its sole
discretion, so long as Common Stock awarded under the Restricted
Stock Award Agreement remains subject to the terms of the
Restricted Stock Award Agreement.
A-9
(v)
Dividends.
A Restricted Stock Award
Agreement may provide that any dividends paid on Restricted Stock
will be subject to the same vesting and forfeiture restrictions as
apply to the shares subject to the Restricted Stock Award to which
they relate.
(b)
Restricted Stock Unit
Awards.
Each Restricted Stock
Unit Award Agreement will be in such form and will contain such
terms and conditions as the Board deems appropriate. The terms and
conditions of separate Restricted Stock Unit Award Agreements need
not be identical
;
provided,
however
, that each
Restricted
Stock Unit Award Agreement will conform to (through incorporation
of the provisions hereof by reference in the
applicable
Award Agreement or otherwise
) the
substance of each of the following provisions:
(i)
Consideration.
At the time of grant of a Restricted
Stock Unit Award, the Board will determine the consideration, if
any, to be paid by the Participant upon delivery of each share of
Common Stock subject to the Restricted Stock Unit Award. The
consideration to be paid (if any) by the Participant for each share
of Common Stock subject to a Restricted Stock Unit Award may be
paid in any form of legal consideration that may be acceptable to
the Board, in its sole discretion, and permissible under applicable
law.
(ii)
Vesting.
A
t the time of the grant of a
Restricted Stock Unit Award, the Board may impose such restrictions
on or conditions to the vesting of the Restricted Stock Unit Award
as it, in its sole discretion, deems
appropriate.
(iii)
Payment.
A Restricted Stock Unit Award may be
settled by the delivery of shares of Common Stock, their cash
equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the
Restricted Stock Unit Award Agreement.
(iv)
Additional
Restrictions.
At the time of
the grant of a Restricted Stock Unit Award, the Board, as it deems
appropriate, may impose such restrictions or conditions that delay
the delivery of the shares of Common Stock (or their cash
equivalent) subject to the Restricted Stock Unit Award to a time
after the vesting of the Restricted Stock Unit
Award.
(v)
Dividend
Equivalents.
Dividend
equivalents may be credited in respect of shares of Common Stock
covered by a Restricted Stock Unit Award, as determined by the
Board and contained in the Restricted Stock Unit Award Agreement.
At the sole discretion of the Board, such dividend equivalents may
be converted into additional shares of Common Stock covered by the
Restricted Stock Unit Award in such manner as determined by the
Board. Any additional shares covered by the Restricted Stock Unit
Award credited by reason of such dividend equivalents will be
subject to all of the same terms and conditions of the underlying
Restricted Stock Unit Award Agreement to which they
relate.
(vi)
Termination
of Continuous Service.
Except
as otherwise provided in the applicable Restricted Stock Unit Award
Agreement or other written agreement between a Participant and the
Company or an Affiliate, if a Participant’s Continuous
Service terminates, any portion of the Participant’s
Restricted Stock Unit Award that has not vested as of
the
date of such termination
will be
forfeited upon such termination
.
(c)
Performance
Awards.
(i)
Performance Stock Awards.
A Performance
Stock Award is a Stock Award (covering a number of shares not in
excess of that set forth in Section 3(d)(ii)) that is payable
(including that may be granted, vest or be exercised) contingent
upon the attainment during a Performance Period of specified
Performance Goals. A Performance Stock Award may, but need not,
require the Participant’s completion of a specified period of
Continuous Service. The length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and
the measure of whether and to what degree such Performance Goals
have been attained will be conclusively determined by the Committee
(or, to the extent that an Award is not intended to qualify as
“performance-based compensation” under Section 162(m)
of the Code, the Board or the Committee), in its sole discretion.
In addition, to the extent permitted by applicable law and the
applicable Award Agreement, the Board or the Committee may
determine that cash may be used in payment of Performance Stock
Awards.
A-10
(ii)
Performance
Cash Awards.
A Performance Cash Award is a cash award (for a
dollar value not in excess of that set forth in Section 3(d)(iii))
that is payable contingent upon the attainment during a Performance
Period of specified Performance Goals. A Performance Cash Award
may, but need not, require the Participant’s completion of a
specified period of Continuous Service. The length of any
Performance Period, the Performance Goals to be achieved during the
Performance Period, and the measure of whether and to what degree
such Performance Goals have been attained will be conclusively
determined by the Committee (or, to the extent that an Award is not
intended to qualify as “performance-based compensation”
under Section 162(m) of the Code, the Board or the Committee), in
its sole discretion. The Board or the Committee may specify the
form of payment of Performance Cash Awards, which may be cash or
other property, or may provide for a Participant to have the option
for his or her Performance Cash Award, or such portion thereof as
the Board or the Committee may specify, to be paid in whole or in
part in cash or other property.
(iii)
Committee
and Board Discretion.
With respect to any Performance Stock
Award or Performance Cash Award, the Committee (or, to the extent
that an Award is not intended to qualify as
“performance-based compensation” under Section 162(m)
of the Code, the Board or the Committee) retains the discretion to
(A) reduce or eliminate the compensation or economic benefit due
upon attainment of the Performance Goals on the basis of any
considerations as the Committee or Board (as applicable), in its
sole discretion, may determine and (B) define the manner of
calculating the Performance Criteria it selects to use for a
Performance Period.
(iv)
Section
162(m) Compliance.
With respect to any Award intended to
qualify as “performance-based compensation” under
Section 162(m) of the Code, unless otherwise permitted under
Section 162(m) of the Code, the Committee will establish the
Performance Goals applicable to, and the formula for calculating
the amount payable under, the Award no later than the earlier of
(A) the date ninety (90) days after the commencement of the
applicable Performance Period, and (B) the date on which
twenty-five percent (25%) of the Performance Period has elapsed,
and in any event at a time when the achievement of the applicable
Performance Goals remains substantially uncertain. Prior to the
payment of any compensation under an Award intended to qualify as
“performance-based compensation” under
Section 162(m) of the Code, the Committee will certify the
extent to which any Performance Goals and any other material terms
under such Award have been satisfied (other than in cases where
such Performance Goals or terms relate solely to the increase in
the value of the Common Stock).
(d)
Other Stock Awards.
Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock, including the appreciation
in value thereof (
e.g
.,
options or stock appreciation rights with an exercise price or
strike price less than one hundred percent (100%) of the Fair
Market Value of the Common Stock at the time of grant) may be
granted either alone or in addition to Stock Awards granted under
Section 5 and this Section 6. Subject to the provisions of the
Plan, the Board will have sole and complete authority to determine
the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or
the cash equivalent thereof) to be granted pursuant to such Other
Stock Awards and all other terms and conditions of such Other Stock
Awards.
7.
Covenants
of the Company.
(a)
Availability of Shares.
The Company will
keep available at all times the number of shares of Common Stock
reasonably required to satisfy then-outstanding Stock
Awards.
(b)
Securities Law Compliance.
The Company
will seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan the authority required to grant
Stock Awards and to issue and sell shares of Common Stock upon
exercise of the Stock Awards;
provided, however
, that this
undertaking will not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued
or issuable pursuant to any such Stock Award. If, after reasonable
efforts and at a reasonable cost, the Company is unable to obtain
from any such regulatory commission or agency the authority that
counsel for the Company deems necessary for the lawful issuance and
sale of Common Stock under the Plan, the Company will be relieved
from any liability for failure to issue and sell Common Stock upon
exercise of such Stock Awards unless and until such authority is
obtained. A Participant will not be eligible for the grant of an
Award or the subsequent issuance of cash or Common Stock pursuant
to the Award if such grant or issuance would be in violation of any
applicable securities law.
A-11
(c)
No Obligation to Notify or Minimize
Taxes.
The Company will have no duty or obligation to any
Participant to advise such holder as to the time or manner of
exercising a Stock Award. Furthermore, the Company will have no
duty or obligation to warn or otherwise advise such holder of a
pending termination or expiration of an Award or a possible period
in which the Award may not be exercised. The Company has no duty or
obligation to minimize the tax consequences of an Award to the
holder of such Award.
8.
Miscellaneous.
(a)
Use of Proceeds from Sales of Common
Stock.
Proceeds from the sale of shares of Common Stock
issued pursuant to Stock Awards will constitute general funds of
the Company.
(b)
Corporate Action Constituting Grant of
Awards.
Corporate action constituting a grant by the Company
of an Award to any Participant will be deemed completed as of the
date of such corporate action, unless otherwise determined by the
Board, regardless of when the instrument, certificate or letter
evidencing the Award is communicated to, or actually received or
accepted by, the Participant. In the event that the corporate
records (
e.g
., Board
consents, resolutions or minutes) documenting the corporate action
constituting the grant contain terms (
e.g
., exercise price, vesting schedule
or number of shares) that are inconsistent with those in the Award
Agreement or related grant documents as a result of a clerical
error in the papering of the Award Agreement or related grant
documents, the corporate records will control and the Participant
will have no legally binding right to the incorrect term in the
Award Agreement or related grant documents.
(c)
Stockholder Rights.
No Participant will
be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to an
Award unless and until (i) such Participant has satisfied all
requirements for exercise of, or the issuance of shares of Common
Stock under, the Award pursuant to its terms, and (ii) the issuance
of the Common Stock subject to such Award has been entered into the
books and records of the Company.
(d)
No Employment or Other Service Rights.
Nothing in the Plan, any Award
Agreement or any other instrument executed thereunder or in
connection with any Award granted pursuant thereto
will
confer upon any Participant any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time the
Award was granted or will affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or
without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s
agreement with the Company or an Affiliate, or (iii) the service of
a Director pursuant to the bylaws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may
be.
(e)
Change in Time Commitment.
In the event
a Participant’s regular level of time commitment in the
performance of his or her services for the Company or any Affiliate
is reduced (for example, and without limitation, if the Participant
is an Employee of the Company and the Employee has a change in
status from a full-time Employee to a part-time Employee or takes
an extended leave of absence) after the date of grant of any Award
to the Participant, the Board has the right in its sole discretion
to (i) make a corresponding reduction in the number of shares or
cash amount subject to any portion of such Award that is scheduled
to vest or become payable after the date of such change in time
commitment, and (ii) in lieu of or in combination with such a
reduction, extend the vesting or payment schedule applicable to
such Award. In the event of any such reduction, the Participant
will have no right with respect to any portion of the Award that is
so reduced or extended.
(f)
Incentive Stock Option Limitations.
To
the extent that the aggregate Fair Market Value (determined at the
time of grant) of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any Participant
during any calendar year (under all plans of the Company and any
Affiliates) exceeds one hundred thousand dollars ($100,000) (or
such other limit established in the Code) or otherwise does not
comply with the rules governing Incentive Stock Options, the
Options or portions thereof that exceed such limit (according to
the order in which they were granted) or otherwise do not comply
with such rules will be treated as Nonstatutory Stock Options,
notwithstanding any contrary provision of the applicable Option
Agreement(s).
A-12
(g)
Investment Assurances.
The Company may
require a Participant, as a condition of exercising or acquiring
Common Stock under any Award, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge
and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of exercising
the Award, and (ii) to give written assurances satisfactory to the
Company stating that the Participant is acquiring Common Stock
subject to the Award for the Participant’s own account and
not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances
given pursuant to such requirements, will be inoperative if (A) the
issuance of the shares upon the exercise or acquisition of Common
Stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities
Act, or (B) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be
met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting
the transfer of the Common Stock.
(h)
Withholding
Obligations.
Unless prohibited
by the terms of an Award Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding
obligation relating to an Award by any of the following means or by
a combination of such means: (i) causing the Participant to tender
a cash payment; (ii) withholding shares of Common Stock from the
shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Stock Award;
provided, however,
that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required
to be withheld by law (or such lesser amount as may be necessary to
avoid classification of the Stock Award as a liability for
financial accounting purposes); (iii) withholding cash from an
Award settled in cash; (iv) withholding payment from any amounts
otherwise payable to the Participant; or (v) by such other method
as may be set forth in the Award Agreement.
(i)
Electronic Delivery.
Any reference
herein to a “written” agreement or document will
include any agreement or document delivered electronically, filed
publicly at www.sec.gov (or any successor website thereto) or
posted on the Company’s intranet (or other shared electronic
medium controlled by the Company to which the Participant has
access).
(j)
Deferrals.
To the extent permitted by
applicable law, the Board, in its sole discretion, may determine
that the delivery of Common Stock or the payment of cash, upon the
exercise, vesting or settlement of all or a portion of any Award
may be deferred and may establish programs and procedures for
deferral elections to be made by Participants. Deferrals by
Participants will be made in accordance with Section 409A of the
Code. Consistent with Section 409A of the Code, the Board may
provide for distributions while a Participant is still an employee
or otherwise providing services to the Company. The Board is
authorized to make deferrals of Awards and determine when, and in
what annual percentages, Participants may receive payments,
including lump sum payments, following the Participant’s
termination of Continuous Service, and implement such other terms
and conditions consistent with the provisions of the Plan and in
accordance with applicable law.
A-13
(k)
Section 409A Compliance.
Unless
otherwise expressly provided for in an Award Agreement, the Plan
and Award Agreements will be interpreted to the greatest extent
possible in a manner that makes the Plan and the Awards granted
hereunder exempt from Section 409A of the Code, and, to the extent
not so exempt, in compliance with Section 409A of the Code. If the
Board determines that any Award granted hereunder is not exempt
from and is therefore subject to Section 409A of the Code, the
Award Agreement evidencing such Award will incorporate the terms
and conditions necessary to avoid the consequences specified in
Section 409A(a)(1) of the Code and to the extent an Award Agreement
is silent on terms necessary for compliance, such terms are hereby
incorporated by reference into the Award Agreement. Notwithstanding
anything to the contrary in this Plan (and unless the Award
Agreement specifically provides otherwise), if the shares of Common
Stock are publicly traded, and if a Participant holding an Award
that constitutes “deferred compensation” under Section
409A of the Code is a “specified employee” for purposes
of Section 409A of the Code, no distribution or payment of any
amount that is due because of a “separation from
service” (as defined in Section 409A of the Code without
regard to alternative definitions thereunder) will be issued or
paid before the date that is six (6) months following the date of
the Participant’s “separation from service” or,
if earlier, the date of the Participant’s death, unless such
distribution or payment may be made in a manner that complies with
Section 409A of the Code, and any amounts so deferred will be paid
in a lump sum on the day after such six (6) month period elapses,
with the balance paid thereafter on the original
schedule.
(l)
Clawback/Recovery.
All Awards granted
under the Plan will be subject to recoupment in accordance with any
clawback policy that the Company is required to adopt pursuant to
the listing standards of any national securities exchange or
association on which the Company’s securities are listed or
as is otherwise required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act or other applicable law. In addition, the
Board may impose such other clawback, recovery or recoupment
provisions in an Award Agreement as the Board determines necessary
or appropriate, including, but not limited to, a reacquisition
right in respect of previously acquired shares of Common Stock or
other cash or property upon the occurrence of Cause. No recovery of
compensation under such a clawback policy will be an event giving
rise to a right to resign for “good reason” or
“constructive termination” (or similar term) under any
agreement with the Company.
9.
Adjustments
upon Changes in Common Stock; Other Corporate Events.
(a)
Capitalization Adjustments.
In the event
of a Capitalization Adjustment, the Board will appropriately and
proportionately adjust: (i) the class(es) and maximum number of
securities subject to the Plan pursuant to Section 3(a); (ii) the
class(es) and maximum number of securities that may be issued
pursuant to the exercise of Incentive Stock Options pursuant to
Section 3(c); (iii) the class(es) and maximum number of securities
that may be awarded to any Participant pursuant to Section 3(d);
(iv) the class(es) and maximum number of securities that may be
awarded to any Non-Employee Director pursuant to Section 3(e); and
(v) the class(es) and number of securities and price per share of
stock subject to outstanding Stock Awards. The Board will make such
adjustments, and its determination will be final, binding and
conclusive.
(b)
Dissolution or Liquidation.
Except as
otherwise provided in the applicable Stock Award Agreement or
other written agreement between a
Participant and the Company or an Affiliate
, in the event of
a dissolution or liquidation of the Company, all outstanding Stock
Awards (other than Stock Awards consisting of vested and
outstanding shares of Common Stock not subject to a forfeiture
condition or the Company’s right of repurchase) will
terminate immediately prior to the completion of such dissolution
or liquidation, and the shares of Common Stock subject to a
forfeiture condition or the Company’s right of repurchase may
be reacquired or repurchased by the Company notwithstanding the
fact that the holder of such Stock Award is providing Continuous
Service;
provided, however
,
that the Board may, in its sole discretion, cause some or all Stock
Awards to become fully vested, exercisable and/or no longer subject
to forfeiture or repurchase (to the extent such Stock Awards have
not previously expired or terminated) before the dissolution or
liquidation is completed but contingent on its
completion.
A-14
(c)
Corporate Transactions.
In the event of
a Corporate Transaction, notwithstanding any other provision of the
Plan, the Board may take one or more of the following actions with
respect to Stock Awards, contingent upon the closing or
consummation of the Corporate Transaction, unless otherwise
provided in the instrument evidencing the Stock Award, in any other
written agreement between the Company or any Affiliate and the
Participant or in any director compensation policy of the Company,
or unless otherwise expressly provided by the Board at the time of
grant of the Stock Award:
(i)
arrange for the
surviving corporation or acquiring corporation (or the surviving or
acquiring corporation’s parent company) to assume or continue
the Stock Award or to substitute a similar stock award for the
Stock Award (including, but not limited to, an award to acquire the
same consideration paid to the stockholders of the Company pursuant
to the Corporate Transaction);
(ii)
arrange
for the assignment of any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to the
Stock Award to the surviving corporation or acquiring corporation
(or the surviving or acquiring corporation’s parent
company);
(iii)
accelerate
the vesting, in whole or in part, of the Stock Award (and, if
applicable, the time at which the Stock Award may be exercised) to
a date prior to the effective time of such Corporate Transaction as
the Board determines (or, if the Board does not determine such a
date, to the date that is five (5) days prior to the effective date
of the Corporate Transaction), with such Stock Award terminating if
not exercised (if applicable) at or prior to the effective time of
the Corporate Transaction;
provided, however
, that the Board may
require Participants to complete and deliver to the Company a
notice of exercise before the effective date of a Corporate
Transaction, which exercise is contingent upon the effectiveness of
such Corporate Transaction;
(iv)
arrange
for the lapse, in whole or in part, of any reacquisition or
repurchase rights held by the Company with respect to the Stock
Award;
(v)
cancel or arrange
for the cancellation of the Stock Award, to the extent not vested
or not exercised prior to the effective time of the Corporate
Transaction, and pay such cash consideration (including no
consideration) as the Board, in its sole discretion, may consider
appropriate; and
(vi)
cancel
or arrange for the cancellation of the Stock Award, to the extent
not vested or not exercised prior to the effective time of the
Corporate Transaction, in exchange for a payment, in such form as
may be determined by the Board equal to the excess, if any, of
(A) the per share amount payable to holders of Common Stock in
connection with the Corporate Transaction, over (B) the per
share exercise price under the applicable Award. For clarity, this
payment may be zero ($0) if the value of the property is equal to
or less than the exercise price. In addition, any escrow, holdback,
earnout or similar provisions in the definitive agreement for the
Corporate Transaction may apply to such payment to the same extent
and in the same manner as such provisions apply to the holders of
Common Stock.
The
Board need not take the same action or actions with respect to all
Stock Awards or portions thereof or with respect to all
Participants. The Board may take different actions with respect to
the vested and unvested portions of a Stock Award.
In the
event of a Corporate Transaction, unless otherwise provided in the
instrument evidencing a Performance Cash Award or any other written
agreement between the Company or any Affiliate and the Participant,
or unless otherwise expressly provided by the Board, all
Performance Cash Awards outstanding under the Plan will terminate
prior to the effective time of such Corporate
Transaction.
A-15
(d)
Change in Control.
A Stock Award may be
subject to additional acceleration of vesting and exercisability
upon or after a Change in Control as may be provided in the Stock
Award Agreement for such Stock Award, in any other written
agreement between the Company or any Affiliate and the Participant
or in any director compensation policy of the Company, but in the
absence of such provision, no such acceleration will
occur.
10.
Termination
or Suspension of the Plan.
(a)
The Board may
suspend or terminate the Plan at any time. No Incentive Stock
Option may be granted after
the tenth (10th)
anniversary of the earlier of (i) the Adoption Date or (ii) the
date the Plan is approved by the stockholders of the Company. No
Awards may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b)
No Impairment of Rights.
Suspension or
termination of the Plan will not materially impair rights and
obligations under any Award granted while the Plan is in effect
except with the written consent of the affected Participant or as
otherwise permitted in the Plan (including Section 2(b)(viii)) or
an Award Agreement.
11.
Effective
Date of Plan.
This
Plan will become effective on the Effective Date.
12.
Choice
of Law.
The
laws of the State of California will govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to that state’s conflict of laws
rules.
13.
Definitions.
As used in the Plan, the following definitions will apply to the
capitalized terms indicated below:
(a)
“
Adoption Date
”
means April 6, 2017, which is the date the Plan was adopted by the
Board.
(b)
“
Affiliate
”
means, at the time of determination, any “parent” or
“subsidiary” of the Company as such terms are defined
in Rule 405. The Board will have the authority to determine the
time or times at which “parent” or
“subsidiary” status is determined within the foregoing
definition.
(c)
“
Award
”
means a Stock Award or a Performance Cash Award.
(d)
“
Award
Agreement
” means a written agreement between the
Company and a Participant evidencing the terms and conditions of an
Award.
(e)
“
Board
” means
the Board of Directors of the Company.
(f)
“
Capital Stock
”
means each and every class of common stock of the Company,
regardless of the number of votes per share.
(g)
“
Capitalization
Adjustment
” means any change that is made in, or other
events that occur with respect to, the Common Stock subject to the
Plan or subject to any Stock Award after the Adoption Date without
the receipt of consideration by the Company through merger,
consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, large
nonrecurring cash dividend, stock split, reverse stock split,
liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or any similar equity restructuring
transaction, as that term is used in Statement of Financial
Accounting Standards Board Accounting Standards Codification Topic
718 (or any successor thereto). Notwithstanding the foregoing, the
conversion of any convertible securities of the Company will not be
treated as a Capitalization Adjustment.
A-16
(h)
“
Cause
”
will
have the meaning ascribed to such term in any written agreement
between a Participant and the Company
or an Affiliate
defining such term and, in the absence of
such agreement, such term means, with respect to a Participant, the
occurrence of any of the following events: (i) such Participant has
breached his or her employment or service contract with the Company
or an Affiliate, (ii) such Participant has engaged in disloyalty to
the Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty,
(iii) such Participant has disclosed trade secrets or confidential
information of the Company or an Affiliate to persons not entitled
to receive such information, (iv) such Participant has breached any
written non-competition, non-solicitation, invention assignment or
confidentiality agreement between the Participant and the Company
or an Affiliate or (v) such Participant has engaged in such other
behavior detrimental to the interests of the Company or an
Affiliate as the Company determines. The determination that a
termination of the Participant’s Continuous Service is either
for Cause or without Cause will be made by the Company, in its sole
discretion. Any determination by the Company that the Continuous
Service of a Participant was terminated with or without Cause for
the purposes of outstanding Awards held by such Participant will
have no effect upon any determination of the rights or obligations
of the Company or such Participant for any other
purpose.
(i)
“
Change in
Control
” means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the
following events:
(i)
any Exchange Act
Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the
combined voting power of the Company’s then outstanding
securities other than by virtue of a merger, consolidation or
similar transaction. Notwithstanding the foregoing, a Change in
Control will not be deemed to occur (A) on account of the
acquisition of securities of the Company directly from the Company,
(B) on account of the acquisition of securities of the Company by
an investor, any affiliate thereof or any other Exchange Act Person
that acquires the Company’s securities in a transaction or
series of related transactions the primary purpose of which is to
obtain financing for the Company through the issuance of equity
securities, or (C) solely because the level of Ownership held by
any Exchange Act Person (the “
Subject
Person
”) exceeds the designated percentage threshold
of the outstanding voting securities as a result of a repurchase or
other acquisition of voting securities by the Company reducing the
number of shares outstanding, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of
the acquisition of voting securities by the Company, and after such
share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control will be
deemed to occur;
(ii)
there
is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving Entity in such
merger, consolidation or similar transaction or (B) more than fifty
percent (50%) of the combined outstanding voting power of the
parent of the surviving Entity in such merger, consolidation or
similar transaction,
in each case in
substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to
such transaction;
(iii)
there
is consummated a sale, lease, exclusive license or other
disposition of all or substantially all of the consolidated assets
of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an
Entity, more than fifty percent (50%) of the combined voting power
of the voting securities of which are Owned by stockholders of the
Company in substantially the same proportions as their Ownership of
the outstanding voting securities of the Company immediately prior
to such sale, lease, license or other disposition; or
A-17
(iv)
individuals
who, on the Adoption Date, are members of the Board (the
“
Incumbent
Board
”) cease for any reason to constitute at least a
majority of the members of the Board;
provided, however
, that if the
appointment or election (or nomination for election) of any new
Board member was approved or recommended by a majority vote of the
members of the Incumbent Board then still in office, such new
member will, for purposes of this Plan, be considered as a member
of the Incumbent Board.
Notwithstanding the
foregoing definition or any other provision of this Plan, (A) the
term Change in Control will not include a sale of assets, merger or
other transaction effected exclusively for the purpose of changing
the domicile of the Company, and (B) the definition of Change in
Control (or any analogous term) in an individual written agreement
between
a Participant and the Company
or an Affiliate
will supersede the foregoing definition with
respect to Awards subject to such agreement;
provided, however
, that (1) if no
definition of Change in Control (or any analogous term) is set
forth in such an individual written agreement, the foregoing
definition will apply; and (2) no Change in Control (or any
analogous term) will be deemed to occur with respect to Awards
subject to such an individual written agreement without a
requirement that the Change in Control (or any analogous term)
actually occur. If required for compliance with Section 409A of the
Code, in no event will an event be deemed a Change in Control if
such event is not also a “change in the ownership of”
the Company, a “change in the effective control of” the
Company, or a “change in the ownership of a substantial
portion of the assets of” the Company, each as determined
under Treasury Regulations Section 1.409A-3(i)(5) (without regard
to any alternative definition thereunder). The Board may, in its
sole discretion and without a Participant’s consent, amend
the definition of “Change in Control” to conform to the
definition of a “change in control event” under Section
409A of the Code and the regulations thereunder.
(j)
“
Code
” means
the Internal Revenue Code of 1986, as amended, including any
applicable regulations and guidance thereunder.
(k)
“
Committee
”
means a committee of one (1) or more Directors to whom authority
has been delegated by the Board in accordance with Section
2(c).
(l)
“
Common Stock
”
means the common stock of the Company.
(m)
“
Company
” means
ChromaDex Corporation, a Delaware corporation.
(n)
“
Consultant
”
means any person, including an advisor, who is (i) engaged by the
Company or an Affiliate to render consulting or advisory services
and is compensated for such services,
or (ii) serving as a
member of the board of directors of an Affiliate and is compensated
for such services
. However, service
solely as a Director, or payment of a fee for such service, will
not cause a Director to be considered a “Consultant”
for purposes of the Plan.
Notwithstanding
the foregoing, a person is treated as a Consultant under this Plan
only if
a Form S-8 Registration
Statement under the Securities Act is available to register either
the offer or the sale of the Company’s securities to such
person.
(o)
“
Continuous
Service
” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee, Director
or Consultant, is not interrupted or terminated. A change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Director or Consultant or a change in
the Entity for which the Participant renders such service, provided
that there is no interruption or termination of the
Participant’s service with the Company or an Affiliate, will
not terminate a Participant’s Continuous Service;
provided, however,
that
if the Entity for
which a Participant is rendering services ceases to qualify as an
Affiliate, as determined by the Board, in its sole discretion, such
Participant’s Continuous Service will be considered to have
terminated on the date such Entity ceases to qualify as an
Affiliate. For example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or to a Director will not
constitute an interruption of Continuous Service. To the extent
permitted by law, the Board or the chief executive officer of the
Company, in that party’s sole discretion, may determine
whether Continuous Service will be considered interrupted in the
case of (i) any leave of absence approved by the Board or chief
executive officer, including sick leave, military leave or any
other personal leave, or (ii) transfers between the Company, an
Affiliate, or their successors. Notwithstanding the foregoing, a
leave of absence will be treated as Continuous Service for purposes
of vesting in an Award only to such extent as may be provided in
the Company’s leave of absence policy, in the written terms
of any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.
A-18
(p)
“
Corporate
Transaction
” means the consummation, in a single
transaction or in a series of related transactions, of any one or
more of the following events:
(i)
a sale
or other disposition of all or
substantially all, as determined by the Board, in its sole
discretion, of the consolidated assets of the Company and its
Subsidiaries;
(ii)
a
sale or other disposition of more than fifty percent (50%) of the
outstanding securities of the Company;
(iii)
a
merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or
(iv)
a
merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the
merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.
If
required for compliance with Section 409A of the Code, in no event
will an event be deemed a Corporate Transaction if such event is
not also a “change in the ownership of” the Company, a
“change in the effective control of” the Company, or a
“change in the ownership of a substantial portion of the
assets of” the Company, each as determined under Treasury
Regulations Section 1.409A-3(i)(5) (without regard to any
alternative definition thereunder). The Board may, in its sole
discretion and without a Participant’s consent, amend the
definition of “Corporate Transaction” to conform to the
definition of a “change in control event” under Section
409A of the Code and the regulations thereunder.
(q)
“
Covered
Employee
” will have the meaning provided in Section
162(m)(3) of the Code.
(r)
“
Director
”
means a member of the Board.
(s)
“
Disability
”
means, with respect to a Participant, the inability of such
Participant to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that
can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than twelve
(12) months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i)
of the Code, and will be determined by the Board on the basis of
such medical evidence as the Board deems warranted under the
circumstances.
(t)
“
Effective
Date
” means the effective date of this Plan document,
which is the date of the annual meeting of stockholders of the
Company held in 2017, provided that this Plan is approved by the
Company’s stockholders at such meeting.
(u)
“
Employee
”
means any person employed by the Company or an Affiliate. However,
service solely as a Director, or payment of a fee for such
services, will not cause a Director to be considered an
“Employee” for purposes of the
Plan.
(v)
“
Entity
” means
a corporation, partnership, limited liability company or other
entity.
(w)
“
Exchange Act
”
means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
A-19
(x)
“
Exchange
Act Person
”
means any
natural person, Entity or “group” (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that
“Exchange Act Person” will not include (i) the Company
or any Subsidiary of the Company, (ii) any employee benefit plan of
the Company or any Subsidiary of the Company or any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any Subsidiary of the Company, (iii) an
underwriter temporarily holding securities pursuant to an offering
of such securities, (iv) an Entity Owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company,
or (v) any natural person, Entity or
“group” (within the meaning of Section 13(d) or 14(d)
of the Exchange Act) that, as of the Effective Date, is the Owner,
directly or indirectly, of securities of the Company representing
more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities.
(y)
“
Fair Market
Value
” means, as of any date, the value of the Common
Stock determined as follows:
(i)
If the Common Stock
is listed on any established stock exchange or traded on any
established market, the Fair Market Value of a share of Common
Stock will be, unless otherwise determined by the Board, the
closing sales price for such stock as quoted on such exchange or
market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the date of determination, as
reported in a source the Board deems reliable.
(ii)
Unless
otherwise provided by the Board, if there is no closing sales price
for the Common Stock on the date of determination, then the Fair
Market Value will be the closing sales price on the last preceding
date for which such quotation exists.
(iii)
In
the absence of such markets for the Common Stock, the Fair Market
Value will be determined by the Board in good faith and in a manner
that complies with Sections 409A and 422 of the Code.
(z)
“
Incentive
Stock Option
” means an option granted pursuant to
Section 5 that is intended to be, and that qualifies as, an
“incentive stock option” within the meaning of Section
422 of the Code.
(aa)
“
Non-Employee
Director
”
means a Director who either (i) is
not a current employee or officer of the Company or an Affiliate,
does not receive compensation, either directly or indirectly, from
the Company or an Affiliate for services rendered as a consultant
or in any capacity other than as a Director (except for an amount
as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act
(“
Regulation
S-K
”)), does not possess an interest in any other
transaction for which disclosure would be required under Item
404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to
Item 404(b) of Regulation S-K, or (ii) is otherwise considered
a “non-employee director” for purposes of Rule
16b-3.
(bb)
“
Nonstatutory
Stock Option
” means an option granted pursuant to
Section 5 that does not qualify as an Incentive Stock
Option.
(cc)
“
Officer
”
means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act.
(dd)
“
Option
”
means an Incentive Stock Option or a Nonstatutory Stock Option to
purchase shares of Common Stock granted pursuant to the
Plan.
(ee)
“
Option
Agreement
” means a written agreement between the
Company
and a holder of an
Option
evidencing the terms and conditions of an Option
grant. Each Option Agreement will be subject to the terms and
conditions of the Plan.
A-20
(ff)
“
Other
Stock Award
” means an award based in whole or in part
by reference to the Common Stock which is granted pursuant to the
terms and conditions of Section 6(d).
(gg)
“
Other
Stock Award Agreement
”
means
a written agreement between the Company and a holder of an Other
Stock Award evidencing the terms and conditions of an Other Stock
Award grant. Each Other Stock Award Agreement will be subject to
the terms and conditions of the Plan.
(hh)
“
Outside
Director
” means a Director who either (i) is not a
current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations
promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation”
who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, has
not been an officer of the Company or an “affiliated
corporation,” and does not receive remuneration from the
Company or an “affiliated corporation,” either directly
or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an “outside director” for purposes
of Section 162(m) of the Code.
(ii)
“
Own,
”
“
Owned,
”
“
Owner,
”
“
Ownership
”
means
a person or Entity will be deemed to “Own,” to have
“Owned,” to be the “Owner” of, or to have
acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting
power, which includes the power to vote or to direct the voting,
with respect to such securities.
(jj)
“
Participant
”
means a person to whom an Award is granted pursuant to the Plan or,
if applicable, such other person who holds an outstanding
Award.
(kk)
“
Performance
Cash Award
” means an award of cash granted pursuant to
the terms and conditions of Section 6(c)(ii).
(ll)
“
Performance
Criteria
” means the one or more criteria that the
Board will select for purposes of establishing the Performance
Goals for a Performance Period. The Performance Criteria that will
be used to establish such Performance Goals may be based on any one
of, or combination of, the following as determined by the Board:
(i) cash flow; (ii) earnings (including gross margin, earnings
before interest and taxes, earnings before taxes, earnings before
interest, taxes, depreciation, amortization and charges for
stock-based compensation, earnings before interest, taxes,
depreciation and amortization, earnings before interest, taxes and
depreciation and net earnings); (iii) earnings per share; (iv)
growth in earnings or earnings per share; (v) stock price; (vi)
return on equity or average stockholder equity; (vii) total
stockholder return or growth in total stockholder return either
directly or in relation to a comparative group; (viii) return on
capital; (ix) return on assets or net assets; (x) revenue, growth
in revenue or return on sales; (xi) income or net income; (xii)
operating income, (xiii) net operating income or net operating
income after tax; (xiv) operating profit or net operating profit;
(xv) operating margin; (xvi) return on operating revenue or return
on operating profit; (xvii) regulatory filings; (xviii) regulatory
approvals, litigation or regulatory resolution goals; (xix) other
operational, regulatory or departmental objectives; (xx) budget
comparisons; (xxi) growth in stockholder value relative to
established indexes, or another peer group or peer group index;
(xxiii) development and implementation of strategic plans and/or
organizational restructuring goals; (xxiv) development and
implementation of risk and crisis management programs; (xxv)
improvement in workforce diversity; (xxvi) compliance requirements
and compliance relief; (xxvii) safety goals; (xxviii) productivity
goals; (xxix) workforce management and succession planning goals;
(xxx) economic value added (including typical adjustments
consistently applied from generally accepted accounting principles
required to determine economic value added performance measures);
(xxxi) measures of customer satisfaction, employee satisfaction or
staff development; (xxxii) development or marketing collaborations,
formations of joint ventures or partnerships or the completion of
other similar transactions intended to enhance the Company’s
revenue or profitability or enhance its customer base; (xxxiii)
merger and acquisitions; (xxxiv) implementation or completion of
projects or processes (including, without limitation, clinical
trial initiation, clinical trial enrollment and dates, clinical
trial results, regulatory filing submissions, regulatory filing
acceptances, regulatory or advisory committee interactions,
regulatory approvals, new and supplemental indications for existing
products, and product supply); (xxxv) initiation of phases of
clinical trials and/or studies by specific dates; (xxxvi)
acquisition of new customers, including institutional accounts;
(xxxvii) customer retention and/or repeat order rate; (xxxviii)
number of institutional customer accounts (xxxix) budget
management; (xl) improvements in sample and test processing times;
(xli) regulatory milestones; (xlii) progress of internal research
or clinical programs; (xliii) progress of partnered programs;
(xliv) partner satisfaction; (xlv) milestones related to samples
received and/or tests run; (xlvi) expansion of sales in additional
geographies or markets; (xlvii) research progress, including the
development of programs; (xlviii) submission to, or approval by, a
regulatory body (including, but not limited to the U.S. Food and
Drug Administration) of an applicable filing or a product; (xlix)
timely completion of clinical trials; (l) milestones related to
samples received and/or tests or panels run; (li) expansion of
sales in additional geographies or markets; (lii) research
progress, including the development of programs; (liii) patient
samples processed and billed; (liv) sample processing operating
metrics (including, without limitation, failure rate maximums and
reduction of repeat rates); (lv) strategic partnerships or
transactions (including in-licensing and out-licensing of
intellectual property; (lvi) and other similar criteria consistent
with the foregoing; and (lvii) to the extent that an Award is not
intended to comply with Section 162(m) of the Code, other measures
of performance selected by the Board.
A-21
(mm)
“
Performance
Goals
” means, for a Performance Period, the one or
more goals established by the Board for the Performance Period
based upon the Performance Criteria. Performance Goals may be based
on a Company-wide basis, with respect to one or more business
units, divisions, Affiliates, or business segments, and in either
absolute terms or relative to the performance of one or more
comparable companies or the performance of one or more relevant
indices. Unless specified otherwise by the Board (i) in the Award
Agreement at the time the Award is granted or (ii) in such other
document setting forth the Performance Goals at the time the
Performance Goals are established, the Board will appropriately
make adjustments in the method of calculating the attainment of
Performance Goals for a Performance Period as follows: (1) to
exclude restructuring and/or other nonrecurring charges; (2) to
exclude exchange rate effects; (3) to exclude the effects of
changes to generally accepted accounting principles; (4) to exclude
the effects of any statutory adjustments to corporate tax rates;
(5) to exclude the effects of items that are unusual in nature or
occur infrequently as determined under generally accepted
accounting principles; (6) to exclude the dilutive effects of
acquisitions or joint ventures; (7) to assume that any business
divested by the Company achieved performance objectives at targeted
levels during the balance of a Performance Period following such
divestiture; (8) to exclude the effect of any change in the
outstanding shares of common stock of the Company by reason of any
stock dividend or split, stock repurchase, reorganization,
recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other similar corporate change, or any
distributions to common stockholders other than regular cash
dividends; (9) to exclude the effects of stock based compensation
and the award of bonuses under the Company’s bonus plans;
(10) to exclude costs incurred in connection with potential
acquisitions or divestitures that are required to be expensed under
generally accepted accounting principles; and (11) to exclude the
goodwill and intangible asset impairment charges that are required
to be recorded under generally accepted accounting principles. In
addition, the Board retains the discretion to reduce or eliminate
the compensation or economic benefit due upon attainment of
Performance Goals and to define the manner of calculating the
Performance Criteria it selects to use for such Performance Period.
Partial achievement of the specified criteria may result in the
payment or vesting corresponding to the degree of achievement as
specified in the Stock Award Agreement or the written terms of a
Performance Cash Award.
(nn)
“
Performance
Period
” means the period of time selected by the
Committee (or, to the extent that an Award is not intended to
qualify as “performance-based compensation” under
Section 162(m) of the Code, the Board or the Committee) over which
the attainment of one or more Performance Goals will be measured
for the purpose of determining a Participant’s right to and
the payment of a Performance Stock Award or a Performance Cash
Award. Performance Periods may be of varying and overlapping
duration, at the sole discretion of the Committee (or Board, if
applicable).
(oo)
“
Performance
Stock Award
” means a Stock Award granted under the
terms and conditions of Section 6(c)(i).
(pp)
“
Plan
”
means this ChromaDex Corporation 2017 Equity Incentive
Plan.
(qq)
“
Restricted
Stock Award
” means an
award of shares of Common Stock which is granted pursuant to the
terms and conditions of Section
6(a)
.
(rr)
“
Restricted
Stock Award Agreement
”
means a written agreement between the Company and a holder of a
Restricted Stock Award evidencing the terms and conditions of a
Restricted Stock Award grant. Each Restricted Stock Award Agreement
will be subject to the terms and conditions of the
Plan.
(ss)
“
Restricted
Stock Unit Award
”
means
a right to receive shares of Common Stock which is granted pursuant
to the terms and conditions of Section
6(b)
.
A-22
(tt)
“
Restricted
Stock Unit Award Agreement
”
means a
written agreement between the Company and a holder of a Restricted
Stock Unit Award evidencing the terms and conditions of a
Restricted Stock Unit Award grant. Each Restricted Stock Unit Award
Agreement will be subject to the terms and conditions of the
Plan.
(uu)
“
Rule
16b-3
” means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to
time.
(vv)
“
Rule
405
” means Rule 405 promulgated under the Securities
Act.
(ww)
“
Securities
Act
” means the Securities Act of 1933, as
amended.
(xx)
“
Stock
Appreciation Right
” or “
SAR
”
means
a right to receive the appreciation on Common Stock that is granted
pursuant to the terms and conditions of Section 5.
(yy)
“
Stock
Appreciation Right Agreement
” or “
SAR Agreement
”
means a written agreement between the Company and a holder of a
Stock Appreciation Right evidencing the terms and conditions of a
Stock Appreciation Right grant. Each Stock Appreciation Right
Agreement will be subject to the terms and conditions of the
Plan.
(zz)
“
Stock
Award
” means any right to
receive Common Stock granted under the Plan, including an Incentive
Stock Option, a Nonstatutory Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, a Restricted Stock Unit Award, a
Performance Stock Award or any Other Stock
Award.
(aa)
“
Stock
Award Agreement
” means a
written agreement between the Company and a Participant evidencing
the terms and conditions of a Stock Award grant. Each Stock Award
Agreement will be subject to the terms and conditions of the
Plan.
(bb)
“
Subsidiary
”
means, with respect to the Company, (i) any corporation of which
more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the
time, stock of any other class or classes of such corporation will
have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the
Company, and (ii) any partnership, limited liability company or
other entity in which the Company has a direct or indirect interest
(whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent
(50%).
(cc)
“
Ten
Percent Stockholder
” means a person who Owns (or is
deemed to Own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any
Affiliate.
A-23
CHROMADEX CORPORATION
REVOCABLE PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of ChromaDex
Corporation (the “Company”) hereby revokes all
previously granted proxies and appoints each of Stephen Allen and
Thomas C. Varvaro as their attorneys, agents and proxies, each with
the power to appoint his substitute, and hereby authorizes them to
represent and to vote as the undersigned has designated, all the
shares of Common Stock of the undersigned at the annual meeting of
stockholders of the Company (the “Annual
Meeting”)
to be held at the offices of ChromaDex
Corporation, 10005 Muirlands Boulevard, Suite G, Irvine, CA 92618,
at 11:00 a.m., local time on June 20, 2017, and at any and all
postponements or adjournments thereof.
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1.
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Election of Directors
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☐
FOR ALL
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☐
FOR ALL
EXCEPT*[ ]
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☐
WITHHOLD
AUTHORITY FOR ALL
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01
|
Frank
L. Jaksch, Jr.
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02
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Stephen
Block
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03
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Stephen
Allen
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04
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Jeff
Baxter
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05
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Robert
Fried
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06
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Kurt
Gustafson
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07
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Steven
Rubin
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NOTE:
To withhold authority to vote for any individual, mark the FOR ALL
EXCEPT box and enter the number next to the name(s) of the
exceptions in the space provided. Unless authority to vote for all
the foregoing individuals is withheld, this proxy will be deemed to
confer authority to vote for every individual whose number is not
so listed.
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2.
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Approval of the ChromaDex Corporation 2017 Equity Incentive
Plan
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||||
|
☐
FOR
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☐
AGAINST
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☐
ABSTAIN
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3.
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Ratification of Marcum LLP As Independent Registered Public
Accounting Firm For the Year Ending December 30, 2017
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||||
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☐
FOR
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☐
AGAINST
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☐
ABSTAIN
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||
4.
In
accordance with the discretion of the proxy as to all other
business as may come before the meeting.
If any other matter is
presented, your proxies will vote in accordance with the
recommendation of the Board of Directors, or, if no recommendation
is given, in their own discretion.
The Board of Directors at present knows of no
other business to be presented at the Annual
Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR ALL OF THE PROPOSALS.
This Proxy revokes any proxy to vote such shares at the Annual
Meeting heretofore given by the undersigned. Please sign and date
below.
The
undersigned hereby ratifies and confirms all that said attorneys
and proxies, or any of them, or their substitutes, shall lawfully
do or cause to be done because of this proxy, and hereby revokes
any and all proxies the undersigned has given before to vote at the
meeting. The undersigned acknowledges receipt of the Notice of
Annual Meeting and the Proxy Statement which accompanies the
notice.
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DATED:
__________, 2017
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(Name)
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(Signature)
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(Signature,
if held jointly)
|
Sign
exactly as name(s) appear(s) on stock certificate(s). If stock is
held jointly, each holder must sign. If signing is by attorney,
executor, administrator, trustee or guardian, give full title as
such. A corporation or partnership must sign by an authorized
officer or general partner, respectively.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENVELOPE PROVIDED TO
EQUITY STOCK TRANSFER C/O MOHIT BHANSALI AT 237 W
37
TH
ST. SUITE 601, NEW YORK, NY
10018.
You
may also submit your proxy facsimile to (646) 201-9006 or
electronically on the Internet by going to
http://www.equitystock.com.
Important Notice Regarding the
Availability of Proxy Materials for the Stockholder Meeting to Be
Held on June 20, 2017.
The
proxy statement and annual report to security holders are available
at http://investors.chromadex.com
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